<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 21, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DOBSON COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
OKLAHOMA 4812 73-1110531
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
------------------------
<TABLE>
<S> <C>
13439 NORTH BROADWAY EXTENSION BRUCE R. KNOOIHUIZEN
SUITE 200 13439 NORTH BROADWAY EXTENSION
OKLAHOMA CITY, OKLAHOMA 73114 SUITE 200
(405) 391-8500 OKLAHOMA CITY, OKLAHOMA 73114
(405) 391-8500
(Address, including Zip Code, and telephone (Name, address, including Zip
number, including area code, of Code, and telephone number,
registrant's principal including area code, of
executive offices) agent for service)
</TABLE>
------------------------
COPIES TO:
THEODORE M. ELAM, ESQ.
MCAFEE & TAFT A PROFESSIONAL CORPORATION
TENTH FLOOR, TWO LEADERSHIP SQUARE
OKLAHOMA CITY, OKLAHOMA 73102
(405) 235-9621
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box: / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
11 3/4% Senior Notes due 2007 $160,000,000 100% $160,000,000 $48,485(1)
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NO.
- ----------------------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus..................... Front cover page
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside front cover page; "Available Information";
Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information.................................. "Summary"; "Risk Factors"; "Selected Consolidated
Financial and Other Data"; "Financial Statements"
4. Terms of the Transaction............................. "Summary"; "The Exchange Offer"; "Description of the
Notes"; "Certain Federal Income Tax Considerations"
5. Pro Forma Financial Information...................... "Summary"; "Selected Consolidated Financial and Other
Data"
6. Material Contacts With the Company Being Acquired.... "Summary"; "Selected Consolidated Financial and Other
Data"
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters...... Not applicable
8. Interests of Named Experts and Counsel............... Not applicable
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Not applicable
10. Information with Respect to S-3 Registrants.......... Not applicable
11. Incorporation of Certain Information by Reference.... Not applicable
12. Information with Respect to S-2 or S-3 Registrants... Not applicable
13. Incorporation of Certain Information by Reference.... Not applicable
14. Information with Respect to Registrants Other than
S-3 or S-2 Registrants............................. "Summary"; "Business"; "Selected Consolidated
Financial and Other Data"; "Management's Discussion
and Analysis of Financial Condition and Results of
Operations"; "Financial Statements"
15. Information with Respect to S-3 Companies............ Not applicable
16. Information with Respect to S-2 or S-3 Companies..... Not applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM
NO.
- ----------------------------------------------------------------
<C> <S> <C>
17. Information with Respect to Companies Other than S-3
or S-2 Companies................................... "Summary"; "Business"; "Selected Consolidated
Financial and Other Data"; "Management's Discussion
and Analysis of Financial Condition and Results of
Operations"; "Financial Statements"
18. Information if Proxies, Consents or Authorizations
are to be Solicited................................ Not applicable
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer.... "The Exchange Offer"; "Management"; "Security
Ownership of Management and Certain Beneficial
Owners"
</TABLE>
<PAGE>
PROSPECTUS (SUBJECT TO COMPLETION) ISSUED MARCH 21, 1997
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
OFFER TO EXCHANGE
ALL OUTSTANDING
11 3/4% SENIOR NOTES DUE 2007
($160,000,000 PRINCIPAL AMOUNT OUTSTANDING)
FOR
11 3/4% SENIOR NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF
DOBSON COMMUNICATIONS CORPORATION
----------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE NEW NOTES OFFERED HEREBY.
------------------------
Dobson Communications Corporation, an Oklahoma corporation (the "Company" or
"Dobson"), hereby offers (the "Exchange Offer"), upon the terms and subject to
the conditions set forth in this Prospectus and the accompanying Letter of
Transmittal relating to the Exchange offer (the "Letter of Transmittal"), to
exchange $1,000 principal amount of its 11 3/4% Senior Notes Due 2007 (the "New
Notes"), which will be registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which this
Prospectus is a part, for each $1,000 principal amountof its outstanding 11 3/4%
Senior Notes Due 2007 (the "Old Notes"), of which an aggregate of $160,000,000
in principal amount is outstanding as of , 1997. The New Notes will be
obligations of the Company entitled to the benefits of the Indenture (as defined
herein). The form and terms of the New
(COVER CONTINUED ON NEXT PAGE)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Company will accept for exchange any and all validly tendered Old Notes
on or prior to 5:00 p.m., New York City time, on , 1997 (if and as
extended, the "Expiration Date"). Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The
Exchange Offer." Interest on the New Notes will be paid in cash at a rate of
11 3/4% per annum on each April 15 and October 15, commencing October 15, 1997.
The New Notes may be redeemed at the option of the Company, in whole or in part,
at any time on or after April 15, 2002 at 105.875% of their principal amount,
plus accrued interest, declining ratably to 100% of their principal amount, plus
accrued interest, on or after April 15, 2004. In addition, at any time prior to
April 15, 2000, the Company may redeem up to 35% of the aggregate principal
amount of the New Notes with the net proceeds of one or more sales of capital
stock of the Company, at 111.750% of their principal amount, plus accrued
interest; provided that after any such redemption at least $104.0 million
aggregate principal amount of Notes remains outstanding. See "Description of the
Notes."
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of , 1997. As of such date,
there were three registered holders of the Old Notes.
The Company will not receive any proceeds from this Exchange offer. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THIS EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
<PAGE>
(COVER CONTINUED FROM PREVIOUS PAGE)
Notes are identical in all material respects to the form and terms of the Old
Notes except that the New Notes have been registered under the Securities Act.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and preferences and will be
subject to the limitations applicable thereto under the Indenture. Following
consummation of the Exchange Offer, the holders of the Old Notes will continue
to be subject to the existing restrictions upon transfer thereof and the Company
will have no further obligation to such holders to provide for the registration
under the Securities Act of the Old Notes held by them. Following the completion
of the Exchange Offer, none of the Notes will be entitled to the contingent
increase in interest rate provided pursuant to the Old Notes. The Exchange Offer
is being made pursuant to the terms of the registration rights agreement (the
"Registration Rights Agreement") entered into between the Company and Morgan
Stanley & Co. Incorporated, Alex. Brown & Sons Incorporated, First Union Capital
Markets Corp. and NationsBanc Capital Markets, Inc. (the "Placement Agents")
pursuant to the terms of the Placement Agreement dated February 25, 1997 between
the Company and the Placement Agents. The New Notes and the Old Notes are
collectively referred to herein as the "Notes." See "The Exchange Offer--Purpose
and Effect of the Exchange Offer."
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than broker-dealers, as set forth
below, and any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and that such holder has no arrangement or understanding with any
person to participate in the distribution of such New Notes. Any holder who
tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the New Notes or who is an
affiliate of the Company may not rely upon such interpretations by the staff of
the Commission and, in the absence of an exemption therefrom, must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Holders of Old Notes wishing
to accept the Exchange offer must represent to the Company in the Letter of
Transmittal that such conditions have been met.
Each broker-dealer (other than an affiliate of the Company) that receives
New Notes for its own account pursuant to the Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution." Any broker-dealer who is an
affiliate of the Company may not rely on such no-action letters and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction.
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS
OR THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THIS PROSPECTUS NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL NOR ALL OF THEM TOGETHER SHALL CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY
TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL OR ALL OF THEM TOGETHER, NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary................................................................... 4
Risk Factors.............................................................. 17
The Exchange Offer........................................................ 25
Use of Proceeds........................................................... 32
Capitalization............................................................ 33
Selected Consolidated Financial and Other Data............................ 34
Pro Forma Consolidated Financial Data..................................... 36
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 41
Business.................................................................. 49
Management................................................................ 71
Security Ownership of Certain Beneficial Owners and Management............ 76
Description of Other Indebtedness and Preferred Stock..................... 78
Description of the Notes.................................................. 85
Certain Federal Income Tax Considerations................................. 112
Plan of Distribution...................................................... 114
Legal Matters............................................................. 115
Experts................................................................... 115
Available Information..................................................... 115
Index to Financial Statements............................................. F-1
</TABLE>
2
<PAGE>
CERTAIN TERMS
For cellular regulatory purposes, the Federal Communications Commission
("FCC") has designated regions of the United States as either a Metropolitan
Statistical Area ("MSA") or Rural Service Area ("RSA"). Interests in cellular
markets are commonly measured on the basis of the population of the MSA or RSA
served, with each person in the market area referred to as a "Pop." As used in
this Memorandum, unless otherwise indicated the term "Pops" means the estimate
of the population of an MSA or RSA, as derived from the CELLULAR/PCS POP BOOK:
1996 by Paul Kagan Associates, Inc. The term "Net Pops" means the estimated
population with respect to a given service area multiplied by the percentage
interest that the Company owns in the entity licensed in such service area. MSAs
and RSAs are also referred to as "markets." The term "non-wireline license"
refers to the license for any market that was initially awarded to a company,
individual or group, not affiliated with any landline carrier providing service
in the market. The term "wireline license" refers to the license for any market
that was initially awarded to a company, individual or group, affiliated with a
landline carrier providing service in the market. There is, however, no
technical distinction between a wireline and a non-wireline license. The term
"system" means an FCC-licensed cellular telephone system. The term "cell" refers
to the service area of an individual transmitter located in a cellular system.
The term "footprint" refers to the total system coverage area served under FCC
license by a given licensee. "Churn" means the number of cellular subscriber
cancellations per month as a percentage of the total cellular subscribers at the
end of such month. Churn is stated as the average monthly churn rate for the
period. The term "TDMA" means a digital technology that uses time division
multiple access and the term "CDMA" means a digital technology that uses code
division multiple access. The term "PCS" means personal communications services.
The term "CTIA" means the Cellular Telecommunications Industry Association. The
term "NACN" means the North American Cellular Network. For PCS regulatory
purposes, the FCC has designated regions of the United States as either a Major
Trading Area ("MTA") or Basic Trading Area ("BTA").
The term "Recent Acquisitions" means, collectively, the acquisitions of FCC
licenses for and assets related to (i) the Maryland 2 RSA ("Maryland 2") (the
"Maryland 2 Acquisition") completed on March 3, 1997, and (ii) the Cumberland
MSA, Hagerstown MSA, Maryland 3 RSA and Pennsylvania 10 West RSA (collectively,
the "Horizon Properties") (the "Horizon Properties Acquisition") completed on
February 28, 1997. The term "Arizona 5 Acquisition" means the acquisition of a
75% interest in a partnership which owns the FCC license and system for the
Arizona 5 RSA ("Arizona 5"). The term "Acquisitions" means, collectively, the
Recent Acquisitions and the Arizona 5 Acquisition. The term "Transactions"
means, collectively, the Acquisitions and related financing, including the sale
of the Old Notes and borrowings under the Bank Facility (as defined herein), and
the payment of $7.5 million in dividends with respect to the Company's Class A
Common Stock on February 28, 1997 and, for purposes of 1995 pro forma statement
of operations data, the term "Transactions" also includes the March 1996
acquisition of the Kansas 5 RSA, Missouri 1 RSA, Missouri 4 RSA, Missouri 5 RSA
and Missouri 2 RSA (collectively, the "Kansas/Missouri Cluster"). Unless
otherwise indicated, all references in this Prospectus to Pops, Net Pops and the
Company's systems give effect to the consummation of the Acquisitions.
The term "EBITDA" represents earnings before interest expense, income taxes,
depreciation and amortization.
As used herein the following companies and businesses will be identified as
indicated: "Airtouch" means Airtouch Communications, Inc.; "AllTel" means AllTel
Corporation; "AT&T" means AT&T Corp.; "AT&T Wireless" means AT&T Wireless
Services, Inc.; "ATTI" means Associated Telecommunications and Technologies,
Inc., an affiliate of the Company; "BANM" means Bell Atlantic/NYNEX Mobile;
"Brooks" means Brooks Fiber Properties, Inc.; "Chariton Cellular" means Missouri
RSA 5 Partnership d/ b/a Chariton Valley Cellular; "Fleet Investors" means,
collectively, Fleet Venture Resources, Inc., Fleet Equity Partners VI L.P. and
Kennedy Plaza Partners; "Kansas Cellular" means Independent Networks, Inc. d/b/a
Kansas Cellular; "MCI" means MCI Communications Corporation; "Motorola" means
Motorola, Inc.; "Enid Cellular" means Enid MSA Partnership d/b/a Enid Cellular;
"NTS" means NTS Communications, Inc.; "Sprint" means Sprint Corporation and
affiliated companies; "SWBM" means Southwestern Bell Mobile Systems, Inc.;
"SWBT" means Southwestern Bell Telephone Company; "Triad Cellular" means Triad
Cellular LP; "U.S. Cellular" means United States Cellular Corporation; "U S
WEST" means U S WEST, Inc. and its affiliated companies; "Vanguard" means
Vanguard Cellular Systems, Inc.; "Vyvx" means Vyvx, Inc.; and "WorldCom" means
WorldCom, Inc.
3
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY AND SHOULD BE READ IN
CONJUNCTION WITH THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS AND
NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT
OTHERWISE REQUIRES, ALL REFERENCES IN THIS PROSPECTUS TO "DOBSON" OR THE
"COMPANY" ARE TO DOBSON COMMUNICATIONS CORPORATION AND, WHERE APPROPRIATE, ITS
SUBSIDIARIES, AND ALL REFERENCES TO "DOC" ARE TO DOBSON OPERATING COMPANY, A
WHOLLY-OWNED SUBSIDIARY OF DOBSON, WHICH OWNS THE CAPITAL STOCK OF THE COMPANY'S
CELLULAR, LOCAL EXCHANGE AND WHOLLY-OWNED FIBER SUBSIDIARIES.
THE COMPANY
Dobson Communications Corporation provides diversified telecommunications
products and services. The Company currently provides rural cellular telephone
services in a cluster of RSAs and a small MSA located in western Oklahoma and
the Texas panhandle (the "Oklahoma/Texas Cluster") and in a cluster of RSAs in
northeastern Kansas and northwestern Missouri near Kansas City (the
"Kansas/Missouri Cluster"). As a result of the consummation of the Recent
Acquisitions, the Company also owns and operates cellular systems in Maryland
and Pennsylvania and, upon consummation of the Arizona 5 Acquisition, the
Company will own and operate a cellular system in Arizona. The Company also owns
interests in, and operates, regional fiberoptic transmission networks in
Oklahoma, Texas and Colorado, and owns and operates local telephone exchanges in
Oklahoma and intends to resell local, long distance and wireless services in
Oklahoma. On a pro forma basis giving effect to the Transactions, for the year
ended December 31, 1996, the Company would have had operating income of $6.4
million and EBITDA of $31.4 million.
RURAL CELLULAR
The Company's principal focus is the ownership, operation and development of
rural cellular systems. The Company believes rural cellular systems generally
provide strong growth opportunities due to lower penetration rates and higher
subscriber growth rates compared to large MSAs. The Company believes rural
cellular areas, which have a significant number of potential customers with
substantial needs for wireless communications, have not yet been developed as
fully as large MSAs, which were licensed earlier by the FCC. In addition, the
Company believes that, in the near term, rural cellular areas will be subject to
less competition from other wireless providers as compared to large MSAs. The
Company focuses on strategic areas that are underdeveloped and possess the
potential for increased cellular usage and superior financial performance. In
particular, the Company focuses on RSAs and small MSAs that (i) are adjacent to
major metropolitan areas, (ii) have favorable demographics, (iii) include a high
concentration of expressway corridors that facilitate a significant amount of
roaming activity, or (iv) are contiguous with existing systems or are clusters
of contiguous systems.
The Company purchased licenses and systems in a cluster of strategically
located RSAs and small MSAs in Maryland and Pennsylvania in February and March
1997 and has entered into a purchase agreement pursuant to which it will
purchase a 75% interest in the partnership which owns the license and systems in
an RSA in Arizona. Following the completion of the Arizona 5 Acquisition, the
Company's cellular systems will include approximately 1.7 million total Pops
(1.5 million Net Pops). On a pro forma basis giving effect to the Transactions,
the Company's operating income and EBITDA from its cellular operations for the
year ended December 31, 1996 would have been $.9 million and $21.3 million,
respectively, and the Company would have had 80,437 subscribers as of December
31, 1996.
The Company began its cellular business in 1990 when it initiated operations
in an area which is now part of the Oklahoma/Texas Cluster and in 1991 acquired
the Enid, Oklahoma MSA and the Oklahoma 2 RSA. Since the inception of its
cellular business, the Company has developed organizational, marketing and
operational programs designed to increase the number and stability of
subscribers, promote superior customer service, control subscriber acquisition
costs and enhance operating cash flow. These programs
4
<PAGE>
include increasing the Company's local presence, expanding coverage through the
addition of cell sites, enhancing system technology and offering simplified rate
plans. Through December 31, 1996, the number of subscribers in the
Oklahoma/Texas Cluster had grown to 30,996 (representing a 9.0% market
penetration rate).
Since acquiring the Kansas/Missouri Cluster on March 19, 1996, the Company
has begun to implement its organizational, marketing and operational programs in
this cluster. Through December 31, 1996, the Company had added four new retail
locations. In 1997, the Company intends to open additional retail locations and
to expand its coverage by increasing its cell sites from 21 to 31. The
implementation of the Company's programs increased the number of subscribers in
the Kansas/Missouri Cluster by approximately 950 net additions to a total of
3,310 subscribers at December 31, 1996. The EBITDA attributable to the
Kansas/Missouri Cluster from its acquisition on March 19, 1996 through December
31, 1996 was $.6 million. The Company expects to incorporate similar programs in
the properties acquired pursuant to the Acquisitions.
The following table sets forth certain data with respect to the Company's
existing cellular systems and the system which will be acquired in the Arizona 5
Acquisition.
<TABLE>
<CAPTION>
TOTAL TOTAL MARKET DATE ACQUIRED/
CLUSTER POPS OWNERSHIP NET POPS SUBSCRIBERS(A) PENETRATION(B) EXPECTED
- ----------------------------- --------- ------------- --------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
OKLAHOMA/TEXAS(C)
Oklahoma 5 RSA(d).......... 32,500 64.4% 20,914 5,994 18.4% August 1989
Oklahoma 7 RSA(d).......... 115,700 64.4 74,453 7,628 6.6 August 1989
Texas 2 RSA................ 89,700 61.0 54,717 11,973 13.3 August 1989
Enid, OK MSA............... 57,600 100.0 57,600 2,817 4.9 September 1991
Oklahoma 2 RSA............. 48,800 100.0 48,800 2,584 5.3 May 1991
--------- --------- ------
Total.................... 344,300 256,484 30,996 9.0
--------- --------- ------
KANSAS/MISSOURI
Kansas 5 RSA............... 118,200 100.0 118,200 914 .8 March 1996
Missouri 1 RSA............. 42,600 100.0 42,600 1,260 3.0 March 1996
Missouri 4 RSA............. 68,800 100.0 68,800 1,069 1.6 March 1996
Missouri 5 RSA(e).......... 14,200 100.0 14,200 67 .5 March 1996
Missouri 2 RSA............. 34,200 100.0 34,200 -- -- March 1996
--------- --------- ------
Total.................... 278,000 278,000 3,310 1.2
--------- --------- ------
MARYLAND/PENNSYLVANIA
Maryland 2 RSA............. 444,700 100.0 444,700 18,728 4.2 March 1997
Cumberland, MD MSA(f)...... 68,000 100.0 68,000 28 -- February 1997
Hagerstown, MD MSA......... 127,800 100.0 127,800 1,253 1.0 February 1997
Maryland 3 RSA............. 184,200 100.0 184,200 19,204 10.4 February 1997
Pennsylvania 10 West
RSA(f)................... 49,500 100.0 49,500 1,251 2.5 February 1997
--------- --------- ------
Total.................... 874,200 874,200 40,464 4.6
--------- --------- ------
ARIZONA 5.................... 184,400 75.0 138,300 5,667 3.1 Pending
--------- --------- ------
Total.................... 1,680,900 1,546,984 80,437 4.8%
--------- --------- ------
--------- --------- ------
</TABLE>
- ------------------------------
(a) As of December 31, 1996.
(b) Determined by dividing total subscribers by the total Pops covered by the
applicable FCC cellular license or authority.
(c) The Company also owns a 5% interest in a partnership which owns a cellular
system in Oklahoma 3 RSA, which had total Pops of 205,600. Information on
the Oklahoma 3 RSA is excluded because the Company does not manage the
system.
(d) The Company's FCC licenses for the Oklahoma 5 RSA and the Oklahoma 7 RSA do
not include Kingfisher and Blaine Counties and approximately one-half of
Dewey County (total Pops estimated by the Company to be 3,000 for the area
in Dewey County not covered by the Company's FCC license), and Harmon and
Greer Counties, respectively. Information for these two RSAs relates only to
the areas covered by the Company's FCC licenses.
5
<PAGE>
(e) The Company's FCC license for the Missouri 5 RSA covers only the Linn County
portion of the RSA. Information for this RSA relates only to the area
covered by the Company's FCC license.
(f) The FCC license for the Cumberland, MD MSA covers only the towns of
Cumberland and Frostburg and surrounding areas (total Pops estimated by the
Company to be 68,000) and the FCC license for the Pennsylvania 10 West RSA
covers only Bedford County. Information for this MSA and RSA relates only to
the area covered by the Company's FCC licenses.
WIRELINE
Since 1936, the Company has provided rural local exchange services and
currently owns and operates nine contiguous local telephone exchanges in western
Oklahoma and three contiguous local telephone exchanges adjacent to and
immediately east of Oklahoma City. At December 31, 1996, the Company's local
telephone exchanges served approximately 12,000 access lines. The Company
provides local and long-distance telecommunications services with enhanced and
value-added calling and billing features. The Company's operating income and
EBITDA from its wireline operations for the year ended December 31, 1996 were
$4.7 million and $8.1 million, respectively. The Company intends to leverage its
reputation in and knowledge of local markets by reselling local, long distance
and wireless services, initially in the greater Oklahoma City and Tulsa
metropolitan areas. The Company expects to commence offering these services in
mid-1997 using its own switches and leasing local exchange lines. As a result,
the Company intends to offer these services without building out an extensive
infrastructure.
FIBER
The Company operates over 545 miles of fiberoptic lines. It owns and
operates approximately 360 miles of fiberoptic lines between Oklahoma City and
Amarillo, Texas and is a 20% partner in, and manages, a partnership which owns
and operates approximately 185 miles of fiberoptic lines between Springfield,
Colorado and Colorado Springs. The Company's fiber networks are linked to other
fiber networks through interconnection agreements that allow it to provide voice
and data telecommunications services to cities in Texas, Colorado, Oklahoma and
Kansas outside its existing network. These networks utilize advanced fiberoptic
technology and are capable of efficiently transmitting capacity-intensive
services, such as Internet, multimedia applications, frame relay and ATM. The
Company sells capacity on a wholesale basis to telecommunications carriers,
including certain subsidiaries of the Company, and also sells services to public
and private businesses and governmental agencies. While the Company has no plans
to add additional fiberoptic lines, the Company intends to initiate additional
marketing programs to increase its customer base and to increase the use of its
fiberoptic networks by its existing customers and will seek to expand its
networks to additional cities through new interconnection agreements. The
Company's operating income and EBITDA from its fiber operations for the year
ended December 31, 1996 were $.8 million and $2.0 million, respectively.
OTHER
In February 1997, the Company was declared the winning bidder for PCS
licenses in nine markets in Oklahoma, Kansas and Missouri that are adjacent to
or overlap its existing cellular clusters. The Company's total bids in the FCC's
10 MHz "F" Block auction amounted to $5.1 million (net of discounts) and the
licenses will cover approximately 4.2 million Pops. The Company is exploring
plans to develop these markets through the creation of alliances with other
wireless companies with similar technology, including reselling and roaming
agreements and, potentially, partitioning spectrum.
BUSINESS STRATEGY
The Company's business strategy is to focus on the development and
acquisition of rural cellular systems. The principal elements of the Company's
business strategy include:
AGGRESSIVE LOCAL MARKETING AND PROMOTION OF WIRELESS SERVICES. The
Company's marketing programs are designed to distinguish it as the local
market's highest quality wireless services provider, stressing its
6
<PAGE>
local sales offices and local personnel, and its commitment to the community.
The Company's sales efforts are conducted primarily through its direct sales
force operating out of its local retail stores, and, to a lesser extent, through
independent agents in other retail outlets. Management believes that, as a local
service provider with strong local distribution of products and services, the
Company has an advantage over its competitors which do not emphasize a local
presence or focus on local knowledge and community involvement.
TARGETED MARKETING STRATEGY. The Company strives to attract subscribers who
are likely to generate high monthly revenue and low churn rates. It undertakes
extensive market research to identify and design marketing programs to attract
these subscribers and tailor distinctive rate plans and roaming rates to
emphasize the "value" and the "advantage" of the Company's cellular service. The
Company has established regional marketing alliances with neighboring cellular
carriers to create larger "home rate" areas in order to increase its roaming
revenue and to effectively expand the Company's footprint to attract new
subscribers. The Company's sales force compensation is structured to maximize
net subscriber additions in order to achieve high penetration levels and
minimize subscriber churn.
RECOGNIZED BRAND NAMES. The Company uses brand names that are predominant
in the areas surrounding its clusters or have a high degree of local
recognition. The Company markets its cellular products and services under the
CELLULAR ONE-Registered Trademark- brand name in central and northwestern
Oklahoma and in the Kansas/Missouri and Maryland/Pennsylvania Clusters. In
Arizona 5, the Company intends to use the AIRTOUCH-TM- CELLULAR brand name which
is currently in use in the adjacent Phoenix and Tucson areas. By using these
brand names, the Company benefits from the extensive marketing efforts
undertaken to promote these brands in the adjacent metropolitan areas. The
DOBSON CELLULAR-TM- brand name is used by the Company in its remaining service
areas in Oklahoma and in Texas where the Company is an established wireline
service provider and has a high degree of recognition.
SUPERIOR CUSTOMER SERVICE. The Company strives to maintain a high level of
customer satisfaction through a variety of techniques including maintaining
24-hour customer service and active ongoing contact with customers. Customer
service is supported on a local level through the Company's direct sales force
and its retail stores, and through centralized customer service centers. The
Company believes that its emphasis on superior customer service has enabled it
to achieve an average monthly churn rate of 1.83% for the year ended December
31, 1996.
FUNCTIONAL ALLOCATION OF MANAGEMENT RESPONSIBILITIES. The Company employs a
management policy that enables local management, with in-depth market knowledge,
to make day-to-day operating decisions, while retaining centralized control of
budgets, pricing, system design and engineering and financial and administrative
functions. The local operating control fosters a strong sense of customer
service and community spirit. The Company believes its management structure
enables it to customize its marketing strategy to the needs of each local
market, while maximizing efficiencies and support through a centralized
corporate staff and customer service centers.
GEOGRAPHICALLY DIVERSE NETWORK CLUSTERS. The Company seeks to operate its
systems in multiple, contiguous market clusters in diverse geographic areas,
with each cluster of sufficient size to achieve scale economies in operation as
well as cost efficiencies in deploying its network infrastructure. The Company
believes that by owning and operating clusters in diverse geographic areas the
Company's financial performance will be less affected by local economic
conditions and seasonality.
COMMITTED SYSTEM DEVELOPMENT AND EXPANSION. The Company plans to expand and
improve coverage and increase the capacity in its existing systems, and to build
out the acquired systems. The Company believes that expanding and improving
coverage and capacity in its systems will attract additional subscribers,
enhance the use of its systems by existing subscribers, increase roamer traffic
due to the larger geographic area covered by the cellular network and further
enhance the overall efficiency of the network.
7
<PAGE>
The Company intends to upgrade its systems with digital technology to enable
it to increase its roaming services and provide enhanced benefits, including
caller ID, longer battery life and zone billing, to digital cellular subscribers
and PCS subscribers with dual mode phones. The Company recently completed
upgrading its system in the Oklahoma/Texas Cluster to analog/TDMA digital
technology. The timing of the upgrading of the Company's other systems will
depend upon the technology selected by the Company's larger cellular neighbors,
and market conditions.
ACQUISITIONS AND FINANCING PLAN
The Company will focus on the integration and development of the systems
acquired or to be acquired in the Acquisitions, including the implementation of
organizational, marketing and operational strategies developed in the
Oklahoma/Texas Cluster and introduced in the Kansas/Missouri Cluster. The
Company will continue to evaluate opportunities to create new cellular clusters
or expand current clusters by acquisitions of additional RSAs and small to
mid-sized MSAs.
MARYLAND 2 ACQUISITION. On March 3, 1997, the Company purchased the FCC
cellular license for, and certain assets relating to, the Maryland 2 RSA for
$75.8 million, subject to adjustment. The property, which is located to the east
of the Washington/Baltimore metropolitan area, has 57 highway miles with heavy
tourist and commercial traffic, and 444,700 Pops. For the year ended December
31, 1996, after pro forma adjustments, the Maryland 2 RSA would have generated
$1.1 million of operating losses and $4.7 million of EBITDA. See "Pro Forma
Consolidated Financial Data."
HORIZON PROPERTIES ACQUISITION. On February 28, 1997, the Company purchased
the FCC cellular licenses for, and certain assets relating to, two MSAs and two
RSAs located in Maryland and Pennsylvania for $77.7 million, subject to
adjustment. The properties have 429,500 Pops and a major suburban population
immediately outside the Washington/Baltimore metropolitan area. These properties
generated $2.9 million of operating income and $5.2 million of EBITDA for the
year ended December 31, 1996.
ARIZONA 5 ACQUISITION. The Company intends to purchase, through a series of
transactions, a 75% interest in a partnership which owns the FCC cellular
license and system for, and certain assets relating to, Arizona 5 (the "Arizona
5 Partnership") for a net purchase price of approximately $39.8 million, subject
to adjustment. As part of the Arizona 5 Acquisition, certain affiliates of the
Company will receive approximately $9.5 million. See "Management Certain
Transactions." In connection with the Arizona 5 Acquisition, the Company will
loan $5.2 million to one of the current partners which will acquire a 25%
interest in the Arizona 5 Partnership. Arizona 5 is located southeast of Phoenix
and northwest of Tucson. Interstate 10 between Phoenix and Tucson runs through
the property and provides a significant source of roaming revenue. The property
has 184,400 Pops and generated $3.1 million of operating income and $4.4 million
of EBITDA for the year ended December 31, 1996.
On February 28, 1997, the Company consummated an offering of the Old Notes
(the "Offering") and replaced its existing bank facility (the "prior bank
facility") with a $200 million secured reducing revolving credit facility
maturing in September 2005 (the "Bank Facility"). DOC is the borrower under the
Bank Facility, and CoreStates Bank, N.A., First Union National Bank of North
Carolina and NationsBank of Texas, N.A. are the managing agents as well as
banks. The Company financed the Recent Acquisitions and will finance the Arizona
5 Acquisition and the related capital expenditures with proceeds of the Offering
and borrowings by DOC under the Bank Facility. The Bank Facility is secured by a
pledge of the capital stock and liens on the assets of DOC and its subsidiaries,
and is guaranteed by the Company and DOC's subsidiaries. See "Business--Company
Organization" and "Description of Other Indebtedness and Preferred Stock The
Bank Facility."
8
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer................ Pursuant to the Exchange Offer, $1,000 principal amount
of New Notes will be issued in exchange for each $1,000
principal amount of Old Notes that are validly tendered
and not withdrawn. As of , 1997, there are three
registered holders of Old Notes and $160,000,000
aggregate principal amount of Old Notes are outstanding.
See "The Exchange Offer."
Holders of Old Notes whose Old Notes are not tendered
and accepted in the Exchange Offer will continue to hold
such Old Notes and will be entitled to all the rights
and preferences and will be subject to the limitations
applicable thereto under the Indenture governing the Old
Notes and the New Notes. Following consummation of the
Exchange Offer, the holders of Old Notes will continue
to be subject to the existing restrictions upon transfer
thereof and the Company will have no further obligation
to such holders to provide for the registration under
the Securities Act of the Old Notes held by them.
Following the completion of the Exchange Offer, none of
the Notes will be entitled to the contingent increase in
interest rate provided pursuant to the Old Notes.
Resale............................ Based on interpretations by the staff of the Securities
and Exchange Commission (the "Commission") set forth in
no-action letters issued to third parties, the Company
believes the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by any holder
thereof (other than broker-dealers, as set forth below,
and any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities
Act, provided that such New Notes are acquired in the
ordinary course of such holder's business and that such
holder has no arrangement or understanding with any
person to participate int he distribution of such New
Notes., Any holder who tenders in the Exchange Offer
with the intention to participate, or for the purpose of
participating, in a distribution of the New Notes or who
is an affiliate of the Company may not rely upon such
interpretations by the staff of the Commission and, in
the absence of an exemption therefrom, must comply with
the registration and prospectus delivery requirements of
the Securities Act in connection with any secondary
resale transaction. Failure to comply with such
requirements in such instance may result in such holder
incurring liabilities under the Securities Act for which
the holder is not indemnified by the Company. Each
broker-dealer (other than an affiliate of the Company)
that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such New
Notes.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
The Company has agreed that, for a period of 90 days
after the Expiration Date (as defined herein), it will
make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of
Distribution."
The Exchange Offer is not being made to, nor will the
Company accept surrenders for exchange from, holders of
Old Notes in any jurisdiction in which this Exchange
Offer or the acceptance thereof would not be in
compliance with the securities or blue sky laws of such
jurisdiction.
Expiration Date................... The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1997, unless extended, in which
case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
Any extension, if made, will be publicly announced
through a release to the Dow Jones News Service and as
otherwise required by applicable law or regulations.
Conditions to the Exchange
Offer........................... The Exchange Offer is subject to certain conditions,
which may be waived by the Company. See "The Exchange
Offer Conditions of the Exchange Offer." The Exchange
Offer is not conditioned upon any minimum principal
amount of Old Notes being tendered.
Procedures for Tendering Old
Notes........................... Each holder of Old Notes wishing to accept the Exchange
Offer must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail
or otherwise deliver such Letter of Transmittal, or a
facsimile thereof, together with such Old Notes and any
other required documentation to United States Trust
Company of New York, the Exchange Agent, at the address
set forth herein and therein. By executing the Letter of
Transmittal, each holder will represent to the Company
that, among other things, the New Notes acquired
pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such
New Notes, whether or not such person is the holder,
that neither the holder nor any such other person has an
arrangement or understanding with any person to
participate in the distribution of such New Notes and
that neither the holder nor any such other person is an
"affiliate" of the Company within the meaning of Rule
405 under the Securities Act. See "The Exchange
Offer--Terms of the Exchange Offer Procedures for
Tendering Old Notes" and "The Exchange Offer--Terms of
the Exchange Offer--Guaranteed Delivery Procedures."
Special Procedures for Beneficial
Owners.......................... Any beneficial owner whose Old Notes are registered in
the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender such
Old Notes in the
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Exchange Offer should contact such registered holder
promptly and instruct such registered holder to tender
on such beneficial owner's behalf. If such beneficial
owner wishes to tender on its own behalf, such owner
must, prior to completing and executing the Letter of
Transmittal and delivering its Old Notes, either make
appropriate arrangements to register ownership of the
Old Notes in such owner's name or obtain a properly
completed bond power from the registered holder. The
transfer of registered ownership may take considerable
time and may not be able to be completed prior to the
Expiration Date. See "The Exchange Offer--Terms of the
Exchange Offer--Procedures for Tendering Old Notes."
Guaranteed Delivery Procedures.... Holders of Old Notes who wish to tender their Old Notes
and whose Old Notes are not immediately available or who
cannot deliver their Old Notes, the Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior to the
Expiration Date, must tender their Old Notes according
to the guaranteed delivery procedures set forth in "The
Exchange Offer--Terms of the Exchange Offer-- Guaranteed
Delivery Procedures."
Acceptance of Old Notes and
Delivery of New Notes........... Subject to certain conditions (as described more fully
in "The Exchange Offer Conditions of the Exchange
offer"), the Company will accept for exchange any and
all Old Notes which are properly tendered in the
Exchange Offer and not withdrawn, prior to 5:00 p.m.,
New York City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer will be
delivered as promptly as practicable following the
Expiration Date.
Withdrawal Rights................. Except as otherwise provided herein, tenders of Old
Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date. See "The
Exchange Offer--Terms of the Exchange Offer--Withdrawal
of Tenders of Old Notes."
Certain Federal Income Tax
Considerations.................. For a discussion of certain federal income tax
considerations relating to the exchange of the New Notes
for the Old Notes, see "Certain Federal Income Tax
Considerations."
Exchange Agent.................... United States Trust Company of New York is the Exchange
Agent. The address, telephone number and facsimile
number of the Exchange Agent are set forth in "The
Exchange Offer-- Exchange Agent."
</TABLE>
11
<PAGE>
SUMMARY OF TERMS OF THE NEW NOTES
The Exchange Offer applies to $160,000,000 aggregate principal amount of Old
Notes. The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes except that (i) the New Notes
will be registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof, and (ii) holders of the New Notes will
not be entitled to certain rights of holders of Old Notes under the Registration
Rights Agreement, which will terminate upon consummation of the Exchange Offer.
The New Notes will evidence the same debt as the Old Notes, will be entitled to
the benefits of the Indenture and will be treated as a single class thereunder
with any Old Notes that remain outstanding. Following the Exchange Offer, none
of the Notes will be entitled to the contingent increase in interest rate
provided for (in the event of a failure to consummate the Exchange Offer in
accordance with the terms of the Registration Rights Agreement) pursuant to the
Old Notes. See "Description of the Notes."
<TABLE>
<S> <C>
Issuer............................ Dobson Communications Corporation
Securities Offered................ $160 million aggregate principal amount of 11 3/4%
Senior Notes due 2007.
Maturity.......................... April 15, 2007.
Interest.......................... Payable semiannually, in cash, on April 15 and October
15, commencing October 15, 1997.
Security.......................... A portion of the proceeds from the Old Notes was placed
in escrow and invested in U.S. government securities
("Pledged Securities") which secure payment of the first
four scheduled interest payments due on the Notes.
Proceeds from the Pledged Securities will be used by the
Company to make the first four scheduled interest
payments on the Notes and as security for the repayment
of the aggregate principal amount of the Notes. After
the first four interest payments, the Notes will be
unsecured. See "Description of the Notes--Security." The
Pledged Securities will be held by the Trustee for the
benefit of the holders of the Notes under the Escrow and
Security Agreement (as defined herein) pending
disbursement.
Optional Redemption............... The Notes are redeemable, at the option of the Company,
in whole or in part, at any time on or after April 15,
2002, initially at 105.875% of their principal amount,
plus accrued interest, declining ratably to 100% of
their principal amount, plus accrued interest, on or
after April 15, 2004. In addition, prior to April 15,
2000, the Company may redeem up to 35% of the aggregate
principal amount of the Notes with the net proceeds from
one or more sales of Capital Stock of the Company (other
than Disqualified Stock), at 111.750% of their principal
amount plus accrued interest; provided that after any
such redemption at least $104.0 million aggregate
principal amount of the Notes remains outstanding. See
"Description of the Notes--Optional Redemption."
Change of Control................. Upon a Change of Control (as defined under "Description
of the Notes--Certain Definitions"), the Company will be
required to make an offer to purchase the Notes at a
purchase price equal to 101% of their principal amount,
plus accrued interest. See
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
"Description of the Notes--Repurchase of Notes upon a
Change of Control."
Ranking........................... The Notes are unsubordinated indebtedness of the
Company, ranking PARI PASSU in right of payment with all
other unsubordinated indebtedness of the Company and
senior in right of payment to all subordinated
indebtedness of the Company. After giving pro forma
effect to the Transactions, as of December 31, 1996, the
Company would have had (on an unconsolidated basis) no
indebtedness other than the Notes. In addition, the
Company is a holding company and the Notes will be
effectively subordinated to all existing and future
liabilities (including trade payables) of the Company's
subsidiaries. On December 31, 1996, on the same pro
forma basis, the subsidiaries of the Company would have
had $212.4 million of liabilities (excluding
intercompany payables), including $200.2 million of
indebtedness, all of which would have been secured. See
"Risk Factors--Leverage; Significant Capital
Requirements; Ability to Meet Required Debt Service;
Refinancing Risk."
Certain Covenants................. The Indenture contains certain covenants for the benefit
of the holders of the Notes (the "Holders") which, among
other things, restrict the ability of the Company and
its Restricted Subsidiaries (as defined in "Description
of the Notes Certain Definitions") to incur additional
indebtedness, create liens, engage in sale-leaseback
transactions, pay dividends or make distributions in
respect of their capital stock, make investments or
certain other restricted payments, sell assets, issue or
sell stock of Restricted Subsidiaries, enter into
transactions with stockholders or affiliates or effect a
consolidation or merger. However, these limitations are
subject to a number of important qualifications and
exceptions. See "Description of the Notes-- Covenants."
Book Entry; Delivery and Form..... Transfers of Notes between participants in The
Depository Trust Company ("DTC") will be effected in the
ordinary way in accordance with DTC rules and will be
settled in same-day funds. See "Description of the
Notes--Book-Entry; Delivery and Form."
</TABLE>
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the New Notes
pursuant to this Prospectus.
RISK FACTORS
For a discussion of certain factors to be considered in evaluating the
Company, its business and an investment in the Notes, see "Risk Factors"
beginning on page 17.
13
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth certain historical consolidated financial
data with respect to each of the five years ended December 31, 1996. The
consolidated financial data as of and for each of the years in the period 1992
to 1996 have been derived from the Company's audited consolidated financial
statements. The pro forma statement of operations data give effect to the
Transactions as if they occurred on January 1, 1996 and the pro forma balance
sheet data give effect to the Transactions as if they occurred on December 31,
1996. The pro forma financial information does not purport to represent what the
Company's results of operations would have been if the Transactions had in fact
occurred on such dates, nor does it purport to indicate the future financial
position or results of future operations of the Company. The historical and pro
forma data should be read in conjunction with "Selected Consolidated Financial
and Other Data," "Pro Forma Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and the related notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
PRO FORMA
1992 1993 1994 1995 1996(A) 1996(A)(B)
------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenue:
Cellular................................................................. $ 7,033 $11,089 $15,169 $18,989 $26,107 $ 62,396
Wireline................................................................. 9,607 10,716 11,557 12,807 13,472 13,472
Fiber.................................................................... 290 671 904 1,415 2,313 2,313
Rental income and other.................................................. 723 321 616 1,238 1,333 1,333
------- ------- ------- ------- ------- ---------
Total revenue.......................................................... 17,653 22,797 28,246 34,449 43,225 79,514
Costs and expenses:
Cost of services and equipment sales..................................... 4,210 4,965 5,418 7,014 9,076 20,562
General and administrative............................................... 7,098 7,971 9,621 10,138 12,087 16,213
Marketing and selling.................................................... 1,965 2,552 3,098 3,157 4,908 11,305
Depreciation and amortization............................................ 4,284 4,563 5,534 6,653 9,720 25,013
------- ------- ------- ------- ------- ---------
Total costs and expenses............................................... 17,557 20,051 23,671 26,962 35,791 73,093
Operating income........................................................... 96 2,746 4,575 7,487 7,434 6,421
Interest expense, net...................................................... (2,284) (2,276) (2,926) (3,824) (6,477 ) (35,263)
Other income (expense), net................................................ (338) (146) (191) (487) (1,587 ) (1,623)
Minority interests in income (losses) of subsidiaries(c)................... 185 (502) (1,105) (1,334) (675 ) (698)
Income tax (provision) benefit............................................. 856 78 (119) (738) 411 525
Extraordinary items(d)..................................................... 90 -- 228 -- (527 ) (850)
------- ------- ------- ------- ------- ---------
Net income (loss).......................................................... (1,395) 541 (e) 462 1,104 (1,421 ) (31,488)
Dividends on preferred stock............................................... -- -- (83) (591) (849 ) (849)
------- ------- ------- ------- ------- ---------
Net income (loss) applicable to common stockholders........................ $(1,395) $ 541 $ 379 $ 513 $(2,270) $(32,337)
------- ------- ------- ------- ------- ---------
------- ------- ------- ------- ------- ---------
Net income (loss) applicable to common stockholders per common share....... (2.95) 1.14 .80 1.08 (4.12 ) (58.63)
Dividends per common share................................................. -- -- .11 1.40 1.02 1.02
OTHER FINANCIAL DATA:
EBITDA(f):
Cellular(g).............................................................. $ 328 $ 2,680 $ 3,923 $ 5,439 $7,005 $ 21,284
Wireline................................................................. 4,115 4,637 5,413 6,968 8,137 8,137
Fiber.................................................................... (63) (8) 774 1,733 2,013 2,013
------- ------- ------- ------- ------- ---------
Total.................................................................. 4,380 7,309 10,110 14,140 17,155 31,434
Ratio of earnings to fixed charges(h)...................................... -- -- 1.1x 1.5x -- --
Capital expenditures, excluding cost of acquisitions....................... $ 5,191 $ 7,353 $ 5,267 $ 3,925 $17,438 $ 19,948
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
PRO FORMA
1992 1993 1994 1995 1996(A) 1996(A)(B)
------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
($ IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
OTHER DATA:
Wireline access lines (at period end)...................................... 10,426 10,899 11,322 11,806 11,959 11,959
Route miles (at period end)(i)............................................. 450 485 485 516 545 545
Fiber miles (at period end)(j)............................................. 10,397 10,817 10,817 11,189 11,537 11,537
Ending cellular subscribers (at period end)................................ 8,644 15,283 21,481 26,614 34,306 80,437
Cellular penetration(k).................................................... 2.67% 4.63% 6.45% 8.02% 5.51% 4.79%
Cellular churn(l).......................................................... .45% .92% 1.52% 1.83% 1.77%
Average monthly revenue per cellular subscriber(m)......................... $ 52.77 $ 50.45 $ 50.00 $48.04 $ 44.20
Marketing and selling costs per gross additional cellular subscriber(n).... $392.04 $429.06 $451.23 $472.70 $377.80
Cellular cell sites (at period end)........................................ 18 26 36 46 67 122
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------
PRO
ACTUAL FORMA(B)
---------- --------
($ IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Net fixed assets........................................................... $ 61,930 $73,930
Total assets............................................................... 116,948 378,161
Total debt................................................................. 105,495 360,212 (o)
Preferred stock............................................................ 10,000 10,000 (p)
Stockholders' equity (deficit)............................................. (9,802) (19,946 )(p)
</TABLE>
- ------------------------------
(a) Includes the operations of Kansas/Missouri Cluster from March 19, 1996, the
date of its acquisition by the Company. Information for the period January 1
to March 19, 1996 is not provided as such information is not available.
(b) Gives pro forma effect to the Transactions. See "Pro Forma Consolidated
Financial Data."
(c) Reflects minority interests in partnerships in which the Company owns the
majority interests.
(d) Extraordinary items reflect gain or (loss) related to early extinguishment
of debt. A write-off of $2.6 million of previously capitalized financing
costs associated with the Company's prior bank facility will be recognized
by the Company in 1997 as a result of the Bank Facility refinancing.
(e) Includes $641,000 of additional income to give cumulative effect to
accounting change resulting from the implementation of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes."
(f) EBITDA is provided because it is a measure commonly used in the industry to
determine a company's ability to incur or service debt. EBITDA is not
derived pursuant to generally accepted accounting principles and should not
be construed as an alternative to net income, as a measure of performance,
or to cash flows, as a measure of liquidity. The calculation of EBITDA does
not include the Company's commitments for capital expenditures or payments
of debts and should not be deemed to represent funds available to the
Company.
(g) Includes 100% of the EBITDA from partnerships in which the Company owns a
majority interest. The portion of the EBITDA attributable to minority
interests was $.2 million, $.9 million, $1.5 million, $2.0 million and $2.2
million, for the years ended December 31, 1992, 1993, 1994, 1995 and 1996,
respectively, and $3.3 million for the year ended December 31, 1996 on a pro
forma basis giving effect to the Transactions.
(h) For the years ended December 31, 1992, 1993 and 1996, earnings were
insufficient to cover fixed charges by $2.3 million, $.2 million and $1.3
million, respectively. On a pro forma basis, for the year ended December 31,
1996, earnings would have been insufficient to cover fixed charges by $31.2
million. "Earnings" are defined as earnings before extraordinary items and
accounting changes, interest expense, amortization of deferred financing
costs, taxes and the portion of rent expense under operating leases
representative of interest. Fixed charges consist of interest expense,
amortization of deferred financing costs and a portion of rent expense under
operating leases representative of interest.
(i) Route miles refers to the number of miles over which fiberoptic cables are
installed.
(j) Fiber miles refers to the number of route miles multiplied by the number of
fibers installed along that path.
(k) Determined by dividing the Company's total ending cellular subscribers for
the period by the estimated total Pops covered by applicable FCC cellular
licenses or authorizations held by the Company.
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(l) Churn means the number of cellular subscriber cancellations during a month
as a percentage of the total cellular subscribers at the end of such month.
Churn is stated as the average monthly churn rate for the period.
(m) Excludes roaming revenue.
(n) Determined by dividing cellular marketing and selling costs by the gross
cellular subscribers added during such period. Cellular marketing and
selling costs represent selling expenses and losses incurred on equipment
sales.
(o) Does not give effect to an additional $1.5 million of indebtedness to be
outstanding upon the issuance of the PCS licenses.
(p) Does not give effect to a dividend of approximately $1.7 million paid in
preferred stock to the Fleet Investors in connection with the Transactions.
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY
AND ITS BUSINESS.
LEVERAGE; SIGNIFICANT CAPITAL REQUIREMENTS; ABILITY TO MEET REQUIRED DEBT
SERVICE; REFINANCING RISK
The Company is highly leveraged. At December 31, 1996, on a pro forma basis
giving effect to the Transactions, the Company would have had approximately
$360.2 million of indebtedness and a deficit in stockholders' equity of $19.9
million. On the same pro forma basis, for the year ended December 31, 1996, the
Company's EBITDA would have been insufficient to cover its interest expense by
$3.8 million, and its EBITDA minus interest expense, preferred stock dividends
and capital expenditures (excluding cost of acquisitions) would have been
($24.6) million. In the event the Arizona 5 Acquisition is not consummated, the
Company's EBITDA would have been insufficient to cover its interest expense by
$3.9 million for the year ended December 31, 1996, and its EBITDA minus interest
expense, preferred stock dividends and capital expenditures (excluding cost of
acquisitions) would have been ($24.7) million. For the year ended December 31,
1996, on a pro forma basis giving effect to the Transactions, the Company's
earnings would have been insufficient to cover fixed charges and preferred stock
dividends by $32.0 million. The Company's high degree of leverage could
significantly limit its ability to make acquisitions, withstand competitive
pressures or adverse economic conditions, finance its operations or take
advantage of future business opportunities.
The Company has required, and will likely continue to require, substantial
capital in connection with the further development and expansion of its systems.
Historically, the Company has funded its capital requirements by debt financing
and the sale of capital stock. The Company expects its capital expenditures for
1997 will be approximately $19 million. The Company believes that the net
proceeds of the Offering, together with borrowings under the Bank Facility and
cash flow from operations will be sufficient to fund the Arizona 5 Acquisition
and its capital expenditures and working capital and debt service requirements.
The Company may require additional financing for future acquisitions and for
buildout requirements related to its PCS licenses. See "--PCS Risks." Sources of
additional capital may include cash flow from operations and public and private
equity and debt financings by the Company or its subsidiaries including vendor
financing. The extent of additional financing required will depend on the
success of the Company's operations. There can be no assurance that additional
financing will be available to the Company or, if available, that it can be
obtained on terms acceptable to the Company and within the limitations contained
in the Indenture, the Bank Facility, the Class B Convertible Preferred Stock
(the "Class B Preferred Stock") and the Company's other indebtedness or that may
be contained in any future financing arrangements. See "Description of Other
Indebtedness and Preferred Stock."
The Company's total indebtedness and debt service requirements have been
substantially increased as a result of the Transactions and the Company and its
subsidiaries will be subject to significant financial restrictions and
limitations. The successful implementation of the Company's strategy, including
further development of its systems, and significant and sustained growth in the
Company's cash flow are necessary for the Company to be able to meet its debt
service requirements, including its obligations under the Notes. There can be no
assurance that the Company will successfully implement its strategy or that the
Company will be able to generate sufficient cash flow from operating activities
to meet its debt service obligations and working capital requirements.
Furthermore, if the Company is unable to satisfy any of the covenants under the
Bank Facility, including financial covenants, the Company will be unable to
borrow under the Bank Facility during such time period to fund planned capital
expenditures, its ongoing operations or other permissible uses. Failure to
obtain such financing could result in the delay or abandonment of some or all of
the Company's plans, which could limit the ability of the Company to meet its
debt service obligations (including obligations with respect to the Notes) and
could have a material adverse effect on its business. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources." The ability of the Company to borrow under the
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Bank Facility will be limited by the requirement that, on a quarterly basis
beginning June 30, 2000, the amount available under the Bank Facility will
reduce until the Bank Facility terminates in September 2005. The reduction in
availability may require the Company to make significant principal payments
thereunder. See "--Restrictions Imposed by Lenders" and "Description of Other
Indebtedness and Preferred Stock."
The indebtedness under the Bank Facility may need to be refinanced at its
maturity. The Company's ability to do so will depend on, among other things, its
financial condition at the time, the restrictions in the instruments governing
its indebtedness and other factors, including market conditions, beyond the
control of the Company. The holders of the Class B Preferred Stock have the
right to require the Company to purchase their Class B Preferred Stock beginning
in 2001, and the Company is required to redeem the Class C Preferred Stock in
2002, or in both cases earlier under certain circumstances. See "Description of
Other Indebtedness and Preferred Stock--Preferred Stock." In the event the
implementation of the Company's strategy to develop and expand its systems is
delayed or the Company does not generate sufficient cash flow to meet its debt
service requirements or obligations with respect to its Preferred Stock, the
Company may need to seek additional financing. There can be no assurance that
any such financing or refinancing could be obtained on terms that are acceptable
to the Company. In the absence of such financing or refinancing, the Company
could be forced to dispose of assets in order to make up for any shortfall in
the payments due on its indebtedness under circumstances that might not be
favorable to realizing the highest price for such assets. A substantial portion
of the Company's assets consists of intangible assets, principally licenses
granted by the FCC, the value of which will depend upon a variety of factors
(including the success of the Company's cellular business and the wireless
telecommunications industry in general). In addition, transfers of interests in
such licenses are subject to FCC approval. As a result, there can be no
assurance that the Company's assets could be sold quickly enough, or for
sufficient amounts, to enable the Company to meet its obligations, including its
obligations with respect to the Notes.
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION; PRIORITY OF SECURED
INDEBTEDNESS
The Company is a holding company with no direct operations and no
significant assets other than the stock of its subsidiaries. DOC has no
significant assets other than the stock of its subsidiaries that conduct its
cellular, local exchange and fiber operations, including Dobson Telephone
Company, Inc. ("Telco"), which conducts the Company's local exchange business.
The Company is dependent on the cash flows of its subsidiaries to meet its
obligations, including the payment of interest and principal on the Notes.
Receipt of funds from its subsidiaries will be restricted by the terms of
existing and future indebtedness including, with respect to DOC, the Bank
Facility. See "Description of Other Indebtedness and Preferred Stock The Bank
Facility." The Company's subsidiaries are separate legal entities that have no
obligation to pay any amounts due pursuant to the Notes or to make any funds
available therefor, whether by dividends, loans or other payments. Because the
Company's subsidiaries have not guaranteed the payment of the principal of or
interest on the Notes, any right of the Company to receive assets of any of its
subsidiaries upon its liquidation or reorganization (and the consequent right of
the holders of the Notes to participate in the distribution or realize proceeds
from those assets) will be effectively subordinated to the claims of the
creditors of such subsidiary (including trade creditors and holders of
indebtedness of such subsidiary), except if and to the extent the Company is
itself a creditor of such subsidiary, in which case the claims of the Company
would still be effectively subordinated to any security interest in the assets
of such subsidiary senior to that held by the Company. The stock of DOC and its
subsidiaries has been pledged to secure borrowings under the Bank Facility. In
addition, DOC and its subsidiaries have granted liens on substantially all of
their assets as security for the obligations under the Bank Facility. The
Company has also guaranteed the indebtedness under the Bank Facility. In
addition, all indebtedness of Telco to the Rural Utilities Services (formerly
the Rural Electrification Administration) ("RUS") and the Rural Telephone Bank
("RTB") is secured by substantially all of the assets of Telco. Because the
Notes are not secured by any assets, in the event of a dissolution, bankruptcy,
liquidation or reorganization of the Company and its subsidiaries, holders of
the Notes may receive less ratably than the secured creditors under the Bank
Facility and the RUS/RTB indebtedness. At December 31, 1996, after giving effect
to the Transactions,
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DOC (on a consolidated basis with its subsidiaries) would have had $212.4
million of total outstanding liabilities, including $170.5 million of secured
indebtedness under the Bank Facility, and $29.7 million of secured indebtedness
of Telco to the RUS/RTB, all of which would have been effectively senior in
right of payment to the Notes. See "Capitalization," "Pro Forma Consolidated
Financial Data" and "Description of Other Indebtedness and Preferred Stock."
COVENANT RESTRICTIONS
The instruments governing the indebtedness of the Company and its
subsidiaries impose significant operating and financial restrictions on the
Company and its subsidiaries. Such restrictions will affect, and in many
respects significantly limit or prohibit, among other things, the ability of the
Company and its subsidiaries to incur additional indebtedness, pay dividends,
repay indebtedness prior to stated maturities, sell assets, make investments,
engage in transactions with stockholders and affiliates, issue capital stock,
create liens or engage in mergers or acquisitions. In addition, the Bank
Facility requires the Company and DOC to maintain certain financial ratios.
These restrictions could also limit the ability of the Company and its
subsidiaries to effect future financings, make needed capital expenditures,
withstand a future downturn in the Company's business or the economy in general,
or otherwise conduct necessary corporate activities. A failure by the Company or
its subsidiaries to comply with these restrictions could lead to a default under
the terms of such indebtedness and the Notes notwithstanding the ability of the
Company to meet its debt service obligations. In the event of a default, the
holders of such indebtedness could elect to declare all such indebtedness to be
due and payable together with accrued and unpaid interest. In such event, a
significant portion of the Company's other indebtedness (including the Notes)
may become immediately due and payable and there can be no assurance that the
Company and its subsidiaries would be able to make such payments or borrow
sufficient funds from alternative sources to make any such payment. Even if
additional financing could be obtained, there can be no assurance that it would
be on terms that are acceptable to the Company. In addition, DOC's indebtedness
under the Bank Facility is secured by a pledge of the capital stock and assets
of DOC and its subsidiaries. Telco's indebtedness to RUS/RTB is secured by liens
upon substantially all of Telco's assets. The pledge of such collateral to
existing lenders could impair the Company's ability to obtain favorable
financing. The terms of the Preferred Stock and the agreements executed in
connection therewith also contain certain covenants and restrictions with
respect to the Company, and the RUS/RTB indebtedness contains certain covenants
and restrictions with respect to Telco. See "Description of Other Indebtedness
and Preferred Stock."
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
The Company must offer to purchase the Notes upon the occurrence of a Change
of Control at a purchase price equal to 101% of the principal amount thereof,
plus accrued interest to the date of purchase. See "Description of the
Notes--Repurchase of Notes upon a Change of Control."
The Bank Facility prohibits the Company from prepaying the Notes, including
prepayments pursuant to a Change of Control offer. Prior to commencing such an
offer to purchase, the Company would be required to (i) repay in full all
indebtedness of the Company that would prohibit the repurchase of the Notes
including indebtedness under the Bank Facility, or (ii) obtain any requisite
consent to permit the repurchase. If the Company is unable to repay all of such
indebtedness or is unable to obtain the necessary consents, then the Company
will be unable to offer to purchase the Notes and such failure will constitute
an Event of Default under the Indenture. There can be no assurance that the
Company will have sufficient funds available at the time of any Change of
Control offer to make any debt payment (including repurchases of Notes) as
described above.
The events that constitute a Change of Control under the Indenture may also
be events of default under the Bank Facility or other indebtedness of the
Company and its subsidiaries. Such events may permit the lenders under such debt
to accelerate the debt and, if the debt is not paid, to enforce security
interests in the assets of the Company and its subsidiaries, thereby limiting
the Company's ability to raise cash to
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repurchase the Notes and reducing the practical benefit of the offer to purchase
provisions to the holders of the Notes. See "Description of Other Indebtedness
and Preferred Stock."
RISKS ASSOCIATED WITH THE ACQUISITIONS; ABILITY TO MANAGE GROWTH
The Company is subject to risks that the systems acquired and to be acquired
in the Acquisitions will not perform as expected and that the returns from such
systems will not support the indebtedness incurred to acquire, or the capital
expenditures needed to develop, the systems. In addition, expansion of the
Company's operations may place a significant strain on the Company's management,
financial and other resources. The Company's ability to manage future growth
will depend upon its ability to monitor operations, control costs, maintain
effective quality controls and significantly expand the Company's internal
management, technical and accounting systems, all of which will result in higher
operating expenses. Any failure to expand these areas and to implement and
improve such systems, procedures and controls in an efficient manner at a pace
consistent with the growth of the Company's business could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the integration of acquired systems with existing
operations will entail considerable expenses in advance of anticipated revenues
and may cause substantial fluctuations in the Company's operating results. This
will involve, among other things, integration of switching, transmission,
technical, sales, marketing, billing, accounting, quality control, management,
personnel, payroll, regulatory compliance and other systems and operating
hardware and software, some of which may be incompatible with the Company's
existing systems. In addition, telecommunications providers generally experience
higher customer and employee turnover rates during and after an acquisition.
There can be no assurance that the Company will be able to successfully
integrate the systems acquired and to be acquired in the Acquisitions or any
other businesses it may acquire or that any such acquired business will not
experience high employee or customer turnover rates after the acquisition.
PCS RISKS
In February 1997, the Company was declared the successful bidder for PCS
licenses for nine markets in the FCC "F" Block auction. The Company is obligated
to pay $5.1 million (net of discounts) for the licenses and will be obligated to
build out PCS systems to cover at least 25% of the Pops covered by the licenses
within five years. See "Business--Cellular Operations." The Company estimates
that the capital expenditures relating to such a buildout would range from $10.0
million to $30.0 million. The actual amount of the expenditures, however, will
depend on the PCS technology selected by the Company, the extent of the
Company's buildout, costs at the time of buildout and the extent the Company
must relocate incumbent microwave licensees. The Company will need additional
financing for the buildout of its PCS system. There can be no assurance that
financing will be available to the Company or, if available, that it can be
obtained on terms acceptable to the Company and within the limitations contained
in the Indenture, the Bank Facility, the terms of and agreements with respect to
the Preferred Stock and the Company's other indebtedness. There can be no
assurance that the Company's PCS system will be profitable. The extent of
potential demand for PCS in the Company's markets cannot be estimated with any
degree of certainty and the technology related to PCS is uncertain at this time.
The Company has no experience operating PCS systems.
When the FCC first licensed cellular systems in the United States, it
specified the technical standards of systems operations to insure nationwide
compatibility between all cellular carriers. In contrast, the FCC has not
mandated the technology standard for PCS operations, leaving each licensee free
to select among several competing technologies that have sufficient
technological differences to preclude their interoperability. There can be no
assurance that the technical standards selected by the Company will be the most
widely used, or technologically sound. Also, because handsets which use one PCS
technology will not be operable on other systems, the ability to offer PCS
roamer service will be impacted. While the Company believes that dual-mode
handsets will be commercially available in the future, there can be no assurance
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that new handsets will be successful or available at competitive prices. To the
extent most competitors in the PCS industry select a competing technology that
is not compatible to the system selected by the Company, the Company's PCS
business may be adversely affected.
COMPETITION
The telecommunications industry is highly competitive. Many of the Company's
competitors and potential competitors have substantially greater financial,
personnel, technical, marketing and other resources than those of the Company as
well as other competitive advantages, and, in connection with the fiber
business, a far more extensive transmission network than the Company. Current
policies of the FCC authorize only two cellular licensees to operate in each
license area and in each of its markets the Company competes with one other
cellular licensee. Competition for subscribers between cellular licensees in a
given license area is based principally upon price, the services and
enhancements offered, the technical quality of the cellular system, customer
service and system coverage. The Company also competes, although to a lesser
extent, with resellers, paging companies and landline telephone service
providers. There can be no assurance that the Company will be able to continue
to compete successfully or that new technologies and products that are more
commercially effective than the Company's will not be developed. Some
competitors may market other services such as cable television access or
landline local exchange or long distance services with their wireless offerings.
There has been an industry trend of declining average revenue per minute, as
competition between service providers has led to reductions in rates for airtime
and subscriptions and other charges. See "Business--Competition" for more
detailed information on the competitive environment faced by the Company.
As a result of recent regulatory and legislative initiatives, the Company's
cellular operations may face increased competition from entities which use other
communications technologies or other radio frequency spectrum such as broadband
PCS licensees, and enhanced specialized mobile radio ("ESMR") licensees. The
Company is unable to predict whether such competing technologies will be
successful and as a result will provide significant competition for the Company.
The Company's operations may also face competition from other technologies
developed in the future including, but not limited to, satellite systems. The
Company believes the likelihood of near-term competition from such services is
reduced because the areas in which it operates are less densely populated. There
can be no assurance, however, that one or more of the technologies currently
utilized by the Company in its business will not become inferior or obsolete at
some time in the future. See "Business Competition."
In connection with the Company's fiber business, its competitors may build
additional fiber capacity in the geographic areas served by the Company's
fiberoptic operations. The Company is aware that at least one other company is
considering building a new nationwide long-distance fiberoptic network. In
addition, many telecommunications companies are acquiring switches and users of
switches will have an increasing number of alternative providers of switched
long-distance services. The Company competes primarily on the basis of price,
availability, transmission quality, customer service and a variety of other
services. The ability of the Company to compete effectively in the fiber
business will depend on its ability to maintain high-quality services at prices
generally equal to or below those charged by its competitors.
In connection with its resale of local, long distance and wireless services,
the Company will compete in Oklahoma City and Tulsa with the incumbent local
exchange carrier, SWBT, which has long-standing relationships with its customers
and has financial, technical and marketing resources substantially greater than
those of the Company. Other competitors may include Brooks and other competitive
local exchange carriers, microwave and satellite carriers, wireless
telecommunications providers and other resellers. In addition, AT&T, MCI and
Sprint have announced plans to offer integrated local and long distance
telecommunications services. There can be no assurance that the Company will be
able to achieve or maintain significant revenue or compete effectively in its
resale business. See "Business--Competition."
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RAPID TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant changes
in technology, including advancements protected by intellectual property laws.
In particular, the wireless telecommunications industry is experiencing
significant technological change, as evidenced by the increasing pace of digital
upgrades in existing analog wireless systems, evolving industry standards, the
availability of new radio frequency spectrum allocations in which to develop
wireless services, ongoing improvements in the capacity and quality of digital
technology, shorter development cycles for new products and enhancements, and
changes in end-user requirements and preferences. There is also uncertainty as
to the extent of customer demand as well as the extent to which airtime and
monthly access rates may continue to decline. The effect of technological
changes on the businesses of the Company cannot be predicted, and there can be
no assurance that technological developments will not have a material adverse
effect on the Company.
DEPENDENCE ON KEY PERSONNEL
The Company's businesses are managed by a small number of management and
operating personnel, the loss of certain of whom could have a material adverse
effect on the Company. The Company believes that its ability to manage its
planned growth successfully will depend in large part on its continued ability
to attract and retain highly skilled and qualified personnel. See "--Risks
Associated with Acquisitions; Ability to Manage Growth" and "Management."
RELIANCE ON USE OF THIRD-PARTY SERVICE MARK
The Company intends to continue to use the registered service mark CELLULAR
ONE-Registered Trademark- to promote the services it offers in many of its
license areas. Upon completion of its Arizona 5 Acquisition, the Company will
use the service mark AIRTOUCH-TM- CELLULAR in that system. The Company's use of
the CELLULAR ONE-Registered Trademark- service mark is governed by five-year
contracts between the Company and Cellular One Group, the owner of the service
mark. Such contracts expire in 2002, and each is renewable at the option of the
Company for two additional five-year terms, subject to the attainment of certain
customer satisfaction ratings. The Company's contract to use the AIRTOUCH-TM-
CELLULAR service mark is for an initial term of 20 years with provisions to
extend the term for successive five-year periods. See "Business Service Marks."
Under these agreements, the Company must meet specified operating and service
quality standards for its systems. If these agreements are not renewed upon
expiration or if the Company fails to meet the applicable operating or service
quality standards, the Company's ability both to attract new subscribers and
retain existing subscribers could be impaired. Recently, AT&T Wireless, which
had been the single largest user of the CELLULAR ONE-Registered Trademark- name,
has significantly reduced its use of the brand name as a primary service mark.
If for this or some other reason beyond the Company's control, the names
CELLULAR ONE-Registered Trademark- or AIRTOUCH-TM- CELLULAR were to suffer
diminished marketing appeal, the Company's ability both to attract new
subscribers and retain existing subscribers could be materially impaired in the
applicable markets.
FRAUDULENT CONVEYANCE STATUTES
Various laws enacted for the protection of creditors may apply to the
Company's incurrence of indebtedness and other obligations in connection with
the Acquisitions, including the issuance of the Notes. If a court were to find
in a lawsuit by an unpaid creditor or representative of creditors of the Company
that the Company did not receive fair consideration or reasonably equivalent
value for incurring such indebtedness or obligation and, at the time of such
incurrence, the Company: (i) was insolvent; (ii) was rendered insolvent by
reason of such incurrence; (iii) was engaged in a business or transaction for
which the assets remaining in the Company constituted unreasonably small
capital; or (iv) intended to incur or believed it would incur obligations beyond
its ability to pay such obligations as they mature, such court, subject to
applicable statutes of limitation, could determine to invalidate, in whole or in
part, such
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indebtedness and obligations as fraudulent conveyances or subordinate such
indebtedness and obligations to existing or future creditors of the Company.
The measure of insolvency for purposes of the foregoing will vary depending
on the law of the jurisdiction which is being applied. Generally, however, the
Company would be considered insolvent at a particular time if the sum of its
debts was then greater than all of its property at a fair valuation or if the
present fair saleable value of its assets was then less than the amount that
would be required to pay its probable liabilities on its existing debts as they
became absolute and matured. On the basis of its historical financial
information, its recent operating history as discussed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
other factors, the Company's management believes that, after giving effect to
indebtedness incurred in connection with the Acquisitions and other related
financings, the Company will not be rendered insolvent, will have sufficient
capital for the business in which it will be engaged and will be able to pay its
debts as they mature; however, management has not obtained any independent
opinion regarding such issues. In addition, there can be no assurance as to what
standard a court would apply in making such determinations.
POTENTIAL FOR ADVERSE REGULATORY CHANGE AND THE NEED FOR REGULATORY APPROVALS
CELLULAR. The licensing, construction, operation, acquisition and sale of
cellular systems, as well as the number of cellular and other wireless licensees
permitted in each market, are regulated by the FCC. Changes in the regulation of
cellular activities and other wireless carriers or the loss of any license or
licensed area could have a material adverse effect on the Company's operations.
In addition, all cellular and PCS licenses in the United States are subject to
renewal upon expiration of their initial ten-year term. The Company's cellular
licenses will expire beginning in 2000. The licenses acquired and to be acquired
in the Acquisitions will expire at varying dates beginning October 1997. The
Company will apply for renewal of its respective licenses, and while the Company
believes that each of these licenses will be renewed based upon FCC rules
establishing a presumption in favor of licensees that have complied with their
regulatory obligations during the initial license period, there can be no
assurance that the Company's licenses will be renewed. See
"Business--Regulation."
WIRELINE. The Company's local exchange operations are regulated by the
Oklahoma Corporation Commission (the "OCC"). The OCC sets rates, terms and
conditions of service and mandates minimum service and quality of service
requirements. Changes in the regulation of its local exchanges could have a
material adverse effect on the Company. Telco, like other companies who operate
in areas where, due to factors such as geographical conditions or subscriber
density, the cost to provide service is higher than normal, receives support
revenue from federal and state agencies. For the year ended December 31, 1996,
support revenue accounted for $5.2 million, or 37%, of the Company's revenue
from its wireline operations. With respect to federal support revenue, the FCC
has initiated proceedings to overhaul the contribution mechanism for support
revenue. A board consisting of state utility commissioners and members of the
FCC recently recommended changes that would, over time, reduce or eliminate
subsidies to telephone companies in areas where connecting and maintaining phone
lines is expensive. In the event such or similar changes are adopted, they could
have a material adverse effect on the Company's wireline operations.
EQUIPMENT FAILURE AND NATURAL DISASTER
Although the Company carries "business interruption" insurance, a major
equipment failure or a natural disaster affecting the Company's central
switching office, its microwave links or certain of its cell sites could have a
material adverse effect on the Company's operations.
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RADIO FREQUENCY EMISSION CONCERNS
Media reports have suggested that certain radio frequency ("RF") emissions
from portable cellular telephones may be linked to cancer, and may interfere
with pacemakers and other medical devices. Concerns over RF emissions may have
the effect of discouraging the use of cellular telephones, which could have a
material adverse effect on the Company's business. On August 1, 1996, the FCC
released a report and order, which will become effective in September 1997, that
updates the guidelines and methods it uses for evaluating RF emissions from
radio equipment, including cellular and PCS telephones and transmitting
facilities. The Company does not believe these guidelines will have a material
impact on its operations. While the FCC's new rules impose more restrictive
standards on RF emissions from lower power devices such as portable cellular
telephones, the Company believes that all cellular telephones currently provided
by the Company to its customers, as well as the Company's transmitting
facilities, comply with the proposed new standards. See "Business--Regulation."
CONFLICTS OF INTEREST
All of the Company's outstanding Class A Common Stock is beneficially owned
by Everett R. Dobson, the Company's Chairman of the Board, President and Chief
Executive Officer, and his affiliates. Certain decisions concerning the
operations or financial structure of the Company may present conflicts of
interest between the holders of the Company's capital stock and the holders of
the Notes. In addition, equity investors may have an interest in pursuing
acquisitions, divestitures, financings or other transactions that, in their
judgment, could enhance their equity investment, even though such transactions
might involve risk to the holders of the Notes.
ABSENCE OF A PUBLIC MARKET
The Notes are a new issue of securities for which there is currently no
market and the Company does not intend to apply for listing of the Notes on any
national securities exchange or the Nasdaq National Market. Although the Company
has been advised by the Placement Agents that they currently intend to make a
market in the Notes, they are not obligated to do so and any such market-making
activities may be discontinued at any time without notice. Accordingly, there
can be no assurance as to the development or liquidity of any market for the
Notes. If a market for the Notes were to develop, the Notes could trade at
prices that may be higher or lower than their initial offering price depending
upon many factors, including prevailing interest rates, the Company's operating
results and the markets for similar securities, and such market may cease to
continue at any time.
If a trading market does not develop or is not maintained, holders of the
Notes may experience difficulty in reselling the Notes or may be unable to sell
them at all. If a market for the New Notes develops, any such market may cease
to continue at any time.
CONSEQUENCES OF THE EXCHANGE OFFER ON NON-TENDERING HOLDERS OF THE OLD NOTES
In the event the Exchange Offer is consummated, the Company will not be
required to register any Old Notes not tendered and accepted in the Exchange
Offer. In such event, holders of Old Notes seeking liquidity in their investment
would have to rely on exemptions to the registration requirements under the
securities laws, including the Securities Act. Following the Exchange Offer,
none of the Notes will be entitled to the contingent increase in interest rate
provided for (in the event of a failure to consummate the Exchange Offer in
accordance with the terms of the Registration Rights Agreement) pursuant to the
Old Notes.
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<PAGE>
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by Dobson on February 25, 1997 to Morgan Stanley &
Co. Incorporated, Alex. Brown & Sons Incorporated, First Union Capital Markets
Corp. and NationsBanc Capital Markets, Inc. (together, the "Placement Agents")
in reliance on Section 4(2) of the Securities Act. The Placement Agents offered
and sold the Old Notes only (i) to "qualified institutional buyers" (as defined
in Rule 144A) in compliance with Rule 144A, (ii) to a limited number of other
institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act) that, prior to their purchase of Old Notes,
delivered to the Placement Agents a letter containing certain representations
and agreements, and (iii) outside the United States to persons other than U.S.
Persons, which term shall include dealers or other professional fiduciaries in
the United States acting on a discretionary basis for foreign beneficial owners
(other than an estate or trust), in reliance upon Regulation S under the
Securities Act.
In connection with the sale of the Old Notes, the Company and the Placement
Agents entered into a Registration Rights Agreement dated as of February 25,
1997 (the "Registration Rights Agreement"), which requires the Company (i) to
cause the Old Notes to be registered under the Securities Act, or (ii) to file
with the Commission a registration statement under the Securities Act with
respect to an issue of new notes of the Company identical in all material
respects to the Old Notes and use its best efforts to cause such registration
statement to become effective under the Securities Act and, upon the
effectiveness of that registration statement, to offer to the holders of the Old
Notes the opportunity to exchange their Old Notes for a like principal amount of
New Notes, which will be issued without a restrictive legend and which may be
reoffered and resold by the holder without restrictions or limitations under the
Securities Act. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
Exchange Offer is being made pursuant to the Registration Rights Agreement to
satisfy the Company's obligations thereunder with regard to the Notes. The term
"Holder" with respect to the Exchange Offer means any person in whose name Old
Notes are registered on the trustee's books or any other person who has obtained
a properly completed bond power from the registered holder, or any person whose
Old Notes are held of record by The Depository Trust Company ("DTC") who desires
to deliver such Old Note by book-entry transfer at DTC.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Based on interpretations by the staff of the Commission set
forth in no-action letters issued to third parties, the Company believes the New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder thereof
(other than broker-dealers, as set forth below, and any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and that such holder has no arrangement or
understanding with any person to participate in the distribution of such New
Notes. Any holder who tenders in the Exchange Offer with the intention to
participate, or for the purpose of participating, in a distribution of the New
Notes or who is an affiliate of the Company may not rely upon such
interpretations by the staff of the Commission and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Failure to comply with such requirements in such instance may
result in such holder incurring liabilities under the Securities Act for which
the holder is not indemnified by the Company. Each broker-dealer (other than an
affiliate of the Company) that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging
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<PAGE>
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. The Company has
agreed that, for a period of 180 days after the Expiration Date, it will make
the Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution."
The Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of Old Notes in any jurisdiction in which
this Exchange Offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
By tendering in the Exchange Offer, each holder of Old Notes will represent
to the Company that, among other things, (i) the New Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such New Notes, whether or not such person is the holder, (ii)
neither the holder of Old Notes nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Notes, (iii) if the holder is not a broker-dealer, or is a broker-dealer but
will not receive New Notes for its own account in exchange for Old Notes,
neither the holder nor any such other person is engaged in or intends to
participate in the distribution of such New Notes, and (iv) neither the holder
nor any such other person is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act or, if such holder is an "affiliate," that
such holder will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
Following the completion of the Exchange Offer, none of the Notes will be
entitled to the contingent increase in interest rate provided pursuant to the
Old Notes. Following the consummation of the Exchange Offer, holders of Notes
will not have any further registration rights, and the Old Notes will continue
to be subject to certain restrictions on transfer. See "--Consequences of
Failure to Exchange." Accordingly, the liquidity of the market for the Old Notes
could be adversely affected. See "Risk Factors--Consequences of the Exchange
Offer on Non-Tendering Holders of the Old Notes."
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Notes are urged to
consult their financial and tax advisors in making their own decisions on
whether to participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
GENERAL. Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and all
Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. Subject to the minimum denomination requirements
of the New Notes, the Company will issue $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of outstanding Old Notes accepted in
the Exchange Offer. Holders may tender some or all of their Old Notes pursuant
to the Exchange Offer. However, Old Notes may be tendered only in amounts that
are integral multiples of $1,000 principal amount.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes except that (i) the New Notes
will be registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof, and (ii) holders of the New Notes will
not be entitled to certain rights of holders of Old Notes under the Registration
Rights Agreement, which will terminate upon consummation of the Exchange Offer.
The New Notes will evidence the same debt as the Old Notes, will be entitled to
the benefits of the Indenture and will be treated as a single class thereunder
with any Old Notes that remain outstanding. The Exchange Offer is not
conditioned upon any minimum aggregate principal amount of Old Notes being
tendered for exchange.
As of , 1997, $160,000,000 aggregate principal amount of the Old
Notes were outstanding and there were two registered holders. This Prospectus,
together with the Letter of Transmittal, is being sent to such registered
Holders.
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<PAGE>
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Oklahoma General Corporation Act or the Indenture in connection with the
Exchange Offer. The Company intends to conduct the Exchange Offer in accordance
with the provisions of the Registration Rights Agreement and the applicable
requirements of the Exchange Act, and the rules and regulations of the
Commission thereunder. Old Notes which are not tendered for exchange in the
Exchange Offer will remain outstanding and interest thereon will continue to
accrue, but such Old Notes will not be entitled to any rights or benefits under
the Registration Rights Agreement.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purposes of receiving the New Notes from the Company. If any tendered
Old Notes are not accepted for exchange because of an invalid tender, the
occurrence of certain other events set forth herein or otherwise, certificates
for any such unaccepted Old Notes will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS. The term "Expiration Date" shall
mean 5:00 p.m., New York City time, on , 1997, unless the Company,
in its sole discretion, extends the Exchange Offer, in which case the term
"Expiration Date" shall mean the latest date and time to which the Exchange
Offer is extended. Although the Company has no current intention to extend the
Exchange Offer, the Company reserves the right to extend the Exchange Offer at
any time and from time to time by giving oral or written notice to the Exchange
Agent and by timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to the Dow Jones News
Service. During any extension of the Exchange Offer, all Old Notes previously
tendered pursuant to the Exchange Offer and not withdrawn will remain subject to
the Exchange Offer. The date of the exchange of the New Notes for Old Notes will
be the first New York Stock Exchange trading day following the Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions of
the Exchange Offer" shall not have been satisfied, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, or (ii) to
amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders. If the
Exchange Offer is amended in any manner determined by the Company to constitute
a material change, the Company will promptly disclose such amendment by means of
a prospectus supplement that will be distributed to the registered holders, and
the Company will extend the Exchange Offer for a period of time, depending upon
the significance of the amendment and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such period.
In all cases, issuance of the New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent, of a properly completed and duly executed Letter of
Transmittal and all other required documents; provided, however, that the
Company reserves the absolute right to waive any conditions of the Exchange
Offer or defects or irregularities in the tender of Old Notes. If any tendered
Old Notes are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer or if Old Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged Old
Notes or substitute Old Notes evidencing the unaccepted portion, as appropriate,
will be returned without expense
27
<PAGE>
to the tendering holder, unless otherwise provided in the Letter of Transmittal,
as promptly as practicable after the expiration or termination of the Exchange
Offer.
INTEREST ON THE NEW NOTES. Holders of Old Notes that are accepted for
exchange will not receive accrued interest thereon at the time of exchange.
However, each New Note will bear interest from the most recent date to which
interest has been paid on the Old Notes or New Notes, or if no interest has been
paid on the Old Notes or New Notes, from February 28, 1997.
PROCEDURES FOR TENDERING OLD NOTES. The tender to the Company of Old Notes
by a holder thereof pursuant to one of the procedures set forth below will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal. A holder of the Old Notes may tender such Old Notes by (i) properly
completing and signing a Letter of Transmittal or a facsimile thereof (all
reference in this Prospectus to a Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with any
corresponding certificate or certificates representing the Old Notes being
tendered (if in certificated form) and any required signature guarantees, to the
Exchange Agent at its address set forth in the Letter of Transmittal on or prior
to the Expiration Date (or complying with the procedure for book-entry transfer
described below), or (ii) complying with the guaranteed delivery procedures
described below.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the New Notes to be issued in exchange therefor are to be
issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in DTC (also referred to as a book-entry facility) whose name
appears on a security listing as the owner of Old Notes), the signature of such
signer need not be guaranteed. In any other case, the tendered Old Notes must be
endorsed or accompanied by written instruments of transfer in form satisfactory
to the Company and duly executed by the registered holder and the signature on
the endorsement or instrument of transfer must be guaranteed by an eligible
guarantor institution which is a member of one of the following recognized
signature guarantee programs (an "Eligible Institution"): (i) The Securities
Transfer Agents Medallion Program (STAMP), (ii) The New York Stock Exchange
Medallion Signature Program (MSF), or (iii) The Stock Exchange Medallion Program
(SEMP). If the New Notes or Old Notes not exchanged are to be delivered to an
address other than that of the registered holder appearing on the note register
for the Old Notes, the signature in the Letter of Transmittal must be guaranteed
by an Eligible Institution.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT
TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
The Company understands that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish an account with respect to the
Old Notes at DTC for the purpose of facilitating the Exchange Offer, and subject
to the establishment thereof, any financial institution that is a participant in
DTC's system may make book-entry delivery of Old Notes by causing DTC to
transfer such Old Notes into the Exchange Agent's account with respect to the
Old Notes in accordance with DTC's procedure for such transfer. Although
delivery of the Old Notes may be effected through book-entry transfer into the
Exchange Agent's account at DTC, an appropriate Letter of Transmittal with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the Exchange Agent at the address
set forth in the Letter of Transmittal on or prior to the Expiration
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<PAGE>
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC), is received by the Exchange
Agent, or (ii) a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided below) from an Eligible Institution
is received by the Exchange Agent. Issuances of New Notes in exchange for Old
Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram
or facsimile transmission to similar effect (as provided below) by an Eligible
Institution will be made only against submission of a duly signed Letter of
Transmittal (and any other required documents) and deposit of the tendered Old
Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptance for exchange of which may, in the opinion of the
Company's counsel, be unlawful. The Company also reserves the absolute right to
waive any of the conditions of the Exchange Offer or any defect or irregularity
in the tender of any Old Notes. None of the Company, the Exchange Agent or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. Any Old Notes received by the Exchange Agent that are not validly
tendered and as to which the defects or irregularities have not been cured or
waived, or if Old Notes are submitted in principal amount greater than the
principal amount of Old Notes being tendered by such tendering holder, such
unaccepted or non-exchanged Old Notes will be returned by the Exchange Agent to
the tendering holder, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion (a) to
purchase or make offers for any Old Notes that remain outstanding subsequent to
the Expiration Date, and (b) to the extent permitted by applicable law, to
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers will differ from the terms
of the Exchange Offer.
GUARANTEED DELIVERY PROCEDURES. If the holder desires to accept the
Exchange Offer and time will not permit a Letter of Transmittal or Old Notes to
reach the Exchange Agent before the Expiration Date or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if the Exchange Agent has received at its office, on or prior to the
Expiration Date, a letter, telegram or facsimile transmission from an Eligible
Institution setting forth the name and address of the tendering holder, the
name(s) in which the Old Notes are registered and the certificate number(s) of
the Old Notes to be tendered, and stating that the tender is being made thereby
and guaranteeing that, within three New York Stock Exchange trading days after
the date of execution of such letter, telegram or facsimile transmission by the
Eligible Institution, such Old Notes, in proper form for transfer (or a
confirmation of book-entry transfer of such Old Notes into the Exchange Agent's
account at DTC), will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Old Notes being tendered by the above-described
method are deposited with the Exchange Agent within the time period set forth
above (accompanied or preceded by a properly competed Letter of Transmittal and
any other required documents), the Company may, at its option, reject the
tender. Copies of a Notice of Guaranteed Delivery which may be used by Eligible
Institutions for the purposes described in this paragraph are available from the
Exchange Agent.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL. The Letter of
Transmittal contains, among other things, the following terms and conditions,
which are part of the Exchange Offer.
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<PAGE>
The party tendering Old Notes for exchange (the "Transferor") exchanges,
assigns and transfers the Old Notes to the Company and irrevocably constitutes
and appoints the Exchange Agent as the Transferor's agent and attorney-in-fact
to cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire New Notes issuable
upon the exchange of such tendered Old Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The Transferor also warrants
that it will, upon request, execute and deliver any additional documents deemed
by the Company to be necessary or desirable to complete the exchange, assignment
and transfer of tendered Old Notes or to transfer ownership of such Old Notes on
the account books maintained by DTC. All authority conferred by the Transferor
will survive the death, bankruptcy or incapacity of the Transferor and every
obligation of the Transferor shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives of such Transferor.
By executing a Letter of Transmittal, each holder will make to the Company
the representations set forth above under the heading "--Purpose and Effect of
the Exchange Offer."
WITHDRAWAL OF TENDERS OF OLD NOTES. Except as otherwise provided herein,
tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the Expiration Date.
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) contain a statement that
such holder is withdrawing his election to have such Old Notes exchanged, (iv)
be signed by the Holder in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Old Notes register the
transfer of such Old Notes in the name of the person withdrawing the tender, and
(v) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. If Old Notes have been tendered pursuant
to the procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at the book-entry transfer facility. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no New
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the Holder thereof without cost to
such Holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under
"--Procedures for Tendering Old Notes" at any time prior to the Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, or any extension of
the Exchange Offer, the Company shall not be required to accept for exchange, or
exchange New Notes for, any Old Notes, and may terminate the Exchange Offer as
provided herein before the acceptance of such Old Notes, if:
(a) any statute, rule or regulation shall have been enacted, or any
action shall have been taken by any court or governmental authority which,
in the reasonable judgment of the Company, would prohibit, restrict or
otherwise render illegal consummation of the Exchange Offer; or
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<PAGE>
(b) any change, or any development involving a prospective change, in
the business or financial affairs of the Company or any of its subsidiaries
has occurred which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Exchange Offer or
materially impair the contemplated benefits of the Exchange Offer to the
Company; or
(c) there shall occur a change in the current interpretations by the
staff of the Commission which, in the Company's reasonable judgment, might
materially impair the Company's ability to proceed with the Exchange Offer.
If the Company determines in its sole discretion that any of the above
conditions are not satisfied, the Company may (i) refuse to accept any Old Notes
and return all tendered Old Notes to the tendering holders, (ii) extend the
Exchange Offer and retain all Old Notes tendered prior to the Expiration Date,
subject, however, to the right of holders to withdraw such Old Notes (see
"--Terms of the Exchange Offer--Withdrawal of Tenders of Old Notes"), or (iii)
waive such unsatisfied conditions with respect to the Exchange Offer and accept
all validly tendered Old Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and the Company will extend the Exchange
Offer for a period of time, depending upon the significance of the waiver and
the manner of disclosure to the registered holders, if the Exchange Offer would
otherwise expire during such period.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal and
requests for Notices of Guaranteed Delivery should be directed to the Exchange
Agent addressed as follows:
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
P. O. Box 844 Corporate Trust Operations 111 Broadway
Cooper Station Department Lower Level
New York, NY 10276-0844 770 Broadway - 13th Floor New York, NY 10006
(registered or certified mail New York, NY 10003 Attn: Corporate Trust
recommended) Services
By Facsimile:
(212) 420-6152
(For Eligible Institutions Only)
Confirm by Telephone:
(800) 548-6565
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telecopy, telephone or in person by officers and regular
employees of the Company and its affiliates. No additional compensation will be
paid to any such officers and employees who engage in soliciting tenders.
The Company has not retained any dealer-manager or other soliciting agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptance of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith. The
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Company may also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this Prospectus, the Letter of Transmittal and related documents to
the beneficial owners of the Old Notes and in handling or forwarding tenders for
exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and transfer agent and registrar, accounting and legal fees and printing
costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of the Old Notes pursuant to the Exchange Offer. If, however, New Notes, or Old
Notes for principal amounts not tendered or accepted for exchange, are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered or if a transfer tax is imposed for
any reason other than the exchange of the Old Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the Exchange
Offer will remain restricted securities within the meaning of Rule 144 of the
Securities Act. Accordingly, such Old Notes may be resold only (i) to the
Company or any subsidiary thereof, (ii) inside the United States to a qualified
institutional buyer in compliance with Rule 144A, (iii) inside the United States
to an institutional accredited investor that, prior to such transfer, furnishes
to the Trustee a signed letter containing certain representations and agreements
relating to the restrictions on transfer of the Old Notes (the form of which
letter can be obtained from the Trustee) and, if such transfer is in respect of
an aggregate principal amount of Old Notes at the time of transfer of less than
$100,000, an opinion of counsel acceptable to the Company that such transfer is
in compliance with the Securities Act, (iv) outside the United States in
compliance with Rule 904 under the Securities Act, (v) pursuant to the exemption
from registration provided by Rule 144 under the Securities Act (if available),
or (vi) pursuant to an effective registration statement under the Securities
Act. The liquidity of the Old Notes could be adversely affected by the Exchange
Offer. Following the consummation of the Exchange Offer, holders of the Old
Notes will have no further registration rights under the Registration Rights
Agreement and will not be entitled to the contingent increase in the interest
rate provided for in the Old Notes.
ACCOUNTING TREATMENT
The New Notes would be recorded at the same carrying value as the Old Notes,
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company. The costs of the Exchange Offer and the unamortized expenses related to
the issuance of the Old Notes will be amortized over the term of the New Notes.
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the New Notes
offered hereby. In consideration for issuing the New Notes as contemplated in
this Prospectus, the Company will receive in exchange Old Notes in like
principal amount, the term and form of which are identical in all material
respects to the New Notes. The Old Notes surrendered in exchange for New Notes
will be retired and canceled and cannot be reissued. Accordingly, issuance of
the New Notes will not result in any increase in the indebtedness of the
Company. The net proceeds of the Offering of the Old Notes were used to finance
a portion of the purchase price for the Recent Acquisitions, to purchase the
Pledged Securities securing the first four scheduled interest payments due on
the Notes and to pay certain expenses related to the Offering and the Bank
Facility.
32
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of December 31, 1996 and as adjusted to give pro forma effect to the
Transactions. This table should be read in conjunction with "Selected
Consolidated Financial and Other Data," "Pro Forma Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
ACTUAL PRO FORMA
---------- -----------
($ IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt......................................................... $ 1,191 $ 1,191
---------- -----------
Prior bank facility....................................................................... 75,750 --
Bank Facility............................................................................. -- 170,459
Notes..................................................................................... -- 160,000
Other long-term debt...................................................................... 28,554 28,562
---------- -----------
Total long-term debt (net of current portion)........................................... 104,304 359,021(a)
---------- -----------
Minority interests........................................................................ 2,444 15,719
---------- -----------
Class B Convertible Preferred Stock....................................................... 10,000 10,000
---------- -----------
Stockholders' equity:
Class A Common Stock, par value $1 per share; 1,000,000 shares authorized, 473,152 shares
issued and outstanding................................................................... 473 473
Paid-in capital........................................................................... 5,508 5,508
Retained earnings (deficit)............................................................... (3,870) (14,014)(b)
Treasury stock............................................................................ (11,913) (11,913)
---------- -----------
Total stockholders' equity (deficit).................................................... (9,802) (19,946)
---------- -----------
Total capitalization.................................................................... $ 108,137 $ 365,985
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(a) Does not give effect to the additional $1.5 million of indebtedness to be
outstanding upon the issuance of the PCS licenses.
(b) Gives effect to a $7.5 million dividend to holders of Class A Common Stock
and the writeoff of approximately $2.6 million of debt issuance costs
related to the prior bank facility. Does not give effect to a make-whole
dividend of approximately $1.7 million paid in preferred stock to the Fleet
Investors in connection with the Transactions. See "Description of Other
Indebtedness and Preferred Stock."
33
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth certain historical consolidated financial
data with respect to each of the five years ended December 31, 1996. The
consolidated financial data as of and for each of the years in the period 1992
to 1996 have been derived from the Company's audited historical consolidated
financial statements. The data should be read in conjunction with "Pro Forma
Consolidated Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and the
related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1992 1993 1994 1995 1996(A)
--------- --------- --------- --------- ---------
($ IN THOUSANDS, EXCEPT PER SUBSCRIBER AND PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Cellular....................................................... $ 7,033 $ 11,089 $ 15,169 $ 18,989 $ 26,107
Wireline....................................................... 9,607 10,716 11,557 12,807 13,472
Fiber.......................................................... 290 671 904 1,415 2,313
Rental income and other........................................ 723 321 616 1,238 1,333
--------- --------- --------- --------- ---------
Total revenue................................................ 17,653 22,797 28,246 34,449 43,225
Costs and expenses:
Cost of services and equipment sales........................... 4,210 4,965 5,418 7,014 9,076
General and administrative..................................... 7,098 7,971 9,621 10,138 12,087
Marketing and selling.......................................... 1,965 2,552 3,098 3,157 4,908
Depreciation and amortization.................................. 4,284 4,563 5,534 6,653 9,720
--------- --------- --------- --------- ---------
Total costs and expenses..................................... 17,557 20,051 23,671 26,962 35,791
Operating income................................................. 96 2,746 4,575 7,487 7,434
Interest expense, net............................................ (2,284) (2,276) (2,926) (3,824) (6,477)
Other income (expense), net...................................... (338) (146) (191) (487) (1,587)
Minority interests in income (losses) of subsidiaries(b)......... 185 (502) (1,105) (1,334) (675)
Income tax (provision) benefit................................... 856 78 (119) (738) 411
Extraordinary items(c)........................................... 90 -- 228 -- (527)
--------- --------- --------- --------- ---------
Net income (loss)................................................ (1,395) 541(d) 462 1,104 (1,421)
Dividends on preferred stock..................................... -- -- (83) (591) (849)
--------- --------- --------- --------- ---------
Net income (loss) applicable to common stockholders.............. $ (1,395) $ 541 $ 379 $ 513 $ (2,270)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income (loss) applicable to common stockholders per common
share.......................................................... $ (2.95) $ 1.14 $ .80 $ 1.08 $ (4.12)
Dividends per common share....................................... -- -- $ .11 $ 1.40 $ 1.02
OTHER FINANCIAL DATA:
EBITDA(e):
Cellular(f).................................................... $ 328 $ 2,680 $ 3,923 $ 5,439 $ 7,005
Wireline....................................................... 4,115 4,637 5,413 6,968 8,137
Fiber.......................................................... (63) (8) 774 1,733 2,013
--------- --------- --------- --------- ---------
Total........................................................ 4,380 7,309 10,110 14,140 17,155
Ratio of earnings to fixed charges(g)............................ -- -- 1.1x 1.5x --
Capital expenditures, excluding cost of acquisition.............. $ 5,191 $ 7,353 $ 5,267 $ 3,925 $ 17,438
OTHER DATA:
Wireline access lines (at period end)............................ 10,426 10,899 11,322 11,806 11,959
Route miles (at period end)(h)................................... 450 485 485 516 545
Fiber miles (at period end)(i)................................... 10,397 10,817 10,817 11,189 11,537
Ending cellular subscribers...................................... 8,644 15,283 21,481 26,614 34,306
Cellular penetration(j).......................................... 2.67% 4.63% 6.45% 8.02% 5.51%
Cellular churn(k)................................................ .45% .92% 1.52% 1.83%
Average monthly revenue per cellular subscriber(l)............... $ 52.77 $ 50.45 $ 50.00 $ 48.04
Marketing and selling costs per gross additional cellular
subscriber(m).................................................. $ 392.04 $ 429.06 $ 451.23 $ 472.70
Cellular cell sites (at period end).............................. 18 26 36 46 67
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net fixed assets.......................................... $ 44,910 $ 48,469 $ 48,834 $ 46,987 $ 61,930
Total assets.............................................. 63,273 67,250 69,647 73,490 116,948
Total debt................................................ 53,210 54,874 63,005 65,655 105,495
Preferred stock........................................... -- -- 5,913 5,913 10,000
Stockholders' equity (deficit)............................ 4,219 4,760 (6,824) (6,972) (9,802)
</TABLE>
- ------------------------
(a) Includes the operations of Kansas/Missouri Cluster from March 19, 1996, the
date of its acquisition by the Company.
(b) Reflects minority interests in partnerships in which the Company owns the
majority interests.
(c) Extraordinary items reflect gain or (loss) related to early extinguishment
of debt.
(d) Includes $641,000 of additional income to give cumulative effect to
accounting change resulting from the implementation of Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes."
(e) EBITDA is provided because it is a measure commonly used in the industry to
determine a company's ability to incur or service debt. EBITDA is not
derived pursuant to generally accepted accounting principles and should not
be construed as an alternative to net income, as a measure of performance,
or to cash flows, as a measure of liquidity. The calculation of EBITDA does
not include the Company's commitments for capital expenditures or payments
of debts and should not be deemed to represent funds available to the
Company.
(f) Includes EBITDA attributable to minority interests in partnerships in which
the Company owns a majority interest. These amounts were $.2 million, $.9
million, $1.5 million, $2.0 million and $2.2 million for the years ended
December 31, 1992, 1993, 1994, 1995 and 1996, respectively.
(g) For the years ended December 31, 1992, 1993 and 1996, earnings were
insufficient to cover fixed charges by $2.3 million, $.2 million and $1.3
million, respectively. "Earnings" are defined as earnings before
extraordinary items and accounting changes, interest expense, amortization
of deferred financing costs, taxes and the portion of rent expense under
operating leases representative of interest. Fixed charges consist of
interest expense, amortization of deferred financing costs and a portion of
rent expense under operating leases representative of interest.
(h) Route miles refers to the number of miles over which fiberoptic cables are
installed.
(i) Fiber miles refers to the number of route miles multiplied by the number of
fibers installed along that path.
(j) Determined by dividing the Company's total ending cellular subscribers for
the period by the estimated total Pops covered by applicable FCC cellular
licenses or authorizations held by the Company.
(k) Churn means the number of cellular subscriber cancellations during a month
as a percentage of the total cellular subscribers at the end of such month.
Churn is stated as the average monthly churn rate for the period.
(l) Excludes roaming revenue.
(m) Determined by dividing cellular marketing and selling costs by the gross
cellular subscribers added during such period. Cellular marketing and
selling costs represent selling expenses and losses incurred on equipment
sales.
35
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial statements have
been prepared to give effect to the Transactions. The accompanying unaudited pro
forma consolidated statement of operations of the Company for the year ended
December 31, 1996 gives effect to the Transactions as if they occurred on
January 1, 1996. However, the information from the Kansas/Missouri Cluster for
the period January 1 to March 19, 1996 has not been included, as it is not
available to the Company. The accompanying unaudited pro forma consolidated
balance sheet as of December 31, 1996 has been prepared as if the Transactions
occurred as of that date. The Acquisitions have been accounted for using the
purchase method of accounting.
The unaudited pro forma consolidated financial statements have been prepared
on the basis of certain assumptions that the Company believes are reasonable,
including assumptions relating to the allocation of the consideration paid and
to be paid in the Acquisitions to the assets and liabilities acquired, based on
estimates of fair values using available information provided by the management
of the Maryland 2, the Horizon Properties and the Arizona 5 systems.
The unaudited pro forma consolidated financial statements and notes thereto
are provided for informational purposes only and do not purport to be indicative
of the results that would have actually been obtained had the Transactions been
completed on the dates indicated or that may be expected to occur in the future.
The unaudited pro forma consolidated financial statements and notes thereto
should be read in conjunction with "Selected Consolidated Financial and Other
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations," "Business--Cellular Markets and Systems" and the historical
financial statements and notes thereto included elsewhere in this Prospectus.
36
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
DOBSON
COMMUNICATIONS HORIZON
CORPORATION MARYLAND 2(A) PROPERTIES ARIZONA 5 ADJUSTMENTS PRO FORMA
--------------- ------------- ----------- ----------- ----------------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenue:
Cellular service....................... $ 17,593 $ 11,195 $ 10,868 $ 2,152 $ (5,359)(b) $ 36,449
Cellular equipment sales............... 662 -- 388 275 -- 1,325
Cellular roaming....................... 7,852 -- 4,264 5,583 6,923(b) 24,622
Wireline telephone service............. 13,472 -- -- -- -- 13,472
Fiber service.......................... 2,313 -- -- -- -- 2,313
Rental income and other................ 1,333 -- -- -- -- 1,333
------- ------------- ----------- ----------- -------- ----------
Total operating revenue.............. 43,225 11,195 15,520 8,010 1,564 79,514
------- ------------- ----------- ----------- -------- ----------
Operating expenses:
Service and equipment.................. 9,076 754 5,666 1,343 3,723 (c)(d 20,562
General and administrative............. 12,087 -- 2,144 1,208 774(d) 16,213
Marketing and selling.................. 4,908 2,272 2,479 1,081 565(d) 11,305
Depreciation and amortization.......... 9,720 -- 2,331 1,244 11,718(e) 25,013
------- ------------- ----------- ----------- -------- ----------
Total operating expenses............. 35,791 3,026 12,620 4,876 16,780 73,093
------- ------------- ----------- ----------- -------- ----------
Operating income......................... 7,434 8,169 2,900 3,134 (15,216) 6,421
------- ------------- ----------- ----------- -------- ----------
Other income (expense), net.............. (1,587) -- -- (36) -- (1,623)
Interest expense, net.................... (6,477) -- (1,454) -- (27,332)(f) (35,263)
------- ------------- ----------- ----------- -------- ----------
Income before minority interests, income
taxes and extraordinary item........... (630) 8,169 1,446 3,098 (42,548) (30,465)
Minority interests in income of
subsidiaries........................... (675) -- -- -- (23)(g) (698)
------- ------------- ----------- ----------- -------- ----------
Income before income taxes and
extraordinary item..................... (1,305) 8,169 1,446 3,098 (42,571) (31,163)
Income tax (provision) benefit........... 411 -- -- -- 114(h) 525
------- ------------- ----------- ----------- -------- ----------
Income before extraordinary item......... (894) 8,169 1,446 3,098 (42,457) (30,638)
Extraordinary item....................... (527) -- -- -- (323)(h) (850)
------- ------------- ----------- ----------- -------- ----------
Net income (loss)........................ $ (1,421) $ 8,169 $ 1,446 $ 3,098 $ (42,780) $ (31,488)
Dividends on preferred stock............. (849) -- -- -- -- (849)
------- ------------- ----------- ----------- -------- ----------
Net income (loss) applicable to common
stockholders........................... $ (2,270) $ 8,169 $ 1,446 $ 3,098 $ (42,780) $ (32,337)
------- ------------- ----------- ----------- -------- ----------
------- ------------- ----------- ----------- -------- ----------
Net income (loss) applicable to commons
stockholders per common share.......... (4.12) (58.63)
Weighted average common shares
outstanding............................ 551,567 551,567
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed statement
of operations.
37
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED STATEMENT OF OPERATIONS
(a) The statement of operations for Maryland 2 presents only cellular revenue
and direct operating expenses, as the Maryland 2 operations were included
with other cellular operations of the seller and no full statement of
operations is available.
(b) To reclassify the revenue from non-Maryland 2 subscribers of the prior
operator of Maryland 2 from cellular service to roaming and to reflect the
additional roaming revenue that would have been received by the Company
under its roaming agreement with the prior operator.
(c) To reflect the additional costs of cellular service that would have been
incurred by the Company under its roaming agreement with the prior operator
of Maryland 2 for Maryland 2 subscribers roaming in the prior operator's
other cellular systems.
(d) To reflect the additional costs that the Company anticipates it would have
incurred to operate the Maryland 2 system and other costs that were not
reflected in Maryland 2's statement of cellular revenues and direct
operating expenses.
(e) To reflect the additional depreciation and amortization resulting from the
increase in the fair value of property and equipment, cellular license
acquisition costs and intangible assets. Property and equipment is being
depreciated over five to eight years, cellular license acquisition costs
over fifteen years and intangible assets over five years.
(f) To reflect (i) the elimination of $1.5 million of interest expense
associated with indebtedness of the Acquisitions which was not assumed by
the Company, (ii) $18.8 million of interest expense relating to the $160
million principal amount of Notes, (iii) $14.1 million of interest expense
relating to the $170.5 million of indebtedness incurred under the Bank
Facility (assuming an interest rate of 9.0% per annum), (iv) $1.1 million of
amortization of deferred financing costs relating to the estimated $10.8
million of debt issuance costs incurred in connection with the offering of
the Old Notes and the Bank Facility, and (v) the elimination of $5.2 million
of interest expense relating to the indebtedness under the Company's prior
bank facility which was repaid in the Transactions.
For each .5% change in the assumed interest rate on the Bank Facility,
interest expense would change by approximately $.9 million.
(g) To reflect the 25% equity interest in the income of the Arizona 5
Partnership to be owned by the Gila River Indian Community following the
Arizona 5 Acquisition. See "Business--Cellular Markets and Systems."
(h) To reflect an adjustment to income tax expense for the effects of the
Acquisitions. Net operating loss carryforwards generated have not been
recognized as an income tax benefit due to the uncertainty of realizing the
benefit of these carryforwards.
38
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
ACQUISITIONS(A)
------------------------------------------------------------------
DOBSON
COMMUNICATIONS HORIZON
CORPORATION PROPERTIES ARIZONA 5 ADJUSTMENTS PRO FORMA
--------------- ----------- ----------- ----------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS:
Cash restricted........................... $ -- $ -- $ -- $ 38,300(b) $ 38,300
Current assets............................ 19,956 2,924 2,446 (918) (f) 24,408
Property, plant and equipment............. 61,930 7,607 8,230 (3,837)(c) 73,930
Receivables affiliate..................... 3,267 -- -- 5,224(d) 8,491
Cellular license acquisition costs........ 23,465 31,842 -- 155,946(c) 211,253
Deferred costs............................ 3,952 -- -- 8,206(e) 12,158
Intangible assets......................... 2,771 -- -- 5,243(c) 8,014
Other assets.............................. 1,607 100 -- (100)(c) 1,607
--------------- ----------- ----------- ----------- ----------
Total assets............................ $ 116,948 $ 42,473 $ 10,676 $ 208,064 $ 378,161
--------------- ----------- ----------- ----------- ----------
--------------- ----------- ----------- ----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities....................... $ 8,924 $ 15,638 $ 1,127 $ (13,400)(g) $ 12,289
Long-term debt, net of current portion.... 104,304 -- 8 254,709(h) 359,021
Deferred credits.......................... 1,078 -- -- -- 1,078
Minority interests........................ 2,444 -- -- 13,275 )(d 15,719
Preferred stock........................... 10,000 -- -- -- 10,000(i)
Stockholders' equity (deficit)............ (9,802) 26,835 9,541 (46,520)(j) (19,946)(i)
--------------- ----------- ----------- ----------- ----------
Total liabilities and stockholders'
equity................................ $ 116,948 $ 42,473 $ 10,676 $ 208,064 $ 378,161
--------------- ----------- ----------- ----------- ----------
--------------- ----------- ----------- ----------- ----------
</TABLE>
See accompanying notes to unaudited pro forma consolidated condensed balance
sheet.
39
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED
CONDENSED BALANCE SHEET
(a) No balance sheet as of December 31, 1996 for the Maryland 2 Property is
available, as Maryland 2's operations were included with other cellular
operations of the prior operator. The fair value of the license and customer
list to be acquired in the Maryland 2 Acquisition is reflected in the pro
forma adjustments. See footnote (c) below.
(b) To reflect the approximately $38.3 million in restricted cash to be held in
a pledged account to secure the Notes until payment of the first four
scheduled interest payments. See "Description of the Notes Security."
(c) To allocate the purchase price to the assets acquired and liabilities
assumed as follows:
<TABLE>
<CAPTION>
HORIZON
MARYLAND 2 PROPERTIES ARIZONA 5 TOTAL
----------- ----------- ----------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Estimated acquisition price...................................... $ 75,801 $ 77,700 $ 39,817 $ 193,318
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Historical net book value at December 31, 1996................... 26,835 9,541 36,376
Estimated liabilities not assumed................................ -- 13,400 -- 13,400
----------- ----------- ----------- ----------
Adjusted historical net book value at December 31, 1996.......... -- 40,235 9,541 49,776
Current assets................................................... -- (435) -- (435)
Property, plant and equipment.................................... -- (1,907) (1,930) (3,837)
Cellular license acquisition costs............................... 70,558 39,907 45,481 155,946
Intangible assets................................................ 5,243 -- -- 5,243
Other............................................................ -- (100) -- (100)
----------- ----------- ----------- ----------
75,801 77,700 53,092 206,593
Minority interest................................................ -- -- 13,275 13,275
----------- ----------- ----------- ----------
$ 75,801 $ 77,700 $ 39,817 $ 193,318
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
</TABLE>
(d) To reflect the 25% equity interest in the Arizona 5 Partnership to be owned
by the Gila River Indian Community following completion of the Arizona 5
Acquisition and the $5.2 million loan to be made by the Company to the Gila
River Indian Community in connection with the Arizona 5 Acquisition.
(e) Reflects an estimated $10.8 million of debt issuance costs incurred in
connection with the Offering of the Old Notes, the Bank Facility and the
write-off of approximately $2.6 million of debt issuance costs relating to
the Company's prior bank facility which was repaid with proceeds from the
Bank Facility.
(f) To reflect the reduction in current assets resulting from the repayment by
the Dobson Trusts of approximately $.5 million of liabilities owed to the
Company upon receipt of a dividend of approximately $.5 million.
(g) To eliminate advances from affiliates at December 31, 1996 for Horizon
Properties which were not assumed by the Company in the Horizon Properties
Acquisition.
(h) To reflect the $160.0 million principal amount of Notes and $170.5 million
of indebtedness under the Bank Facility and the repayment of approximately
$75.8 million of indebtedness under the Company's prior bank facility. Does
not give effect to an additional $1.5 million of indebtedness to be
outstanding upon the issuance of the PCS licenses.
(i) Does not reflect a dividend of approximately $1.7 million paid in Class C
Preferred Stock to the Fleet Investors in connection with the Transactions.
(j) To eliminate stockholders' equity accounts of the Acquisitions, to reflect
the write-off of approximately $2.6 million of debt issuance costs related
to the Company's prior bank facility, and to reflect a $7.5 million dividend
paid with respect to the Company's Class A Common Stock in the Transactions.
40
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company provides diversified telecommunication products and services.
The Company currently provides rural cellular telephone services in its
Oklahoma/Texas Cluster and in its Kansas/Missouri Cluster. As a result of the
Recent Acquisitions, the Company also operates cellular systems in Maryland and
Pennsylvania and, upon consummation of the Arizona 5 Acquisition, will also own
and operate a cellular system in Arizona. The Company also owns interests in,
and operates, regional fiberoptic transmission networks in Oklahoma, Texas and
Colorado, and owns and operates local telephone exchanges in Oklahoma, and
intends to resell local, long distance and wireless services in Oklahoma.
CELLULAR
The Company commenced providing rural cellular services in its
Oklahoma/Texas Cluster in 1990. The Company expanded the cluster in 1991 and
developed organizational, marketing and operational programs designed to
increase the number of its cellular subscribers and operating revenue. At
December 31, 1996, the number of subscribers in the Oklahoma/Texas Cluster had
increased to 30,996. In March 1996, the Company further expanded its cellular
operations through the purchase, for approximately $30 million, of the
Kansas/Missouri Cluster with 2,354 subscribers at the time of acquisition. Since
acquiring the Cluster the Company has increased the number of subscribers by
approximately 950, or 41%, and at December 31, 1996, the Kansas/Missouri Cluster
had 3,310 subscribers. While the acquisition of the Kansas/Missouri Cluster
added $.6 million of EBITDA for the period from March 19, 1996 to December 31,
1996, as a result of increased interest expense and amortization resulting from
the acquisition, the Company's cellular business incurred a net loss for the
year ended December 31, 1996.
The Company purchased Maryland 2 and the Horizon Properties for an aggregate
purchase price of $153.5 million, subject to adjustments, in February and March
1997, and expects to purchase a 75% interest in Arizona 5 for a net purchase
price of approximately $39.8 million in June 1997. The size and scope of the
Company's cellular operations increased substantially upon consummation of the
Recent Acquisitions and will increase further upon consummation of the Arizona 5
Acquisition. On a pro forma basis, giving effect to the Acquisitions, the
Company would have had 80,437 subscribers at December 31, 1996. The Company
financed the Recent Acquisitions with proceeds from the Offering and borrowings
under the Bank Facility and will finance the Arizona 5 Acquisition with
additional borrowings under the Bank Facility. Although the Company expects its
EBITDA will increase as a result of the Acquisitions, the increased interest and
amortization expense associated with the Acquisitions is expected to result in
increased losses in 1997 and thereafter until the Company expands the acquired
systems and increases the subscriber base.
There has been an industry trend of declining average revenue per minute, as
competition between service providers has led to reductions in rates for airtime
and subscriptions and other charges. The Company believes that the impact of
this trend will be mitigated by increases in the number of wireless
telecommunications subscribers and the number of minutes of usage per
subscriber. There has also been a broad trend in the cellular industry of
declining average revenue per subscriber. The Company believes that the downward
trend is primarily the result of the addition of new lower usage customers who
utilize cellular services for personal convenience, security or as a backup for
their traditional landline telephone. Although the Company has experienced a
decline in average revenue per subscriber, the Company has introduced new
services, such as voice mail and call forwarding, to increase revenue and
encourage additional usage.
In recent years, the Company, and other cellular companies, have increased
their use of discounts on phone equipment and free phone promotions, as
competition between service providers has intensified. The Company expects that
the use of these promotions will continue. As a result, although the number of
41
<PAGE>
the Company's additional subscribers has been increasing, revenue from equipment
sales has decreased substantially and the Company has incurred, and expects to
continue to incur, losses on cellular equipment sales.
Roaming revenue is a substantial source of revenue for the Company,
accounting for 30.1% of the Company's cellular revenue for the year ended
December 31, 1996 and 39.5% on a pro forma basis after giving effect to the
Acquisitions. While the industry trend is to reduce roaming rates, the Company
believes that, historically, its roaming rates have been generally lower than
rates offered by others in or near the Company's systems and that its roaming
rates have not been materially impacted by this trend. Roaming yield (roamer
service revenue, which includes airtime, toll charges and surcharges, divided by
roaming minutes of use) was $.70 per minute for the years ended December 31,
1995 and 1996.
WIRELINE
The Company has provided local exchange services since 1936, and currently
owns and operates nine contiguous exchanges in western Oklahoma and three
contiguous exchanges adjacent to and east of the Oklahoma City metropolitan
area. The Company's wireline revenues consist of (i) end user revenue, which
includes charges for local service and enhanced services such as call waiting
and call forwarding, (ii) access revenue, which is paid by interexchange
carriers ("IXCs") for providing access from the IXC's point of presence to the
end user who makes or receives a long distance call and (iii) support revenue,
which is paid by federal and state agencies to companies, such as the Company,
which operate in areas where, due to factors such as geographic conditions or
subscriber density, the cost to provide service is higher than normal. Support
revenue, which consists of high cost funds ("HCF") from state agencies and
universal service funds ("USF") from federal agencies, accounted for
approximately 38.5% of the Company's revenue from its wireline operations, or
$5.2 million, for the year ended December 31, 1996.
The Telecommunications Act of 1996 potentially impacts the Company's sources
of support revenue. Under previous regulations access charges contained implicit
support for high cost areas. Regulations proposed pursuant to the 1996 Act would
remove implicit support from access revenues and place more emphasis for such
support on HCF/USF. However, a board consisting of state utility commissioners
and members of the FCC recently recommended changes that would, over time,
reduce or eliminate subsidies to telephone companies in areas where connecting
and maintaining phone lines is expensive. Although the Company cannot predict
whether any such recommended changes will be adopted, management will continue
to pursue its strategy to lessen the impact of any future regulatory changes by
limiting investments in new plant which may not be recoverable in the future,
and by reducing its operating costs through consolidation of operational
functions at the Company level in order to achieve economies of scale. See "Risk
Factors--Potential for Adverse Regulatory Change and Regulatory Approval."
The Company intends to resell local, long distance and wireless services,
initially in the greater Oklahoma City and Tulsa metropolitan areas. The Company
expects to commence offering these services in mid-1997, using its own switches
and leasing local exchange lines. The Company has entered into an agreement with
SWBT, pursuant to which the Company may resell local exchange and other services
in all markets served by SWBT in Oklahoma. The Company expects to incur losses
and negative cash flows in its resale business in 1997 and until it develops and
expands its subscriber base, primarily as a result of marketing and advertising
costs.
FIBER
The Company's revenues from its fiber business are generated from three
different sources: (1) wholesale long-haul transport services as a "carrier's
carrier," (2) transport services to private businesses and government agencies
requiring network services, and (3) long-haul transport services for the
Company's subsidiaries. For 1996, approximately 49% of its gross fiber revenue
was attributable to NTS and approximately 33% of its gross fiber revenue was
attributable to the Company's subsidiaries.
42
<PAGE>
During this period, the Company's operating income and EBITDA have declined as a
percentage of gross fiber revenue primarily as a result of increases in sales
and administrative staff and additional allocations of corporate overhead.
Although the Company currently has excess capacity and does not currently
plan to add additional fiberoptic lines, the Company will seek to expand its
network through interconnect agreements to access other major population centers
(including routes which may be attractive to major carriers).
OTHER
In February 1997, the Company was declared the winning bidder for PCS
licenses for nine markets in the FCC's "F" block auction. The Company's total
bids amounted to $5.1 million (net of discounts) and the licenses will cover
approximately 4.2 million Pops in markets that are adjacent to or overlap the
Company's existing cellular clusters. The Company is exploring plans to develop
these markets through the creation of alliances with other wireless companies
with similar technology, including reselling and roaming agreements and,
potentially, partitioning spectrum.
The following table is a summary of certain data related to the Company's
principal business activities for the periods indicated and includes
intercompany transactions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
($ IN THOUSANDS EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C>
CELLULAR:
Operating revenue............................. $ 15,169 $ 18,989 $ 26,107
Operating income.............................. 2,159 3,045 1,947
EBITDA........................................ 3,923 5,439 7,005
Identifiable assets........................... 21,108 19,749 60,859
Total subscribers, at period end.............. 21,481 26,614 34,306
Average monthly revenue per subscriber,
excluding roaming........................... 50.45 50.00 48.04
WIRELINE:
Gross operating revenue....................... $ 14,147 $ 18,842 $ 23,113
Operating income.............................. 2,340 3,625 4,684
EBITDA........................................ 5,413 6,968 8,137
Identifiable assets........................... 35,593 40,604 40,058
Total access lines, at period end............. 11,322 11,806 11,959
FIBER:
Gross operating revenue....................... $ 1,489 $ 2,525 $ 3,453
Operating income.............................. 77 816 804
EBITDA........................................ 774 1,733 2,013
Identifiable assets........................... 13,092 13,137 16,032
Equivalent DS3 lines, at period end........... 8 20 46
</TABLE>
HISTORICAL RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
OPERATING REVENUE. For the year ended December 31, 1996, total operating
revenue increased $8.8 million, or 25.5%, to $43.2 million from $34.4 million
for the comparable period in 1995.
CELLULAR. The Company's operating revenue from its cellular operations
increased $7.1 million in 1996 compared to 1995. Cellular service revenue
increased $3.6 million, or 26.1%, to $17.6 million in 1996
43
<PAGE>
from $14.0 million in 1995. Of the $3.6 million increase, $2.5 million was
attributable to increased penetration and usage in the Oklahoma/Texas Cluster
and $1.1 million was attributable to the acquisition of the Kansas/Missouri
Cluster in March 1996. The Company's cellular subscriber base increased 28.9% to
34,306 at December 31, 1996, from 26,614 at December 31, 1995, of which 42.5%
(3,270 subscribers) was attributable to increased penetration in the
Oklahoma/Texas Cluster. However, the Company's average monthly cellular service
revenue per subscriber decreased 3.9% to $48.04 for the year ended December 31,
1996 from $50.00 for the year ended December 31, 1995 due to competitive market
pressures and the addition of new lower usage subscribers. Cellular equipment
sales of $.7 million in 1996 represented a slight decrease over 1995. Although
the Company sold more equipment during the year ended December 31, 1996, the
Company increased its use of discounted equipment and free phone promotions with
the signing of one-year service contracts. Cellular roaming revenue increased
$3.5 million, or 79.7%, to $7.9 million in the year ended December 31, 1996 from
$4.4 million for the same period of 1995. Of the $3.5 million increase, $1.9
million, or 54.3%, was as a result of the inclusion of the Kansas/Missouri
Cluster from March 1996 with roaming minutes of use totaling 1.7 million from
the acquisition date to December 31, 1996. The remaining $1.6 million, or 45.7%,
resulted from a 37.4% increase in roaming minutes of use in 1996 for the
Oklahoma/Texas Cluster.
WIRELINE. The Company's revenue from its wireline operations increased $.8
million to $14.8 million for the year ended December 31, 1996 compared to $14.0
million for the same period in 1995. Wireline telephone service revenue
increased $.7 million, or 5.1%, to $13.5 million for the year ended December 31,
1996 from $12.8 million for the same period in 1995 due to a 1.3% increase in
the number of access lines. Other revenue increased $.1 million, or 7.7%, to
$1.3 million in 1996 primarily as a result of an increase in management services
provided to third parties.
FIBER. The Company's revenue from its fiber operations increased $.9
million to $2.3 million in 1996 from $1.4 million in 1995 primarily as a result
of an increase in the number of fiber lines leased by an equivalent of 26 DS3
lines, bringing the total lines leased to an equivalent of 46 DS3s at December
31, 1996, partially offset by a decline in leased line charges.
COST OF SERVICES AND EQUIPMENT SALES. For the year ended December 31, 1996,
the total cost of services and equipment sales increased $2.1 million, or 30.0%,
to $9.1 million from $7.0 million for the comparable period in 1995.
CELLULAR. Cost of cellular services increased $1.3 million, or 42.7%, to
$4.5 million during 1996 from $3.2 million in 1995. Cost of services includes
costs incurred for access for local exchange company facilities, rerating,
roaming validation (provided by a third party clearinghouse) and long distance
toll services. Of the increase, 58.7% was attributable to the inclusion of the
Kansas/Missouri Cluster from March 1996. The remaining increase primarily is the
result of roaming agreements entered into by the Company in 1995 with eleven
other carriers in Texas and Oklahoma to expand its home rate coverage. Cost of
cellular service increased as a percentage of cellular service and roaming
revenue to 17.7% for the year ended December 31, 1996 from 17.2% for the same
period in 1995. Cost of cellular equipment increased $.6 million, or 27.7%, to
$2.6 million in 1996 from $2.0 million in 1995. The increase resulted primarily
from increases in the volume of equipment sales due to the growth in subscribers
during 1996, partially offset by a decrease in equipment costs.
WIRELINE. Cost of wireline telephone service increased $.2 million, or
8.5%, to $1.9 million in 1996 from $1.7 million in 1995. Cost of wireline
telephone service in 1996 increased as a percentage of wireline telephone
service revenues to 13.9% from 13.5% in 1995 as a result of increased
maintenance costs of wireline plant and costs associated with continued
subscriber growth.
FIBER. Cost of fiber service remained constant at $.1 million for the years
ended December 31, 1996 and 1995.
44
<PAGE>
GENERAL AND ADMINISTRATIVE COSTS. For the year ended December 31, 1996,
general and administrative costs increased $2.0 million, or 19.2%, to $12.1
million from $10.1 million for 1995. The increase was primarily due to increased
billing costs as a result of the growth in cellular subscribers, the inclusion
of the Kansas/Missouri Cluster from March 1996 and increased salary costs
resulting from additional personnel in its cellular and fiber operations.
General and administrative costs decreased as a percentage of the Company's
total revenues to 28.0% in 1996 from 29.4% in 1995.
MARKETING AND SELLING COSTS. Marketing and selling costs increased $1.7
million, or 55.5%, to $4.9 million in 1996 from $3.2 million in 1995. The
increase was primarily due to the higher level of cellular subscribers added
period to period. Gross cellular subscribers added for the year ended December
31, 1996 was 11,709 with the Kansas/Missouri Cluster making up 1,511 of the
gross cellular subscribers added since its acquisition. The gross number of
cellular subscribers added in 1995 was 9,653.
DEPRECIATION AND AMORTIZATION EXPENSE. For 1996, depreciation and
amortization expense increased $3.1 million to $9.7 million from $6.6 million in
1995. Approximately $1.2 million of the increase was the result of the
amortization of the licenses acquired in the Kansas/Missouri Cluster, with the
remainder due primarily to the increase in equipment in the Company's cellular,
wireline and fiber businesses.
INTEREST EXPENSE, NET. For 1996, interest expense, net increased $2.7
million to $6.5 million from $3.8 million in 1995. The increase was primarily a
result of increased borrowings to finance the Kansas/ Missouri Cluster
acquisition and the acquisition of fiber equipment.
OTHER INCOME (EXPENSE), NET. For 1996, other expense increased $1.1 million
to $1.6 million from $.5 million in 1995 primarily as a result of a $1.7 million
pretax loss on the disposal of two mobile telecommunications switching offices
and related equipment sold during 1996 in connection with the technology upgrade
of the Company's systems in the Oklahoma/Texas Cluster.
EXTRAORDINARY EXPENSE. For the year ended December 31, 1996, the Company
incurred a pretax loss of approximately $.9 million as a result of writing off
previously capitalized financing costs associated with a revolving credit
facility that was refinanced in March 1996. The Company expects to incur a
pretax loss of approximately $2.6 million in 1997 as a result of writing off
capitalized financing costs associated with its prior bank facility which was
refinanced in connection with the Transactions.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
OPERATING REVENUE. For the year ended December 31, 1995, total operating
revenue increased $6.2 million, or 22.0%, to $34.4 million from $28.2 million
for 1994.
CELLULAR. The Company's operating revenue from its cellular operations
increased $3.8 million in 1995 compared to 1994. Cellular service revenue
increased $3.1 million, or 28.0%, to $13.9 million in 1995 from $10.9 million in
1994 as a result of continued subscriber growth in the Company's Oklahoma/Texas
Cluster. The Company's total subscriber base was 26,614 as of December 31, 1995,
a 23.9% increase from 21,481 subscribers as of December 31, 1994. The Company's
average monthly churn rate increased to 1.52% for 1995 from an average monthly
churn rate of .92% for 1994. Cellular equipment sales decreased $.3 million to
$.7 million for 1995 from $1.0 million in 1994 due to increased use of
discounted equipment and free phone promotions. Cellular roaming revenue
increased $1.1 million, or 34.4%, to $4.4 million in 1995 from $3.3 million in
1994 as a result of a 34.0% increase in roaming traffic. Roaming yield was $.71
in 1994, decreasing by $.01 to $.70 in 1995.
WIRELINE. The Company's revenue from its wireline operations increased $1.9
million to $14.0 million in 1995 compared to $12.2 million in 1994. Wireline
telephone service revenue increased $1.2 million, or 10.8%, to $12.8 million
during 1995 from $11.6 million in 1994. USF support revenue increased 29.4% in
1995 as a direct result of the increase in wireline equipment put into service.
The increase in support revenue accounted for $.6 million of the increase in
total wireline telephone service revenue. In addition,
45
<PAGE>
wireline access lines increased 4.3% in 1995. Revenue from other operations
increased $.6 million to $1.2 million for 1995 from $.6 million for 1994 due to
an increase in management services provided to third parties and an increase in
interest from Company held loans.
FIBER. The Company's revenue from its fiber operations increased $.5
million to $1.4 million during 1995 from $0.9 million in 1994 as a direct result
of increasing fiber line leasing. The number of fiber lines leased increased by
an equivalent of 12 DS3 lines for 1995 bringing the total lines leased to an
equivalent of 20 DS3s at December 31, 1995.
COST OF SERVICES AND EQUIPMENT SALES. For the year ended December 31, 1995
the total cost of services and equipment sales increased $1.6 million, or 29.5%,
to $7.0 million from $5.4 million for 1994.
CELLULAR. Cost of cellular services increased $1.2 million, or 58.4%, to
$3.2 million in 1995 from $2.0 million in 1994. Of this increase, approximately
56.7% was due to networking and engineering costs increased to add 10 cell sites
to bring the total sites to 46 at December 31, 1995. The Company entered into
roaming agreements in 1995 with eleven other carriers in Texas and Oklahoma to
expand its home rate coverage which accounted for approximately 24.1% of the
increase in cost of cellular services in 1995. The remaining 19.2% was due to
increases in technician salary expenses, cell site repairs, utilities and toll
charges. Cellular equipment costs increased $.5 million or 34.0%, to $2.0
million for 1995 from $1.5 million in 1994. The increase in cellular equipment
costs was due to a 17.8% increase in gross subscribers added during 1995
compared to 1994.
WIRELINE. Cost of wireline telephone service decreased slightly to $1.7
million in 1995 from $1.8 million in 1994, primarily as a result of the
consolidation of network monitoring operations. Cost of wireline telephone
service as a percentage of wireline telephone service revenue decreased to 13.5%
in 1995 from 15.5% in 1994.
FIBER. Cost of fiber service remained at $.1 million.
MARKETING AND SELLING COSTS. Marketing and selling costs increased slightly
to $3.2 million during 1995 from $3.1 million in 1994 as a result of the
increase in the number of subscribers.
DEPRECIATION AND AMORTIZATION EXPENSE. Depreciation and amortization
expense increased $1.2 million to $6.7 million in 1995 from $5.5 million in
1994. The increase was primarily due to the addition of 10 new cellular cell
sites in 1995 and, to a lesser extent, due to an increased investment in
equipment for the wireline operations.
GENERAL AND ADMINISTRATIVE COSTS. General and administrative costs
increased $.5 million to $10.1 million in 1995 from $9.6 million in 1994,
primarily as a result of incremental costs incurred to maintain and retain
cellular subscribers offset by a slight decrease in customer and corporate
operations in the Company's wireline operations.
INTEREST EXPENSE, NET. Interest expense, net increased $.9 million to $3.8
million in 1995 from $2.9 million in 1994, primarily as a result of borrowings
to fund a $5.0 million deposit required to participate in the FCC's "C" Block
PCS license auctions and borrowings to finance the repurchase of outstanding
common stock of the Company. The Company was not successful in the "C" Block
auctions.
EXTRAORDINARY INCOME. In 1994 the Company realized extraordinary income of
approximately $354,000 from the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
The cellular telephone business requires substantial capital to acquire,
construct, and expand cellular telephone systems and to fund operating
requirements. The Company historically has financed its acquisitions and other
capital needs through vendor financing, bank debt and proceeds from the sale of
46
<PAGE>
equity. The Company's wireline and fiber businesses have historically been
financed through government loans.
The Company's capital expenditures (excluding cost of acquisitions) were
$17.4 million for the year ended December 31, 1996 and the Company expects its
capital expenditures (excluding cost of acquisitions) to be approximately $19
million for 1997. Capital expenditures for its cellular operations include
buildout of new cell sites and new store locations in the Kansas/Missouri
Cluster, in the Maryland/ Pennsylvania Cluster and in Arizona 5. The fiber
operations capital expenditures will be for electronics to increase capacity and
the Company expects to invest only maintenance capital for its wireline
operations. The Company expects to invest approximately $4.0 million in high
capacity switches in 1997 for use in its resale business in Oklahoma City and
Tulsa, and in its wireline operations.
In February 1997, the Company was declared the winning bidder for PCS
licenses in nine markets adjacent to and overlapping the Company's existing
cellular footprint. The aggregate bid for these licenses was $5.1 million after
a discount of 15%. The Company has paid 10% of the winning bid amount and
another 10% will be payable upon granting of the licenses. The balance will be
financed by the government at the U.S. Treasury rate for ten-year obligations
and will amortize quarterly over eight years after the second year. The Company
is required to build out systems covering 25% of the population within the first
five years after obtaining the licenses. The Company currently anticipates that
the cost to build out the minimum PCS system will be $10 million to $30 million.
The actual amount of the expenditures will depend on the PCS technology selected
by the Company, the extent of the Company's buildout, the costs at the time of
buildout and the extent the Company must relocate incumbent microwave licensees.
The amount and timing of capital expenditures may vary depending on the rate
the Company expands and develops its cellular systems, whether the Company
consummates additional acquisitions, the rate at which the Company builds out a
PCS system and whether the Company expands its fiberoptic network or local
exchange operations.
The minority partners in the Company's partnerships that own certain of its
cellular operations receive distributions equal to their share of the profit
multiplied by estimated income tax rates. In 1995 and 1996, the minority
partners received distributions of $.9 million and $.1 million, respectively.
Under the Bank Facility, the Company's minority partners are not entitled to
receive any cash distributions in excess of amounts required to meet income tax
obligations until all indebtedness of their respective partnerships is paid or
extinguished.
The Company has paid dividends each year in amounts sufficient to fund the
interest and principal payments owed by certain of its shareholders with respect
to debt incurred in November 1994 to purchase common stock. In 1995 and 1996,
the Company paid aggregate dividends on its common stock of $.7 million and $.6
million, respectively. In connection with the Transactions, the Company paid a
$7.5 million dividend, of which $6.0 million was used to repay such debt and $.5
million was used to pay indebtedness to the Company. The Company does not expect
to pay dividends on its common stock in the foreseeable future. See
"Management--Certain Transactions."
As of December 31, 1996, on a pro forma basis giving effect to the
Transactions, the Company would have had $360.2 million of indebtedness
outstanding, including $170.5 million of secured indebtedness under the Bank
Facility, and $29.7 million of secured indebtedness to the RUS/RTB. See
"Description of Other Indebtedness and Preferred Stock." The Bank Facility will
amortize quarterly beginning June 30, 2000 until the Bank Facility terminates on
September 30, 2005. The RUS/RTB loans have scheduled maturities between 1997 and
2028. The indebtedness under the Bank Facility and the RUS/RTB loans may need to
be refinanced at their maturity. The Company's ability to do so will depend
upon, among other things, its financial condition at the time, the restrictions
on its indebtedness and other factors, including market conditions, beyond the
control of the Company. See "Risk Factors--Leverage; Significant Capital
Requirements; Ability to Meet Required Debt Service; Refinancing Risk."
47
<PAGE>
The Company entered into an interest rate collar to hedge the Company's
interest expense on $36.5 million of its indebtedness under the Bank Facility.
The collar agreement places a ceiling and floor on the interest rate at 7.9375%
and 5.25% and expires in April 1998. The Bank Facility requires the Company to
enter into a hedging agreement by April 29, 1997 for one-half of its
indebtedness under the Bank Facility.
A portion of the net proceeds from the Offering was used to purchase a
portfolio of Pledged Securities, consisting of U.S. government securities, that
will be held as security for the payment of the first four scheduled interest
payments on the Notes.
Although there can be no assurance, management believes the proceeds from
the Offering, together with cash on hand, borrowings under the Bank Facility and
cash flow from operations will be sufficient to fund the Acquisitions, the
Company's capital expenditures and its working capital and debt service
requirements. The Company may require additional financing for future
acquisitions and to meet the required PCS buildout. Also, the holders of the
Class B Preferred Stock have the right to require the Company to purchase their
Class B Preferred Stock beginning in 2001, and the Company is required to redeem
the Class C Preferred Stock in 2002, or in both cases earlier under certain
circumstances. However,
in connection with the Offering the Fleet Investors acknowledged that the
Indenture could restrict the Company from repurchasing their stock for cash and
agreed that any claim for such payment would be subordinate in right of payment
to the Notes. See "Description of Other Indebtedness and Preferred
Stock--Preferred Stock." Sources of additional capital may include cash flow
from operations and public or private debt or equity financings, including
vendor financing. There can be no assurance that any additional financing will
be available to the Company or, if available, that it can be obtained on terms
acceptable to the Company and within the limitations contained in the Company's
financing arrangements. The successful implementation of the Company's strategy,
including the further development of its cellular systems and significant and
sustained growth in the Company's cash flow, is necessary for the Company to
meet its debt service requirements, including its obligations under the Notes.
See "Risk Factors-- Leverage; Significant Capital Requirements; Ability to Meet
Required Debt Service; Refinancing Risk."
In connection with the repayment of the indebtedness outstanding under its
prior bank facility, the Company expects to recognize a pretax loss of
approximately $2.6 million as a result of writing off deferred financing costs
associated with its prior bank facility.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The Company
adopted SFAS No. 121 in 1996 with no impact on its consolidated financial
position or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which the Company adopted in 1996. SFAS 123 allows companies to
either account for stock-based compensation under the new provisions of SFAS No.
123 or under the provisions of Accounting Principles Board Opinion No. 25 ("APB
25"), but requires pro forma disclosure in the footnotes to the financial
statements, if material, as if the measurement provisions of SFAS 123 had been
adopted. The Company has determined that the effect of SFAS 123 on a pro forma
basis would not be material. The Company intends to continue accounting for its
stock-based compensation in accordance with the provisions of APB 25. As such,
the adoption of SFAS No. 123 did not have an impact on the financial position or
the results of operations of the Company.
48
<PAGE>
BUSINESS
GENERAL
The Company provides diversified telecommunications products and services.
The Company currently provides rural cellular telephone services in its
Oklahoma/Texas Cluster, a cluster of RSAs and a small MSA located in western
Oklahoma and the Texas panhandle, in its Kansas/Missouri Cluster, a cluster of
RSAs in northeastern Kansas and northwestern Missouri near Kansas City, and in
its Maryland/Pennsylvania Cluster, a cluster of RSAs and small MSAs in Maryland
and Pennsylvania. Upon consummation of the Arizona 5 Acquisition, the Company
will also own and operate a cellular system in Arizona. The Company also owns
interests in, and operates, regional fiberoptic transmission networks in
Oklahoma, Texas and Colorado, and owns and operates local telephone exchanges in
Oklahoma and intends to resell local, long distance and wireless services in
Oklahoma. On a pro forma basis giving effect to the Transactions, for the year
ended December 31, 1996, the Company would have had operating income of $6.4
million and EBITDA of $31.4 million.
RURAL CELLULAR
The Company's principal focus is the ownership, operation and development of
rural cellular systems. The Company believes rural cellular systems generally
provide strong growth opportunities due to lower penetration rates and higher
subscriber growth rates compared to large MSAs. The Company believes rural
cellular areas, which have a significant number of potential customers with
substantial needs for wireless communications, have not yet been developed as
fully as large MSAs, which were licensed earlier by the FCC. In addition, the
Company believes that, in the near term, rural cellular areas will be subject to
less competition from other wireless providers as compared to large MSAs. The
Company focuses on strategic areas that are underdeveloped and possess the
potential for increased cellular usage and superior financial performance. In
particular, the Company focuses on RSAs and small MSAs that (i) are adjacent to
major metropolitan areas, (ii) have favorable demographics, (iii) include a high
concentration of expressway corridors that facilitate a significant amount of
roaming activity, or (iv) are contiguous with existing systems or are clusters
of contiguous systems.
The Company purchased licenses and systems in a cluster of strategically
located RSAs and small MSAs in Maryland and Pennsylvania in February and March
1997 and has entered into a purchase agreement pursuant to which it will
purchase a 75% interest in the partnership which owns the license and system in
Arizona 5. Following the completion of the Arizona 5 Acquisition, the Company's
cellular systems will include approximately 1.7 million total Pops (1.5 million
Net Pops). On a pro forma basis giving effect to the Transactions, the Company's
operating income and EBITDA from its cellular operations for the year ended
December 31, 1996 would have been $.9 million and $21.3 million, respectively,
and the Company would have had 80,437 subscribers as of December 31, 1996.
The Company began its cellular business in 1990 when it initiated operations
in an area which is now a part of the Oklahoma/Texas Cluster and in 1991
acquired the Enid, Oklahoma MSA and Oklahoma 2 RSA. Since the inception of the
its cellular business, the Company has developed organizational, marketing and
operational programs designed to increase the number and stability of
subscribers, promote superior customer service, control subscriber acquisition
costs and enhance operating cash flow. These programs include increasing the
Company's local presence, expanding coverage through the addition of cell sites,
enhancing system technology and offering simplified rate plans. Through December
31, 1996 the number of subscribers in the Oklahoma/Texas Cluster had grown to
30,996 (representing a 9.0% market penetration rate).
Since acquiring the Kansas/Missouri Cluster in March 1996, the Company has
begun to implement its organizational, marketing and operational programs in
this cluster. Through December 31, 1996, the Company had added four new retail
locations. In 1997, the Company intends to open additional retail locations and
to expand its coverage by increasing its cell sites from 21 to 31. The
implementation of the
49
<PAGE>
Company's programs has increased the number of subscribers in the
Kansas/Missouri Cluster by approximately 950 net additions to a total of 3,310
subscribers at December 31, 1996. The EBITDA attributable to the Kansas/Missouri
Cluster from its acquisition on March 19, 1996 through December 31, 1996 was $.6
million. The Company expects to incorporate similar programs in the properties
acquired pursuant to the Acquisitions.
The following table sets forth certain data with respect to the Company's
existing cellular systems and the system which will be acquired in the Arizona 5
Acquisition.
<TABLE>
<CAPTION>
TOTAL TOTAL MARKET DATE
CLUSTER POPS OWNERSHIP NET POPS SUBSCRIBERS (A) PENETRATION (B) ACQUIRED/EXPECTED
- ---------------------------- --------- ----------- --------- --------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
OKLAHOMA/TEXAS(C)
Oklahoma 5 RSA(d)......... 32,500 64.4% 20,914 5,994 18.4% August 1989
Oklahoma 7 RSA(d)......... 115,700 64.4 74,453 7,628 6.6 August 1989
Texas 2 RSA............... 89,700 61.0 54,717 11,973 13.3 August 1989
Enid, OK MSA.............. 57,600 100.0 57,600 2,817 4.9 September 1991
Oklahoma 2 RSA............ 48,800 100.0 48,800 2,584 5.3 May 1991
--------- --------- ------
Total................... 344,300 256,484 30,996 9.0
--------- --------- ------
KANSAS/MISSOURI
Kansas 5 RSA.............. 118,200 100.0 118,200 914 .8 March 1996
Missouri 1 RSA............ 42,600 100.0 42,600 1,260 3.0 March 1996
Missouri 4 RSA............ 68,800 100.0 68,800 1,069 1.6 March 1996
Missouri 5 RSA(e)......... 14,200 100.0 14,200 67 .5 March 1996
Missouri 2 RSA............ 34,200 100.0 34,200 -- -- March 1996
--------- --------- ------
Total................... 278,000 278,000 3,310 1.2
--------- --------- ------
MARYLAND/PENNSYLVANIA
Maryland 2 RSA............ 444,700 100.0 444,700 18,728 4.2 March 1997
Cumberland, MD MSA(f)..... 68,000 100.0 68,000 28 -- February 1997
Hagerstown, MD MSA........ 127,800 100.0 127,800 1,253 1.0 February 1997
Maryland 3 RSA............ 184,200 100.0 184,200 19,204 10.4 February 1997
Pennsylvania 10 West
RSA(f).................. 49,500 100.0 49,500 1,251 2.5 February 1997
--------- --------- ------
Total................... 874,200 874,200 40,464 4.6
--------- --------- ------
ARIZONA 5................... 184,400 75.0 138,300 5,667 3.1 Pending
--------- --------- ------
Total................... 1,680,900 1,546,984 80,437 4.8%
--------- --------- ------
--------- --------- ------
</TABLE>
- ------------------------
(a) As of December 31, 1996.
(b) Determined by dividing total subscribers by the total Pops covered by the
applicable FCC cellular license or authority.
(c) The Company also owns a 5% interest in a partnership which owns a cellular
system in Oklahoma 3 RSA, which had total Pops of 205,600. Information on
the Oklahoma 3 RSA is excluded because the Company does not manage the
system.
(d) The Company's FCC licenses for the Oklahoma 5 RSA and the Oklahoma 7 RSA do
not include Kingfisher and Blaine Counties and approximately one-half of
Dewey County (total Pops estimated by the Company to be 3,000 for the area
in Dewey County not covered by the Company's FCC license), and Harmon and
Greer Counties, respectively. Information for these two RSAs relates only to
the areas covered by the Company's FCC licenses.
(e) The Company's FCC license for the Missouri 5 RSA covers only the Linn County
portion of the RSA. Information for this RSA relates only to the area
covered by the Company's FCC license. See "Business--Cellular Markets and
Systems."
50
<PAGE>
(f) The FCC license for the Cumberland, MD MSA covers only the towns of
Cumberland and Frostburg and surrounding areas (total Pops estimated by the
Company to be 68,000) and the FCC license for the Pennsylvania 10 West RSA
covers only Bedford County. Information for this MSA and RSA relates only to
the area covered by the FCC licenses.
WIRELINE
Since 1936, the Company has provided rural local exchange services and
currently owns and operates nine contiguous local telephone exchanges in western
Oklahoma and three contiguous local telephone exchanges adjacent to and
immediately east of Oklahoma City. At December 31, 1996, the Company's local
telephone exchanges served approximately 12,000 access lines. The Company
provides local and long-distance telecommunications services with enhanced and
value-added calling and billing features. The Company intends to leverage its
reputation in and knowledge of local markets by reselling local, long distance
and wireless services, initially in the greater Oklahoma City and Tulsa
metropolitan areas. The Company expects to commence offering these services in
mid-1997 using its own switches and leasing local exchange lines. As a result,
the Company intends to offer these services without building out an extensive
infrastructure. The Company's operating income and EBITDA from its wireline
operations for the year ended December 31, 1996 were $4.7 million and $8.1
million, respectively.
FIBER
The Company operates over 545 miles of fiberoptic lines. It owns and
operates approximately 360 miles of fiberoptic lines between Oklahoma City and
Amarillo, Texas and is a 20% partner in, and manages, a partnership which owns
and operates approximately 185 miles of fiberoptic lines between Springfield,
Colorado and Colorado Springs. The Company's fiber networks are linked to other
fiber networks through interconnection agreements that allow it to provide voice
and data telecommunications services to cities in Texas, Colorado, Oklahoma and
Kansas outside its existing network. These networks utilize advanced fiberoptic
technology and are capable of efficiently transmitting capacity-intensive
services, such as Internet, multimedia applications, frame relay and ATM. The
Company sells capacity on a wholesale basis to telecommunications carriers,
including certain subsidiaries of the Company, and also sells services to public
and private businesses and governmental agencies. While the Company has no plans
to add additional fiberoptic lines, the Company intends to initiate additional
marketing programs to increase its customer base and to increase the use of its
fiberoptic networks by its existing customers and will seek to expand its
networks to additional cities through new interconnection agreements. The
Company's operating income and EBITDA from its fiber operations for the year
ended December 31, 1996 were $.8 million and $2.0 million, respectively.
OTHER
In February 1997, the Company was declared the winning bidder for PCS
licenses in nine markets in Oklahoma, Kansas and Missouri that are adjacent to
or overlap its existing cellular clusters. The Company's total bids in the FCC's
10 MHz "F" Block auction amounted to $5.1 million (net of discounts) and the
licenses will cover approximately 4.2 million Pops. The Company is exploring
plans to develop these markets through the creation of alliances with other
wireless companies with similar technology, including reselling and roaming
agreements and, potentially, partitioning spectrum. The Company has applied to
the FCC to issue the PCS licenses. While no assurance can be given that the
licenses will be issued, the Company has no reason to believe the licenses will
not be issued.
BUSINESS STRATEGY
The Company's business strategy is to focus on the development and
acquisition of rural cellular systems. The principal elements of the Company's
business strategy include:
51
<PAGE>
AGGRESSIVE LOCAL MARKETING AND PROMOTION OF WIRELESS SERVICES. The
Company's marketing programs are designed to distinguish it as the local
market's highest quality wireless services provider, stressing its local sales
offices and local personnel, and its commitment to the community. The Company's
sales efforts are conducted primarily through its direct sales force operating
out of its local retail stores, and, to a lesser extent, through independent
agents in other retail outlets. Management believes that, as a local service
provider with strong local distribution of products and services, the Company
has an advantage over its competitors which do not emphasize a local presence or
focus on local knowledge and community involvement.
TARGETED MARKETING STRATEGY. The Company strives to attract subscribers who
are likely to generate high monthly revenue and low churn rates. It undertakes
extensive market research to identify and design marketing programs to attract
these subscribers and tailor distinctive rate plans and roaming rates to
emphasize the "value" and the "advantage" of the Company's cellular service. The
Company has established regional marketing alliances with neighboring cellular
carriers to create larger "home rate" areas in order to increase its roaming
revenue and to effectively expand the Company's footprint to attract new
subscribers. The Company's sales force compensation is structured to maximize
net subscriber additions in order to achieve high penetration levels and
minimize subscriber churn.
RECOGNIZED BRAND NAMES. The Company uses brand names that are predominant
in the areas surrounding its clusters or have a high degree of local
recognition. The Company markets its cellular products and services under the
CELLULAR ONE-Registered Trademark- brand name in central and northwestern
Oklahoma and in the Kansas/Missouri and Maryland/Pennsylvania Clusters. In
Arizona 5, the Company intends to use the AIRTOUCH-TM- CELLULAR brand name which
is currently in use in the adjacent Phoenix and Tucson areas. By using these
brand names, the Company benefits from the extensive marketing efforts
undertaken to promote these brands in the adjacent metropolitan areas. The
DOBSON CELLULAR-TM- brand name is used by the Company in its remaining service
areas in Oklahoma and in Texas where the Company is an established wireline
service provider and has a high degree of recognition.
SUPERIOR CUSTOMER SERVICE. The Company strives to maintain a high level of
customer satisfaction through a variety of techniques including maintaining
24-hour customer service and active ongoing contact with customers. Customer
service is supported on a local level through the Company's direct sales force
and its retail stores, and through centralized customer service centers. The
Company believes that its emphasis on superior customer service has enabled it
to achieve an average monthly churn rate of 1.83% for the year ended December
31, 1996.
FUNCTIONAL ALLOCATION OF MANAGEMENT RESPONSIBILITIES. The Company employs a
management policy that enables local management, with in-depth market knowledge,
to make day-to-day operating decisions, while retaining centralized control of
budgets, pricing, system design and engineering and financial and administrative
functions. The local operating control fosters a strong sense of customer
service and community spirit. The Company believes its management structure
enables it to customize its marketing strategy to the needs of each local
market, while maximizing efficiencies and support through a centralized
corporate staff and customer service centers.
GEOGRAPHICALLY DIVERSE NETWORK CLUSTERS. The Company seeks to operate its
systems in multiple, contiguous market clusters in diverse geographic areas,
with each cluster of sufficient size to achieve scale economies in operation as
well as cost efficiencies in deploying its network infrastructure. The Company
believes that by owning and operating clusters in diverse geographic areas the
Company's financial performance will be less affected by local economic
conditions and seasonality.
COMMITTED SYSTEM DEVELOPMENT AND EXPANSION. The Company plans to expand and
improve coverage and increase the capacity in its existing systems, and to build
out the acquired systems. The Company believes that expanding and improving
coverage and capacity in its systems will attract additional
52
<PAGE>
subscribers, enhance the use of its systems by existing subscribers, increase
roamer traffic due to the larger geographic area covered by the cellular network
and further enhance the overall efficiency of the network.
The Company intends to upgrade its systems with digital technology to enable
it to increase its roaming services and provide enhanced benefits, including
caller ID, longer battery life and zone billing, to digital cellular subscribers
and PCS subscribers with dual mode phones. The Company recently completed
upgrading its system in the Oklahoma/Texas Cluster to analog/TDMA digital
technology. The timing of the upgrading of the Company's other systems will
depend upon the technology selected by the Company's larger cellular neighbors,
and market conditions.
CELLULAR MARKETS AND SYSTEMS
The following is a description of the Company's existing cellular markets
and the system to be acquired upon consummation of the Arizona 5 Acquisition.
OKLAHOMA/TEXAS CLUSTER
GENERAL. The Oklahoma/Texas Cluster, which consists of the Oklahoma 5 and 7
RSAs, Texas 2 RSA, the Enid, Oklahoma MSA and the Oklahoma 2 (Woodward) RSA,
extends west from Oklahoma City to Amarillo. The Company initiated cellular
operations in the Oklahoma 5 and 7 and Texas 2 RSAs in 1990 when the wireline
FCC licenses were issued. The Oklahoma 5 and 7 and Texas 2 RSAs were start-up
operations in which the Company activated its first cell site in March 1991. The
Oklahoma 2 MSA and the Oklahoma 2 RSA were acquired by the Company in 1991 from
owners who had not developed the market area. The following table provides
certain data regarding the Oklahoma/Texas Cluster:
<TABLE>
<CAPTION>
PRINCIPAL
TOTAL TOTAL MARKET CELLULAR
POPS(A) OWNERSHIP NET POPS SUBSCRIBERS(B) PENETRATION(C) COMPETITORS
----------- ----------- ----------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Oklahoma 5 RSA(d).............. 32,500 64.4% 20,914 5,994 18.4% AT&T Wireless
Oklahoma 7 RSA(d).............. 115,700 64.4 74,453 7,628 6.6 Triad Cellular
Texas 2 RSA.................... 89,700 61.0 54,717 11,973 13.3 Triad Cellular
Enid, OK MSA................... 57,600 100.0 57,600 2,817 4.9 Enid Cellular
Oklahoma 2 RSA................. 48,800 100.0 48,800 2,584 5.3 Enid Cellular
----------- ----------- ------
Total........................ 344,300 256,484 30,996 9.0%
----------- ----------- ------
----------- ----------- ------
</TABLE>
- ------------------------------
(a) The data excludes Oklahoma 3 RSA (total Pops of 205,600) in which the
Company has a 5% interest.
(b) As of December 31, 1996.
(c) Determined by dividing total subscribers by the total Pops covered by the
applicable FCC cellular license.
(d) The Company's FCC licenses for the Oklahoma 5 RSA and the Oklahoma 7 RSA do
not include Kingfisher and Blaine Counties and approximately one-half of
Dewey County (total Pops estimated by the Company to be 3,000 for the area
in Dewey County not covered by the Company's FCC license), and Harmon and
Greer Counties, respectively. Information for these two RSAs relates only to
the areas covered by the Company's FCC licenses.
DEMOGRAPHICS. The Oklahoma/Texas Cluster covers a contiguous area of
approximately 27,000 square miles. The cluster includes the cities of Chickasha,
Clinton, Enid and Woodward in Oklahoma, and Pampa and Borger in Texas. The
Oklahoma 5 and 7 RSAs, extend west from Oklahoma City along Interstate 40 to the
Texas state line. The Texas 2 RSA is located in the eastern half of the Texas
panhandle. The Enid, Oklahoma MSA and Oklahoma 2 RSA are located north and
northwest of Oklahoma City. Enid, with a population of approximately 45,000, is
the largest town in the Oklahoma/Texas Cluster. The Oklahoma/Texas Cluster is
primarily agricultural and oil and gas industry oriented.
MARKETING AND ROAMING. The Company operates under the brand name CELLULAR
ONE-Registered Trademark- in the Enid, Oklahoma MSA and Oklahoma 2 RSA, and
DOBSON CELLULAR-TM- in the rest of the cluster. The Company currently has 18
retail locations and approximately 80 agents in the cluster. The Company has
53
<PAGE>
roaming agreements with SWBM, AT&T Wireless and several other companies which
include their respective market areas in Oklahoma City, Amarillo and adjacent
RSAs.
SYSTEMS. There are 46 cell sites covering approximately 99% of the total
population in the cluster. The Company has completed upgrading its system in
this cluster to be able to offer analog or TDMA digital service. However, the
Company's current subscribers would have to exchange their analog handsets for
new digital handsets in order to receive digital service.
KANSAS/MISSOURI CLUSTER
GENERAL. In March 1996, the Company purchased the cellular licenses and
assets of the Kansas 5 RSA, Missouri 1 RSA, Missouri 4 RSA, and parts of
Missouri 2 and Missouri 5 RSAs and, through December 31, 1996 the Company had
added approximately 950 net subscribers to this system. The Company's authority
to operate in the Missouri 2 RSA is an interim operating authority, which will
be terminated if a permanent license for the Missouri 2 RSA is granted by the
FCC and such licensee commences commercial service in the RSA. The FCC has not
scheduled any proceedings to issue a permanent license for the Missouri 2 RSA.
The Kansas/Missouri Cluster is located in northeastern Kansas and northwestern
Missouri near Kansas City. Cellular services have been provided in the
Kansas/Missouri Cluster since 1992. The following table provides certain data
regarding the Kansas/Missouri Cluster as of December 31, 1996:
<TABLE>
<CAPTION>
TOTAL TOTAL MARKET PRINCIPAL CELLULAR
POPS OWNERSHIP NET POPS SUBSCRIBERS(A) PENETRATION(B) COMPETITORS
--------- ------------- ----------- ----------------- ------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Kansas 5 RSA.............. 118,200 100.0% 118,200 914 .8% SWBM; Kansas Cellular
Missouri 1 RSA............ 42,600 100.0 42,600 1,260 3.0 SWBM
Missouri 4 RSA............ 68,800 100.0 68,800 1,069 1.6 AllTel
Missouri 5 RSA(c)......... 14,200 100.0 14,200 67 .5 Chariton Cellular
Missouri 2 RSA............ 34,200 100.0 34,200 -- -- SWBM; AllTel
--------- ----------- -----
Total................... 278,000 278,000 3,310 1.2%
--------- ----------- -----
--------- ----------- -----
</TABLE>
- ------------------------
(a) As of December 31, 1996.
(b) Determined by dividing total subscribers by the total Pops covered by the
applicable FCC cellular license or authority.
(c) The Company's FCC license for Missouri 5 RSA covers only the Linn County
portion of the RSA. All information for this RSA relates only to the area
covered by the Company's FCC license.
DEMOGRAPHICS. The Kansas/Missouri Cluster covers a contiguous area of
approximately 10,500 square miles. The Kansas 5 RSA is northwest of Kansas City.
Leavenworth, Kansas, is the largest city in the Kansas/Missouri Cluster and
serves primarily as a bedroom community to Kansas City. The Missouri 1 RSA is in
northwest Missouri directly north of St. Joseph and the Missouri 4 RSA is
northeast of Kansas City. The Company's portion of the Missouri 2 RSA serves as
a roaming corridor for I-35, which connects Kansas City and Des Moines. The
Kansas/Missouri Cluster also includes Linn County, Missouri in the northwest
corner of the Missouri 5 RSA, which is contiguous to the Missouri 2 and Missouri
4 RSAs.
MARKETING AND ROAMING. The Company operates under the CELLULAR
ONE-Registered Trademark- service mark in the Kansas/Missouri Cluster. Since
March 1996, the Company has increased the number of retail locations from one to
five, and currently has 18 sales agents in this cluster. The Company has a
roaming agreement with CMT Partners, a partnership between AirTouch and AT&T
Wireless, which includes Kansas City and St. Joseph MSAs and adjacent RSAs. The
Company also has roaming agreements with Western Wireless and U.S. Cellular,
each of which have systems adjacent to the Kansas/Missouri Cluster.
SYSTEMS. The Kansas/Missouri Cluster has 21 cell sites which cover
approximately 60% of the population. The Company expects to convert its system
to analog/digital, although the digital technology
54
<PAGE>
will not be selected until the digital technologies for the Kansas City and St.
Joseph MSAs have been chosen by CMT Partners.
MARYLAND/PENNSYLVANIA CLUSTER
GENERAL. On March 3, 1997, the Company purchased from Maryland Wireless
Communications, L.P. and Wendy C. Coleman the FCC cellular license for, and
certain assets relating to, the Maryland 2 RSA for $75.8 million (subject to
certain adjustments). In January 1997, the Company also purchased from
Washington Baltimore Cellular Limited Partnership ("WBCLP"), an affiliate of
SWBM, for $5.2 million approximately 18,700 customers in the Maryland 2 RSA. The
owner of the Maryland 2 RSA license has had no employees, distribution
facilities or cell sites, and the RSA was serviced by WBCLP on an interim basis.
The agreement with WBCLP also provides for the Company to lease the existing
cell sites and related equipment used by WBCLP in the Maryland 2 RSA. On
February 28, 1997, the Company also purchased from Horizon Cellular Telephone
Company of Hagerstown, L.P. and Cumberland Cellular Partnership the FCC cellular
licenses for, and certain assets relating to, the Horizon Properties for $77.7
million, subject to certain adjustments. Cellular service has been provided in
the Horizon Properties since 1991. The following table provides certain data
regarding the Maryland/Pennsylvania Cluster:
<TABLE>
<CAPTION>
TOTAL TOTAL MARKET PRINCIPAL CELLULAR
POPS OWNERSHIP NET POPS SUBSCRIBERS(A) PENETRATION(B) COMPETITORS
--------- ------------- --------- --------------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Maryland 2 RSA............. 444,700 100.0% 444,700 18,728 4.2% BANM; Sprint
Cumberland, MD MSA(c)...... 68,000 100.0 68,000 28 -- U.S. Cellular
Hagerstown, MD MSA......... 127,800 100.0 127,800 1,253 1.0 Sprint; U.S. Cellular
Maryland 3 RSA............. 184,200 100.0 184,200 19,204 10.4 BANM
Pennsylvania 10 West
RSA(c).................... 49,500 100.0 49,500 1,251 2.5 U.S. Cellular
--------- --------- ------
Total.................... 874,200 874,200 40,464 4.6%
--------- --------- ------
--------- --------- ------
</TABLE>
- ------------------------
(a) As of December 31, 1996.
(b) Determined by dividing the total subscribers by the total Pops covered by
the applicable FCC cellular license.
(c) The FCC license for the Cumberland, MD MSA covers only the towns of
Cumberland and Frostburg and surrounding areas (total Pops estimated by the
Company to be 68,000) and the FCC license for the Pennsylvania 10 West RSA
covers only Bedford County. Information for this MSA and RSA relates only to
the area covered by the FCC licenses.
DEMOGRAPHICS. The Maryland/Pennsylvania Cluster covers approximately 6,200
square miles. The Maryland 2 RSA encompasses suburban areas south and east of
Washington, D.C. as well as the eastern shore of Maryland. Many residents in the
Maryland 2 RSA commute to Annapolis, Baltimore and Washington, D.C. and there is
a heavy traffic pattern in Maryland 2 RSA during the summer months as tourists
travel to and from several popular vacation spots along the eastern shore,
especially Ocean City.
The Horizon Properties are within 100 miles of Washington, D.C. and
Baltimore. The area has numerous high-technology businesses and is considered a
high-commuter market due to its proximity to nearby metropolitan areas.
MARKETING AND ROAMING. In the Maryland/Pennsylvania Cluster, the Company
operates under the brand name CELLULAR ONE-Registered Trademark-, which is the
dominant brand name within the Washington/Baltimore area. The
Maryland/Pennsylvania Cluster presently has seven retail locations and five
agents, and the Company intends to open additional retail locations.
The Company has entered into roaming agreements with SWBM, which operates
under the CELLULAR ONE-Registered Trademark- trade name in the Washington, D.C.
area, that allows each party to include in its home coverage footprint the other
party's system. The Company also has a roaming agreement with Vanguard, which
operates a system adjacent to the Horizon Properties on the north and east.
55
<PAGE>
SYSTEMS. The Company leases 22 cell sites from WBCLP which cover
approximately 95% of the population in the Maryland 2 RSA. During the next three
years, the Company will either acquire these cell sites from WBCLP or construct
its own cell sites. The Horizon Properties currently have fourteen cell sites
covering approximately 99% of the population of the market area.
ARIZONA 5
GENERAL. The Company intends to purchase, through a series of transactions,
a 75% interest in the Arizona 5 Partnership for a net purchase price of
approximately $39.8 million, subject to adjustment. Arizona 5 is located
southeast of Phoenix and northwest of Tucson. ATTI, an affiliate of the Company,
owns an interest in the Arizona 5 Partnership. As part of the Arizona 5
Acquisition, the Company will purchase the outstanding stock of ATTI and the
stockholders of ATTI affiliated with the Company will receive approximately $9.5
million. See "Management--Certain Transactions." In addition, in connection with
the Arizona 5 Acquisition, the Company will loan $5.2 million to the Arizona 5
Partnership which will lend $5.2 million to one of the current partners in the
Arizona 5 Partnership which will use the loan proceeds together with other funds
to acquire a 25% interest in the Arizona 5 Partnership. Cellular services have
been provided in the Arizona 5 RSA since 1991. The Arizona 5 RSA has 184,400
total Pops, resulting in Net Pops of 138,300 to the Company, and, as of December
31, 1996, there were 5,667 subscribers (representing a 3.1% market penetration).
DEMOGRAPHICS. The Arizona 5 RSA covers an area of approximately 10,100
square miles in southern Arizona. The principal industries in the Arizona 5 RSA
are mining and smelting. In addition, the area experiences significant tourist
traffic to the local Indian dwellings and commuter traffic from persons
commuting to Phoenix and Tucson. The service area includes approximately 100
miles of I-10.
MARKETING AND ROAMING. As part of the Arizona 5 Acquisition, the Company
has entered into a roaming agreement and other agreements with WMC Partners,
L.P. ("WMC"), an affiliate of Airtouch and U S WEST. Pursuant to these
agreements the Company is licensed to use the AIRTOUCH-TM- CELLULAR service mark
to identify and promote its cellular telephone service in the Arizona 5 RSA. The
agreements also provide for WMC and the Company to include each other's service
area in its home coverage footprint, allowing both parties to offer a wider
service area. WMC's service area includes Phoenix and Tucson. The Company's
principal competitor will be BANM.
At present, Arizona 5 does not have any retail locations and only seven
agents serve the coverage area. The Company intends to open retail stores,
increase the number of agents, and significantly increase the use and marketing
of the AIRTOUCH-TM- CELLULAR name in the coverage area.
SYSTEMS. Arizona 5 has sixteen cell sites. The system is currently switched
out of the Phoenix office of U S WEST. The Company intends to continue this
arrangement with U S WEST until it purchases its own switch. The Company expects
to convert the system to analog/digital, although the digital technology will
not be selected until WMC chooses a technology for its Phoenix and Tucson
systems.
CELLULAR OPERATIONS
PRODUCTS AND SERVICES
The Company provides a variety of cellular services and products designed to
address a range of consumer, business and personal security needs. In addition
to mobile voice and data transmission, the Company offers ancillary services
such as call forwarding, call-waiting, three-party conference calling, voice
message storage and retrieval and no-answer transfer. The nature of the services
offered by the Company varies depending upon the market area. The Company also
sells cellular equipment at discount prices as a way to encourage use of its
mobile services.
The Company offers cellular service for a fixed monthly access fee
(accompanied by varying allotments of unbilled or "free" minutes), plus
additional variable charges per minute of use and for custom calling features.
Various pricing programs (which may be based on multi-year service contracts)
are
56
<PAGE>
utilized. Unlike some of its competitors, the Company designs rate plans on a
market-by-market basis. The Company's local general managers generally have the
authority to initiate and modify rate plans, depending upon market and
competitive conditions. Generally, these rate plans include a high-volume user
plan, a medium-volume user plan, a basic plan and an economy plan. In general,
rate plans which include a higher monthly access fee typically include a lower
usage rate per minute. An ongoing review of equipment and servicing pricing is
maintained to ensure the Company's competitiveness, and as appropriate,
revisions to pricing of service plans and equipment are made to meet the demands
of the local marketplace.
The Company intends to upgrade its cellular systems to digital technology to
enable it to increase its roaming services and provide enhanced benefits,
including caller ID, longer battery life and zone billing to digital cellular
subscribers and PCS subscribers with dual mode phones. Currently, the Company
does not intend to actively market digital cellular services to its customers
until market conditions in each area will support such services. The Company has
completed the upgrade to digital technology in the Oklahoma/ Texas Cluster.
Because its digital switches will be capable of handling both analog and digital
transmission, the Company will be able to continue to offer analog cellular
service to those customers who do not transfer to digital handsets.
CUSTOMER SERVICE
Customer service is an essential element of the Company's marketing and
operating philosophy. The Company is committed to attracting new subscribers and
retaining existing subscribers by providing consistently high-quality customer
service. In each of its cellular service areas, the Company maintains
installation and repair facilities and a local staff, including a market
manager, customer service representatives, technical and sales representatives.
Each cellular service area handles its own customer-related functions such as
customer activations, account adjustments and rate plan changes. Local offices
and installation and repair facilities enable the Company to service customers
better, schedule installations and make repairs. Through the use of
sophisticated, centralized monitoring equipment, the Company will be able to
centrally monitor the technical performance of its cellular service areas.
In addition, the Company's customers generally are able to report cellular
telephone service or account problems 24-hours a day to the Company's two
central customer service centers on a toll-free access number (with no airtime
charge). Management believes its emphasis on customer service affords it a
competitive advantage over its large competitors. The Company contacts its
subscribers at frequent intervals in order to evaluate and measure, on an
ongoing basis, the quality and competitiveness of its services.
SALES, MARKETING AND DISTRIBUTION
The Company's marketing programs are designed to generate continued net
subscriber growth by focusing on subscribers who are likely to generate high
monthly revenue and low churn rates, while simultaneously maintaining a low cost
of adding net subscribers. The Company undertakes extensive market research to
identify and design marketing programs to attract these subscribers and tailor
distinctive rate plans and roaming rates to emphasize the "value" and the
"advantage" of the Company's cellular service. The Company has established
marketing alliances with neighboring cellular systems to create larger "home
rate" areas and to effectively expand the Company's footprint in order to
increase its roaming revenue and to attract new subscribers. The Company markets
its service offerings primarily through its direct sales force and Company-owned
retail stores. The Company also uses a network of dealers and other agents, such
as electronics stores, car dealerships and department stores. In addition to
these traditional channels, the Company's marketing team continuously evaluates
other, less traditional, methods of distributing the Company's services and
products, such as targeted telemarketing and direct mail programs.
The Company markets its cellular products and services under the name DOBSON
CELLULAR-TM- in portions of western Oklahoma and the Texas panhandle. Elsewhere
in the Oklahoma/Texas Cluster and in the Kansas/Missouri and
Maryland/Pennsylvania Clusters, the Company markets its cellular service under
57
<PAGE>
the name CELLULAR ONE-Registered Trademark-, one of the most recognized brand
names in the cellular industry. The national advertising campaign conducted by
the Cellular One Group enhances the Company's advertising exposure at a fraction
of the cost of what could be achieved by the Company alone. Upon completion of
the Arizona 5 Acquisition, the Company intends to use the service mark
AIRTOUCH-TM- CELLULAR in that service area. See "--Service Marks." The service
mark selected for use by the Company in each of its clusters will, to a large
extent, depend upon the service mark used in neighboring MSAs.
Management trains and compensates its sales force in a manner designed to
stress the importance of customer service, high penetration levels and minimum
acquisition costs per subscriber. The Company believes that its direct sales
force is better able to select and screen new subscribers and select pricing
plans that realistically match subscriber means and needs than are independent
agents. In addition, the Company motivates its direct sales force to sell
appropriate rate plans to subscribers, thereby reducing churn, by linking
payment of commissions to subscriber retention. As a result, the Company's use
of a direct sales force keeps marketing costs low both directly, because
commissions are lower, and indirectly, because subscriber retention is higher
than when independent agents are used.
The Company believes that the after-sale telemarketing program conducted by
its sales force and customer service personnel helps to reduce its churn rate.
This program enhances customer loyalty and allows the sales staff to check
customer satisfaction as well as to offer additional calling features, such as
voicemail, call waiting and call forwarding.
At December 31, 1996, the Company had 14 retail stores and nine other retail
outlets (19 retail stores and 11 other retail outlets on a pro forma basis
giving effect to the Acquisitions). The retail stores range in size from 750
square feet to 5,000 square feet, and each retail store is fully equipped to
handle customer service and telephone maintenance and installation. Some of
these stores are also authorized warranty repair centers. The Company's stores
provide subscriber-friendly retail environments (extended hours, large
selection, an expert sales staff and convenient locations) which make the sales
process quick and easy for the subscriber.
ROAMING
The Company believes that regional roaming is an important service component
for many subscribers. Accordingly, where possible, the Company attempts to
arrange reciprocal roaming rates that allow customers to roam at competitive
prices. The Company believes this increases usage on all cellular systems,
including the Company's. Roaming revenue is a substantial source of revenue for
the Company due, in part, to the fact that a number of the Company's cellular
systems are located in rural areas and because certain of the Company's systems
as well as the systems included in the Acquisitions are in the early stages of
their growth cycle. While there is an industry trend to reduce roaming rates,
the Company believes that, historically, its roaming rates have been generally
lower than the rates offered by others in or near the Company's systems and that
its roaming rates have not been materially impacted by this trend.
The Company has agreements with NACN, which is the largest wireless
telephone network system in the world linking cellular operators throughout the
United States and Canada. NACN connects key areas across North America so that
customers can use their cellular phones to place and receive calls in these
areas as easily as they do in their home areas. Through NACN, customers receive
calls automatically without the use of complicated roaming codes as they roam in
more than 5,000 cities and towns in the United States and Canada. In addition,
special services such as call forwarding and call waiting automatically follow
subscribers as they travel.
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TECHNOLOGY AND SYSTEM DEVELOPMENT
OVERVIEW. Historically, most cellular services have transmitted voice and
data signals over analog-based systems, which use one continuous electronic
signal that varies in amplitude or frequency over a single radio channel.
Digital systems, on the other hand, convert voice or data signals into a stream
of digits that is compressed before transmission, enabling a single radio
channel to carry multiple simultaneous signal transmissions. This enhanced
capacity, along with enhancements in digital protocols, allows digital-based
wireless technologies to offer new and enhanced services, such as greater call
privacy and single number (or "find me") service, and more robust data
transmission features, such as "mobile office" applications (including
facsimile, electronic mail and connecting notebook computers with computer/data
networks).
While digital technology serves generally to reduce transmission
interference relative to analog technology, capacity limitations in the 8
kilobit cellular digital handsets now deployed by most digital cellular
operators also cause a perceptible decline in transmission quality. This gap in
transmission quality has proven to be a significant barrier to cellular
operators seeking to switch their customers from analog to digital service.
Enhanced 13 kilobit digital handsets are now being developed by vendors for
digital cellular systems, and are expected to be available in 1997. These new
handsets are expected to offer digital transmission quality comparable to, if
not better than, current analog cellular handsets.
SYSTEM DEVELOPMENT. The Company develops or builds out its cellular service
areas by adding channels to existing cell sites and by building new cell sites
with an emphasis on improving coverage for hand-held phones in
heavily-trafficked areas. Such development is designed to increase capacity and
to improve coverage in response to projected subscriber demand and in response
to competitive factors. Projected subscriber demand is calculated for each
cellular service area on a cell-by-cell basis. The Company has historically met
such demand through a combination of augmenting channel capacity in existing
cell sites and building new cell sites.
Cell site expansion is expected to enable the Company to continue to add and
retain subscribers, enhance subscriber use of the systems, increase roamer
traffic due to the larger geographic area covered by the cellular network and
further enhance the overall efficiency of the network. The Company believes that
the increased cellular coverage will have a positive impact on market
penetration and subscriber usage.
The Company also continues to evaluate expansion through acquisitions of
other cellular properties that will further enhance its network. In evaluating
acquisition targets, the Company considers, among other things, demographic
factors, including population size and density, traffic patterns, cell site
coverage and required capital expenditures.
DIGITAL TECHNOLOGY. Digital signal transmission is accomplished through the
use of frequency management technologies, or "protocols." These protocols
"manage" the radio channel either by dividing it into distinct time slots (TDMA)
or by assigning specific coding instructions to each packet of digitized data
that comprises a signal (CDMA). While the FCC has mandated that licensed
cellular systems in the U.S. must utilize compatible analog signaling protocols,
at present there is no required universal digital signaling protocol. Because
the CDMA and TDMA protocols are incompatible, a subscriber of a system that
relies on TDMA technology, for example, will be unable to use his handset when
traveling in an area served only by CDMA, unless he carries a dual-mode handset
(which is not yet available) that permits the subscriber to use the cellular
system in that area. However, the FCC or industry organizations may decide to
move toward a universal digital switching protocol in the future.
Over the next decade, it is expected that many cellular systems will convert
from analog to digital technology. This conversion is due in part to capacity
constraints in many of the largest cellular markets, such as New York, Los
Angeles and Chicago. As carriers reach limited capacity levels, certain calls
may be unable to be completed, especially during peak hours. Digital technology
increases system capacity and offers other advantages, often including improved
overall average signal quality, improved call security,
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potentially lower incremental costs for additional subscribers and the ability
to provide data transmission services. The conversion from analog to digital
technology is expected to be an industry-wide process that will take a number of
years to complete. While management does not believe that its network will
experience capacity constraints in the foreseeable future that would require
converting its network from analog to digital technology, management intends to
effect such conversion based upon market demand so that its subscribers will
enjoy the added benefits of digital technology, and the Company will benefit
from increased roamer revenue.
The technology utilized by the Company will be governed, to a large extent,
by the technology used by the large, dominant carriers in MSAs near the
Company's systems. The timing of the conversions will be governed by the
conversion rate of larger, neighboring MSAs and market conditions. The Company's
systems in its Oklahoma/Texas Cluster have been upgraded to enable the Company
to offer analog or TDMA digital services.
INFORMATION SYSTEMS. All billing functions for the Company's cellular
operations are provided by International Telecommunications Data Service
("ITDS"). Proprietary software furnished by ITDS serves all functions of billing
for the corporate and retail locations. All administrative and customer
maintenance functions are handled in-house with invoice processing and printing
handled by ITDS. The Company uses complementing software to the billing system
allowing the use of credit, collection, and switch interfaces. Bill processing
is performed off-site by a billing vendor.
The Company operates a Nortel Meridian phone system with voice mail
features. In addition, the Company's customer service and collections groups
extensively utilize the automatic call distribution queues and traffic and
productivity reporting capacities of the system.
WIRELINE
The Company provides wireline telephone services to nine contiguous local
exchanges in western Oklahoma and three contiguous local exchanges adjacent to
and east of the Oklahoma City metropolitan area. These services are provided
through Telco.
Telco, like other wireline companies who operate in areas where, due to
factors such as geographic conditions or subscriber density, the cost to provide
service is higher than normal, receives high cost support funds (HCF) (from
state jurisdictions) and the federal universal service fund (USF). Approximately
38% of the Company's revenue from its wireline operations for the nine months
ended September 30, 1996 was from these two sources. Telco's other primary
sources of revenue consist of end user revenue and access revenue. End user
revenue include charges for local service and enhanced services such as call
waiting and call forwarding. Access revenue are amounts charged by Telco to IXCs
for providing access from the IXCs' point of presence to the end user who makes
or receives a long-distance call.
The Telecommunications Act of 1996 (the "1996 Act") potentially impacts
these revenue sources. Under previous regulation, access charges contained
implicit support for high cost areas. The proposed rules would remove implicit
support from access revenues and place more emphasis for such support on
HCF/USF. Thus, in the near term, the Company expects that the 1996 Act will be
revenue neutral for Telco. However, a board consisting of state utility
commissioners and members of the FCC has recently recommended changes that
would, over time, reduce or eliminate subsidies to telephone companies. Although
the Company cannot predict whether any such recommended changes will be adopted,
management will continue to pursue its strategy to lessen the impact of any
future regulatory changes by limiting substantial investments in new facilities
which may not be recoverable in the future and by reducing its operating costs
through consolidation of operations at the Company level in order to achieve
economies of scale. Additionally, efforts are continuing to maximize revenues
from sources such as enhanced services, rather than from support funds. Although
there can be no assurance, management believes these pro-active steps will
assist in maintaining the stability of Telco's long-term revenue.
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The Company expects to commence reselling local exchange, long-distance,
wireless, data transmission and internet access services in the Oklahoma City
and Tulsa metropolitan areas in mid 1997. The Company has an agreement which
allows the Company to provide these services in all markets served by SWBT in
Oklahoma. Initially, however, the Company will focus on Oklahoma City, where the
Company can leverage off of its existing wireline operations in McLoud, and in
Tulsa. By using its own switches and leasing local exchange lines, the Company
expects to offer these services without building out an extensive
infrastructure. The Company intends to utilize its existing reputation and
goodwill by offering a full range of telecommunication services under the
LOGIX-TM- brand name. The Company intends to focus primarily on small and
mid-size businesses and residential customers.
FIBER
The Company operates over 545 miles of fiberoptic lines. The Company entered
the fiber business in 1990 when it joined with AT&T to place fiber between
Oklahoma City and Amarillo, Texas. The Company and AT&T each has its own cable,
sharing in all legal rights to the private right-of-way where the cables are
located. The Company's cable covers approximately 360 route miles and consists
of 36 strands of fiber. In 1991, the Company acquired a 20% interest in Forte of
Colorado Partnership which has 24 strands of fiber from Springfield, Colorado,
to Colorado Springs, approximately 185 miles in length. To enhance the revenue
potential for the above segments, the Company, Forte of Colorado, and other
segment providers have interconnected their networks and currently offer
fiber-based transport services among Denver, Colorado Springs, Amarillo, Kansas
City, Wichita, Lubbock, Midland, Albuquerque, Oklahoma City, Wichita Falls and
Dallas. Other segment providers have expressed interest in interconnecting to
this network and expansion may occur north to Chicago, south to Houston and San
Antonio, and east toward Atlanta. There can be no assurance that such expansion
will occur to all or any of these cities, or if such expansion does occur, when
it may occur or on what terms and conditions.
Revenue from the fiber business is generated from three principal sources:
(1) wholesale long-haul transport services as a "carrier's carrier"; (2)
services to private business and government end users; and (3) long-haul
transport services for the Company's subsidiaries. Substantially all of the
Company's revenues from its fiber business is generated from its long-haul
services including those of the Company's subsidiaries.
The Company has long-haul service contracts with various long-distance
carriers, including AT&T, SWBT, Sprint and NTS, which, in turn, resells to MCI
and WorldCom. NTS is the largest customer of the Company's fiber business,
accounting for approximately 49% of its gross fiber revenue for the year ended
December 31, 1996. The Company also provides services to the State of Oklahoma
and has recently contracted to provide fiber service to Vyvx.
The Company currently markets its fiber services through one full-time sales
employee and an independent marketing agent. While the Company has no plans to
add additional fiberoptic lines, the Company intends to initiate additional
marketing programs to increase its customer base and the use of its fiber
network by its existing customers and will seek to expand its network to
additional cities through new interconnection agreements.
The Company believes that it has a competitive advantage in the market area
that it serves because it has the only fiber network between Oklahoma City and
Amarillo, other than AT&T. AT&T's network, however, does not branch off to small
communities between Oklahoma City and Amarillo. By expanding its network through
interconnect agreements to access other major population centers (including
routes which may be attractive to major carriers) and providing high-quality,
reliable transmission services on a fixed-cost basis at competitive rates, the
Company can expand its customer values and increase its fiber revenue.
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OTHER
In February 1997, the Company was declared the winning bidder for PCS
licenses in nine markets in Oklahoma, Kansas and Missouri that are adjacent to
or overlap its existing cellular markets. Because the Company qualifies as a
"small business", the Company will receive a 15% discount on its bid amount. As
a result, the Company's aggregate obligations are approximately $5.1 million.
The Company has paid 10% of its bid amount and will be required to pay an
additional 10% when the licenses are issued (expected to be in the late spring
of 1997). The balance will be financed by the government, at the U.S. treasury
rate for ten year obligations, and will amortize quarterly over eight years
after the second year. The FCC debt will be secured by a lien on the license,
and will limit the Company's ability to place other liens on the PCS licenses.
If the Company fails to meet its obligations to pay for its PCS licenses, the
Company will forfeit the licenses and the FCC may pursue the Company for the
balance due.
The Company has made application to the FCC to issue the PCS licenses. The
PCS licenses, if issued, will obligate the Company to construct network
facilities that cover at least 25% of the population in each market within five
years from the grant of the license. The licenses will cover an aggregate of
approximately 4.2 million Pops.
SERVICE MARKS
The Company owns the service mark DOBSON CELLULAR-TM- which it uses in its
cellular telephone systems in western Oklahoma. The Company also owns the
service mark LOGIX-TM- which it uses in its competitive local exchange
operations in the Oklahoma City and Tulsa areas. In its cellular telephone
business, the Company is currently licensed to use the CELLULAR
ONE-Registered Trademark- service mark in market areas in part of the
Oklahoma/Texas Cluster and in the Kansas/Missouri and the Maryland/Pennsylvania
Clusters. The Company will use the AIRTOUCH-TM- CELLULAR service mark in Arizona
5.
CELLULAR ONE-Registered Trademark- is a registered service mark with the
U.S. Patent and Trademark Office. The service mark is owned by Cellular One
Group, a Delaware general partnership of Cellular One Marketing, Inc., a
subsidiary of SWBM, together with Cellular One Development, Inc., a subsidiary
of AT&T Wireless and Vanguard. The Company uses the CELLULAR
ONE-Registered Trademark- service mark to identify and promote its cellular
telephone service pursuant to licensing agreements with Cellular One Group (the
"Licensor"). Licensing and advertising fees are determined based upon the
population of the licensed areas. The licensing agreements require the Company
to provide high-quality cellular telephone service to its customers and to
maintain a certain minimum overall customer satisfaction rating in surveys
commissioned by the Licensor. The licensing agreements which the Company has
entered into are for original five-year terms expiring in 2002. These agreements
may be renewed at the Company's option, subject to the satisfaction of certain
operating standards, for two additional five-year terms.
AIRTOUCH-TM- CELLULAR is a registered service mark licensed by WMC, an
affiliate of Airtouch and U S WEST. In connection with the Arizona 5
Acquisition, the Company has entered into a licensing agreement which will
permit the Company to use the AIRTOUCH-TM- CELLULAR service mark to identify and
promote its cellular telephone service in Arizona 5. The Company's right to use
the service mark in the territory is non-exclusive and non-transferrable. The
licensing agreement for the AIRTOUCH-TM- CELLULAR mark requires the Company to
provide high-quality cellular telephone services to its customers and to
otherwise maintain reasonable standards set by WMC. The licensing agreement is
for an initial term of 20 years with automatic extensions for additional
five-year periods.
COMPETITION
CELLULAR
The wireless telecommunications industry is experiencing significant
technological change, as evidenced by the increasing pace of improvements in the
capacity and quality of digital technology, shorter
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cycles for new products and enhancements, and changes in consumer preferences
and expectations. Accordingly, the Company expects competition in the wireless
telecommunications business to be dynamic and intense as a result of the
entrance of new competitors and the development of new technologies, products
and services.
Each of the markets in which the Company competes will be served by other
two-way wireless service providers, including licensed cellular and PCS
operators and resellers. Many of these competitors have been operating for a
number of years, currently serve a substantial subscriber base and have
significantly greater financial and technical resources than those available to
the Company. Some competitors are expected to market other services, such as
cable television access, with their wireless telecommunication service
offerings. Several of the Company's competitors are operating, or planning to
operate, through joint ventures and affiliation arrangements, wireless
telecommunications systems that encompass most of the United States.
The Company competes primarily against one other facilities-based cellular
carrier in each of its RSA and MSA markets. See "--Cellular Markets and
Systems." Competition for customers between cellular licensees is based
principally upon the services and enhancements offered, the quality of the
cellular system, customer service, system coverage, capacity and price. Such
competition may increase to the extent that licenses are transferred from
smaller, stand-alone operators to larger, better capitalized and more
experienced cellular operators that may be able to offer consumers certain
network advantages.
Cellular carriers also face to a lesser extent competition from PCS, ESMR
and mobile satellite service ("MSS") systems, as well as from resellers of these
services and cellular service. In the future, cellular operators may also
compete more directly with traditional landline telephone service providers.
Continuing technological advances in telecommunications make it impossible to
predict the extent of future competition. However, due to the depth and breadth
of these competitive services offered by operators using these other
technologies, such competition could be significant and is expected to become
more intense.
The FCC requires that all cellular system operators provide service to
resellers on a nondiscriminatory basis. A reseller provides cellular service to
customers but does not hold an FCC license or own cellular facilities. Instead,
the reseller buys blocks of cellular telephone numbers from a licensed carrier
and resells service through its own distribution network to the public.
Therefore, a reseller may be both a customer of a cellular licensee's services
and a competitor of that licensee. Several well-known telecommunications
companies resell cellular service as a complement to their long distance, local
telephone, paging, cable television or internet offerings.
The most likely future source of direct competition to cellular providers in
the near term from a new technology is broadband PCS. Broadband PCS services
consist of wireless two-way telecommunications services for voice, data and
other transmissions employing digital micro-cellular technology. PCS operates in
the 1850 to 1990 MHz band. Like cellular, PCS technology utilizes a network of
small, low-powered transceivers placed throughout a neighborhood, business
complex, community or metropolitan area to provide customers with mobile and
portable voice and data communications. Many PCS licensees that will compete
with the Company have access to substantial capital resources. In addition, many
of these companies or their predecessors and affiliates, already operate large
cellular telephone systems and thus bring significant wireless experience to
this new marketplace. In the Oklahoma/Texas Cluster the Company competes with
Western Wireless, Sprint Telecommunications Venture, Nextwave Communications,
PCS PrimeCo and Omni Point, who are the PCS providers in or overlapping the
Company's cellular coverage area. In the Kansas/Missouri Cluster, the Company
competes, or will compete, with Sprint Telecommunications Venture, American
Portable Telecommunications, RLV-PCS I Partnership and Nextwave/RLV PCS, Inc.,
who are the PCS providers in or overlapping the Company's cellular coverage
area. In the Maryland/Pennsylvania Cluster, the Company competes with AT&T
Wireless, Sprint Spectrum, Nextwave
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Communications and Aer Force Communications LP as the PCS providers in or
overlapping the Company's cellular coverage area. In the Arizona 5 area, the
Company will compete with AT&T Wireless and Sprint Spectrum as the PCS providers
in or overlapping the Company's cellular coverage area.
ESMR is a wireless communications service supplied by converting analog SMR
services into an integrated, digital transmission system. The ESMR system
incorporates characteristics of cellular technology, including multiple low
power transmitters and interconnection with the landline telephone network. ESMR
service may compete with analog cellular service by providing high quality
digital communication technology, lower rates, enhanced privacy and additional
features such as electronic mail and built-in paging. ESMR handsets are likely
to be more expensive than cellular telephones.
A consortium of telecommunications providers known as American Mobile
Satellite Corporation has been licensed by the FCC to provide mobile satellite
service. In addition, Motorola has filed for a license from the FCC for a
low-orbit satellite system, called "Iridium," that would provide mobile
communications to subscribers throughout the world. Other proposals for MSS are
pending before the FCC. The FCC is developing rules for these services and
international and foreign regulatory authorities must also approve aspects of
some mobile satellite systems and services. Mobile satellite systems could
augment or replace communications within land-based cellular systems.
The commercial development and deployment of most of these new technologies
remain in an early phase. The Company expects this activity to be focused
initially in relatively large markets in view of the substantial costs involved
in building and launching systems using these technologies. The Company believes
that it can effectively face this competition from its position as an incumbent
in the cellular field with a high quality network, an extensive footprint that
is not capacity constrained, strong distribution channels, superior customer
service capabilities and an experienced management team. Since the Company
operates in medium to small markets, the new entrants may be unable to offer
wireless service at competitive rates in many of the Company's markets in the
near term. The extensive capital expenditures required to deploy infrastructure
are more readily justifiable from an economic standpoint in larger, more densely
populated urban areas, than in the rural areas in which the Company operates.
WIRELINE
There are currently no competitors in the areas served by the Company's
local exchanges. In connection with its resale of local, long distance and
wireless services, the Company will compete in Oklahoma City and Tulsa with the
incumbent local exchange carrier, SWBT, which has long-standing relationships
with its customers, has financial, technical and marketing resources
substantially greater than those of the Company and benefits from certain
existing regulations that favor the local exchange carrier over the Company in
certain respects. Other competitors may include Brooks and other competitive
local exchange carriers, microwave and satellite carriers, wireless
telecommunications providers and other resellers. In addition, AT&T and Sprint
have announced plans to offer integrated local and long distance
telecommunications services. There can be no assurance that the Company will be
able to achieve or maintain significant revenue or compete effectively in its
resale business.
FIBER
In providing bulk long-haul circuit capacity, the Company's primary
competitors are IXC Communications, Inc., QWest and AT&T. AT&T is the largest
supplier of long distance voice and data transmission services in the United
States and has a transmission line adjacent to the Company's between Oklahoma
City and Amarillo. The Company also competes with other facilities-based IXCs,
such as MCI, WorldCom and Sprint, all of which have substantially greater
financial resources than the Company and a far more extensive transmission
network than the Company's network. In Oklahoma, the Company's principal
competitor is a subsidiary of SWBT. The Company may also face competition from
the regional Bell operating companies ("RBOCs"), GTE and others such as electric
utilities and cable television companies.
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REGULATION
CELLULAR AND PCS
OVERVIEW. The cellular telephone industry is subject to extensive
governmental regulation on the federal level and to varying degrees on the state
level. Many aspects of such regulation have recently been impacted by the
enactment of the 1996 Act and are currently the subject of administrative
rulemakings that are significant to the Company. Neither the outcome of these
rulemakings nor their impact upon the cellular telephone industry or the Company
can be predicted at this time. The following is a summary of the federal laws
and regulations that materially affect the cellular communications industry and
a description of certain state laws. This section does not purport to be a
summary of all present and proposed federal, state and local regulations and
legislation relating to the cellular communications industry.
FEDERAL REGULATION. The licensing, construction, modification, operation,
ownership and acquisition of cellular telephone systems are subject to
regulations and policies of the FCC under the Communications Act of 1934, as
amended (the "Communications Act"). The FCC has promulgated rules and
regulations governing, among other things, applications to construct and operate
cellular communications systems, applications to transfer control of or assign
cellular licenses and technical and operational standards for the operation of
cellular systems (such as maximum power and antenna height).
The FCC licenses cellular systems in accordance with 734 geographically
defined market areas comprised of 306 MSAs and 428 RSAs. In each market, the
frequencies allocated for cellular telephone use are divided into two equal 25
MHz blocks and designated as wireline and non-wireline. Block B licenses
initially were reserved for wireline entities, such as the Company, while
non-wireline licenses initially were reserved for entities that were not
affiliated with a wireline telephone company. Apart from the different frequency
blocks, there is no technical difference between wireline and non-wireline
cellular systems and the operational requirements imposed on each by the FCC are
the same. Under current FCC rules, with FCC approval, wireline and non-wireline
licenses are transferable without restriction as to wireline affiliation.
However, no entity may own, directly or indirectly, more than a 5% interest in
both systems in any one MSA or RSA, unless such ownership will not pose a
substantial threat to competition, and no entity may, directly or indirectly,
own a controlling interest in, or otherwise have the ability to control, both
such systems. The FCC may prohibit or impose conditions on transfers of
licenses. In addition, under FCC rules, no person may have an attributable
interest in a total of more than 45 Mhz of licensed, broadband PCS, cellular and
ESMR spectrum regulated as Commercial Mobile Radio Services ("CMRS") with
significant overlap in any geographic area (significant overlap will occur when
at least 10% of the population of the PCS licensed service areas is within the
CGSA (as defined below) and/or the ESMR service area).
Under FCC rules, the authorized service area of a cellular provider in each
of its markets is referred to as the "Cellular Geographic Service Area" or
"CGSA." The CGSA may conform exactly with the boundaries of the FCC designated
MSA or RSA, or it may be smaller, subject to certain minimum service
requirements. A cellular licensee has the exclusive right to expand its CGSA
boundaries within the licensee's MSA or RSA for a period of five years after
grant of the licensee's initial construction permit. At the end of this
five-year build-out period, however, any entity may apply to serve portions of
the MSA or RSA outside the licensee's then designated CGSA. The five year
build-out period has expired for substantially all licensees and the FCC has
granted several "unserved area" applications filed by parties.
Cellular service providers also must satisfy a variety of FCC requirements
relating to technical and reporting matters. One such requirement is the
coordination of proposed frequency usage with adjacent cellular users,
permittees and licensees in order to avoid interference between adjacent
systems. In addition, the height and power of base station transmitting
facilities and the type of signals they emit must fall within specified
parameters. The Company is obligated to pay certain annual regulatory fees to
the FCC in connection with its cellular operations.
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The Communications Act requires prior FCC approval for transfers to or from
the Company of a controlling interest in any license or construction permit, or
any rights thereunder. Although there can be no assurance that any future
requests for approval of applications filed will be approved or acted upon in a
timely manner by the FCC, the Company has no reason to believe such requests or
applications would not be approved or granted in due course.
The FCC also regulates a number of other aspects of the cellular business.
For example, the FCC regulates cellular resale practices and recently extended
the resale requirement to broadband PCS and ESMR licensees. Cellular, PCS and
ESMR providers may not restrict any customers' resale of their services or
unreasonably discriminate against resellers of their services. Under the new FCC
policy, all resale obligations for cellular, broadband PCS and ESMR operators
will terminate five years after the date that the last group of initial PCS
licenses are granted. The FCC has also adopted requirements for cellular and
other providers of two-way voice services to implement enhanced 911 services,
providing emergency service providers the ability to better locate carriers who
have used wireless 911 features, such implementation to occur by October 2001.
In addition, the FCC regulates the ancillary service offerings that cellular
and PCS licensees can provide and recently revised its rules to permit cellular,
PCS, paging and ESMR licensees to offer fixed services on a primary basis along
with mobile services. This rule change may facilitate the provision of wireless
local loop service, which involves the use of wireless links to provide
telephone service by cellular licensees, as well as broadband PCS and ESMR
licensees. In this regard, the FCC also recently adopted telephone number
portability rules for local exchange carriers ("LECs"), as well as cellular,
broadband PCS and ESMR licensees, that could facilitate the development of local
exchange competition, including wireless local loop service. The new number
portability rules generally require cellular, broadband PCS and ESMR licensees
to have the capability to deliver calls from their systems to ported numbers by
December 31, 1998 and to offer number portability and roaming to ported numbers
by June 30, 1999. These requirements may result in added capital expenditures
for the Company to make necessary system changes, although the Company currently
has no plans for any such expenditures.
Initial cellular and PCS licenses are generally granted for terms of ten
years, beginning on the date of the grant of the initial operating authority,
and are renewable upon application to the FCC. The Company's existing cellular
licenses expire at various dates beginning in October 2000. The licenses which
are being acquired in the Horizon Properties Acquisition will expire at varying
dates beginning in October 1997. Licenses may be revoked and license renewal
applications denied for cause after appropriate notice and hearing. Near the
conclusion of the license term, licensees must file applications for renewal of
licenses to obtain authority to operate for up to an additional 10-year term.
The FCC will award a renewal expectancy to a cellular licensee that meets
certain standards of past performance. If the existing licensee receives a
renewal expectancy, it is very likely that the existing licensee's cellular
license will be renewed without becoming subject to competing applications. To
receive a renewal expectancy, a licensee must show that it has provided
"substantial" service during its past license term, and has substantially
complied with applicable FCC rules and policies and the Communications Act.
"Substantial" service is defined as service which is sound, favorable and
substantially above a level of mediocre service that might only minimally
warrant renewal. If the existing licensee does not receive a renewal expectancy,
competing applications for the license will be accepted by the FCC and the
license may be awarded to another entity.
In order to increase competition in wireless communications, promote
improved quality and service and make available the widest possible range of
wireless services, federal legislation was enacted directing the FCC to allocate
radio frequency spectrum for PCS by competitive bidding. A PCS system operates
under a protected geographic service area license granted by the FCC for either
an MTA or BTA on one of six frequency blocks allocated for broadband PCS
service. The FCC has divided the United States and its possessions and
territories into PCS markets made up of 493 BTAs and 51 MTAs. As many as six
licensees will compete in each PCS service area. The FCC has allocated 120 MHz
of radio spectrum in the 2 GHz band for licensed broadband PCS services. The FCC
divided the 120 MHz of spectrum into six individual
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blocks, each of which is allocated to serve either MTAs or BTAs. The spectrum
allocation includes two 30 MHz blocks (A and B Blocks) licensed for each of the
51 MTAs, one 30 MHz block (C Block) licensed for each of the 493 BTAs, and three
10 MHz blocks (D, E and F Blocks) licensed for each of the 493 BTAs, a total of
more than 2,000 licenses.
The FCC has adopted specific standards to apply to PCS renewals, under which
the FCC will award a renewal expectancy to a PCS licensee that (i) has provided
substantial service during its past license term and (ii) has substantially
complied with applicable FCC rules and policies and the Communicates Act. All 30
MHz broadband PCS licensees must construct facilities that offer coverage to
one-third of the population of their service area within five years, and
two-thirds of the population within ten years, of their initial license grants.
Licensees that fail to meet the coverage requirements may be subject to
forfeiture of the license. FCC rules restrict the voluntary assignments or
transfers of control of C Block and F Block licenses. During the first five
years of the license term, assignments or transfers affecting control are
permitted only to assignees or transferees that meet the eligibility criteria
for participation in the entrepreneur block auction at the time the application
for assignment or transfer of control is filed, or if the proposed assignee or
transferee holds other licenses for C Block and F Block and, at the time of
receipt of such licenses, met the same eligibility criteria. Any transfers or
assignments during the entire 10-year initial license terms are subject to
unjust enrichment penalties, I.E., forfeiture of any bidding credits and
acceleration of any installment payment plans should the assignee or transferee
not qualify for the same benefits. In the case of the C Block and F Block, the
FCC will conduct random audits to ensure that licensees are in compliance with
the FCC's eligibility rules. Violations of the Communications Act or the FCC's
rules could result in license revocations, forfeitures or fines.
For a period of up to five years after the grant of a PCS license (subject
to extension), a PCS licensee will be required to share spectrum with existing
licensees that operate certain fixed microwave systems within its license area.
To secure a sufficient amount of unencumbered spectrum to operate its PCS
systems efficiently and with adequate population coverage, the Company may need
to relocate many of these incumbent licensees, at the Company's expense. In an
effort to balance the competing interests of existing microwave users and newly
authorized PCS licensees, the FCC has adopted (i) a transition plan to relocate
such microwave operators to other spectrum blocks and (ii) a cost sharing plan
so that if the relocation of an incumbent benefits more than one PCS licensee,
the benefitting PCS licensees will share the cost of the relocation. This
transition plan allows most microwave users to operate in the PCS spectrum for a
two-year voluntary negotiation period and an additional one-year mandatory
negotiation period. For public safety entities dedicating a majority of their
system communications for police, fire or emergency medical services operations,
the voluntary negotiation period is three years, with an additional two year
mandatory negotiation period. The FCC is considering shortening the voluntary
negotiation period by one year and lengthening the mandatory negotiation period
by one year for PCS licensees in the C, D, E and F Blocks. There can be no
assurance that the FCC will accept this proposal. Parties unable to reach
agreement within these time periods may refer the matter to the FCC for
resolution, but the incumbent microwave user is permitted to continue its
operations until final FCC resolution of the matter. The transition and cost
sharing plans expire on April 4, 2005, at which time remaining incumbents in the
PCS spectrum will be responsible for their costs to relocate to alternate
spectrum locations. The Company has not yet determined the extent, if any, of
expenses it may need to incur to relocate microwave incumbents in order to
provide PCS services using the PCS licenses it expects to be awarded.
Applications for FCC authority may be denied and in extreme cases licenses
may be revoked if the FCC finds that an entity lacks the requisite "character"
qualifications to be a licensee. In making the determination, the FCC considers
whether an applicant or licensee has been the subject of adverse findings in a
judicial or administrative proceeding involving felonies, the possession or sale
of unlawful drugs, fraud, antitrust violations or unfair competition, employment
discrimination, misrepresentations to the FCC or other government agencies, or
serious violations of the Communications Act or FCC regulations. The FCC
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also requires licensees to comply with statutory restrictions regarding the
direct or indirect ownership or control of FCC licenses by non-U.S. persons or
entities.
Interconnection charges paid to local exchange carriers are a major
component of the Company's cost structure. Changes in the interconnection charge
rate structure imposed by the FCC or mandated by the 1996 Act may have a
material impact on the Company.
The 1996 Act, which makes significant changes to the Communications Act and
terminated the antitrust consent decree applicable to the RBOCs, affects the
telecommunications industry. This legislation, among other things, affects
competition for local telecommunications services, interconnection arrangements
for carriers, universal service funding and the provision of interexchange
services.
The 1996 Act requires state public utilities commissions and/or the FCC to
implement policies that mandate reciprocal compensation between local exchange
carriers, a category that will, for these purposes, include cellular carriers,
for interconnection services at rates more closely related to cost. On August 1,
1996, the FCC adopted rules implementing the interconnection policies imposed by
the 1996 Act. Various aspects of the order are being appealed in federal court
and the FCC's orders are currently subject to a court stay. While it is too soon
to predict the actual effect of the FCC's order, the Company believes that the
new rules are likely to reduce the interconnection expenses incurred by the
Company.
The 1996 Act requires the FCC to adopt rules that require interstate
communications carriers, including cellular carriers, to "make an equitable and
non-discriminatory contribution" to a universal service fund that reimburses
communications carriers that provide basic communications services to users who
receive services at subsidized rates. If adopted, these rules could result in
increased costs for the Company's cellular operations. These provisions may also
impact the Company's wireline operations. See "--Wireline." The 1996 Act also
eases the restrictions on the provision of interexchange telephone services by
wireless carriers affiliated with RBOCs. RBOC-related wireless carriers have
interpreted the legislation to permit immediate provision of long distance call
delivery for their cellular customers.
The 1996 Act specifically exempts all cellular carriers from the obligation
to provide equal access to interstate long distance carriers. However, the 1996
Act gives the FCC the authority to impose rules to require unblocked access
through carrier identification codes or 800/888 numbers, so that cellular
subscribers are not denied access to the long distance carrier of their
choosing, if the FCC determines that the public interest so requires. The
Company currently provides "dial around" equal access to all of its customers.
The overall impact of the 1996 Act on the business of the Company is unclear
and will likely remain so for the foreseeable future. The new limitations on
local zoning requirements may facilitate the construction of new cell sites and
related facilities. See "--State, Local and Other Regulation." However, other
provisions of the new statute relating to interconnection, telephone number
portability, equal access and resale could subject the Company to additional
costs and increased competition.
STATE, LOCAL AND OTHER REGULATION. The Communications Act preempts state or
local regulation of the entry of, or the rates charged by, any commercial mobile
service or any private mobile service provider, which includes cellular
telephone service providers. The FCC has denied the petition of eight states to
continue their rate regulation authority, including authority over cellular
operators. As a practical matter, the Company is free to establish rates and
offer new products and service with a minimum of regulatory requirements. The
Company's four states of its existing operations, and the three new states in
which it will operate upon completion of the Acquisitions, maintain nominal
oversight jurisdiction, primarily focusing upon prior approval of acquisitions
and transfers and resolution of customer complaints.
The location and construction of cellular transmitter towers and antennas
are subject to FCC and Federal Aviation Administration ("FAA") regulations and
are subject to federal, state and local environmental regulation, as well as
state or local zoning, land use and other regulation. Before a system can be put
into commercial operation, the grantee of a construction permit must obtain all
necessary zoning and
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building permit approvals for the cell sites microwave tower locations and must
secure state certification, if required. The time needed to obtain zoning
approvals and requisite state permits varies from market to market and state to
state. Likewise, variations exist in local zoning processes.
Zoning and planning regulation may become more restrictive in the future as
many broadband PCS carriers are now seeking sites for network construction. The
1996 Act may provide some relief from state and local laws that arbitrarily
restrict the expansion of personal wireless services, which include cellular,
PCS and ESMR systems. For example, under the 1996 Act, localities are now
precluded from denying zoning approval for cell sites based upon electromagnetic
emission concerns, if the cellular operator's system complies with FCC emissions
standards. In addition, localities are prohibited from adopting zoning
requirements that simply prohibit or have the effect of prohibiting personal
wireless services, or that discriminate between "functionally equivalent"
services. Notwithstanding these new requirements, the effectiveness of the new
law has not yet been tested and it is still unclear whether the costs of
expanding cellular systems by adding cell sites will increase and whether
significant delays will be experienced due to local zoning regulation.
There can be no assurance that any state or local regulatory requirements
currently applicable to the Company's systems will not be changed in the future
or that regulatory requirements will not be adopted in those states and
localities which currently have none.
FUTURE REGULATION. From time to time, legislation that potentially could
affect the Company, either beneficially or adversely, is proposed by federal or
state legislators. There can be no assurance that federal or state legislation
will not be enacted, or that regulations will not be adopted or actions taken by
the FCC or state regulatory authorities that might adversely affect the business
of the Company. Changes such as the allocation by the FCC of radio spectrum or
services that compete with the Company's business could adversely affect the
Company's operating results. In this regard, the FCC is considering allocating
an additional 30 MHz for new wireless communications services.
WIRELINE
Telco is subject to the regulatory authority of the OCC, which sets rates,
terms and conditions of service, and mandates minimum service and quality of
service requirements for telephone companies in Oklahoma. Telephone companies in
Oklahoma have elected to be access providers, providing long distance service
only between their own exchanges. Interexchange carriers, including SWBT,
provide all other long distance services for other customers. Telco has received
authority to provide competitive local exchange telecommunications services
within Oklahoma and has made application to the OCC for authority for the resale
of intrastate long distance services.
The 1996 Act potentially impacts the Company's wireline operations. Under
previous regulations access charges contained implicit support for high-cost
areas. The FCC has initiated proceedings to overhaul the contribution mechanism
for federal support revenue. The proposed rules would remove implicit support
from access revenues and place more emphasis for such support on HCF/USF. In
addition, a board consisting of state utility commissioners and members of the
FCC has recently recommended changes that would, over time, reduce or eliminate
subsidies to businesses in high-cost areas. While it is too early to predict
what the final FCC orders may be, or the effect of FCC orders, the rules
ultimately adopted by the FCC may have a material impact on the Company's
wireline operations. See "Risk Factors--Potential for Adverse Regulatory Change
and the Need for Regulatory Approvals."
EMPLOYEES AND AGENTS
As of March 13, 1997, the Company had approximately 298 employees. In
addition, as of such date, the Company had agreements with 146 independent sales
agents, including car dealerships, electronics stores, paging service companies
and independent contractors. None of the Company's employees are represented by
a labor organization, and the Company considers its employee relations to be
good.
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PROPERTIES
The Company maintains its corporate headquarters in Oklahoma City, Oklahoma.
The Company leases this space, which is approximately 24,111 square feet, from
an affiliate of the Company at a monthly rental of approximately $22,000. See
"Management Certain Transactions." As of March 13, 1997, the Company's cellular
operations leased 20 and owned three sales and administrative offices, at
aggregate annual rentals of approximately $.2 million, and leased 62 and owned
44 cell sites, with aggregate annual rentals of approximately $2.1 million. The
Company anticipates that it will review these leases from time to time and may,
in the future, lease or acquire new facilities as needed. The Company expects to
lease or purchase additional sales and administrative office spaces and tower
sites in connection with the Arizona 5 Acquisition. The Company does not
anticipate that it will encounter any material difficulties in meeting its
future needs for any leased space.
LEGAL PROCEEDINGS
The Company is not currently involved in any pending legal proceedings that
individually or in the aggregate are material to the Company. The Company is a
party to routine filings and customary regulatory proceedings with the FCC
relating to its operations.
COMPANY ORGANIZATION
The organization of the Company is as follows:
[LOGO]
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The holders of the Company's voting securities have agreed that the Board
will consist of six directors, four designated by the principal holder of the
Company's Class A Common Stock, par value $1.00 per share (the "Class A Common
Stock"), and two designated by holders of the Class B Preferred Stock. See
"Description of Other Indebtedness and Preferred Stock" for a description of the
provisions of the Certificate of Designation for the Class B Preferred Stock and
the Shareholders' Agreement with respect to election of directors.
The Company's Board of Directors presently consists of five directors, with
one vacancy to be filled by an independent director designee of the principal
holder of the Class A Common Stock. Directors and executive officers of the
Company are elected to serve until they resign or are removed, or are otherwise
disqualified to serve, or until their successors are elected and qualified.
Directors of the Company are elected for one-year terms at the annual meeting of
stockholders which is held in April of each year. Officers of the Company are
appointed at the Board's first meeting after each annual meeting of
stockholders.
The directors and executive officers of the Company are set forth below.
Certain of the officers and directors hold or have held positions in several of
the Company's subsidiaries. The ages of the persons set forth below are as of
December 31, 1996.
<TABLE>
<CAPTION>
NAME AGE POSITION(A)
- -------------------------------- --- ----------------------------------------------------------------
<S> <C> <C>
Everett R. Dobson(b)............ 37 Chairman of the Board, President and Chief Executive Officer and
Director
G. Edward Evans................. 35 Chief Operating Officer of cellular subsidiaries
Robert J. Mirabito.............. 42 President of fiber subsidiaries
Bruce R. Knooihuizen............ 40 Vice President and Chief Financial Officer
Stephen T. Dobson(b)............ 34 Treasurer, Secretary and Director
Russell L. Dobson(b)............ 61 Director
Justin L. Jaschke(c)............ 38 Director
Thadeus J. Mocarski(c).......... 34 Director
</TABLE>
- ------------------------
(a) Unless otherwise indicated, position is held with the Company.
(b) Everett R. Dobson and Stephen T. Dobson are sons of Russell L. Dobson.
(c) Director designee of holders of Class B Preferred Stock. See "Description of
Other Indebtedness and Preferred Stock."
Dobson was incorporated in February 1997 in connection with a corporate
reorganization (the "Reorganization") pursuant to which Dobson became the
holding company parent of DOC, which owns the capital stock of the Company's
cellular, local exchange and wholly-owned fiber subsidiaries. Information below
with respect to positions held by the Company's executive officers and directors
refers to their positions with DOC and, since February 1997, also with Dobson.
Everett R. Dobson has been a director and President of the Company, and
President and Chief Executive Officer of the Company's cellular subsidiaries,
since 1990. In April 1996, he succeeded his father, Russell L. Dobson, as
Chairman of the Board and Chief Executive Officer. Mr. Dobson is President of
Gila River Telecommunications, Inc., which presently owns a 41.95% interest in
Gila River Cellular General Partnership, the owner of Arizona 5. See "--Certain
Transactions." Mr. Dobson served on the board of the Cellular Telecommunications
Industry Association ("CTIA") in 1993 and 1994 and is a member of the Rural
Cellular Association, Oklahoma Telephone Association ("OTA") and the
Organization for the Protection and Advancement of Small Telephone Companies
("OPASTC"). He is a member of
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the Young Presidents Organization. Mr. Dobson holds a B.A. in economics from
Southwestern Oklahoma State University.
G. Edward Evans joined the Company as Chief Operating Officer of the
cellular subsidiaries in January 1997. Mr. Evans was employed by BellSouth
Mobility, Inc. from 1993 to 1996, serving as General Manager-Kentucky, Director
of Field Operations at the company's corporate office in Atlanta and Director of
Marketing-Alabama. He was an Area Manager and a Market Manager of United States
Cellular, Inc. from 1990 to 1993 and was a Sales Manager of GTE Mobilnet from
1989 to 1990. Mr. Evans has an M.B.A. from Georgia State University.
Robert J. Mirabito became President of each of the fiber subsidiaries in
April 1996. He served as Vice President of Dobson Fiber Company and Dobson
Network Management, Inc. from 1994 to 1996 and was Director of Strategic
Planning for the Company from 1991 to 1994. Prior to joining the Company, Mr.
Mirabito was employed by AT&T for eight years in various capacities, including
Manager-State Government Affairs and Senior Internal Auditor. Mr. Mirabito is
active in the CTIA and OTA and has published numerous articles in
telecommunications and fiber optic trade journals. Mr. Mirabito holds a B.S. in
civil engineering from the University of Notre Dame and an M.B.A. from the
University of Kansas.
Bruce R. Knooihuizen joined the Company as Vice President and Chief
Financial Officer in July 1996. From 1994 to 1996, Mr. Knooihuizen was Chief
Financial Officer and Secretary for Westlink Holdings, Inc. in San Diego, a
wireless provider which was formerly an operating unit of U S WEST. Previously,
he was Treasurer and Controller of Ameritech Cellular from 1990 to 1994,
Director, Accounting Operations of Ameritech Applied Technologies from 1988 to
1990, and Controller of Ameritech Properties in 1988, all located in Chicago.
From 1980 to 1988 he held various financial and accounting positions with The
Ohio Bell Telephone Company. Mr. Knooihuizen received a B.S. in finance from
Miami University in Oxford, Ohio and an M.B.A. in finance from the University of
Cincinnati.
Stephen T. Dobson has been a director of the Company since 1990. He has
served as Treasurer and Secretary of the Company since 1990 and General Manager
and Secretary of Telco since 1994 and 1990, respectively. He became President of
Dobson Wireless, Inc. in January 1997. Mr. Dobson is a member of the Western
Rural Cellular Association ("WRTA"), National Telephone Cooperative Association
and National Cable Television Association. He holds a B.S. in business
administration from the University of Central Oklahoma.
Russell L. Dobson has been a director of the Company since 1990 and was
Chairman of the Board and Chief Executive Officer from 1990 to 1996. Mr. Dobson
joined his father at Telco in 1956 and became the controlling owner and Chief
Executive Officer in 1975 when he purchased his father's interest. He has been
active in many industry-related groups, including the OTA, WRTA and OPASTC.
Justin L. Jaschke has been a director of the Company since October 1996. Mr.
Jaschke has been the Chief Executive Officer and a director of World-Net Access,
Inc., a privately held Internet access provider based in Englewood, Colorado,
since its inception in March 1996. Prior to March 1996, he was Chief Operating
Officer of Nextel Communications, Inc. following its merger with OneComm
Corporation in 1995. He served as OneComm's President and was a member of its
Board of Directors from 1993. From 1990 to 1993, he was President and Chief
Executive Officer of Bay Area Cellular Telephone Company in South San Francisco,
California. Mr. Jaschke is a director of Metricom, Inc., a wireless modem and
Internet service provider in Los Gatos, California. Mr. Jaschke has a B.S. in
mathematics from the University of Puget Sound and an M.S. in management from
the Massachusetts Institute of Technology Sloan School of Management.
Thadeus J. Mocarski has been a director of the Company since April 1996. Mr.
Mocarski has been a partner of Fleet Equity Partners, a private equity fund
located in Providence, Rhode Island, since 1994. Affiliates of Fleet Equity
Partners (the "Fleet Investors") own all of the outstanding Class B and Class C
Preferred Stock of the Company. See "Description of Other Indebtedness and
Preferred Stock." From
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1989 to 1994, Mr. Mocarski was employed by the law firm Edwards & Angell in
Providence, Rhode Island, where he represented various private equity capital
firms in their investment and acquisition activities, including Fleet Equity
Partners. Mr. Mocarski received a B.A. from Colby College and a J.D. from the
Washington College of Law. Mr. Mocarski is a director of MJD Communications,
Inc., a rural local exchange company headquartered in Charlotte, North Carolina.
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation during
1996 earned by the Company's chief executive officer and its other most highly
compensated executive officers whose combined salary and bonus exceeded $100,000
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($)(A) COMPENSATION($)(B) COMPENSATION($)(C)
- ----------------------------------------------- --------- ----------- ------------------- -------------------
<S> <C> <C> <C> <C>
Everett R. Dobson, Chairman of the Board,
President and Chief Executive Officer........ 300,000 -- 77,100(d) 9,500
Russell L. Dobson, Director(e)................. 250,000 -- 37,500(f) 9,500
Robert J. Mirabito, President of fiber
subsidiaries................................. 80,000 25,000 -- 3,200
Thomas F. Riley, Executive Vice President(g)... 129,000 -- -- 14,500
Stephen T. Dobson, Treasurer and Secretary..... 97,000 -- 20,600(h) 3,900
</TABLE>
- ------------------------
(a) For Mr. Mirabito, represents the amount of bonus paid in 1997 with respect
to services performed in 1996. It is expected that bonuses relating to 1996
will be paid in 1997 to Everett R. Dobson and Stephen T. Dobson; however,
the amount of such bonuses has not yet been determined. Does not include
$205,000 and $69,000 paid to Everett R. Dobson and Stephen T. Dobson,
respectively, in 1996 with respect to services performed in 1995.
(b) Represents the value of perquisites and other personal benefits in excess of
10% of annual salary and bonus.
(c) Includes the matching contributions made by the Company to the account of
the executive officer under the Company's 401(k)/Profit Sharing Plan. With
respect to Mr. Riley, also includes a severance payment of $10,000.
(d) Includes $62,900 for personal use of Company aircraft and $12,500 for a
Company-provided vehicle.
(e) Russell L. Dobson was Chairman of the Board and Chief Executive Officer of
the Company until April 1996, when he was succeeded by Everett R. Dobson.
(f) Includes $20,600 for personal use of Company aircraft, $9,600 for premiums
paid by the Company on an individual life insurance policy for Mr. Dobson
and $5,300 for a Company-provided vehicle.
(g) Mr. Riley ceased to be an employee of the Company on December 31, 1996.
(h) Includes $7,400 for personal use of Company aircraft and $6,500 for a
Company-provided vehicle.
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EMPLOYMENT AGREEMENTS
In connection with offers of employment to G. Edward Evans and Bruce R.
Knooihuizen in 1996, the Company agreed to provide them compensation in the form
of salary, bonus, stock options and other benefits. The arrangement with Mr.
Evans included the following: a $20,000 payment upon acceptance of employment,
an initial annual salary of $120,000, an annual bonus ranging from 30% to 50% of
his annual salary, a five-year home mortgage loan not to exceed $300,000 at an
annual interest rate of 4%, and a 10-year option to purchase 6,033 shares of
Class B Common Stock at $100 per share, with 60% of the option vesting ratably
over five years and 40% vesting over five years based on the achievement of
annual performance objectives. Mr. Knooihuizen's employment arrangement includes
an initial annual salary of $150,000, an annual bonus ranging from 30% to 50% of
his annual salary, and a 10-year option to purchase 7,541 shares of Class B
Common Stock at $100 per share vesting at the rate of 20% per year. The Company
also agreed to a severance payment equal to one year's salary in the event of
termination of employment of either Mr. Evans or Mr. Knooihuizen without cause.
The options to purchase shares of Class B Common Stock held by Messrs. Evans and
Knooihuizen become fully vested upon a change of control of the Company. The
Company employs Russell L. Dobson on an as-needed basis to assist the Company in
connection with the wireline and fiber operations for annual compensation of
$250,000. There are no other employment agreements with the Company's executive
officers.
The Purchase Agreement executed in connection with the Fleet Investors'
purchase of Class B Preferred Stock imposes limitations on the amount of salary
that the Company may pay to each of Everett R., Stephen T. and Russell L. Dobson
and provides for performance criteria for bonus payments to Everett R. Dobson.
Other compensation paid to executive officers is subject to prior approval of
the Fleet Investors. See "Description of Other Indebtedness and Preferred
Stock."
DIRECTOR COMPENSATION
The Company reimburses directors for out-of-pocket expenses incurred in
attending board meetings. Justin L. Jaschke, in connection with his election as
a director by the Fleet Investors in October 1996, was granted an option to
acquire 833 shares of Class B Common Stock at an exercise price of $100 per
share. Mr. Jaschke's option vests ratably over a five-year period and fully
vests upon a change of control of the Company. Directors who are officers or
consultants to the Company receive no additional compensation for services
rendered as directors.
CERTAIN TRANSACTIONS
The Company has adopted a policy requiring that any material transaction
between the Company and persons or entities affiliated with officers, directors
or principal stockholders of the Company be on terms no less favorable to the
Company than reasonably could have been obtained in an arms' length transaction
with independent third parties. Any other matters involving potential conflicts
of interests are to be resolved on a case-by-case basis.
In connection with the Reorganization effected in February 1997, the
shareholders of DOC exchanged their DOC stock for the following stock of Dobson,
all of which has a par value of $1.00: Dobson CC Limited Partnership, 469,998
shares of Class A Common Stock ("Class A Common Stock"); Russell L. Dobson,
3,154 shares of Class A Common Stock; Telco, 100,000 shares of Class A 5%
Non-Cumulative, Non-Voting, Non-Convertible Preferred Stock ("Class A Preferred
Stock"); Fleet Venture Resources, Inc., 69,446 shares of Class B Convertible
Preferred Stock ("Class B Preferred Stock"); Fleet Equity Partners VI, L.P.,
29,762 shares of Class B Preferred Stock; and Kennedy Plaza Partners, 792 shares
of Class B Preferred Stock. In addition, Dobson assumed outstanding DOC stock
options, substituting shares of Dobson's Class B Non-Voting Common Stock for the
DOC stock subject to options held by the following optionees: Justin L. Jaschke,
833 shares; G. Edward Evans, 6,033 shares; Bruce R. Knooihuizen, 7,541 shares.
Further, in connection with the Transactions in February 1997, Dobson issued
100,000 shares of its
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Class C 8% Cumulative, Non-Voting, Non-Convertible Preferred Stock ("Class C
Preferred Stock") to the Fleet Investors (each holding the same number of shares
as it holds of Class B Preferred Stock). See "Description of Other Indebtedness
and Preferred Stock--Preferred Stock."
Transactions with the Company described below refer to DOC if they occurred
prior to the Reorganization.
In March 1996, the Fleet Investors purchased 100,000 shares of Class B
Preferred Stock from the Company for $10.0 million. In connection with this
transaction, the Company and its shareholders entered into a Shareholders'
Agreement providing for, among other matters, registration rights, restrictions
on the transfer of Company stock, put and call rights with respect to the Class
B Preferred Stock, and the issuance of additional stock upon the happening of
certain events. The Fleet Investors also granted the Company a stock option. In
connection with the Reorganization, Dobson and its shareholders entered into a
new Shareholders' Agreement having substantially the same terms and conditions.
For a summary of the terms of the Fleet Investors Purchase Agreement, the
Shareholders' Agreement and option agreement, see "Description of Other
Indebtedness and Preferred Stock."
The Everett R. Dobson Irrevocable Family Trust, Steven T. Dobson Irrevocable
Family Trust and Robbin L. Dobson Irrevocable Family Trust (collectively, the
"Dobson Trusts") were co-borrowers with the Company and certain of its
subsidiaries under the prior bank facility, which was first entered into in
1994. The Dobson Trusts are the limited partners of Dobson CC Limited
Partnership, which holds more than 99% of Dobson's Class A Common Stock and,
prior to the Reorganization, held more than 99% of DOC's Class A Common Stock.
See "Security Ownership of Certain Beneficial Owners and Management." The
Company and its borrower subsidiaries guaranteed, and the Company pledged the
equity securities of certain of its subsidiaries as security for, the
obligations of the Dobson Trusts under a $6.0 million promissory note maturing
in 2004 (the "Trust Loan"), and Dobson CC Limited Partnership guaranteed the
loan obligations of the Company and its subsidiaries under the credit agreement.
All borrowings were secured by the Class A Common Stock. In accordance with the
terms of the Fleet Investors Purchase Agreement and the prior bank facility, the
Company paid dividends on the Class A Common Stock in amounts sufficient to
permit the Dobson Trusts to service the Trust Loan. See "Description of Other
Indebtedness and Preferred Stock." The Dobson Trusts incurred legal fees
totaling approximately $.5 million in connection with the negotiation and
closing of the bank credit agreement in 1994 and an amendment effected in 1996.
Such fees were paid by the Company. In connection with the Transactions, the
Company used $7.5 million of borrowings under the Bank Facility to pay a
dividend to holders of its Class A Common Stock, of which $6.0 million was used
to fully pay the Trust Loan and $.5 million was used to pay indebtedness owed to
the Company by the Dobson Trusts with respect to the legal fees described above.
Everett R. Dobson and Russell L. Dobson beneficially own 67% of the capital
stock of ATTI. In December 1996, the Company consolidated $263,000 of ATTI's
outstanding indebtedness to the Company in an unsecured promissory note which
provides for interest at an annual rate of 10%. The consolidation refinanced
earlier loans made prior to 1994. At December 31, 1996, National
Telecommunications Technologies, Inc. ("Natelco"), a wholly-owned subsidiary of
ATTI, was indebted to the Company in the aggregate principal amount of $307,000,
representing funds advanced by the Company during 1992, 1993 and 1995. The
indebtedness is evidenced by an unsecured promissory note which matures in
December 1997 and which provides for interest at an annual rate of 10%. In
December 1993, the Company made a $25,000 unsecured loan to Natelco, which loan,
together with accrued interest, was fully repaid in May 1994. The Company loaned
another subsidiary of ATTI $21,000 in 1994 and $32,000 in 1995, at annual
interest rates of 12% and 14%, respectively. These loans were paid in full in
October 1995 and January 1996.
The Company performs certain management services for ATTI and its
subsidiaries, including accounting, plant and central office management and
engineering. Billings for the services are based on the time
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spent by, and hourly rates of, Company personnel and expenses incurred. During
1994, 1995 and 1996, the aggregate amounts billed for management fees and
expenses to ATTI and its subsidiaries were approximately $547,000, $210,000 and
$333,000, respectively. The amounts owed by these entities to the Company for
management fees at December 31, 1994, 1995 and 1996 were $832,000, $1.0 million,
and $1.2 million, respectively.
ATTI beneficially owns, among other assets, a 20.55% partnership interest in
the Arizona 5 Partnership, which owns the FCC license and systems for Arizona 5.
In connection with the Arizona 5 Acquisition, the Company will purchase all of
the outstanding capital stock of ATTI for $14.2 million. The purchase price for
the ATTI stock is based on ATTI's beneficial ownership in the Arizona 5
Partnership and the purchase price to be paid to unrelated parties for their
beneficial interests in the Arizona 5 Partnership. All notes and accounts
receivable due from ATTI and its subsidiaries will be paid contemporaneously
with the Company's acquisition of ATTI. The Company will make an $8.1 million
contribution to ATTI which will be transferred to the Gila River Indian
Community ("GRIC"), along with ATTI's other assets, in exchange for GRIC's
21.39% interest in the Arizona 5 Partnership.
In March 1996, the Company made a $1.4 million unsecured loan to Everett R.
Dobson which bears interest, payable quarterly, at the same annual rate as that
payable under the Company's prior bank facility. The loan consolidated amounts
borrowed prior to 1994, together with accrued interest. The entire principal
amount, plus unpaid interest, is due on the earlier of March 2003 or the sale of
certain assets of ATTI. The promissory note evidencing this loan has been
collaterally assigned to the lenders under the existing bank facility. The note
will be repaid in connection with the Arizona 5 Acquisition.
In December 1996, Everett R. Dobson executed a promissory note in favor of
the Company in the amount of approximately $340,000, which represented loans
made to him by the Company during 1996. The note bears interest at 8% per annum
and matures in June 1997. In November and December 1996, the Company made three
loans to Russell L. Dobson aggregating approximately $416,000. These loans bear
interest at annual rates of 9% and 9.25%, respectively, and mature in March
1997. Of the amount owed by Russell L. Dobson, $290,000 had been outstanding
since prior to 1994. In 1993, Steven T. Dobson was indebted to the Company in
the principal amount of $7,500, which loan was paid in full in March 1995. In
February 1994, the Company made a $45,000 unsecured loan to Dobson CC Limited
Partnership, which was paid in full in December 1994.
The Company leases its headquarters from WillRuss Limited Liability Company
("WillRuss") pursuant to a 10-year lease expiring in 2005. WillRuss is owned by
Russell L. Dobson and his wife. Monthly rent under the lease is approximately
$22,000, or $.91 per square foot. In August 1995, the Company loaned WillRuss
$60,000, which was paid in full in September 1995, together with interest at an
annual rate of 10%.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information, as of 1997, concerning
beneficial ownership of the Company's Class A Common Stock and Class B Preferred
Stock by (a) each person known by the Company to own beneficially more than 5%
of such stock, (b) each director and Named Executive Officer
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who beneficially owns any Class A Common Stock or Class B Preferred Stock, and
(c) all directors and executive officers as a group:
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B PREFERRED STOCK
------------------------------ ------------------------------
PERCENT OF PERCENT OF PERCENT OF TOTAL
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES CLASS NUMBER OF SHARES CLASS VOTING POWER(A)
- --------------------------------------- ----------------- ----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Everett R. Dobson 469,998(b) 99.3% 40,000(c) 40.0% 89.0%
13439 N. Broadway Ext.
Oklahoma City, OK 73114
Russell L. Dobson 3,154 * -- -- *
13439 N. Broadway Ext.
Oklahoma City, OK 73114
Thadeus J. Mocarski -- -- 100,000(d) 100.0 17.4
50 Kennedy Plaza
Providence, RI 02903
Fleet Venture Resources, Inc. -- -- 69,446 69.4 12.1
50 Kennedy Plaza
Providence, RI 02903
Fleet Equity Partners VI, L.P. -- -- 29,762 29.8 5.2
50 Kennedy Plaza
Providence, RI 02903
All directors and executive officers as
a group (8 persons) 473,152 100.0 100,000 100.0 100.0
</TABLE>
- ------------------------
* Less than 1%.
(a) In calculating the percent of total voting power, the voting power of shares
of Class A Common Stock (one vote per share) and Class B Preferred Stock
(presently equivalent to one vote per share) is aggregated. See "Description
of Other Indebtedness and Preferred Stock" for a description of the voting
rights of the Class B Preferred Stock.
(b) All such shares are held by Dobson CC Limited Partnership. As the president
and sole director and shareholder of RLD, Inc., the general partner of the
partnership, Everett R. Dobson has voting and investment power with respect
to such shares.
(c) Includes an option, presently exercisable, to purchase 27,778 shares from
Fleet Venture Resources, Inc. ("FVR"), an indirect subsidiary of Fleet
Financial Group, 11,905 shares from Fleet Equity Partners VI, L.P. ("FEP6")
and 317 shares from Kennedy Plaza Partners ("KPP").
(d) Includes 69,446 shares held by FVR, 29,762 shares held by FEP6 and 792
shares held by KPP. Mr. Mocarski has shared voting and investment power with
respect to such shares in his capacity as Senior Vice President of FVR, as
Senior Vice President of Fleet Growth Resources II, Inc., an indirect
subsidiary of Fleet Financial Group and a general partner of FEP6, and as a
general partner of KPP. Mr. Mocarski disclaims beneficial ownership of all
such shares, except to the extent of his pecuniary interest therein.
In addition to the voting stock set forth above, there are also outstanding
100,000 shares of nonvoting Class A Preferred Stock, all of which are owned by
Telco, and 100,000 shares of nonvoting Class C Preferred Stock, all of which are
held by the Fleet Investors (69,446 shares by FVR, 29,762 shares by FEP6, and
792 shares by KPP). See "Management--Certain Transactions" and "Description of
Other Indebtedness and Preferred Stock--Preferred Stock."
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DESCRIPTION OF OTHER INDEBTEDNESS AND PREFERRED STOCK
THE BANK FACILITY
The Bank Facility was established pursuant to the Second Amended and
Restated Credit Agreement dated as of February 28, 1997 among DOC and CoreStates
Bank, N.A., First Union National Bank of North Carolina and NationsBank of
Texas, N.A., as co-agents and banks. The initial proceeds of the Bank Facility
were used to refinance indebtedness outstanding under the prior bank facility,
to pay a $7.5 million dividend on Class A Common Stock, to pay a portion of the
purchase price for the Recent Acquisitions and to pay certain expenses of the
Offering, the Bank Facility and the Acquisitions. Thereafter, proceeds may be
used for the Arizona 5 Acquisition and other permitted acquisitions, to fund
dividends to Dobson for the purpose of paying scheduled interest on the Notes
(after the first four interest payments), to finance capital expenditures and
for general corporate purposes. The following summary of the material provisions
of the Bank Facility does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the credit agreement, a copy of which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. Capitalized terms that are used but not defined in this
section have the meanings that are given such terms in the credit agreement.
The Bank Facility is a $200 million reducing revolving credit facility which
matures on September 30, 2005. Borrowings under the Bank Facility bear interest,
payable at least quarterly, at DOC's option, at an annual rate equal to either
(i) the greater of (x) the federal funds rate plus 1/2% and (y) the prime rate
of CoreStates Bank, N.A., plus in each case a percentage per annum ranging from
0% to 1 3/4%, or (ii) a Libor-based rate plus a percentage per annum ranging
from 1 1/4% to 3.0%. The amount of additional interest applicable to either
option is based on the Company's quarterly Leverage Ratio.
Commencing June 30, 2000, the borrowing commitment under the Bank Facility
will reduce quarterly in percentage increments ranging from 3.75% in each of the
four quarters ending March 31, 2001 to 5.0% in each of the two quarters ending
September 30, 2005. A mandatory prepayment and reduction of the borrowing
commitment will be required at the time of, and in an amount equal to, certain
distributions made by DOC to the Company or any of its subsidiaries not directly
owned by DOC, excluding distributions to the Company for the purpose of paying
scheduled interest on the Notes after the first four interest payments. In
addition, the borrowing commitment under the Bank Facility will be reduced by an
amount equal to 100% of the net proceeds from sales of assets other than in the
ordinary course of business and in connection with the incurrence of certain
indebtedness by DOC, its subsidiaries or the Company. If the Company incurs
indebtedness for borrowed money (other than the Notes), the proceeds must be
used to repay borrowings under the Bank Facility and reduce the borrowing
commitment thereunder.
The Bank Facility contains a number of covenants including, among others,
covenants limiting the ability of the Company, DOC and their respective
subsidiaries to incur debt, make loans or guarantees, create liens, pay
dividends, make distributions or stock repurchases, make investments, make sale
and lease-back transactions, change their business, engage in transactions with
affiliates and non-subsidiaries, sell assets and engage in mergers and
acquisitions. Approval of the Banks is required for any acquisition in excess of
$15 million or outside the domestic cellular industry and Everett R. Dobson or
the Everett R. Dobson Irrevocable Family Trust must maintain voting control of
the Company and Everett Dobson must maintain a senior management position with
the Company or DOC. The Bank Facility contains other affirmative covenants,
including, among others, compliance with laws, maintenance of corporate
existence, licenses and insurance, payment of taxes and performance of other
material obligations and the delivery of financial and other information.
The Bank Facility restricts DOC from declaring and paying dividends or
distributions, including dividends to pay scheduled interest on the Notes.
However, DOC will be permitted to pay dividends to the Company to pay scheduled
interest on the Notes commencing after the first four interest payments on the
Notes, unless at the time of such dividend or distribution an event of default
(other than an event of
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default resulting solely from the breach of a representation or warranty) exists
or would be caused by such dividend or distribution; provided that, with respect
to any event of default (other than a payment default, a bankruptcy event with
respect to the Company or DOC or the loss of a material license or cellular
system), DOC will not be prohibited from paying dividends to the Company to pay
scheduled interest on the Notes for more than 180 days.
The Company is required to comply with certain financial tests and maintain
certain financial ratios, including, among others, a requirement that (i) the
ratio of DOC's Total Debt to its Operating Cash Flow not exceed 6.75 to 1 until
June 30, 1997, 6.5 to 1 from July 1 to September 30, 1997, 6.25 to 1 from
October 1 to December 31, 1997, 6.0 to 1 from January 1 to March 31, 1998, 5.75
to 1 from April 1 to June 30, 1998, 5.5 from July 1 to December 31, 1998, 5.0 to
1 from January 1 to June 30, 1999, 4.5 to 1 from July 1 to December 31, 1999,
4.0 to 1 from January 1 to June 30, 2000 and 3.5 to 1 at July 1, 2000 and
thereafter; (ii) the ratio of DOC's Operating Cash Flow to its Pro Forma Debt
Service be not less than 1.15 to 1; (iii) the ratio of DOC's Operating Cash Flow
to its Interest Expense for the most recently ended four quarters be not less
than 1.75 to 1 through March 31, 1998, 2.0 to 1 from April 1 to December 31,
1998, and 2.25 to 1 thereafter; (iv) the Fixed Charge Coverage Ratio be not less
than 1.0 to 1; (v) the Company's Leverage Ratio be less than 10.5 to 1 through
March 31, 1998, 10.25 to 1 from April 1 to September 30, 1998, 10.0 to 1 from
October 1 to December 31, 1998, 9.5 to 1 from January 1 to March 31, 1999, 9.0
to 1 from April 1 to September 30, 1999, 8.0 to 1 from October 1, 1999 to March
31, 2000, 6.5 to 1 from April 1 to December 31, 2000, 5.5 to 1 from January 1 to
December 31, 2001 and 4.5 to 1 at January 1, 2002 and thereafter; and (vi) the
Company's Consolidated Operating Cash Flow to its Consolidated Interest Expense
for the most recently ended four quarters from April 1 to December 31, 1999 be
not less than 1.10 to 1 and 1.25 to 1 thereafter.
For purposes of the financial covenants, "Operating Cash Flow" is defined as
Operating Cash Flow of DOC or the Company, as applicable, and their consolidated
subsidiaries, including certain cash flow of the "Cellular Partnerships"
(defined as Oklahoma RSA 5 Limited Partnership, Oklahoma RSA 7 Limited
Partnership, Texas RSA No. 2 Limited Partnership and any other entity in which
DOC or Dobson Cellular Systems, Inc., as applicable, owns a partnership interest
and serves as the managing general partner) for the four most recently completed
fiscal quarters; provided that, until March 31, 1998, the Company's Operating
Cash Flow may be increased by up to $5 million of losses incurred in new
businesses. "Operating Cash Flow" for any period is defined as the (i) sum of
net income, income taxes, interest, depreciation and amortization expenses,
extraordinary losses, and non-cash charges, minus (ii) interest and dividend
income, capitalized marketing costs, reductions in deferred taxes, gains on the
sale of assets, extraordinary gains and other non-cash components of income.
"Total Debt" of DOC is defined as the sum of all obligations for borrowed money,
all payments required under non-compete agreements, capital lease obligations,
amounts required under installment sale purchases, all financial obligations of
others guaranteed by DOC, and any amounts for which DOC is contingently liable
to provide as equity or debt advances to other parties, but does not include
intercompany subordinated debt owed by DOC to the Company or any subsidiary of
the Company not owned by DOC. "Total Debt" of the Company is defined as the sum
of all obligations for borrowed money, all payments required under non-compete
agreements, capital lease obligations, amounts required under installment sale
purchases, all financial obligations of others guaranteed, and any amounts for
which the Company and any of its direct or indirect subsidiaries are
contingently liable to provide as equity or debt advances to other parties (less
the amount held in the Pledge Account). "Pro Forma Debt Service" is defined as
the sum of Pro Forma Interest Expense and payments scheduled to be made on Total
Debt for the succeeding twelve months. "Pro Forma Interest Expense" is the
result obtained by multiplying the average debt outstanding during the period
(the sum of (a) Total Debt at the beginning of the period plus (b) such Total
Debt at the end of the period, taking into account payments thereof scheduled to
be made during the period, divided by two) by the interest rate in effect at the
time of calculation. "Fixed Charge Coverage Ratio" is defined as the ratio of
(i) the Operating Cash Flow of DOC for the most recently ended four fiscal
quarters to (ii) the sum of all payments on DOC's Total Debt required to be
paid, cash interest expense and capital expenditures of DOC, cash taxes, and
distributions
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and dividends paid by DOC (other than up to $7.5 million distributed for "new
businesses," as defined in the Bank Facility), in each case for the most
recently ended four fiscal quarters; provided that in 1997, the measurement
period with respect to clauses (i) and (ii) will commence January 1, 1997. The
Company's "Leverage Ratio" is defined as the ratio, on a consolidated basis, of
its Total Debt to its Operating Cash Flow.
Failure to satisfy any of the financial covenants will constitute an Event
of Default under the Bank Facility, permitting the Banks, after notice, to
terminate the commitment and/or accelerate payment of outstanding indebtedness
notwithstanding the ability of the Company to meet its debt service obligations.
The Bank Facility also includes other customary events of default, including,
without limitation, a cross-default to other indebtedness, material undischarged
judgments, bankruptcy and a change of control.
DOC's obligations under the Bank Facility are guaranteed by the Company and
DOC's subsidiaries. Borrowings under the Bank Facility are secured by all assets
of DOC and its present and future subsidiaries, and by a pledge of the stock of
DOC and the stock of and partnership interests in its subsidiaries.
RUS/RTB FACILITY
Telco is a party to loan agreements with the United States of America, Rural
Utilities Services ("RUS") and the Rural Telephone Bank ("RTB") pursuant to
which the RUS and RTB have agreed to loan Telco an aggregate maximum of $75
million at any time outstanding (the "RUS/RTB Facility"). At December 31, 1996,
the aggregate unpaid principal balance of these loans was $29.7 million. The
loans bear interest at annual rates varying from 2% to 10 3/4% and with
scheduled maturities between 1997 and 2028.
No loans under the RUS/RTB Facility may mature after May 2043. All advances
under the RUS/RTB Facility are secured by substantially all of Telco's assets,
including its licenses and other intangible assets.
The RUS/RTB Facility contains covenants which, among other things, require
prior approval of the applicable lending agencies before Telco can declare or
pay dividends, make distributions to or investments in affiliates or
stockholders or redeem its capital stock, unless after such payments, Telco's
current assets equal or exceed current liabilities and its adjusted net worth
meets specified requirements. In addition, the RUS/RTB Facility limits Telco's
ability to merge or consolidate or sell its assets or enter into any contracts
for the operation or maintenance of its property for use by others or for toll
traffic, operator assistance, extended scope or switching services to be
furnished by or for connecting or other companies other than contracts generally
used in the telephone industry. Telco is restricted from advancing payments or
loans to any stockholders or affiliates, other than for certain wireline related
investments unless if after such investment, the aggregate of investments does
not exceed one-third of Telco's net worth and its net worth is at least 20% of
its total assets.
The RUS/RTB Facility also provides that while Telco's adjusted net worth is
less than 10% of its total assets, Telco is restricted from increasing salaries
of officers or directors without the prior consent of the holders of a majority
of the outstanding indebtedness. In addition, if retained earnings decrease as a
result of operations, Telco must increase its charges for telephone service or
execute a plan for reducing expenses, each with the approval of the holders of
outstanding indebtedness. Telco is also required to maintain a ratio of net
income or net margins plus interest expense to interest expense of 1.50 to 1.
Failure to satisfy any of the covenants constitutes an event of default
under the RUS/RTB Facility permitting the applicable lending agencies to
accelerate payment of the outstanding indebtedness or sell or take possession of
the mortgaged property notwithstanding Telco's ability to meet its debt
obligations. In the event of a default in the payment of principal or interest
on the outstanding indebtedness, if in the opinion of holders of a majority of
the outstanding indebtedness Telco's operations are not being efficiently
operated, Telco may be required to terminate operating contracts or the
employment of certain
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managers. The RUS/RTB Facility also contains certain other events of default,
including forfeiture of permits or licenses required to carry on a material
portion of its business, and customary events of default, including, without
limitation, material undischarged judgments and bankruptcy.
PREFERRED STOCK
CLASS A PREFERRED STOCK
As part of the Reorganization, Telco was issued 100,000 shares of Class A
Preferred Stock. A certificate of designation for the Class A Preferred Stock
provides for the following rights, preferences and powers:
VOTING RIGHTS. Except as otherwise required by law, the holders of shares
of Class A Preferred Stock have no voting rights.
DIVIDENDS. The holders of Class A Preferred Stock are entitled to receive
non-cumulative dividends at the annual rate of 5% of the $70 per share
liquidation value, if and when declared by the Board of Directors. The Indenture
will limit, and for the foreseeable future effectively prohibit, the payment of
cash dividends on the Class A Preferred Stock.
CONVERSION. The Class A Preferred Stock is not convertible.
REDEMPTION. At any time and from time to time, the Class A Preferred Stock
may be redeemed, in whole or in part, at the option of the Company at the
liquidation value thereof.
FLEET INVESTORS PREFERRED STOCK
In March 1996, Fleet Venture Resources, Inc., Fleet Equity Partners VI, L.P.
and Kennedy Plaza Partners purchased 100,000 shares of Class B Preferred Stock
from DOC for $10 million net of acquisition cost pursuant to a securities
purchase agreement (the "Fleet Investors Purchase Agreement") and entered into a
shareholders' agreement (the "Shareholders' Agreement") with DOC, Dobson CC
Limited Partnership and Russell L. Dobson (the "Dobson Shareholders" and,
together with the Fleet Investors, the "Shareholders"). As part of the
Reorganization and in connection with the Transactions, the DOC Class B
Preferred Stock was exchanged for 100,000 shares of Dobson Class B Preferred
Stock and the Fleet Investors were also issued 100,000 shares of Dobson Class C
Preferred Stock (together with the Dobson Class B Preferred Stock, sometimes
hereafter referred to as the "Fleet Investors Preferred Stock"). The following
summary of the Fleet Investors Preferred Stock, the Fleet Investors Purchase
Agreement and the Shareholders' Agreement does not purport to be complete and is
qualified in its entirety by reference to the applicable certificates of
designation and such agreements, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part.
PURCHASE AGREEMENT. The Fleet Investors Purchase Agreement contains various
covenants which, among other things, restrict the ability of the Company and its
subsidiaries to pay dividends, purchase their outstanding equity securities,
issue equity securities (including rights, options or warrants with respect to
such securities and other securities convertible into equity securities), make
investments or acquire or dispose of material amounts of assets outside the
ordinary course of business, or engage in transactions with affiliates.
CLASS B PREFERRED STOCK CERTIFICATE OF DESIGNATION. The certificate of
designation for the Class B Preferred Stock (the "Class B Preferred Stock
Certificate of Designation") provides for the following rights, including voting
rights, preferences and powers:
Voting Rights. Except as otherwise provided by law, the shares of Class A
Common Stock and Class B Preferred Stock vote together on all matters submitted
to a vote of the shareholders. Each share of Class B Preferred Stock, which is
presently convertible into one share of Class A Common Stock, is entitled to the
number of votes that it would have upon conversion on the record date fixed for
any meeting, or the effective date of action taken by written consent, of
shareholders. The holders of Class B Preferred Stock
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are entitled to elect, voting as a single class, two directors of the Company.
In addition, as long as at least 50,000 shares of Class B Preferred Stock remain
outstanding, approval of the holders of a majority of the outstanding Class B
Preferred Stock, voting as a single class, is necessary to (i) authorize or
increase the authorized number of shares of, or issue, any class or a series of
capital stock ranking prior to, or on a parity with, the Class B Preferred
Stock, (ii) make any change in the Company's Certificate of Incorporation which
would adversely affect the powers, preferences or rights of the Class B
Preferred Stock, (iii) authorize or effect the sale of all or substantially all
of the assets of the Company, any merger or consolidation of the Company
resulting in the change of control, or the liquidation, dissolution or winding
up of the Company, (iv) amend the Bylaws to change the authorized number of
directors, or (v) amend the provisions of the Company's Certificate of
Incorporation setting forth the voting rights of the Class B Preferred Stock.
Dividends. Cumulative dividends on each share of Class B Preferred Stock
accrue daily at the annual rate of 8% (15% upon the happening of any
Noncompliance Event) on the sum of the $100 per share liquidation value and all
accumulated and unpaid dividends ("Accrued Dividends") from the date of
issuance, compounded annually on December 31 of each year, and are payable when
declared by the Board of Directors (subject to any prohibition on the payment of
dividends in the Bank Facility). Further, upon the earliest to occur of
conversion of Class B Preferred Stock into Class A Common Stock, liquidation,
dissolution or winding up of the Company, sale of assets or merger or
consolidation resulting in the change of control of the Company and the
consummation of a public offering of the Company's common stock (each, a
"Trigger Event"), holders of Class B Preferred Stock will be entitled to receive
Accrued Dividends. A "Noncompliance Event" includes, among other things, a
breach of certain covenants under the Fleet Investors Purchase Agreement,
Shareholders' Agreement, Class B Preferred Stock Certificate of Designation or
the Bank Facility or related documents, any representation or warranty made in
such agreements which proves to be materially false, an uncured default on
indebtedness of the Company or its subsidiaries, undischarged final judgments in
excess of $5 million, the bankruptcy of the Company or its subsidiaries, the
death of Everett R. Dobson or his ceasing to be President of the Company unless
replaced by a person with comparable expertise and experience or a change of
control in which Everett R. Dobson ceases to have voting control of the
securities owned by, or ceases to own at least 90% of the economic interest of,
Dobson CC Limited Partnership.
The Indenture will limit, and for the foreseeable future effectively
prohibit, the payment of cash dividends on the Class B Preferred Stock.
The Class B Preferred Stock Certificate of Designation prohibits the
declaration or payment of dividends or redemption or purchase (by the Company,
any subsidiary or other affiliate) of any junior securities. The certificate of
designation for the Class B Preferred Stock held by the Fleet Investors prior to
the Reorganization contained a similar prohibition, except that it permitted the
payment of a dividend on the Class A Common Stock solely for the purpose of
permitting distributions to the Dobson Trusts to service the Trust Loan.
Simultaneously with the payment of such dividend, the holders of the Class B
Preferred Stock were entitled to receive a dividend (a "Make-Whole Dividend") in
an amount equal to the amount they would have received had their Class B
Preferred Stock been converted into Class A Common Stock. At December 31, 1996,
the Company had accrued approximately $94,300 of Make-Whole Dividends. It
further provided that, in the event the Trust Loan became a liability of the
Company, the holders of the Class B Preferred Stock would be entitled to receive
a Make-Whole Dividend in an amount equal to the product of (a) an amount
computed by dividing (i) the aggregate amount of the Trust Loan assumed by (ii)
the proportionate equity ownership interest of Dobson CC Limited Partnership in
the Company and (b) the Fleet Investors' proportionate equity ownership interest
in the Company.
In February 1997, a $7.5 million dividend was paid on the Class A Common
Stock, of which $6.0 million was used to fully discharge the Trust Loan and $.5
million was used to repay certain indebtedness owed to the Company. See
"Management--Certain Transactions." As a result of the $7.5 million dividend,
the Fleet Investors were entitled to a Make-Whole Dividend of approximately $1.7
million. In lieu of such Make-Whole Dividend, the Fleet Investors received
100,000 shares of Class C
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Preferred Stock having a liquidation preference of $1,656,000, and all
provisions for Make-Whole Dividends were eliminated from the terms of the Class
B Preferred Stock.
Conversion. At any time and from time to time, any holder of Class B
Preferred Stock may convert all or a portion of the shares of Class B Preferred
Stock held by such holder into a number of shares of Class A Common Stock equal
to the product of (x) the number of shares of Class B Preferred Stock to be
converted and (y) a fraction the numerator of which is $100 and the denominator
is the conversion price then in effect. The conversion rate is initially one to
one. Upon the occurrence of a "Texas 2 Event" (as defined below), the conversion
price will be adjusted to an amount equal to 100.45% of the conversion price.
Redemption. There are no provisions for redemption of the Class B Preferred
Stock. See, however, "--Shareholders' Agreement" below for a description of
certain put and call rights.
CLASS C PREFERRED STOCK CERTIFICATE OF DESIGNATION. The certificate of
designation for the Class C Preferred Stock provides for the following rights,
preferences and powers:
Voting Rights. Except as otherwise required by law, the holders of shares of
Class C Preferred Stock have no voting rights.
Dividends. Cumulative dividends on each share of Class C Preferred Stock
accrue daily at the annual rate of 8% on the sum of the $16.56 per share
liquidation value ("Liquidation Value") and all accumulated and unpaid dividends
thereon ("Accrued Dividends") from the date of issuance, compounded annually on
December 31 of each year, and are payable when declared by the Board of
Directors (subject to any prohibition on the payment of dividends in the Bank
Facility). Further, upon the occurrence of a Trigger Event, holders of Class C
Preferred Stock will be entitled to receive Accrued Dividends. The Indenture
will limit, and for the foreseeable future effectively prohibit, the payment of
cash dividends on the Class C Preferred Stock.
Conversion. The Class C Preferred Stock is not convertible.
Redemption. At any time and from time to time, the Class C Preferred Stock
may be redeemed, in whole or in part, at the option of the Company at the
Liquidation Value thereof plus Accrued Dividends. Upon the earlier to occur of a
Trigger Event or February 28, 2002, the Company shall redeem all the outstanding
shares of Class C Preferred Stock at the Liquidation Value thereof plus Accrued
Dividends. The Fleet Investors have acknowledged that the Indenture could
restrict the Company from redeeming their Class C Preferred Stock for cash in
accordance with its terms and agreed that any claim for such payment would be
subordinate in right of payment to the Notes. See "Description of the Notes."
SHAREHOLDERS' AGREEMENT. Under the Shareholders' Agreement, after a public
offering of the Company's equity securities, the Fleet Investors have demand and
"piggy-back" registration rights for their shares of Class A Common Stock
issuable upon conversion of the Class B Preferred Stock. The Shareholders have
also agreed that six directors will constitute the Company's Board, four
designated by Dobson CC Limited Partnership (one of whom must be Everett R.
Dobson and one of whom must be reasonably acceptable to the Fleet Investors and
not an affiliate or employee of the Company or a family member thereof), one
designated by FVR and one designated by FEP6, provided that upon written request
of Everett R. Dobson, the FEP6 designee must be reasonably acceptable to Mr.
Dobson and not an officer, director or employee of FEP6 or FVR. FVR has the
right to designate one representative of each committee established by the Board
and have an observer, selected by FVR, attend each meeting of the Board and each
meeting of any committee of the Board.
The Fleet Investors have preemptive rights with respect to new equity
securities issued by the Company (excluding securities issued in a public
offering or upon the exercise of employee stock options) and rights to
participate with the Dobson Shareholders in a sale of their shares. The Fleet
Investors may not sell their shares without first giving the Company an
opportunity to purchase the shares. The transfer restrictions in the
Shareholders' Agreement applicable to Shareholders other than the Fleet
Investors terminate upon the earlier of an initial public offering by the
Company or the sale of the Company.
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The Shareholders' Agreement also provides for put and call rights. The Fleet
Investors have the right to require the Company to purchase their Class B
Preferred Stock or the Class A Common Stock into which it may be converted (the
"Put") after the earliest to occur of (i) March 19, 2001, (ii) a Change of
Control Event, (iii) a Noncompliance Event, and (iv) the six month anniversary
of the death of Everett R. Dobson, provided that a Fleet Investor may not
exercise its Put rights as to more than 50% of its shares prior to March 19,
2002 unless one or more of the events referred to clauses (ii) to (iv) have
occurred. The purchase price for each share of Class A Common Stock is its Fair
Market Value (determined by the Company's outside directors or, if their
determination is not acceptable to the Company or the Fleet Investors, by an
investment banking firm) and, for each share of Class B Preferred Stock is the
greater of (x) liquidation value ($100) plus Accrued Dividends and (y) the Fair
Market Value of the Class A Common Stock issuable upon the conversion of one
share of Class B Preferred Stock. A "Change of Control Event" means (i) any
merger or consolidation of the Company as a result of which the Shareholders own
less than a majority of the Company's voting equity securities, (ii) the sale of
all or substantially all of the assets of the Company and its subsidiaries,
(iii) the issuance of equity securities as a result of which the Shareholders
own less than a majority of the voting equity securities of the Company, (iv)
the failure by Everett R. Dobson to control at least 50.1% of the Company's
voting equity securities, and (v) the failure of the persons comprising the
Board of Directors on March 19, 1996 or persons approved by a majority of the
Company's incumbent Board of Directors to comprise the majority of the directors
of the Company. In the event that the Company fails to redeem any shares
pursuant to a Put request by the later of six months after the date of the
request or three months after the determination of Fair Market Value (the
"Mandatory Date"), but in no event later than the nine months after the date of
the request, the Company is required to issue to the Fleet Investors exercising
the Put the number of shares of common stock of the Company as is then equal to
1% of the outstanding common stock of the Company and on each third month
anniversary until the repurchase date, the Company is required to issue an
additional 1% of the outstanding shares of common stock of the Company to such
Fleet Investors. In the event that the Company fails to redeem all of the shares
pursuant to the Put within two years after the earlier of the determination of
the Fair Market Value of the shares and the Mandatory Date, Fleet Investors
exercising the Put have the right to immediately designate a majority of the
Board until such time as all shares subject to the Put are purchased. The
Company has the right to purchase (the "Call") all the shares held by any Fleet
Investor after March 19, 2003 at the same purchase price applicable to the Put.
The Call rights terminate upon the consummation of an initial public offering or
upon transfer of the shares if they are transferred in transactions to which the
rights of refusal or co-sale apply.
The Indenture limits the ability of the Company to repurchase shares of
Class B Preferred Stock or common stock. In connection with the Offering, the
Fleet Investors acknowledged that the Indenture could restrict the Company from
repurchasing their stock for cash and agreed that any claim for such payment
would be subordinate in right of payment to the Notes. See "Description of the
Notes."
COMPANY OPTION. The Fleet Investors have granted the Company an option to
purchase up to 452 shares (subject to antidilution adjustments) of Class A
Common Stock issuable upon conversion of Class B Preferred Stock at an exercise
price of $.01 per share. The option is exercisable during the 30-day period
following the consummation of a "Texas 2 Event" if the Fleet Investors have
converted the Class B Preferred Stock to Class A Common Stock. The "Texas 2
Event" means the purchase by the Company, prior to March 19, 1999, of the entire
interest in Texas RSA 2 Limited Partnership not owned by the Company on March
19, 1996 (other than the interest owned by SWBM) for a purchase price of not
more than $7.5 million and on such other terms as are reasonably satisfactory to
the Fleet Investors.
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DESCRIPTION OF THE NOTES
The Old Notes were issued under an Indenture, dated as of February 28, 1997
(the "Indenture"), between the Company and United States Trust Company of New
York, as trustee (the "Trustee"). The New Notes will be issued under the
Indenture, which will be qualified under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act), upon the effectiveness of the Registration
Statement of which this Prospectus is a part. The form and terms of the New
Notes are identical in all material respects to the form and terms of the Old
Notes except that the New Notes will be registered under the Securities Act and,
therefore, will not bear legends restricting transfer thereof. Upon the
consummation of the Exchange Offer, holders of Notes will not be entitled to
registration rights under, or the contingent increase in interest rate provided
pursuant to, the Old Notes. The New Notes will evidence the same debt as the Old
Notes and will be treated as a single class under the Indenture with any Old
Notes that remain outstanding. The Old Notes and New Notes are herein
collectively referred to as the "Notes."
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act as in effect on
the date of the Indenture. The Notes are subject to all such terms and reference
is made to the Indenture and the Trust Indenture Act for a statement thereof. A
copy of the Indenture has been filed with the Commission as an exhibit to the
Registration Statement of which this Prospectus is a part. The following
summary, which describes certain provisions of the Indenture and the Notes, does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to all the provisions of the Indenture, including the definitions
of certain terms therein and those terms made a part thereof by the Trust
Indenture Act.
GENERAL
The Notes will be unsubordinated obligations of the Company, initially
limited to $160 million aggregate principal amount, and will mature on April 15,
2007. Each Note will initially bear interest at 11 3/4% per annum from February
28, 1997 or from the most recent Interest Payment Date to which interest has
been paid or provided for, payable semiannually (to Holders of record at the
close of business on the April 1 or October 1 immediately preceding the Interest
Payment Date) on April 15 and October 15 of each year, commencing October 15,
1997.
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, the City of New York (which initially will
be the corporate trust office of the Trustee at 114 W. 47th Street, New York,
New York 10036); PROVIDED that, at the option of the Company, payment of
interest may be made by check mailed to the Holders at their addresses as they
appear in the Security Register.
The Notes will be issued only in fully registered form, without coupons, in
denominations of $1,000 of principal amount and any integral multiple thereof.
See "--Book-Entry; Delivery and Form." No service charge will be made for any
registration of transfer or exchange of Notes, but the Company may require
payment of a sum sufficient to cover any transfer tax or other similar
governmental charge payable in connection therewith.
The Company may, subject to the covenants described below under "Covenants"
and applicable law, issue additional Notes under the Indenture. The New Notes
offered hereby and any additional Notes subsequently issued would be treated as
a single class for all purposes of the Indenture.
OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in part,
at any time or from time to time, on or after April 15, 2002 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the Security
Register, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid
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interest, if any, to the Redemption Date (subject to the right of Holders of
record on the relevant Regular Record Date that is prior to the Redemption Date
to receive interest due on an Interest Payment Date), if redeemed during the
12-month period commencing April 15, of the years set forth below:
YEAR REDEMPTION PRICE
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ------------------------------------------------------------------ -----------------
<S> <C>
2002.............................................................. 105.8750%
2003.............................................................. 102.9375
2004 and thereafter............................................... 100.0000
</TABLE>
In addition, at any time prior to April 15, 2000, the Company may redeem up
to 35% of the aggregate principal amount of the Notes with the Net Cash Proceeds
of one or more sales of Capital Stock of the Company (other than Disqualified
Stock), at any time as a whole or from time to time in part, at a Redemption
Price (expressed as a percentage of principal amount) of 111.750%, plus accrued
and unpaid interest to the Redemption Date (subject to the rights of Holders of
record on the relevant Regular Record Date that is prior to the Redemption Date
to receive interest due on an Interest Payment Date); PROVIDED that at least
$104.0 million aggregate principal amount of Notes remains outstanding after
each such redemption.
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes are listed or, if the
Notes are not listed on a national securities exchange, on a pro rata basis, by
lot or by such other method as the Trustee in its sole discretion shall deem to
be fair and appropriate; PROVIDED that no Note of $1,000 in principal amount or
less shall be redeemed in part. If any Note is to be redeemed in part only, the
notice of redemption relating to such Note shall state the portion of the
principal amount thereof to be redeemed. A new Note in principal amount equal to
the unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.
SECURITY
Immediately prior to the closing of the Offering, the Company entered into
an escrow and security agreement (the "Escrow and Security Agreement") with the
Placement Agents and United States Trust Company of New York, escrow agent (in
such capacity, the "Escrow Agent"), pursuant to which the Company, on the
Closing Date, deposited with the Escrow Agent the net proceeds from the Offering
which were pledged to the Trustee for the benefit of the Holders of the Notes to
secure the payment of principal, premium if any, and interest on Notes.
The escrowed proceeds which remain subject to the Escrow and Security
Agreement have been invested in Pledged Securities held in the Pledge Account.
The Pledged Securities consist of U.S. Government Obligations having scheduled
interest and principal payments which exceed the amount sufficient, in the
opinion of a nationally recognized firm of independent public accountants
selected by the Company, to provide for payment in full of the first four
scheduled interest payments due on all Notes then outstanding.
Immediately prior to an Interest Payment Date, the Company may either
deposit with the Trustee from funds otherwise available to the Company cash
sufficient to pay the interest scheduled to be paid on such date or the Company
may direct the Trustee to release from the Pledge Account proceeds sufficient to
pay interest then due on the Notes. In the event the Company exercises the
former option, the Company may direct the Trustee to release a like amount of
proceeds from the Pledge Account. A failure to pay
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interest on the Notes in a timely manner through the first four scheduled
interest payment dates will constitute an immediate Event of Default under the
Indenture, with no grace or cure period.
Interest earned on the Pledged Securities will be added to the Pledge
Account. In the event that the funds or Pledged Securities held in the Pledge
Account exceed the amount sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by the Company, to provide for
payment in full of the first four scheduled interest payments due on the Notes,
the Trustee will be permitted to release to the Company, at its request, any
such excess amount. The Pledged Securities and Pledge Account will also secure
the repayment of the principal amount and premium on the Notes.
Under the Escrow and Security Agreement, once the Company makes the first
four scheduled interest payments on the Notes, all of the remaining Pledged
Securities, if any, will be released from the Pledge Account and thereafter the
Notes will be unsecured.
RANKING
The Notes are unsubordinated indebtedness of the Company, and rank PARI
PASSU in right of payment with all other unsubordinated indebtedness of the
Company and senior in right of payment to all subordinated indebtedness of the
Company. After giving pro forma effect to the Transactions, as of December 31,
1996, the Company would have had (on an unconsolidated basis) no indebtedness
outstanding other than the Notes. In addition, the Company is a holding company
and the Notes will be effectively subordinated to all existing and future
liabilities (including trade payables) of the Company's subsidiaries. As of
December 31, 1996, on the same pro forma basis, the subsidiaries of the Company
would have had $212.4 million of liabilities (excluding intercompany payables),
including $200.2 million of indebtedness, all of which would have been secured.
See "Risk Factors--Leverage; Significant Capital Requirements; Ability to Meet
Required Debt Service; Refinancing Risk."
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the definition of all terms as well as any other capitalized term
used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by a Restricted Subsidiary and not Incurred in connection
with, or in anticipation of, such Person becoming a Restricted Subsidiary or
such Asset Acquisition; provided that Indebtedness of such Person which is
redeemed, defeased, retired or otherwise repaid at the time of or immediately
upon consummation of the transactions by which such Person becomes a Restricted
Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined in conformity with GAAP; PROVIDED that the following items shall be
excluded in computing Adjusted Consolidated Net Income (without duplication):
(i) the net income of any Person (other than net income attributable to a
Restricted Subsidiary) in which any Person (other than the Company or any of its
Restricted Subsidiaries) has a joint interest and the net income of any
Unrestricted Subsidiary, except to the extent of the amount of dividends or
other distributions actually paid to the Company or any of its Restricted
Subsidiaries by such other Person or such Unrestricted Subsidiary during such
period; (ii) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of the
"Limitation on Restricted Payments" covenant described below (and in such case,
except to the extent includable pursuant to clause (i) above), the net income
(or loss) of any Person accrued prior to the date it becomes a Restricted
Subsidiary or is merged into or consolidated with the Company or any of its
Restricted Subsidiaries or all or substantially all of the property and assets
of such Person are acquired by the Company or any of its Restricted
Subsidiaries; (iii) the net income of any Restricted Subsidiary to the
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extent that the declaration or payment of dividends or similar distributions by
such Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such Restricted Subsidiary; (iv) any gains or losses (on an after-tax basis)
attributable to Asset Sales; (v) except for purposes of calculating the amount
of Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of the "Limitation on Restricted Payments" covenant described below,
any amount paid or accrued as dividends on Preferred Stock of the Company or any
Restricted Subsidiary owned by Persons other than the Company and any of its
Restricted Subsidiaries; and (vi) all extraordinary gains and extraordinary
losses, net of tax.
"Adjusted Consolidated Net Tangible Assets" means the total amount of assets
of the Company and its Restricted Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting from
write-ups of capital assets (excluding write-ups in connection with accounting
for acquisitions in conformity with GAAP), after deducting therefrom (i) all
current liabilities of the Company and its Restricted Subsidiaries (excluding
intercompany items) and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles (other than FCC
license acquisition costs), all as set forth on the most recent quarterly or
annual consolidated balance sheet of the Company and its Restricted
Subsidiaries, prepared in conformity with GAAP and filed with the Commission
pursuant to the "Commission Reports and Reports to Holders" covenant.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Arizona 5 Acquisition" means the acquisition by DOC, or a Subsidiary
thereof, of a 75% interest in the Arizona 5 Partnership.
"Arizona 5 Partnership" means the Gila River Cellular General Partnership,
which holds the FCC cellular license and system relating to the Arizona 5 RSA.
"Asset Acquisition" means (i) an investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries; PROVIDED that such Person's
primary business is related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such investment or (ii)
an acquisition by the Company or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Company or any of its
Restricted Subsidiaries that constitute substantially all of a division or line
of business of such Person; PROVIDED that the property and assets acquired are
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including by way
of merger, consolidation or sale-leaseback transaction) in one transaction or a
series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets of the Company or any of its Restricted
Subsidiaries outside the ordinary course
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of business of the Company or such Restricted Subsidiary and, in each case, that
is not governed by the provisions of the Indenture applicable to mergers,
consolidations and sales of all or substantially all of the assets of the
Company; PROVIDED that "Asset Sale" shall not include (a) sales or other
dispositions of inventory, receivables and other current assets, (b) sales or
other dispositions of assets for consideration at least equal to the fair market
value of the assets sold or disposed of, provided that the consideration
received consists of property or assets (other than current assets) of a nature
or type or that are used in a business (or a company having property or assets
of a nature or type, or engaged in a business) similar or related to the nature
or type of the property and assets of, or business of, the Company and its
Restricted Subsidiaries existing on the date of such sale or other disposition
or (c) the sale of the Prior ATTI Assets.
"ATTI" means Associated Telecommunications and Technologies, Inc.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Bank Credit Agreement" means the Existing Credit Agreement until it is
refinanced by the Bank Facility Agreement and thereafter means the Bank Facility
Agreement.
"Bank Facility" means the $200 million reducing revolving credit facility
established pursuant to the Bank Facility Commitment Letter.
"Bank Facility Agreement" means the credit agreement establishing the Bank
Facility, together with all other agreements, instruments and documents executed
or delivered pursuant thereto or in connection therewith, in each case as such
agreements, instruments or documents may be amended, supplemented, extended,
renewed, replaced or otherwise modified from time to time.
"Bank Facility Commitment Letter" means the commitment letter (including the
Summary of Terms attached thereto) dated February 5, 1997 among Dobson
Communications Corporation, Dobson Operating Company and the banks party
thereto.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether now outstanding or
issued after the Closing Date, including, without limitation, all Common Stock
and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) (a) prior to the occurrence of a
Public Market, a "person" or "group" (within the meaning of Section 13(d) or
14(d)(2) under the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of Voting Stock representing a
greater percentage of the total voting power of the Voting Stock of the Company,
on a fully diluted basis, than is held by the Existing Stockholders and their
Affiliates on such date and (b) after the occurrence of a Public Market, a
"person" or "group" (within the meaning of Section 13(d) or 14(d)(2) under the
Exchange Act) becomes the ultimate "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of more than 35% of the total voting power of the Voting
Stock of the Company on a fully diluted basis and such ownership represents a
greater percentage of the total voting power of the Voting Stock of the Company,
on a fully diluted basis, than is held by the Existing Stockholders and their
Affiliates on such date; or (ii) individuals who on the Closing Date constitute
the Board of Directors (together with any new directors whose election by the
Board of Directors or whose nomination for
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election by the Company's stockholders was approved by a vote of at least a
majority of the members of the Board of Directors then in office who either were
members of the Board of Directors on the Closing Date or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board of Directors then in office.
"Class A Common Stock" means the Class A Common Stock, par value $1.00 per
share, of the Company.
"Class B Preferred Stock" means the Class B Convertible Preferred Stock, par
value $1.00 per share, of the Company.
"Class C Preferred Stock" means the Class C Preferred Stock, par value $1.00
per share, of the Company.
"Closing Date" means February 28, 1997, the date on which the Notes were
originally issued under the Indenture.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non voting) of such Person's equity, other than Preferred Stock of
such Person, whether now outstanding or issued after the Closing Date, including
without limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income (i) Consolidated Interest Expense,
(ii) income taxes, (other than income taxes (either positive or negative)
attributable to extraordinary and non-recurring gains or losses or sales of
assets), (iii) depreciation expense, (iv) amortization expense, and (v) all
other non-cash items reducing Adjusted Consolidated Net Income (other than items
that will require cash payments and for which an accrual or reserve is, or is
required by GAAP to be, made), less all non-cash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in conformity with GAAP; PROVIDED that,
if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of the Adjusted
Consolidated Net Income attributable to such Restricted Subsidiary multiplied by
(B) the quotient of (1) the number of shares of outstanding Common Stock of such
Restricted Subsidiary not owned on the last day of such period by the Company or
any of its Restricted Subsidiaries divided by (2) the total number of shares of
outstanding Common Stock of such Restricted Subsidiary on the last day of such
period.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Subsidiaries during such
period; EXCLUDING, HOWEVER, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in connection
with the offering of the Notes, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with GAAP.
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"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) the aggregate amount of Consolidated EBITDA for the four fiscal quarters
for which financial statements of the Company have been filed with the
Commission pursuant to the "Commission Reports and Reports to Holders" covenant
described below (such four fiscal quarter period being the "Four Quarter
Period"); PROVIDED that (A) PRO FORMA effect shall be given to any Indebtedness
that is to be Incurred or repaid on the Transaction Date as if such Incurrence
or repayment had occurred on the first day of such Four Quarter Period; (B) PRO
FORMA effect shall be given to Asset Dispositions and Asset Acquisitions
(including giving PRO FORMA effect to the application of proceeds of any Asset
Disposition) that occur during the period beginning on the first day of the Four
Quarter Period and ending on the Transaction Date (the "Reference Period") as if
they had occurred and such proceeds had been applied on the first day of such
Reference Period; and (C) PRO FORMA effect shall be given to asset dispositions
and asset acquisitions (including giving PRO FORMA effect to the application of
proceeds of any asset disposition) that have been made by any Person that has
become a Restricted Subsidiary or has been merged with or into the Company or
any Restricted Subsidiary during such Reference Period and that would have
constituted Asset Dispositions or Asset Acquisitions had such transactions
occurred when such Person was a Restricted Subsidiary as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions
that occurred on the first day of such Reference Period; PROVIDED that to the
extent that clause (B) or (C) of this sentence requires that PRO FORMA effect be
given to an Asset Acquisition or Asset Disposition, such PRO FORMA calculation
shall be based upon the four full fiscal quarters immediately preceding the
Transaction Date of the Person, or division or line of business of the Person,
that is acquired or disposed for which financial information is available.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; PROVIDED that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in "Limitation on Asset Sales" and
"Repurchase of Notes upon a Change of Control" covenants described below and
such Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased
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pursuant to the "Limitation on Asset Sales" and "Repurchase of Notes upon a
Change of Control" covenants described below.
"Existing Credit Agreement" means the Amended and Restated Credit Agreement,
dated March 19, 1996, among CoreStates Bank, N.A., as a bank and as
administrative agent, NationsBank of Texas, N.A., First Union National Bank of
North Carolina, PNC Bank, National Association, each as a bank and as co-agents,
and DOC and certain of its subsidiaries and certain other related parties,
together with all other agreements, instruments and documents executed or
delivered pursuant thereto or in connection therewith, in each case as such
agreements, instruments or documents may be amended, supplemented, extended,
renewed, replaced or otherwise modified from time to time.
"Existing Stockholders" means Everett R. Dobson and Fleet Investors.
"fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution.
"Fleet Investors" means Fleet Venture Resources, Inc., Fleet Equity Partners
VI, L.P. and Kennedy Plaza Partners and their Affiliates.
"Fleet Investors Preferred Stock" means the Class B Preferred Stock and the
Class C Preferred Stock.
"FCC" means the Federal Communications Commission.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
the Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of the Indenture shall be
made without giving effect to (i) the amortization of any expenses incurred in
connection with the offering of the Notes and (ii) except as otherwise provided,
the amortization of any amounts required or permitted by Accounting Principles
Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and, without limiting the generality of the foregoing, 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
Indebtedness or other obligation of such other 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 purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); PROVIDED 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.
"Horizon Properties Acquisition" means the acquisition by DOC, or a
Subsidiary thereof, of the FCC licenses for, and certain assets relating to, the
Cumberland MSA, Hagerstown MSA, Maryland 3 RSA and Pennsylvania 10 West RSA
pursuant to the asset purchase agreement among Horizon Cellular Telephone
Company of Hagerstown, L.P., Cumberland Cellular Partnership, Dobson Cellular of
Maryland, Inc. and DOC dated as of November 19, 1996.
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"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an "Incurrence" of Indebtedness by reason of a Person becoming a
Restricted Subsidiary; PROVIDED that neither the accrual of interest nor the
accretion of original issue discount shall be considered an Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such services, except Trade Payables, (v) all obligations of
such Person as lessee under Capitalized Leases, (vi) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; PROVIDED that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness, (vii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person and (viii) to the extent not otherwise
included in this definition, obligations under Currency Agreements and Interest
Rate Agreements. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date (or in the case of a revolving credit or
other similar facility, the total amount of funds outstanding and/or available
on the date of determination) of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, PROVIDED (A)
that the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the unamortized
portion of the original issue discount of such Indebtedness at the time of its
issuance as determined in conformity with GAAP, (B) money borrowed at the time
of the Incurrence of any Indebtedness in order to pre-fund the payment of
interest on such Indebtedness shall be deemed not to be "Indebtedness" and (C)
that Indebtedness shall not include any liability for federal, state, local or
other taxes.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers in the ordinary course
of business that are, in conformity with GAAP, recorded as accounts receivable
on the balance sheet of the Company or its Restricted Subsidiaries) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, bonds, notes, debentures or other
similar instruments issued by, such Person and shall include (i) the designation
of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair
market value of the Capital Stock (or any other Investment), held by the Company
or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to
be a Restricted Subsidiary, including without limitation, by reason of any
transaction permitted by clause (iii) of the "Limitation on the Issuance and
Sale of Capital Stock of Restricted Subsidiaries" covenant. For purposes of the
definition of "Unrestricted Subsidiary" and the "Limitation on Restricted
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Payments" covenant described below, (i) "Investment" shall include the fair
market value of the assets (net of liabilities (other than liabilities to the
Company or any of its Subsidiaries)) of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii)
the fair market value of the assets (net of liabilities (other than liabilities
to the Company or any of its Subsidiaries)) of any Unrestricted Subsidiary at
the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary
shall be considered a reduction in outstanding Investments and (iii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
"Maryland 2 Acquisition" means the acquisition by DOC, or a Subsidiary
thereof, of (a) the FCC license for, and assets relating to, the Maryland 2 RSA
pursuant to the asset purchase agreement among Maryland Wireless Communications,
L.P., Wendy C. Coleman, Dobson Cellular of Maryland, Inc. and DOC dated as of
September 25, 1996 and (b) approximately 18,700 customers in Maryland 2 RSA from
Washington Baltimore Cellular Limited Partnership.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary of the Company as a reserve against any
liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of such
issuance or sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary of the Company)
and proceeds from the conversion of other property received when converted to
cash or cash equivalents, net of attorney's fees, accountants' fees,
underwriters' or placement agents' fees, discounts or commissions and brokerage,
consultant and other fees incurred in connection with such issuance or sale and
net of taxes paid or payable as a result thereof.
"Offer to Purchase" means an offer by the Company to purchase Notes from the
Holders commenced by mailing a notice to the Trustee and each Holder stating:
(i) the covenant pursuant to which the offer is being made and that all Notes
validly tendered will be accepted for payment on a pro rata basis; (ii) the
purchase price and the date of purchase (which shall be a Business Day no
earlier than 30 days nor later than 60 days from the date such notice is mailed)
(the "Payment Date"); (iii) that any Note not tendered will continue to accrue
interest pursuant to its terms; (iv) that, unless the Company defaults in the
payment of the purchase price, any Note accepted for payment pursuant to the
Offer to Purchase shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased
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pursuant to the Offer to Purchase will be required to surrender the Note,
together with the form entitled "Option of the Holder to Elect Purchase" on the
reverse side of the Note completed, to the Paying Agent at the address specified
in the notice prior to the close of business on the Business Day immediately
preceding the Payment Date; (vi) that Holders will be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the third Business Day immediately preceding the Payment Date, a telegram,
facsimile transmission or letter setting forth the name of such Holder, the
principal amount of Notes delivered for purchase and a statement that such
Holder is withdrawing his election to have such Notes purchased; and (vii) that
Holders whose Notes are being purchased only in part will be issued new Notes
equal in principal amount to the unpurchased portion of the Notes surrendered;
PROVIDED that each Note purchased and each new Note issued shall be in a
principal amount of $1,000 or integral multiples thereof. On the Payment Date,
the Company shall (i) accept for payment on a pro rata basis Notes or portions
thereof validly tendered pursuant to an Offer to Purchase; (ii) deposit with the
Paying Agent money sufficient to pay the purchase price of all Notes or portions
thereof so accepted; and (iii) deliver, or cause to be delivered, to the Trustee
all Notes or portions thereof so accepted together with an Officers' Certificate
specifying the Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail to the Holders of Notes so accepted payment
in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Note surrendered; PROVIDED that each Note
purchased and each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof. The Company will publicly announce the results of an
Offer to Purchase as soon as practicable after the Payment Date. The Trustee
shall act as the Paying Agent for an Offer to Purchase. The Company will comply
with Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable,
in the event that the Company is required to repurchase Notes pursuant to an
Offer to Purchase.
"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; PROVIDED that such person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP; and (iv) stock, obligations or securities received in
satisfaction of judgments.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made in the ordinary
course of business in connection with workers' compensation, unemployment
insurance and other types of social security; (iv) Liens incurred or deposits
made (including deposits made to the FCC) to secure the performance of tenders,
bids, leases, statutory or regulatory obligations, bankers' acceptances, surety
and appeal bonds, government contracts, performance and return-of-money bonds
and other obligations of a similar nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (v)
easements, rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof)
upon real or personal property acquired after the Closing Date; PROVIDED that
(a) such Lien is created solely for the purpose of
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securing Indebtedness Incurred, in accordance with the "Limitation on
Indebtedness" covenant described below, (1) to finance the cost (including the
cost of design, development, improvement, construction, installation or
integration) of the item of property or assets subject thereto and such Lien is
created prior to, at the time of or within six months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or (2) to refinance any Indebtedness previously so
secured, (b) the principal amount of the Indebtedness secured by such Lien does
not exceed 100% of such cost and (c) any such Lien shall not extend to or cover
any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property
or assets under construction arising from progress or partial payments by a
customer of the Company or its Restricted Subsidiaries relating to such property
or assets; (ix) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease; (x) Liens arising from filing Uniform
Commercial Code financing statements regarding leases; (xi) Liens on property
of, or on shares of Capital Stock or Indebtedness of, any Person existing at the
time such Person becomes, or becomes a part of, any Restricted Subsidiary;
PROVIDED that such Liens do not extend to or cover any property or assets of the
Company or any Restricted Subsidiary other than the property or assets acquired;
(xii) Liens in favor of the Company or any Restricted Subsidiary; (xiii) Liens
arising from the rendering of a final judgment or order against the Company or
any Restricted Subsidiary of the Company that does not give rise to an Event of
Default; (xiv) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such letters of
credit and the products and proceeds thereof; (xv) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (xvi) Liens encumbering
customary initial deposits and margin deposits, and other Liens that are either
within the general parameters customary in the industry and incurred in the
ordinary course of business, in each case, securing Indebtedness under Interest
Rate Agreements and Currency Agreements and forward contracts, options, future
contracts, futures options or similar agreements or arrangements designed solely
to protect the Company or any of its Restricted Subsidiaries from fluctuations
in interest rates, currencies or the price of commodities; (xvii) Liens arising
out of conditional sale, title retention, consignment or similar arrangements
for the sale of goods entered into by the Company or any of its Restricted
Subsidiaries in the ordinary course of business in accordance with the past
practices of the Company and its Restricted Subsidiaries prior to the Closing
Date; (xviii) Liens on or sales of receivables; and (xix) Liens on PCS licenses
issued by the FCC to secure obligations in favor of the FCC.
"Pledge Account" means an account established with the Trustee pursuant to
the terms of the Escrow and Security Agreement for the deposit of the Pledged
Securities to be purchased by the Company with the net proceeds from the Notes.
"Pledged Securities" means the U.S. Government Obligations to be purchased
by the Company and held in the Pledge Account in accordance with the Escrow and
Security Agreement.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's preferred or preference equity, whether
now outstanding or issued after the Closing Date, including, without limitation,
all series and classes of such preferred stock or preference stock.
"Prior ATTI Assets" means the interests in Fort Mojave Telecommunications
Inc., FMTV Cable Television Company and Saginaw Chippewa Telecommunications
Joint Venture, to be sold by ATTI prior to or in connection with the acquisition
of ATTI by DOC or a Subsidiary thereof.
"Public Equity Offering" means an underwritten primary public offering of
Common Stock of the Company pursuant to an effective registration statement
under the Securities Act.
A "Public Market" shall be deemed to exist if (i) a Public Equity Offering
has been consummated and (ii) at least 15% of the total issued and outstanding
Common Stock of the Company has been distributed
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by means of an effective registration statement under the Securities Act or
sales pursuant to Rule 144 under the Securities Act.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Significant Subsidiary" means, at any date of determination, any Restricted
Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal
year of the Company, accounted for more than 10% of the consolidated revenues of
the Company and its Restricted Subsidiaries or (ii) as of the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of the Company
and its Restricted Subsidiaries, all as set forth on the most recently available
consolidated financial statements of the Company for such fiscal year.
"S&P" means Standard & Poor's Ratings Service and its successors.
"Stated Maturity" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"Subsidiary" means, with respect to any Person, any corporation, association
or other business entity of which more than 50% of the voting power of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within 180 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, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
commercial paper, maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Company) organized and
in existence under the laws of the United States of America, any state thereof
or any foreign country recognized by 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 or "A-1" (or higher) according to S&P, and (v) securities
with maturities of six months or less from the date of acquisition issued or
fully and unconditionally guaranteed by any state, commonwealth or territory of
the United States of America, or by any political subdivision or taxing
authority thereof, and rated at least "A" by S&P or Moody's.
"Term Loan" means the $6 million of indebtedness of the Trusts under the
Existing Credit Agreement as in effect on the Closing Date.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any Indebtedness
by the Company or any of its Restricted Subsidiaries, the date such Indebtedness
is to be Incurred and, with respect to any Restricted Payment, the date such
Restricted Payment is to be made.
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"Trusts" means, collectively, the Everett R. Dobson Irrevocable Family
Trust, Stephen T. Dobson Irrevocable Family Trust and Robbin L. Dobson
Irrevocable Family Trust.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; PROVIDED that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under the "Limitation on Restricted
Payments" covenant described below and (C) if applicable, the Incurrence of
Indebtedness and the Investment referred to in clause (A) of this proviso would
be permitted under the "Limitation on Indebtedness" and "Limitation on
Restricted Payments" covenants described below. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED
that immediately after giving effect to such designation (x) all Liens and
Indebtedness of such Unrestricted Subsidiary outstanding immediately after such
designation would, if Incurred at such time, have been permitted to be incurred
for all purposes of the Indenture and (y) no Default or Event of Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly providing the Trustee a copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
COVENANTS
The Indenture contains, among others, the following covenants.
LIMITATION ON INDEBTEDNESS
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes and Indebtedness
existing on the Closing Date); PROVIDED that the Company may Incur Indebtedness,
and any Restricted Subsidiary may Incur Acquired Indebtedness, if, after giving
effect to the Incurrence of such Indebtedness and the receipt and application of
the proceeds therefrom, the Consolidated Leverage Ratio would be less than 8 to
1, for Indebtedness Incurred on or prior to December 31, 1998, or 7 to 1, for
Indebtedness Incurred thereafter.
Notwithstanding the foregoing, the Company and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following: (i)
Indebtedness outstanding at any time in an aggregate principal amount not to
exceed $250 million, less any amount of such Indebtedness permanently repaid as
provided under the "Limitation on Asset Sales" covenant described below; (ii)
Indebtedness (A) to the Company evidenced by an unsubordinated promissory note
or (B) to any of its Restricted Subsidiaries; PROVIDED that any event which
results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary
or any subsequent transfer of such Indebtedness (other than to the Company or
another
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Restricted Subsidiary) shall be deemed, in each case, to constitute an
Incurrence of such Indebtedness not permitted by this clause (ii); (iii)
Indebtedness issued in exchange for, or the net proceeds of which are used to
refinance or refund, then outstanding Indebtedness, other than Indebtedness
Incurred under clause (i), (ii), (iv), (vi) or (ix) of this paragraph, and any
refinancings thereof in an amount not to exceed the amount so refinanced or
refunded (plus premiums, accrued interest, fees and expenses); PROVIDED that
Indebtedness the proceeds of which are used to refinance or refund the Notes or
Indebtedness that is PARI PASSU with, or subordinated in right of payment to,
the Notes shall only be permitted under this clause (iii) if (A) in case the
Notes are refinanced in part or the Indebtedness to be refinanced is PARI PASSU
with the Notes, such new Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such new Indebtedness is outstanding,
is expressly made PARI PASSU with, or subordinate in right of payment to, the
remaining Notes, (B) in case the Indebtedness to be refinanced is subordinated
in right of payment to the Notes, such new Indebtedness, by its terms or by the
terms of any agreement or instrument pursuant to which such new Indebtedness is
issued or remains outstanding, is expressly made subordinate in right of payment
to the Notes at least to the extent that the Indebtedness to be refinanced is
subordinated to the Notes and (C) such new Indebtedness, determined as of the
date of Incurrence of such new Indebtedness, does not mature prior to the Stated
Maturity of the Indebtedness to be refinanced or refunded, and the Average Life
of such new Indebtedness is at least equal to the remaining Average Life of the
Indebtedness to be refinanced or refunded; and PROVIDED FURTHER that in no event
may Indebtedness of the Company be refinanced by means of any Indebtedness of
any Restricted Subsidiary pursuant to this clause (iii); (iv) Indebtedness (A)
in respect of performance, surety or appeal bonds provided in the ordinary
course of business, (B) under Currency Agreements and Interest Rate Agreements;
PROVIDED that such agreements (a) are designed solely to protect the Company or
its Subsidiaries against fluctuations in foreign currency exchange rates or
interest rates and (b) do not increase the Indebtedness of the obligor
outstanding at any time other than as a result of fluctuations in foreign
currency exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder; or (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Restricted Subsidiaries pursuant to
such agreements, in any case Incurred in connection with the disposition of any
business, assets or Restricted Subsidiary of the Company (other than Guarantees
of Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary of the Company for the purpose of
financing such acquisition), in an amount not to exceed the gross proceeds
actually received by the Company or any Restricted Subsidiary in connection with
such disposition; (v) Indebtedness of the Company, to the extent the net
proceeds thereof are promptly (A) used to purchase Notes tendered in an Offer to
Purchase made as a result of a Change in Control or (B) deposited to defease the
Notes as described below under "Defeasance"; (vi) Guarantees of the Notes and
Guarantees of Indebtedness of the Company by any Restricted Subsidiary provided
the Guarantee of such Indebtedness is permitted by and made in accordance with
the "Limitation on Issuance of Guarantees by Restricted Subsidiaries" covenant
described below; (vii) Indebtedness Incurred to finance the cost (including the
cost of design, development, construction, installation or integration) of
telecommunications network assets, equipment or inventory acquired by the
Company or a Restricted Subsidiary after the Closing Date; (viii) Indebtedness
of the Company not to exceed, at any one time outstanding, two times the Net
Cash Proceeds received by the Company after the Closing Date from the issuance
and sale of its Capital Stock (other than Disqualified Stock) to a Person that
is not a Subsidiary of the Company to the extent such Net Cash Proceeds have not
been used pursuant to clause (C) (2) of the first paragraph of the "Limitation
on Restricted Payments" covenant described below to make a Restricted Payment;
PROVIDED that such Indebtedness does not mature prior to the Stated Maturity of
the Notes and has an Average Life longer than the Notes; and (ix) Indebtedness
outstanding at any time in an aggregate principal amount not to exceed $7.5
million, less any amount of such Indebtedness permanently repaid as provided
under the "Limitation on Asset Sales" covenant described below; PROVIDED, that
the proceeds of such Indebtedness are used in the Company's PCS or competitive
local exchange carrier businesses or to refinance any such Indebtedness.
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(b) Notwithstanding any other provision of this "Limitation on Indebtedness"
covenant, the maximum amount of Indebtedness that the Company or a Restricted
Subsidiary may Incur pursuant to this "Limitation on Indebtedness" covenant
shall not be deemed to be exceeded, with respect to any outstanding Indebtedness
due solely to the result of fluctuations in the exchange rates of currencies.
(c) For purposes of determining any particular amount of Indebtedness under
this "Limitation on Indebtedness" covenant, (1) Indebtedness Incurred under the
Bank Credit Agreement on or prior to the Closing Date shall be treated as
Incurred pursuant to clause (i) of the second paragraph of this "Limitation on
Indebtedness" covenant, (2) Guarantees, Liens or obligations with respect to
letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (3) any Liens
granted pursuant to the equal and ratable provisions referred to in the
"Limitation on Liens" covenant described below shall not be treated as
Indebtedness. For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses (other than Indebtedness referred to in clause (1) above), the Company,
in its sole discretion, shall classify such item of Indebtedness and only be
required to include the amount and type of such Indebtedness in one of such
clauses.
LIMITATION ON RESTRICTED PAYMENTS
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on or with respect to its Capital Stock (other than (x) dividends or
distributions payable solely in shares of its Capital Stock (other than
Disqualified Stock) or in options, warrants or other rights to acquire shares of
such Capital Stock and (y) pro rata dividends or distributions on Common Stock
of Restricted Subsidiaries held by minority stockholders, PROVIDED that such
dividends do not in the aggregate exceed the minority stockholders' pro rata
share of such Restricted Subsidiaries' net income from the first day of the
fiscal quarter beginning immediately following the Closing Date) held by
Persons
other than the Company or any of its Restricted Subsidiaries, (ii) purchase,
redeem, retire or otherwise acquire for value any shares of Capital Stock of (A)
the Company or an Unrestricted Subsidiary (including options, warrants or other
rights to acquire such shares of Capital Stock) held by any Person or (B) a
Restricted Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Affiliate of the Company (other than a
Wholly Owned Restricted Subsidiary) or any holder (or any Affiliate of such
holder) of 5% or more of the Capital Stock of the Company, (iii) make any
voluntary or optional principal payment, or voluntary or optional redemption,
repurchase, defeasance, or other acquisition or retirement for value, of
Indebtedness of the Company that is subordinated in right of payment to the
Notes or (iv) make any Investment, other than a Permitted Investment, in any
Person (such payments or any other actions described in clauses (i) through (iv)
being collectively "Restricted Payments") if, at the time of, and after giving
effect to, the proposed Restricted Payment: (A) a Default or Event of Default
shall have occurred and be continuing, (B) except with respect to an Investment,
the Company could not Incur at least $1.00 of Indebtedness under the first
paragraph of the "Limitation on Indebtedness" covenant or (C) the aggregate
amount of all Restricted Payments (the amount, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination shall be
conclusive and evidenced by a Board Resolution) made after the Closing Date
shall exceed the sum of (1) 50% of the aggregate amount of the Adjusted
Consolidated Net Income (or, if the Adjusted Consolidated Net Income is a loss,
minus 100% of the amount of such loss) (determined by excluding income resulting
from transfers of assets by the Company or a Restricted Subsidiary to an
Unrestricted Subsidiary) accrued on a cumulative basis during the period (taken
as one accounting period) beginning on the first day of the fiscal quarter
immediately following the Closing Date and ending on the last day of the last
fiscal quarter preceding the Transaction Date for which reports have been filed
pursuant to the "Commission Reports and Reports to Holders" covenant PLUS (2)
the aggregate Net Cash Proceeds received by the Company after the Closing Date
from the issuance and sale permitted by the Indenture of its Capital Stock
(other than Disqualified Stock) to a Person who is not a Subsidiary of the
Company
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(except to the extent such Net Cash Proceeds are used to Incur Indebtedness
pursuant to clause (viii) under the "Limitation on Indebtedness" covenant) or
from the issuance to a Person who is not a Subsidiary of the Company of any
options, warrants or other rights to acquire Capital Stock of the Company (in
each case, exclusive of any Disqualified Stock or any options, warrants or other
rights that are redeemable at the option of the holder, or are required to be
redeemed, prior to the Stated Maturity of the Notes) PLUS (3) an amount equal to
the net reduction in Investments (other than reductions in Permitted
Investments) in any Person resulting from payments of interest on Indebtedness,
dividends, repayments of loans or advances, or other transfers of assets, in
each case to the Company or any Restricted Subsidiary or from the Net Cash
Proceeds from the sale of any such Investment (except, in each case, to the
extent any such payment or proceeds are included in the calculation of Adjusted
Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed, in each case, the amount of Investments
previously made by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary.
The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at said
date of declaration, such payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the Notes
including premium, if any, and accrued and unpaid interest, with the proceeds
of, or in exchange for, Indebtedness Incurred under clause (iii) of the second
paragraph of part (a) of the "Limitation on Indebtedness" covenant; (iii) the
repurchase, redemption or other acquisition of Capital Stock of the Company (or
options, warrants or other rights to acquire such Capital Stock) in exchange
for, or out of the proceeds of a substantially concurrent offering of, shares of
Capital Stock (other than Disqualified Stock) of the Company; (iv) the making of
any principal payment or the repurchase, redemption, retirement, defeasance or
other acquisition for value of Indebtedness of the Company which is subordinated
in right of payment to the Notes in exchange for, or out of the proceeds of, a
substantially concurrent offering of, shares of the Capital Stock of the Company
(other than Disqualified Stock); (v) the declaration or payment of dividends on
the Common Stock of the Company following a Public Equity Offering of such
Common Stock, of up to 6% per annum of the Net Cash Proceeds received by the
Company in such Public Equity Offering; (vi) payments or distributions, to
dissenting stockholders pursuant to applicable law, pursuant to or in connection
with a consolidation, merger or transfer of assets that complies with the
provisions of the Indenture applicable to mergers, consolidations and transfers
of all or substantially all of the property and assets of the Company; (vii) the
purchase, redemption, acquisition, cancellation or other retirement for value of
shares of Capital Stock of the Company to the extent necessary in the good faith
judgment of the Board of Directors of the Company, to prevent the loss or secure
the renewal or reinstatement of any license or franchise held by the Company or
any Restricted Subsidiary from any governmental agency; (viii) the declaration
or payment of up to $7.5 million of dividends on Class A Common Stock of the
Company of which $6.0 million will be used by the Trusts to repay the Term Loan
and $.5 million of which will be used to repay liabilities owed to the Company;
(ix) the purchase of shares of Fleet Investors Preferred Stock of the Company
(or the Class A Common Stock into which the Class B Preferred Stock may be
converted) pursuant to the exercise of the put rights granted to the Fleet
Investors under the Shareholders' Agreement or any mandatory redemption
provisions, in each case as in effect on the Closing Date; PROVIDED (a) after
giving pro forma effect to any such purchase the Consolidated Leverage Ratio
would be less than 7.5 to 1, and (b) if the event triggering the exercisability
of the put rights constitutes an Asset Sale or Change of Control, no such
repurchase shall be made prior to the Company's repurchase of such Notes as are
required to be repurchased pursuant to the "Limitation on Asset Sales" and
"Repurchase of Notes upon a Change of Control" covenants described below; (x) an
Investment of up to $5.3 million in the Gila River Indian Community in
connection with the Arizona 5 Acquisition; (xi) the declaration or payment of
dividends on the Fleet Investors Preferred Stock (I) if after giving pro forma
effect to any such dividend, the Consolidated Leverage Ratio would be less than
6 to 1 or (II) following a Public Equity Offering of Capital Stock; PROVIDED (A)
the Net Cash Proceeds received by the Company in
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such Public Equity Offering is at least equal to $90 million and (B) the
aggregate amount of dividends permitted to be made in any fiscal year of the
Company under clause (v) and this clause (xi) shall not exceed 6% of the Net
Cash Proceeds received by the Company in the Public Equity Offering; or (xii)
the purchase, redemption, retirement or other acquisition for value of Capital
Stock of the Company, or options to purchase such shares, held by directors,
employees or former directors or employees of the Company or any Restricted
Subsidiary (or their estates or beneficiaries under their estates) upon death,
disability, retirement, termination of employment or pursuant to the terms of
any agreement under which such shares of Capital Stock or options were issued;
PROVIDED that the aggregate consideration paid for such purchase, redemption,
acquisition, cancellation or other retirement of such shares of Capital Stock or
options after the Closing Date does not exceed $500,000 in any calendar year, or
$1.5 million in the aggregate; PROVIDED that, except in the case of clauses (i)
and (iii), no Default or Event of Default shall have occurred and be continuing
or occur as a consequence of the actions or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph (other
than the Restricted Payment referred to in clause (ii) thereof and an exchange
of Capital Stock for Capital Stock or Indebtedness referred to in clause (iii)
or (iv) thereof), and the Net Cash Proceeds from any issuance of Capital Stock
referred to in clauses (iii) and (iv), shall be included in calculating whether
the conditions of clause (C) of the first paragraph of this "Limitation on
Restricted Payments" covenant have been met with respect to any subsequent
Restricted Payments. In the event the proceeds of an issuance of Capital Stock
of the Company are used for the redemption, repurchase or other acquisition of
the Notes, or Indebtedness that is PARI PASSU with the Notes, then the Net Cash
Proceeds of such issuance shall be included in clause (C) of the first paragraph
of this "Limitation on Restricted Payments" covenant only to the extent such
proceeds are not used for such redemption, repurchase or other acquisition of
Indebtedness.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by the
Company or any other Restricted Subsidiary, (ii) pay any Indebtedness owed to
the Company or any other Restricted Subsidiary, (iii) make loans or advances to
the Company or any other Restricted Subsidiary or (iv) transfer any of its
property or assets to the Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Existing Credit Agreement,
the Indenture or any other agreements in effect on the Closing Date, and any
amendments, extensions, refinancings, renewals or replacements of such
agreements; PROVIDED that the encumbrances and restrictions in any such
amendments, extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the Holders than those encumbrances or
restrictions that are then in effect and that are being extended, refinanced,
renewed or replaced; (ii) existing under or by reason of applicable law; (iii)
existing with respect to any Person or the property or assets of such Person
acquired by the Company or any Restricted Subsidiary, existing at the time of
such acquisition and not incurred in contemplation thereof, which encumbrances
or restrictions are not applicable to any Person or the property or assets of
any Person other than such Person or the property or assets of such Person so
acquired; (iv) in the case of clause (iv) of the first paragraph of this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant, (A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease, license,
conveyance or contract or similar property or asset, (B) existing by virtue of
any transfer of, agreement to transfer, option or right with respect to, or Lien
on, any property or assets of the Company or any Restricted Subsidiary not
otherwise prohibited by the Indenture or (C) arising or agreed to in the
ordinary course of business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of property or assets
of the Company or any Restricted Subsidiary in any
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manner material to the Company or any Restricted Subsidiary; (v) with respect to
a Restricted Subsidiary and imposed pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock of, or property and assets of, such Restricted Subsidiary; (vi)
contained in the Bank Facility Agreement, provided any encumbrance or
restriction that would prevent payments to the Company to pay interest on the
Notes applies only in the event of an event of default (other than an event of
default resulting solely from a breach of a representation or warranty) under
the Bank Facility Agreement; PROVIDED (x) with respect to any event of default
(other than a payment default, bankruptcy default or a loss of a material
license or cellular system), such restriction will terminate 180 days after the
occurrence of such event of default and (y) the financial covenants in the Bank
Facility Agreement are no less favorable to the Company or its Subsidiaries than
the financial covenants set forth in the Bank Facility Commitment Letter on the
Closing Date; or (vii) contained in the terms of any Indebtedness of a
Restricted Subsidiary, or any agreement pursuant to which such Indebtedness was
issued, if the encumbrance or restriction applies only in the event of a payment
default or a default with respect to a financial covenant contained in such
Indebtedness or agreement, if the encumbrance or restriction is not materially
more disadvantageous to the Holders of the Notes than is customary in comparable
financings (as determined by the Company) and if the Company determines that any
such encumbrance or restriction will not materially affect the Company's ability
to make principal or interest payments on the Notes. Nothing contained in this
"Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries" covenant shall prevent the Company or any Restricted Subsidiary
from (1) creating, incurring, assuming or suffering to exist any Liens otherwise
permitted in the "Limitation on Liens" covenant or (2) restricting the sale or
other disposition of property or assets of the Company or any of its Restricted
Subsidiaries that secure Indebtedness of the Company or any of its Restricted
Subsidiaries.
LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
The Company will not sell, and will not permit any Restricted Subsidiary,
directly or indirectly, to issue or sell, any shares of Capital Stock of a
Restricted Subsidiary (including options, warrants or other rights to purchase
shares of such Capital Stock) except (i) to the Company or a Wholly Owned
Restricted Subsidiary; (ii) issuances of director's qualifying shares or sales
to foreign nationals of shares of Capital Stock of foreign Restricted
Subsidiaries, to the extent required by applicable law; (iii) if, immediately
after giving effect to such issuance or sale, such Restricted Subsidiary would
no longer constitute a Restricted Subsidiary, PROVIDED any Investment in such
Person remaining after giving effect to such issuance or sale would have been
permitted to be made under the "Limitation on Restricted Payments" covenant, if
made on the date of such issuance or sale; (iv) sales of up to 25% of the Common
Stock of the Arizona 5 Partnership in connection with the Arizona 5 Acquisition,
PROVIDED after such issuance the Company or its Restricted Subsidiaries would
own at least 75% of the outstanding Common Stock of the Arizona 5 Partnership,
and (v) sales of Common Stock of a Restricted Subsidiary; PROVIDED that the
assets of such Restricted Subsidiary consist solely of assets relating to the
Company's PCS or resale business and the Net Cash Proceeds, if any, of such sale
are applied in accordance with clause (A) or (B) of the "Limitation on Asset
Sales" covenant described below.
LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is PARI PASSU
with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to the Indenture providing for a Guarantee
(a "Subsidiary Guarantee") of payment of the Notes by such Restricted Subsidiary
and (ii) such Restricted Subsidiary waives, and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; PROVIDED that this
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paragraph shall not be applicable to (a) any Guarantee of any Restricted
Subsidiary that existed at the time such Person became a Restricted Subsidiary
and was not Incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary or (b) any Guarantee of any Restricted
Subsidiary required under the Bank Facility Agreement as contemplated by the
Bank Facility Commitment Letter as in effect on the Closing Date. If the
Guaranteed Indebtedness is (A) PARI PASSU with the Notes, then the Guarantee of
such Guaranteed Indebtedness shall be PARI PASSU with, or subordinated to, the
Subsidiary Guarantee or (B) subordinated to the Notes, then the Guarantee of
such Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee
at least to the extent that the Guaranteed Indebtedness is subordinated to the
Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
LIMITATION ON TRANSACTIONS WITH STOCKHOLDERS AND AFFILIATES
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of the Company or with any
Affiliate of the Company or any Restricted Subsidiary, except upon fair and
reasonable terms no less favorable to the Company or such Restricted Subsidiary
than could be obtained, at the time of such transaction or, if such transaction
is pursuant to a written agreement, at the time of the execution of the
agreement providing therefor, in a comparable arm's-length transaction with a
Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between the Company and any of its Wholly Owned Restricted Subsidiaries
or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of
reasonable and customary regular fees to directors of the Company who are not
employees of the Company; (iv) any payments or other transactions pursuant to
any tax-sharing agreement between the Company and any other Person with which
the Company files a consolidated tax return or with which the Company is part of
a consolidated group for tax purposes; (v) any Restricted Payments not
prohibited by the "Limitation on Restricted Payments" covenant; or (vi) the
acquisition of the capital stock of ATTI in the Arizona 5 Acquisition for an
aggregate purchase price of up to $14.2 million and the sale of the Prior ATTI
Assets. Notwithstanding the foregoing, any transaction covered by the first
paragraph of this "Limitation on Transactions with Stockholders and Affiliates"
covenant and not covered by clauses (ii) through (vi) of this paragraph, the
aggregate amount of which exceeds $2 million in value, must be approved or
determined to be fair in the manner provided for in clause (i)(A) or (B) above.
LIMITATION ON LIENS
The Company will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any shares of Capital Stock or Indebtedness of
any Restricted Subsidiary, without making effective provision for all of the
Notes and all other amounts due under the Indenture to be directly secured
equally and ratably with (or, if the obligation
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or liability to be secured by such Lien is subordinated in right of payment to
the Notes, prior to) the obligation or liability secured by such Lien.
The foregoing limitation does not apply to (i) Liens existing on the Closing
Date; (ii) Liens granted after the Closing Date on any assets or Capital Stock
of the Company or its Restricted Subsidiaries created in favor of the Holders;
(iii) Liens with respect to the assets of a Restricted Subsidiary granted by
such Restricted Subsidiary to the Company or a Wholly Owned Restricted
Subsidiary to secure Indebtedness owing to the Company or such other Restricted
Subsidiary; (iv) Liens securing Indebtedness which is Incurred to refinance
secured Indebtedness which is permitted to be Incurred under clause (iii) of the
second paragraph of the "Limitation on Indebtedness" covenant; PROVIDED that
such Liens do not extend to or cover any property or assets of the Company or
any Restricted Subsidiary other than the property or assets securing the
Indebtedness being refinanced; (v) Liens on the Capital Stock and assets of
Dobson Operating Company and its subsidiaries securing the Company's or any of
its Restricted Subsidiaries' obligations under the Bank Facility Agreement; or
(vi) Permitted Liens.
LIMITATION ON SALE-LEASEBACK TRANSACTIONS
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby the Company or a
Restricted Subsidiary sells or transfers such assets or properties and then or
thereafter leases such assets or properties or any part thereof or any other
assets or properties which the Company or such Restricted Subsidiary, as the
case may be, intends to use for substantially the same purpose or purposes as
the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Company and
any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within twelve
months after the sale or transfer of any assets or properties is completed,
applies an amount not less than the net proceeds received from such sale in
accordance with clause (A) or (B) of the first paragraph of the "Limitation on
Asset Sales" covenant described below.
LIMITATION ON ASSET SALES
The Company will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (i) the consideration received by the Company
or such Restricted Subsidiary is at least equal to the fair market value of the
assets sold or disposed of and (ii) at least 85% of the consideration received
consists of cash or Temporary Cash Investments. In the event and to the extent
that the Net Cash Proceeds received by the Company or any of its Restricted
Subsidiaries from one or more Asset Sales occurring on or after the Closing Date
in any period of 12 consecutive months exceed 10% of Adjusted Consolidated Net
Tangible Assets (determined as of the date closest to the commencement of such
12-month period for which a consolidated balance sheet of the Company and its
subsidiaries has been filed pursuant to the "Commission Reports and Reports to
Holders" covenant), then the Company shall or shall cause the relevant
Restricted Subsidiary to (i) within 12 months after the date Net Cash Proceeds
so received exceed 10% of Adjusted Consolidated Net Tangible Assets (A) apply an
amount equal to such excess Net Cash Proceeds to permanently repay
unsubordinated Indebtedness of the Company or any Restricted Subsidiary
providing a Subsidiary Guarantee pursuant to the "Limitation on Issuances of
Guarantees by Restricted Subsidiaries" covenant described above or Indebtedness
of any other Restricted Subsidiary, in each case owing to a Person other than
the Company or any of its Restricted Subsidiaries or (B) invest an equal amount,
or the amount not so applied pursuant to clause (A) (or enter into a definitive
agreement committing to so invest within 12 months after the date of such
agreement), in property or assets (other than current assets) of a nature or
type or that are used in a business (or in a company having property and
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assets of a nature or type, or engaged in a business) similar or related to the
nature or type of the property and assets of, or the business of, the Company
and its Restricted Subsidiaries existing on the date of such investment and (ii)
apply (no later than the end of the 12-month period referred to in clause (i))
such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i))
as provided in the following paragraph of this "Limitation on Asset Sales"
covenant. The amount of such excess Net Cash Proceeds required to be applied (or
to be committed to be applied) during such twelve-month period as set forth in
clause (i) of the preceding sentence and not applied as so required by the end
of such period shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $5 million, the Company
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Notes equal to the Excess Proceeds on such date,
at a purchase price equal to 101% of the principal amount thereof, plus, in each
case, accrued interest (if any) to the Payment Date.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
The Company must commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then outstanding, at
a purchase price equal to 101% of the principal amount thereof, plus accrued
interest (if any) to the Payment Date.
There can be no assurance that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of the Company which might be outstanding
at the time). The above covenant requiring the Company to repurchase the Notes
will, unless consents are obtained, require the Company to repay all
indebtedness then outstanding which by its terms would prohibit such Note
repurchase, either prior to or concurrently with such Note repurchase.
COMMISSION REPORTS AND REPORTS TO HOLDERS
Whether or not the Company is required to file reports with the Commission,
for so long as any Notes are outstanding, the Company will file with the
Commission all such reports and other information as it would be required to
file with the Commission by Sections 13(a) or 15(d) under the Securities
Exchange Act of 1934 if it were subject thereto. The Company shall supply the
Trustee and each Holder or shall supply to the Trustee for forwarding to each
such Holder, without cost to such Holder, copies of such reports and other
information.
EVENTS OF DEFAULT
The following events are defined as "Events of Default" in the Indenture:
(a) default in the payment of principal of (or premium, if any, on) any Note
when the same becomes due and payable at maturity, upon acceleration, redemption
or otherwise; (b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days;
PROVIDED that a failure to make any of the first four scheduled interest
payments on the Notes on the applicable Interest Payment Date will constitute an
Event of Default with no grace or cure period; (c) default in the performance or
breach of the provisions of the Indenture applicable to mergers, consolidations
and transfers of all or substantially all of the assets of the Company or the
failure to make or consummate an Offer to Purchase in accordance with the
"Limitation on Asset Sales" or "Repurchase of Notes upon a Change of Control"
covenant; (d) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture or under the Notes (other
than a default specified in clause (a), (b) or (c) above) and such default or
breach continues for a period of 30 consecutive days after written notice by the
Trustee or the Holders of 25% or more in aggregate principal amount of the
Notes; (e) there occurs
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with respect to any issue or issues of Indebtedness of the Company or any
Significant Subsidiary having an outstanding principal amount of $5 million or
more in the aggregate for all such issues of all such Persons, whether such
Indebtedness now exists or shall hereafter be created, (I) an event of default
that has caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 30 days of such acceleration and/or (II) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such defaulted
payment shall not have been made, waived or extended within 30 days of such
payment default; (f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $5 million in the aggregate for all such final
judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Company or any Significant Subsidiary and shall not be paid or discharged, and
there shall be any period of 30 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final judgments
or orders outstanding and not paid or discharged against all such Persons to
exceed $5 million during which a stay of enforcement of such final judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; (g) a
court having jurisdiction in the premises enters a decree or order for (A)
relief in respect of the Company or any Significant Subsidiary in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, (B) appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary and, in
each case, such decree or order shall remain unstayed and in effect for a period
of 30 consecutive days; (h) the Company or any Significant Subsidiary (A)
commences a voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any general
assignment for the benefit of creditors; or (i) the Escrow and Security
Agreement shall cease to be in full force and effect or enforceable in
accordance with its terms, other than in accordance with its terms.
If an Event of Default (other than an Event of Default specified in clause
(g) or (h) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes, then outstanding, by written notice to
the Company (and to the Trustee if such notice is given by the Holders), may,
and the Trustee at the request of such Holders shall, declare the principal of,
premium, if any, and accrued interest on the Notes to be immediately due and
payable. Upon a declaration of acceleration, such principal of, premium, if any,
and accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (e)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by the
Company or the relevant Significant Subsidiary or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto. If an Event of Default specified in clause (g) or (h) above
occurs with respect to the Company, the principal of, premium, if any, and
accrued interest on the Notes then outstanding shall IPSO FACTO become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. At any time after declaration of acceleration, but
before a judgment or decree for the payment of the money due has been obtained
by the Trustee, the Holders of at least a majority in principal amount of the
outstanding Notes by written notice to the Company and to the Trustee, may waive
all past defaults and rescind and annul a declaration of acceleration and its
consequences if (i) all existing Events of Default, other than the nonpayment of
the principal of, premium, if any, and interest on the Notes that have become
due solely by such declaration of acceleration, have been
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cured or waived and (ii) the rescission would not conflict with any judgment or
decree of a court of competent jurisdiction. For information as to the waiver of
defaults, see "--Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes. A Holder
may not pursue any remedy with respect to the Indenture or the Notes unless: (i)
the Holder gives the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of outstanding
Notes make a written request to the Trustee to pursue the remedy; (iii) such
Holder or Holders offer the Trustee indemnity satisfactory to the Trustee
against any costs, liability or expense; (iv) the Trustee does not comply with
the request within 60 days after receipt of the request and the offer of
indemnity; and (v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Notes do not give the Trustee a
direction that is inconsistent with the request. However, such limitations do
not apply to the right of any Holder of a Note to receive payment of the
principal of, premium, if any, or interest on, such Note or to bring suit for
the enforcement of any such payment, on or after the due date expressed in the
Notes, which right shall not be impaired or affected without the consent of the
Holder.
The Indenture requires certain officers of the Company to certify, on or
before a date not more than 90 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries' performance
under the Indenture and that the Company has fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof. The
Company will also be obligated to notify the Trustee of any default or defaults
in the performance of any covenants or agreements under the Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not consolidate with, merge with or into, or sell, convey,
transfer, lease or otherwise dispose of all or substantially all of its property
and assets (as an entirety or substantially an entirety in one transaction or a
series of related transactions) to, any Person or permit any Person to merge
with or into the Company unless: (i) the Company shall be the continuing Person,
or the Person (if other than the Company) formed by such consolidation or into
which the Company is merged or that acquired or leased such property and assets
of the Company shall be a corporation organized and validly existing under the
laws of the United States of America or any jurisdiction thereof and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, all of the obligations of the Company on all of the Notes and under the
Indenture; (ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing; (iii) immediately
after giving effect to such transaction on a pro forma basis, the Company or any
Person becoming the successor obligor of the Notes shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction; (iv) immediately after giving effect to
such transaction on a pro forma basis the Company, or any Person becoming the
successor obligor of the Notes, as the case may be, could Incur at least $1.00
of Indebtedness under the first paragraph of the "Limitation on Indebtedness"
covenant; PROVIDED that this clause (iv) shall not apply to a consolidation or
merger with or into a Wholly Owned Restricted Subsidiary with a positive net
worth; PROVIDED that, in connection with any such merger or consolidation, no
consideration (other than Common Stock in the surviving Person or the Company)
shall be issued or distributed to the stockholders of the Company; and (v) the
Company delivers to the Trustee an Officers' Certificate (attaching the
arithmetic computations to demonstrate compliance with clauses (iii) and (iv))
and Opinion of Counsel, in each case stating that such consolidation, merger or
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transfer and such supplemental indenture complies with this provision and that
all conditions precedent provided for herein relating to such transaction have
been complied with; PROVIDED, HOWEVER, that clauses (iii) and (iv) above do not
apply if, in the good faith determination of the Board of Directors of the
Company, whose determination shall be evidenced by a Board Resolution, the
principal purpose of such transaction is to change the state of incorporation of
the Company; and PROVIDED FURTHER that any such transaction shall not have as
one of its purposes the evasion of the foregoing limitations.
DEFEASANCE
DEFEASANCE AND DISCHARGE. The Indenture provides that the Company will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the 123rd day after the deposit referred to below, and
the provisions of the Indenture will no longer be in effect with respect to the
Notes (except for, among other matters, certain obligations to register the
transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes,
to maintain paying agencies and to hold monies for payment in trust) if, among
other things, (A) the Company has deposited with the Trustee, in trust, money
and/or U.S. Government Obligations that through the payment of interest and
principal in respect thereof in accordance with their terms will provide money
in an amount sufficient to pay the principal of, premium, if any, and accrued
interest on the Notes on the Stated Maturity of such payments in accordance with
the terms of the Indenture and the Notes, (B) the Company has delivered to the
Trustee (i) either (x) an Opinion of Counsel to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
the Company's exercise of its option under this "Defeasance" provision and will
be subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit, defeasance and
discharge had not occurred, which Opinion of Counsel must be based upon (and
accompanied by a copy of) a ruling of the Internal Revenue Service to the same
effect unless there has been a change in applicable federal income tax law after
the Closing Date such that a ruling is no longer required or (y) a ruling
directed to the Trustee received from the Internal Revenue Service to the same
effect as the aforementioned Opinion of Counsel and (ii) an Opinion of Counsel
to the effect that the creation of the defeasance trust does not violate the
Investment Company Act of 1940 and after the passage of 123 days following the
deposit (except with respect to any trust funds for the account of any Holder
who may be deemed an "insider" for purposes of the United States Bankruptcy
Code, after one year following the deposit); the trust funds will not be subject
to the effect of Section 547 of the United States Bankruptcy Code or Section 15
of the New York Debtor and Creditor Law, (C) immediately after giving effect to
such deposit on a pro forma basis, no Default or Event of Default shall have
occurred and be continuing on the date of such deposit or during the period
ending on the 123rd day after the date of such deposit, and such deposit shall
not result in a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound, and (D) if at
such time the Notes are listed on a national securities exchange, the Company
has delivered to the Trustee an Opinion of Counsel to the effect that the Notes
will not be delisted as a result of such deposit, defeasance and discharge.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT. The
Indenture further provides that the provisions of the Indenture will no longer
be in effect with respect to clauses (iii) and (iv) under "Consolidation, Merger
and Sale of Assets" and all the covenants described herein under "Covenants,"
clauses (c) and (d) under "Events of Default" with respect to such clauses (iii)
and (iv) under "Consolidation, Merger and Sale of Assets" and such covenants and
clauses (e) and (f) under "Events of Default" shall be deemed not to be Events
of Default, upon, among other things, the deposit with the Trustee, in trust, of
money and/or U.S. Government Obligations that through the payment of interest
and principal in respect thereof in accordance with their terms will provide
money in an amount sufficient to pay the principal of, premium, if any, and
accrued interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the Notes, the satisfaction of
the provisions described in clauses (B)(ii), (C) and (D) of the preceding
paragraph and the delivery by the Company to the Trustee of an Opinion of
Counsel to the effect that, among other things, the Holders will not recognize
income, gain
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or loss for federal income tax purposes as a result of such deposit and
defeasance of certain covenants and Events of Default and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT. In the event the Company
exercises its option to omit compliance with certain covenants and provisions of
the Indenture with respect to the Notes as described in the immediately
preceding paragraphs and the Notes are declared due and payable because of the
occurrence of an Event of Default that remains applicable, the amount of money
and/or U.S. Government Obligations on deposit with the Trustee will be
sufficient to pay amounts due on the Notes at the time of their Stated Maturity
but may not be sufficient to pay amounts due on the Notes at the time of the
acceleration resulting from such Event of Default. However, the Company will
remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes; PROVIDED, HOWEVER, that no
such modification or amendment may, without the consent of each Holder affected
thereby, (i) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, (ii) reduce the principal of, or premium, if any, or
interest on, any Note, (iii) change the place or currency of payment of
principal of, or premium, if any, or interest on, any Note, (iv) impair the
right to institute suit for the enforcement of any payment on or after the
Stated Maturity (or, in the case of a redemption, on or after the Redemption
Date) of any Note, (v) reduce the above-stated percentage of outstanding Notes
the consent of whose Holders is necessary to modify or amend the Indenture, (vi)
waive a default in the payment of principal of, premium, if any, or interest on
the Notes or (vii) reduce the percentage or aggregate principal amount of
outstanding Notes the consent of whose Holders is necessary for waiver of
compliance with certain provisions of the Indenture or for waiver of certain
defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest on any of the Notes or for any claim based thereon
or otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in the Escrow and Security Agreement, the
Indenture, or in any of the Notes or because of the creation of any Indebtedness
represented thereby, shall be had against any incorporator, stockholder,
officer, director, employee or controlling person of the Company or of any
successor Person thereof. Each Holder, by accepting the Notes, waives and
releases all such liability.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default, the
Trustee will not be liable, except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the Trustee will use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein contain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; PROVIDED, HOWEVER, that if it acquires any conflicting
interest, it must eliminate such conflict or resign.
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BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Notes will initially be represented by
one or more permanent global Notes in definitive, fully registered form without
interest coupons (each a "Global Note") and will be deposited with the Trustee
as custodian for, and registered in the name of, a nominee of DTC. Except in the
limited circumstances described below under "Certificated Notes," owners of
beneficial interests in a Global Note will not be entitled to receive physical
delivery of Certificated Notes (as defined below).
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with the applicable procedures of DTC, in addition to those provided for under
the Indenture and, if applicable, those of Euroclear and Cedel Bank.
Payments of the principal of, and interest on, a Global Note will be made to
DTC or its nominee, as the case may be, as the registered owner thereof. Neither
the Company, the Trustee nor any Paying Agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in a Global Note or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Note, will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Note as shown on the records of
DTC or its nominee. The Company also expects that payments by participants to
owners of beneficial interests in such Global Note held through such
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for such customers. Such payments will be the
responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds. Transfers
between participants in Euroclear and Cedel Bank will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
The Company expects that DTC will take any action permitted to be taken by a
holder of Notes (including the presentation of Notes for exchange as described
below) only at the direction of one or more participants to whose account the
DTC interests in a Global Note are credited and only in respect of such portion
of the aggregate principal amount of Notes as to which such participant or
participants has or have given such direction. However, if there is an Event of
Default under the Notes, DTC will exchange the applicable Global Note for
Certificated Notes, which it will distribute to its participants.
The Company understands that DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A under the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates and certain other organizations. Indirect access to the DTC
system is available to others such as banks, brokers, dealers and trust
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companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC, Euroclear and Cedel Bank are expected to follow the foregoing
procedures in order to facilitate transfers of interests in a Global Note among
participants of DTC, Euroclear and Cedel Bank, they are under no obligation to
perform or continue to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC, Euroclear or Cedel Bank or their
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
CERTIFICATED NOTES
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Notes and a successor depositary is not appointed by the Company
within 90 days, the Company will issue Notes in registered form without coupons
("Certificated Notes") in exchange for the Global Notes. Holders of an interest
in a Global Note may receive Certificated Notes in accordance with DTC's rules
and procedures in addition to those provided for under the Indenture.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary sets forth the material federal income tax
consequences of the acquisition, ownership and disposition of the New Notes. It
is based on the relevant provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), accompanying Treasury Regulations, published positions of
the Internal Revenue Service (the "Service"), legislative history, and judicial
decisions as in effect on the date hereof. The existing authorities, however,
are subject to change, and any changes could be applied retroactively and could
cause the tax consequences to vary substantially from those described below.
Furthermore, this summary does not discuss all aspects of federal income
taxation that may be relevant to a particular Holder because of the Holder's
personal investment circumstances or because of the Holder's classification
(such as an insurance company, a dealer in securities, a tax-exempt
organization, a financial institution or a foreign taxpayer) and resulting
special treatment under the federal income tax laws. The summary also does not
discuss aspects of state, local or foreign tax laws and is limited to Holders
who have held, and on the effective date of the Exchange Offer will hold, their
Notes as "capital assets," which would generally be property held for investment
purposes, within the meaning of Section 1221 of the Code, and will not be part
of a straddle, hedge or a conversion transaction within the meaning of Section
1258 of the Code.
THE NEW NOTES
EXCHANGE FOR REGISTERED SECURITIES. The exchange by a Holder of an Old Note
for a New Note should not constitute a taxable exchange. Each New Note should be
treated as having been originally issued at the time the Old Note exchanged
therefor was originally issued.
STATED INTEREST. Each Holder of Notes must include as ordinary interest
income the interest attributable to such Notes at the time it accrues or is
received, in accordance with the Holder's accounting method for United States
federal income tax purposes.
ORIGINAL ISSUE DISCOUNT. The Notes were not issued with original issue
discount for federal income tax purposes.
SALE, EXCHANGE OR RETIREMENT. Upon the sale, exchange or retirement of a
Note, a Holder will recognize taxable gain or loss equal to the difference
between the amount realized on the sale, exchange or retirement (excluding, in
the case of a cash basis taxpayer, any amount attributable to accrued interest,
which is taxable as such) and such Holder's adjusted tax basis in such Note. A
Holder's adjusted tax basis in
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<PAGE>
a Note will generally equal the cost of such Note to such Holder, increased by,
in the case of an accrual basis taxpayer, any accrued interest, and by any
market discount previously included in taxable income by the Holder, and reduced
by any amortized bond premium and any non-interest payments received by the
Holder, and, in the case of an accrual basis taxpayer, by any interest payments
received by the Holder, all with respect to such Note.
Subject to the exception discussed below for market discount, gain or loss
recognized on the sale, exchange or retirement of a Note generally will be
capital gain or loss and will be a long-term capital gain or loss if at the time
of sale, exchange or retirement such Note has been held for more than one year.
AMORTIZABLE BOND PREMIUM AND MARKET DISCOUNT. If a Holder purchased a Note
for an amount that is greater than the amount payable at maturity, such Holder
will be considered to have purchased such Note with "bond premium." The amount
of bond premium is the excess of (i) the Holder's tax basis in such Note, over
(ii) the amount payable at maturity (or on an earlier call date if it results in
a smaller amortizable bond premium). Such Holder may elect (in accordance with
applicable Code provisions) to amortize such premium using a constant yield
method over the remaining term of such Note (or until an earlier call date if it
resulted in a smaller amortizable bond premium) and to offset interest otherwise
required to be included in income in respect of such Note during any taxable
year by the amortized amount of such excess for such taxable year. Such
election, once made, is irrevocable (unless permission is received from the
Service and applies to all taxable bonds held during the taxable year for which
the election is made or subsequently acquired.
If a Holder purchased a Note for an amount that is less than the stated
redemption price at maturity, such Holder will generally be considered to have
purchased such Note with "market discount." For this purpose, the stated
redemption price at maturity of a Note will equal its principal amount. Market
discount with respect to a Note is the excess of the stated redemption price at
maturity over the amount paid by the Holder for such Note. However, the amount
of market discount will be considered zero if it would otherwise be less than
1/4 of 1 percent of the stated redemption price of such Note at maturity
multiplied by the number of complete years to maturity (after the Holder
acquired such Note). If a Note is subject to the market discount rules, a Holder
will generally be required to (i) treat any gain realized with respect to such
Note as ordinary income to the extent market discount accrued during the period
such Holder held the Note, (ii) possibly treat any payment on such Note (other
than stated interest) as ordinary income to the extent market discount accrued
during the period such Holder held such Note, and (iii) defer the deduction of
all or a portion of the interest expense on any indebtedness incurred or
maintained by such Holder to purchase or carry such Note. If such Note is
disposed of in a nontaxable transaction (other than a nonrecognition transaction
described in Section 1276(c) of the Code), accrued market discount will be
includable as ordinary income to the Holder as if such Holder had sold such Note
at its then fair market value. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
such Note, unless the Holder irrevocably elects (on an instrument-by-instrument
basis) to accrue market discount on the basis of a constant interest rate. A
Holder may elect to include market discount in income currently as it accrues
(on either a ratable or constant yield basis), in which case the rules described
above regarding the treatment of gain realized and the deferral of interest
deductions will not apply. An election to include market discount currently,
once made, will apply to all market discount obligations acquired by the Holder
on or after the first day of the first taxable year to which the election
applies, and may not be revoked without the consent of the Service.
Because of the complexity of the rules relating to bond premium and market
discount, Holders should consult their tax advisors as to the application of
these rules to their particular circumstances and as to the merit of making any
elections in connection therewith.
113
<PAGE>
BACKUP WITHHOLDING AND INFORMATION REPORTING
The 31% "backup" withholding and information reporting requirements apply to
certain payments of principal, premium, if any, and interest on a debt
instrument and to proceeds of the sale or redemption of a debt instrument.
Certain Holders may be subject to backup withholding at a rate of 31% on any
payments made with respect to, and proceeds of disposition of, the Notes. Backup
withholding will apply only if the Holder fails to furnish its taxpayer
identification number (social security number or employer identification number)
to certify that such Holder is not subject to backup withholding, or otherwise
fails to comply with the applicable requirements of the backup withholding
rules. Any amount withheld under these backup withholding rules will be
creditable against the Holder's federal income tax liability. Certain Holders
(including, among others, corporations) are not subject to the backup
withholding and information reporting requirements.
PLAN OF DISTRIBUTION
Except as described below, (i) a broker-dealer may not participate in the
Exchange Offer in connection with a distribution of the New Notes, (ii) such
broker-dealer would be deemed an underwriter in connection with such
distribution, and (iii) such broker-dealer would be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transactions. A broker-dealer may, however,
receive New Notes for its own account pursuant to the Exchange Offer in exchange
for Old Notes when such Old Notes were acquired as a result of market-making
activities or other trading activities. Each such broker-dealer must acknowledge
that it will deliver a prospectus in connection with any resale of such New
Notes. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer (other than an "affiliate" of the Company) in
connection with resales of such New Notes. The Company has agreed that for a
period of 180 days after the Expiration Date, it will make this Prospectus, as
amended or supplemented, available to any such broker-dealer for use in
connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of the New Notes and any
commission or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in a Letter of Transmittal. The Company has agreed to pay all expenses incident
to the Exchange Offer other than commissions or concessions of any brokers or
dealers and transfer taxes and will indemnify the holders of the Old Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
The New Notes will constitute a new issue of securities with no established
trading market. The Company does not intend to list the New Notes on any
national securities exchange or to seek approval for quotation through any
automated quotation system. The Company has been advised by the Placement
114
<PAGE>
Agents that following completion of the Exchange Offer, the Placement Agents
intend to make a market in the New Notes. However, the Placement Agents are not
obligated to do so and any market-making activities with respect to the New
Notes may be discontinued at any time without notice. Accordingly, no assurance
can be given that an active public or other market will develop for the New
Notes or as to the liquidity of or the trading market for the New Notes. If a
trading market does not develop or is not maintained, holders of the New Notes
may experience difficulty in reselling the New Notes or may be unable to sell
them at all. If a market for the New Notes develops, any such market may cease
to continue at any time. If a public trading market develops for the New Notes,
future trading prices of the New Notes will depend on many factors, including,
among other things, prevailing interest rates, the Company's results of
operations and the market for similar securities and other factors, including
the financial conditions of the Company.
LEGAL MATTERS
The legality of the Notes offered hereby will be passed upon for the Company
by McAfee & Taft A Professional Corporation, Oklahoma City, Oklahoma.
EXPERTS
The following financial statements appearing in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto as of the dates indicated, and are included
herein in reliance upon said firm as experts in giving said reports:
-- The consolidated balance sheets of Dobson Communications Corporation and
subsidiaries as of December 31, 1995 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1996.
-- The combined balance sheets of Kansas RSA #5, Inc., USCOC of Missouri RSA
#1, Inc., USCOC of Missouri RSA #4, Inc. and Missouri RSA No. 2 (a
division of USCOC of Missouri RSA #5, Inc.) as of December 31, 1994 and
1995, and the related combined statements of operations, cash flows and
retained earnings for the years then ended.
-- The balance sheets of Gila River Cellular General Partnership as of
December 31, 1995 and 1996, and the related statements of operations,
changes in partners' capital and cash flows for each of the three years in
the period ended December 31, 1996.
The following financial statements appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon as of the indicated dates,
appearing elswhere herein, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing:
-- The statements of cellular revenue and direct operating expenses of
Maryland RSA 2 for the years ended December 31, 1994, 1995 and 1996.
-- The combined statements of assets and liabilities of The Cellular
Telephone Business of Selected Systems of Horizon Cellular Telephone
Company, L.P. as of December 31, 1995 and 1996, and the related combined
statements of operations and net assets and of cash flows for each of the
three years in the period ended December 31, 1996.
AVAILABLE INFORMATION
The Company is not currently subject to the informational reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Upon effectiveness of the Registration Statement of which this Prospectus
is a part, the Company will become subject to the informational requirements of
the Exchange Act. In addition, the Indenture provides that, regardless of
whether the
115
<PAGE>
Company is required to file reports with the Commission, the Company will file
with the Commission all such reports and other information as it would be
required to file with the Commission if the Company were subject to the
reporting requirements of the Exchange Act. The Company will supply the Trustee
and each holder of Notes, or cause the Trustee to supply each such holder,
without cost, copies of such reports or other information.
The Company has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Registration Statement on Form S-4 under the
Securities Act, and the rules and regulations promulgated thereunder, with
respect to the New Notes offered pursuant to the Exchange Offer. For the
purposes hereof, the term "Registration Statement" means the original
Registration Statement and any and all amendments thereto. In accordance with
the rules and regulations of the Commission, this Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
thereto. For further information concerning the Company and the New Notes
offered in the Exchange Offer, reference is made to the Registration Statement
and the exhibits filed therewith, which may be examined without charge at, or
copies obtained upon payment of prescribed fees from, the Commission and its
regional offices at Seven World Trade Center, New York, New York 10048 and at
500 West Madison Street, Chicago, Illinois 60661-2511. The Registration
Statement may also be examined electronically through the Commission's Web site
at http://www.sec.gov. Any statements contained herein concerning the provisions
of any document are not necessarily complete, and, in each instance, reference
is made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
116
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Report of independent public accountants................................................................. F-2
Consolidated balance sheets as of December 31, 1995 and 1996............................................. F-4
Consolidated statements of operations for the years ended December 31, 1994, 1995
and 1996............................................................................................... F-6
Consolidated statements of stockholders' equity for the years ended December 31, 1994, 1995 and 1996..... F-7
Consolidated statements of cash flows for the years ended December 31, 1994, 1995
and 1996............................................................................................... F-8
Notes to consolidated financial statements............................................................... F-10
SELECTED SYSTEMS OF UNITED STATES CELLULAR CORPORATION
Report of independent public accountants................................................................. F-25
Combined balance sheets as of December 31, 1994 and 1995................................................. F-26
Combined statements of operations for the years ended December 31, 1994 and 1995......................... F-27
Combined statements of cash flows for the years ended December 31, 1994 and 1995......................... F-28
Combined statements of retained earnings for the years ended December 31, 1994 and 1995.................. F-29
Notes to combined financial statements................................................................... F-30
MARYLAND RSA 2
Report of independent auditors........................................................................... F-36
Statements of cellular revenue and direct operating expenses for the years ended December 31, 1994, 1995
and 1996............................................................................................... F-37
Notes to statements of cellular revenue and direct operating expenses.................................... F-38
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF HORIZON CELLULAR TELEPHONE
COMPANY, L.P.
Report of independent auditors........................................................................... F-40
Combined statements of assets and liabilities as of December 31, 1995 and 1996........................... F-41
Combined statements of operations and net assets for the years ended December 31, 1994, 1995 and 1996.... F-42
Combined statements of cash flows for the years ended December 31, 1994, 1995 and 1996................... F-43
Notes to combined financial statements................................................................... F-44
GILA RIVER CELLULAR GENERAL PARTNERSHIP
Report of independent public accountants................................................................. F-49
Balance sheets as of December 31, 1995 and 1996.......................................................... F-50
Statements of operations for the years ended December 31, 1994, 1995 and 1996............................ F-51
Statements of changes in partners' capital for the years ended December 31, 1994, 1995 and 1996.......... F-52
Statements of cash flows for the years ended December 31, 1994, 1995 and 1996............................ F-53
Notes to financial statements............................................................................ F-54
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Dobson Communications Corporation:
We have audited the accompanying consolidated balance sheets of Dobson
Communications Corporation (an Oklahoma corporation) and subsidiaries as of
December 31, 1995 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Dobson
Communications Corporation and subsidiaries as of December 31, 1995 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
March 3, 1997
F-2
<PAGE>
[This page intentionally left blank]
F-3
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
ASSETS
<TABLE>
<CAPTION>
1995 1996
-------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents...................................................... $ 1,116,773 $ 1,609,221
Accounts receivable--
Due from customers, net of allowance for doubtful accounts of $41,425 and
$339,144 in 1995 and 1996, respectively.................................... 6,223,623 6,584,103
Affiliates................................................................... -- 1,704,033
Inventory...................................................................... 472,294 1,012,589
Deposits....................................................................... 5,000,000 6,350,000
RTFC subordinated capital certificates......................................... -- 1,051,057
Income taxes receivable........................................................ -- 1,133,063
Prepaid expenses and other..................................................... 212,520 121,836
Deferred income taxes.......................................................... 540,308 390,553
-------------- --------------
Total current assets....................................................... 13,565,518 19,956,455
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT, net............................................... 46,986,949 61,929,904
-------------- --------------
OTHER ASSETS:
Receivables -- Affiliates...................................................... 1,464,020 228,041
Notes receivable -- Affiliates................................................. 2,256,939 3,266,765
Notes receivable............................................................... 47,064 41,673
Cellular license acquisition costs, net of accumulated amortization of
$1,689,310 and $3,286,104 in 1995 and 1996, respectively..................... 2,445,545 23,465,128
Deferred costs, net of accumulated amortization of $1,542,950 and $1,948,443 in
1995 and 1996, respectively.................................................. 1,080,262 3,952,155
Excess of cost over original cost of assets acquired, net of accumulated
amortization of $940,289 and $1,035,529 in 1995 and 1996, respectively....... 2,866,683 2,771,443
Investments in unconsolidated subsidiaries and other........................... 2,777,119 1,336,461
-------------- --------------
Total other assets......................................................... 12,937,632 35,061,666
-------------- --------------
Total assets............................................................... $ 73,490,099 $ 116,948,025
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1996
-------------- --------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable............................................................... $ 2,813,931 $ 4,718,124
Accrued expenses............................................................... 1,350,184 1,633,834
Deferred revenue and customer deposits......................................... 548,316 648,512
Current portion of long-term debt.............................................. 1,250,391 1,190,924
Notes payable.................................................................. 700,000 --
Accrued dividends payable...................................................... 49,275 732,391
-------------- --------------
Total current liabilities.................................................. 6,712,097 8,923,785
-------------- --------------
LONG-TERM DEBT, net of current portion........................................... 64,404,805 104,303,802
DEFERRED CREDITS:
Income taxes................................................................... 1,379,138 916,252
Investment tax credits and other............................................... 209,484 161,612
-------------- --------------
Total deferred credits..................................................... 1,588,622 1,077,864
-------------- --------------
MINORITY INTERESTS............................................................... 1,843,138 2,444,176
COMMITMENTS (Note 13)
CLASS A REDEEMABLE PREFERRED STOCK............................................. 5,913,000 --
CLASS B CONVERTIBLE PREFERRED STOCK............................................ -- 10,000,000
STOCKHOLDERS' EQUITY:
Class A common stock, no par, 300 shares authorized, issued and outstanding in
1995 and $1 par value 1,000,000 shares authorized and 473,152 shares issued
and outstanding in 1996...................................................... 1,000 473,152
Class B common stock, no par, 1,000 shares authorized, 150 shares issued and
outstanding in 1995 and $1 par value, 31,000 shares authorized, and no shares
issued or outstanding in 1996................................................ 1,000 --
Class C common stock (Note 6).................................................. -- --
Paid-in capital................................................................ 5,980,437 5,508,285
Retained deficit............................................................... (1,040,000) (3,870,039)
-------------- --------------
4,942,437 2,111,398
Less--
Class A Common Stock held in treasury, at cost................................. (11,913,000) (11,913,000)
Class B Common Stock owned by Dobson Telephone................................. (1,000) --
-------------- --------------
Total stockholders' equity................................................. (6,971,563) (9,801,602)
-------------- --------------
Total liabilities and stockholders' equity................................. $ 73,490,099 $ 116,948,025
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-5
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING REVENUE:
Cellular service.......................................................... $ 10,897,796 $ 13,948,966 $ 17,593,317
Cellular equipment sales.................................................. 1,020,648 671,349 661,632
Cellular roaming.......................................................... 3,250,332 4,369,476 7,852,532
Wireline telephone service................................................ 11,557,683 12,806,790 13,472,100
Fiber service............................................................. 904,313 1,414,521 2,312,762
Rental income and other................................................... 616,149 1,237,720 1,333,130
------------ ------------ ------------
Total operating revenue................................................. 28,246,921 34,448,822 43,225,473
------------ ------------ ------------
OPERATING EXPENSES:
Cellular service.......................................................... 1,991,389 3,154,946 4,502,676
Cellular equipment........................................................ 1,501,929 2,012,871 2,571,531
Wireline telephone service................................................ 1,787,763 1,729,730 1,877,088
Fiber service............................................................. 137,113 116,730 124,676
Marketing and selling..................................................... 3,098,350 3,156,620 4,908,050
General and administrative................................................ 9,620,625 10,138,379 12,086,509
Depreciation and amortization............................................. 5,534,481 6,652,792 9,720,379
------------ ------------ ------------
Total operating expenses................................................ 23,671,650 26,962,068 35,790,909
------------ ------------ ------------
OPERATING INCOME 4,575,271 7,486,754 7,434,564
------------ ------------ ------------
OTHER INCOME (EXPENSES):
Equity in income (losses) of unconsolidated partnerships.................. $ (61,383) $ (98,288) $ 21,576
Interest income........................................................... 44,151 9,884 1,075
Interest expense.......................................................... (2,969,846) (3,833,189) (6,477,651)
Other..................................................................... (129,626) (388,591) (1,608,538)
------------ ------------ ------------
Total other expenses.................................................... (3,116,704) (4,310,184) (8,063,538)
------------ ------------ ------------
INCOME (LOSS) BEFORE MINORITY INTERESTS IN INCOME OF SUBSIDIARIES, INCOME
TAXES AND EXTRAORDINARY ITEMS............................................. 1,458,567 3,176,570 (628,974)
MINORITY INTERESTS IN INCOME OF SUBSIDIARIES................................ (1,104,930) (1,334,155) (675,098)
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS................... 353,637 1,842,415 (1,304,072)
INCOME TAX (PROVISION) BENEFIT.............................................. (119,436) (738,235) 410,795
------------ ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS.................................... 234,201 1,104,180 (893,277)
EXTRAORDINARY INCOME (EXPENSE), net of income tax expense (benefit) of
$125,472 in 1994 and $(323,205) in 1996 (Note 4).......................... 228,278 -- (527,334)
------------ ------------ ------------
NET INCOME (LOSS)........................................................... 462,479 1,104,180 (1,420,611)
DIVIDENDS ON PREFERRED STOCK................................................ (83,388) (591,300) (849,137)
------------ ------------ ------------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS......................... $ 379,091 $ 512,880 $ (2,269,748)
------------ ------------ ------------
------------ ------------ ------------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS PER COMMON SHARE........ $ .80 $ 1.08 $ (4.12)
------------ ------------ ------------
------------ ------------ ------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.................................. 473,152 473,152 551,567
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 1994, 1995 AND 1996
<TABLE>
<CAPTION>
CLASS B COMMON
CLASS A CLASS B STOCK OWNED
COMMON STOCK COMMON STOCK BY SUBSIDIARY TREASURY
-------------------- ------------------------ ------------------------ PAID-IN STOCK, AT
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL COST
--------- --------- ----------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1993............... 300 $ 1,000 1,000 $ 1,000 1,000 $ (1,000) $5,980,437 $ --
Net income.................... -- -- -- -- -- -- -- --
Cash dividends declared on
preferred stock............. -- -- -- -- -- -- -- --
Cash dividends declared on
common stock................ -- -- -- -- -- -- -- --
Repurchase of Class A common
stock....................... -- -- -- -- -- -- -- (11,913,000)
--------- --------- ----------- ----------- ----------- ----------- --------- -----------
DECEMBER 31, 1994............... 300 1,000 1,000 1,000 1,000 (1,000) 5,980,437 (11,913,000)
Net income.................... -- -- -- -- -- -- -- --
Cash dividends declared on
preferred stock............. -- -- -- -- -- -- -- --
Cash dividends declared on
common stock................ -- -- -- -- -- -- -- --
--------- --------- ----------- ----------- ----------- ----------- --------- -----------
DECEMBER 31, 1995 300 1,000 1,000 1,000 1,000 (1,000) 5,980,437 (11,913,000)
Net loss...................... -- -- -- -- -- -- -- --
Recapitalization (Note 6)..... 472,852 472,152 (1,000) (1,000) (1,000) 1,000 (472,152) --
Cash dividends declared on
preferred stock............. -- -- -- -- -- -- -- --
Cash dividends declared on
common stock................ -- -- -- -- -- -- -- --
--------- --------- ----------- ----------- ----------- ----------- --------- -----------
DECEMBER 31, 1996............... 473,152 $ 473,152 -- $ -- -- $ -- $5,508,285 $(11,913,000)
--------- --------- ----------- ----------- ----------- ----------- --------- -----------
--------- --------- ----------- ----------- ----------- ----------- --------- -----------
<CAPTION>
RETAINED
EARNINGS
(DEFICIT)
----------
<S> <C>
DECEMBER 31, 1993............... $(1,221,113)
Net income.................... 462,479
Cash dividends declared on
preferred stock............. (83,388)
Cash dividends declared on
common stock................ (50,000)
Repurchase of Class A common
stock....................... --
----------
DECEMBER 31, 1994............... (892,022)
Net income.................... 1,104,180
Cash dividends declared on
preferred stock............. (591,300)
Cash dividends declared on
common stock................ (660,858)
----------
DECEMBER 31, 1995 (1,040,000)
Net loss...................... (1,420,611)
Recapitalization (Note 6)..... --
Cash dividends declared on
preferred stock............. (849,137)
Cash dividends declared on
common stock................ (560,291)
----------
DECEMBER 31, 1996............... $(3,870,039)
----------
----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
-------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................... $ 462,479 $ 1,104,180 $ (1,420,611)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities--
Depreciation and amortization................................. 5,534,481 6,652,792 9,720,379
Deferred income taxes and investment tax credits, net......... 279,986 277,882 (361,003)
Other deferred credits........................................ 1,450 (1,450) --
Loss on disposition of assets, net............................ 101,318 -- 1,799,570
Extraordinary loss on financing cost.......................... -- -- 850,539
Gain on early extinguishment of debt.......................... (353,749) -- --
Minority interests in income of subsidiaries.................. 1,104,930 1,334,155 675,098
Equity in losses (income) of unconsolidated partnerships...... 61,383 98,288 (21,576)
Changes in current assets and liabilities--
Accounts receivable............................................. (1,709,056) (1,814,510) (360,480)
Inventory....................................................... (177,927) 88,862 (540,295)
Income taxes receivable......................................... (291,706) 274,207 (1,133,063)
Prepaid expenses and other...................................... (99,555) 257,904 90,684
Accounts payable................................................ 416,826 (132,794) 1,904,193
Accrued expenses................................................ (201,832) 403,132 283,650
Deferred revenue and customer deposits.......................... 171,746 90,717 100,196
Other current liabilities....................................... (218,926) -- --
-------------- ------------- --------------
Net cash provided by operating activities................... 5,081,848 8,633,365 11,587,281
-------------- ------------- --------------
</TABLE>
F-8
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
-------------- ------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................ $ (5,267,434) $ (3,924,961) $ (17,437,774)
Purchase of cellular license and properties..................... -- -- (30,000,000)
Proceeds from sale of property, plant and equipment............. 117,962 23,500 377,178
Proceeds from sale of investment in unconsolidated subsidiary... -- -- 967,000
Deposits........................................................ -- (5,000,000) (1,350,000)
Increase in receivable--affiliate............................... (94,195) (340,606) (468,054)
Increase in notes receivable, net............................... (100,045) (1,164,290) (1,004,435)
Investment in unconsolidated partnerships and other, net........ (65,350) (663,122) (463,668)
-------------- ------------- --------------
Net cash used in investing activities....................... (5,409,062) (11,069,479) (49,379,753)
-------------- ------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable..................................... -- 700,000 100,000
Repayments of notes payable..................................... -- -- (800,000)
Proceeds from long-term debt.................................... 23,306,511 7,373,499 75,750,000
Repayments of long-term debt.................................... (15,241,801) (4,723,198) (35,910,470)
Dividend distributions-.........................................
Preferred stock............................................... (34,113) (591,300) (176,748)
Common stock.................................................. (50,000) (660,858) (549,564)
Distributions to partners....................................... (1,252,339) (877,122) (145,005)
Issuance of preferred stock..................................... -- -- 10,000,000
Purchase of treasury stock...................................... (6,000,000) -- (5,913,000)
Redemption of RTFC subordinated capital certificates............ 56,694 866,283 57,632
Deferred costs.................................................. (470,635) (297,087) (4,127,925)
-------------- ------------- --------------
Net cash provided by financing activities................... 314,317 1,790,217 38,284,920
-------------- ------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (12,897) (645,897) 492,448
CASH AND CASH EQUIVALENTS, beginning of year.................... 1,775,567 1,762,670 1,116,773
-------------- ------------- --------------
CASH AND CASH EQUIVALENTS, end of year.......................... $ 1,762,670 $ 1,116,773 $ 1,609,221
-------------- ------------- --------------
-------------- ------------- --------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for--
Interest (net of amounts capitalized)......................... $ 3,088,760 $ 3,415,088 $ 6,784,154
Income taxes.................................................. $ 237,964 $ 303,031 $ 838,100
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
Dobson Communications Corporation ("Dobson Communications") and its
subsidiaries (the "Company") provides service to customers in primarily three
business segments: Cellular Telephone, Wireline Telephone and Fiber Optic
Telecommunications.
CAPITAL RESOURCES AND GROWTH
The Company's total indebtedness and debt service requirements will be
substantially increased as a result of the transactions described in Note 16 and
the Company will be subject to significant financial restrictions and
limitations. If the Company is unable to satisfy any of the covenants under the
revolving credit agreement described in Note 16 including financial covenants,
the Company will be unable to borrow under the revolving credit agreement during
such time period to fund planned capital expenditures, its ongoing operations or
other permissible uses.
The Company's ability to manage future growth will depend upon its ability
to monitor operations, control costs, maintain effective quality controls and
significantly expand the Company's internal management, technical and accounting
systems, all of which will result in higher operating expenses. Any failure to
expand these areas and to implement and improve such systems, procedures and
controls in an efficient manner at a pace consistent with the growth of the
Company's business could have a material adverse effect on the Company's
business, financial condition and results of operations.
CELLULAR TELEPHONE
The Cellular Telephone segment is comprised of the cellular entities of
Dobson Communications listed below, which operate cellular telephone systems
servicing areas in Oklahoma, Kansas, Missouri and Texas. The name of the
entity/partnership, metropolitan statistical area ("MSA")/rural statistical area
("RSA") and the Company's percentage of ownership are as follows:
<TABLE>
<CAPTION>
PERCENT
ENTITY/PARTNERSHIP MSA/RSA SERVED OWNERSHIP
- ---------------------------------------------------------- ------------------------------- -------------
<S> <C> <C>
Dobson Cellular of Enid, Inc.............................. Oklahoma MSA 2 100
Dobson Cellular of Woodward, Inc.......................... Oklahoma RSA 2 100
Texas RSA 2 Limited Partnership........................... Texas RSA 2 61
Oklahoma Independent RSA 5 Partnership.................... Oklahoma RSA 5 64.35
Oklahoma Independent RSA 7 Partnership.................... Oklahoma RSA 7 64.35
Oklahoma RSA 3 Limited Partnership........................ Oklahoma RSA 3 5
Dobson Cellular of Kansas/Missouri, Inc................... Kansas RSA 5, Missouri RSAs 1, 100
2 and 4, and the Linn County
portion of Missouri RSA 5
</TABLE>
The Company is responsible for managing and providing administrative
services to the Oklahoma Independent RSA 5 and 7 Partnerships and the Texas RSA
2 Limited Partnership. The Company is accountable to the partners for the
execution and compliance with contracts and agreements, and for filing of
instruments required by law which are made on behalf of these partnerships. The
books and records of these partnerships are also maintained by the Company.
WIRELINE TELEPHONE
The Company, through Dobson Telephone Company, Inc. ("Dobson Telephone")
provides wireline telephone service to nine contiguous exchanges in western
Oklahoma and three contiguous counties adjacent to and east of the Oklahoma City
metropolitan area. Dobson Telephone operates under the
F-10
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION: (CONTINUED)
authority of the Federal Communications Commission ("FCC"). Rates charged by
Dobson Telephone are regulated by the FCC and the Oklahoma Corporation
Commission.
FIBER OPTIC TELECOMMUNICATIONS
The Fiber Optic Telecommunications segment provides service between Oklahoma
City, Oklahoma and Amarillo, Texas through Dobson Fiber Company, Inc. ("Dobson
Fiber"). In addition, the Company has a 20% interest in the Forte of Colorado
Partnership which provides fiber optic telecommunication service between
Springfield, Colorado and Colorado Springs, Colorado.
2. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
all majority owned subsidiaries. For financial reporting purposes, the Company
reports 100% of revenues and expenses for the markets for which it provides
cellular telephone service. However, in several of its markets, the Company
holds less than 100% of the equity ownership. The minority stockholders' and
partners' shares of income or losses in those markets are reflected in the
consolidated statements of operations as "minority interests in income of
subsidiaries." For financial reporting purposes, the Company consolidates each
subsidiary and partnership in which it has a controlling interest (greater than
50%). Significant intercompany accounts and transactions have been eliminated.
Investments in unconsolidated partnerships where the Company does not have a
controlling interest are accounted for under the equity method.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents on the accompanying consolidated balance sheets
includes cash and short-term investments with original maturities of three
months or less.
INVENTORY
The Company values its inventory at the lower of cost or market on the
first-in, first-out method of accounting.
CELLULAR LICENSE ACQUISITION COSTS
Cellular license acquisition costs consist of amounts paid to acquire FCC
licenses to provide cellular services. Cellular license acquisition costs are
being amortized on a straight-line basis over ten to fifteen years. Amortization
expense of $413,486, $413,486 and $1,596,794 was recorded in 1994, 1995 and
1996, respectively.
DEFERRED COSTS
Deferred costs consist primarily of start-up costs and fees incurred to
secure long-term debt. Deferred start-up costs are amortized on a straight-line
basis over five years. Deferred financing costs are being amortized on a
straight-line basis over the term of the debt of eight years. Amortization
expense related to these costs of $322,248, $412,384 and $405,493 was recorded
in 1994, 1995 and 1996, respectively.
F-11
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
EXCESS OF COST OVER ORIGINAL COST OF ASSETS ACQUIRED
The excess of cost over the original cost of assets acquired relates to
Dobson Telephone's acquisition of McLoud Telephone Company in 1985 and is being
amortized using the straight-line method over 40 years. Amortization expense of
$95,240 was recorded in 1994, 1995 and 1996.
ADVERTISING COSTS
Advertising costs are expensed as incurred and are included as marketing and
selling expenses in the accompanying consolidated statements of operations.
INCOME TAXES
The Company files a consolidated income tax return. Income taxes are
allocated among the various entities included in the consolidated tax return, as
agreed, based on the ratio of each entity's taxable income (loss) to
consolidated taxable income (loss). Deferred income taxes reflect the estimated
future tax effects of differences between financial statement and tax bases of
assets and liabilities at year end.
REVENUE RECOGNITION
The Company records service revenues over the period they are earned. The
cost of providing service is recognized as incurred.
Airtime and toll revenue is billed in arrears and monthly access charges are
billed in advance. The Company accrued estimated unbilled revenues for services
provided of approximately $803,016 and $858,074 as of December 31, 1995 and
1996, respectively, which are included in accounts receivable in the
accompanying consolidated balance sheets. Cellular equipment sales are
recognized when the cellular equipment is delivered to the customer. Subscriber
acquisition costs (primarily commissions and loss on equipment sales) are
expensed as incurred.
EARNINGS PER SHARE
Earnings per share is calculated using the weighted average shares of common
stock outstanding during the period. For the purposes of this calculation, the
exchange of common stock described in Note 6 has been treated as if it occurred
as of January 1, 1994. In addition, shares of Class B convertible preferred
stock are included in the calculation as if they were common stock from the date
of their issuance, as each share of Class B convertible preferred stock is
entitled to participate in common stock dividends on a basis equivalent to
shares of common stock, in addition to the stated preferred stock dividend.
USE OF ESTIMATES
The preparation of these consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual results could differ from
those estimates.
F-12
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
SIGNIFICANT CONCENTRATIONS
In connection with providing cellular services to customers of other
cellular carriers, the Company has contractual agreements with those carriers
which provide for agreed-upon billing rates between the parties. Approximately
54%, 54% and 56% of the Company's cellular roaming revenue was earned from two
cellular carriers during the years ended December 31, 1994, 1995 and 1996,
respectively.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The Company
adopted SFAS No. 121 in 1996 with no impact on its consolidated financial
position or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which the Company adopted in 1996. SFAS No. 123 allows companies
to either account for stock-based compensation under the new provisions of SFAS
No. 123 or under the provisions of Accounting Principles Board Opinion No. 25
("APB 25"), but requires pro forma disclosure in the footnotes to the financial
statements, if material, as if the measurement provisions of SFAS No. 123 had
been adopted. The Company has determined that the effect of SFAS No. 123 on a
pro forma basis would not be material. The Company intends to continue
accounting for its stock-based compensation in accordance with the provisions of
APB 25. As such, the adoption of SFAS No. 123 did not have an impact on the
financial position or the results of operations of the Company.
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are recorded at cost. Newly constructed
cellular systems, telephone systems and fiber optic cable systems are added to
property, plant and equipment at cost which includes contracted services, direct
labor, materials overhead, and capitalized interest. Repairs, minor replacements
and maintenance are charged to operations as incurred. The provisions for
depreciation are provided using the straight-line method based on the estimated
useful lives of the various classes of depreciable property.
Listed below are the major classes of property, plant and equipment and
their estimated useful lives, in years, as of December 31, 1995 and 1996:
<TABLE>
<CAPTION>
USEFUL LIFE 1995 1996
----------- ------------- -------------
<S> <C> <C> <C>
Cellular systems and equipment............................... 2 - 10 $ 10,074,277 $ 21,441,766
Telephone systems and equipment.............................. 5 - 40 43,582,981 42,659,436
Fiber systems and equipment.................................. 5 - 22 11,764,111 15,643,458
Buildings and improvements................................... 5 - 40 7,139,964 8,631,772
Vehicles, aircraft and other work equipment.................. 3 - 10 2,598,762 4,106,869
Furniture and office equipment............................... 5 - 10 2,704,634 2,848,049
Plant under construction..................................... 480,364 2,147,321
Land......................................................... 242,991 201,494
------------- -------------
Property, plant and equipment.............................. 78,588,084 97,680,165
Accumulated depreciation..................................... 31,601,135 35,750,261
------------- -------------
Property, plant and equipment, net......................... $ 46,986,949 $ 61,929,904
------------- -------------
------------- -------------
</TABLE>
F-13
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT: (CONTINUED)
During 1996, the Company disposed of two mobile telecommunications switching
offices and related equipment for which it recognized a pretax loss of
$1,725,396. The loss is included in other income (expenses) in the accompanying
consolidated statements of operations.
4. LONG-TERM DEBT:
The Company's long-term debt as of December 31, 1995 and 1996, consisted of
the following:
<TABLE>
<CAPTION>
1995 1996
------------- --------------
<S> <C> <C>
Revolving credit agreement with a bank, due in
quarterly installments, maturing in 2004,
interest at LIBOR plus 2.25% (7.92% at December
31, 1996)....................................... $ 24,000,000 $ 75,750,000
Mortgage notes payable to the United States of
America, through the RUS and the RTB, with
interest rates ranging from 2% to 10.75%, due in
quarterly or monthly installments, maturing at
various dates from 1997 to 2028................. 30,825,770 29,744,726
Revolving credit agreement with RTFC.............. 10,510,567 --
Various notes payable............................. 318,859 --
------------- --------------
Total debt.................................... 65,655,196 105,494,726
Less--Current maturities.......................... 1,250,391 1,190,924
------------- --------------
Total long-term debt.......................... $ 64,404,805 $ 104,303,802
------------- --------------
------------- --------------
</TABLE>
Effective November 9, 1994, the Company entered into a $20,000,000 revolving
credit agreement with a bank. On December 1, 1995, the revolving credit
agreement was amended to increase the credit limit to $25,000,000.
On March 19, 1996, the revolving credit agreement was amended and restated
to include certain of the Company's wholly owned subsidiaries, Dobson Cellular
of Enid, Inc. ("Enid Cellular"), Dobson Cellular of Woodward, Inc. ("Woodward
Cellular"), Dobson Fiber, DCC PCS, Inc. and Dobson Cellular of Kansas/Missouri,
Inc. ("Kansas/Missouri Cluster") as joint and several obligors with the original
borrowers (Dobson Communications, Dobson Cellular Systems, Inc. ("Dobson
Cellular"), Enid Cellular, Woodward Cellular and DCC PCS, Inc.) and to increase
the revolving credit facility to $84,000,000. The proceeds from the credit
facility were used to refinance existing indebtedness, provide $5,000,000 for
the C block PCS auction (this amount was subsequently refunded and a deposit of
$2,600,000 was made for the F block PCS auction in 1996), finance capital
expenditures of the Oklahoma Partnerships and Texas Partnership, finance the
acquisition of the Kansas/Missouri Cluster properties, repurchase the Company's
outstanding preferred stock and finance investments in nonborrower subsidiaries
of the Company and other general corporate purposes. This loan was secured by
100% of the capital stock and assets of Dobson Communications and its borrower
subsidiaries and by the capital stock of Dobson Telephone and partnership
interests in the principal stockholder of Dobson Communications. In connection
with closing the amended and restated revolving credit agreement, the Company
recorded a pretax loss of $850,539 as a result of writing off previously
capitalized financing costs which is included as extraordinary income (expense)
in the accompanying statement of operations. At December 31, 1996, the Company
had an outstanding balance of $75,750,000 under this revolving credit agreement.
F-14
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT: (CONTINUED)
In connection with this revolving credit agreement, the Company entered into
an interest rate collar agreement to hedge the Company's interest expense on
$36,500,000 of the revolving credit agreement. This collar agreement places a
ceiling and floor on the Company's interest rate on this amount of the revolving
credit agreement at 7.9375% and 5.25%, respectively, and expires in April 1998.
The Company will be required to increase the amount of the collar agreement to
hedge one-half of the Company's total indebtedness under the new revolving
credit facility described in Note 16.
On November 1, 1996, the Company entered into a terms agreement to refinance
this revolving credit agreement along with certain of its subsidiaries. The
terms of the credit facility described in Note 16 have not been reflected in the
maturities of the long-term debt provided below.
The mortgage notes payable to the United States of America, through the
Rural Utilities Service ("RUS") and the Rural Telephone Bank ("RTB"), are
secured by substantially all the assets of Dobson Telephone and contain, among
other things, restrictions on the payment of dividends and redemption of capital
stock, as defined. Under the long-term debt agreements, Dobson Telephone is
restricted, without RUS approval, from making any loans to, or in any manner
extending its credit to various affiliates. The agreements also prohibit payment
of dividends or distributions or new investments in affiliated companies unless
after such action Dobson Telephone's current assets exceed its current
liabilities and its adjusted net worth (as defined in the agreement) is at least
40% of (i) its adjusted assets (as defined in the agreement), or, (ii) if
smaller, the sum of 10% of its adjusted assets, plus 30% of the excess of its
adjusted net worth over 10% of its adjusted assets, if any, plus 30% of the
amount of any reduction of its adjusted net worth resulting from the declaration
or payment of dividends or other distributions.
In October 1990, Dobson Fiber entered into a revolving credit agreement with
the Rural Telephone Finance Cooperative ("RTFC") under which it borrowed
$12,333,333, at a variable interest rate, which was scheduled to mature in 2005.
Under the terms of the RTFC revolving credit agreement, the Company guaranteed
the indebtedness thereunder and was required to purchase subordinated capital
certificates ("SCCs") from the RTFC equal to 10% of each advance. On March 19,
1996, the Company repaid this debt with the proceeds from its refinanced
revolving credit agreement with certain banks as described above and in Note 16.
As a result, the SCCs are to be redeemed in March 1997.
In 1991, Enid Cellular and Woodward Cellular acquired permits to construct
and operate a cellular system in the Enid and Woodward, Oklahoma, areas for
$255,000 in cash and promissory notes totaling $3,499,072. In exchange for early
payoff of the outstanding principal and accrued interest of these promissory
notes balances in 1994, the lender reduced the payoff amount by $353,749. The
gain on early extinguishment of debt is shown as an extraordinary item, net of
taxes of $125,472, in the accompanying consolidated statement of operations for
the year ended December 31, 1994.
F-15
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT: (CONTINUED)
Minimum future payments of long-term debt for years subsequent to December
31, 1996, are as follows:
<TABLE>
<S> <C>
1997.......................................... $ 1,190,924
1998.......................................... 4,075,061
1999.......................................... 13,763,443
2000.......................................... 14,675,760
2001.......................................... 14,887,086
2002 and thereafter........................... 56,902,452
-----------
$105,494,726
-----------
-----------
</TABLE>
5. NOTES PAYABLE:
In September 1995, Dobson Telephone entered into a revolving credit
agreement with the RTFC. Under terms of the agreement, Dobson Telephone was able
to borrow up to $1,000,000 through September 1996, at one and one-half percent
above the prevailing prime interest rate. Dobson Telephone did not renew this
revolving credit agreement, and it expired in 1996.
6. STOCKHOLDERS' EQUITY:
On November 9, 1994, the Company repurchased 49.67 percent of its
outstanding Class A common stock (149 shares) from a stockholder for an
aggregate price of $11,913,000, consisting of $6,000,000 in cash and 59,130
shares of $100 par value, 10%, Class A redeemable preferred stock ("Class A
Preferred"). On March 19, 1996, the Company redeemed all of the shares of the
Class A Preferred for $5,913,000, which is reflected in the accompanying
consolidated statement of cash flows for the year ended December 31, 1996.
Also on November 9, 1994, the Company's majority stockholder and chairman of
the board of directors sold the majority of his Class A common stock through his
interest in a partnership to three grantor trusts which he established. These
trusts borrowed $6,000,000 to finance this purchase under substantially the same
terms as those in the Company's revolving credit agreement described in Note 4.
The trusts secured their borrowings with the Class A common stock of the Company
that they purchased. The Company has guaranteed the repayment of this
indebtedness on behalf of the trusts. In addition, the Company has a receivable
of $483,850 from the trusts for legal fees paid on behalf of the trusts in
connection with the financing obtained by the trusts. These receivables are
included in accounts receivables in the accompanying consolidated balance
sheets. During 1994, 1995 and 1996, the Company made dividend distributions
totaling $50,000, $660,858 and $549,564, respectively, to these three trusts.
In conjunction with the execution of the amended and restated revolving
credit facility on March 19, 1996, as described in Note 4, the Company canceled
its then outstanding Class A and Class B common stock and authorized the capital
structure of the Company to consist of 1,000,000 shares of Class A voting common
stock, $1 par value per share, 31,000 shares of Class B common stock, $1 par
value per share, 59,130 shares of 10% cumulative, compounded, convertible,
redeemable Class A preferred stock, $100 par value per share, and 100,000 shares
of Class B convertible preferred stock ("Class B Preferred"), $1 par value per
share, 8% dividend that accrues on a daily basis. On the same date, the Company
issued 100,000
F-16
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' EQUITY: (CONTINUED)
shares of Class B Preferred. The net proceeds from the issuance of the Class B
Preferred was approximately $9,400,000. In addition, the Company issued 473,152
shares of Class A voting common stock to the holders of the original Class A
common stock. On November 15, 1996, the Company amended its certificate of
incorporation to eliminate Class A Preferred from its authorized capital stock.
As part of this recapitalization of the Company, Dobson Telephone was
entitled to receive shares of Class C common stock, all of which, as of December
31, 1996, had not been issued, in exchange for its shares of Class B common
stock. Subsequent to December 31, 1996, the Company amended its certificate of
incorporation to entitle Dobson Telephone to receive Class A Preferred stock in
exchange for its shares of Class C common stock as described in Note 16.
Holders of Class B Preferred are entitled to cumulative dividends as and
when declared by the board of directors of the Company and a liquidation
preference over the other classes of capital stock. The Class B Preferred
stockholders are also entitled to a dividend equal to the amount they would have
received had the Preferred Stock been converted into Class A common stock. Each
share of Class B Preferred is convertible into Class A common stock initially at
a ratio of one to one. Each share of Class B Preferred has voting rights
equivalent to Class A common stock, at a rate equal to the number of Class A
common shares into which the share of Class B Preferred is convertible at the
record date of such vote. In addition, the Class B Preferred shareholders have
the right, as a class, to elect two members of the board of directors of the
Company.
Holders of Class B Preferred have the right to sell up to 50% and 100% of
their stock to the Company after March 19, 2001 and 2002, respectively, or upon
the occurrence of certain events, at the then fair market value. After March 19,
2003, the Company has the right to call all of the outstanding shares of Class B
Preferred at the then fair market value.
7. CELLULAR PROPERTY ACQUISITION:
On March 19, 1996, the Company, through a wholly owned subsidiary, purchased
all rights, title and interest in and to the licenses and the assets of Kansas
RSA 5, Missouri RSA 1, Missouri RSA 4 and the Linn County portion of Missouri
RSA 5 for $30 million. In addition, the Company was assigned the interim
operating authority and purchased certain cellular system assets relating to the
Grundy, Harrison and Mercer counties portion of Missouri RSA 2. The transaction
was accounted for as a purchase and, accordingly, the results of operations have
been included in the accompanying consolidated statements of operations from the
date of acquisition.
The following unaudited financial information presents the results of
operations of the Company for the years ended December 31, 1995 and 1996,
respectively, on a pro forma basis as if the acquisition had occurred at the
beginning of the respective periods presented. The results include certain
adjustments consistent with the Company's accounting policies related to revenue
recognition and amortization of intangible assets. These results are not
necessarily indicative of the results that actually would have been
F-17
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. CELLULAR PROPERTY ACQUISITION: (CONTINUED)
attained if the acquisition had occurred at the beginning of each period or
which may be attained in the future.
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Revenue........................................................ $ 37,252,773 $ 43,832,356
Loss before extraordinary items................................ (1,030,426) (1,853,871)
Net loss applicable to common stockholders..................... (1,621,726) (3,230,342)
Net loss applicable to common stockholders per common share.... (3.43) (5.86)
</TABLE>
8. EMPLOYEE BENEFIT PLANS:
401(K) PLAN
The Company maintains a 401(k) plan (the "Plan") in which substantially all
employees of the Company are eligible to participate. The Plan requires the
Company to match 100% of employees' contributions up to 4% of their salary.
Contributions to the Plan charged to the Company's operations were approximately
$284,000, $149,000 and $149,000 during the years ended December 31, 1994, 1995
and 1996, respectively.
STOCK OPTION PLAN
During 1996, stock options were granted to an employee and one director
allowing the purchase of 1.25% and 0.14%, respectively, of the Company's shares
of common stock at an exercise price of $100 per share. The Company did not
recognize any compensation expense for the issuance of these options, because in
management's opinion, they were issued at the fair value of the common stock on
the date of the issuance. The options vest at a rate of 20% per year.
9. TAXES:
Provision (benefit) for income taxes for the years ended December 31, 1994,
1995 and 1996, were as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- -------------
<S> <C> <C> <C>
Federal income taxes--
Current........................................................ $ (55,573) $ 393,891 $ (44,692)
Deferred....................................................... 231,264 245,119 (280,170)
Deferred investment tax credits amortized...................... (47,714) (47,714) (47,714)
State income taxes (current and deferred)........................ (8,541) 146,939 (38,219)
---------- ---------- -------------
Total income tax provision (benefit)......................... $ 119,436 $ 738,235 $ (410,795)
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
F-18
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. TAXES: (CONTINUED)
The provisions for income taxes for the years ended December 31, 1994, 1995
and 1996, differ from amounts computed at the statutory rate as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---------- ---------- -------------
<S> <C> <C> <C>
Income taxes at statutory rate (34%)............................. $ 120,807 $ 625,399 $ (443,688)
Deferred investment credits amortized............................ (47,714) (47,714) (47,714)
Amortization of excess of cost over original cost of assets
acquired....................................................... 32,382 32,382 32,382
State income taxes, net of Federal income tax benefit............ (11,515) 70,432 (52,199)
Loss on redemption of executive life insurance policy............ -- 47,780 --
Other, net....................................................... 25,476 9,956 100,424
---------- ---------- -------------
$ 119,436 $ 738,235 $ (410,795)
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
The tax effects of the temporary differences which gave rise to deferred tax
assets and liabilities at December 31, 1995 and 1996, were as follows:
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Current deferred income taxes:
Allowance for doubtful accounts receivable.............................. $ 15,109 $ 92,762
Deferred revenue........................................................ (33,949) --
Deferred expenses....................................................... 559,148 297,791
------------- -------------
Net current deferred income tax asset................................. 540,308 390,553
------------- -------------
Noncurrent deferred income taxes:
Depreciation and amortization........................................... (2,158,763) (1,710,000)
ITC carryforwards....................................................... 48,970 134,347
AMT credit carryforwards.................................................. 730,655 659,401
------------- -------------
Net noncurrent deferred income tax liability.......................... (1,379,138) (916,252)
------------- -------------
Total deferred income taxes........................................... $ (838,830) $ (525,699)
------------- -------------
------------- -------------
</TABLE>
The investment tax credits previously recorded by the Company for book
purposes have been deferred and are being amortized over the average lives of
the property giving rise to the credits. The investment tax credit amortization
used to offset income tax expense was $47,714 for each of the years ended
December 31, 1994, 1995 and 1996, respectively.
At December 31, 1996, the Company had investment tax credit carryforwards
for tax purposes of $134,347, which may be utilized to reduce future Federal
income taxes payable. Unless utilized, the remaining investment tax credit
carryforwards will expire in 1999.
At December 31, 1996, the Company had alternative minimum tax credit
carryforwards that may be utilized to reduce future regular Federal income taxes
payable.
10. RELATED PARTY TRANSACTIONS:
At December 31, 1995 and 1996, the Company had notes and interest receivable
of $2,304,003 and $3,308,438, respectively, of which $2,256,939 and $3,266,765
was due from related parties, including
F-19
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. RELATED PARTY TRANSACTIONS: (CONTINUED)
$1,100,522 and $2,253,892 at December 31, 1995 and 1996, respectively, from the
Company's directors and officers.
The president and a director of the Company have a 67% equity interest in
Associated Telecommunications and Technologies, Inc. ("ATTI"). The Company had
$528,685 and $570,545 in notes and interest receivable from ATTI and its
subsidiaries at December 31, 1995 and 1996, respectively. Additionally, the
Company had $1,041,983 and $1,157,581 of accounts receivable from ATTI and its
subsidiaries for services provided by various employees of the Company on behalf
of ATTI and its subsidiaries and for the working capital requirements of ATTI
and its subsidiaries at December 31, 1995 and 1996, respectively, which are
included in accounts receivable--affiliates in the accompanying consolidated
balance sheets.
The Company leases its corporate office space from a related party, as
discussed in Note 13. In addition, the Company has guaranteed indebtedness of a
related party, as discussed in Note 6.
INVESTMENT IN ZENEX COMMUNICATIONS, INC.
During 1995, the Company bought 75,000 shares of common stock of Zenex
Communications, Inc. ("Zenex") a long distance carrier serving customers
primarily in Oklahoma, for $75,000 and 400,000 shares of Zenex Class B preferred
stock for $400,000. In 1996, the Company bought an additional 275,000 shares of
Zenex Class B preferred stock for $275,000.
On October 28, 1996, the Company sold its 675,000 shares of Zenex Class B
preferred stock and 30,000 of its shares of Zenex common stock for approximately
$817,000. In addition, the Company sold its option to purchase additional stock
for $150,000. The Company recognized a $262,000 gain on these transactions.
11. ACCRUED EXPENSES:
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
1995 1996
------------ ------------
<S> <C> <C>
Interest.................................................................... $ 486,185 $ 179,682
Property tax................................................................ 473,969 472,914
Vacation, wages and other................................................... 390,030 981,238
------------ ------------
Total accrued expenses.................................................... $ 1,350,184 $ 1,633,834
------------ ------------
------------ ------------
</TABLE>
F-20
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. REPORT OF BUSINESS SEGMENTS:
The Company operates in three reportable segments: Cellular Telephone,
Wireline Telephone and Fiber Optic Telecommunications. A summary of the
Company's operations by industry is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------------- ------------- --------------
<S> <C> <C> <C>
OPERATING INFORMATION:
Operating revenue--
Cellular Telephone................................. $ 15,168,776 $ 18,989,791 $ 26,107,481
Wireline Telephone................................. 14,146,504 18,841,512 23,112,944
Fiber Optic Telecommunications..................... 1,489,272 2,524,776 3,452,525
Intersegment activity.............................. (2,557,631) (5,907,257) (9,447,477)
------------- ------------- --------------
Total operating revenue.......................... 28,246,921 34,448,822 43,225,473
------------- ------------- --------------
Operating income--
Cellular Telephone................................. 2,158,857 3,045,258 1,947,026
Wireline Telephone................................. 2,339,883 3,625,328 4,683,647
Fiber Optic Telecommunications..................... 76,531 816,168 803,891
------------- ------------- --------------
Total operating income........................... 4,575,271 7,486,754 7,434,564
------------- ------------- --------------
INVESTMENT INFORMATION:
Identifiable assets--
Cellular Telephone................................. 21,018,092 19,749,045 60,858,579
Wireline Telephone................................. 35,592,655 40,603,706 40,057,711
Fiber Optic Telecommunications..................... 13,092,232 13,137,348 16,031,735
------------- ------------- --------------
69,702,979 73,490,099 116,948,025
------------- ------------- --------------
OTHER INFORMATION:
Depreciation and amortization--
Cellular Telephone................................. 1,764,225 2,393,506 5,058,348
Wireline Telephone................................. 3,073,265 3,342,532 3,453,342
Fiber Optic Telecommunications..................... 696,991 916,754 1,208,689
------------- ------------- --------------
5,534,481 6,652,792 9,720,379
------------- ------------- --------------
Capital expenditures--
Cellular Telephone................................. 2,565,883 1,412,033 12,619,701
Wireline Telephone................................. 2,590,880 1,673,706 2,137,254
Fiber Optic Telecommunications..................... 110,671 839,222 2,680,819
------------- ------------- --------------
5,267,434 3,924,961 17,437,774
------------- ------------- --------------
</TABLE>
F-21
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. COMMITMENTS:
Future minimum lease payments required under operating leases that have an
initial or remaining noncancellable lease term in excess of one year at December
31, 1996, are as follows:
<TABLE>
<S> <C>
1997............................................ $ 440,067
1998............................................ 406,682
1999............................................ 381,446
2000............................................ 377,038
2001............................................ 339,851
2002 and thereafter............................. 1,121,972
</TABLE>
Included in the annual lease commitments is approximately $264,000, payable
annually to an affiliated entity through July 2005. Lease expense under the
above leases was approximately $282,000, $300,000 and $425,000 for the years
ended December 31, 1994, 1995 and 1996, respectively.
14. LITIGATION SETTLEMENT:
On February 16, 1994, a judgment was entered against Dobson Cellular in a
lawsuit initiated by a competitor for violation of the Federal Communications
Act in connection with pricing of various services in the Texas RSA 2 market
area in the amount of $742,318, and post-judgment interest at a rate of 3.74%
from the date of the judgment until the amount was to be paid in full.
Management of the Texas RSA 2 Limited Partnership agreed to reimburse Dobson
Cellular for any and all costs related to these actions. A provision of $150,000
was charged to the Texas Partnership's operations in 1993, for anticipated costs
of appealing the judgment. During 1995, this case was settled at a total cost to
the Texas Partnership of approximately $430,000, net of insurance proceeds. A
provision for $280,000 was charged to the Texas Partnership's operations in
1995, and is included in other expenses in the accompanying consolidated
statement of operations for the year ended December 31, 1995.
15. FINANCIAL INSTRUMENTS:
The Company values its financial instruments as required by SFAS No. 107,
"Disclosures about Fair Values of Financial Instruments." Unless otherwise
noted, the carrying value of the Company's financial instruments approximates
fair market value. The Company estimates the fair value of its long-term debt
using a discounted cash flow analysis based on borrowings currently available to
the Company for debt with similar terms and maturities.
<TABLE>
<CAPTION>
1995 1996
---------------------------- ------------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Long-term debt.......................... $ 65,655,196 $ 60,847,895 $ 105,494,726 $ 100,605,656
</TABLE>
16. SUBSEQUENT EVENTS:
REVOLVING CREDIT FACILITY
On February 28, 1997, the Company's revolving credit agreement was amended
and restated with certain banks to provide the Company with $200,000,000 at a
variable interest rate (9% at February 28,
F-22
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS: (CONTINUED)
1997), to refinance existing indebtedness, finance the completed and pending
acquisitions described below and for general corporate purposes, including using
$7.5 million of the borrowings to pay a dividend to holders of its Class A
Common Stock. Of the $7.5 million dividend, $6.0 million was used to repay the
trust loan which had been guaranteed by the Company, described in Note 6, and
approximately $.5 million was used to repay indebtedness owed to the Company
with respect to the legal fees described in Note 6. As a result of the $7.5
million dividend, the holders of Class B Preferred were entitled to a make-whole
dividend of approximately $1.7 million. In lieu of such dividend, the holders of
Class B Preferred were issued 100,000 shares of Class C Preferred stock having a
liquidation preference of approximately $1.7 million. In connection with the
closing of the revolving credit facility, the Company extinguished its then
existing credit facility, and recognized a pretax loss of approximately $2.6
million as a result of writing off previously capitalized financing costs
associated with the revolving credit facility. Such amount is included in
deferred costs in the accompanying consolidated balance sheets.
SENIOR NOTES
On February 25, 1997, the company issued $160,000,000 of 11.75% Senior Notes
maturing in 2007 to finance the acquisitions described below. The Company placed
approximately $38.3 million of the proceeds into an escrow account which will be
used to pay the first four semi-annual interest payments on the notes, which
begin on October 15, 1997. The senior notes are redeemable at the option of the
Company in whole or in part, on or after April 15, 2002, initially at 105.875%.
REORGANIZATION
Effective February 28, 1997, the stockholders of Dobson Communications and
Dobson Holdings Corporation ("Dobson Holdings"), a new corporation, entered into
an agreement and plan of reorganization. Under the reorganization, Dobson
Holdings acquired all of the outstanding Class A common stock, Class C common
stock and Class B Preferred of Dobson Communications. In exchange, the holders
of the Class A common stock and Class B Preferred of Dobson Communications
received equivalent shares of stock of Dobson Holdings. The holders of the Class
C common stock received 100,000 shares of Class A preferred stock of Dobson
Holdings. In addition, Dobson Holdings assumed all Dobson Communications
outstanding stock options, substituting shares of Dobson Holdings Class B common
stock for the Dobson Communications stock subject to options. As a result,
Dobson Holdings is the parent company of Dobson Communications.
As part of the reorganization, the stock of certain subsidiaries was
distributed to Dobson Holdings, so that Dobson Communications is the holding
company for only Dobson Fiber, Dobson Telephone and each company that comprises
the Cellular Telephone segment. Additionally, Dobson Communications changed its
corporate name to Dobson Operating Company and Dobson Holdings changed its
corporate name to Dobson Communications Corporation.
ACQUISITION OF SELECTED CELLULAR SYSTEMS
HORIZON PROPERTIES ACQUISITION. On February 28, 1997, the Company purchased
the FCC cellular licenses for, and certain assets relating to, two MSAs and two
RSAs located in Maryland and Pennsylvania for $77.7 million, subject to
adjustment. The properties are located immediately outside the Washington/
Baltimore metropolitan area.
F-23
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS: (CONTINUED)
MARYLAND 2 ACQUISITION. On March 3, 1997, the Company purchased the FCC
cellular license for, and certain assets relating to, the Maryland RSA 2 for
$75.8 million, subject to adjustment. The property is located to the east of the
Washington/Baltimore metropolitan area.
ACQUISITION OF PCS LICENSES
In February 1997, the Company was declared the successful bidder for PCS
licenses for nine markets, adjacent to and overlapping the Company's existing
Cellular footprint, in the FCC "F" Block auction. The aggregate bid for these
licenses was $5.1 million after a 15% discount. The Company has been refunded
its $2.6 million deposit (discussed in Note 4) net of payment for 10% of the
winning bid amount with another 10% payable upon the granting of the new
licenses. The balance will be financed by the U.S. Government at the U.S.
Treasury ten-year rate. The obligations will be due in quarterly installments
over an eight year amortization beginning after two years from the grant date.
The Company is required to build out systems covering 25% of the population
within the first five years after obtaining the licenses. Management of the
Company anticipates that the cost to build out the minimum PCS system will be
approximately $10 million to $30 million. The actual amount of the expenditures
will depend on the PCS technology selected by the Company, the extent of the
Company's buildout, the costs at the time of the buildout and the extent the
Company must relocate incumbent microwave licensees.
PENDING ACQUISITION OF A CELLULAR SYSTEM
On February 28, 1997, the Company signed a definitive agreement to purchase
a 100% interest in the Gila River Cellular General Partnership (the "Arizona 5
Partnership") which owns the cellular license for Arizona RSA 5 as well as the
associated tangible operating assets for $53.1 million. Gila River
Telecommunications, Inc. ("GRTI") owns 41.95% of Arizona 5 Partnership and ATTI,
an affiliate of the Company, owns 49% of GRTI. In connection with this
acquisition, the Company will loan $5.2 million to one of the current partners
which will acquire a 25% interest in the Arizona 5 Partnership. Upon completion
of these transactions, the Company will own a 75% interest in the Arizona 5
Partnership. Subject to regulatory approval and satisfactory completion of the
Company's due diligence, management of the Company expects that this acquisition
will close in June 1997.
F-24
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Kansas RSA #5, Inc., USCOC of Missouri RSA #1, Inc., USCOC of Missouri RSA #4,
Inc.
and Missouri RSA No. 2 (a division of USCOC of Missouri RSA #5, Inc.):
We have audited the accompanying combined balance sheets of Kansas RSA #5,
Inc., USCOC of Missouri RSA #1, Inc., USCOC of Missouri RSA #4, Inc. and
Missouri RSA No. 2 (a division of USCOC of Missouri RSA #5, Inc.) (collectively
referred to as "the Company") as of December 31, 1995 and 1994, and the related
combined statements of operations, cash flows and retained earnings for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Company as of
December 31, 1995 and 1994, and the combined results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Chicago, Illinois
February 1, 1996
(except with respect to Note 10,
as to which the date is March 19, 1996)
F-25
<PAGE>
SELECTED SYSTEMS OF UNITED STATES CELLULAR CORPORATION
COMBINED BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
ASSETS
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Cash and cash equivalents.......................................................... $ 353,244 $ 307,354
Accounts receivable
Customers, less allowance of $12,121 and $8,019.................................. 28,898 99,729
Affiliates....................................................................... 32,027 160,235
Roaming.......................................................................... 155,148 272,877
Other............................................................................ -- 1,137
Deferred tax asset--current........................................................ 2,299 6,404
Other current assets............................................................... 11,401 4,020
Inventory.......................................................................... -- 13,351
------------- -------------
Total current assets........................................................... 583,017 865,107
Property, plant and equipment, net of accumulated depreciation of $1,736,097 and
$1,068,601....................................................................... 4,919,703 7,897,864
Deferred start-up costs, net of accumulated amortization of $72,809 and $52,579.... 48,575 28,344
Other deferred charges, net of accumulated amortization of $4,012 and $2,943....... 4,548 3,478
Investments in licenses, net of accumulated amortization of $400,823 and
$276,047......................................................................... 4,720,878 4,658,383
------------- -------------
Total assets................................................................... $ 10,276,721 $ 13,453,176
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses.............................................. $ 530,694 $ 235,345
Accounts payable and accrued interest--affiliates.................................. 313,637 626,611
Notes payable--affiliates.......................................................... 6,530,911 11,240,474
Current maturities of long term debt--affiliates................................... 134,745 190,987
Deferred revenues and customer deposits............................................ 10,005 20,984
Other current liabilities.......................................................... 23,558 86,936
------------- -------------
Total current liabilities...................................................... 7,543,550 12,401,337
Long term debt--affiliates......................................................... 910,119 719,132
Net deferred tax liability--noncurrent............................................. 2,161 272,216
------------- -------------
Total liabilities.............................................................. 8,455,830 13,392,685
Common Stock, $1 par value, 21,000 shares authorized, 1,100 issued................. 1,100 1,100
Preferred stock, $100 stated value, 30,000 shares authorized, 20,087 and 24,587
shares issued.................................................................... 2,458,700 2,008,700
Additional paid-in capital......................................................... 2,537,127 3,049,403
Retained earnings (deficit)........................................................ (3,176,036) (4,998,712)
------------- -------------
Total shareholders' equity..................................................... 1,820,891 60,491
------------- -------------
Total liabilities and shareholders' equity..................................... $ 10,276,721 $ 13,453,176
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to combined financial statements are an integral part
of these combined financial statements.
F-26
<PAGE>
SELECTED SYSTEMS OF UNITED STATES CELLULAR CORPORATION
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Revenues:
Cellular service.................................................................. $ 709,981 $ 1,180,689
Cellular equipment sales.......................................................... 38,740 35,443
Roaming........................................................................... 1,072,160 1,587,819
------------- -------------
Total revenues.................................................................. 1,820,881 2,803,951
------------- -------------
Expenses:
Cellular equipment................................................................ 84,724 126,928
Cellular service.................................................................. 729,325 1,192,784
Marketing and selling............................................................. 346,178 372,682
General and administrative........................................................ 532,605 737,113
Depreciation and amortization..................................................... 577,632 847,476
------------- -------------
Total expenses.................................................................. 2,270,464 3,276,983
------------- -------------
Operating loss...................................................................... (449,583) (473,032)
Other income (expense).............................................................. (7,837) 9,414
Interest expense.................................................................... (578,974) (1,077,628)
------------- -------------
Loss before income taxes............................................................ (1,036,394) (1,541,246)
Income tax expense.................................................................. -- 265,812
------------- -------------
Net loss............................................................................ $ (1,036,394) $ (1,807,058)
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to combined financial statements are an integral part
of these combined financial statements.
F-27
<PAGE>
SELECTED SYSTEMS OF UNITED STATES CELLULAR CORPORATION
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from operations.......................................................... $ (1,036,394) $ (1,807,058)
Add (deduct) adjustments to reconcile net loss from operations to net cash
required by operating activities:
Depreciation and amortization................................................... 577,632 847,476
Change in accounts receivable................................................... 59,078 (317,905)
Change in inventory............................................................. 8,210 (13,351)
Change in accounts payable/accrued expenses and accrued interest................ 371,743 (821,437)
Change in deferred tax asset and liability...................................... 676 265,950
Change in deferred revenues and customer deposits............................... 856 10,979
Change in other assets and liabilities.......................................... 7,590 70,759
------------- -------------
Net cash required by operating activities......................................... (10,609) (1,764,587)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in notes payable-affiliates................................................ 1,868,723 5,548,625
Change in long-term debt.......................................................... 202,708 (190,987)
Change in current maturities--LTD................................................. -- 56,242
Dividends paid.................................................................... (26,337) (15,618)
------------- -------------
Net cash provided by financing activities......................................... 2,045,094 5,398,262
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net additions to property, plant and equipment.................................... (1,900,763) (3,679,565)
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................ 133,722 (45,890)
CASH AND CASH EQUIVALENTS
Beginning of period............................................................... 219,522 353,244
------------- -------------
End of period..................................................................... $ 353,244 $ 307,354
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to combined financial statements are an integral part
of these combined financial statements.
F-28
<PAGE>
SELECTED SYSTEMS OF UNITED STATES CELLULAR CORPORATION
COMBINED STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
1994 1995
------------- -------------
<S> <C> <C>
Retained earnings (deficit) at beginning of period.................................. $ (2,113,305) $ (3,176,036)
Dividends........................................................................... (26,337) (15,618)
Loss................................................................................ (1,036,394) (1,807,058)
------------- -------------
Retained earnings (deficit) at end of period........................................ $ (3,176,036) $ (4,998,712)
------------- -------------
------------- -------------
</TABLE>
The accompanying notes to combined financial statements are an integral part
of these combined financial statements.
F-29
<PAGE>
SELECTED SYSTEMS OF UNITED STATES CELLULAR CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION AND DOCUMENTATION OF BUSINESS:
The accompanying combined financial statements reflect the combined
financial position, combined results of operations and combined cash flows of
Kansas RSA #5, Inc., USCOC of Missouri RSA #1, USCOC of Missouri RSA #4, Inc.
and Missouri RSA No. 2 (a division of USCOC of Missouri RSA #5, Inc.)
(collectively referred to as "Selected Systems" or "the Company") as of and for
the years ended December 31, 1995 and 1994.
Kansas RSA #5, Inc. was formed on August 16, 1988, under the laws of the
State of Illinois for the purpose of providing cellular telephone service in the
Kansas Rural Service Area ("RSA") No. 5. Kansas RSA #5, Inc. is a wholly owned
subsidiary of United States Cellular Corporation ("USCC"). USCC is an
80.8%-owned subsidiary of Telephone and Data Systems, Inc. ("TDS").
USCOC of Missouri RSA #1, Inc. was formed on July 10, 1991, under the laws
of the State of Missouri for the purpose of providing cellular telephone service
in the Missouri RSA No. 1. USCOC of Missouri RSA #1, Inc. is a wholly owned
subsidiary of USCC.
USCOC of Missouri RSA #4, Inc. was formed on July 23, 1992, under the laws
of the State of Delaware for the purpose of providing cellular telephone service
in the Missouri RSA No. 4. In July 1993, Aegis Cellular Group, L.P. ("Aegis
L.P.") assigned all of its interest in Missouri RSA No. 4 to USCOC of Missouri
RSA #4, Inc. In January 1995, Aegis L.P. was dissolved and assets of Missouri
RSA No. 4 were transferred to USCOC of Missouri RSA #4, Inc. The accompanying
combined 1994 financial statements reflect partners' capital as a component of
shareholders' equity.
USCC holds all of the common stock of USCOC of Missouri RSA #4, Inc., and
the previous owners hold all of the non-voting cumulative, exchangeable
preferred stock of USCOC of Missouri RSA #4. Prior to May 28, 2003, holders,
previous owners, of the preferred stock may exchange such stock for TDS common
shares. Each share of the preferred stock is exchangeable for 2.52058 of TDS
common shares. Prior to December 31, 1995, 9,000 shares of the preferred stock
had been exchanged for TDS common shares.
USCOC of Missouri RSA #5, Inc. holds the interim operating authority (IOA)
to provide cellular service in Missouri RSA No. 2. USCOC of Missouri RSA #5,
Inc. is a wholly owned subsidiary of USCC.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
a. DEPRECIATION--Depreciation is computed using the straight-line method
over the useful lives of the assets, which are estimated to be 3 to 25
years.
b. OPERATING REVENUES--Operating revenues primarily consist of charges to
customers for monthly access, cellular airtime usage, roamer charges,
equipment sales, toll charges and vertical services. The Company
recognizes revenues as services are rendered. Revenues earned but
unbilled at December 31, 1995 and 1994 were $125,069 and $69,020,
respectively, and are included in accounts receivable. Unbilled revenues
result from cellular service provided from the billing cycle
F-30
<PAGE>
SELECTED SYSTEMS OF UNITED STATES CELLULAR CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
date to the end of each month and from other cellular carriers' customers
using the Company's cellular system for the last half of December.
c. CASH AND CASH EQUIVALENTS--Cash and cash equivalents include cash and
short-term, highly liquid investments with original maturities of three
months or less. The carrying amount reported in the balance sheet for
cash and cash equivalents approximates their fair value.
d. ACCOUNTS RECEIVABLES--Accounts receivable consists of amounts owed by
customers for both service provided and equipment sales, by affiliated
entities and by other cellular carriers as a result of these carriers'
customers using the Company's cellular system.
e. INVENTORY--Inventory is stated at the lower of cost or market, using the
specific identification method to determine cost.
f. DEFERRED START-UP COSTS--Deferred start-up costs represent expenses for
the costs incurred by the Company for the acquisition of site locations,
zoning approvals, and technical and other services including related
interest and other expenses, related to constructing and obtaining
necessary approvals and licenses to operate and prepare to operate the
cellular system. These costs are capitalized and are being amortized over
five years. Amortization of these costs began in the first full month of
operations.
g. INVESTMENTS IN LICENSES--Investments in licenses consists of the costs
of acquiring Federal Communications Commission ("FCC") licenses. These
costs include amounts paid for legal, engineering and consulting services
and amounts paid for legal, engineering and consulting services and
amount incurred by the Company in acquiring these interests. License
costs are being amortized over 40 years. Amortization expenses were
$124,775 and $124,698 during 1995 and 1994, respectively.
h. DEFERRED REVENUES--Deferred revenues primarily represent monthly access
fees filled in advance. Such revenues are recognized in the following
month when service is provided.
i. PENSION PLAN--USCC's employees, who manage the daily operations of the
Company, are eligible for United States Cellular Corporation's Employees
Pension Trust I (the "Pension Trust"). The Pension Trust is a qualified
noncontributory defined contribution pension plan, which began effective
January 1, 1994. It provides pension benefits for all employees of USCC
and its subsidiaries. Under this plan, pension benefits and costs are
calculated separately for each participant and are funded currently. The
Company's pension costs were $2,569 and $2,435 and 1995 and 1994,
respectively.
j. Supplemental Cash Flow Disclosures--The Company paid interest in the
amounts of $100 and $180 during 1995 and 1994, respectively, and
converted $839,061 and $436,176 of accrued interest into notes
payable--affiliates during 1995 and 1994, respectively.
(3) LEASE COMMITMENTS:
The Company leases cell site locations under operating leases. Rent expense
totaled $24,343 and $18,505 for the years ended December 31, 1995 and 1994,
respectively. Rent expense for the cell site locations is included in cellular
service expense.
F-31
<PAGE>
SELECTED SYSTEMS OF UNITED STATES CELLULAR CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(3) LEASE COMMITMENTS: (CONTINUED)
Future minimum rental payments required under these operating leases, which
have an initial noncancellable lease term of more than one year as of December
31, 1995, are as follows:
<TABLE>
<S> <C>
1996............................................... $ 10,619
1997............................................... 5,400
1998............................................... 5,400
1999............................................... 5,400
2000............................................... 5,400
Thereafter......................................... 60,900
---------
$ 93,119
---------
---------
</TABLE>
(4) PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment is stated at cost and consists of:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
------------ ------------
<S> <C> <C>
Land and land improvements....................................... $ 728,652 $ 676,918
Leasehold improvements........................................... 4,924 174,303
Buildings and equipment.......................................... 5,154,430 8,684,781
Furniture and office equipment................................... 61,379 57,602
Vehicles......................................................... 38,919 40,357
------------ ------------
5,988,304 9,633,961
Less accumulated depreciation.................................... 1,068,601 1,736,097
------------ ------------
$4,919,703 $7,897,864
------------ ------------
------------ ------------
</TABLE>
(5) NOTES PAYABLE--AFFILIATES:
The Company has notes payable to USCC of $11,240,474 and $6,530,911 at
December 31, 1995 and 1994, respectively. These notes bear interest at a rate of
prime plus and one-half percent and become due in 1996. The carrying value of
the Company's borrowings from USCC approximates their fair value, as the notes
payable--affiliates are variable debt with the interest rate based on the prime
rate.
(6) LONG TERM DEBT--AFFILIATES:
On October 1, 1991, USCC entered into an agreement with Northern Telecom
Finance Corporation ("NTFC") that included a commitment by NTFC to finance
equipment purchases made and construction costs incurred by certain entities
managed by USCC. Any borrowings made by USCC were loaned to the individual
entity which made the purchases and incurred the costs.
On March 31, 1992, USCC borrowed $943,214 from NTFC on behalf of the Company
and in turn loaned the same amount to the Company. There borrowings are
collateralized by a secured interest in the tangible assets (excluding customer
accounts receivable) and intangible assets of the Company (excluding any
interest in the Company's FCC license). Monthly principal and interest payments
began in April of
F-32
<PAGE>
SELECTED SYSTEMS OF UNITED STATES CELLULAR CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(6) LONG TERM DEBT--AFFILIATES: (CONTINUED)
1993, and will continue for a period of 84 months. Interest accrues at a rate of
prime plus one and one-half percent on the outstanding debt balance.
USCC entered into a new agreement with NTFC on December 22, 1994. Under this
new agreement an additional $337,453 was borrowed from NTFC on December 29,
1994, with the same collateral requirements and interest rate as stated in the
preceding paragraph. Monthly interest payments began in January of 1995, and
will continue for a period of 84 months while monthly principal payments will
begin in January of 1996, and continue for a period of 72 months.
The carrying value of the Company's borrowings under the vendor financing
arrangements approximates their fair value. The fair value of the long-term debt
is estimated using a discounted cash flow analysis.
Following are maturities of long-term debt for the term of financing:
<TABLE>
<S> <C>
1996.............................................. $ 190,987
1997.............................................. 190,987
1988.............................................. 190,987
1999.............................................. 190,987
2000.............................................. 89,928
Thereafter........................................ 56,243
---------
$ 910,119
---------
---------
</TABLE>
(7) INCOME TAXES
The Company records all deferred tax liabilities and assets for the deferred
tax consequences of all temporary differences. Additionally, deferred tax
balances are adjusted to reflect any new tax rates when they are enacted into
law.
The Company is included in a consolidated federal income tax return and
certain state income tax returns (as applicable) with other members of the TDS
Consolidated Group.
The Company has available at December 31, 1995 and 1994, unused operating
loss carryforwards for state purposes of approximately $5,283,055 and
$2,793,656, respectively, and for federal purposes of $5,284,646, and 2,793,656,
respectively, which may be applied against future taxable income, expiring
between 2001 and 2010.
F-33
<PAGE>
SELECTED SYSTEMS OF UNITED STATES CELLULAR CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(7) INCOME TAXES (CONTINUED)
The components of the Company's noncurrent deferred tax assets and
liabilities at December 31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
DEFERRED TAX ASSET
--------------------------
1994 1995
------------ ------------
<S> <C> <C>
Net operating loss carryforwards.................................. $ 1,165,854 $ 2,192,535
License costs..................................................... 176,219 155,799
------------ ------------
1,342,073 2,348,334
Less: Valuation Allowance......................................... 1,125,701 1,526,552
------------ ------------
$ 216,372 $ 821,782
------------ ------------
------------ ------------
<CAPTION>
1994 1995
------------ ------------
<S> <C> <C>
Property, plan and equipment...................................... 218,533 429,469
License costs..................................................... -- 664,529
------------ ------------
$ 218,533 $ 1,093,998
------------ ------------
------------ ------------
</TABLE>
A valuation allowance has been provided when it is more likely than not that
some portion of the deferred tax asset will not be realized. The Company has
established a valuation allowance of $1,526,552 and $1,125,701 for 1995 and
1994, respectively, primarily for operating loss carryforwards that may expire
before they can be utilized. During 1995 and 1994 the valuation allowance
increased $400,851 and $551,180, respectively, primarily due to the Company's
1995 and 1994 net operating loss. The Company had current deferred tax assets
totaling $6,404 and $2,299 at December 31, 1995 and 1994, resulting primarily
from the allowance for customer receivables.
The components of the income tax provisions charged to expenses are
summarized below:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
Federal Income Taxes Deferred................................................... $ 216,504
State Income Taxes Deferred..................................................... 49,308
------------
Total Income Tax Expense........................................................ $ 265,812
------------
------------
</TABLE>
The statutory federal income tax rate is reconciled to the Company's
effective income rate below.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
--------------
<S> <C>
Statutory federal income tax rate............................................... 34.00%
Effects of valuation allowance on deferred tax asset............................ (51.2)
-----
Effective income tax rate....................................................... (17.2)%
-----
-----
</TABLE>
F-34
<PAGE>
SELECTED SYSTEMS OF UNITED STATES CELLULAR CORPORATION
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(8) CONCENTRATION OF CREDIT RISK:
The Company provides cellular service and sells cellular telephones to a
diversified group of consumers within a concentrated geographical area. The
Company performs credit evaluations of the Company's customers and generally
does not require collateral. Receivables are generally due within 30 days.
Credit losses related to customers have been within management's expectations.
(9) TRANSACTIONS WITH RELATED PARTIES:
USCC and certain affiliates of TDS provide the Company with centralized
management, accounting, consulting and computer services which resulted in
billings to the Company of $647,511 and $365,179 during 1995 and 1994,
respectively. The Company earned roaming revenues of $177,298 and $100,655 and
incurred roaming expenses of $119,305 and $70,398 from certain affiliates of
USCC during 1995 and 1994, respectively. The Company also received
administrative and other services from certain affiliates of USCC which resulted
in net billings to those affiliates of $5,982 and $91,616 during 1995 and 1994,
respectively. The Company also received switching revenue of $285,750 and
$198,000, and incurred switching fees of $34,650 and $143,400 from certain
affiliates of USCC during 1995 and 1994, respectively.
(10) SUBSEQUENT EVENT:
Kansas RSA #5, Inc., USCOC of Missouri RSA #1, Inc., and USCOC of Missouri
RSA #4, Inc. were merged with USCOC of Missouri RSA #5, Inc. on March 18, 1996.
These three markets, along with the IOA of Missouri RSA No. 2 and the Linn
County portion of USCOC of Missouri RSA #5, Inc., were sold to Dobson
Communications Corporation on March 19, 1996.
F-35
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Management
Maryland RSA 2
We have audited the accompanying Statements of Cellular Revenue and Direct
Operating Expenses of Maryland RSA 2 (Statements) for the years ended December
31, 1996, 1995 and 1994. These Statements are the responsibility of management.
Our responsibility is to express an opinion on the Statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Statements. An audit also includes assessing
the basis of accounting used and significant estimates made by management, as
well as evaluating the overall presentation of the Statements. We believe that
our audits provide a reasonable basis for our opinion.
As discussed in Note 1, the accompanying Statements were prepared in
connection with the sale of the customers of Maryland RSA 2. The Statements are
not intended to be a complete presentation of Maryland RSA 2's results of
operations.
In our opinion, the Statements referred to above present fairly, in all
material respects, the cellular revenue and direct operating expenses described
in Note 1 of Maryland RSA 2 for the years ended December 31, 1996, 1995 and
1994, in conformity with generally accepted accounting principles.
Ernst & Young LLP
San Antonio, Texas
February 21, 1997
F-36
<PAGE>
MARYLAND RSA 2
STATEMENTS OF CELLULAR REVENUE AND
DIRECT OPERATING EXPENSES
(IN 000S)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Cellular revenue.................................................................... $ 2,320 $ 5,093 $ 11,195
Direct operating expenses:
Commission........................................................................ 973 1,248 2,272
Operations........................................................................ 227 292 340
Facilities........................................................................ 224 420 414
--------- --------- ---------
Total direct operating expenses..................................................... 1,424 1,960 3,026
--------- --------- ---------
$ 896 $ 3,133 $ 8,169
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-37
<PAGE>
MARYLAND RSA 2
NOTES TO STATEMENTS OF CELLULAR REVENUE AND
DIRECT OPERATING EXPENSES
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
1. PURPOSE OF STATEMENTS
Maryland RSA 2 (the RSA) is a cellular mobile telephone system operating
under an interim authority granted by the FCC servicing rural eastern Maryland.
The RSA is operated by Washington Baltimore Cellular Limited Partnership (the
Partnership), an indirect majority owned investee of Southwestern Bell Wireless
Holdings.
In a services agreement dated December 9, 1996, the Partnership agreed to
sell the customers of the RSA to Dobson Cellular of Maryland, Inc., Maryland
Wireless Communications Limited Partnership, a Maryland limited partnership, and
Wendy C. Coleman. These Statements of Cellular Revenue and Direct Operating
Expenses (the Statements) were prepared in connection with this transaction. The
Statements are not intended to be a complete presentation of the RSA's results
of operations. Accordingly, the Statements do not include other revenues
generated or depreciation, general, administrative and other expenses incurred
by the Partnership in operating the RSA.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION
REVENUE RECOGNITION
The RSA earns revenue by providing access to its cellular system (access
revenue) and for usage of its cellular system (airtime revenue). Access revenue
is billed one month in advance and is recognized when earned. Airtime revenue,
including roaming revenue, is recognized when the service is rendered.
DIRECT OPERATING EXPENSES
COMMISSIONS
Commissions include commissions paid for obtaining customers and are
expensed as incurred.
OPERATIONS
Operations expense includes cellsite rent, lease and utilities expense and
is expensed as incurred.
FACILITIES
Facilities expense includes network access and circuit charges and is
expensed as incurred.
BASIS OF PRESENTATION
The preparation of statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the statements and accompanying notes. Actual
results could differ from those estimates.
3. RELATED PARTY TRANSACTIONS
INTERSYSTEM ROAMING
The RSA is operated by the Partnership as part of a single cellular system
in combination with certain affiliated MSAs and RSAs in the Washington
D.C./Baltimore region. In 1996, regional airtime and long
F-38
<PAGE>
3. RELATED PARTY TRANSACTIONS (CONTINUED)
distance revenue were allocated among the MSAs and RSAs based on airtime
recorded by cell sites in each MSA and RSA. Regional interconnection revenue was
allocated based on the number of calls recorded by the cellsites. During 1996,
approximately $5,400,000 of revenue was recognized by the RSA under this
arrangement. In 1995 and 1994, regional airtime revenue was recorded based on
actual RSA cellsite usage using the rate plans of the calling customers.
Regional interconnection revenue was also based on actual RSA cellsite usage.
During 1995 and 1994, revenue of approximately $1,800,000 and $700,000,
respectively, was recognized by the RSA under this arrangement. Long distance
service was not provided in 1995 or 1994.
F-39
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Horizon, G.P., Inc.
We have audited the accompanying combined statements of assets and
liabilities of The Cellular Telephone Business of Selected Systems of Horizon
Cellular Telephone Company, L.P. as of December 31, 1995 and 1996, and the
related combined statements of operations and net assets and of cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of Horizon Cellular Telephone Company, L.P.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets and liabilities of The Cellular Telephone
Business of Selected Systems of Horizon Cellular Telephone Company, L.P. at
December 31, 1995 and 1996, and the combined results of their operations and
their cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
January 27, 1997
F-40
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED STATEMENTS OF ASSETS AND LIABILITIES
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
Current assets:
Cash............................................................................. $ 355,069 $ 435,407
Accounts receivable, net of allowance for doubtful accounts of $82,160 and
$100,790....................................................................... 1,709,143 2,240,468
Inventory........................................................................ 130,730 219,079
Prepaid expenses................................................................. 77,731 29,991
------------- -------------
Total current assets............................................................... 2,272,673 2,924,945
Property and equipment:
Cellular system.................................................................. 8,669,758 10,810,808
Other............................................................................ 959,727 1,287,823
------------- -------------
9,629,485 12,098,631
Accumulated depreciation......................................................... (3,080,449) (4,491,663)
------------- -------------
6,549,036 7,606,968
Licenses, net of accumulated amortization of $3,099,061 and $4,020,825............. 32,763,313 31,841,549
Other assets, net of accumulated amortization of $18,483 and $22,838............... 94,275 99,200
------------- -------------
Total assets....................................................................... $ 41,679,297 $ 42,472,662
------------- -------------
------------- -------------
LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable................................................................. $ 354,798 $ 702,859
Accrued expenses................................................................. 669,390 968,815
Deferred revenue................................................................. 403,994 566,521
------------- -------------
Total current liabilities.......................................................... 1,428,182 2,238,195
Advances from affiliates........................................................... 14,862,381 13,399,571
Net assets......................................................................... 25,388,734 26,834,896
------------- -------------
Total liabilities and net assets................................................... $ 41,679,297 $ 42,472,662
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-41
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED STATEMENTS OF OPERATIONS AND NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Cellular service.................................................. $ 5,863,828 $ 7,801,918 $ 10,867,791
Roaming revenues.................................................. 2,765,685 3,496,366 4,264,112
Cellular equipment sales.......................................... 524,892 402,430 388,505
------------- ------------- -------------
Total revenues...................................................... 9,154,405 11,700,714 15,520,408
Operating expenses:
Cellular service.................................................. 2,918,043 3,569,152 4,532,595
Cellular equipment................................................ 1,100,160 1,182,309 1,133,171
General and administrative........................................ 1,528,970 1,471,078 1,869,299
LPAR compensation................................................. -- -- 275,000
Marketing and selling............................................. 1,272,265 1,944,731 2,478,918
Depreciation and amortization..................................... 1,959,106 2,170,963 2,331,184
------------- ------------- -------------
8,778,544 10,338,233 12,620,167
------------- ------------- -------------
Income from operations.............................................. 375,861 1,362,481 2,900,241
Interest expense.................................................... 1,358,153 1,568,883 1,454,079
------------- ------------- -------------
Net (loss) income................................................... (982,292) (206,402) 1,446,162
Net assets at beginning of year..................................... 21,926,001 25,314,904 25,388,734
Partners' contributions............................................. 4,371,195 280,232 --
------------- ------------- -------------
Net assets at end of year........................................... $ 25,314,904 $ 25,388,734 $ 26,834,896
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes.
F-42
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income.................................................... $ (982,292) $ (206,402) $ 1,446,162
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization...................................... 1,959,106 2,170,963 2,331,184
Provision for bad debts............................................ 433,490 3,075 169,582
LPAR compensation.................................................. -- -- 275,000
Accrued interest expense--affiliate................................ 1,358,153 1,568,883 1,454,079
Changes in operating assets and liabilities:
Accounts receivable.............................................. (1,194,015) (280,891) (700,907)
Inventory........................................................ (72,670) 42,003 (88,349)
Prepaid expenses................................................. (4,768) (61,027) 47,740
Accounts payable and accrued expenses............................ 691,454 (239,835) 372,486
Deferred revenue................................................. 95,128 205,588 162,527
------------- ------------- -------------
Net cash provided by operating activities............................ 2,283,586 3,202,357 5,469,504
INVESTING ACTIVITIES
Purchases of property and equipment.................................. (1,942,166) (1,418,979) (2,462,997)
License and system acquisitions...................................... (4,205,125) -- --
Other................................................................ 27,925 (12,161) (9,280)
------------- ------------- -------------
Net cash used in investing activities................................ (6,119,366) (1,431,140) (2,472,277)
FINANCING ACTIVITIES.................................................
Advances to affiliates, net of $166,069 and $280,232 noncash
contributions in 1994 and 1995, respectively........................ (139,739) (2,038,131) (2,916,889)
Partners' contributions.............................................. 4,205,125 -- --
------------- ------------- -------------
Net cash provided by (used in) financing activities.................. 4,065,386 (2,038,131) (2,916,889)
------------- ------------- -------------
Net increase (decrease) in cash...................................... 229,606 (266,914) 80,338
Cash at beginning of year............................................ 392,377 621,983 355,069
------------- ------------- -------------
Cash at end of year.................................................. $ 621,983 $ 355,069 $ 435,407
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes.
F-43
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The accompanying audited combined financial statements of The Cellular
Telephone Business of Selected Systems of Horizon Cellular Telephone Company,
L.P. (HCTC) reflect the combined assets and liabilities, combined results of
operations, and combined cash flows of the cellular telephone business of
Horizon Cellular Telephone Company of Frederick ("Frederick"), Horizon Cellular
Telephone Company of Bedford ("Bedford"), Horizon Cellular Telephone Company of
Hagerstown, L.P. ("Hagerstown"), and the Cumberland Cellular Partnership
("Cumberland") (collectively referred to as "the Selected Systems," "the
Systems," or "the Company") as of December 31, 1995 and 1996, and for each of
the three years in the period ended December 31, 1996. The accompanying
financial statements are presented on HCTC's historical cost basis and are
intended to reflect only the assets, liabilities, operations, and cash flows
relating to the cellular telephone business of the named legal entities, which
are majority-owned subsidiary partnerships of HCTC, and do not represent the
financial statements of the named legal entities. The combined financial
statements include only the operating results since the Systems were acquired by
HCTC.
The Company owns, designs, develops, and operates cellular communications
systems. With the exception of Cumberland, KCCGP, L.P. (KCCGP) is the managing
and sole general partner of the subsidiary partnerships that own directly the
aforesaid cellular telephone businesses at December 31, 1996. With respect to
Cumberland, KCCGP is the managing and sole general partner of Horizon Cellular
Telephone Company of Cumberland, L.P., a 90.55% general partner in Cumberland.
KCCGP performs certain administrative functions for the Systems and,
accordingly, certain expenses of KCCGP (see Note 5) have been allocated to the
Systems on a basis which, in the opinion of management, is reasonable. However,
such expenditures are not necessarily indicative of, and it is not practicable
for management to estimate, the nature and level of expenses which might have
been incurred had the Systems been operating as separate independent companies.
2. ACQUISITIONS
In April 1994, HCTC simultaneously closed on various purchase, sale and
exchange agreements which ultimately resulted in HCTC (i) acquiring a majority
interest (90.55%) in the non-wireline FCC Operating License of the Cumberland
MSA, (ii) acquiring the non-wireline FCC Operating License of the Hagerstown MSA
together with certain operating assets, in exchange for substantially all of the
assets of the eastern portion of Bedford, and (iii) making a net payment of $4.2
million in cash. Simultaneously, HCTC contributed the Operating License to
Cumberland and contributed the Operating License to Hagerstown in exchange for a
99.0% interest in Hagerstown and KCCGP obtained a 1.0% interest in Hagerstown.
Effective January 1, 1995, the operations of Frederick and Bedford were
merged into Hagerstown. As part of the market consolidation, the general partner
interests were reorganized. KCCGP acquired an additional .9% interest in
Frederick (resulting in a 1% general partner ownership), reducing HCTC's Limited
Partnership interest to 99%. The additional partner contribution was based on
the estimated fair market value of the Frederick System.
All of the Company's acquisitions were accounted for under the purchase
method of accounting; accordingly, assets acquired and liabilities assumed have
been recorded at their estimated fair market values at the dates of acquisition
and their results of operations are included in the accompanying combined
statements of operations since the date of acquisition. The accompanying
financial statements
F-44
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
2. ACQUISITIONS (CONTINUED)
exclude the results of operations of the eastern portion of Bedford. The excess
of purchase price over the fair market value of identifiable net tangible assets
acquired has been allocated to customer lists and licenses. Pro forma results of
operations for 1994, assuming the acquisitions of Hagerstown and Cumberland
occurred on January 1, 1994, would not differ materially from reported results.
3. ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INVENTORIES
Inventories are carried at the lower of cost (using the first-in, first-out
method) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated over their
estimated useful lives (three to twelve years) using the straight-line method.
Depreciation expense amounted to approximately $1,143,000 in 1994,
$1,237,000 in 1995, and $1,405,000 in 1996.
LICENSES
Licenses primarily represent the acquisition costs of the Operating
Licenses. Such costs are being amortized over a period of 40 years using the
straight-line method.
The Systems periodically review the carrying value of their licenses to
determine whether such amounts are recoverable based on undiscounted future cash
flows and whether a reduction to fair value is necessary. There have been no
such reductions through December 31, 1996.
ADVANCES FROM AFFILIATES
Advances from affiliates primarily represent cash advances from HCTC and
KCCGP which provided funds for investing and operating activities, and have no
specific repayment terms. Interest expense is charged monthly at a rate of
11-3/8% of the ending balances payable to HCTC.
REVENUE AND EXPENSE RECOGNITION
Cellular airtime revenue and access charges are recognized as service is
provided. Cellular airtime is billed in arrears and access charges are billed in
advance. Subscriber acquisition costs (mainly commissions and loss on equipment
sales) are expensed when incurred. Accounts receivable consist mainly of amounts
due from subscribers and other cellular companies whose subscribers use the
Systems' cellular service.
F-45
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
3. ACCOUNTING POLICIES (CONTINUED)
Approximately 40% of the 1996 roaming revenues were generated from
subscribers of a cellular company serving an adjacent market when such
subscribers place or receive calls on the Company's system.
ADVERTISING EXPENSES
Advertising expenses are charged to operations as incurred and amounted to
approximately $256,100 in 1994, $394,400 in 1995, and $512,000 in 1996.
ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Property, sales, and excise taxes..................................... $ 128,400 $ 112,800
Interconnection and other billing costs............................... 68,400 63,500
Salaries and bonuses.................................................. 118,900 139,100
LPAR compensation..................................................... -- 275,000
Other................................................................. 353,700 378,400
---------- ----------
$ 669,400 $ 968,800
---------- ----------
---------- ----------
</TABLE>
INCOME TAXES
The legal entities under which the Systems operate are partnerships
organized under the laws of Delaware. Accordingly, federal and state income
taxes are not paid at the partnership level but by the ultimate partners. The
tax basis of the Systems' assets amounted to approximately $28.8 million and $30
million at December 31, 1995 and 1996, respectively.
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The impact of adopting this Statement in 1996 was not material
to the financial statements.
SFAS No. 123, "Accounting for Stock-Based Compensation," is effective for
fiscal years beginning after December 15, 1995. SFAS 123 provides companies with
a choice to follow the provisions of SFAS 123 in determining stock-based
compensation expense or to continue with the provisions of APB 25, "Accounting
for Stock Issued to Employees." Although the Selected Systems expect to continue
to follow APB 25, Statement 123 would have no effect on the combined financial
statements for the periods indicated (see Note 6).
F-46
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
4. COMMITMENTS AND CONTINGENCIES
The Systems lease office space, office equipment, and cellular sites and
facilities under operating leases with initial terms ranging from 1 to 20 years.
Most cellular sites contain renewal options ranging up to 25 years.
Future minimum payments under noncancelable operating leases with initial
terms of one year or more consisted of the following amounts as of December 31,
1996:
<TABLE>
<CAPTION>
CELLULAR
SITES OTHER
---------- ------------
<S> <C> <C>
1997................................................................ $ 87,000 $ 353,000
1998................................................................ 89,000 289,000
1999................................................................ 65,000 244,000
2000................................................................ 61,000 197,000
2001................................................................ 41,000 --
Thereafter.......................................................... 281,000 --
---------- ------------
Total minimum lease payments........................................ $ 624,000 $ 1,083,000
---------- ------------
---------- ------------
</TABLE>
Rental expense amounted to approximately $251,100 in 1994, $336,500 in 1995,
and $389,800 in 1996.
5. RELATED PARTY TRANSACTIONS
KCCGP provides various administrative services to the Systems, including
accounting, engineering, and marketing and advertising services, in addition to
funding working capital requirements and capital expenditures as necessary.
These expenses are charged, first on the basis of direct usage when
identifiable, with the remainder allocated equally among its operating systems.
Allocated expenses amounted to $107,000 for the year ended December 31, 1994,
and $50,000 for each of the years ended December 31, 1995 and 1996.
6. BENEFIT PLANS
HCTC has granted certain officers of the Selected Systems limited
partnership appreciation rights in HCTC pursuant to a Limited Partnership Unit
Appreciation Rights Plan ("LPAR Plan"), as amended, that was adopted September
1, 1994 to be effective January 1, 1993. Upon the occurrence of certain events
as specified therein ("Termination Events"), participants are entitled to share
in the amounts, if any, of distributions to HCTC's partners after all capital
contributions made by HCTC's partners have been repaid, together with a fixed
return on such contributions. Such rights vest over a period of five years;
however, vesting is automatically accelerated upon the occurrence of a
Termination Event. LPAR Plan compensation expense of $275,000 has been
recognized and included in accrued expenses as of December 31, 1996, which is
the LPAR Plan amount attributable to participants who are employees of the
Selected Systems.
Effective July 1, 1994, KCCGP established an employee savings plan (the
"Plan") that qualifies as a deferred salary arrangement under Section 401(k) of
the Internal Revenue Code. Under the Plan, which covers employees of the
Selected Systems who have met certain eligibility requirements, participating
F-47
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
6. BENEFIT PLANS (CONTINUED)
employees may defer up to 15% of their pretax earnings, up to the Internal
Revenue Service annual contribution limit ($9,500 for calendar year 1996). The
Company matches up to 50% of the employee's contributions, up to a maximum of 3%
of the employee's earnings. Employees who participate in the LPAR Plan are
excluded from matching contributions. Matching Plan contributions, which vest
equally over five years, amounted to approximately $7,600 in 1994, $10,100 in
1995, and $17,600 in 1996.
7. SUBSEQUENT EVENTS
On November 19, 1996, the Company entered into a definitive agreement to
sell the FCC Operating Licenses of the Selected Systems, together with certain
operating assets and liabilities, to Dobson Cellular of Maryland, Inc. for
approximately $75 million, subject to adjustment. The combined financial
statements do not reflect either the estimated gain, or any expenses incurred or
expected to be incurred related to the sale of the systems. The sale is expected
to close in February of 1997, and is subject to certain regulatory and other
approvals.
F-48
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Gila River Cellular General Partnership:
We have audited the accompanying balance sheets of Gila River Cellular
General Partnership (an Arizona general partnership) as of December 31, 1996 and
1995, and the related statements of operations, changes in partners' capital and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Gila River Cellular General
Partnership as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 10, 1997
F-49
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 2)............................................... $ 1,569,595 $ --
Accounts receivable, net of allowance of $159,707 and $58,696, respectively...... 849,026 503,165
Inventories (Note 2)............................................................. 27,645 32,551
Prepaid expenses................................................................. 107 555
------------- -------------
Total current assets........................................................... 2,446,373 536,271
------------- -------------
Property and Equipment (Notes 2 and 5):
Cellular systems................................................................. 10,363,236 10,218,397
Furniture and equipment.......................................................... 5,354 5,354
Construction in progress......................................................... 466,707 178,687
------------- -------------
10,835,297 10,402,438
Less accumulated depreciation and amortization................................... (2,605,661) (1,361,443)
------------- -------------
8,229,636 9,040,995
------------- -------------
Total assets................................................................... $ 10,676,009 $ 9,577,266
------------- -------------
------------- -------------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable................................................................. $ 614,134 $ 170,867
Accrued liabilities.............................................................. 415,006 762,799
Advance billings and deposits (Note 2)........................................... 97,915 80,964
Due to general partner (Notes 2 and 4)........................................... -- 2,111,267
------------- -------------
Total current liabilities...................................................... 1,127,055 3,125,897
Long term liabilities.............................................................. 8,002 8,002
Commitments (Note 3) -- --
Partners' capital.................................................................. 9,540,952 6,443,367
------------- -------------
Total liabilities and partners' capital........................................ $ 10,676,009 $ 9,577,266
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Revenues (Note 2)
Cellular service...................................................... $ 2,151,888 $ 1,286,901 $ 906,882
Cellular equipment.................................................... 275,346 226,193 258,582
Roaming and other..................................................... 5,583,073 4,230,127 2,437,233
------------ ------------ ------------
Total revenues...................................................... 8,010,307 5,743,221 3,602,697
------------ ------------ ------------
Operating Expenses (Notes 2 and 4):
Cost of cellular service.............................................. 993,086 531,380 373,159
Cost of cellular equipment............................................ 350,028 264,037 269,986
Selling............................................................... 1,080,862 708,545 419,683
General and administrative............................................ 1,208,123 911,065 596,117
Depreciation and amortization......................................... 1,244,204 926,995 320,727
------------ ------------ ------------
Total operating expenses............................................ 4,876,303 3,342,022 1,979,672
------------ ------------ ------------
Operating income........................................................ 3,134,004 2,401,199 1,623,025
Other (expense) income (Note 2)......................................... (36,419) (50,024) 24,251
------------ ------------ ------------
Net income........................................................ $ 3,097,585 $ 2,351,175 $ 1,647,276
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-51
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
BEGINNING BALANCE TRANSFER OF BALANCE ADJUSTED BALANCE
OWNERSHIP DEC. 31, INTEREST DEC. 31, OWNERSHIP DEC. 31,
INTEREST 1993 NET INCOME (NOTE 1) 1994 INTEREST NET INCOME 1995
----------- --------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
General Partners:
Gila River Telecommuni-
cations, Inc......... 40.00% $ 977,966 $ 658,910 $ 79,799 $1,716,675 41.9500% $ 986,318 $2,702,993
Tohono O'odham Utility
Authority............ 23.00% 562,331 378,874 (30,590) 910,615 22.2525% 523,195 1,433,810
Aztel, Inc............. 23.00% 562,331 378,874 (30,590) 910,615 22.2525% 523,195 1,433,810
U S WEST NewVector
Group, Inc........... 14.00% 342,288 230,618 (18,619) 554,287 13.5450% 318,467 872,754
----------- --------- ----------- ----------- --------- ----------- ----------- ---------
100.00% $2,444,916 $1,647,276 $ -- $4,092,192 100.0000% $2,351,175 $6,443,367
----------- --------- ----------- ----------- --------- ----------- ----------- ---------
----------- --------- ----------- ----------- --------- ----------- ----------- ---------
<CAPTION>
BALANCE
DEC. 31,
NET INCOME 1996
----------- ---------
<S> <C> <C>
General Partners:
Gila River Telecommuni-
cations, Inc......... $1,299,437 $4,002,430
Tohono O'odham Utility
Authority............ 689,290 2,123,100
Aztel, Inc............. 689,290 2,123,100
U S WEST NewVector
Group, Inc........... 419,568 1,292,322
----------- ---------
$3,097,585 $9,540,952
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-52
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income......................................................... $ 3,097,585 $ 2,351,175 $ 1,647,276
------------- ------------- -------------
Adjustments to net income:
Depreciation and amortization...................................... 1,244,204 926,995 320,727
Changes in current assets and current liabilities:
Accounts receivable, net......................................... (345,861) (143,655) (139,488)
Inventories...................................................... 4,906 (3,259) (9,171)
Accounts payable................................................. 35,995 10,260 62,289
Accrued liabilities.............................................. (347,793) 663,163 99,636
Advance billings and deposits.................................... 16,951 33,632 22,220
Prepaid expenses................................................. 448 (249) (306)
Other............................................................ -- -- (20,389)
------------- ------------- -------------
Total adjustments................................................ 608,850 1,486,887 335,518
------------- ------------- -------------
Cash provided by operations...................................... 3,706,435 3,838,062 1,982,794
------------- ------------- -------------
INVESTING ACTIVITIES:
Purchase of property and equipment................................. (25,573) (7,090,057) (1,381,306)
Cash received on disposition of property and equipment............. -- 525,000 --
------------- ------------- -------------
Cash used for investing activities............................... (25,573) (6,565,057) (1,381,306)
------------- ------------- -------------
FINANCING ACTIVITIES:
(Payments to) advances from general partner........................ (2,111,267) 2,111,267 --
------------- ------------- -------------
Cash (used for) provided by financing activities................. (2,111,267) 2,111,267 --
------------- ------------- -------------
CASH AND CASH EQUIVALENTS:
Net increase (decrease).......................................... 1,569,595 (615,728) 601,488
Beginning balance................................................ -- 615,728 14,240
------------- ------------- -------------
Ending balance................................................... $ 1,569,595 $ -- $ 615,728
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-53
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. ORGANIZATION
Gila River Cellular General Partnership (an Arizona general partnership) was
formed on September 1, 1990, to fund, establish and provide cellular
telecommunication services to customers within the geographical area between the
cities of Phoenix and Tucson, Arizona known as the Gila Rural Statistical Area
("RSA") Number 5 (corridor). Gila River Telecommunications, Inc., Tohono O'odham
Utility Authority (a subsidiary organization of the Tohono O'odham Nation), and
Aztel, Inc. participate as general partners. U S WEST NewVector Group, Inc.
participates as the managing general partner.
Effective December 31, 1994, the partners of Gila River Cellular General
Partnership entered into a definitive agreement to amend the Partnership
Agreement to incorporate the geographical service area of Arizona RSA Number 5
(non-corridor) served by a separate partnership of Gila River
Telecommunications, Inc., Tohono O'odham Utility Authority and Aztel, Inc. As a
result of this transaction, the ownership interest of the general partners of
Gila River Cellular General Partnership has been revised as reflected in the
accompanying financial statements.
In late 1996, Dobson Communications Corporation ("Dobson") and the general
partners signed a letter of intent wherein Dobson agreed to purchase the
interests of the general partners. Upon completion of the transaction, which is
expected to occur in the first half of 1997, Dobson and the Gila River Indian
Community will have a 100% interest in Arizona RSA Number 5. At Dobson's option,
during the sales transition and post-transition periods, Dobson may purchase
services from the managing general partner similar to those discussed in Note 4.
2. SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include amounts which are readily convertible into
cash and which are not subject to significant risk from fluctuations in interest
rates.
INVENTORIES
Inventories are stated at the lower of cost or market on a first-in,
first-out (FIFO) basis. Inventories consist of cellular mobile telephone
equipment that is purchased by the Partnership primarily for sale to customers.
PROPERTY, EQUIPMENT AND DEPRECIATION
The Partnership's investment in property and equipment is stated at cost
less accumulated depreciation. Interest incurred during construction is
capitalized and amortized over the life of the underlying asset. Interest of
$9,216, $163,427 and $2,404 was capitalized during the years ended December 31,
1996, 1995 and 1994, respectively. The cost of these assets includes purchased
materials, contracted services, internal labor and applicable overhead.
F-54
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Depreciation is calculated on a straight-line basis over the following
estimated economic life of the assets:
<TABLE>
<S> <C>
3 to 20
Cellular systems.............................. years
Furniture and equipment....................... 3 to 5 years
</TABLE>
INCOME TAXES
Under provisions of the Internal Revenue Code, the partners include their
respective share of Partnership income or loss in their individual tax returns.
Accordingly, no provision for income taxes has been made in the accompanying
financial statements.
MANAGING GENERAL PARTNER FINANCING
The managing general partner advances funds to the Partnership as necessary
to finance operations and network construction. Interest is charged to the
Partnership on these advances at a rate equivalent with U S WEST NewVector
Group, Inc.'s borrowing rate which averaged 8.1% for the year ended December 31,
1996 and 7.5% for the years ended December 31, 1995 and 1994. Interest expense
incurred and paid, net of amounts capitalized for the years ended December 31,
1996, 1995 and 1994 was $50,098, $50,024 and $0, respectively.
REVENUES
The Partnership earns cellular service revenue by providing access to the
cellular network (access revenue) and for use of the network (airtime revenue).
Access revenue is billed one month in advance. Airtime and access revenues are
recognized when the service is provided.
ADVERTISING COSTS
Costs incurred for advertising are expensed as incurred.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATION
Certain reclassifications have been made to the prior year's financial
statements in order to present them on a basis consistent with that of the
current year.
F-55
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
3. COMMITMENTS:
OPERATING LEASES
Future minimum rental payments required under operating leases for real
estate that have initial or remaining noncancelable lease terms ending after
December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997.............................................. $ 91,086
1998.............................................. 80,038
1999.............................................. 67,769
2000.............................................. 19,090
2001.............................................. 180
---------
Total............................................. $ 258,163
---------
---------
</TABLE>
Leases for real estate provide for renewal at various intervals with
provision for increased rents at each renewal.Rental expense for the years ended
December 31, 1996, 1995 and 1994 was $91,663, $103,604 and $51,809,
respectively.
4. RELATED PARTY TRANSACTIONS
In accordance with the Partnership Agreement, the managing general partner
provides many services to the Partnership as well as to other cellular
partnerships. These include legal, financial, engineering, operations, marketing
and accounting services. Costs for performing these services are charged to the
Partnership primarily on the basis of the managing general partner's time and
effort incurred on behalf of the Partnership for each activity.The Partnership
incurred costs from the managing general partner for the years ended December
31, 1996, 1995, and 1994 of $986,301, $848,279 and $529,924, respectively.
The Partnership purchases telecommunication services from an affiliate of
the managing general partner. Purchases for the years ended December 31, 1996,
1995 and 1994 were $289,404, $175,641 and $80,840, respectively.
The managing general partner provides switching services to the Partnership.
The Partnership was charged $196,202, $97,220 and $58,266 for the years ended
December 31, 1996, 1995 and 1994, respectively.
The Partnership utilizes digital transmission facilities from a U S WEST
NewVector Group, Inc. managed partnership. The Partnership was charged $4,380
for these services during the year ended December 31, 1996 and $0 for the two
years ended December 31, 1995 and 1994.
5. UPGRADE OF CELLULAR SYSTEM
During 1993, the Partnership decided to replace substantially all of its
cellular network equipment consisting primarily of cell site electronics. The
Partnership recorded a reserve of $460,000 in connection with this transaction
in order to reduce the cellular equipment to its net realizable value. During
the fourth quarter of 1995, assets with a book value of $1,132,394 and
accumulated depreciation of $200,153 were replaced in connection with the
upgrade. As part of this transaction, the Partnership's displaced cellular
equipment was transferred to the managing general partner at its fair market
value of $525,000.
F-56
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Oklahoma General Corporation Act under which the Company
is incorporated, Article Eleven of the Company's Amended and Restate Certificate
of Incorporation provides for indemnification of the Company's officers and
directors against expenses, including attorney's fees, (a) incurred in
connection with any action, suit or proceeding brought by reason of his being or
having been a director, officer, employee or agent of the Company, or of any
other corporation, partnership, joint venture, or other enterprise at the
request of the Company, other than an action by or in the right o the Company,
provided that he acted in good faith and in a manner he reasonably believed to
be in the best interest of the Company, and with respect to any criminal action,
he had no reasonable cause to believe that his conduct was unlawful and (b)
actually and reasonably incurred in connection with the defense or settlement of
any action or suit by or in the right of the Company brought by reason of his
being or having been a director, officer, employee or agent of the Company, or
any other corporation, partnership, joint venture, or other enterprise at the
request of the Company, provided that he acted in good faith and in a manner he
reasonably believed to be in the best interest of the Company, and provided
further that he shall not have been adjudged liable, unless and to the extent
that the court in which such action was decided has determined that the person
is fairly and reasonably entitled to indemnification. The Company's bylaws
provide for similar indemnification. These provisions may be sufficiently broad
to indemnify such persons for liabilities arising under the Securities Act of
1933, as amended.
The Company's directors and officers are also insured against claims arising
out of the performance of their duties in such capacities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Reorganization dated February 24, 1997 by and between Dobson CC Limited
Partnership, Fleet Venture Resources, Inc., Fleet Equity Partners VI, L.P., Kennedy Plaza
Partners, Dobson Telephone Company, Inc., Russell L. Dobson, the Shareholders of Registrant,
Registrant and Dobson Holdings Corporation
3.1 Registrant's Amended and Restated Certificate of Incorporation
3.2* Registrant's Bylaws
4.1 Second Amended and Restated Credit Agreement dated February 28, 1997 among CoreStates Bank, N.A.,
First Union National Bank of North Carolina, Nationsbank of Texas, N.A. and the additional banks
listed therein and Registrant
4.2 Telephone Loan Contract dated as of November 7, 1958 between Dobson Telephone Company, Inc. and
United States of America
4.3 Telephone Loan Contract dated as of March 19, 1956 between McLoud Telephone Company and United
States of America
4.4 Telephone Loan Contract Amendment dated as of January 15, 1993 between Dobson Telephone Company,
Inc., Rural Telephone Bank and United States of America.
4.5 Restated Mortgage, Security Agreement and Financing Statement dated as of May 15, 1993 made by and
among Dobson Telephone Company and United States of America
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
4.6 Indenture dated as of February 28, 1997 between the Registrant, as Issuer, and United States Trust
Company of New York, as Trustee
4.7 Form of 11 3/4% Senior Notes due 2007 (included in Exhibit 4.6)
4.8 Registration Rights Agreement dated February 25, 1997 between the Registrant and Morgan Stanley &
Co. Incorporated, Alex. Brown & Sons Incorporated, First Union Capital Markets Corp. and
NationsBanc Capital Markets, Inc.
4.9 Escrow and Security Agreement dated February 28, 1997 among the Registrant, as Pledgor, and Morgan
Stanley & Co. Incorporated, Alex. Brown & Sons Incorporated, First Union Capital Markets Corp.
and NationsBanc Capital Markets, Inc., as Placement Agents, and United States Trust Company of
New York, as Trustee
5* Opinion of McAfee & Taft A Professional Corporation
10.1* Registrant's 1996 Stock Option Plan
10.2.1 Promissory Note dated February 10, 1997 of G. Edward Evans in the amount of $300,000 in favor of
the Registrant
10.2.2 Promissory Note dated March 19, 1996 of Everett R. Dobson in the amount of $1,400,000 in favor of
the Registrant
10.2.3 Promissory Note dated December 15, 1996 of Russell L. Dobson in the amount of $290,591.85 in favor
of the Registrant
10.2.4 Promissory Note dated December 31, 1996 of Russell L. Dobson in the amount of $12,908 in favor of
the Registrant
10.2.5 Promissory Note dated November 13, 1996 of Russell L. Dobson in the amount of $112,592.97 in favor
of the Registrant
10.2.6 Promissory Note dated December 31, 1996 of Everett R. Dobson in the amount of $339,884.26 in favor
of the Registrant
10.2.7 Lease Agreement dated July 17, 1995 between WillRuss Limited Liability Company and Western
Financial Services Corp.
10.3.1 Letter dated December 26, 1996 from Registrant to G. Edward Evans describing employment arrangement
10.3.2 Letter dated June 3, 1996 from Registrant to Bruce Knooihuizen describing employment arrangement
10.3.3 Letter dated October 15, 1996 from Fleet Equity Partners to Justin Jaschke regarding directors
compensation
10.4.1 Agreement for DS-3 service between Dobson Fiber Company and NTS Communications, Inc. dated December
16, 1993
10.4.2 North American Cellular Network Services Agreement dated August 26, 1992 by and between North
American Cellular Network, Inc. and Dobson Cellular, Inc.
10.4.3 Trademark Sublicense Agreement dated February 28, 1997 between WMC Partners L.P. and Dobson
Cellular of Arizona, Inc. and Registrant
10.4.4 Affiliation Agreement dated February 28, 1997 by and between Registrant and Dobson Cellular of
Arizona, Inc. and WMC Partners L.P.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
10.4.5 Form of Cellular One License Agreement between Cellular One Group and Dobson Cellular of Enid,
Inc., and Dobson Cellular of Woodward, Inc., and Dobson Cellular of Kansas, Inc.
10.5.1 Asset Purchase Agreement dated as of November 19, 1996 among Horizon Cellular Telephone Company of
Hagerstown L.P., Cumberland Cellular Partnership and Dobson Cellular of Maryland, Inc., and
Dobson Communications Corporation as amended by Amendment No. 1 to Asset Purchase Agreement
effective as of January 17, 1997, Amendment No. 2 to Asset Purchase Agreement dated February 6,
1997
10.5.2 Asset Purchase Agreement dated September 25, 1996 among Maryland Wireless Communications L.P.,
Wendy C. Coleman, Dobson Cellular of Maryland, Inc. and Dobson Communications Corporation.
10.5.3 Purchase Agreement dated February 28, 1997 among Aztel, Inc., Gila River Communications, Inc., US
West, New Vector Group, Inc., Tohono Oldham Utility Authority and Dobson Cellular of Arizona,
Inc.
10.6.1 Securities Purchase Agreement by and among Fleet Venture Resources, Inc., Fleet Equity Partners VI,
L.P., Kennedy Plaza Partners and Registrant as of dated March 19, 1996
10.6.2 Amendment No. 1 to the Securities Purchase Agreement dated as of February 26, 1997 between
Registrant, Dobson Operating Company, Fleet Equity Partners VI, L.P., Fleet Venture Resources,
Inc., and Kennedy Plaza Partners
10.6.3 Shareholders' Agreement dated as of February 26, 1997 between the Registrant and its shareholders
10.6.4 Option Agreement dated as of March 19, 1996 among Registrant, Kennedy Plaza Partners, Fleet Venture
Resources, Inc. and Fleet Equity Partners VI, L.P.
12 Statement Re Computation of Ratios
21 Subsidiaries
23.1 Consent of Arthur Andersen LLP, independent public accountants, with respect to Dobson
Communications Corporation
23.2 Consent of Arthur Andersen LLP, independent public accountants, with respect to Kansas RSA #5,
Inc., USCOC of Missouri RSA #1, Inc., USCOC of Missouri RSA #4, Inc. and Missouri RSA No. 2, a
division USCOC of Missouri #5, Inc.
23.3 Consent of Arthur Andersen LLP, independent public accountants, with respect to Gila River Cellular
General Partnership
23.4 Consent of Ernst & Young LLP, independent auditors with respect to Maryland RSA 2
23.5 Consent of Ernst & Young LLP, independent auditors with respect to the cellular telephone business
of selected systems of Horizon Cellular Telephone Company, L.P.
23.6 Consent of McAfee & Taft A Professional Corporation (included as part of its opinion filed as
Exhibit 5.1)
24 Power of Attorney
25 Statement of Eligibility of Trustee on Form T-1
27 Financial Data Schedule
99.1 Form of Letter of Transmittal for 11 3/4% Senior Notes due 2007
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
99.2 Form of Notice of Guaranteed Delivery for 11 3/4% Senior Notes due 2007
99.3* Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
</TABLE>
- ------------------------
* To be filed by amendment
(b) Financial Statement Schedules
None.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To include any prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement;
(iii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement;
(iv) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that for purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
<PAGE>
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registration pursuant to the provisions described under Item 20, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnifications against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of Section 310 of the Trust Indenture Act (the "Act") in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma, on the 21st day of March, 1997.
DOBSON COMMUNICATIONS CORPORATION
By: /s/ EVERETT R. DOBSON
-----------------------------------------
Everett R. Dobson
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on the 21st day of March, 1997.
<TABLE>
<CAPTION>
NAME TITLE
- ------------------------------------------------------ --------------------------------------
<C> <S> <C>
/s/ EVERETT R. DOBSON Chairman of the Board, President and
------------------------------------------- Chief Executive Officer (Principal
Everett R. Dobson Executive Officer)
/s/ STEPHEN T. DOBSON
------------------------------------------- Treasurer, Secretary and Director
Stephen T. Dobson
/s/ BRUCE R. KNOOIHUIZEN Vice President and Chief Financial
------------------------------------------- Officer (Principal Financial
Bruce R. Knooihuizen Officer)
/s/ TRENTON W. LEFORCE
------------------------------------------- Controller (Principal Accounting
Trenton W. LeForce Officer)
/s/ RUSSELL L. DOBSON
------------------------------------------- Director
Russell L. Dobson
/s/ JUSTIN L. JASCHKE
------------------------------------------- Director
Justin L. Jaschke
/s/ THADEUS J. MOCARSKI
------------------------------------------- Director
Thadeus J. Mocarski
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION
- ----------- -------------------------------------------------------------------------------------
<C> <S> <C>
2.1 Agreement and Plan of Reorganization dated February 24, 1997 by and between Dobson CC
Limited Partnership, Fleet Venture Resources, Inc., Fleet Equity Partners VI, L.P.,
Kennedy Plaza Partners, Dobson Telephone Company, Inc., Russell L. Dobson, the
Shareholders of Registrant, Registrant and Dobson Holdings Corporation
3.1 Registrant's Amended and Restated Certificate of Incorporation
3.2* Registrant's Bylaws
4.1 Second Amended and Restated Credit Agreement dated February 28, 1997 among CoreStates
Bank, N.A., First Union National Bank of North Carolina, Nationsbank of Texas, N.A.
and the additional banks listed therein and Registrant
4.2 Telephone Loan Contract dated as of November 7, 1958 between Dobson Telephone
Company, Inc. and United States of America
4.3 Telephone Loan Contract dated as of March 19, 1956 between McLoud Telephone Company
and United States of America
4.4 Telephone Loan Contract Amendment dated as of January 15, 1993 between Dobson
Telephone Company, Inc., Rural Telephone Bank and United States of America.
4.5 Restated Mortgage, Security Agreement and Financing Statement dated as of May 15,
1993 made by and among Dobson Telephone Company and United States of America
4.6 Indenture dated as of February 28, 1997 between the Registrant, as Issuer, and United
States Trust Company of New York, as Trustee
4.7 Form of 11 3/4% Senior Notes due 2007 (included in Exhibit 4.6)
4.8 Registration Rights Agreement dated February 25, 1997 between the Registrant and
Morgan Stanley & Co. Incorporated, Alex. Brown & Sons Incorporated, First Union
Capital Markets Corp. and NationsBanc Capital Markets, Inc.
4.9 Escrow and Security Agreement dated February 28, 1997 among the Registrant, as
Pledgor, and Morgan Stanley & Co. Incorporated, Alex. Brown & Sons Incorporated,
First Union Capital Markets Corp. and NationsBanc Capital Markets, Inc., as
Placement Agents, and United States Trust Company of New York, as Trustee
5* Opinion of McAfee & Taft A Professional Corporation
10.1* Registrant's 1996 Stock Option Plan
10.2.1 Promissory Note dated February 10, 1997 of G. Edward Evans in the amount of $300,000
in favor of the Registrant
10.2.2 Promissory Note dated March 19, 1996 of Everett R. Dobson in the amount of $1,400,000
in favor of the Registrant
10.2.3 Promissory Note dated December 15, 1996 of Russell L. Dobson in the amount of
$290,591.85 in favor of the Registrant
10.2.4 Promissory Note dated December 31, 1996 of Russell L. Dobson in the amount of $12,908
in favor of the Registrant
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION
- ----------- -------------------------------------------------------------------------------------
10.2.5 Promissory Note dated November 13, 1996 of Russell L. Dobson in the amount of
$112,592.97 in favor of the Registrant
<C> <S> <C>
10.2.6 Promissory Note dated December 31, 1996 of Everett R. Dobson in the amount of
$339,884.26 in favor of the Registrant
10.2.7 Lease Agreement dated July 17, 1995 between WillRuss Limited Liability Company and
Western Financial Services Corp.
10.3.1 Letter dated December 26, 1996 from Registrant to G. Edward Evans describing
employment arrangement
10.3.2 Letter dated June 3, 1996 from Registrant to Bruce Knooihuizen describing employment
arrangement
10.3.3 Letter dated October 15, 1996 from Fleet Equity Partners to Justin Jaschke regarding
directors compensation
10.4.1 Agreement for DS-3 service between Dobson Fiber Company and NTS Communications, Inc.
dated December 16, 1993
10.4.2 North American Cellular Network Services Agreement dated August 26, 1992 by and
between North American Cellular Network, Inc. and Dobson Cellular, Inc.
10.4.3 Trademark Sublicense Agreement dated February 28, 1997 between WMC Partners L.P. and
Dobson Cellular of Arizona, Inc. and Registrant
10.4.4 Affiliation Agreement dated February 28, 1997 by and between Registrant and Dobson
Cellular of Arizona, Inc. and WMC Partners L.P.
10.4.5 Form of Cellular One License Agreement between Cellular One Group and Dobson Cellular
of Enid, Inc., and Dobson Cellular of Woodward, Inc., and Dobson Cellular of
Kansas, Inc.
10.5.1 Asset Purchase Agreement dated as of November 19, 1996 among Horizon Cellular
Telephone Company of Hagerstown L.P., Cumberland Cellular Partnership and Dobson
Cellular of Maryland, Inc., and Dobson Communications Corporation as amended by
Amendment No. 1 to Asset Purchase Agreement effective as of January 17, 1997,
Amendment No. 2 to Asset Purchase Agreement dated February 6, 1997
10.5.2 Asset Purchase Agreement dated September 25, 1996 among Maryland Wireless
Communications L.P., Wendy C. Coleman, Dobson Cellular of Maryland, Inc. and Dobson
Communications Corporation.
10.5.3 Purchase Agreement dated February 28, 1997 among Aztel, Inc., Gila River
Communications, Inc., US West, New Vector Group, Inc., Tohono Oldham Utility
Authority and Dobson Cellular of Arizona, Inc.
10.6.1 Securities Purchase Agreement by and among Fleet Venture Resources, Inc., Fleet
Equity Partners VI, L.P., Kennedy Plaza Partners and Registrant as of dated March
19, 1996
10.6.2 Amendment No. 1 to the Securities Purchase Agreement dated as of February 26, 1997
between Registrant, Dobson Operating Company, Fleet Equity Partners VI, L.P., Fleet
Venture Resources, Inc., and Kennedy Plaza Partners
10.6.3 Shareholders' Agreement dated as of February 26, 1997 between the Registrant and its
shareholders
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION
- ----------- -------------------------------------------------------------------------------------
10.6.4 Option Agreement dated as of March 19, 1996 among Registrant, Kennedy Plaza Partners,
Fleet Venture Resources, Inc. and Fleet Equity Partners VI, L.P.
<C> <S> <C>
12 Statement Re Computation of Ratios
21 Subsidiaries
23.1 Consent of Arthur Andersen LLP, independent public accountants, with respect to
Dobson Communications Corporation
23.2 Consent of Arthur Andersen LLP, independent public accountants, with respect to
Kansas RSA #5, Inc., USCOC of Missouri RSA #1, Inc., USCOC of Missouri RSA #4, Inc.
and Missouri RSA No. 2, a division USCOC of Missouri #5, Inc.
23.3 Consent of Arthur Andersen LLP, independent public accountants, with respect to Gila
River Cellular General Partnership
23.4 Consent of Ernst & Young LLP, independent auditors with respect to Maryland RSA 2
23.5 Consent of Ernst & Young LLP, independent auditors with respect to the cellular
telephone business of selected systems of Horizon Cellular Telephone Company, L.P.
23.6 Consent of McAfee & Taft A Professional Corporation (included as part of its opinion
filed as Exhibit 5.1)
24 Power of Attorney
25 Statement of Eligibility of Trustee on Form T-1
27 Financial Data Schedule
99.1 Form of Letter of Transmittal for 11 3/4% Senior Notes due 2007
99.2 Form of Notice of Guaranteed Delivery for 11 3/4% Senior Notes due 2007
99.3* Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9
</TABLE>
- ------------------------
* To be filed by amendment
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (herein "Agreement") is made on
the 24th day of February, 1997 by and between DOBSON CC LIMITED PARTNERSHIP, an
Oklahoma limited partnership, FLEET VENTURE RESOURCES, INC., a Rhode Island
corporation, FLEET EQUITY PARTNERS VI, L.P., a Delaware limited partnership,
KENNEDY PLAZA PARTNERS, a Rhode Island general partnership, DOBSON TELEPHONE
COMPANY, INC., an Oklahoma corporation, and RUSSELL L. DOBSON, an individual,
all of the Shareholders of Dobson Communications Corporation (herein
"Shareholders"), DOBSON COMMUNICATIONS CORPORATION, an Oklahoma corporation,
(herein "Dobson Communications"), and DOBSON HOLDINGS CORPORATION, an Oklahoma
corporation (herein "Dobson Holdings").
PLAN OF REORGANIZATION
Under its current organization, Dobson Communications functions as the
parent company of multiple subsidiary operations which conduct various business
operations. The current organizational structure is set out as Exhibit "A" to
this Agreement.
In addition, Dobson Telephone Company, Inc. (herein "Dobson Telephone"), a
subsidiary of Dobson Communications, owns non-voting common stock in Dobson
Communications.
In order to carry on its expanding business operations in an efficient
manner and to enhance its financing opportunities, the Shareholders of Dobson
Communications agree to this Plan of Reorganization set forth herein.
Dobson Holdings is a new corporation which has been formed under the
Oklahoma General Corporation Act (the "Act").
Under the proposed reorganization, Dobson Holdings shall acquire all of
the outstanding Class A Common Stock, Class C Non-Voting Common Stock and Class
B Convertible Preferred Stock of Dobson Communications. In exchange, the
holders of the Class A Common Stock and Class B Convertible Preferred Stock of
Dobson Communications shall receive equivalent shares of stock of Dobson
Holdings. The holders of the Class C Non-Voting Common Stock of Dobson
Communications shall receive 100,000 shares of Class A Preferred Stock of Dobson
Holdings. In addition, Dobson Holdings shall assume all outstanding options to
purchase shares of Class B
<PAGE>
Non-Voting Common Stock of Dobson Communications. As a result, Dobson
Holdings will be the parent company of Dobson Communications.
For financing purposes, it is necessary to separate certain of the
subsidiaries from the other subsidiaries (herein "Other Subsidiaries"). To do
this, the stock of the Other Subsidiaries will be distributed to Dobson
Holdings, so that Dobson Communications shall be the holding company for only
those remaining subsidiaries not transferred under this Agreement. The Other
Subsidiaries referenced herein are set forth at paragraph 3A of this Agreement.
For practical reasons, Dobson Communications will change its corporate name
to Dobson Operating Company and Dobson Holdings will change its corporate name
to Dobson Communications Corporation. The final structure of the proposed
reorganized reorganization is set forth as Exhibit "B" to this Agreement.
The commencement of business in the reorganized organizational form will
take place at the close of business, February ___, 1997 (called "Effective
Date"). The changes in the corporate structure are to be accomplished at
various times prior to the Effective Date.
AGREEMENT AMONG THE PARTIES
In order to consummate the above Plan of Reorganization and in
consideration of the mutual benefits to be derived and the mutual agreements
contained, the Shareholders, Dobson Communications and Dobson Holdings approve
and adopt this Agreement and Plan of Reorganization and mutually covenant with
each other as follows:
1. SHARES TO BE TRANSFERRED AND SHARES TO BE ISSUED.
A. The share exchange is to take place on February ___, 1997 (called
"Closing Date") at 4:30 p.m. CST in the offices of Dobson
Communications in Oklahoma City, Oklahoma.
B. On the Closing Date, the Shareholders shall transfer to Dobson
Holdings, Certificates for the number of shares of Dobson
Communications stock described below, which in the
AGREEMENT AND PLAN OF REORGANIZATION
PAGE 2
<PAGE>
aggregate shall represent all of the outstanding Class A Common Stock,
Class C Non-Voting Common Stock and Class B Preferred Stock of Dobson
Communications Corporation. The certificates shall be duly endorsed
in blank by the Shareholders.
(1) Dobson CC Limited Partnership
469,998 shares,
Class A Common Stock, $1.00 par value;
(2) Russell L. Dobson
3,154 shares,
Class A Common Stock, $1.00 par value;
(3) Fleet Equity Partners VI, L.P. ("FEPVI")
29,762 shares,
Class B Convertible Preferred Stock, $1.00 par value;
(4) Fleet Venture Resources, Inc. ("FVR")
69,446 shares,
Class B Convertible Preferred Stock, $1.00 par value;
(5) Kennedy Plaza Partners ("KPP")
792 shares,
Class B Convertible Preferred Stock, $1.00 par value;
(6) Dobson Telephone Company, Inc.
470,020 shares,
Class C Non-Voting Common Stock, $1.00 par value.
C. In exchange for stock of Dobson Communications being transferred to it
pursuant to the preceding paragraph, Dobson Holdings shall, on the
Closing Date and contemporaneously with the transfer of the stock to
it, issue and deliver to such Shareholders the number of shares of
Dobson Holdings specified and described below.
(1) Dobson CC Limited Partnership
469,998 shares,
AGREEMENT AND PLAN OF REORGANIZATION
PAGE 3
<PAGE>
Class A Common Stock, $1.00 par value;
(2) Russell L. Dobson
3,154 shares,
Class A Common Stock, $1.00 par value;
(3) Fleet Equity Partners VI, L.P. ("FEPVI")
29,762 shares,
Class B Convertible Preferred Stock, $1.00 par value;
(4) Fleet Venture Resources, Inc. ("FVR")
69,446 shares,
Class B Convertible Preferred Stock, $1.00 par value;
(5) Kennedy Plaza Partners ("KPP")
792 shares,
Class B Convertible Preferred Stock, $1.00 par value;
(6) Dobson Telephone Company, Inc.
100,000 shares,
Class A 5% Non-Cumulative, Non-Voting, Non-Convertible Preferred
Stock, $1.00 par value.
D. In addition, Dobson Holdings shall assume the following options to
purchase the prescribed shares of Class B Non-Voting Common Stock of
Dobson Communications:
(1) Justin Jaschke
833 shares,
Class B Non-Voting Common Stock;
(2) G. Edward Evans
6033 shares,
Class B Non-Voting Common Stock;
(3) Bruce Knooihuizen
7541 shares,
Class B Non-Voting Common Stock.
AGREEMENT AND PLAN OF REORGANIZATION
PAGE 4
<PAGE>
2. CORPORATE ORGANIZATION OF THE COMPANY.
A. Dobson Holdings is to be formed for the purposes of carrying out this
share exchange and Plan of Reorganization. Dobson Holdings has been
formed and is to maintain its Certificate of Incorporation in a form
to provide that the nature of the business or purposes to be conducted
or promoted is for the corporation to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Act of Oklahoma.
B. The Bylaws to be adopted by Dobson Holdings are to be substantially
the same as those presently in effect for Dobson Communications.
C. The Certificate of Designations, Preferences and Relative and Other
Special Rights, and Qualifications, Limitations and Restrictions of
Class B Convertible Preferred Stock to be filed with the Oklahoma
Secretary State by Dobson Holdings is to be substantially the same as
the one filed by Dobson Communications, less the "Make-Whole"
provisions.
D. The original directors of Dobson Holdings will be the same directors
presently serving as directors of Dobson Communications.
E. The initial officers of Dobson Holdings will be the same or
substantially the same as those presently serving as officers of
Dobson Communications.
F. The Parties to this Agreement shall enter into a Shareholders'
Agreement in the form as attached hereto, and Dobson Holdings and
Dobson Communications will amend the Securities Purchase Agreement in
the form as attached hereto.
G. Upon completion of the reorganization and in recognition of assumption
by Dobson Communications of the Trust Loans as defined in that certain
Shareholders' Agreement dated March 19, 1996, among Dobson
Communications, FEPVI, FVR and KPP, and to satisfy the Make-Whole
provisions of the
AGREEMENT AND PLAN OF REORGANIZATION
PAGE 5
<PAGE>
same Shareholders' Agreement, FEPVI, FVR and KPP will be issued
100,000 shares of Class C 8% Cumulative, Non-Voting, Non-Convertible
Preferred Stock of Dobson Holdings, with the rights and preferences
as set forth in Exhibit "C".
H. The Certificate of Designations, Preferences and Relative and Other
Special Rights, and Qualifications, Limitations and Restrictions of
Class A 5% Non-Cumulative, Non-Voting, Non-Convertible Preferred Stock
to be filed with the Oklahoma Secretary State by Dobson Holdings is
to be in the form attached hereto as Exhibit "D".
3. REALIGNMENT OF PRESENT SUBSIDIARIES
A. The Other Subsidiaries of Dobson Communications will become
subsidiaries of Dobson Holdings based upon a transfer to Dobson
Holdings of all the outstanding stock of such subsidiaries owned by
Dobson Communications on the Effective Date. The following list of
subsidiaries will become subsidiaries of Dobson Holdings:
(1) Logix Communications Corporation;
(2) Dobson Wireless, Inc.;
(3) DCC PCS, Inc.;
(4) Western Financial Services Corp.;
(5) Dobson Network Management, Inc.;
(6) Call Center and Client Outreach Services, Inc.;
(7) Dobson Fiber/Forte of Colorado, Inc.;
(8) Dobson Wireless Cable, Inc.
4. CHANGE OF CORPORATE NAMES AND OTHER MATTERS.
A. The officers, directors and shareholders of Dobson Communications
shall take the necessary steps to change the corporate name of Dobson
Communications Corporation to Dobson Operating Company.
B. The officers and directors of Dobson Holdings shall take the necessary
steps to change the corporate name of Dobson Holdings Corporation to
Dobson Communications Corporation.
AGREEMENT AND PLAN OF REORGANIZATION
PAGE 6
<PAGE>
C. Upon completion of the reorganization, all outstanding shares of
capital stock of Dobson Operating Company (except 100 shares of Class
A Common Stock) shall be surrendered and canceled.
D. The changes in corporate structure and other matters contained herein
may take place in a different sequence than set forth in this
Agreement. Such changes in sequence shall not have any effect on the
overall objectives of this Agreement.
5. MAINTENANCE OF BUSINESS OPERATIONS.
After the reorganization is effective, the officers and directors of Dobson
Holdings, Dobson Communications, and all subsidiaries will cause the business
entities to:
A. Carry on their businesses in substantially the same manner as they
have previously and not introduce material new methods of management,
operation or accounting;
B. Maintain their properties and facilities in good working order and
condition;
C. Perform all their material obligations under agreements relating to or
affecting their assets, properties and rights;
D. Keep in full force and effect present insurance policies and other
comparable insurance coverage and add such coverage for Dobson
Holdings as needed;
E. Keep in full force and effect the current pension plan and other
employee benefit plans; and
F. Use their best efforts to maintain and preserve the current business
organizations, retain the present employees and maintain the
relationship with suppliers, customers and others having business
relations with Dobson Holdings and its subsidiaries.
AGREEMENT AND PLAN OF REORGANIZATION
PAGE 7
<PAGE>
6. VOLUNTARY SHARE EXCHANGE.
The Shareholders agree and are informed that this transaction by which
Dobson Holdings is to acquire the outstanding Class A Common Stock, Class B Non-
Voting Common Stock (per the outstanding options), Class C Non-Voting Common
Stock and Class B Preferred Stock of Dobson Communications Corporation is
through a voluntary share exchange as permitted under the provisions Section
Section 1090.1 (F) of the Act and the parties agree and intend that all other
provisions of Section Section 1090.1 of the Act do not apply to this transaction
which is intended to and constitutes a voluntary share exchange.
7. FEDERAL COMMUNICATIONS COMMISSION APPROVAL.
This Agreement shall be dependent upon any Federal Communications
Commission ("FCC") approval, as may be required, of the acts set forth herein.
8. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument. It shall not be
necessary that any single counterpart hereof be executed by all parties hereto
so long as at least one counterpart is executed by each party.
9. ENTIRE AGREEMENT.
This Agreement (including the Exhibits thereto) constitutes the entire
agreement and understanding between the parties and supersedes any prior
agreement and understanding relating to the subject matter of this Agreement.
This Agreement may be modified or amended only by a duly authorized written
instrument executed by all parties.
10. BINDING EFFECT.
AGREEMENT AND PLAN OF REORGANIZATION
PAGE 8
<PAGE>
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto, and successors and heirs and legal representatives of the
parties hereto.
This Agreement is executed as of the day and year first above stated.
AGREEMENT AND PLAN OF REORGANIZATION
PAGE 9
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
By: /s/ EVERETT R. DOBSON
------------------------------
Everett R. Dobson
President
DOBSON HOLDINGS CORPORATION
By: /s/ EVERETT R. DOBSON
------------------------------
Everett R. Dobson
President
SHAREHOLDERS:
DOBSON CC LIMITED PARTNERSHIP
By: /s/ EVERETT R. DOBSON
------------------------------
Everett R. Dobson
President
DOBSON TELEPHONE COMPANY, INC.
By: /s/ EVERETT R. DOBSON
------------------------------
Everett R. Dobson
President
By: /s/ RUSSELL L. DOBSON
------------------------------
RUSSELL L. DOBSON
AGREEMENT AND PLAN OF REORGANIZATION
PAGE 10
<PAGE>
FLEET VENTURE RESOURCES, INC.
By: /s/ THADEUS J. MOCARSKI
------------------------------
Thadeus J. Mocarski
Senior Vice President
FLEET EQUITY PARTNERS VI, L.P.
By: /s/ THADEUS J. MOCARSKI
------------------------------
Thadeus J. Mocarski
Senior Vice President
Fleet Growth Resources II, Inc.
General Partner
KENNEDY PLAZA PARTNERS
By: /s/ THADEUS J. MOCARSKI
------------------------------
Managing Partner
AGREEMENT AND PLAN OF REORGANIZATION
PAGE 11
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DOBSON COMMUNICATIONS CORPORATION
The undersigned, Everett R. Dobson and Stephen T. Dobson, certify that they
are the President and Secretary, respectively, of DOBSON COMMUNICATIONS
CORPORATION, a corporation organized and existing under the laws of the State of
Oklahoma (the "Corporation"), and do hereby further certify as follows:
1. The Corporation has not received any payment for any of its stock.
2. This Amended and Restated Certificate of Incorporation was duly
adopted in accordance with the provisions of Section 1076(B) and 1080 of the
General Corporation Act of Oklahoma (the "Act") by Consent to Action of the
Board of Directors Without a Meeting.
3. The text of the Certificate of Incorporation of the Corporation is
amended and restated to read in its entirety as follows:
FIRST: The name of the Corporation is Dobson Communications Corporation.
SECOND: The address of the Corporation's registered office in the State of
Oklahoma is 13439 North Broadway Extension, Oklahoma City, Oklahoma, 73114. The
name of the Corporation's registered agent at such address is Everett R. Dobson.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the general corporation
law of the State of Oklahoma. The Corporation is authorized to exercise and
enjoy all powers, rights, and privileges which corporations organized under the
Act may have as in force from time to time, including, without limitation, all
powers, rights and privileges necessary or convenient to carry out the purposes
of the Corporation.
FOURTH: CAPITAL STOCK.
<PAGE>
A. The total number of shares of capital stock which the Corporation has
authority to issue is one million three hundred thirty one thousand (1,331,000),
to be divided into two classes consisting of (i) one million thirty one thousand
(1,031,000) shares of Common Stock, of which one million (1,000,000) shares will
be Class A Common Stock, $1.00 par value per share ("Class A Common Stock") and
thirty-one thousand (31,000) shares will be Class B Non-Voting Common Stock,
$1.00 par value per share ("Class B Common Stock"), and (ii) three hundred
thousand (300,000) shares of Preferred Stock with a $1.00 par value per share.
B. Except as otherwise required by the Oklahoma General Corporation Act,
the holders of Class B Common Stock shall have no voting powers whatsoever, and
no holder of Class B Common Stock shall vote on or otherwise participate in any
proceedings in which actions shall be taken by the Corporation or the
shareholders thereof or be entitled to notification as to any meeting of the
Board of Directors of the shareholders.
C. The Board of Directors of the Corporation (the "Board") is expressly
authorized at any time, and from time to time, to provide for the issuance of
shares of Preferred Stock in one or more classes or series, with such voting
powers, full or limited, or without voting powers, and with such designations,
preferences and relative, participating, optional or other special rights, and
qualifications, expressed in the resolution or resolutions providing for the
issue thereof adopted by the Board, and as are not stated and expressed in this
Certificate of Incorporation, or any amendment thereto, including (but without
limiting the generality of the foregoing) the following:
(1) The designation of and number of shares constituting such class or
series;
(2) The dividend rate of such class or series, the conditions and dates
upon which such dividends shall be payable, the preference or relation
which such dividends shall bear to the dividends payable on any other
series of the same class or of any other class or series of any class of
capital stock and whether such dividends shall be cumulative or
noncumulative;
(3) Whether the shares of such class or series shall be subject to
redemption by the Corporation, and, if made subject
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<PAGE>
to such redemption, the times, prices, and other terms and conditions of
such redemption;
(4) The terms and amount of any sinking fund provided for the purchase or
redemption of the shares of such class or series;
(5) Whether or not the shares of such class or series shall be convertible
into or exchangeable for shares of any other class or of any other series
of any class or classes of capital stock of the Corporation, and if
provision be made for conversion or exchange, the times, prices, rates,
adjustments, and other terms and conditions of such conversion or exchange;
(6) Whether or not the shares of such class or series shall have voting
rights, in addition to the voting rights provided by law, and, if so, the
terms and conditions of such voting rights;
(7) The restrictions, if any, on the issue or reissue of any additional
Preferred Stock;
(8) The rights of the holders of the shares of such class or series upon
the dissolution of, or upon the distribution of assets of, the Corporation;
and
(9) Such other powers, preferences and relative, participating, optional
and other special rights, and the qualifications, limitations, and
restrictions thereof, as the board shall determine.
FIFTH: A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for damages for breach of fiduciary duty as a
director, except for personal liability for (i) acts or omissions by such
director not in good faith or which involve intentional misconduct or a knowing
violation of law; (ii) the payment of dividends or the redemption or purchase
of stock in violation of Section 1041 or Section 1052 of the Act; (iii) any
breach of such director's duty of loyalty to the Corporation or its
shareholders; or (iv) any transaction from which such director derived an
improper personal benefit.
3
<PAGE>
SIXTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized:
(a) To adopt, amend or repeal the Bylaws of the corporation; but the
powers of such directors in this regard shall at all times be subject to
the rights of the shareholders to alter or repeal such Bylaws at any
meeting of shareholders;
(b) To authorize and cause to be executed or granted mortgages,
security interests and liens upon the real and personal property of the
corporation;
(c) To set apart out of any of the funds of the corporation available
for dividends a reserve or reserves for any proper purpose and to abolish
any such reserve in the manner in which it was created;
(d) By a majority of the whole Board of Directors, to designate one
or more committees, each committee to consist of one (1) or more of the
directors of the corporation. The board may designate one (1) or more
directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. Any such
committee, to the extent provided in the resolution or in the Bylaws of the
corporation, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers
which may require it; provided, however, the Bylaws may provide that in the
absence or disqualification of any member of such committee or committees,
the member or members thereof present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in
the place of any such absent or disqualified member; and
(e) When and as authorized by the affirmative vote of the holders of
a majority of the stock issued and outstanding having voting power given at
a shareholders' meeting duly called upon such notice as is required by law,
or when authorized by the written consent of the holders of a majority
4
<PAGE>
of the voting stock issued and outstanding, to sell, lease or exchange all
or substantially all of the property and assets of the corporation,
including its goodwill and its corporate franchises, upon such terms and
conditions and for such consideration, which may consist in whole or in
part of other securities of, any other corporation or corporations, as its
Board of Directors shall deem expedient and for the best interests of the
corporation.
SEVENTH: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its shareholders or any class of them, any court of equitable
jurisdiction within the State of Oklahoma, on the application in a summary way
of this corporation or of any creditor or shareholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 1106 of Title 18 of the Oklahoma Statutes or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 1100 of Title 18 of the
Oklahoma Statutes order a meeting of the creditors or class of creditors, and/or
of the shareholders or class of shareholders of this corporation, as the case
may be, to be summoned in such manner as the court directs. If a majority in
number representing three-fourths (3/4ths) in value of the creditors or class of
creditors, and/or of the shareholders or class of shareholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the compromise or arrangement and the reorganization shall, if
sanctioned by the court to which the application has been made, be binding on
all the creditors or class of creditors and/or on all the shareholders or class
of shareholders of this corporation, as the case may be, and also this
corporation.
EIGHTH: Meetings of shareholders may be held within or without of the
State of Oklahoma, as the Bylaws may provide. The books of the corporation may
be kept (subject to applicable law) inside or outside the State of Oklahoma at
such place or places as may be designated from time to time by the Board of
Directors or in the Bylaws of the corporation. Elections of directors need not
be by written ballot unless the Bylaws of the corporation shall so provide.
5
<PAGE>
NINTH: To the extent permitted by law, no contract or transaction between
the corporation and one or more of its directors or officers, or between the
corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
officers or have a financial interest, shall be void or voidable solely for this
reason, or solely because the directors or officers are present at or
participate in the meeting of the board or committee thereof which authorized
the contract or transaction, or solely because the directors or officers or
their votes are counted for such purpose.
TENTH: INDEMNIFICATION.
A. The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, or other enterprise, against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in the best interest
of the Corporation and, with respect to any criminal action or proceeding, had
no reasonable cause to believe that his conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction or
upon a plea of nolo contendere or its equivalent shall not itself create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation and with respect to any criminal action or proceeding had reasonable
cause to believe that his conduct was unlawful.
B. The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
6
<PAGE>
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorney's fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the court in which
such action or suit was brought shall determine, upon application, that despite
the adjudication of liability, but in the view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper.
C. Expenses, including fees and expenses of counsel, incurred in defending
a civil, criminal, administrative or investigative action, suit or proceeding
may be paid by the Corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation as
authorized herein.
D. The Corporation may purchase (upon resolution duly adopted by the Board
of Directors) and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability.
E. To the extent that a director, officer, employee or agent of, or any
other person entitled to indemnity hereunder by, the Corporation has been
successful on the merits or otherwise in defense of any action, suit, or
proceeding referred to herein or in defense of any claim, issue or matter
therein, he shall be
7
<PAGE>
indemnified against expenses (including attorney's fees) actually and
reasonably incurred by him in connection therewith.
F. Every such person shall be entitled, without demand by him upon the
Corporation or any action by the Corporation, to enforce his right to such
indemnity in an action at law against the Corporation. The right of
indemnification and advancement of expenses hereinabove provided shall not be
deemed exclusive of any rights to which any such person may now or hereafter be
otherwise entitled and specifically, without limiting the generality of the
foregoing, shall not be deemed exclusive of any rights pursuant to statute or
otherwise, of any such person in any such action, suit or proceeding to have
assessed or allowed in his favor against the Corporation or otherwise, his costs
and expenses incurred therein or in connection therewith or any part thereof.
ELEVENTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Oklahoma, the Board of Directors is expressly
authorized to adopt, amend, repeal or rescind the Bylaws of the Corporation. In
addition, the Bylaws of the Corporation may be adopted, repealed, altered,
amended, or rescinded by the affirmative vote of the holders of a majority of
each class of the outstanding capital stock of the Corporation entitled to vote
thereon.
TWELFTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Amended and Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by law, and all rights
conferred upon the shareholders herein are granted subject to this reservation.
8
<PAGE>
By: /s/ EVERETT R. DOBSON
-------------------------------
Everett R. Dobson
President
Attest:
/S/ STEPHEN T. DOBSON
- -----------------------------------
Stephen T. Dobson
Secretary
9
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
(FORMERLY, DOBSON HOLDINGS CORPORATION)
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RELATIVE AND OTHER SPECIAL RIGHTS,
AND QUALIFICATIONS, LIMITATIONS, AND
RESTRICTIONS OF CLASS A PREFERRED STOCK
____________________________
Pursuant to Title 18, Section 1032(G) of the
General Corporation Act of the State of Oklahoma
____________________________
DOBSON COMMUNICATIONS CORPORATION (the "Corporation"), a corporation
organized and existing under the General Corporation Act of the State of
Oklahoma, does hereby certify that pursuant to the authority vested in the Board
of Directors of the Corporation by its Certificate of Incorporation, and
pursuant to the provisions of Title 18, Section 1032(G) of the General
Corporation Act of the State of Oklahoma, said Board of Directors, by unanimous
written consent, adopted the following resolution which remains in full force
and effect as of the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation (the "Board of Directors") by its Certificate of
Incorporation (hereinafter referred to as the "Certificate of Incorporation"),
the Board of Directors does hereby authorize and provide for the issuance of
Class A Preferred Stock, $1.00 par value per share, consisting of 100,000
shares, having the following designations, preferences and relative and other
special rights, qualifications, limitations and restrictions:
1. DESIGNATION. The designation of such class is "Class A 5% Non-
Cumulative, Non-Voting, Non-Convertible Preferred Stock" (hereinafter in this
Certificate of Designation called the "Class A Preferred Stock"), and the number
of shares constituting such class shall be 100,000, which number may not be
decreased or increased by the Board of Directors without a vote of stockholders.
All capitalized terms used in this Certificate of Designation and not otherwise
defined shall have the meaning given to such terms in Section 10 hereof.
<PAGE>
2. DIVIDENDS. (a) The holders of shares of Class A Preferred Stock
shall be entitled to receive, out of funds at the time legally available for the
payment of dividends in the State of Oklahoma, a non-cumulative dividend at the
rate of 5% of the Liquidation Value per annum per share, if and when declared
and paid by the Board of directors.
3. LIQUIDATION PREFERENCE. (a) In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, either voluntarily
or involuntarily, each holder of Class A Preferred Stock shall be entitled,
after provision for the payment of the Corporation's debts and other
liabilities, to be paid in cash, before any distribution is made on any Junior
Securities, the aggregate Liquidation Value of all shares of Class A Preferred
Stock held by such holder. If, upon any such liquidation, dissolution or other
winding up of the affairs of the Corporation, the net assets of the corporation
distributable among the holders of all outstanding shares of the Class A
Preferred Stock shall be insufficient to permit the payment in full to such
holders of the preferential amounts to which they are entitled under the
Certificate of Incorporation, then the entire net assets of the Corporation
remaining after the provision for the payment of the Corporation's debts and
other liabilities shall be distributed among the holders of the Class A
Preferred Stock ratably in proportion to the full amounts to which they would
otherwise be respectively entitled.
(b) Holders of Class A Preferred Stock shall not be entitled to any
additional distribution in the event of any liquidation, dissolution or winding
up of the affairs of the Corporation in excess of the preferential amount
referred to in Section 3(a) above.
(c) The assets available for distribution pursuant to the Section 3 shall
be determined by applicable law.
4. VOTING. Except as otherwise required by law, the holders of the Class
A Preferred Stock shall have no voting powers whatsoever, and no holder of Class
A Preferred Stock shall vote on or otherwise participate in any proceedings in
which actions shall be taken by the Corporation or the shareholders thereof or
be
11
<PAGE>
entitled to notification as to any meeting of the Board of Directors of the
shareholders.
5. CONVERSION RIGHTS. Except as otherwise required by law, the holders
of Class A Preferred Stock shall have no rights of conversion of the Class A
Preferred Stock into any other class of preferred or common stock.
6. REDEMPTION. (a) At any time, the Class A Preferred Stock may be
redeemed, in whole or in part, at the option of the Corporation by vote of its
Board of Directors, at any time or from time to time, at the Liquidation Value
thereof. In case of the redemption of a part of the outstanding Class A
Preferred Stock, such redemption shall be allocated among the holders of the
Class A Preferred Stock in proportion to each holders ownership.
(b) At least 30 days prior to the date fixed for redemption, a written
notice shall be provided to each holder of record of Class A Preferred Stock to
be redeemed. Such notice shall provide the date fixed for redemption, and call
upon such holder to surrender to the Corporation on such date fixed the
certificate or certificates representing the number of shares to be redeemed.
On the date fixed for redemption, each holder of Class A Preferred Stock to be
redeemed shall present and surrender the certificate or certificates
representing such shares to the Corporation. In case less than all of the
shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.
7. STATUS OF REACQUIRED SHARES. Shares of Class A Preferred Stock which
have been issued and reacquired in any manner shall have the status of
authorized and unissued shares of Class A Preferred Stock.
8. RANK. The Class A Preferred Stock shall rank senior upon liquidation,
dissolution or winding up to all Junior Securities, whenever issued.
9. CERTIFICATES. So long as any shares of the Class A Preferred Stock
are outstanding, there shall be set forth on the face or back of each stock
certificate issued by the Corporation a
12
<PAGE>
statement that the Corporation shall furnish without charge to each shareholder
who so requests, a full statement of the designation and relative rights,
preferences and limitations of each class of stock or series thereof that the
Corporation is authorized to issue and of the authority of the Board of
Directors to designate and fix the relative rights, preferences and limitations
of each series.
10. DEFINITIONS.
"Applicable Rate" means 5% per annum.
"Certificate of Designation" means this Certificate of Designations,
Preferences and Relative and Other Special Rights and Qualifications,
Limitations and Restrictions of the Class A Preferred Stock.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company.
"Class A Common Stock" means the Corporation's Class A Common Stock,
$1.00 par value per share.
"Class A Preferred Stock" means the Corporation's Class A 5% Non-
Cumulative Preferred Stock, $1.00 par value per share.
"Class B Common Stock" means the Corporation's Class B Common Stock,
$1.00 par value per share.
"Class B Preferred Stock" means the Corporation's Class B Preferred
Stock, $1.00 par value per share.
"Class C Preferred Stock" means the Corporation's Class C 8%
Cumulative, Non-Voting, Non-Convertible Preferred Stock, $1.00 par value per
share, as in effect the date hereof.
"Common Stock" means the Class A Common Stock and Class B Common
Stock.
13
<PAGE>
"Junior Securities" means any of the Corporation's Common Stock and
all other equity securities of the Corporation other than Class B Preferred
Stock and Class C Preferred Stock.
"Liquidation Value" of any share of Class A Preferred Stock shall be
seventy dollars per share. ($70.00).
"Person" means an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization and any government,
governmental department or agency or political subdivision thereof.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association, or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
general partner of such partnership, association or other business entity.
11. SEVERABILITY OF PROVISIONS. If any right, preference or
limitation of the Class A Preferred Stock set forth in this Resolution (as such
Resolution may be amended from time to time) is invalid, unlawful or incapable
of being enforced by reason of any rule, law or public policy, all other rights,
preferences and limitations set forth in this Resolution (as so amended) which
can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other right, preference or limitation unless so expressed
herein.
14
<PAGE>
15
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Everett Dobson, its President, and attested to by Stephen T. Dobson,
its Secretary this 25th day of February, 1997.
By: /s/ EVERETT R. DOBSON
-----------------------------------
Everett R. Dobson
President
ATTEST:
/s/ STEPHEN T. DOBSON
- -----------------------------------
Stephen T. Dobson
Secretary
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
(FORMERLY, DOBSON HOLDINGS CORPORATION)
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RELATIVE AND OTHER SPECIAL RIGHTS,
AND QUALIFICATIONS, LIMITATIONS, AND
RESTRICTIONS OF CLASS B CONVERTIBLE
PREFERRED STOCK
----------------------------
Pursuant to Title 18, Section 1032(G) of the
General Corporation Act of the State of Oklahoma
----------------------------
DOBSON COMMUNICATIONS CORPORATION (the "Corporation"), a corporation
organized and existing under the General Corporation Act of the State of
Oklahoma, does hereby certify that pursuant to the authority vested in the Board
of Directors of the Corporation by its Certificate of Incorporation, and
pursuant to the provisions of Title 18, Section 1032(G) of the General
Corporation Act of the State of Oklahoma, said Board of Directors, by unanimous
written consent, adopted the following resolution which remains in full force
and effect as of the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation (the "Board of Directors") by its Certificate of
Incorporation (hereinafter referred to as the "Certificate of Incorporation"),
the Board of Directors does hereby create, authorize and provide for the
issuance of Class B Convertible Preferred Stock, $1.00 par value per share,
consisting of 100,000 shares, having the following designations, preferences and
relative and other special rights, qualifications, limitations and restrictions:
1. DESIGNATION. The designation of such class is "Class B Convertible
Preferred Stock" (hereinafter in this Certificate of Designation called the
"Class B Preferred Stock"), and the number of shares constituting such class
shall be 100,000, which number may be decreased (but not increased) by the Board
of Directors without a vote of stockholders; PROVIDED, HOWEVER, that such number
may not be decreased below the number of then currently outstanding
<PAGE>
shares of Class B Preferred Stock and shares of Class B Preferred Stock
subject to outstanding rights and options, if any. All capitalized terms
used in this Certificate of Designation and not otherwise defined shall have
the meaning given to such terms in Section 9 hereof.
2. DIVIDENDS. (a) The holders of shares of Class B Preferred Stock,
in preference to the holders of the Junior Securities, shall be entitled to
receive, out of funds legally available for the purpose, cumulative dividends as
provided in this Section 2. Dividends on each share of Class B Preferred Stock
shall accrue on a daily basis at the Applicable Rate on the sum of (i) the
Liquidation Value and (ii) all accumulated and unpaid dividends thereon from the
date of issuance to the end of the immediately preceding calendar year and shall
be payable as provided in subparagraph (b) of this Section 2. Accrued but
unpaid dividends will be compounded annually on December 31 of each year (each a
"dividend date") (the initial such calculation to be made at the Applicable Rate
for the number of days elapsed from the date of issue of the Class B Preferred
Stock to and including the 31st day of December, 1997). Such dividends shall
commence to accrue on each share of Class B Preferred Stock from the date of
issuance thereof whether or not declared by the Board of Directors, and whether
or not there are profits, surplus or other funds of the Corporation legally
available for the payment of dividends, and shall continue to accrue thereon
until the date the Liquidation Value of such share (plus all accrued and unpaid
dividends thereon) is paid. For purposes of determining the amount of dividends
accrued on the Class B Preferred Stock pursuant to this Section 2 in connection
with the sale, redemption or repurchase of any Class B Preferred Stock which may
occur prior to December 31 of any year, the Applicable Rate for such period
shall be multiplied by a fraction, the numerator of which is the actual number
of days elapsed in the then current year and the denominator of which is 365.
(b) Subject to any applicable prohibition on the payment of dividends in
the Financing Agreement, dividends accrued on each outstanding share of Class B
Preferred Stock may be paid when, as and if declared by the Board of Directors.
Further, upon the earliest to occur of (i) the conversion of Class B Preferred
Stock into Class A Common Stock pursuant to Section 5 hereof, (ii) a voluntary
or involuntary liquidation, dissolution or winding up of
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the affairs of the Corporation, (iii) a merger or consolidation of the
Corporation into or with another corporation in which the shareholders of
this Corporation shall own less than 50% of the voting securities of the
surviving corporation or its parent, (iv) the sale, transfer or lease (but
not including a transfer or lease by pledge or mortgage to a bona fide
lender) of all or substantially all of the assets of the Corporation, and (v)
the consummation of a Public Offering of the Corporation's Common Stock, each
holder of Class B Preferred Stock shall be entitled to receive dividends on
each share of the Class B Preferred Stock then held by such holder (including
shares of Class B Preferred Stock to be converted to Common Stock effective
upon such Public Offering) in an amount equal to the accumulated and unpaid
dividends on such Class B Preferred Stock from the date of issuance to the
date of such payment (as used in this Section 2, the "Accrued Dividend").
The Accrued Dividend shall be paid in cash.
(c) Except as otherwise provided herein, if at any time the Corporation
pays less than the total amount of dividends then accrued with respect to the
Class B Preferred Stock, such payment shall be distributed ratably among the
holders thereof based upon the aggregate accrued but unpaid dividends on the
Class B Preferred Stock held by each holder.
(d) Except as otherwise may be specifically provided in this Certificate
of Designation, the Purchase Agreement or the Shareholders' Agreement, so long
as any shares of Class B Preferred Stock are outstanding, the Corporation will
not declare, pay or set apart for payment any dividends or make any other
distribution on or redeem any Junior Securities and will not permit any
Subsidiary or other Affiliate to redeem, purchase or otherwise acquire for
value, or set apart for any sinking or other analogous fund for the redemption
or purchase of, any Junior Securities.
3. LIQUIDATION PREFERENCE. (a) In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, either voluntarily
or involuntarily, each holder of Class B Preferred Stock shall be entitled,
after provision for the payment of the Corporation's debts and other
liabilities, to be paid in cash, before any distribution is made on any Junior
Securities (including, without limitation any other class of Preferred Stock),
the aggregate Liquidation Value of all shares of Class B Preferred Stock held by
such holder plus an amount equal to
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the sum of all accrued and unpaid dividends thereon, whether or not declared
to the date of such payment. If, upon any such liquidation, dissolution or
other winding up of the affairs of the Corporation, the net assets of the
corporation distributable among the holders of all outstanding shares of the
Class B Preferred Stock shall be insufficient to permit the payment in full
to such holders of the preferential amounts to which they are entitled under
the Certificate of Incorporation, then the entire net assets of the
Corporation remaining after the provision for the payment of the
Corporation's debts and other liabilities shall be distributed among the
holders of the Class B Preferred Stock ratably in proportion to the full
amounts to which they would otherwise be respectively entitled.
(b) Holders of Class B Preferred Stock shall not be entitled to any
additional distribution in the event of any liquidation, dissolution or winding
up of the affairs of the Corporation in excess of the preferential amount
referred to in Section 3(a) above.
(c) The assets available for distribution pursuant to this Section 3 shall
be determined by applicable law and prior to payment of any liquidation
preference the Corporation shall first satisfy its outstanding obligations
concerning rights, if any, of holders of Class B Preferred Stock which have been
exercised to have purchased, redeemed or otherwise retired any capital stock.
(d) The merger or consolidation of the Corporation into or with another
corporation in which the shareholders of this Corporation shall own less than
50% of the voting securities of the surviving corporation or its parent or the
sale, transfer or lease (but not including a transfer or lease by pledge or
mortgage to a bona fide lender) of all or substantially all of the assets of the
Corporation may be deemed by the holders of the Class B Preferred Stock to be a
liquidation, dissolution or winding up of the Corporation as those terms are
used in this Section 3. In the event of such merger, consolidation or sale of
substantially all of the Company's assets, the holders of shares of Class B
Preferred Stock shall have the right to preference in the merger or
consolidation or upon the distribution of assets as provided in this Section 3,
or alternatively at such holder's election, shall have the right to convert to
shares of Class A Common Stock and
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receive distribution of assets as holders of Class A Common Stock as provided
in Section 5 hereof.
(e) Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Corporation's assets to another
person or other transaction which is effected in such a manner that holders of
Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets (other than solely cash and/or publicly
traded securities) with respect to or in exchange for Common Stock is referred
to herein as an "Organic Change." Prior to the consummation of any Organic
Change, the Corporation shall make appropriate provisions (in form and substance
reasonably satisfactory to the holders of a majority of the Class B Preferred
Stock then outstanding voting separately) to ensure that each of the holders of
Class B Preferred Stock shall thereafter have the right to acquire and receive,
in lieu of or in addition to (as the case may be) the shares of Class A Common
Stock immediately theretofore acquirable and receivable upon the conversion of
such holder's Class B Preferred Stock, such shares of stock, securities or
assets as such holder would have received in connection with such Organic Change
if such holder had converted its Class B Preferred Stock into Class A Common
Stock immediately prior to the Organic Change or, if the Organic Change is to be
deemed a liquidation pursuant to subsection 3(d), the preference upon
distribution of assets as provided in this Section 3. In each such case, the
Corporation shall also make appropriate provisions (in form and substance
reasonably satisfactory to the holders of a majority of the Class B Preferred
Stock then outstanding) to ensure that the provisions of Section 5 hereof shall
thereafter be applicable to the Class B Preferred Stock and to the shares of
stock, securities or assets received by each holder upon such Organic Change
(including, in the case of any such consolidation, merger or sale in which the
successor entity or purchasing entity is other than the Corporation, an
immediate adjustment of the Conversion Price to the value for the Class A Common
Stock reflected by the terms of such consolidation, merger or sale, and a
corresponding immediate adjustment in the number of shares of Class A Common
Stock acquirable and receivable upon conversion of Class B Preferred Stock, if
the value so reflected is less than the Conversion Price in effect immediately
prior to such consolidation, merger or sale). The Corporation shall not effect
any such consolidation, merger or sale, unless prior to the consummation
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thereof the successor corporation (if other than the Corporation) resulting
from consolidation or merger or the corporation purchasing such assets
assumes by written instrument (in form and substance reasonably satisfactory
to the holders of a majority of the Class B Preferred Stock then outstanding
voting separately), the obligation to deliver to each such holder such shares
of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to acquire.
(f) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the Corporation shall within ten (10) days
after the date the Board of Directors approves such action, or twenty (20) days
prior to any shareholders' meeting called to approve such action, or twenty (20)
days after the commencement of an involuntary proceeding, whichever is earliest,
give each holder of shares of Class B Preferred Stock initial written notice of
the proposed action. Such initial written notice shall describe the material
terms and conditions of such proposed action, including a description of the
stock, cash and property to be received by the holders of shares of Class B
Preferred Stock upon consummation of the proposed action and the date of
delivery thereof. If any material change in the facts set forth in the initial
notice shall occur, the Corporation shall promptly give written notice to each
holder of shares of Class B Preferred Stock of such material change.
(g) The Corporation shall not consummate any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation before the expiration
of thirty (30) days after the mailing of the initial notice referred to in
subparagraph (f) above or ten (10) days after the mailing of any subsequent
written notice, whichever is later; provided, that any such 30-day or 10-day
period may be shortened upon the written consent of the holders of a majority of
the outstanding shares of the Class B Preferred Stock voting as a single class.
(h) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation which will involve the distribution of assets
other than cash, the Corporation shall promptly engage competent independent
appraisers to determine the value of the assets to be distributed to the holders
of shares of Class B Preferred Stock and the holders of shares of Common Stock
(it being understood that with respect to such valuation, the
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Corporation shall engage such appraiser as shall be approved by the holders
of a majority of shares of the Corporation's outstanding Common Stock and
Class B Preferred Stock voting separately). The Corporation shall, upon
receipt of such appraiser's valuation, give prompt written notice to each
holder of shares of Common Stock and Class B Preferred Stock of the
appraiser's valuation.
4. VOTING. (a) Except as otherwise required by law or as set forth
herein and subject to the rights of any class or series of preferred stock which
may from time to time come into existence hereafter, the shares of the Class B
Preferred Stock shall vote together with the shares of the Corporation's Class A
Common Stock at any annual or special meeting of shareholders of the
Corporation, or may act by written consent in the same manner as the
Corporation's Class A Common Stock, upon the following basis: each holder of
shares of Class B Preferred Stock shall be entitled to such number of votes for
the Class B Preferred Stock held by him on the record date fixed for such
meeting, or on the effective date of such written consent, as shall be equal to
the whole number of shares of the Corporation's Class A Common Stock into which
his shares of Class B Preferred Stock are convertible, in accordance with the
terms of Section 5 hereof, immediately after the close of business on the record
date fixed for such meeting or the effective date of such written consent.
(b) In the election of directors, two (2) directors shall be elected by
the holders of the Class B Preferred Stock voting as a separate class, subject
to compliance with any applicable provisions of the Shareholders' Agreement.
(c) As long as at least 50% of the shares of Class B Preferred Stock
purchased pursuant to the Purchase Agreement remain outstanding, the holders of
shares of Class B Preferred Stock also shall have the following voting rights:
(i) The affirmative vote of the holders of a majority of the outstanding
shares of Class B Preferred Stock, voting separately as a single class, in
person or by proxy, at a special or annual meeting of stockholders called
for the purpose, shall be necessary to (t) authorize or increase the
authorized number of shares of, or issue, any class or series of the
Corporation's capital stock ranking prior to, or on a parity with, the
Class B Preferred Stock, including shares of
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Class B Preferred Stock authorized pursuant to this Certificate of
Designation and issued after the date of original issuance of the Class
B Preferred Stock, or (u) amend, repeal or change, directly or
indirectly, any of the provisions of the Certificate of Incorporation of
the Corporation, as amended, in any manner which would alter or change
the powers, preferences or special rights of the shares of Class B
Preferred Stock so as to affect them adversely, or (v) authorize or
effect the sale of all or substantially all of the assets of the
Corporation, or (w) authorize or effect the merger or consolidation of
the Corporation with any other Person as the result of which the
shareholders of the Corporation shall own less than 50.1% of the voting
securities of the surviving corporation or its parent, or (x) authorize
or effect the liquidation (whether complete or partial), dissolution or
winding up of the Corporation, or (y) amend the Bylaws of the
Corporation to change the authorized number of directors, or (z) amend
this Section 4.
(ii) The rights of holders of shares of Class B Preferred Stock to vote or
take any other actions as provided in this Section 4 may be exercised at
any annual meeting of stockholders or at a special meeting of stockholders
held for such purpose. At each meeting of stockholders at which the
holders of shares of Class B Preferred Stock shall have the right, voting
separately as a single series, to take any action as provided in this
Section 4, the presence in person or by proxy of the holders of record of a
majority of the total number of shares of Class B Preferred Stock then
outstanding and entitled to vote on the matter shall be necessary and
sufficient to constitute a quorum. At any such meeting or at any
adjournment thereof, in the absence of a quorum of the holders of shares of
Class B Preferred Stock, a majority of the holders of such shares present
in person or by proxy shall have the power to adjourn the meeting as to the
actions to be taken by the holders of shares of Class B Preferred Stock
from time to time and place to place without notice other than announcement
at the meeting until a quorum shall be present.
5. CONVERSION RIGHTS.
(a) CONVERSION PROCEDURE.
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(i) At any time and from time to time, any holder of Class B
Preferred Stock may convert all or any portion of the Class B Preferred Stock
(including any fraction of a share) held by such holder into a number of shares
of Class A Common Stock equal to the product of (x) the number of shares of
Class B Preferred Stock to be converted into Class A Common Stock and (y) a
fraction the numerator of which is $100.00 and the denominator is the Conversion
Price then in effect.
(ii) Each conversion of Class B Preferred Stock shall be deemed to
have been effected as of the close of business on the date on which the
certificate or certificates representing the Class B Preferred Stock to be
converted have been surrendered at the principal office of the Corporation or at
such other place as may be designated by the Corporation. At such time as such
conversion has been effected, the rights of the holder of such Class B Preferred
Stock as such holder shall cease and the Person or Persons in whose name or
names any certificate or certificates for shares of Class A Common Stock are to
be issued upon such conversion shall be deemed to have become the holder or
holders of record of the shares of Class A Common Stock represented thereby.
(iii) The conversion rights of any share of Class B Preferred
Stock repurchased by the Corporation pursuant to the Shareholders' Agreement
shall terminate on the date the repurchase price for such share is paid in full.
(iv) Notwithstanding any other provision hereof, if a conversion of
shares is to be made in connection with a Public Offering, the conversion of
such shares may, at the election of the holder thereof, be conditioned upon the
consummation of the Public Offering, in which case such conversion shall not be
deemed to be effective until the consummation of the Public Offering.
(v) As soon as possible after a conversion has been effected (but
in any event within five business days in the case of subparagraph (y) below),
the Corporation shall deliver to the converting holder:
(y) a certificate or certificates representing, in the aggregate, the
number of shares of Class A Common Stock issuable by reason of such
conversion, in the same name or names as the certificates representing the
converted shares
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and in such denomination or denominations as the converting holder has
specified; and
(z) a certificate representing any shares which were represented by the
certificate or certificates delivered to the Corporation in connection with
such conversion but which were not converted.
(vi) The issuance of certificates of shares of Class A Common Stock
upon conversion of Class B Preferred Stock shall be made without charge to the
holders of such Class B Preferred Stock for any issuance tax in respect thereof
or other cost incurred by the Corporation in connection with such conversion and
the related issuance of shares of Class A Common Stock. Upon conversion of any
shares of Class B Preferred Stock, the Corporation shall take all such actions
as are necessary in order to ensure that the Class A Common Stock issuable with
respect to such conversion shall be validly issued, fully paid and
nonassessable.
(vii) The Corporation shall not close its books against the
transfer of Class B Preferred Stock or of Class A Common Stock issued or
issuable upon conversion of Class B Preferred Stock in any manner which
interferes with the timely conversion of Class B Preferred Stock. The
Corporation shall assist and cooperate with any holder of shares of Class B
Preferred Stock required to make any governmental filings or obtain any
governmental approval prior to or in connection with any conversion of shares of
Class B Preferred Stock hereunder (including, without limitation, making any
filings required to be made by the Corporation).
(viii) The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Class A Common Stock, solely for
the purpose of issuance upon the conversion of the Class B Preferred Stock,
such number of shares of Class A Common Stock as are issuable upon the
conversion of all outstanding Class B Preferred Stock. All shares of Class A
Common Stock which are so issuable shall, when issued, be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens and
charges. The Corporation shall take all such actions as may be necessary to
assure that all such shares of Class A Common Stock may be so issued without
violation of any applicable law or governmental regulation or any
requirements of any domestic
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securities exchange upon which shares of Class A Common Stock may be listed
(except for official notice of issuance which shall be immediately delivered
by the Corporation upon each such issuance).
(b) CONVERSION PRICE.
(i) The initial conversion price shall be $100.00, which may be
adjusted from time to time hereafter (the "Conversion Price"). If and whenever
on or after the original date of issuance of the Class B Preferred Stock the
Corporation issues or sells, or in accordance with Section 5(c) is deemed to
have issued or sold, any shares of its Common Stock or other capital stock
convertible into Common Stock (other than Permitted Issuances) for a
consideration per share less than the Conversion Price in effect immediately
prior to the time of such issue or sale, then forthwith upon such issue or sale
the Conversion Price shall be reduced to the Conversion Price determined by
dividing (a) the sum of (1) the product derived by multiplying the Conversion
Price in effect immediately prior to such issue or sale times the number of
shares of Common Stock Deemed Outstanding immediately prior to such issue or
sale, plus (2) the consideration, if any, received (or deemed received pursuant
to Section 5(c) below) by the Corporation upon such issue or sale, (b) the
number of shares of Common Stock Deemed Outstanding immediately after such issue
or sale. Notwithstanding the foregoing, if a Texas 2 Event occurs prior to
March 19, 1999, the then Conversion Price shall be adjusted to an amount equal
to 100.45% of the then Conversion Price.
(c) EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Conversion Price under Section 5(b), the following
shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation in any manner
grants any rights or options, other than Permitted Issuances, to subscribe
for or to purchase Common Stock or any stock or other securities
convertible into or exchangeable for Common Stock (such rights or options
being herein called "Options" and such convertible or exchangeable stock or
securities being herein called "CONVERTIBLE SECURITIES")and the price per
share for which Common Stock is issuable upon the exercise of such Options
or upon conversion or exchange of such Convertible Securities is less than
the conversion Price in effect immediately prior to the time of the
granting of
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such Options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or
exchange of the total maximum amount of such convertible Securities
shall be deemed to be outstanding and to have been issued and sold by
the corporation at the time of the granting of such Options for such
price per share. For purposes of this paragraph, the "PRICE PER SHARE
FOR WHICH COMMON STOCK IS ISSUABLE" shall be determined by dividing (a)
the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation
upon exercise of all such Options, plus in the case of such Options
which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
issuance or sale of such Convertible Securities and the conversion or
exchange thereof (such amount is the consideration "deemed received" for
purposes of Section 5(b) above), by (b) the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or
upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options. No further adjustment of
the Conversion Price shall be made when Convertible Securities are
actually issued upon the exercise of such Options or when Common Stock
is actually issued upon the exercise of such Options or the conversion
or exchange of such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation in any manner
issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon such conversion or exchange is less
than the Conversion Price in effect immediately prior to the time of such
issue or sale, then the maximum number of shares of Common Stock issuable
upon conversion or exchange of such Convertible Securities shall be deemed
to be outstanding and to have been issued and sold by the Corporation at
the time of the issuance or sale of such Convertible Securities for such
price per share. For the purposes of this paragraph, the "PRICE PER SHARE
FOR WHICH COMMON STOCK IS ISSUABLE" shall be determined by dividing (a) the
total amount received or receivable by the Corporation as consideration for
the issue or sale of such Convertible Securities, plus the minimum
aggregate amount of additional
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consideration, if any, payable to the Corporation upon the conversion or
exchange thereof (such amount is the consideration "deemed received" for
purposes of Section 5(b) above), by (b) the total maximum number of
shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities. No further adjustment of the Conversion
Price shall be made when Common Stock is actually issued upon the
conversion or exchange of such Convertible Securities, and if any such
issue or sale of such Convertible Securities is made upon exercise of
any Options for which adjustments of the Conversion Price had been or
are to be made pursuant to other provisions of this Section 5, no
further adjustment of the Conversion Price shall be made by reason of
such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION PRICE. If the purchase
price provided for in any Options, the additional consideration, if any,
payable upon the conversion or exchange of any Convertible Securities, or
the rate at which any Convertible Securities are convertible into or
exchangeable for Common Stock change at any time, the Conversion Price in
effect at the time of such change shall be readjusted to the Conversion
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or changed conversion rate, as the case may
be, at the time initially granted, issued or sold; provided that if such
adjustment would result in an increase of the Conversion Price then in
effect, such adjustment shall not be effective until 30 days after written
notice thereof has been given by the Corporation to all holders of the
Class B Preferred Stock.
(d) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Corporation at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise), one or more classes of its outstanding shares of Common Stock into a
greater number of shares, or if the Corporation at any time combines (by reverse
stock split or otherwise), one or more classes of its outstanding shares of
Common Stock into a smaller number of shares, the Conversion Price in effect
immediately prior to such subdivision or combination shall be proportionately
adjusted.
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(e) CERTAIN EVENTS. If an event not specifically enumerated in this
Section 5 occurs which has substantially the same economic effect on the Class B
Preferred Stock as those specifically enumerated shall occur, then this Section
5 shall be construed liberally, MUTATIS MUTANDIS, in order to give the Class B
Preferred Common Stock the benefit of the protections provided under this
Section 5. The Corporation's Board of Directors shall make an appropriate
adjustment in the Conversion Price so as to protect the rights of the holders of
Class B Preferred Stock; provided, that no such adjustment shall increase the
Conversion Price as otherwise determined pursuant to this Section 5 or decrease
the number of shares of Class A Common Stock issuable upon conversion of each
share of Class B Preferred Stock.
(f) NOTICES.
(i) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Class B
Preferred Stock, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) The Corporation shall give written notice to all holders of
Class B Preferred Stock at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any
dividend or distribution upon Common Stock, (b) with respect to any pro rata
subscription offer to holders of Common Stock or (c) for determining rights
to vote with respect to any Organic Change, dissolution or liquidation.
(iii) The Corporation shall also give written notice to the holders
of Class B Preferred Stock at least 20 days prior to the date on which any
Organic Change shall take place.
6. STATUS OF REACQUIRED SHARES. Shares of Class B Preferred Stock which
have been issued and reacquired in any manner shall have the status of
authorized and unissued shares of Class B Preferred Stock.
7. RANK. The Class B Preferred Stock shall rank senior as to dividends
and upon liquidation, dissolution or winding up to all Junior Securities,
whenever issued.
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8. CERTIFICATES. So long as any shares of the Class B Preferred Stock
are outstanding, there shall be set forth on the face or back of each stock
certificate issued by the Corporation a statement that the Corporation shall
furnish without charge to each shareholder who so requests, a full statement of
the designation and relative rights, preferences and limitations of each class
of stock or series thereof that the Corporation is authorized to issue and of
the authority of the Board of Directors to designate and fix the relative
rights, preferences and limitations of each series.
9. DEFINITIONS.
"Affiliate" shall have the meaning given such term in the Purchase
Agreement.
"Applicable Rate" means 8% per annum, except during any period a
Noncompliance Event exists, the Applicable Rate shall mean 15% per annum.
"Certificate of Designation" means this Certificate of Designations,
Preferences and Relative and Other Special Rights and Qualifications,
Limitations and Restrictions of the Class B Preferred Stock.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Corporation, as amended.
"Class A Common Stock" means the Corporation's Class A Common Stock,
$1.00 par value per share.
"Class A Preferred Stock" means the Corporation's Class A 5% Non-
Cumulative, Non-Voting, Non-Convertible Preferred Stock, $1.00 par value per
share.
"Class B Common Stock" means the Corporation's Class B Common Stock,
$1.00 par value per share.
"Class B Preferred Stock" means the Corporation's Class B Preferred
Stock, $1.00 par value per share.
"Common Stock" means the Class A Common Stock and Class B Common
Stock.
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"Conversion Price" shall have the meaning set forth in Section 5(b)
hereof.
"Common Stock Deemed Outstanding" means, at any given time, the number
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock issuable upon conversion of the Class B Preferred Stock,
plus the number of shares of Common Stock deemed to be outstanding with respect
to Options or Convertible Securities whether or not the Options are actually
exercisable at such time.
"DCC" means Dobson CC Limited Partnership, an Oklahoma limited
partnership.
"Financing Agreement" means that certain Second Amended and Restated
Credit Agreement dated as of February 26, 1997, between CoreStates Bank, N.A.,
in its capacity as Administrative Agent and a Bank, the other Banks listed
therein, the Corporate Borrowers listed therein or any credit agreement
evidencing a senior debt facility which replaces the facility evidenced by such
Second Amended and Restated Credit Agreement.
"Junior Securities" means any of the Corporation's Common Stock and
all other equity securities of the Corporation other than the Class B Preferred
Stock and Class C Preferred Stock.
"Liquidation Value" of any share of Class B Preferred Stock shall be
One Hundred Dollars ($100.00).
"Noncompliance Event" shall have the meaning given such term in the
Purchase Agreement.
"Organic Change" shall have the meaning set forth in Section 3(e)
hereof.
"Permitted Issuances" means the issuance to key employees of the
Corporation or any Subsidiary acceptable to the holders of Class B Preferred
Stock of options to purchase an aggregate of 30,166 shares of Class B Common
Stock in the amounts, at the price and on other terms and conditions acceptable
to the holders of Class B Preferred Stock and the issuance of Class B Common
Stock pursuant to the exercise of such options.
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"Person" means an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization and any government,
governmental department or agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its equity
securities to the public pursuant to an effective registration statement under
the Securities Act of 1933 or any comparable statement under any similar federal
statute then in force, other than an offering of shares being issued as
consideration in a business acquisition or combination or an offering in
connection with an employee benefit plan.
"Purchase Agreement" means that certain Securities Purchase Agreement
dated as of March 19, 1996, among the purchasers named therein and Dobson
Operating Company (formerly known as Dobson Communication Corporation), as
amended by that certain Amendment No.1 to Securities Purchase Agreement dated as
of February 26, 1997, as it may be amended from time to time.
"Shareholders' Agreement" means that certain Shareholders' Agreement
dated as of February 24, 1997 among this Corporation and the shareholders of
this Corporation, as it may be amended from time to time.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association, or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
general partner of such partnership, association or other business entity.
33
<PAGE>
"Texas 2 Event" shall have the meaning set forth in the Securities
Purchase Agreement.
10. SEVERABILITY OF PROVISIONS. If any right, preference or limitation
of the Class B Preferred Stock set forth in this Resolution (as such Resolution
may be amended from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule, law or public policy, all other rights,
preferences and limitations set forth in this Resolution (as so amended) which
can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other right, preference or limitation unless so expressed
herein.
34
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Everett Dobson, its President, and attested to by Stephen T. Dobson,
its Secretary this 25th day of February, 1997.
By: /s/ Everett R. Dobson
-------------------------------
Everett R. Dobson
President
ATTEST:
/s/ Stephen T. Dobson
- ----------------------------
Stephen T. Dobson
Secretary
35
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
(FORMERLY, DOBSON HOLDINGS CORPORATION)
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RELATIVE AND OTHER SPECIAL RIGHTS,
AND QUALIFICATIONS, LIMITATIONS, AND
RESTRICTIONS OF CLASS C PREFERRED STOCK
____________________________
Pursuant to Title 18, Section 1032(G) of the
General Corporation Act of the State of Oklahoma
____________________________
DOBSON COMMUNICATIONS CORPORATION (the "Corporation"), a corporation
organized and existing under the General Corporation Act of the State of
Oklahoma, does hereby certify that pursuant to the authority vested in the Board
of Directors of the Corporation by its Certificate of Incorporation, and
pursuant to the provisions of Title 18, Section 1032(G) of the General
Corporation Act of the State of Oklahoma, said Board of Directors, by unanimous
written consent, adopted the following resolution which remains in full force
and effect as of the date hereof:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation (the "Board of Directors") by its Certificate of
Incorporation (hereinafter referred to as the "Certificate of Incorporation"),
the Board of Directors does hereby authorize and provide for the issuance of
Class C Preferred Stock, $1.00 par value per share, consisting of 100,000
shares, having the following designations, preferences and relative and other
special rights, qualifications, limitations and restrictions:
1. DESIGNATION. The designation of such class is "Class C 8%
Cumulative, Non-Voting, Non-Convertible Preferred Stock" (hereinafter in this
Certificate of Designation called the "Class C Preferred Stock"), and the number
of shares constituting such class shall be 100,000, which number may not be
decreased or increased by the Board of Directors without a vote of stockholders.
All capitalized terms used in this Certificate of Designation and not otherwise
defined shall have the meaning given to such terms in Section 10 hereof.
<PAGE>
2. DIVIDENDS. (a) The holders of shares of Class C Preferred Stock,
in preference to the holders of the Junior Securities, shall be entitled to
receive, out of funds legally available for the purpose, cumulative dividends as
provided in this Section 2. Dividends on each share of Class C Preferred Stock
shall accrue on a daily basis at the Applicable Rate on the sum of (i) the
Liquidation Value and (ii) all accumulated and unpaid dividends thereon from the
date of issuance to the end of the immediately preceding calendar year and shall
be payable as provided in subparagraph (b) of this Section 2. Accrued but
unpaid dividends will be compounded annually on December 31 of each year (each a
"dividend date") (the initial such calculation to be made at the Applicable Rate
for the number of days elapsed from the date of issue of the Class C Preferred
Stock to and including the 31st day of December, 1997). Such dividends shall
commence to accrue on each share of Class C Preferred Stock from the date of
issuance thereof whether or not declared by the Board of Directors, and whether
or not there are profits, surplus or other funds of the Corporation legally
available for the payment of dividends, and shall continue to accrue thereon
until the date the Liquidation Value of such share (plus all accrued and unpaid
dividends thereon) is paid. For purposes of determining the amount of dividends
accrued on the Class C Preferred Stock pursuant to this Section 2 in connection
with the sale, redemption or repurchase of any Class C Preferred Stock which may
occur prior to December 31 of any year, the Applicable Rate for such period
shall be multiplied by a fraction, the numerator of which is the actual number
of days elapsed in the then current year and the denominator of which is 365.
(b) Subject to any applicable prohibition on the payment of dividends in
the Financing Agreement, dividends accrued on each outstanding share of Class C
Preferred Stock may be paid when, as and if declared by the Board of Directors.
Further, upon the earliest to occur of (i) a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, (ii) a
merger or consolidation of the Corporation into or with another corporation in
which the shareholders of this Corporation shall own less than 50% of the voting
securities of the surviving corporation or its parent, (iii) the sale, transfer
or lease (but not including a transfer or lease by pledge or mortgage to a bona
fide lender) of all or substantially all of the assets of the Corporation, and
(iv) the consummation of a Public Offering of the Corporation's Common
37
<PAGE>
Stocks (each a "Trigger Event"), each holder of Class C Preferred Stock shall
be entitled to receive dividends on each share of the Class C Preferred Stock
then held by such holder in an amount equal to the accumulated and unpaid
dividends on such Class C Preferred Stock from the date of issuance to the
date of such payment (as used in this Section 2, the "Accrued Dividend").
The Accrued Dividend shall be paid in cash.
(c) Except as otherwise provided herein, if at any time the Corporation
pays less than the total amount of dividends then accrued with respect to the
Class C Preferred Stock, such payment shall be distributed ratably among the
holders thereof based upon the aggregate accrued but unpaid dividends on the
Class C Preferred Stock held by each holder.
3. LIQUIDATION PREFERENCE. (a) In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, either voluntarily
or involuntarily, each holder of Class C Preferred Stock shall be entitled,
after provision for the payment of the Corporation's debts and other
liabilities, to be paid in cash, before any distribution is made on any Junior
Securities, the aggregate Liquidation Value of all shares of Class C Preferred
Stock held by such holder plus an amount equal to the Accrued Dividend, whether
or not declared to the date of such payment. If, upon any such liquidation,
dissolution or other winding up of the affairs of the Corporation, the net
assets of the corporation distributable among the holders of all outstanding
shares of the Class C Preferred Stock shall be insufficient to permit the
payment in full to such holders of the preferential amounts to which they are
entitled under the Certificate of Incorporation, then the entire net assets of
the Corporation remaining after the provision for the payment of the
Corporation's debts and other liabilities shall be distributed among the holders
of the Class C Preferred Stock ratably in proportion to the full amounts to
which they would otherwise be respectively entitled.
(b) Holders of Class C Preferred Stock shall not be entitled to any
additional distribution in the event of any liquidation, dissolution or winding
up of the affairs of the Corporation in excess of the preferential amount
referred to in Section 3(a) above.
38
<PAGE>
(c) The assets available for distribution pursuant to the Section 3 shall
be determined by applicable law.
(d) The merger or consolidation of the Corporation into or with another
corporation in which the shareholders of this Corporation shall own less than
50% of the voting securities of the surviving corporation or its parent or the
sale, transfer or lease (but not including a transfer or lease by pledge or
mortgage to a bona fide lender) of all or substantially all of the assets of the
Corporation may be deemed by the holders of the Class C Preferred Stock to be a
liquidation, dissolution or winding up of the Corporation as those terms are
used in this Section 3. In the event of such merger, consolidation or sale of
substantially all of the Company's assets, the holders of shares of Class C
Preferred Stock shall have the right to preference in the merger or
consolidation or upon the distribution of assets as provided in this Section.
(e) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the Corporation shall within ten (10) days
after the date of the Board of Directors approves such action, or twenty (20)
days prior to any shareholders' meeting called to approve such action, or twenty
(20) days after the commencement of an involuntary proceeding, whichever is
earliest, give each holder of shares of Class C Preferred Stock initial written
notice of the proposed action. Such initial written notice shall describe the
material terms and conditions of such proposed action, including a description
of the stock, cash and property to be received by the holders of shares of Class
C Preferred Stock upon consummation of the proposed action and the date of
delivery thereof. If any material change in the facts set forth in the initial
notice shall occur, the Corporation shall promptly give written notice to each
holder of shares of Class C Preferred Stock of such material change.
(f) The Corporation shall not consummate any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation before the expiration
of thirty (30) days after the mailing of the initial notice referred to in
subparagraph (e) above or ten (10) days after the mailing of any subsequent
written notice, whichever is later; provided, that any such 30-day or 10-day
period may be shortened upon the written consent of the holders
39
<PAGE>
of a majority of the outstanding shares of the Class B Preferred Stock voting
as a single class.
(g) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation which will involve distribution of assets other
than cash, the Corporation shall promptly engage competent independent
appraisers to determine the value of the assets to be distributed to the holders
of shares of Class B Preferred Stock, Class C Preferred Stock and the holders of
shares of Common Stock (it being understood that with respect to such valuation,
the Corporation shall engage such appraiser as shall be approved by the holders
of a majority of shares of the Corporation's outstanding Common Stock and by the
holders of a majority of the outstanding shares of Class B Preferred Stock
voting as separate classes). The Corporation shall, upon receipt of such
appraiser's valuation, give prompt written notice to each holder of shares of
Common Stock, Class B Preferred Stock and Class C Preferred Stock of the
appraiser's valuation.
4. VOTING. Except as otherwise required by law, the holders of the
Class C Preferred Stock shall have no voting powers whatsoever, and no holder of
Class C Preferred Stock shall vote on or otherwise participate in any
proceedings in which actions shall be taken by the Corporation or the
shareholders thereof or be entitled to notification as to any meeting of the
Board of Directors of the shareholders.
5. CONVERSION RIGHTS. Except as otherwise required by law, the holders
of Class C Preferred Stock shall have no rights of conversion of the Class C
Preferred Stock into any other class of preferred or common stock.
6. REDEMPTION. (a) At any time, the Class C Preferred Stock may be
redeemed, in whole or in part, at the option of the Corporation by vote of its
Board of Directors, at any time or from time to time, at the Liquidation Value
thereof plus an amount equal to the sum of the Accrued Dividends thereon,
whether or not declared to the date of such payment. In case of the redemption
of a part of the outstanding Class C Preferred Stock, such redemption shall be
allocated among the holders of the Class C Preferred Stock in proportion to each
holders ownership.
40
<PAGE>
(b) Upon the earlier to occur of a Trigger Event or February 28, 2002, the
Corporation shall redeem all the outstanding shares of Class C Preferred Stock
at the Liquidation Value thereof plus an amount equal to the sum of the Accrued
Dividend thereof, whether or not declared to the date of payment.
(c) At least 30 days prior to the date fixed for redemption, a written
notice shall be provided to each holder of record of Class C Preferred Stock to
be redeemed. Such notice shall provide the date fixed for redemption, and call
upon such holder to surrender to the Corporation on such date fixed the
certificate or certificates representing the number of shares to be redeemed.
On the date fixed for redemption, each holder of Class C Preferred Stock to be
redeemed shall present and surrender the certificate or certificates
representing such shares to the Corporation. In case less than all of the
shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares.
7. STATUS OF REACQUIRED SHARES. Shares of Class C Preferred Stock which
have been issued and reacquired in any manner shall have the status of
authorized and unissued shares of Class C Preferred Stock.
8. RESTRICTIONS. So long as any shares of Class C Preferred Stock are
outstanding, no dividends or distributions shall be made on or in respect of any
Junior Securities and no Junior Securities shall be purchased or redeemed
directly or indirectly by the Corporation or any Subsidiary without the prior
written consent of the holders of a majority of the outstanding shares of Class
C Preferred Stock.
8. RANK. The Class C Preferred Stock shall rank senior upon liquidation,
dissolution or winding up to all Junior Securities, whenever issued.
9. CERTIFICATES. So long as any shares of the Class C Preferred Stock
are outstanding, there shall be set forth on the face or back of each stock
certificate issued by the Corporation a statement that the Corporation shall
furnish without charge to each
41
<PAGE>
shareholder who so requests, a full statement of the designation and relative
rights, preferences and limitations of each class of stock or series thereof
that the Corporation is authorized to issue and of the authority of the Board
of Directors to designate and fix the relative rights, preferences and
limitations of each series.
10. DEFINITIONS.
"Applicable Rate" means 8% per annum.
"Certificate of Designation" means this Certificate of Designations,
Preferences and Relative and Other Special Rights and Qualifications,
Limitations and Restrictions of the Class C Preferred Stock.
"Certificate of Incorporation" means the Certificate of Incorporation
of the Company.
"Class A Common Stock" means the Corporation's Class A Common Stock,
$1.00 par value per share.
"Class B Common Stock" means the Corporation's Class B Common Stock,
$1.00 par value per share.
"Class B Preferred Stock" means the Corporation's Class B Preferred
Stock, $1.00 par value per share.
"Class C Common Stock" means the Corporation's Class C Non-Voting
Common Stock, $1.00 par value per share.
"Class C Preferred Stock" means the Corporation's Class C 8%
Cumulative, Non-Voting, Non-Convertible Preferred Stock, $1.00 par value per
share, as in effect the date hereof.
"Common Stock" means the Class A Common Stock, Class B Common Stock
and Class C Common Stock.
"Financing Agreement" means that certain Second Amended and Restated
Credit Agreement dated as of February 28th, 1997, between CoreStates Bank, N.A.,
in its capacity as Administrative Agent and a Bank, the other Banks listed
therein, and the Corporate
42
<PAGE>
Borrowers listed therein, or any credit agreement evidencing a senior debt
facility which replaces the facility evidenced by such Second Amended and
Restated Credit Agreement.
"Junior Securities" means any of the Corporation's Common Stock and
all other equity securities of the Corporation other than Class C Preferred
Stock.
"Liquidation Value" of any share of Class C Preferred Stock shall be
one hundred dollars ($100.00).
"Person" means an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization and any government,
governmental department or agency or political subdivision thereof.
"Public Offering" means any offering by the Corporation of its equity
securities to the public pursuant to an effective registration statement under
the Securities Act of 1933 or any comparable statement under any similar federal
statute then in force, other than an offering of shares being issued as
consideration in a business acquisition or combination or an offering in
connection with an employee benefit plan.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association, or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
general partner of such partnership, association or other business entity.
43
<PAGE>
11. SEVERABILITY OF PROVISIONS. If any right, preference or
limitation of the Class C Preferred Stock set forth in this Resolution (as such
Resolution may be amended from time to time) is invalid, unlawful or incapable
of being enforced by reason of any rule, law or public policy, all other rights,
preferences and limitations set forth in this Resolution (as so amended) which
can be given effect without the invalid, unlawful or unenforceable right,
preference or limitation shall, nevertheless, remain in full force and effect,
and no right, preference or limitation herein set forth shall be deemed
dependent upon any other right, preference or limitation unless so expressed
herein.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by Everett Dobson, its President, and attested to by Stephen T. Dobson,
its Secretary this 25th day of February, 1997.
By: /s/ EVERETT R. DOBSON
-----------------------------------
Everett R. Dobson
President
ATTEST:
/s/ STEPHEN T. DOBSON
- -----------------------------------
Stephen T. Dobson
Secretary
44
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
(FORMERLY, DOBSON HOLDINGS CORPORATION)
CERTIFICATE OF CORRECTION
Pursuant to Section 7 of the Oklahoma General Corporation Act, this
Certificate of Correction is filed with the Oklahoma Secretary of State to
correct an inaccurate recording of a corporate action of the above named
corporation.
The inaccurate portion of the corporate record is contained in the Amended
Certificate of Incorporation of Dobson Communications Corporation filed with the
Oklahoma Secretary of State on February 24, 1997. Such portion stated as
follows:
"That at a meeting of the Board of Directors, a resolution was
duly adopted setting forth the foregoing proposed amendment(s) to
the Certificate of Incorporation of said corporation, declaring
said amendment(s) to be advisable and calling a meeting of the
shareholders of said corporation for consideration thereof.
That thereafter, pursuant to said resolution of its Board of
Directors, a meeting of the shareholders of said corporation was
duly called and held, at which meeting the necessary number of
shares as required by statute were voted in favor of the
amendment(s).
SUCH AMENDMENT(S) WAS DULY ADOPTED WITH 18 O.S., Section 1077."
Such portion of the Amended Certificate of Incorporation is inaccurate and
should be deleted and replaced with the following:
"That pursuant to Sections 27 of the Oklahoma General Corporation
Act, all of the directors of this corporation consent to the
above action without meetings of the directors.
As this corporation has not received any payment for any of its
stock nor has it issued any of its stock:
<PAGE>
SUCH AMENDMENT WAS DULY EXECUTED IN ACCORDANCE WITH 18 O.S.
Section 1076.
46
<PAGE>
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
among
CORESTATES BANK, N.A.,
as a Bank, as Administrative Agent, and as Managing Agent,
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as a Bank, as Documentation Agent, and as Managing Agent,
NATIONSBANK OF TEXAS, N.A.,
as a Bank, as Syndication Agent, and as Managing Agent,
the Additional Banks listed
on Schedule 1 attached hereto
(collectively, the "BANKS"),
and
DOBSON OPERATING COMPANY
(the "Borrower")
February 28, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1 - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2. Rules of Construction . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2 - REVOLVING CREDIT COMMITMENT. . . . . . . . . . . . . . . . . . 17
2.1. The Facility . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2. Promissory Note. . . . . . . . . . . . . . . . . . . . . . . . 18
2.3. Banks' Commitment. . . . . . . . . . . . . . . . . . . . . . . 18
2.4. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 18
2.5. Reductions in Commitment . . . . . . . . . . . . . . . . . . . 19
2.6. Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.7. Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.8. Reduction and Termination of Commitment. . . . . . . . . . . . 28
2.9. Prepayment; Repayment. . . . . . . . . . . . . . . . . . . . . 29
2.10. Funding Costs; Loss of Earnings. . . . . . . . . . . . . . . . 30
2.11. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.12. Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . 31
2.13. Regulatory Changes in Capital Requirements . . . . . . . . . . 31
SECTION 2A - LETTERS OF CREDIT . . . . . . . . . . . . . . . . . . . . . . 32
2A.1 Availability of Credits . . . . . . . . . . . . . . . . . . . . 32
2A.2 Commitment Availability . . . . . . . . . . . . . . . . . . . . 32
2A.3 Approval and Issuance . . . . . . . . . . . . . . . . . . . . . 33
2A.4 Obligations of the Borrower . . . . . . . . . . . . . . . . . . 33
2A.5 Payment by Banks on Letters of Credit . . . . . . . . . . . . . 34
2A.6 Collateral Security . . . . . . . . . . . . . . . . . . . . . . 35
2A.7 General Terms of Credits. . . . . . . . . . . . . . . . . . . . 36
SECTION 3 - REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 37
3.1. Organization and Good Standing . . . . . . . . . . . . . . . . 37
3.2. Power and Authority; Validity of Agreement . . . . . . . . . . 37
3.3. No Violation of Laws or Agreements . . . . . . . . . . . . . . 38
-i-
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Page
----
3.4. Material Contracts . . . . . . . . . . . . . . . . . . . . . . 38
3.5. Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.6. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.7. Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . 39
3.8. Capital Stock/Partnership Interests. . . . . . . . . . . . . . 39
3.9. Accuracy of Information; Full Disclosure . . . . . . . . . . . 39
3.10. Taxes and Assessments. . . . . . . . . . . . . . . . . . . . . 40
3.11. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 40
3.12. Management Agreements. . . . . . . . . . . . . . . . . . . . . 41
3.13. Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.14. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
3.15. Acquisition Agreements . . . . . . . . . . . . . . . . . . . . 42
3.16. Fees and Commissions . . . . . . . . . . . . . . . . . . . . . 42
3.17. No Extension of Credit for Securities. . . . . . . . . . . . . 42
3.18. Perfection of Security Interests . . . . . . . . . . . . . . . 43
3.19. Hazardous Wastes, Substances and Petroleum
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.20. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 4 - CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.1. First Advance . . . . . . . . . . . . . . . . . . . . . . . . . 44
4.2. Advance for Maryland Acquisition. . . . . . . . . . . . . . . . 48
4.3. Advance for Horizon Acquisition . . . . . . . . . . . . . . . . 49
4.4. Advance for Arizona Acquisition . . . . . . . . . . . . . . . . 50
4.5. Subsequent Advances . . . . . . . . . . . . . . . . . . . . . . 51
4.6. Additional Condition to Banks' Obligations. . . . . . . . . . . 51
SECTION 5 - AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . 52
5.1. Existence and Good Standing. . . . . . . . . . . . . . . . . . 52
5.2. Quarterly Financial Statements . . . . . . . . . . . . . . . . 52
5.3. Annual Financial Statements. . . . . . . . . . . . . . . . . . 52
5.4. Other Information. . . . . . . . . . . . . . . . . . . . . . . 53
5.5. Management Reports . . . . . . . . . . . . . . . . . . . . . . 53
5.6. Books and Records. . . . . . . . . . . . . . . . . . . . . . . 53
5.7. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.8. Litigation; Event of Default . . . . . . . . . . . . . . . . . 54
5.9. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
-ii-
<PAGE>
Page
----
5.10. Expenses and Costs . . . . . . . . . . . . . . . . . . . . . . 54
5.11. Additional Collateral and New Subsidiary Designation . . . . . 55
5.12. Compliance; Notification . . . . . . . . . . . . . . . . . . . 56
5.13. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
5.14. Subsequent Credit Terms. . . . . . . . . . . . . . . . . . . . 57
5.15. Total Debt to Operating Cash Flow. . . . . . . . . . . . . . . 57
5.16. Proforma Debt Service Coverage.. . . . . . . . . . . . . . . . 58
5.17. Interest Coverage. . . . . . . . . . . . . . . . . . . . . . . 58
5.18. Fixed Charge Coverage. . . . . . . . . . . . . . . . . . . . . 58
5.19. Communications Leverage Ratio. . . . . . . . . . . . . . . . . 58
5.20. Communications Interest Coverage . . . . . . . . . . . . . . . 59
5.21. Interest Rate Protection . . . . . . . . . . . . . . . . . . . 59
5.22. Management Changes . . . . . . . . . . . . . . . . . . . . . . 59
5.23. Successor Administrative Agent . . . . . . . . . . . . . . . . 59
5.24. Transactions Among Affiliates. . . . . . . . . . . . . . . . . 60
5.25. Deposit Account. . . . . . . . . . . . . . . . . . . . . . . . 60
5.26. Other Information. . . . . . . . . . . . . . . . . . . . . . . 60
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SECTION 6 - NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . 60
6.1. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.2. Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.3. Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
6.4. Liens and Encumbrances . . . . . . . . . . . . . . . . . . . . 61
6.5. Additional Negative Pledge . . . . . . . . . . . . . . . . . . 61
6.6. Restricted Payments. . . . . . . . . . . . . . . . . . . . . . 61
6.7. Transfer of Assets; Liquidation. . . . . . . . . . . . . . . . 63
6.8. Acquisitions and Investments . . . . . . . . . . . . . . . . . 63
6.9. Payments to Affiliates . . . . . . . . . . . . . . . . . . . . 64
6.10. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 64
6.11. Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 64
6.12. Amendments to Documents. . . . . . . . . . . . . . . . . . . . 64
SECTION 7 - NEGATIVE COVENANTS OF COMMUNICATIONS . . . . . . . . . . . . . 64
7.1. Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . 64
7.2. Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . . . 65
7.3. Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
7.4. Liens and Encumbrances. . . . . . . . . . . . . . . . . . . . . 65
7.5. Additional Negative Pledge. . . . . . . . . . . . . . . . . . . 65
7.6. Communications Bond Debt. . . . . . . . . . . . . . . . . . . . 65
7.7. Amendments to Documents . . . . . . . . . . . . . . . . . . . . 66
7.8. Indebtedness to Subsidiaries. . . . . . . . . . . . . . . . . . 66
SECTION 8 - ADDITIONAL COLLATERAL AND RIGHT OF SET OFF . . . . . . . . . . 66
8.1. Additional Collateral . . . . . . . . . . . . . . . . . . . . . 66
8.2. Right of Set-off. . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 9 - DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
9.1. Events of Default . . . . . . . . . . . . . . . . . . . . . . . 67
9.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 10 - THE BANKS . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.1. Application of Payments . . . . . . . . . . . . . . . . . . . . 70
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10.2. Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
10.3. Modifications and Waivers . . . . . . . . . . . . . . . . . . 70
10.4. Obligations Several . . . . . . . . . . . . . . . . . . . . . 71
10.5. Banks' Representations. . . . . . . . . . . . . . . . . . . . 71
10.6. Investigation . . . . . . . . . . . . . . . . . . . . . . . . 71
10.7. Powers of Administrative Agent. . . . . . . . . . . . . . . . 71
10.8. General Duties of Agents, Immunity and Indemnity . . . . . . 71
10.9. No Responsibility for Representations or Validity, etc . . . 72
10.10. Action on Instruction of Banks; Right to Indemnity. . . . . . 72
10.11. Employment of Agents. . . . . . . . . . . . . . . . . . . . . 72
10.12. Reliance on Documents . . . . . . . . . . . . . . . . . . . . 72
10.13. Administrative Agent's Rights as a Bank . . . . . . . . . . . 73
10.14. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.15. Resignation of Administrative Agent . . . . . . . . . . . . . 73
10.16. Successor Administrative Agent. . . . . . . . . . . . . . . . 73
10.17. Collateral Security . . . . . . . . . . . . . . . . . . . . . 73
10.18. Enforcement by Administrative Agent . . . . . . . . . . . . . 74
SECTION 11 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 74
11.1. Indemnification and Release Provisions. . . . . . . . . . . . 74
11.2. Participations and Assignments. . . . . . . . . . . . . . . . 74
11.3. Binding and Governing Law . . . . . . . . . . . . . . . . . . 75
11.4. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.5. No Waiver; Delay. . . . . . . . . . . . . . . . . . . . . . . 76
11.6. Modification. . . . . . . . . . . . . . . . . . . . . . . . . 76
11.7. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.8. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
11.9. Payment on Non-Business Days. . . . . . . . . . . . . . . . . 77
11.10. Time of Day . . . . . . . . . . . . . . . . . . . . . . . . . 77
11.11. Severability. . . . . . . . . . . . . . . . . . . . . . . . . 77
11.12. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 77
11.13. Consent to Jurisdiction and Service of Process. . . . . . . . 77
11.14. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . 79
11.15. ACKNOWLEDGMENTS . . . . . . . . . . . . . . . . . . . . . . . 79
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LIST OF EXHIBITS
Exhibit A: Advance Request Form
Exhibit B: Form of Promissory Note
Exhibit C: Funding Costs and Loss of Earnings Calculation
Exhibit D: Disclosure Pursuant to Representations and Warranties
Exhibit E: Form of Quarterly Compliance Certificate
Exhibit F: Letter of Credit Request Form
Exhibit G: Standby Letter of Credit Application Form
Exhibit H: Commercial Letter of Credit Application Form
Exhibit I: Form of Assignment and Assumption Agreement
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<PAGE>
SECOND
AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is made this 28th
day of February, 1997, by and among DOBSON OPERATING COMPANY ("Borrower"), an
Oklahoma corporation with offices at 13439 N. Broadway Extension, Suite 200,
Oklahoma City, Oklahoma 73114, CORESTATES BANK, N.A., a national banking
association with offices at 1339 Chestnut Street, Philadelphia, Pennsylvania
19101 ("CoreStates"), in its capacity as administrative agent hereunder
("Administrative Agent"), NATIONSBANK OF TEXAS, N.A., a national banking
association ("NationsBank"), in its capacity as Syndication Agent hereunder
("Syndication Agent"), FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national
banking association ("First Union"), in its capacity as Documentation Agent
hereunder ("Documentation Agent"), the banks listed on Schedule 1 attached
hereto (CoreStates and such additional banks, individually a "Bank" and
collectively the "Banks"). Each of the Guarantors, as herein defined, has
executed this Credit Agreement for the limited purposes of making the
representations and warranties set forth in Article 3 and agreeing to the
covenants set forth in Articles 5, 6 and 7 hereof.
BACKGROUND
WHEREAS, Borrower (under its previous name, Dobson Communications
Corporation), its wholly owned subsidiary, Dobson Cellular Systems, Inc. (the
"Original Corporate Borrowers") and Everett R. Dobson Irrevocable Family Trust,
Stephen T. Dobson Irrevocable Family Trust, and Robbin L. Dobson Irrevocable
Family Trust ("collectively, the "Trust Borrowers" and together with the
Original Corporate Borrowers, the "Original Borrowers") entered into a Credit
Agreement dated November 9, 1994 with Administrative Agent and Bank IV Oklahoma,
N.A. (the "Original Lenders"), which Credit Agreement was amended by Amendment
No. 1 to Credit Agreement dated September 19, 1995 and Amendment No. 2 to Credit
Agreement dated December 1, 1995 (as amended, the "Original Credit Agreement"),
pursuant to which the Original Lenders agreed to make loans and advances to the
Original Corporate Borrowers up to an aggregate principal amount outstanding at
any time of Twenty Five Million Dollars ($25,000,000), and to make a Six Million
Dollar ($6,000,000) term
<PAGE>
loan to the Trust Borrowers (the "Trust Loan"), in each case subject to the
terms and conditions set forth therein; and
WHEREAS, the Original Borrowers and certain additional borrowers (the
"Amended and Restated Borrowers") entered into an Amended and Restated Credit
Agreement dated March 19, 1996 (the "Amended and Restated Credit Agreement")
with the Administrative Agent and certain additional banks listed therein (the
"Amended and Restated Lenders"), pursuant to which the Amended and Restated
Lenders agreed to make loans and advances to the Amended and Restated Borrowers
up to an aggregate principal amount outstanding at any time of Eighty Four
Million Dollars ($84,000,000), and to permit the Trust Loan to remain
outstanding thereunder, in each case subject to the terms and conditions set
forth therein; and
WHEREAS, in a series of related transactions occurring substantially
concurrently with the execution of this Second Amended and Restated Credit
Agreement, (i) Borrower has changed its name from Dobson Communications
Corporation to Dobson Operating Company, (ii) a newly-formed Oklahoma
corporation has changed its name to Dobson Communications Corporation
("Communications"), (iii) all of the issued and outstanding shares of capital
stock of the Borrower are being transferred by the current holders thereof to
Communications in exchange for shares of capital stock of Communications and all
of the shares of the capital stock of certain of Borrower's subsidiaries are
being transferred from Borrower to Communications (as further defined herein,
the "Reorganization") and (iv) Communications is issuing its Senior Notes due
2007 pursuant to an Indenture dated February 28, 1997, and selling such notes to
certain holders pursuant to a Preliminary Offering Memorandum dated February 10,
1997 and a Final Offering Memorandum dated February 25, 1997 (as further defined
herein, the "Communications Bond Debt");
WHEREAS, in connection with and subject to the Completion of the
foregoing transactions and to the terms and conditions set forth below, the
Borrower, the Managing Agents and the Banks wish to amend and restate the
Amended and Restated Credit Agreement in order to: (i) increase the amount of
the Commitment available to Borrower to Two Hundred Million Dollars
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($200,000,000), (ii) refinance all existing indebtedness of the Amended and
Restated Borrowers under the Amended and Restated Credit Agreement (other than
the Trust Loan), (iii) finance capital expenditures and general corporate
purposes of the Borrower and the Guarantors (except Communications provided that
expenses relating to the Communications Bond Debt may be advanced), (iv) finance
the Arizona Acquisition (as defined below) in an aggregate principal amount of
Forty Five Million Dollars ($45,000,000) subject to normal working capital
adjustments, (v) finance, together with the proceeds of the Communications Bond
Debt, the acquisition of Maryland RSA #2 (as further defined below, the
"Maryland Acquisition") in an aggregate principal amount of approximately
Seventy Five Million Two Hundred Thousand Dollars ($75,200,000), subject to
adjustments required by the applicable Acquisition Agreements, (vi) finance,
together with the proceeds of the Communications Bond Debt, the acquisition of
Horizon Cellular's Maryland RSA #3, Maryland Hagerstown MSA, Maryland Cumberland
MSA, and Pennsylvania RSA #10-West (as further defined below, the "Horizon
Systems Acquisition" and together with the Arizona Acquisition and the Maryland
Acquisition, collectively the "Acquisitions") in an aggregate principal amount
of Seventy-Five Million Dollars ($75,000,000), subject to normal working capital
adjustments plus capital expenditure reimbursements not to exceed Three Million
Dollars ($3,000,000), (vii) finance Permitted Acquisitions, (viii) finance
advances to New Guarantors, (ix) commencing after the first four such interest
payments, in the absence of any existing or created Events of Default (other
than those arising only under Paragraph 9.1(b) hereof) to fund dividends and
distributions to Communications to fund regularly scheduled semi-annual interest
payments on Communications Bond Debt, (x) finance a Seven Million Five Hundred
Fifty One Thousand Dollar ($7,551,000) distribution to Communications to fund a
distribution by Communications to its shareholders of which $6,000,000 shall be
further distributed to the Trust Borrowers and used to repay the Trust Loan in
full, and (xi) together with the proceeds of the Communications Bond Debt,
finance closing costs with respect to this Agreement, the Communications Bond
Debt, the Reorganization and the Acquisitions to the extent completed on the
date hereof in an aggregate amount not to exceed Eleven Million Five Hundred
Thousand Dollars ($11,500,000);
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<PAGE>
WHEREAS, the amendment and restatement of the Amended and Restated
Credit Agreement hereunder is not intended by the parties to constitute either a
novation or a discharge or satisfaction of the indebtedness under the Amended
and Restated Credit Agreement, which indebtedness shall remain outstanding
hereunder on the terms and conditions hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing background and the
promises and the agreements hereinafter set forth, and intending to be legally
bound hereby, the parties hereto agree that, effective upon the Effective Date
as hereinafter defined, the Amended and Restated Credit Agreement is amended and
restated in its entirety as follows:
SECTION 1
DEFINITIONS
1.1. DEFINITIONS. When used in this Agreement, the following terms
shall have the respective meanings set forth below. Certain terms relating to
interest rates are defined in Paragraph 2.6 and shall have the respective
meanings set forth therein.
"ACCUMULATED FUNDING DEFICIENCY" has the meaning ascribed to that term
in Section 302 of ERISA.
"ACQUISITIONS" shall have the meaning specified in the fourth
paragraph of the Background Section.
"ACQUISITION AGREEMENTS" means, collectively: (i) the Asset Purchase
Agreement dated as of September 25, 1996 among Borrower, Maryland, Maryland
Wireless Communications, L.P. and Wendy Coleman; (ii) the Services Agreement
dated as of December 9, 1996 among Maryland, Maryland Wireless Communications
Limited Partnership, Wendy Coleman and Washington Baltimore Cellular Limited
Partnership; (iii) the Asset Purchase Agreement dated as of November 19, 1996
among Horizon Cellular Telephone Company of Hagerstown, L.P., Cumberland
Cellular Partnership,
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<PAGE>
Maryland and Borrower; and (iv) the purchase agreement to be entered into
among Aztel, Inc., Gila River Telecommunications, Inc., U.S. West Newvector
Group, Inc., Tohono O'Odhom Utility Authority and Dobson Cellular of Arizona,
Inc., together with all schedules and exhibits thereto and all documents
delivered in connection therewith, in connection with the Arizona Acquisition.
"ADVANCE" means a borrowing under the Commitment pursuant to Paragraph
2.7 of this Agreement.
"ADVANCE REQUEST FORM" means the certificate in the form attached
hereto as Exhibit A to be delivered by Borrower to Administrative Agent as a
condition of each Advance.
"AFFILIATE" means: (i) any person who or entity which directly or
indirectly owns, controls or holds five percent (5%) or more of the outstanding
beneficial interest in the Borrower; (ii) any entity of which five percent (5%)
or more of the outstanding beneficial interest is directly or indirectly owned,
controlled, or held by the Borrower; (iii) any entity which directly or
indirectly is under common control with the Borrower; (iv) any officer or
director of the Borrower or any Affiliate; or (v) any immediate family member of
any person who is an Affiliate. For purposes of this definition, "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of an entity, whether through the
ownership of voting securities, by contract, or otherwise.
"ADMINISTRATIVE AGENT" means CoreStates in its capacity as
administrative agent for the Banks hereunder, and its successors and assigns in
such capacity.
"AGREEMENT" means this Second Amended and Restated Credit Agreement
and all exhibits and schedules hereto, as each may be amended, modified or
restated from time to time.
"ARIZONA" means Dobson Cellular of Arizona, Inc., an Oklahoma
corporation and a wholly owned Subsidiary of Borrower.
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<PAGE>
"ARIZONA ACQUISITION" shall mean a transaction or series of related
transactions to be in form and substance satisfactory to Required Banks,
pursuant to which Arizona will acquire a seventy-five percent (75%) interest in
GRCGP and GRCGP will own the FCC license and related assets for the operation of
a System for the FCC's Rural Service Area No. 322, Arizona 5-Gila.
"ASSIGNMENT OF NOTES" means the assignment by Borrower in favor of
Administrative Agent on behalf of Banks of notes payable to Borrower from each
of the Cellular Partnerships, required to be delivered pursuant to Section 4
hereof, as amended, modified or restated from time to time.
"BANK" means individually and "BANKS" means collectively, the Managing
Agents, and the banks set forth on Schedule 1 attached hereto, their respective
successors and assigns and any additional banks or lenders which become parties
to this Agreement after the date hereof, but shall not include any bank or
lender which is replaced hereunder.
"BORROWER" means Dobson Operating Company, an Oklahoma corporation and
a wholly owned Subsidiary of Communications.
"BUSINESS DAY" means any day not a Saturday, Sunday or a day on which
banks are required or permitted to be closed under the laws of the Commonwealth
of Pennsylvania.
"CAPITAL EXPENDITURE" means an expenditure for any fixed asset having
a useful life of more than one (1) year, or any improvements or additions
thereto, including direct or indirect acquisition of such assets, and including
any obligations to pay rent or other amounts under a Capital Lease; provided,
however, that Capital Expenditures shall not include acquisitions of stock or
assets which are made in accordance with Paragraph 6.8 hereof.
"CAPITAL LEASES" means capital leases and subleases, as defined in
Statement 13 of the Financial Accounting Standards Board dated November 1976, as
amended and updated from time to time.
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<PAGE>
"CELLULAR" means Dobson Cellular Systems, Inc., an Oklahoma
corporation and a wholly-owned subsidiary of Borrower.
"CELLULAR PARTNERSHIP" means individually and "CELLULAR PARTNERSHIPS"
means collectively, Texas 2, Oklahoma 5, Oklahoma 7 and any other entity in
which the Borrower or Cellular owns, directly or indirectly, a partnership
interest and serves, directly or indirectly, as the Managing General Partner.
"CELLULAR PARTNERSHIP PROMISSORY NOTE" shall have the meaning set
forth in Paragraph 4.1(f) hereof.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, as amended from time to time, and all rules and
regulations promulgated in connection therewith.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time, and regulations with respect thereto in effect from time to time.
"COLLATERAL SECURITY DOCUMENTS" means collectively, the Security
Agreements, the Pledge Agreements, the Pledges of Partnership Interests, the
Assignment of Notes, and the Guaranty Agreements, in each case required to be
delivered pursuant to Section 4 hereof, and any additional documents granting
security to Administrative Agent on behalf of Banks hereunder or any interest
rate hedging agreement with a Bank.
"COLLATERAL" means the collateral security afforded to Administrative
Agent on behalf of Banks under the Collateral Security Documents.
"COMMITMENT" means the maximum aggregate principal amount which Banks
on a several basis have agreed to advance to the Borrower under Paragraph
2.1(a) hereof and/or issue Letters of Credit under Section 2A hereof being Two
Hundred Million Dollars ($200,000,000) on the date hereof, as such amount may be
reduced from time to time in accordance with the terms hereof.
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<PAGE>
"COMMITMENT REDUCTION DATE" shall have the meaning specified in
Paragraph 2.5 hereof.
"COMMUNICATIONS" means Dobson Communications Corporation, an Oklahoma
corporation, and the owner of all of the issued and outstanding shares of
capital stock of Borrower.
"COMMUNICATIONS ACT" means collectively The Federal Communications Act
of 1934 and the Telecommunications Act of 1996, each as amended from time to
time, and the rules and regulations in effect at any time thereunder.
"COMMUNICATIONS BOND DEBT" shall mean the high yield debt offering by
Communications in a principal amount of not less than One Hundred Fifty Million
Dollars ($150,000,000) and not more than One Hundred Eighty Million Dollars
($180,000,000) including any exchange notes issued in connection with any
exchange offer made in connection therewith, and the documents and agreements
evidencing and establishing such Indebtedness as in effect on the date hereof as
described in the Preliminary Offering Memorandum dated February 10, 1997 with
respect to the Communications Bond Debt and as may be amended from time to time
in accordance with the terms thereof and hereof.
"COMMUNICATIONS INTEREST EXPENSE", as of any date of determination,
shall mean the interest expense of Communications and its Consolidated
Subsidiaries for the four most recent fiscal quarters as adjusted by interest
income earned by Communications under the Escrow Agreement, as determined in
accordance with GAAP.
"COMMUNICATIONS LEVERAGE RATIO" shall mean as of the last day of the
most recently ended quarter, the ratio of Communications Total Debt to
Communications Operating Cash Flow.
"COMMUNICATIONS OPERATING CASH FLOW", as of any date of determination
shall mean the Operating Cash Flow of Communications and its Consolidated
Subsidiaries on a consolidated basis for the four most recent fiscal quarters
adjusted as required, with respect to any Cellular Partnership, to take into
account any minority ownership when intercompany Indebtedness to the Borrower
has been paid in full; provided,
-8-
<PAGE>
however, that such Operating Cash Flow may be increased by up to a maximum
amount of Five Million Dollars ($5,000,000) of losses attributable to New
Businesses incurred from the date hereof through and including March 31,
1998, to the extent such losses were included in the calculation of Operating
Cash Flow.
"CONSOLIDATED SUBSIDIARY" means individually, and "CONSOLIDATED
SUBSIDIARIES" means collectively, as the context shall require, those
Subsidiaries of Communications or Borrower, now existing or hereafter created or
acquired whose accounts, financial results or position, for either federal
income tax or financial accounting purposes, are consolidated with those of
Communications or Borrower, as applicable.
"COMMUNICATIONS TOTAL DEBT" shall mean the Total Debt of
Communications and its Consolidated Subsidiaries, excluding the outstanding
balance of the Communications Bond Debt which is held pursuant to the Escrow
Agreement, if any.
"DEFAULT" means an event, condition or circumstance the occurrence of
which would, with the giving of notice or the passage of time or both,
constitute an Event of Default.
"DOBSON TELEPHONE" means Dobson Telephone Company, Inc., an Oklahoma
corporation, and a wholly owned subsidiary of Borrower.
"EFFECTIVE DATE" shall mean the date on which the conditions set forth
in Paragraph 4.1 shall have been satisfied.
"ENID" means Dobson Cellular of Enid, Inc., an Oklahoma corporation,
and a wholly owned subsidiary of Borrower.
"ENVIRONMENTAL CONTROL STATUTES" means any federal, state, county,
regional or local laws governing the control, storage, removal, spill, release
or discharge of Hazardous Substances, including without limitation CERCLA, the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the Federal
Water Pollution Control Act, as amended by the Clean Water Act of 1977, The
Clean Air Act, the Clean Air Act Amendments, the Hazardous Materials
Transportation Act, the
-9-
<PAGE>
Emergency Planning and Community Right to Know Act of 1986, the National
Environmental Policy Act of 1975, the Oil Pollution Act of 1990, the Toxic
Substances Control Act, any similar or implementing state law, and in each
case including all amendments thereto and all rules and regulations in effect
at any time thereunder and all permits issued in connection therewith.
"EPA" means the United States Environmental Protection Agency, or any
successor thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, all
amendments thereto and all rules and regulations in effect at any time
thereunder.
"ERISA AFFILIATE" means, when used with respect to any Plan, ERISA,
the PBGC or a provision of the Code pertaining to employee benefit plans, any
person that is a member of any group or organization within the meaning of Code
Sections 414(b), (c), (m) or (o) of which a Borrower or a Subsidiary is a
member.
"ESCROW AGREEMENT" means the Escrow and Security Agreement dated
February 28, 1997 between Communications and the trustee for the Communications
Bond Debt pursuant to which the proceeds of the Communications Bond Debt are
held in escrow, subject to release of portions thereof in connection with the
completion of the Horizon Acquisition and the Maryland Acquisition, to secure
the special repurchase and the mandatory redemption (if applicable) of, and two
years interest on, the Communications Bond Debt.
"EVENT OF DEFAULT" means an event described in Paragraph 9.1 hereof.
"FIBER" means Dobson Fiber Company, Inc., an Oklahoma corporation and
a wholly owned subsidiary of Borrower.
"FCC" means the Federal Communications Commission, or any successor
thereto.
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<PAGE>
"FINAL MATURITY DATE" shall mean the earlier of September 30, 2005 or
the date on which the Commitment is terminated pursuant to Paragraph 2.8 hereof.
"FIXED CHARGE COVERAGE RATIO" means, as of any date of determination,
the ratio of: (a) the Borrower and its Consolidated Subsidiaries' Operating
Cash Flow for the most recently ended Rolling Period; to (b) the sum of (i)
mandatory and regularly scheduled principal payments or required Commitment
reductions with respect to Total Debt of the Borrower and its Consolidated
Subsidiaries required to be paid during such period; and (ii) the amount paid
for Capital Expenditures for the Borrower and its Consolidated Subsidiaries,
(iii) cash Interest Expense of the Borrower and its Consolidated Subsidiaries,
(iv) cash taxes of the Borrower and its Consolidated Subsidiaries, to the extent
allocable to them pursuant to the Tax Sharing Agreement, and (v) distributions
and dividends paid by the Borrower, including without limitations any amounts
paid to fund interest on the Communications Bond Debt, but not including the up
to $7,500,000 permitted to be distributed for New Businesses in each case in
cash, without duplication, and for the most recently ended Rolling Period.
"GAAP" means generally accepted accounting principles set forth in the
Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants and in statements of the Financial Accounting
Standards Board and in such other statements by such other entity as
Administrative Agent may reasonably approve, which are applicable in the
circumstances as of the date in question; and such principles observed in a
current period shall be comparable in all material respects to those applied in
a preceding period.
"GRCGP" shall mean the Gila River Cellular General Partnership, a
general partnership to be formed for the purpose of effectuating the Arizona
Acquisition.
"GUARANTOR" means individually, and "GUARANTORS" means collectively,
any party at any time obligated to the Banks pursuant to the Guaranty Agreement.
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"GUARANTY AGREEMENT" means the Guaranty Agreement which
Communications, Cellular, Woodward, Enid, Fiber, KS/MO, Maryland, Arizona,
Oklahoma 5, Oklahoma 7 and Texas 2 have delivered to Administrative Agent on
behalf of Banks pursuant to Section 4 hereof, as amended, modified or restated
from time to time.
"HAZARDOUS SUBSTANCE" means petroleum products and items defined in
the Environmental Control Statutes as "hazardous substances", "hazardous
wastes", "pollutants" or "contaminants" and any other toxic, reactive,
corrosive, carcinogenic, flammable or hazardous substance or other pollutant.
"HORIZON SYSTEMS ACQUISITION" means the acquisition by Maryland or
Borrower of Maryland RSA #3, Maryland Hagerstown MSA, Maryland Cumberland MSA,
and Pennsylvania RSA #10-West from Horizon Cellular Telephone Company of
Hagerstown, L.P. and Cumberland Cellular Partnership pursuant to that certain
Asset Purchase Agreement dated as of November 19, 1996.
"INDEBTEDNESS" of any person means and includes all obligations of
such person which, in accordance with GAAP, shall be classified on a balance
sheet of such person as liabilities of such person and in any event shall
include all (i) obligations of such person for borrowed money or which have been
incurred in connection with the acquisition of property or assets, (ii)
obligations secured by any lien upon property or assets owned by such person,
notwithstanding that such person has not assumed or become liable for the
payment of such obligations, (iii) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of property, (iv) Capitalized Leases, (v)
guarantees, (vi) letters of credit and letter of credit reimbursement
obligations and (vii) net payments under interest rate protection agreements.
"INTEREST EXPENSE", as of any date of determination, shall mean the
interest expense of the Borrower and its Consolidated Subsidiaries, for the four
most recent fiscal quarters, as determined in accordance with GAAP.
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"KS/MO" means Dobson Cellular of Kansas/Missouri, Inc., an Oklahoma
corporation and a wholly-owned Subsidiary of Borrower.
"LETTER OF CREDIT" means individually, and "LETTERS OF CREDIT" means
individually and collectively, the letter(s) of credit issued hereunder in the
form agreed upon among the Borrower, the Administrative Agent and the
beneficiary thereof at the time of issuance thereof and participated in by the
Banks pursuant to the terms and conditions of Section 2A hereof.
"LETTER OF CREDIT REQUEST FORM" shall mean the certificate in the form
attached as EXHIBIT F hereto to be delivered by the Borrower to Administrative
Agent as a condition of each issuance of a Letter of Credit pursuant to
Paragraph 2A.3 hereof.
"LETTER OF CREDIT SUBLIMIT" shall mean the portion of the Commitment
up to which Banks have agreed to participate in the issuance by Administrative
Agent of Letters of Credit pursuant to Paragraph 2A hereof, being Fifteen
Million Dollars ($15,000,000) on the date of this Agreement.
"LOAN" means the outstanding principal balance under the Commitment
and the face amount of Letters of Credit issued under the Commitment, and,
without duplication, the amount of all unreimbursed draws under Letters of
Credit under Paragraph 2A of this Agreement, together with interest accrued
thereon and fees and expenses incurred in connection therewith.
"LOCAL AUTHORITIES" means individually and collectively the state and
local governmental authorities and administrative agencies which govern the
commercial or industrial facilities owned or operated by the Borrower, a
Guarantor, or any Operating Company.
"LOC CONTRIBUTION" shall have the meaning assigned to it in Paragraph
2.5A hereof.
"MANAGING AGENTS" means collectively, CoreStates, NationsBank and
First Union.
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"MARYLAND" means Dobson Cellular of Maryland, Inc., an Oklahoma
corporation and a wholly-owned Subsidiary of Borrower.
"MARYLAND ACQUISITION" means the acquisition by Maryland or Borrower
of the FCC license for Maryland RSA #2 and related assets and customer lists
from Maryland Wireless Communications, L.P., Wendy Coleman and Washington
Baltimore Cellular Limited Partnership pursuant to that certain Asset Purchase
Agreement dated as of September 25, 1996 and that certain Services Agreement
dated as of December 9, 1996.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the
business, financial condition or prospects of the Borrower, any Subsidiary of
the Borrower, or any Guarantor as a result of any condition, circumstance or
contingency, either singly or in the aggregate.
"MAXIMUM PRINCIPAL AMOUNT" means the maximum principal amount of the
Loan which each Bank has agreed to lend or participate in the issuance of
Letters of Credit as set forth in Paragraph 2.3 hereof.
"NET PROCEEDS" shall have the meaning specified in Paragraph
2.9(b)(i)(A) hereof.
"NEW BUSINESSES" shall mean investments by Communications after the
date of this Agreement in entities engaged in any domestic communications or
related service business.
"NEW GUARANTOR" shall have the meaning specified in Paragraph 5.11(c)
hereof.
"NOTE" means the promissory notes in the form of Exhibit B attached
hereto and delivered by the Borrower to Banks pursuant to Paragraph 4.1 hereof,
as each may be amended, modified, restated or divided from time to time.
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"OKLAHOMA 5" means Oklahoma RSA 5 Limited Partnership, an Oklahoma
limited partnership of which Cellular, through Oklahoma Independent 5, is the
Managing General Partner.
"OKLAHOMA 7" means Oklahoma RSA 7 Limited Partnership, an Oklahoma
limited partnership of which Cellular, through Oklahoma Independent 7, is the
Managing General Partner.
"OKLAHOMA INDEPENDENT 5" means Oklahoma Independent RSA 5 General
Partnership, an Oklahoma general partnership, which is the general partner of
Oklahoma 5 of which Cellular is the Managing General Partner.
"OKLAHOMA INDEPENDENT 7" means Oklahoma Independent RSA 7 General
Partnership, an Oklahoma general partnership, which is the general partner of
Oklahoma 7 of which Cellular is the Managing General Partner.
"OPERATING CASH FLOW" means, as of any date of determination for the
four most recent fiscal quarters, the (i) sum of net income, provision for
income taxes, Interest Expense, depreciation expense, amortization expense,
extraordinary losses, and other non-cash charges; less (ii) interest and
dividend income, capitalized marketing costs attributable to such fiscal period,
reductions in deferred taxes, gains on the sale of assets, extraordinary gains
and other non-cash components of income, adjusted, as required with respect to
any Cellular Partnership to take into account any minority ownership when
intercompany Indebtedness to the Borrower has been paid in full. The provision
for income taxes and reductions in deferred taxes shall be adjusted in
accordance with the Tax Sharing Agreement. In the fiscal quarter in which any
Permitted Acquisition is completed, and the three fiscal quarters immediately
thereafter, the Operating Cash Flow of the acquired entity for the period for
which Operating Cash Flow is being determined shall be included in calculation
of the Consolidated Cash Flow of Borrower and of Communications, with such
adjustments as the chief financial officer of Borrower or Communications shall
certify as reasonable and with which the Banks shall be reasonably satisfied.
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"PARTNERSHIP AGREEMENT" means individually and "PARTNERSHIP
AGREEMENTS" means collectively the Agreement Establishing Texas 2 Limited
Partnership dated August 31, 1989, the Agreement Establishing Oklahoma 5 Limited
Partnership dated August 9, 1989, the Agreement Establishing Oklahoma 7 Limited
Partnership dated August 9, 1989, the Agreement Establishing Oklahoma
Independent 5 Partnership dated August 9, 1989, and the Agreement Establishing
Oklahoma Independent 7 Partnership dated August 9, 1989, and any other
partnership agreement which creates any Cellular Partnership, as each may be
amended from time to time in accordance with the terms hereof and thereof.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PERMITTED ACQUISITION" shall have the meaning specified in Paragraph
6.8 hereof.
"PERMITTED INVESTMENT" means an investment in: (i) short term
certificates of deposit, (ii) obligations fully guaranteed by the United States
government, (iii) commercial paper maturing not in excess of 365 days from the
date of acquisition and rated P-1 by Moody's Investors Service, Inc. or A-1 by
Standard & Poors Ratings Service on the date of acquisition, or (iv)
indebtedness maturing not in excess of 365 days from the date of acquisition and
rated A or better by Moody's Investors Service, Inc. or Standard & Poors Ratings
Service on the date of acquisition.
"PLAN" means any employee pension benefit or employee welfare benefit
plan as defined in Sections 3(1) or (2) of ERISA maintained or sponsored by,
contributed to, or covering employees of, any Borrower, any Subsidiary or any
ERISA Affiliate.
"PLEDGE AGREEMENT" means individually and Pledge Agreements means
collectively the pledge agreements required to be executed and delivered by
Communications and Borrower pursuant to Section 4 as each may be amended,
modified or restated from time to time.
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"PLEDGE OF PARTNERSHIP INTERESTS" means individually, and "PLEDGES OF
PARTNERSHIP INTERESTS" means collectively, the pledges to be delivered by
Cellular, Oklahoma Independent 5, Oklahoma Independent 7 or any Cellular
Partnership and the other general partners of Oklahoma Independent 5 and
Oklahoma Independent 7 pursuant to Section 4 hereof, as each may be amended,
modified or restated from time to time.
"PRO RATA SHARE" means, as to a Bank, the ratio which the outstanding
principal balance of its portion of the Loan bears to the aggregate outstanding
principal balance of the Loan, at any time.
"PROFORMA DEBT SERVICE" means, on any date of determination, the sum
of: (i) Proforma Interest Expense as of such date, plus; (ii) principal payments
scheduled to be made on Total Debt for the twelve months following the date of
determination and with respect to the Loan as of any test date, the difference
between the then-current outstanding principal amount of the Loan and the amount
to which the Commitment is to be reduced within twelve months.
"PROFORMA INTEREST EXPENSE" means, on any date of determination, for
the consecutive twelve month period following such date, the result of the
following calculation:
{[A + B]/2} x C
where:
A = Total Debt at beginning of period.
B = Total Debt at end of period, taking into account all
scheduled principal payments and required Commitment
reductions within such twelve month period.
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C = With respect to the Loan, the applicable interest rate as
calculated based on the existing Base Rate or LIBOR Rate
plus the Applicable Margin as in effect at the date of
determination plus the applicable rate under any other
Indebtedness.
"RELEASE" means any spill, leak, emission, discharge or the pumping,
pouring, emptying, disposing, injecting, escaping, leaching or dumping of a
Hazardous Substance.
"REORGANIZATION" means the corporate reorganization pursuant to which
Communications will become the holding company parent of Borrower and Borrower
will transfer to Communications all of the issued and outstanding capital stock
of certain subsidiaries of Borrower.
"REQUIRED BANKS" means those Banks (which may include Administrative
Agent) holding sixty six and two-thirds percent (66-2/3%) or more of the amount
of the Commitment or, if indebtedness is outstanding hereunder, sixty six and
two-thirds percent (66-2/3%) or more of such outstanding indebtedness.
"RESTRICTED PAYMENTS" means: (i) redemptions, repurchases, dividends
and distributions of any kind in respect of the Borrower's or Communications'
capital stock (including without limitation any class of common or preferred
shares); (ii) so long as the Cellular Partnership Promissory Note from the
applicable Cellular Partnership to Borrower remains outstanding, distributions
of any kind in respect of partnership interests in Texas 2, Oklahoma 5, Oklahoma
7, Oklahoma Independent 5 and Oklahoma Independent 7; and (iii) payments of
principal and interest on and any redemptions or repurchases of, Subordinated
Debt.
"ROLLING PERIOD" means the most recent four fiscal quarters ended
March 31, June 30, September 30, or December 31.
"SECURITY AGREEMENT" means individually and "SECURITY AGREEMENTS"
means collectively the amended and restated security agreements required to be
executed and delivered by the Borrower
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and the Guarantors pursuant to Section 4 hereof, as the same may be amended,
modified or restated from time to time.
"SHARES" of any corporation means any and all shares of capital stock
of such corporation of any class or other shares, interests, participation or
other equivalents (however designated) in the capital of such corporation.
"SUBORDINATED DEBT" means (i) the Communications Bond Debt plus (ii)
any indebtedness of the Borrower, Communications or any Guarantor subordinated
to the Loan with subordination provisions, in form and substance satisfactory to
Managing Agents.
"SUBORDINATION AGREEMENT" means individually and "SUBORDINATION
AGREEMENTS" means collectively the amended and restated subordination agreements
in favor of Administrative Agent required to be executed and delivered pursuant
to Section 4 hereof by any Affiliate of Borrower or any of its Subsidiaries to
which such an entity is indebted, and any agreement executed in connection with
any Subordinated Debt incurred after the date hereof, as the same may be
amended, modified or restated from time to time.
"SUBSIDIARY" means individually and "SUBSIDIARIES" means collectively,
with respect to Borrower or any Guarantor, any corporation of which such
Borrower or Guarantor (or one or more other Subsidiaries of such Borrower or
Guarantor) shall at the time own Shares (however designated) having ordinary
voting power for the election of at least a majority of the board of directors
(or other governing body) of such corporation, other than Shares having such
power only by reason of the happening of a contingency, or any partnership
(limited or general) of which such Borrower or Guarantor (or one or more other
Subsidiaries of such Borrower or Guarantor) shall at any time be the general
partner or own fifty percent (50%) or more of the issued and outstanding
partnership interests. Unless otherwise specified, any reference to a
Subsidiary or Subsidiaries in this Agreement means a Subsidiary or Subsidiaries
of a Borrower or a Guarantor and includes, specifically but without limitation,
each of the Cellular Partnerships.
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"SYSTEM" means individually and "SYSTEMS" means collectively the
wireless cellular communication systems and personal communications systems
owned, operated or managed by the Borrower or any Subsidiary of the Borrower,
including, without limitation for the FCC's: (i) Texas 2-Hansford Rural Service
Area, Market Number 653B, operating in twelve counties in northwestern Texas,
owned and operated by Texas 2, (ii) Oklahoma 5 West-Roger Mills Rural Service
Area, Market Number 600B1, operating in three counties in western Oklahoma,
owned and operated by Oklahoma 5, (iii) Oklahoma 7-Beckham Rural Service Area,
Market Number 602B, operating in five counties in central and western Oklahoma,
owned and operated by Oklahoma 7, (iv) Oklahoma 2-Harper Rural Service Area,
Market Number 597A, operating in six counties in northwestern Oklahoma, owned
and operated by Woodward, (v) Enid, Oklahoma Metropolitan Service Area, Market
Number 302A, operating in the area of Enid, Oklahoma owned and operated by Enid,
(vi) Kansas Rural Service Area 5, Market Number 432A, Missouri Rural Service
Area 1, Market Number 504A, Missouri Rural Service Area 4, Market Number 507A,
and the Linn County, Missouri Rural Service Area 5, Market Number 508A,
operating in Kansas and Missouri and owned and operated by KS/MO, (vii) Maryland
Rural Service Area, Market Number 468, operating in Kent County, Maryland and
owned and operated by Maryland, (viii) Maryland Rural Service Area Number 3 in
the State of Maryland, the Cumberland, Maryland metropolitan statistical area,
the Hagerstown, Maryland statistical area and the Pennsylvania 10 West Rural
Service Area, owned and operated by Maryland; and (ix) (upon consummation of the
Arizona Acquisition) Rural Service Area No. 322, Arizona 5 - Gila, and any
additional communications system acquired by a Borrower or a Guarantor to the
extent permitted by Paragraph 6.8 hereof.
"TEXAS 2" means Texas RSA No. 2 Limited Partnership, a Texas limited
partnership of which Cellular is the Managing General Partner.
"TOTAL DEBT" means, as of any date of determination with respect to
any entity, the sum of all obligations for borrowed money, all payments required
under non-compete agreements, capital lease obligations, amounts required under
installment sales purchases, all debt or other financial
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obligations of others guaranteed by such entity, and any amounts for which the
such entity is contingently liable to provide, as equity or debt, advances to
other parties. With respect to Borrower, "TOTAL DEBT" shall exclude any
Subordinated Debt owed by the Borrower to Communications or any subsidiary of
Communications not owned by Borrower.
"WOODWARD" means Dobson Cellular of Woodward, Inc., an Oklahoma
corporation and a wholly-owned Subsidiary of the Borrower.
1.2. RULES OF CONSTRUCTION.
(a) GAAP. Except as otherwise provided herein, financial and
accounting terms used in the foregoing definitions or elsewhere in this
Agreement, shall be defined in accordance with GAAP. If the Borrower or any
Bank determines that a change in GAAP from that in effect on the date hereof has
altered the treatment of certain financial data to its detriment under this
Agreement, such party may, by written notice to the others and Administrative
Agent not later than ten (10) days after the effective date of such change in
GAAP, request renegotiation of the financial covenants affected by such change.
If the Borrower and Required Banks have not agreed on revised covenants within
thirty (30) days after delivery of such notice, then, for purposes of this
Agreement, GAAP will mean generally accepted accounting principles on the date
just prior to the date on which the change that gave rise to the renegotiation
occurred.
(b) USE OF TERM "CONSOLIDATED". Any term defined in Paragraph
1.1 hereof, when modified by the word "Consolidated," shall have the meaning
given to such term herein as to Communications or the Borrower, as applicable,
and all entities whose accounts, financial results or position, for either
federal income tax or financial accounting purposes, are consolidated with those
of Communications or the Borrower, as applicable, in accordance with GAAP.
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SECTION 2
REVOLVING CREDIT COMMITMENT
2.1. THE FACILITY.
(a) LOAN. From time to time prior to the Final Maturity Date,
subject to satisfaction of the applicable conditions set forth in Section 4
hereof and the provisions below, each Bank on a several basis shall make
Advances to the Borrower up to such Bank's respective Maximum Principal Amount,
which the Borrower may repay and reborrow, up to the amount of the Commitment
(as reduced by the available amount to be drawn under Letters of Credit and any
unreimbursed draws under Letters of Credit), as the Commitment may be reduced
from time to time in accordance with the terms hereof.
(b) NO NOVATION; FIRST ADVANCE. On the Effective Date, this
Agreement amends and restates the Amended and Restated Credit Agreement,
provided, however, that the execution and delivery of this Agreement, the Notes,
the Collateral Security Documents and the other documents and agreements
executed in connection herewith shall not in any circumstances be deemed to have
terminated, extinguished or discharged the indebtedness under the Amended and
Restated Credit Agreement or the collateral security therefor, all of which
indebtedness and collateral security shall continue under and be governed by
this Agreement, the Notes, the Collateral Security Documents and the other
documents and agreements executed and delivered in connection herewith. On the
Effective Date, each Bank shall advance its respective Pro Rata Share of the
first advance, which may be netted against its outstandings under the Amended
and Restated Credit Agreement and shall be used to repay all outstanding
indebtedness under the Amended and Restated Credit Agreement due the Original
Lenders which are not Banks.
2.2. PROMISSORY NOTE. The indebtedness of the Borrower to each Bank
under the Loan will be evidenced by a Note executed by the Borrower in favor of
such Bank in the form of Exhibit B hereto. The original principal amount of
each Bank's Note from the Borrower will be the amount identified in Paragraph
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2.3 hereof as its respective Maximum Principal Amount of Loan; provided,
however, that notwithstanding the face amount of each such Note, the Borrower's
liability under each such Note shall be limited at all times to its aggregate
actual indebtedness, including principal, interest and fees, and obligations
under Letters of Credit and unreimbursed draws under Letters of Credit then
outstanding in connection with the Loan hereunder.
The Notes issued hereunder amend and restate in their entirety, and
are substituted for, the Revolving/Term Notes and Term Notes held by the Amended
and Restated Lenders as described in the Amended and Restated Credit Agreement,
without any discharge, satisfaction or novation of the underlying indebtedness
or any collateral security thereof, all of which indebtedness and collateral
security remains outstanding under this Agreement, the Notes issued pursuant
hereto and the Collateral Security Documents.
2.3. BANKS' COMMITMENT. Schedule 1 attached hereto sets forth the
names and addresses of the Banks and the Pro Rata Shares and Maximum Principal
Amounts in which Banks shall participate in the Loan.
2.4. USE OF PROCEEDS. Funds advanced under the Loan shall be used by
Borrower to: (i) refinance all existing indebtedness of the Amended and Restated
Borrowers under the Amended and Restated Credit Agreement (other than the Trust
Loan), (ii) finance capital expenditures and general corporate purposes of the
Borrower and the Guarantors (except Communications, provided that expenses
relating to the Communications Bond Debt may be advanced), (iii) finance the
Arizona Acquisition in an aggregate principal amount of Forty Five Million
Dollars ($45,000,000) subject to normal working capital adjustments, (iv)
finance the Maryland Acquisition in an aggregate principal amount of
approximately Seventy Five Million Two Hundred Thousand Dollars ($75,200,000),
subject to adjustments required by the applicable Acquisition Agreements, (v)
finance the Horizon Systems Acquisition in an aggregate principal amount of
approximately Seventy Five Million Dollars ($75,000,000) subject to normal
working capital adjustments including certain capital expenditure
reimbursements,
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(vi) finance Permitted Acquisitions, (vii) finance advances to New Guarantors;
(viii) finance a Seven Million Five Hundred Fifty One Thousand Dollar
($7,551,000) distribution to Communications to fund a distribution by
Communications to its shareholders of which $6,000,000 shall be distributed
to the Trust Borrowers to repay the Trust Loan in full, (ix) commencing after
the first four such interest payments on the Communications Bond Debt have
been made, in the absence of any existing or created Events of Default (other
than those arising only under Paragraph 9.1(b) hereof), fund distributions
and dividends to Communications to fund regularly scheduled semi-annual
interest payments on the Communications Bond Debt to the extent permitted
herein, and (x) together with a portion of the proceeds of the Communications
Bond Debt, finance closing costs with respect to this Agreement, the
Communications Bond Debt, and the Acquisitions to the extent completed on the
date hereof in an aggregate amount not to exceed Eleven Million Five Hundred
Thousand Dollars ($11,500,000).
2.5. REDUCTIONS IN COMMITMENT.
(a) COMMITMENT REDUCTION DATES.
(i) The aggregate outstanding principal balance under the
Commitment on the Final Maturity Date shall be due and payable on the Final
Maturity Date.
(ii) On June 30, 2000 and on the last Business Day of each
March, June, September and December thereafter until September 30, 2005 (each, a
"Commitment Reduction Date"), the Commitment shall be reduced by an amount equal
to the outstanding principal balance on June 30, 2000 multiplied by the
percentages set forth below.
QUARTERLY COMMITMENT QUARTERLY COMMITMENT
REDUCTION DATE REDUCTION
-------------------- --------------------
06/30/00 - 03/31/01 3.75%
06/30/01 - 03/31/02 4.25%
06/30/02 - 03/31/03 4.50%
06/30/03 - 03/31/04 4.75%
06/30/04 - 03/31/05 5.25%
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06/30/05 - 09/30/05 5.00%
(b) COMMITMENT REDUCTION PAYMENTS. On each Commitment Reduction
Date the Borrower shall make a principal payment (including any amounts due
under Paragraph 2.10 hereof) of amounts outstanding under Commitment in an
amount sufficient to cause the sum of advances under the Loan, and without
limitation, the undrawn amount of and unreimbursed draws under Letters of
Credit, to be equal to or less than the amount of the Commitment as then so
reduced.
(c) MANDATORY PREPAYMENTS. In addition, the Loan will be
subject to prepayments in connection with certain events, as set forth in
Paragraphs 2.8 and 2.9 hereof.
(d) ACCELERATION. Notwithstanding the immediately preceding
subparagraphs, the aggregate outstanding balance of the Note shall be due and
payable on the date of Administrative Agent's notice to Borrower of the
occurrence of an Event of Default, termination of the Commitment and
acceleration of the Loan.
2.6. INTEREST. Portions of the Loan shall bear interest on the
outstanding principal amount thereof in accordance with the following
provisions:
(a) DEFINITIONS. When used in this Agreement, the following
words and terms shall have the respective meanings set forth below:
"ADJUSTED BASE RATE" means the Base Rate plus the Applicable
Margin, such rate to change when and as the Base Rate changes and when and as
the Applicable Margin changes.
"ADJUSTED LIBOR RATE" means, for any Interest Period, as applied
to a Portion, the rate per annum (rounded upwards, if necessary to the next
1/100 of 1%) determined pursuant to the following formula:
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LIBOR RATE
---------------------------------------------
1 - Administrative Agent's Reserve Percentage
For purposes hereof, "LIBOR RATE" shall mean, as applied to a Portion, the rate
which appears on the Telerate Page 3750 at approximately 9:00 a.m. Philadelphia
time two Business Days prior to the commencement of such Interest period for the
offering to leading banks in the London Interbank Market of deposits in United
States dollars ("Eurodollars") or, if such rate does not appear on the Telerate
page 3750, the rate which appears (or, if two or more such rates appear, the
average rounded up to the nearest 1/100 of 1% of the rates which appear) on the
Reuters Screen LIBO Page as of 11:00 a.m. Philadelphia time two Business Days
prior to the commencement of the Interest Period, in either case for an amount
substantially equal to such Portion as to which the Borrower may elect the
Libor-Based Rate to be applicable with a maturity of comparable duration to the
Interest Period selected by the Borrower for such Portion, as may be adjusted
from time to time in accordance with Paragraph 2.6(e) hereof.
"APPLICABLE MARGIN" means: in the absence of Default or an Event of
Default, with respect to each Portion bearing interest based on the Base Rate or
Libor Rate, respectively, the percentage per annum set forth in the appropriate
column below that corresponds to the Communications Leverage Ratio set forth in
the left-hand column below, as calculated based on the quarterly compliance
certificate of the Borrower and Communications most recently delivered pursuant
to Paragraph 5.2 hereof:
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APPLICABLE APPLICABLE
COMMUNICATIONS BASE RATE LIBOR
LEVERAGE RATIO MARGIN MARGIN
- -------------- ---------- ----------
10.00 or greater 1.750% 3.000%
9.00 or greater 1.500% 2.750%
but less than 10.00
8.00 or greater 1.25% 2.500%
but less than 9.00
7.00 or greater 1.00% 2.250%
but less than 8.00
6.00 or greater 0.750% 2.000%
but less than 7.00
5.0 or greater 0.500% 1.750%
but less than 6.0
4.0 or greater 0.250% 1.500%
but less than 5.00
Less than 4.0 0.000% 1.250%
The Applicable Margin shall be adjusted quarterly by Administrative
Agent and shall become effective on the earlier of (i) two (2) Business Days
after the receipt by Administrative Agent of the quarterly compliance
certificate of Borrower and Communications pursuant to Paragraph 5.2 hereof, and
(ii) the last date on which such compliance certificate was to be delivered,
provided, however, that in the event the Borrower fails to deliver such
compliance certificate on a timely basis, the Communications Leverage Ratio
shall be deemed to be "10.00 or greater" until such compliance certificate is
delivered, and in each case the Applicable Margin shall remain in effect until
the next quarterly determination of the Applicable Margin by Administrative
Agent; provided, however, that the Applicable Margin shall be adjusted on the
date of each Acquisition on a prospective basis based on the proforma
Communications Leverage
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Ratio as set forth in the Compliance Certificate delivered by the Borrower in
connection with such Acquisition.
"BASE RATE" means the higher of (a) the Federal Funds Rate plus one
half of one percent ( 1/2%) per annum or (b) the Prime Rate.
"FEDERAL FUNDS RATE" means, for any day, the effective rate of
interest for such day, as announced from time to time by the Board of Governors
of the Federal Reserve System as shown in publication H.15 as the "Federal Funds
Rate."
"INTEREST PERIOD" means, with respect to the Libor-Based Rate, a
period of one (l), two (2), three (3) or six (6) months' duration (or such other
periods requested by the Borrower and available from the Banks in their sole
discretion), as the Borrower may elect, during which the Libor-Based Rate is
applicable; provided, however, that (i) interest on each Portion (other than
Portions bearing interest at the Adjusted Base Rate) shall accrue from and
including the first day of its Interest Period to, but excluding, the day on
which such Interest Period expires; (ii) if any Interest Period would otherwise
end on a day which is not a London Business Day, such Interest Period shall be
extended to the next succeeding London Business Day unless such London Business
Day falls in another calendar month, in which case such Interest Period shall
end on the next preceding London Business Day, as applicable (subject to clause
(iii) below); and (iii) any Interest Period for a Portion bearing interest at
the Libor-Based Rate which begins on the last London Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last London
Business Day of a calendar month.
"LIBOR-BASED RATE" means the Adjusted Libor Rate plus the Applicable
Margin, such rate to change when and as the Applicable Margin changes.
"LONDON BUSINESS DAY" means any Business Day on which banks in London,
England are open for business.
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"PORTION" means a portion of a Loan as to which the Borrower has
elected a specific interest rate and, with respect to a Portion bearing interest
at the Libor-Based Rate, an Interest Period.
"PRIME RATE" means the rate of interest announced by Administrative
Agent from time to time as its prime rate.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System, comprising Part 204 of Title 12, Code of Federal
Regulations, as amended from time to time, and any successor thereto.
"RESERVE" means, for any day, that reserve (expressed as a decimal)
which is in effect (whether or not actually incurred) with respect to a Bank on
such day, as prescribed by the Board of Governors of the Federal Reserve System
(or any successor or any other banking authority to which a Bank is subject
including any board or governmental or administrative agency of the United
States or any other jurisdiction to which a Bank is subject), for determining
the maximum reserve requirement (including without limitation any basic,
supplemental, marginal or emergency reserves) for Eurocurrency liabilities as
defined in Regulation D.
"RESERVE PERCENTAGE" means, for a Bank on any day, that percentage
(expressed as a decimal) prescribed by the Board of Governors of the Federal
Reserve System (or any successor or any other banking authority to which a Bank
is subject, including any board or governmental or administrative agency of the
United States or any other jurisdiction to which a Bank is subject), for
determining the maximum reserve requirement (including without limitation any
basic, supplemental, marginal or emergency reserves) for deposits of United
States Dollars in a non-United States or an international banking office of a
Bank used to fund a Portion subject to a Libor-Based Rate or any loan made with
the proceeds of such deposit. The Libor-Based Rate shall be adjusted on and as
of the effective day of any change in the Reserve Percentage.
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(b) INTEREST ON LOAN.
(i) At the election of the Borrower, in accordance with
the provisions of Paragraph 2.6(c) below, in the absence of an Event of Default
or Default hereunder, and prior to maturity, each Portion of the Loan shall bear
interest at either the Base Rate or the Libor-Based Rate, in each case, plus the
Applicable Margin.
(ii) Notwithstanding the foregoing, upon the occurrence and
during the continuance of an Event of Default or Default hereunder, including
after maturity and before and after judgment, Borrower hereby agrees to pay to
Banks interest on the outstanding principal balance of the Loan and, to the
extent permitted by law, overdue interest with respect thereto, at the rate of
two percent (2%) per annum in excess of the Adjusted Libor Rate or Adjusted Base
Rate, as applicable, plus the highest Applicable Margin, for each Portion then
outstanding and bearing interest through the end of the applicable Interest
Period and thereafter at the Adjusted Base Rate, plus the highest Applicable
Base Rate margin plus two percent (2%) per annum.
(c) PROCEDURE FOR DETERMINING INTEREST PERIODS AND RATES OF
INTEREST.
(i) If the Borrower elects the Adjusted Base Rate to be
applicable to a Portion, such Borrower must notify Administrative Agent of such
election prior to twelve o'clock (12:00) noon Philadelphia time one (l) Business
Day prior to the proposed application of such rate. If Borrower elects the
Libor-Based Rate to be applicable to a Portion, Borrower must notify
Administrative Agent of (i) such election and (ii) the Interest Period selected
prior to eleven o'clock (11:00) a.m. Philadelphia time at least three (3) London
Business Days prior to the date of the applicable Advance or the commencement of
the proposed Interest Period. If the applicable Borrower does not provide the
required notice for the Libor-Based Rate, then such Borrower shall be deemed to
have requested that the Adjusted Base Rate shall apply to any Portion as to
which the Interest Period is
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expiring and to any new Advance until the Borrower shall have given proper
notice of a change in or determination of the rate of interest in accordance
with this Paragraph 2.6(c).
(ii) The Borrower shall not elect more than ten (10)
different Portions (other than Portions bearing interest at the Adjusted Base
Rate) to be applicable to the Loan at one time.
(d) PAYMENT AND CALCULATION OF INTEREST. Interest shall be due
and payable on the last day of each Interest Period for each Portion; provided,
however, that (i) with respect to Portions which bear interest at the Libor-
Based Rate, having an Interest Period in excess of three (3) months, the
Borrower shall pay interest quarterly in arrears on the last Business Day of
each March, June, September and December commencing on the first such date after
the date on which such Interest Period commences and continuing on the last
Business Day of each March, June, September and December thereafter and on the
expiration of each Interest Period; and (ii) with respect to Portions which bear
interest at the Adjusted Base Rate, Borrower shall pay interest on the last
Business Day of each March, June, September and December commencing on the first
such date after the first Portion which bears interest at the Adjusted Base
Rate. Interest shall be calculated in accordance with the provisions of
Paragraph 2.6(b) hereof and (i) with respect to Portions which bear interest at
the Libor-Based Rate, on the basis of the actual number of days elapsed over a
year of three hundred sixty (360) days and (ii) with respect to Portions which
bear interest at the Adjusted Base Rate, on the basis of the actual number of
days elapsed over a year of 365 days (or, if appropriate, 366 days).
(e) RESERVES. If at any time when a Portion is subject to the
Libor-Based Rate, and a Bank is subject to and incurs a Reserve for which the
Banks have not been compensated pursuant to the calculation of the Adjusted
Libor Rate, the Borrower hereby agree to pay within five (5) Business Days of
demand thereof from time to time, as billed by Administrative Agent on behalf of
itself or a Bank, such additional amount as is necessary to reimburse such Bank
for its costs in maintaining such Reserve. Such amount shall be computed by
taking into account the cost incurred by the Bank in maintaining such Reserve
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in an amount equal to such Bank's ratable share of the Portion on which such
Reserve is incurred. The determination by Administrative Agent of such costs
incurred and the allocation, if any, of such costs among the Borrower and
other customers which have similar arrangements with such Bank shall be prima
facie evidence of the correctness of the fact and the amount of such
additional costs.
(f) SPECIAL PROVISIONS APPLICABLE TO LIBOR-BASED RATE. The
following special provisions shall apply to the Libor-Based Rate:
(i) CHANGE OF LIBOR-BASED RATE. The Libor-Based Rate may
be automatically adjusted by Administrative Agent on a prospective basis to take
into account the additional or increased cost of maintaining any necessary
reserves for Eurodollar deposits or increased costs due to changes in applicable
law or regulation or the interpretation thereof occurring subsequent to the
commencement of the then applicable Interest Period, including but not limited
to changes in tax laws (except changes of general applicability in corporate
income tax laws) and changes in the reserve requirements imposed by the Board of
Governors of the Federal Reserve System (or any successor), excluding the
Reserve Percentage, that increase the cost to Banks of funding the Loan or a
Portion thereof bearing interest at the Libor-Based Rate. Administrative Agent
shall give the Borrower notice of such a determination and adjustment, which
determination shall be prima facie evidence of the correctness of the fact and
the amount of such adjustment. the Borrower may, by notice to Administrative
Agent, (A) request Administrative Agent to furnish to the Borrower a statement
setting forth the basis for adjusting such Libor-Based Rate and the method for
determining the amount of such adjustment; and/or (B) repay the Portion with
respect to which such adjustment is made in accordance with Paragraphs 2.9 and
2.10 hereof.
(ii) UNAVAILABILITY OF EURODOLLAR FUNDS. In the event that
the Borrower shall have requested the Libor-Based Rate in accordance with
Paragraph 2.6(c) hereof and any Bank shall have reasonably determined that
Eurodollar deposits equal to the amount of the principal of such Bank's share of
the
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Portion and for the Interest Period specified are unavailable, or that the
Libor-Based Rate will not adequately and fairly reflect the cost of making or
maintaining such Bank's share of the principal amount of the Portion
specified by the Borrower during the Interest Period specified or that by
reason of circumstances affecting Eurodollar markets, adequate and reasonable
means do not exist for ascertaining the Libor-Based Rate applicable to the
specified Interest Period, Administrative Agent shall promptly give notice of
such determination to the Borrower that the Libor-Based Rate is not
available. Upon such a determination, (i) the Banks' obligation to advance
or maintain Portions at the Libor-Based Rate shall be suspended until
Administrative Agent shall have notified Borrower and Banks that such
conditions shall have ceased to exist, and (ii) the Adjusted Base Rate shall
be applicable to Portions.
(iii) ILLEGALITY. In the event that it becomes unlawful for
a Bank to maintain Eurodollar liabilities sufficient to fund such Bank's share
of any Portion subject to the Libor-Based Rate, then such Bank shall immediately
notify the Borrower thereof (with a copy to Administrative Agent) and such
Bank's obligations hereunder to make Advances or maintain Portions at the Libor-
Based Rate shall be suspended until such time as such Bank may again cause the
Libor-Based Rate to be applicable to its share of any Portion of the outstanding
principal balance of the Loan, and until such time such Bank's share of any
Portion shall then bear interest at the Adjusted Base Rate.
2.7. ADVANCES.
(a) The Borrower shall give Administrative Agent written notice
of each requested Advance under the Commitment specifying the date, amount and
purpose thereof. Such notice shall be given at the time for providing the
requisite notices set forth in Paragraph 2.6(c) hereof relating to the election
of interest rates. Each such notice shall be in the form of the Advance Request
Form attached hereto as EXHIBIT A, shall be certified by the chief executive and
chief financial officers of the Borrower and shall contain the following
information and
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representations, which shall be deemed affirmed and true and correct as of
the date of the requested Advance:
(i) the aggregate amount of the requested Advance, which in
the case of the Commitment shall be in multiples of $1,000,000 or the unborrowed
balance of the Commitment;
(ii) the purpose of the requested Advance;
(iii) confirmation of the interest rate(s) the Borrower has
elected to apply to the Advance and, if more than one interest rate has been
elected, the amount of the Portion as to which each interest rate shall apply;
(iv) with respect to any Portion bearing interest at the
Libor-Based Rate, the Interest Period selected;
(v) demonstration of compliance with Paragraphs 5.15
through 5.20 and Paragraphs 6.1, 6.3, 6.6, 6.7 and 7.1 hereof following such
Advance by delivery of a completed Exhibit A to Quarterly Covenant Compliance
Certificate;
(vi) statements that the representations and warranties set
forth in Section Three hereof are true and correct in all material respects as
of the date thereof; no Event of Default or Default hereunder has occurred and
is then continuing; and that there has been no material adverse change in
Communications and its Consolidated Subsidiaries or the Borrower and its
Consolidated Subsidiaries' financial condition, operations or business since the
date of the quarterly and audited annual financial statements most recently
delivered by the Borrower to Banks pursuant to Paragraphs 4.1, 5.2 and 5.3 of
this Agreement; and
(vii) if the requested Advance is to finance a Permitted
Acquisition, Borrower has complied with and delivered the items required by
Paragraphs 5.11(c), if applicable, and 6.8 hereof.
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(b) (i) Upon receiving a request for an Advance in accordance
with subparagraph (a) above, Administrative Agent shall promptly request that
each Bank advance its Pro Rata Share of the requested Advance to Administrative
Agent. Each Bank shall advance its Pro Rata Share of the requested Advance to
Administrative Agent by delivering federal funds immediately available at
Administrative Agent's offices prior to twelve o'clock (12:00) noon on the date
of the Advance. Subject to the satisfaction of the terms and conditions hereof,
Administrative Agent shall make the requested Advance available to the Borrower
by crediting such amount to the Borrower's deposit account with Administrative
Agent not later than two o'clock (2:00) p.m. on the day of the requested
Advance; provided, however, that in the event Administrative Agent does not
receive a Bank's share of the requested Advance by such time as provided above,
Administrative Agent shall not be obligated to Advance such Bank's share.
(ii) Unless Administrative Agent shall have been notified by
a Bank prior to the date such Bank's share of any such Advance is to be made by
such Bank that such Bank does not intend to make its share of such requested
Advance available to Administrative Agent, Administrative Agent may assume that
such Bank has made such proceeds available to Administrative Agent on such date,
and Administrative Agent may, in reliance upon such assumption (but shall not be
obligated to), make available to the Borrower a corresponding amount. If such
corresponding amount is not in fact made available to Administrative Agent by
such Bank on the date the Advance is made, Administrative Agent shall be
entitled to recover such amount, on demand from such Bank, together with
interest thereon in respect of each day during the period commencing on the date
such amount was made available to the Borrower and ending on (but excluding) the
date Administrative Agent recovers such amount, from such Bank, at a rate per
annum, equal to the effective rate for overnight federal funds in New York as
reported by the Federal Reserve Bank of New York for such day (or, if such day
is not a Business Day, for the next preceding Business Day). If such Bank
(other than a Bank which is the Administrative Agent) fails to pay such amount
forthwith upon such demand, Administrative Agent may recover such amount from
Borrower, with interest at the Adjusted Base Rate.
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(c) Each request for an Advance pursuant to this Paragraph 2.7
shall be irrevocable and binding on the Borrower. In the case of any Advance
which is to bear interest at the Libor-Based Rate, the Borrower shall indemnify
each Bank against any loss, cost or expense incurred by such Bank as a result of
any failure of the Borrower to borrow the Advance for any reason, including
without limitation, the failure to fulfill on or before the date specified in
such request for an Advance the applicable conditions set forth in Section Four,
including, without limitation, any loss (excluding loss of the Applicable
Margin) and anticipated profits), cost or expense incurred by reason of the
liquidation or redeployment of deposits or other funds acquired by such Bank to
fund the Advance to be made by such Bank when such Advance is not made on such
date, as calculated by Administrative Agent in accordance with EXHIBIT C
attached hereto.
2.8. REDUCTION AND TERMINATION OF COMMITMENT.
(a) THE BORROWER. The Borrower shall have the right at any time
and from time to time, upon three (3) days prior written notice to
Administrative Agent, to reduce the Commitment in whole or in part pro rata
among the Banks in increments aggregating $1,000,000 or multiples thereof
without penalty or premium, provided that on the effective date of such
reduction the Borrower shall make a prepayment of the Loan in an amount, if any,
by which the aggregate outstanding principal balance of the Loan, together with
the undrawn amount of and unreimbursed draws under Letters of Credit, exceeds
the amount of the Commitment as then so reduced, together with accrued interest
on the amount so prepaid and together with any amount which may be due pursuant
to Paragraph 2.10 hereof.
(b) BANKS. Pursuant to Paragraph 9.2 hereof, Required Banks
shall have the right to terminate the Commitment at any time following the
occurrence of any Event of Default hereunder, in their discretion and upon
notice to the Borrower. Any payment following the occurrence of an Event of
Default, acceleration and demand for payment shall include the payment of any
amounts due pursuant to Paragraph 2.10 hereof.
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(c) RESTORATION ONLY WITH CONSENT. Any termination or reduction
of the Commitment pursuant to subparagraphs 2.8(a), and (b) shall be permanent,
and the Commitment cannot thereafter be restored or increased without the
written consent of all Banks.
2.9. PREPAYMENT; REPAYMENT.
(a) VOLUNTARY. Upon three (3) Business Day's prior written
notice with respect to any Portion bearing interest at the Libor-Based Rate and
same day notice with respect to any Portion bearing interest at the Adjusted
Base Rate, by the Borrower to Administrative Agent, the Borrower may prepay all
or any portion of the outstanding principal balance under the Loan at any time,
provided that (i) payments of the Loan hereunder prior to the Final Maturity
Date shall not reduce the Commitment and may be reborrowed; (ii) such payments
shall be applied in accordance with subparagraph (c) below; (iii) any prepayment
shall be in an amount equal to or in excess of $5,000,000 and multiples of
$1,000,000 in excess thereof; and (iv) such prepayment shall be accompanied by
any amounts which may be due pursuant to Paragraph 2.10 hereof.
(b) MANDATORY.
(i) EVENTS OF PREPAYMENT.
(A) SALE OF ASSETS. In the event of dispositions of
assets by the Borrower or any of its Subsidiaries after the date of this
Agreement, excepting such sales or dispositions permitted by Paragraph 6.7(a)(i)
or (ii) hereof, then 100% of the proceeds from such sale net of taxes and
reasonable expenses in connection therewith (the "Net Proceeds") shall be used
by the Borrower to make a prepayment of the Loan and reduce the Commitment as
specified in clause (ii) below;
(B) INDEBTEDNESS. (1) If the Borrower or any of its
Subsidiaries shall incur Indebtedness for borrowed money after the date hereof,
other than as permitted pursuant to Paragraph 6.1 hereof, all of the proceeds
thereof shall be used to make a prepayment of the Loan and reduce the Commitment
as
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specified in clause (ii) below; and (2) if Communications (but not its
Subsidiaries other than Borrower and its Subsidiaries) incurs Indebtedness
for borrowed money (except the Communications Bond Debt) after the date
hereof, the proceeds thereof shall be used to make a prepayment of the Loan
(but not to reduce the Commitment) as specified in clause (ii) below.
(C) DISTRIBUTIONS. If, after the date hereof,
Borrower makes any dividends, distributions, advances, loans, or other payments
to Communications or any Subsidiary of Communications not directly owned by
Borrower other than in the ordinary course of business for value received,
Borrower shall be required to make a mandatory prepayment of the Loan in the
amount of such dividend, distribution, advance or loan and to reduce the
Commitment as specified in clause (ii) below; PROVIDED, HOWEVER that if such
dividend, distribution, advance or loan is permitted under subparagraph (a) of
Paragraph 6.6 hereof, when the Communications Leverage Ratio is less than 4.50:1
or is permitted under subparagraphs (b), (c) or (d) of Paragraph 6.6 hereof at
any time, Borrower may make such dividend, distribution, advance or loan and
shall not be required to make a prepayment of the Loan or to reduce the
Commitment by such amount;
(ii) If an event described in clause (i) above occurs prior
to the Final Maturity Date, and the Commitment is required to be reduced by the
amounts specified, and if following such reduction in the Commitment, the amount
of the Loan, together with the undrawn amount of and unreimbursed draws under
Letters of Credit, exceeds the Commitment as then reduced, the amount of such
excess shall be paid by the Borrower as a prepayment of the Loan.
(c) APPLICATION. Required payments and reductions in the
Commitment shall be applied on the basis of each Bank's Pro Rata Share thereof.
2.10. FUNDING COSTS; LOSS OF EARNINGS. In connection with any
prepayment or repayment of a Portion bearing interest based on the Libor-Based
Rate made on other than the last day of the applicable Interest Period, whether
such prepayment or
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repayment is voluntary, mandatory, by demand, acceleration or otherwise, the
Borrower shall pay to Banks any loss (excluding loss of Applicable Margin and
anticipated profits), costs or expense incurred by Banks or any of them,
which may arise in connection with such prepayment or repayment, as
calculated by Administrative Agent in accordance with EXHIBIT C attached
hereto.
2.11. PAYMENTS. All payments of principal, interest, fees and other
amounts due hereunder, including any prepayments thereof, shall be made by
Borrower to Administrative Agent in immediately available funds before twelve
o'clock (12:00) noon on any Business Day at the principal office of
Administrative Agent set forth at the beginning of this Agreement. Borrower
hereby authorizes Administrative Agent to charge Borrower's account with
Administrative Agent for all payments of principal, interest and fees when due
hereunder.
2.12. COMMITMENT FEE. The Borrower shall pay to Administrative Agent
(for the benefit of Banks) a non-refundable commitment fee at the rate of three-
eighths of one percent (3/8%) per annum on the unborrowed portion of the
Commitment from the date hereof through the Final Maturity Date, which fee shall
be calculated on the basis of the actual number of days elapsed over a year of
three hundred sixty (360) days and be payable at the offices of Administrative
Agent quarterly in arrears on the last day of each December, March, June and
September, as billed by Administrative Agent. Banks shall share in such
commitment fee on the basis of their Pro Rata Shares.
2.13. REGULATORY CHANGES IN CAPITAL REQUIREMENTS. If any Bank shall
have determined that the adoption or the effectiveness after the date hereof of
any law, rule, regulation or guideline regarding capital adequacy, or any change
in any of the foregoing or in the interpretation or administration of any of the
foregoing by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by such
Bank (or any lending office of such Bank) or such Bank's holding company with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank
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or comparable agency, has or would have the effect of reducing the rate of
return on such Bank's capital or on the capital of such Bank's holding
company if any, as a consequence of this Agreement, the Commitment, Advances
or the Loan made by such Bank pursuant hereto to a level below that which
such Bank or its holding company could have achieved but for such adoption,
change or compliance (taking into consideration such Bank's policies and the
policies of such Bank's holding company with respect to capital adequacy) by
an amount deemed by such Bank to be material, then from time to time the
Borrower shall pay to such Bank such additional amount or amounts as will
compensate such Bank or its holding company for any such reduction suffered
together with interest on each such amount from the date demanded until
payment in full thereof at the rate provided in Paragraph 2.6(b)(ii) hereof
with respect to amounts not paid when due.
Each Bank will notify the Borrower of any event occurring after the
date of this Agreement that will entitle such Bank to compensation pursuant to
this Paragraph as promptly as practicable after it obtains knowledge thereof and
determines to request such compensation. An election by any Bank not to demand
compensation for increased costs or reduction in amounts received or receivable
or reductions in return on capital with respect to any such event shall not
constitute a waiver of such Bank's right to demand compensation with respect to
any other such event. A certificate of such Bank setting forth such amount or
amounts as shall be necessary to compensate such Bank or its holding company as
specified above shall be delivered to Borrower and shall be conclusive absent
manifest error. Borrower shall pay such Bank the amount shown as due on any
such certificate delivered by such Bank within three (3) days after its receipt
of the same.
SECTION 2A
LETTERS OF CREDIT
2A.1 AVAILABILITY OF CREDITS. Subject to the terms and conditions
set forth herein, Banks shall from time to time prior to one year prior to the
Final Maturity Date participate in
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the issuance by Administrative Agent of Letters of Credit for the account of
Borrower on the following terms and conditions:
(a) at the time of issuance of the Letter of Credit, the
unborrowed portion of the Commitment shall equal or exceed the sum of the
amount available to be drawn under such Letter of Credit and the amount
available to be drawn under and any unreimbursed draws under all other Letters
of Credit;
(b) at the time of issuance of the Letter of Credit, the amount
available to be drawn under such Letter of Credit and all other Letters of
Credit then outstanding hereunder plus any unreimbursed draws under all other
Letters of Credit shall not exceed, in the aggregate, the Letter of Credit
Sublimit;
(c) the final expiration date of each Letter of Credit shall be
on or before the earlier of one year from (i) the date of issuance thereof or
(ii) the Final Maturity Date;
(d) there shall not exist at the time of issuance of the Letter
of Credit, and as a result thereof, any Default or Event of Default; and
(e) each Letter of Credit issued under this Section 2A shall be
required by Borrower or a Guarantor in the ordinary course of its business.
Upon issuance of each Letter of Credit, each Bank shall have a
participation interest therein based on its Pro Rata Share of the Commitment as
set forth in SCHEDULE 1 attached to the Agreement.
2A.2 COMMITMENT AVAILABILITY. The amount available under the
Commitment as from time to time in effect shall be reduced by the amount
available to be drawn under all outstanding Letters of Credit and unreimbursed
amounts of any draws under Letters of Credit. The amount by which the
Commitment is so reduced shall not be available for Advances under Paragraph 2.7
hereof, except Advances thereunder which are made to reimburse
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Administrative Agent for draws under the Letters of Credit as permitted
pursuant to Paragraph 2A.4(b) hereof.
2A.3 APPROVAL AND ISSUANCE.
(a) Borrower shall provide Administrative Agent not less than
three (3) Business Days' prior written notice of each request for the issuance
of a Letter of Credit by delivery of a Letter of Credit Request Form in the form
attached as EXHIBIT F hereto and Administrative Agent's Letter of Credit
Application in either the form attached as EXHIBIT G ("Standby Letter of Credit
Application") or EXHIBIT H ("Commercial Letter of Credit Application") hereto.
Each Letter of Credit Request Form submitted by Borrower to Administrative Agent
requesting the issuance of a Letter of Credit shall be certified by the chief
executive or chief financial officer of the Borrower, and shall, in addition to
the matters described in Paragraph 2.7 hereof, list all Letters of Credit
outstanding for the account of Borrower at that time and, for each Letter of
Credit so listed, its face amount, outstanding undrawn balance and expiration
date. It shall be a condition to the issuance of any Letter of Credit that
Administrative Agent shall have received a Letter of Credit Request Form and
either a Standby Letter of Credit Application or a Commercial Letter of Credit
Application as described above and that the conditions set forth in
Paragraph 4.5 shall be satisfied.
(b) Administrative Agent will promptly provide to Banks written
or telephonic notification of Administrative Agent's receipt of the Letter of
Credit Request Form and the Letter of Credit Application which shall state (i)
the amount of the Letter of Credit requested and (ii) the expiration date of the
requested Letter of Credit.
2A.4 OBLIGATIONS OF THE BORROWER.
(a) Borrower agrees to pay to Administrative Agent in connection
with each Letter of Credit issued hereunder: (i) immediately upon the demand of
Administrative Agent on behalf of all Banks, the amount paid by each Bank with
respect to such Letter of Credit; (ii) immediately upon demand of Administrative
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Agent, the amount of any draft presented purporting to be drawn under such
Letter of Credit provided that the draft and accompanying documents conform to
the terms of the Letter of Credit but subject to the terms of Paragraph 2A.7
(whether or not Administrative Agent has at such time honored such draft) and
any other amounts paid thereunder (it being understood that Administrative Agent
is not required to make demand upon or proceed against any Bank or other party
or to resort to any Collateral before obtaining payment from Borrower); (iii) on
the date of issuance of each Letter of Credit and on the effective date of any
extension or renewal of any Letter of Credit a non-refundable fee for the
benefit of Banks in accordance with each Bank's percentage share of the
Commitment as set forth on Schedule 1 attached hereto, calculated on the face
amount of such Letter of Credit in the following amounts: (A) a standard
issuance charge determined by the Administrative Agent plus the Applicable Libor
Margin for the period during which the Letter of Credit is to be outstanding
plus (B) a twenty-five basis points fronting fee payable to Administrative
Agent; (iv) interest on any indebtedness outstanding with respect to such Letter
of Credit, whether for funds paid on drafts on such Letter of Credit, or
otherwise (but such indebtedness shall not include undrawn balances of such
Letter of Credit issued hereunder) at the rate applicable to Base Rate Portions
under Paragraph 2.6(b)(i)(A) hereof from the date of payment by Administrative
Agent (if not reimbursed by Borrower on the same day) to the date one (1)
Business Day after notice to Borrower of such payment, and thereafter at the
rate applicable to Base Rate Portions under Paragraph 2.6(b) hereof. Interest
under the preceding clause (iv) shall be paid at the times and in the manner set
forth in Paragraph 2.6 hereof, and shall accrue on amounts paid on a Letter of
Credit (if not reimbursed by Borrower on the same day) from the date of payment
by Administrative Agent, whether or not demand is made, until such amounts are
reimbursed by Borrower whether before, at or after demand.
(b) On or before the Final Maturity Date, in the absence of a
Default or Event of Default, and subject to the provisions of Paragraph 2.7
hereof, Banks hereby agree to advance funds to Borrower under the Loan to make
the payments required under Paragraphs 2A.4(a)(i) and (ii) hereof. If any
payment by
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the Administrative Agent of a draft drawn under a Letter of Credit is for any
reason (including without limitation the occurrence or continuation of a
Default or Event of Default hereunder) not reimbursed prior to or on the date
of such payment, the amount of such payment shall thereupon be deemed for
purposes hereof an Advance under Paragraph 2.7 hereof but payable upon the
demand of Administrative Agent at the direction of Required Banks. Such
demand reimbursement obligation shall be otherwise subject to all the terms
and conditions thereof as if advanced by Banks pursuant to Paragraph 2.7
hereof (but without duplication).
2A.5 PAYMENT BY BANKS ON LETTERS OF CREDIT.
(a) With respect to each Letter of Credit, each Bank agrees that
it is irrevocably obligated to pay to Administrative Agent, for each such Letter
of Credit, such Bank's Pro Rata Share of each and every payment made or to be
made by Administrative Agent under such Letter of Credit (each such payment to
be made, a "LOC Contribution"). Each Bank's LOC Contribution shall be due from
such Bank immediately upon, and in any event no later than the same day as,
receipt of written notice (which may be sent by telex or telecopier) from
Administrative Agent (except that if such notice is received after 3:00 p.m. on
any Business Day, payment may be made on the following Business Day, together
with interest equal to the effective rate for overnight funds in New York as
reported by the Federal Reserve Lender of New York for such day (or, if such day
is not a Business Day, for the next preceding Business Day)) that (i) it has
made a payment or (ii) a draft has been presented purporting to be drawn on a
Letter of Credit issued hereunder. Such payment shall be made at Administrative
Agent's offices in immediately available federal funds.
(b) The obligation of each Bank to make its LOC Contribution
hereunder is absolute, continuing and unconditional, and Administrative Agent
shall not be required first to make demand upon or proceed against Borrower or
any guarantor or surety, or any others liable with respect to the applicable
Letter of Credit and shall not be required first to resort to any Collateral.
LOC Contributions shall be made without regard to
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termination of this Agreement or the Commitment, the existence of an Event of
Default or Default hereunder, the acceleration of indebtedness hereunder or
any other event or circumstance.
2A.6 COLLATERAL SECURITY.
(a) The indebtedness, liabilities and obligations of the
Borrower under this Section 2A, however created or incurred, whether now
existing or hereafter arising, due or to become due, absolute or contingent,
direct or indirect, secured or unsecured, are among the obligations secured by
the security interests, liens and encumbrances created by the Collateral
Security Documents delivered to Administrative Agent and Administrative Agent
and the Banks are entitled to the benefit of the collateral security granted
thereunder with respect to such indebtedness.
(b) Notwithstanding the payment in full of the Loan, the
termination of the Commitment or the occurrence of the Final Maturity Date, the
Collateral shall continue to secure the indebtedness, liabilities and
obligations of the Borrower under this Section 2A until all Letters of Credit
shall have expired and all indebtedness, liabilities and obligations under this
Section 2A shall have been paid in full.
(c) On the termination of the Commitment, the Final Maturity
Date and the occurrence of an Event of Default, Required Banks may require (and
in the case of an Event of Default occurring under Paragraph 9.1(k) it shall be
required automatically) that the Borrower deliver to Administrative Agent, cash
or U.S. Treasury Bills with maturities of not more than 90 days from the date of
delivery (discounted in accordance with customary banking practice to present
value to determine amount) in an amount equal at all times to one hundred ten
percent (110%) of the outstanding undrawn amount of all Letters of Credit, such
cash or U.S. Treasury Bills and all interest earned thereon to constitute cash
collateral for all such Letters of Credit. At such time as such collateral is
required to be and has not been deposited, Administrative Agent on behalf of
Banks shall be entitled to liquidate such of the other collateral for the Loan
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(if any) as is necessary or appropriate in its sole judgment so as to create
such cash collateral.
(d) Any cash collateral deposited under subparagraph (c) above,
and all interest earned thereon, shall be held by Administrative Agent and
invested and reinvested at the expense and the written direction of the
Borrower, in U.S. Treasury Bills with maturities of no more than ninety (90)
days from the date of investment.
2A.7 GENERAL TERMS OF CREDITS. The following terms and conditions
apply with respect to each Letter of Credit (a "Credit") notwithstanding
anything to the contrary contained herein:
(a) the Borrower assume all risks of the acts or omissions of
the beneficiary of each Credit with respect to the use of the Credit or with
respect to the beneficiary's obligations to the Borrower. None of the Banks nor
any of their officers or directors shall be liable or responsible for, and the
Banks hereby agree to indemnify and hold Administrative Agent and any issuer of
a Credit harmless (except for the issuer's gross negligence or willful
misconduct) with respect to: (i) the use which may be made of the Credit or for
any acts or omissions of the beneficiary in connection therewith; (ii) the
accuracy, truth, validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should in fact prove to be in any or
all respects false, misleading, inaccurate, invalid, insufficient, fraudulent,
or forged; (iii) the payment by Administrative Agent against presentation of
documents which do not comply with the terms of the Credit, including failure of
any documents to bear any reference or adequate reference to a Credit; (iv) any
other circumstances whatsoever in making or failing to make payment under a
Credit; or (v) any inaccuracy, interruption, error or delay in transmission or
delivery of correspondence or documents by post, telegraph or otherwise. In
furtherance and not in limitation of the foregoing, Administrative Agent may
accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
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(b) Notwithstanding the foregoing, with respect to any Credit,
the Borrower shall have a claim against Administrative Agent, and Administrative
Agent shall be liable to the Borrower, to the extent, but only to the extent, of
any direct, as opposed to indirect or consequential, damages suffered by the
Borrower caused by the Administrative Agent's willful misconduct or gross
negligence.
(c) To the extent not inconsistent with this Agreement, the
Uniform Customs and Practices for Documentary Credits (1993 Revision),
International Chamber of Commerce Publication No. 500, are hereby made a part of
this Agreement with respect to obligations in connection with each Credit.
SECTION 3
REPRESENTATIONS AND WARRANTIES
The Borrower, Communications and the Guarantors, jointly and severally
represent and warrant, as to themselves and, as applicable, their Subsidiaries
as follows:
3.1. ORGANIZATION AND GOOD STANDING. Each of Borrower,
Communications, each Guarantor (other than the Cellular Partnerships) and each
of their respective Subsidiaries is a corporation duly organized and existing
and in good standing, under the laws of its respective state of incorporation,
and each Cellular Partnership is a partnership duly formed and validly existing
under the laws of its respective state of formation. Each of Communication,
Borrower, each Guarantor and each of their respective Subsidiaries has the power
and authority to carry on its business as now conducted, and is qualified to do
business in all other states in which the nature of its business or the
ownership of its properties requires such qualification.
3.2. POWER AND AUTHORITY; VALIDITY OF AGREEMENT. Each of Borrower,
the Guarantors, Communications and their respective Subsidiaries has the power
and authority under the laws of its respective states of incorporation and under
its respective articles of incorporation and by-laws or its Partnership
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Agreement, as applicable, to enter into and perform this Agreement, the Notes,
the Collateral Security Documents and all other agreements, documents and
actions required hereunder to the extent that each is a party thereto; and all
actions (corporate or otherwise) necessary or appropriate for execution and
performance of this Agreement, the Notes, the Collateral Security Documents and
all other agreements, documents and actions required hereunder by Borrower, the
Guarantors, Communications and their respective Subsidiaries have been taken,
and, upon their execution, the same will constitute the valid and binding
obligations of Borrower, the Guarantors, Communications and their respective
Subsidiaries to the extent that each is a party thereto, enforceable in
accordance with their terms.
3.3. NO VIOLATION OF LAWS OR AGREEMENTS. The making and performance
of this Agreement, the Notes, the Collateral Security Documents and the other
documents, agreements and actions required of Borrower, the Guarantors,
Communications and their respective Subsidiaries will not violate any provisions
of any law or regulation, federal, state or local, or the respective articles of
incorporation and by-laws or the Partnership Agreements, as applicable, of
Borrower, the Guarantors, Communications and their respective Subsidiaries or
result in any breach or violation of, or constitute a default under, any
agreement or instruments by which Borrower, any Guarantor, Communications or
their respective Subsidiaries or their respective property may be bound.
3.4. MATERIAL CONTRACTS. Exhibit D hereto sets forth a list of all
contracts material to the respective business of the Borrower, the Guarantors,
Communications and their respective Subsidiaries (including with respect to the
Systems), and there exists no material default under any of such contracts.
There is no default existing under the Restated Mortgage, Security Agreement and
Financing Statement dated as of May 15, 1993, as amended, by and among Dobson
Telephone Company, Inc., the United States of America, Rural Utility Service
("RUS") and Rural Telephone Bank (the "Telephone/RUS Agreement").
3.5. COMPLIANCE. Each of Borrower, the Guarantors, Communications
and their respective Subsidiaries is in compliance
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in all material respects with all applicable laws and regulations, federal,
state and local (including without limitation, the Communications Act, the
Environmental Control Statutes and those administered by the Local
Authorities and the FCC), material to the conduct of its business and
operations. Each of Borrower, the Guarantors, Communications and their
respective Subsidiaries possesses all the franchises, permits, licenses,
certificates of compliance and approval and grants of authority necessary,
including, without limitation, any license or permit issued by the FCC, all
of which are described on Exhibit D hereto, necessary or required in the
conduct of its respective business(es), and the same are valid, binding,
enforceable and subsisting without any defaults thereunder or enforceable
adverse limitations thereon and are not subject to any proceedings or claims
opposing the issuance, development or use thereof or contesting the validity
thereof. No authorization, consent, approval, waiver, license or formal
exemptions from, nor any filing, declaration or registration with, any court,
governmental agency or regulatory authority (federal, state or local) or
non-governmental entity, under the terms of contracts or otherwise, is
required by reason of or in connection with the execution and performance of
this Agreement, the Notes, the Collateral Security Documents and all other
agreements, documents and actions required hereunder by Borrower, the
Guarantors, Communications and their respective Subsidiaries.
3.6. LITIGATION. There are no actions, suits, proceedings or claims
which are pending or, to the best of Borrower's knowledge or information,
threatened against Borrower, the Guarantors, Communications or their respective
Subsidiaries which, if adversely resolved, would have a Material Adverse Effect.
3.7. TITLE TO ASSETS. Each of Borrower, the Guarantors,
Communications and their respective Subsidiaries has good and marketable title
to all of its properties and assets free and clear of any liens and
encumbrances, except the security interests granted to Banks hereunder, and
liens and security interests permitted pursuant to Paragraphs 6.4 and 7.4
hereof; and all such assets are in good order and repair and fully covered by
the insurance required under Paragraph 5.7 hereof.
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The aggregate annual rental payments on all real estate leased, as lessee, by
Communications, the Borrower, the Guarantors and their respective
Subsidiaries does not exceed One Million Dollars ($1,000,000).
3.8. CAPITAL STOCK/PARTNERSHIP INTERESTS. The number of shares and
classes of the capital stock of Borrower, Communications and each of their
respective Subsidiaries (other than the Cellular Partnerships) and the ownership
thereof are accurately set forth on EXHIBIT D attached hereto; all such shares
are validly issued, fully paid and non-assessable, and the issuance and sale
thereof are in compliance with all applicable federal and state securities and
other applicable laws; and the shareholders' ownership thereof is free and clear
of any liens or encumbrances or other contractual restrictions except the pledge
of the common shares of Borrower, and its Subsidiaries to Administrative Agent
for the benefit of the Banks hereunder. The number and percentage shares of
partnership interests in each of the Cellular Partnerships and the ownership
thereof are accurately set forth on EXHIBIT D attached hereto, all such
partnership interests are validly issued under the terms of the applicable
Partnership Agreements and applicable law, and the partners' ownership thereof
is free and clear of any liens or security interests or other contractual
restrictions other than the pledge thereof in favor of Administrative Agent on
behalf of Banks and as set forth on EXHIBIT D attached hereto.
3.9. ACCURACY OF INFORMATION; FULL DISCLOSURE.
(a) All information furnished to Banks concerning the financial
condition of Borrower and its Consolidated Subsidiaries and Communications and
its Consolidated Subsidiaries, including the annual financial statement for the
period ending December 31, 1995, and the consolidated unaudited financial
statements dated December 31, 1996, copies of which have been furnished to
Banks, has been prepared in accordance with GAAP and fairly presents the
financial condition of Borrower and its Consolidated Subsidiaries and
Communications and its Consolidated Subsidiaries as of the dates and for the
periods covered and discloses all liabilities of Borrower and such Consolidated
Subsidiaries and Communications and its Consolidated
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Subsidiaries and there has been no material adverse change in the financial
condition or business of Borrower and its Consolidated Subsidiaries and
Communications and its Consolidated Subsidiaries from the date of such
statements to the date hereof; and
(b) All financial statements and other documents furnished by
Communications and the Borrower to the Banks in connection with this Agreement
and the Notes do not and will not contain any untrue statement of material fact
or omit to state a material fact necessary in order to make the statements
contained therein not misleading. Communications and the Borrower have disclosed
to the Banks in writing any and all facts which materially and adversely affect
the business, properties, operations or condition, financial or otherwise, of
Communications and the Borrower or of Communications and the Borrower and their
Subsidiaries, considered as a whole, or Communications' and the Borrower's
ability to perform their obligations under this Agreement and the Notes.
3.10. TAXES AND ASSESSMENTS. (a) Each of the Borrower, the
Guarantors, Communications and their respective Subsidiaries has filed all
required tax returns or has filed for extensions of time for the filing thereof,
and has paid all applicable federal, state and local taxes, other than taxes not
yet due or which may be paid hereafter without penalty; provided that no such
taxes shall be required to be paid if they are being contested in good faith by
appropriate proceedings and are covered by appropriate reserves maintained in
accordance with GAAP; and (b) Borrower the Guarantors and Communications have no
knowledge of any deficiency or additional assessment in connection therewith not
provided for in the financial statements required hereunder.
3.11. INDEBTEDNESS. Each of the Borrower, the Guarantors,
Communications and their respective Subsidiaries have no presently outstanding
Indebtedness or obligations, including contingent obligations and obligations
under leases of property from others, except the Indebtedness and obligations
described in Exhibit D hereto and in the Borrower's, the Guarantors and
Communications' financial statements which have been furnished to
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Banks from time to time pursuant to Paragraphs 4.1, 5.2 and 5.3 hereof.
3.12. MANAGEMENT AGREEMENTS. Neither the Borrower, the Guarantors,
Communications nor their respective Subsidiaries is a party to any management or
consulting agreements for the provision of services to it, except as described
in EXHIBIT D hereto.
3.13. INVESTMENTS. Neither the Borrower, the Guarantors,
Communications nor their respective Subsidiaries has any investments in or loans
to any other individuals or business entities, other than the investments
described in Paragraphs 3.8 and 3.9 above and such loans and investments as are
permitted pursuant to Section 6 hereof.
3.14. ERISA. Each of the Borrower, the Guarantors, Communications
and their respective Subsidiaries and each ERISA Affiliate is in compliance in
all material respects with all applicable provisions of ERISA and the
regulations promulgated thereunder; and,
(a) Neither the Borrower, the Guarantors, Communications, their
respective Subsidiaries, nor any ERISA Affiliate maintains or contributes to or
has maintained or contributed to any multiemployer plan (as defined in section
4001 of ERISA) under which Borrower, Communications or their respective
Subsidiaries or any ERISA Affiliate could have any withdrawal liability;
(b) Neither the Borrower, the Guarantors, Communications, their
respective Subsidiaries, nor any ERISA Affiliate, sponsors or maintains any Plan
under which there is an Accumulated Funding Deficiency, whether or not waived;
(c) The aggregate liability for accrued benefits and other
ancillary benefits under each Plan that is or will be sponsored or maintained by
the Borrower, the Guarantors, Communications, their respective Subsidiaries or
any ERISA Affiliate (determined on the basis of the actuarial assumptions
prescribed for valuing benefits under terminating single-employer defined
benefit plans under Title IV of ERISA) does not exceed
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the aggregate fair market value of the assets under each such defined benefit
pension Plan;
(d) The aggregate liability of the Borrower, the Guarantors,
Communications, their respective Subsidiaries and each ERISA Affiliate arising
out of or relating to a failure of any Plan to comply with the provisions of
ERISA or the Code is not an amount which is reasonably likely to have a Material
Adverse Effect; and
(e) There does not exist any unfunded liability (determined on
the basis of actuarial assumptions utilized by the actuary for the Plan in
preparing the most recent Annual Report) of the Borrower, the Guarantors,
Communications, their respective Subsidiaries or any ERISA Affiliate under any
Plan providing post-retirement life or health benefits.
3.15. ACQUISITION AGREEMENTS.
(a) VALIDITY. Each of the Borrower, the Guarantors,
Communications and their respective Subsidiaries has the power and authority
under laws of its state of incorporation and under its articles of incorporation
and by-laws or Partnership Agreement, if applicable, to enter into and perform
the Acquisition Agreements to which it is a party and all other agreements,
documents and actions required thereunder; and all actions (corporate or
otherwise) necessary or appropriate for the Borrower, the Guarantors,
Communications or their respective Subsidiaries (as the case may be) execution
and performance of the Acquisition Agreements and all other documents,
agreements and actions required thereunder have been taken, and, upon their
execution, the Acquisition Agreements will constitute the valid and binding
obligation of the Borrower, the Guarantors, Communications and their respective
Subsidiaries, enforceable in accordance with their respective terms.
(i) NO VIOLATIONS. The making and performance of the
Acquisition Agreements, and all other agreements, documents and actions required
thereunder, will not violate any provision of any law or regulation, federal,
state or local, including without limitation all state corporate laws and
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judicial precedents of the states of incorporation or formation of the Borrower,
the Guarantors, Communications and their respective Subsidiaries and will not
violate any provisions of the articles of incorporation and by-laws or
Partnership Agreements of the Borrower, the Guarantors, Communications or their
respective Subsidiaries, or constitute a default under any agreement by which
the Borrower, the Guarantors, Communications or their respective Subsidiaries or
their respective property may be bound.
3.16. FEES AND COMMISSIONS. Neither the Borrower, the Guarantors,
Communications nor their respective Subsidiaries owe any brokers' or finders'
fees or commissions of any kind, and the Borrower, the Guarantors,
Communications and their respective Subsidiaries know of no claim for any
brokers' or finders' fees or commissions, in connection with the Borrower
obtaining the Commitment or the Loan from Banks, except those provided herein.
3.17 NO EXTENSION OF CREDIT FOR SECURITIES. Neither the Borrower,
the Guarantors, Communications nor their respective Subsidiaries is now, nor at
any time has it been, engaged principally, or as one of its important
activities, in the business of extending or arranging for the extension of
credit, for the purpose of purchasing or carrying any margin stock or margin
securities; nor will the proceeds of the Loan be used by the Borrower directly
or indirectly, for such purposes.
3.18. PERFECTION OF SECURITY INTERESTS. Upon the filing of the
financing statements against the Borrower, the Guarantors (except
Communications), and their respective Subsidiaries and the respective partners
of the Cellular Partnerships covering all the security interests created by the
Security Agreement and the Pledges of Partnership Interests, in all places as,
in the opinion of counsel for the Borrower, are necessary to perfect said
security interests, and upon the delivery into the possession of Administrative
Agent of all the outstanding shares of stock of the Borrower, the Guarantors
(other than the Cellular Partnerships) and their respective Subsidiaries (other
than the Cellular Partnerships) pursuant to the Pledge Agreements, no further
action, including any filing or recording of any document, is necessary in order
to establish,
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perfect and maintain Banks' first priority security interests in the assets
and the stock created by the Security Agreement, the Pledges of Partnership
Interests and the Pledge Agreements, respectively, except for the periodic
filing of continuation statements with respect to financing statements filed
under the Uniform Commercial Code of applicable jurisdiction.
3.19. HAZARDOUS WASTES, SUBSTANCES AND PETROLEUM PRODUCTS.
(a) Each of the Borrower, the Guarantors, Communications and
their respective Subsidiaries: (i) has received all permits and filed all
notifications necessary to carry on their respective business(es); and (ii) is
in compliance in all respects with all Environmental Control Statutes.
(b) Neither the Borrower, the Guarantors, Communications nor any
of their respective Subsidiaries has given any written or oral notice, nor has
it failed to give required notice, to the EPA or any state or local agency with
regard to any actual or imminently threatened Release of Hazardous Substances on
properties owned, leased or operated by the Borrower, the Guarantors,
Communications or any of their respective Subsidiaries or used in connection
with the conduct of its business and operations.
(c) Neither the Borrower, the Guarantors, Communications nor any
of their respective Subsidiaries has received notice that it is potentially
responsible for costs of clean-up or remediation of any actual or imminently
threatened Release of Hazardous Substances pursuant to any Environmental Control
Statute.
3.20. SOLVENCY. Communications, on a consolidated basis, is, and
after receipt and application of the Communications Bond Debt by Communications
and of the first Advance hereunder by Borrower will be, solvent such that:
(i) the fair value of its assets (including without limitation the fair salable
value of the goodwill and other intangible property of Communications and its
Consolidated Subsidiaries) is greater than the total amount of its liabilities,
including
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without limitation, contingent liabilities, (ii) the present fair salable
value of its assets (including without limitation the fair salable value of
the goodwill and other intangible property of Communications and its
Consolidated Subsidiaries) is not less than the amount it will be required to
pay the probable liability on its debts as they become absolute and matured,
and (iii) it is able to realize upon its assets and pay its debts and other
liabilities, contingent obligations and other commitments as they mature in
the normal course of business. Each of Borrower, the Guarantors,
Communications and each of their respective Subsidiaries (i) does not intend
to, and does not believe that it will, incur debts or liabilities beyond its
ability to pay as such debts and liabilities mature, and (ii) is not engaged
in a business or transaction, or about to engage in a business or
transaction, for which its property would constitute unreasonably small
capital after giving due consideration to the prevailing practice and
industry in which it is engaged. For purposes of this Paragraph 3.20, in
computing the amount of contingent liabilities at any time, it is intended
that such liabilities will be computed at the amount which, in light of all
the facts and circumstances existing at such time, represents the amount that
reasonably can be expected to become an actual matured liability of the
Borrower, the Guarantors, Communications or their respective Subsidiaries.
SECTION 4
CONDITIONS
4.1. FIRST ADVANCE. The obligation of Banks to make the first
Advance of the Loan on the Effective Date shall be subject to the satisfaction
of the following conditions and Banks' receipt of the following documents, each
in form and substance satisfactory to Banks:
(a) PROMISSORY NOTES. A Note in favor of each Bank in the form
of EXHIBIT B hereto duly executed by the Borrower.
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(b) AUTHORIZATION DOCUMENTS. A certified copy of the articles
of incorporation, bylaws and resolutions of the boards of directors of the
Borrower, the Guarantors (other than the Cellular Partnerships) and
Communications and a certified copy of each Partnership Agreement and evidence
of authorization by the applicable partners of the Cellular Partnerships, in
each case authorizing execution and full performance of this Agreement, the
Notes, the Collateral Security Documents and all other documents and actions
required hereunder, to the extent each is a party thereto, and an incumbency
certificate setting forth the officers and partners of each of the Borrower,
each Guarantor, and Communications and providing specimen signatures of those
persons authorized to execute this Agreement and related documents.
(c) SECURITY AGREEMENTS. A Security Agreement executed jointly
and severally by the Borrower, and each Guarantor (other than Communications) in
favor of Administrative Agent on behalf of Banks granting and confirming a first
lien security interest in all of their respective assets (now owned or hereafter
acquired) as security for the Loan including without limitation, any
intercompany debt and the collateral security therefor, together with financing
statements or amendments to financing statements, as the case may be, landlord
waivers, mortgagee consents and waivers and evidence of any other recordations
required by applicable law or by Banks to perfect or to continue the perfected
status of such security interests. With respect to the Cellular Partnerships,
the Security Agreement shall provide:
(i) If Texas 2 has repaid all of its intercompany
Indebtedness to the Borrower pursuant to the Cellular Partnership Promissory
Note in accordance with its terms then Banks shall release Texas 2 from the
Guaranty Agreement and release all Collateral owned by Texas 2 held pursuant to
the Security Agreement with respect to Texas 2; provided, however, that from the
date of such repayment until all Indebtedness hereunder has been paid in full
and the Commitment has been terminated, the Borrower may not, directly or
through another Subsidiary, advance funds to Texas 2, and Texas 2 may have no
Indebtedness for borrowed money.
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(ii) If Oklahoma 5 and Oklahoma 7 have repaid all of
their Indebtedness to the Borrower pursuant to the Cellular Partnership
Promissory Note in accordance with its terms then Banks shall release Oklahoma 5
and Oklahoma 7 from the Guaranty Agreement, release all Collateral owned by
Oklahoma 5 and Oklahoma 7 held pursuant to the Security Agreements with respect
to Oklahoma 5 and Oklahoma 7 and terminate the Pledges of Partnership Interests
executed by The Hinton Cellular Co., L.L.C. and Stojmat; provided, however, that
from the date of such repayment until all Indebtedness hereunder has been paid
in full and the Commitment has been terminated, the Borrower may not, directly
or through another Subsidiary, advance funds to Oklahoma 5 and Oklahoma 7, and
Oklahoma 5 and Oklahoma 7 may have no Indebtedness for borrowed money.
(d) PLEDGE AGREEMENTS. Pledges and confirmation of pledge
agreements executed by Communications and Borrower, in favor of Administrative
Agent on behalf of the Banks (i) with respect to Communications, pledging one
hundred percent (100%) of the outstanding common stock of Borrower, and (ii)
with respect to the Borrower, pledging one hundred percent (100%) of the issued
and outstanding capital stock of Enid, Cellular, Woodward, KS/MO, Arizona,
Maryland, Dobson Telephone and Fiber, as security for the Loan, together with
the stock certificates therefor, stock powers executed by such shareholders in
blank and copies of any shareholder agreements.
(e) PLEDGES OF PARTNERSHIP INTERESTS. (i) Pledges and
confirmations of pledges of one hundred percent (100%) of the partnership
interests in Oklahoma Independent 5 and Oklahoma Independent 7, ninety-nine
percent (99%) of the partnership interests in Oklahoma 5 and Oklahoma 7 and
sixty-one percent (61%) of the partnership interests in Texas 2, executed by the
applicable partners of Texas 2, Oklahoma 5, Oklahoma 7, Oklahoma Independent 5
and Oklahoma Independent 7 in favor of Administrative Agent on behalf of the
Banks as security for the Loan, subject to certain agreed limitations as set
forth therein, together with appropriate financing statements. The Pledges of
Partnership Interests executed with respect to partnership interests in Oklahoma
Independent 5 and Oklahoma Independent 7, other than those executed by Cellular,
shall be subject to release provisions as set forth therein.
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(f) ASSIGNMENT OF NOTES. A collateral assignment by Borrower of
all intercompany notes payable to Borrower by the Cellular Partnerships, each
payable to Borrower and endorsed by Borrower to Administrative Agent on behalf
of Banks, containing amortization schedules acceptable to the Banks (each a
"Cellular Partnership Promissory Note").
(g) GUARANTY AGREEMENTS. A Guaranty Agreement executed by the
Guarantors, jointly and severally, absolutely and unconditionally guarantying
the payment of Borrower's indebtedness and the performance of Borrower's
obligations hereunder. The Guaranty Agreement shall contain release provisions
applicable to Texas, Oklahoma 5 and Oklahoma 7 as set forth therein.
(h) OPINIONS OF COUNSEL. Opinion letters from counsel for
Borrower (including FCC and Oklahoma, Kansas and Missouri counsel) covering with
such exceptions and qualifications as may be satisfactory to Banks, the
representations and warranties set forth in Section Three hereof.
(i) INSURANCE. Certificates of insurance and evidence of loss
payee endorsements in favor of Banks with respect to all fire, casualty,
liability and other insurance covering the Systems.
(j) SUBORDINATION DOCUMENTS. Subordination agreements executed
by any Affiliates of a Borrower to which Borrower or any Guarantor is indebted,
subordinating such indebtedness to the Loan and the Guaranty Agreement together
with copies of all documents creating or evidencing such indebtedness, and
appropriate certified board resolutions and legal opinions as required by Banks.
(k) FINANCIAL INFORMATION. (i) A PRO FORMA schedule of
consolidated assets and liabilities of Borrower and its Subsidiaries and
Communications and its Consolidated Subsidiaries, as of the date hereof, setting
forth all of indebtedness of Borrower, Communications and such Subsidiaries,
certified as accurate by the chief financial officer of Borrower and
Communications; and (ii) cash flow projections for Borrower
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and its Consolidated Subsidiaries and Communications and its Consolidated
Subsidiaries on consolidated and consolidating bases, for the three (3) year
period immediately following the date hereof, satisfactory to Administrative
Agent and certified as being based on reasonable assumptions by the chief
financial officer of Borrower and Communications (such cash flow projections
having taken into account the transactions contemplated by this Agreement and
the Transaction Agreements and identified the sources of cash Borrower,
Communications and such Consolidated Subsidiaries intend to use to meet their
cash needs during such three year period).
(l) ADVANCE REQUEST. A completed Advance Request Form required
under Paragraph 2.7(a), hereof, and any other documents or information
reasonably required by Banks in connection therewith.
(m) FEES. Payment to Administrative Agent and the Managing
Agents of the fees described in letters dated the date hereof by and among the
Borrower, Communications and the Managing Agents (the "Fee Letters").
(n) SEARCHES. Uniform Commercial Code, tax, judgment, PBGC and
EPA searches against the Borrower, the Guarantors, Communications, and each of
their respective Subsidiaries in those offices and jurisdictions as the Banks
shall reasonably request.
(o) COMMUNICATIONS BOND DEBT. Communications shall have
satisfied all conditions and taken all actions necessary to complete the
Communications Bond Debt and all of the proceeds thereof shall have been paid
into the escrow fund created pursuant to the Escrow Agreement or contributed to
the equity of the Borrower and used to fund costs of the Horizon Systems
Acquisition.
(p) TAX SHARING AGREEMENT. A Tax Sharing Agreement among the
Borrower, Communications and the Guarantors, the form and substance of which
shall be satisfactory to Banks.
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(q) FCC APPROVALS. Preliminary approval from the FCC of the
Reorganization shall have been obtained and the FCC's approval of the transfer
to Borrower or a Subsidiary of Borrower of the FCC licenses to be transferred in
connection with the Horizon Systems Acquisition and the Maryland Acquisition
shall be final and non-appealable.
(r) OTHER DOCUMENTS. Such additional documents as Banks
reasonably may request.
4.2. ADVANCE FOR MARYLAND ACQUISITION. The Banks shall make an
additional Advance of the Loan (the "Maryland Advance") to fund the Maryland
Acquisition in an amount not to exceed, together with proceeds of the
Communications Bond Debt released from the escrow established under the Escrow
Agreement, Seventy Five Million Two Hundred Thousand Dollars ($75,200,000),
subject to adjustments required by the applicable Acquisition Agreements. The
obligation of Banks to make the Maryland Advance shall be subject to the
satisfaction of the conditions set forth in Paragraph 4.1 above, as well as the
satisfaction of the following conditions and Banks' receipt of the following
documents, each in form and substance satisfactory to Banks:
(a) MARYLAND ACQUISITION. Borrower and Maryland shall have
satisfied all conditions and taken all actions necessary to complete the
Maryland Acquisition.
(b) ACQUISITION DOCUMENTS. Copies of fully executed acquisition
agreements, together with a certificate of an officer of Borrower stating that
all conditions set forth in such acquisition agreements, other than the payment
of money, have been satisfied.
(c) ADVANCE REQUEST. A completed Advance Request Form required
under Paragraph 2.7(a), hereof, and any other documents or information
reasonably required by Banks in connection therewith.
(d) APPROVALS; COMPLIANCE. Each of Borrower and Maryland shall
have received all necessary final approvals required by all local, state and
federal laws and regulations
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applicable to its business, including without limitation the Environmental
Control Statutes, the Communications Act and all laws and regulations of the
FCC and the Local Authorities, and the provisions and requirements of all
franchises, permits, certificates of compliance and approval issued by
regulatory authorities and other like grants of authority. Borrower and
Maryland shall have satisfied all necessary notification and waiting period
requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
(e) OTHER DOCUMENTS. Any other documents or information,
including without limitation, any additional searches, certificates, opinions or
financing statements
reasonably required by Banks in connection with the Maryland Advance.
4.3. ADVANCE FOR HORIZON ACQUISITION. The Banks shall make an
additional Advance of the Loan (the "Horizon Advance") to fund the Horizon
Acquisition in an amount not to exceed, together with proceeds of the
Communications Bond Debt released from the escrow established pursuant to the
Escrow Agreement, Seventy Five Million Dollars ($75,000,000) subject to normal
working capital adjustments plus the reimbursement of capital expenditures not
to exceed Three Million Dollars ($3,000,000). The obligation of Banks to make
the Horizon Advance shall be subject to the satisfaction of the conditions set
forth in Paragraph 4.1 above, as well as the satisfaction of the following
conditions and Banks' receipt of the following documents, each in form and
substance satisfactory to Banks:
(a) HORIZON ACQUISITION. Borrower and Maryland shall have
satisfied all conditions and taken all actions necessary to complete the Horizon
Acquisition.
(b) ACQUISITION DOCUMENTS. Copies of fully executed acquisition
agreements, together with a certificate of an officer of Borrower stating that
all conditions set forth in such acquisition agreements, other than the payment
of money, have been satisfied.
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(c) ADVANCE REQUEST. A completed Advance Request Form required
under Paragraph 2.7(a), hereof, and any other documents or information
reasonably required by Banks in connection therewith.
(d) APPROVALS; COMPLIANCE. Each of Borrower and Maryland shall
have received all necessary final approvals required by all local, state and
federal laws and regulations applicable to its business, including without
limitation the Environmental Control Statutes, the Communications Act and all
laws and regulations of the FCC and the Local Authorities, and the provisions
and requirements of all franchises, permits, certificates of compliance and
approval issued by regulatory authorities and other like grants of authority.
Borrower and Maryland shall have satisfied all necessary notification and
waiting period requirements under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
(e) OTHER DOCUMENTS. Any other documents or information,
including without limitation, any additional searches, certificates, opinions or
financing statements reasonably required by Banks in connection with the
Horizon Advance.
4.4. ADVANCE FOR ARIZONA ACQUISITION. The Banks shall make an
additional Advance of the Loan to fund the Arizona Acquisition in an amount not
to exceed Forty Five Million Dollars ($45,000,000) subject to normal working
capital adjustments (the "Arizona Advance"). The obligation of Banks to make
the Arizona Advance shall be subject to the satisfaction of the conditions set
forth in Paragraph 4.1 above, as well as the satisfaction of the following
conditions and Banks' receipt of the following documents, each in form and
substance satisfactory to Required Banks:
(a) ARIZONA ACQUISITION. Required Banks shall have approved the
form and substance of the Arizona Acquisition and Borrower and Arizona shall
have satisfied all conditions and taken all actions necessary to complete the
Arizona Acquisition.
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(b) ACQUISITION DOCUMENTS. Copies of fully executed acquisition
agreements, together with a certificate of an officer of Borrower stating that
all conditions set forth in such acquisition agreements, other than the payment
of money, have been satisfied.
(c) ADVANCE REQUEST. A completed Advance Request Form required
under Paragraph 2.7(a), hereof, and any other documents or information
reasonably required by Banks in connection therewith.
(d) APPROVALS; COMPLIANCE. Each of Borrower and Arizona shall
have received all necessary final approvals required by all local, state and
federal laws and regulations applicable to its business, including without
limitation the Environmental Control Statutes, the Communications Act and all
laws and regulations of the FCC and the Local Authorities, and the provisions
and requirements of all franchises, permits, certificates of compliance and
approval issued by regulatory authorities and other like grants of authority.
Borrower and Communications shall have satisfied all necessary notification and
waiting period requirements under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976.
(e) EQUITY INVESTMENT. The capital contributions or other equity
investments required to be made for the partnership interests in GRCGP to be
owned by any party other than Borrower or a Subsidiary of Borrower shall have
been fully funded by the applicable partners of GRCGP.
(f) SUBORDINATED SELLER FINANCING. Copies of fully executed
documents related to the subordinated seller financing provided to the Gila
Indian Tribe by the Borrower, on terms, including collateral security,
satisfactory to the Required Banks.
(g) JOINDERS AND AMENDMENTS. GRCGP shall have executed and
delivered such joinders to this Agreement, the Guaranty Agreement and the
Collateral Security Documents as Banks shall have reasonably requested; the
holders of one hundred percent (100%) of the GPCGP partnership interests shall
have
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pledged such interests in favor of Administrative Agent on behalf of Banks to
secure the Loan; and the parties to this Agreement shall have entered into an
amendment to this Agreement, if appropriate, to reflect any agreed-upon
changes to this Agreement relating to the Arizona Acquisition.
(h) OTHER DOCUMENTS. Any other documents or information,
including without limitation, any additional searches, certificates, opinions or
financing statements
reasonably required by Banks in connection with the Arizona Advance.
4.5. SUBSEQUENT ADVANCES. The obligation of Banks to make additional
Advances under the Commitment or to issue Letters of Credit shall be subject to
the Banks' receipt of a completed Advance Request Form or Letter of Credit
Request Form and either a Stand-by Letter of Credit Application or a Commercial
Letter of Credit Application, as applicable.
4.6. ADDITIONAL CONDITION TO BANKS' OBLIGATIONS. It shall be a
condition to Banks' obligation hereunder to make any Advance that the
representations and warranties set forth herein and in the Collateral Security
Documents shall be true and correct as if made on the date of such Advance, that
no Event of Default or Default shall have occurred and be continuing on the date
of such Advance or be caused by such Advance, that all fees required pursuant to
their Agreement and the Fee Letters have been paid as and when due, and there
shall have been no material adverse change in Communications' and its
Consolidated Subsidiaries' or the Borrower's and its Consolidated Subsidiaries'
financial condition or business since the date hereof.
SECTION 5
AFFIRMATIVE COVENANTS
Each of Borrower, Communications and each Guarantor covenants and
agrees that so long as the Commitment of Banks to Borrower or any indebtedness
of Borrower to Banks is outstanding, Borrower, Communications and each Guarantor
will, and will cause their respective Subsidiaries (and with respect to
Paragraph 5.13, will cause each ERISA Affiliate) to:
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5.1. EXISTENCE AND GOOD STANDING. Preserve and maintain its
existence as a corporation or partnership, as applicable, and its good standing
in all states in which it conducts business and the validity of all its
franchises, licenses, permits, certificates of compliance or grants of authority
required in the conduct of its business.
5.2. QUARTERLY FINANCIAL STATEMENTS. Furnish to Banks in respect of
Borrower and Communications within sixty (60) days of the end of each quarterly
period (or sooner if available), unaudited quarterly Consolidated financial
statements, in form and substance as required by Banks, including (i) a
Consolidated balance sheet, (ii) a Consolidated statement of income, (iii) a
statement of cash flows, (iv) non-consolidated information with respect to
Borrower and Communications to the extent used in calculating the financial
covenants set forth in Paragraphs 5.15 through 5.20 and Paragraphs 6.1, 6.3,
6.6, 6.7 and 7.1 hereof, (v) a compliance certificate in the form of Exhibit E
attached hereto showing the calculation of the covenants set forth in Paragraphs
5.15 through 5.20 and Paragraphs 6.1, 6.3, 6.6, 6.7, and 7.1 hereof, prepared in
accordance with GAAP consistently applied, together with a certificate executed
by the chief executive and chief financial officers of Borrower and
Communications stating that the financial statements fairly present the
financial condition of Borrower, Communications and their respective
Consolidated Subsidiaries as of the date and for the periods covered and that as
of the date of such certificate there exists no violation of any provision of
this Agreement or the happening of any Event of Default or Default, and (vi) a
certificate executed by the chief financial officer of Borrower detailing all
Permitted Acquisitions made in the most recently completed fiscal quarter, and
confirming that all such Permitted Acquisitions have been made in compliance
with all terms of this Agreement.
5.3. ANNUAL FINANCIAL STATEMENTS. Furnish to Banks in respect of
Borrower and Communications within one hundred twenty (120) days after the close
of each fiscal year (or sooner if available) commencing with fiscal 1995,
audited Consolidated and consolidating annual financial statements, including
the financial statements and information required under Paragraph 5.2
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hereof and information with respect to capitalized marketing costs, which
consolidated financial statements shall be prepared in accordance with GAAP
and shall be certified without qualification (except with respect to changes
in GAAP as to which Borrower's independent certified public accountants have
concurred) by an independent certified public accounting firm satisfactory to
Banks; and cause Banks to be furnished, at the time of the completion of the
annual audit, with a certificate signed by such accountants to the effect
that to the best of their knowledge there exists no violations of any
provisions of this Agreement or the happening of any Event of Default or
Default hereunder.
5.4. OTHER INFORMATION. Deliver to Banks: (i) promptly upon
transmission thereof, copies of all such financial statements, proxy statements,
notices and reports as it shall send to its stockholders, partners, trustee or
beneficiary, as applicable; and (ii) copies of all auditors' annual management
letters delivered to Borrower or Communications.
5.5. MANAGEMENT REPORTS. Deliver to Banks within sixty (60) days
after the end of each quarter a management report showing, for each System,
results of operations, subscriber counts and discussing the financial results
and matters affecting performances, and the outstanding principal amount of
intercompany loans and advances from Borrower to each of the Cellular
Partnerships, all in form and substance satisfactory to Banks.
5.6. BOOKS AND RECORDS.
(a) Keep and maintain satisfactory and adequate books and
records of account in accordance with GAAP and make or cause the same to be made
available to Banks or their agents or nominees at any reasonable time upon
reasonable notice for inspection and to make extracts thereof and permit
Administrative Agent or any Bank to discuss contents of same with senior
officers of Borrower and Communications and also with outside auditors and
accountants of Borrower and Communications; and
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(b) In connection with any loans, advances, dividends or
distributions by Borrower to Communications, Borrower shall deliver to
Administrative Agent and maintain in its corporate records such resolutions and
evidence of authority as may be necessary or required in order to demonstrate
the amount, date and purpose thereof and that such loan advance, dividend or
distribution is made in accordance with the terms of this Agreement.
5.7. INSURANCE. Keep and maintain all of its property and assets in
good order and repair and fully covered by insurance with reputable and
financially sound insurance companies against such hazards and in such amounts
as is customary in the industry, under policies requiring the insurer to furnish
reasonable notice to Banks and opportunity to cure any non-payment of premiums
prior to termination of coverage; and, as required above, furnish Banks with
certificates of such insurance and cause Banks to be named as additional
insureds and the lender loss payees thereof, as their interests may appear under
a standard mortgagee clause.
5.8. LITIGATION; EVENT OF DEFAULT. Notify Administrative Agent in
writing immediately of (i) the institution of any litigation, the commencement
of any administrative proceedings, the happening of any event or the assertion
or threat of any claim which could have a Material Adverse Effect (ii) the
occurrence of any Event of Default or Default hereunder or (iii) default under
any material contract.
5.9. TAXES. Pay and discharge all taxes, assessments or other
governmental charges or levies imposed on it or any of its property or assets
prior to the date on which any penalty for non-payment or late payment is
incurred, unless the same are (a) currently being contested in good faith by
appropriate proceedings, diligently prosecuted and (b) are covered by
appropriate reserves maintained in cash or cash equivalents in accordance with
GAAP. Notify Banks immediately if the Internal Revenue Service or any other
taxing authority commences or notifies Borrower or Communications of its
intention to commence an audit or investigation with respect to any taxes of any
kind due or alleged to be due from Borrower or Communications.
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5.10. EXPENSES AND COSTS. Pay or reimburse Administrative Agent and
Managing Agents for all reasonable out-of-pocket costs and expenses (including
but not limited to reasonable attorneys' fees and disbursements) Administrative
Agent or any Managing Agent may pay or incur in connection with the preparation
and review of this Agreement and all waivers, consents and amendments in
connection therewith and all other documentation related thereto, and the making
of the Loan hereunder, and pay or reimburse each of the Banks for all reasonable
out-of-pocket costs and expenses which such Bank may pay or incur in connection
with the collection, administration or enforcement of the same, including
without limitation any fees and disbursements incurred in defense of or to
retain amounts of principal, interest or fees paid. All obligations provided
for in this Paragraph 5.10 shall survive any termination of this Agreement or
the Commitment and the repayment of the Loan.
5.11. ADDITIONAL COLLATERAL AND NEW SUBSIDIARY DESIGNATION.
(a) Execute, deliver and record, at any time upon Banks'
reasonable request and in form and substance satisfactory to Banks, any of the
following instruments in favor of Banks as additional Collateral for the Loan:
(i) mortgages on any of Borrower's real estate and certificates of title
encumbrances against any of their vehicles, (ii) assignments of leases of real
or personal property leased by Borrower from or to others, (iii) specific
assignments by Borrower of easements, licenses, permits, certificates of
compliance and certificates of approval issued by regulatory authorities,
franchises or like grants of authority or service agreements, and (iv) any other
like assignments or agreements specifically covering Borrower's properties or
assets.
(b) Notify Administrative Agent not less than thirty (30) days
prior to: (i) the opening of any new places of business in a jurisdiction in
which Administrative Agent on behalf of Banks has not filed financing statements
or (ii) commencing any business under a new name, including any trade name.
(c) In the event that in the absence of a Default or an Event of
Default, as permitted by this Agreement, Borrower
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shall acquire all of the assets or stock of another entity, or form a new
Subsidiary, or any non-Borrower Subsidiary of Communications (which may
include, subject to the terms hereof, a New Business) shall be designated as
a new Subsidiary (each a "New Guarantor"), at the time of consummation of
such acquisition or the formation or designation of such New Guarantor,
Borrower shall provide Administrative Agent with not less than ten (10)
Business Days prior written notice, and: (i) if stock is acquired or a new
Subsidiary is formed or designated, the Borrower (or Subsidiary) owning such
shares shall deliver to Administrative Agent a joinder or supplement, as
applicable, to the applicable Pledge Agreement covering all shares of such
new or acquired corporate entity as additional collateral under such Pledge
Agreement together with the stock certificates representing such shares and
stock powers signed in blank, (ii) the new, acquired or designated entity
shall deliver to Administrative Agent a joinder to this Agreement, the Notes
and the Collateral Security Documents, certificates, opinions of counsel and
such other documents, including without limitation searches, appraisals and
other information as reasonably required by Required Banks, and (iii)
thereafter, commencing with the first full fiscal quarter in which such
entity has met the requirements of clauses (i) and (ii) above, such entity's
Operating Cash Flow shall be included in the calculation of Borrower's
Operating Cash Flow; PROVIDED, HOWEVER, that in the event Borrower desires to
designate an entity as a New Guarantor, and such entity is not engaged in the
domestic cellular telecommunications business, such designation shall require
the prior written approval of Required Banks.
(d) In the event that the Indebtedness of Dobson Telephone under
the Telephone/RUS Agreement is repaid in full, or in the event that RUS consents
to allow the execution of a guaranty agreement by Dobson Telephone and liens on
the assets of Dobson Telephone, Dobson Telephone shall execute, deliver and
record, in form and substance satisfactory to Banks, a joinder to the Guaranty
Agreement and a mortgage, security agreement and financing statements granting
to Administrative Agent, on behalf of Banks, liens and security interests in all
of the assets of Dobson Telephone.
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5.12. COMPLIANCE; NOTIFICATION.
(a) Comply in all respects with all local, state and federal
laws and regulations applicable to its business, including without limitation
the Environmental Control Statutes, the Communications Act and all laws and
regulations of the FCC and the Local Authorities, and the provisions and
requirements of all franchises, permits, certificates of compliance and approval
issued by regulatory authorities and other like grants of authority. Notify
Banks immediately in detail of any actual or alleged failure to comply with or
perform, breach, violation or default under any such laws or regulations or
under the terms of any of such franchises or licenses, grants of authority, or
of the occurrence or existence of any facts or circumstances which with the
passage of time, the giving of notice or otherwise could create such a breach,
violation or default or could occasion the termination of any of such franchises
or grants of authority.
(b) With respect to the Environmental Control Statutes,
immediately notify Administrative Agent when, in connection with the conduct of
Borrower's or Communications' business or operations, any person (including,
without limitation, EPA or any state or local agency) provides oral or written
notification to Borrower or its Subsidiaries, or Borrower or any Subsidiary
otherwise becomes aware of a condition with regard to an actual or imminently
threatened Release of Hazardous Substances; and notify Banks in detail
immediately upon the receipt by Borrower or any Subsidiary of an assertion of
liability under the Environmental Control Statutes, of any actual or alleged
failure to comply with or perform, breach, violation or default under any such
statutes or regulations or of the occurrence or existence of any facts, events
or circumstances which with the passage of time, the giving of notice, or both,
could create such a breach, violation or default.
5.13. ERISA. (a) Comply in all material respects with the provisions
of ERISA to the extent applicable to any Plan maintained for the employees of
Borrower or any of its Subsidiaries, Communications or any ERISA Affiliate; (b)
do or cause to be done all such acts and things that are required to maintain
the qualified status of each Plan and tax exempt status of each trust forming
part of such Plan; (c) not incur any
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material Accumulated Funding Deficiency or any material liability to the PBGC
(as established by ERISA); (d) permit any event to occur (i) as described in
Section 4042 of ERISA or (ii) which may result in the imposition of a lien on
its properties or assets; and (e) notify Banks in writing promptly after it
has come to the attention of senior management of Borrower or Communications
of the assertion or threat of any "reportable event" or other event described
in Section 4042 of ERISA (relating to the soundness of a Plan) or the PBGC's
ability to assert a material liability against it or impose a lien on the
properties or assets of Borrower or any of its Subsidiaries, Communications,
or any ERISA Affiliates; and (f) refrain from engaging in any prohibited
transactions or actions causing possible liability under Section 5.02 of
ERISA.
5.14. SUBSEQUENT CREDIT TERMS. Notify Banks in writing not less than
five (5) Business Days prior to entering into any new credit arrangement or any
amendment or modification of any credit arrangement. Upon entering into such
new arrangement or modification or amendment pursuant to which the applicable
entity agrees to covenants which are more restrictive to the Borrower,
Communications, the Guarantors or any Subsidiary than those contained in
Articles 5, 6, and 7 hereof, the corresponding covenants, terms and conditions
of this Agreement shall be and shall be deemed to be automatically and
immediately amended to conform with and to include the applicable covenants,
terms and/or conditions of such other agreement; PROVIDED, HOWEVER, that this
Paragraph 5.14 shall not be applicable or be deemed to affect any provision of
this Agreement if any new arrangement or any amendment or modification is less
restrictive to the Borrower, Communications, the Operating Companies, the
Guarantors or any Subsidiary. Borrower, Communications and the Guarantors
hereby agree to, and to cause their respective Subsidiaries to, promptly execute
and deliver any and all such further amendments as the Banks may deem necessary
or appropriate to effectuate the provisions of this Paragraph 5.14.
5.15. TOTAL DEBT TO OPERATING CASH FLOW. Maintain at all times
during the periods set forth in the left-hand column below a ratio of the
Borrower's and its Consolidated
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Subsidiaries' Total Debt to Borrower's and its Consolidated Subsidiaries'
Operating Cash Flow measured as of the last day of the most recently ended
fiscal quarter of not greater than the amount set forth in the right-hand
column:
PERIOD MAXIMUM RATIO
------ -------------
Date hereof through 6/30/97 6.75: 1
7/1/97 - 9/30/97 6.50: 1
10/1/97 - 12/31/97 6.25: 1
1/1/98 - 3/31/98 6.00: 1
4/1/98 - 6/30/98 5.75: 1
7/1/98 - 12/31/98 5.50: 1
1/1/99 - 6/30/99 5.00: 1
7/1/99 - 12/31/99 4.50: 1
1/1/00 - 6/30/00 4.00: 1
7/1/00 and thereafter 3.50: 1
5.16. PROFORMA DEBT SERVICE COVERAGE. Maintain at all times a ratio
of Borrower's and its Consolidated Subsidiaries' Operating Cash Flow measured as
of the last day of the most recently ended fiscal quarter to Borrower's and its
Consolidated Subsidiaries' Proforma Debt Service for the period commencing on
the first day of the current quarter of not less than 1.15 to 1.
5.17. INTEREST COVERAGE. Maintain at all times during the periods
set forth in the left-hand column, a ratio of Borrower's and its Consolidated
Subsidiaries' Operating Cash Flow measured as of the last day of the most
recently ended quarter to Borrower's and its Consolidated Subsidiaries' Interest
Expense during such most recently ended Rolling Period (as determined in
accordance with GAAP) of not less than the ratio set forth in the right-hand
column:
PERIOD MINIMUM RATIO
------ -------------
Date hereof through 3/31/98 1.75: 1
4/1/98 - 12/31/98 2.00: 1
1/1/99 and thereafter 2.25: 1
5.18. FIXED CHARGE COVERAGE. Maintain at all times a Fixed Charge
Coverage Ratio of not less than 1.00 to 1, measured as of the last day of the
most recently ended fiscal quarter.
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5.19. COMMUNICATIONS LEVERAGE RATIO. Maintain at all times during the
periods set forth in the left-hand column, Communications Leverage Ratio
measured as of the last day of the most recently ended quarter of not less than
the ratio set forth in the right-hand column:
PERIOD MINIMUM RATIO
------ -------------
Date hereof through 3/31/98 10.50: 1
4/1/98 - 9/30/98 10.25: 1
10/1/98 - 12/31/98 10.00: 1
1/1/99 - 3/31/99 9.50: 1
4/1/99 - 9/30/99 9.00: 1
10/1/99 - 3/31/00 8.00: 1
4/1/00 - 12/31/00 6.50: 1
1/1/01 - 12/31/01 5.50: 1
1/1/02 and thereafter 4.50: 1
5.20. COMMUNICATIONS INTEREST COVERAGE. Maintain at all times during the
periods set forth in the left-hand column, a ratio of Communications Operating
Cash Flow measured as of the most recently ended quarter to Communications
Interest Expense, for the most recently completed Rolling Period, of not less
than the amount set forth in the right-hand column:
PERIOD MINIMUM RATIO
------ -------------
4/1/99 - 12/31/99 1.10: 1
1/1/00 and thereafter 1.25: 1
5.21. INTEREST RATE PROTECTION. Within 60 days from the date hereof,
enter into interest rate protection agreements in a form acceptable to Managing
Agents and from one or more of the Banks or an institution acceptable to
Managing Agents, with respect to at least fifty percent (50%) of the Loan
outstanding on the date of this Agreement and for a period of at least two
years; provided, however, that (a) the protected rate shall be no greater than
2.5% above the all-in rate on the date hereof; (b) Banks shall be granted a
security interest in the Collateral in the Security Agreement to the extent of
each Bank's credit
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exposure under such interest rate protection agreements which is pari passu
with that of Agent on behalf of the Banks; (c) each such Bank shall calculate
its credit exposure in a reasonable and customary manner; and (d) all
documentation for such interest rate protection shall conform to ISDA
standards and must be acceptable to Managing Agents with respect to
intercreditor issues.
5.22. MANAGEMENT CHANGES. Notify Banks in writing within thirty (30)
days after any change of Borrower's or Communications' senior management
personnel.
5.23. SUCCESSOR ADMINISTRATIVE AGENT. In the event of the
appointment of any successor Administrative Agent pursuant to Paragraph 9.15
hereof, to execute and deliver any documents reasonably requested by Banks to
effectuate and confirm the transfer to such successor Administrative Agent of
all rights, powers, duties, obligations and property vested in its predecessor
Administrative Agent hereunder.
5.24. TRANSACTIONS AMONG AFFILIATES. Cause all transactions between
and among Affiliates to be on an arms-length basis and on such terms and
conditions as are customary in the applicable industry between and among
unrelated entities.
5.25. DEPOSIT ACCOUNT. Maintain at least one demand deposit account
with Administrative Agent.
5.26. OTHER INFORMATION. Provide Banks with any other documents and
information, financial or otherwise, reasonably requested by Banks from time to
time.
SECTION 6
NEGATIVE COVENANTS
So long as the Commitment or any indebtedness of Borrower to Banks
remains outstanding hereunder, each of the Borrower and each Guarantor (except
Communications and its Subsidiaries other than Borrower and its Subsidiaries)
covenants
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and agrees that without Required Banks' prior written consent it will not, and
will not permit any Subsidiary to:
6.1. INDEBTEDNESS. Borrow any monies or create any Indebtedness
except: (i) the Loan; (ii) intercompany loans and advances from Borrower to any
Guarantor other than Communications and the Cellular Partnerships; (iii)
borrowings by the Cellular Partnerships from Borrower, pursuant to Cellular
Partnership Promissory Notes assigned by Borrower to Administrative Agent on
behalf of Banks, subject to the limitations set forth in Paragraphs 4.1(c)(i)
and (ii) hereof; (iv) Indebtedness incurred in connection with interest rate
protection agreements entered into pursuant to Paragraph 5.21 hereof; (v)
Indebtedness of the Borrower to Communications, provided such indebtedness (A)
is unsecured, (B) is expressly subordinated to the Loan pursuant to a
Subordination Agreement, and (C) is subject to terms acceptable to the Borrower
and Managing Agents; (vi) Indebtedness of Dobson Telephone outstanding on the
date hereof and any additional indebtedness, including refinancings thereof up
to such amount plus, either separately or as a part of such refinancing, up to
Five Million Dollars ($5,000,000); PROVIDED, HOWEVER, that prior to incurring
such additional Indebtedness, Borrower shall execute a compliance certificate
evidencing pro forma compliance with the covenants contained herein, after
giving effect to the additional Indebtedness, and PROVIDED, FURTHER, that upon
an Event of Default or Default hereunder, Required Banks may elect to repay such
indebtedness in full on behalf of Dobson Telephone and perfect a first priority
security interest in the assets of Dobson Telephone; and (vii) trade
indebtedness in the ordinary course of business for value received.
6.2. GUARANTEES. Guarantee or assume or agree to become liable in
any way, either directly or indirectly, for any additional indebtedness or
liability of others except: (i) to endorse checks or drafts in the ordinary
course of business and (ii) the obligations of the Guarantors under the Guaranty
Agreement.
6.3. LOANS. Make any loans or advances to others other than (i)
except as set forth in Paragraphs 4.1(c)(i) and (ii) hereof with respect to the
Cellular Partnerships, loans and advances from Borrower to the Guarantors which,
in the case of
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the Cellular Partnerships, shall be evidenced by Cellular Partnership Promissory
Notes from the Cellular Partnerships to Borrower assigned by Borrower to
Administrative Agent on behalf of Banks and (ii) hereof, and (ii) loans or
advances by Borrower to Communications or any Subsidiary of Communications not
directly owned by Borrower to the extent permitted in accordance with Paragraph
6.6 hereof.
6.4. LIENS AND ENCUMBRANCES. Create, permit or suffer the creation
of any liens, security interests, or any other encumbrances on any of its
property, real or personal, except in favor of Banks as security for the Loan,
and except: (i) liens for taxes, assessments or other governmental charges,
federal, state or local, which are then being currently contested in good faith
by appropriate proceedings and are covered by appropriate reserves maintained in
cash or cash equivalents and in accordance with GAAP; (ii) pledges or deposits
to secure obligations under workmen's compensation, unemployment insurance or
social security laws or similar legislation; (iii) deposits to secure
performance or payment bonds, bids, tenders, contracts, leases, franchises or
public and statutory obligations required in the ordinary course of business;
(iv) deposits to secure surety, appeal or custom bonds required in the ordinary
course of business; and (v) liens in the assets of Dobson Telephone in favor of
the RUS to secure Dobson Telephone's obligations under the Telephone/RUS
Agreement.
6.5. ADDITIONAL NEGATIVE PLEDGE. Agree or covenant with or promise
any person or entity other than the Banks that it will not pledge its assets or
properties or otherwise grant any liens, security interests or encumbrances on
its property on terms similar to those set forth in Paragraph 6.4 hereof.
6.6. RESTRICTED PAYMENTS. Make any Restricted Payments; provided,
however, that, except as otherwise provided in subparagraph (b) below, so long
as there exists no Event of Default or Default under this Agreement and no Event
of Default or Default will be caused thereby, Borrower may:
(a) if (1) the Communications Leverage Ratio is greater than or
equal to 4.50 to 1 but less than 5.50 to 1, make distributions, including
without limitation, any dividends,
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advances or loans, to Communications or any Subsidiary of Communications not
directly owned by Borrower if a mandatory prepayment is made pursuant to
Paragraph 2.9(b)(i)(C) hereof and (2) the Communications Leverage Ratio is
less than 4.50 to 1, Borrower may make such dividend, advance or loan and
shall not be required to make a prepayment of the Loan or to reduce the
Commitment;
(b) commencing after the first four interest payments on the
Communications Bond Debt have been made, so long as no Event of Default (other
than an Event of Default under subparagraph (b) of Paragraph 9.1 hereof) exists
or would be caused thereby, pay dividends or make loans or advances to
Communications in an amount sufficient to pay regularly scheduled interest
payments on the Communications Bond Debt in accordance with the Communications
Bond Debt in effect on the date hereof; provided, however, in the event that any
other Event of Default has occurred and is continuing, Borrower may, commencing
after the first four interest payments on the Communications Bond Debt have been
made, declare and pay dividends to Communications or make loans or advances to
Communications in an amount which shall not exceed (A) amounts then required to
make any past due payment of interest on the Communications Bond Debt by reason
of such Event of Default, and (B) the next regularly scheduled payment of
interest on the Communications Bond Debt if, but only if, (1) such Event of
Default (from the date of notice of the existence of the earliest such Event of
Default if more than one exists) has continued for 180 days and has not been
cured or waived; (2) such Event of Default is not an Event of Default set forth
in subparagraphs (a), (j), or (k) of Paragraph 9.1 hereof; and (3) the Banks
have not demanded payment in full of all obligations due and owing by the
Borrower under this Agreement and the Collateral Documents; and
(c) on the date hereof make a Seven Million Five Hundred Fifty-
One Thousand Dollar ($7,551,000) distribution to Communications to fund a
distribution by Communications to its shareholders of which approximately
$6,000,000 shall be further distributed by Communications to the Trust Borrowers
and used by the Trust Borrowers to repay the Trust Loan in full;
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(d) declare and pay no more than six (6) distributions or
dividends between the date hereof and the Final Maturity Date which, in the
aggregate do not exceed Seven Million Five Hundred Thousand Dollars ($7,500,000)
and which are used by Communications only to fund the acquisition or development
of New Businesses;
(e) Texas 2, Oklahoma 5, Oklahoma 7, Oklahoma Independent 5 and
Oklahoma Independent 7 may make distributions in accordance with their
respective Partnership Agreements in an amount sufficient to pay the cash tax
liabilities of their respective partners for federal and state income taxes
directly attributable to the profit of each such Partnership attributable to the
applicable partner.
6.7. TRANSFER OF ASSETS; LIQUIDATION.
(a) Sell, lease, transfer or otherwise dispose of all or any
portion of its assets, real or personal, including pursuant to a sale and
leaseback, lease and leaseback or similar arrangement, except (i) such
transactions in the normal and ordinary course of business for value received,
provided that the aggregate value of assets transferred in all such
transactions does not exceed Seven Million Five Hundred Thousand Dollars
($7,500,000) in any calendar year; (ii) sale and leaseback transactions between
Borrower and any Subsidiary of Borrower with respect to any real or personal
property, so long as Borrower is the purchaser/lessor in each such transaction
and the aggregate value of assets transferred in all such transactions does not
exceed $1,000,000; and (iii) other sales or dispositions of assets if the
consideration received by the Borrower or the applicable Guarantor or Subsidiary
is at least equal to the fair market value of the assets sold or disposed of, at
least eighty-five percent (85%) of the consideration received consists of cash
or cash equivalents and the Borrower makes the payment required pursuant to
Paragraph 2.9(b)(i)(A) hereof; and
(b) discontinue, liquidate, or change in any material respect
any part of its operations or business(es).
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6.8. ACQUISITIONS AND INVESTMENTS. Purchase or otherwise acquire
(including without limitation by way of share exchange) any part or amount of
the capital stock or assets of, or make any investments (other than Permitted
Investments, subject to the conditions and limitations set forth in the
definition thereof) in, any other firm or corporation; or enter into any new
business activities or ventures not directly related to its present business; or
merge or consolidate with or into any other firm or corporation except merge
with any of its Subsidiaries provided that Borrower is the surviving entity of
such merger; or create any Subsidiary; PROVIDED, HOWEVER that in the absence of
an Event of Default or Default under this Agreement and if no Default or Event
of Default will be caused thereby, the Borrower may make acquisitions of
entities engaged in the domestic cellular industry ("Permitted Acquisitions")
provided that: (a) prior to such Permitted Acquisition Borrower provides a
compliance certificate to Banks demonstrating pro forma compliance with all
terms and conditions of this Agreement; (b) Borrower or a Subsidiary acquires
one hundred percent (100%) ownership interests or assets of the operations of
any such entity being acquired; and (c) for any acquisitions with an aggregate
purchase price (including cash and non-cash consideration and any contingent
payments or deferred purchase price) in excess of Fifteen Million Dollars
($15,000,000), Borrower shall: (1) provide Banks with a ten (10) year cash flow
projection for the entity to be acquired indicating continued compliance with
this Agreement; and (2) receive the prior written approval from the Required
Banks.
6.9. PAYMENTS TO AFFILIATES. Pay any salaries or other compensation,
consulting fees or management fees or other like payments to individuals who are
Affiliates of Borrower in any fiscal year other than in the ordinary course of
business for services rendered without any profit or margin with respect
thereto.
6.10. USE OF PROCEEDS. Use any of the proceeds of the Loan, directly
or indirectly, to purchase or carry margin securities within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System; or engage
as its
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principal business in the extension of credit for purchasing or carrying such
securities.
6.11. AGREEMENTS. Amend or modify any provision of, or waive any
condition under the Acquisition Agreements.
6.12. AMENDMENTS TO DOCUMENTS. Amend or permit any amendments to
Borrower's Articles of Incorporation as in effect on the date of this Agreement
or Communications Bond Debt.
SECTION 7
NEGATIVE COVENANTS OF COMMUNICATIONS
So long as the Commitment or any indebtedness of the Borrower to Banks
remains outstanding hereunder, Communications covenants and agrees that it will
not, and with respect to Paragraph 7.4 hereof, it will not permit any Subsidiary
to, without Required Banks' prior written consent:
7.1. INDEBTEDNESS. Borrow any monies or create any Indebtedness
except: (i) unsecured Indebtedness (A) to which Communications has provided a
compliance certificate to Banks evidencing pro forma compliance with all terms
and conditions of this Agreement, (B) which is on terms reasonably acceptable to
the Managing Agents, which shall include without limitation that such
Indebtedness is non-recourse to Borrower and all Guarantors, (C) with respect to
which Borrower complies with the provisions of Paragraph 2.9(b)(i)(B) hereof,
and (D) which, in the aggregate, does not exceed a maximum amount of Seventy
Five Million Dollars ($75,000,000); and (ii) the Communications Bond Debt.
7.2. GUARANTEES. Guarantee or assume or agree to become liable in
any way, either directly or indirectly, for any additional indebtedness or
liability of others except to endorse checks or drafts in the ordinary course of
business except Communications' guaranty of the Loan provided herein.
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7.3. LOANS. Make any loans or advances to others other than (i)
loans to Borrower provided such loans are unsecured, are expressly subordinated
to the Loan pursuant to a Subordination Agreement and as subject to terms and
conditions acceptable to the Borrower and Managing Agents and (ii) loans and
advances to Subsidiaries of Communications other than Borrower and its
Subsidiaries.
7.4. LIENS AND ENCUMBRANCES. Create, permit or suffer the creation
of any liens, security interests, or any other encumbrances on any of its
property, real or personal, except in favor of Banks as security for the Loan,
and except: (i) existing liens securing specified Indebtedness approved by the
Banks; (ii) liens for capital leases, taxes, assessments or other governmental
charges, federal, state or local, which are then being currently contested in
good faith by appropriate proceedings and are covered by appropriate reserves
maintained in cash or cash equivalents and in accordance with GAAP; (iii) liens
of mechanics, carriers, warehousemen or materialmen required in the ordinary
course of business and not yet due and payable; (iv) pledges or deposits to
secure obligations under workmen's compensation, unemployment insurance or
social security laws or similar legislation; (v) deposits to secure performance
or payment bonds, bids, tenders, contracts, leases, franchises or public and
statutory obligations required in the ordinary course of business; (vi) deposits
to secure surety, appeal or custom bonds required in the ordinary course of
business; (vii) liens on the assets (but not the stock) of DCC PCS, Inc. to
secure DCC PCS, Inc.'s indebtedness, and Dobson Telephone to secure indebtedness
due RUS; (viii) the pledge of the Shares of the Borrower in favor of Banks; and
(ix) liens on the fund and investments held pursuant to the Escrow Agreement in
favor of the trustee for the holders of the Communications Bond Debt.
7.5. ADDITIONAL NEGATIVE PLEDGE. Agree or covenant with or promise
any person or entity other than the Banks and the trustee for the holders of the
Communications Bond Debt that it will not pledge its assets or properties or
otherwise grant any liens, security interests or encumbrances on its property on
terms similar to those set forth in Paragraph 7.4 hereof.
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7.6. COMMUNICATIONS BOND DEBT. (i) Amend or modify any provision of,
waive any condition under the Communications Bond Debt; (ii) make any optional
redemptions, prepayments or other payments on the Communications Bond Debt other
than (a) regularly scheduled interest payments, and (b) if applicable, any
Special Redemption or Special Repurchase Offer, as defined in the Communications
Bond Debt offering memorandum; (iii) use dividends received from the Borrower
for any purpose other than to make regularly scheduled interest payments on the
Communications Bond Debt or to acquire or develop New Businesses as set forth
herein; (iv) use the proceeds of the Communications Bond Debt for any purpose
other than (1) to make a contribution to the equity of the Borrower and (2) to
fund the accounts and purchase the investments under the Escrow Agreement; and
(v) use the cash and investments held under the Escrow Agreement for any purpose
other than to make contributions to the equity of Borrower, to make interest
payments on the Communications Bond Debt as and when due and, if applicable, to
fund the Special Redemption or Special Purchase Offer and pay expenses relating
to the Communications Bond Debt.
7.7. AMENDMENTS TO DOCUMENTS. Amend or permit any amendments to
Communications' Amended Articles of Incorporation as in effect on the date of
this Agreement.
7.8. INDEBTEDNESS TO SUBSIDIARIES. Permit any Subsidiary, other than
the Borrower, to borrow any monies or create any Indebtedness except
Indebtedness which: (A) is non-recourse to the Borrower and all Guarantors and
(B) complies with all terms and conditions of this Agreement.
SECTION 8
ADDITIONAL COLLATERAL AND RIGHT OF SET OFF
8.1. ADDITIONAL COLLATERAL. As additional collateral for the payment
of any and all of Borrower's indebtedness and obligations to Banks, whether
matured or unmatured, now existing or hereafter incurred or created hereunder or
otherwise, Borrower, Communications and each Guarantor hereby grant to Banks
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a security interest in and lien upon all funds, balances or other property of
any kind of the Borrower, or in which the Borrower has an interest, limited
to the interest of the Borrower therein, whether now or hereafter in the
possession, custody or control of any Bank.
8.2. RIGHT OF SET-OFF. Each Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set-off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by such Bank to
or for the credit or the account of the Borrower, Communications or any
Subsidiary against any and all of the obligations of the Borrower or
Communications now or hereafter existing under this Agreement and the Note held
by such Bank, irrespective of whether such Bank shall have made any demand under
this Agreement or such Note and although such obligations may be unmatured.
Each Bank agrees promptly to notify Borrower after any such set-off and
application made by such Bank; provided, however, that the failure to give such
notice shall not affect the validity of such set-off and application. The
rights of each Bank under this Section 8 are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which such
Bank may have.
SECTION 9
DEFAULT
9.1. EVENTS OF DEFAULT. Each of the following events shall be an
Event of Default hereunder:
(a) If Borrower shall fail to pay when due any installment of
principal, or any interest, fees, costs, expenses or any other sum payable to
Banks hereunder or otherwise;
(b) If any representation or warranty made herein or in
connection herewith or in any statement, certificate or other document furnished
hereunder is false or misleading in any material respect when made;
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(c) If Borrower, Communications, any Guarantor or any
Subsidiary shall default in the payment or performance of any obligation or
Indebtedness to another either singly or in the aggregate in excess of
$3,000,000, whether now or hereafter incurred;
(d) If Dobson Telephone shall default in the payment or
performance of any obligation or Indebtedness to another either singly or in the
aggregate in excess of $3,000,000, whether now or hereafter incurred;
(e) If there shall be a default in or failure to observe at any
test date the covenants set forth in Paragraphs 5.15 through 5.20 hereof,
Section 6 or 7 hereof;
(f) If there shall exist any default in the performance of any
other agreement or covenant contained herein (other than as provided in
subparagraphs (a), (b) or (e) above) or in any document executed or delivered in
connection herewith, including without limitation any Collateral Security
Document, and such default shall continue uncured for twenty (20) days after
notice thereof to Borrower given by Administrative Agent pursuant to the
direction of Required Banks;
(g) If Everett Dobson or the Everett R. Dobson Irrevocable
Family Trust shall cease to maintain at least 50.1% of the voting control
(directly or indirectly) of Communications; if Communications shall cease to own
(directly or indirectly) one hundred percent (100%) of the issued and
outstanding Shares of the Borrower, if Borrower shall cease to own one hundred
percent (100%) of the issued and outstanding Shares of its Subsidiaries and any
New Subsidiary (if applicable) (other than the Cellular Partnerships); or if
Cellular shall cease to own at least the percentage interest in the Cellular
Partnerships which it owns on the date hereof;
(h) If the Banks cease to hold 100% of the issued and
outstanding Shares of common stock of Borrower and its Subsidiaries as
collateral;
(i) If Everett Dobson shall cease to hold a senior management
position with Communications or Borrower,
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unless such event is by reason of his death or disability and management
replacement arrangements satisfactory to Banks are made within two (2) months
after such death or three (3) months after the commencement of such period of
disability;
(j) If custody or control of any substantial part of the
property of Borrower or any of its Subsidiaries or any Guarantor shall be
assumed by any governmental agency or any court of competent jurisdiction at the
instance of any governmental agency; if any material license or franchise shall
be suspended, revoked, not renewed prior to its stated expiration or otherwise
terminated; or if Borrower or any of its Subsidiaries, a Guarantor or an
Operating Company is required by any franchising authority or by court order or
administrative order to halt construction or operations under any license or
franchise and such action shall continue uncorrected for thirty (30) days after
the applicable entity has received notice thereof; or if any governmental
regulatory authority or judicial body shall make any other final non-appealable
determination the effect of which would be to affect materially and adversely
the operations of Borrower or any of its Subsidiaries, a Guarantor or an
Operating Company as now conducted; or
(k) If Borrower, Communications or any of their respective
Subsidiaries, or any Guarantor becomes insolvent, bankrupt or generally fails to
pay its debts as such debts become due; is adjudicated insolvent or bankrupt;
admits in writing its inability to pay its debts; or shall suffer a custodian,
receiver or trustee for it or substantially all of its property to be appointed
and if appointed without its consent, not be discharged within thirty (30) days;
makes an assignment for the benefit of creditors; or suffers proceedings under
any law related to bankruptcy, insolvency, liquidation or the reorganization,
readjustment or the release of debtors to be instituted against it and if
contested by it not dismissed or stayed within thirty (30) days; if proceedings
under any law related to bankruptcy, insolvency, liquidation, or the
reorganization, readjustment or the release of debtors is instituted or
commenced by Borrower, Communications or any of their respective Subsidiaries,
or any Guarantor; if any order for relief is entered relating to any of the
foregoing proceedings; if Borrower, Communications or any of their respective
Subsidiaries, or any Guarantor shall call a meeting of its creditors with a view
to arranging a composition or adjustment of its debts; or if Borrower,
Communications or any of
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their respective Subsidiaries, or any Guarantor shall by any act or failure
to act indicate its consent to, approval of or acquiescence in any of the
foregoing;
(l) If any event or condition shall exist which could reasonably
be expected to cause a material adverse change in the business, operations,
properties or financial positions of the Borrower, Communications any Guarantor
or any of their respective Subsidiaries, or an Operating Company;
(m) If any event or condition shall occur or exist with respect
to any activity or substance regulated under the Environmental Control Statutes
and as a result of such event or condition, Borrower, Communications, any
Guarantor or any of their respective Subsidiaries, shall have incurred or in the
opinion of the Banks be reasonably likely to incur a liability in excess of
$3,000,000 during any consecutive twelve (12) month period;
(n) If any judgment, writ, warrant or attachment or execution or
similar process which calls for payment or presents liability in excess of
$3,000,000 shall be rendered, issued or levied against Borrower, Communications,
any Guarantor or any of their respective Subsidiaries or any of their respective
property and such process shall not be paid, waived, stayed, vacated,
discharged, settled, satisfied or fully bonded within sixty (60) days after its
issuance or levy;
(o) If the Horizon Systems Acquisition and the Maryland
Acquisition have not been completed by April 30, 1997; or
(p) If the Reorganization does not receive final FCC approval by
May 15, 1997.
9.2. REMEDIES. Upon the happening of any Event of Default and at any
time thereafter so long as such Event of Default has not been waived or cured,
at the election of Required
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Banks, and by notice by Administrative Agent to Borrower (except if an Event
of Default described in Paragraph 9.1(k) shall occur in which case
acceleration shall occur automatically without notice), Required Banks may
(i) terminate the Commitment, and/or (ii) declare the entire unpaid balance,
principal, interest and fees, of all indebtedness of Borrower to Banks,
hereunder or otherwise, to be immediately due and payable. Upon a
declaration of acceleration, the Commitment shall immediately and
automatically terminate and Banks shall have no further obligation to make
any Advances and the immediate right to enforce or realize on any Collateral
in any manner or order they deem expedient without regard to any equitable
principles of marshaling or otherwise. In addition to any rights granted
hereunder or in any documents delivered in connection herewith, Banks shall
have all the rights and remedies granted by any applicable law, all of which
shall be cumulative in nature.
SECTION 10
THE BANKS
This Section sets forth the relative rights and duties of
Administrative Agent and Banks respecting the Loan and does not confer any
enforceable rights on Borrower against Banks or create on the part of Banks any
duties or obligations to Borrower.
10.1. APPLICATION OF PAYMENTS. Administrative Agent shall apply all
payments of principal, interest, commitment fee or other amounts hereunder made
to Administrative Agent by or on behalf of Borrower, to Banks on the basis of
their Pro Rata Shares of the outstanding principal balance of Indebtedness
hereunder, except the fees payable under the Fee Letters and Paragraph 2A.4
hereof, which shall be paid solely to Administrative Agent and to the Managing
Agents under the Fee Letters. Such distribution of payments shall be made
promptly in federal funds immediately available at the office of each Bank set
forth in Schedule 1 attached hereto.
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10.2. SETOFF. In the event a Bank, by exercise of its right of
setoff, or otherwise, reduces Indebtedness owing to it hereunder to an amount
less than its Pro Rata Share of indebtedness outstanding hereunder immediately
following such setoff, such Bank shall purchase a portion of the indebtedness
hereunder owing to each other Bank so that after such purchase each Bank shall
hold its Pro Rata Share of all the indebtedness then outstanding hereunder,
provided that if all or any portion of such setoff amount is thereafter
recovered from such Bank, such purchase shall be rescinded and the purchase
price restored to the extent of any such recovery, but without interest.
10.3. MODIFICATIONS AND WAIVERS. No modification or amendment
hereof, consent hereunder or waiver of Event of Default shall be effective
except by written consent of the Required Banks, provided, however, that (a) the
written consent of all Banks shall be required to: (i) decrease the rate of
interest, (ii) modify the amount of the Commitment, or the Banks' respective
shares thereof, (iii) change the dates of required Commitment reductions or
under the Collateral Security Documents, (iv) decrease the commitment fee, (v)
consent to the taking of any action which is prohibited by Paragraph 6.12
hereof, (vi) change the Final Maturity Date, (vii) release any Collateral except
as expressly permitted to be sold or transferred pursuant to Paragraph 6.7(a)
hereof or otherwise expressly specified herein, (viii) approve the terms of
Subordinated Debt, (ix) amend the definition of Required Banks, or (x) modify or
waive the provisions of this Paragraph 10.3. Any amendment or waiver made
pursuant to this Section 10.3 shall apply to and bind all of the Banks and any
future holder of any Notes.
10.4. OBLIGATIONS SEVERAL. The obligations of the Banks hereunder
are several, and each Bank hereunder shall not be responsible for the
obligations of the other Banks hereunder, nor, will the failure of one Bank to
perform any of its obligations hereunder relieve the other Banks from the
performance of their respective obligations hereunder.
10.5. BANKS' REPRESENTATIONS. Each Bank represents and warrants to
the other Banks that (i) it has been furnished all information it has requested
for the purpose of evaluating
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its proposed participation under this Agreement; and (ii) it has decided to
enter into this Agreement on the basis of its independent review and credit
analysis of Borrower, this Agreement and the documentation in connection
therewith and has not relied for such analysis on any information or analysis
provided by any other Bank.
10.6. INVESTIGATION. No Bank shall have any obligation to the others
to investigate the condition of Borrower or any of the Collateral or any other
matter concerning the Loan.
10.7. POWERS OF ADMINISTRATIVE AGENT. Administrative Agent shall
have and may exercise those powers specifically delegated to Administrative
Agent herein, together with such powers as are reasonably incidental thereto.
10.8. GENERAL DUTIES OF AGENTS, IMMUNITY AND INDEMNITY. In
performing their respective duties as Administrative Agent and Managing Agents
hereunder, Administrative Agent and Managing Agents will each take the same care
as it takes in connection with loans in which it alone is interested, subject to
the limitations on liabilities contained herein; provided that neither
Administrative Agent nor any Managing Agent shall be obligated to ascertain or
inquire as to the performance of any of the terms, covenants or conditions
hereof by Borrower. Neither Administrative Agent nor any Managing Agent nor any
of their respective directors, officers, agents or employees shall be liable for
any action or omission by any of them hereunder or in connection herewith except
for its gross negligence or willful misconduct. Subject to such exception, each
of the Banks hereby indemnifies each of the Administrative Agent and Managing
Agent on the basis of such Bank's Pro Rata Share, against any such liability,
claim, loss or expense. Each Documentation Agent and Syndication Agent shall
have no duties or obligations, and incur no liabilities, in its capacity as such
hereunder.
10.9. NO RESPONSIBILITY FOR REPRESENTATIONS OR VALIDITY, ETC. Each
Bank agrees that Administrative Agent shall not be responsible to any Bank for
any representations, statements, or warranties of Borrower herein. Neither
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Administrative Agent nor any of its directors, officers, employees or agents
shall be responsible for the validity, effectiveness, sufficiency or
enforceability of this Agreement and any collateral security therefor, or any
documents relating thereto or for the priority of any of Banks' security
interests in any such collateral security.
10.10. ACTION ON INSTRUCTION OF BANKS; RIGHT TO INDEMNITY.
Administrative Agent shall in all cases be fully protected in acting or
refraining from acting hereunder in accordance with written instructions to it
signed by Required Banks unless the consent of all the Banks is expressly
required hereunder in which case Administrative Agent shall be so protected when
acting in accordance with such instructions from all the Banks. Such
instructions and any action taken or refrained from pursuant thereto shall be
binding on all the Banks, provided that except where action of Required Banks or
all Banks is required herein, Administrative Agent may act hereunder in its own
discretion without requesting such instructions. Administrative Agent shall be
fully justified in failing or refusing to take any action hereunder unless it
shall first be specifically indemnified to its satisfaction by the other Banks
on the basis of their respective Pro Rata Shares, against any and all liability
and expense which it may incur by reason of taking or continuing to take any
such action.
10.11. EMPLOYMENT OF AGENTS. In connection with its activities
hereunder, Administrative Agent may employ agents and attorneys-in-fact and
shall not be answerable, except as to money or securities received by it or its
authorized agents, for the default or misconduct of agents or attorneys-in-fact
selected with reasonable care.
10.12. RELIANCE ON DOCUMENTS. Administrative Agent shall be entitled
to rely upon (a) any paper or document reasonably believed by it to be genuine
and correct and to have been signed or sent by the proper person or persons and
(b) upon the opinion of its counsel with respect to legal matters.
10.13. ADMINISTRATIVE AGENT'S RIGHTS AS A BANK. With respect to its
share of the Indebtedness hereunder, Administrative Agent shall have the same
rights and powers
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hereunder as any other Bank and may exercise the same as though it were not
Administrative Agent. Each of the Banks may accept deposits from, lend money
to, and generally engage in any kind of banking or trust business with
Borrower as if it were not Administrative Agent or a Bank hereunder.
10.14. EXPENSES. Each of the Banks shall reimburse Administrative
Agent, from time to time at the request of Administrative Agent, for its Pro
Rata Share of any reasonable expenses incurred by Administrative Agent in
connection with the performance of its functions hereunder, provided however
that in the event Banks shall reimburse Administrative Agent for expenses for
which Borrower subsequently reimburse Administrative Agent, Administrative Agent
shall remit to each Bank the respective amount received from such Bank against
such expenses.
10.15. RESIGNATION OF ADMINISTRATIVE AGENT. Administrative Agent may
at any time resign its position as Administrative Agent, without affecting its
position as a Bank, by giving written notice to Banks and Borrower. Such
resignation shall take effect upon the appointment and acceptance of a successor
agent in accordance with this Paragraph. In the event Administrative Agent
shall resign, Required Banks shall appoint a Bank as successor agent. If within
thirty (30) days of the Administrative Agent's notice of resignation no
successor agent shall have been appointed by Banks and accepted such
appointment, then Administrative Agent, in its discretion may, subject to
acceptance by such successor, appoint any other Bank as a successor agent.
10.16. SUCCESSOR ADMINISTRATIVE AGENT. Upon its acceptance, the
successor Administrative Agent appointed pursuant to Paragraph 10.15 shall
execute and deliver to its predecessor and Banks an instrument in writing
accepting such appointment, and thereupon such successor, without any further
act, deed or conveyance, shall become fully vested with all the properties,
rights, duties and obligations of its predecessor Administrative Agent. The
predecessor Administrative Agent shall deliver to its successor Administrative
Agent forthwith all Collateral, documents and moneys held by it as
Administrative Agent, if any, whereupon such predecessor Administrative Agent
shall be
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discharged from its duties and obligations as Administrative Agent under this
Agreement.
10.17. COLLATERAL SECURITY. Administrative Agent will hold,
administer and manage any Collateral pledged from time to time hereunder either
in its own name or as Administrative Agent, but each Bank shall hold a direct,
undivided pro-rata beneficial interest therein, on the basis of its Pro Rata
Share, by reason of and as evidenced by this Agreement.
10.18. ENFORCEMENT BY ADMINISTRATIVE AGENT. All rights of action
under this Agreement and under the Notes and all rights to the Collateral
Security, if any, hereunder may be enforced by Administrative Agent and any suit
or proceeding instituted by Administrative Agent in furtherance of such
enforcement shall be brought in its name as Administrative Agent without the
necessity of joining as plaintiffs or defendants any other Bank, and the
recovery of any judgment shall be for the benefit of Banks subject to the
expenses of Administrative Agent.
SECTION 11
MISCELLANEOUS
11.1. INDEMNIFICATION AND RELEASE PROVISIONS. Borrower and
Communications each hereby agree to defend Administrative Agent and each Bank
and its directors, officers, agents, employees and counsel from, and hold each
of them harmless against, any and all losses, liabilities (including without
limitation settlement costs and amounts, transfer taxes, documentary taxes, or
assessments or charges made by any governmental authority), claims, damages,
interest, judgments, costs, or expenses, including without limitation reasonable
fees and disbursements of counsel, incurred by or asserted against any of them
arising out of or in connection with or by reason of this Agreement, the
Commitment, the making of the Loan or any Collateral Security Document,
including without limitation, any and all losses, liabilities, claims, damages,
interests, judgments, costs or expenses relating to or arising under any
Environmental Control Statute or the application of any such
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Statute to Borrower's or any Guarantor's or any Subsidiary's properties or
assets, except, however, to the extent resulting from a Bank's own willful
misconduct or gross negligence; provided, however, that the Administrative
Agent, the Banks and their respective directors, officers, agents, employees
and counsel shall in no event be liable for any consequential damages.
Borrower, Communications and each Guarantor each hereby release
Administrative Agent and each Bank and its respective directors, officers,
agents, employees and counsel from any and all claims for loss, damages,
costs or expenses caused or alleged to be caused by any act or omission on
the part of any of them, excepting, however, to the extent resulting from a
Bank's own wilful misconduct or gross negligence. All obligations provided
for in this Paragraph 11.1 shall survive any termination of this Agreement or
the Commitment and the repayment of the Loan.
11.2. PARTICIPATIONS AND ASSIGNMENTS. Borrower hereby acknowledges
and agrees that a Bank may at any time: (a) grant participations in all or any
portion of its Pro Rata Share of the Loan or any Note or of its right, title and
interest therein or in or to this Agreement (collectively, "Participations") to
any other lending office or to any other bank, lending institution or other
entity which has the requisite sophistication to evaluate the merits and risks
of investments in Participations ("Participants"); provided, however, that:
(i) all amounts payable by Borrower hereunder shall be determined as if such
Bank had not granted such Participation; (ii) any agreement pursuant to which
any Bank may grant a Participation: (x) shall provide that such Bank shall
retain the sole right and responsibility to enforce the obligations of Borrower
hereunder including, without limitation, the right to approve any amendment,
modification or waiver of any provisions of this Agreement; (y) such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement without the consent of the
Participant if such modification, amendment or waiver would reduce the principal
of or rate of interest on the Loan or postpone the date fixed for any payment of
principal of or interest on the Loan; and (z) shall not relieve such Bank from
its obligations, which shall remain absolute, to make Advances hereunder; and
(b) assign all or any portion of its rights under this Agreement and its Notes;
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provided, however, that: (i) each assignees shall become subject to this
Agreement as a Bank by execution of an Assignment and Assumption Agreement in
substantially the form attached hereto as EXHIBIT I; (ii) at such time Schedule
1 shall be modified to reflect the Pro Rata Shares and Maximum Principal Amounts
of such new Bank and of the existing Banks; (iii) upon surrender of the old
Notes (or the furnishing of a standard indemnity letter from the respective
assigning Bank in respect of any lost Notes) new Notes will be issued, at the
Borrower s expense, to such new Bank and to the assigning Bank, such new Notes
to be in conformity with Paragraph 2.2 (with appropriate modifications) to the
extent needed to reflect the revised Pro Rata Shares and Maximum Principal
Amounts; (iv) such assignments must be in minimum amounts of $5,000,000; (v)
assignees other than Affiliates of a Bank or the Federal Reserve Bank will be
subject to the prior written consent of Borrower (except during the continuance
of an Event of Default) and the Managing Agents, which consent shall not be
unreasonably withheld; and (vi) assignments (other than by Managing Agents) will
be subject to the payment by the assigning bank to the Administrative Agent of a
$3,500 transfer fee.
11.3. BINDING AND GOVERNING LAW. This Agreement and all documents
executed hereunder shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns and shall be governed
as to their validity, interpretation and effect by the laws of the Commonwealth
of Pennsylvania.
11.4. SURVIVAL. All agreements, representations, warranties and
covenants of Borrower contained herein or in any documentation required
hereunder shall survive the execution of this Agreement and the making of the
Loan hereunder and except for Paragraphs 5.10 and 11.1 which provide otherwise,
will continue in full force and effect as long as any Indebtedness or other
obligation of Borrower to any Bank remains outstanding.
11.5. NO WAIVER; DELAY. If Banks or any of them shall waive any
power, right or remedy arising hereunder or under any applicable law, such
waiver shall not be deemed to be a waiver upon any other Bank or the later
occurrence or recurrence of any of events giving rise to such power, right or
remedy with respect to any Bank. No delay by Banks in the exercise of any
power,
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right or remedy shall, under any circumstances, constitute or be deemed to be
a waiver, express or implied, of the same and no course of dealing between
the parties hereto shall constitute a waiver of Banks' powers, rights or
remedies. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
11.6. MODIFICATION; WAIVER. No modification or waiver of any
provision of this Agreement or any Note, nor any consent to any departure by
Borrower herefrom or therefrom, shall in any case be effective unless the same
be in writing, and signed by the requisite Banks and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. No notice to or demand on Borrower in any case shall entitle
Borrower to any other or further notice or demand in any similar or other
circumstances.
11.7. HEADINGS. The various headings in this Agreement are inserted
for convenience only and shall not affect the meaning or interpretation of this
Agreement or any provision hereof.
11.8. NOTICES. Any notice, request or consent required hereunder or
in connection herewith shall be deemed satisfactorily given if in writing and
delivered by hand, by telecopy or mailed (registered or certified mail) to the
parties at their respective addresses or telecopier numbers set forth below or
such other addresses or telecopier numbers as may be given by any party to the
others in writing:
if to Borrower:
Dobson Operating Company
13439 N. Broadway Extension, Suite 200
Oklahoma City, Oklahoma 73114
Attention: Everett Dobson
Telecopier: 405-391-8515
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if to Administrative Agent:
CoreStates Bank, N.A.
1339 Chestnut Street
Philadelphia, PA 19101
Attention: Philip D. Harrison
Telecopier: 215-786-7721
if to Banks and Managing Agents:
to the names, addresses and telecopier numbers
set forth on Schedule 1 attached hereto
11.9. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be made
hereunder shall be stated to be due on a day other than a Business Day, such
payment may be made on the next succeeding Business Day, provided however that
such extension of time shall be included in the computation of interest due in
conjunction with such payment or other fees due hereunder, as the case may be.
11.10. TIME OF DAY. All time of day restrictions imposed herein
shall be calculated using Administrative Agent's local time.
11.11. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
11.12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all the signatures on such counterparts
appeared on one document, and each such counterpart shall be deemed to be an
original.
11.13. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The Borrower
irrevocably appoints the president and the registered service agent of
Communications as its attorney upon
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whom may be served any notice, process or pleading in any action or
proceeding against it arising out of or in connection with the Agreement or
any of the Collateral Security Documents; and the Borrower hereby consents
that any action or proceeding against it be commenced and maintained in any
court within the Commonwealth of Pennsylvania or in the United States
District Court for the Eastern District of Pennsylvania by service of process
on any such officer; and the Borrower agrees that the courts of the
Commonwealth of Pennsylvania and the United States District Court for the
Eastern District of Pennsylvania shall have jurisdiction with respect to the
subject matter hereof and the person of the Borrower and the Collateral.
Notwithstanding the foregoing, the Bank, in its absolute discretion may also
initiate proceedings in the courts of any other jurisdiction in which the
Borrower may be found or in which any of its properties or Collateral may be
located.
11.14. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE NOTE OR COLLATERAL SECURITY
DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF ANY BANK OR ADMINISTRATIVE AGENT. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR EACH BANK'S ENTERING INTO THIS AGREEMENT.
11.15. ACKNOWLEDGMENTS. BORROWER ACKNOWLEDGES THAT IT HAS HAD THE
ASSISTANCE OF COUNSEL IN THE REVIEW AND EXECUTION OF THIS AGREEMENT AND,
SPECIFICALLY, PARAGRAPH 11.14 HEREOF, AND FURTHER ACKNOWLEDGES THAT THE MEANING
AND EFFECT OF THE FOREGOING WAIVER OF JURY TRIAL HAS BEEN FULLY EXPLAINED TO
BORROWER BY SUCH COUNSEL.
IN WITNESS WHEREOF, the undersigned, by their duly authorized officers
and trustees, as applicable, have executed this Agreement the day and year first
above written.
Attest: DOBSON OPERATING COMPANY
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By: /s/ Stephen Dobson By: /s/ Everett R. Dobson
--------------------------- ----------------------------------------
Name: Stephen Dobson Name: Everett R. Dobson
Title: Secretary Title: President
[CORPORATE SEAL]
CORESTATES BANK, N.A., for itself
as Administrative Agent and as Managing Agent
By: /s/ Philip D. Harrison
-----------------------------------------
Name: Philip D. Harrison
Title: Assistant Vice President
[EXECUTIONS CONTINUED]
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FIRST UNION NATIONAL
BANK OF NORTH CAROLINA,
for itself, as Documentation Agent
and as Managing Agent
By: /s/
-----------------------------------------
Name:
Title:
NATIONSBANK OF TEXAS, N.A.
for itself, as Syndication Agent
and as Managing Agent
By: /s/ David G. James
-----------------------------------------
Name: David G. James
Title: Vice President
Each of the undersigned GUARANTORS
hereby acknowledges that it has
reviewed this Credit Agreement and
agrees that the representations and
covenants contained in Sections
Three, Five, Six and Seven hereof
apply to Guarantors:
DOBSON COMMUNICATIONS CORPORATION
By: /s/ Everett R. Dobson
-----------------------------------------
Name: Everett R. Dobson
Title: President
DOBSON CELLULAR SYSTEMS, INC.
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By: /s/ G. Edward Evans
-----------------------------------------
Name: G. Edward Evans
Title: President
[EXECUTIONS CONTINUED]
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<PAGE>
DOBSON CELLULAR OF WOODWARD, INC.
By: /s/ G. Edward Evans
-----------------------------------------
Name: G. Edward Evans
Title: President
DOBSON CELLULAR OF ENID, INC.
By: /s/ G. Edward Evans
-----------------------------------------
Name: G. Edward Evans
Title: President
DOBSON FIBER COMPANY, INC.
By: /s/ Everett R. Dobson
-----------------------------------------
Name: Everett R. Dobson
Title: Chairman of the Board and
Chief Executive Officer
DOBSON CELLULAR OF KANSAS/MISSOURI, INC.
By: /s/ G. Edward Evans
-----------------------------------------
Name: G. Edward Evans
Title: President
DOBSON CELLULAR OF MARYLAND, INC.
By: /s/ G. Edward Evans
-----------------------------------------
Name: G. Edward Evans
Title: President
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DOBSON CELLULAR OF ARIZONA, INC.
By: /s/ G. Edward Evans
-----------------------------------------
Name: G. Edward Evans
Title: President
[EXECUTIONS CONTINUED]
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<PAGE>
TEXAS RSA NO. 2 LIMITED PARTNERSHIP
By: Dobson Cellular Systems, Inc.,
Its Managing General Partner
By: /s/ G. Edward Evans
-----------------------------------------
Name: G. Edward Evans
Title: President
OKLAHOMA RSA 5 LIMITED PARTNERSHIP
By: Dobson Cellular Systems, Inc.,
Its Managing General Partner
By: /s/ G. Edward Evans
-----------------------------------------
Name: G. Edward Evans
Title: President
OKLAHOMA RSA 7 LIMITED PARTNERSHIP
By: Dobson Cellular Systems, Inc.,
Its Managing General Partner
By: /s/ G. Edward Evans
-----------------------------------------
Name: G. Edward Evans
Title: President
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REA PROJECT DESIGNATION:
OKLAHOMA 545-A PARADISE
-----------------------
TELEPHONE LOAN CONTRACT
DATED AS OF NOVEMBER 7, 1958
BETWEEN
DOBSON TELEPHONE COMPANY, INC.
AND
UNITED STATES OF AMERICA
DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
<PAGE>
AGREEMENT, made as of November 7, 1958, pursuant to the Rural
Electrification Act of 1936, as amended (7 U.S.C. 901 et seq.) (hereinafter
called the "Act"), between DOBSON TELEPHONE COMPANY, INC. (hereinafter called
the "Borrower"), a corporation existing under the laws of the State of
Oklahoma, and UNITED STATES OF AMERICA (hereinafter called the "Government"),
acting through the Administrator of the Rural Electrification Administration
(hereinafter called the "Administrator").
WHEREAS, the Borrower owns and operates telephone facilities
(hereinafter called the "Existing Facilities"), serving approximately 215
subscribers located in the Counties of Lincoln, Logan, Oklahoma and Payne, in
the State of Oklahoma; and
WHEREAS, it is intended that the Government shall lend and the Borrower
shall borrow an amount not in excess of $215,000 to finance the improvement
and operation of the Existing Facilities and the construction and operation
of additional telephone facilities to serve approximately 175 subscribers in
addition to those now being served (the improvements and additional telephone
facilities so financed being hereinafter collectively called the "Project",
and the Existing Facilities, as improved and added to by the Project or
otherwise, being hereinafter called the "System"); and
WHEREAS, it is contemplated that the amount of such loan may be
increased from time to time for purposes permitted by the provisions of the
Act, as from time to time amended, and upon the terms and conditions
contained in this agreement, as from time to time amended (such loan and any
such increases in the amount thereof being hereinafter collectively called
the "Loan"); and
WHEREAS, the Administrator, in determining to enter into this agreement,
has relied upon the representation of the Borrower to him that it is willing
to furnish adequate telephone service to the widest practicable number of
persons in rural areas whom it is possible to serve, and the Borrower has
agreed to do so as hereinafter provided;
NOW, THEREFORE, for and in consideration of the mutual agreements herein
contained, the Borrower and the Government agree as follows:
ARTICLE I
LOAN, NOTES AND SECURITY
SECTION 1.1 AMOUNT AND PURPOSE. For the purpose of furnishing or
improving telephone service in rural areas, the Government shall lend and the
Borrower shall borrow an amount not in excess of $215,000, to finance
pursuant to the provisions of the Act, the construction of the Project and
the operation of the System, the Project to be located in the Counties of
Lincoln, Logan, Oklahoma and Payne, and in counties contiguous thereto, all
in the State of Oklahoma.
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<PAGE>
SECTION 1.2 NOTES. The debt created by the Loan shall be evidenced by
notes (such notes and any notes executed and delivered to refund, or in
substitution for, such notes being hereinafter collectively called the
"Notes") to be executed by the Borrower, payable to the order of the
Government. The Notes shall bear interest at rates prescribed by applicable
Federal statutes, and shall otherwise be in form and substance satisfactory
to the Administrator. Interest shall accrue on the principal of each Note
only in respect of amounts which shall have been advanced to the Borrower
from time to time on account of the Loan and charged against such Note.
SECTION 1.3 LOAN CLOSING. The Administrator and the Borrower may from
time to time determine by agreement the amount required to enable the
Borrower to perform its obligations hereunder. If any reduction in the
maximum amount of the loan herein provided for is thus agreed upon, the
Administrator shall cause such one or more of the Notes as may be agreed upon
to be appropriately credited with an amount equal to such reduction, and the
principal amount of such Note or Notes shall, for the purposes of this
agreement, be deemed to be correspondingly reduced. When the Administrator
and the Borrower shall agree that no further funds are required to be
advanced by the Government hereunder in order to enable the Borrower to
perform its obligations hereunder, the Administrator shall execute and
deliver to the Borrower a loan closing certificate (hereinafter called the
"loan closing certificate") which shall, among other things, specify the date
of the closing of the Loan and the amount of the unpaid principal of and the
accrued and unpaid interest on each of the Notes.
SECTION 1.4 SECURITY. The Notes shall be secured by a mortgage made by
the Borrower to the Government, in form and substance satisfactory to the
Administrator and covering all the property of the Borrower now owned or
hereafter acquired (such mortgage being hereinafter called the "Mortgage"),
as supplemented by such supplemental mortgages made by the Borrower to the
Government by such chattel mortgages, and supplemental or additional chattel
mortgages, made by the Borrower to the Government, and by such other action
on the part of the Borrower, as may be required to confirm, fully convey,
preserve or renew the lien of the Mortgage as security for the Notes and
effectuate the intention of these presents that the Mortgage shall cover all
property of the Mortgagor, whether nor owned or hereafter acquired (any such
supplemental mortgage, chattel mortgage, supplemental or additional chattel
mortgage, and any such other action, as the case may be, being hereinafter
called a "supplemental mortgage").
ARTICLE II
ADVANCES AND DISPOSITION OF FUNDS
SECTION 2.1 PREREQUISITES TO ADVANCES. The Government shall be under
no obligation to advance any funds on account of the Loan from time to time
unless and until the Borrower shall have delivered to the Administrator, in
form and substance satisfactory to him, the following:
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<PAGE>
(a) one or more of the Notes, the Mortgage, and such supplemental
mortgages as may be required pursuant to section 1.4 hereof, all duly
executed and accompanied by proof of the due recordation and filing of the
Mortgage and any supplemental mortgage in such places as may be required by
law in order fully to perfect and maintain the lien of the Mortgage and any
supplemental mortgage;
(b) evidence of appropriate corporate action authorizing the
execution and delivery of the Notes, the Mortgage, and any supplemental
mortgage and amendment to this agreement;
(c) evidence that the Borrower has duly registered when and where
required by law with all State, Federal and other public authorities and
regulatory bodies and obtained therefrom all authorizations, certificates,
permits, and approvals to the extent required by law in order to enable the
Borrower to enter into this agreement, to execute and deliver the Notes,
the Mortgage, and any supplemental mortgage and amendment to this
agreement, to construct and operate the System, and to perform all other
acts to be performed by it hereunder;
(d) evidence that the Borrower has duly adopted a tariff which does
not include mileage or zone charges for rural multi-party service and which
will provide revenues sufficient to meet all necessary expenditures,
including all interest and principal payments under the Notes;
(e) evidence that there has been no substantial adverse change in
the Borrower's financial condition or plant since the date of the last
financial statement submitted by the Borrower to the Administrator;
(f) evidence that the Borrower is not involved in or threatened with
any litigation which may substantially and adversely affect the Borrower's
financial condition and that there are no liens or clouds on title except
the lien of the Mortgage and any supplemental mortgage, on any of its
property;
(g) evidence that the Borrower has duly adopted articles of
incorporation and bylaws in form and substance adequate to enable the
Borrower to perform all acts to be performed by it hereunder;
(h) such opinions as the Administrator may require, by counsel (who
may be a member of the Borrower's legal staff, if any, or any attorney
regularly employed by the Borrower) selected by the Borrower and approved
by the Administrator;
(i) evidence that the Borrower has good and marketable title to the
Existing Facilities, and holds such franchises, permits, leases, easements,
rights, privileges, licenses or right-of-way instruments, reasonably
adequate in form and substance, as may be required
-4-
<PAGE>
by law for the continued maintenance and operation of the Existing
Facilities, and every part thereof, in their present location;
(j) evidence of the payment by the Borrower of outstanding
indebtedness in the approximate amount of $3,300, owed to Payne County Bank
of Perkins, Oklahoma, and the discharge of all liens, if any, in connection
therewith; and
(k) evidence that the Borrower has obtained signed applications for
service from prospective subscribers, and confirmation of the desire of
existing subscribers to continue service at proposed rates which are
satisfactory to the Administrator, the total number of such prospective and
existing subscribers being at least 70 percent of the five year loan
subscribers in each proposed exchange area.
SECTION 2.2 REQUISITIONS. The Borrower shall from time to time
submit to the Administrator requisitions, on forms furnished by the
Administrator, requesting the Government to make advances on account of the
Loan. Each requisition shall be accompanied by the following:
(a) evidence that the construction of the Project effected to the
date of the requisition complies with the provisions hereof;
(b) a certificate signed by a duly authorized officer or employee of
the Borrower, which shall specify all payments not previously accounted for
theretofore made by the Borrower from funds in the Special Construction
Account provided for in section 2.4 hereof;
(c) a statement, on a form to be furnished by the Administrator,
setting forth the purposes for which it is intended the requested advance
will be used by the Borrower; and
(d) such additional information, opinions, documents and proofs
relating to the construction of the Project, the expenditure of loan funds,
and the Government's security for the Loan, as may reasonably be requested
by the Administrator.
SECTION 2.3 ADVANCES. The Government, upon receipt of a
requisition and accompanying documents complying with the provisions of
section 2.2 hereof shall, within a reasonable time thereafter, if the
Borrower has complied with the provisions of section 2.1 hereof and all other
conditions precedent to the advance of funds on account of the Loan, make an
advance to the Borrower sufficient for such of the purposes specified in the
statement of purposes accompanying the requisition as the Administrator shall
approve. The Administrator may at any time, as a condition to making any
advance on account of the Loan, require compliance by the Borrower with any
one or more of the covenants, terms and conditions of this agreement to be
performed by the Borrower. Advances made by the Government pursuant to this
section 2.3 shall be charged by the Government against any one or more of the
Notes in such manner and in such amounts as the Administrator and the
Borrower shall agree. The Government shall be under no
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<PAGE>
obligation to make advances on account of the Loan after the date of the
closing of the Loan specified in the loan closing certificate.
SECTION 2.4 SPECIAL CONSTRUCTION ACCOUNT. The Borrower shall hold
all moneys advanced to it by the Government hereunder in trust for the
Government and shall deposit such moneys promptly after the receipt thereof
in a bank or banks which shall meet the requirements specified in section 4.3
hereof. Any account (herein called "Special Construction Account") in which
any such moneys shall be deposited shall be designated by the corporate name
of the Borrower following by the words "Trustee, REA Construction Fund
Account." All loans funds in any Special Construction Account shall be used
solely for the purposes specified in section 1.1 hereof.
The Borrower shall expend each advance on account of the Loan or
equity funds only for such of the purposes specified in the statement of
purposes accompanying the requisition for such advance as shall have been
approved by the Administrator.
SECTION 2.5 UNEXPECTED LOAN FUNDS. Any funds advanced on account
of the Loan remaining unexpended in any Special Construction Account upon the
closing of the Loan shall be forthwith remitted by the Borrower to the
Government and a credit in respect thereof allowed against such Note or Notes
as shall be agreed upon by the Administrator and the Borrower.
SECTION 2.6 COMPLIANCE WITH RESTRICTIONS ON USE OF MATERIALS. No
advances will be made on account of the Loan for the construction of any part
of the Project with respect to which the Borrower shall have failed to submit
to the Government satisfactory evidence that the Borrower has obtained from
the appropriate agency or agencies of the Government all necessary orders or
approvals with respect to the use of the materials required for the
construction of such part of the Project. No construction shall be
undertaken except in accordance with authorizations or regulations of any
such agency or agencies having jurisdiction in the premises.
SECTION 2.7 TERMINATION OF ADVANCES.
(a) If, within one year from the date hereof, the Borrower has not
complied with all conditions precedent to the first advance of funds on
account of the Loan, including the submission of a requisition therefor
in compliance with section 2.2 hereof, the Administrator may, at any time
or times thereafter, request the Borrower in writing to advise the
Administrator whether the Borrower will be able to comply with such
conditions and, if so, to submit evidence to the Administrator, within
thirty days, of the Borrower's need for additional time for compliance with
such conditions. Upon consideration of such evidence, if any, and all
other relevant circumstances, the Administrator may, in his discretion, by
written notice to the Borrower, terminate any obligation of the Government
to advance any funds on account of the Loan to the Borrower, and such
action by the Administrator shall be conclusive.
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(b) If, within three years from the date hereof, or, in case this
agreement is amended to provide for an increase int he amount of the Loan,
then within three years from the date of the latest such amendment, the
Borrower has not complied with all conditions precedent to the advance of
the maximum amount of the Loan, including the submission of requisitions
therefor in compliance with section 2.2 hereof, the Administrator may, at
any time or times thereafter, request the Borrower in writing to advise the
Administrator whether the Borrower will require any further advances on
account of the Loan and, if so, to submit evidence to the Administrator,
within thirty days, of the Borrower's need for additional time for
compliance with such conditions. Upon consideration of such evidence, if
any, and all other relevant circumstances, the Administrator may, in his
discretion, by written notice to the Borrower, terminate any obligation of
the Government to advance funds on account of the Loan not previously
advanced to the Borrower, and such action by the Administrator must be
conclusive.
ARTICLE III
CONSTRUCTION
SECTION 3.1 LABOR AND MATERIALS CONTRACT. The Borrower shall
cause the Project to be constructed under labor and materials contract by a
responsible contractor or contractors selected by the Borrower and approved
by the Administrator, except to the extent that the Administrator may in
writing authorize other methods of construction. The Borrower shall keep
accurate and detailed records of all costs and expenses in connection with
construction of the Project.
SECTION 3.2 COMMENCEMENT AND COMPLETION. The Project shall be
constructed in accordance with the approved plans and specifications
hereinafter provided for, the provisions of this agreement and all contracts
and subcontracts made pursuant hereto. Construction of the Project or any
portion thereof shall be commenced promptly after the Government shall have
notified the Borrower of approval to commence such construction, and the
Borrower shall cause such construction to be prosecuted diligently and to be
completed in such manner that the System shall be free and clear of all liens
and lawful claims for liens except the liens of the Mortgage and any
supplemental mortgage.
SECTION 3.3. BIDDING. The Borrower shall invite bids for
construction of outside plant and buildings, for installation of station
equipment, an for purchase and installation, or either, of central office
equipment, included in the Project, unless otherwise authorized in writing by
the Administrator. The Borrower shall open all bids publicly at the time and
place which shall have been specified in the notice to bidders, after
reasonable prior written notification of such time and place has been given
by the Borrower to the Administrator. The Borrower shall award each contract
to the lowest responsible bidder, unless all bids are rejected.
SECTION 3.4 INSPECTION BY ADMINISTRATOR. The Administrator may
inspect the construction and equipment of the Project, and shall have the
right to examine and test all work and
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materials, and the Borrower shall provide reasonable facilities therefor for
the use of the Administrator and his agents. The Administrator may reject any
defective material or workmanship and require that any such material shall be
replaced with proper material and that any such workmanship shall be
corrected, to the end that all material and workmanship shall conform with
the approved plans and specifications hereinafter provided for.
SECTION 3.5 CERTIFICATE AND MAPS. The Borrower shall, at the
request of the Administrator, furnish to the Government: (a) such
certificates of the approved engineer and of the officers and employees of
the Borrower as the Administrator shall reasonably require with respect to
construction of the Project, or any portion thereof, and the cost thereof;
(b) a complete inventory by construction units, in sufficient detail to
reflect accurately all construction costs, and a description of the Project,
or any portion thereof; and (c) a map or maps, in the same form as contained
in the approved plans and specifications hereinafter provided fork, corrected
to show actual locations and classification of all exchanges, lines and other
properties of the Borrower except those, if any, not directly connected with
the Project.
ARTICLE IV
PARTICULAR COVENANTS
SECTION 4.1 APPOINTS BY BORROWER. The Borrower shall designate (a) one
or more engineers who shall perform the engineering services involved in the
construction of the Project or the several portions thereof, and execute all
certificates and other instruments pertaining to engineering details required
hereunder to be delivered to the Government; and (b) a person (who may be
regularly employed by the Borrower) who, subject to the general policies
fixed by the board of directors for the conduct of the Borrower's business,
shall have active charge of the management and operations of the Borrower
(hereinafter called the "Manager"). Persons so designated by the Borrower
shall be subject to the approval of the Administrator; provided that if any
such person is disapproved by the Administrator, the Administrator shall
notify the Borrower in writing of the reasons why the designated persons is
deemed not qualified to perform the proposed duties properly; and provided
further that the Administrator's approval shall not be required for a person
designated as the Manager by the Borrower if, for each of the five years
immediately preceding such designation, the Borrower has owned and operated
the Existing Facilities and has not had a deficit in net income as determined
in accordance with methods of accounting prescribed by the state regulatory
body having jurisdiction over the Borrower, or in the absence of such
regulatory body or such prescription, by the Federal Communications Commission
(a) a contract or contracts with one or more approved engineers for
all necessary engineering services in connection with the construction of
the Project;
(b) plans and specifications for the construction of each portion of
the Project, identified by the signatures of the approved engineer for such
portion or portions, and of a duly authorized and responsible officer or
employee of the Borrower;
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(c) a contract or contracts for the construction of outside plant
and buildings, for installation of station equipment, and for purchase and
installation, or either, of central office equipment, included in the
Project, together with any contractor's or subcontractor's bond relating
thereto;
(d) a contract or contracts for such toll traffic and operator
assistance services, to be furnished by connection companies, as may be
necessary for the proposed operation of the System; provided, however, that
the Administrator's approval shall not be required for any such contract or
contracts, submitted to the Administrator which, in form and substance
conform with contracts in general use in the telephone industry;
(e) a contract or contracts for the purchase by the Borrower of
materials, equipment and supplies for use in connection with the Project;
(f) a contract or contracts for the joint use of facilities of other
companies, as may be necessary for the construction or proper operation of
the System; and
(g) a contract or contracts for the purchase, lease or other
acquisition of land for use in connection with the construction or
operation of the System.
SECTION 4.3 DEPOSIT OF FUNDS. The Borrower shall not deposit or
allow to remain on deposit any of its funds, regardless of the source
thereof, in any bank which is not insured by the Federal Deposit Insurance
Corporation, or the successor thereof. The Borrower shall inform the
Administrator of the names of the banks which it has selected for deposit of
its funds.
SECTION 4.4 EASEMENTS AND PERMITS. The Borrower shall submit to
the Government, when requested by the Administrator, evidence satisfactory to
the Administrator that the Borrower has obtained such easements from
landowners and releases from lienor and such franchises, authorizations,
permits, licenses, certificates of convenience and necessity, approvals, and
orders from public bodies and others, reasonably adequate in form and
substance, as may be required by law for the construction of the Project and
the operation of the System. If requested so to do by the Administrator, the
Borrower shall cause such easements and releases to be recorded in
appropriate offices of record. Except with the consent of the Administrator,
none of the funds advanced on account of the Loan shall be used by the
Borrower to pay for easements obtained from landowners, or for releases of
liens affecting easements.
SECTION 4.5 AREA COVERAGE. The Borrower shall furnish adequate
telephone service to the widest practicable number of rural users in the
borrower's telephone service area, as such area is shown on the map which is
a part of the Borrower's application for the Loan, and which map, as revised
by agreement between the Borrower and the Administrator, is incorporated
herein by reference thereto. In the performance of this obligation, the
Borrower shall (except to the extent that the Administrator, upon request of
the Borrower, amy in writing authorize deviations therefrom):
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(a) furnish service to all applicants for service included in the
Project, without payment by such applicants of any extra charge as a
contribution to the cost of construction of facilities to provide such
service; and
(b) take all action that may be required to enable it to extend
service, with the use of such funds as may from time to time be available
to it, either from surplus earnings, increased equity capital, additional
loans made by the Government, or otherwise as the Borrower may elect, and
without payment to the Borrower of any extra charge as a contribution to
construction of facilities to provide such service, to at least those other
unserved rural applicants for service in its telephone service area who
meet either of the following conditions: *(1) service to such applicant
will not reduce the overall density of the Systems below ___ subscribers
per route mile of pole line, underground cable and radio link, or (2) the
cost of constructing the required line extension for such applicant will
not exceed seven times the estimated annual exchange revenue from such
applicant. Such service shall be furnished pursuant to terms and
conditions set forth in the borrower's tariff, as duly filed with or
approved by regulatory bodies having jurisdiction in the premises, or in
the absence of any such regulatory body, as adopted by the Borrower;
provided that the Borrower shall not file ahead or submit for approval of
appropriate regulatory bodies or adopt any proposed tariff, or continue in
effect any existing tariff not required to be continued by any regulatory
body, unless under such tariff the Borrower will be obligated to serve
unserved rural applicants as provided herein.
The furnishing of service to applicants for service under the conditions
provided in this section is of the essence of the Borrower's obligations
under this agreement, and the failure or neglect of the Borrower to perform
such obligation shall be deemed to be an event of default hereunder.
SECTION 4.6 MORTGAGES COVENANTS. The Borrower shall perform all
covenants by it to be performed under the Mortgage and any supplemental
mortgage.
SECTION 4.7 REPRESENTATIONS AND WARRANTIES. The Borrower
represents and warrants as follows:
(a) it is a corporation duly organized, existing and in good standing
under the laws of the State specified in the introductory paragraph of this
agreement and has corporate power to enter into this agreement and perform
every act required to be performed by it hereunder;
(b) all proceedings prerequisite to the valid execution of this
agreement by it have been duly taken and all required authorizations
therefor have been secured;
(c) it has not entered into any contract (not heretofore fully
performed) for the construction of any portion of the Project, or for
engineering or for other services pertaining to the construction or
operation of the System, unless such contract has (i) been approved by
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the Administrator; (2) will be submitted for the approval of the
Administrator; or (3) the effectiveness thereof has been made subject
to the approval of the Administrator;
(d) the capital structure of the Borrower is as shown in a certified
copy of its articles of incorporation last submitted to the Administrator;
the Borrower has issued and outstanding only such numbers and classes of
shares of its capital stock and such bonds and other evidences of
indebtedness, if any, as shown in the statement thereof last submitted to
the Administrator; and the Borrower has not entered into any agreement for
the issuance of any other shares of its capital stock, or of bonds or other
evidences if indebtedness; and
(e) every statement contained in this agreement and in every other
document, statement, certificate and opinion submitted to the Government by
it or in its behalf is true and correct.
SECTION 4.8 FEES AND COMMISSIONS. No fee or commission has been or
shall be paid and no agreement therefor has been or shall be entered into by
the Borrower or any of its officers, employees, agents, or representatives in
order to obtain the Loan.
SECTION 4.9 "BUY AMERICAN" CLAUSE. The Borrower shall use or cause
to be used in connection with the expenditures of funds advanced on account
of the Loan only such unmanufactured articles, materials, and supplies as
have been mined or produced in the United States, and only such manufactured
articles, materials, and supplies as have been manufactured in the United
States substantially all from articles, materials, or supplies mined,
produced, or manufactured, as the case may be, in the United States, except
to the extent the Administrator shall determine that such use shall be
impracticable or that the cost thereof shall be unreasonable.
SECTION 4.10 NON-DISCRIMINATION CLAUSE. The Borrowers, in the
performance of this agreement, shall not discriminate against any employee or
applicant for employment in regard to hire, tenure, terms or conditions of
employment because of race, creed, color or national origin. The Borrower
shall include in every contract involving the employment of persons hereafter
negotiated or renegotiated with any third party or parties a provision
obligating such party or parties not to discriminate in performing the work
required by such contract against any employee or applicant for employment in
regard to hire, tenure, terms or conditions of employment because of race,
creed color or national origin.
SECTION 4.11 EVIDENCE OF FEASIBILITY. The Borrower shall, whenever
requested so to do by the Administrator, submit evidence satisfactory to the
Administrator of the economic and engineering feasibility of each portion of
the System designated by the Administrator.
SECTION 4.12 PROOF OF TITLE. No funds shall be advanced on account
of the Loan to finance the acquisition of any real property by the Borrower,
or any constructions thereon, until the Borrower shall have submitted
evidence satisfactory to the Administrator that it has acquired or will
acquire good and marketable title to such real property.
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<PAGE>
SECTION 4.13 COMMENCEMENT OF OPERATION. The Borrower shall not
operate any portion of the Project until the Borrower shall have furnished
evidence that (a) such portion of the Project has been properly constructed
and is ready to be operated, (b) there are sufficient subscribers ready to
take service to permit the economical operation of such portion of the
Project, and (c) the Borrower has complied with the provisions of the
Mortgage concerning insurance in respect of such portion of the Project.
SECTION 4.14 OPERATING AND MAINTENANCE PROCEDURES. The Borrower
shall, subject to applicable laws and rules, regulations and orders of
regulatory bodies, operate and maintain the System in accordance with
standards of operation and maintenance generally accepted for corporations of
the size and character of the Borrower.
SECTION 4.15 RESTRICTIONS ON USE OF LOAN FUNDS IN PARADISE
EXCHANGE AREA. The Borrower shall not use any of the funds on account of the
Loan for the operation, rehabilitation, improvement or expansion of telephone
facilities within the Paradise exchange area.
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
SECTION 5.1 EVENTS OF DEFAULT. The happening of any of the
following events (hereinafter called "events of default") shall constitute a
default by the Borrower hereunder:
(a) any failure to perform, or any violation of, any term, covenant,
promise, condition, or agreement on the part of the Borrower to be
performed hereunder at the time and in the manner herein provided;
(b) any breach of any warranty or any material or substantial
inaccuracy in any representation on the part of the Borrower; or
(c) any event of default which is specified in the Mortgage or any
supplemental mortgage.
SECTION 5.2 REMEDIES UPON DEFAULT. Upon the happening of any
event of default, as specified in section 5.1 hereof, the Government or the
holder or holders of any one or more of the Notes, as their respective
interests may appear, may exercise either one or both of the following
rights, privileges, powers, and remedies, to the extent that the exercise
thereof is not prohibited by law:
(a) refuse to make any advance or any further advances on account of
the Loan, but any advance thereafter made by the Government shall not
constitute a waiver of such default; and
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(b) declare all unpaid principal of and all interest accrued on any
or all of the Notes held by such holder or holders (which may include the
Government) to be due and payable immediately and upon such declaration all
such principal and interest shall become due and payable immediately,
anything herein or in any other agreement to which the Borrower shall be a
party, or in the Notes or in the Mortgage or any supplemental mortgage to
the contrary notwithstanding.
SECTION 5.3 REMEDIES CUMULATIVE. Every right, privilege, power or
remedy herein or in the Notes or in the Mortgage or in any supplemental
mortgage conferred upon or reserved to the government or any holder or
holders of the Notes shall be cumulative and shall be in addition to every
other right, privilege, power, and remedy now or hereafter existing at law or
in equity or by statute. The pursuit of any right, privilege, power, or
remedy shall not be construed as an election.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 MEMBERS OF CONGRESS. No member of or delegate to the
Congress of the United States shall be admitted to any share or part of this
agreement or to any benefit to arise herefrom other than the receiving of
telephone service through the System on the same terms accorded others served
through the System.
SECTION 6.2 FALSE CLAIMS STATUTES. The Borrower and each of the
officers signing this agreement respectively acknowledge that they have
received copies of sections 286, 287, 641, 1001 and 1361 of Title 18, United
States Code, Crimes and Criminal Procedure.
SECTION 6.3 DEFINITIONS. Whenever the following terms are used in
this agreement, unless the context indicates another or different meaning or
intent, they shall be construed to have meanings as follows:
(a) "Administrator" means the Administrator of the Rural
Electrification Administration or his duly authorized representative or any
other person or authority in whom may be vested the duties and functions
relating to loans for telephone service in rural areas made pursuant to the
act which the Administrator is now or may hereafter be authorized by law to
perform;
(b) "plans and specifications" means the plans and specifications for
the Project originally approved by the Administrator and shall include such
changes and modifications thereof as may from time to time be agreed upon
by the Borrower and the Government;
(c) "note" includes "bond"; and
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(d) "construction" includes "acquisition", and the word "construct"
includes the word "acquire".
SECTION 6.4 APPROVALS IN WRITING. No counsel, engineer, manager
or other person, or instruments, or act of the Borrower, who or which shall
be subject to the approval of the Administrator, shall be deemed to be
approved unless and until the Administrator shall have given such approval in
writing.
SECTION 6.5 WAIVER. The Administrator, in his absolute discretion
and upon such terms and conditions as he may determine, may waive the
performance or doing of any one or more of the acts to be performed or things
to be done by the Borrower, and any provision hereof may be modified or
amended by mutual consent of the Borrower and the Administrator. The
Borrower shall not claim any modification, amendment, rescission, release, or
annulment of any part hereof except pursuant to a written instrument
subscribed by the Administrator. The approval by or on behalf of the
Administrator of any advance of funds on account of the Loan shall constitute
a finding of sufficient performance by the Borrower of all acts prerequisite
to such advance, or a waiver thereof; provided, however, that any such
waiver shall be effective only with reference to such advance and shall not
preclude the Administrator from requiring full performance of the acts so
waived as a prerequisite to any subsequent advance.
SECTION 6.6 NON-ASSIGNABILITY. The Borrower shall not assign this
agreement or any part hereof or any moneys due or to become due hereunder.
SECTION 6.7 DESCRIPTIVE HEADINGS; SEPARABILITY. The descriptive
headings of the various articles and sections hereof were formulated and
inserted for convenience only and shall not be deemed to affect the meaning
or construction of any of the provisions hereof. The invalidity of any one
or more phrases, clauses, sentences, paragraphs, or provisions of this
agreement shall not affect any remaining portion or portions hereof.
SECTION 6.8 NOTICES. All demands, notices, approvals,
designations, or directions permitted or required to be made upon or given to
the Borrower hereunder shall be mailed to the Borrower at Stillwater,
Oklahoma or such other address as the Borrower shall designate in writing to
the Administrator. All notices, designations, or communications permitted or
required to be given or sent to the Government or the Administrator hereunder
shall be mailed to the Administrator at Washington 25, D.C., or such other
address as the Administrator shall designate in writing to the Borrower.
SECTION 6.9 DURATION OF AGREEMENT. Except where otherwise
required by the context, all provisions of this agreement shall continue in
full force and effect until all amounts owing by the Borrower to the
Government on account of the Loan shall have been paid, and upon such payment
this agreement shall be deemed to have been fully performed.
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SECTION 6.10 COUNTERPARTS. This agreement may be simultaneously
executed and delivered in two or more counterparts, each of which so executed
and delivered shall be deemed to be an original, and all shall constitute but
one and the same instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be signed
in its corporate name and its corporate seal to be hereunto affixed and
attested by its officers thereunto duly authorized, and the Government has
caused this agreement to be duly executed, all as of the day and year first
above written.
DOBSON TELEPHONE COMPANY, INC.
By: /s/ E.R. DOBSON
-------------------------------------
ATTEST:
/s/ RUBY DOBSON
- -------------------------------------
Secretary
UNITED STATES OF AMERICA
By: /s/ RALPH J. FOREMAN
-------------------------------------
Acting Administrator
of
Rural Electrification Administration
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REA PROJECT DESIGNATION:
OKLAHOMA 535-A MCLOUD
TELEPHONE LOAN CONTRACT
DATED AS OF MARCH 19, 1956
BETWEEN
MCLOUD TELEPHONE COMPANY
AND
UNITED STATES OF AMERICA
DEPARTMENT OF AGRICULTURE
RURAL ELECTRIFICATION ADMINISTRATION
<PAGE>
AGREEMENT, made as of March 19, 1956, pursuant to the Rural
Electrification Act of 1936, as amended (7 U.S.C. 901 et seq.)
(hereinafter called the "Act"), between McLOUD TELEPHONE COMPANY
(hereinafter called the "Borrower"), a corporation existing under the
laws of the State of Oklahoma, and United States of America
(hereinafter called the "Government"), acting through the
Administrator of the Rural Electrification Administration (hereinafter
called the "Administrator").
WHEREAS, the Borrower owns and operates telephone facilities
(hereinafter called the "Existing Facilities"), serving approximately 332
subscribers located in the Counties of Cleveland, Lincoln, Oklahoma and
Pottawatomie, in the State of Oklahoma; and
WHEREAS, it is intended that the Government shall lend and the
Borrower shall borrow an amount not in excess of $218,000 to finance the
improvement and operation of the Existing Facilities and the construction and
operation of additional telephone facilities to serve approximately 313
subscribers in addition to those now being served (the improvements and
additional telephone facilities so financed being hereinafter collectively
called the "Project", and the Existing Facilities, as improved and added to by
the Project or otherwise, being hereinafter called the "System"), and to finance
the payment and discharge of outstanding indebtedness of the Borrower as
hereinafter provided; and
WHEREAS, it is contemplated that the amount of such loan may be
increased from time to time for purposes permitted by the provisions of the Act,
as from time to time amended, and upon the terms and conditions contained in
this agreement, as from time to time amended (such loan and any such increases
in the amount thereof being hereinafter collectively called the "Loan"); and
WHEREAS, the Administrator, in determining to enter into this
agreement, has relied upon the representation of the Borrower to him that it is
willing to furnish adequate telephone service to the widest practicable number
of persons in rural areas whom it is possible to serve, and the Borrower has
agreed to do so as hereinafter provided;
NOW, THEREFORE, for and in consideration of the mutual agreements
herein contained, the Borrower and the Government agree as follows:
ARTICLE I
LOAN, NOTES AND SECURITY
SECTION 1.1 AMOUNT AND PURPOSE. For the purpose of furnishing or
improving telephone service in rural areas, the Government shall lend and the
Borrower shall borrow an amount not in excess of $218,000, to finance pursuant
to the provisions of the Act, the construction of the Project and the operation
of the System, the Project to be located in the Counties of Cleveland, Lincoln,
Oklahoma and Pottawatomie, and in counties contiguous thereto, all in the State
of
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Oklahoma, and to finance the payment and discharge of outstanding indebtedness
of the Borrower in an aggregate amount not in excess of $11,712, plus accrued
interest, if any, and such other charges, if any, as the Borrower may be
obligated to pay in order to discharge such outstanding indebtedness.
SEC. 1.2 NOTES. The debt created by the Loan shall be evidenced by
notes (such notes and any notes executed and delivered to refund, or in
substitution for, such notes being hereinafter collectively called the "Notes")
to be executed by the Borrower, payable to the order of the Government. The
Notes shall bear interest at rates prescribed by applicable Federal statutes,
and shall otherwise be in form and substance satisfactory to the Administrator.
Interest shall accrue on the principal of each Note only in respect of amounts
which shall have been advanced to the Borrower from time to time on account of
the Loan and charged against such Note.
SEC. 1.3 LOAN CLOSING. The Administrator and the Borrower may from
time to time determine by agreement the amount required to enable the Borrower
to perform its obligations hereunder. If any reduction in the maximum amount of
the loan herein provided for is thus agreed upon, the Administrator shall cause
such one or more of the Notes as may be agreed upon to be appropriately credited
with an amount equal to such reduction, and the principal amount of such Note or
Notes shall, for the purposes of this agreement, be deemed to be correspondingly
reduced. When the Administrator and the Borrower shall agree that no further
funds are required to be advanced by the Government hereunder in order to enable
the Borrower to perform its obligations hereunder, the Administrator shall
execute and deliver to the Borrower a loan closing certificate (hereinafter
called the "loan closing certificate") which shall, among other things, specify
the date of the closing of the Loan and the amount of unpaid principal of and
the accrued and unpaid interest on each of the Notes.
SEC. 1.4. SECURITY. The Notes shall be secured by a mortgage made
by the Borrower to the Government, in form and substance satisfactory to the
Administrator and covering all the property of the Borrower now owned or
hereafter acquired (such mortgage being hereinafter called the "Mortgage"), as
supplemented by such supplemental mortgages made by the Borrower to the
Government, by such chattel mortgages, and supplemental or additional chattel
mortgages, made by the Borrower to the Government, and by such other action on
the part of the Borrower, as may be required to confirm, fully convey, preserve
or renew the lien of the Mortgage as security for the Notes and to effectuate
the intention of these presents that the Mortgage shall cover all property of
the Mortgagor, whether now owned or hereafter acquired (any such supplemental
mortgage, chattel mortgage, supplemental or additional chattel mortgage, and any
such other action, as the case may be, being hereinafter called a "supplemental
mortgage").
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ARTICLE II
ADVANCES AND DISPOSITION OF FUNDS
SECTION 2.1. PREREQUISITES TO ADVANCES. The Government shall be
under no obligation to advance any funds on account of the Loan from time to
time unless and until the Borrower shall have delivered to the Administrator, in
form and substance satisfactory to him, the following:
(a) one or more of the Notes, the Mortgages, and such
supplemental mortgages as may be required pursuant to section 1.4
hereof, all duly executed and accompanied by proof of the due
recordation and filing of the mortgage and any supplemental mortgage
in such places as may be required by law in order fully to perfect and
maintain the lien of the Mortgage and any supplemental mortgage;
(b) evidence of appropriate corporate action authorizing the
execution and delivery of the Notes, the Mortgage, and any
supplemental mortgage and amendment to this agreement;
(c) evidence that the Borrower has duly registered when and
where required by law with all State, Federal and other public
authorities and regulatory bodies and obtained therefrom all
authorizations, certificates, permits, and approvals to the extent
required by law in order to enable the Borrower to enter into this
agreement, to execute and deliver the Notes, the Mortgage, and any
supplemental mortgage and amendment to this agreement, to construct
and operate the System, and to perform all other acts to be performed
by it hereunder;
(d) evidence that the Borrower has duly adopted a tariff which
does not include mileage or zone charges for rural multi-party service
and which will provide revenues sufficient to meet all necessary
expenditures, including all interest and principal payments under the
Notes;
(e) evidence that there has been no substantial adverse change
in the Borrower's financial condition or plant since the date of the
last financial statement submitted by the Borrower to the
Administrator;
(f) evidence that the Borrower is not involved in or threatened
with any litigation which may substantially and adversely affect the
Borrower's financial condition and that there are no liens or clouds
on title except the lien of the Mortgage and any supplemental
mortgage, on any of its property; provided, however, that with respect
to the first advance of funds on account of the Loan (which advance is
more particularly conditioned as hereinafter provided in this section)
the obligation of the Borrower to furnish evidence relating to liens
on its property shall be to furnish evidence that there are no liens
on any of its property except the lien of the mortgage and any
supplemental mortgages, and any chattel mortgages or other mortgages
(hereinafter collectively called the "Underlying Mortgage"), securing
certain indebtedness owing by the Borrower to Mae Verity in the
approximate principal
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<PAGE>
amount of $10,700, and to the Stromberg-Carlson Supply Company in the
approximate amount of $850;
(g) evidence that the Borrower has duly adopted articles of
incorporation and by laws in form and substance adequate to enable the
Borrower to perform all acts to be performed by it hereunder;
(h) such opinions as the Administrator may require, by counsel
(who may be a member of the Borrower's legal staff, if any, or an
attorney regularly employed by the Borrower) selected by the Borrower
and approved by the Administrator;
(i) evidence that the Borrower has good and marketable title to
the Existing Facilities, subject only to the lien of the Underlying
Mortgage referred to in subparagraph (f) of this section. 2.1, and
holds such franchises, permits, leases, easements, rights, privileges,
licenses or right-of-way instruments, reasonably adequate in form and
substance, as may be required by law for the continued maintenance and
operation of the Existing Facilities, and every part thereof, in their
present location;
(j) a comment or commitments from other companies covering the
joint use of facilities, as may be necessary for the construction or
proper operation of the System;
The first advance of funds on account of the Loan shall be made by the
Government to the Borrower (upon compliance by the Borrower with all conditions
of this agreement precedent to the advance of funds on account of the Loan) for
the purpose of enabling the Borrower: (1) to pay and discharge outstanding
indebtedness, in an amount not in excess of the amount provided in Section 1.1
hereof for such purpose, and (2) to pay for preloan engineering services, in an
amount to be approved by the Administrator. Thereafter, the Government shall be
under no obligation to make any further advances on account of the Loan until
the Borrower shall have submitted evidence, satisfactory in form and substance
to the Administrator, of: (a) the payment and discharge of all indebtedness of
the Borrower required to be paid and discharged with loan funds; and (b) the
position of the Mortgage and any supplemental mortgages as the first and only
lien against the System.
SEC. 2.2 REQUISITIONS. The Borrower shall from time to time submit
to the Administrator requisitions, on forms furnished by the Administrator,
requesting the Government to make advances on account of the Loan. Each
requisition shall be accompanied by the following:
(a) evidence that the construction of the Project effected to
the date of the requisition complies with the provisions hereof;
(b) a certificate signed by a duly authorized officer or
employee of the Borrower, which shall specify all payments not
previously accounted for theretofore
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<PAGE>
made by the Borrower from funds in the Special Construction Account
provided for in section 2.4 hereof;
(c) a statement, on a form to be furnished by the Administrator,
setting forth the purposes for which it is intended the requested
advance will be used by the Borrower; and
(d) such additional information, opinions, documents and proofs
relating to the construction of the Project, the expenditure of loan
funds, and the Government's security for the Loan, as may reasonably
be requested by the Administrator.
SEC. 2.3. ADVANCES. The Government, upon receipt of a requisition
and accompanying documents complying with the provisions of section 2.2 hereof
shall, within a reasonable time thereafter, if the Borrower has complied with
the provisions of section 2.1 hereof and all other conditions precedent to the
advance of funds on account of the Loan, make an advance to the Borrower
sufficient for such of the purposes specified in the statement of purposes
accompanying the requisition as the Administrator shall approve. The
Administrator may at any time, as a condition to making any advance on account
of the Loan, require compliance by the Borrower with any one or more of the
covenants, terms and conditions of this agreement to be performed by the
Borrower. Advances made by the Government pursuant to this section 2.3 shall be
charged by the Government against any one or more of the Notes in such manner
and in such amounts as the Administrator and the Borrower shall agree. The
Government shall be under no obligation to make advances on account of the Loan
after the date of the closing of the Loan specified in the loan closing
certificate.
SEC. 2.4. SPECIAL CONSTRUCTION ACCOUNT. The Borrower shall hold all
moneys advanced to it by the Government hereunder in trust for the Government
and shall deposit such moneys promptly after the receipt thereof in a bank or
banks which shall meet the requirements specified in section 4.3 hereof. Any
account (herein called "Special Construction Account") in which any such moneys
shall be deposited shall be designated by the corporate name of the Borrower
followed by the words "Trustee, REA Construction Fund Account". All loan funds
in any Special Construction Account shall be used solely for the purposes
specified in section 1.1 hereof.
The Fairer shall expend each advance on account of the Loan only for such of the
purposes specified in the statement of purposes accompanying the requisition for
such advance as shall have been approved by the Administrator.
SEC. 2.5 UNEXPENDED LOAN FUNDS. Any Funds advanced on account of the
Loan remaining unexpended in any Special Construction Account upon the closing
of the Loan shall be forthwith remitted by the Borrower to the Government and a
credit in respect thereof allowed against such Note or Notes as shall be agreed
upon by the Administrator and the Borrower.
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<PAGE>
SEC. 2.6. COMPLIANCE WITH RESTRICTIONS ON USE OF MATERIALS. No
advances will be made on account of the Loan for the construction of any part of
the Project with respect to which the Borrower shall have failed to submit to
the Government satisfactory evidence that the Borrower has obtained from the
appropriated agency or agencies of the Government all necessary orders or
approvals with respect to the use of the materials required for the construction
of such part of the Project. No construction shall be undertaken except in
accordance with authorizations or regulations of any such agency or agencies
having jurisdiction in the premises.
SEC. 2.7. TERMINATION OF ADVANCES.
(a) If, within one year from the date hereof, the Borrower has
not complied with all conditions precedent to the first advance of
funds on account of the Loan, including the submission of a
requisition therefor in compliance with section 2.2 hereof, the
Administrator may, at any time or times thereafter, request the
Borrower in writing to advise the Administrator whether the Borrower
will be able to comply with such conditions and, if so, to submit
evidence to the Administrator, within thirty days, of the Borrower's
need for additional time for compliance with such conditions. Upon
consideration of such evidence, if any, and all other relevant
circumstances, the Administrator may, in his discretion, by written
notice to the Borrower, terminate any obligation of the Government to
advance any funds on account of the Loan to the Borrower, and such
action by the Administrator shall be conclusive.
(b) If, within three years from the date hereof, or, in case
this agreement is amended to provide for an increase in the amount of
the Loan, then within three years from the date of the latest such
amendment, the Borrower has not complied with all conditions precedent
to the advance of the maximum amount of the Loan, including the
submission of requisitions therefor in compliance with section 2.2
hereof,t he Administrator may, at any time or times thereafter,
request the Borrower in writing to advise the Administrator whether
the Borrower will require any further advances on account of the Loan
and, if so, to submit evidence to the Administrator, within thirty
days, of the Borrower's need for additional time for compliance with
such conditions. Upon consideration of such evidence, if any, and all
other relevant circumstances, the Administrator may, in his
discretion, by written notice to the Borrower, terminate any
obligation of the Government to advance funds on account of the Loan
not previously advanced to the Borrower, and such action by the
Administrator shall be conclusive.
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<PAGE>
ARTICLE III
CONSTRUCTION
SEC. 3.1. LABOR AND MATERIALS CONTRACT. The Borrower shall cause the
Project to be constructed under labor and materials contract by a responsible
contractor or contractors selected by the Borrower and approved by the
Administrator, except to the extent that the Administrator may in writing
authorize other methods of construction. The Borrower shall keep accurate and
detailed records of all costs and expenses in connection with construction of
the Project.
SEC. 3.2 COMMENCEMENT AND COMPLETION. The Project shall be
constructed in accordance with the approved plans and specifications hereinafter
provided for, the provisions of this agreement and all contracts and
subcontracts made pursuant hereto. Construction of the Project or any portion
thereof shall be commenced promptly after the Government shall have notified the
Borrower of approval to commence such construction, and the Borrower shall cause
such construction to be prosecuted diligently and to be completed within a
reasonable time, unless prevented from so doing by causes beyond the control and
without the fault or negligence of the Borrower. The Borrower shall cause the
Project to be completed in such manner that the System shall be free and clear
of all liens and lawful claims for liens except the liens of the Mortgage and
any supplemental mortgage.
SEC. 3.3 BIDDING. The Borrower shall invite bids for construction
of outside plant and buildings, for installation of station equipment, and for
purchases and installation, or either, of central office equipment, included in
the Project, unless otherwise authorized in writing by the Administrator. The
Borrower shall open all bide publicly at the time and place which shall have
been specified in the notice to bidders, after reasonable prior written
notification of such time and place has been given by the Borrower to the
Administrator. The Borrower shall award each contract to the lowest responsible
bidder, unless all bids are rejected.
SEC. 3.4 INSPECTION BY ADMINISTRATOR. The Administrator may inspect
the construction and equipment of the Project, and shall have the right to
examine and test all work and materials, and the Borrower shall provide
reasonable facilities therefor for the use of the Administrator and his agents.
The Administrator may reject any defective material or workmanship and require
that any such material shall be replaced with proper material and that any such
workmanship shall be corrected, to the end that all material and workmanship
shall conform with the approved plans and specifications hereinafter provided
for.
SEC. 3.5. CERTIFICATES AND MAPS. The Borrower shall, at the request
of the Administrator, furnish to the Government: (a) such certificates of the
approved engineer and of the officers and employees of the Borrower as the
Administrator shall reasonably require with respect to construction of the
Project, or any portion thereof, and the cost thereof; (b) a complete inventory
by construction units, in sufficient detail to reflect accurately all
construction costs, and a description of the Project, or any portion thereof;
and (c) a map or maps, in the same form as contained in the approved plans and
specifications hereinafter provided for, corrected to show actual locations and
classification of all exchanges, lines and other properties of the Borrower
except those, if any, not directly connected with the Project.
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<PAGE>
ARTICLE IV
PARTICULAR COVENANTS
SEC. 4.1. APPOINTMENTS BY BORROWER. The Borrower shall designate:
(a) one or more engineers who shall perform the engineering services involved in
the construction of the Project or the several portions thereof, and execute all
certificates and other instruments pertaining to engineering details required
hereunder to be delivered to the Government; and (b) a person (who may be
regularly employed by the Borrower) who, subject to the general policies fixed
by the board of directors for the conduct of the Borrower's business, shall have
active charge of the management and operations of the Borrower (hereinafter
called the "Manager"). Persons so designated by the Borrower shall be subject
to the approval of the Administrator; provided that if any such person is
disapproved by the Administrator, the Administrator shall notify the Borrower in
writing of the reasons why the designated person is deemed not qualified to
perform the proposed duties properly; and provided further that the
Administrator's approval shall not be required for a person designated as the
Manager by the Borrower if, for each of the five years immediately preceding
such designation, the Borrower has owned and operated the Existing Facilities
and has not had a deficit in net income as determined in accordance with methods
of accounting prescribed by the state regulatory body having jurisdiction over
the borrower, or in the absence of such regulatory body or such prescription, by
the Federal Communications Commission.
SEC. 4.2. SUBMISSION OF PLANS, SPECIFICATIONS AND CONTRACTS WITH
THIRD PARTIES. The Borrower shall submit, when requested by the Administrator
and subject to the Administrator's approval:
(a) a contract or contracts with one or more approved engineers
for all necessary engineering services in connection with the
construction of the Project;
(b) plans and specifications for the construction of each
portion of the Project, identified by the signatures of the approved
engineer for such portion or portions, and of a duly authorized and
responsible officer or employee of the Borrower;
(c) a contract or contracts for the construction of outside
plant and buildings, for installation of station equipment, and for
purchase and installation, or either, of central office equipment,
included in the Project, together with any contractor's or
subcontractor's bond relating thereto;
(d) a contract or contracts for such toll traffic and operator
assistance services, to be furnished by connecting companies, as may
be necessary for the proper operation of the System; provided,
however, that the Administrator's approval shall not be required for
any such contract or contracts, submitted to the
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Administrator, which in form and substance conform with contracts in
general use in the telephone industry;
(e) a contract or contracts for the purchase by the Borrower of
materials, equipment and supplies for use in connection with the
Project;
(f) a contract or contracts for the joint use of facilities of
other companies, as may be necessary for the construction or proper
operation of the System.
SEC. 4.3. DEPOSIT OF FUND. The Borrower shall not deposit or allow
to remain on deposit any of its funds, regardless of the source thereof, in any
bank which is not insured by the Federal Deposit Insurance Corporation, or the
successor thereof. The Borrower shall inform the Administrator of the names of
the banks which it has selected for deposit of its funds.
SEC. 4.4 EASEMENTS AND PERMITS. The Borrower shall submit to the
Government, when requested by the Administrator, evidence satisfactory to the
Administrator that the Borrower has obtained such easements from landowners and
releases from lienors and such franchises, authorizations, permits, licenses,
certificates of convenience and necessity, approvals, and orders from public
bodies and others, reasonably adequate in form and substance, as may be required
by law for the construction of the Project and the operation of the System. If
requested so to do by the Administrator, the Borrower shall cause such easements
and releases to be recorded in appropriate offices of record. Except with the
consent of the Administrator, none of the funds advanced on account of the Loan
shall be used by the Borrower to pay for easements obtained from landowners, or
for releases of liens affecting easements.
SEC. 4.5. AREA COVERAGE. The Borrower shall furnish adequate
telephone service to the widest practicable number of rural users in the
Borrower's telephone service area, as such area is shown on the map which is a
part of the Borrower's application for the Loan, and which map, as revised by
agreement between the Borrower and the Administrator, is incorporated herein by
reference thereto. In the performance of this obligation, the Borrower shall
(except to the extent that the Administrator, upon request of the Borrower, may
in writing authorize deviations therefrom):
(a) furnish service to all applicants for service included in
the Project, without payment by such applicants of any extra charge as
a contribution to the cost of construction of facilities to provide
such serviced; and
(b) take all action that may be required to enable it to extend
service, with the use of such funds as may from time to time be
available to it, either from surplus earnings, increased equity
capital, additional loans made by the Government, or otherwise as the
Borrower may elect, and without payment to the Borrower of any extra
charge as a contribution to construction of facilities to provide such
service, to
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<PAGE>
at lease those other unserved rural applicants for service in its
telephone service area who meet either of the following conditions:
(1) service to such applicant will not reduce the overall density of
the System below 3.9 subscribers per route mile of pole line,
underground cable and radio link, or (2) the cost of constructing the
required line extension for such applicant will not exceed seven times
the estimated annual exchange revenue from such applicant. Such
service shall be furnished pursuant to terms and conditions set forth
in the Borrower's tariff, as duly filed with or approved by regulatory
bodies having jurisdiction in the premises, or in the absence of any
such regulatory body, as adopted by the Borrower; provided that the
Borrower shall not file with or submit for approval of appropriate
regulatory bodies or adopt any proposed tariff, or continue in effect
any existing tariff not required to be continued by any regulatory
body, unless under such tariff the Borrower will be obligated to
serve unserved rural applicants as provided herein.
The furnishing of service to applicants for service under the conditions
provided in this section is of the essence of the Borrower's obligations under
this agreement, and the failure or neglect of the Borrower to perform such
obligation shall be deemed to be an event of default hereunder.
SEC. 4.6 MORTGAGE COVENANTS. The Borrower shall perform all
covenants by it to be performed under the Mortgage and any supplemental
mortgage.
SEC. 4.7. REPRESENTATIONS AND WARRANTIES. The Borrower represents
and warrants as follows:
(a) it is a corporation duly organized, existing and in good
standing under the laws of the State specified in the introductory
paragraph of this agreement and has corporate power to enter into this
agreement and perform every act required to be performed by it
hereunder;
(b) all proceedings prerequisite to the valid execution of this
agreement by it have been duly taken and all required authorizations
therefor have been secured;
(c) it has not entered into any contract (not heretofore fully
performed) for the construction of any portion of the Project, or for
engineering or for other services pertaining to the construction or
operation of the System, unless such contract has (1) been approved by
the Administrator; (2) will be submitted for the approval of the
Administrator; or (3) the effectiveness thereof has been made subject
to the approval of the Administrator;
(d) the capital structure of the Borrower is as shown in a
certified copy of its articles of incorporation last submitted to the
Administrator; the Borrower has issued and outstanding only such
numbers and classes of shares of its capital stock and such bonds and
other evidence of indebtedness, if any, as shown in the statement
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thereof last submitted to the Administrator; and the Borrower has not
entered into any agreement for the issuance of any other shares of its
capital stock, or of bonds or other evidence of indebtedness; and
(e) every statement contained in this agreement and in every
other document, statement, certificate and opinion submitted to the
Government by it or in its behalf is true and correct.
SEC. 4.8. FEES AND COMMISSIONS. No fee or commission has been or
shall be paid and no agreement therefor has been or shall be entered into by the
Borrower or any of its officers, employees, agents, or representatives in order
to obtain the Loan.
SEC. 4.9. "BUY AMERICAN" CLAUSE. The Borrower shall use or cause to
be used in connection with the expenditures of funds advanced on account of the
Loan only such unmanufactured articles, materials, and supplies as have been
mined or produced in the United States, and only such manufactured articles,
materials, and supplies as have been manufactured in the United States
substantially all from articles, materials, or supplies mined, produced, or
manufactured, as the case may be, in the United States, except to the extend the
Administrator shall determine that such use shall be impracticable or that the
cost thereof shall be unreasonable.
SEC. 4.10. NON-DISCRIMINATION CLAUSE. The Borrower, in the
performance of this agreement, shall not discriminate against any employee or
applicant for employment in regard to hire, tenure, terms or conditions of
employment because of race, creed, color or national origin. The Borrower shall
include in every contract involving the employment of persons hereafter
negotiated or renegotiated with any third party or parties a provision
obligating such party or parties not to discriminate in performing the work
required by such contract against any employee or applicant for employment in
regard to hire, tenure, terms or conditions or employment because of race,
creed, color or national origin.
SEC. 4.11. EVIDENCE OF FEASIBILITY. The Borrower shall, whenever
requested so to do by the Administrator, submit evidence satisfactory to the
Administrator of the economic and engineering feasibility of each portion of the
System designated by the Administrator.
SEC. 4.12. PROOF OF TITLE. No funds shall be advanced on account the
Loan to finance the acquisition of any real property by the Borrower, or any
construction thereon, until the Borrower shall have submitted evidence
satisfactory to the Administrator that it has acquired or will acquire good and
marketable title to such real property.
SEC. 4.13. COMMENCEMENT OF OPERATION. The Borrower shall not operate
any portion of the Project until the Borrower shall have furnished evidence that
(a) such portion of the Project has been properly constructed and is ready to be
operated, (b) there are sufficient subscribers ready to take service to permit
the economical operation of such portion of the Project, and (c) the
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Borrower has complied with the provisions of the Mortgage concerning insurance
in respect of such portion of the Project.
SEC. 4.14. OPERATING AND MAINTENANCE PROCEDURES. The Borrower shall,
subject to applicable laws and rules, regulations and orders of regulatory
bodies, operate and maintain the System in accordance with standards of
operation and maintenance generally accepted for corporations of the size and
character of the Borrower.
SEC. 4.15. NON-DUPLICATION OF FACILITIES. The Borrower shall not use
any part of the Loan for the construction of telephone facilities to furnish or
improve service to persons receiving telephone service from any other telephone
company at the time the Borrower proposes to furnish or improve service to such
persons, except that the Borrower may provide or improve service to persons
receiving service through facilities acquired or to be acquired by the Borrower,
and except to the extent that the Administrator, on the basis of evidence
submitted to him by the Borrower, shall have determined that service by the
Borrower to such persons will not result in duplication of lines, facilities or
systems providing reasonably adequate service.
ARTICLE V
EVENTS OF DEFAULT AND REMEDIES
SEC. 5.1. EVENTS OF DEFAULT. The happening of any of the following
events (hereinafter called "events of default") shall constitute a default by
the Borrower hereunder:
(a) any failure to perform, or any violation of, any term,
covenant, promise, condition, or agreement, on the part of the
Borrower to be performed hereunder at the time and in the manner
herein provided;
(b) any breach of any warranty or any material or substantial
inaccuracy in any representation on the part of the Borrower; or
(c) any event of default which is specified in the Mortgage or
any supplemental mortgage.
SEC. 5.2. REMEDIES UPON DEFAULT. Upon the happening of any event of
default, as specified in section 5.1 hereof, the Government or the holder or
holders of any one or more of the Notes, as their respective interests may
appear, may exercise either one or both of the following rights, privileges,
powers, and remedies, to the extent that the exercise thereof is not prohibited
by law:
(a) refuse to make any advance or any further advances on
account of the Loan, but any advance thereafter made by the Government
shall not constitute a waiver of such default; and
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<PAGE>
(b) declare all unpaid principal of and all interest accrued on
any or all of the Notes held by such holder or holders (which may
include the Government) to be due and payable immediately and upon
such declaration all such principal and interest shall become due and
payable immediately, anything herein or in any other agreement to
which the Borrower shall be a party, or in the Notes or in the
Mortgage or any supplemental mortgage to the contrary notwithstanding.
SEC. 5.3. REMEDIES CUMULATIVE. Every right, privilege, power or
remedy herein or in the Notes or in the Mortgage or in any supplemental mortgage
conferred upon or reserved to the Government or any holder or holders of the
Notes shall be cumulative and shall be in addition to every other right,
privilege, power, and remedy now or hereafter existing at law or in equity or by
statute. The pursuit of any right, privilege, power, or remedy shall not be
construed as an election.
ARTICLE VI
MISCELLANEOUS
SEC. 6.1. MEMBERS OF CONGRESS. No member of or Delegate to the
Congress of the United States shall be admitted to any share or part of this
agreement or to any benefit to arise herefrom other than the receiving of
telephone service through the System on the same terms accorded others served
through the System.
SEC. 6.2 FALSE CLAIMS STATUTES. The Borrower and each of the
officers signing this agreement respectively acknowledge that they have received
copies of sections 286, 287, 641, 1001 and 1361 of Title 18, United States Code,
Crimes and Criminal Procedure.
SEC. 6.3 DEFINITIONS. Whenever the following terms are used in this
agreement, unless the context indicates another or different meaning or intent,
they shall be construed to have meanings as follows:
(a) "Administrator" means the Administrator of the Rural
Electrification Administration or his duly authorized representative
or any other person or authority in whom may be vested the duties and
functions relating to loans for telephone service in rural areas made
pursuant to the Act which the Administrator is now or may hereafter be
authorized by law to perform;
(b) "plans of specifications" means the plans and specifications
for the Project originally approved by the Administrator and shall
include such changes and modifications thereof as may from time to
time be agreed upon by the Borrower and the Government;
(c) "note" includes "bond"; and
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(d) "construction" includes "acquisition", and the word
"construct" includes the word "acquire".
SEC. 6.4 APPROVALS IN WRITING. No counsel, engineer, manager or
other person, or instruments, or act of the Borrower, who or which shall be
subject to the approval of the Administrator, shall be deemed to be approved
unless and until the Administrator shall have given such approval in writing.
SEC. 6.5 WAIVER. The Administrator, in his absolute discretion and
upon such terms and conditions as he may determine, may waive the performance or
doing of any one or more of the acts to be performed or things to be done by the
Borrower, and any provision hereof may be modified or amended by mutual consent
of the Borrower and the Administrator. The Borrower shall not claim any
modification, amendment, rescission, release, or annulment of any part hereof
except pursuant to a written instrument subscribed by the Administrator. The
approval by or on behalf of the Administrator of any advance of funds on account
of the Loan shall constitute a finding of sufficient performance by the Borrower
of all acts prerequisite to such advance, or a waiver thereof; provided,
however, that any such waiver shall be effective only with reference to such
advance and shall not preclude the Administrator from requiring full performance
of the acts so waived as a prerequisite to any subsequent advance.
SEC. 6.6 NON-ASSIGNABILITY. The Borrower shall not assign this
agreement or any part hereof or any moneys due or to become due hereunder.
SEC. 6.7 DESCRIPTIVE HEADINGS; SEPARABILITY. The descriptive
headings of the various articles and sections hereof were formulated and
inserted for convenience only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof. The invalidity of any one or more
phrases, clauses, sentences, paragraphs, or provisions of this agreement shall
not affect any remaining portion or portions hereof.
SEC. 6.8. NOTICES. All demands, notices, approvals, designations, or
directions permitted or required to be made upon or given to the Borrower
hereunder shall be mailed to the Borrower at McLoud, Oklahoma or such other
address as the Borrower shall designate in writing to the Administrator. All
notices, designations, or communications permitted or required to be given or
sent to the Government or the Administrator hereunder shall be mailed to the
Administrator at Washington 25, D.C., or such other address as the Administrator
shall designate in writing to the Borrower.
SEC. 6.9 DURATION OF AGREEMENT. Except where otherwise required by
the context, all provisions of this agreement shall continue in full force and
effect until all amounts owing by the Borrower to the Government on account of
the Loan shall have been paid, and upon such payment this agreement shall be
deemed to have been fully performed.
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SEC. 6.10 COUNTERPARTS. This agreement may be simultaneously
executed and delivered in two or more counterparts, each of which so executed
and delivered shall be deemed to be an original, and all shall constitute but
one and the same instrument.
IN WITNESS WHEREOF the Borrower has caused this agreement to be signed
in its corporate name and its corporate seal to be hereunto affixed and attested
by its officers thereunto duly authorized, and the Government has caused this
agreement to be duly executed, all as of the day and year first above written.
McLOUD TELEPHONE COMPANY
by /s/ CHARLES BLAKELEY
-------------------------------
Charles Blakeley, President
(Seal)
Attest: /s/ LUCILE BLAKELEY
----------------------------
Lucile Blakeley
Secretary
UNITED STATES OF AMERICA
by /s/ J. K. O'SHAUGHNESSY
-------------------------------
J. K. O'Shaughnessy
Acting Administrator of Rural
Electrification Administration
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T.L.C.A. - Additional Bank Loan
Project Designation:
Oklahoma 545-TA1, TP1 CHEYENNE
(Oklahoma 535 McLoud)
TELEPHONE LOAN
CONTRACT AMENDMENT
Dated as of January 15, 1993
between
DOBSON TELEPHONE COMPANY, INC.
RURAL TELEPHONE BANK
and
UNITED STATES OF AMERICA
<PAGE>
AGREEMENT, made as of January 15, 1993, between DOBSON TELEPHONE COMPANY,
INC. (hereinafter called the "Borrower"), a corporation existing under the laws
of the State of Oklahoma, UNITED STATES OF AMERICA (hereinafter called the
"Government"), acting through the Administrator of the Rural Electrification
Administration (hereinafter called the "Administrator"), and RURAL TELEPHONE
BANK (hereinafter called the "Bank"), a corporation existing under the laws of
the Government, acting through the Governor of the Bank (hereinafter called the
"Governor").
WHEREAS, the Government and the Borrower have heretofore entered into a
certain telephone loan contract, amending telephone loan contract, consolidating
telephone loan contract, or consolidating and amending telephone loan contract,
dated as of November 7, 1958 (such agreement, as it may have been amended by
agreements between the Borrower and the Government, being hereinafter called the
"Loan Contract"); and
WHEREAS, the McLoud Telephone Co. (hereinafter called "McLoud"), a
corporation formerly existing under the laws of the State of Oklahoma, and the
Government have heretofore entered into a telephone loan contract, dated as of
MARCH 19, 1956, as heretofore amended by certain agreements, including a certain
amendment made by and among McLoud, the Government and the Bank (said agreement,
as it may have been amended being hereinafter called the "McLoud Loan
Contract"), with respect to the terms and conditions of loans (hereinafter
called the "McLoud Loan(s)") made by the Government and the Bank to McLoud; and
WHEREAS, pursuant to a Resolution of Merger, McLoud merged into the
Borrower, effective December 31, 1990, in accordance with all applicable laws,
with the Borrower being the surviving corporation, and acquiring all right,
title and interest of McLoud in all of the assets, rights, and properties of
McLoud and the Borrower has assumed all of the debts, liabilities and
obligations of McLoud (such acquisition and assumption of indebtedness being
hereinafter called the "McLoud Acquisition"); and
WHEREAS, it is intended by this agreement to amend the Loan Contract to
reflect the "McLoud Acquisition" by the Borrower; and
WHEREAS, it is intended by this agreement to amend the Loan Contract (a) by
increasing the aggregate amount of the loans provided for in the Loan Contract
by the sum of the aggregate amount of the loans provided for in the McLoud Loan
Contract, and (b) in certain other respects;
NOW, THEREFORE, for and in consideration of the mutual agreements herein
contained, the Borrower, the Government, and the Bank agree as follows:
SECTION 1. The Bank is hereby made a party to the Loan Contract.
SECTION 2. The definition of "Loan" in the Loan Contract is amended to
include the Bank Loan, as defined in section 3 of this agreement.
SECTION 3. The Loan Contract is amended by the addition of (1) the term
"REA
<PAGE>
Loan", which shall mean collectively that part of the Loan which the
Government has heretofore agreed to make (hereinafter sometimes called the
"underlying loan"), plus any increase in the underlying loan which the
Government may agree to make pursuant to the Loan Contract, as amended hereby
and as it may be hereafter amended from time to time, and (2) the term "Bank
Loan", which shall mean the amount of the outstanding balance of the loans
made by the Bank to McLoud as set forth in Section 7(B) of this Agreement and
assumed by the Borrower and payable to the Bank and any increase in the amount
thereof which the Bank may agree to make pursuant to the Loan Contract, as
amended hereby and as it may be hereafter amended from time to time.
SECTION 4. The definition of the term "Existing Facilities" in the Loan
Contract is amended (a) to include the existing facilities owned and operated by
McLoud as defined in the McLoud Loan Contract, and (b) by changing to 332 the
approximate number of subscribers served thereby.
SECTION 5. The definition of the term "Project" in the Loan Contract is
amended (a) to include the improvements and additional telephone facilities
financed by the McLoud Loans, and (b) by changing to 13,156 the approximate
number of subscribers to be served thereby (aside from those served by the
Existing Facilities as such term is defined in the Loan Contract as amended by
this agreement).
SECTION 6. The definition of the term "System" in the Loan Contract is
amended to include the Project, as such term is amended by this agreement, and
the Existing Facilities, as such term is amended by this agreement, and shall
include, without limitation, the improvements and additional telephone
facilities acquired as a result of the McLoud Acquisition.
SECTION 7 (A). Section 1.1 of the Loan Contract is amended by
(1) substituting "A) THE REA LOAN" for "AMOUNT AND PURPOSE" and adding
"partially," (if omitted) after "to finance" and before "pursuant to the
provisions of the Act", (2) adding the following to the counties listed in
section 1.1: Cleveland, Lincoln, Oklahoma and Pottawatomie, (3) to include the
definition of REA Loan, $14,477,560.45, which represents the outstanding balance
of the McLoud Loan assumed by the Borrower and payable to the Government, and
(4) to include in the definition of REA Loan, $1,750,000 which represents an
unadvanced portion of the McLoud Loan to be advanced to the Borrower by the
Government hereunder.
SECTION 7 (B). Section 1.1 of the Loan Contract is further amended by
adding the following as subsection (B) thereto:
"(B) THE BANK LOAN. For the purposes set forth in section 408 of
the Act, the Bank, pursuant to the provisions of the Act, has
previously lent and the Borrower has or shall assume the outstanding
balance of the McLoud loans payable to the Bank in the amount of
$1,037,953.91.
SECTION 8. The provisions set forth in Exhibit A hereto, and by this
reference
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<PAGE>
made a part hereof, shall amend and supersede all provisions of the Loan
Contract inconsistent therewith. If the Loan Contract does not include
"System" as a defined term, any reference to "System" in this agreement,
including Exhibit A, shall be read as "Project". If the Loan Contract does
not include "Project" as a defined term, any reference to "Project" in this
agreement, including Exhibit A, shall be read as "System".
SECTION 9. Neither the Government nor the Bank shall be under any
obligation to advance funds from time to time on account of the REA Loan or the
Bank Loan, as the case may be, including, without limitation, funds on account
of the unadvanced portion of the McLoud REA Loan, unless and until the Borrower
shall have delivered to the Administrator, in form and substance satisfactory to
him, the following:
(a) evidence, in form and substance satisfactory to him that the
Borrower has duly authorized, executed, recorded and filed a security
instrument, in form and substance satisfactory to the Administrator, which,
among other things, includes all properties acquired as a result of the
McLoud Acquisition and secures McLoud's indebtedness to the Government and
Bank as assumed by the Borrower together with all existing and future
obligations owed by the Borrower to the Government or Bank;
(b) evidence, in form and substance satisfactory to him, that the
Borrower has duly authorized and executed assumption notes, in form and
substance satisfactory to the Administrator, assuming amounts remaining
owned under the McLoud Loans to the Government or Bank, as the case may be,
and that said assumption notes have been duly delivered to the Government
or Bank, as the case may be;
(c) evidence in form and substance satisfactory to him that the
Borrower has duly authorized and executed a note in the amount of
$1,752,000 payable to the Government representing the unadvanced portion of
the McLoud REA Loan to be advanced to the Borrower and that said note has
been duly delivered to the Government; and
(d) evidence that the Borrower has duly registered when and where
required by law with all State, Federal and other public authorities and
regulatory bodies and obtained therefrom all authorizations, certificates,
permits, and approvals to the extent required by law in order to enable the
Borrower to enter into this agreement, to execute and deliver the notes,
mortgage and other documents required by the Administrator; to construct
and operate the System, and to Perform all other acts to be performed by it
hereunder;
(e) evidence that there has been no substantial adverse change in the
Borrower's financial condition or plant since the date of the last
financial statement submitted by the Borrower to the Administrator;
(f) evidence that the Borrower is not involved in or threatened with
any
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<PAGE>
litigation which may substantially and adversely affect the Borrower's
financial condition, and that there are no liens or clouds on title on any
of its property, except the lien of the Mortgage, any mortgages or
indentures made to secure the obligation of McLoud to the Government and
the Bank and any supplemental mortgage;
(g) such opinions as the Administrator may require, by counsel (who
may be a member of the Borrower's legal staff, if any, or an attorney
regularly employed by the Borrower) selected by the Borrower and approved
by the Administrator:
(h) evidence that the Borrower has good and marketable title to the
Existing Facilities, subject only to the lien of the Mortgage and any
mortgages or indentures made to secure the obligation of McLoud to the
Government and the Bank and holds such franchises, permits, leases,
easements, rights, privileges, licenses or right-of-way instruments,
reasonably adequate in form and substance, as may be required by law for
the continued maintenance and operation of the Existing Facilities, and
every part thereof, in their present location;
(i) evidence that McLoud has duly and effectively merged into the
Borrower, with the Borrower as the surviving corporation, under terms and
conditions satisfactory to the Administrator, and that such merger has been
effectively consummated in compliance with all applicable laws and
regulations;
SECTION 10. The Notes referred to in the preceding sections of this
Agreement shall bear interest at the rate set forth in the Loan Agreement
relating thereto.
SECTION 11. To the extent that the terms of this agreement, as it amends
the Loan Contract, differ from the terms of the McLoud Loan Contract, this
agreement shall constitute an amendment to the McLoud Loan Contract. All
obligations of McLoud, the Government and the Bank under the McLoud Loan
Contract which have heretofore been performed shall be deemed to have been
performed hereunder.
SECTION 12. COUNTERPARTS. This agreement may be simultaneously executed
and delivered in two or more counterparts, each of which so executed and
delivered shall be deemed to be an original, and all shall constitute but one
and the same instrument.
DOBSON TELEPHONE COMPANY, INC.
By /s/ Everett R. Dobson
-------------------------------
President
(Seal)
Attest:
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<PAGE>
/s/ Stephen T. Dobson
- ---------------------------------
Secretary
UNITED STATES OF AMERICA, and
RURAL TELEPHONE BANK,
respectively,
By /s/ James B. Hogan
-------------------------------
As Administrator of Rural
Electrification Administration,
and as Governor of Rural
Telephone Bank
(Seal)
Attest:
/s/ Matthew Link
- ---------------------------------
Assistant Secretary of
Rural Telephone Bank
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<PAGE>
Orig. Common REA - Tel. Bank Mtg. (ORIG-BNK. A) -9/91
Project Designation:
OKLAHOMA 545-TA1-TP1 CHEYENNE
(OKLAHOMA 535 MCLOUD)
RESTATED MORTGAGE, SECURITY AGREEMENT
AND FINANCING STATEMENT
dated as of May 15, 1993,
made by and among
DOBSON TELEPHONE COMPANY, INC.,
mortgagor and debtor,
UNITED STATES OF AMERICA,
Rural Electrification Administration
Washington, D.C. 20250-1500,
mortgagee and secured party,
and
RURAL TELEPHONE BANK,
c/o Rural Electrification Administration
Washington, D.C. 20250-1500,
mortgagee and secured party.
THE DEBTOR AS MORTGAGOR IS A TRANSMITTING UTILITY
THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS
THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A UTILITY
THE ADDRESSES OF THE PARTIES TO THIS INSTRUMENT ARE STATED ON PAGE 30
<PAGE>
RESTATED MORTGAGE, SECURITY AGREEMENT AND FINANCING STATEMENT
AGREEMENT, dated as of May 15, 1993, made by and among DOBSON
TELEPHONE COMPANY, INC. (hereinafter called the "Mortgagor"), a
corporation existing under the laws of the State of Oklahoma, as
mortgagor and debtor; UNITED STATES OF AMERICA (hereinafter called
the "Government"), acting through the Administrator of the Rural
Electrification Administration (hereinafter called "REA") pursuant
to the Rural Electrification Act of 1936, as amended (7 U.S.C. 901
et seq.) (hereinafter called the "Act"), as mortgagee and secured
party; and RURAL TELEPHONE BANK (hereinafter called the "Bank"), a
corporation existing under the laws of the Government, as mortgagee
and secured party (the Government and the Bank being hereinafter
sometimes collectively called the "Mortgagees").
WHEREAS, the Mortgagor has heretofore borrowed funds from the Government
pursuant to a certain telephone loan contract, identified in the seventeenth
recital hereof (hereinafter called the "Instruments Recital"), by and between
the Mortgagor and the Government (such contract being hereinafter called the
"Mortgagor Prior Loan Contract"); and, pursuant to the Mortgagor Prior Loan
Contract, as it has been amended from time to time, the Mortgagor has
heretofore duly authorized and executed, and has delivered to the Government,
or has assumed the payment of, a certain mortgage note or certain mortgage
notes payable to the order of the Government, in installments, of which a
certain mortgage note is, or certain mortgage notes are, now outstanding and
held by the Government (such note or notes being hereinafter collectively
called the "Outstanding Mortgagor REA Notes"); and
WHEREAS, the Outstanding Mortgagor REA Notes are secured by a security
instrument or instruments, identified in the Instruments Recital, made by the
Mortgagor in favor of the Government (such instrument or instruments being
hereinafter collectively called the "Existing Mortgage"); and
WHEREAS, McLoud Telephone Company (hereinafter called "McLoud"), a
corporation previously existing under the laws of the State of Oklahoma,
heretofore borrowed funds from the Government pursuant to a certain telephone
loan contract, identified in the Instruments Recital, by and between McLoud
and the Government (such contract being hereinafter called the "McLoud Loan
Contract"); and, pursuant to the McLoud Loan Contract, as it was amended from
time to time, McLoud heretofore duly authorized and executed, and delivered
to the Government, or assumed the payment of, a certain mortgage note or
certain mortgage notes payable to the order of the Government, in
installments, of which a certain mortgage note is or certain mortgages are,
now outstanding and held by the Government (such note or notes being
hereinafter collectively called the "Outstanding McLoud REA Totes"); and
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<PAGE>
WHEREAS, McLoud heretofore borrowed funds from the Bank pursuant to a
certain amendment to the McLoud Loan Contract, identified in the Instruments
Recital, by and among McLoud, the Government and the Bank (such amendment
being hereinafter called the "McLoud Loan Contract Amendment"); and, pursuant
to the McLoud Loan Contract Amendment and similar subsequent amendments, if
any, McLoud heretofore duly authorized and executed, and delivered to the
Bank, or assumed the payment of, a certain mortgage note or certain mortgage
notes payable to the order of the Bank, in installments, of which a certain
mortgage note is, or certain mortgage notes are, now outstanding and held by
the Bank (such note or notes being hereinafter collectively called the
"Outstanding McLoud Bank Notes"); and
WHEREAS, the Outstanding McLoud REA Notes and the Outstanding McLoud
Bank Notes are secured by a security instrument or instruments, identified in
the Instruments Recital, made by McLoud in favor of the Government and the
Bank (such instrument or instruments being hereinafter collectively called
the "McLoud Mortgage"); and
WHEREAS, McLoud merged into the Mortgagor in accordance with law; and
the Mortgagor is the surviving corporation of such merger, is the lawful
owner of all assets and properties of McLoud, is liable for all of the debts
and obligations of McLoud, including, without limitation, the obligations of
McLoud to the Government under the Outstanding McLoud REA Notes, and the
obligations of McLoud to the Bank under the Outstanding McLoud Bank Notes; and
WHEREAS, the Mortgagor and the Mortgagees desire that all of the assets
and properties (real, personal and mixed) owned by McLoud on the date that
McLoud merged into the Mortgagor be included under the lien of the Existing
Mortgage, as amended, supplemented, consolidated and restated hereby, and
that the indebtedness owed by McLoud to the Government evidenced by the
Outstanding McLoud REA Notes, and the indebtedness owed by McLoud to the Bank
evidenced by the Outstanding McLoud Bank Notes, be included in the
indebtedness secured by the Existing Mortgage, as amended, supplemented,
consolidated and restated hereby; and
WHEREAS, in accordance with such transfers of properties and
obligations, the Mortgagor, the Government and the Bank have entered into a
certain loan contract identified in the Instruments Recital (such contract
being hereinafter called the "Telephone Loan Contract Amendment"), amending
the Mortgagor Prior Loan Contract, as the Mortgagor Prior Loan Contract had
theretofore been amended, and setting forth, among other things, the
respective rights and obligations of the Mortgagor, the Government and the
Bank with respect to the borrowing of funds by the Mortgagor and McLoud from
the Government and the Bank (the Mortgagor Prior Loan Contract, as amended
prior to the date of the Telephone Loan Contract Amendment, as amended by the
Telephone Loan Contract Amendment, and as it may be further amended from time
to time, being hereinafter called the "Consolidated Loan Agreement"); and
WHEREAS, pursuant to the Telephone Loan Contract Amendment, the
Mortgagor has duly authorized and executed, and has delivered to the
Government, a certain mortgage note or certain mortgage notes, identified in
the Instruments Recital, payable to the order of the Government
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<PAGE>
to evidence the outstanding indebtedness of McLoud to the Government under
the Outstanding McLoud REA Notes as of January 31, 1993, assumed by the
Mortgagor in connection with the merger of McLoud into the Mortgagor (such
note or notes being hereinafter collectively called the "Mortgagor/McLoud
Assumption REA Notes"); and
WHEREAS, pursuant to the Telephone Loan Contract Amendment, the
Mortgagor has duly authorized and executed, and has delivered to the Bank, a
certain mortgage note or certain mortgage notes, identified in the
Instruments Recital, payable to the order of the Bank to evidence the
outstanding indebtedness of McLoud to the Bank under the Outstanding McLoud
Bank Notes as of January 31, 1993, assumed by the .Mortgagor in connection
with the merger of McLoud into the Mortgagor (such note or notes being
hereinafter collectively called the Mortgagor/McLoud Assumption Bank Notes");
and
WHEREAS, the Mortgagor, the Government and the Bank desire to add the
Bank as a secured party under the Existing Mortgage and further desire to
amend and supplement the Existing Mortgage in certain respects; and
WHEREAS, the changes in the Existing Mortgage which the parties thereto
and hereto desire now to effect make advisable the consolidating and
restating of each of the instruments constituting the Existing Mortgage in
its entirety; and
WHEREAS, under the provisions of the Act and other applicable law, the
Administrator of REA is authorized to amend, supplement, consolidate and
restate the Mortgage as herein provided; and
NOW, THEREFORE, this Restated Mortgage, Security Agreement and Financing
Statement
WITNESSETH:
That each of the instruments constituting the Existing Mortgage is
hereby amended, supplemented, consolidated and restated to read in its
entirety from and after the date of execution of this Restated Mortgage,
Security Agreement and Financing Statement (the Existing Mortgage, as
amended, supplemented, consolidated and restated hereby, being herein called
"this Mortgage") as follows:
WHEREAS, the Mortgagor has determined to borrow from the Government,
pursuant to the Telephone Loan Contract Amendment, those funds which had not
been borrowed by McLoud from the Government, pursuant to the McLoud Loan
Contract, as of the effective date of the merger of McLoud into the
Mortgagor; and, pursuant to the Telephone Loan Contract Amendment, the
Mortgagor has duly authorized and executed, and has delivered to the
Government, the certain note identified in the Instruments Recital (such note
being hereinafter called the "Current REA Note") to be secured by this
Mortgage of the property hereinafter described; and
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<PAGE>
WHEREAS, it is contemplated that the Mortgagor/McLoud Assumption Bank
Notes shall be secured hereby, as well as additional notes and refunding,
renewal and substitute notes which may from time to tune be executed and
delivered by the Mortgagor to the Bank as hereinafter provided (such
additional notes and refunding, renewal and substitute notes delivered to the
Bank being hereinafter collectively called "Additional Bank Notes"; and the
Mortgagor McLoud Assumption Bank Notes and any Additional Bank Notes being
hereinafter collectively called the "Bank Notes"); and
WHEREAS, it is contemplated that the Outstanding Mortgage REA Notes, the
Current REA Note and the Mortgagor/McLoud Assumption REA Notes, shall be
secured hereby, as well as additional notes and refunding, renewal and
substitute notes which may from time to time be executed and delivered by the
Mortgagor to the Government as hereinafter provided (such additional notes
and refunding, renewal and substitute notes delivered to the Government being
hereinafter collectively called "Additional REA Notes"; Additional REA Notes
and Additional Bank Notes being hereinafter collectively called "Additional
Notes"; the Outstanding Mortgagor REA Notes, the Current REA Note, the
Mortgagor/McLoud Assumption REA Notes, and any Additional REA Notes being
hereinafter collectively called the "REA Notes"; and the REA Notes and the
Bank Notes being hereinafter collectively called the "notes"); and
WHEREAS, the instruments referred to in the preceding recitals, the
Maximum Debt Limit referred to in Article 1, Section 1 hereof, the
subdivision or subdivisions, of Article II hereof, made applicable by this
recital, and certain data referred to in Article II, Section 15 hereof are as
follows:
INSTRUMENTS RECITAL
1. The instruments referred to in the preceding recitals are as follows:
"Mortgagor Prior Loan Contract" (exclusive of amendments) dated as of
November 7, 1958.
"Telephone Loan Contract Amendment": dated as of January 15, 1993
"Existing Mortgage":
Instrument Date Trustee, if any
---------- ---- ---------------
Mortgage November 20, 1970
Supplemental Mortgage February 13, 1981
Restated Mortgage,
Security Agreement and
Financing Statement April 20, 1992
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<PAGE>
"McLoud Mortgage":
Instrument Date Trustee, if any
---------- ---- ---------------
Mortgage March 20, 1956
Supplemental Mortgage June 1, 1957
Supplemental Mortgage November 9, 1961
Supplemental Mortgage December 13, 1965
Supplemental Mortgage and
Security Agreement December 31, 1974
"McLoud Loan Contract": dated as of March 19, 1996.
"McLoud Loan Contract Amendment": dated as of October 23, 1974.
"Outstanding Mortgagor REA Notes":
Twenty (20) certain mortgage notes in an aggregate principal amount of
$21,816,000, all of which will mature on or before October 1, 2027.
"Mortgagor/McLoud Assumption REA Notes":
Note Loan Principal Interest Final Payment
Date Designation Amount Rate Date
---- ----------- ------------- -------- -------------
1-31-93 C $ 18,246.93 2% 11-09-96
1-31-93 D#1 60,608.62 2% 12-13-00
1-31-93 D#2 95,212.91 2% 03-02-01
1-31-93 E 400,826.43 2% 07-15-06
1-31-93 F4 904,134.60 5% 12-31-09
1-31-93 G8 572,702.92 5% 07-02-11
1-31-93 H4 3,430,026.96 5% 04-10-16
1-31-93 H4 517,831.36 5% 10-14-22
1-31-93 K8 3,853,969.72 5% 11-30-22
1-31-93 K8 4,624,000.00 5% 11-30-22
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<PAGE>
"Mortgagor/McLoud Assumption REA Notes":
Note Loan Principal Interest Final Payment
Date Designation Amount Rate Date
---- ----------- ------------- -------- -------------
1-31-93 F7 $ 812,953.55 8.00% 12-31-09
1-31-93 H7 225,000.36 10.75% 04-10-16
"Current REA Notes":
Note Loan Principal Interest Final Payment
Date Designation Amount Rate Date
---- ----------- ------------- -------- -------------
5-15-93 K-8 $1,752,000 5.0% 5-15-2028
2. "Maximum Debt Limit" for purposes of Article 1, Section I hereof shall be
seventy-five million dollars ($75,000,000).
3. The following subdivision(s) of Article II hereof is (are) hereby made
applicable: Section 4(b).
4. The date referred to in Section 15(a)(3) of Article II hereof is hereby
established as December 31, 1962.
5. The Forecast Period referred to in Article II, Section 21(a) of this
Mortgage shall be the period commencing with the date hereof and ending
December 31, 1995. Also in Article II, Section 21(a), the TIER the
Mortgagor is required to maintain during the Forecast Period shall be 1.0.
WHEREAS, the Mortgagor now owns a telephone system and other facilities
identified in the Property Schedule contained in the granting clause hereof
(hereinafter called the "Existing Facilities"); and
WHEREAS, the Government and the Bank are authorized to enter into this
Mortgage; and
WHEREAS, to the extent that any of the property described or referred to
in this Mortgage is governed by the provisions of the Uniform Commercial Code
of any state (hereinafter called the "Uniform Commercial Code"), the parties
hereto desire that this Mortgage be regarded as
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<PAGE>
a "security agreement" and as a "financing statement" for said security
agreement under the Uniform Commercial Code;
NOW, THEREFORE, THIS MORTGAGE WITNESSETH that, in order to secure the
payment of the principal of and interest on the notes, according to their
tenor and effect, and further to secure the due performance of the covenants,
agreements and provisions contained in this Mortgage and the Consolidated
Loan Agreement and to declare the terms and conditions upon which the notes
are to be secured, the Mortgagor, in consideration of the premises, has
executed and delivered this Mortgage, and has granted, bargained, sold,
conveyed, warranted, assigned, transferred, mortgaged, pledged, and set over,
and by these presents does hereby grant, bargain, sell, convey, warrant,
assign, transfer, mortgage, pledge and set over, unto the Mortgagees, and
their respective assigns, all and singular the following-described property
(hereinafter sometimes called the "Mortgaged Property"):
I
All right, title and interest of the Mortgagor in and to the Existing
Facilities and buildings, plants, works, improvements, structures, estates.
grants, franchises, easements, rights, privileges and properties real,
personal and mixed, tangible or intangible, of every kind or description, now
owned or leased by the Mortgagor or which may hereafter be owned or leased,
constructed or acquired by the Mortgagor, wherever located, and in and to all
extensions and improvements thereof and additions thereto, including all
buildings, plants, works, structures, improvements, fixtures, apparatus,
materials, supplies, machinery, tools, implements, poles, posts, crossarms,
conduits, ducts, lines, whether underground or overhead or otherwise, wires,
cables, exchanges, switches, including, without limitation, host switches and
remote switches, desks, testboards, frames, racks, motors, generators,
batteries and other items of central office equipment, paystations,
protectors, instruments, connections and appliances, office furniture and
equipment, work equipment and any and all other property of every kind,
nature and description, used, useful or acquired for use by the Mortgagor in
connection therewith and including, without limitation, the property
described in the following property schedule:
PROPERTY SCHEDULE
(a) The Existing Facilities are located in the following Counties:
Beckham, Cleveland, Custer, Dewey, Ellis, Lincoln, Oklahoma, Pottawatomie,
Roger Mills and Woodward in the State of Oklahoma, and Hemphill and Wheeler
in the State of Texas.
(b) The property referred to in the last line of paragraph I of the
Granting clause includes the following described real estate:
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<PAGE>
BECKHAM COUNTY:
(1) Lots 11 & 12 in Block 29 of the Original Town of Erick, OK.
(2) Northeast Corner of the Northeast Quarter of Sec 23, T11N, R26W I.M.,
beginning 310' South of the Northeast Corner going West 190' then South 160'
then East 190' then North 160'.
DEWEY COUNTY:
(3) East 29' of Lot 18 of Block 24, West 1/2 of Lot 4 and all of Lots 5 & 6
Block 33 Town of Leedey, OK.
(4) Lots 22, 23 & 24 of Block 22 Town of Camargo, OK.
(5) All of Lot 15 and then South 20' of the South end of Lot 13 of Block 36,
West 1' of Lot 23 and all of lot 24 of Block 37, Town of Vici, OK.
(6) Lots 5, 6, 7, 8 & 9 of Block 53, 65' South 100' West of the N.#. Corner
of Lot 1 henceforth West 40' then South 50' East 40' North 50' in Block 53
Orig Town of Taloga, OK.
ROGER MILLS COUNTY:
(7) Lots 1 & 2 of Block 11 and Lots 10 & 11 of Block 4 of the Town of
Reydon, OK.
(8) Lots 1, 2, 3, 4, 5, 6, & & of Block 66 Town of Cheyenne, OK.
(9) South 50' of Lots 13, 14, & 15 of Block 47 Town of Cheyenne, OK.
(10) Lot 20 of Block 47 Town of Cheyenne, OK.
(11) All of Block 24 in Town of Cheyenne, OK.
(12) Northwest Corner of Northwest 1/2 of Sec. 31 T16N R 24W I.M. E. 150., S.
100', W. 150' N.100'.
(13) Northwest Half of the Northeast Quarter of Sec. 8, T12N, R23W I.M.,
containing 5 acres more or less.
1. CHOCTAW REMOTE - Oklahoma County
Beginning 685.5 feet South of the Northeast corner (NE/C) thence West 100.0
feet, thence North 50.0 feet, thence East 100.0 feet, thence South 50.0
feet to point of beginning
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<PAGE>
THE EAST HALF OF THE NORTHWEST QUARTER OF THE NORTHEAST QUARTER OF THE
NORTHEAST QUARTER (E 1/2 NW 1/4 NE 1/4 NE 1/4)
AND
THE NORTHEAST QUARTER OF THE NORTHEAST QUARTER OF THE NORTHEAST QUARTER
(NE 1/4 NE 1/4 NE 1/4) ALL IN SECTION 26, TOWNSHIP 11 NORTH, RANGE 1 WEST
OF THE INDIAN MERIDIAN
2. LUTHER REMOTE - Oklahoma County
A tract of land being located in the SE/4 of Section 9, Township 11 North,
Range 1 East of the Indian Meridian, Oklahoma County, Oklahoma described as
beginning at a point 716 feet North of the SE/Corner of the said SE/4;
thence West 100 feet; thence North 50 feet; thence East 100 feet; thence
South 50 feet to the point of beginning, containing 0.1148 acres more or
less.
3. POTT REMOTE - Oklahoma County
A tract of land located in the NE/4 of Section 13, Township 11 North, Range
1 East of the Indian Meridian, Oklahoma County, Oklahoma, described as
beginning at the NE Corner of said NE/4; Thence West along the North line
of said NE/4 a distance of 100.00'; thence South and parallel to the East
line of said NE/4 a distance of 100.00'; thence East and parallel to the
North line of said NE/4 a distance of 100.00'; thence north along the East
line of said NE/4 a distance of 100.00' to the point of beginning,
containing 0.2296 acres, more or less.
4. STELLA HOST - Cleveland County
A tract of land in the South Half (S/2) of the Southeast Quarter (SE/4) of
Section Four (4), Township Ten (10) North, Range One (1) East of the Indian
Meridian, Cleveland County, Oklahoma, described as follows: Beginning at a
point 660 feet West of the Southeast Corner of the Southeast Quarter
(SE/4), thence North 100 feet; thence East 100 feet; thence South 100 feet;
thence West 100 feet to the point of beginning.
5. PRO AM REMOTE - Oklahoma County
Having a beginning point that is 760.00 feet East of the Northeast Corner
(NE/C) of the Northeast Quarter (NE/4) of Section 35, Township 11 North,
Range 1 West of the Indian Meridian; thence South 50.0 feet to the True
Point of Beginning, thence; West 4520.0 feet, thence South 16.5 feet,
thence; East 4520.0 feet, thence North 16.5 feet to Point of Beginning, all
being a part of Oklahoma County, Oklahoma, AND
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Having a beginning Point 50.0 feet South of the Northeast Corner (NE/C) of
the Northeast Quarter (NE/4) of Section 34, Township 11 North, Range 1 West
of the Indian Meridian, thence West 1320.0 feet, thence South 16.5 feet,
thence East 1320.0 feet, thence North 16.5 feet to Point of Beginning, all
being a part of Oklahoma County, Oklahoma AND
Beginning at a point 1248.74 feet North of the Southeast corner of the
Northeast 1/4 of Section 35, Township 11 North, Range 1 West of the Indian
Meridian, Oklahoma County, Oklahoma. Thence West 100.00 feet, thence North
50.00 feet, thence East 100.00 feet, thence South 50.00 feet to the point
of beginning, contains 0.11 acres more or less.
6. INDIAN MERIDIAN REMOTE - Cleveland County
Part of Lots Three (3) and Four (4) and the East Half (E/2) of the
Southwest Quarter (S/4) of Section Nineteen (19), Township Ten (10) North,
Range One (1) East of the Indian Meridian, described as follows: Beginning
at a point 1235.0 feet Est and 33.0 feet North of the SW Corner of Section
19, Township 10 North, Range 1 East; thence North 100.0 feet thence West
50.00 feet; thence South 100.00 feet; thence East 50.00 feet to the point
of beginning.
7. MARKET REMOTE - Pottawatomie County
Beginning at a point 665.55 feet West of the Northeast corner of the
Northeast Quarter (NE/C NE/4) of Section Six (6), Township Ten (10) North,
Range Two (2) East of the Indian Meridian; thence West 186.98 feet; thence
South 582.4 feet; thence East 186.98 feet; thence North 582.4 feet to the
point of beginning, Pottawatomie County, Oklahoma.
8. OAKDALE REMOTE - Pottawatomie County
A tract of land described as beginning at the Northwest corner of the West
Half of the Northeast Quarter of the Northeast Quarter of the Northeast
Quarter (NW/C W/2 NE/4 NE/4 NE/4) of Section Three (3)(, Township Ten (10)
North, Range Two (2) East of the Indian Meridian; thence South 100.00 feet;
thence East 50.00 feet; thence North 100.00 feet; thence West 50.00 feet to
the point of beginning, Pottawatomie County, Oklahoma.
9. SHAWNEE REMOTE - Pottawatomie County
A tract of land being a part of Block Two (2), THOMPSON'S ADDITION, to the
City of Shawnee, Pottawatomie County, Oklahoma, described as beginning at
the Northwest corner of said Block 2; thence South 310 feet; thence East
140 feet; thence
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North 310 feet; thence West 140 feet to the place of beginning, LESS AND
EXCEPT 0.83 acres, more or less deeded as a public highway described as
beginning at a point on the North line of said Block 2 a distance of 140
feet East of the Northwest corner of said Block 2; thence South on a
line parallel to and 140 feet East of the West line of said Block 2 a
distance of 310 feet; thence West a distance of 140 feet to a point on
the West line of said Block 2; thence North along said West line a distance
of 188.8 feet; thence N87'07E a distance of 63 feet; thence NO 02'53' West
a distance of 118.8 feet to a point on the North line of said Block 2;
thence East along said North line a distance of 82.8 feet to the point of
beginning.
10. TURKEY HILLS NORTH REMOTE - Cleveland County
A tract of land being a part of the NW/4 of Section 13, Township 10 North,
Range 1 East, more particularly beginning at the NW/C of the NW/4 of
Section 13, Township 10 North, Range 1 East, thence East 330 feet, thence
South 100 feet, thence East 100 feet, thence North 100 feet, thence West
100 feet to point of beginning. Being a 100 x 100 foot tract.
11. TURKEY HILL SOUTH REMOTE - Cleveland County
This tract begins in the Southeast Corner (SE/C) of Section 9, Township 10
North, Range 2 East, thence North Six Hundred and Sixty (660.00) feet
thence West One Hundred (100.0) feet thence North Fifty (50.0) feet thence
East One Hundred (100.0) feet thence South Fifty (50.0) feet to the point
of beginning.
12. PRESTON OLIVE REMOTE - Cleveland County
Part of Lots Three (3) and Four (4) and the East Half (E/2) of the
Southwest Quarter (S/4) of Section Nineteen (19(, Township Ten (10) North,
Range One (1) East of the Indian Meridian, described as follows: Beginning
at a point 1235.0 feet East and 33.0 feet North of the SW Corner of Section
19, Township 10 North, Range 1 East, thence North 100.00 feet; thence West
50.00 feet; thence South 100.00 feet; thence East 50.00 feet to the point
of beginning.
13. DALE REMOTE-Pottawatomie County
A tract of land being a part of the East Half of the East Half of the
Southwest Quarter (E1/2-E1/2-SW1/4) of Section 26, Township 11 North, Range
2 East of the Indian Meridian, Pottawatomie County, Oklahoma, said tract
beginning at a point of the west line of said E1/2-E1/2-SW1/4; 389.01 feet
north of the southwest corner of said E1/2-E1/2-SW1/4; thence north, on
said west line, for a distance of 100.00 feet; thence east and
perpendicular to said west line for a distance of 50.00 feet; thence south
and parallel to said west line for a distance of 100.00 feet; thence west
and
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perpendicular to said west line for a distance of 50.00 feet to the
point of beginning containing 0.115 acre.
14. EAST REMOTE-Pottawatomie County
Lot One (1), less and except the South 237.19 feet of the West 183.65 feet,
Block Six (6), AUSTIN'S COUNTRY ESTATES, being a subdivision of the West
Half of Section Five (5), Township 11 North, Range 3 East of the Indian
Meridian, Pottawatomie County, Oklahoma, according to the recorded plat
thereof.
15. NORTH REMOTE-Lincoln County
The Southwest Quarter of the Northwest Quarter (SW1/4 NW1/4) of Section 11,
Township 12 North, Range Z East of the Indian Meridian, containing 40 acres more
or less.
16. NEWALLA C.O.-Oklahoma County
The East Half (E1/2) of the Southwest Quarter (SW1/4) of the Southwest
Quarter (SW1/4) of the Southwest Quarter (SW1/4)., EXCEPT a tract 100 feet
by 133 feet in the Southeast corner thereof more particularly described as
follows: BEGINNING at the Southeast corner of the Southwest Quarter of the
Southwest Quarter of the Southwest Quarter THENCE North 133 feet, THENCE
West 100 feet, THENCE South 133 feet, THENCE East 100 feet to the point of
beginning and being in Section 22, Township 11 North, Range 1 East of the
Indian Meridian, Oklahoma County, Oklahoma, and being Five (5) acres, more
or less.
17. STELLA REMOTE-Cleveland County
The South Half (S1/2) of the Southwest Quarter (SW1/4) of the Northwest
Quarter (NW1/4) of the Northwest Quarter (NW1/4) of Section Twenty-one
(21), Township Ten (10) North, Range One (1) East of the Indian Meridian,
Cleveland County, Oklahoma, being Five (5) acres more or less.
18. McLOUD C.O. AND COMM.-Pottawatomie County
Block 21, lots One through Five (1-5) and Block 21, Lots Six through Eight
(6-8), Original Town of McLoud, Pottawatomie County, Oklahoma, accorded to
the recorded plat thereof.
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19. OAKLEAF REMOTE-Pottawatomie County
A tract of land beginning at a point 1084.00 feet East of the Northwest
Corner of Section 20, Township 11 North, Range 2 East of the Indian
Meridian, Pottawatomie County, Oklahoma; thence South 150.00 feet; thence
East 50.00 feet; thence North 150.00 feet; thence West 50.00 feet to the
point of beginning, containing 0.172 acres more or less.
20. WATSON REMOTE-Pottawatomie County
A tract of land beginning at the Northwest Corner of Section 29, Township
11 North, Range 3 East of the Indian Meridian, Pottawatomie County,
Oklahoma; thence East 100 feet; thence South 100 feet; thence West 100
feet; thence North 100 feet to the point of beginning, containing 0.23
acres more or less.
21. DEERCREEK REMOTE-Pottawatomie County
A tract of land beginning 143.5 feet East of the Southwest Corner of the
Southwest Quarter (SW/4) of Section 28, Township 11 North, Range 2 East of
the Indian Meridian; thence North 100.0 feet; thence East 50.0 feet; thence
South 100.0 feet; thence West 50.0 feet to the point of beginning,
containing 0.115 acres more or less, Pottawatomie County, Oklahoma.
TOGETHER WITH all plants, works, structures, erections, reservoirs, dams,
buildings, fixtures and improvements now or hereafter located on any of the
properties conveyed by any and all of the aforesaid deeds mentioned above and
all tenements, hereditaments and appurtenances now or hereafter thereunto
belonging or in anywise appertaining.
II
All right, title and interest of the Mortgagor in, to and under any and
all grants, privileges, rights of way and easements now owned, held, leased,
enjoyed or exercised, or which may hereafter be owned, held, leased,
acquired, enjoyed or exercised, by the Mortgagor for the purposes of, or in
connection with, the construction or operation by or on behalf of the
Mortgagor of telephone properties, facilities, systems or businesses, whether
underground or overhead or otherwise, wherever located;
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III
All right, title and interest of the Mortgagor in, to and under any and
all licenses, franchises, ordinances, privileges and permits heretofore
granted, issued or executed, or which may hereafter be granted, issued or
executed, to it or to its assignors by the United States of America, or by
any state, or by any county, township, municipality, village or other
political subdivision thereof, or by any agency, board, commission or
department of any of the foregoing, authorizing the construction,
acquisition, or operation of telephone properties, facilities, systems or
businesses, insofar as the same may by law be assigned, granted, bargained,
sold, conveyed, transferred, mortgaged, or pledged;
IV
All right, title and interest of the Mortgagor in, to and under any and
all contracts heretofore or hereafter executed by and between the Mortgagor
and any person, firm, or corporation relating to the Mortgaged Property
together with any and all other accounts, chattel paper, contract rights and
general intangibles (as such terms are defined in the applicable Uniform
Commercial Code), and all stock, bonds, notes, debentures, commercial paper,
subordinated capital certificates, securities, obligations of or beneficial
interests or investments in any corporation, association, partnership, joint
venture, trust, the United States of America or any agency or department
thereof, or any other entity of any kind, heretofore or hereafter acquired by
the Mortgagor;
V
Also, all right, title and interest of the Mortgagor in and to all other
property, real or personal, tangible or intangible, of every kind, nature and
description, and wheresoever situated, now owned or leased or hereafter
acquired by the Mortgagor, it being the intention hereof that all such
property now owned or leased but not specifically described herein or
acquired or held by the Mortgagor after the date hereof shall be as fully
embraced within and subjected to the lien hereof as if the same were now
owned by the Mortgagor and were specifically described herein to the extent
only, however, that the subjection of such property to the lien hereof shall
not be contrary to law;
Together with all rents, income, revenues, proceeds, profits and
benefits at any time derived, received or had from any and all of the
above-described property of the Mortgagor. Provided, however, that except as
hereinafter provided in section 12(b) of Article II hereof, no automobiles,
trucks, trailers, tractors or other vehicles (including without limitation
aircraft or ships, if any) owned or used by the Mortgagor shall be included
in the Mortgaged Property.
TO HAVE AND TO HOLD all and singular the Mortgaged Property unto the
Mortgagees and their respective assigns forever, to secure equally and
ratably the payment of the principal of and interest on the notes, according
to their tenor and effect, without preference, priority or distinction as to
interest or principal (except as otherwise specifically provided herein) or
as to lien or otherwise of any note over any other note by reason of the
priority in time of the execution, delivery or maturity thereof or of the
assignment or negotiation thereof, or otherwise, and to secure the due
performance of the covenants, agreements and provisions herein and in the
Consolidated
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Loan Agreement contained, and for the uses and purposes and upon the terms,
conditions, provisos and agreements hereinafter expressed and declared.
ARTICLE I
ADDITIONAL NOTES
SECTION 1. The Mortgagor, when authorized by resolution or resolutions
of its board of directors, may from time to time (1) execute and deliver to
the Government one or more Additional REA Notes to evidence loans made by the
Government to the Mortgagor pursuant to the Act, or to evidence indebtedness
of the Mortgagor incurred by the assumption by the Mortgagor of the
indebtedness of a third party or parties to the Government created by a loan
or loans theretofore made by the Government to such third party or parties
pursuant to the Act, and (2) execute and deliver to the Bank one or more
Additional Bank Notes to evidence loans made by the Bank to the Mortgagor
pursuant to the Act, or to evidence indebtedness of the Mortgagor incurred by
the assumption by the Mortgagor of the indebtedness of a third party or
parties to the Bank created by a loan or loans theretofore made by the Bank
to such third party or parties pursuant to the Act. The Mortgagor, when
authorized by resolution or resolutions of its board of directors, may also
from time to time execute and deliver one or more Additional Notes to refund
any note or notes at the time outstanding and secured hereby, or in renewal
of, or in substitution for, any such outstanding note or notes. Additional
Notes shall contain such provisions and shall be executed and delivered upon
such terms and conditions as the board of directors of the Mortgagor in the
resolution or resolutions authorizing the execution and delivery thereof and
the relevant lender shall prescribe; provided, however, that the outstanding
principal balances owing on the notes shall not at any one time exceed the
amount identified in the Instruments Recital as the Maximum Debt Limit, and
no note shall mature more than fifty (50) years after the date hereof.
Additional Notes, including refunding, renewal and substitute notes, when and
as executed and delivered, shall be secured by this Mortgage, equally and
ratably with all other notes at the time outstanding, without preference,
priority, or distinction of any of the notes over any other of the notes by
reason of the priority of the time of the execution, delivery or maturity
thereof or of the assignment or negotiation thereof. As used in this
Mortgage, the term "directors" includes trustees.
SECTION 2. The Mortgagor, when authorized by resolution or resolutions
of its board of directors, may from time to time execute, acknowledge,
deliver, record and file mortgages supplemental to this Mortgage which
thereafter shall form a part hereof, for the purpose of formally confirming
this Mortgage as security for the notes. Nothing herein contained shall
require the execution and delivery by the Mortgagor of a supplemental
mortgage in connection with the issuance hereunder or the securing hereby of
notes except as hereinafter provided in section 12 of article II hereof.
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ARTICLE II
PARTICULAR COVENANTS OF THE MORTGAGOR
The Mortgagor covenants with the Mortgagees and the holders of notes
secured hereby (hereinafter sometimes collectively called the "noteholders") and
each of them as follows:
SECTION 1. The Mortgagor is duly authorized under its articles of
incorporation and by-laws and the laws of the State of its incorporation and all
other applicable provisions of law to execute and deliver and assume the Current
REA Note, the Outstanding REA Notes, the Mortgagor/McLoud Assumption REA Notes,
the Mortgagor/McLoud Assumption Bank Notes and this Mortgage and to execute and
deliver Additional Notes; and all corporate action on its part for the execution
and delivery and assumption of the Current REA Note, the outstanding REA Notes,
the Mortgagor/McLoud Assumption REA Notes, the Mortgagor/McLoud Assumption Bank
Notes and this Mortgage has been duly and effectively taken; and the Current REA
Note, the Outstanding REA Notes, the Mortgagor/McLoud Assumption REA Notes, the
Mortgagor/McLoud Assumption Bank Notes and this Mortgage are, or when executed
and delivered will be, the valid and enforceable obligations of the Mortgagor in
accordance with their respective terms.
SECTION 2. The Mortgagor warrants that it has good right and lawful
authority to mortgage the property described in the granting clauses of this
Mortgage for the purposes herein expressed, and that the said property is free
and clear of any deed of trust, mortgage, lien, charge or encumbrance thereon or
affecting the title thereto, except (i) the lien of this Mortgage and taxes or
assessments not yet due; (ii) deposits or pledges to secure payment of workmen's
compensation, unemployment insurance, old age pensions or other social security;
and (iii) deposits or pledges to secure performance of bids, tenders, contracts
(other than contracts for the payment of borrowed money), leases, public or
statutory obligations, surety or appeal bonds, or other deposits or pledges for
purposes of like general nature in the ordinary course of business.
The Mortgagor will, so long as any of the notes shall be outstanding,
maintain and preserve the lien of this Mortgage superior to all other liens
affecting the Mortgaged Property, and will forever warrant and defend the title
to the property described as being mortgaged hereby to the Mortgagees against
any and all claims and demands whatsoever. The Mortgagor will promptly pay or
discharge any and all obligations for or on account of which any such lien or
charge might exist or could be created and any and all lawful taxes, rates,
levies, assessments, liens, claims or other charges imposed upon or accruing
upon any of the Mortgagor's property (whether taxed to the Mortgagor or to any
noteholder), or the franchises, earnings or business of the Mortgagor, as and
when the same shall become due and payable; and whenever called upon so to do
the Mortgagor will furnish to the Mortgagees or to any noteholder adequate proof
of such payment or discharge.
SECTION 3. The Mortgagor will duly and punctually pay the principal of and
interest on the notes at the dates and places and in the manner provided
therein, according to the true intent and meaning thereof, and all other sums
becoming due hereunder.
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SECTION 4. (a) The Mortgagor will at all times, so long as any of the
notes shall be outstanding, take or cause to be taken all such action as from
time to time may be necessary to preserve its corporate existence and to
preserve and renew all franchises, rights of way, easements, permits and
licenses now or hereafter to it granted or upon it conferred, and will comply
with all valid laws, ordinances, regulations and requirements applicable to it
or its property. The Mortgagor will not, without the approval in writing of the
holder or holders of not less than a majority in principal amount of the REA
Notes at the time outstanding (hereinafter called the "majority REA
noteholders") and of the holder or holders of not less than a majority in
principal amount of the Bank Notes at the time outstanding (hereinafter called
the "majority Bank noteholders"), take or suffer to be taken any steps to
reorganize, or to consolidate with or merge into any other corporation, or to
sell, lease or transfer (or make any agreement therefor) the Mortgaged Property,
or any part thereof.
(b) If this subsection is made applicable by the Instruments Recital,
then nothing herein contained shall prevent any such reorganization,
consolidation or merger provided that the lien and security of this Mortgage and
the rights or powers of the Mortgagees and the noteholders hereunder shall not
thereby be impaired or adversely affected, and provided that upon such
reorganization, consolidation or merger, the due and punctual payment of the
principal of and interest on the notes according to their tenor and the due and
punctual performance of all covenants and conditions of this Mortgage shall be
assumed by the corporation formed by such reorganization, consolidation or
merger, and the lien of this Mortgage shall remain a superior lien upon the
property owned by the Mortgagor at the time of such reorganization,
consolidation or merger and upon any improvements or additions to such property,
either prior to or subsequent to such reorganization, consolidation or merger.
(c) The Mortgagor may, however, without obtaining the approval of the
holder or holders of any of the notes at the time outstanding, at any time or
from time to time so long as the Mortgagor is not in default hereunder, sell or
otherwise dispose of, free from the lien hereof, any of its property which is
neither necessary to nor useful for the operation of the Mortgagor's business,
or which has become obsolete, worn out or damaged or otherwise unsuitable for
the purposes of the Mortgagor; provided, however, that the Mortgagor shall: (1)
to the extent necessary, replace the same by, or substitute therefor, other
property of the same kind and nature, which shall be subject to the lien hereof,
free and clear of all prior liens, and apply any proceeds derived from such sale
or other disposition of such property and not needed for the replacement thereof
to the payment of the indebtedness evidenced by the REA Notes and the Bank Notes
in the proportions which the aggregate principal balances then owing on the REA
Notes and the aggregate principal balances then owing on the Bank Notes,
respectively, bear to the aggregate principal balances then owing on the REA
Notes and the Bank Notes, collectively, and shall be applied to such notes and
installments thereof as may be designated by the respective noteholders at the
time of any such receipt; or (2) immediately upon the receipt of the proceeds of
any sale or other disposition of said property, apply the entire amount of such
proceeds to the payment of the indebtedness evidenced by the REA Notes and the
Bank Notes in the proportions and in the manner provided for in (1) above; or
(3) deposit all or such part of the proceeds derived from the sale or other
disposition of said property as the majority REA noteholders and the majority
Bank noteholders shall specify in such
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restricted bank accounts as such holder or holders shall designate, and shall
use the same only for such additions to or improvements of the Mortgaged
Property and on such terms and conditions as such holder or holders shall
specify.
SECTION 5. The Mortgagor will at all times maintain and preserve the
Mortgaged Property in good repair, working order and condition, and will from
time to time make all needful and proper repairs, renewals, and replacements,
and useful and proper alterations, additions, betterments and improvements, and
will, subject to contingencies beyond its reasonable control, at all times keep
its plant and properties in continuous operation and use all reasonable
diligence to furnish the subscribers served by it through the Mortgaged Property
with adequate telephone service.
SECTION 6. Except as specifically authorized in writing in advance by the
majority REA noteholders and the majority Bank noteholders, the Mortgagor will
purchase all materials, equipment, supplies and replacements to be incorporated
in or used in connection with the Mortgaged Property outright, and not subject
to any conditional sales agreement, chattel mortgage, bailment lease, or other
agreement reserving to the seller any right, title or lien.
SECTION 7. (a) The Mortgagor will take out, as the respective risks
are incurred, and maintain the following classes and amounts of insurance:
(1) fidelity bonds covering each officer and employee of the Mortgagor in not
less than the following amounts, based on the estimated annual gross revenues
(including gross toll collected) of the Mortgaged Property:
Amount of
Annual Gross Revenue Coverage
-------------------- ----------
Less than $ 200,000 $ 50,000
From $200,001 to 400,000 100,000
400,001 to 600,000 250,000
600,001 to 800,000 300,000
800,001 to 1,000,000 400,000
over 1,000,000 500,000
and each collection agent of the Mortgagor shall be included in such fidelity
bonds for not less than $2,500, or 10 percent of the highest amount collected
annually by any one collection agent, whichever is greater; (2) workmen's
compensation and employer's liability insurance covering all employees of the
Mortgagor, in such amounts as may be required by law, or if the Mortgagor or any
of its employees are not subject to the workmen's compensation laws of the State
or States in which the Mortgagor conducts its operations, then its workmen's
compensation policy shall provide voluntary compensation coverage to the same
extent as though the Mortgagor and such employees were subject to such laws; and
including occupational disease liability coverage, employer's liability
insurance and "additional medical" coverage of not less than $10,000 in States
where full medical coverage is not required by law; (3) public liability and
property damage liability insurance, covering ownership liability, and all
operations of the Mortgagor, with limits for bodily injury or death of not
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less than $1,000,000 for one person and $1,000,000 for each accident, and
with limits for property damage of not less than $1,000,000 for each accident
and $1,000,000 aggregate for the policy period; (4) liability insurance on
all motor vehicles, trailers, semitrailers, and aircraft used in the conduct
of the Mortgagor's business, whether owned, non-owned or hired by the
Mortgagor, with bodily injury limits of not less than $1,000,000 for one
person and $1,000,000 for each accident, and with property damage limits of
$1,000,000 for each accident; in connection with aircraft liability, also
passenger bodily injury limits of $1,000,000 per person and $1,000,000 for
each accident; (5) comprehensive, or separate fire, theft and windstorm
insurance covering loss of or damage to all owned motor vehicles, trailers,
and aircraft of the Mortgagor, having a unit value in excess of $1,000, in an
amount not less than the actual cash value of the property insured; and (6)
fire and extended coverage insurance, designating the Government and the Bank
as mortgagees in the policy, on each building, each building and its
contents, and materials, supplies, poles and crossarms, owned by the
Mortgagor, having a value at any one location in excess of $5,000, or in
excess of one percent of the total plant value, whichever is larger, and in
an amount not less than 80 percent of the current cost to replace the
property new, less actual depreciation.
The Mortgagor will also, from time to time, increase or supplement the
classes and amounts of insurance specified above to the extent requested by the
Governor or the Administrator or required to conform to the accepted practice of
the telephone industry for companies of the size and character of the Mortgagor.
The Mortgagor will, upon request of the majority REA noteholders or the majority
Bank noteholders, submit to the noteholder or noteholders designated in such
request a schedule of its insurance in effect on the date specified in such
request. If the Mortgagor shall at any time fail or refuse to take out or
maintain insurance or to make changes in respect thereof upon appropriate
request by such noteholder or noteholders, such noteholder or noteholders may
take out such insurance on behalf and in the name of the Mortgagor, and the
Mortgagor will pay the cost thereof.
(b) In the event of damage to or the destruction or loss of
any portion of the Mortgaged Property which shall be covered by insurance,
unless the majority REA noteholders and the majority Bank noteholders shall
otherwise agree, the Mortgagor shall replace or restore such damaged, destroyed
or lost portion so that the Mortgaged Property shall be in substantially the
same condition as it was in prior to such damage, destruction or loss, and shall
deposit the proceeds of the insurance in the Special Construction Account
required by the Consolidated Loan Agreement to be applied for that purpose. The
Mortgagor shall replace the loss or shall commence such restoration promptly
after such damage, destruction or loss shall have occurred and shall complete
such replacement or restoration as expeditiously as practicable, and shall pay
or cause to be paid out of the proceeds of such insurance all costs and expenses
in connection therewith so that such replacement or restoration shall be so
completed that the portion of the Mortgaged Property so replaced or restored
shall be free and clear of all mechanics' liens and other claims.
(c) Sums recovered under any fidelity bond by the Mortgagor
for a loss of funds advanced under the notes or recovered by a Mortgagee for any
loss
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under such bond shall, unless otherwise directed by the Mortgagees, be
applied to the prepayment of the notes, PRO RATA according to the unpaid
principal amounts thereof (such prepayments to be applied to such
installments thereof as may be designated by the respective noteholders at
the time of any such prepayment), or to construct or acquire facilities
approved by the Mortgagees, which will become part of the Mortgaged Property.
(d) The foregoing insurance coverage shall be obtained by
means of bond and policy forms approved by regulatory authorities, including
standard REA endorsements and riders used by the insurance industry to provide
coverage for REA borrowers. Each policy or other contract for such insurance
shall contain an agreement by the insurer that, notwithstanding any right or
cancellation reserved to such insurer, such policy or contract shall continue in
force for at least ten (10) days after written notice to the Mortgagees of
cancellation.
SECTION 8. In the event of the failure of the Mortgagor in any respect to
comply with the covenants and conditions herein contained with respect to the
procuring of insurance, the payment of taxes, assessments and other charges, the
keeping of the Mortgaged Property in repair and free of liens and other claims
or to comply with any other covenant contained in this Mortgage, any noteholder
or noteholders shall have the right (without prejudice to any other rights
arising by reason of such default) to advance or expend moneys for the purpose
of procuring such insurance, or for the payment of insurance premiums, taxes,
assessments or other charges, or to save the Mortgaged Property from sale or
forfeiture for any unpaid tax or assessment, or otherwise, or to redeem the same
from any tax or other sale, or to purchase any tax title thereon, or to remove
or purchase any mechanics' liens or other encumbrance thereon, or to make
repairs thereon or to comply with any other covenant herein contained or to
prosecute or defend any suit in relation to the Mortgaged Property or in any
manner to protect the Mortgaged Property and the title thereto, and all sums so
advanced for any of the aforesaid purposes with interest thereon at the highest
legal rate but not in excess of twelve per centum (12%) per annum shall be
deemed a charge upon the Mortgaged Property in the same manner as the notes at
the time outstanding are secured and shall be forthwith paid to the noteholder
or noteholders making such advance or advances upon demand. It shall not be
obligatory for any noteholder in making any such advances or expenditures to
inquire into the validity of any such tax title, or of any of such taxes or
assessments or sales therefor, or of any such mechanics' liens or other
encumbrance.
SECTION 9. The Mortgagor will not, without the approval in writing of the
majority REA noteholders and the majority Bank noteholders: (a) enter into any
contract or contracts for the operation or maintenance of all or any part of its
property, for the use by others of any of the Mortgaged Property, or for toll
traffic, operator assistance, extended scope or switching services to be
furnished by or for connecting or other companies; provided, however, that such
approval shall not be required for any toll traffic or operator assistance
contract which in form and substance conforms with contracts in general use in
the telephone industry; or (b) deposit any of its funds, regardless of the
source thereof, in any bank, institution or other depository which is not
insured by the Federal Government.
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SECTION 10. (a) If this subsection is made applicable by the
Instruments Recital, the Mortgagor will not pay its directors or trustees, as
such, any salaries for their services, except such as shall have been
approved by the majority REA noteholders and the majority Bank noteholders,
provided that nothing herein contained shall preclude any director or trustee
from serving the Mortgagor in any other capacity and receiving compensation
therefor.
(b) Salaries, wages and other compensation paid by the
Mortgagor for services, and directors' or trustees' fees, shall be reasonable
and in conformity with the usual practice of corporations of the size and
nature of the Mortgagor. Except as specifically authorized in writing in
advance by the majority REA noteholders and the majority Bank noteholders,
the Mortgagor will make no advance payments or loans, or in any manner extend
its credit, either directly or indirectly, with or without interest, to any
of its directors, trustees, officers, employees, stockholders, members or
affiliated companies, provided, however, the Mortgagor may make an investment
for any purpose described in section 607(c)(2) of the Rural Development Act
of 1972 (including any investment in, or extension of credit, guarantee or
advance made to, an affiliated company of the Mortgagor that is used by such
company for such purpose) to the extent that, immediately after such
investment, (1) the aggregate of such investments does not exceed one-third
of the net worth (defined in Exhibit One) of the Mortgagor and (2) the
Mortgagor's net worth is at least twenty percent of its total assets (defined
in Exhibit One). As used in this section, the term "affiliated companies"
shall have the meaning prescribed for this term by the Federal Communications
Commission in its prevailing uniform system of accounts for Class A telephone
companies.
SECTION 11. The Mortgagor will at all times keep, and safely preserve,
proper books, records and accounts in which full and true entries will be made
of all of the dealings business and affairs of the Mortgagor, in accordance with
the methods and principles of accounting then prescribed by the state regulatory
body having jurisdiction over the Mortgagor, or in the absence of such
regulatory body or such prescription, by the Federal Communications Commission
in its uniform system of accounts for telecommunications companies, as those
methods and principles of accounting may be supplemented, from time to time, by
the REA. The Mortgagor will prepare and furnish each noteholder not later than
the thirtieth day of January in each year, or at such more or less frequent
intervals when specified by the majority REA noteholders and the majority Bank
noteholders, financial and statistical reports on its condition and operations.
Such reports shall be in such form and include such information as may be
specified by the majority REA noteholders and the majority Bank noteholders,
including without limitation an analysis of the Mortgagor's revenues, expenses,
and subscriber accounts. The Mortgagor will cause to be prepared and furnished
to each noteholder at least once during each twelve (12)-month period during the
term hereof, full and complete reports of its financial condition and cash flow
as of a date (hereinafter called the "Fiscal Date"), and a full and complete
report of its operations of the twelve (12)-month period ended on the Fiscal
Date, all in form and substance satisfactory to the majority REA noteholders and
the majority Bank noteholders, and will cause such reports to be furnished to
each noteholder within 120 days of the Fiscal Date, such reports having been
audited and certified by independent certified public accountants satisfactory
to said noteholders and accompanied by such reports of such audit in form
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and substance satisfactory to said noteholders. The majority REA noteholders
and the majority Bank noteholders, through its or their representatives,
shall at all times during reasonable business hours have access to, and the
right to inspect and make copies of, any or all books, records and accounts,
and any or all invoices, contracts, leases, payrolls, canceled checks,
statements and other documents and papers of every kind belonging to or in
possession of the Mortgagor and in anywise pertaining to its property or
business. The Mortgagor shall enter into an audit agreement with an
independent certified public accountant in form and substance satisfactory to
the majority REA noteholders and the majority Bank noteholders.
SECTION 12. (a) The Mortgagor will from time to time upon written
demand of the majority REA noteholders or the majority Bank noteholders make,
execute, acknowledge and deliver or cause to be made, executed, acknowledged and
delivered all such further and supplemental indentures of mortgage, deeds of
trust, mortgages, financing statements, continuation statements, security
agreements, instruments and conveyances as may reasonably be requested by the
majority REA noteholders or the majority Bank noteholders and take or cause to
be taken all such further action as may reasonably be requested by the majority
REA noteholders or the majority Bank noteholders to effectuate the intention of
these presents and to provide for the securing and payment of the principal of
and interest on the notes according to the terms thereof and for the purpose of
fully conveying, transferring and confirming unto the Mortgagees the property
hereby conveyed, mortgaged and pledged, or intended so to be, whether now owned
by the Mortgagor or hereafter acquired by it and to reflect the assignment of
the rights or interests of either of the Mortgagees or any and all supplemental
indentures of mortgage, mortgages and deeds of trust and every security
agreement, financing statement, continuation statement and every additional
instrument which shall be recorded and filed and rerecorded and refiled as
conveyances and mortgages and deeds of trust of and security interest in real
and personal property in such manner and in such places as may be required by
law or reasonably requested by the majority REA noteholders or the majority Bank
noteholders in order fully to preserve the security for the notes and to perfect
and maintain the superior lien of this Mortgage and all supplemental indentures
of mortgage, mortgages and deeds of trust and the rights and remedies of the
Mortgagees and the noteholders.
(b) In the event that the Mortgagor has had or suffers a
deficit in net income or net margins, as determined in accordance with methods
of accounting prescribed in section 11 of article II hereof, for any of the five
fiscal years immediately preceding the date hereof or for any fiscal year while
any of the notes are outstanding, the Mortgagor will at any time or times upon
written demand of the majority REA noteholders or the majority Bank noteholders,
make, execute, acknowledge and deliver or cause to be made, executed,
acknowledged and delivered all such further and supplemental indentures of
mortgage, mortgages, security agreements, financing statements, instruments and
conveyances, and take or cause to be taken all such further action, as may
reasonably be requested by the majority REA noteholders or the majority Bank
noteholders in order to include in this Mortgage, as Mortgaged Property, and to
subject to all the terms and conditions of this Mortgage, all right, title and
interest of the Mortgagor in and to, all and singular, the automobiles, trucks,
trailers, tractors, aircraft, ships and other vehicles then owned
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by the Mortgagor, or which may thereafter be owned or acquired by the
Mortgagor. From and after the time of such written demand of the majority
REA noteholders or the majority Bank noteholders, such vehicles shall be
deemed to be part of the Mortgaged Property for all purposes hereof.
SECTION 13. Any noteholder may, at any time or times in succession without
notice to or the consent of the Mortgagor or any other noteholder and upon such
terms as such noteholder may prescribe, grant to any person, firm or corporation
who shall have become obligated to pay all or any part of the principal of or
interest on any note held by or indebtedness owed to such noteholder or who may
be affected by the lien hereby created, an extension of the time for the payment
of such principal or interest, and after any such extension the Mortgagor will
remain liable for the payment of such note or indebtedness to the same extent as
though it had at the time of such extension consented thereto in writing.
SECTION 14. The Mortgagor, subject to applicable laws and rules, and
regulations and orders of regulatory bodies, will charge for telephone service
furnished by it rates which shall yield revenues at least sufficient to enable
the Mortgagor to pay and discharge all taxes and expenses when due, and also to
make any payment in respect of principal of and interest on the notes when and
as the same shall become due. The Mortgagor will, not less than ninety (90) days
prior to the effective date of any proposed change in its rates, give to the
holder or holders of the notes at the time outstanding written notice of such
proposed change and a copy of a schedule showing the then existing rates and the
proposed changes therein.
SECTION 15. (a) Except as specifically authorized in writing in advance
by the majority REA noteholders and the majority Bank noteholders, the Mortgagor
will not declare or pay any dividends on its capital stock, membership
certificates or equity capital certificates (other than in shares of such
capital stock or in such certificates), or make any other distribution to its
stockholders, members or subscribers, or purchase, redeem or retire any of its
capital stock, membership certificates or equity capital certificates, or make
any investment in affiliated companies (except as allowed by subsection (d)
below), unless after such action the Mortgagor's current assets (determined in
accordance with Exhibit One hereto) will equal or exceed its current liabilities
(determined in accordance with Exhibit One hereto) (exclusive of current
liabilities incurred for additions to plant), and the Mortgagor's adjusted net
worth (determined in accordance with Exhibit One hereto) will be at least forty
percentum (40%) of its adjusted assets (determined in accordance with Exhibit
One hereto), or the sum of the following (whichever is the smaller amount):
(1) ten percentum (10%) of its adjusted assets, plus
(2) thirty percentum (30%) of its adjusted net worth, if any, in excess of
the amount represented by the percentage of adjusted assets set out in
the immediately preceding subparagraph (1), plus
(3) thirty percentum (30%) of the amount of any reduction of its adjusted
net worth after the date specified in the Instruments Recital,
resulting from the
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declaration or payment of dividends or distributions, the purchase,
redemption or retirement of its capital stock, membership
certificates or equity capital certificates or investments in
affiliated companies.
(b) During such time or times as the Mortgagor's adjusted
net worth is less than ten percentum (10%):
(1) The Mortgagor will make no increase, without prior written approval of
the majority REA noteholders and the majority Bank noteholders, in
salaries, wages, fees and other compensation paid to officers,
directors, trustees, executives, or supervisors of the Mortgagor, or
to other employees having either a substantial ownership interest in
the Mortgagor, or a close family relationship with officers,
directors, trustees, executives, supervisors, or holders of
substantial ownership interests in the Mortgagor; and
(2) the Mortgagor will promptly furnish the majority REA noteholders and
the majority Bank noteholders with certified copies of the minutes of
all meetings of its stockholders, members, directors or trustees;
(3) if the operation of the Mortgaged Property for the preceding calendar
year resulted in a decrease in the Mortgagor's retained earnings
(determined in accordance with Exhibit One hereto), the Mortgagor
shall upon the written direction of the majority REA noteholders or
the majority Bank noteholders, take all required action to promptly
(1) increase its charges for telephone service or (2) execute a plan
for reducing expenses, such increase in charges and such plan to be
submitted to all the noteholders and to be acceptable to and approved
in writing by the majority REA noteholders and the majority Bank
noteholders.
(c) During such time or times as the Mortgagor's adjusted
net worth is less than twenty percentum (20%) of its adjusted assets the
Mortgagor will promptly furnish the REA noteholders and the Bank noteholders
with a detailed report on ownership or transfers of its capital stock,
membership certificates or equity capital certificates whenever requested in
writing by the majority REA noteholders or the majority Bank noteholders, or
whenever one percentum (1%) or more of its outstanding ownership interests has
been transferred since the last preceding report to such noteholders on
ownership interests or transfers; and
(d) If the Mortgagor's net worth (defined in Exhibit One
hereto) is equal to at least 20 percent of its total assets (defined in Exhibit
One), then the term "investment in affiliated companies" used in subsection (a)
of this section 15 shall not include investments by the Mortgagor for any
purpose described in section 607(c)(2) of the Rural Development Act of 1972
(including any investment in, or extension of credit, guarantee, or advance made
to an affiliated company of the Mortgagor that is used by such company for such
purpose) to
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the extent that, immediately after such investment, the aggregate of such
investments does not exceed one-third of the net worth of the borrower.
SECTION 16. In the event that the Mortgaged Property, or any part thereof,
shall be taken under the power of eminent domain, all proceeds and avails
therefrom, except to the extent that all noteholders shall consent to other use
and application thereof by the Mortgagor, shall forthwith be applied by the
Mortgagor: first, to the ratable payment of any indebtedness by this Mortgage
secured other than principal of or interest on the notes; second, to the ratable
payment of interest which shall have accrued on the notes and be unpaid; third,
to the ratable payment of or on account of the unpaid principal of the notes and
to such installments thereof as may be designated by the respective noteholders
at the time of any such payment, and fourth, the balance shall be paid to
whosoever shall be entitled thereto.
SECTION 17. The Mortgagor will well and truly observe and perform all of
the covenants, agreements, terms and conditions contained in the Consolidated
Loan Agreement, on its part to be observed or performed.
SECTION 18. If this section is made applicable by the Instruments Recital,
then: (a) The Mortgagor will not at any time employ, or enter into any contract
for the employment of, any manager of its telephone properties, unless such
employment or such contract shall first have been approved by the majority REA
noteholders and the majority Bank noteholders. (b) If. during such periods as
the Mortgagor shall be in default in the making of a payment or payments of
principal of or interest on one or more of the notes, the majority REA
noteholders or the majority Bank noteholders shall give notice to the Mortgagor
that in their opinion its telephone properties are not being efficiently
operated, and shall request the termination of the employment of any such
manager, or shall request the termination of any operating contract in respect
of any such telephone properties, the Mortgagor will terminate such employment
or operating contract within thirty (30) days after the date of such notice. (c)
All contracts in respect of the employment of any such manager or for the
operation of such telephone properties shall contain provisions to permit
compliance with the foregoing covenants.
SECTION 19. If all the REA Notes have been paid and discharged while any
of the Bank Notes are still outstanding, all rights and powers of the Government
and the holders of the REA Notes under this Mortgage shall immediately vest in
the Bank and the holders of the Bank Notes, respectively, and, correspondingly,
if all the Bank Notes have been paid and discharged while any of the REA Notes
are still outstanding, all rights and powers of the Bank and the holders of the
Bank Notes under this Mortgage shall immediately vest in the Government and the
holders of the REA Notes, respectively. The Bank, the Government, the Mortgagor
and the noteholders shall execute and deliver such instruments, assignments,
releases or other documents as shall be reasonably required to carry out the
intention of this section.
SECTION 20. At all times when any note is held by the Government, or in
the event the Government shall assign a note without having insured the payment
of such note, this Mortgage
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shall secure payment of such note for the benefit of the Government or such
uninsured holder thereof, as the case may be. Whenever any note may be sold
to an insured purchaser, it shall continue to be considered a "note" as
defined herein, but as to any such insured note the Government, and not such
insured purchaser, shall be considered to be, and shall have the rights of,
the noteholder for purposes of this Mortgage. Notice of the rights of the
Government under the preceding sentence shall be set forth in all such
insured notes.
SECTION 21. (a) The Mortgagor, subject to applicable laws and rules and
orders of regulatory bodies, shall design its rates for telephone service and
other services furnished by it with a view to paying and discharging all taxes,
maintenance expenses and operating expenses of its telephone system, and also to
making all payments in respect of principal of and interest on the notes when
and as the same shall become due, to providing and maintaining reasonable
working capital for the Mortgagor and to maintaining an Average TIER on all of
its outstanding indebtedness to the Government, the Bank, and all other lenders
of not less than the TIER stated in the Instruments Recital during the Forecast
Period described in the Instruments Recital and, after the Forecast Period, a
TIER of 1.50.
(b) For purposes of this section 21, Average TIER shall
be determined as of January 1 of each year during which any obligation
secured by the Mortgage remains unsatisfied and shall mean the average of the
two highest TIER ratios achieved by the Mortgagor during each of the three
calendar years last preceding the various dates of its determination.
(c) As used in this section 21, TIER means the
Mortgagor's net income or net margins (determined in accordance with Exhibit
One hereto) plus interest expense (determined in accordance with Exhibit One
hereto), divided by interest expense.
SECTION 22. (a) Current assets, current liabilities, net worth,
adjusted net worth, adjusted assets, retained earnings, net income or net
margins, interest expense, and total assets, as used in sections 15 or 21 of
this Mortgage, are defined in Exhibit One of this Mortgage. Net plant and
secured debt, if referred to in this Mortgage, are also determined in accordance
with Exhibit One.
(b) Accounting terms used in this Mortgage shall also apply
to accounts or groups of accounts of the Mortgagor, regardless of the account
title or the system of accounts used, if such accounts have substantially the
same meaning as those prescribed by the Federal Communications Commission in its
prevailing uniform system of accounts for telecommunications companies (47 CFR
Part 32).
SECTION 23. Exhibit One, attached hereto, is made part of this Mortgage.
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ARTICLE III
REMEDIES OF THE MORTGAGEES AND NOTEHOLDERS
SECTION 1. If one or more of the following events (hereinafter called
"events of default") shall happen, that is to say:
(a) default shall be made in the payment of any installment of or on
account of interest on or principal of any note or notes when and as the
same shall be required to be made and such default shall continue for
thirty (30) days;
(b) default shall be made in the due observance or performance of any
other of the representations, warranties, covenants, conditions or
agreements on the part of the Mortgagor in any of the notes or in this
Mortgage or in the Consolidated Loan Agreement contained; and such default
shall continue for a period of thirty (30) days after written notice
specifying such default and requiring the same to be remedied shall have
been given to the Mortgagor by any noteholder;
(c) the Mortgagor shall file a petition in bankruptcy or be
adjudicated a bankrupt or insolvent, or shall make an assignment for the
benefit of its creditors, or shall consent to the appointment of a receiver
of itself or of its property, or shall institute proceedings for its
reorganization or proceedings instituted by others for its reorganization
shall not be dismissed within thirty (30) days after the institution
thereof;
(d) a receiver or liquidator of the Mortgagor or of any substantial
portion of its property shall be appointed and the order appointing such
receiver or liquidator shall not be vacated within thirty (30) days after
the entry thereof;
(e) the Mortgagor shall forfeit or otherwise be deprived of its
corporate charter or franchises, permits or licenses required to carry on
any material portion of its business; or
(f) a final judgment shall be entered against the Mortgagor and shall
remain unsatisfied or without a stay in respect thereof for a period of
thirty (30) days;
then in each and every such case any noteholder may, by notice in writing to the
Mortgagor and delivery of a copy thereof to the other noteholders, declare all
unpaid principal of and accrued interest on any or all notes held by such
noteholder to be due and payable immediately; and upon any such declaration all
such unpaid principal and accrued interest so declared to be due and payable
shall become and be due and payable, immediately, anything contained herein or
in any note or notes to the contrary notwithstanding; provided, however, that if
at any time after the unpaid principal of and accrued interest on any of the
notes shall have been so declared to be due and payable, all
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payments in respect of principal and interest which shall have become due and
payable by the terms of such note or notes shall be paid to the respective
noteholders, and all other defaults hereunder and under the notes shall have
been made good or secured to the satisfaction of all of the noteholders, then
and in every such case, the noteholder or noteholders who shall have declared
the principal of and interest on notes held by such noteholder or noteholders
to be due and payable may, by written notice to the Mortgagor and delivery of
a copy thereof to the other noteholders, annul such declaration or
declarations and waive such default or defaults and the consequences thereof,
but no such waiver shall extend to or affect any subsequent default or impair
any right consequent
SECTION 2. If one or more of the events of default shall happen, the
holder or holders of not less than a majority in principal amount of the notes
at the time outstanding (hereinafter called the "majority noteholders"), for
itself or themselves, and as the agent or agents of the other noteholders,
personally or by attorney, in its or their discretion, may, insofar as not
prohibited by law:
(a) take immediate possession of the Mortgaged Property, collect and
receive all credits, outstanding accounts and bills receivable of the
Mortgagor and all rents, income, revenues and profits pertaining to or
arising from the Mortgaged Property, or any part thereof, and issue binding
receipts therefor; and manage, control and operate the Mortgaged Property
as fully as the Mortgagor might do if in possession thereof, including,
without limitation, the making of all repairs or replacements deemed
necessary or advisable;
(b) proceed to protect and enforce the rights of the Mortgagees and
the rights of the noteholder or noteholders under this Mortgage by suits or
actions in equity or at law in any court or courts of competent
jurisdiction, whether for specific performance of any covenant or any
agreement contained herein or in aid of the execution of any power herein
granted or for the foreclosure hereof or hereunder or for the sale of the
Mortgaged Property, or any part thereof, or to collect the debts hereby
secured or for the enforcement of such other or additional appropriate
legal or equitable remedies as may be deemed most effectual to protect and
enforce the rights and remedies herein granted or conferred, and in the
event of the institution of any such action or suit the noteholder or
noteholders instituting such action or suit shall have the right to have
appointed a receiver of the Mortgaged Property and of all rents, income,
revenues and profits pertaining thereto or arising therefrom derived,
received or had from the time of the commencement of such suit or action,
and such receiver shall have all the usual powers and duties of receivers,
in like and similar cases, to the fullest extent permitted by law, and if
application shall be made for the appointment of a receiver the Mortgagor
hereby expressly consents that the court to which such application shall be
made may make said appointment; and
(c) sell or cause to be sold all and singular the Mortgaged Property
or any part thereof, and all right, title, interest, claim and demand of
the Mortgagor therein or
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thereto, at public auction at such place in any county in which the
property to be sold, or any part thereof is located, at such time and
upon such terms as may be specified in a notice of sale, which shall
state the time when and the place where the sale is to be held, shall
contain a brief general description of the property to be sold, and shall
be given by mailing a copy thereof to the Mortgagor at least fifteen (15)
days prior to the date fixed for such sale and by publishing the same
once in each week for two successive calendar weeks prior to the date of
such sale in a newspaper of general circulation published in said county,
or if no such newspaper is published in such county, in a newspaper of
general circulation in such county, the first such publication to be not
less than fifteen (15) days nor more than thirty (30) days prior to the
date fixed for such sale. Any sale to be made under this subparagraph (c)
of this section 2 may be adjourned from time to time by announcement at
the time and place appointed for such sale or for such adjourned sale or
sales, and without further notice or publication the sale may be had at
the time and place to which the same shall be adjourned, provided,
however, that in the event another or different notice of sale or another
or different manner of conducting the same shall be required by law the
notice of sale shall be given or the sale shall be conducted as the case
may be, in accordance with the applicable provisions of law.
SECTION 3. If, within thirty (30) days after the majority noteholders
shall have had knowledge of the happening of an event or events of default, the
majority noteholders shall not have proceeded to exercise the rights and enforce
each of the remedies herein or by law conferred upon or reserved to the
Mortgagees or to said majority noteholders, then, and only then, any noteholder
for itself and as the agent of all the other noteholders, including the majority
noteholders, may proceed to exercise any such right or rights and remedy or
remedies not being enforced by the majority noteholders. Nothing contained in
this Mortgage shall affect or impair the right, which is absolute and
unconditional, of any holder of any note which may be secured hereby to enforce
the payment of the principal of or interest on such note on the date or dates
any such interest or principal shall become due and payable in accordance with
the terms of such note.
SECTION 4. At any sale hereunder any noteholder or noteholders shall have
the right to bid for and purchase the Mortgaged Property, or such part thereof
as shall be offered for sale, and any noteholder or noteholders may apply in
settlement of the purchase price of the property so purchased the portion of the
net proceeds of such sale which would be applicable to the payment on account of
the principal of and interest on the note or notes held by such noteholder or
noteholders, and such amount so applied shall be credited as a payment on
account of principal of and interest on the note or notes held by such
noteholder or noteholders.
SECTION 5. Any proceeds or funds arising from the exercise of any rights
or the enforcement of any remedies herein provided after the payment or
provision for the payment of any and all costs and expenses in connection with
the exercise of such rights or the enforcement of such remedies shall be applied
first, to the payment of indebtedness hereby secured other than the principal of
or interest on the notes; second, to the ratable payment of interest which shall
have
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accrued on the notes and which shall be unpaid; third, to the ratable payment
of or on account of the unpaid principal of the notes, and the balance, if
any, shall be paid to whosoever shall be entitled thereto.
SECTION 6. The Mortgagor covenants that it will give immediate written
notice to both of the Mortgagees and to all of the noteholders of the occurrence
of an event of default or in the event that any right or remedy described in
clauses (a) through (fl of section 1 of this article m is exercised or enforced,
or any action is taken to exercise or enforce any such right or remedy.
SECTION 7. Every right or remedy herein conferred upon or reserved to the
Mortgagees or to the noteholders shall be cumulative and shall be in addition to
every other right and remedy given hereunder or now or hereafter existing at
law, or in equity, or by statute. The pursuit of any right or remedy shall not
be construed as an election.
SECTION 8. The Mortgagor, for itself and all who may claim through or
under it, covenants that it will not at any time insist upon or plead, or in any
manner whatever claim, or take the benefit or advantage of, any appraisement,
valuation, stay, extension or redemption laws now or hereafter in force in any
locality where any of the Mortgaged Property may be situated, in order to
prevent, delay or hinder the enforcement or foreclosure of this Mortgage, or the
absolute sale of the Mortgaged Property, or any part thereof, or the final and
absolute putting into possession thereof, immediately after such sale, of the
purchaser or purchasers thereat, and the Mortgagor, for itself and all who may
claim through or under it, hereby waives the benefit of all such laws unless
such waiver shall be forbidden by law.
ARTICLE IV
POSSESSION Until DEFAULT-DEFEASANCE CLAUSE
SECTION 1. Until some one or more of the events of default shall have
happened, the Mortgagor shall be suffered and permitted to retain actual
possession of the Mortgaged Property, and to manage, operate and use the same
and any part thereof, with the rights and franchises appertaining thereto, and
to collect, receive, take, use and enjoy the rents, revenues, issues, earnings,
income, products and profits thereof or therefrom, subject to the provisions of
this Mortgage.
SECTION 2. If the Mortgagor shall well and truly pay or cause to be paid
the whole amount of the principal of and interest on the notes at the time and
in the manner therein provided, according to the true intent and meaning
thereof, and shall also pay or cause to be paid all other sums payable hereunder
by the Mortgagor and shall well and truly keep and perform according to the true
intent and meaning of this Mortgage, all covenants herein required to be kept
and performed by it, then and in that case, all property, rights and interests
hereby conveyed or assigned or pledged shall revert to the Mortgagor and the
estate, right, title and interest of the Mortgagees and the noteholders shall
thereupon cease, determine and become void and the Mortgagees and the
noteholders, in such
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case, on written demand of the Mortgagor but at the Mortgagor's cost and
expense, shall enter satisfaction of this Mortgage upon the record. In any
event, each noteholder, upon payment in full to him by the Mortgagor of all
principal of and interest on any note held by him and the payment and
discharge by the Mortgagor of all charges due to such noteholder hereunder,
shall execute and deliver to the Mortgagor such instrument of satisfaction,
discharge or release as shall be required by law in the circumstances.
ARTICLE V
MISCELLANEOUS
SECTION 1. It is hereby declared to be the intention of the Mortgagor that
all lines, or systems, embraced in the Mortgaged Property, including, without
limitation, all rights of way and easements granted or given to the Mortgagor or
obtained by it to use real property in connection with the construction,
operation or maintenance of such lines, or systems, and all service and
connecting lines, poles, posts, crossarms, wires, cables, conduits, ducts,
connections and fixtures forming part of, or used in connection with, such
lines, or systems, and all other property physically attached to any of the
foregoing-described property, shall be deemed to be real property.
SECTION 2. All acts and obligations of the Mortgagor hereunder shall be
subject to all applicable orders, rules and regulations, now or hereafter in
effect, of all regulatory bodies having jurisdiction in the premises, to the end
that no act or omission to act on the part of the Mortgagor shall constitute a
default hereunder insofar as such act or omission shall have been required by
reason of any order, rule or regulation of any such regulatory body.
SECTION 3. All of the covenants, stipulations, promises, undertakings and
agreements herein contained by or on behalf of the Mortgagor shall bind its
successors and assigns, whether so specified or not, and all titles, rights and
remedies hereby granted to or conferred upon the Mortgagees shall pass to and
inure to the benefit of the successors and assigns of the Mortgagees and shall
be deemed to be granted or conferred for the ratable benefit and security of all
who shall from time to time be the holders of notes executed and delivered as
herein provided.
SECTION 4. The descriptive headings of the various articles of this
Mortgage were formulated and inserted for convenience only and shall not be
deemed to affect the meaning or construction of any of the provisions hereof.
SECTION 5. All demands, notices, reports, approvals, designations, or
directions required or permitted to be given hereunder shall be in writing and
shall be deemed to be properly given if mailed by registered mail addressed to
the proper party or parties at the following addresses:
As to the Mortgagor: Dobson Telephone Company, Inc.
13439 Broadway Extension
-32-
<PAGE>
Oklahoma City, OK 73114
As to the Mortgagees:
The Bank: Rural Telephone Bank
c/o Rural Electrification
Administration
Washington, D.C. 20250-1500
The Government: Rural Electrification
Administration
Washington, D.C. 20250-1500
and as to any other person, firm, corporation or governmental body or agency
having an interest herein by reason of being the holder of any note or
otherwise, at the last address designated by such person, firm, corporation,
governmental body or agency to the Mortgagor and the Mortgagees. The Mortgagor
or the Mortgagees may from time to time designate to one another a new address
to which demands, notices, reports, approvals, designations or directions may be
addressed and from and after any such designation the address designated shall
be deemed to be the address of such party in lieu of the address hereinabove
given. The Mortgagor will promptly notify the Mortgagees in writing of any
change in location of its chief place of business or the office where its
records concerning accounts and contract rights are kept.
SECTION 6. The invalidity of any one or more phrases, clauses, sentences,
paragraphs or provisions shall not affect the remaining portions of this
Mortgage, nor shall any such invalidity as to one Mortgagee or as to any holder
of notes hereunder affect the rights hereunder of the other Mortgagee or any
other holder of notes.
SECTION 7. This Mortgage may be simultaneously executed in any number of
counterparts, and all said counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.
IN WITNESS WHEREOF, DOBSON TELEPHONE COMPANY, INC., as Mortgagor, has
caused this Mortgage to be signed in its name and its corporate seal to be
hereunto affixed and attested by its officers thereunto duly authorized, RURAL
TELEPHONE BANK, as Mortgagee, has caused this Mortgage to be signed in its name
and its corporate seal to be hereunto affixed and attested by its officers
thereunto duly authorized, and UNITED STATES OF AMERICA, as Mortgagee, has
caused this Mortgage to be duly executed in its behalf, all as of the day and
year first above written.
DOBSON TELEPHONE COMPANY, INC.
-33-
<PAGE>
(Seal) By: /s/
Attest: -------------------------------
President
/s/
- ---------------------------------
Secretary
Executed by the Mortgagor
in the presence of:
/s/
- ---------------------------------
/s/
- ---------------------------------
Witnesses
UNITED STATES OF AMERICA, and
RURAL TELEPHONE BANK, respectively
By /s/ as
--------------------------------
Administrator of Rural Electrification
Administration, and as Governor of the
Rural Telephone Bank
(Seal)
Attest:
/s/
- ---------------------------------
Assistant Secretary of
Rural Telephone Bank
Executed by United States of America,
Mortgagee, and Rural Telephone Bank,
Mortgagee, in the presence of:
/s/
- ---------------------------------
/s/
- ---------------------------------
Witnesses
-34-
<PAGE>
EXHIBIT ONE (EXHIBIT TO MORTGAGE)
UNIFORM SYSTEM OF ACCOUNTS
ACCOUNT NUMBERS USED IN CERTAIN PROVISIONS
THIS EXHIBIT CONSISTS OF 4 PAGES
All references regarding account numbers are to 47 CFR Part 32 and supplementary
accounts required by REA.
ACCOUNT NUMBERS
ACCOUNT NAMES CLASS A CLASS B
- ------------- -----------------------
ADJUSTED ASSETS - Article II, Sec. 15(a): the sum of the balances of the
following accounts of the Mortgagor:
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Current Assets 1100s thru 1300s
- -------------------------------------------------------------------------
Noncurrent Assets 1400s thru 1500s
- -------------------------------------------------------------------------
Total Telecommunications Plant
(Defined Below)
- -------------------------------------------------------------------------
LESS: Accumulated Depreciation 3100 thru 3300s
- -------------------------------------------------------------------------
LESS: Accumulated Amortization 3400 thru 3600s
- -------------------------------------------------------------------------
Funded Debt (Still to be advanced
under Loan Contract) ( 4210.20 4210.20
( 4210.21 4210.21
( 4210.22 4210.22
( 4210.24 4210.24
( 4210.23 4210.23
- -------------------------------------------------------------------------
LESS: Adjustments (Defined Below)
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
ADJUSTMENTS: the sum of the balances of the following accounts of the
Mortgagor:
-35-
<PAGE>
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Telecommunications Accounts Receivable 1180* 1180*
- -------------------------------------------------------------------------
Accounts Receivable Allowance
Telecommunications 1181* 1181*
- -------------------------------------------------------------------------
Other Accounts Receivable 1190* 1190*
- -------------------------------------------------------------------------
Accounts Receivable Allowance - Other 1191* 1191*
- -------------------------------------------------------------------------
Notes Receivable 1200* 1200*
- -------------------------------------------------------------------------
Notes Receivable Allowance
(*Include Only Those Portions of These
Accounts Shown in Subsidiary Record
Accounts Related to Affiliates) 1201* 1201*
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
CURRENT LIABILITIES - Article II, Sec. 15(a): the balances of the following
accounts of the Morgagor:
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Current Liabilities 4010 thru 4100s
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
INTEREST EXPENSE - Article, Sec. 21 or any other section of the Mortgage setting
forth a TIER requirement for the Mortgagor: the sum of the balances of the
following accounts of the Mortgagor:
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Interest and Related Items 7500** 7500
- -------------------------------------------------------------------------
Interest on Funded Debt 7510
- -------------------------------------------------------------------------
Interest Expense - Capital Leases 7520
- -------------------------------------------------------------------------
Amortization of Debt Issurance Expense 7530
- -------------------------------------------------------------------------
Other Interest Deductions 7540
- -------------------------------------------------------------------------
LESS: Allowance for Funds Used During
Construction 7340 4300.4
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
-36-
<PAGE>
NET INCOME OR NET MARGINS - Article II, Sec. 21 or any other section of the
Mortgage setting forth a TIER requirement for the Mortgagor: the sum of the
balances of the following accounts of the Mortgagor:
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Local Network Services Revenues )
- -------------------------------------------------------------------------
Network Access Services Revnues )
- -------------------------------------------------------------------------
Long Distance Network Services Revenues ) 5000 thru 5300s
- -------------------------------------------------------------------------
Miscellaneous Revenues )
- -------------------------------------------------------------------------
LESS: Uncollectible Revenues )
- -------------------------------------------------------------------------
Other Operating Income and Expense ) 7100** 7100
- -------------------------------------------------------------------------
Nonoperating Income and Expense ) 7300** 7300
- -------------------------------------------------------------------------
Income Effect of Jurisdictional
Rate-making Difference - Net ) 7910 7910
- -------------------------------------------------------------------------
Nonregulated Net Income ) 7990 7990
- -------------------------------------------------------------------------
Other nonregulated Revenues ) 7991 7991
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
-37-
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
DOBSON COMMUNICATIONS CORPORATION,
Issuer
and
UNITED STATES TRUST COMPANY OF NEW YORK
Trustee
--------------------
INDENTURE
Dated as of February 28, 1997
--------------------
11 3/4% Senior Notes due 2007
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
TIA Sections Indenture Sections
- ------------ ------------------
Section 310(a)(1). . . . . . . . . . . . . . . . 7.10
(a)(2). . . . . . . . . . . . . . . . 7.10
(b) . . . . . . . . . . . . . . . . . 7.08
Section 313(c) . . . . . . . . . . . . . . . . . 7.06; 11.02
Section 314(a) . . . . . . . . . . . . . . . . . 4.17; 11.02
(a)(4). . . . . . . . . . . . . . . . 4.16; 11.02
(c)(1). . . . . . . . . . . . . . . . 11.03
(c)(2). . . . . . . . . . . . . . . . 11.03
(e) . . . . . . . . . . . . . . . . . 11.04
Section 315(b) . . . . . . . . . . . . . . . . . 7.05; 11.02
Section 316(a)(1)(A) . . . . . . . . . . . . . . 6.05
(a)(1)(B) . . . . . . . . . . . . . . 6.04
(b) . . . . . . . . . . . . . . . . . 6.07
Section 317(a)(1). . . . . . . . . . . . . . . . 6.08
(a)(2). . . . . . . . . . . . . . . . 6.09
Section 318(a) . . . . . . . . . . . . . . . . . 11.01
(c) . . . . . . . . . . . . . . . . . 11.01
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. . . . . . 22
SECTION 1.03. RULES OF CONSTRUCTION. . . . . . . . . . . . . . . . . . . . 22
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING. . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.02. RESTRICTIVE LEGENDS. . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.03. EXECUTION, AUTHENTICATION AND DENOMINATIONS. . . . . . . . . 26
SECTION 2.04. REGISTRAR AND PAYING AGENT . . . . . . . . . . . . . . . . . 27
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST. . . . . . . . . . . . . 28
SECTION 2.06. TRANSFER AND EXCHANGE. . . . . . . . . . . . . . . . . . . . 28
SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES . . . . . . . . . . . 29
SECTION 2.08. SPECIAL TRANSFER PROVISIONS. . . . . . . . . . . . . . . . . 31
SECTION 2.09. REPLACEMENT NOTES. . . . . . . . . . . . . . . . . . . . . . 34
SECTION 2.10. OUTSTANDING NOTES. . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.11. TEMPORARY NOTES. . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.12. CANCELLATION . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.13. CUSIP NUMBERS. . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.14. DEFAULTED INTEREST . . . . . . . . . . . . . . . . . . . . . 36
SECTION 2.15. ISSUANCE OF ADDITIONAL NOTES . . . . . . . . . . . . . . . . 36
ARTICLE THREE
REDEMPTION
SECTION 3.01. RIGHT OF REDEMPTION; MANDATORY REDEMPTION. . . . . . . . . . 36
SECTION 3.02. NOTICES TO TRUSTEE . . . . . . . . . . . . . . . . . . . . . 37
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED. . . . . . . . . . . . . . 37
SECTION 3.04. NOTICE OF REDEMPTION . . . . . . . . . . . . . . . . . . . . 38
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION . . . . . . . . . . . . . . . 39
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE. . . . . . . . . . . . . . . . . 39
- --------------------------
Note: The Table of Contents shall not for any purposes be deemed to be a
part of the Indenture.
<PAGE>
ii
SECTION 3.07. PAYMENT OF NOTES CALLED FOR REDEMPTION . . . . . . . . . . . 39
SECTION 3.08. NOTES REDEEMED IN PART . . . . . . . . . . . . . . . . . . . 39
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. . . . . . . . . . . . . . . 40
SECTION 4.03. LIMITATION ON INDEBTEDNESS . . . . . . . . . . . . . . . . . 40
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. . . . . . . . . . . . . . 43
SECTION 4.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES . . . . . . . . . . . . . 45
SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES . . . . . . . . . . . . . . . . . . 47
SECTION 4.07. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED
SUBSIDIARIES. . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH STOCKHOLDERS AND
AFFILIATES. . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.09. LIMITATION ON LIENS. . . . . . . . . . . . . . . . . . . . . 48
SECTION 4.10. LIMITATION ON ASSET SALES. . . . . . . . . . . . . . . . . . 49
SECTION 4.11. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL . . . . . . . . 50
SECTION 4.12. EXISTENCE. . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 4.13. PAYMENT OF TAXES AND OTHER CLAIMS. . . . . . . . . . . . . . 50
SECTION 4.14. MAINTENANCE OF PROPERTIES AND INSURANCE. . . . . . . . . . . 50
SECTION 4.15. NOTICE OF DEFAULTS . . . . . . . . . . . . . . . . . . . . . 51
SECTION 4.16. COMPLIANCE CERTIFICATES. . . . . . . . . . . . . . . . . . . 51
SECTION 4.17. COMMISSION REPORTS AND REPORTS TO HOLDERS. . . . . . . . . . 52
SECTION 4.18. WAIVER OF STAY, EXTENSION OR USURY LAWS. . . . . . . . . . . 52
SECTION 4.19. LIMITATION ON SALE-LEASEBACK TRANSACTIONS. . . . . . . . . . 52
SECTION 4.20. SPECIAL REPURCHASE OFFER.. . . . . . . . . . . . . . . . . . 53
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC. . . . . . . . . . . . . . . . . 53
SECTION 5.02. SUCCESSOR SUBSTITUTED. . . . . . . . . . . . . . . . . . . . 54
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 54
SECTION 6.02. ACCELERATION . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 6.03. OTHER REMEDIES . . . . . . . . . . . . . . . . . . . . . . . 57
<PAGE>
iii
SECTION 6.04. WAIVER OF PAST DEFAULTS. . . . . . . . . . . . . . . . . . . 57
SECTION 6.05. CONTROL BY MAJORITY. . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.06. LIMITATION ON SUITS. . . . . . . . . . . . . . . . . . . . . 57
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT . . . . . . . . . . . . 58
SECTION 6.08. COLLECTION SUIT BY TRUSTEE . . . . . . . . . . . . . . . . . 58
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM . . . . . . . . . . . . . . 58
SECTION 6.10. PRIORITIES . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.11. UNDERTAKING FOR COSTS. . . . . . . . . . . . . . . . . . . . 59
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES . . . . . . . . . . . . . 60
SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE . . . . . . . . . . . . . . . 60
SECTION 6.14. DELAY OR OMISSION NOT WAIVER . . . . . . . . . . . . . . . . 60
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. . . . . . . . . . . . . . . . . . 61
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE . . . . . . . . . . . . . . . . 62
SECTION 7.04. TRUSTEE'S DISCLAIMER . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.05. NOTICE OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . 62
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. . . . . . . . . . . . . . . . 62
SECTION 7.07. COMPENSATION AND INDEMNITY . . . . . . . . . . . . . . . . . 62
SECTION 7.08. REPLACEMENT OF TRUSTEE . . . . . . . . . . . . . . . . . . . 63
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.. . . . . . . . . . . . . . 64
SECTION 7.10. ELIGIBILITY. . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 7.11. MONEY HELD IN TRUST. . . . . . . . . . . . . . . . . . . . . 64
SECTION 7.12. WITHHOLDING TAXES. . . . . . . . . . . . . . . . . . . . . . 64
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS . . . . . . . . . . . . 65
SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE. . . . . . . . . . . . 66
SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS. . . . . . . . . . . . . . 68
SECTION 8.04. APPLICATION OF TRUST MONEY . . . . . . . . . . . . . . . . . 70
SECTION 8.05. REPAYMENT TO COMPANY . . . . . . . . . . . . . . . . . . . . 70
SECTION 8.06. REINSTATEMENT. . . . . . . . . . . . . . . . . . . . . . . . 70
<PAGE>
iv
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS . . . . . . . . . . . . . . . . . 71
SECTION 9.02. WITH CONSENT OF HOLDERS. . . . . . . . . . . . . . . . . . . 71
SECTION 9.03. REVOCATION AND EFFECT OF CONSENT . . . . . . . . . . . . . . 72
SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES . . . . . . . . . . . . . . 73
SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC. . . . . . . . . . . . . . . 73
SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT. . . . . . . . . . . . . 73
ARTICLE TEN
SECURITY
SECTION 10.01. SECURITY. . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT OF 1939 . . . . . . . . . . . . . . . . 75
SECTION 11.02. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 11.03. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. . . . . 76
SECTION 11.04. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION . . . . . . . 77
SECTION 11.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR . . . . . . . . 77
SECTION 11.06. PAYMENT DATE OTHER THAN A BUSINESS DAY. . . . . . . . . . . 77
SECTION 11.07. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 11.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS . . . . . . . 77
SECTION 11.09. NO RECOURSE AGAINST OTHERS. . . . . . . . . . . . . . . . . 78
SECTION 11.10. SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.11. DUPLICATE ORIGINALS . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.12. SEPARABILITY. . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC. . . . . . . . . . . . . . 78
EXHIBIT A Form of Note . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B Form of Certificate. . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Non-QIB Accredited Investors . . . . C-1
EXHIBIT D Form of Certificate to be Delivered in Connection with
Transfers Pursuant to Regulation S . . . . . . . . . . . . D-1
<PAGE>
INDENTURE, dated as of February 28, 1997, between DOBSON COMMUNICATIONS
CORPORATION, an Oklahoma corporation (the "COMPANY"), and United States Trust
Company of New York, a bank and trust company organized under the New York
banking law (the "TRUSTEE").
RECITALS
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance initially of up to $160,000,000 aggregate
principal amount of the Company's 11 3/4% Senior Notes due 2007 (the "NOTES")
issuable as provided in this Indenture. The Notes will be partially secured
pursuant to the terms of an Escrow and Security Agreement (as defined herein) by
U.S. Government Obligations as provided by Article Ten of this Indenture. In
connection with the offering of the Notes, the Company has effected a corporate
reorganization (the "Reorganization") pursuant to which the Company became the
holding company parent of Dobson Operating Company. All things necessary to
make this Indenture a valid agreement of the Company, in accordance with its
terms, have been done, and the Company has done all things necessary to make the
Notes, when executed by the Company and authenticated and delivered by the
Trustee hereunder and duly issued by the Company, the valid obligations of the
Company as hereinafter provided.
This Indenture is subject to, and shall be governed by, the provisions of
the Trust Indenture Act of 1939 that are required to be a part of and to govern
indentures qualified under the Trust Indenture Act of 1939.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of the Notes by
the Holders thereof, it is mutually covenanted and agreed, for the equal and
proportionate benefit of all Holders, the Company and the Trustee, as follows.
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by a Restricted Subsidiary and not Incurred in connection
with, or in anticipation of, such Person becoming a Restricted Subsidiary or
such Asset Acquisition; provided that Indebtedness of such Person which is
redeemed, defeased, retired or otherwise repaid at the time of or immediately
<PAGE>
2
upon consummation of the transactions by which such Person becomes a Restricted
Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined in conformity with GAAP; provided that the following items shall be
excluded in computing Adjusted Consolidated Net Income (without duplication):
(i) the net income of any Person (other than net income attributable to a
Restricted Subsidiary) in which any Person (other than the Company or any of its
Restricted Subsidiaries) has a joint interest and the net income of any
Unrestricted Subsidiary, except to the extent of the amount of dividends or
other distributions actually paid to the Company or any of its Restricted
Subsidiaries by such other Person or such Unrestricted Subsidiary during such
period; (ii) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
Section 4.04 (and in such case, except to the extent includable pursuant to
clause (i) above), the net income (or loss) of any Person accrued prior to the
date it becomes a Restricted Subsidiary or is merged into or consolidated with
the Company or any of its Restricted Subsidiaries or all or substantially all of
the property and assets of such Person are acquired by the Company or any of its
Restricted Subsidiaries; (iii) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by such Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such Restricted Subsidiary; (iv) any gains or losses (on an after-tax basis)
attributable to Asset Sales; (v) except for purposes of calculating the amount
of Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of Section 4.04, any amount paid or accrued as dividends on Preferred
Stock of the Company or any Restricted Subsidiary owned by Persons other than
the Company and any of its Restricted Subsidiaries; and (vi) all extraordinary
gains and extraordinary losses, net of tax.
"Adjusted Consolidated Net Tangible Assets" means the total amount of
assets of the Company and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom (i) all current liabilities of the Company and its Restricted
Subsidiaries (excluding intercompany items) and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles (other than FCC license acquisition costs), all as set forth on the
most recent quarterly or annual consolidated balance sheet of the Company and
its Restricted Subsidiaries, prepared in conformity with GAAP and filed with the
Commission pursuant to Section 4.17.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For
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3
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by" and "under common control with"), as
applied to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent Members" has the meaning provided in Section 2.07(a).
"Arizona 5 Acquisition" means the acquisition by Dobson Operating Company,
or a Subsidiary thereof, of a 75% interest in the Arizona 5 Partnership.
"Arizona 5 Partnership" means the Gila River Cellular General Partnership,
which holds the FCC cellular license and system relating to the Arizona 5 RSA.
"Asset Acquisition" means (i) an investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries; provided that such Person's
primary business is related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such investment or
(ii) an acquisition by the Company or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Company or any of its
Restricted Subsidiaries that constitute substantially all of a division or line
of business of such Person; provided that the property and assets acquired are
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including by
way of merger, consolidation or sale-leaseback transaction) in one transaction
or a series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets of the Company or any of its Restricted
Subsidiaries outside the ordinary course of business of the Company or such
Restricted Subsidiary and, in each case, that is not governed by Article Five;
provided that "Asset Sale" shall not include (a) sales or other dispositions of
inventory, receivables and other current assets, (b) sales or other dispositions
of assets for consideration at
<PAGE>
4
least equal to the fair market value of the assets sold or disposed of,
provided that the consideration received consists of property or assets
(other than current assets) of a nature or type or that are used in a
business (or a company having property or assets of a nature or type, or
engaged in a business) similar or related to the nature or type of the
property and assets of, or business of, the Company and its Restricted
Subsidiaries existing on the date of such sale or other disposition or
(c) the sale of the Prior ATTI Assets.
"ATTI" means Associated Telecommunications and Technologies, Inc.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Bank Credit Agreement" means the Existing Credit Agreement until it is
refinanced by the Bank Facility Agreement and thereafter means the Bank Facility
Agreement.
"Bank Facility" means the $200 million reducing revolving credit facility
to be established pursuant to the Bank Facility Commitment Letter.
"Bank Facility Agreement" means the credit agreement establishing the Bank
Facility, together with all other agreements, instruments and documents executed
or delivered pursuant thereto or in connection therewith, in each case as such
agreements, instruments or documents may be amended, supplemented, extended,
renewed, replaced or otherwise modified from time to time.
"Bank Facility Commitment Letter" means the commitment letter (including
the Summary of Terms attached thereto) dated February 5, 1997 among Dobson
Communications Corporation, Dobson Operating Company and the banks party
thereto.
"Board of Directors" means the Board of Directors of the Company or any
committee of such Board of Directors duly authorized to act under this
Indenture.
"Board Resolution" means a copy of a resolution, certified by the Secretary
of the Company to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the Corporate
Trust Office of the Trustee, are authorized by law to close.
<PAGE>
5
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether now outstanding or
issued after the Closing Date, including, without limitation, all Common Stock
and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) (a) prior to the occurrence of a
Public Market, a "person" or "group" (within the meaning of Section 13(d) or
14(d)(2) under the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of Voting Stock representing a
greater percentage of the total voting power of the Voting Stock of the Company,
on a fully diluted basis, than is held by the Existing Stockholders and their
Affiliates on such date and (b) after the occurrence of a Public Market, a
"person" or "group" (within the meaning of Section 13(d) or 14(d)(2) under the
Exchange Act) becomes the ultimate "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act) of more than 35% of the total voting power of the Voting
Stock of the Company on a fully diluted basis and such ownership represents a
greater percentage of the total voting power of the Voting Stock of the Company,
on a fully diluted basis, than is held by the Existing Stockholders and their
Affiliates on such date; or (ii) individuals who on the Closing Date constitute
the Board of Directors (together with any new directors whose election by the
Board of Directors or whose nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the members of the
Board of Directors then in office who either were members of the Board of
Directors on the Closing Date or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
members of the Board of Directors then in office.
"Class A Common Stock" means the Class A Common Stock, par value $1.00 per
share, of the Company.
"Class B Preferred Stock" means the Class B Convertible Preferred Stock,
par value $1.00 per share, of the Company.
"Class C Preferred Stock" means the Class C Preferred Stock, par value
$1.00 per share, of the Company.
<PAGE>
6
"Closing Date" means the date on which the Notes are originally issued
under this Indenture.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non voting) of such Person's equity, other than Preferred Stock of
such Person, whether now outstanding or issued after the Closing Date, including
without limitation, all series and classes of such common stock.
"Company" means the party named as such in the first paragraph of this
Indenture until a successor replaces it pursuant to Article Five of this
Indenture and thereafter means the successor.
"Company Order" means a written request or order signed in the name of the
Company (i) by its Chairman, a Vice Chairman, its President or a Vice President
and (ii) by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant
Secretary and delivered to the Trustee; PROVIDED, HOWEVER, that such written
request or order may be signed by any two of the officers or directors listed in
clause (i) above in lieu of being signed by one of such officers or directors
listed in such clause (i) and one of the officers listed in clause (ii) above.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income (i) Consolidated Interest Expense,
(ii) income taxes, (other than income taxes (either positive or negative)
attributable to extraordinary and non-recurring gains or losses or sales of
assets), (iii) depreciation expense, (iv) amortization expense, and (v) all
other non-cash items reducing Adjusted Consolidated Net Income (other than items
that will require cash payments and for which an accrual or reserve is, or is
required by GAAP to be, made), less all non-cash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in conformity with GAAP; provided that,
if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of the Adjusted
Consolidated Net Income attributable to such Restricted Subsidiary multiplied by
(B) the quotient of (1) the number of shares of outstanding Common Stock of such
Restricted Subsidiary not owned on the last day of such period by the Company or
any of its Restricted Subsidiaries divided by (2) the total number of shares of
outstanding Common Stock of such Restricted Subsidiary on the last day of such
period.
<PAGE>
7
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Subsidiaries during such
period; excluding, however, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in connection
with the offering of the Notes, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) the aggregate amount of Consolidated EBITDA for the four fiscal quarters
for which financial statements of the Company have been filed with the
Commission pursuant to Section 4.17 (such four fiscal quarter period being the
"Four Quarter Period"); provided that (A) pro forma effect shall be given to any
Indebtedness that is to be Incurred or repaid on the Transaction Date as if such
Incurrence or repayment had occurred on the first day of such Four Quarter
Period; (B) pro forma effect shall be given to Asset Dispositions and Asset
Acquisitions (including giving pro forma effect to the application of proceeds
of any Asset Disposition) that occur during the period beginning on the first
day of the Four Quarter Period and ending on the Transaction Date (the
"Reference Period") as if they had occurred and such proceeds had been applied
on the first day of such Reference Period; and (C) pro forma effect shall be
given to asset dispositions and asset acquisitions (including giving pro forma
effect to the application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary or has been merged
with or into the Company or any Restricted Subsidiary during such Reference
Period and that would have constituted Asset Dispositions or Asset Acquisitions
had such transactions occurred when such Person was a Restricted Subsidiary as
if such asset dispositions or asset acquisitions were Asset Dispositions or
Asset Acquisitions that occurred on the first day of such Reference Period;
provided that to the extent that clause (B) or (C) of this sentence requires
that pro forma effect be given to an Asset Acquisition or Asset Disposition,
such pro forma calculation shall be based upon the four full fiscal quarters
immediately preceding the Transaction Date of the Person, or division
<PAGE>
8
or line of business of the Person, that is acquired or disposed for which
financial information is available.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Corporate Trust Office" means the office of the Trustee at which the
corporate trust business of the Trustee shall, at any particular time, be
principally administered, which office is, at the date of this Indenture,
located at 114 West 47th Street, New York, NY 10036, Attention: Corporate Trust
Department.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Depositary" shall mean The Depository Trust Company, its nominees, and
their respective successors.
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in Section 4.10 and Section 4.11 and
such Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
<PAGE>
9
repurchase of such Notes as are required to be repurchased pursuant to
Section 4.10 and Section 4.11.
"Escrow and Security Agreement" means the Escrow and Security Agreement
dated the Closing Date from the Company, as pledgor, to United States Trust
Company of New York, as Trustee.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.10.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Notes" means any securities of the Company containing terms
identical to the Notes (except that such Exchange Notes shall be registered
under the Securities Act) that are issued and exchanged for the Notes pursuant
to the Registration Rights Agreement and this Indenture.
"Existing Credit Agreement" means the Amended and Restated Credit
Agreement, dated March 19, 1996, among CoreStates Bank, N.A., as a bank and as
administrative agent, NationsBank of Texas, N.A., First Union National Bank of
North Carolina, PNC Bank, National Association, each as a bank and as co-agents
and Dobson Operating Company and certain of its subsidiaries and certain other
related parties, together with all other agreements, instruments and documents
executed or delivered pursuant thereto or in connection therewith, in each case
as such agreements, instruments or documents may be amended, supplemented,
extended, renewed, replaced or otherwise modified from time to time.
"Existing Stockholders" means Everett R. Dobson and Fleet Investors.
"fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution.
"Fleet Investors" means Fleet Venture Resources, Inc., Fleet Equity
Partners VI, L.P. and Kennedy Plaza Partners and their Affiliates.
"Fleet Investors Preferred Stock" means the Class B Preferred Stock and the
Class C Preferred Stock.
"FCC" means the Federal Communications Commission.
<PAGE>
10
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
this Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of this Indenture shall be
made without giving effect to (i) the amortization of any expenses incurred in
connection with the offering of the Notes and (ii) except as otherwise provided,
the amortization of any amounts required or permitted by Accounting Principles
Board Opinion Nos. 16 and 17.
"Global Notes" has the meaning provided in Section 2.01.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and, without limiting the generality of the foregoing, 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
Indebtedness or other obligation of such other 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 purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); provided 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.
"Guaranteed Indebtedness" has the meaning provided in Section 4.07.
"Holder" or "Noteholder" means the registered holder of any Note.
"Horizon Properties Acquisition" means the acquisition by Dobson Operating
Company, or a Subsidiary thereof, of the FCC licenses for, and certain assets
relating to, the Cumberland MSA, Hagerstown MSA, Maryland 3 RSA and
Pennsylvania 10 West RSA pursuant to the asset purchase agreement among Horizon
Cellular Telephone Company of Hagerstown, L.P., Cumberland Cellular Partnership,
Dobson Cellular of Maryland, Inc. and Dobson Operating Company dated as of
November 19, 1996.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the
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11
payment of, contingently or otherwise, such Indebtedness, including an
"Incurrence" of Indebtedness by reason of a Person becoming a Restricted
Subsidiary; provided that neither the accrual of interest nor the accretion of
original issue discount shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto, but excluding obligations with
respect to letters of credit (including trade letters of credit) securing
obligations (other than obligations described in (i) or (ii) above or (v), (vi)
or (vii) below) entered into in the ordinary course of business of such Person
to the extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third Business Day
following receipt by such Person of a demand for reimbursement), (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services, which purchase price is due more than six months after the
date of placing such property in service or taking delivery and title thereto or
the completion of such services, except Trade Payables, (v) all obligations of
such Person as lessee under Capitalized Leases, (vi) all Indebtedness of other
Persons secured by a Lien on any asset of such Person, whether or not such
Indebtedness is assumed by such Person; provided that the amount of such
Indebtedness shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness, (vii) all
Indebtedness of other Persons Guaranteed by such Person to the extent such
Indebtedness is Guaranteed by such Person and (viii) to the extent not otherwise
included in this definition, obligations under Currency Agreements and Interest
Rate Agreements. The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date (or in the case of a revolving credit or
other similar facility, the total amount of funds outstanding and/or available
on the date of determination) of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, provided
(A) that the amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less the
unamortized portion of the original issue discount of such Indebtedness at the
time of its issuance as determined in conformity with GAAP, (B) money borrowed
at the time of the Incurrence of any Indebtedness in order to pre-fund the
payment of interest on such Indebtedness, shall be deemed not to be
"Indebtedness" and (C) that Indebtedness shall not include any liability for
federal, state, local or other taxes.
"Indenture" means this Indenture as originally executed or as it may be
amended or supplemented from time to time by one or more indentures supplemental
to this Indenture entered into pursuant to the applicable provisions of this
Indenture.
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12
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" means each semiannual interest payment date on
April 15 and October 15 of each year, commencing October 15, 1997.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers in the ordinary course
of business that are, in conformity with GAAP, recorded as accounts receivable
on the balance sheet of the Company or its Restricted Subsidiaries) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, bonds, notes, debentures or other
similar instruments issued by, such Person and shall include (i) the designation
of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair
market value of the Capital Stock (or any other Investment), held by the Company
or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to
be a Restricted Subsidiary, including without limitation, by reason of any
transaction permitted by clause (iii) of Section 4.06. For purposes of the
definition of "Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall
include the fair market value of the assets (net of liabilities (other than
liabilities to the Company or any of its Subsidiaries)) of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary, (ii) the fair market value of the assets (net of
liabilities (other than liabilities to the Company or any of its Subsidiaries))
of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary shall be considered a reduction in
outstanding Investments and (iii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at its fair market value at the time of
such transfer.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
"Maryland 2 Acquisition" means the acquisition by Dobson Operating Company,
or a Subsidiary thereof, of (a) the FCC license for, and assets relating to, the
Maryland 2 RSA pursuant to the asset purchase agreement among Maryland Wireless
Communications, L.P., Wendy C. Coleman, Dobson Cellular of Maryland, Inc. and
Dobson Operating Company dated
<PAGE>
13
as of September 25, 1996 and (b) approximately 18,700 customers in the
Maryland 2 RSA from Washington Baltimore Cellular Limited Partnership.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary of the Company as a reserve against any
liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of such
issuance or sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary of the Company)
and proceeds from the conversion of other property received when converted to
cash or cash equivalents, net of attorney's fees, accountants' fees,
underwriters' or placement agents' fees, discounts or commissions and brokerage,
consultant and other fees incurred in connection with such issuance or sale and
net of taxes paid or payable as a result thereof.
"Notes" means any of the securities, as defined in the first paragraph of
the recitals hereof, that are authenticated and delivered under this Indenture.
For all purposes of this Indenture, the term "Notes" shall include the Notes
initially issued on the Closing Date, any Exchange Notes to be issued and
exchanged for any Notes pursuant to the Registration Rights Agreement and this
Indenture and any other Notes issued after the Closing Date under this
Indenture. For purposes of this Indenture, all Notes shall vote together as one
series of Notes under this Indenture.
"Non-U.S. Person" means a person who is not a U.S. person, as defined in
Regulation S.
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14
"Offer to Purchase" means an offer by the Company to purchase Notes from
the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and that all
Notes validly tendered will be accepted for payment on a pro rata basis;
(ii) the purchase price and the date of purchase (which shall be a Business Day
no earlier than 30 days nor later than 60 days from the date such notice is
mailed) (the "Payment Date"); (iii) that any Note not tendered will continue to
accrue interest pursuant to its terms; (iv) that, unless the Company defaults in
the payment of the purchase price, any Note accepted for payment pursuant to the
Offer to Purchase shall cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the Offer to
Purchase will be required to surrender the Note, together with the form entitled
"Option of the Holder to Elect Purchase" on the reverse side of the Note
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day immediately preceding the Payment
Date; (vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and (vii) that Holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
of $1,000 or integral multiples thereof. On the Payment Date, the Company shall
(i) accept for payment on a pro rata basis Notes or portions thereof validly
tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Notes or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes
or portions thereof so accepted together with an Officers' Certificate
specifying the Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail to the Holders of Notes so accepted payment
in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Note surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof. The Company will publicly announce the results of an
Offer to Purchase as soon as practicable after the Payment Date. The Trustee
shall act as the Paying Agent for an Offer to Purchase. The Company will comply
with Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable,
in the event that the Company is required to repurchase Notes pursuant to an
Offer to Purchase.
"Officer" means, with respect to the Company, (i) the Chairman of the
Board, the President, any Vice President, the Chief Financial Officer, and (ii)
the Treasurer or any Assistant Treasurer, or the Secretary or any Assistant
Secretary.
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15
"Officers' Certificate" means a certificate signed by one Officer listed in
clause (i) of the definition thereof and one Officer listed in clause (ii) of
the definition thereof or two officers listed in clause (i) of the definition
thereof. Each Officers' Certificate (other than certificates provided pursuant
to TIA Section 314(a)(4)) shall include the statements provided for in TIA
Section 314(e).
"Offshore Global Note" has the meaning provided in Section 2.01.
"Offshore Notes Exchange Date" has the meaning provided in Section 2.01.
"Offshore Physical Notes" has the meaning provided in Section 2.01.
"Opinion of Counsel" means a written opinion signed by legal counsel, who
may be an employee of or counsel to the Company, that meets the requirements of
Section 11.04 hereof. Each such Opinion of Counsel shall include the
statements provided for in TIA Section 314(e).
"Paying Agent" has the meaning provided in Section 2.04, except that, for
the purposes of Article Eight, the Paying Agent shall not be the Company or a
Subsidiary of the Company or an Affiliate of any of them. The term "Paying
Agent" includes any additional Paying Agent.
"Permanent Offshore Global Note" has the meaning provided in Section 2.01.
"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; (ii) Temporary Cash
Investments; (iii) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP; and (iv) stock, obligations or securities received in
satisfaction of judgments.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory and common law Liens of landlords and
carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (iii) Liens incurred or deposits made
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16
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) Liens incurred
or deposits made (including deposits made to the FCC) to secure the
performance of tenders, bids, leases, statutory or regulatory obligations,
bankers' acceptances, surety and appeal bonds, government contracts,
performance and return-of-money bonds and other obligations of a similar
nature incurred in the ordinary course of business (exclusive of obligations
for the payment of borrowed money); (v) easements, rights-of-way, municipal
and zoning ordinances and similar charges, encumbrances, title defects or
other irregularities that do not materially interfere with the ordinary course
of business of the Company or any of its Restricted Subsidiaries; (vi) Liens
(including extensions and renewals thereof) upon real or personal property
acquired after the Closing Date; provided that (a) such Lien is created solely
for the purpose of securing Indebtedness Incurred, in accordance with Section
4.03, (1) to finance the cost (including the cost of design, development,
improvement, construction, installation or integration) of the item of
property or assets subject thereto and such Lien is created prior to, at the
time of or within six months after the later of the acquisition, the
completion of construction or the commencement of full operation of such
property or (2) to refinance any Indebtedness previously so secured, (b) the
principal amount of the Indebtedness secured by such Lien does not exceed 100%
of such cost and (c) any such Lien shall not extend to or cover any property
or assets other than such item of property or assets and any improvements on
such item; (vii) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering property
or assets under construction arising from progress or partial payments by a
customer of the Company or its Restricted Subsidiaries relating to such
property or assets; (ix) any interest or title of a lessor in the property
subject to any Capitalized Lease or operating lease; (x) Liens arising from
filing Uniform Commercial Code financing statements regarding leases; (xi)
Liens on property of, or on shares of Capital Stock or Indebtedness of, any
Person existing at the time such Person becomes, or becomes a part of, any
Restricted Subsidiary; provided that such Liens do not extend to or cover any
property or assets of the Company or any Restricted Subsidiary other than the
property or assets acquired; (xii) Liens in favor of the Company or any
Restricted Subsidiary; (xiii) Liens arising from the rendering of a final
judgment or order against the Company or any Restricted Subsidiary of the
Company that does not give rise to an Event of Default; (xiv) Liens securing
reimbursement obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit and the
products and proceeds thereof; (xv) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (xvi) Liens encumbering customary
initial deposits and margin deposits, and other Liens that are either within
the general parameters customary in the industry and incurred in the ordinary
course of business, in each case, securing Indebtedness under Interest Rate
Agreements and Currency Agreements and forward contracts, options, future
contracts, futures options or similar agreements or arrangements designed
solely to protect the Company or any of its Restricted Subsidiaries from
fluctuations in interest rates, currencies or the price of commodities; (xvii)
Liens arising out of conditional sale, title retention,
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17
consignment or similar arrangements for the sale of goods entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
business in accordance with the past practices of the Company and its
Restricted Subsidiaries prior to the Closing Date; (xviii) Liens on or sales
of receivables; and (xix) Liens on PCS licenses issued by the FCC to secure
obligations in favor of the FCC.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Pledge Account" means an account established with the Trustee pursuant to
the terms of the Escrow and Security Agreement for the deposit of the Pledged
Securities to be purchased by the Company with the net proceeds from the Notes.
"Pledged Securities" means the U.S. Government Obligations to be purchased
by the Company and held in the Pledge Account in accordance with the Escrow and
Security Agreement.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non voting) of such Person's preferred or preference equity, whether
now outstanding or issued after the Closing Date, including, without limitation,
all series and classes of such preferred stock or preference stock.
"principal" of a debt security, including the Notes, means the principal
amount due on the Stated Maturity as shown on such debt security.
"Prior ATTI Assets" means the interests in Fort Mojave Telecommunications
Inc., FMTV Cable Television Company and Saginaw Chippewa Telecommunications
Joint Venture, to be sold by ATTI prior to or in connection with the acquisition
of ATTI by Dobson Operating Company or a Subsidiary thereof.
"Private Placement Legend" means the legend initially set forth on the
Notes in the form set forth in Section 2.02.
"Public Equity Offering" means an underwritten primary public offering of
Common Stock of the Company pursuant to an effective registration statement
under the Securities Act.
A "Public Market" shall be deemed to exist if (i) a Public Equity Offering
has been consummated and (ii) at least 15% of the total issued and outstanding
Common Stock of the
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18
Company has been distributed by means of an effective registration statement
under the Securities Act or sales pursuant to Rule 144 under the Securities
Act.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Redemption Date" means, when used with respect to any Note to be redeemed,
the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price" means, when used with respect to any Note to be
redeemed, the price at which such Note is to be redeemed pursuant to this
Indenture.
"Registrar" has the meaning provided in Section 2.04.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated February 25, 1997, between the Company and Morgan Stanley & Co.
Incorporated, Alex. Brown & Sons Incorporated, First Union Capital Markets Corp.
and NationsBanc Capital Markets, Inc., and certain permitted assigns specified
therein.
"Registration Statement" means the Registration Statement as defined and
described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the April 1 or October 1 (whether or not a Business Day), as the case may
be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Reorganization" means the corporate reorganization, to be effected with
the approval of the FCC, pursuant to which the Company will become the holding
company parent of Dobson Operating Company.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice chairman of the board of directors, the chairman or any
vice chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, any assistant vice
president, the secretary, any assistant secretary, the treasurer, any assistant
treasurer, the cashier, any assistant cashier, any trust officer or assistant
trust officer, the controller or any assistant controller or any other officer
of the Trustee in its Corporate Trust Department having direct responsibility
for the administration of this Indenture or the Escrow and Security Agreement
and also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his or her knowledge of and
familiarity with the particular subject.
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19
"Restricted Payments" has the meaning provided in Section 4.04.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the Securities Act of 1933.
"Security Register" has the meaning provided in Section 2.04.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary that, together with its Subsidiaries, (i) for the most
recent fiscal year of the Company, accounted for more than 10% of the
consolidated revenues of the Company and its Restricted Subsidiaries or (ii) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"Special Redemption" means a redemption of the Notes in whole pursuant to
Section 3.01(c).
"Special Repurchase Offer" means an Offer to Purchase $60 million principal
amount of the Notes made pursuant to Section 4.20.
"S&P" means Standard & Poor's Ratings Service and its successors.
"Stated Maturity" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.
"Subsidiary Guarantee" has the meaning provided in Section 4.07.
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20
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and unconditionally guaranteed by the United States of America or any
agency thereof, (ii) time deposit accounts, certificates of deposit and money
market deposits maturing within 180 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, any state thereof or any foreign country recognized by
the United States, and which bank or trust company has capital, surplus and
undivided profits aggregating in excess of $50 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally recognized statistical
rating organization (as defined in Rule 436 under the Securities Act) or any
money-market fund sponsored by a registered broker dealer or mutual fund
distributor, (iii) repurchase obligations with a term of not more than 30 days
for underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) commercial paper, maturing not more than 90 days after the date of
acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America, any
state thereof or any foreign country recognized by 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 or "A-1" (or higher) according to S&P, and
(v) securities with maturities of six months or less from the date of
acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by S&P or
Moody's.
"Temporary Offshore Global Note" has the meaning provided in Section 2.01.
"Term Loan" means the $6 million of indebtedness of the Trusts under the
Existing Credit Agreement as in effect on the Closing Date.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act of 1939, (15
U.S. Code Sections 77aaa-77bbbb), as in effect on the date this Indenture was
executed, except as provided in Section 9.06.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date such
Indebtedness is to be Incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
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21
"Trustee" means the party named as such in the first paragraph of this
Indenture until a successor replaces it in accordance with the provisions of
Article Seven of this Indenture and thereafter means such successor.
"Trusts" means, collectively, the Everett R. Dobson Irrevocable Family
Trust, Stephen T. Dobson Irrevocable Family Trust and Robbin L. Dobson
Irrevocable Family Trust.
"United States Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended and as codified in Title 11 of the United States Code, as amended from
time to time hereafter, or any successor federal bankruptcy law.
"U.S. Global Note" has the meaning provided in Section 2.01.
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; PROVIDED that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"U.S. Physical Notes" has the meaning provided in Section 2.01.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; provided that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than
$1,000, such
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22
designation would be permitted under Section 4.04 and (C) if applicable, the
Incurrence of Indebtedness and the Investment referred to in clause (A) of
this proviso would be permitted under Section 4.03 and Section 4.04. The Board
of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that immediately after giving effect to such designation
(x) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately after such designation would, if Incurred at such time, have been
permitted to be incurred for all purposes of this Indenture and (y) no Default
or Event of Default shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Trustee by
promptly providing the Trustee a copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
SECTION 1.02. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder or a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the indenture securities means the Company or any other
obligor on the Notes.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
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23
SECTION 1.03. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words in the plural
include the singular;
(v) provisions apply to successive events and transactions;
(vi) "herein," "hereof" and other words of similar import refer to
this Indenture as a whole and not to any particular Article, Section or
other subdivision;
(vii) all ratios and computations based on GAAP contained in this
Indenture shall be computed in accordance with the definition of GAAP set
forth in Section 1.01; and
(viii) all references to Sections or Articles refer to Sections or
Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE NOTES
SECTION 2.01. FORM AND DATING. The Notes and the Trustee's
certificate of authentication shall be substantially in the form annexed hereto
as Exhibit A with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture. The Notes may
have notations, legends or endorsements required by law, stock exchange
agreements to which the Company is subject or usage. The Company shall approve
the form of the Notes and any notation, legend or endorsement on the Notes.
Each Note shall be dated the date of its authentication.
The terms and provisions contained in the form of the Notes annexed
hereto as Exhibit A shall constitute, and are hereby expressly made, a part of
this Indenture. To the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby.
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24
Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of a single permanent global Note in registered form,
substantially in the form set forth in Exhibit A (the "U.S. GLOBAL NOTE"),
registered in the name of the nominee of the Depositary, deposited with the
Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the U.S. Global Note may from time to time be increased or decreased
by adjustments made on the records of the Trustee, as custodian for the
Depositary or its nominee, in accordance with the instructions given by the
Holder thereof, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of a single temporary global
Note in registered form substantially in the form set forth in Exhibit A (the
"TEMPORARY OFFSHORE GLOBAL NOTE"), registered in the name of the nominee of the
Depositary, deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. At any time following April 9, 1997 (the "OFFSHORE NOTES EXCHANGE
DATE"), upon receipt by the Trustee and the Company of a certificate
substantially in the form of Exhibit B hereto, a single permanent global Note in
registered form substantially in the form set forth in Exhibit A (the "PERMANENT
OFFSHORE GLOBAL NOTE"; and together with the Temporary Offshore Global Note, the
"OFFSHORE GLOBAL NOTES") duly executed by the Company and authenticated by the
Trustee as hereinafter provided shall be deposited with the Trustee, as
custodian for the Depositary, and the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the Temporary
Offshore Global Note in an amount equal to the principal amount of the
beneficial interest in the Temporary Offshore Global Note transferred.
Notes offered and sold in reliance on Regulation D under the
Securities Act shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "U.S.
PHYSICAL NOTES"). Notes issued pursuant to Section 2.07 in exchange for
interests in the Offshore Global Note shall be in the form of permanent
certificated Notes in registered form substantially in the form set forth in
Exhibit A (the "OFFSHORE PHYSICAL NOTES").
The Offshore Physical Notes and U.S. Physical Notes are sometimes
collectively herein referred to as the "PHYSICAL NOTES". The U.S. Global Note
and the Offshore Global Note are sometimes referred to herein as the "GLOBAL
NOTES".
The definitive Notes shall be typed, printed, lithographed or engraved
or produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Notes may
be listed, all as determined by the Officers executing such Notes, as evidenced
by their execution of such Notes.
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25
SECTION 2.02. RESTRICTIVE LEGENDS. Unless and until a Note is
exchanged for an Exchange Note in connection with an effective Registration
pursuant to the Registration Rights Agreement, the U.S. Global Note, Temporary
Offshore Global Note and each U.S. Physical Note shall bear the following legend
on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT ON THE
DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT,
(C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL
AMOUNT OF NOTES OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT,
(D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE TIME PERIOD REFERRED
TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE
<PAGE>
26
MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Note, whether or not an Exchange Note, shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY
(AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTION 2.08 OF THE INDENTURE.
SECTION 2.03. EXECUTION, AUTHENTICATION AND DENOMINATIONS. Subject
to Article Four, the aggregate principal amount of Notes which may be
authenticated and delivered under
<PAGE>
27
this Indenture is unlimited. The Notes shall be executed by two Officers of
the Company. The signature of these Officers on the Notes may be by
facsimile or manual signature in the name and on behalf of the Company.
If an Officer whose signature is on a Note no longer holds that office
at the time the Trustee or authenticating agent authenticates the Note, the Note
shall be valid nevertheless.
A Note shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on the Note. The signature
shall be conclusive evidence that the Note has been authenticated under this
Indenture.
At any time and from time to time after the execution of this
Indenture, the Trustee or an authenticating agent shall upon receipt of a
Company Order authenticate for original issue Notes in the aggregate principal
amount specified in such Company Order; PROVIDED that the Trustee shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel of the
Company in connection with such authentication of Notes. Such Company Order
shall specify the amount of Notes to be authenticated and the date on which the
original issue of Notes is to be authenticated and in case of an issuance of
Notes pursuant to Section 2.15, shall certify that such issuance is in
compliance with Article Four.
The Trustee may appoint an authenticating agent to authenticate Notes.
An authenticating agent may authenticate Notes whenever the Trustee may do so.
Each reference in this Indenture to authentication by the Trustee includes
authentication by such authenticating agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the Company.
The Trustee shall not be liable for the misconduct or negligence of any
authenticating agent appointed with due care.
The Notes shall be issuable only in registered form without coupons
and only in denominations of $1,000 in principal amount and any integral
multiple of $1,000 in excess thereof.
SECTION 2.04. REGISTRAR AND PAYING AGENT. The Company shall maintain
an office or agency where Notes may be presented for registration of transfer or
for exchange (the "REGISTRAR"), an office or agency where Notes may be presented
for payment (the "PAYING AGENT") and an office or agency where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served, which shall be in the Borough of Manhattan, the City of New York. The
Company shall cause the Registrar to keep a register of the Notes and of their
transfer and exchange (the "SECURITY REGISTER"). The Company may have one or
more co-Registrars and one or more additional Paying Agents.
<PAGE>
28
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall give
prompt written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Company fails to maintain a
Registrar, Paying Agent and/or agent for service of notices and demands, the
Trustee shall act as such Registrar, Paying Agent and/or agent for service of
notices and demands. The Company may remove any Agent upon written notice to
such Agent and the Trustee; PROVIDED that no such removal shall become effective
until (i) the acceptance of an appointment by a successor Agent to such Agent as
evidenced by an appropriate agency agreement entered into by the Company and
such successor Agent and delivered to the Trustee or (ii) notification to the
Trustee that the Trustee shall serve as such Agent until the appointment of a
successor Agent in accordance with clause (i) of this proviso. The Company, any
Subsidiary of the Company, or any Affiliate of any of them may act as Paying
Agent, Registrar or co-Registrar, and/or agent for service of notice and
demands.
The Company initially appoints the Trustee as Registrar, Paying Agent,
authenticating agent and agent for service of notice and demands. The Trustee
shall preserve in as current a form as is reasonably practicable the most recent
list available to it of the names and addresses of Holders and shall otherwise
comply with TIA Section 312(a). If the Trustee is not the Registrar, the
Company shall furnish to the Trustee as of each Regular Record Date and at such
other times as the Trustee may request in writing a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
Holders, including the aggregate principal amount of Notes held by each Holder.
SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST. Not later than
11:00 a.m. (New York City time) each due date of the principal, premium, if any,
and interest on any Notes, the Company shall deposit with the Paying Agent money
in immediately available funds sufficient to pay such principal, premium, if
any, and interest so becoming due. The Company shall require each Paying Agent
other than the Trustee to agree in writing that such Paying Agent shall hold in
trust for the benefit of the Holders or the Trustee all money held by the Paying
Agent for the payment of principal of, premium, if any, and interest on the
Notes (whether such money has been paid to it by the Company or any other
obligor on the Notes), and such Paying Agent shall promptly notify the Trustee
of any default by the Company (or any other obligor on the Notes) in making any
such payment. The Company at any time may require a Paying Agent to pay all
money held by it to the Trustee and account for any funds disbursed, and the
Trustee may at any time during the continuance of any payment default, upon
written request to a Paying Agent, require such Paying Agent to pay all money
held by it to the Trustee and to account for any funds disbursed. Upon doing
so, the Paying Agent shall have no further liability for the money so paid over
to the Trustee. If the Company or any Subsidiary of the Company or any
Affiliate of any of them acts as Paying Agent, it will, on or before each due
date of any principal of, premium,
<PAGE>
29
if any, or interest on the Notes, segregate and hold in a separate trust fund
for the benefit of the Holders a sum of money sufficient to pay such principal,
premium, if any, or interest so becoming due until such sum of money shall be
paid to such Holders or otherwise disposed of as provided in this Indenture,
and will promptly notify the Trustee of its action or failure to act.
SECTION 2.06. TRANSFER AND EXCHANGE. The Notes are issuable only in
registered form. A Holder may transfer a Note only by written application to
the Registrar stating the name of the proposed transferee and otherwise
complying with the terms of this Indenture. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Registrar in the
Security Register. Prior to the registration of any transfer by a Holder as
provided herein, the Company, the Trustee, and any agent of the Company shall
treat the person in whose name the Note is registered as the owner thereof for
all purposes whether or not the Note shall be overdue, and neither the Company,
the Trustee, nor any such agent shall be affected by notice to the contrary.
Furthermore, any Holder of a Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent) and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry. When Notes are
presented to the Registrar or a co-Registrar with a request to register the
transfer or to exchange them for an equal principal amount of Notes of other
authorized denominations (including an exchange of Notes for Exchange Notes),
the Registrar shall register the transfer or make the exchange as requested if
its requirements for such transactions are met (including that such Notes are
duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Trustee and Registrar duly executed by the Holder thereof or
by an attorney who is authorized in writing to act on behalf of the Holder);
PROVIDED that no exchanges of Notes for Exchange Notes shall occur until a
Registration Statement shall have been declared effective by the Commission and
that any Notes that are exchanged for Exchange Notes shall be cancelled by the
Trustee. To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Notes at the Registrar's request. No
service charge shall be made for any registration of transfer or exchange or
redemption of the Notes, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other similar governmental
charge payable upon exchanges pursuant to Section 2.11, 3.08 or 9.04).
The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Notes selected for redemption under Section 3.03 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
<PAGE>
30
SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES. (a) The U.S.
Global Note and Offshore Global Note initially shall (i) be registered in the
name of the Depositary for such Global Notes or the nominee of such Depositary,
(ii) be delivered to the Trustee as custodian for such Depositary and (iii) bear
legends as set forth in Section 2.02.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Note, and the Depositary may be treated by the Company, the Trustee and
any agent of the Company or the Trustee as the absolute owner of such Global
Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Trustee or any agent of the Company or the
Trustee, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note. Neither the Company nor the
Trustee shall be liable for any delay by the Depositary in identifying the
beneficial owners of the Notes and the Company and the Trustee may conclusively
rely on, and shall be protected in relying on, instructions from the Depositary
for all purposes (including with respect to the registration and delivery, and
the respective principal amounts, of any Notes to be issued).
(b) Transfers of a Global Note shall be limited to transfers of such
Global Note in whole, but not in part, to the Depositary, its successors or
their respective nominees. Interests of beneficial owners in a Global Note may
be transferred in accordance with the rules and procedures of the Depositary and
the provisions of Section 2.08. In addition, U.S. Physical Notes and Offshore
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in the U.S. Global Note or the Offshore Global Note,
respectively, if (i) the Depositary notifies the Company that it is unwilling or
unable to continue as Depositary for the U.S. Global Note or the Offshore Global
Note, as the case may be, and a successor depositary is not appointed by the
Company within 90 days of such notice, (ii) an Event of Default has occurred and
is continuing and the Registrar has received a request from the Depositary or
(iii) in accordance with the rules and procedures of the Depositary and the
provisions of Section 2.08.
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(d) In connection with any transfer of a portion of the beneficial
interests in the U.S. Global Note to beneficial owners pursuant to paragraph (b)
of this Section, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of the U.S.
<PAGE>
31
Global Note in an amount equal to the principal amount of the beneficial
interest in the U.S. Global Note to be transferred, and the Company shall
execute, and the Trustee shall authenticate and deliver, one or more U.S.
Physical Notes of like tenor and amount.
(e) In connection with the transfer of the entire U.S. Global Note or
Offshore Global Note to beneficial owners pursuant to paragraph (b) of this
Section, the U.S. Global Note or Offshore Global Note, as the case may be, shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the U.S. Global Note or Offshore Global Note, as the case may be, an
equal aggregate principal amount of U.S. Physical Notes or Offshore Physical
Notes, as the case may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an interest in
the U.S. Global Note pursuant to paragraph (b) or (d) of this Section shall,
except as otherwise provided by paragraph (f) of Section 2.08, bear the legend
regarding transfer restrictions applicable to the U.S. Physical Note set forth
in Section 2.02.
(g) Any Offshore Physical Note delivered in exchange for an interest
in the Offshore Global Note pursuant to paragraph (b) of this Section shall,
except as otherwise provided by paragraph (f) of Section 2.08, bear the legend
regarding transfer restrictions applicable to the Offshore Physical Note set
forth in Section 2.02.
(h) The registered holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
SECTION 2.08. SPECIAL TRANSFER PROVISIONS. Unless and until a Note
is exchanged for an Exchange Note in connection with an effective Registration
pursuant to the Registration Rights Agreement, the following provisions shall
apply:
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The
following provisions shall apply with respect to the registration of any
proposed transfer of a Note to any Institutional Accredited Investor which is
not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Note, whether or
not such Note bears the Private Placement Legend, if (x) the requested
transfer is after the time period referred to in Rule 144(k) under the
Securities Act or (y) the proposed transferee has delivered to the
Registrar (A) a certificate substantially in the form of Exhibit C hereto
and (B) if the aggregate principal amount of the Notes being transferred is
less than
<PAGE>
32
$100,000, an opinion of counsel acceptable to the Company that such
transfer is in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Note, upon receipt by the Registrar
of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of the U.S. Global Note in an amount
equal to the principal amount of the beneficial interest in the U.S. Global
Note to be transferred, and the Company shall execute, and the Trustee
shall authenticate and deliver, one or more U.S. Physical Notes of like
tenor and amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of a U.S. Physical Note or
an interest in the U.S. Global Note to a QIB (excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of (x) U.S. Physical
Notes, the Registrar shall register the transfer if such transfer is being
made by a proposed transferor who has checked the box provided for on the
form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A or (y) an
interest in the U.S. Global Note, the transfer of such interest may be
effected only through the book entry system maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and the Note to be
transferred consists of U.S. Physical Notes, upon receipt by the Registrar
of the documents referred to in clause (i) and instructions given in
accordance with the Depositary's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and an increase
in the principal amount of the U.S. Global Note in an amount equal to the
principal amount of the U.S. Physical Notes, to be transferred, and the
Trustee shall cancel the U.S. Physical Note so transferred.
<PAGE>
33
(c) TRANSFERS OF INTERESTS IN THE TEMPORARY OFFSHORE GLOBAL NOTE.
The following provisions shall apply with respect to registration of any
proposed transfer of interests in the Temporary Offshore Global Note:
(i) The Registrar shall register the transfer of any Note (x) if the
proposed transferee is a Non-U.S. Person and the proposed transferor has
delivered to the Registrar a certificate substantially in the form of
Exhibit D hereto or (y) if the proposed transferee is a QIB and the
proposed transferor has checked the box provided for on the form of Note
stating, or has otherwise advised the Company and the Registrar in writing,
that the sale has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided for on the form
of Note stating, or has otherwise advised the Company and the Registrar in
writing, that it is purchasing the Note for its own account or an account
with respect to which it exercises sole investment discretion and that it
and any such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges
that it has received such information regarding the Company as it has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Registrar of the documents referred to in clause (i)(y) above and
instructions given in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date
and an increase in the principal amount of the U.S. Global Note, in an
amount equal to the principal amount of the Temporary Offshore Global Note
to be transferred, and the Trustee shall decrease the amount of the
Temporary Offshore Global Note.
(d) TRANSFERS OF INTERESTS IN THE PERMANENT OFFSHORE GLOBAL NOTE OR
OFFSHORE PHYSICAL NOTES TO U.S. PERSONS. The following provisions shall apply
with respect to any transfer of interests in the Permanent Offshore Global Note
or Offshore Physical Notes to U.S. Persons: The Registrar shall register the
transfer of any such Note without requiring any additional certification.
(e) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following
provisions shall apply with respect to any transfer of a Note to a Non-U.S.
Person:
(i) Prior to April 9, 1997, the Registrar shall register any proposed
transfer of a Note to a Non-U.S. Person upon receipt of a certificate
substantially in the form of Exhibit D hereto from the proposed transferor.
<PAGE>
34
(ii) On and after April 9, 1997, the Registrar shall register any
proposed transfer to any Non-U.S. Person if the Note to be transferred is a
U.S. Physical Note or an interest in the U.S. Global Note, upon receipt of
a certificate substantially in the form of Exhibit D from the proposed
transferor.
(iii) (a) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Note, upon receipt by the Registrar
of (x) the documents, if any, required by paragraph (ii) and (y)
instructions in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the date
and a decrease in the principal amount of the U.S. Global Note in an amount
equal to the principal amount of the beneficial interest in the U.S. Global
Note to be transferred, and (b) if the proposed transferee is an Agent
Member, upon receipt by the Registrar of instructions given in accordance
with the Depositary's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the principal
amount of the Offshore Global Note in an amount equal to the principal
amount of the U.S. Physical Notes or the U.S. Global Note, as the case may
be, to be transferred, and the Trustee shall cancel the Physical Note, if
any, so transferred or decrease the amount of the U.S. Global Note.
(f) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Notes not bearing the Private Placement Legend, the Registrar
shall deliver Notes that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Notes bearing the Private Placement Legend,
the Registrar shall deliver only Notes that bear the Private Placement Legend
unless either (i) the circumstances contemplated by the fourth paragraph of
Section 2.01 or paragraphs (a)(i)(x) or (e)(ii) of this Section 2.08 exist or
(ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(g) GENERAL. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such a Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture. The Registrar shall not register a transfer of any Note unless such
transfer complies with the restrictions on transfer of such Note set forth in
this Indenture. In connection with any transfer of Notes, each Holder agrees by
its acceptance of the Notes to furnish the Registrar or the Company such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act; PROVIDED that the Registrar shall not be required to
determine (but may rely on a determination made by the Company with respect to)
the sufficiency of any such certifications, legal opinions or other information.
<PAGE>
35
The Registrar shall retain copies of all letters, notices and other
written communications received pursuant to Section 2.07 or this Section 2.08.
The Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the Registrar.
SECTION 2.09. REPLACEMENT NOTES. If a mutilated Note is surrendered
to the Trustee or if the Holder claims that the Note has been lost, destroyed or
wrongfully taken, the Company shall issue and the Trustee shall authenticate a
replacement Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding; PROVIDED that the requirements of the second
paragraph of Section 2.10 are met. If required by the Trustee or the Company,
an indemnity bond must be furnished that is sufficient in the judgment of both
the Trustee and the Company to protect the Company, the Trustee or any Agent
from any loss that any of them may suffer if a Note is replaced. The Company
may charge such Holder for its expenses and the expenses of the Trustee in
replacing a Note. In case any such mutilated, lost, destroyed or wrongfully
taken Note has become or is about to become due and payable, the Company in its
discretion may pay such Note instead of issuing a new Note in replacement
thereof.
Every replacement Note is an additional obligation of the Company and
shall be entitled to the benefits of this Indenture.
SECTION 2.10. OUTSTANDING NOTES. Notes outstanding at any time are
all Notes that have been authenticated by the Trustee except for those cancelled
by it, those delivered to it for cancellation and those described in this
Section 2.10 as not outstanding.
If a Note is replaced pursuant to Section 2.09, it ceases to be
outstanding unless and until the Trustee and the Company receive proof
satisfactory to them that the replaced Note is held by a BONA FIDE purchaser.
If the Paying Agent (other than the Company or an Affiliate of the
Company) holds on the maturity date money sufficient to pay Notes payable on
that date, then on and after that date such Notes cease to be outstanding and
interest on them shall cease to accrue.
A Note does not cease to be outstanding because the Company or one of
its Affiliates holds such Note, PROVIDED, HOWEVER, that, in determining whether
the Holders of the requisite principal amount of the outstanding Notes have
given any request, demand, authorization, direction, notice, consent or waiver
hereunder, Notes owned by the Company or any other obligor upon the Notes or any
Affiliate of the Company or of such other obligor shall be disregarded and
deemed not to be outstanding, except that, in determining whether the Trustee
shall be protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver, only Notes which the Trustee knows to be
so owned shall be so disregarded.
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36
Notes so owned which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Notes and that the pledgee is
not the Company or any other obligor upon the Notes or any Affiliate of the
Company or of such other obligor.
SECTION 2.11. TEMPORARY NOTES. Until definitive Notes are ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Notes. Temporary Notes shall be substantially in the form of definitive Notes
but may have insertions, substitutions, omissions and other variations
determined to be appropriate by the Officers executing the temporary Notes, as
evidenced by their execution of such temporary Notes. If temporary Notes are
issued, the Company will cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes, the temporary
Notes shall be exchangeable for definitive Notes upon surrender of the temporary
Notes at the office or agency of the Company designated for such purpose
pursuant to Section 4.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes the Company shall execute and
the Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Notes of authorized denominations. Until so exchanged, the
temporary Notes shall be entitled to the same benefits under this Indenture as
definitive Notes.
SECTION 2.12. CANCELLATION. The Company at any time may deliver to
the Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
deliver to the Trustee for cancellation any Notes previously authenticated
hereunder which the Company has not issued and sold. The Registrar and the
Paying Agent shall forward to the Trustee any Notes surrendered to them for
transfer, exchange or payment. The Trustee shall cancel all Notes surrendered
for transfer, exchange, payment or cancellation and shall destroy them in
accordance with its normal procedure. Except as expressly permitted by this
Indenture, the Company may not issue new Notes to replace Notes it has paid in
full or delivered to the Trustee for cancellation.
SECTION 2.13. CUSIP NUMBERS. The Company in issuing the Notes may
use "CUSIP", "CINS" or "ISIN" numbers (if then generally in use), and the
Trustee shall use CUSIP, CINS or ISIN numbers, as the case may be, in notices of
redemption or exchange as a convenience to Holders; PROVIDED that any such
notice shall state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of
redemption or exchange and that reliance may be placed only on the other
identification numbers printed on the Notes. The Company will promptly notify
the Trustee of any change in "CUSIP", "CINS" or "ISIN" numbers for the Notes.
SECTION 2.14. DEFAULTED INTEREST. If the Company defaults in a
payment of interest on the Notes, it shall pay, or shall deposit with the Paying
Agent money in immediately available funds sufficient to pay the defaulted
interest, plus (to the extent lawful) any interest
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37
payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date. A special record date, as used in this
Section 2.14 with respect to the payment of any defaulted interest, shall
mean the 15th day next preceding the date fixed by the Company for the
payment of defaulted interest, whether or not such day is a Business Day. At
least 15 days before the subsequent special record date, the Company shall
mail to each Holder and to the Trustee a notice that states the subsequent
special record date, the payment date and the amount of defaulted interest to
be paid.
SECTION 2.15. ISSUANCE OF ADDITIONAL NOTES. The Company may, subject to
Article Four of this Indenture, issue additional Notes under this Indenture.
The Notes issued on the Closing Date and any additional Notes subsequently
issued shall be treated as a single class for all purposes under this Indenture.
ARTICLE THREE
REDEMPTION
SECTION 3.01. RIGHT OF REDEMPTION; MANDATORY REDEMPTION. (a) The Notes
may be redeemed at the election of the Company, in whole or in part, at any time
and from time to time on or after April 15, 2002 and prior to maturity, upon not
less than 30 nor more than 60 days' prior notice mailed by first-class mail to
each Holder's last address as it appears in the Security Register, at the
following Redemption Prices (expressed in percentages of their principal
amount), plus accrued and unpaid interest, if any, to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
that is on or prior to the Redemption Date to receive interest due on an
Interest Payment Date) if redeemed during the 12-month period commencing on
April 15 of the applicable year set forth below:
REDEMPTION
YEAR PRICE
---- ----------
2002 105.8750%
2003 102.9375
2004 and thereafter 100.000
(b) At any time prior to April 15, 2000, the Company may redeem up to 35%
of the aggregate principal amount of the Notes with the Net Cash Proceeds from
one or more sales of Capital Stock of the Company (other than Disqualified
Stock), at any time as a whole or from time to time in part, upon not less than
30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's last address as it appears in the Security Register, at a Redemption
Price (expressed in percentages of their principal amount) of 111.750%, plus
accrued and unpaid interest to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date that is on or prior to the
Redemption Date to receive interest due on an Interest Payment Date); provided
that at least $104,000,000 aggregate principal amount of Notes remains
outstanding after each such redemption.
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38
(c) In the event neither the Maryland 2 Acquisition nor the Horizon
Properties Acquisition is consummated prior to March 31, 1997, the Company shall
redeem the Notes in whole, on 10 days' prior notice mailed by first class mail
to each Holder's last address as it appears in the Security Register, at a
Redemption Price (expressed in percentages of their principal amount) of 101%,
plus accrued and unpaid interest to the Redemption Date.
SECTION 3.02. NOTICES TO TRUSTEE. If the Company elects to redeem Notes
pursuant to Section 3.01(a) or (b), it shall notify the Trustee in writing of
the Redemption Date and the principal amount of Notes to be redeemed.
The Company shall give each notice provided for in this Section 3.02 in an
Officers' Certificate at least 45 days before the Redemption Date (unless a
shorter period shall be satisfactory to the Trustee).
SECTION 3.03. SELECTION OF NOTES TO BE REDEEMED. If less than all of the
Notes are to be redeemed at any time, the Trustee shall select the Notes to be
redeemed in compliance with the requirements, as certified to it by the Company,
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange, on a
pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem fair and appropriate; PROVIDED that no Notes of $1,000 in
principal amount or less shall be redeemed in part.
The Trustee shall make the selection from the Notes outstanding and not
previously called for redemption. Notes in denominations of $1,000 in principal
amount may only be redeemed in whole. The Trustee may select for redemption
portions (equal to $1,000 in principal amount or any integral multiple thereof)
of Notes that have denominations larger than $1,000 in principal amount.
Provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption. The Trustee shall notify the
Company and the Registrar promptly in writing of the Notes or portions of Notes
to be called for redemption.
SECTION 3.04. NOTICE OF REDEMPTION. With respect to any redemption of
Notes pursuant to Section 3.01(a) or (b), at least 30 days but not more than 60
days before a Redemption Date, and with respect to a redemption of Notes
pursuant to Section 3.01(c), at least 10 days before the Redemption Date, the
Company shall mail a notice of redemption by first class mail to each Holder
whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
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39
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered to the
Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date and the only remaining right of the Holders is to
receive payment of the Redemption Price plus accrued interest to the
Redemption Date upon surrender of the Notes to the Paying Agent;
(vi) that, if any Note is being redeemed in part, the portion of the
principal amount (equal to $1,000 in principal amount or any integral
multiple thereof) of such Note to be redeemed and that, on and after the
Redemption Date, upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion thereof will be reissued;
and
(vii) that, if any Note contains a CUSIP, CINS or ISIN number as
provided in Section 2.13, no representation is being made as to the
correctness of the CUSIP, CINS or ISIN number either as printed on the
Notes or as contained in the notice of redemption and that reliance may be
placed only on the other identification numbers printed on the Notes.
At the Company's request (which request may be revoked by the Company at
any time prior to the time at which the Trustee shall have given such notice to
the Holders), made in writing to the Trustee at least 45 days (or such shorter
period as shall be satisfactory to the Trustee) before a Redemption Date, the
Trustee shall give the notice of redemption in the name and at the expense of
the Company. If, however, the Company gives such notice to the Holders, the
Company shall concurrently deliver to the Trustee an Officers' Certificate
stating that such notice has been given.
SECTION 3.05. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption
is mailed, Notes called for redemption become due and payable on the Redemption
Date and at the Redemption Price. Upon surrender of any Notes to the Paying
Agent, such Notes shall be paid at the Redemption Price, plus accrued interest,
if any, to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed, whether or
not the Holder receives the notice. In any event, failure to give such notice,
or any defect therein, shall not affect the validity of the proceedings for the
redemption of Notes held by Holders to whom such notice was properly given.
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40
SECTION 3.06. DEPOSIT OF REDEMPTION PRICE. On or prior to any Redemption
Date, the Company shall deposit with the Paying Agent (or, if the Company is
acting as its own Paying Agent, shall segregate and hold in trust as provided in
Section 2.05) money sufficient to pay the Redemption Price of and accrued
interest on all Notes to be redeemed on that date other than Notes or portions
thereof called for redemption on that date that have been delivered by the
Company to the Trustee for cancellation.
SECTION 3.07. PAYMENT OF NOTES CALLED FOR REDEMPTION. If notice of
redemption has been given in the manner provided above, the Notes or portion of
Notes specified in such notice to be redeemed shall become due and payable on
the Redemption Date at the Redemption Price stated therein, together with
accrued interest to such Redemption Date, and on and after such date (unless the
Company shall default in the payment of such Notes at the Redemption Price and
accrued interest to the Redemption Date, in which case the principal, until
paid, shall bear interest from the Redemption Date at the rate prescribed in the
Notes), such Notes shall cease to accrue interest. Upon surrender of any Note
for redemption in accordance with a notice of redemption, such Note shall be
paid and redeemed by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date; PROVIDED that installments of interest
whose Stated Maturity is on or prior to the Redemption Date shall be payable to
the Holders registered as such at the close of business on the relevant Regular
Record Date.
SECTION 3.08. NOTES REDEEMED IN PART. Upon surrender of any Note that is
redeemed in part, the Company shall execute and the Trustee shall authenticate
and deliver to the Holder a new Note equal in principal amount to the unredeemed
portion of such surrendered Note.
ARTICLE FOUR
COVENANTS
SECTION 4.01. PAYMENT OF NOTES. The Company shall pay the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes and this Indenture. An installment of principal, premium,
if any, or interest shall be considered paid on the date due if the Trustee or
Paying Agent (other than the Company, a Subsidiary of the Company, or any
Affiliate of any of them) holds on that date money designated for and sufficient
to pay the installment. If the Company or any Subsidiary of the Company or any
Affiliate of any of them, acts as Paying Agent, an installment of principal,
premium, if any, or interest shall be considered paid on the due date if the
entity acting as Paying Agent complies with the last sentence of Section 2.05.
As provided in Section 6.09, upon any bankruptcy or reorganization procedure
relative to the Company, the Trustee shall serve as the Paying Agent, if any,
for the Notes.
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41
The Company shall pay interest on overdue principal, premium, if any, and
interest on overdue installments of interest, to the extent lawful, at the rate
per annum specified in the Notes.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain
in the Borough of Manhattan, The City of New York an office or agency where
Notes may be surrendered for registration of transfer or exchange or for
presentation for payment and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 11.02.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; PROVIDED that no
such designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York for such purposes. The Company will give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
The Company hereby initially designates the Corporate Trust Office of the
Trustee as such office of the Company in accordance with Section 2.04.
SECTION 4.03. LIMITATION ON INDEBTEDNESS. (a) The Company will not, and
will not permit any of its Restricted Subsidiaries to, Incur any Indebtedness
(other than the Notes and Indebtedness existing on the Closing Date); provided
that the Company may Incur Indebtedness, and any Restricted Subsidiary may Incur
Acquired Indebtedness, if, after giving effect to the Incurrence of such
Indebtedness and the receipt and application of the proceeds therefrom, the
Consolidated Leverage Ratio would be less than 8 to 1, for Indebtedness Incurred
on or prior to December 31, 1998, or 7 to 1, for Indebtedness Incurred
thereafter.
Notwithstanding the foregoing, the Company and any Restricted Subsidiary
(except as specified below) may Incur each and all of the following:
(i) Indebtedness outstanding at any time in an aggregate principal amount not to
exceed $250 million, less any amount of such Indebtedness permanently repaid as
provided under Section 4.10; (ii) Indebtedness (A) to the Company evidenced by
an unsubordinated promissory note or (B) to any of its Restricted Subsidiaries;
provided that any event which results in any such Restricted Subsidiary ceasing
to be a Restricted Subsidiary or any subsequent transfer of such Indebtedness
(other than to the Company or another Restricted Subsidiary) shall be deemed, in
each case, to constitute an Incurrence of such Indebtedness not permitted by
this clause (ii); (iii) Indebtedness issued in
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42
exchange for, or the net proceeds of which are used to refinance or refund,
then outstanding Indebtedness, other than Indebtedness Incurred under clause
(i), (ii), (iv), (vi) or (ix) of this paragraph, and any refinancings thereof
in an amount not to exceed the amount so refinanced or refunded (plus
premiums, accrued interest, fees and expenses); provided that Indebtedness
the proceeds of which are used to refinance or refund the Notes or
Indebtedness that is pari passu with, or subordinated in right of payment to,
the Notes shall only be permitted under this clause (iii) if (A) in case the
Notes are refinanced in part or the Indebtedness to be refinanced is pari
passu with the Notes, such new Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such new Indebtedness is
outstanding, is expressly made pari passu with, or subordinate in right of
payment to, the remaining Notes, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding, is
expressly made subordinate in right of payment to the Notes at least to the
extent that the Indebtedness to be refinanced is subordinated to the Notes
and (C) such new Indebtedness, determined as of the date of Incurrence of
such new Indebtedness, does not mature prior to the Stated Maturity of the
Indebtedness to be refinanced or refunded, and the Average Life of such new
Indebtedness is at least equal to the remaining Average Life of the
Indebtedness to be refinanced or refunded; and provided further that in no
event may Indebtedness of the Company be refinanced by means of any
Indebtedness of any Restricted Subsidiary pursuant to this clause (iii); (iv)
Indebtedness (A) in respect of performance, surety or appeal bonds provided
in the ordinary course of business, (B) under Currency Agreements and
Interest Rate Agreements; provided that such agreements (a) are designed
solely to protect the Company or its Subsidiaries against fluctuations in
foreign currency exchange rates or interest rates and (b) do not increase the
Indebtedness of the obligor outstanding at any time other than as a result of
fluctuations in foreign currency exchange rates or interest rates or by
reason of fees, indemnities and compensation payable thereunder; or (C)
arising from agreements providing for indemnification, adjustment of purchase
price or similar obligations, or from Guarantees or letters of credit, surety
bonds or performance bonds securing any obligations of the Company or any of
its Restricted Subsidiaries pursuant to such agreements, in any case Incurred
in connection with the disposition of any business, assets or Restricted
Subsidiary of the Company (other than Guarantees of Indebtedness Incurred by
any Person acquiring all or any portion of such business, assets or
Restricted Subsidiary of the Company for the purpose of financing such
acquisition), in an amount not to exceed the gross proceeds actually received
by the Company or any Restricted Subsidiary in connection with such
disposition; (v) Indebtedness of the Company, to the extent the net proceeds
thereof are promptly (A) used to purchase Notes tendered in an Offer to
Purchase made as a result of a Change in Control or (B) deposited to defease
the Notes in accordance with Article Eight; (vi) Guarantees of the Notes and
Guarantees of Indebtedness of the Company by any Restricted Subsidiary
provided the Guarantee of such Indebtedness is permitted by and made in
accordance with Section 4.07; (vii) Indebtedness Incurred to finance the cost
(including the cost of design, development, construction, installation or
integration) of telecommunications network assets, equipment or inventory
acquired by the Company or a
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43
Restricted Subsidiary after the Closing Date; (viii) Indebtedness of the
Company not to exceed, at any one time outstanding, two times the Net Cash
Proceeds received by the Company after the Closing Date from the issuance and
sale of its Capital Stock (other than Disqualified Stock) to a Person that is
not a Subsidiary of the Company to the extent such Net Cash Proceeds have not
been used pursuant to clause (C) (2) of the first paragraph of Section 4.04
to make a Restricted Payment; provided that such Indebtedness does not mature
prior to the Stated Maturity of the Notes and has an Average Life longer than
the Notes; and (ix) Indebtedness outstanding at any time in an aggregate
principal amount not to exceed $7.5 million, less any amount of such
Indebtedness permanently repaid as provided under Section 4.10; provided,
that the proceeds of such Indebtedness are used in the Company's PCS or
competitive local exchange carrier businesses or to refinance any such
Indebtedness.
(b) Notwithstanding any other provision of this Section 4.03, the maximum
amount of Indebtedness that the Company or a Restricted Subsidiary may Incur
pursuant to this Section 4.03 shall not be deemed to be exceeded, with respect
to any outstanding Indebtedness due solely to the result of fluctuations in the
exchange rates of currencies.
(c) For purposes of determining any particular amount of Indebtedness
under this Section 4.03, (1) Indebtedness Incurred under the Bank Credit
Agreement on or prior to the Closing Date shall be treated as Incurred pursuant
to clause (i) of the second paragraph of Section 4.03(a), (2) Guarantees, Liens
or obligations with respect to letters of credit supporting Indebtedness
otherwise included in the determination of such particular amount shall not be
included and (3) any Liens granted pursuant to the equal and ratable provisions
referred to in Section 4.09 shall not be treated as Indebtedness. For purposes
of determining compliance with this Section 4.03, in the event that an item of
Indebtedness meets the criteria of more than one of the types of Indebtedness
described in the above clauses (other than Indebtedness referred to in
clause (1) above), the Company, in its sole discretion, shall classify such item
of Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses.
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. The Company will not,
and will not permit any Restricted Subsidiary to, directly or indirectly,
(i) declare or pay any dividend or make any distribution on or with respect to
its Capital Stock (other than (x) dividends or distributions payable solely in
shares of its Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to acquire shares of such Capital Stock and (y) pro
rata dividends or distributions on Common Stock of Restricted Subsidiaries held
by minority stockholders, provided that such dividends do not in the aggregate
exceed the minority stockholders' pro rata share of such Restricted
Subsidiaries' net income from the first day of the fiscal quarter beginning
immediately following the Closing Date) held by Persons other than the Company
or any of its Restricted Subsidiaries, (ii) purchase, redeem, retire or
otherwise acquire for value any shares of Capital Stock of (A) the Company or an
Unrestricted Subsidiary (including options, warrants or other rights to acquire
such shares of Capital Stock) held by any Person or (B) a Restricted Subsidiary
(including options, warrants or other rights to acquire such shares of Capital
Stock) held by any
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44
Affiliate of the Company (other than a Wholly Owned Restricted Subsidiary) or
any holder (or any Affiliate of such holder) of 5% or more of the Capital
Stock of the Company, (iii) make any voluntary or optional principal payment,
or voluntary or optional redemption, repurchase, defeasance, or other
acquisition or retirement for value, of Indebtedness of the Company that is
subordinated in right of payment to the Notes or (iv) make any Investment,
other than a Permitted Investment, in any Person (such payments or any other
actions described in clauses (i) through (iv) being collectively "Restricted
Payments") if, at the time of, and after giving effect to, the proposed
Restricted Payment: (A) a Default or Event of Default shall have occurred and
be continuing, (B) except with respect to an Investment, the Company could
not Incur at least $1.00 of Indebtedness under the first paragraph of Section
4.03(a) or (C) the aggregate amount of all Restricted Payments (the amount,
if other than in cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) made after the Closing Date shall exceed the sum of (1) 50% of
the aggregate amount of the Adjusted Consolidated Net Income (or, if the
Adjusted Consolidated Net Income is a loss, minus 100% of the amount of such
loss) (determined by excluding income resulting from transfers of assets by
the Company or a Restricted Subsidiary to an Unrestricted Subsidiary) accrued
on a cumulative basis during the period (taken as one accounting period)
beginning on the first day of the fiscal quarter immediately following the
Closing Date and ending on the last day of the last fiscal quarter preceding
the Transaction Date for which reports have been filed pursuant to Section
4.17 plus (2) the aggregate Net Cash Proceeds received by the Company after
the Closing Date from the issuance and sale permitted by this Indenture of
its Capital Stock (other than Disqualified Stock) to a Person who is not a
Subsidiary of the Company (except to the extent such Net Cash Proceeds are
used to Incur Indebtedness pursuant to clause (viii) under Section 4.03) or
from the issuance to a Person who is not a Subsidiary of the Company of any
options, warrants or other rights to acquire Capital Stock of the Company (in
each case, exclusive of any Disqualified Stock or any options, warrants or
other rights that are redeemable at the option of the holder, or are required
to be redeemed, prior to the Stated Maturity of the Notes) plus (3) an amount
equal to the net reduction in Investments (other than reductions in Permitted
Investments) in any Person resulting from payments of interest on Indebtedness,
dividends, repayments of loans or advances, or other transfers of assets, in
each case to the Company or any Restricted Subsidiary or from the Net Cash
Proceeds from the sale of any such Investment (except, in each case, to the
extent any such payment or proceeds are included in the calculation of
Adjusted Consolidated Net Income), or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided in
the definition of "Investments"), not to exceed, in each case, the amount of
Investments previously made by the Company or any Restricted Subsidiary in
such Person or Unrestricted Subsidiary.
The foregoing provision shall not be violated by reason of: (i) the payment
of any dividend within 60 days after the date of declaration thereof if, at said
date of declaration, such payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other acquisition or retirement
for value of Indebtedness that is subordinated in right of payment to the
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45
Notes including premium, if any, and accrued and unpaid interest, with the
proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of
the second paragraph of part (a) of Section 4.03; (iii) the repurchase,
redemption or other acquisition of Capital Stock of the Company (or options,
warrants or other rights to acquire such Capital Stock) in exchange for, or
out of the proceeds of a substantially concurrent offering of, shares of
Capital Stock (other than Disqualified Stock) of the Company; (iv) the making
of any principal payment or the repurchase, redemption, retirement,
defeasance or other acquisition for value of Indebtedness of the Company
which is subordinated in right of payment to the Notes in exchange for, or
out of the proceeds of, a substantially concurrent offering of, shares of the
Capital Stock of the Company (other than Disqualified Stock); (v) the
declaration or payment of dividends on the Common Stock of the Company
following a Public Equity Offering of such Common Stock, of up to 6% per
annum of the Net Cash Proceeds received by the Company in such Public Equity
Offering; (vi) payments or distributions, to dissenting stockholders pursuant
to applicable law, pursuant to or in connection with a consolidation, merger
or transfer of assets that complies with the provisions of Article Five;
(vii) the purchase, redemption, acquisition, cancellation or other retirement
for value of shares of Capital Stock of the Company to the extent necessary
in the good faith judgment of the Board of Directors of the Company, to
prevent the loss or secure the renewal or reinstatement of any license or
franchise held by the Company or any Restricted Subsidiary from any
governmental agency; (viii) the declaration or payment of up to $7.5 million
of dividends on Class A Common Stock of the Company of which $6.0 million
will be used by the Trusts to repay the Term Loan and $.5 million of which
will be used to repay liabilities owed to the Company; (ix) the purchase of
shares of Fleet Investors Preferred Stock of the Company (or the Class A
Common Stock into which the Class B Preferred Stock may be converted)
pursuant to the exercise of the put rights granted to the Fleet Investors
under the Shareholders' Agreement or any mandatory redemption provisions, in
each case as in effect on the Closing Date; provided (a) after giving pro
forma effect to any such purchase the Consolidated Leverage Ratio would be
less than 7.5 to 1, and (b) if the event triggering the exercisability of the
put rights constitutes an Asset Sale or Change of Control, no such repurchase
shall be made prior to the Company's repurchase of such Notes as are required
to be repurchased pursuant to Section 4.10 and Section 4.11; (x) an
Investment of up to $5.3 million in the Gila River Indian Community in
connection with the Arizona 5 Acquisition; (xi) the declaration or payment of
dividends on the Fleet Investors Preferred Stock (I) if after giving pro
forma effect to any such dividend, the Consolidated Leverage Ratio would be
less than 6 to 1 or (II) following a Public Equity Offering of Capital Stock;
provided (A) the Net Cash Proceeds received by the Company in such Public
Equity Offering is at least equal to $90 million and (B) the aggregate amount
of dividends permitted to be made in any fiscal year of the Company under
clause (v) and this clause (xi) shall not exceed 6% of the Net Cash Proceeds
received by the Company in the Public Equity Offering; or (xii) the purchase,
redemption, retirement or other acquisition for value of Capital Stock of the
Company, or options to purchase such shares, held by directors, employees or
former directors or employees of the Company or any Restricted Subsidiary (or
their estates or beneficiaries under their estates) upon death, disability,
retirement, termination of employment or pursuant to the terms of any
agreement under
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46
which such shares of Capital Stock or options were issued: provided that the
aggregate consideration paid for such purchase, redemption, acquisition,
cancellation or other retirement of such shares of Capital Stock or options
after the Closing Date does not exceed $500,000 in any calendar year, or $1.5
million in the aggregate; provided that, except in the case of clauses (i)
and (iii), no Default or Event of Default shall have occurred and be
continuing or occur as a consequence of the actions or payments set forth
therein.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof and an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof), and the Net Cash Proceeds from any issuance of
Capital Stock referred to in clauses (iii) and (iv), shall be included in
calculating whether the conditions of clause (C) of the first paragraph of this
Section 4.04 have been met with respect to any subsequent Restricted Payments.
In the event the proceeds of an issuance of Capital Stock of the Company are
used for the redemption, repurchase or other acquisition of the Notes, or
Indebtedness that is pari passu with the Notes, then the Net Cash Proceeds of
such issuance shall be included in clause (C) of the first paragraph of this
Section 4.04 only to the extent such proceeds are not used for such redemption,
repurchase or other acquisition of Indebtedness.
SECTION 4.05. LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS
AFFECTING RESTRICTED SUBSIDIARIES. The Company will not, and will not permit
any Restricted Subsidiary to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any Restricted Subsidiary to (i) pay dividends or make any other
distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Existing Credit Agreement,
this Indenture or any other agreements in effect on the Closing Date, and any
amendments, extensions, refinancings, renewals or replacements of such
agreements; provided that the encumbrances and restrictions in any such
amendments, extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the Holders than those encumbrances or
restrictions that are then in effect and that are being extended, refinanced,
renewed or replaced; (ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the property or assets of such
Person acquired by the Company or any Restricted Subsidiary, existing at the
time of such acquisition and not incurred in contemplation thereof, which
encumbrances or restrictions are not applicable to any Person or the property or
assets of any Person other than such Person or the property or assets of such
Person so acquired; (iv) in the case of clause (iv) of the first paragraph of
this Section 4.05, (A) that restrict in a customary manner the subletting,
assignment or transfer of any
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47
property or asset that is a lease, license, conveyance or contract or similar
property or asset, (B) existing by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any property or assets
of the Company or any Restricted Subsidiary not otherwise prohibited by this
Indenture or (C) arising or agreed to in the ordinary course of business, not
relating to any Indebtedness, and that do not, individually or in the
aggregate, detract from the value of property or assets of the Company or any
Restricted Subsidiary in any manner material to the Company or any Restricted
Subsidiary; (v) with respect to a Restricted Subsidiary and imposed pursuant
to an agreement that has been entered into for the sale or disposition of all
or substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary; (vi) contained in the Bank Facility Agreement,
provided any encumbrance or restriction that would prevent payments to the
Company to pay interest on the Notes applies only in the event of an event of
default (other than an event of default resulting solely from a breach of a
representation or warranty) under the Bank Facility Agreement; provided (x)
with respect to any event of default (other than a payment default,
bankruptcy default or a loss of a material license or cellular system), such
restriction will terminate 180 days after the occurrence of such event of
default and (y) the financial covenants in the Bank Facility Agreement are no
less favorable to the Company or its Subsidiaries than the financial
covenants set forth in the Bank Facility Commitment Letter on the Closing
Date; or (vii) contained in the terms of any Indebtedness of a Restricted
Subsidiary, or any agreement pursuant to which such Indebtedness was issued,
if the encumbrance or restriction applies only in the event of a payment
default or a default with respect to a financial covenant contained in such
Indebtedness or agreement, if the encumbrance or restriction is not
materially more disadvantageous to the Holders of the Notes than is customary
in comparable financings (as determined by the Company) and if the Company
determines that any such encumbrance or restriction will not materially
affect the Company's ability to make principal or interest payments on the
Notes. Nothing contained in this Section 4.05 shall prevent the Company or
any Restricted Subsidiary from (1) creating, incurring, assuming or suffering
to exist any Liens otherwise permitted in Section 4.09 or (2) restricting the
sale or other disposition of property or assets of the Company or any of its
Restricted Subsidiaries that secure Indebtedness of the Company or any of its
Restricted Subsidiaries.
SECTION 4.06. LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF
RESTRICTED SUBSIDIARIES. The Company will not sell, and will not permit any
Restricted Subsidiary, directly or indirectly, to issue or sell, any shares of
Capital Stock of a Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except (i) to the Company or a
Wholly Owned Restricted Subsidiary; (ii) issuances of director's qualifying
shares or sales to foreign nationals of shares of Capital Stock of foreign
Restricted Subsidiaries, to the extent required by applicable law; (iii) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary, provided any
Investment in such Person remaining after giving effect to such issuance or sale
would have been permitted to be made under the Section 4.04, if made on the date
of such issuance or sale; (iv) sales of up to 25% of the Common Stock of the
Arizona 5 Partnership in connection with the
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48
Arizona 5 Acquisition, provided after such issuance the Company or its
Restricted Subsidiaries would own at least 75% of the outstanding Common
Stock of the Arizona 5 Partnership, and (v) sales of Common Stock of a
Restricted Subsidiary; provided that the assets of such Restricted Subsidiary
consist solely of assets relating to the Company's PCS or resale business and
the Net Cash Proceeds, if any, of such sales are applied in accordance with
clause (A) or (B) of Section 4.10.
SECTION 4.07. LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED
SUBSIDIARIES. The Company will not permit any Restricted Subsidiary, directly
or indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to this Indenture providing for a
Guarantee (a "Subsidiary Guarantee") of payment of the Notes by such Restricted
Subsidiary and (ii) such Restricted Subsidiary waives, and will not in any
manner whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to (a) any Guarantee of any Restricted Subsidiary that existed
at the time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary or (b) any Guarantee of any Restricted Subsidiary required under the
Bank Facility Agreement as contemplated by the Bank Facility Commitment Letter
as in effect on the Closing Date. If the Guaranteed Indebtedness is (A) pari
passu with the Notes, then the Guarantee of such Guaranteed Indebtedness shall
be pari passu with, or subordinated to, the Subsidiary Guarantee or
(B) subordinated to the Notes, then the Guarantee of such Guaranteed
Indebtedness shall be subordinated to the Subsidiary Guarantee at least to the
extent that the Guaranteed Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by this Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
SECTION 4.08. LIMITATION ON TRANSACTIONS WITH STOCKHOLDERS AND AFFILIATES.
The Company will not, and will not permit any Restricted Subsidiary to, directly
or indirectly, enter into, renew or extend any transaction (including, without
limitation, the purchase, sale, lease or exchange of property or assets, or the
rendering of any service) with any holder (or any Affiliate of such holder) of
5% or more of any class of Capital Stock of the Company or with any Affiliate
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49
of the Company or any Restricted Subsidiary, except upon fair and reasonable
terms no less favorable to the Company or such Restricted Subsidiary than
could be obtained, at the time of such transaction or, if such transaction is
pursuant to a written agreement, at the time of the execution of the
agreement providing therefor, in a comparable arm's-length transaction with a
Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to
(i) transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between the Company and any of its Wholly Owned Restricted Subsidiaries
or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of
reasonable and customary regular fees to directors of the Company who are not
employees of the Company; (iv) any payments or other transactions pursuant to
any tax-sharing agreement between the Company and any other Person with which
the Company files a consolidated tax return or with which the Company is part of
a consolidated group for tax purposes; (v) any Restricted Payments not
prohibited by Section 4.04; or (vi) the acquisition of the capital stock of ATTI
in the Arizona 5 Acquisition for an aggregate purchase price of up to
$14.2 million and the sale of the Prior ATTI Assets. Notwithstanding the
foregoing, any transaction covered by the first paragraph of this Section 4.08
and not covered by clauses (ii) through (vi) of this paragraph, the aggregate
amount of which exceeds $2 million in value, must be approved or determined to
be fair in the manner provided for in clause (i)(A) or (B) above.
SECTION 4.09. LIMITATION ON LIENS. The Company will not, and will not
permit any Restricted Subsidiary to, create, incur, assume or suffer to exist
any Lien on any of its assets or properties of any character, or any shares of
Capital Stock or Indebtedness of any Restricted Subsidiary, without making
effective provision for all of the Notes and all other amounts due under this
Indenture to be directly secured equally and ratably with (or, if the obligation
or liability to be secured by such Lien is subordinated in right of payment to
the Notes, prior to) the obligation or liability secured by such Lien.
The foregoing limitation does not apply to (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or Capital
Stock of the Company or its Restricted Subsidiaries created in favor of the
Holders; (iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to the Company or such other
Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred to
refinance secured Indebtedness which is permitted to be Incurred under
clause (iii) of the second paragraph of Section 4.03(a); provided that such
Liens do not extend to or cover any property or assets of the Company or any
Restricted Subsidiary other than the property or assets securing the
Indebtedness being refinanced; (v) Liens
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50
on the Capital Stock and assets of Dobson Operating Company and its subsidiaries
securing the Company's or any of its Restricted Subsidiaries' obligations under
the Bank Facility Agreement; or (vi) Permitted Liens.
SECTION 4.10. LIMITATION ON ASSET SALES. The Company will not, and will
not permit any Restricted Subsidiary to, consummate any Asset Sale, unless
(i) the consideration received by the Company or such Restricted Subsidiary is
at least equal to the fair market value of the assets sold or disposed of and
(ii) at least 85% of the consideration received consists of cash or Temporary
Cash Investments. In the event and to the extent that the Net Cash Proceeds
received by the Company or any of its Restricted Subsidiaries from one or more
Asset Sales occurring on or after the Closing Date in any period of 12
consecutive months exceed 10% of Adjusted Consolidated Net Tangible Assets
(determined as of the date closest to the commencement of such 12-month period
for which a consolidated balance sheet of the Company and its subsidiaries have
been filed pursuant to Section 4.17), then the Company shall or shall cause the
relevant Restricted Subsidiary to (i) within twelve months after the date Net
Cash Proceeds so received exceed 10% of Adjusted Consolidated Net Tangible
Assets (A) apply an amount equal to such excess Net Cash Proceeds to permanently
repay unsubordinated Indebtedness of the Company or any Restricted Subsidiary
providing a Subsidiary Guarantee pursuant to Section 4.07 or Indebtedness of any
other Restricted Subsidiary, in each case owing to a Person other than the
Company or any of its Restricted Subsidiaries or (B) invest an equal amount, or
the amount not so applied pursuant to clause (A) (or enter into a definitive
agreement committing to so invest within twelve months after the date of such
agreement), in property or assets (other than current assets) of a nature or
type or that are used in a business (or in a company having property and assets
of a nature or type, or engaged in a business) similar or related to the nature
or type of the property and assets of, or the business of, the Company and its
Restricted Subsidiaries existing on the date of such investment and (ii) apply
(no later than the end of the twelve-month period referred to in clause (i))
such excess Net Cash Proceeds (to the extent not applied pursuant to clause (i))
as provided in the following paragraph of this Section 4.10. The amount of such
excess Net Cash Proceeds required to be applied (or to be committed to be
applied) during such twelve-month period as set forth in clause (i) of the
preceding sentence and not applied as so required by the end of such period
shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section 4.10 totals at least $5 million, the Company must commence, not later
than the fifteenth Business Day of such month, and consummate an Offer to
Purchase from the Holders on a pro rata basis an aggregate principal amount of
Notes equal to the Excess Proceeds on such date, at a purchase price equal to
101% of the principal amount thereof, plus, in each case, accrued interest (if
any) to the Payment Date.
SECTION 4.11. REPURCHASE OF NOTES UPON A CHANGE OF CONTROL. The Company
must commence, within 30 days after the occurrence of a Change of Control, and
consummate an Offer
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51
to Purchase for all Notes then outstanding, at a purchase price equal to 101%
of the principal amount thereof, plus accrued interest (if any) to the date
of purchase.
SECTION 4.12. EXISTENCE. Subject to Articles Four and Five of this
Indenture, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and the existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each such Subsidiary and the rights
(whether pursuant to charter, partnership certificate, agreement, statute or
otherwise), material licenses and franchises of the Company and each such
Subsidiary; PROVIDED that the Company shall not be required to preserve any such
right, license or franchise, or the existence of any Restricted Subsidiary, if
the maintenance or preservation thereof is no longer desirable in the conduct of
the business of the Company and its Restricted Subsidiaries taken as a whole.
SECTION 4.13. PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or
discharge and shall cause each of its Subsidiaries to pay or discharge, or cause
to be paid or discharged, before the same shall become delinquent (i) all
material taxes, assessments and governmental charges levied or imposed upon
(a) the Company or any such Subsidiary, (b) the income or profits of any such
Subsidiary which is a corporation or (c) the property of the Company or any such
Subsidiary and (ii) all material lawful claims for labor, materials and supplies
that, if unpaid, might by law become a lien upon the property of the Company or
any such Subsidiary; PROVIDED that the Company shall not be required to pay or
discharge, or cause to be paid or discharged, any such tax, assessment, charge
or claim the amount, applicability or validity of which is being contested in
good faith by appropriate proceedings and for which adequate reserves have been
established.
SECTION 4.14. MAINTENANCE OF PROPERTIES AND INSURANCE. The Company will
cause all properties used or useful in the conduct of its business or the
business of any of its Restricted Subsidiaries, to be maintained and kept in
good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; PROVIDED
that nothing in this Section 4.14 shall prevent the Company or any such
Subsidiary from discontinuing the use, operation or maintenance of any of such
properties or disposing of any of them, if such discontinuance or disposal is,
in the judgment of the Company, desirable in the conduct of the business of the
Company or such Subsidiary.
The Company will provide or cause to be provided, for itself and its
Restricted Subsidiaries, insurance (including appropriate self-insurance)
against loss or damage of the kinds customarily insured against by corporations
similarly situated and owning like properties, including, but not limited to,
products liability insurance and public liability insurance, with reputable
insurers or with the government of the United States of America, or an agency or
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52
instrumentality thereof, in such amounts, with such deductibles and by such
methods as shall be customary for corporations similarly situated in the
industry in which the Company or such Restricted Subsidiary, as the case may be,
is then conducting business.
SECTION 4.15. NOTICE OF DEFAULTS. In the event that the Company becomes
aware of any Default or Event of Default the Company, promptly after it becomes
aware thereof, will give written notice thereof to the Trustee.
SECTION 4.16. COMPLIANCE CERTIFICATES. (a) The Company shall deliver to
the Trustee, within 45 days after the end of each fiscal quarter (90 days after
the end of the last fiscal quarter of each year), an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default that
occurred during such fiscal quarter. In the case of the Officers' Certificate
delivered within 90 days of the end of the Company's fiscal year, such
certificate shall contain a certification from the principal executive officer,
principal financial officer or principal accounting officer that a review has
been conducted of the activities of the Company and its Restricted Subsidiaries
and the Company's and its Restricted Subsidiaries' performance under this
Indenture and that the Company has complied with all conditions and covenants
under this Indenture. For purposes of this Section 4.16, such compliance shall
be determined without regard to any period of grace or requirement of notice
provided under this Indenture. If they do know of such a Default or Event of
Default, the certificate shall describe any such Default or Event of Default and
its status. The first certificate to be delivered pursuant to this Section
4.16(a) shall be for the first fiscal quarter beginning after the execution of
this Indenture.
(b) The Company shall deliver to the Trustee, within 90 days after the end
of the Company's fiscal year, a certificate signed by the Company's independent
certified public accountants stating (i) that their audit examination has
included a review of the terms of this Indenture and the Notes as they relate to
accounting matters, (ii) that they have read the most recent Officers'
Certificate delivered to the Trustee pursuant to paragraph (a) of this Section
4.16 and (iii) whether, in connection with their audit examination, anything
came to their attention that caused them to believe that the Company was not in
compliance with any of the terms, covenants, provisions or conditions of Article
Four and Section 5.01 of this Indenture as they pertain to accounting matters
and, if any Default or Event of Default has come to their attention, specifying
the nature and period of existence thereof; PROVIDED that such independent
certified public accountants shall not be liable in respect of such statement by
reason of any failure to obtain knowledge of any such Default or Event of
Default that would not be disclosed in the course of an audit examination
conducted in accordance with generally accepted auditing standards in effect at
the date of such examination.
SECTION 4.17. COMMISSION REPORTS AND REPORTS TO HOLDERS. At all times
from and after the earlier of (i) the date of the commencement of an Exchange
Offer or the effectiveness of the Shelf Registration Statement (the
"Registration") and (ii) August 28, 1997, in either case, whether
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53
or not the Company is then required to file reports with the Commission, the
Company shall file with the Commission all such reports and other information
as it would be required to file with the Commission by Sections 13(a) or
15(d) under the Securities Exchange Act of 1934 if it were subject thereto.
The Company shall supply the Trustee and each Holder or shall supply to the
Trustee for forwarding to each such Holder, without cost to such Holder,
copies of such reports and other information. In addition, at all times prior
to the earlier of the date of the Registration and August 28, 1997, the
Company shall, at its cost, deliver to each Holder of the Notes quarterly and
annual reports substantially equivalent to those which would be required by
the Exchange Act. In addition, at all times prior to the Registration, upon
the request of any Holder or any prospective purchaser of the Notes
designated by a Holder, the Company shall supply to such Holder or such
prospective purchaser the information required under Rule 144A under the
Securities Act. The Company also shall comply with the other provisions of
TIA Section 314(a).
SECTION 4.18. WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company from paying all or any portion of the
principal of, premium, if any, or interest on the Notes as contemplated herein,
wherever enacted, now or at any time hereafter in force, or that may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
SECTION 4.19. LIMITATION ON SALE-LEASEBACK TRANSACTIONS. The Company
will not, and will not permit any Restricted Subsidiary to, enter into any
sale-leaseback transaction involving any of its assets or properties whether now
owned or hereafter acquired, whereby the Company or a Restricted Subsidiary
sells or transfers such assets or properties and then or thereafter leases such
assets or properties or any part thereof or any other assets or properties which
the Company or such Restricted Subsidiary, as the case may be, intends to use
for substantially the same purpose or purposes as the assets or properties sold
or transferred.
The foregoing restriction does not apply to any sale-leaseback transaction
if (i) the lease is for a period, including renewal rights, of not in excess of
three years; (ii) the lease secures or relates to industrial revenue or
pollution control bonds; (iii) the transaction is solely between the Company and
any Wholly Owned Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within twelve
months after the sale or transfer of any assets or properties is completed,
applies an amount not less than the net proceeds received from such sale in
accordance with clause (A) or (B) of the first paragraph of Section 4.10.
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SECTION 4.20. SPECIAL REPURCHASE OFFER. In the event either the Maryland
2 Acquisition or the Horizon Properties Acquisition is not consummated prior to
March 31, 1997, the Company must commence, on March 31, 1997, and consummate an
Offer to Purchase for $60 million principal amount of Notes, at a purchase price
equal to 101% of the principal amount thereof, plus accrued interest to the date
of purchase; PROVIDED that neither of such acquisitions may be consummated until
(i) the Reorganization shall have been consummated with the preliminary approval
of the FCC and (ii) the Company and the Banks enter into definitive agreements
for the Bank Facility Agreement containing terms substantially as described in
the Bank Facility Commitment Letter or if at the time of and after giving effect
to such acquisition a default shall have occurred and be continuing under the
Bank Facility Agreement.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. WHEN COMPANY MAY MERGE, ETC. The Company will not
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person or permit any Person to merge with or into the
Company unless: (i) the Company shall be the continuing Person, or the Person
(if other than the Company) formed by such consolidation or into which the
Company is merged or that acquired or leased such property and assets of the
Company shall be a corporation organized and validly existing under the laws of
the United States of America or any jurisdiction thereof and shall expressly
assume, by a supplemental indenture, executed and delivered to the Trustee, all
of the obligations of the Company on all of the Notes and under this Indenture;
(ii) immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction on a pro forma basis, the Company or any Person
becoming the successor obligor of the Notes shall have a Consolidated Net Worth
equal to or greater than the Consolidated Net Worth of the Company immediately
prior to such transaction; (iv) immediately after giving effect to such
transaction on a pro forma basis the Company, or any Person becoming the
successor obligor of the Notes, as the case may be, could Incur at least $1.00
of Indebtedness under the first paragraph of Section 4.03(a); provided that this
clause (iv) shall not apply to a consolidation or merger with or into a Wholly
Owned Restricted Subsidiary with a positive net worth; provided that, in
connection with any such merger or consolidation, no consideration (other than
Common Stock in the surviving Person or the Company) shall be issued or
distributed to the stockholders of the Company; and (v) the Company delivers to
the Trustee an Officers' Certificate (attaching the arithmetic computations to
demonstrate compliance with clauses (iii) and (iv)) and Opinion of Counsel, in
each case stating that such consolidation, merger or transfer and such
supplemental indenture complies with this provision and that all conditions
precedent provided for herein relating to such transaction have been complied
with; provided, however, that clauses (iii) and (iv) above do not apply if, in
the good faith determination of the Board of Directors of the Company, whose
determination shall
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55
be evidenced by a Board Resolution, the principal purpose of such transaction
is to change the state of incorporation of the Company; and provided further
that any such transaction shall not have as one of its purposes the evasion
of the foregoing limitations.
SECTION 5.02. SUCCESSOR SUBSTITUTED. Upon any consolidation or merger, or
any sale, conveyance, transfer, lease or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer, lease or other disposition is made shall succeed to, and
be substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; PROVIDED that the Company shall not be released from its
obligation to pay the principal of, premium, if any, or interest on the Notes in
the case of a lease of all or substantially all of its property and assets.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall occur with
respect to the Notes if:
(a) the Company defaults in the payment of the principal of (or
premium, if any, on) any Note when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise;
(b) the Company defaults in the payment of interest on any Note when
the same becomes due and payable, and such default continues for a period
of 30 days; PROVIDED that a failure to make any of the first four scheduled
interest payments on the Notes on the applicable Interest Payment Date will
constitute an Event of Default with no grace or cure period;
(c) the Company defaults in the performance of, or breaches the
provisions of, Article Five or fails to make or consummate an Offer to
Purchase in accordance with Section 4.10, 4.11 or 4.20;
(d) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in this Indenture or under the Notes
(other than a default specified in clause (a), (b) or (c) above) and such
default or breach continues for a period of 30 consecutive days after
written notice to the Company by the Trustee or to the Company and the
Trustee by the Holders of 25% or more in aggregate principal amount of the
Notes;
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56
(e) there occurs with respect to any issue or issues of Indebtedness
of the Company or any Significant Subsidiary having an outstanding
principal amount of $5 million or more in the aggregate for all such issues
of all such Persons, whether such Indebtedness now exists or shall
hereafter be created, (I) an event of default that has caused the holder
thereof to declare such Indebtedness to be due and payable prior to its
Stated Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the
final (but not any interim) fixed maturity and such defaulted payment shall
not have been made, waived or extended within 30 days of such payment
default;
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $5 million in the aggregate for all such
final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall not be
paid or discharged, and there shall be any period of 30 consecutive days
following entry of the final judgment or order that causes the aggregate
amount for all such final judgments or orders outstanding and not paid or
discharged against all such Persons to exceed $5 million during which a
stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect;
(g) a court having jurisdiction in the premises enters a decree or
order for (A) relief in respect of the Company or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, (B) appointment
of a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs
of the Company or any Significant Subsidiary and, in each case, such decree
or order shall remain unstayed and in effect for a period of 30 consecutive
days;
(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or consents to the entry of an order for
relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) effects any
general assignment for the benefit of creditors; or
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(i) the Escrow and Security Agreement shall cease to be in full force
and effect or enforceable in accordance with its terms, other than in
accordance with its terms.
SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event
of Default specified in clause (g) or (h) of Section 6.01 that occurs with
respect to the Company) occurs and is continuing under this Indenture, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by written notice to the Company (and to the Trustee if
such notice is given by the Holders), may, and the Trustee at the request of
such Holders shall, declare the principal of, premium, if any, and accrued
interest on the Notes to be immediately due and payable. Upon a declaration of
acceleration, such principal of, premium, if any, and accrued interest shall be
immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in clause (e) of Section 6.01 has occurred
and is continuing, such declaration of acceleration shall be automatically
rescinded and annulled if the event of default triggering such Event of Default
pursuant to clause (e) shall be remedied or cured by the Company and/or the
relevant Significant Subsidiary or waived by the holders of the relevant
Indebtedness within 60 days after the declaration of acceleration hereunder with
respect thereto. If an Event of Default specified in clause (g) or (h) of
Section 6.01 occurs with respect to the Company, the principal of, premium, if
any, and accrued interest on the Notes then outstanding shall IPSO FACTO become
and be immediately due and payable without any declaration or other act on the
part of the Trustee or any Holder.
At any time after such a declaration of acceleration, but before a judgment
or decree for the payment of the money due has been obtained by the Trustee, the
Holders of at least a majority in principal amount of the outstanding Notes by
written notice to the Company and to the Trustee, may waive all past Defaults
and rescind and annul such declaration of acceleration and its consequences if
(i) all existing Events of Default, other than the non-payment of the principal
of, premium, if any, and accrued interest on the Notes that have become due
solely by such declaration of acceleration, have been cured or waived and
(ii) the rescission would not conflict with any judgment or decree of a court of
competent jurisdiction.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available remedy by proceeding at law or
in equity to collect the payment of principal of, premium, if any, or interest
on the Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding.
SECTION 6.04. WAIVER OF PAST DEFAULTS. Subject to Sections 6.02, 6.07 and
9.02, the Holders of at least a majority in principal amount of the outstanding
Notes, by notice to the Trustee, may waive an existing Default or Event of
Default and its consequences, except a Default
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in the payment of principal of, premium, if any, or interest on any Note as
specified in clause (a) or (b) of Section 6.01 or in respect of a covenant or
provision of this Indenture which cannot be modified or amended without the
consent of the Holder of each outstanding Note affected. Upon any such
waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereto.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of at least a majority in
aggregate principal amount of the outstanding Notes may direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
or exercising any trust or power conferred on the Trustee; PROVIDED, that the
Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders of Notes not joining in the giving of such direction; and PROVIDED
FURTHER, that the Trustee may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes pursuant to
this Section 6.05.
SECTION 6.06. LIMITATION ON SUITS. A Holder may not institute any
proceeding, judicial or otherwise, with respect to this Indenture or the Notes,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(i) the Holder has previously given to the Trustee written notice
of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of
outstanding Notes shall have made written request to the Trustee to pursue
the remedy;
(iii) such Holder or Holders have offered and, if requested,
provided to the Trustee indemnity satisfactory to the Trustee against any
costs, liabilities or expenses to be incurred in compliance with such
request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to comply with such request; and
(v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Notes have not given the
Trustee a direction that is inconsistent with such written request.
For purposes of Section 6.05 of this Indenture and this Section 6.06, the
Trustee shall comply with TIA Section 316(a) in making any determination of
whether the Holders of the
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required aggregate principal amount of outstanding Notes have concurred in
any request or direction of the Trustee to pursue any remedy available to the
Trustee or the Holders with respect to this Indenture or the Notes or
otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.
The limitations set forth in this Section 6.06 shall not apply to the right
of any Holder of a Note to receive payment of the principal of, premium, if any,
or interest on, such Note or to bring suit for the enforcement of any such
payment, on or after the due date expressed in the Notes, which right shall not
be impaired or affected without the consent of the Holder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any
other provision of this Indenture, the right of any Holder of a Note to receive
payment of principal of, premium, if any, or interest on such Holder's Note on
or after the respective due dates expressed on such Note, 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.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default in
payment of principal, premium or interest specified in clause (a), (b) (c) or
(d) of Section 6.01 occurs and is continuing, the Trustee may recover judgment
in its own name and as trustee of an express trust against the Company or any
other obligor of the Notes for the whole amount of principal, premium, if any,
and accrued interest remaining unpaid, together with interest on overdue
principal, premium, if any, and, to the extent that payment of such interest is
lawful, interest on overdue installments of interest, in each case at the rate
specified in the Notes, and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee 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 Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section
7.07) and the Holders allowed in any judicial proceedings relative to the
Company (or any other obligor of the Notes), its creditors or its property and
shall be entitled and empowered to collect and receive any monies, securities or
other property payable or deliverable upon conversion or exchange of the Notes
or upon any such claims and to distribute the same, and any custodian, receiver,
assignee, trustee, liquidator, sequestrator or other similar official in any
such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation,
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expenses, disbursements and advances of the Trustee, its agent and counsel,
and any other amounts due the Trustee under Section 7.07. Nothing herein
contained shall be deemed to empower the Trustee to authorize or consent to,
or accept or adopt on behalf of any Holder, any plan of reorganization,
arrangement, adjustment or composition affecting the Notes or the rights of
any Holder thereof, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to
this Article Six, it shall pay out the money in the following order:
First: to the Trustee for all amounts due under Section 7.07;
Second: to Holders for amounts then due and unpaid for principal of,
premium, if any, and interest on the Notes in respect of which or for the
benefit of which such money has been collected, ratably, without preference
or priority of any kind, according to the amounts due and payable on such
Notes for principal, premium, if any, and interest, respectively; and
Third: to the Company or any other obligors of the Notes, as their
interests may appear, or as a court of competent jurisdiction may direct.
The Trustee, upon prior written notice to the Company, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of
any right or remedy under this Indenture or in any suit against the Trustee for
any action taken or omitted by it as Trustee, a court may require any party
litigant in such suit to file an undertaking to pay the costs of the suit, and
the court may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section
6.07 of this Indenture, or a suit by Holders of more than 10% in principal
amount of the outstanding Notes.
SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Holder has instituted any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined adversely to the Trustee or to such Holder, then, and in
every such case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders shall be restored severally and respectively to
their former positions hereunder and thereafter all rights and remedies of the
Company, Trustee and the Holders shall continue as though no such proceeding had
been instituted.
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SECTION 6.13. RIGHTS AND REMEDIES CUMULATIVE. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or wrongfully taken Notes in Section 2.09, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 6.14. DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder to exercise any right or remedy accruing upon any Event
of Default shall impair any such right or remedy or constitute a waiver of any
such Event of Default or an acquiescence therein. Every right and remedy given
by this Article Six or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. GENERAL. The duties and responsibilities of the Trustee
shall be as provided by the TIA and as set forth herein. Notwithstanding the
foregoing, no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it. Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Article Seven.
SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. Subject to TIA Sections 315(a)
through (d):
(i) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter
stated in the document;
(ii) before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, which shall conform to
Section 11.04. The Trustee
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shall not be liable for any action it takes or omits to take in good faith
in reliance on such certificate or opinion;
(iii) the Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care;
(iv) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Holders, unless such Holders shall have offered to the
Trustee reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction;
(v) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within its
rights or powers or for any action it takes or omits to take in accordance
with the written direction of the Holders of a majority in principal amount
of the outstanding Notes relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture;
(vi) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officer's Certificate; and
(vii) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled to examine the books, records and premises of the Company
personally or by agent or attorney.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee, in its
individual or any other capacity, may become the owner or pledgee of Notes and
may otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee (i) makes no
representation as to the validity or adequacy of this Indenture or the Notes,
(ii) shall not be accountable for the Company's use or application of the
proceeds from the Notes and (iii) shall not be responsible for any statement in
the Notes other than its certificate of authentication.
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SECTION 7.05. NOTICE OF DEFAULT. If any Default or any Event of Default
occurs and is continuing and if such Default or Event of Default is known to a
Responsible Officer of the Trustee, the Trustee shall mail to each Holder in
the manner and to the extent provided in TIA Section 313(c) notice of the
Default or Event of Default within 45 days after it occurs, unless such Default
or Event of Default has been cured; PROVIDED, HOWEVER, that, except in the case
of a default in the payment of the principal of, premium, if any, or interest on
any Note, the Trustee shall be protected in withholding such notice if and so
long as the board of directors, the executive committee or a trust committee of
directors and/or Responsible Officers of the Trustee in good faith determine
that the withholding of such notice is in the interest of the Holders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. Within 60 days after each
May 15, beginning with May 15, 1997, the Trustee shall mail to each Holder as
provided in TIA Section 313(c) a brief report dated as of such May 15, if
required by TIA Section 313(a).
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to the
Trustee such compensation as shall be agreed upon in writing for its services.
The compensation of the Trustee shall not be limited by any law on compensation
of a trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses and advances incurred or made
by the Trustee. Such expenses shall include the reasonable compensation and
expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all losses,
liabilities, obligations, damages, penalties, judgments, actions, suits,
proceedings, reasonable costs and expenses (including reasonable fees and
disbursements of counsel) of any kind whatsoever which may be incurred by the
Trustee in connection with any investigative, administrative or judicial
proceeding (whether or not such indemnified party is designated a party to such
proceeding) arising out of or in connection with the acceptance or
administration of its duties under this Indenture; provided, however, that the
Company need not reimburse any expense or indemnify against any loss,
obligation, damage, penalty, judgment, action, suit, proceeding, reasonable cost
or expense (including reasonable fees and disbursements of counsel) of any kind
whatsoever which may be incurred by the Trustee in connection with any
investigative, administrative or judicial proceeding (whether or not such
indemnified party is designated a party to such proceeding) in which it is
determined that the Trustee acted with negligence, bad faith or willful
misconduct, The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. Failure by the Trustee to so notify the Company
shall not relieve the Company of its obligations hereunder, unless the Company
is materially prejudiced thereby. The Company shall defend the claim and the
Trustee shall cooperate in the defense. Unless otherwise set forth herein, the
Trustee may have separate counsel and the Company shall pay the reasonable fees
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
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To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, in its capacity as Trustee, except money or property
held in trust to pay principal of, premium, if any, and interest on particular
Notes.
If the Trustee incurs expenses or renders services after the occurrence of
an Event of Default specified in clause (g) or (h) of Section 6.01, the expenses
and the compensation for the services will be intended to constitute expenses of
administration under Title 11 of the United States Bankruptcy Code or any
applicable federal or state law for the relief of debtors.
SECTION 7.08. REPLACEMENT OF TRUSTEE. A resignation or removal of the
Trustee and appointment of a successor Trustee shall become effective only upon
the successor Trustee's acceptance of appointment as provided in this Section
7.08.
The Trustee may resign at any time by so notifying the Company in writing
at least 30 days prior to the date of the proposed resignation. The Holders of
a majority in principal amount of the outstanding Notes may remove the Trustee
by so notifying the Trustee in writing and may appoint a successor Trustee with
the consent of the Company. The Company may remove the Trustee if: (i) the
Trustee is no longer eligible under Section 7.10; (ii) the Trustee is adjudged a
bankrupt or an insolvent; (iii) a receiver or other public officer takes charge
of the Trustee or its property; or (iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company. If
the successor Trustee does not deliver its written acceptance required by the
next succeeding paragraph of this Section 7.08 within 30 days after the retiring
Trustee resigns or is removed, the retiring Trustee, the Company or the Holders
of a majority in principal amount of the outstanding Notes may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after the delivery of
such written acceptance, subject to the lien provided in Section 7.07, (i) the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, (ii) the resignation or removal of the retiring Trustee shall
become effective and (iii) the successor Trustee shall have all the rights,
powers and duties of the Trustee under this Indenture. A successor Trustee
shall mail notice of its succession to each Holder.
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If the Trustee is no longer eligible under Section 7.10, any Holder who
satisfies the requirements of TIA Section 310(b) may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee.
The Company shall give notice of any resignation and any removal of the
Trustee and each appointment of a successor Trustee to all Holders. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligation under Section 7.07 shall continue for the benefit of
the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
SECTION 7.10. ELIGIBILITY. This Indenture shall always have a Trustee who
satisfies the requirements of TIA Section 310(a)(1). The Trustee shall have a
combined capital and surplus of at least $25 million as set forth in its most
recent published annual report of condition.
SECTION 7.11. MONEY HELD IN TRUST. The Trustee shall not be liable for
interest on any money received by it except as the Trustee may agree with the
Company. Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law and except for money held in trust
under Article Eight of this Indenture.
SECTION 7.12. WITHHOLDING TAXES. The Trustee, as agent for the Company,
shall exclude and withhold from each payment of principal and interest and other
amounts due hereunder or under the Notes any and all withholding taxes
applicable thereto as required by law. The Trustee agrees to act as such
withholding agent and, in connection therewith, whenever any present or future
taxes or similar charges are required to be withheld with respect to any amounts
payable in respect of the Notes, to withhold such amounts and timely pay the
same to the appropriate authority in the name of and on behalf of the holders of
the Notes, that it will file any necessary withholding tax returns or statements
when due, and that, as promptly as possible after the payment thereof, it will
deliver to each Holder of a Note appropriate documentation showing the payment
thereof, together with such additional documentary evidence as such Holders may
reasonably request from time to time.
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ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS. Except as otherwise
provided in this Section 8.01, the Company may terminate its obligations under
the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered (other than
destroyed, lost or stolen Notes that have been replaced or Notes that are
paid pursuant to Section 4.01 or Notes for whose payment money or
securities have theretofore been held in trust and thereafter repaid to the
Company, as provided in Section 8.05) have been delivered to the Trustee
for cancellation and the Company has paid all sums payable by it hereunder;
or
(ii) (A) the Notes mature within one year or all of them are to be
called for redemption within one year under arrangements satisfactory to
the Trustee for giving the notice of redemption, (B) the Company
irrevocably deposits in trust with the Trustee during such one-year period,
under the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, as trust funds solely for the benefit of the
Holders for that purpose, money or U.S. Government Obligations sufficient
(in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee), without consideration of any reinvestment of any interest
thereon, to pay principal, premium, if, any, and interest on the Notes to
maturity or redemption, as the case may be, and to pay all other sums
payable by it hereunder, (C) no Default or Event of Default with respect to
the Notes shall have occurred and be continuing on the date of such
deposit, (D) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound and (E)
the Company has delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, in each case stating that all conditions precedent
provided for herein relating to the satisfaction and discharge of this
Indenture have been complied with.
With respect to the foregoing clause (i), the Company's obligations under
Section 7.07 shall survive. With respect to the foregoing clause (ii), the
Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.04, 8.05 and 8.06 shall survive until the
Notes are no longer outstanding. Thereafter, only the Company's obligations in
Sections 7.07, 8.05 and 8.06 shall survive. After any such irrevocable deposit,
the Trustee upon request shall acknowledge in writing the discharge of the
Company's obligations under the Notes and this Indenture except for those
surviving obligations specified above.
SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE. The Company will be
deemed to have paid and will be discharged from any and all obligations in
respect of the Notes on the
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123rd day after the date of the deposit referred to in clause (A) of this
Section 8.02, and the provisions of this Indenture will no longer be in
effect with respect to the Notes, and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same, except as
to (i) rights of registration of transfer and exchange, (ii) substitution of
apparently mutilated, defaced, destroyed, lost or stolen Notes, (iii) rights
of Holders to receive payments of principal thereof and interest thereon,
(iv) the Company's obligations under Section 4.02, (v) the rights,
obligations and immunities of the Trustee hereunder and (vi) the rights of
the Holders as beneficiaries of this Indenture with respect to the property
so deposited with the Trustee payable to all or any of them; PROVIDED that
the following conditions shall have been satisfied:
(A) with reference to this Section 8.02, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee (or
another trustee satisfying the requirements of Section 7.10 of this
Indenture) and conveyed all right, title and interest for the benefit of
the Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust, specifically
pledged to the Trustee for the benefit of the Holders as security for
payment of the principal of, premium, if any, and interest, if any, on the
Notes, and dedicated solely to, the benefit of the Holders, in and to
(1) money in an amount, (2) U.S. Government Obligations that, through the
payment of interest, premium, if any, and principal in respect thereof in
accordance with their terms, will provide, not later than one day before
the due date of any payment referred to in this clause (A), money in an
amount or (3) a combination thereof in an amount sufficient, in the opinion
of a nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge, without consideration of the reinvestment of such interest and
after payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and accrued interest on the outstanding Notes at the
Stated Maturity of such principal or interest; PROVIDED that the Trustee
shall have been irrevocably instructed to apply such money or the proceeds
of such U.S. Government Obligations to the payment of such principal,
premium, if any, and interest with respect to the Notes;
(B) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(C) immediately after giving effect to such deposit on a pro forma
basis, no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or during the period ending on the 123rd day
after such date of deposit;
(D) the Company shall have delivered to the Trustee (1) either (x) a
ruling directed to the Trustee received from the Internal Revenue Service
to the effect that the
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Holders will not recognize income, gain or loss for federal income tax
purposes as a result of the Company's exercise of its option under this
Section 8.02 and will be subject to federal income tax on the same amount
and in the same manner and at the same times as would have been the case
if such option had not been exercised or (y) an Opinion of Counsel to the
same effect as the ruling described in clause (x) above accompanied by a
ruling to that effect published by the Internal Revenue Service, unless
there has been a change in the applicable federal income tax law since the
date of this Indenture such that a ruling from the Internal Revenue
Service is no longer required and (2) an Opinion of Counsel to the effect
that (x) the creation of the defeasance trust does not violate the
Investment Company Act of 1940 and (y) after the passage of 123 days
following the deposit (except, with respect to any trust funds for the
account of any Holder who may be deemed to be an "insider" for purposes
of the United States Bankruptcy Code, after one year following the
deposit), the trust funds will not be subject to the effect of Section 547
of the United States Bankruptcy Code or Section 15 of the New York Debtor
and Creditor Law in a case commenced by or against the Company under either
such statute, and either (I) the trust funds will no longer remain the
property of the Company (and therefore will not be subject to the effect of
any applicable bankruptcy, insolvency, reorganization or similar laws
affecting creditors' rights generally) or (II) if a court were to rule
under any such law in any case or proceeding that the trust funds remained
property of the Company, (a) assuming such trust funds remained in the
possession of the Trustee prior to such court ruling to the extent not paid
to the Holders, the Trustee will hold, for the benefit of the Holders, a
valid and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise except for the effect of Section
552(b) of the United States Bankruptcy Code on interest on the trust funds
accruing after the commencement of a case under such statute and (b) the
Holders will be entitled to receive adequate protection of their interests
in such trust funds if such trust funds are used in such case or
proceeding;
(E) if the Notes are then listed on a national securities exchange,
the Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that such deposit, defeasance and discharge will not cause the
Notes to be delisted; and
(F) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by
this Section 8.02 have been complied with.
Notwithstanding the foregoing, prior to the end of the 123-day (or one
year) period referred to in clause (D)(2)(y) of this Section 8.02, none of the
Company's obligations under this Indenture shall be discharged. Subsequent to
the end of such 123-day (or one year) period with respect to this Section 8.02,
the Company's obligations in Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09, 2.14, 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06 shall survive until the Notes
are no longer outstanding. Thereafter, only the Company's obligations in
Sections 7.07, 8.05 and
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69
8.06 shall survive. If and when a ruling from the Internal Revenue Service
or an Opinion of Counsel referred to in clause (D)(1) of this Section 8.02 is
able to be provided specifically without regard to, and not in reliance upon,
the continuance of the Company's obligations under Section 4.01, then the
Company's obligations under such Section 4.01 shall cease upon delivery to
the Trustee of such ruling or Opinion of Counsel and compliance with the
other conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request shall
acknowledge in writing the discharge of the Company's obligations under the
Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03. DEFEASANCE OF CERTAIN OBLIGATIONS. The Company may omit to
comply with any term, provision or condition set forth in clauses (iii) and (iv)
of Section 5.01 and Sections 4.03 through 4.17, Section 4.19, Section 4.20 and
clause (c) of Section 6.01 with respect to clauses (iii) and (iv) of Section
5.01 and Sections 4.03 through 4.17, Section 4.19, Section 4.20 and clauses (d),
(e), (f) and (i) of Section 6.01 shall be deemed not to be Events of Default, in
each case with respect to the outstanding Notes if:
(i) with reference to this Section 8.03, the Company has irrevocably
deposited or caused to be irrevocably deposited with the Trustee (or
another trustee satisfying the requirements of Section 7.10) and conveyed
all right, title and interest to the Trustee for the benefit of the
Holders, under the terms of an irrevocable trust agreement in form and
substance satisfactory to the Trustee as trust funds in trust, specifically
pledged to the Trustee for the benefit of the Holders as security for
payment of the principal of, premium, if any, and interest, if any, on the
Notes, and dedicated solely to, the benefit of the Holders, in and to
(A) money in an amount, (B) U.S. Government Obligations that, through the
payment of interest and principal in respect thereof in accordance with
their terms, will provide, not later than one day before the due date of
any payment referred to in this clause (i), money in an amount or (C) a
combination thereof in an amount sufficient, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, to pay and discharge,
without consideration of the reinvestment of such interest and after
payment of all federal, state and local taxes or other charges and
assessments in respect thereof payable by the Trustee, the principal of,
premium, if any, and interest on the outstanding Notes on the Stated
Maturity of such principal or interest; PROVIDED that the Trustee shall
have been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of such principal, premium,
if any, and interest with respect to the Notes;
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(ii) such deposit will not result in a breach or violation of, or
constitute a default under, this Indenture or any other agreement or
instrument to which the Company is a party or by which it is bound;
(iii) immediately after giving effect to such deposit on a pro
forma basis, no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or during the period ending on the
123rd day after such date of deposit;
(iv) the Company has delivered to the Trustee an Opinion of Counsel
to the effect that (A) the creation of the defeasance trust does not
violate the Investment Company Act of 1940, (B) the Trustee, for the
benefit of the Holders, has a valid first-priority security interest in
the trust funds, (C) the Holders will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit and defeasance
of certain obligations and will be subject to federal income tax on the
same amount and in the same manner and at the same times as would have
been the case if such deposit and defeasance had not occurred and (D) after
the passage of 123 days following the deposit (except, with respect to any
trust funds for the account of any Holder who may be deemed to be an
"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the trust funds will not be subject to the
effect of Section 547 of the United States Bankruptcy Code or Section 15
of the New York Debtor and Creditor Law in a case commenced by or against
the Company under either such statute, and either (1) the trust funds
will no longer remain the property of the Company (and therefore will not
be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally) or
(2) if a court were to rule under any such law in any case or proceeding
that the trust funds remained property of the Company, (x) assuming such
trust funds remained in the possession of the Trustee prior to such court
ruling to the extent not paid to the Holders, the Trustee will hold, for
the benefit of the Holders, a valid and perfected security interest in
such trust funds that is not avoidable in bankruptcy or otherwise (except
for the effect of Section 552(b) of the United States Bankruptcy Code on
interest on the trust funds accruing after the commencement of a case
under such statute) and (y) the Holders will be entitled to receive
adequate protection of their interests in such trust funds if such trust
funds are used in such case or proceeding;
(v) if the Notes are then listed on a national securities exchange,
the Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that such deposit defeasance and discharge will not cause the
Notes to be delisted; and
(vi) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, in each case stating that all conditions
precedent provided for herein relating to the defeasance contemplated by
this Section 8.03 have been complied with.
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71
SECTION 8.04. APPLICATION OF TRUST MONEY. Subject to Section 8.06, the
Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Section 8.01, 8.02 or 8.03, as the case may be,
and shall apply the deposited money and the money from U.S. Government
Obligations in accordance with the Notes and this Indenture to the payment of
principal of, premium, if any, and interest on the Notes; but such money need
not be segregated from other funds except to the extent required by law.
SECTION 8.05. REPAYMENT TO COMPANY. Subject to Sections 7.07, 8.01, 8.02
and 8.03, the Trustee and the Paying Agent shall promptly pay to the Company
upon request set forth in an Officers' Certificate any excess money held by them
at any time and thereupon shall be relieved from all liability with respect to
such money. The Trustee and the Paying Agent shall pay to the Company upon
request any money held by them for the payment of principal, premium, if any, or
interest that remains unclaimed for two years. After payment to the Company,
Holders entitled to such money must look to the Company for payment as general
creditors unless an applicable law designates another Person, and all liability
of the Trustee and such Paying Agent with respect to such money shall cease.
SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with Section 8.01,
8.02 or 8.03, as the case may be, by reason of any legal proceeding or by reason
of any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the Company's obligations
under this Indenture and the Notes shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.01, 8.02 or 8.03, as the case may be,
until such time as the Trustee or Paying Agent is permitted to apply all such
money or U.S. Government Obligations in accordance with Section 8.01, 8.02 or
8.03, as the case may be; PROVIDED that, if the Company has made any payment of
principal of, premium, if any, or interest on any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money or U.S.
Government Obligations held by the Trustee or Paying Agent.
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, when authorized by
a resolution of its Board of Directors (as evidenced by a Board Resolution
delivered to the Trustee), and the Trustee may amend or supplement this
Indenture or the Notes without notice to or the consent of any Holder:
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(1) to cure any ambiguity, defect or inconsistency in this Indenture;
PROVIDED that such amendments or supplements shall not adversely affect the
interests of the Holders in any material respect;
(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in connection
with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee; or
(5) to make any change that, in the good faith opinion of the Board
of Directors as evidenced by a Board Resolution, does not materially and
adversely affect the rights of any Holder.
SECTION 9.02. WITH CONSENT OF HOLDERS. Subject to Sections 6.04 and 6.07
and without prior notice to the Holders, the Company, when authorized by its
Board of Directors (as evidenced by a Board Resolution delivered to the
Trustee), and the Trustee may amend this Indenture and the Notes with the
written consent of the Holders of a majority in principal amount of the Notes
then outstanding, and the Holders of a majority in principal amount of the Notes
then outstanding by written notice to the Trustee may waive future compliance by
the Company with any provision of this Indenture or the Notes.
Notwithstanding the provisions of this Section 9.02, without the consent of
each Holder affected, an amendment or waiver, including a waiver pursuant to
Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or any
installment of interest on, any Note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or adversely affect any right of repayment at the
option of any Holder of any Note, or change any place of payment where, or
the currency in which, any Note or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) reduce the percentage in principal amount of outstanding Notes
the consent of whose Holders is required for any such supplemental
indenture, for any waiver of compliance with certain provisions of this
Indenture or certain Defaults and their consequences provided for in this
Indenture;
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(iii) waive a Default in the payment of principal of, premium, if
any, or interest on, any Note; or
(iv) modify any of the provisions of this Section 9.02, except to
increase any such percentage or to provide that certain other provisions of
this Indenture cannot be modified or waived without the consent of the
Holder of each outstanding Note affected thereby.
It shall not be necessary for the consent of the Holders under this Section
9.02 to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders affected thereby a notice
briefly describing the amendment, supplement or waiver. The Company will mail
supplemental indentures to Holders upon request. Any failure of the Company to
mail such notice, or any defect therein, shall not, however, in any way impair
or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. REVOCATION AND EFFECT OF CONSENT. Until an amendment or
waiver becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every subsequent Holder of a Note or portion of a Note that
evidences the same debt as the Note of the consenting Holder, even if notation
of the consent is not made on any Note. However, any such Holder or subsequent
Holder may revoke the consent as to its Note or portion of its Note. Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the time the amendment, supplement or waiver becomes
effective. An amendment, supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the requisite percentage
in principal amount of the outstanding Notes.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then, notwithstanding the last
two sentences of the immediately preceding paragraph, those persons who were
Holders at such record date (or their duly designated proxies) and only those
persons shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be Holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it shall bind
every Holder unless it is of the type described in any of clauses (i) through
(iv) of Section 9.02. In case of an amendment or waiver of the type described
in clauses (i) through (iv) of Section 9.02, the
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74
amendment or waiver shall bind each Holder who has consented to it and every
subsequent Holder of a Note that evidences the same indebtedness as the Note
of the consenting Holder.
SECTION 9.04. NOTATION ON OR EXCHANGE OF NOTES. If an amendment,
supplement or waiver changes the terms of a Note, the Trustee may require the
Holder to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Note about the changed terms and return it to the Holder and the
Trustee may place an appropriate notation on any Note thereafter authenticated.
Alternatively, if the Company or the Trustee so determines, the Company in
exchange for the Note shall issue and the Trustee shall authenticate a new Note
that reflects the changed terms. Failure to make the appropriate notation, or
issue a new Note, shall not affect the validity and effect of such amendment,
supplement or waiver.
SECTION 9.05. TRUSTEE TO SIGN AMENDMENTS, ETC. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of any amendment, supplement or waiver
authorized pursuant to this Article Nine is authorized or permitted by this
Indenture and that it will be valid and binding upon the Company. Subject to
the preceding sentence, the Trustee shall sign such amendment, supplement or
waiver if the same does not adversely affect the rights, duties, liabilities or
immunities of the Trustee. The Trustee may, but shall not be obligated to,
execute any such amendment, supplement or waiver that affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise.
SECTION 9.06. CONFORMITY WITH TRUST INDENTURE ACT. Every supplemental
indenture executed pursuant to this Article Nine shall conform to the
requirements of the TIA as then in effect.
ARTICLE TEN
SECURITY
SECTION 10.01. SECURITY. (a) On the Closing Date, the Company shall (i)
enter into the Escrow and Security Agreement and comply with the terms and
provisions thereof and (ii) purchase the Pledged Securities to be pledged to the
Trustee for the benefit of the Holders in an amount equal to the net proceeds to
be received by the Company from the sale of the Notes. At all times the Company
shall maintain Pledged Securities pledged to the Trustee for the benefit of the
Holders in such amount as will be sufficient upon receipt of scheduled interest
and/or principal payments of such Pledged Securities, in the opinion of a
nationally recognized firm of independent public accountants selected by the
Company, to provide for payment in full of the first four scheduled interest
payments due on the outstanding Notes. The Pledged Securities shall be pledged
by the Company to the Trustee for the benefit of the Holders and shall be held
by the
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75
Trustee in the Pledge Account pending disposition pursuant to the Escrow and
Security Agreement.
(b) Each Holder, by its acceptance of a Note, consents and agrees to the
terms of the Escrow and Security Agreement (including, without limitation, the
provisions providing for foreclosure and release of the Pledged Securities) as
the same may be in effect or may be amended from time to time in accordance with
its terms, and authorizes and directs the Trustee to enter into the Escrow and
Security Agreement and to perform its respective obligations and exercise its
respective rights thereunder in accordance therewith. The Company will do or
cause to be done all such acts and things as may be necessary or proper, or as
may be required by the provisions of the Escrow and Security Agreement, to
assure and confirm to the Trustee the security interest in the Pledged
Securities contemplated hereby, by the Escrow and Security Agreement or any part
thereof, as from time to time constituted, so as to render the same available
for the security and benefit of this Indenture and of the Notes secured hereby,
according to the intent and purposes herein expressed. The Company shall take,
or shall cause to be taken, any and all actions reasonably required (and any
action requested by the Trustee) to cause the Escrow and Security Agreement to
create and maintain, as security for the obligations of the Company under this
Indenture and the Notes, valid and enforceable first priority liens in and on
all the Pledged Securities, in favor of the Trustee, superior to and prior to
the rights of third Persons and subject to no other Liens.
(c) The release of any Pledged Securities pursuant to the Escrow and
Security Agreement will not be deemed to impair the security under this
Indenture in contravention of the provisions hereof if and to the extent the
Pledged Securities are released pursuant to this Indenture and the Escrow and
Security Agreement. To the extent applicable, the Company shall cause TIA
Section 314(d) relating to the release of property or securities from the Lien
and security interest of the Escrow and Security Agreement (other than pursuant
to Section 7(c) and 7(d) thereof) and relating to the substitution therefor of
any property or securities to be subjected to the Lien and security interest of
the Escrow and Security Agreement to be complied with. Any certificate or
opinion required by TIA Section 314(d) may be made by an Officer of the Company,
except in cases where TIA Section 314(d) requires that such certificate or
opinion be made by an independent Person, which Person shall be an independent
engineer, appraiser or other expert selected by the Company.
(d) The Company shall cause TIA Section 314(b), relating to opinions of
counsel regarding the Lien under the Escrow and Security Agreement, to be
complied with. The Trustee may, to the extent permitted by Sections 7.01 and
7.02 hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such instruments.
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(e) The Trustee, in its sole discretion and without the consent of the
Holders, may, and at the request of the Holders of at least 25% in aggregate
principal amount of Notes then outstanding shall, on behalf of the Holders, take
all actions it deems necessary or appropriate in order to (i) enforce any of the
terms of the Escrow and Security Agreement and (ii) collect and receive any and
all amounts payable in respect of the obligations of the Company thereunder. The
Trustee shall have power to institute and to maintain such suits and proceedings
as the Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders in the Pledged Securities (including power to institute
and maintain suits or proceedings to restrain the enforcement of or compliance
with any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudicial to the interests of the Holders or of the Trustee).
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT OF 1939. Prior to the effectiveness of
the Registration Statement, this Indenture shall incorporate and be governed by
the provisions of the TIA that are required to be part of and to govern
indentures qualified under the TIA. After the effectiveness of the Registration
Statement, this Indenture shall be subject to the provisions of the TIA that are
required to be a part of this Indenture and shall, to the extent applicable, be
governed by such provisions.
SECTION 11.02. NOTICES. Any notice or communication shall be sufficiently
given if in writing and delivered in person or mailed by first class mail
addressed as follows:
IF TO THE COMPANY:
Dobson Communications Corporation
13439 N. Broadway Extension, Suite 200
Oklahoma City, OK 73114
Attention: Chief Financial Officer
IF TO THE TRUSTEE:
United States Trust Company of New York
114 West 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Department
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77
The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder shall be mailed to it at its
address as it appears on the Security Register by first class mail and shall be
sufficiently given to him if so mailed within the time prescribed. Copies of
any such communication or notice to a Holder shall also be mailed to the Trustee
and each Agent at the same time.
Failure to mail a notice or communication to a Holder or any defect in it
shall not affect its sufficiency with respect to other Holders. Except for a
notice to the Trustee, which is deemed given only when received, and except as
otherwise provided in this Indenture, if a notice or communication is mailed in
the manner provided in this Section 11.02, it is duly given, whether or not the
addressee receives it.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Trustee shall constitute
a sufficient notification for every purpose hereunder.
SECTION 11.03. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon
any request or application by the Company to the Trustee to take any action
under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with; and
(ii) an Opinion of Counsel stating that, in the opinion of such
Counsel, all such conditions precedent have been complied with.
SECTION 11.04. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a condition or covenant
provided for in this Indenture shall include:
(i) a statement that each person signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
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(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statement or opinion contained in such
certificate or opinion is based;
(iii) a statement that, in the opinion of each such person, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(iv) a statement as to whether or not, in the opinion of each such
person, such condition or covenant has been complied with; PROVIDED,
HOWEVER, that, with respect to matters of fact, an Opinion of Counsel may
rely on an Officers' Certificate or certificates of public officials.
SECTION 11.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR. The Trustee
may make reasonable rules for action by or at a meeting of Holders. The Paying
Agent or Registrar may make reasonable rules for its functions.
SECTION 11.06. PAYMENT DATE OTHER THAN A BUSINESS DAY. If an Interest
Payment Date, Redemption Date, Payment Date, Stated Maturity or date of maturity
of any Note shall not be a Business Day, then payment of principal of, premium,
if any, or interest on such Note, as the case may be, need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Payment Date or Redemption
Date, or at the Stated Maturity or date of maturity of such Note; PROVIDED that
no interest shall accrue for the period from and after such Interest Payment
Date, Payment Date, Redemption Date, Stated Maturity or date of maturity, as the
case may be.
SECTION 11.07. GOVERNING LAW. The laws of the State of New York shall
govern this Indenture and the Notes. The Trustee, the Company and the Holders
agree to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to this Indenture or the
Notes.
SECTION 11.08. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any Subsidiary of the Company. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.
SECTION 11.09. NO RECOURSE AGAINST OTHERS. No recourse for the payment of
the principal of, premium, if any, or interest on any of the Notes, or for any
claim based thereon or otherwise in respect thereof, and no recourse under or
upon any obligation, covenant or agreement of the Company contained in this
Indenture, or in any of the Notes, or because of the creation of any
Indebtedness represented thereby, shall be had against any incorporator or
against any past,
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present or future partner, shareholder, other equityholder, officer, director,
employee or controlling person, as such, of the Company or of any successor
Person, either directly or through the Company or any successor Person,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that all such liability is hereby expressly waived and released as
a condition of, and as a consideration for, the execution of this Indenture
and the issue of the Notes.
SECTION 11.10. SUCCESSORS. All agreements of the Company in this
Indenture and the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 11.11. DUPLICATE ORIGINALS. The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
SECTION 11.12. SEPARABILITY. In case any provision in this Indenture or
in the Notes 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.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents,
Cross-Reference Table and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
and provisions hereof.
<PAGE>
80
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.
DOBSON COMMUNICATIONS
CORPORATION
By: /s/ Everett R. Dobson
-----------------------------
Name:
Title:
UNITED STATES TRUST COMPANY
OF NEW YORK
By: /s/ U.S. Trust Company of New York
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT A
[FACE OF NOTE]
DOBSON COMMUNICATIONS CORPORATION
11 3/4% Senior Note due 2007
[CUSIP] [CINS] [__________]
No. $_________
DOBSON COMMUNICATIONS CORPORATION, an Oklahoma corporation (the "Company",
which term includes any successor under the Indenture hereinafter referred to),
for value received, promises to pay to _____________, or its registered assigns,
the principal sum of ____________ ($____) on April 15, 2007.
Interest Payment Dates: April 15 and October 15, commencing October 15,
1997.
Regular Record Dates: April 1 and October 1.
Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.
<PAGE>
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be signed manually
or by facsimile by its duly authorized officers.
Date: DOBSON COMMUNICATIONS CORPORATION
By:
------------------------------
Name:
Title:
By:
-------------------------------
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 11 3/4% Senior Notes due 2007 described in the
within-mentioned Indenture.
UNITED STATES TRUST COMPANY OF
NEW YORK
as Trustee
By:
-------------------------------
Authorized Signatory
<PAGE>
A-3
[REVERSE SIDE OF NOTE]
DOBSON COMMUNICATIONS CORPORATION
11 3/4% Senior Note due 2007
1. PRINCIPAL AND INTEREST.
The Company will pay the principal of this Note on April 15, 2007.
The Company promises to pay interest on the principal amount of this Note
on each Interest Payment Date, as set forth below, at the rate per annum shown
above.
Interest will be payable semiannually (to the holders of record of the
Notes at the close of business on the April 1 or October 1 immediately preceding
the Interest Payment Date) on each Interest Payment Date, commencing October 15,
1997.
If an exchange offer registered under the Securities Act is not
consummated, or a Shelf Registration Statement under the Securities Act with
respect to resales of the Notes is not declared effective by the Commission, on
or before August 28, 1997 in accordance with the terms of the Registration
Rights Agreement dated February 25, 1997 between the Company and Morgan
Stanley & Co. Incorporated, Alex. Brown & Sons Incorporated, First Union Capital
Markets Corp. and NationsBanc Capital Markets, Inc., the annual interest rate
borne by the Notes shall be permanently increased by 0.5% from the rate shown
above accruing from August 28, 1997, payable in cash semiannually, in arrears,
on each Interest Payment Date, commencing October 15, 1997. The Holder of this
Note is entitled to the benefits of such Registration Rights Agreement.
Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from February 28, 1997;
PROVIDED that, if there is no existing default in the payment of interest and
this Note is authenticated between a Regular Record Date referred to on the face
hereof and the next succeeding Interest Payment Date, interest shall accrue from
such Interest Payment Date. Interest will be computed on the basis of a 360-day
year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if any,
and interest on overdue installments of interest, to the extent lawful, at a
rate per annum that is 2% in excess of the rate otherwise payable.
<PAGE>
A-4
2. METHOD OF PAYMENT.
The Company will pay interest (except defaulted interest) on the principal
amount of the Notes as provided above on each April 15 and October 15 commencing
October 15, 1997 to the persons who are Holders (as reflected in the Security
Register at the close of business on the April 1 or October 1, immediately
preceding the Interest Payment Date), in each case, even if the Note is
cancelled on registration of transfer or registration of exchange after such
record date; PROVIDED that, with respect to the payment of principal, the
Company will make payment to the Holder that surrenders this Note to a Paying
Agent on or after April 15, 2007.
The Company will pay principal, premium, if any, and as provided above,
interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts. However, the Company may pay
principal, premium, if any, and interest by its check payable in such money. It
may mail an interest check to a Holder's registered address (as reflected in the
Security Register). If a payment date is a date other than a Business Day at a
place of payment, payment may be made at that place on the next succeeding day
that is a Business Day and no interest shall accrue for the intervening period.
3. PAYING AGENT AND REGISTRAR.
Initially, the Trustee will act as authenticating agent, Paying Agent and
Registrar. The Company may change any authenticating agent, Paying Agent or
Registrar without notice. The Company, any Subsidiary or any Affiliate of any
of them may act as Paying Agent, Registrar or co-Registrar.
4. INDENTURE; LIMITATIONS.
The Company issued the Notes under an Indenture dated as of February 28,
1997 (the "Indenture"), between the Company and United States Trust Company of
New York, trustee (the "Trustee"). Capitalized terms herein are used as defined
in the Indenture unless otherwise indicated. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act. The Notes are subject to all such terms, and
Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.
The Notes are general obligations of the Company.
<PAGE>
A-5
5. OPTIONAL REDEMPTION.
The Notes will be redeemable, at the Company's option, in whole or in part,
at any time on or after April 15, 2002 and prior to maturity, upon not less
than 30 nor more than 60 days' prior notice mailed by first-class mail to each
Holder's last address as it appears in the Security Register, at the following
Redemption Prices (expressed in percentages of their principal amount), plus
accrued and unpaid interest, if any, to the Redemption Date (subject to the
right of Holders of record on the relevant Regular Record Date that is on or
prior to the Redemption Date to receive interest due on an Interest Payment
Date), if redeemed during the 12-month period commencing on April 15 of the
applicable year set forth below:
REDEMPTION
YEAR PRICE
---- -----------
2002 105.8750%
2003 102.9375
2004 and thereafter 100.000
At any time prior to April 15, 2000, the Company may redeem up to 35% of
the aggregate principal amount of the Notes with the Net Cash Proceeds from one
or more sales of Capital Stock of the Company (other than Disqualified Stock),
at any time as a whole or from time to time in part, upon not less than 30 nor
more than 60 days' prior notice mailed by first-class mail to each Holder's last
address as it appears in the Security Register, at a Redemption Price (expressed
in percentages of their principal amount) of 111.750%, plus accrued and unpaid
interest to the Redemption Date (subject to the right of Holders of record on
the relevant Regular Record Date that is on or prior to the Redemption Date to
receive interest due on an Interest Payment Date); provided that at least
$104,000,000 aggregate principal amount of Notes remains outstanding after each
such redemption.
Notes in original denominations larger than $1,000 may be redeemed in part.
On and after the Redemption Date, interest ceases to accrue on Notes or portions
of Notes called for redemption, unless the Company defaults in the payment of
the Redemption Price.
6. SPECIAL REPURCHASE OFFER AND SPECIAL REDEMPTION.
In the event either the Maryland 2 Acquisition or the Horizon Properties
Acquisition is not consummated prior to March 31, 1997, the Company must
commence, on March 31, 1997, and consummate an Offer to Purchase for $60 million
principal amount of Notes, at a purchase price equal to 101% of the principal
amount thereof, plus accrued interest to the date of purchase; PROVIDED that
neither of such acquisitions may be consummated until (i) the Reorganization
shall have been consummated with the preliminary approval of the FCC and (ii)
the Company and the Banks enter into definitive agreements for the Bank Facility
containing terms substantially as
<PAGE>
A-6
described in the Bank Facility Commitment Letter or, if at the time of and
after giving effect to such acquisition a default shall have occurred and be
continuing under the Bank Facility Agreement.
In the event neither the Maryland 2 Acquisition nor the Horizon Properties
Acquisition is consummated prior to March 31, 1997, the Company shall redeem the
Notes in whole, on 10 days' prior notice mailed by first class mail to each
Holder's last address as it appears in the Security Register, at a Redemption
Price (expressed in percentages of their principal amount) of 101%, plus accrued
and unpaid interest to the Redemption Date.
7. REPURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of any Change of Control, each Holder shall have the
right to require the repurchase of its Notes by the Company in cash pursuant to
the offer described in the Indenture at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of purchase (the "Payment Date").
A notice of such Change of Control will be mailed within 30 days after any
Change of Control occurs to each Holder at its last address as it appears in the
Security Register. Notes in original denominations larger than $1,000 may be
sold to the Company in part. On and after the Payment Date, interest ceases to
accrue on Notes or portions of Notes surrendered for purchase by the Company,
unless the Company defaults in the payment of the purchase price.
8. DENOMINATIONS; TRANSFER; EXCHANGE.
The Notes are in registered form without coupons in denominations of $1,000
of principal amount and multiples of $1,000 in excess thereof. A Holder may
register the transfer or exchange of Notes in accordance with the Indenture.
The Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
or exchange of any Notes selected for redemption. Also, it need not register
the transfer or exchange of any Notes for a period of 15 days before the day of
mailing of a notice of redemption of Notes selected for redemption.
9. PERSONS DEEMED OWNERS.
A Holder shall be treated as the owner of a Note for all purposes.
10. UNCLAIMED MONEY.
<PAGE>
A-7
If money for the payment of principal, premium, if any, or interest remains
unclaimed for two years, the Trustee and the Paying Agent will pay the money
back to the Company at its request. After that, Holders entitled to the money
must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
11. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.
If the Company deposits with the Trustee money or U.S. Government
Obligations sufficient to pay the then outstanding principal of, premium, if
any, and accrued interest on the Notes (a) to redemption or maturity, the
Company will be discharged from the Indenture and the Notes, except in certain
circumstances for certain sections thereof, and (b) to the Stated Maturity, the
Company will be discharged from certain covenants set forth in the Indenture.
12. AMENDMENT; SUPPLEMENT; WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Notes then outstanding, and any existing default or compliance
with any provision may be waived with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding. Without notice to
or the consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Notes to, among other things, cure any ambiguity, defect or
inconsistency and make any change that does not materially and adversely affect
the rights of any Holder.
13. RESTRICTIVE COVENANTS.
The Indenture imposes certain limitations on the ability of the Company and
its Restricted Subsidiaries, among other things, to Incur additional
Indebtedness, make Restricted Payments, use the proceeds from Asset Sales,
engage in transactions with Affiliates or merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each fiscal
quarter (90 days after the end of the last fiscal quarter of each year), the
Company must report to the Trustee on compliance with such limitations.
14. SUCCESSOR PERSONS.
When a successor person or other entity assumes all the obligations of its
predecessor under the Notes and the Indenture, the predecessor person will be
released from those obligations.
15. DEFAULTS AND REMEDIES.
<PAGE>
A-8
The following events constitute "Events of Default" under the Indenture:
(a) default in the payment of principal of (or premium, if any, on) any Note
when the same becomes due and payable at maturity, upon acceleration, redemption
or otherwise; (b) default in the payment of interest on any Note when the same
becomes due and payable, and such default continues for a period of 30 days;
PROVIDED that a failure to make any of the first four scheduled interest
payments on the Notes on the applicable Interest Payment Date will constitute an
Event of Default with no grace or cure period; (c) default in the performance or
breach of Article Five of the Indenture or the failure to make or consummate an
Offer to Purchase in accordance with Section 4.10, 4.11 or 4.20 of the
Indenture; (d) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture or under the Notes (other
than a default specified in clause (a), (b) or (c) above) and such default or
breach continues for a period of 30 consecutive days after written notice by the
Trustee or the Holders of 25% or more in aggregate principal amount of the
Notes; (e) there occurs with respect to any issue or issues of Indebtedness of
the Company or any Significant Subsidiary having an outstanding principal amount
of $5 million or more in the aggregate for all such issues of all such Persons,
whether such Indebtedness now exists or shall hereafter be created, (I) an event
of default that has caused the holder thereof to declare such Indebtedness to be
due and payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 30 days of such acceleration and/or (II) the failure to make a principal
payment at the final (but not any interim) fixed maturity and such defaulted
payment shall not have been made, waived or extended within 30 days of such
payment default; (f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $5 million in the aggregate for all such final
judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Company or any Significant Subsidiary and shall not be paid or discharged, and
there shall be any period of 30 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final judgments
or orders outstanding and not paid or discharged against all such Persons to
exceed $5 million during which a stay of enforcement of such final judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; (g) a
court having jurisdiction in the premises enters a decree or order for
(A) relief in respect of the Company or any Significant Subsidiary in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, (B) appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the Company or
any Significant Subsidiary or for all or substantially all of the property and
assets of the Company or any Significant Subsidiary or (C) the winding up or
liquidation of the affairs of the Company or any Significant Subsidiary and, in
each case, such decree or order shall remain unstayed and in effect for a period
of 30 consecutive days; (h) the Company or any Significant Subsidiary
(A) commences a voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B) consents to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or
<PAGE>
A-9
substantially all of the property and assets of the Company or any of its
Significant Subsidiaries or (C) effects any general assignment for the
benefit of creditors; or (i) the Escrow and Security Agreement shall cease to
be in full force and effect or enforceable in accordance with its terms,
other than in accordance with its terms.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the Notes may declare all the Notes to be due and payable. If a bankruptcy or
insolvency default with respect to the Company occurs and is continuing, the
Notes automatically become due and payable. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. The Trustee may
require indemnity satisfactory to it before it enforces the Indenture or the
Notes. Subject to certain limitations, Holders of at least a majority in
principal amount of the Notes then outstanding may direct the Trustee in its
exercise of any trust or power.
16. COLLATERAL.
The payment of the Notes will be secured by U.S. Government Obligations
held in an account to secure and fund the first four scheduled interest payments
on the Notes. Once the first four scheduled interest payments are made, the
Notes will be unsecured.
17. TRUSTEE DEALINGS WITH COMPANY.
The Trustee under the Indenture, in its individual or any other capacity,
may make loans to, accept deposits from and perform services for the Company or
its Affiliates and may otherwise deal with the Company or its Affiliates as if
it were not the Trustee.
18. NO RECOURSE AGAINST OTHERS.
No incorporator or any past, present or future partner, stockholder, other
equity holder, officer, director, employee or controlling person as such, of the
Company or of any successor Person shall have any liability for any obligations
of the Company under Escrow and Security Agreement, the Notes or the Indenture
or for any claim based on, in respect of or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes.
19. AUTHENTICATION.
This Note shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on the other side of this Note.
20. ABBREVIATIONS.
<PAGE>
A-10
Customary abbreviations may be used in the name of a Holder or an assignee,
such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties),
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to Dobson Communications
Corporation, 13439 N. Broadway Extension, Suite 200, Oklahoma City, OK 73114
Attention: Chief Financial Officer.
<PAGE>
A-11
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
INSERT TAXPAYER IDENTIFICATION NO.
___________________________________________________________________________
Please print or typewrite name and address including zip code of assignee
___________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting
and appointing ____________________________________________________________
attorney to transfer said Note on the books of the Company with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL NOTES OTHER THAN EXCHANGE NOTES,
PERMANENT OFFSHORE GLOBAL NOTES AND
PERMANENT OFFSHORE PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior to the date
which is the earlier of (i) the date the Shelf Registration Statement is
declared effective or (ii) the end of the period referred to in Rule 144(k)
under the Securities Act, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[CHECK ONE]
[ ] (a) this Note is being transferred in compliance with the exemption from
registration under the Securities Act of 1933 provided by Rule 144A
thereunder.
OR
[ ] (b) this Note is being transferred other than in accordance with (a) above
and documents are being furnished which comply with the conditions of
transfer set forth in this Note and the Indenture.
<PAGE>
A-12
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date:
-------------- ------------------------------------------------------
NOTICE: The signature to this assignment must
correspond with the name as written upon the face of
the within-mentioned instrument in every particular,
without alteration or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933 and is aware
that the sale to it is being made in reliance on Rule 144A and acknowledges that
it has received such information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
-------------- ------------------------------------------------------
NOTICE: To be executed by an executive officer
<PAGE>
A-13
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company pursuant to
Section 4.10, 4.11 or 4.20 of the Indenture, check the Box: / /
If you wish to have a portion of this Note purchased by the Company
pursuant to Section 4.10, 4.11 or 4.20 of the Indenture, state the amount:
$___________________.
Date:
--------------
Your Signature:
------------------------------------------------------------------
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:
--------------------------
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE
__________, ____
United States Trust Company
of New York
114 W. 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Department
Re: DOBSON COMMUNICATIONS CORPORATION (THE "COMPANY")
11 3/4% SENIOR NOTES DUE 2007 (THE "NOTES")
Dear Sirs:
This letter relates to U.S. $_______________ principal amount of Notes
represented by a Note (the "Legended Note") which bears a legend outlining
restrictions upon transfer of such Legended Note. Pursuant to Section 2.01
of the Indenture dated as of February 28, 1997 (the "Indenture") relating to
the Notes, we hereby certify that we are (or we will hold such securities on
behalf of) a person outside the United States to whom the Notes could be
transferred in accordance with Rule 904 of Regulation S promulgated under the
U.S. Securities Act of 1933. Accordingly, you are hereby requested to
exchange the legended certificate for an unlegended certificate representing
an identical principal amount of Notes, all in the manner provided for in the
Indenture.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
------------------------------------
Authorized Signature
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE
DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB ACCREDITED INVESTORS
__________, ____
United States Trust Company
of New York
114 W. 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Department
Re: DOBSON COMMUNICATIONS CORPORATION (THE "COMPANY")
11 3/4% SENIOR NOTES DUE 2007 (THE "NOTES")
Dear Sirs:
In connection with our proposed purchase of $______________ aggregate
principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is subject to
certain restrictions and conditions set forth in the Indenture dated as of
February 28, 1997 (the "Indenture"), relating to the Notes, and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes
except in compliance with, such restrictions and conditions and the Securities
Act of 1933 (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated,
that if we should sell any Notes, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter, (D) outside
the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the exemption from registration provided by Rule
144 under the Securities Act, or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to provide to any
person purchasing any of the Notes from us a notice advising such purchaser that
resales of the Notes are restricted as stated herein.
<PAGE>
C-2
3. We understand that, on any proposed resale of any Notes, we will be
required to furnish to you and the Company such certifications, legal opinions
and other information as you and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions. We further
understand that the Notes purchased by us will bear a legend to the foregoing
effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes purchased by us for our own account or for
one or more accounts (each of which is an institutional "accredited investor")
as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
-----------------------------
Authorized Signature
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S
__________, ____
United States Trust Company
of New York
114 W. 47th Street
New York, NY 10036-1532
Attention: Corporate Trust Department
Re: DOBSON COMMUNICATIONS CORPORATION (THE "COMPANY")
11 3/4% SENIOR NOTES DUE 2007 (THE "NOTES")
Dear Sirs:
In connection with our proposed sale of U.S.$___________________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of 1933
and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United States;
(2) at the time the buy order was originated, the transferee was outside
the United States or we and any person acting on our behalf reasonably believed
that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-----------------------------
Authorized Signature
<PAGE>
- ------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated February 25, 1997
between
DOBSON COMMUNICATIONS CORPORATION
and
MORGAN STANLEY & CO. INCORPORATED
ALEX. BROWN & SONS INCORPORATED
FIRST UNION CAPITAL MARKETS CORP.
NATIONSBANC CAPITAL MARKETS, INC.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into February 25, 1997, between DOBSON COMMUNICATIONS CORPORATION, an
Oklahoma corporation (the "Company"), and MORGAN STANLEY & CO. INCORPORATED,
ALEX. BROWN & SONS INCORPORATED, FIRST UNION CAPITAL MARKETS CORP. AND
NATIONSBANC CAPITAL MARKETS, INC. (the "Placement Agents").
This Agreement is made pursuant to the Placement Agreement dated the
date hereof, between the Company and Dobson Operating Company, an Oklahoma
corporation, and the Placement Agents (the "Placement Agreement"), which
provides for the sale by the Company to the Placement Agents of an aggregate
of $160,000,000 principal amount of the Company's 11 3/4% Senior Notes due
2007 (the "Securities"). In order to induce the Placement Agents to enter
into the Placement Agreement, the Company has agreed to provide to the
Placement Agents and their direct and indirect transferees the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended from time
to time.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"CLOSING DATE" shall mean the Closing Date as defined in the Placement
Agreement.
"COMPANY" shall have the meaning set forth in the preamble to this
Agreement and shall also include the Company's successors.
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"EXCHANGE OFFER" shall mean the exchange offer by the Company of
Exchange Securities for Registrable Securities pursuant to Section 2(a)
hereof.
"EXCHANGE OFFER REGISTRATION" shall mean a registration under the 1933
Act effected pursuant to Section 2(a) hereof.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"EXCHANGE SECURITIES" shall mean securities issued by the Company
under the Indenture containing terms identical to the Securities (except
that (i) interest thereon shall accrue from the last date on which interest
was paid on the Securities or, if no such interest has been paid, from
February 28, 1997 and (ii) the Exchange Securities will not contain
restrictions on transfer) and to be offered to Holders of Securities in
exchange for Securities pursuant to the Exchange Offer.
"HOLDER" shall mean the Placement Agents, for so long as they own any
Registrable Securities, and each of their successors, assigns and direct
and indirect transferees who become registered owners of Registrable
Securities under the Indenture; PROVIDED that for purposes of Sections 4
and 5 of this Agreement, the term "Holder" shall include Participating
Broker-Dealers (as defined in Section 4(a)).
"INDENTURE" shall mean the Indenture relating to the Securities to be
dated as of February 28, 1997 between the Company and United States Trust
Company of New York, as trustee, and as the same may be amended from time
to time in accordance with the terms thereof.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities; PROVIDED
that whenever the consent or approval of Holders of a specified percentage
of Registrable Securities is required hereunder, Registrable Securities
held by the Company or any of its affiliates (as such term is defined in
Rule 405 under the 1933 Act) (other than the Placement Agents or subsequent
holders of Registrable Securities if such subsequent holders are deemed to
be such affiliates solely by reason of their holding of such Registrable
Securities) shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage or amount.
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"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
"PLACEMENT AGENTS" shall have the meaning set forth in the preamble to
this Agreement.
"PLACEMENT AGREEMENT" shall have the meaning set forth in the preamble
to this Agreement.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to such prospectus,
and in each case including all material incorporated by reference therein.
"REGISTRABLE SECURITIES" shall mean the Securities; PROVIDED, HOWEVER,
that the Securities shall cease to be Registrable Securities (i) when a
Registration Statement with respect to such Securities shall have been
declared effective under the 1933 Act and such Securities shall have been
disposed of pursuant to such Registration Statement, (ii) when such
Securities have been sold to the public pursuant to Rule 144 (or any
similar provision then in force, but not Rule 144A) under the 1933 Act or
(iii) when such Securities shall have ceased to be outstanding.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses incurred in connection with compliance with state securities or
blue sky laws (including reasonable fees and disbursements of counsel for
any underwriters or Holders in connection with blue sky qualification of
any of the Exchange Securities or Registrable Securities), (iii) all
expenses of any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting
agreements, securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating agency
fees, (v) all fees and disbursements relating to the qualification of the
Indenture under applicable securities laws, (vi) the fees and disbursements
of the Trustee and its counsel, (vii) the fees and disbursements of counsel
for the Company and, in the case of a Shelf Registration Statement, the
fees and disbursements of one
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4
counsel for the Holders (which counsel shall be selected by the Majority
Holders and which counsel may also be counsel for the Placement Agents)
and (viii) the fees and disbursements of the independent public
accountants of the Company, including the expenses of any special audits
or "cold comfort" letters required by or incident to such performance and
compliance, but excluding fees and expenses of counsel to the
underwriters (other than fees and expenses set forth in clause (ii)
above) or the Holders and underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.
"REGISTRATION STATEMENT" shall mean any registration statement of the
Company that covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement and all amendments
and supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"SHELF REGISTRATION" shall mean a registration effected pursuant to
Section 2(b) hereof.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) of this
Agreement which covers all of the Registrable Securities (but no other
securities unless approved by the Holders whose Registrable Securities are
covered by such Shelf Registration Statement) on an appropriate form under
Rule 415 under the 1933 Act, or any similar rule that may be adopted by the
SEC, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"TRUSTEE" shall mean the trustee with respect to the Securities under
the Indenture.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" shall mean a
registration in which Registrable Securities are sold to an Underwriter (as
hereinafter defined) for reoffering to the public.
2. REGISTRATION UNDER THE 1933 ACT.
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(a) To the extent not prohibited by any applicable law or applicable
interpretation of the Staff of the SEC, the Company shall use its best efforts
to cause to be filed, no later than 90 days after the Closing Date, an Exchange
Offer Registration Statement covering the offer by the Company to the Holders to
exchange all of the Registrable Securities for Exchange Securities and to have
such Registration Statement remain effective until the closing of the Exchange
Offer. The Company shall commence the Exchange Offer promptly after the
Exchange Offer Registration Statement has been declared effective by the SEC and
use its best efforts to have the Exchange Offer consummated not later than 60
days after such effective date. The Company shall commence the Exchange Offer
by mailing the related exchange offer Prospectus and accompanying documents to
each Holder stating, in addition to such other disclosures as are required by
applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Securities validly
tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a period of
at least 20 business days from the date such notice is mailed) (the
"Exchange Dates");
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue interest, but will not retain any rights
under this Registration Rights Agreement;
(iv) that Holders electing to have a Registrable Security exchanged
pursuant to the Exchange Offer will be required to surrender such
Registrable Security, together with the enclosed letters of transmittal, to
the institution and at the address specified in the notice prior to the
close of business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the last Exchange Date, by sending to
the institution and at the address specified in the notice a telegram,
telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Securities delivered for
exchange and a statement that such Holder is withdrawing his election to
have such Securities exchanged.
As soon as practicable after the last Exchange Date, the Company
shall:
(i) accept for exchange Registrable Securities or portions thereof
validly tendered and not validly withdrawn pursuant to the Exchange Offer;
and
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6
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so accepted for
exchange by the Company and issue, and cause the Trustee to promptly
authenticate and mail to each Holder, an Exchange Security equal in
principal amount to the principal amount of the Registrable Securities
surrendered by such Holder.
The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the Staff of the SEC. The Company shall inform the
Placement Agents of the names and addresses of the Holders to whom the Exchange
Offer is made, and the Placement Agents shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate the tender of
Registrable Securities in the Exchange Offer.
(b) In the event that (i) the Company determines that the Exchange
Offer Registration provided for in Section 2(a) above is not available or may
not be consummated as soon as practicable after the last Exchange Date because
it would violate applicable law or the applicable interpretations of the Staff
of the SEC, (ii) the Exchange Offer is not for any other reason consummated by
August 28, 1997 or (iii) the Exchange Offer has been completed and in the
opinion of counsel for the Placement Agents a Registration Statement must be
filed and a Prospectus must be delivered by the Placement Agents in connection
with any offering or sale of Registrable Securities, the Company shall use its
best efforts to cause to be filed as soon as practicable after such
determination, date or notice of such opinion of counsel is given to the
Company, as the case may be, a Shelf Registration Statement providing for the
sale by the Holders of all of the Registrable Securities and to have such Shelf
Registration Statement declared effective by the SEC. In the event the Company
is required to file a Shelf Registration Statement solely as a result of the
matters referred to in clause (iii) of the preceding sentence, the Company shall
file and use its best efforts have declared effective by the SEC both an
Exchange Offer Registration Statement pursuant to Section 2(a) with respect to
all Registrable Securities and a Shelf Registration Statement (which may be a
combined Registration Statement with the Exchange Offer Registration Statement)
with respect to offers and sales of Registrable Securities held by the Placement
Agents after completion of the Exchange Offer. The Company agrees to use its
best efforts to keep the Shelf Registration Statement continuously effective
until the expiration of the period referred to in Rule 144(k) with respect to
all Registrable Securities covered by the Shelf Registration Statement or such
shorter period that will terminate when all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement. The Company further agrees to supplement or amend the
Shelf Registration Statement if required by the rules, regulations or
instructions applicable to the registration form used by the
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7
Company for such Shelf Registration Statement or by the 1933 Act or by any
other rules and regulations thereunder for shelf registration or if
reasonably requested by a Holder with respect to information relating to such
Holder, and to use its best efforts to cause any such amendment to become
effective and such Shelf Registration Statement to become usable as soon as
thereafter practicable. The Company agrees to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly
after its being used or filed with the SEC.
(c) The Company shall pay all Registration Expenses in connection
with the registration pursuant to Section 2(a) or Section 2(b). Each Holder
shall pay all underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to Section
2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof
will not be deemed to have become effective unless it has been declared
effective by the SEC; PROVIDED, HOWEVER, that, if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or
other order or requirement of the SEC or any other governmental agency or
court, such Registration Statement will be deemed not to have become
effective during the period of such interference until the offering of
Registrable Securities pursuant to such Registration Statement may legally
resume. As provided for in the Indenture, in the event that the Exchange
Offer is not consummated, and a Shelf Registration Statement is not declared
effective on or prior to August 28, 1997, the interest rate on the Securities
(and the Exchange Securities) will permanently increase by 0.5% per annum.
(e) Without limiting the remedies available to the Placement Agents
and the Holders, the Company acknowledges that any failure by the Company to
comply with its obligations under Section 2(a) and Section 2(b) hereof may
result in material irreparable injury to the Placement Agents or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any
such failure, the Placement Agents or any Holder may obtain such relief as
may be required to specifically enforce the Company's obligations under
Section 2(a) and Section 2(b) hereof.
3. REGISTRATION PROCEDURES.
In connection with the obligations of the Company with respect to
the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof,
the Company shall as expeditiously as possible:
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8
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the 1933 Act, which form (x) shall be selected by
the Company and (y) shall, in the case of a Shelf Registration, be
available for the sale of the Registrable Securities by the selling Holders
thereof and (z) shall comply as to form in all material respects with the
requirements of the applicable form and include all financial statements
required by the SEC to be filed therewith, and use its best efforts to
cause such Registration Statement to become effective and remain effective
in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period and cause each
Prospectus to be supplemented by any required prospectus supplement and, as
so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; to
keep each Prospectus current during the period described under Section 4(3)
and Rule 174 under the 1933 Act that is applicable to transactions by
brokers or dealers with respect to the Registrable Securities or Exchange
Securities;
(c) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, to counsel for the Placement Agents, to counsel for
the Holders and to each Underwriter of an Underwritten Offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or Underwriter
may reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Securities; and the Company consents to the
use of such Prospectus and any amendment or supplement thereto in
accordance with applicable law by each of the selling Holders of
Registrable Securities and any such Underwriters in connection with the
offering and sale of the Registrable Securities covered by and in the
manner described in such Prospectus or any amendment or supplement thereto
in accordance with applicable law;
(d) use its best efforts to register or qualify the Registrable
Securities under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement shall reasonably request in writing by the time the
applicable Registration Statement is declared effective by the SEC, to
cooperate with such Holders in connection with any filings required to be
made with the National Association of Securities Dealers, Inc. and do any
and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; PROVIDED,
HOWEVER, that the Company shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where
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9
it would not otherwise be required to qualify but for this Section 3(d),
(ii) file any general consent to service of process or (iii) subject itself
to taxation in any such jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities, counsel for the Holders and counsel for the
Placement Agents promptly and, if requested by any such Holder or counsel,
confirm such advice in writing (i) when a Registration Statement has become
effective and when any post-effective amendment thereto has been filed and
becomes effective, (ii) of any request by the SEC or any state securities
authority for amendments and supplements to a Registration Statement and
Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, between the effective date of a Registration Statement
and the closing of any sale of Registrable Securities covered thereby, the
representations and warranties of the Company contained in any underwriting
agreement, securities sales agreement or other similar agreement, if any,
relating to the offering cease to be true and correct in all material
respects or if the Company receives any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation of any proceeding for such purpose,
(v) of the happening of any event during the period a Shelf Registration
Statement is effective which makes any statement made in such Registration
Statement or the related Prospectus untrue in any material respect or which
requires the making of any changes in such Registration Statement or
Prospectus in order to make the statements therein not misleading and (vi)
of any determination by the Company that a post-effective amendment to a
Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the
earliest possible moment and provide immediate notice to each Holder of the
withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Securities, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Securities to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends and enable such Registrable Securities
to be in such denominations (consistent with the provisions of the
Indenture) and registered in such names as the selling Holders may
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10
reasonably request at least one business day prior to the closing of any
sale of Registrable Securities;
(i) in the case of a Shelf Registration, upon the occurrence of any
event contemplated by Section 3(e)(v) or (vi) hereof, use its best efforts
to prepare and file with the SEC a supplement or post-effective amendment
to a Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees to notify the Holders to suspend
use of the Prospectus as promptly as practicable after the occurrence of
such an event, and the Holders hereby agree to suspend use of the
Prospectus upon receipt of such notice until the Company has amended or
supplemented the Prospectus to correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide copies of such
document to the Placement Agents and their counsel (and, in the case of a
Shelf Registration Statement, the Holders and their counsel) and make such
of the representatives of the Company as shall be reasonably requested by
the Placement Agents or their counsel (and, in the case of a Shelf
Registration Statement, the Holders or their counsel) available for
discussion of such document, and shall not at any time file or make any
amendment to the Registration Statement, any Prospectus or any amendment of
or supplement to a Registration Statement or a Prospectus or any document
which is to be incorporated by reference into a Registration Statement or a
Prospectus, of which the Placement Agents and their counsel (and, in the
case of a Shelf Registration Statement, the Holders and their counsel)
shall not have previously been advised and furnished a copy or to which the
Placement Agents or their counsel (and, in the case of a Shelf Registration
Statement, the Holders or their counsel) shall reasonably object;
(k) obtain a CUSIP number for all Exchange Securities or Registrable
Securities, as the case may be, not later than the effective date of a
Registration Statement;
(l) cause the Indenture to be qualified under the Trust Indenture Act
of 1939, as amended (the "TIA"), in connection with the registration of the
Exchange Securities or Registrable Securities, as the case may be,
cooperate with the Trustee and
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the Holders to effect such changes to the Indenture as may be required
for the Indenture to be so qualified in accordance with the terms of the
TIA and execute, and use its best efforts to cause the Trustee to
execute, all documents as may be required to effect such changes and all
other forms and documents required to be filed with the SEC to enable the
Indenture to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the Registrable
Securities, any Underwriter participating in any disposition pursuant to
such Shelf Registration Statement, and attorneys and accountants designated
by the Holders, at reasonable times and in a reasonable manner, all
financial and other records, pertinent documents and properties of the
Company, and cause the respective officers, directors and employees of the
Company to supply all information reasonably requested by any such
representative, Underwriter, attorney or accountant in connection with a
Shelf Registration Statement;
(n) if reasonably requested by any Holder of Registrable Securities
covered by a Registration Statement, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such information with
respect to such Holder as such Holder reasonably requests to be included
therein and (ii) make all required filings of such Prospectus supplement or
such post-effective amendment as soon as the Company has received
notification of the matters to be incorporated in such filing; and
(o) in the case of a Shelf Registration, enter into such customary
agreements and take all such other actions in connection therewith
(including those requested by the Holders of a majority of the Registrable
Securities being sold) in order to expedite or facilitate the disposition
of such Registrable Securities including, but not limited to, an
Underwritten Offering and in such connection, (i) to the extent possible,
make such representations and warranties to the Holders and, in the event
of an Underwritten Offering, any Underwriters of such Registrable
Securities with respect to the business of the Company and its
subsidiaries, the Registration Statement, Prospectus and documents
incorporated by reference or deemed incorporated by reference, if any, in
each case, in form, substance and scope as are customarily made by issuers
to underwriters in underwritten offerings and confirm the same if and when
requested, (ii) obtain opinions of counsel to the Company (which counsel
and opinions, in form, scope and substance, shall be reasonably
satisfactory to the Holders and such Underwriters and their respective
counsel) addressed to each selling Holder and Underwriter of Registrable
Securities, covering the matters customarily covered in opinions requested
in underwritten offerings, (iii) obtain "cold comfort" letters from the
independent certified public accountants of the Company (and, if necessary,
any other certified public accountant of any subsidiary of the Company, or
of any business acquired by the Company for which financial statements and
financial data are or are
<PAGE>
12
required to be included in the Registration Statement) addressed to each
selling Holder and Underwriter of Registrable Securities, such letters to
be in customary form and covering matters of the type customarily covered
in "cold comfort" letters in connection with underwritten offerings, and
(iv) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority in principal amount of the
Registrable Securities being sold or the Underwriters, and which are
customarily delivered in underwritten offerings, to evidence the
continued validity of the representations and warranties of the Company
made pursuant to clause (i) above and to evidence compliance with any
customary conditions contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company may
require each Holder of Registrable Securities to furnish to the Company such
information regarding the Holder and the proposed distribution by such Holder
of such Registrable Securities as the Company may from time to time
reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3(e)(v) or (vi) hereof, such Holder
will forthwith discontinue disposition of Registrable Securities pursuant to
a Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof, and,
if so directed by the Company, such Holder will deliver to the Company (at
its expense) all copies in its possession, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. If the Company
shall give any such notice to suspend the disposition of Registrable
Securities pursuant to a Registration Statement, the Company shall extend the
period during which the Registration Statement shall be maintained effective
pursuant to this Agreement by the number of days during the period from and
including the date of the giving of such notice to and including the date
when the Holders shall have received copies of the supplemented or amended
Prospectus necessary to resume such dispositions. There may not be more than
90 days during any consecutive 365 day period in which such suspensions are
in effect.
The Holders of Registrable Securities covered by a Shelf
Registration Statement who desire to do so may sell such Registrable
Securities in an Underwritten Offering. In any such Underwritten Offering,
the investment banker or investment bankers and manager or managers (the
"Underwriters") that will administer the offering will be selected by the
Majority Holders of the Registrable Securities included in such offering.
4. PARTICIPATION OF BROKER-DEALERS IN EXCHANGE OFFER.
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(a) The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the
Exchange Offer in exchange for Securities that were acquired by such
broker-dealer as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), may be deemed to be an "underwriter" within
the meaning of the 1933 Act and must deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of such Exchange
Securities.
The Company understands that it is the Staff's position that if the
Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means by
which Participating Broker-Dealers may resell the Exchange Securities, without
naming the Participating Broker-Dealers or specifying the amount of Exchange
Securities owned by them, such Prospectus may be delivered by Participating
Broker-Dealers to satisfy their prospectus delivery obligation under the 1933
Act in connection with resales of Exchange Securities for their own accounts, so
long as the Prospectus otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other provisions of
this Agreement, the Company agrees that the provisions of this Agreement as they
relate to a Shelf Registration shall also apply to an Exchange Offer
Registration to the extent, and with such reasonable modifications thereto as
may be, reasonably requested by the Placement Agents or by one or more
Participating Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange Securities by
Participating Broker-Dealers consistent with the positions of the Staff recited
in Section 4(a) above; PROVIDED that:
(i) the Company shall not be required to amend or supplement the
Prospectus contained in the Exchange Offer Registration Statement, as would
otherwise be contemplated by Section 3(i), for a period exceeding 180 days
after the last Exchange Date (as such period may be extended pursuant to
the penultimate paragraph of Section 3 of this Agreement) and Participating
Broker-Dealers shall not be authorized by the Company to deliver and shall
not deliver such Prospectus after such period in connection with the
resales contemplated by this Section 4; and
(ii) the application of the Shelf Registration procedures set forth in
Section 3 of this Agreement to an Exchange Offer Registration, to the
extent not required by the positions of the Staff of the SEC or the 1933
Act and the rules and regulations thereunder, will be in conformity with
the reasonable request to the Company by the Placement Agents or with the
reasonable request in writing to the Company by one or more broker-dealers
who certify to the Placement Agents and the Company in writing that they
anticipate that they will be Participating Broker-Dealers; and PROVIDED
FURTHER that, in connection with such application of the Shelf Registration
procedures set forth
<PAGE>
14
in Section 3 to an Exchange Offer Registration, the Company shall be
obligated (x) to deal only with one entity representing the Participating
Broker-Dealers, which shall be Morgan Stanley & Co. Incorporated unless
it elects not to act as such representative, (y) to pay the fees and
expenses of only one counsel representing the Participating Broker-Dealers,
which shall be counsel to the Placement Agents unless such counsel elects
not to so act and (z) to cause to be delivered only one, if any, "cold
comfort" letter with respect to the Prospectus in the form existing on the
last Exchange Date and with respect to each subsequent amendment or
supplement, if any, effected during the period specified in clause (i)
above.
(c) The Placement Agents shall have no liability to the Company or
any Holder with respect to any request that it may make pursuant to Section 4(b)
above.
5. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless the Placement
Agents, each Holder and each person, if any, who controls any Placement Agent or
any Holder within the meaning of either Section 15 of the 1933 Act or Section 20
of the 1934 Act, or is under common control with, or is controlled by, any
Placement Agent or any Holder, from and against all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by the Placement Agent, any Holder or any such controlling
or affiliated person in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement (or any amendment thereto)
pursuant to which Exchange Securities or Registrable Securities were registered
under the 1933 Act, including all documents incorporated therein by reference,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or caused by any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact necessary
to make the statements therein in light of the circumstances under which they
were made not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to the Placement
Agents or any Holder furnished to the Company in writing by the Placement Agents
or any selling Holder expressly for use therein. In connection with any
Underwritten Offering permitted by Section 3, the Company will also indemnify
the Underwriters, if any, selling brokers, dealers and similar securities
industry professionals participating in the distribution, their officers and
directors and each Person who controls such Persons (within the meaning of the
Securities Act and the Exchange Act) to the same extent as provided above with
respect to the indemnification of the Holders, if requested in connection with
any Registration Statement.
<PAGE>
15
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company, the Placement Agents and the other selling Holders,
and each of their respective directors, officers who sign the Registration
Statement and each person, if any, who controls the Company, any Placement Agent
and any other selling Holder within the meaning of either Section 15 of the 1933
Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity
from the Company to the Placement Agents and the Holders, but only with
reference to information relating to such Holder furnished to the Company in
writing by such Holder expressly for use in any Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto).
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or paragraph (b) above, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Placement Agents and all
persons, if any, who control any Placement Agent within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and
expenses of more than one separate firm (in addition to any local counsel) for
the Company, its directors, its officers who sign the Registration Statement and
each person, if any, who controls the Company within the meaning of either such
Section and (c) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Holders and all persons, if any, who
control any Holders within the meaning of either such Section, and that all such
fees and expenses shall be reimbursed as they are incurred. In such case
involving the Placement Agents and persons who control the Placement Agent, such
firm shall be designated in writing by Morgan Stanley & Co. Incorporated. In
such case involving the Holders and such persons who control Holders, such firm
shall be designated in writing by the Majority Holders. In all other cases,
such firm shall be designated by the Company. The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent but, if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying
<PAGE>
16
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second and third sentences of this
paragraph, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party for such fees and expenses of
counsel in accordance with such request prior to the date of such settlement.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which such indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
(d) If the indemnification provided for in paragraph (a) or paragraph
(b) of this Section 4 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or parties on the one hand and of the indemnified party or parties on the
other hand in connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company and the Holders shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the Holders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this Section 5(d) are several
in proportion to the respective number of Registrable Securities of such Holder
that were registered pursuant to a Registration Statement.
(e) The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 5 were determined by PRO RATA
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in paragraph (d) above shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 5, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total
<PAGE>
17
price at which Registrable Securities were sold by such Holder exceeds the
amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
remedies provided for in this Section 5 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
The indemnity and contribution provisions contained in this Section 5
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
the Placement Agents, any Holder or any person controlling any Placement Agent
or any Holder, or by or on behalf of the Company, its officers or directors or
any person controlling the Company, (iii) acceptance of any of the Exchange
Securities and (iv) any sale of Registrable Securities pursuant to a Shelf
Registration Statement.
6. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company has not entered into,
and on or after the date of this Agreement will not enter into, any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
other issued and outstanding securities under any such agreements.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or consent; PROVIDED, HOWEVER, that no amendment, modification,
supplement, waiver or consents to any departure from the provisions of Section 5
hereof shall be effective as against any Holder of Registrable Securities unless
consented to in writing by such Holder.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder
to the Company by means of a notice given in accordance with the provisions of
this Section 6(c), which address initially is, with respect to the Placement
Agents, the address set forth in the Placement Agreement; and (ii) if to the
Company, initially at the Company's address set forth in the Placement
Agreement and
<PAGE>
18
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; PROVIDED that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Placement Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such person shall be entitled to receive the benefits hereof. The
Placement Agents (in their capacity as Placement Agents) shall have no liability
or obligation to the Company with respect to any failure by a Holder to comply
with, or any breach by any Holder of, any of the obligations of such Holder
under this Agreement.
(e) PURCHASES AND SALES OF NOTES. The Company shall not, and shall
use its best efforts to cause its affiliates (as defined in Rule 405 under the
1933 Act) not to, purchase and then resell or otherwise transfer any Notes.
(f) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Placement Agents, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
<PAGE>
19
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
(j) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
<PAGE>
20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DOBSON COMMUNICATIONS
CORPORATION
By /s/ Everett R. Dobson
-------------------------------------
Name:
Title:
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
ALEX. BROWN & SONS INCORPORATED
FIRST UNION CAPITAL MARKETS CORP.
NATIONSBANC CAPITAL MARKETS, INC.
By: /s/ MORGAN STANLEY & CO. INCORPORATED
By /s/ Morgan Stanley & Co. Incorporated
-------------------------------------
Name:
Title:
<PAGE>
ESCROW AND
SECURITY AGREEMENT
Dated as of February 28, 1997
From
DOBSON COMMUNICATIONS CORPORATION
AS PLEDGOR
to
UNITED STATES TRUST COMPANY OF NEW YORK
AS TRUSTEE
<PAGE>
T A B L E O F C O N T E N T S
PAGE
----
SECTION 1. DEFINITIONS; APPOINTMENT; DEPOSIT AND INVESTMENT . . . . . . . . 2
1.2 APPOINTMENT OF THE TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . 3
1.3 PLEDGE AND GRANT OF SECURITY INTEREST . . . . . . . . . . . . . . . . . 3
1.4. DEPOSIT OF ESCROWED FUNDS . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2. SECURITY FOR OBLIGATION . . . . . . . . . . . . . . . . . . . . 4
SECTION 3. DELIVERY OF COLLATERAL. . . . . . . . . . . . . . . . . . . . . 4
SECTION 4. MAINTAINING THE CASH COLLATERAL ACCOUNT . . . . . . . . . . . . 5
SECTION 5. INVESTING OF AMOUNTS IN THE CASH COLLATERAL ACCOUNT . . . . . . 5
SECTION 6. DELIVERY OF COLLATERAL INVESTMENTS; FILING. . . . . . . . . . . 5
SECTION 7. DISBURSEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 8. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . 10
SECTION 9. FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 10. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 11. POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 12. NO ASSUMPTION OF DUTIES; REASONABLE CARE. . . . . . . . . . . . 13
SECTION 13. INDEMNITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 14. REMEDIES UPON EVENT OF DEFAULT. . . . . . . . . . . . . . . . . 14
SECTION 15. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
ii
SECTION PAGE
----
SECTION 16. SECURITY INTEREST ABSOLUTE. . . . . . . . . . . . . . . . . . . 15
SECTION 17. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . 16
17.1. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17.2. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. . . . . . . . . . . . 17
17.3. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
17.4. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
17.5. COUNTERPART ORIGINALS. . . . . . . . . . . . . . . . . . . . . . . . 17
17.6. BENEFITS OF ESCROW AND SECURITY AGREEMENT. . . . . . . . . . . . . . 17
17.7. AMENDMENTS, WAIVERS AND CONSENTS . . . . . . . . . . . . . . . . . . 17
17.8. INTERPRETATION OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . 18
17.9. CONTINUING SECURITY INTEREST; TERMINATION. . . . . . . . . . . . . . 18
17.10. SURVIVAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 18
17.11. WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
17.12. AUTHORITY OF THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . 19
17.13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
17.14. FINAL EXPRESSION . . . . . . . . . . . . . . . . . . . . . . . . . . 19
17.15. RIGHTS OF HOLDERS OF THE NOTES . . . . . . . . . . . . . . . . . . . 19
17.16. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; WAIVER OF DAMAGES. . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>
ESCROW AND SECURITY AGREEMENT
This ESCROW AND SECURITY AGREEMENT (this "ESCROW AND SECURITY
AGREEMENT") is made and entered into as of February 28, 1997 by and among DOBSON
COMMUNICATIONS CORPORATION, an Oklahoma corporation (the "PLEDGOR"), having its
principal office at 13439 North Broadway Extension, Oklahoma City, Oklahoma
73114, MORGAN STANLEY & CO. INCORPORATED, ALEX. BROWN & SONS INCORPORATED, FIRST
UNION CAPITAL MARKETS CORP. and NATIONSBANC CAPITAL MARKETS, INC., acting as the
Placement Agents (collectively, the "PLACEMENT AGENTS"), in favor of United
States Trust Company of New York, a banking and trust company duly organized and
existing under the laws of the State of New York ("U.S. TRUST"), having an
office at 114 West 47th Street, New York, NY 10036, as trustee (the "TRUSTEE")
for the holders (the "HOLDERS") of the Notes (as defined herein) issued by the
Pledgor under the Indenture referred to below.
W I T N E S S E T H
WHEREAS, the Pledgor and the Placement Agents are parties to a
Placement Agreement dated February 25, 1997 (the "PLACEMENT AGREEMENT"),
pursuant to which the Pledgor will issue and sell to the Placement Agents
$160,000,000 in aggregate principal amount of 113/4% Senior Notes due 2007 (the
"NOTES");
WHEREAS, the Pledgor and the Trustee, have entered into that certain
indenture dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "INDENTURE"), pursuant to which the
Pledgor is issuing the Notes on the date hereof; and
WHEREAS, pursuant to the Placement Agreement and the Indenture, the
Pledgor is required to deposit on the Closing Date (as defined in the Placement
Agreement) $155,200,000 (the "ESCROWED FUNDS") with the Trustee to be held by
the Trustee for the benefit of the Holders of the Notes to secure the Pledgor's
obligation to (i) provide for payment in full of the first four scheduled
interest payments due on the Notes, (ii) secure repayment of the principal,
premium and interest on the Notes in the event that the Notes become due and
payable prior to such time as the first four scheduled interest payments thereon
shall have been paid in full, (iii) make an Offer to Purchase (as defined in the
Indenture) for $60 million principal amount of Notes (a "SPECIAL REPURCHASE
OFFER") in the
<PAGE>
2
event that either the Maryland 2 Acquisition (as defined in the Indenture) or
the Horizon Properties Acquisition (as defined in the Indenture) is not
consummated by March 31, 1997 (the "TERMINATION DATE") and (iv) redeem all of
the Notes in the event that neither the Maryland 2 Acquisition nor the
Horizon Properties Acquisition is consummated by the Termination Date
(collectively, the "OBLIGATIONS");
WHEREAS, the Pledgor has opened a non-interest bearing cash collateral
account (the "CASH COLLATERAL ACCOUNT) with U.S. Trust at its office at 114 West
47th Street New York, NY 10036 Account No. 047-005-00 in the name of the Pledgor
but under the sole dominion and control of the Trustee and subject to the terms
of this Escrow and Security Agreement; and
WHEREAS, to secure the Obligations of the Pledgor, the Pledgor has
agreed to (i) pledge to the Trustee for its benefit and the ratable benefit of
the Holders of the Notes, a security interest in the Escrowed Funds and the
Collateral (as hereinafter defined) and (ii) execute and deliver this Escrow and
Security Agreement in order to secure the payment and performance by the Pledgor
of all the Obligations.
AGREEMENT
NOW, THEREFORE, in consideration of the premises herein contained, and
in order to induce the Holders of the Notes to purchase the Notes, the Pledgor,
the Placement Agents and the Trustee hereby agree, for the benefit of the
Trustee and for the ratable benefit of the Holders of the Notes, as follows:
SECTION 1. DEFINITIONS; APPOINTMENT; DEPOSIT AND INVESTMENT.
1.1 DEFINITIONS.
"ACQUISITION" shall mean the Maryland 2 Acquisition or the Horizon
Properties Acquisition, as the context requires.
"CASH EQUIVALENTS" means any of the following, to the extent owned by
the Pledgor free and clear of all liens other than liens created hereunder:
(a) U.S. Government Obligations, (b) insured certificates of deposit of or
time deposits with any commercial bank that (i) is a member of the Federal
Reserve System, (ii) issues (or the parent of which issues) commercial
paper rated as described in clause (c), (iii) is organized under the laws
of the United States or any State thereof and (iv) has combined capital and
surplus of at least $1 billion or (c) commercial paper in an aggregate
amount of no more than $5 million per issuer outstanding at any time,
issued by any corporation organized under the laws of any State of the
United States and rated
<PAGE>
3
at least "Prime-1" (or the then equivalent grade) by Moody's Investors
Service, Inc. or "A-1" (or the then equivalent grade) by Standard & Poor's
Ratings Service.
"OFFICERS' CERTIFICATE" shall mean a certificate signed by the
President or any Vice President of the Pledgor stating that (i) the Bank
Facility Agreement (as defined in the Indenture) has been consummated and
is in full force and effect and there are no defaults in existence under
the Bank Facility Agreement, (ii) all FCC and any other required
governmental consents and approvals with respect to the Acquisition have
been obtained, (iii) the Acquisition has been consummated or will be
consummated on the date of the release of such funds and (iv) the corporate
reorganization pursuant to which the Company became the holding company
parent of Dobson Operating Company has been consummated with the approval
of the FCC.
"OPINIONS OF COUNSEL" shall mean an opinion of Pate, Kempf & Knarr
substantially in the form attached hereto as Exhibit B and an opinion of
Wilkinson, Barker, Knauer & Quinn substantially in the form attached hereto
as Exhibit C. As to factual matters, each of Pate, Kempf & Knarr and
Wilkinson, Barker, Knauer & Quinn may rely on a certificate signed by the
President or any Vice President of the Pledgor and attached to its opinion.
"TRUSTEE" shall mean the Person named as the "Trustee" in the first
paragraph of this Agreement until a successor Trustee shall have become
such, and thereafter "Trustee" shall mean the Person who is then the
Trustee hereunder.
All defined terms used herein without definition shall have the
respective meanings ascribed to them in the Indenture. Unless otherwise defined
herein or in the Indenture, terms used in Articles 8 or 9 of the Uniform
Commercial Code as in effect in the State of New York (the "U.C.C.") are used
herein as therein defined.
1.2 APPOINTMENT OF THE TRUSTEE. The Pledgor and the Placement
Agents hereby appoint the Trustee as Trustee in accordance with the terms
and conditions set forth herein and the Trustee hereby accepts such
appointment.
1.3 PLEDGE AND GRANT OF SECURITY INTEREST. The Pledgor hereby
pledges to the Trustee for its benefit and for the ratable benefit of the
Holders of the Notes, and grants to the Trustee for its benefit and for the
ratable benefit of the Holders of the Notes, a continuing first priority
security interest in and to all of the Pledgor's right, title and interest
in, to and under the following (hereinafter collectively referred to as the
"COLLATERAL"), whether characterized as investment property, general
intangibles or otherwise: (a) the Cash Collateral Account, all funds held
therein and all certificates and instruments, if any, from time to time
representing or evidencing the
<PAGE>
4
Cash Collateral Account, (b) all Collateral Investments (as hereinafter
defined) and all certificates and instruments, if any, representing or
evidencing the Collateral Investments, and any and all securities
entitlements to the Collateral Investments, and any and all related
securities accounts in which security entitlements to the Collateral
Investments are carried (c) all notes, certificates of deposit, deposit
accounts, checks and other instruments from time to time hereafter
delivered to or otherwise possessed by the Trustee for or on behalf of the
Pledgor in substitution for or in addition to any or all the then existing
Collateral, (d) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the then existing Collateral,
and (e) all proceeds of any and all of the foregoing Collateral (including,
without limitation, proceeds that constitute property of the types
described in clauses (a) - (d) of this Section 1.3) and, to the extent not
otherwise included, all cash.
1.4. DEPOSIT OF ESCROWED FUNDS. The Pledgor shall deposit, or
cause to be deposited, all Escrowed Funds into the Cash Collateral Account.
SECTION 2. SECURITY FOR OBLIGATION. This Escrow and Security
Agreement secures the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of all the
Obligations.
SECTION 3. DELIVERY OF COLLATERAL. (a) All certificates or
instruments representing or evidencing the Collateral, including, without
limitation, amounts invested as provided in Section 5, shall be delivered to and
held by or on behalf of the Trustee pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
sufficient to convey a valid security interest in such Collateral to the Trustee
or shall be credited to a securities account (the "COLLATERAL INVESTMENTS
ACCOUNT") designated by the Trustee. For the better perfection of the Trustee's
rights in and to the Collateral, the Pledgor shall forthwith, upon the pledge of
any Collateral hereunder, cause all such Collateral, including the Collateral
Investments Account and all other accounts representing a security entitlement
to or containing any Collateral (including, without limitation, any Collateral
Investments) to be registered in the name of the Trustee or such of its nominees
as the Trustee shall direct, and to be under the sole dominion and control of
the Trustee, which dominion and control shall be agreed to and acknowledged by
any securities intermediary holding any such account in an acknowledgement in
the form of Exhibit D hereto, subject only to the revocable rights specified in
Section 7. In addition, the Trustee shall have the right at any time to
exchange certificates or instruments representing or evidencing the Collateral
for certificates or instruments of smaller or larger denominations.
<PAGE>
5
SECTION 4. MAINTAINING THE CASH COLLATERAL ACCOUNT. (a) So long as
any Obligation shall remain unpaid, the Pledgor will maintain the Cash
Collateral Account with U.S. Trust.
(b) It shall be a term and condition of the Cash Collateral Account,
notwithstanding any term or condition to the contrary in any other
agreement relating to the Cash Collateral Account, and except as otherwise
provided by the provisions of Section 7 and Section 14, that no amount
(including interest on Collateral Investments) shall be paid or released to
or for the account of, or withdrawn by or for the account of, the Pledgor
or any other Person from the Cash Collateral Account.
The Cash Collateral Account shall be subject to such applicable laws, and such
applicable regulations of the Board of Governors of the Federal Reserve System
and of any other appropriate banking or governmental authority, as may now or
hereafter be in effect.
SECTION 5. INVESTING OF AMOUNTS IN THE CASH COLLATERAL ACCOUNT. If
requested by the Pledgor, the Trustee will, subject to the provisions of
Section 7 and Section 14, from time to time (a) invest amounts on deposit in the
Cash Collateral Account in such Cash Equivalents in the name of the Trustee as
the Pledgor may select and the Trustee may approve and (b) invest interest paid
on the Cash Equivalents referred to in clause (a) above, and reinvest other
proceeds of any such Cash Equivalents that may mature or be sold, in each case
in such Cash Equivalents in the name of the Trustee, as the Pledgor may select
and the Trustee may approve (the Cash Equivalents referred to in clauses (a) and
(b) above being collectively "COLLATERAL INVESTMENTS"); PROVIDED, HOWEVER, that
(a) following the consummation of the first Acquisition, the amount on deposit
in the Collateral Investments Account must include U.S. Government Obligations
sufficient to provide for the payment in full of the first four scheduled
interest payments on $100 million principal amount of Notes and (b) following
the consummation of the second Acquisition or the consummation of the Special
Repurchase Offer, the amount on deposit in the Collateral Investments Account
shall be U.S. Government Obligations sufficient to provide for the payment in
full of the first four scheduled interest payments, on all of the Notes then
outstanding. Interest and proceeds that are not invested or reinvested in
Collateral Investments as provided above shall be deposited and held in the Cash
Collateral Account. In no event shall the Trustee be liable for any loss in the
investment or reinvestment of amounts held in the Cash Collateral Account.
SECTION 6. DELIVERY OF COLLATERAL INVESTMENTS; FILING. (a) The
Trustee shall become the holder of the Collateral Investments and of any and all
security entitlements to the Collateral Investments, through action by the
Federal Reserve Bank of New York ("FRBNY") or another securities intermediary,
as confirmed (in writing or electronically or otherwise in accordance with
standard industry practice) to the Trustee by FRBNY or such other securities
intermediary (i) indicating by book-entry that the Collateral Investments or a
security
<PAGE>
6
entitlement thereto has been credited to the Collateral Investments Account,
or (ii) acquiring the Collateral Investments or a security entitlement
thereto for the Trustee and accepting the same for credit to the Collateral
Investments Account.
(b) Prior to or concurrently with the execution and delivery hereof
and prior to the transfer to the Trustee of Collateral Investments (or
acquisition by the Trustee of any security entitlement thereto), as provided in
subsection (a) of this Section 6, the Trustee shall establish the Collateral
Investments Account on its books as an account segregated from all other
custodial or collateral accounts at its office at 114 West 47th Street, New
York, NY 10036. Upon transfer of the Collateral Investments to the Trustee (or
the Trustee's acquisition of a security entitlement thereto), as confirmed to
the Trustee by FRBNY or another securities intermediary, the Trustee shall make
appropriate book entries indicating that the Collateral Investments and/or such
security entitlement have been credited to and are held in the Collateral
Investments Account. Subject to the other terms and conditions of this Escrow
and Security Agreement, all Collateral Investments held by the Trustee pursuant
to this Escrow and Security Agreement shall be held in the Collateral
Investments Account subject (except as expressly provided in subsections
7(a)-7(e) and 7(g) hereof) to the exclusive dominion and control of the Trustee
and exclusively for the benefit of the Trustee and for the ratable benefit of
the Holders of the Notes and segregated from all other funds or other property
otherwise held by the Trustee.
(c) All Collateral shall be retained in the Cash Collateral Account
and the Collateral Investments Account pending disbursement pursuant to the
terms hereof.
(d) Concurrently with the execution and delivery of this Agreement,
the Trustee is delivering to the Pledgor and the Placement Agents a duly
executed certificate, in the form of EXHIBIT A hereto, of an officer of the
Trustee, confirming the Trustee's establishment and maintenance of the
Collateral Investment Account and its receipt and holding of the Collateral
Investments or a security entitlement thereto and the crediting of the
Collateral Investments or such security entitlement to the Collateral Investment
Account, all in accordance with this Escrow and Security Agreement.
(e) Concurrently with the execution and delivery of this Agreement,
the Pledgor is delivering to the Trustee acknowledgement copies or stamped
receipt copies of proper financing statements, duly filed on or before the
Closing Date under the Uniform Commercial Code of the State of New York and the
State of Oklahoma, covering the Collateral described in this Escrow and Security
Agreement.
SECTION 7. DISBURSEMENTS. The Trustee shall hold the assets in
the Cash Collateral Account and the Collateral Investments Account and release
the same, or a portion thereof, only as follows:
<PAGE>
7
(a) At least five Business Days prior to the due date of any of the
first four scheduled interest payments on the Notes, the Pledgor may,
pursuant to written instructions executed by the Pledgor (an "ISSUER ORDER"),
direct the Trustee to release from the Cash Collateral Account and pay to the
Holders of the Notes proceeds sufficient to provide for payment in full of
such interest then due on the Notes. Upon receipt of an Issuer Order, the
Trustee will take any action necessary to provide for the payment of the
interest on the Notes in accordance with the payment provisions of the
Indenture to the Holders of the Notes from (and to the extent of) proceeds of
the Escrowed Funds in the Cash Collateral Account. Nothing in this Section 7
shall affect the Trustee's rights to apply the Collateral to the payments of
amounts due on the Notes upon acceleration thereof.
(b) If the Pledgor makes any interest payment or portion of an
interest payment for which the Collateral is security from a source of funds
other than the Cash Collateral Account ("PLEDGOR FUNDS"), the Pledgor may,
after payment in full of such interest payment or portion thereof from
proceeds of the Collateral or such Pledgor Funds or both, direct the Trustee
to release to the Pledgor or to another party at the direction of the Pledgor
(the "PLEDGOR'S DESIGNEE") proceeds from the Cash Collateral Account in an
amount less than or equal to the amount of Pledgor Funds applied to such
interest payment. Upon receipt of an Issuer Order by the Trustee, the
Trustee shall pay over to the Pledgor or the Pledgor's Designee, as the case
may be, the requested amount from proceeds in the Cash Collateral Account.
Concurrently with any release of funds to the Pledgor pursuant to this
Section 7(b), the Pledgor shall deliver to the Trustee a certificate signed
by an officer of the Pledgor stating that such release has been duly
authorized by the Pledgor and will not contravene any provision of applicable
law or the Certificate of Incorporation of the Pledgor or any material
agreement or other material instrument binding upon the Pledgor or any of its
subsidiaries or any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Pledgor or any of its
subsidiaries or result in the creation or imposition of any Lien on any
assets of the Pledgor, except for the security interest granted under the
Escrow and Security Agreement.
(c) Upon receipt by the Trustee prior to 9:00 A.M. New York City
time on the Termination Date of an Officers' Certificate and Opinions of
Counsel with respect to the first Acquisition, the Trustee shall immediately
disburse proceeds from the Cash Collateral Account such that the amount
remaining in the Cash Collateral Account equals (i) an amount sufficient to
purchase U.S. Government Obligations in such amount as will be sufficient
upon receipt of scheduled interest and principal payments on such securities,
in the opinion of a nationally recognized firm of independent public
accountants selected by the Pledgor, to provide for payment in full of the
first four scheduled interest payments due on $100 million principal amount
of Notes plus (ii) $60.6 million plus the amount of interest that would
accrue on the $60.0 million principal amount of Notes from the Closing Date
to April 30, 1997 to, or at the written direction of, the Pledgor by the
close of business on the date such Opinions of
<PAGE>
8
Counsel and Officers' Certificate are received by the Trustee; PROVIDED,
HOWEVER, that if such directions, the Opinions of Counsel and Officers'
Certificate are received by the Trustee (i) on a day other than a Business
Day or (ii) after 9:00 A.M. local time on such date, then, in either
instance, the Trustee shall disburse the proceeds by the close of business on
the next Business Day (unless such date is the Closing Date in which case the
Trustee shall nevertheless disburse the proceeds immediately). The Pledgor
agrees to use the disbursed proceeds to consummate the Acquisition on the
date of such release or to repay indebtedness under the Bank Facility
Agreement if the Acquisition was financed with such indebtedness; PROVIDED
that the Pledgor may retain up to $7.55 million of such proceeds.
(d) If the Trustee receives, prior to 9:00 A.M. New York City time
on the Termination Date, an Officers' Certificate and Opinions of Counsel
with respect to the second Acquisition, the Trustee shall immediately
disburse from the Cash Collateral Account to, or at the written direction of,
the Pledgor by the close of business, on the date such Opinions of Counsel
and Officers' Certificate are received by the Trustee, proceeds to the extent
the U.S. Government Obligations held in the Collateral Investment Account
exceed the amount sufficient upon the receipt of scheduled interest and
principal payments on such securities, in the opinion of a nationally
recognized firm of independent public accountants selected by the Pledgor, to
provide for payment in full of the first four scheduled interest payments due
on all Notes then outstanding.
(e) (i) On the Termination Date, if one, but not both Acquisitions
have been consummated prior to such date, the Pledgor shall mail a notice to
the Trustee and each Holder of the Notes stating that the Pledgor is making a
Special Repurchase Offer for $60 million principal amount of the Notes on a
date no earlier than 30 days and no later than 60 days after the Termination
Date (the "PURCHASE DATE"), at 101% of the principal amount thereof plus
accrued interest thereon from the Closing Date to the Purchase Date (the
"PURCHASE PRICE"), and shall state that such Notes must be surrendered to the
Trustee in order to collect the Purchase Price.
(ii) On the Purchase Date, the Trustee shall release proceeds from the
Cash Collateral Account to the Paying Agent to be used to repurchase Notes
surrendered in the Special Repurchase Offer and the Trustee shall release
proceeds to the Pledgor to the extent that the U.S. Government Obligations
held in the Collateral Investment Account exceed the amount sufficient upon
the receipt of scheduled interest and principal payments on such
securities, in the opinion of a nationally recognized firm of independent
public accountants selected by the Pledgor, to provide for payment in full
of the first four scheduled interest payments due on all Notes then
outstanding. The Special Repurchase Offer shall be made as specified in
the Indenture.
<PAGE>
9
(iii) On the Termination Date, if neither the Maryland 2
Acquisition nor the Horizon Properties Acquisition has been consummated
prior to such date, the Trustee shall mail a notice by first class mail to
each Holder's last address as it appears on the Security Register (as
determined in the Indenture) stating that all of the outstanding Notes
shall be redeemed within ten days after the Termination Date (the
"REDEMPTION DATE"), at 101% of the principal amount thereof plus accrued
interest thereon from the Closing Date to the Redemption Date (the "SPECIAL
REDEMPTION PRICE"), and shall state that the Notes must be surrendered to
the Trustee in order to collect the Special Redemption Price.
(iv) On the Business Day prior to the Redemption Date, the Trustee
shall release all Collateral to the Paying Agent. The Notes shall be
redeemed as specified in the Indenture.
(f)(i) In the event, for any reason, the amount of Collateral to be
released is insufficient to pay the aggregate Purchase Price to repurchase
the portion of the Notes as provided for in Section 5(e)(i) hereof, the
Pledgor shall, on or prior to the Purchase Date, deposit with the Paying
Agent the amount of funds necessary to permit such Notes to be repurchased in
accordance with the provisions of the Indenture.
(ii) In the event, for any reason, the amount of Collateral to be
released is insufficient to pay the aggregate Special Redemption Price to
redeem all of the outstanding Notes, the Pledgor shall, on or prior to the
Redemption Date, deposit with the Paying Agent the amount of funds
necessary to permit all outstanding Notes to be redeemed in accordance with
the provisions of the Indenture.
(g) If at any time following the consummation of the second
Acquisition or the Special Repurchase Offer, the principal of and interest on
the Collateral exceeds 100% of the amount sufficient, in the written opinion
of a nationally recognized firm of independent accountants selected by the
Pledgor and delivered to the Trustee, to provide for payment in full of the
first four scheduled interest payments due on the Notes, the Pledgor may
direct the Trustee to release any such overfunded amount to the Pledgor or to
such other party as the Pledgor may direct. Upon receipt of an Issuer Order
the Trustee shall pay over to the Pledgor or the Pledgor's Designee, as the
case may be, any such overfunded amount.
(h) Upon payment in full of the first four scheduled interest
payments on the Notes in a timely manner, the security interest in the
Collateral evidenced by this Escrow and Security Agreement will automatically
terminate and be of no further force and effect and the Collateral shall
promptly be paid over and transferred to the Pledgor. Furthermore, upon the
release of any Collateral from the Cash Collateral Account in accordance with
the terms of this Escrow and Security Agreement, whether upon release of
Collateral to Holders as payment of
<PAGE>
10
interest or otherwise, the security interest evidenced by this Escrow and
Security Agreement in such released Collateral will automatically terminate
and be of no further force and effect.
(i) At least three Business Days prior to the due date of any of
the first four scheduled interest payments on the Notes, the Pledgor
covenants to give the Trustee (by Issuer Order) notice as to whether payment
of interest will be made pursuant to Section 7(a) or 7(b) and as to the
respective amounts of interest that will be paid pursuant to Section 7(a) or
7(b). If no such notice is given, the Trustee will act pursuant to Section
7(a) as if it had received an Issuer Order pursuant thereto for the payment
in full of the interest then due.
(j) The Trustee shall not be required to liquidate any Collateral
Investment in order to make any scheduled payment of interest or any release
hereunder unless instructed to do so by Issuer Order or pursuant to Section
14 hereof.
(k) Nothing contained in Section 1, Section 5, this Section 7 or
any other provision of this Agreement shall (i) afford the Pledgor any right
to issue entitlement orders with respect to any security entitlement to the
Collateral Investments or any securities account in which any such security
entitlement may be carried, or otherwise afford the Pledgor control of any
such security entitlement or (ii) otherwise give rise to any rights of
Pledgor with respect to the Collateral Investments, any security entitlement
thereto or any securities account in which any such security entitlement may
be carried, other than the Pledgor's rights under this Escrow and Security
Agreement as the beneficial owner of collateral pledged to and subject to the
exclusive dominion and control (except as expressly provided in Sections
7(a), (b), (c), (d), (e), (f) and (g) hereof) of the Trustee in its capacity
as such (and not as a securities intermediary). The Pledgor acknowledges,
confirms and agrees that the Trustee holds a security entitlement to the
Collateral Investments solely as trustee for the Holders of the Notes and not
as a securities intermediary.
SECTION 8. REPRESENTATIONS AND WARRANTIES. The Pledgor hereby
represents and warrants that:
(a) The execution and delivery by the Pledgor of, and the performance
by the Pledgor of its obligations under, this Escrow and Security Agreement
will not contravene any provision of applicable law or the Certificate of
Incorporation of the Pledgor or any material agreement or other material
instrument binding upon the Pledgor or any of its subsidiaries or any
judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Pledgor or any of its subsidiaries, or result in the
creation or imposition of any Lien on any assets of the Pledgor, except for
the security interests granted under this Escrow and Security Agreement; no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required (i) for the performance by the
Pledgor of its
<PAGE>
11
obligations under this Escrow and Security Agreement, (ii) for the pledge
by the Pledgor of the Collateral pursuant to this Escrow and Security
Agreement or (iii) except for any such consents, approvals, authorizations
or orders required to be obtained by the Trustee (or the Holders) for
reasons other than the consummation of this transaction, for the exercise
by the Trustee of the rights provided for in this Escrow and Security
Agreement or the remedies in respect of the Collateral pursuant to this
Escrow and Security Agreement.
(b) The Pledgor is the beneficial owner of the Collateral, free and
clear of any Lien or claims of any person or entity (except for the
security interests granted under this Escrow and Security Agreement). No
financing statement covering the Pledgor's interest in the Collateral is on
file in any public office other than the financing statements, if any,
filed pursuant to this Escrow and Security Agreement.
(c) This Escrow and Security Agreement has been duly authorized,
validly executed and delivered by the Pledgor and (assuming the due
authorization and valid execution and delivery of this Escrow and Security
Agreement by the Trustee and enforceability of the Escrow and Security
Agreement against the Trustee in accordance with its terms) constitutes a
valid and binding agreement of the Pledgor, enforceable against the Pledgor
in accordance with its terms, except as (i) the enforceability hereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, preference,
reorganization, moratorium or similar laws now or hereafter in effect
relating to or affecting creditors' rights or remedies generally, (ii) the
availability of equitable remedies may be limited by equitable principles
of general applicability and the discretion of the court before which any
proceeding therefor may be brought, (iii) the exculpation provisions and
rights to indemnification hereunder may be limited by U.S. federal and
state securities laws and public policy considerations and (iv) the waiver
of rights and defenses contained in Section 14(b), Section 17.11 and
Section 17.16 hereof may be limited by applicable law.
(d) Upon the delivery to the Trustee of the certificates or
instruments, if any, representing or evidencing the Collateral, the filing
of financing statements, if any, required by the UCC in the appropriate
offices in the State of New York and Oklahoma, and the transfer and pledge
to the Trustee of the Collateral and the acquisition by the Trustee of a
security entitlement thereto, in accordance with Section 3, the pledge of
and grant of a security interest in the Collateral securing the payment of
the Obligations for the benefit of the Trustee and the Holders of the Notes
will constitute a first priority perfected security interest in such
Collateral, enforceable as such against all creditors of the Pledgor (and
any persons purporting to purchase any of the Collateral from the Pledgor),
other than as permitted by the Indenture.
<PAGE>
12
(e) There are no legal or governmental proceedings pending or, to the
best of the Pledgor's knowledge, threatened to which the Pledgor or any of
its subsidiaries is a party or to which any of the properties of the
Pledgor or any such subsidiary is subject that would materially adversely
affect the power or ability of the Pledgor to perform its obligations under
this Escrow and Security Agreement or to consummate the transactions
contemplated hereby.
(f) The pledge of the Collateral pursuant to this Escrow and Security
Agreement is not prohibited by law or governmental regulation (including,
without limitation, Regulations G, T, U and X of the Board of Governors of
the Federal Reserve System) applicable to the Pledgor.
(g) No Event of Default exists.
SECTION 9. FURTHER ASSURANCES. The Pledgor will, promptly upon
request by the Trustee (which request the Trustee may submit at the direction
of the Holders of a majority in principal amount of the Notes then
outstanding), execute and deliver or cause to be executed and delivered, or
use its reasonable best efforts to procure, all assignments, instruments and
other documents, deliver any instruments to the Trustee and take any other
actions that are necessary or desirable to perfect, continue the perfection
of, or protect the first priority of the Trustee's security interest in and
to the Collateral, to protect the Collateral against the rights, claims, or
interests of third persons (other than any such rights, claims or interests
created by or arising through the Trustee) or to effect the purposes of this
Escrow and Security Agreement. The Pledgor also hereby authorizes the Trustee
to file any financing or continuation statements in the United States with
respect to the Collateral without the signature of the Pledgor (to the extent
permitted by applicable law). The Pledgor will promptly pay all reasonable
costs incurred in connection with any of the foregoing within 45 days of
receipt of an invoice therefor. The Pledgor also agrees, whether or not
requested by the Trustee, to take all actions that are necessary to perfect
or continue the perfection of, or to protect the first priority of, the
Trustee's security interest in and to the Collateral, including the filing of
all necessary financing and continuation statements, and to protect the
Collateral against the rights, claims or interests of third persons (other
than any such rights, claims or interests created by or arising through the
Trustee).
SECTION 10. COVENANTS. The Pledgor covenants and agrees with the
Trustee and the Holders of the Notes that from and after the date of this
Escrow and Security Agreement until the earlier of payment in full in cash of
(x) each of the first four scheduled interest payments due on the Notes under
the terms of the Indenture or (y) all obligations due and owing under the
Indenture and the Notes in the event such obligations become due and payable
prior to the payment of the first four scheduled interest payments on the
Notes:
<PAGE>
13
(a) that (i) it will not (and will not purport to) sell or otherwise
dispose of, or grant any option or warrant with respect to, any of the
Collateral or (ii) it will not create or permit to exist any Lien upon or
with respect to any of the Collateral (except for the security interests
granted under this Escrow and Security Agreement and any Lien created by or
arising through the Trustee) and at all times will be the sole beneficial
owner of the Collateral; or
(b) that it will not (i) enter into any agreement or understanding
that restricts or inhibits or purports to restrict or inhibit the Trustee's
rights or remedies hereunder, including, without limitation, the Trustee's
right to sell or otherwise dispose of the Collateral or (ii) fail to pay or
discharge any tax, assessment or levy of any nature with respect to the
Collateral not later than five days prior to the date of any proposed sale
under any judgment, writ or warrant of attachment with respect to the
Collateral.
SECTION 11. POWER OF ATTORNEY. In addition to all of the powers
granted to the Trustee pursuant to the Indenture, the Pledgor hereby appoints
and constitutes the Trustee as the Pledgor's attorney-in-fact (with full
power of substitution) to exercise to the fullest extent permitted by law all
of the following powers upon and at any time after the occurrence and during
the continuance of an Event of Default: (a) collection of proceeds of any
Collateral; (b) conveyance of any item of Collateral to any purchaser
thereof; (c) giving of any notices or recording of any Liens under Section 6
hereof; and (d) paying or discharging taxes or Liens levied or placed upon
the Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Trustee in its sole reasonable
discretion, and such payments made by the Trustee to become part of the
Obligations of the Pledgor to the Trustee, due and payable immediately upon
demand. The Trustee's authority under this Section 11 shall include, without
limitation, the authority to endorse and negotiate any checks or instruments
representing proceeds of Collateral in the name of the Pledgor, execute and
give receipt for any certificate of ownership or any document constituting
Collateral, transfer title to any item of Collateral, sign the Pledgor's name
on all financing statements (to the extent permitted by applicable law) or
any other documents deemed necessary or appropriate by the Trustee to
preserve, protect or perfect the security interest in the Collateral and to
file the same, prepare, file and sign the Pledgor's name on any notice of
Lien, and to take any other actions arising from or incident to the powers
granted to the Trustee in this Escrow and Security Agreement. This power of
attorney is coupled with an interest and is irrevocable by the Pledgor.
SECTION 12. NO ASSUMPTION OF DUTIES; REASONABLE CARE. The rights and
powers granted to the Trustee hereunder are being granted in order to preserve
and protect the security interest of the Trustee and the Holders of the Notes in
and to the Collateral granted hereby and shall not be interpreted to, and shall
not impose any duties on the Trustee in connection therewith other than those
expressly provided herein or imposed under applicable
<PAGE>
14
law. Except as provided by applicable law or by the Indenture, the Trustee
shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which the Trustee accords
similar property held by the Trustee for similar accounts, it being
understood that the Trustee in its capacity as such shall not have any
responsibility for (a) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities or other matters relative to any
Collateral, whether or not the Trustee has or is deemed to have knowledge of
such matters, (b) taking any necessary steps to preserve rights against any
parties with respect to any Collateral or (c) investing or reinvesting any of
the Collateral, provided, however, that nothing contained in this Agreement
shall relieve the Trustee of any responsibilities as a securities
intermediary under applicable law.
SECTION 13. INDEMNITY. The Pledgor shall indemnify, hold harmless
and defend the Trustee and its directors, officers, agents and employees,
from and against any and all claims, actions, obligations, liabilities and
expenses, including reasonable defense costs, reasonable investigative fees
and costs, and reasonable legal fees and damages arising from the Trustee's
performance as Trustee under this Escrow and Security Agreement, except to
the extent that such claim, action, obligation, liability or expense is
directly attributable to the bad faith, gross negligence or wilful misconduct
of such indemnified person.
SECTION 14. REMEDIES UPON EVENT OF DEFAULT. If any Event of
Default under the Indenture or default hereunder (any such Event of Default
or default being referred to in this Escrow and Security Agreement as an
"EVENT OF DEFAULT") shall have occurred and be continuing:
(a) The Trustee and the Holders of the Notes shall have, in addition
to all other rights given by law or by this Escrow and Security Agreement
or the Indenture, all of the rights and remedies with respect to the
Collateral of a secured party under the UCC in effect in the State of New
York at that time. In addition, with respect to any Collateral that shall
then be in or shall thereafter come into the possession or custody of the
Trustee, the Trustee may and, at the direction of the Holders of a majority
in principal amount of the Notes then outstanding, shall, sell or cause the
same to be sold at any broker's board or at public or private sale, in one
or more sales or lots, at such price or prices as the Trustee may deem
best, for cash or on credit or for future delivery, without assumption of
any credit risk. The purchaser of any or all Collateral so sold shall
thereafter hold the same absolutely, free from any claim, encumbrance or
right of any kind whatsoever created by or through the Pledgor. Unless any
of the Collateral threatens, in the reasonable judgment of the Trustee, to
decline speedily in value or is or becomes of a type sold on a recognized
market, the Trustee will give the Pledgor reasonable notice of the time and
place of any public sale thereof, or of the time after which any private
sale or other intended disposition is to be made. Any sale
<PAGE>
15
of the Collateral conducted in conformity with reasonable commercial
practices of banks, insurance companies, commercial finance companies, or
other financial institutions disposing of property similar to the Collateral
shall be deemed to be commercially reasonable. Any requirements of
reasonable notice shall be met if such notice is mailed to the Pledgor as
provided in Section 17.1 hereof at least ten (10) days before the time of
the sale or disposition. The Trustee or any Holder of Notes may, in its
own name or in the name of a designee or nominee, buy any of the Collateral
at any public sale and, if permitted by applicable law, at any private
sale. All expenses (including court costs and reasonable attorneys' fees,
expenses and disbursements) of, or incident to, the enforcement of any of
the provisions hereof shall be recoverable from the proceeds of the sale or
other disposition of the Collateral.
(b) The Pledgor further agrees to use its reasonable best efforts to
do or cause to be done all such other acts as may be necessary to make such
sale or sales of all or any portion of the Collateral pursuant to this
Section 14 valid and binding and in compliance with any and all other
applicable requirements of law. The Pledgor further agrees that a breach
of any of the covenants contained in this Section 14 will cause irreparable
injury to the Trustee and the Holders of the Notes, that the Trustee and
the Holders of the Notes have no adequate remedy at law in respect of such
breach and, as a consequence, that each and every covenant contained in
this Section 14 shall be specifically enforceable against the Pledgor, and
the Pledgor hereby waives and agrees not to assert any defenses against an
action for specific performance of such covenants except for a defense that
no Event of Default has occurred.
SECTION 15. EXPENSES. The Pledgor will upon demand pay to the
Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the Trustee, that the Trustee may incur in
connection with (a) the review, negotiation and administration of this Escrow
and Security Agreement, (b) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (c) the
exercise or enforcement of any of the rights of the Trustee and the Holders
of the Notes hereunder or (d) the failure by the Pledgor to perform or
observe any of the provisions hereof.
SECTION 16. SECURITY INTEREST ABSOLUTE. All rights of the Trustee
and the Holders of the Notes and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
<PAGE>
16
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens
on any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other circumstance
which might otherwise constitute a defense available to, or a discharge of,
the Pledgor in respect of the Obligations or of this Escrow and Security
Agreement.
SECTION 17. MISCELLANEOUS PROVISIONS.
17.1. NOTICES. Any notice or communication shall be sufficiently
given if in writing and delivered in person or mailed by first class mail,
commercial courier service or telecopier communication, addressed as follows:
IF TO THE PLEDGOR:
Dobson Communications Corporation
13439 North Broadway Extension
Oklahoma City, Oklahoma 73114
Attention: Mr. Bruce R. Knooihuizen
WITH A COPY TO:
McAfee & Taft A Professional Corporation
Two Leadership Square, 10th floor
Oklahoma City, Oklahoma 73102
Attention: Theodore M. Elam, Esq.
IF TO THE PLACEMENT AGENTS:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Attention: Mr. Garth Williams
WITH A COPY TO:
Shearman & Sterling
<PAGE>
17
599 Lexington Avenue
New York, NY 10022
Attention: Jerry V. Elliott, Esq.
IF TO THE TRUSTEE:
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Attention: Mr. Lewis Young
17.2. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS. This Escrow and
Security Agreement may not be used to interpret another pledge, security or debt
agreement of the Pledgor or any subsidiary thereof. No such pledge, security or
debt agreement (other than the Indenture) may be used to interpret this Escrow
and Security Agreement.
17.3. SEVERABILITY. The provisions of this Escrow and Security
Agreement are severable, and if any clause or provision shall be held invalid,
illegal or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in any manner affect such
clause or provision in any other jurisdiction or any other clause or provision
of this Escrow and Security Agreement in any jurisdiction.
17.4. HEADINGS. The headings in this Escrow and Security Agreement
have been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
17.5. COUNTERPART ORIGINALS. This Escrow and Security Agreement may
be signed in two or more counterparts, each of which shall be deemed an
original, but all of which shall together constitute one and the same agreement.
17.6. BENEFITS OF ESCROW AND SECURITY AGREEMENT. Nothing in this
Escrow and Security Agreement, express or implied, shall give to any person,
other than the parties hereto and their successors hereunder, and the Holders of
the Notes, any benefit or any legal or equitable right, remedy or claim under
this Escrow and Security Agreement.
17.7. AMENDMENTS, WAIVERS AND CONSENTS. Any amendment or waiver of
any provision of this Escrow and Security Agreement and any consent to any
departure by the Pledgor from any provision of this Escrow and Security
Agreement shall be effective only if made or duly given in compliance with all
of the terms and provisions of the Indenture, and neither the Trustee nor any
Holder of Notes shall be deemed, by any act, delay, indulgence,
<PAGE>
18
omission or otherwise, to have waived any right or remedy hereunder or to
have acquiesced in any Default or Event of Default or in any breach of any of
the terms and conditions hereof. Failure of the Trustee or any Holder of
Notes to exercise, or delay in exercising, any right, power or privilege
hereunder shall not preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. A waiver by the Trustee or
any Holder of Notes of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy that the Trustee or
such Holder of Notes would otherwise have on any future occasion. The rights
and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.
17.8. INTERPRETATION OF AGREEMENT. All terms not defined herein or
in the Indenture shall have the meaning set forth in the UCC, except where the
context otherwise requires. To the extent a term or provision of this Escrow
and Security Agreement conflicts with the Indenture, the Indenture shall control
with respect to the subject matter of such term or provision. Acceptance of or
acquiescence in a course of performance rendered under this Escrow and Security
Agreement shall not be relevant to determine the meaning of this Escrow and
Security Agreement even though the accepting or acquiescing party had knowledge
of the nature of the performance and opportunity for objection.
17.9. CONTINUING SECURITY INTEREST; TERMINATION. (a) This Escrow
and Security Agreement shall create a continuing security interest in and to the
Collateral and shall, unless otherwise provided in the Indenture or in this
Escrow and Security Agreement, remain in full force and effect until the payment
in full in cash of the Obligations. This Escrow and Security Agreement shall be
binding upon the Pledgor, its transferees, successors and assigns, and shall
inure, together with the rights and remedies of the Trustee hereunder, to the
benefit of the Trustee, the Holders of the Notes and their respective
successors, transferees and assigns.
(b) This Escrow and Security Agreement shall terminate upon the
payment in full in cash of the Obligations. At such time, the Trustee shall,
pursuant to an Issuer Order, reassign and redeliver to the Pledgor all of the
Collateral hereunder that has not been sold, disposed of, retained or applied by
the Trustee in accordance with the terms of this Escrow and Security Agreement
and the Indenture. Such reassignment and redelivery shall be without warranty
by or recourse to the Trustee in its capacity as such, except as to the absence
of any Liens on the Collateral created by or arising through the Trustee, and
shall be at the reasonable expense of the Pledgor.
17.10. SURVIVAL PROVISIONS. All representations, warranties and
covenants of the Pledgor contained herein shall survive the execution and
delivery of this Escrow and Security Agreement, and shall terminate only upon
the termination of this Escrow and Security
<PAGE>
19
Agreement. The obligations of the Pledgor under Sections 13 and 15 hereof
shall survive the termination of this Agreement.
17.11. WAIVERS. The Pledgor waives presentment and demand for
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
17.12. AUTHORITY OF THE TRUSTEE. (a) The Trustee shall have and be
entitled to exercise all powers hereunder that are specifically granted to the
Trustee by the terms hereof, together with such powers as are reasonably
incident thereto. The Trustee may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Escrow and Security Agreement or the Indenture, neither the Trustee nor any
director, officer, employee, attorney or agent of the Trustee shall be liable to
the Pledgor for any action taken or omitted to be taken by the Trustee, in its
capacity as Trustee, hereunder, except for its own bad faith, gross negligence
or willful misconduct, and the Trustee shall not be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Trustee and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document believed by it or them to be genuine and correct and to have been
signed or sent by the proper person or persons. The Trustee shall have no duty
to cause any financing statement or continuation statement to be filed in
respect of the Collateral.
(b) The Pledgor acknowledges that the rights and responsibilities of
the Trustee under this Escrow and Security Agreement with respect to any action
taken by the Trustee or the exercise or non-exercise by the Trustee of any
option, right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Escrow and Security Agreement shall, as between
the Trustee and the Holders of the Notes, be governed by the Indenture and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Trustee and the Pledgor, the Trustee shall be
conclusively presumed to be acting as agent for the Holders of the Notes with
full and valid authority so to act or refrain from acting, and the Pledgor shall
not be obligated or entitled to make any inquiry respecting such authority.
17.13. Intentionally Omitted.
17.14. FINAL EXPRESSION. This Escrow and Security Agreement,
together with the Indenture and any other agreement executed in connection
herewith, is intended by the
<PAGE>
20
parties as a final expression of this Escrow and Security Agreement and is
intended as a complete and exclusive statement of the terms and conditions
thereof.
17.15. RIGHTS OF HOLDERS OF THE NOTES. No Holder of Notes shall have
any independent rights hereunder other than those rights granted to individual
Holders of the Notes pursuant to Section 6.07 of the Indenture; PROVIDED that
nothing in this subsection shall limit any rights granted to the Trustee under
the Notes or the Indenture.
17.16. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; WAIVER OF DAMAGES. (a) THIS ESCROW AND SECURITY AGREEMENT SHALL BE
GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY
DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE
NOTES IN CONNECTION WITH THIS ESCROW AND SECURITY AGREEMENT, AND WHETHER ARISING
IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING: (i) THE MATTERS
IDENTIFIED IN 31 C.F.R. Sections 357.10 AND 357.11 (AS IN EFFECT ON THE DATE OF
THIS AGREEMENT) SHALL BE GOVERNED SOLELY BY THE LAWS SPECIFIED THEREIN.
(b) THE PLEDGOR HAS APPOINTED CT CORPORATION SYSTEM 1633 BROADWAY NEW
YORK, NY 10019 AS ITS AGENT FOR SERVICE OF PROCESS IN ANY SUIT, ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT AND FOR ACTIONS BROUGHT UNDER U.S.
FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY FEDERAL OR STATE COURT LOCATED
IN THE CITY OF NEW YORK AND AGREES TO SUBMIT TO THE JURISDICTION OF ANY SUCH
COURT. INTENTIONALLY OMITTED.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY AS
TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE THE RIGHT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR THE
COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH (AND
HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE COLLATERAL, AS
THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH COLLATERAL, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE. THE
PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS
IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON SUCH PROPERTY OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
<PAGE>
21
TRUSTEE, EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT
ASSERTED IN ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED.
THE PLEDGOR WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE
COURT IN THE CITY OF NEW YORK ONCE THE TRUSTEE HAS COMMENCED A PROCEEDING
DESCRIBED IN THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO
THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(d) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES NOR (EXCEPT
AS OTHERWISE PROVIDED IN THIS ESCROW AND SECURITY AGREEMENT OR THE INDENTURE)
THE TRUSTEE IN ITS CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO THE PLEDGOR
(WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE
PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS ESCROW AND
SECURITY AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION
THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A
COURT THAT IS BINDING ON THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE CASE MAY
BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE
TRUSTEE OR SUCH HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD FAITH,
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR WAIVES
THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES
IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY JUDGMENT OR
OTHER COURT ORDER PERTAINING TO THIS ESCROW AND SECURITY AGREEMENT OR ANY
RELATED AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF
NOTES, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR
PRELIMINARY OR PERMANENT INJUNCTION, THIS ESCROW AND SECURITY AGREEMENT OR ANY
RELATED AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR ON THE ONE HAND AND THE
TRUSTEE AND/OR THE HOLDERS OF THE NOTES ON THE OTHER HAND.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
22
IN WITNESS WHEREOF, the Pledgor, the Placement Agents and the Trustee
have each caused this Escrow and Security Agreement to be duly executed and
delivered as of the date first above written.
Pledgor:
DOBSON COMMUNICATIONS CORPORATION
By: /s/ Everett R. Dobson
--------------------------------
Name:
Title:
Placement Agents:
MORGAN STANLEY & CO. INCORPORATED
ALEX. BROWN & SONS INCORPORATED
FIRST UNION CAPITAL MARKETS CORP.
NATIONSBANC CAPITAL MARKETS, INC.
By: Morgan Stanley & Co. Incorporated
By:
--------------------------------
Name:
Title:
Trustee:
UNITED STATES TRUST COMPANY
OF NEW YORK, as Trustee
By:
--------------------------------
Name:
Title:
<PAGE>
DEBTORS' NAME & ADDRESS:
G. Edward Evans
CUSTOMER NO.
NOTE/LOAN NO.
9702
HOME PHONE
BUSINESS PHONE
OFFICER
LENDER/SECURED PARTY:
Western Financial Services Corp.
13439 N. Broadway Ext., Ste. 200
Oklahoma City, Oklahoma 73114
DATE OF NOTE
2-10-97
MATURITY DATE
2-10-02
PRINCIPAL AMOUNT
$300,000.00
INTEREST RATE
4.0%
PURPOSE OF LOAN
home purchase
ANNUAL PERCENTAGE RATE. The cost of your credit as a yearly rate.
4.0%
<PAGE>
FINANCE CHARGE. The dollar amount the credit will cost you.
$57,277.27
AMOUNT FINANCED. The amount of credit provided to you or on your behalf.
$300,000.00
TOTAL OF PAYMENTS. The amount you will have paid after you have made all
payments.
$357,277.27
( ) This obligation is payable on Demand.
( ) This obligation has a demand feature.
( ) All disclosures are based on an assumed maturity of one year.
PAYMENT SCHEDULE WILL BE: Number of Payments
60
and 1
PREPAYMENT: If you pay off early, you may be charged a minimum Finance Charge.
Any Prepaid Finance Charges will not be refunded.
"e" means an estimate
AMOUNT OF PAYMENTS
$1,432.25
$271,342.27
WHEN PAYMENTS ARE DUE
On the 10th of each month beginning 3-10-97,
ending 2-10-97
On the 10th of February, 2002
( ) VARIABLE RATE. If checked, you loan is a variable rate loan. The Annual
Percentage Rate may increase or decrease according to the following changes:
<PAGE>
( ) Upon changes in index (describe)
( ) Upon other conditions (describe)
Interest rate increases are subject to the following limitation(s):
( ) Not applicable
( ) Not more than once every
( ) Not more than ________% at a time
( ) Not more than ________% overall
( ) The maximum interest rate will not exceed _____%
Any increase in the interest rate will result in changes in the form of:
( ) Higher payment amounts
( ) A larger payment amount at maturity
( ) More payments of the same amount
If your loan ( ) is ( ) were for $___________ at _______% for
________________, and the rate increased to _____% in _______________:
( ) Your regular payments would increase by $____________. ( ) Your
final payment would increase by $____________. ( ) You would make
______________ additional payments.
Security: You are giving a security interest in: The property being
purchased (describe)
Lot SEVEN(7), of Block ONE HUNDRED TWO(102), in AMENDED PLAT OF OAK TREE,
Blocks 102-103-104, an addition to the City of Edmond, Oklahoma County,
Oklahoma
Other Property (describe)
Signature
( ) Late Charge: If a payment or part of a payment is late more than
_____________ days, you may be charged _________% of the amount that is
late, but not more than $___________________.
<PAGE>
See your contract documents for any additional information about
nonpayment, default, and required repayment in full before the
scheduled date, and prepayment refunds and penalties.
FILING FEES
NON-FILING INSURANCE
( ) Assumption: Someone buying your home may, subject to conditions, be
allowed to assume the remainder of the mortgage on the original terms.
( ) Assumption: Someone buying your home cannot assume the remainder of
the mortgage on the original terms.
Collateral securing other loans with the Lender may also secure this
loan.
INSURANCE: Credit Life and Disability Insurance are not required to obtain
credit, and will not be provided unless you sign and agree to pay the additional
cost.
TYPE OF INSURANCE
( ) Credit Life - Joint
( ) Credit Life - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Disability - Joint
( ) Disability - Single
TERM
PREMIUM
NAME OF INSURED
<PAGE>
I want the insurance checked below left, at the cost shown.
( ) Property Insurance
( ) Vendor's Single Interest Insurance
TERM
PREMIUM
Property & Vendor's Single Interest Insurance may be obtained from anyone
you want that is acceptable to the Lender, or provided through an existing
policy you carry which is acceptable to the Lender. If you get this
Insurance from the Lender you will pay the cost shown to the left. Any
Insurer issuing Vendor's Single Interest Insurance waives its right to
subrogation against the Debtors.
ITEMIZATION OF AMOUNT FINANCED
$____________ 1. Amount Give to You Directly
$____________ 2. Amount Paid on Loans with Us
____________________
3. Amounts Paid to Others on Your Behalf
_____ a. Insurance
_____ b. Filing & Releasing Fees to
Public Officials
_____ c. License, Title & Registration
Fees to Pub. Off.
300,000.00 _____ d. Lawyers' Title
_____ e. ____________________
_____ f. ____________________
_____ g. ____________________
$300,000.00 3. Total Amounts Paid to Others (Add a thru g)
$300,000.00 4. Amount of Loan (Principal) (Add 1, 2, & 3)
$____________ 5. Less: Prepaid Finance Charge
$300,000.00 6. AMOUNT FINANCED (4 minus 5)
NOTICE TO CONSUMERS: 1. Do not sign this agreement before you read it. 2.
You are entitled to a copy of this agreement. 3. You may prepay the unpaid
balance at any time without penalty. 4. This document, together with other
written agreements of the parties, is the final expression of the agreement
between the
<PAGE>
parties and may not be contradicted by evidence of any prior or
contemporaneous oral agreements of the parties. Any credit agreement not
contained in the printed form must be inserted below to be enforceable.
Debtor and Lender affirm they have no unwritten oral agreements.
DEBTORS' INITIALS: __________
LENDER'S INITIALS: BRK
REPRESENTING THIS LENDER/SECURED PARTY (Officer Signature)
PROMISE TO PAY: In return for my loan, the undersigned (called I, me, or thy)
promise to pay to the order of the Lender the Principal Amount, plus Interest at
the rate stated above (subject to any applicable variable rate), together with
any other sums owed by me under this agreement including any Prepaid Finance
Charge not included in the Principal Amount, in accordance with the payment
schedule disclosed above or any modification due to a variable rate.
VARIABLE INTEREST RATE CHANGES: If this contract is subject to a variable rate,
changes in the rate will result in a change in terms according to the method
agreed for effecting them. These changes will be provided to me by the Lender
as applicable from time to time. The maximum interest will never exceed the
lesser of the maximum legal rate, or as set forth above, if any.
APPLICATION OF PAYMENTS: Each payment shall be applied first to interest as of
the date the payment is received, with the remainder of the payment applied to
reduce the principal. If any payment is not received when due, the unpaid
principal shall bear interest on a daily basis at the applicable rate. The
terms set forth above are based on an assumed repayment schedule, and variance
from this schedule or changes in the rate due to a variable rate may cause
certain amounts to be greater or less than stated.
PREPAYMENT: I may prepay any amount of this loan at any time without penalty;
however, the Lender may collect or retain a minimum Finance Charge of $5 when
the Amount Financed is $75 or less, or $7.50 when the Amount Financed exceeds
$75.
LATE CHARGE: If any payment is not paid in full when due, the Lender may assess
a delinquency charge if set forth above.
<PAGE>
INSUFFICIENT CHECKS: The Lender may charge and collect from me a ten dollar fee
for each return by a bank or other depository institution of a dishonored check,
negotiable order of withdrawal, or share draft issued by me in connection with
this loan.
PREPAID FINANCE CHARGE: I agree to pay Lender those loan fees, if any, shown on
line 5 of the Itemization of Amount Financed. I agree that any such fee shall
be considered as earned when this loan is made, and will not be subject to
refund or rebate.
ATTORNEY FEES: If this Note referred to an attorney for collection, I agree to
pay reasonable attorney fees not to exceed 15% of the unpaid balance after
default; provided however, if the Amount Financed is such that this promise to
pay attorney fees is not enforceable, no attorney fees will be assessed against
me by the terms of this Note.
SECURITY AGREEMENT: To secure this obligation, I grant to the Lender a security
interest in the property described above and other property covered by this
agreement (collateral). If any of the collateral is real estate, the terms of
this agreement will apply and control over any mortgage in case of any conflict.
Collateral will be located in _________________ County at:
( ) My Address above
( ) Other Address (Specify): _______________________________________________
_____________________________________________________________________________
Collateral will be used primarily for: ( ) Personal, family, household ( )
Business or Agricultural purpose.
The terms above and on the reserve sid of this form are all incorporated by
reference as if they were fully set out at this point. I (jointly and
severally, if more than one) agree to the forms of this Promissory Note,
Disclosure Statement & Security Agreement, including the authorization of all
charges, and acknowledge receiving a completed copy of this form.
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a Security Interest in
the Collateral) Date: ___________________
G. EDWARD EVANS
G. Edward Evans
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a Security Interest in
the Collateral) Date: _____________________
<PAGE>
G. EDWARD EVANS
G. Edward Evans
( ) Check here if the Federal Trade Commission Notice on the reverse side
is to apply to this loan.
PROMISSORY NOTE, DISCLOSURE STATEMENT, & SECURITY AGREEMENT - SIMPLE INTEREST
OKLAHOMA
<PAGE>
PROMISSORY NOTE
$1,400,000 March 19, 1996
FOR VALUE RECEIVED, EVERETT R. DOBSON, a resident of 1905 Mission Hills,
Edmond, Oklahoma 73038 ("Borrower"), promises to pay DOBSON COMMUNICATIONS
CORPORATION, an Oklahoma corporation with its principal office at 13439 N.
Broadway Extension, Oklahoma City, Oklahoma 73114 ("Lender"), the principal
sum of One Million Four Hundred Thousand Dollars ($1,400,000), together with
interest in arrears on the unpaid principal balance from time to time
outstanding from the date hereof until the entire principal amount due
hereunder is paid in full at the same rate of interest charged to Lender and
the other borrowers under that certain Amended and Restated Credit Agreement
(the "Credit Agreement") by and among CoreStates Bank, N.A., as a Bank and as
Administrative Agent, the other Banks named therein and the Borrowers named
therein, dated March 19, 1996, compounded annually. Interest shall be
calculated on the basis of a three hundred sixty (360) day year counting the
actual number of days elapsed.
The entire principal balance of this Note shall be paid on the earlier of
seven (7) years or the date of the sale of certain corporate assets of
Associated Telecommunications & Technologies, Inc. All accrued and unpaid
interest shall be paid in quarterly installments commencing on March 31, 1996
and continuing on the last days of each successive quarter thereafter, with a
final payment of all accrued interest payable contemporaneously with the
principal payment hereunder.
Payments of both principal and interest as required hereunder shall be
made on lawful money of the United States of America in immediately available
funds at the address set forth above for Lender.
Borrower may, from time to time at its election, prepay this Note, in
whole or in part, without penalty or premium.
In the event Borrower shall fail to make any payment of principal or
interest hereunder within fifteen (15) days after the same is due, then the
Lender may declare the entire unpaid principal balance hereunder, together
with accrued but unpaid interest thereon, immediately due and payable.
<PAGE>
Borrower hereby waives presentment for payment, protest and demand, and
notice of protest, demand and/or dishonor and nonpayment of this Note, and
all other notices or demands otherwise required by law that Borrower may
lawfully waive. No unilateral consent or waiver by Lender with respect to
any action or failure to act which, without consent, would constitute a
breach of any provision of this Note shall be valid and binding unless in
writing and signed by Lender.
Borrower hereby acknowledges and agrees that this Note is being pledged
and assigned to the Administrative Agent for the obligations of the Lender
and the other obligors to the Banks under the Credit Agreement pursuant to a
Collateral Assignment of Note dated the date hereof.
The rights and obligations of Borrower and all provisions hereof shall be
governed by and construed in accordance with the laws of the State of
Oklahoma, except to the extent that such laws are superseded by Federal
enactments.
All agreements between Borrower and Lender are hereby expressly limited
so that in no contingency or event whatsoever, whether by reason or
acceleration of maturity of the indebtedness evidenced hereby or otherwise,
shall the amount paid or agreed to be paid to Lender for the use, forbearance
or detention of the indebtedness evidenced hereby exceed the maximum
permissible under applicable law. As used herein, the term "applicable law"
shall mean the law in effect as of the date hereof, provided, however, that
in the event there is a change in the law which results in a higher
permissible rate of interest, then this Note shall be governed by such new
law as of its effective date. In this regard, it is expressly agreed that it
is the intent of Borrower and Lender in the execution, delivery and
acceptance of this Note to contract in strict compliance with the laws of the
State of Oklahoma from time to time in effect. If, from any circumstance
whatsoever, fulfillment of any provision hereof at the time performance of
such provision shall be due, shall involve transcending the limit of validity
prescribed by law, then the obligation to be fulfilled shall automatically be
reduced to the limit of such validity, and if from any circumstances Lender
should ever receive as interest an amount which would exceed the highest
lawful rate, such amount which would be excessive interest shall be applied
to the reduction of the principal balance evidenced hereby and not to the
payment of interest. This provision shall control every other provision of
all agreements between Borrower and Lender.
<PAGE>
If this Note shall not be paid when due and shall be placed by the holder
hereof in the hands of any attorney for collection, through legal proceedings
or otherwise, Borrower will pay a reasonable attorney's fee to the holder
hereof together with reasonable costs and expenses of collection.
Borrower shall remain primarily liable on this Note until full payment,
unaffected by any agreement or transaction between Lender and any subsequent
borrowers as to the payment of principal, interest or other moneys, by any
forbearance or extension of time, guaranty or assumption by others, or by any
other matter, as to all of which notice is hereby waived by Borrower.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed by its
duly authorized officer as of the day and year first above written.
WITNESS:
LYNN SOSNOSKY EVERETT R. DOBSON
Lynn Sosnosky Everett R. Dobson
<PAGE>
DEBTORS' NAME & ADDRESS:
Russell L. Dobson
CUSTOMER NO.
NOTE/LOAN NO.
9901
HOME PHONE
BUSINESS PHONE
OFFICER
LENDER/SECURED PARTY:
Western Financial Services Corp.
13439 N. Broadway Ext., Ste. 200
Oklahoma City, Oklahoma 73114
DATE OF NOTE
12-15-96
MATURITY DATE
3-15-97
PRINCIPAL AMOUNT
$290,591.85
INTEREST RATE
9.0%
PURPOSE OF LOAN
Consolidation
ANNUAL PERCENTAGE RATE. The cost of your credit as a yearly rate.
9.0%
<PAGE>
FINANCE CHARGE. The dollar amount the credit will cost you.
$6,587.48
AMOUNT FINANCED. The amount of credit provided to you or on your behalf.
$290,591.85
TOTAL OF PAYMENTS. The amount you will have paid after you have made all
payments.
$297,179.33
( ) This obligation is payable on Demand.
( ) This obligation has a demand feature.
( ) All disclosures are based on an assumed maturity of one year.
PAYMENT SCHEDULE WILL BE: Number of Payments
1
PREPAYMENT: If you pay off early, you may be charged a minimum Finance Charge.
Any Prepaid Finance Charges will not be refunded.
"e" means an estimate
AMOUNT OF PAYMENTS
$297,179.33
WHEN PAYMENTS ARE DUE
Payment in full due on or before 3-15-97
( ) VARIABLE RATE. If checked, you loan is a variable rate loan. The Annual
Percentage Rate may increase or decrease according to the following changes:
( ) Upon changes in index (describe)
( ) Upon other conditions (describe)
<PAGE>
Interest rate increases are subject to the following limitation(s):
( ) Not applicable
( ) Not more than once every
( ) Not more than ________% at a time
( ) Not more than ________% overall
( ) The maximum interest rate will not exceed _____%
Any increase in the interest rate will result in changes in the form of:
( ) Higher payment amounts
( ) A larger payment amount at maturity
( ) More payments of the same amount
If your loan ( ) is ( ) were for $___________ at _______% for
________________, and the rate increased to _____% in _______________:
( ) Your regular payments would increase by $____________. ( ) Your
final payment would increase by $____________. ( ) You would make
______________ additional payments.
Security: You are giving a security interest in: The property being
purchased (describe)
Other Property (describe)
Signature
( ) Late Charge: If a payment or part of a payment is late more than
_____________ days, you may be charged _________% of the amount that is
late, but not more than $___________________. See your contract
documents for any additional information about nonpayment, default,
and required repayment in full before the scheduled date, and
prepayment refunds and penalties.
FILING FEES
<PAGE>
NON-FILING INSURANCE
( ) Assumption: Someone buying your home may, subject to conditions, be
allowed to assume the remainder of the mortgage on the original terms.
( ) Assumption: Someone buying your home cannot assume the remainder of
the mortgage on the original terms.
Collateral securing other loans with the Lender may also secure this
loan.
INSURANCE: Credit Life and Disability Insurance are not required to obtain
credit, and will not be provided unless you sign and agree to pay the additional
cost.
TYPE OF INSURANCE
( ) Credit Life - Joint
( ) Credit Life - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Disability - Joint
( ) Disability - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Property Insurance
( ) Vendor's Single Interest Insurance
TERM
<PAGE>
PREMIUM
Property & Vendor's Single Interest Insurance may be obtained from anyone
you want that is acceptable to the Lender, or provided through an existing
policy you carry which is acceptable to the Lender. If you get this
Insurance from the Lender you will pay the cost shown to the left. Any
Insurer issuing Vendor's Single Interest Insurance waives its right to
subrogation against the Debtors.
ITEMIZATION OF AMOUNT FINANCED
$____________ 1. Amount Give to You Directly
$290,591.85 2. Amount Paid on Loans with Us
loans 1001 & 1004
3. Amounts Paid to Others on Your Behalf
_____ a. Insurance
_____ b. Filing & Releasing Fees to
Public Officials
_____ c. License, Title & Registration
Fees to Pub. Off.
_____ d. ____________________
_____ e. ____________________
_____ f. ____________________
_____ g. ____________________
$____________ 3. Total Amounts Paid to Others (Add a thru g)
$290,591.85 4. Amount of Loan (Principal) (Add 1, 2, & 3)
$____________ 5. Less: Prepaid Finance Charge
$290,591.85 6. AMOUNT FINANCED (4 minus 5)
NOTICE TO CONSUMERS: 1. Do not sign this agreement before you read it. 2.
You are entitled to a copy of this agreement. 3. You may prepay the unpaid
balance at any time without penalty. 4. This document, together with other
written agreements of the parties, is the final expression of the agreement
between the parties and may not be contradicted by evidence of any prior or
contemporaneous oral agreements of the parties. Any credit agreement not
contained in the printed form must be inserted below to be enforceable.
Debtor and Lender affirm they have no unwritten oral agreements.
<PAGE>
DEBTORS' INITIALS: RLD
LENDER'S INITIALS: __________
REPRESENTING THIS LENDER/SECURED PARTY (Officer Signature)
PROMISE TO PAY: In return for my loan, the undersigned (called I, me, or thy)
promise to pay to the order of the Lender the Principal Amount, plus Interest at
the rate stated above (subject to any applicable variable rate), together with
any other sums owed by me under this agreement including any Prepaid Finance
Charge not included in the Principal Amount, in accordance with the payment
schedule disclosed above or any modification due to a variable rate.
VARIABLE INTEREST RATE CHANGES: If this contract is subject to a variable rate,
changes in the rate will result in a change in terms according to the method
agreed for effecting them. These changes will be provided to me by the Lender
as applicable from time to time. The maximum interest will never exceed the
lesser of the maximum legal rate, or as set forth above, if any.
APPLICATION OF PAYMENTS: Each payment shall be applied first to interest as of
the date the payment is received, with the remainder of the payment applied to
reduce the principal. If any payment is not received when due, the unpaid
principal shall bear interest on a daily basis at the applicable rate. The
terms set forth above are based on an assumed repayment schedule, and variance
from this schedule or changes in the rate due to a variable rate may cause
certain amounts to be greater or less than stated.
PREPAYMENT: I may prepay any amount of this loan at any time without penalty;
however, the Lender may collect or retain a minimum Finance Charge of $5 when
the Amount Financed is $75 or less, or $7.50 when the Amount Financed exceeds
$75.
LATE CHARGE: If any payment is not paid in full when due, the Lender may assess
a delinquency charge if set forth above.
INSUFFICIENT CHECKS: The Lender may charge and collect from me a ten dollar fee
for each return by a bank or other depository institution of a dishonored check,
negotiable order of withdrawal, or share draft issued by me in connection with
this loan.
PREPAID FINANCE CHARGE: I agree to pay Lender those loan fees, if any, shown on
line 5 of the Itemization of Amount Financed. I
<PAGE>
agree that any such fee shall be considered as earned when this loan is made,
and will not be subject to refund or rebate.
ATTORNEY FEES: If this Note referred to an attorney for collection, I agree to
pay reasonable attorney fees not to exceed 15% of the unpaid balance after
default; provided however, if the Amount Financed is such that this promise to
pay attorney fees is not enforceable, no attorney fees will be assessed against
me by the terms of this Note.
SECURITY AGREEMENT: To secure this obligation, I grant to the Lender a security
interest in the property described above and other property covered by this
agreement (collateral). If any of the collateral is real estate, the terms of
this agreement will apply and control over any mortgage in case of any conflict.
Collateral will be located in _________________ County at:
( ) My Address above
( ) Other Address (Specify): __________________________________
_________________________________________________________________
Collateral will be used primarily for: ( ) Personal, family, household ( )
Business or Agricultural purpose.
The terms above and on the reserve sid of this form are all incorporated by
reference as if they were fully set out at this point. I (jointly and
severally, if more than one) agree to the forms of this Promissory Note,
Disclosure Statement & Security Agreement, including the authorization of all
charges, and acknowledge receiving a completed copy of this form.
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a Security Interest in
the Collateral) Date: ___________________
R.L. DOBSON
R.L. Dobson
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a Security Interest in
the Collateral) Date: _____________________
R.L. DOBSON
R.L. Dobson
( ) Check here if the Federal Trade Commission Notice on the reverse side
is to apply to this loan.
PROMISSORY NOTE, DISCLOSURE STATEMENT, & SECURITY AGREEMENT -
<PAGE>
SIMPLE INTEREST OKLAHOMA
<PAGE>
DEBTORS' NAME & ADDRESS:
Russell L. Dobson
CUSTOMER NO.
NOTE/LOAN NO.
4003
HOME PHONE
BUSINESS PHONE
OFFICER
LENDER/SECURED PARTY:
Western Financial Services Corp.
13439 N. Broadway Ext., Ste. 200
Oklahoma City, Oklahoma 73114
DATE OF NOTE
12-31-96
MATURITY DATE
21-31-97
PRINCIPAL AMOUNT
$12,908.00
INTEREST RATE
9.0%
PURPOSE OF LOAN
ANNUAL PERCENTAGE RATE. The cost of your credit as a yearly rate.
9.0%
<PAGE>
FINANCE CHARGE. The dollar amount the credit will cost you.
$1,161.72
AMOUNT FINANCED. The amount of credit provided to you or on your behalf.
$12,908.00
TOTAL OF PAYMENTS. The amount you will have paid after you have made all
payments.
$14,069.72
( ) This obligation is payable on Demand.
( ) This obligation has a demand feature.
( ) All disclosures are based on an assumed maturity of one year.
PAYMENT SCHEDULE WILL BE: Number of Payments
1
PREPAYMENT: If you pay off early, you may be charged a minimum Finance Charge.
Any Prepaid Finance Charges will not be refunded.
"e" means an estimate
AMOUNT OF PAYMENTS
$14,069.72
WHEN PAYMENTS ARE DUE
Payment in full due on or before 12-31-97
( ) VARIABLE RATE. If checked, you loan is a variable rate loan. The Annual
Percentage Rate may increase or decrease according to the following changes:
( ) Upon changes in index (describe)
( ) Upon other conditions (describe)
<PAGE>
Interest rate increases are subject to the following limitation(s):
( ) Not applicable
( ) Not more than once every
( ) Not more than ________% at a time
( ) Not more than ________% overall
( ) The maximum interest rate will not exceed _____%
Any increase in the interest rate will result in changes in the form of:
( ) Higher payment amounts
( ) A larger payment amount at maturity
( ) More payments of the same amount
If your loan ( ) is ( ) were for $___________ at _______% for
________________, and the rate increased to _____% in _______________:
( ) Your regular payments would increase by $____________. ( ) Your
final payment would increase by $____________. ( ) You would make
______________ additional payments.
Security: You are giving a security interest in: The property being
purchased (describe)
Signature
Other Property (describe)
( ) Late Charge: If a payment or part of a payment is late more than
_____________ days, you may be charged _________% of the amount that is
late, but not more than $___________________. See your contract documents
for any additional information about nonpayment, default, and required
repayment in full before the scheduled date, and prepayment refunds and
penalties.
FILING FEES
<PAGE>
NON-FILING INSURANCE
( ) Assumption: Someone buying your home may, subject to conditions, be
allowed to assume the remainder of the mortgage on the original terms.
( ) Assumption: Someone buying your home cannot assume the remainder of the
mortgage on the original terms.
Collateral securing other loans with the Lender may also secure this loan.
INSURANCE: Credit Life and Disability Insurance are not required to obtain
credit, and will not be provided unless you sign and agree to pay the additional
cost.
TYPE OF INSURANCE
( ) Credit Life - Joint
( ) Credit Life - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Disability - Joint
( ) Disability - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Property Insurance
( ) Vendor's Single Interest Insurance
TERM
<PAGE>
PREMIUM
Property & Vendor's Single Interest Insurance may be obtained from anyone
you want that is acceptable to the Lender, or provided through an existing
policy you carry which is acceptable to the Lender. If you get this
Insurance from the Lender you will pay the cost shown to the left. Any
Insurer issuing Vendor's Single Interest Insurance waives its right to
subrogation against the Debtors.
ITEMIZATION OF AMOUNT FINANCED
$____________ 1. Amount Give to You Directly
$____________ 2. Amount Paid on Loans with Us
3. Amounts Paid to Others on Your Behalf
_____ a. Insurance
_____ b. Filing & Releasing Fees to
Public Officials
_____ c. License, Title & Registration
Fees to Pub. Off.
$10,304.00 d. DTC
2,604.00 e. Boatmen's Bank
_____ f. ____________________
_____ g. ____________________
$12,908.00 3. Total Amounts Paid to Others (Add a thru g)
$12,908.00 4. Amount of Loan (Principal) (Add 1, 2, & 3)
$____________ 5. Less: Prepaid Finance Charge
$12,908.00 6. AMOUNT FINANCED (4 minus 5)
NOTICE TO CONSUMERS: 1. Do not sign this agreement before you read it. 2.
You are entitled to a copy of this agreement. 3. You may prepay the unpaid
balance at any time without penalty. 4. This document, together with other
written agreements of the parties, is the final expression of the agreement
between the parties and may not be contradicted by evidence of any prior or
contemporaneous oral agreements of the parties. Any credit agreement not
contained in the printed form must be inserted below to be enforceable.
Debtor and Lender affirm they have no unwritten oral agreements.
<PAGE>
DEBTORS' INITIALS: __________
LENDER'S INITIALS: BRK
REPRESENTING THIS LENDER/SECURED PARTY (Officer Signature)
PROMISE TO PAY: In return for my loan, the undersigned (called I, me, or thy)
promise to pay to the order of the Lender the Principal Amount, plus Interest at
the rate stated above (subject to any applicable variable rate), together with
any other sums owed by me under this agreement including any Prepaid Finance
Charge not included in the Principal Amount, in accordance with the payment
schedule disclosed above or any modification due to a variable rate.
VARIABLE INTEREST RATE CHANGES: If this contract is subject to a variable rate,
changes in the rate will result in a change in terms according to the method
agreed for effecting them. These changes will be provided to me by the Lender
as applicable from time to time. The maximum interest will never exceed the
lesser of the maximum legal rate, or as set forth above, if any.
APPLICATION OF PAYMENTS: Each payment shall be applied first to interest as of
the date the payment is received, with the remainder of the payment applied to
reduce the principal. If any payment is not received when due, the unpaid
principal shall bear interest on a daily basis at the applicable rate. The
terms set forth above are based on an assumed repayment schedule, and variance
from this schedule or changes in the rate due to a variable rate may cause
certain amounts to be greater or less than stated.
PREPAYMENT: I may prepay any amount of this loan at any time without penalty;
however, the Lender may collect or retain a minimum Finance Charge of $5 when
the Amount Financed is $75 or less, or $7.50 when the Amount Financed exceeds
$75.
LATE CHARGE: If any payment is not paid in full when due, the Lender may assess
a delinquency charge if set forth above.
INSUFFICIENT CHECKS: The Lender may charge and collect from me a ten dollar fee
for each return by a bank or other depository institution of a dishonored check,
negotiable order of withdrawal, or share draft issued by me in connection with
this loan.
PREPAID FINANCE CHARGE: I agree to pay Lender those loan fees, if any, shown on
line 5 of the Itemization of Amount Financed. I
<PAGE>
agree that any such fee shall be considered as earned when this loan is made,
and will not be subject to refund or rebate.
ATTORNEY FEES: If this Note referred to an attorney for collection, I agree to
pay reasonable attorney fees not to exceed 15% of the unpaid balance after
default; provided however, if the Amount Financed is such that this promise to
pay attorney fees is not enforceable, no attorney fees will be assessed against
me by the terms of this Note.
SECURITY AGREEMENT: To secure this obligation, I grant to the Lender a security
interest in the property described above and other property covered by this
agreement (collateral). If any of the collateral is real estate, the terms of
this agreement will apply and control over any mortgage in case of any conflict.
Collateral will be located in _________________ County at:
( ) My Address above
( ) Other Address (Specify): _______________________________________________
_____________________________________________________________________________
Collateral will be used primarily for: ( ) Personal, family, household ( )
Business or Agricultural purpose.
The terms above and on the reserve sid of this form are all incorporated by
reference as if they were fully set out at this point. I (jointly and
severally, if more than one) agree to the forms of this Promissory Note,
Disclosure Statement & Security Agreement, including the authorization of all
charges, and acknowledge receiving a completed copy of this form.
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a Security Interest in
the Collateral) Date: ___________________
R.L. DOBSON
R.L. Dobson
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a Security Interest in
the Collateral) Date: _____________________
R.L. DOBSON
R.L. Dobson
( ) Check here if the Federal Trade Commission Notice on the reverse side is
to apply to this loan.
PROMISSORY NOTE, DISCLOSURE STATEMENT, & SECURITY AGREEMENT - SIMPLE INTEREST
OKLAHOMA
<PAGE>
DEBTORS' NAME & ADDRESS:
Russell L. Dobson
CUSTOMER NO.
NOTE/LOAN NO.
111396
HOME PHONE
BUSINESS PHONE
OFFICER
LENDER/SECURED PARTY:
Western Financial Services
13439 N. Broadway Extension
Oklahoma City, Oklahoma 73114
DATE OF NOTE
11-13-96
MATURITY DATE
3-15-97
PRINCIPAL AMOUNT
$112,592.97
INTEREST RATE
9.25%
PURPOSE OF LOAN
To pay loan at Boatmen's Bank
ANNUAL PERCENTAGE RATE. The cost of your credit as a yearly rate.
9.25%
<PAGE>
FINANCE CHARGE. The dollar amount the credit will cost you.
$3,570.81
AMOUNT FINANCED. The amount of credit provided to you or on your behalf.
$112,592.97
TOTAL OF PAYMENTS. The amount you will have paid after you have made all
payments.
$116,163.78
( ) This obligation is payable on Demand.
( ) This obligation has a demand feature.
( ) All disclosures are based on an assumed maturity of one year.
PAYMENT SCHEDULE WILL BE: Number of Payments
1
PREPAYMENT: If you pay off early, you may be charged a minimum Finance Charge.
Any Prepaid Finance Charges will not be refunded.
"e" means an estimate
AMOUNT OF PAYMENTS
$116,163.78
WHEN PAYMENTS ARE DUE
Payment due in full at or before maturity date 3-15-97
( ) VARIABLE RATE. If checked, you loan is a variable rate loan. The Annual
Percentage Rate may increase or decrease according to the following changes:
( ) Upon changes in index (describe)
( ) Upon other conditions (describe)
<PAGE>
Interest rate increases are subject to the following limitation(s):
( ) Not applicable
( ) Not more than once every
( ) Not more than ________% at a time
( ) Not more than ________% overall
( ) The maximum interest rate will not exceed _____%
Any increase in the interest rate will result in changes in the form of:
( ) Higher payment amounts
( ) A larger payment amount at maturity
( ) More payments of the same amount
If your loan ( ) is ( ) were for $___________ at _______% for ___________,
and the rate increased to _____% in _______________: ( ) Your regular
payments would increase by $____________. ( ) Your final payment would
increase by $____________. ( ) You would make _____________ additional
payments.
Security: You are giving a security interest in: The property being
purchased (describe)
Other Property (describe)
( ) Late Charge: If a payment or part of a payment is late more than
_____________ days, you may be charged _________% of the amount that is
late, but not more than $___________________. See your contract
documents for any additional information about nonpayment, default,
and required repayment in full before the scheduled date, and
prepayment refunds and penalties.
FILING FEES
<PAGE>
NON-FILING INSURANCE
( ) Assumption: Someone buying your home may, subject to conditions, be
allowed to assume the remainder of the mortgage on the original terms.
( ) Assumption: Someone buying your home cannot assume the remainder of
the mortgage on the original terms.
Collateral securing other loans with the Lender may also secure this loan.
INSURANCE: Credit Life and Disability Insurance are not required to obtain
credit, and will not be provided unless you sign and agree to pay the additional
cost.
TYPE OF INSURANCE
( ) Credit Life - Joint
( ) Credit Life - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Disability - Joint
( ) Disability - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Property Insurance
( ) Vendor's Single Interest Insurance
TERM
<PAGE>
PREMIUM
Property & Vendor's Single Interest Insurance may be obtained from anyone
you want that is acceptable to the Lender, or provided through an existing
policy you carry which is acceptable to the Lender. If you get this
Insurance from the Lender you will pay the cost shown to the left. Any
Insurer issuing Vendor's Single Interest Insurance waives its right to
subrogation against the Debtors.
ITEMIZATION OF AMOUNT FINANCED
$____________ 1. Amount Give to You Directly
$____________ 2. Amount Paid on Loans with Us
3. Amounts Paid to Others on Your Behalf
_____ a. Insurance
_____ b. Filing & Releasing Fees to
Public Officials
_____ c. License, Title & Registration
Fees to Pub. Off.
$112,592.97 _____ d. #362-0001-5142784-9001
_____ e. ____________________
_____ f. ____________________
_____ g. ____________________
$112,592.97 3. Total Amounts Paid to Others (Add a thru g)
$112,592.97 4. Amount of Loan (Principal) (Add 1, 2, & 3)
$____________ 5. Less: Prepaid Finance Charge
$112,592.97 6. AMOUNT FINANCED (4 minus 5)
NOTICE TO CONSUMERS: 1. Do not sign this agreement before you read it. 2.
You are entitled to a copy of this agreement. 3. You may prepay the unpaid
balance at any time without penalty. 4. This document, together with other
written agreements of the parties, is the final expression of the agreement
between the parties and may not be contradicted by evidence of any prior or
contemporaneous oral agreements of the parties. Any credit agreement not
contained in the printed form must be inserted below to be enforceable.
Debtor and Lender affirm they have no unwritten oral agreements.
<PAGE>
DEBTORS' INITIALS: RLD
LENDER'S INITIALS: __________
REPRESENTING THIS LENDER/SECURED PARTY (Officer Signature)
PROMISE TO PAY: In return for my loan, the undersigned (called I, me, or thy)
promise to pay to the order of the Lender the Principal Amount, plus Interest at
the rate stated above (subject to any applicable variable rate), together with
any other sums owed by me under this agreement including any Prepaid Finance
Charge not included in the Principal Amount, in accordance with the payment
schedule disclosed above or any modification due to a variable rate.
VARIABLE INTEREST RATE CHANGES: If this contract is subject to a variable rate,
changes in the rate will result in a change in terms according to the method
agreed for effecting them. These changes will be provided to me by the Lender
as applicable from time to time. The maximum interest will never exceed the
lesser of the maximum legal rate, or as set forth above, if any.
APPLICATION OF PAYMENTS: Each payment shall be applied first to interest as of
the date the payment is received, with the remainder of the payment applied to
reduce the principal. If any payment is not received when due, the unpaid
principal shall bear interest on a daily basis at the applicable rate. The
terms set forth above are based on an assumed repayment schedule, and variance
from this schedule or changes in the rate due to a variable rate may cause
certain amounts to be greater or less than stated.
PREPAYMENT: I may prepay any amount of this loan at any time without penalty;
however, the Lender may collect or retain a minimum Finance Charge of $5 when
the Amount Financed is $75 or less, or $7.50 when the Amount Financed exceeds
$75.
LATE CHARGE: If any payment is not paid in full when due, the Lender may assess
a delinquency charge if set forth above.
INSUFFICIENT CHECKS: The Lender may charge and collect from me a ten dollar fee
for each return by a bank or other depository institution of a dishonored check,
negotiable order of withdrawal, or share draft issued by me in connection with
this loan.
PREPAID FINANCE CHARGE: I agree to pay Lender those loan fees, if any, shown on
line 5 of the Itemization of Amount Financed. I
<PAGE>
agree that any such fee shall be considered as earned when this loan is made,
and will not be subject to refund or rebate.
ATTORNEY FEES: If this Note referred to an attorney for collection, I agree to
pay reasonable attorney fees not to exceed 15% of the unpaid balance after
default; provided however, if the Amount Financed is such that this promise to
pay attorney fees is not enforceable, no attorney fees will be assessed against
me by the terms of this Note.
SECURITY AGREEMENT: To secure this obligation, I grant to the Lender a security
interest in the property described above and other property covered by this
agreement (collateral). If any of the collateral is real estate, the terms of
this agreement will apply and control over any mortgage in case of any conflict.
Collateral will be located in _________________ County at:
( ) My Address above
( ) Other Address (Specify): __________________________________
_________________________________________________________________
Collateral will be used primarily for: ( ) Personal, family, household ( )
Business or Agricultural purpose.
The terms above and on the reserve sid of this form are all incorporated by
reference as if they were fully set out at this point. I (jointly and
severally, if more than one) agree to the forms of this Promissory Note,
Disclosure Statement & Security Agreement, including the authorization of all
charges, and acknowledge receiving a completed copy of this form.
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a Security Interest in
the Collateral) Date: ___________________
R.L. DOBSON
R.L. Dobson
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a Security Interest in
the Collateral) Date: _____________________
R.L. DOBSON
R.L. Dobson
( ) Check here if the Federal Trade Commission Notice on the reverse side
is to apply to this loan.
PROMISSORY NOTE, DISCLOSURE STATEMENT, & SECURITY AGREEMENT -
<PAGE>
SIMPLE INTEREST OKLAHOMA
<PAGE>
DEBTORS' NAME & ADDRESS:
Everett R. Dobson
CUSTOMER NO.
NOTE/LOAN NO.
9612
HOME PHONE
BUSINESS PHONE
OFFICER
LENDER/SECURED PARTY:
Western Financial Services Corp.
13439 N. Broadway Ext., Ste. 200
Oklahoma City, Oklahoma 73114
DATE OF NOTE
12-31-96
MATURITY DATE
6-30-97
PRINCIPAL AMOUNT
$339,884.26
INTEREST RATE
8.0%
PURPOSE OF LOAN
Consolidate
ANNUAL PERCENTAGE RATE. The cost of your credit as a yearly rate.
8.0%
<PAGE>
FINANCE CHARGE. The dollar amount the credit will cost you.
$13,595.37
AMOUNT FINANCED. The amount of credit provided to you or on your behalf.
$339,884.26
TOTAL OF PAYMENTS. The amount you will have paid after you have made all
payments.
$353,479.63
( ) This obligation is payable on Demand.
( ) This obligation has a demand feature.
( ) All disclosures are based on an assumed maturity of one year.
PAYMENT SCHEDULE WILL BE: Number of Payments
1
PREPAYMENT: If you pay off early, you may be charged a minimum Finance Charge.
Any Prepaid Finance Charges will not be refunded.
"e" means an estimate
AMOUNT OF PAYMENTS
$353,479.63
WHEN PAYMENTS ARE DUE
( ) VARIABLE RATE. If checked, you loan is a variable rate loan. The Annual
Percentage Rate may increase or decrease according to the following changes:
( ) Upon changes in index (describe)
( ) Upon other conditions (describe)
<PAGE>
Interest rate increases are subject to the following limitation(s):
( ) Not applicable
( ) Not more than once every
( ) Not more than ________% at a time
( ) Not more than ________% overall
( ) The maximum interest rate will not exceed _____%
Any increase in the interest rate will result in changes in the form of:
( ) Higher payment amounts
( ) A larger payment amount at maturity
( ) More payments of the same amount
If your loan ( ) is ( ) were for $___________ at _______% for
________________, and the rate increased to _____% in _______________:
( ) Your regular payments would increase by $____________. ( ) Your final
payment would increase by $____________. ( ) You would make ______________
additional payments.
Security: You are giving a security interest in: The property being
purchased (describe)
Other Property (describe)
( ) Late Charge: If a payment or part of a payment is late more than
_____________ days, you may be charged _________% of the amount that is
late, but not more than $___________________. See your contract
documents for any additional information about nonpayment, default,
and required repayment in full before the scheduled date, and
prepayment refunds and penalties.
FILING FEES
<PAGE>
NON-FILING INSURANCE
( ) Assumption: Someone buying your home may, subject to conditions, be
allowed to assume the remainder of the mortgage on the original terms.
( ) Assumption: Someone buying your home cannot assume the remainder of
the mortgage on the original terms.
Collateral securing other loans with the Lender may also secure this loan.
INSURANCE: Credit Life and Disability Insurance are not required to obtain
credit, and will not be provided unless you sign and agree to pay the additional
cost.
TYPE OF INSURANCE
( ) Credit Life - Joint
( ) Credit Life - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Disability - Joint
( ) Disability - Single
TERM
PREMIUM
NAME OF INSURED
I want the insurance checked below left, at the cost shown.
( ) Property Insurance
( ) Vendor's Single Interest Insurance
TERM
<PAGE>
PREMIUM
Property & Vendor's Single Interest Insurance may be obtained from anyone
you want that is acceptable to the Lender, or provided through an existing
policy you carry which is acceptable to the Lender. If you get this
Insurance from the Lender you will pay the cost shown to the left. Any
Insurer issuing Vendor's Single Interest Insurance waives its right to
subrogation against the Debtors.
ITEMIZATION OF AMOUNT FINANCED
$____________ 1. Amount Give to You Directly
$339,884.26 2. Amount Paid on Loans with Us
5590A, 5826, 111396, 5885
3. Amounts Paid to Others on Your Behalf
_____ a. Insurance
_____ b. Filing & Releasing Fees to
Public Officials
_____ c. License, Title & Registration
Fees to Pub. Off.
_____ d. ____________________
_____ e. ____________________
_____ f. ____________________
_____ g. ____________________
$339,884.26 3. Total Amounts Paid to Others (Add a thru g)
$339,884.26 4. Amount of Loan (Principal) (Add 1, 2, & 3)
$____________ 5. Less: Prepaid Finance Charge
$339,884.26 6. AMOUNT FINANCED (4 minus 5)
NOTICE TO CONSUMERS: 1. Do not sign this agreement before you read it. 2.
You are entitled to a copy of this agreement. 3. You may prepay the unpaid
balance at any time without penalty. 4. This document, together with other
written agreements of the parties, is the final expression of the agreement
between the parties and may not be contradicted by evidence of any prior or
contemporaneous oral agreements of the parties. Any credit agreement not
contained in the printed form must be inserted below to be enforceable.
Debtor and Lender affirm they have no unwritten oral agreements.
<PAGE>
DEBTORS' INITIALS: __________
LENDER'S INITIALS: BRK
REPRESENTING THIS LENDER/SECURED PARTY (Officer Signature)
PROMISE TO PAY: In return for my loan, the undersigned (called I, me, or thy)
promise to pay to the order of the Lender the Principal Amount, plus Interest at
the rate stated above (subject to any applicable variable rate), together with
any other sums owed by me under this agreement including any Prepaid Finance
Charge not included in the Principal Amount, in accordance with the payment
schedule disclosed above or any modification due to a variable rate.
VARIABLE INTEREST RATE CHANGES: If this contract is subject to a variable rate,
changes in the rate will result in a change in terms according to the method
agreed for effecting them. These changes will be provided to me by the Lender
as applicable from time to time. The maximum interest will never exceed the
lesser of the maximum legal rate, or as set forth above, if any.
APPLICATION OF PAYMENTS: Each payment shall be applied first to interest as of
the date the payment is received, with the remainder of the payment applied to
reduce the principal. If any payment is not received when due, the unpaid
principal shall bear interest on a daily basis at the applicable rate. The
terms set forth above are based on an assumed repayment schedule, and variance
from this schedule or changes in the rate due to a variable rate may cause
certain amounts to be greater or less than stated.
PREPAYMENT: I may prepay any amount of this loan at any time without penalty;
however, the Lender may collect or retain a minimum Finance Charge of $5 when
the Amount Financed is $75 or less, or $7.50 when the Amount Financed exceeds
$75.
LATE CHARGE: If any payment is not paid in full when due, the Lender may assess
a delinquency charge if set forth above.
INSUFFICIENT CHECKS: The Lender may charge and collect from me a ten dollar fee
for each return by a bank or other depository institution of a dishonored check,
negotiable order of withdrawal, or share draft issued by me in connection with
this loan.
PREPAID FINANCE CHARGE: I agree to pay Lender those loan fees, if any, shown on
line 5 of the Itemization of Amount Financed. I
<PAGE>
agree that any such fee shall be considered as earned when this loan is made,
and will not be subject to refund or rebate.
ATTORNEY FEES: If this Note referred to an attorney for collection, I agree to
pay reasonable attorney fees not to exceed 15% of the unpaid balance after
default; provided however, if the Amount Financed is such that this promise to
pay attorney fees is not enforceable, no attorney fees will be assessed against
me by the terms of this Note.
SECURITY AGREEMENT: To secure this obligation, I grant to the Lender a security
interest in the property described above and other property covered by this
agreement (collateral). If any of the collateral is real estate, the terms of
this agreement will apply and control over any mortgage in case of any conflict.
Collateral will be located in _________________ County at:
( ) My Address above
( ) Other Address (Specify): __________________________________
_________________________________________________________________
Collateral will be used primarily for: ( ) Personal, family, household ( )
Business or Agricultural purpose.
The terms above and on the reserve sid of this form are all incorporated by
reference as if they were fully set out at this point. I (jointly and
severally, if more than one) agree to the forms of this Promissory Note,
Disclosure Statement & Security Agreement, including the authorization of all
charges, and acknowledge receiving a completed copy of this form.
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a Security Interest in
the Collateral) Date: ___________________
EVERETT DOBSON
Everett Dobson
DEBTOR SIGNATURE ( ) (Check Box if Signing Only to Grant a Security Interest in
the Collateral) Date: _____________________
( ) Check here if the Federal Trade Commission Notice on the reverse side
is to apply to this loan.
PROMISSORY NOTE, DISCLOSURE STATEMENT, & SECURITY AGREEMENT -
<PAGE>
SIMPLE INTEREST OKLAHOMA
<PAGE>
LEASE AGREEMENT
This Lease Agreement is made effective this 17th day of July, 1995 between the
entities hereafter identified as Landlord and Tenant. All of the General
Information contained in Article 1 below is effective for this entire document.
ARTICLE 1: GENERAL INFORMATION
1.1 PARTIES
Each reference in this Lease Agreement to any of the following entities shall be
construed to incorporate the data stated for that entity in this Section 1.1:
LANDLORD: WILLRUSS LIMITED LIABILITY COMPANY, an Oklahoma Limited
Liability Company
ADDRESS OF WILLRUSS: 13439 N. Broadway Extension, Oklahoma City,
Oklahoma 73114, Suite 200
WILLRUSS' REPRESENTATIVE: Russell Dobson
TENANT: Western Financial Services Corp.
TENANT'S ADDRESS (For notice and billing): 13439 N. Broadway Ext., Suite 200
Oklahoma City, Okla 73114
TENANT'S REPRESENTATIVE: Tom Riley
BUILDING: 13439 North Broadway Extension, Oklahoma City, Oklahoma
RENTABLE FLOOR AREA OF TENANT'S SPACE: 18,916 square feet
Rentable Floor Area Leased by Tenant 24,011 square feet
TOTAL RENTABLE FLOOR AREA OF THE BUILDING: 32,015 square feet
TENANT'S DESIGN COMPLETION DATE: July 14, 1995
<PAGE>
SCHEDULED TERM COMMENCEMENT DATE: July 14, 1995
TERM EXPIRATION DATE: July 14, 2005
APPROXIMATE TERM: Ten (10) years.
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<PAGE>
SCHEDULE OF BASE RENT:
MONTHS MONTHLY INSTALLMENT TOTAL PERIOD BASE RENT
120 $18,008.00 $216,099 yr x 10 = $2,160,990
TOTAL SCHEDULED BASE RENT: $216,099
ANNUAL ESTIMATED OPERATING COSTS: $________ OR _________/S.F./YR
TENANT IMPROVEMENT REIMBURSEMENT TO LANDLORD: $ -0-
SECURITY DEPOSIT: $12,278 GUARANTOR: N/A
PERMITTED USES: General offices
TENANTS PUBLIC LIABILITY INSURANCE: $1,000,000
SPECIAL PROVISIONS: Effective 3/1/96 additional square footage leased in the
amount of 2,288 sq. feet. Rent increase from $4 square foot
to $11 sq. foot for duration of term ($216,099 to $264,121)
Effective 8/1/96 additional space rented,
total under lease to 23,414 square feet.
1.2 EXHIBITS
The Exhibits listed below are incorporated in this Lease by reference and are to
be construed as part of this Lease:
EXHIBIT A - Legal Description
EXHIBIT B - Plan Showing Tenant's Space
EXHIBIT C - Specifications of Tenant Improvements
EXHIBIT D - Riders
EXHIBIT E - Rules and Regulations
EXHIBIT F - Guaranty
EXHIBIT G - Estoppel Certificate
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<PAGE>
ARTICLE 2: PREMISES AND TERM
2.1 PREMISES
Landlord hereby leases to Tenant, and Tenant leases from Landlord, Tenant's
Space in the Building, as shown in Exhibit B. Tenant's Space is hereinafter
referred to as "the Premises".
2.2 TERM
The Lease Term shall begin on the Scheduled Term Commencement Date (the
"Commencement Date") and continue until the Expiration Date, unless postponed,
accelerated or extended as hereinafter provided.
2.2.1 EARLY OCCUPANCY. If the tenant occupies the Leased Premises prior
to the Commencement Date, Rent will commence on the date of such occupancy
at the average rate applicable to the first twelve months of the Term, and
the Term will be extended to include the period of such early occupancy.
2.2.2 DELAYED OCCUPANCY. To the extent that Landlord agrees to perform
construction pursuant to Exhibit C, if for any reason construction has not
reached substantial completion on the Commencement Date, this Lease will
nevertheless continue in effect. If the failure to reach substantial
completion arises from: (a) the Tenant's failure to furnish final working
drawings prior to Tenant's Design Completion Date; (b) any delay in
construction caused by any change in or addition to the work ordered by the
Tenant; (c) the Tenant's failure to pay the Tenant Improvement
Reimbursement to Landlord; or (d) any other default, delay or omission by
the Tenant; the payment of Rent will begin on the Commencement Date and the
Term will not be modified. If the failure to reach substantial completion
arises through no fault of the Tenant, the Rent will abate and not commence
until the date of substantial completion; provided that such abatement will
be for a period of no greater than one hundred eighty (180) days unless the
Landlord and Tenant otherwise agree in writing. Such abatement of rent
will constitute full settlement of all claims which the Tenant might
otherwise have against the Landlord by reason of any delay in occupancy of
the Premises. Any delay in occupancy will not extend the Term Expiration
Date as set forth in Section 1.1.
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<PAGE>
ARTICLE 3: CONSTRUCTION
3.1 INITIAL CONSTRUCTION
Except to the extent of construction work which Landlord agrees to perform
pursuant to Exhibit C, Tenant agrees to take the Premises in their existing
condition as of the date of this Lease.
If the Landlord agrees in Exhibit C to perform construction, then Tenant shall,
on or before Tenant's Design Completion Date, provide to Landlord complete sets
of plans and specifications acceptable to Landlord prepared at Tenant's expense
by an architect approved by Landlord, including but not limited to: dimensioned
partition plans, furniture and equipment layout plans, dimensioned electrical
and telephone outlet plans, reflected ceiling plans, door and hardware
schedules, room finish schedules including wall, carpet and floor tile colors,
electrical and mechanical engineering plans, and all other necessary
construction details and specifications.
3.2 TENANT IMPROVEMENT REIMBURSEMENT TO LANDLORD
Unless otherwise specified in Exhibit C, the cost of all construction performed
by Landlord in accordance with the aforesaid plans and specifications shall be
at Tenant's expense. Tenant agrees to pay the Tenant Improvement Reimbursement
to Landlord one half before the Landlord begins construction and one half on the
date of substantial completion. In the event the Tenant orders any changes in
or additions to the work, all costs resulting therefrom will be paid by Tenant
on the date of substantial completion. If no figure is shown in Section 1.1
hereof, the Tenant Improvement Reimbursement to Landlord shall equal the
Landlord's total cost of construction (including any supervisor fee to
Landlord's managing agent) less the cost of any allowance to Tenant specified in
Exhibit C.
3.3 GENERAL PROVISIONS APPLICABLE TO CONSTRUCTION
Tenant's furniture, furnishings, telephones, and equipment shall be the
responsibility of Tenant, and shall be coordinated with any work being performed
by Landlord in such a manner as to maintain harmonious labor relations and not
damage the Building or interfere with Building operations. The installation of
furniture, furnishings, telephones and equipment shall be performed at Tenant's
direction and expense during weekday working hours when Landlord's maintenance
personnel are available for supervision and
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<PAGE>
coordination with building operations. If Tenant wishes to perform their
work at other times it shall pay the overtime cost of Landlord's supervisory
personnel. Tenant agrees to provide Landlord with an insurance certificate
from any contractor it employs before the contractor begins work in the
Building.
All construction work required or permitted by this Lease, whether by Landlord
or by Tenant shall be done in a good and workmanlike manner and in compliance
with all applicable laws and ordinances, regulations and orders of governmental
authorities and insurers of Building. Landlord's obligations under Section 3.1
shall be deemed to have been performed when Tenant commences to occupy any
portion of the Premises, except for items which are incomplete or do not conform
with the requirements of Section 3.1 and as to which Tenant in either case has
given written notice to Landlord within 30 days after such commencement. If
Tenant has not commenced to occupy the Premises within 30 days after they are
ready for occupancy, a certificate of completion by a licensed architect or
registered engineer shall be conclusive evidence that Landlord has performed all
such obligations except for items stated in such certificate to be incomplete or
not in conformity with such requirements.
Landlord will not approve any construction, alterations or additions requiring
unusual expense to readapt the Premises to normal office use on lease
termination or increasing the cost of construction, insurance or taxes on the
Building or of Landlord's services called for by Section 5.1 unless Tenant first
gives assurances acceptable to Landlord that such re adaptation will be made
prior to such termination without expense to Landlord and makes provisions
acceptable to Landlord for payment of such increased cost. Landlord will also
disapprove any construction, alterations or additions requested by Tenant which
will delay completion of the Premises or the Building. Following its approval
of the plans and specifications, the Landlord agrees to carry out the
construction called for in Exhibit C. All such work shall be performed by the
Landlord's contractors. All construction, alterations, and additions shall be
part of the Building and under no circumstances removed by Tenant except for
items which the parties agree in writing at the time of Landlord's approval
shall be removed by Tenant on termination of this Lease, or shall be removed or
left at Tenant's election.
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<PAGE>
3.4 REPRESENTATIVES
Each party authorized the other to rely in connection with its rights and
obligations under this Article III upon approval and other action on the party's
behalf by Landlord's Representative in the case of Landlord or Tenant's
Representative in the case of Tenant or by any person designated in substitution
or addition by notice to the party relying.
ARTICLE 4: RENT
4.1 RENT
Tenant agrees to pay Landlord rent for the Premises, without any offset or
reduction whatever (except as made in accordance with the express provisions of
this Lease), equal to the Total Scheduled Base Rent, in monthly installments as
shown in Section 1.1 in advance on the first day of each calendar month included
in the Term; and for any portion of a calendar month at the beginning or end of
the Term, at the prorated monthly rate in advance.
4.2 OPERATING COST ESCALATION
4.2.1 DEFINITIONS. For purpose of this section, the following terms shall
have the definitions indicated:
"Landlord's Operating Costs" are the costs of cleaning, operating,
managing, maintaining and repairing the Building, plazas, parking areas,
landscaping and grounds. These are intended to include, without
limitation, expenditures for: real estate taxes; personal property taxes;
other taxes, assessments and governmental charges (including taxes on rents
or services); expenses of proceedings for abatement; premiums for
insurance; utility charges; janitorial service; cleaning supplies;
licenses; permits and inspection fees; payments to independent contractors
(including affiliates of Landlord at reasonable arms-length rates); repairs
and maintenance; management fees and expenses; equipment rental; labor;
supplies; security charges; if the Building is located in an office park,
the Building's pro rata share (as reasonably determined by Landlord) of the
cost of operating and maintaining the common areas and facilities within
the park; the amortized cost (with interest) of a new or replacement
capital item which has the effect of reducing Landlord's Operating Costs;
and all other reasonable and necessary
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<PAGE>
expenses properly chargeable against income. "Real Estate Taxes" shall
mean all taxes of every kind and nature assessed by any governmental
authority on the land, the Building and improvements, which the Landlord
shall become obligated to pay because of or in connection with the
ownership, leasing and operating of the land and the Building. The
following will be excluded from Landlord's Operating Costs: charges which
are reimbursed to the Landlord; depreciation; debt service; costs of
tenant improvements; leasing commissions; marketing expenses; and income,
franchise and similar taxes which are personal to the Landlord.
"Tenant's Share" shall mean a fraction having as it numerator the Rentable
Floor Area of Tenant's Space and as its denominator the Total Rentable
Floor Area of The Building less on half of the average vacant area during a
fiscal year or fraction thereof. As it applies to services which are not
rendered to all areas on a comparable basis, the Tenant's Share shall be
the proportion which the Rentable Floor Area of Tenants's Space bears to
the total rentable floor area to which such service is rendered.
"Operating Cost Escalation" shall mean the difference, if any, between
Tenant's Share of Landlord's Operating Costs, and the product of Annual
Estimated Operating Costs per square foot multiplied by the Rentable Floor
Area of Tenant's Space.
4.2.2 DETERMINATION OF OPERATING COST ESCALATION. As soon as practicable
after the end of each fiscal year during the Term and after Lease
termination, Landlord shall render a statement to Tenant showing Landlord's
Operating Cost and the calculation of operating Cost Escalation for the
preceding fiscal year or fraction thereof, in reasonable detail certified
by Landlord.
4.2.3 PAYMENTS OF OPERATING COST ESCALATION. Within 30 days after
Landlord renders a statement, Tenant shall pay to the Landlord as
additional rent (i) all Operating Cost Escalation applicable to the
preceding fiscal year or fraction thereof not theretofore paid, and (ii) in
the case of an annual statement, the product of 1/12 of Landlord's estimate
of the Operating Cost Escalation for the current fiscal year and the number
of elapsed months in the current fiscal year less
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<PAGE>
installments already paid, for application on Operating Cost Escalation
for the current fiscal year. Thereafter, on the first day of each month,
Tenant shall pay as additional rent an amount equal to 1/12 of the
Landlord's estimate of Operating Cost Escalation as set forth in Landlord's
last statement, to be applied against Operating Cost Escalation owed for
the current fiscal year. If the Landlord's statement shows that Tenant's
payments of estimated Operating Cost Escalation for the preceding fiscal
year exceed the actual Operating Cost Escalation, the excess shall be
used to offset the Tenant's rent.
4.2.4 AUDIT. Tenant may at its own expense cause an audit to be made of
the Landlord's books and records pertaining to Operating Cost Escalation upon
written notice received by Landlord within 30 days following a statement from
Landlord. If as a result of such audit Landlord and Tenant agree on a
redetermination of Operating Cost Escalation, then an appropriate rental
adjustment shall be made by the parties. If the redetermined Operating Cost
Escalation is less than Landlord's determination by an amount in excess of
3-TM-, then Landlord shall reimburse Tenant's reasonable costs of audit.
Tenant's obligation to pay Operating Cost Escalation shall not be suspended
during the period of an audit. Landlord's determination of Operating Cost
Escalation shall be conclusively binding unless Tenant notifies Landlord of its
intent to audit within the 30 days set forth above.
4.3 LATE PAYMENTS
If any installment of Base Rent or additional rent, or on account of tenant
improvements, is received more than 10 days after the due date thereof, at
Landlord's election, it shall bear interest at a rate equal to 1 1/2 % per month
from such due date, which interest shall be immediately due and payable as
further rent.
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<PAGE>
ARTICLE 5: LANDLORD'S COVENANTS
5.1 LANDLORD'S COVENANTS DURING THE TERM
Landlord covenants during the Term:
5.1.1 BUILDING SERVICES - To furnish the services listed below through
Landlord's employees or independent contractors so long as Tenant is not in
default:
(a) Cleaning - Landlord shall provide five day a week cleaning of the
Premises. Abnormal waste removal (e.g. bulk computer paper, bulk
packaging, wood or cardboard crates, refuse from cafeteria operations,
etc.) shall be Tenant's responsibility. Normal trash and garbage removal
is provided by Landlord.
(b) Heating, Ventilation and Air Conditioning - Landlord shall provide
heating, ventilation and air conditioning as required to provide reasonably
comfortable temperatures for normal business day occupancy (excepting
holidays) Monday through Friday from 8:00 a.m. to 6:00 p.m. and Saturdays
from 8:00 a.m. to 1:00 p.m. Additional hours of operation will be provided
at Tenant's expenses, upon advance written request, at rates equal to
Landlord's actual cost of operation. The cost of operation and maintenance
of any additional or special air conditioning equipment will be paid by
Tenant.
(c) Lawncare and Landscaping - Landlord shall provide lawncare and
landscaping services as Landlord from time to time determines best for the
building as a whole.
(d) Water and Sewage - Landlord shall, at Landlord's expense, furnish water
and sewer services for the benefit of Tenant's space and Tenant's
reasonable requirements.
(e) Elevators - Landlord shall provide elevators for the use of tenants and
the general public and shall program them as Landlord from time to time
determines best for the Building as a whole.
(f) Electricity -
(1) Landlord, at Landlord's expense, shall furnish electrical energy
required for lighting,electrical facilities, equipment, machinery,
fixtures and appliances used in or for the benefit of Tenant's Space,
subject to the limitations in the following paragraph.
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<PAGE>
(2) Tenant shall not, without prior written notice to Landlord in
each instance, connect to the Building's electric distribution system
any fixtures, appliances or equipment other than normal office
machines such as desktop calculators and typewriters, or any fixtures,
appliances or equipment which Tenant on a regular basis operates
beyond normal building operating hours, or which operate on a voltage
in excess of 120 volts or which in the aggregate, including lighting,
consume more than 2 watts multiplied by the Rentable Floor Area of
Tenant's Space. In the event of any such connection, Tenant agrees to
an increase in the Base Rent by an amount which will reflect the cost
to Landlord of the additional electric service to be furnished by
Landlord, such increase to be effective as of the date of any such
installation.
(3) Whenever the Base Rent is to be increased pursuant to the
foregoing paragraph, if Landlord and Tenant cannot agree thereon, such
amount shall be conclusively determined by a reputable independent
electrical engineer selected by Landlord and paid equally by both
parties, and the cost to Landlord's Operating Costs as provided in
Section 4.2 hereof. The parties agree to execute and deliver each to
the other an amendment of this Lease confirming such increase.
5.1.2 ADDITIONAL BUILDING SERVICES
To furnish, through Landlord's employees or independent contractors,
reasonable additional Building services upon reasonable advance request of
Tenant at equitable rates from time to time established by Landlord to be
paid by Tenant;
5.1.3 REPAIRS
Except as otherwise provided in Article VII, to make such repairs to the
roof, exterior walls, floor slabs and common facilities of the Building as
may be necessary to keep them in serviceable condition; and
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<PAGE>
5.1.4 QUIET ENJOYMENT
That Landlord has the right to make this Lease and that Tenant on paying
the rent and performing its obligations hereunder shall peacefully and
quietly have, hold and enjoy the Premises throughout the Term.
5.2 INTERRUPTIONS
Landlord shall not be liable to Tenant for any compensation or reduction of rent
by reason of inconvenience or annoyance or for loss of business arising from
power losses or shortages or from the necessity of Landlord's entering the
Premises for any of the purposes in this Lease authorized, or for repairing the
Premises, Building, or lot. In case Landlord is prevented or delayed from
making any repairs, alterations or improvements, or furnishing any service or
performing any other covenant or duty to be performed on Landlord's part, by
reason of any cause reasonably beyond Landlord's control or in case Tenant's
access to the Premises is limited by Landlord's repairs, alterations or
improvements, Landlord shall not be liable to Tenant therefor, nor, except as
expressly otherwise provided in Article VII, shall Tenant be entitled to any
abatement or reduction of rent by reason thereof, nor shall the same give rise
to a claim in Tenant's favor that such failure constitutes actual or
constructive, total or partial, eviction from the Premises.
Landlord reserves the right to stop any service or utility system when necessary
by reason of accident or emergency or until necessary repairs have been
completed. Except in case of emergency repairs, Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
Landlord also reserves the right to institute such policies, and measures as may
be necessary, required or expedient for the conservation or preservation of
energy or energy services or as may be necessary or required to comply with
applicable codes, rules, regulations or standards.
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<PAGE>
ARTICLE 6: TENANT'S COVENANTS
6.1 TENANT'S COVENANTS DURING THE TERM
Tenant covenants during the Term and such further time as Tenant occupies any
part of the Premises:
6.1.1 TENANT'S PAYMENTS - To pay when due (a) all Base Rent and additional
rent, (b) all taxes which may be imposed on Tenant's personal property in
the Premises (including without limitation, Tenant's fixtures and
equipment) regardless to whomever assessed, (c) all charges by public
utilities for telephone a;nd other utility services rendered to the
Premises and not required hereunder to be furnished by Landlord and (d) as
additional rent, all charges of Landlord for services rendered pursuant to
Section 5.1.2 hereof;
6.1.2 REPAIRS AND ALTERATIONS - Except as otherwise provided in Article
VII and Section 5.1.3 to maintain the Premises in good order, repair and
condition, reasonable wear only excepted. Tenant agrees not to make any
alterations, changes, or additions to the Premises without Landlord's prior
written consent;
6.1.3 USE AND OCCUPANCY - To use and occupy the Premises only for the
Permitted Uses; and not to injure of deface the Premises, Building, or lot;
and not to permit any use in the Premises which is improper, offensive,
contrary to law or ordinances, liable to create a nuisance or to adversely
affect the Landlord's leasing of the Building or to invalidate or increase
the premiums for any insurance or the Building or its contents or liable to
render necessary any alteration or addition to the Building.
6.1.4 RULES AND REGULATIONS - To comply with the Rules and Regulations set
forth in Exhibit E and all other reasonable Rules and Regulations hereafter
made by Landlord, of which Tenant has been given notice, it being
understood that Landlord shall not be liable to Tenant for the failure of
other tenants of the Building to conform to such Rules and Regulations.
6.1.5 CAFETERIA AND VENDING INSTALLATIONS - Not to install a lunch
room,vending machine or cafeteria service without Landlord's prior written
approval. All cleaning necessitated by such an installation shall be at
Tenant's expense.
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6.1.6 ASSIGNMENT AND SUBLETTING - Not without the prior written consent of
Landlord to assign this Lease, to make any sublease, or to permit occupancy
of the Premises or any part thereof by anyone other than Tenant,
voluntarily or by operation of law, and any such assignment, sublease or
occupancy without such consent shall be void. Landlord shall not be
obligated to consent to any such assignment, sublease or occupancy without
such consent shall be void. Landlord shall not be obligated to consent to
any such assignment, sublease or occupancy if the same is on terms more
favorable to the successor occupant than to the then occupant. As
additional rent, Tenant shall reimburse Landlord promptly for reasonable
legal and other expenses incurred by Landlord in connection with any
request by Tenant for consent to assignment or subletting. No assignment
or subletting shall affect the continuing primary liability of Tenant
(which, following assignment, shall be joint and several with the
assignee). No consent to any of the foregoing in a specific instance shall
operate as a waiver in any subsequent instance. If Tenant requests
Landlord's consent to assign this Lease or sublet more than 25% of the
Premises, Landlord shall have the option, exercisable by written notice to
Tenant given within 10 days after receipt of such request, to terminate
this Lease as to the area to be assigned or sublet, on a date not less than
30 nor more than 60 days after the date of such notice. In the event any
assignment or sublease to which Landlord has consented results in the
payment to Tenant of rent and other sums in an amount per square foot of
the portion to the Premises subject to such assignment or sublease greater
than the rent and other sums payable hereunder per square foot of the
Premises, Tenant shall remit to Landlord all such excess.
6.1.7 INDEMNITY - To defend, with counsel reasonably acceptable to
Landlord, save harmless, and indemnify Landlord from any liability for
injury, loss, accident or damage to any person or property and from any
claims, actions, proceedings and expenses and costs in connection therewith
(including, without implied limitation, reasonable counsel fees): (i)
arising from the omission, fault, willful act, negligence or other
misconduct of Tenant or from any use made or thing done or occurring or the
Premises not due to the omission, fault, willful act, negligence or other
misconduct of Landlord or
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(ii) resulting from the failure of Tenant to perform and discharge its
covenants and obligations under this Lease;
6.1.8 TENANT'S PUBLIC LIABILITY INSURANCE - To maintain public liability
insurance on the Premises in amounts which shall be at least equal to the
limits set forth in Section 1.1 and from time to time shall be for such
higher limits as are customarily carried in the area. Tenant agrees to
furnish Landlord with certificates of the required insurance.
6.1.9 TENANT'S WORKERS' COMPENSATION INSURANCE - To keep all Tenants
employees working on the Premises covered by workers compensation insurance
in statutory amounts and to furnish Landlord with certificates thereof;
6.1.10 LANDLORD'S RIGHT OF ENTRY - To permit Landlord and Landlord's
agents entry: to examine the Premises at reasonable times and, if Landlord
shall so elect, to make repairs or replacements; to remove, at Tenant's
expense, any changes, additions, signs, curtains, blinds, shades, awnings,
aerials, flagpoles, or the like not consented to in writing; and to show
the Premises to prospective tenants during the 12 months preceding
expiration of the Term and at any time the Tenant is in default and to
prospective purchasers and mortgagees at all reasonable times.
6.1.11 LOADING - Not to place a load upon the Premises exceeding an
average rate of 50 pounds of live load per square foot of floor area; and
not to move any safe, vault or other heavy equipment in, about or out of
the Premises except in such manner and at such times as Landlord shall in
each instance approve;
6.1.12 LANDLORD'S COSTS - In case Landlord shall, without any fault on its
part, be made party to any litigation commenced by or against Tenant or by
or against any parties in possession of the Premises or any part hereof
claiming under Tenant, to pay, as additional rent, all costs including,
without implied limitation, reasonable counsel fees incurred by or imposed
upon Landlord in connection with such litigation.
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6.1.13 LOSS OR DAMAGE TO TENANT'S PROPERTY - All furnishings, fixtures,
equipment, effects and property of Tenant and of anyone claiming under
Tenant which, during the continuance of this Lease or any occupancy of the
Premises by Tenant or anyone claiming under Tenant, may be on the Premises
or elsewhere in the Building or on the land shall be at the sole risk and
hazard of Tenant, and if the whole or any part thereof shall be destroyed
or damaged by fire, water or otherwise, or by the leakage or bursting of
water pipes, steam pipes, or other pipes, by theft, or from any other
cause, no part of said loss or damage is to be charged to or be borne by
Landlord unless due to the omission, fault, wilful act, negligence or other
misconduct of Landlord;
6.1.14 LABOR OR MATERIALMEN'S LIENS - To pay promptly when due the entire
cost of any work done on the Premises by Tenant, its agents, employees, or
independent contractors. Tenant shall not permit any liens for labor or
materials performed or furnished in connection therewith to attach to the
Premises and agrees to discharge any such liens immediately.
6.1.15 YIELDING UP - To yield up the Premises peaceably at the expiration
or termination of the Lease, in good order, repair and condition. Tenant
agrees that all improvements, alterations and additions to the Premises are
the property of Landlord whether paid for by Landlord or Tenant (including,
without limitation: floor coverings, wall coverings, plumbing fixtures,
built-in appliances, built-in furniture, and cabinets and shelving attached
to the wall or floor) and will be left behind when Tenant yields up the
Premises, unless the parties agreed otherwise in writing at the time of
construction or installation.
6.1.16 HOLDOVER - To pay to Landlord twice the total of the Base Rent and
additional rent applicable to the last month of the Term for each month or
portion thereof Tenant shall retain possession of the Premises or any part
thereof after the termination of this Lease, and also to pay all damages
sustained by Landlord on account thereof; the provisions of this subsection
shall not operate as a waiver by Landlord of any right of re-entry provided
in this Lease; at the option of Landlord exercised by written notice given
to Tenant while
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such holding over continues, such holding over shall constitute an
extension of this Lease for a period of one year.
6.1.17 LANDLORD'S LIEN - As security for the performance of the
obligations of the Tenant under this Lease, the Tenant hereby grants the
Landlord a security interest in all of the property now owned or hereafter
acquired by the Tenant which is located in the Premises and all proceeds
and products thereof. The Tenant will not remove any of such personal
property from the Premises until all of the Tenants obligations under this
lease have been satisfied in full. Without excluding any other manner of
notice, any requirement for reasonable notice to the Tenant of the
Landlord's intention to dispose of any property pursuant to the enforcement
of such security interest will be met if such notice is given at least ten
days before the time of such disposition. Any sale made pursuant to the
enforcement of such security interest will be deemed to have been a public
sale conducted in a commercially reasonable manner if held at the Premises
after advertisement of the time, place, method of sale and a general
description of the property to be sold in a daily newspaper published in
the county in which the Building is located, for five consecutive days
before the date of sale. The Tenant agrees to execute and deliver to the
Landlord such financing statements, continuation statements and other
instruments as Landlord might reasonably require to perfect, protect or
continue the foregoing security interest within ten days after written
request therefor.
6.1.18 ABANDONED PROPERTY - All personal property not removed by the
Tenant from the premises within five days after the termination of this
Lease will be conclusively presumed to have been abandoned by the Tenant
and the Landlord may, at the Landlord's option, thereafter take possession
of such property and either declare the same to be the property of the
Landlord or, at the expense of the Tenant, dispose of such property in any
manner and for whatever consideration the Landlord in the Landlord's sole
discretion deems advisable.
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ARTICLE 7: CASUALTY AND TAKING
7.1 CASUALTY
If the Premises are damaged by fire or other casualty and such damage cannot be
repaired within 120 days (as estimated by the Landlord as soon as reasonably
practicable after the occurrence of such damage), this Lease, at the option of
the Landlord, exercised by giving written notice thereof to the Tenant within 30
days after the occurrence of such damage, will terminate as to the date such
notice is given. On such termination the Tenant will pay Rent and all other
obligations of the Tenant apportioned to the date on which such damage occurred
and will immediately surrender the Premises to the Landlord. If the damage can
be repaired within 120 days, or if the damage cannot be repaired within 120 days
but the Landlord does not exercise the option to terminate this Lease, the
Landlord will, at the Landlord's expense to the extent of the net award of
insurance, make the necessary repairs and this Lease will continue in effect,
but the Rent will be equitably abated (as determined in the good faith judgment
of the Landlord) until such repairs are made, unless such damage is so slight
that the Tenant's occupancy of the Premises is not materially interrupted, in
which case the Rent will not be abated or reduced.
7.2 TAKING
If all or any substantial part of the Premises, the Building, or the land is
taken or condemned for any public use or purpose by right of eminent domain
(with or without litigation) or is transferred by agreement in connection with
or in lieu of or under threat of condemnation, the Term and the leasehold estate
created hereby will, at the option of the Landlord, terminate as of the date
title vests in the condemnor or transferee. If the Lease is not so terminated,
the Landlord will put the Premises (or the remaining portion) into proper
condition for occupancy to the extent permitted by the net award of damages, and
the Rent will be equitably abated (as determined in the good faith judgement of
the Landlord) until such repairs are made, or in the case of a permanent
reduction in area of the Premises, until the end of the Term. The Landlord will
receive the entire award from such taking (or the entire compensation paid on
account of any transfer by agreement) and the Tenant will have no claim thereto.
The Tenant shall have the right, however, to make a claim in a separate action
for any damages payable for movable trade fixtures and moving expenses and any
other damages inuring directly to the Tenant.
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ARTICLE 8: RIGHTS OF MORTGAGEE
8.1 PRIORITY OF LEASE
This Lease is and shall continue to be subject and subordinate to any presently
existing mortgage or deed of trust of record covering the land or Building or
both (the "mortgaged premises"). The holder of any such presently existing
mortgage or deed of trust shall have the election to subordinate the same to the
rights and interests of Tenant under this Lease exercisable by filing with the
appropriate recording office a notice of such election.
This Lease shall be superior to any mortgage, deed of trust or other voluntary
lien hereafter placed on the mortgage premises unless the option provided in the
following sentence shall be exercised. The holder of any such mortgage, deed of
trust or other voluntary lien shall have the option to subordinate this Lease to
the same, provided that such holder enters into an agreement with Tenant by the
terms of which the holder will agree to recognize the rights of Tenant under
this Lease in the event of acquisition of title by such holder through
foreclosure proceedings or otherwise and Tenant will agree to recognize the
holder of such mortgage as Landlord in such event, such agreement shall be made
to expressly bind and inure to the benefit of the successors and assigns of
Tenant and of the holder and upon anyone purchasing the mortgaged premises at
any foreclosure sale.
8.2 NO PREPAYMENT OR MODIFICATION
Tenant shall not pay Base Rent, additional rent, or any other charge more than
ten days prior to the due dates thereof. No prepayment of Base Rent, additional
rent or other charges, no assignment of this Leases and no agreement to make or
accept any surrender, termination or cancellation of the Lease and no agreement
to modify so as to reduce the rent, change the Term, or otherwise materially
change the rights of Landlord under this Lease, or to relieve Tenant of any
obligations or liability under this Lease, shall be valid unless consented to in
writing by Landlord's mortgagees of record, if any.
8.3 NO RELEASE OR TERMINATION
No act or failure to act on the part of Landlord which would entitle Tenant
under the terms of this Lease, or by law, to be relieved of Tenant's obligations
hereunder or to terminate this
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Lease, shall result in a release or termination of such obligations or a
termination of this Lease unless (i) Tenant shall have first give written
notice of Landlord's act or failure to act to Landlord's mortgagees or
record, if any, specifying the act or failure to act on the part of Landlord
which could or would give basis to Tenant's rights and (ii) such mortgagees,
after receipt of such notice, have failed or refused to correct or cure the
condition complained of within a reasonable time thereafter. Reasonable time
as used above means a reasonable time to obtain possession of the mortgaged
premises, if the mortgagee elects to do so, and a reasonable time to correct
or cure the condition if such condition is determined to exist.
8.4 MORTGAGEE'S APPROVAL
Landlord's obligation to perform its covenants and agreements hereunder is
subject to the condition precedent that this Lease be approved by the holder of
any mortgage of which the Premises are a part and by the issuer of any
commitment to provide permanent financing which is in effect on the date hereof.
Unless Landlord gives Tenant written notice within 15 business days after the
date hereof that such holder or issuer, or both, disapproves this Lease, then
this condition shall be deemed to have been satisfied or waived and the
provisions of this Section 8.4 shall be of no further force or effect.
ARTICLE 9: DEFAULT
9.1 EVENTS OF DEFAULT
The following events will be deemed to be events of default by the Tenant under
this Lease: (a) failure to pay any Base Rent or additional rent or other sums
payable by the Tenant hereunder when such sums become due; (b) failure to comply
with any term of this Lease or the Rules and Regulations to be observed by the
Tenant; (c) vacation or abandonment of any portion of the Premises; (d) the
filing by or against the Tenant or any Guarantor of any proceeding under the
federal bankruptcy act or any similar law; (e) the adjudication of the Tenant or
any Guarantor as bankrupt or insolvent in proceedings filed under the federal
bankruptcy act or any similar law; (f) the insolvency of the Tenant or any
Guarantor or the making of a transfer in fraud of creditors or an assignment for
the benefit of creditors; or (g) the appointment of a receiver
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or trustee for the Tenant, any Guarantor or any of the assets of the Tenant.
9.2 REMEDIES
If Tenant has failed to cure a default described in sub-paragraph 9.1(a) within
10 days after written notice, or if Tenant has failed to cure a default
described in subparagraph 9.1(b) within 30 days after written notice or such
longer time as is reasonably necessary if Tenant commences to cure within such
30 days, or upon the occurrence of any other event of default the Landlord will
have the option to do any one or more of the following without any notice or
demand including without limitation any notice of forfeiture or notice to
vacate, in addition to and not in limitation of any other remedy permitted by
law or by this Lease:
9.2.1 TERMINATION. The Landlord may terminate this Lease, in which event
the Tenant will immediately surrender the Premises to the Landlord, but if
the Tenant fails to do so, the Landlord may without notice and without
prejudice to any other remedy the Landlord might have, enter and take
possession of the Premises and remove the Tenant and the Tenant's property
therefrom without being liable to prosecution or any other claim of damages
therefor.
9.2.2 ACCELERATION. The Landlord may declare the entire amount of the
rent to become payable during the remainder of the Term to be due
immediately, in which event the Tenant agrees to pay the same to the
Landlord on demand. The acceleration and acceptance by the Landlord of the
payment of such rent will not constitute a waiver of any default then
existing or thereafter occurring hereunder.
9.2.3 RELETTING. the Landlord may enter and take possession of the
Premises as the agent of the Tenant without terminating this Lease and
without being liable to prosecution or any claim for damages therefor, and
the Landlord may relet the Premises as the agent of the Tenant and receive
the rent therefor, in which event the Tenant will pay to the Landlord, on
demand, the cost of renovating, repairing, and altering the Premises and
any deficiency that might arise by reason of such reletting; provided,
however, that the Landlord will have no duty to relet the Premises and the
failure of the Landlord to
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relet the Premises will not release or affect the Tenant's liability for
rent or for damages.
9.2.4 OPTION TO PERFORM. The Landlord may perform or cause to be
performed the obligation of the Tenant under this Lease and may enter the
Premises to accomplish such purpose without being liable to prosecution or
any claim for damages therefor. The Tenant agrees to reimburse the
Landlord on demand for any expense which the Landlord might incur in
effecting compliance with this Lease on behalf of the Tenant (together with
interest at the rate of 12% per month), and the Tenant further agrees that
the Landlord will not be liable for any damages resulting to the Tenant
from such action, whether caused by the negligence of the Landlord or
otherwise.
9.3 DAMAGES
In any case where Landlord has terminated this Lease under Section 9.2.1 or
where Landlord has entered and repossessed the Premises under Section 9.2.3,
Landlord, at Landlord's option, may cause the Premises to be redecorated,
altered, divided, consolidated with adjoining premises, or otherwise changed or
prepared for reletting, and may relet the Premises or any part thereof for any
term or terms, and receive the rentals therefor, applying these rentals first to
the payment of such reasonable expenses as the Landlord may have incurred in
connection with any termination of this Lease under Section 9.2.1 or any entry
and repossession of the Premises under Section 9.2.3, and any redecoration,
altering, dividing, consolidating with adjoining premises or otherwise changing
or preparing for reletting and reletting, including attorneys' and brokerage
fees, and then to the payment of Landlord's damages hereunder which damages are
deemed to equal all rentals and all other payments due and to become due
hereunder plus all expenses Of Landlord's performance of Tenant's other
covenants as herein provided; Tenant agrees that, upon any such termination or
any such entry and repossession, and regardless of whether or not Landlord has
relet, Tenant shall pay to Landlord Landlord's damages hereunder equal to all
accrued and accelerated rentals and to all other payments herein agreed to be
paid by Tenant, less the net proceeds of reletting, if any, payable to Landlord
under any reletting effected by Landlord prior to entry of judgment against
Tenant for said damages. In reletting the Premises, Landlord may grant rent
concessions and Tenant shall not be credited therewith.
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No reletting shall constitute a surrender and acceptance or a release of
Tenant or of any guarantor of Tenant from obligations under this Lease.
Landlord shall have no obligation to attempt to relet the Premises after any
such termination or any such entry and repossession and Landlord shall have
no liability to Tenant for any failure to relet or for any failure to collect
or to receive rentals from a reletting. Tenant hereby waives and relinquishes
any and all claims to any and all proceeds of any reletting which exceed the
damages required to be paid to Landlord by Tenant hereunder on account of
Tenant's default.
9.4 NO WAIVER OR ACCEPTANCE
No action by the Landlord during the Term will be deemed an acceptance of an
attempted surrender of the Premises and no agreement to accept a surrender of
the Premises will be valid unless made in writing and signed by the Landlord.
No re-entry or taking possession of the Premises by the Landlord will be
construed as an election by the Landlord to terminate this Lease, unless a
written notice of termination is given to the Tenant. Notwithstanding any such
reletting, re-entry or taking possession, the Landlord may at anytime thereafter
elect to terminate this Lease for a previous default. The Landlord's acceptance
of rent following the occurrence of an event of default will not be construed as
the Landlord's of such event of default. No waiver by the Landlord of any
default by the Tenant will be deemed to constitute a waiver of any other or
future default hereunder. Forbearance by the Landlord to enforce one or more of
the remedies herein provided will not be deemed to constitute a waiver of any
default. The failure of the Landlord to enforce Rules and Regulations against
the Tenant or any other tenant in the Building will not be deemed a waiver
thereof. No provision of this Lease will be deemed to have been waived by the
Landlord unless such waiver is in writing signed by the Landlord. No
endorsement or statement on any check or any letter accompanying any check or
payment of rent shall be deemed an accord and satisfaction. Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or pursue any other remedy.
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9.5 CUMULATIVE REMEDIES
The rights granted to the Landlord in this Lease are cumulative and not intended
to be exclusive of any other right or remedy which the Landlord might have at
law or in equity and the exercise of one or more rights or remedies will not
prejudice the concurrent or subsequent exercise of other rights or remedies.
9.6 LANDLORD'S COSTS
If the Landlord brings any action under this Lease or consults or places this
Lease or any amount payable by the Tenant hereunder with an attorney for the
enforcement of any of the Landlord's rights hereunder, the Tenant agrees in each
such case to pay to the Landlord the reasonable attorney's fees and other
expenses incurred by the Landlord in connection therewith.
ARTICLE 10: MISCELLANEOUS
10.1 TITLES
The titles of the articles and paragraphs are for convenience and are not to be
considered in construing this Lease.
10.2 NOTICE OF LEASE
Upon request of either party, both parties shall execute and deliver, after the
Term begins, a short form of this Lease in form appropriate for recording or
registration, and if this Lease is terminated before the Term expires, an
instrument in such form acknowledging the date of the termination.
10.3 RELOCATION
Landlord reserves the right to relocate the Premises to comparable space within
the Building or another building in the office park or vicinity in which the
Building is located by giving Tenant prior written notice of such intention to
relocate. If within 30 days after receipt of such notice, Landlord and Tenant
have not agreed on the space to which the Premises are to be relocated and the
timing of such relocation, this Lease shall terminate on that date which is 60
days after Tenant's receipt of such notice. If Landlord and Tenant do so agree,
then effective on the date of such relocation, this Lease shall be amended by
deleting the description of the original Premises and substituting therefor a
description of
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such comparable space. Landlord agrees to pay the reasonable costs of moving
Tenant to such other space within the Building or the park.
10.4 NOTICES FROM ONE PARTY TO THE OTHER
No notice, approval, consent requested or election required or permitted
pursuant to this Lease shall be effective unless the same is in writing.
Communications shall be addressed, if to Landlord, at Landlord's address or at
such other address as may have been specified by prior notice to Tenant and, if
to Tenant, at Tenant's Address or at such other place as may have been specified
by prior notice to Landlord. Any communication so addressed shall be deemed
duly served when hand delivered or two days after mailing by registered or
certified mail, return receipt requested.
10.5 BIND AND INURE
The obligations of this Lease shall run with the land, and this Lease shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Landlord named herein and each
successive owner of the Premises shall be liable only for the obligations
accruing during the period of its ownership. Whenever the Premises are owned by
a trustee or trustees, the obligation of Landlord shall be binding upon
Landlord's trust estate, but not upon any trustee, beneficiary or shareholder of
the trust individually. In the event this Lease is executed by two or more
entities as "Tenant", the liability of each shall be joint and several.
10.6 PARTIAL INVALIDITY
If any term of this Lease shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such term to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby, and each term of this Lease shall be valid and
enforceable to the fullest extent Permitted by law.
10.7 ESTOPPEL CERTIFICATE
Tenant agrees on the Commencement Date, and from time to time thereafter upon
not less than 15 days prior written request by
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Landlord, to execute, acknowledge and deliver to Landlord a statement in
writing in the form attached hereto as Exhibit G, certifying that this Lease
is unmodified and in full force and effect; that Tenant has no defenses,
offset or counterclaims against its obligations to pay the Fixed Rent and
additional rent and to perform its other covenants under this Lease; that
there are no defaults of Landlord or Tenant under this Lease (or, if there
have been any modifications, defenses, offsets, counterclaims, or defaults,
setting them forth in reasonable detail); and the dates to which the Fixed
Rent, additional rent and other charges have been paid. Any such statement
delivered pursuant to this Section 10.7 may be relied upon by any prospective
purchaser or mortgagee of premises which include the Premises or any
prospective assignee of any such mortgagee.
10.8 WAIVER OF SUBROGATION
Any insurance carried by either party with respect to the Premises and property
therein or occurrences thereon shall, if the other party so requests and it can
be so written without additional premium or with an additional premium which the
other party agrees to pay, include a clause or endorsement denying to the
insurer rights of subrogation against the other party to the extent rights have
been waived by the insured prior to the occurrence of injury or loss. Each
party, notwithstanding any provisions of this Lease to the contrary, hereby
waives any right of recovery against the other for injury or loss due to hazards
covered by insurance containing such clause or endorsement to the extent of the
indemnification received thereunder.
10.9 BROKERAGE
Tenant represents and warrants that it has dealt with no broker in connection
with this transaction, and agrees to defend, indemnify and save Landlord
harmless from and against any and all claims for a commission arising out of
this Lease made by anyone.
10.10 LANDLORD'S EXECUTION
In the event that Landlord's execution of this Lease is not attested or
acknowledged where provided below, the parties hereby acknowledge that in lieu
thereof Landlord has provided Tenant with a Certificate executed by Landlord's
Secretary certifying that the
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officer who has executed this Lease on behalf of Landlord was duly authorized
to do so by Landlord's Board of Directors.
ARTICLE 11: SECURITY DEPOSIT
Landlord acknowledges receipt from Tenant of the Security Deposit to be held by
Landlord, as security, without interest, for and during the Term, which deposit
shall be returned to Tenant, at the termination of this Lease provide there
exists no breach of any undertaking of Tenant. If all or any part of the
Security Deposit is applied to an obligation of Tenant hereunder, Tenant shall
immediately upon request by Landlord restore the Security Deposit to its
original amount. Tenant shall not have the right to call upon Landlord to apply
all or any part of the Security Deposit to cure any default or fulfill any
obligation of Tenant, but such use shall be solely in the discretion of the
Landlord. Upon any conveyance by Landlord of its interest under this Lease, the
Security Deposit may be delivered by Landlord to Landlord's grantee or
transferee. Upon any such delivery, Tenant hereby releases Landlord herein
named of any and all liability with respect to the Security Deposit, its
application and return, and Tenant agrees to look solely to such grantee or
transferee. It is further understood that this provision shall also apply to
subsequent grantees and transferees.
EXECUTED and delivered as of the day and year first above written.
LANDLORD: WILLRUSS LIMITED LIABILITY COMPANY
By: /s/ RUSSELL L. DOBSON
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Russell L. Dobson
Operating Manager
STATE OF OKLAHOMA )
) SS:
COUNTY OF OKLAHOMA )
The foregoing instrument was acknowledged, before me this 14th day of July,
1995, by Russell L. Dobson, Operating Manager of WillRuss Limited Liability
Company, a limited liability corporation, on behalf of the corporation.
-27-
<PAGE>
/s/
--------------------------------------
Notary Public
My Commission Expires: July 18, 1995.
TENANT: WESTERN FINANCIAL SERVICES CORP.
By: THOMAS F. RILEY JR.
-----------------------------------
Thomas F. Riley Jr.
Executive Vice President
Attest:
/s/
- --------------------------
Secretary
STATE OF OKLAHOMA )
) SS:
COUNTY OF OKLAHOMA )
The foregoing instrument was acknowledged, before me this 14th day of July,
1995, by Thomas F. Riley, Jr., Executive Vice President of Western Financial
Services Corp., a corporation, on behalf of the corporation.
/s/
--------------------------------------
Notary Public
My Commission Expires: July 18, 1995.
-28-
<PAGE>
RIDER
OPTION TO PURCHASE
In consideration of Tenant's agreement to pay the Total Scheduled Base Rent
based upon seventy-five percent (75%) of the total rentable floor area of the
Premises, although currently not occupying said seventy-five percent (75%) of
the total rentable floor area of the Premises, Landlord does hereby bargain,
sell, grant and demise to Tenant this Option to Purchase under and subject to
the following terms and conditions, to wit:
1. Tenant is hereby granted by Landlord a right of first refusal to
accept or reject all future tenants in the Premises, from and after the
effective date of the foregoing Agreement. Tenant agrees that it will not
unreasonably withhold its consent with respect to any such future tenant.
2. Tenant is hereby granted by Landlord the right to approve all terms
and conditions of all future leases negotiated by Landlord with respect to the
Premises. Tenant agrees that it will not unreasonably withhold its approval of
any and all future leases.
3. Tenant is hereby granted the right to exercise this Option to Purchase
at any time up to and including ten (10) years from the date of the foregoing
Agreement. In the event Landlord receives a legitimate offer in writing to
purchase the Premises during this period, Landlord shall so notify Tenant and
provide Tenant with all details of said legitimate offer, and Tenant shall have
thirty days to exercise the Option to Purchase at the Purchase Price hereinafter
set out, notwithstanding the other offer received for the Premises. In the
event Tenant fails to exercise the Option to Purchase within the thirty day
period, the Option to Purchase terminates, and the Landlord may then consummate
the sale of the Premises under the terms of the legitimate offer previously
received.
4. With respect to this Option to Purchase, Landlord and Tenant agree to
the following Purchase Price:
a. From July 6, 1995 through July 5, 1996 - $1,430,000.00
b. From July 6, 1996 through July 5, 1997 - $1,560,000.00
<PAGE>
c. From July 6, 1997 through July 5, 1998 - $1,690,000.00
d. From July 6, 1998 through July 5, 1999 - $1,820,000.00
e. From July 6, 1999 through July 5, 2000 - $1,950,000.00
f. From and after July 6, 2000 through July 5, 2005,
$1,950,000.00, plus the previous five (5) years inflation rate as
reflected by the U.S. Department of Labor Consumer Price Index for all
United States' Cities multiplied times the said $1,950,000.00.
The amounts reflected above can be paid by Tenant at any time within the
respective periods, and Tenant will give Landlord thirty (30) days written
notice of Tenant's desire to exercise this Option to Purchase.
5. Upon exercise of this Option to Purchase by Tenant, Landlord and
Tenant agree to cooperate and undertake all necessary action to finalize all
documents, assignments and deeds in order to facilitate an orderly closing of
the sale of the Premises. Landlord agrees to convey said Premises to Tenant by
Warranty Deed. Upon Tenant's exercise of this Option to Purchase the terms and
provisions of the preceding Agreement will be terminated between the Landlord
and Tenant.
<PAGE>
ADDENDUM
Tenant agrees to pay to Landlord the Total, Scheduled Base Rent, in monthly
installments, totalling $18,008 per month. The Total Scheduled Base Rent is
computed by determining that Tenant is occupying seventy-five percent (75%) of
the total rentable floor area of the Premises.
At the time of execution of this Agreement, Tenant is only occupying fifty-
nine percent (59%) of the total rentable floor area of the Premises. Landlord
hereby specifically grants to Tenant throughout the term of this Agreement, the
exclusive right to increase its total rentable floor area of the Premises from
its current percentage up to and including seventy-five percent (75%) of the
Premises, upon sixty days written notice to Landlord.
In the event Tenant does not occupy the full seventy-five percent (75%) of
the total rentable floor space, Landlord agrees to refund to Tenant, on a
monthly basis, the difference in the Total Scheduled Base Rent for occupancy of
seventy-five percent (75%) of the total rentable floor space and the total
rentable floor space of that seventy-five percent (75%) occupied and paid for by
any other tenant.
<PAGE>
[DOBSON COMMUNICATIONS CORPORATION LETTERHEAD]
December 26, 1996
Mr. Ed Evans
10088 Brookwood Court
Louisville, Kentucky 40223
Dear Ed,
It is with great pleasure I offer you a position with Dobson Communications
Corporation. After our conversations I am convinced you would be a good
complement to our companies and lead the wireless group forward over the next
several years.
Your title will be President, Chief Operating Officer of Dobson's cellular
and PCS operations, reporting to me. Upon your agreement to join Dobson
Communications Corporation, you will receive a signing bonus of $20,000.00.
The initial annual salary will be $120,000, which will be reviewed one year
after the start date. In addition, there will be a bonus of between 30-50%
dependent on your performance as defined by a set of objectives agreed to by
you, myself, the business plan, and the Board of Directors. The bonus will
be paid annually during the first quarter.
In addition, we will provide you an in-house mortgage for up to five years,
or up to 180 days following an early separation from your employment with
Dobson Communications Corporation. The mortgage amount will not exceed
$300,000.00 and will carry a 4% interest rate on a 30-year amortization.
We also offer you the opportunity to purchase options for 1.0% of Dobson
Communications Corporation at a strike price consistent with the current
valuation of the company. Sixty percent (60%) of those options will vest over
five years at 20%, or 12% of the total option pool per year. Forty percent
(40%) of the options will be
<PAGE>
performance-based, vesting at the end of the year and dependent upon
achieving specific milestones and objectives, again identified within the
business plan. Should a change of control occur at Dobson Communications
Corporation, your options will become fully vested.
In addition, you will have three weeks vacation and a full medical and dental
plan. We also have a 401K plan which will give you some additional deferred
compensation opportunities. To insure relocation from Kentucky is quick and
easy, we will reimburse you for actual moving expenses.
In the event you are terminated without cause, Dobson Communications
Corporation agrees to a severance pay equal to one year's salary.
It would be beneficial to all for your start date to be January 6, 1997.
Please indicated your concurrence to the above by signing below, then return
the document to me.
Dobson Communications Corporation looks forward to you become a part of our
team.
Sincerely,
/s/ Everett Dobson
Everett Dobson
President/Chief Executive Officer
Agreed to:
/s/ Ed Evans
- ---------------------------------
Ed Evans
Date: 12/30/96
---------------
-2-
<PAGE>
[DOBSON COMMUNICATIONS CORPORATION LETTERHEAD]
June 3, 1996
Mr. Bruce Knooihuizen
807 Calle Talentia
Escondido, California 92025
Dear Bruce,
Dobson Communications Corporation is pleased you have accepted our offer to join
our company as Chief Financial Officer. Your acceptance is based on the
following compensation package.
Your title will be Chief Financial Officer reporting to me. The initial salary
will be $150,000, which will be reviewed one year after your start date. In
addition, there will be a bonus of between 30-50% dependent on your performance
as defined by a set of objectives agreed to by you, myself and the Board of
Directors. The bonus will be paid annually during the first quarter and will be
prorated for 1996.
We have offered you the opportunity to purchase options for 1.25% of Dobson
Communications Corporation. The strike price will be the same as the strike
price for Fleet which is based upon the current valuation of the company of
approximately $50 million. As we achieve our business plan over the next few
years, this should prove to be a very attractive opportunity. The options will
vest at 20% per year and in the event of a change of control of Dobson
Communications Corporation, you will automaticallly be fully vested. This
equity should allow you and your family to create a significant level of wealth
based on the company's success and your contribution to our long-term growth.
In addition, you will have three weeks vacation and a full medical and dental
plan. We also have a 401K plan which will give you some
<PAGE>
additional deferred compensation opportunities. To insure you and your family
relocate from San Diego quickly and easily, we will reimburse you for actual
moving expenses.
In the event you are terminated without cause, Dobson Communications Corporation
agrees to a severance pay equal to one year's salary.
As we agreed, your start date will be July 8, 1996. Please indicate your
concurrence to the above by signing below, then return the document to me.
Dobson Communications Corporation looks forward to you becoming a part of our
team.
Sincerely,
/s/ Everett Dobson
- ---------------------------------
Everett Dobson
Agreed to:
/s/ Bruce Knooihuizen
- ---------------------------------
Bruce Knooihuizen
Date: 6/10/96
---------------
-2-
<PAGE>
FLEET Fleet Equity Partners
Mail Stop: RI MO F12C
Providence, RI 02903
401-278-6770
Fax 401-278-6387
October 15, 1996
Mr. Justin Jaschke
Chief Executive Officer
World-Net Access, Inc.
9250 East Costilla Ave.
Englewood, CO 80112
Dear Justin:
As you know, we closed a $10 Million equity investment earlier this year
in Dobson Communications Corporation ("Dobson") located in Oklahoma City,
Oklahoma. Dobson is in the business of providing rural cellular and telephone
services, operating a fiber optic network and reselling various
telecommunication services. As part of our investment, we were provided the
opportunity to designate a Fleet representative and a non-Fleet
representative to Dobson's Board of Directors. This letter serves as our
invitation for you to serve as the non-Fleet designee.
We think you will find this an exciting opportunity. Dobson is committed
to growing its wireless operations through a combination of cellular, PCS and
resale strategies. In addition, Dobson is hoping to enter the long distance
resale and CLEC markets in larger markets close to its rural clusters. We
feel that your past experiences and current role with World-Net Access would
bring considerable value to Dobson as it pursues these strategies.
As a Board member, it is expected that you will be able to attend Board
meetings every other month (typically held in Oklahoma City), attend an
annual strategy session and be available (understanding your time
constraints) to render some assistance to Dobson from time to time as
requested by Everett Dobson. As compensation for your services, you will be
granted an option to acquire 833 shares of Dobson common stock (approximately
.14% of
<PAGE>
Dobson's equity on a fully-diluted basis) with an exercise price of $100 per
share. Based on our investment thesis, we expect the equity value of Dobson
(approximately $60 Million at our closing) to increase by a factor of 4X to
$240 Million over the next five years which would place a gross value of
$333,200 and a net value of approximately $250,000 on the options. The
options would vest in equal 20% increments (on an annual basis) over the next
five years, subject to an earlier sale of the business which would accelerate
vesting. In addition, Dobson will reimburse your out-of-pocket expenses
incurred in connection with attending the meetings described above.
We hope that you share our excitement about this opportunity. If you
have any questions concerning this letter, please do not hesitate to give me
a call at (401) 278-5678. If the general terms set forth in this letter are
acceptable (pending final drafts of the option), please sign this letter in
the space provided below. I look forward to working with you and hope that
you will join me on the Board.
Sincerely,
THADEUS J. MOCARSKI
Thadeus J. Mocarski
Partner
Agreed and accepted this 10/22/
day of October, 1996:
JUSTIN JASCHKE
Justin Jaschke
cc: Everett Dobson
Robert M. Van Degna
<PAGE>
DOBSON
FIBER December 16, 1993
COMPANY
Mr. Garey Wallace, President
NTS COMMUNICATIONS, INC.
1220 Broadway, Suite 400
Lubbock, TX 79401
RE: Agreement for DS-3 Service
Dear Garey:
Thank you for your letter and proposal of December 6, 1993. We have reviewed
the same and the following are the terms we propose that DS-3 service be
provided between our respective companies. NTS Communications, Inc. ("NTS")
shall be allowed to purchase digital telecommunications service on Dobson Fiber
Company's ("Dobson") facilities under the terms and conditions set forth herein.
This document shall serve as the definitive agreement between NTS and Dobson
concerning service on Dobson's facilities.
1. SERVICE. Dobson agrees to install, test and maintain, and NTS agrees
to purchase, DS-3 digital telecommunications service on Dobson's facilities.
Such service shall be provided on an "as needed" basis for the term set forth on
the relevant Purchase Order initiating the particular service in question.
2. RATES. Dobson shall provide DS-3 digital telecommunication service to
NTS at the following monthly V&H DS-O rate scenario:
Dobson shall sell DS-3 service to NTS at $0.045 for any DS-3 service which
NTS sells or trades to MCI and at $0.05 for all other DS-3 service pur
chased by NTS. In order to recover its marketing and monitoring costs, NTS
shall receive, on a monthly basis, ten percent (10%) of the gross revenue
accruing to Dobson utilizing the above rates. Under this scenario, DS-3
service shall encompass all circuits between Oklahoma City, Oklahoma and
the following NTS network cities: Albuquerque, Amarillo,
<PAGE>
Colorado Springs, El Paso, Kansas City, Lubbock, Midland, Topeka and
Wichita.
It is further agreed that Dobson and NTS shall, in good faith, enter
negotiations to adjust the percentage of the gross revenue that NTS
receives for marketing and monitoring; it is further agreed that in the
event that a written amendment agreeing to adjust the percentage is not
achieved between the parties by June 1, 1994, that the rate for any and all
DS-3 service purchased by NTS for itself shall be at $0.064 effective that
date.
3. TERM. This Agreement shall become effective upon execution by both
parties and shall continue on a month-to-month basis terminable by either party
with not less than thirty (30) days prior written notice to the other party.
Notwithstanding any termination of this Agreement, the term for any given DS-3
service purchased hereunder shall be as stated on the Purchase Order initiating
the service. NTS reserves the right to order DS-3 service under this Agreement
for the following terms; one (1) month; one 11) year; and such other term as the
parties may mutually agree in writing when the service is ordered.
4. PAYMENT TERMS. For all service purchased hereunder, Dobson agrees to
provide monthly invoices to NTS in advance of the month in which the service is
to be provided. NTS shall remit payment to Dobson on or before the expiration
of the tenth (10th) day of the month immediately following the month in which
the service is rendered. With regard to any invoice amount, the validity of
which is in good faith disputed by NTS, Dobson and NTS agree to negotiate a
settlement as expeditiously as possible and to accomplish a "true-up" of the
account immediately following such settlement.
5. SERVICE STANDARDS/OUTAGES. Dobson shall provide all service purchased
hereunder in accordance with generally accepted industry standards. NTS shall
receive a credit on service outages at the rate of 1/1440 of the monthly
recurring charges applicable to a particular circuit for each one-half (1/2)
hour, or major fraction thereof, in excess of the first one-half (1/2) hour when
the service is not operational in accordance with generally accepted industry
standards.
-2-
<PAGE>
6. EXISTING SERVICE. The parties agree, that effective on the date this
Agreement is executed by both parties, all existing DS-3 service being purchased
from Dobson by NTS shall become subject to this Agreement, and the parties agree
to execute such new purchase orders as may be necessary to memorialize this
fact.
It is further agreed that NTS shall not be paid any fee in the future as
contemplated by paragraph 2. RATES above for marketing and monitoring costs for
DS-3 service that is presently being purchased from Dobson by NTS on the date
that this Agreement is entered, and any future DS-3 service purchased by NTS for
its own use.
7. MONITORING. In the event this Agreement should for any reason be
terminated, at the request of Dobson in writing, NTS agrees to continue
monitoring Dobson's DS-3 facilities between Oklahoma and Amarillo, Texas at
the rate of S.003 per V&H DS-O mile per month.
8. SOLE AGREEMENT. This Agreement constitutes the sole agreement between
the parties concerning the subject matter hereof, and ali prior agreements,
whether verbal or written, or rescinded.
9. ADDITIONAL TERMS. The parties understand that this Agreement does not
encompass all issues which may arise between them concerning the subject matter
hereof. As such, each agrees to negotiate in good faith such additional issues
as may from time to time arise.
If the above proposal is acceptable to your Company, please signify your
approval by signing in the space provided, and return one original copy to me
for our files.
Sincerely,
/s/ Russell L. Dobson
Russell L. Dobson
Chairman/CEO
RLD/pf
-3-
<PAGE>
AGREED:
NTS Communications, Inc.
By: /s/ Garey Wallace
--------------------------
Name: Garey Wallace
------------------------
Title: President
-----------------------
-4-
<PAGE>
ADDENDUM TO AGREEMENT FOR DS-3 SERVICE
BE IT REMEMBERED THAT on December 16, 1993, Dobson Fiber Company ("Dobson")
and NTS Communications, Inc. ("NTS") entered into an Agreement For DS-3 Service.
By mutual agreement, Dobson and NTS modify the said Agreement For DS-3
Service by the following terms and conditions as set out in this Addendum:
1. This Addendum and its terms are effective June 1, 1994.
2. The provision at Paragraph 2 of the December 16, 1993, Agreement For
DS-3 Service is deleted and replaced with the following provision:
Dobson shall provide DS-3 digital telecommunication service to NTS on
Dobson's Fiber Optic network at the following monthly V&H DS-O rate
scenario:
- Minimum of $0.045 for any DS-3 service;
- NTS may sell DS-3 service at a higher rate within its
discretion;
- All revenue generated at whatever rate from the sale or
trade of DS-3 service is gross revenue and is the revenue
of Dobson;
- NTS shall receive and Dobson agrees to pay to NTS, on a
monthly basis, seven percent (7%) of the gross revenue
generated; and
- NTS agrees to market and monitor Dobson's DS-3 digital
telecommunication service for the consideration set out
above.
Under this scenario, DS-3 service shall encompass all circuits between
Oklahoma City, Oklahoma and the following NTS network cities: Albuquerque,
Amarillo, Colorado Springs, El Paso, Kansas City, Lubbock, Midland, Topeka and
Wichita.
<PAGE>
In the event that Dobson pays to NTS the sum of $21,000.00 under the above
referenced terms during any calendar month, it is agreed that Dobson and NTS
shall, in good faith, enter negotiations to adjust the revenue that each party
shall receive from NTS's sale of DS-3 service on Dobson's network, but in no
event shall said adjusted revenue payment by Dobson to NTS exceed the seven
percent (7%) stated above.
In the event that NTS's customer should, due to DS-3 malfunction that is
the fault of Dobson, fail or refuse to remit to NTS the rentals for any given
DS-3 service, then NTS shall, upon ten (10) days advance written notice to
Dobson, be allowed to disconnect the DS-3 service in question without penalty or
further liability for any rentals (gross revenue) which would have normally
accrued on dates subsequent to the requested disconnection date of said service.
3. It is specifically acknowledged between Dobson and NTS that all other
provisions of the Agreement For DS-3 Service dated December 16, 1993,
remains in full force and effect except as modified herein.
This Addendum is entered on this 1st day of June, 1994, at Oklahoma City,
Oklahoma.
DOBSON FIBER COMPANY
By: /s/ Russell Dobson
----------------------------
Name: Russell Dobson
Title:
--------------------
NTS COMMUNICATIONS, INC.
By: /s/ Barbara Andrews
---------------------------
Name: Barbara Andrews
Title: President
-2-
<PAGE>
NORTH AMERICAN CELLULAR NETWORK
SERVICES AGREEMENT
This North American Cellular Network Services Agreement ("Agreement") is
entered into this 26th day of August, 1992, by and between North American
Cellular Network, Inc., a Washington corporation ("NACN"), and Dobson Cellular,
Inc., an Oklahoma Corporation ("Carrier") d/b/a/ Cellular One of Enid; Cellular
One of Woodward.
In consideration of the promises and warranties made and obligations
exchanged between the parties according to the term and provisions of this
Agreement, the parties agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms have the
meaning set forth below.
AUTONOMOUS The signalling services provided by the NACN
CALL DELIVERY Network by which Carrier's MSC(s) are instructed to
SERVICES: deliver calls directed to the cellular subscriber
while roaming in any Visited System which is a party
to an NACN Services Agreement. Actual delivery of the
voice transmission is NOT included within Call Delivery.
CARRIER AREA The area of cellular radio coverage within
OR MARKET: which all cell sites broadcast a SID which matches the SID
programmed into the Carrier Subscriber Station (cellular
telephone). Carrier's Market is more specifically described
in Exhibit A.
CUSTOMER The signalling services provided by the NACN
VALIDATION: Network by which a Roaming Subscriber becomes listed as
being present in a Carrier Area and by which that
Subscriber's financial accountability is established.
This also includes the process of establishing a
Subscriber's entitlement to have the NACN Subscriber
Features activated on the NACN Network.
<PAGE>
HOME SYSTEM: The system which is transmitting a SID which is recognized
by the Cellular Subscriber Station as the Home SID and in
which the Subscriber receives service under agreement with
the Carrier.
MSC OR MOBILE The configuration of switching and related
SWITCHING telecommunications equipment designed to provide
CENTER: radio telephone service to Subscriber operating in
accordance with EIA/TIA-553 "Cellular System Mobile
Station - Land Station Compatibility Specification,"
September 1989, or any successor documents directly
descended therefrom.
NACN COVERAGE The area consisting of the combined Carrier
AREA: Area defined in all NACN Services Agreements.
NACN The feature set which is identified in the
SUBSCRIBER Standard Customer Interface attached hereto as
FEATURES: Exhibit "C", and as may be updated from time to time
pursuant to this Agreement
NACN SYSTEM A data-only network based on ANSI standard SS7
OR NETWORK: signalling protocol that allows for Autonomous Call
Delivery, Customer Validation, and NACN Subscriber Feature
profile transfer. The NACN Network comprises
hardware/software, transmission links, physical or
intangible properties or rights possessed by NACN and all
other facilities or instrumentalities utilized in providing
the NACN Services. This includes, but is not limited to,
the NACN STPs, leased rights to the SS7 network, certain
links to Carrier MSC, links to the SS7 network, etc.
ROAMING A cellular subscriber whose Cellular Subscriber
SUBSCRIBER: Station has left its Home System and is present within a
Visited System.
-2-
<PAGE>
VISITED A system which is transmitting a SID which is
SYSTEM: not recognized by the Cellular Subscriber Station as the
Home SID.
SIGNAL An SS7 compatible switching facility which
TRANSFER functions as Point the first point of concentration of SS7
POINT OR STP: signalling messages.
2. NACN SERVICES.
A. NACN agrees to provide, and Carrier agrees to accept, the following
services:
(1) Autonomous Customer Validation for Carrier's Roaming Subscribers
throughout the NACN Coverage Area and for subscribers of other
Carriers which are parties to an NACN Services Agreement while
roaming within Carrier's Market.
(2) Autonomous Call Delivery throughout the NACN Coverage Area,
unless a subscriber initiates the Roaming Do Not Disturb feature
when roaming.
(3) NACN Subscriber Features to roaming subscribers throughout the
NACN Coverage Area, provided that delivery of each subscriber
feature shall be limited to those approved for subscriber by the
Home System.
B. The parties understand that NACN provides only the signalling portion
of the above-listed communications via the NACN Network. The NACN
Network allows for customer validation, call delivery and NACN
Subscriber Features transfer instructions to be provided to Home
Systems and Visited Systems. Home Systems will initiate the
transmission of voice communications to their Roaming Subscribers
according to routes determined by Carrier or Carrier's subscriber.
Visited Systems will similarly initiate transmission of voice
communications by Roaming Subscribers according to routes determined
by Carrier or the Roaming Subscriber.
-3-
<PAGE>
C. NACN shall operate a 24-hour-a-day, 7-day-a-week trouble line [(206)
828-8098] which will be available to specified, authorized technical
staff of Carrier in order to advise regarding technical
specifications, network interference, and feature service availability
and standards.
D. NACN will provide all software, hardware, and transmission links
necessary to operate the NACN Network beginning at the NACN STP and
linking all STPs in the NACN network. The precise point of
demarkation between NACN and Carrier property is as described on
Exhibit 'B'. Such hardware/software or transmission links may be
purchased or leased by NACN at its sole discretion, and shall be
operated and maintained in a manner which provides efficient,
highquality services and which minimizes outages.
3. CARRIER RESPONSIBILITIES AND COVENANTS.
A. Carrier covenants that during the term of this Agreement it shall
continuously provide the hardware, software, and transmission links
required under this Agreement, and shall at all times remain in
compliance with each of the technical, service, and feature standards
established by NACN hereunder for participation in the NACN Network
and use of NACN Services, as modified by NACN from time to time
pursuant to this Agreement. Carrier acknowledges that its performance
of each of these obligations and compliance with such standards is
necessary for the efficient operation of the NACN Network and for use
of NACN Services by other carriers.
B. Carrier shall provide all software, including IS-41 Rev A, as updated
from time to time, all hardware which must be installed at Carrier's
MSC(s), and all transmission facilities between its MSC(s) and the
nearest pair of NACN STPs necessary for Carrier to transmit and
receive IS-41 messages in conformity with NACN's specifications
established hereunder.
C. All software, hardware and transmission facilities provided by Carrier
shall at all times be operated and
-4-
<PAGE>
maintained to provide the most efficient level of service technically
feasible and to minimize transmission errors and service
interruptions. Carrier specifically agrees that all software,
hardware and transmission facilities provided by Carrier shall at
all times remain in compliance with all technical specifications
and standards adopted and promulgated by NACN from time to time
pursuant to this Agreement, and shall not interfere with the
operation of the NACN Network or the delivery of NACN Services to
other carriers.
D. Carrier shall, at its option, market NACN services to its subscribers.
If so marketed, Carrier shall do so at its sole costs and in
accordance with its own business and marketing judgment. Carrier and
NACN shall not discuss or agree upon the price, if any, charged by
Carrier to Carrier's subscribers for the services provided by NACN
under this Agreement. Carrier covenants that NACN shall remain the
exclusive provider to Carrier of Autonomous Customer Validation,
Autonomous Call Delivery and NACN Subscriber Feature services for the
term of this Agreement, and that Carrier shall not offer any other
entity the right to offer such services on an equal access or
presubscription basis except as may hereafter be specifically required
by law.
E. If necessary for the maintenance of the NACN Network, Carrier shall
provide NACN access to its MSC(s), so long as NACN gives reasonable
prior notice and is accompanied by an authorized technical
representation of Carrier.
F. Carrier agrees to accept from and transmit to all carriers
participating in the NACN Network all IS-41 messages necessary for
operation of the NACN Network and provision of Autonomous Customer
Validation, Autonomous Call Delivery and NACN Subscriber Feature
services in compliance with technical specifications adopted and
promulgated by NACN from time to time pursuant to this Agreement.
NACN warrants that all carriers participating in the NACN Network will
be required to make this covenant.
-5-
<PAGE>
G. Carrier agrees to offer to its subscribers the "NACN Standard Customer
Interface", attached as Exhibit "C", which includes specifications for
feature codes, dialing plans, system tones and recordings, as may be
updated from time to time by NACN.
H. Carrier agrees to adhere to NACN Standard Call Barring Restrictions,
attached as Exhibit "D", as may be updated from time to time by NACN.
I. Carrier agrees to pay for NACN Network Services, under the fee
schedule set forth in this Agreement, within 15 days of receiving each
of NACN's invoices.
J. All terms and conditions related to the provision of automatic roaming
services among Carrier and other parties to an NACN Services Agreement
shall be governed by the existing agreement between those carriers
unless superseded by this Agreement, and NACN shall not, by reason of
providing the services specified in this Agreement, require or cause a
breach of such roaming agreement(s).
K. Carrier agrees to maintain in good standing all FCC and state licenses
or permits required for Carrier's operation of its system as a
cellular telecommunications provider.
4. MODIFICATION OF SERVICES. Carrier understands and agrees that NACN may
modify or upgrade the operation of the NACN Network, and the NACN Services
provided thereunder, or make changes to the Standard Customer Interface,
Standard Call Barring Restrictions, and other technical standards and
specifications during the term of this Agreement, so long as such
modification or upgrade is provided to all carriers participating in the
NACN Network. Any cost of making modifications necessary at the NACN STP
or between NACN STPs shall be at the sole cost and expense of NACN. Any
such modifications or other reconfigurations at the MSC or for facilities
linking the MSC to the STPs shall be at the sole cost and expense of
Carrier.
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<PAGE>
5. NACN RIGHT TO TERMINATE OR WITHHOLD SERVICES. Carrier agrees that, in
addition to the remedies for breach provided for in this Agreement, NACN
shall have the right, at its discretion, to terminate provision of service
to Carrier, or to suspend or withhold service to Carrier, for any or all of
the following reasons:
A. TECHNICAL NON-COMPLIANCE: Carrier's failure to comply with any of the
technical standards or specifications established by NACN hereunder
for participation in the NACN Network and use of NACN Services,
including IS-41 Rev A and subsequent revisions, as modified by NACN
from time to time pursuant to this Agreement.
B. NETWORK INTERFERENCE. Carrier's operation of its software, hardware
or transmission facilities in a manner which causes unreasonable
service disruption or interference with the NACN Network or the
network or services of any other carrier participating in the NACN.
C. SERVICE OR FEATURE NON-COMPLIANCE: Carrier's failure to adhere to the
NACN Standard Customer Interface or the NACN Standardized Call Barring
Restrictions.
NACN shall provide reasonable prior notice of termination, suspension or
withholding of service to Carrier under this Section, at no time less than
twelve (12) hours, and shall cooperate with Carrier in attempting to cure
any such technical, service or feature non-compliance or network
interference. NACN will not terminate services under this Section unless
Carrier fails to make prompt and reasonable efforts to cure any
non-compliance or interference, or unless such non-compliance or
interference is unreasonably repeated or would prevent NACN from providing
services to other carriers participating in the NACN Network.
6. FINANCIAL RECORDS. NACN shall keep accounts and complete books and records
with respect to NACN's business in accordance with generally accepted
accounting principals consistently applied, showing all financial records
necessary and appropriate to recording NACN's financial status.
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<PAGE>
The fiscal year of NACN shall be the calendar year unless otherwise
designated by the NACN Board of Directors.
Within 90 days after the end of each fiscal year, there shall be prepared
by NACN and delivered to each Carrier a financial statement which shall
include a balance sheet, a statement of operations, and cashflow statement,
together with all supporting schedules. The annual statements shall be
certified by an independent accounting firm chosen by NACN.
7. FEES. For all services provided by NACN under this Agreement, Carrier
shall be charged a monthly fee equal to 12 CENTS times the number of active
subscribers in Carrier's system ("Subscriber Count") as of the last day of
the Carrier's billing period ("Billing Month"). NACN shall invoice Carrier
for this amount no later than the 15th day of each month. This amount
shall be paid by Carrier within 15 days of receiving invoice without
deductions or offset of any sort whatsoever. Any payments not received by
NACN by the due date shall accrue interest at the rate of 12% per annum
until paid in full. Carrier agrees to instruct its billing service
provider to provide NACN with verification of the Subscriber Count each
month, which verification shall be received by NACN no more than 5 days
after the end of Carrier's Billing Month.
If the Subscriber Count is not received from Carrier in this time frame,
NACN shall use the Carrier's previous months' Subscriber Count plus 5% for
payment calculation. If Carrier disputes the calculation of the amount
due, Carrier shall pay all undisputed amounts on or before the due date and
shall, on or before the due date, submit a written statement setting forth
the basis for its dispute of the remainder. NACN and Carrier shall make
good faith efforts to resolve the dispute within 20 days of receipt of
Carrier's written statement. If the dispute is not resolved by that date,
the disputed amount shall be paid into a trust fund with
_______________________, and the matter shall be submitted to pending
arbitration. The fees charged by Carrier to its subscribers for services,
whether provided pursuant to this Agreement or otherwise, shall be
established independently by Carrier and without consultation with or
restriction of any sort by NACN.
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<PAGE>
Rates for NACN Services may be modified by NACN upon 30 days' notice, not
more than once in any twelve-month period, with the earliest such
modification effective no earlier than May 1,1993. Rates may be modified
only as necessary to reflect changes in the financial position of NACN such
that revenues generated by such rates will not exceed all expenses and
costs in any way incurred by or on behalf of NACN in building, maintaining,
and operating the NACN Network and in providing the NACN Services.
8. TERM/TERMINATION. This Agreement shall run for an initial term of three
years, commencing on the date of this Agreement. It shall automatically
renew for additional successive terms of two years each, unless either
party gives the other party written notice of its intent not to renew at
least 90 days prior to the termination of the then-current term.
In addition, either party may terminate its rights and obligations under
this Agreement (except those which specifically survive termination) for
any of the following reasons:
A. Upon breach of the other party which is not cured or for which cure is
not reasonably commenced within 30 days after notice of claimed
breach;
B. Immediately by either party, after reasonable prior notice, if the
other party's operations materially and unreasonably interfere with
its operations and such interference is not eliminated within 10 days;
C. By NACN in accordance with the provisions of Section 5 of this
Agreement;
D. By either party, in accordance with the provision of Section 10 of
this Agreement.
Upon termination of this Agreement, for any reason whatsoever, or as a
result of the expiration of its term, Carrier at its sole expense shall
forward a notice to all Carrier's subscribers stating the following:
"Previously, you were provided a national call delivery service by North
American Cellular Network, Incorporated. ("Carrier") has decided not
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<PAGE>
to continue the use of this service. If you have any questions pertaining
to this notice, please call "Customer Care."
9. MAINTENANCE, REPAIR AND OWNERSHIP. NACN shall have sole right, obligation,
and authority to maintain, repair or upgrade the NACN Network and all
components thereof, all of which are and remain the sole property (whether
by purchase or lease or otherwise) of NACN.
Carrier shall have sole right, obligation and authority to maintain, repair
or upgrade the Carrier's System, MSC and any transmission links between the
MSC and the nearest pair of NACN STPs, all of which are and remain the sole
property (whether by purchase or lease or otherwise) of Carrier.
10. SERVICE INTERRUPTION. The parties agree and acknowledge that cellular
telephone system operations are complex and that service interruptions may
be unavoidable. NACN and Carrier shall use their best efforts to avoid
unnecessary service interruption, and, where required, to work with each
other to schedule necessary service interruptions so as to minimize
disruptions to customers. In the event of any service interruption, the
parties agree to make all reasonable efforts to restore full service at the
earliest possible time. The occurrence of unnecessary interruptions of a
sustained and commercially unreasonable nature shall give either party the
right to terminate this Agreement under Section 8 above.
11. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each party hereby represents
and warrants and covenants to the other, which representations, warranties
and covenants shall survive the execution of this Agreement, as follows:
A. It is duly organized and validly existing under the laws of the
jurisdiction of its organization;
B. It has full power and authority to execute and perform this Agreement;
C. The execution, delivery, and performance of this Agreement has been
duly authorized by all necessary
-10-
<PAGE>
action on its part and is binding and enforceable against it;
D. The execution, delivery, and performance of this Agreement will not
conflict with, result in a breach of, or cause a default under, with
or without the giving of notice or the passage of time, or both, its
organization agreements, or any material agreement or instrument to
which it is a party or by which it or any of its property is bound,
nor will it conflict with or violate any statute, law, rule,
regulation, order, decree, license, permit or judgment of any court or
governmental authority which is binding upon it or its property;
E. There are no actions, suits or proceedings pending against it, or to
its knowledge threatened against it, which might have a materially
adverse effect upon its business, operations or financial condition or
its ability to perform its obligations under this Agreement; and
F. During the term of this Agreement each party shall (a) maintain in
full force and effect all necessary federal, state and local
regulatory agency authorizations; (b) timely file all requests for
renewals or replacements thereof; (c) supply all such agencies with
all other required information, which relate to the operation of its
facilities; (d) cooperate fully with the other party in maintenance,
renewal and replacement of all such necessary federal, state and local
regulatory authorizations; (e) provide to the other party all
necessary information and execute any and all documents necessary to
accomplish the same; and (f) observe and comply with all laws, rules,
regulations, ordinances, codes, orders, licenses and permits relating
to its properties or applicable to its business.
12. LIMITATION OF LIABILITY.
A. FORCE MAJEURE. Neither of the parties hereto will be liable for
nonperformance or defective or late performance of any of its
obligations hereunder to the extent and for such periods of time as
such
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<PAGE>
nonperformance, defective performance or late performance is due
to reasons outside such party's control, including, without
limitation, acts of God, war (declared or undeclared), acts (including
failure to act) of any governmental authority, riots, revolutions,
fire, floods, explosions, sabotage, nuclear incidents, lightning,
weather, earthquakes, storms, sinkholes, epidemics, strikes, or delays
of suppliers or subcontractors for the same causes, provided that
prompt and thorough efforts are made by the party to cure any
noncompliance, interference or outage resulting from such cause.
Neither party shall be required to settle any labor dispute in any
manner which is deemed by that party to be less than totally
advantageous, in that party's sole discretion.
B. EXCULPATION OF NACN. Notwithstanding any other provision of this
Agreement, NACN shall not be liable for any failure or delay in its
performance hereunder, or for any performance which is substandard or
not in compliance with technical standards or specifications, except
where such failure, delay or substandard performance is the result of
intentionally wrongful acts or gross negligence on the part of NACN.
In the event of such intentionally wrongful or grossly negligent acts
or omissions by NACN, NACN's liability to Carrier shall be limited to
the amount of any services fees paid by Carrier pursuant to this
Agreement for the period of such default.
C. NO CONSEQUENTIAL OR SPECIAL DAMAGES. NEITHER PARTY SHALL BE LIABLE TO
THE OTHER FOR ANY DIRECT, INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES
TO THE OTHER PARTY, ITS PROPERTY, OR ANY SUBSCRIBER OR CUSTOMER OF THE
OTHER PARTY, INCLUDING, WITHOUT LIMITATION, ANY DAMAGE TO OR LOSS OF
REVENUES, BUSINESS OR GOODWILL, SUFFERED BY ANY PERSON OR ENTITY FOR
ANY FAILURE OF PERFORMANCE HEREUNDER
Approved: CARRIER's Initials _____ NACN's Initials _____
13. CONFIDENTIALITY/PROPRIETARY INFORMATION. Each of the parties hereto hereby
covenants and agrees that, during the Term of this Agreement and
thereafter, neither it, nor any of its employees, agents, officers or
directors, will at any time
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<PAGE>
make use of, divulge or disclose to any person, firm or corporation any
trade secrets or confidential or proprietary information about the other
party, its business, financial condition, operations or otherwise
(including, without limitation, any information concerning the other
party's subscribers, their names, addresses, or telephone numbers),
whatever the source of such confidential or proprietary information.
Specifically, and without limitation, Carrier acknowledges that all
operational user's guides, manuals, computer application programs,
written procedures or other systems documentation furnished to it by
NACN is the sole property and proprietary information of NACN. This
confidentiality agreement shall not apply to information which is in the
public domain through no act of the party desiring to disclose.
Information contained in documents shall be considered confidential or
proprietary if it relates to information described above or the content
and context of the information is indicative of a desire to maintain
confidentiality, whether or not the document is specifically marked
"confidential" or proprietary. Each party agrees that such confidential
or proprietary information concerning the other party shall only be
divulged or disclosed to its employees who have a valid business reason
to know such information and then only to the extent required for the
performance of such employee's duties.
Nothing herein shall restrict the right of any party to disclose
confidential or proprietary information which is ordered to be disclosed
pursuant to judicial or other lawful governmental action, but only to the
extent so ordered, or as otherwise required by applicable law or
regulation. If either party is served with process to obtain any
confidential or proprietary information or subscriber records of the other
party, that party shall immediately notify the other party and permit the
other party to conduct the defense against disclosure.
Upon termination of this Agreement, each party shall return to the other
all confidential and proprietary information concerning the other which
exists in written form.
Each of the parties acknowledges and confirms that any failure on its part
to adhere strictly to the terms and conditions of
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<PAGE>
this paragraph is likely to cause substantial and irreparable injury to
the other party. Accordingly, each party confirms and agrees that, in
addition to all other remedies to which the other party may be entitled
under this Agreement or at law or in equity, the other party shall be
entitled to specific performance and other equitable relief, including
temporary and permanent injunctive relief to enforce the provisions of
this paragraph.
14. TITLE OF SOFTWARE. The Services provided hereunder may require the use of
computer software developed by NACN ("NACN Software"). Carrier agrees to
execute a License Agreement with NACN if such NACN Software is used by
Carrier. Title to any such NACN Software shall remain with NACN, and shall
not pass to Carrier. No licenses, expressed or implied, under any patents,
copyrights, trademarks or other proprietary rights are granted to Carrier
under this Agreement.
15. TITLE OF EQUIPMENT. The parties agree and acknowledge that all equipment
supplied to either from time to time for the provision of the Services
shall be and remain the property of the supplying party. Both parties
agree to take reasonable steps to maintain all such equipment in good
repair and to keep such equipment free and clear of any and all liens and
encumbrances. The parties further agree that, upon termination of this
Agreement, they will return at their cost all such equipment to the
supplying party. Each party shall be responsible for loss or damage to
such equipment while the equipment is in their respective possession or
control, reasonable wear and tear excepted.
16. ADVERTISING. Neither party shall in any manner advertise or publish the
fact that the parties have an agreement regarding the Services, unless it
obtains the written consent of the other (which will not be unreasonably
withheld), nor may either party operate under or otherwise use the other's
name or any other trade name, assumed name, service mark or trademark used
by the other unless first receiving written consent of the other. Neither
party shall disclose any of the terms of this Agreement to any third party
except as may be required to perform hereunder without the written consent
of the other, which consent will not be unreasonably withheld.
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<PAGE>
17. ATTORNEYS' FEES AND COSTS. In the event of any action at law or in equity
concerning the enforcement or interpretation of the terms of this
Agreement, the prevailing party shall be entitled to reimbursement for
reasonable attorneys' fees, costs, and necessary disbursements in addition
to any other relief to which it may show itself to be entitled.
18. PROTECTION OF MARKS. This Agreement grants no ownership, claim to,
interest in, nor right to use the other party's service marks or
trademarks. Any use of the other party's Marks must be approved in advance
by that other party, comply with such license agreements as may be required
by the other party from time to time in connection with participation under
this Agreement, and must be in strict compliance with usage guidelines
issued by that other party from time to time.
19. ADVISORY BOARD. NACN will create an advisory board made up of carriers
participating in NACN. This advisory board may recommend modifications and
enhancements to NACN Services,- which may be adopted, in whole or in part,
by management of NACN at its discretion. Carrier is entitled to vote(s) on
the NACN advisory board, which is its pro rata share based on the
percentage of Carrier customers, as compared to the total customers in all
systems executing NACN services agreements. NACN will provide Carrier with
notice of its vote(s) on the advisory board each January, based on a
yearend Subscriber Count.
20. NO JOINT VENTURE. Nothing in this Agreement is intended, or shall be
construed, to create a joint venture, partnership or other common business
entity as among NACN and Carrier. This Agreement is not intended, nor
shall it be construed, to make NACN the agent of Carrier, nor Carrier the
agent of NACN. Neither of the parties shall have the authority to bind or
commit the other party in any respect or to accept legal process on behalf
of the other party. Nothing herein gives Carrier or NACN claim to the
subscribers of the other or to revenues of the other derived from its
respective system. Both parties shall be solely responsible for the
operation of its systems or businesses, including but not limited to
payment of wages, benefits, taxes for employees and sales or income taxes.
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<PAGE>
21. GOVERNMENTAL APPROVAL. The performance of any obligations of any party
hereunder, or the exercise of any rights hereunder by any party hereto that
may require FCC or other governmental authority approval, shall be subject
to obtaining such approval. Both parties agree to take no action under
this Agreement which may place the other party in non-compliance with known
and applicable government regulations.
22. NOTICES. All notices required by or to be given pursuant to the terms of
this Agreement shall be sent:
If to NACN:
NACN, Inc.
5400 Carillon Point
Kirkland, Washington 98033
Attn: General Manager
with a copy to:
Jennifer Marsh, Esq.
General Counsel - National Operations
McCaw Cellular Communications, Inc.
5400 Carillon Point
Kirkland, WA 98033
If to Carrier:
Dobson Cellular, Inc.
13439 North Broadway, Suite 100
Oklahoma City, OK 73114
Attn: Verland Brewster
with a copy to:
Everett Dobson
Dobson Cellular Systems, Inc.
13439 N. Broadway Ext.
Oklahoma City, OK 73114
The parties may change these names or addresses from time to time by giving
notice as provided in this Section. Notice
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<PAGE>
shall be effective on the earlier of (a) the date of actual receipt, or
(b) two days after the date of mailing, if sent by certified or
registered mail.
23. GOVERNING LAW. This Agreement shall be construed under and in accordance
with the Laws of the State of Washington.
24. ASSIGNMENT. This Agreement and the duties and obligations hereunder may
not be assigned by either party without the express written consent of the
other party and an agreement by the assignee to be fully bound by the terms
and conditions hereof; provided, however, that such consent will not be
unreasonably withheld.
25. NO THIRD-PARTY BENEFICIARY. This Agreement is not intended, nor shall it
be construed, to create or convert any right in or upon any person or
entity not a party to this Agreement.
26. PARTIES BOUND. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns where
permitted by this Agreement.
27. SEVERABILITY. In case any one or more of the provisions contained in this
Agreement shall for any reason be held by any arbitration tribunal or court
of competent jurisdiction to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect
any other provision thereof, and this Agreement shall be construed as if
such invalid, illegal, or unenforceable provisions were deleted, and
replaced with enforceable provisions, which as nearly as possible, give
effect to the intent of such invalid, illegal or unenforceable provisions.
28. ENTIRE AGREEMENT. This Agreement, along with any Exhibits and/or Schedules
attached hereto, constitutes the sole and only agreement of the parties
with respect to the Services and supersedes any prior understanding or
written or oral agreements between the parties respecting the within
subject matter. The parties agree that the terms of this and the Exhibits
or Schedules attached hereto constitute the final written expression of all
of the terms and conditions of this Agreement and are a complete and
exclusive statement of those
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<PAGE>
terms and conditions. In the event another form or invoice is used for
provision of the Services and such form or invoice contains terms or
conditions different from those set forth herein, the parties agree that
the language of this Agreement shall control.
29. EQUAL EMPLOYMENT OPPORTUNITY/AFFIRMATIVE ACTION COMPLIANCE. NACN expressly
agrees not to discriminate against any employee or applicant for employment
because of race, color, religion, sex, national origin, or handicap.
30. SECTION HEADINGS. The headings of the several sections and paragraphs of
this Agreement are inserted for convenience of reference only and are not
[rest is illegible].
NORTH AMERICAN CELLULAR NETWORK, INC.
By /s/ JOHN MULHER
-----------------------------------
Date: 7/9/92
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EXHIBIT A
Definition of Carrier Area or Market
Oklahoma RSA #2 - Market 597
Enid, OK MSA - Market #302
Amendment includes the following:
Kansas RSA #5 - Market #432
Missouri RSA #1 - Market #504
Missouri RSA #2 - Market #505
Missouri RSA #4 - Market #507
Missouri RSA #5 - Market #508 (LINN COUNTY ONLY)
Maryland RSA #2 - Market #468
Maryland RSA #3 - Market #469
Hagerstown, MD MSA - Market #257
Cumberland, MD MSA - Market #269
Pennsylvania RSA 10-W - Market #621 (BEDFORD COUNTY ONLY)
NORTH AMERICAN CELLULAR NETWORK, INC.
By: /s/ JOHN MULHER
----------------------------------
Date: 2/13/97
and
DOBSON CELLULAR SYSTEMS, INC. d/b/a Cellular One
By: /s/ JAMIE L. PELWORTH
- --------------------------------------
Date: 2/10/97
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TRADEMARK SUBLICENSE AGREEMENT
THIS AGREEMENT, effective simultaneously upon the effectiveness of the
Affiliation Agreement between the parties hereto and Dobson Communications
Corporation, is between WMC Partners, L.P., a limited partnership organized and
existing under the laws of the State of Delaware ("WMC") and Dobson Cellular of
Arizona, Inc., an Oklahoma corporation ("Sublicensee").
WITNESSETH:
WHEREAS, WMC is a licensee of the marks AIRTOUCH and AIRTOUCH DESIGN which
are owned by AirTouch Communications, Inc. ("AirTouch");
WHEREAS, WMC has the right, pursuant to its Trademark License Agreement
from AirTouch, to grant a sublicense to Sublicensee for the marks, AIRTOUCH and
AIRTOUCH DESIGN;
WHEREAS, the parties hereto have entered into an Affiliation Agreement of
even date herewith (the "Affiliation Agreement") pursuant to which Operator's
System will offer Services (each as defined in the Affiliation Agreement or
herein) exclusively under the Licensed Marks;
WHEREAS, WMC believes that Sublicensee provides high quality goods and
services and further believes that Sublicensee will continue providing high
quality goods and services under the licensed marks; and
WHEREAS, WMC wishes to license to Sublicensee, and Sublicensee wishes to
obtain from WMC, the right to use certain trademarks subject to the restrictions
stated below;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, the parties hereto agree as follows:
I. DEFINITIONS
A. "LICENSED MARKS" means the trade name, "AirTouch Cellular", the
AIRTOUCH mark, and the AIRTOUCH DESIGN mark, as described in attached Exhibit 1.
<PAGE>
B. "PRODUCTS" means subscriber equipment offered for sale or lease and
any goods and other property ancillary thereto.
C. "SERVICES" means commercial mobile radio services provided by Systems
(as defined in the Affiliation Agreement), including, without limitation, voice
and data transport, and the services ancillary thereto.
D. "TERRITORY" means the rural service area designated by the FCC as
Cellular Market No. Arizona 5 (Arizona RSA #5).
II. LICENSE GRANT
A. SCOPE. Effective as of the date hereof and subject to the terms and
conditions of this Agreement, WMC grants to Sublicensee a royalty-free,
nonexclusive, nontransferable, revocable sublicense to use the Licensed Marks in
connection with the Products and Services and the sale and marketing of the
Products and Services in the Territory. WMC and AirTouch retain the right to
concurrently use or license others to use the Licensed Marks in the Territory in
connection with any goods and/or services. Sublicensee is expressly prohibited
from adopting a corporate or partnership name that includes, or would be
confusingly similar to, the Licensed Marks. Sublicensee may, only if required
by Arizona law, file a fictitious business name statement using the words
AirTouch Cellular, but agrees to cancel and/or withdraw such filing when this
Agreement ends or is terminated.
B. QUALITY CONTROL. All uses of the Licensed Marks must appear
identical in substance to the Licensed Marks as they appear in Exhibit 1 and
the Manual as defined below. Sublicensee shall employ the guidelines stated
in the attached "Corporate Identity Program" (the "Manual"), and any other
reasonable standards that AirTouch may adopt from time to time and of which
Sublicensee has been notified, when preparing any materials in which the
Licensed Marks are displayed. Prior to adopting any use of the Licensed
Marks, including without limitation, the use of the Licensed Marks on
documents, including packaging and labels of any kind, Sublicensee shall
deliver, at its own expense, one sample of each manner in which the Licensed
Marks are to be used to: Mary Hamaker, Senior Counsel, AirTouch
Communications, Inc., One California Street, 21st Floor, San Francisco, CA
94111 ("AirTouch Quality Control"). For purposes of this Agreement, a sample
of a docu-
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ment means the document itself, and a sample of a Product means either the
Product or a very clear photograph of the Product. AirTouch Quality Control
shall have ten working days from the date it receives the samples to approve
or disapprove of the sample, unless otherwise mutually agreed. The method of
delivery shall be by overnight mail and the samples shall be deemed received
the next working day after Sublicensee sends them. In the event that
AirTouch Quality Control disapproves any sample, then Sublicensee shall not
employ that sample and shall immediately destroy all other like samples,
copies, and any other media bearing the disapproved manner of use of the
Licensed Marks.
C. RIGHT TO INSPECT. In addition to the foregoing, representatives of
WMC and AirTouch shall have the right, at all reasonable times, to inspect
the manner in which Sublicensee uses the Licensed Marks and the quality of
the Products on which the Licensed Marks are affixed. Such inspection may,
at the election of WMC or AirTouch, be by personal visit to Sublicensee or by
written request for information or samples. If the inspection is by request
for samples, then the entity conducting the inspection shall reimburse
Sublicensee for the cost of shipping said samples. Sublicensee agrees to
cooperate with such inspections. In the event that WMC or AirTouch
determines that one or more manners in which Sublicensee uses the Licensed
Marks are inconsistent with the Manual or other standards adopted by AirTouch
and of which Sublicensee has notice, or that the quality of any of the
Products on which the Licensed Marks are affixed is not consistent with
maintaining the goodwill inherent in the Licensed Marks, then WMC or AirTouch
shall so notify Sublicensee, and Sublicensee shall immediately cease use of
any such disapproved usage of the Licensed Marks and shall destroy all
copies, samples and other media that bear the disapproved usage. Within
thirty days of notice from WMC or AirTouch that a particular usage has been
disapproved, Sublicensee shall certify in writing to the person providing the
notice that Sublicensee has destroyed all media that bear said usage.
D. RECOGNITION OF OWNERSHIP. Sublicensee recognizes AirTouch's title
to the Licensed Marks, and shall not at any time do or suffer to be done any
act or thing which will in any way impair the rights of AirTouch in and to
the Licensed Marks or the goodwill inherent in said Licensed Marks. It is
understood that Sublicensee shall not acquire and shall not claim any title
to the Licensed Marks adverse to AirTouch by virtue of the license granted
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<PAGE>
herein, or through Sublicensee's use of said Licensed Marks, it being the
intention of the parties that all use of the Licensed Marks by Sublicensee
shall at all times inure to the benefit of AirTouch. Sublicensee is estopped
from challenging the validity of the Licensed Marks or from setting up any
claim adverse to AirTouch.
E. SALES OUTSIDE TERRITORY. Sublicensee agrees not to sell any Products
bearing the Licensed Marks with knowledge that such products are to be resold
outside the Territory. Such sales shall constitute a breach of this Agreement
if made with Sublicensee's knowledge. If Sublicensee learns of any such sales,
it shall use its best efforts to obtain possession of said Products and to
prevent such sales in the future, including refusing to sell Products bearing
the Licensed Marks to the persons or entities responsible for the resale outside
the Territory.
III. INFRINGEMENTS
A. INFRINGEMENT BY OTHERS. Sublicensee shall review regularly the
market for Products and Services in the Territory and shall inform AirTouch
or WMC promptly of any possible infringement of, or unfair competition
affecting, the Licensed Marks which comes to the attention of Sublicensee.
In the event affirmative action is taken against any such possible
infringement or act of unfair competition, Sublicensee agrees to assist, in
whatever reasonable manner is requested, and at the expense of the requester.
Recovery of damages resulting from any such action shall be solely for the
account of AirTouch. Sublicensee shall have no right to initiate any action
to defend the Licensed Marks.
B. ACTIONS AGAINST SUBLICENSEE OR WMC. Should either party be involved
as a defendant in judicial action under the trademark laws or with regard to an
act of unfair competition in the Territory with regard to the Licensed Marks,
the parties agree to cooperate with each other to the greatest possible extent
in defending such an action.
IV. TERM AND TERMINATION
A. TERM. This Agreement will have an initial term of 20 years from
the date hereof. Thereafter, the term will automatically be extended for
additional five-year periods unless either
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party makes a valid election not to renew this Agreement. An election not to
renew will be valid only if in writing and delivered to the other party at
least one year prior to the expiration of the then current term. In the
event of a termination under this Paragraph, Sublicensee shall immediately
cease implementation of any new or expanded uses of the Licensed Marks and
shall discontinue existing uses of the Licensed Marks in accordance with the
procedure stated in Paragraph IV E below.
B. OPTIONAL TERMINATION. If Sublicensee fails to use one or more of
the Licensed Marks in the Territory within any given term that this Agreement
is in effect, then WMC may, in its sole discretion, terminate this Agreement
as to the unused Licensed Mark or Marks. In the event of a termination under
this Paragraph, Sublicensee shall immediately cease implementation of any new
or expanded uses of the Licensed Marks and shall discontinue existing uses of
the Licensed Marks in accordance with the procedure stated in Paragraph IV E
below.
C. TERMINATION FOR UNAUTHORIZED USE. If Sublicensee uses the Licensed
Marks for purposes other than the sale of Products and Services or promoting
the sale of Products and Services within the Territory or if Sublicensee
fails to use the Licensed Marks in accordance with Section II above or any
other requirements of this Agreement, then WMC shall notify Sublicensee of
such failure by written notice sent by overnight courier or facsimile,
including a detailed statement of the improper use. If Sublicensee fails to
correct such improper use within ten days after the date of such notice, then
WMC or AirTouch may seek an injunction to compel Sublicensee to discontinue
the specific unauthorized use of the Licensed Marks and/or terminate this
Agreement by written notice sent by overnight courier or facsimile to
Sublicensee. In the event of such termination, Sublicensee shall immediately
cease implementation of any new or expanded uses of the Licensed Marks and
shall discontinue existing uses of the Licensed Marks in accordance with the
procedure stated in Paragraph IV E below.
D. TERMINATION OF AFFILIATION AGREEMENT. If the Affiliation Agreement
terminates pursuant to Paragraph 9 thereof, then WMC may, in its sole
discretion, provide written notice of termination of this Trademark
Sublicense Agreement sent by overnight courier or facsimile. The provisions
of Paragraph IV E below shall govern Sublicensee's transition away from the
Licensed Marks.
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<PAGE>
E. PROCEDURE UPON TERMINATION; LICENSED MARKS REMOVAL PERIOD. Upon
termination of this Agreement pursuant to Paragraphs IV A through D above,
Sublicensee shall have three months in which to remove the Licensed Marks
from all advertisements, packaging, labels or other documentation created by
Sublicensee. Within six months after termination of this Agreement pursuant
to Paragraphs IV A through D above, Sublicensee shall remove the Licensed
Marks from all Products and any other tangible items on which the Licensed
Marks have been affixed or used by Sublicensee. At the end of each such
period, WMC shall be allowed reasonable access to Sublicensee's premises to
observe and inspect to insure that Sublicensee is in compliance with the
above requirements and that the Licensed Marks are no longer in use.
Continued use of the Licensed Marks beyond the above specified removal
periods shall constitute infringement of the Licensed Marks by Sublicensee
and shall give rise to AirTouch's remedy of specific performance in
accordance with Paragraph IV F. Sublicensee shall not adopt any trade name,
trademarks, or service marks that are confusingly similar to the Licensed
Marks in the event of termination of this Agreement. Sublicensee may not,
after termination of this Agreement, use the Licensed Marks in any manner,
including without limitation, indicating that Sublicensee was formerly called
"AirTouch" or "AirTouch Cellular."
F. AIRTOUCH'S REMEDY OF SPECIFIC PERFORMANCE. Sublicensee
acknowledges that its failure to cease use of the Licensed Marks in
accordance with the provisions of this Agreement after termination thereof
will result in immediate and irreparable harm to AirTouch for which there is
no adequate remedy at law. AirTouch shall be entitled to bring an action or
proceeding for specific performance, injunctive relief and/or other equitable
relief to compel Sublicensee to discontinue the infringement of the Licensed
Marks, to cease and desist all unauthorized use of the Licensed Marks, to
take all affirmative acts necessary to ensure discontinuance of use of the
Licensed Marks after termination of this Agreement, and to obtain such relief
as may be necessary and proper.
G. BREACH. If Sublicensee breaches any provision of this Agreement,
WMC may immediately give written notice of intention to terminate within
thirty days of the date of the writing, and, unless Sublicensee notifies WMC
in writing of a correction of such breach within said period, this Agreement
shall automatically terminate at the expiration of the thirty day notice
period. WMC
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may inspect Sublicensee's premises during the period sixty to ninety days
after this Agreement has terminated to ensure that Sublicensee is no longer
using the Licensed Marks. WMC and AirTouch retain all of its rights and
remedies to prevent Sublicensee from continuing to use the Licensed Marks
after termination of this Agreement due to breach.
H. NO DAMAGES. Notwithstanding any other provision in this or any
other agreement between the parties, should this Trademark Sublicense
Agreement be terminated for any reason, neither party shall be able to claim
from the other party any actual, consequential or incidental damages.
I. CONTINUING OBLIGATIONS. Termination of this Agreement for any
reason shall not affect those obligations which, from the context hereof, are
intended to survive termination of this Agreement.
J. NO WAIVER. Any waiver by either party of a breach of any term or
condition of this Agreement shall not be considered as a waiver of any
subsequent breach of the same or any other term or condition thereof.
K. ATTORNEYS' FEES. The prevailing party in any action arising under
this Agreement shall be entitled to collect its reasonable attorneys' fees
from the non-prevailing party. In the event that any such action is resolved
by a settlement agreement, then neither party shall be deemed the "prevailing
party" and each party shall be responsible for its own attorneys' fees. In
the event of bankruptcy of one of the parties hereto, the attorneys' fees of
the nondebtor party, incurred in dealing with a bankruptcy, shall be
considered actual pecuniary loss under 11 USC section 365(b)(1).
V. MISCELLANEOUS
A. PARAGRAPH HEADINGS. The paragraph headings are for convenience
only and shall not be deemed to affect in any way the language of the
provisions to which they refer.
B. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without reference to
choice of law provisions. Selection of California law as the governing law
shall not be deemed to invoke
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<PAGE>
any provision of California law which would not otherwise be applicable to
the relationship contemplated hereunder. All actions arising under this
Agreement, including without limitation, actions regarding the interpretation
or breach of the Agreement, shall be brought in the federal or state courts
of California.
C. NOTICES. All notices or other communications hereunder to WMC, except
as otherwise specified above, shall be sent to:
WMC Partners, L.P.
Legal Department
2999 Oak Road
Walnut Creek, CA 94596
Attn: Vice President - Legal
and if to Sublicensee, shall be sent to:
Dobson Communications Corporation
13439 N. Broadway Extension
Oklahoma City, OK 73114
Attn: Everett Dobson, President
with a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
Attn: David K. Duffell, Esq.
Any such notice or communication shall be in writing and shall be deemed to
have been received on the day of delivery if sent via facsimile with
confirmation of valid transmission, or after seven calendar days from mailing
if sent via certified mail, postage prepaid or on the next business day if
sent by overnight courier. Either party may designate a new address to which
notices or other communications may be sent by giving notice to the other
party.
D. SEVERABILITY. If any provision of this Agreement shall be held
illegal or invalid by any court, this Agreement shall be construed and
enforced as if such illegal or invalid provision had not been contained
herein, and this Agreement shall be deemed an agreement of the parties to the
full extent permitted by law.
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<PAGE>
If any provision shall be declared invalid or unenforceable because of its
breadth, scope or duration, such provision shall be severed from the rest of
this Agreement, and the remaining portions of the Agreement shall remain
valid and enforceable.
E. ASSIGNABILITY. Sublicensee may not assign or sublicense any of its
rights or delegate any of its duties under this Agreement. Any attempted
assignment, sublicense, or delegation by Sublicensee shall be null and void.
F. COMPLETE AGREEMENT. This Agreement, together with the Affiliation
Agreement, embodies all of the terms and conditions of the agreement between
the parties with respect to the matters set forth herein. There are no
statements, terms, conditions, representations, or warranties which have not
been embodied herein.
G. MODIFICATIONS. This Agreement may not be modified or amended,
except in a writing signed on behalf of both parties by their duly authorized
representatives which refers specifically to this Agreement.
H. FORCE MAJEURE. Neither party shall be in default under this
Agreement by reason of its delay in the performance of or failure to perform
any of its obligations herein if such delay or failure is caused by strikes,
acts of God or the public enemy, riots, incendiaries, interference by civil
or military authorities, compliance with governmental laws, rules, and
regulations, delays in transit or delivery, or any fault beyond its control
or without its fault or negligence.
I. WAIVER. The failure of either party at any time to require
performance of any provision of this Agreement by the other party shall not
be deemed a waiver and shall not deprive that party of its full right to
require such performance in a particular instance or at any other time. Any
waiver must be in a writing executed by a duly authorized representative of
the waiving party.
J. DISPUTE RESOLUTION. Any dispute regarding this Agreement,
including without limitation, the interpretation, performance, or termination
of this Agreement, shall be handled pursuant to the dispute resolution
provisions stated in Paragraph 13(n) of the Affiliation Agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized representatives as of the day and year
first set forth above.
WMC PARTNERS, L.P.
By /SIGNED/
-------------------------------
Print Name
-----------------------
Title
---------------------------
DOBSON CELLULAR OF ARIZONA, INC.
By /SIGNED/
-------------------------------
Print Name
-----------------------
Title
---------------------------
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EXHIBIT 1
LICENSED MARKS
1. The AIRTOUCH mark referred to in Paragraph I A above shall be used
only in the following manner:
AIRTOUCH-TM- or AirTouch-TM-
Sublicensee must use fonts from the Times or Univers families when this mark is
used on Products or in advertising for Products.
2. The AIRTOUCH DESIGN mark referred to in Paragraph IA above shall
conform to the Manual referred to in Paragraph II B above. Sublicensee shall
always place the letters "TM" as a superscript directly behind the letter "H"
in the AIRTOUCH DESIGN or such other designation as WMC or AirTouch may
direct. Sublicensee may not vary the typeface, spacing, or general structure
or configuration of the AIRTOUCH DESIGN mark. Sublicensee may employ
different sizes' of the AIRTOUCH DESIGN mark so long as those different sizes
conform the Manual. Use of color in connection with the AIRTOUCH DESIGN must
also conform to the Manual.
3. The "AirTouch Cellular" trade name referred to in Paragraph I A above
shall be used on in the following manner:
AIRTOUCH CELLULAR or AirTouch Cellular
Sublicensee must use fonts from the Times or Univers families when this trade
name is used on Products or in advertising for Products.
<PAGE>
AFFILIATION AGREEMENT
THIS AFFILIATION AGREEMENT (this "Agreement") is made as of February 28,
1997, by and among DOBSON COMMUNICATIONS CORPORATION, an Oklahoma corporation
("DCC"), and DOBSON CELLULAR OF ARIZONA, INC., an Oklahoma corporation ("DCA" or
"Operator"), and WMC PARTNERS, L.P., a Delaware limited partnership ("WMC").
WITNESSETH:
WHEREAS, WMC seeks, through operating its own Systems (as defined below)
and through affiliation, roaming and other arrangements with other operators of
Systems, to establish and maintain a seamless wireless communications network
and to establish among participants therein certain minimum levels of common
customer service and technical capabilities; and
WHEREAS, DCC and Operator have determined that certain benefits of affilia
tion, including but not limited to those arising from increased scale and scope
of services, would inure to Operator by aligning itself with a larger scale
provider of wireless communications services.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms have
the following meanings:
"AFFILIATE" means any Person that, directly or indirectly through one
or more intermediaries, controls, is controlled by, or is under common control
with the Person specified.
"AFFILIATED SYSTEM" means a WMC System or any other System that offers
Services under the Brands.
"BRANDS" mean the service marks, trademarks, trade names, symbols or
designs used, from time to time, by the WMC Systems in connection with the offer
and sale of Products and Services.
"CELLULAR SYSTEM" means a radio communications system authorized under
the rules for the domestic public cellular
<PAGE>
radio telecommunications service designated as Subpart K of Part 22 of the
FCC Rules in effect as of the date hereof or any revision thereto or
successor thereof which may be in effect from time to time, including the
network, marketing, distribution, sales, customer interface and operations
functions relating thereto.
"CONTROL" (including the terms "controlling," "controlled by" and
"under common control with") of a Person means (i) the possession, direct or
indirect, of the power to vote 50% or more of the voting securities or other
voting interests of such Person, or (ii) the possession, directly or
indirectly, of the affirmative power to direct, or cause the direction of,
the management and policies of such Person, whether through the ownership of
voting securities or other voting interests, by contract or otherwise.
"EFFECTIVE DATE" means the date on which the closing of the
transactions contemplated by the Purchase Agreement occurs.
"ESMR SYSTEM" means any commercial mobile radio system authorized
under the rules for Enhanced Specialized Mobile Radio services designated
under Subpart S of Part 90 of the FCC Rules in effect as of the date hereof
or any revision or successor thereof, which may be in effect from time to
time, including the network, marketing, distribution, sales, customer
interface and operations functions relating thereto.
"FCC" means the Federal Communications Commission or any successor
agency or entity performing substantially the same functions.
"FEATURES" means the dialing plans, feature codes and other
technical capabilities related to the provision of Services.
"LICENSE" means any permit, license, waiver or authorization from any
governmental body having jurisdiction over a Person required for conduct of an
activity, including, without limitation, any FCC license or any certificate of
public convenience and necessity.
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"OPERATOR'S SERVICE AREA" or "ARIZONA RSA # 5" means the rural
service area designated by the FCC as Cellular Market No. Arizona 5.
"OPERATOR'S SYSTEM" means the Cellular System controlled by
Operator in Arizona RSA # 5.
"PARTNER" means any general or limited partner of WMC.
"PCS SYSTEM" means a radio communications system authorized under
the rules for broadband personal communications services designated as
Subpart E of part 24 of the FCC Rules as of the date hereof, or any revision
thereto or successor thereof which may be in effect from time to time,
including the network, marketing, distribution, sales, customer interface and
operations functions relating thereto.
"PERSON" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company,
trust, estate, unincorporated organization, governmental or regulatory body
or other entity.
"PLANS" means subscriber purchasing plans for Products and/or
Services.
"PRODUCTS" means subscriber equipment offered for sale or lease and
any goods and other property ancillary thereto.
"PURCHASE AGREEMENT" means that certain agreement dated as of
February _, 1997 among U S WEST New Vector Group, DCA, AZTEL, Inc., Gila
River Telecommunications, Inc. and Tohono O'odham Utility Authority, as such
agreement may be amended from time to time.
"SERVICE AREA" means, as to any Person, the geographic territory in
which such Person provides Services.
"SERVICES" means commercial mobile radio services provided by Systems,
including, without limitation, voice and data transport, and the services
ancillary thereto.
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"SYSTEM" means a Cellular System, an ESMR System or a PCS System.
"TRADEMARK SUBLICENSE AGREEMENT" means the trademark sublicense
agreement in the form attached as Exhibit A to be entered into between WMC and
Operator on the Effective Date, as amended from time to time, and any other
Brand license or sublicense agreement executed in substitution therefor.
"WMC SYSTEMS" means those Systems controlled by WMC.
2. PERFORMANCE STANDARDS.
(a) PERFORMANCE STANDARDS. WMC may establish minimum standards
for various aspects of the WMC Systems and for the operations thereof (the
"Performance Standards"), including but not limited to certain minimum
Features, Plans, Products and Services to be offered by the WMC Systems. WMC
may revise the Performance Standards from time to time in its reasonable
discretion. The Performance Standards will be generally consistent with
industry practices and capabilities. Set forth on Exhibit B are the initial
Performance Standards (the "Initial Performance Standards").
(b) COMPLIANCE WITH PERFORMANCE STANDARDS. Operator will cause
Operator's System to comply with the Initial Performance Standards and any
revised Performance Standards of which WMC has notified Operator and to which
Operator has not reasonably objected by notice to WMC within 10 days after
receiving notification of the revised Performance Standard. Operator shall
be deemed to comply with a Performance Standard so long as Operator's
performance with such Performance Standard equals or exceeds the median
performance recorded in respect thereto for the same date or period by the
WMC Systems. Subject to Section 7, upon request of Operator and solely for
the purpose of confirming the median performance of the WMC Systems with a
Performance Standard, WMC shall furnish Operator with summary information for
the applicable date or period in respect of the performance of the WMC
Systems for any Performance Standard as to which Operator fails to equal or
exceed the median performance of the WMC Systems.
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<PAGE>
(c) SURVEYS.
(i) The parties recognize that Operator and WMC may wish
to obtain market research data or other information related to Operator's
System or to Features, Plans, Products or Services. To this end, WMC agrees
to conduct or cause a third party to conduct surveys of subscribers or other
Persons within Operator's Service Area (each a "Survey") at least on an
annual basis (the "Annual Survey") and may, in its sole discretion, conduct
or cause a third party to conduct additional Surveys from time to time.
(ii) Annually and at such other times as WMC determines to
conduct a Survey or cause a Survey to be conducted, Operator will, upon WMC's
request, furnish promptly to WMC or such third party a complete and accurate
list of its subscribers in such a format as may be reasonably requested by
WMC or such third party, together with such other information as WMC or such
third party organization determines is reasonably necessary to conduct the
Surveys. Operator authorizes WMC or such third party to contact any and all
of its subscribers solely for the purposes of conducting the Surveys. WMC
will furnish or cause any such third party to furnish Operator with copies of
such Surveys, the results therefrom and any market data so obtained with
respect to Operator's Service Area. WMC will treat and will cause any third
party to treat Operator's list of subscribers and the information obtained or
generated in connection with such Surveys in accordance with the provisions
of Section 7 hereof. All Annual Surveys shall be at Operator's expense.
(d) INSPECTION. In order to determine the compliance of
Operator's System with the Performance Standards referred to in Section 2(a),
WMC and its representatives will have the right to meet with Operator's
employees and officers and to inspect the operations of Operator's System,
including conducting reasonable on-site tests. Such inspections will be
conducted on reasonable prior notice, during normal business hours and will
be performed in a manner which does not unreasonably interfere with the
operations of Operator's System. The costs of any such inspection will be
borne by WMC. If WMC determines that Operator's System is not in compliance
with any such Performance Standard, it will notify Operator in writing of (A)
the nature of the noncompliance and (B) the action (or omission) necessary to
cure the noncompliance. In such event, WMC may also specify within such
notice or by separate no-
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tice, a date not less than 60 days after such notice is delivered to
Operator, by which such noncompliance must be remedied.
3. BRANDS; ADVERTISING.
(a) BRANDS. All Products and Services offered and sold by
Operator's System will be offered and sold exclusively under the Licensed
Marks (as defined in the Trademark Sublicense Agreement) pursuant to the
terms and conditions of the Trademark Sublicense Agreement, except for any
Product that Operator is prohibited from offering or selling under the
Licensed Marks under the terms of the purchase agreement therefor, in which
case such Product may be offered and sold under the brand of the manufacturer
or distributor thereof. WMC will have the right, in its sole discretion, to
substitute other Brand(s) for the Licensed Marks or to require Operator's
System to use additional Brand(s) in connection with some or all of the
Products and Services; provided that any Brand to be used by and licensed to
Operator will be substantially the same as a Brand used in the State of
Arizona by the WMC Systems. If WMC designates any substitute or additional
Brand, Operator will enter into a license agreement in respect of such Brand
in such form as will be reasonably prescribed by WMC and will use such Brand
only in compliance with the terms and conditions set forth in such license
agreement; provided, however, that Operator will not be required to enter
into any license agreement that provides for compensation thereunder that is
in addition to that provided herein or the Trademark Sublicense Agreement.
(b) ADVERTISING.
(i) WMC and the Affiliated Systems may from time to time
implement or participate in advertising programs that directly or indirectly
promote the Brands on a national or regional basis ("Advertising"). Such
Advertising may include, but is not limited to, (A) newspaper, magazine and
written periodical advertising; (B) radio scripts, tape recordings and audio
advertising; (C) television scripts, videotape recording and electronic
advertising; (D) telephone directories; (E) billboards, in-store point of
purchase or other display advertising; (F) flyers or similar advertising; and
(G) direct mail materials.
(ii) For each calendar year or portion thereof after the
Effective Date, Operator will pay WMC an amount equal to
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$0.15 multiplied by the total population of the Operator's Service Area as of
the end of the immediately preceding calendar year as estimated by Rand
McNally to support the activities of WMC and its Affiliates in connection
with the development, design, production, placement, printing, publishing,
display, distribution, mailing and airing of Advertising. WMC will use
reasonable efforts to coordinate with Operator in respect of the placement,
publication, display, distribution, mailing or airing of Advertising in
Operator's Service Area. Operator acknowledges and agrees that WMC is not
obligated to insure that Operator benefits directly from any expenditures
made by WMC with respect to such activities.
(iii) The payment required under Section 3(b)(ii) will be
payable within 30 days after the first day of each calendar year (or in the
case of 1997, within 30 days after the Effective Date). Notwithstanding the
foregoing, Operator will not be required to pay the amount due with respect
to 1997 until the first day of the seventh full calendar month following the
Effective Date. Unpaid amounts (including any amount deferred pursuant to the
preceding sentence) will accrue interest at the "prime rate" (i.e., the rate
reported, from time to time, by the Wall Street Journal as the base rate on
corporate loans posted by at least 75% of the 30 largest banks in the United
States) plus 2% or, if lower, the highest rate permitted by applicable law.
(iv) Operator will use reasonable efforts to coordinate its
promotional activities (including without limitation promotion of Plans) with
Affiliated Systems in-Service Areas which are adjacent to Operator's Service
Area and shall bear the costs and expenses of its own promotional activities.
4. ROAMING AGREEMENTS.
(a) RECIPROCAL AGREEMENTS. Operator will enter into and maintain
in effect during the term of this Agreement (and thereafter to the extent
provided in Section 4(b)), roaming agreements for Operator's System with each
WMC System having a Service Area within the State of Arizona, which
agreements will provide for mutual roaming rights between Operator's System
and each such WMC System. Such roaming agreements will (i) contain no pricing
elements other than for airtime used, (ii) provide initial reciprocal prices
for airtime during the five-year period commencing on the Effective Date of
$.60 per minute of airtime used and (iii) provide
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reciprocal prices for airtime for periods thereafter that do not exceed $0.60
per minute of airtime used. Notwithstanding the foregoing, if the reciprocal
price pursuant to subsections 4(a)(ii) and (iii) for airtime used in any such
agreement exceeds the price available from one or more other service
providers in the Operator's Service Area, Operator and WMC shall use their
respective best efforts promptly to reduce such price so that the applicable
price under such agreement for airtime used is competitive with the price
available from such other service provider(s).
(b) CONTINUATION OF ROAMING AGREEMENTS. If this Agreement is
terminated for any reason prior to the fifth anniversary of the Effective
Date (the "Five Year Date"), Operator and DCC agree that WMC may, if it so
elects in its sole discretion, continue any or al! of the roaming agreements
entered into pursuant to Section 4(a) until the Five Year Date. Operator and
DCC further agree that if Operator or DCC proposes to effect a Transfer (as
defined below) prior to the Five Year Date that would result in a Change of
Control of Operator's System, if WMC so elects in its sole discretion, such
Transfer will be subject to the condition (which may not be waived) that the
transferee assume and agree to perform any or all of the roaming agreements
entered into pursuant to Section 4(a) and that any such roaming agreements
continue until the Five Year Date notwithstanding any termination of this
Agreement.
5. REPRESENTATIONS AND WARRANTIES OF WMC. WMC represents to Operator and
DCC that:
(a) ORGANIZATION. It is duly organized, validly existing and in
good standing under the laws of the state of its organization and has all
requisite power and authority to carry out its business as now conducted, and
to enter into this Agreement and to perform its obligations hereunder. It is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary.
(b) AUTHORITY. This Agreement has been duly authorized by all
necessary partnership action on the part of WMC. It has been duly executed
and delivered by one of its duly authorized officers or partners and
constitutes its valid and binding obliga-
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tion, enforceable against it in accordance with its terms, except as the same
may be limited by bankruptcy, insolvency, reorganization or other laws
affecting the enforceability of creditors' rights generally and except that
the remedy of specific performance or similar equitable relief may be subject
to equitable defenses and to the discretion of the court before which
enforcement is sought.
(c) AUTHORIZATIONS AND CONSENTS: NO VIOLATION.
(i) Neither its execution and delivery of this Agreement nor
its performance hereunder will conflict with, or result in any breach or
violation of, any provision of any of its formative organizational or
governance agreements; or constitute, with or without notice or the passage
of time or both, a breach, violation or default, create a lien or give rise
to any right of termination, modification, cancellation, prepayment or
acceleration under any order, writ, injunction, decree, law, statute, rule or
regulation, franchise, License or any mortgage, indenture, lease, agreement
or other instrument by which it is bound or to which its properties are
subject, except for breaches, violations, defaults, liens or rights of
termination, modification, cancellation, prepayment or acceleration which
would not, singly or in the aggregate, materially adversely affect its
ability to perform the obligations contemplated by this Agreement.
(ii) No authorizations are required to be obtained from any
governmental body with respect to its execution of this Agreement and its
performance hereunder.
(iii) No consents are reasonably anticipated to be required to
be obtained pursuant to any partnership, joint venture or other similar
agreement or any material contract, agreement, License or instrument to which
is a party with respect to its execution of this Agreement and its
performance hereunder.
(d) AGREEMENTS WITH THIRD PARTIES; EMPLOYMENT AND NON-COMPETITION
AGREEMENTS. Neither it nor any of its Affiliates is a party to any
employment agreement or a party to or otherwise bound by any non-competition,
non-solicitation or other similar agreement relating to the provision of
Services or that would otherwise be inconsistent with the performance of its
obligations under this Agreement.
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6. REPRESENTATIONS AND WARRANTIES OF OPERATOR AND DCC. Each of Operator
and DCC, jointly and severally, represent and warrant to WMC that:
(a) ORGANIZATION. It is duly organized, validly existing and in
good standing under the laws of the state of its organization and has all
requisite power and authority to carry out its business as now conducted, and
to enter into this Agreement and to perform its obligations hereunder. It is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary.
(b) AUTHORITY. This Agreement has been duly authorized by all
necessary partnership or corporate action, as applicable, on the part of
Operator and DCC. It has been duly executed and delivered by one of its duly
authorized officers or partners and constitutes its valid and binding
obligation, enforceable against it in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency, reorganization or other
laws affecting the enforceability of creditors' rights generally and except
that the remedy of specific performance or similar equitable relief may be
subject to equitable defenses and to the discretion of the court before which
enforcement is sought.
(c) AUTHORIZATIONS AND CONSENTS: NO VIOLATION.
(i) Neither its execution and delivery of this Agreement nor
its performance hereunder will conflict with, or result in any breach or
violation of, any provision of any of its formative organizational or
governance agreements; or constitute, with or without notice or the passage
of time or both, a breach, violation or default, create a lien or give rise
to any right of termination, modification, cancellation, prepayment or
acceleration under any order, writ, injunction, decree, law, statute, rule or
regulation, franchise, License or any mortgage, indenture, lease, agreement
or other instrument by which it is bound or to which its properties are
subject, except for breaches, violations, defaults, liens or rights of
termination, modification, cancellation, prepayment or acceleration which
would not, singly or in the aggregate,
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materially adversely affect its ability to perform the obligations
contemplated by this Agreement.
(ii) No authorizations are required to be obtained from any
governmental body with respect to its execution of this Agreement and its
performance hereunder.
(iii) No consents are reasonably anticipated to be required to
be obtained pursuant to any partnership, joint venture or other similar
agreement or any material contract, agreement, License or instrument to which
is a party with respect to its execution of this Agreement and its
performance hereunder.
(d) AGREEMENTS WITH THIRD PARTIES; EMPLOYMENT AND NON-COMPETITION
AGREEMENTS. Neither it nor any of its Affiliates is a party to any
employment agreement or a party to or otherwise bound by any non-competition,
non-solicitation or other similar agreement relating to the provision of
Services or that would otherwise be inconsistent with the performance of its
obligations under this Agreement.
(e) OWNERSHIP. DCC is the sole record and beneficial owner of all
of the outstanding equity in and voting interests of DCA. On the Effective
Date, Operator will be the sole owner of all of the assets of Operator's
System.
7. CONFIDENTIAL INFORMATION.
(a) Each of DCC, Operator and WMC will, and will cause its
respective partners, shareholders, directors, officers, employees, and agents
(collectively, when used with respect to any party, its "Representatives"),
to keep secret and retain in strictest confidence, except as provided in
Section 7(b) hereof, any and all Confidential Information and will not
distribute, disseminate or disclose such Confidential Information, and will
cause its Representatives not to distribute, disseminate or disclose such
Confidential Information, except to (i) any Representative of WMC or Operator
on a "need to know" basis in connection with this Agreement or the operation
of Operator's System, the WMC Systems (or the Affiliated Systems) and their
respective businesses or (ii) to any lender to Operator or WMC on a "need to
know" basis in connection with the financing of the Operator's System or the
WMC Systems, and any such Person receiving Confidential Information pursuant
to this
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Section 7(a) will use, and will cause its Representatives or lenders to use,
such Confidential Information only for the benefit of DCC, Operator, WMC and
the WMC Systems (or the Affiliated Systems) or for any other specific
purposes for which it was disclosed to such party. All Confidential
Information disclosed pursuant to this Agreement will remain the property of
the Person whose property it was prior to such disclosure.
(b) In the event that DCC, Operator, WMC or any Person to whom any
of them transmits any Confidential Information becomes legally compelled (by
oral questions, interrogatories, requests for information or documents,
subpoena, investigative demand or similar process) to disclose any of the
Confidential Information, such Person will use its best efforts to provide
WMC and Operator with prompt written notice prior to disclosure (not less
than 24 hours) so that WMC, Operator, as applicable, may seek a protective
order or other appropriate remedy and/or waive compliance with the provisions
of this Agreement. In the event that such protective order or other remedy
is not obtained, or that DCC, Operator or WMC, as applicable, waives
compliance with the provisions of Section 7(a), the Person who is compelled
to disclose such Confidential Information will furnish only that portion of
the Confidential Information which (based on the advice of counsel) it is
legally required to disclose and will exercise its best efforts to obtain
reliable assurance that protective treatment will be accorded the
Confidential Information.
(c) Upon termination of this Agreement, Operator, DCC and WMC will,
and will cause their respective Representatives to, return to the appropriate
party all documents that contain Confidential Information or, if the party so
requests, cause such documents to be destroyed.
(d) For purposes of this Section, "Confidential Information" means
all confidential documents and information (including, without limitation,
confidential commercial information and information with respect to customers
and proprietary technologies or processes and the design and development of
new products and services) concerning Operator, Operator's System, WMC, its
Partners or other Affiliates, the WMC Systems or the Affiliated Systems,
furnished to or obtained by a party to this Agreement by or from the other
parties or their Representatives (as such term is defined in Section 7(a)
hereof) in connection with this Agreement
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or the operation of Operator's System, the Affiliated Systems or the parties'
respective businesses, except to the extent that such information is (i)
generally available to the public other than as a result of a breach by the
receiving Person of the provisions of Section 7 hereof; (ii) already in the
possession of the receiving Person or its Representatives without restriction
and prior to any disclosure pursuant to any of the terms of this Agreement;
(iii) lawfully disclosed to the receiving Person or its Representatives by a
third party who is free lawfully to disclose the same; or (iv) independently
developed by the receiving Person or its Representatives without use of any
Confidential Information obtained in connection with this Agreement or the
operation of Operator's System, the Affiliated Systems or the parties'
respective businesses.
8. INDEMNIFICATION.
(a) INDEMNIFICATION BY OPERATOR OR DCC. DCC and Operator jointly
and severally will, to the fullest extent permitted by law, indemnify, defend
and hold harmless WMC, its Partners, officers, directors, employees, agents
and control Persons from any and all losses, claims, damages, liabilities,
costs and expenses (including reasonable attorneys' fees and expenses)
(collectively "Losses") arising from claims by Persons other than WMC and its
Affiliates and their respective officers, directors, employees, partners,
agents and control Persons and which relate to the performance or
non-performance of Operator or DCC of their respective duties or breach of
their representations hereunder, except where such Losses are due to the
negligence or willful misconduct of WMC, its partners, officers, directors,
employees, agents and control Persons or where such Losses have been
reimbursed to WMC directly by Operator's or DCC's insurer.
(b) INDEMNIFICATION BY WMC. WMC will, to the fullest extent
permitted by law, indemnify, defend and hold harmless Operator, its partners,
officers, directors, employees, agents and control Persons from any and all
Losses arising from claims by Persons other than Operator, DCC or their
respective Affiliates and their respective officers, directors, employees,
agents and control Persons and which relate to the performance or
non-performance of WMC of its duties or breaches of its representations
hereunder, except where such Losses are due to the negligence or willful
misconduct of Operator, its shareholders, officers, directors, employ-
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ees, agents and control Persons or where such Losses have been reimbursed to
Operator directly by WMC's insurer.
(c) THIRD PARTY CLAIMS. Promptly after receipt by an indemnified party
under this Section 8 of notice of any claim or the commencement of any action
(including any governmental action), such indemnified party will, if a claim
in respect thereof is to be made against any indemnifying party under this
Section 8, deliver to the indemnifying party a written notice of the claim or
action and the indemnifying party will have the right to participate in, and,
to the extent the indemnifying party so desires and promptly notifies the
indemnified party in writing of such desire, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party; provided, however,
that an indemnified party will only have the right to retain its own counsel,
with the fees, disbursements and other charges to be paid by the indemnifying
party, if (i) representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate (based on the
reasonable advice of counsel to the indemnified party) due to actual or
potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding (provided that if such
other party is the indemnifying party, the indemnifying party will not have
the right to direct the defense of such action on the part of the indemnified
party), (ii) the indemnified party has reasonably concluded (based on the
reasonable advice of counsel) that there may be legal defenses available to
it or other indemnified parties that are different from or in addition to
those available to the indemnifying party, (iii) the indemnifying party has
not in fact employed counsel reasonably satisfactory to the indemnified party
within a reasonable time after receiving notice of the claim or commencement
of the action or (iv) the employment of counsel at the indemnifying party's
expense by the indemnified party has been authorized in writing by the
indemnifying party specifying that it will pay for such counsel. If, and only
to the extent that, the failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action results
in the forfeiture of substantive rights or defenses of the indemnifying party
in such action, such failure will relieve such indemnifying party of
liability to the indemnified party under this Section 8, but the omission so
to deliver written notice to the indemnifying party will
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not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 8.
9. TERM; TERMINATION.
(a) TERM. The initial term of this Agreement will expire on the
twentieth anniversary of the Effective Date. Thereafter, the term will
automatically be extended for additional five-year periods unless either
Operator or WMC makes a valid election not to renew this Agreement. An
election not to renew will be valid only if in writing and delivered to the
other at least one year prior to the expiration of the then current term.
(b) TERMINATION BY OPERATOR. This Agreement may be terminated by
Operator at any time following the occurrence of any of the following events:
(i) a material breach of this Agreement by WMC which has
not been cured within 90 days after Operator has delivered written notice to
WMC of such breach;
(ii) a Change of Control of Operator's System;
(iii) a termination of the Trademark Sublicense Agreement;
(iv) dissolution, liquidation or winding-up of WMC unless
an Affiliate of WMC or of AirTouch Communications, Inc. (or any successor
thereto whether by merger, spin-off or otherwise) assumes WMC's obligations
hereunder;
(v) the suspension, revocation, or surrender of
the FCC License for the Phoenix Service Area that is currently held by U S
West New Vector Group (unless such FCC License is promptly thereafter awarded
to WMC or a permitted assignee of WMC hereunder) or the sale or other
disposition of such FCC License to a Person other than WMC or a permitted
assignee of WMC hereunder;
(vi) the entry by a court having jurisdiction of (A) a
decree or order for relief in respect of WMC in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudicating WMC
bankrupt or insolvent or approv-
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ing as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of WMC under any applicable
federal or state law, or appointing a custodian, receiver, liquidator,
assignee, trustee or other similar official of WMC or of any substantial part
of its property; or
(vii) the commencement by WMC of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of any case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of WMC in any involuntary case or
proceeding under applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy
or insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable federal or state law or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or other similar official of WMC or
any substantial part of its property, or the making by it of an assignment
for the benefit of creditors.
(c) TERMINATION BY WMC. This Agreement may be terminated
by WMC at any time following the occurrence of any of the following events:
(i) a payment default which has not been cured within
60 days or other material breach of this Agreement by Operator which has not
been cured within 90 days after WMC has delivered written notice to Operator
of such breach;
(ii) upon termination of the Trademark Sublicense
Agreement;
(iii) dissolution, liquidation or winding-up of Operator;
(iv) the suspension, revocation or other loss of, or
surrender, sale or other disposition of, Operator's FCC License for
Operator's Service Area;
(v) Operator's failure to consent to any revised
Performance Standard;
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(vi) the occurrence of any event which is, or after
notice or passage of time or both would be an "event of default" under any
material debt of Operator or under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any debt by Operator, whether such debt now exists or will hereafter be
created, provided that such event will not permit termination hereof unless
either (A) such event will remain uncured at the earlier of the end of any
cure period available under the applicable loan agreement or other instrument
or six months from the first occurrence thereof or (B) the lender, obligee or
other beneficiary will assert any remedies under the applicable loan
agreement or other instrument;
(vii) the entry by a court having jurisdiction of (A) a
decree or order for relief in respect of Operator in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (B) a decree or order adjudicating
Operator bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization, arrangement, adjustment or composition of or in
respect of Operator under any applicable federal or state law, or appointing
a custodian, receiver, liquidator, assignee, trustee or other similar of
official of Operator or of any substantial part of its property;
(viii) the commencement by Operator of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of any case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of Operator in any involuntary case or
proceeding under applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy
or insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under any
applicable federal or state law or the consent by it to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or other similar of official of
Operator or any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or its failure to pay its debts
generally as they become due; or
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(ix) a Change of Control of Operator's System.
(d) For purposes of this Section 9, a "Change of Control"
of Operator's System will be deemed to have occurred at such time as: (i)
DCC no longer beneficially owns directly or indirectly (whether as a result
of merger, consolidation, sale, assignment, lease or otherwise, in one
transaction or series of related transactions) equity of Operator
constituting a majority of the outstanding equity in and voting interests of
Operator, (ii) any Person other that DCC, or group of Persons acting in
concert, acquires beneficial ownership, directly or indirectly, of 50% or
more of the outstanding equity in or voting interests of Operator or DCC or
(iii) Operator sells or otherwise disposes of (including, without limitation
in connection with the formation of a joint venture that is not controlled by
DCC) all or substantially all of the assets of Operator's System (including,
without limitation in connection with the sale or other deposition of all or
substantially all of the assets of Operator).
10. FUTURE SALE OF ARIZONA RSA # 5. In the event that (i) Operator
proposes to transfer, sell, assign or otherwise dispose of all or substantially
all of the assets of Operator's System, including but not limited to any
transfer of its FCC License for Operator's Service Area, or (ii) DCC proposes to
transfer, sell, assign or otherwise dispose of, directly or indirectly, a
majority of the outstanding equity in or voting interests of DCA or Operator
(the transactions referred to in clauses (i) and (ii) being referred to as a
Transfer), other than (x) a Transfer to an Affiliate of DCC, (y) a Transfer
resulting from a Change of Control of Operator's System as a result of the
circumstances set forth in subsection 9(d)(ii) with respect to DCC or (z) a
Transfer in connection with the direct or indirect sale by DCC and/or Operator
of the Operator's System and Cellular Systems for two or more other metropolitan
or rural service areas, the following will apply:
(a) DCC and/or Operator will send a written notice of the proposed
Transfer (a "Transfer Notice") to WMC, which notice will describe the assets
or equity securities (the "Interest") proposed to be Transferred.
(b) During the 20-day period following delivery of the Transfer
Notice to WMC, Operator will not contact or initiate discussions with (or
entertain any approach from), or conduct nego-
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tiations with any Person other than WMC with respect to any Transfer of the
Interest.
(c) WMC will have 20 days from its receipt of the Transfer Notice
to deliver to Operator its written offer to purchase the Interest subject to
the Transfer Notice (a "WMC Offer").
(d) If WMC makes a WMC Offer, DCC or Operator as applicable will
have the right to accept or reject the WMC Offer. If DCC or Operator as
applicable accepts the WMC Offer, the Interest will be transferred to WMC
subject to the terms and conditions contained in the WMC Offer. If DCC or
Operator rejects the WMC Offer, DCC or Operator, as applicable, will be free
to Transfer the Interest during the 12-month period after the date of the
Transfer Notice to any other Person for consideration having a fair market
value that is no less than the fair market value of the consideration set
forth in the WMC Offer.
(e) If WMC does not make a WMC Offer, DCC or Operator, as
applicable, will be free to Transfer the Interest during the 12-month period
after the date of the Transfer Notice to any other Person without limitation
as to the amount of the consideration paid in respect of the Transfer.
11. MISCELLANEOUS PROVISIONS.
(a) NOTICES. All notices, requests, demands or other
communications required by or otherwise with respect to this Agreement will
be in writing and will be deemed to have been duly given to any party (i)
when delivered personally (by courier service or otherwise), (ii) when
delivered by telecopy and confirmed by return telecopy, (iii) on the business
day after the date sent by a nationally recognized overnight courier service,
or (iv) seven days after being mailed by first-class, registered or certified
mail, postage prepaid and return receipt requested, in each case to the
applicable addresses set forth below:
If to DCC/Operator:
Dobson Communications, Inc.
13439 N. Broadway Extension
Oklahoma City, OK 73114
Attention: Everett Dobson, President
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With a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
Attention: David K. Duffell, Esquire
If to WMC:
WMC Partners, L.P.
Legal Department
2999 Oak Road
Walnut Creek, CA 94596
Attention: Vice President-Legal
or to such other address or telecopy number as any party may have furnished
to the other parties in writing in accordance with this Section 11(a).
(b) GOVERNING LAW. This Agreement will be governed by Arizona law
without regard to the conflicts of laws principles thereof.
(c) AMENDMENTS. Except as provided herein, this Agreement may be
modified or amended only by an instrument in writing signed by the parties
hereto.
(d) ENTIRE AGREEMENT. This Agreement, the Exhibits and the
Trademark Sublicense Agreement constitute the entire agreement between the
parties with respect to the matters covered hereby and supersede all prior
agreements, understandings, offers and negotiations, oral or written, with
regard to the subject matter hereof. In the event of any conflict between
the terms of this Agreement and the terms of the Trademark Sublicense
Agreement, the terms of the Trademark Sublicense Agreement shall control.
(e) ASSIGNMENT: SUCCESSORS AND ASSIGNS.
(i) Except as set forth in subsection 11(e)(ii) below, no
party will be entitled to sell, assign, or transfer this Agreement or any
right or obligation hereunder without the written consent of the other party.
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(ii) WMC may assign this Agreement to any Affiliate of WMC or
of AirTouch Communications, Inc. (or any successor thereto whether by merger,
spin-off or otherwise). Operator may assign this Agreement to any Affiliate
of DCC in connection with the transfer, sale, assignment or other disposition
of all or substantially all of the assets of Operator's System (including
Operator's FCC License for Operator's Service Area) to such Affiliate and may
assign its rights under this Agreement to any lender as collateral security
for financing provided to Operator or DCC. If this Agreement is assigned by
WMC or by Operator in accordance with the provisions of this subsection 1
l(e)(ii), the assignor will be released from its obligations hereunder upon,
and to the extent of, the assumption of such obligations by the assignee. In
the event all of WMC's prospective obligations hereunder are assumed by an
assignee, all references herein to WMC will be deemed references to the
Person that assumes the prospective obligations of WMC hereunder after the
date of such assumption and in the event all of Operator's prospective
obligations hereunder are assumed by an Affiliate of DCC all references
herein to Operator will be deemed references to the Affiliate of DCC that
assumes the prospective obligations of Operator hereunder after the date of
such assumption; each such assignee shall be required to execute and deliver
a counterpart of this Agreement as of the date of the assignment and shall be
deemed to have made the representations and warranties of its assignor
contained herein as of the date thereof. WMC may also assign its rights and
delegate its duties under any portion of this Agreement to other entities.
(iii) Subject to subsections (i) and (ii) above, all rights
and duties of the parties hereunder will inure to the benefit of their
respective successors and assigns.
(f) SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof (unless such prohibition on
unenforceability materially alters the intent of the parties or the relative
economic benefits of the parties, in which case the materially affected party
will have the right to terminate this Agreement), and any such prohibition or
unenforceability in any jurisdiction will not invalidate or render unenforceable
such provision in any other jurisdiction.
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(g) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which will
constitute one and the same instrument.
(h) THIRD PARTY BENEFICIARIES. Nothing contained in this
Agreement is intended to, or will, confer upon any Person other than the
parties hereto any rights or remedies hereunder.
(i) WAIVER. The observance of any term of this Agreement may be
waived only with the written consent of the party against whom such waiver is
sought to be enforced. No waiver by any party of any default with respect to
any provision, condition or requirement hereof will be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof.
(j) SETOFF. WMC and Operator will have the right to set off any
amounts it would otherwise be required to remit to the other under this
Agreement or otherwise against amounts due to it hereunder
(k) NO AGENCY OR OTHER RELATIONSHIP. Neither Operator nor DCC
will have any authority, express or implied, to act as an agent of WMC, the
Affiliated Systems or any of their respective Affiliates for any purpose; and
WMC will have no authority, express or implied, to act as agent of Operator
or DCC or their respective Affiliates. Further, nothing in this Agreement
will be construed to create a partnership, agency, reseller or other
relationship between the parties, or to make either party liable for any
debts or obligations incurred by the other.
(l) INSURANCE.
(i) REQUIREMENTS. Operator will procure, and will maintain
in full force and effect, at Operator's expense, an insurance policy or
policies protecting Operator against any demand or claim with respect to
personal injury, death or property damage, or any loss, liability, or expense
whatsoever arising or occurring upon or in connection with Operator's
business, the minimum forms and amounts of which are set forth in Exhibit C.
All insurance policies must provide for severability of interest or cross
liability; designate WMC and its partners, officers, directors, employees and
agents as additional insureds; provide that such insurance is
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non-contributing primary coverage with respect to all insureds; contain a
waiver of subrogation; and augment the contractual indemnity to assign the
employer's statutory lien to WMC.
(ii) CERTIFICATES OF INSURANCE. On the Effective Date and
thereafter at least 30 days prior to the expiration of any such policy or
upon the request of WMC, Operator shall deliver to WMC certificates of
insurance evidencing the proper coverage with limits not less than those
required hereunder. All certificates will expressly provide that not less
than 30 days' prior written notice shall be given WMC in the event of
material alteration to, or cancellation of, the coverages evidenced by such
certificates.
(m) DISPUTE RESOLUTION. Any dispute, controversy or claim between
the parties hereto arising out of or relating to this Agreement or any breach,
termination or claim of invalidity of this Agreement will be resolved as
follows:
(i) The dispute shall first be referred to the president of
Operator or DCC, as applicable, and WMC's general manager for the Southwest
Region (or their respective designees). Such Persons will confer in an
attempt to reach a resolution.
(ii) Any dispute which is not resolved by such Persons (other
than a dispute, controversy, or claim arising out of or in connection with
the exercise by any party of its right to approve or consent to any action
under this Agreement, which will not be appealable to, or reviewable by, any
court or arbitrator) within 30 days of referral of such dispute shall be
resolved by binding arbitration. To the fullest extent permitted by law, the
arbitration will be conducted in accordance with the United States
Arbitration Act (Title 9, U.S. Code) and under the Commercial Rules of the
American Arbitration Association ("AAA"), and not the law of any state. The
arbitration shall be administered by the AAA and, notwithstanding Rule 11 of
the AAA Commercial Rules or any other rule, the locale of the hearing will be
in Phoenix, Arizona unless all parties to the arbitration agree to a
different locale. A single neutral arbitrator will preside over the
arbitration and decide the dispute, controversy or claim. The parties will
cooperate with each other in causing the arbitration to be held in as
efficient and expeditious a manner as practicable and in this connection
furnish such documents and make available such of their
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respective personnel as the arbitrator may request. Any controversy
concerning whether an issue is arbitrable will be determined by the
arbitrator. The arbitrator will have the power to set discovery limits, to
award specific performance, and to affirm or reject the exercise of
termination rights, but will not have the authority to award damages other
than actual damages. The decision of the arbitrator will be binding and
nonappealable. Judgment upon the arbitration award may be entered in any
court having jurisdiction. The arbitrator will render a decision within 90
days after accepting an appointment to serve as arbitrator unless the parties
otherwise agree or the arbitrator makes a finding that a party has carried
the burden of showing good cause for a longer period.
(n) EQUITABLE RELIEF. The parties agree that notwithstanding
anything to the contrary contained herein, any party may seek a temporary
restraining order or a preliminary injunction from any court of competent
jurisdiction in order to prevent immediate and irreparable injury, loss or
damage pending the selection of an arbitrator to render a decision on the
ultimate merits of any dispute, controversy or claim.
(o) ATTORNEYS' FEES. The "non-prevailing party" in any
arbitration conducted hereunder (as determined by the arbitrator) will pay
all costs and expenses incurred by the "prevailing party" in preparing for
and conducting the arbitration. If a party commences an action in court
against another party with respect to this Agreement, then the prevailing
party in such action (including appeals) will be entitled to an award of
reasonable costs and expenses of litigation, including attorneys' fees, to be
paid by the non-prevailing party. In the event the parties settle a dispute,
no party will be deemed a "prevailing party."
(p) DOCUMENTS. Each party agrees to execute and, if necessary
file with the appropriate governmental entities, such documents as any other
party reasonably requests in order to carry out the purposes of this
Agreement.
(q) FORCE MAJEURE. Neither Operator nor WMC will be liable or
deemed to be in default for a delay in or failure of performance of its
obligations, that results from any of the following causes beyond the
reasonable control of such party: strikes, work stoppages, shortages of
equipment, supplies or energy, malfunction or breakdown of a third Person's
equipment or tele-
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communications network, war, insurrection, acts of God or the public enemy,
or governmental action (whether in its sovereign or contractual capacity).
Any delay resulting from any such cause will extend performance accordingly
or excuse performance, in whole or in part, for such time as may be
reasonable; provided, however, that (i) such causes will not excuse payment
of any amounts due or owed at the time of such occurrence or thereafter, (ii)
the party asserting any such cause will promptly commence and diligently
pursue action to remedy its inability or failure to perform hereunder, and
(iii) in no event will such causes extend or excuse performance for more than
120 consecutive days. Any party asserting this Section 11(q) will promptly
notify the other parties of the occurrence and nature of any such cause and
will thereafter regularly inform the other parties of the progress of actions
to remedy its inability or failure to perform hereunder.
(r) OPERATOR RESPONSIBILITY. Operator will be solely responsible
for any and all costs, expenses, taxes and other liabilities incurred in
connection with its operations.
(s) COVENANTS AND ACKNOWLEDGEMENTS.
(i) LEGAL COMPLIANCE. Operator agrees to comply with all
applicable laws and regulations, including but not limited to the rules and
regulations promulgated by the FCC under the Communications Act of 1934, as
amended, and to obtain and maintain all appropriate government Licenses
necessary to the operation of Operator's System. Operator agrees to notify
WMC in writing within five days after Operator becomes aware of the
commencement of any action, suit or proceeding, or of the issuance of any
order, writ, injunction, award or decree of any court, agency or other
governmental instrumentality, which could have a material effect on the
operations of the Affiliated Systems or the operations or financial condition
of Operator.
(ii) NO WARRANTY. WMC expressly disclaims the making of, and
Operator acknowledges that it has not received from WMC or any Person acting on
WMC's behalf, any warranty or guarantee, express or implied, as to the extent of
the market for Products or Services, or the earnings or success resulting from
Operator's operation of Operator's System pursuant to this Agreement, or any
representation, inducement, promise or agreement, orally or
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<PAGE>
otherwise, respecting this Agreement, which is not set forth herein.
(iii) TELECOMMUNICATIONS ACT. Operator agrees not to take any
actions that would, in the reasonable judgment of WMC, cause Operator, WMC,
any Partner or any of their respective Affiliates to be in violation of the
Telecommunications Act of 1996, as amended.
(iv) NO OTHER DUTIES. DCC and Operator acknowledge and agree
that WMC will have no duties to Operator in the course of performance of this
Agreement except as specifically provided herein.
(v) NO PROMISE OF RENEWAL. DCC and Operator acknowledge that
the term of this Agreement is set forth in Section 9(a) hereof with no
promise or representation as to the renewal thereof or the execution of a new
Agreement.
(t) SURVIVAL. The provisions of Sections 4 and 7 will survive the
termination or expiration of this Agreement without limitation except as
provided therein. All indemnities and payment or reimbursement obligations
made hereunder will survive the termination or expiration of this Agreement
until expiration of the longest applicable statute of limitations (including
extensions and waivers) with respect to the matter for which a party would be
entitled to be indemnified, paid or reimbursed, as the case may be.
(u) EFFECTIVENESS. The provisions of Articles 2, 3 and 4 and
Section 11(1) will be effective only on the Effective Date. This Agreement
will terminate automatically in the event of the termination of the Purchase
Agreement prior to the Effective Date. The parties hereto agree to execute
and deliver the Trademark Sublicense Agreement on the Effective Date.
(v) EXPENSES. Each party to this Agreement will bear its
respective expenses incurred in connection with the negotiation, preparation
and execution of this Agreement, including all fees and expenses of agents,
representatives. counsel and accountants.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
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<PAGE>
DOBSON COMMUNICATIONS CORPORATION,
an Oklahoma corporation
By /SIGNED/
--------------------------------
Its
--------------------------------
DOBSON CELLULAR OF ARIZONA, INC.
an Oklahoma corporation
By /SIGNED/
--------------------------------
Its
--------------------------------
WMC PARTNERS, L.P., a Delaware
limited partnership
By /SIGNED/
--------------------------------
Its
--------------------------------
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<PAGE>
The following document is a form of the Cellular One License Agreements
dated February 25, 1997 which have been entered into with Dobson Cellular of
Kansas/Missouri,Inc., Dobson Cellular of Enid, Inc. and Dobson Cellular of
Woodward, Inc., respectively. There are seven of these agreements currently
in place covering the service areas reflected in each of the Exhibits B,
which are each filed herewith. With the exception of the Exhibits B, all of
the agreements are identical.
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
between
Cellular One Group
and
Dobson Cellular of Kansas/Missouri, Inc.
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
SECTION TITLE PAGE NO.
- ------- ----- -------
I. GRANT, LIMITATIONS AND ACKNOWLEDGMENTS.........................
II. TERM AND RENEWAL ..............................................
III. RIGHTS AND DUTIES OF LICENSOR..................................
IV. DUTIES OF LICENSEE.............................................
V. FEES AND REPORTING.............................................
VI. MARKS..........................................................
VII. CONFIDENTIAL INFORMATION.......................................
VIII. ADVERTISING....................................................
IX. INSURANCE......................................................
X. TRANSFER OF INTEREST ..........................................
XI. DEFAULT AND TERMINATION .......................................
XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION ....................
XIII. INDEPENDENT STATUS AND INDEMNIFICATION ........................
XIV. APPROVAL AND WAIVERS ..........................................
XV. NOTICES .......................................................
XVI. ENTIRE AGREEMENT...............................................
XVII. SEVERABILITY AND CONSTRUCTION .................................
XVIII. APPLICABLE LAW ................................................
XIX. ACKNOWLEDGMENTS ...............................................
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
THIS AGREEMENT is entered by and between Cellular One Group, a
Delaware general partnership ("Licensor") and [Dobson Cellular of Enid Inc.],
[Dobson Cellular of Woodward, Inc.], [Dobson Cellular of Kansas/Missouri,
Inc.], a corporation/partnership organized under the laws of Oklahoma
("Licensee").
PREAMBLE
Licensor is a Delaware general partnership (the "Partnership") with its
principal place of business in Dallas, Texas. The current general partners of
the Partnership are Cellular One Marketing, Inc., a Delaware corporation,
Cellular One Development, Inc., a Delaware corporation, and Vanguard Cellular
Corp., a North Carolina corporation. Additional partners may be admitted to the
Partnership from time to time. (The Partnership partners, as they may exist
from time to time, are referred to herein as the "Partnership Partners").
The Partnership is engaged in the business of Licensing and promoting the
service mark "Cellular One" and certain related trademarks, service marks and
designs.
Licensee desires to receive a License from Licensor to use the Cellular
One-Registered Trademark- mark together with the marks designated on Exhibit A
hereto and such other marks as Licensor may hereinafter designate in writing
(collectively referred to as the "Marks") within the market(s) described on
Exhibit B (the "Licensed Territory") in accordance with the provisions of this
License Agreement.
INTRODUCTORY STATEMENT
Licensor's goal has been and continues to be the promotion of the Marks as
being synonymous, in the minds of consumers of telecommunications services, with
nationwide, dependable, high quality telecommunications services and related
services, goods and equipment (the "National Brand Goal"). Historically,
Licensor's strategy to achieve the National Brand Goal has been to License the
Marks, and predecessors of the Marks, for use by providers of Cellular
Radiotelephone Services (as defined in 47 C.F.R Section 22.99) ("Cellular
Telephone Services") on the so-called "A" side in certain Federal Communications
Commission ("FCC") designated markets. The competition to licensees of the
<PAGE>
Marks has historically come primarily from "B" side providers of Cellular
Telephone Services (who constitute the other providers of Cellular Telephone
Services under the duopoly created by the FCC for such service). Given this
duopoly, Licensor believes that its strategy for achieving the National Brand
Goal has been effective to date. However, the telecommunications landscape has
changed dramatically in recent periods and Licensor believes that its strategy
may need to be modified or entirely new strategies adopted to achieve and
maintain the National Brand Goal.
Licensor believes that these modified or new strategies will be essential
if its licensees are to enjoy the competitive benefits afforded by a widely
recognized national brand as other powerful national brand competitors, which
have not historically competed with licensees of the Marks, enter their markets
directly. Licensor believes that the emergence of these major new competitors,
with powerful national brands, will be accompanied by technological changes that
will render the distinction between Cellular Telephone Services and other
telecommunications services increasingly less important to consumers. Licensor
expects that consumers will begin to focus on applications, utilities, brand
names and distribution channels and will demand that a provider of
telecommunications services, either directly or through alliances, offer a full
menu of communications, such as long distance, cellular (or other wireless)
service, internet access, satellite television and local service, all under one
name and perhaps billed by a single source. Licensor believes that its current
and future strategies must be sufficiently flexible to permit it to respond to
these expected changes in the industry and to provide its licensees with a
national brand that can be used in a manner that will allow those licensees to
meet consumer expectations.
Licensor plans to continue, as its primary strategy, granting licenses to
"A" side Cellular Telephone Services providers (both in newly licensed markets
or in connection with the renewal of currently outstanding Cellular One "A" side
licenses), and to begin attempting to grant licenses to "B" side providers of
Cellular Telephone Services or to resellers of Cellular Telephone Services in
FCC licensed markets not served by an "A" side Cellular One licensee. Licensor
may also consider, however, licensing a provider of Alternate Wireless Services
(as defined below), such as a personal communications service provider, the
right to utilize
-2-
<PAGE>
the Marks in a market or markets where no Cellular Telephone Services
provider utilizes the Marks to promote such services.
Licensor has, from time to time, granted licensees of the Marks the right
to use one or more of such Marks in connection with products or services other
than those constituting Cellular Telephone Services. Among other things,
Licensor has permitted licensees of the Marks to incorporate one or more of the
Marks onto cellular telephone equipment or to utilize one or more of the Marks
in connection with the nationwide delivery of calls to cellular telephones.
Licensor has also granted licensees the right to continue to use or to begin
using one or more of the Marks in connection with some of the products and
services (the "Additional Products" and "Additional Services") described on
Exhibit D hereto. Licensor anticipates that consumers of wireless
telecommunications services may come to expect that high quality offerings of
services such as Cellular Telephone Services or other Primary Services (as
defined below) will include uniform functionality and service features and
bundles of Additional Products, Additional Services and Cellular Telephone
Services or other Primary Services. As such demand develops, Licensor expects
to designate standards for the offering and delivery of the Cellular Telephone
Services or other Primary Services and related Additional Products and
Additional Services, and to identify one or more Additional Products or
Additional Services as "Core Products," the offering of which will be subject to
the provisions of this License Agreement, as described in Section III.I. hereof.
As part of its plan to achieve and maintain the National Brand Goal,
Licensor will from time to time establish standards pursuant to Section III.B.
hereof, defining minimum acceptable operating and other criteria for offerings
by Licensee of the Cellular Telephone Services or other Primary Services and
related Additional Services and Additional Products. In light of market
conditions, as they change from time to time, Licensor may designate separate
standards for products offered under a particular Mark. Licensor has provided,
on Exhibit E to this License Agreement, a description of the technical standards
and service standards (collectively, the "Quality Standards") which will
initially be applicable to the Cellular Telephone Services or other Primary
Services, Core Products, Additional Services and Additional Products displaying
or sold under the various Marks.
-3-
<PAGE>
Licensor may, in the future, designate certain of the Additional Products or
Additional Services as Core Products where and when it determines that
consumers have come to expect that such products or services will be offered
in conjunction with any high quality offering of Cellular Telephone Services
or other Primary Services, and in order to achieve and maintain the National
Brand Goal. The existing required Core Products are nationwide call delivery
and roaming capability. Additional Core Products may include, by way of
example only, such products or services as long distance, voice messaging,
local exchange service, dispatch service and paging service, which offer
consumers nationwide consistency of operation or other benefits. Unless it
elects not to do so, Licensee will be obligated to offer the Core Products
under the specified Marks throughout the Licensed Territory in connection
with its delivery of Cellular Telephone Services or other Primary Services.
If Licensee is unable or elects not to so offer one or more Core Products in
connection with Cellular Telephone Services or other Primary Services,
Licensor, subject to Section III.I. of this License Agreement, may amend the
License Agreement to terminate Licensee's rights to utilize the Marks to
promote the Core Products not then being offered or, with respect to the
existing Core Products of nationwide call delivery and roaming capability,
may terminate this License Agreement.
The development of the wireless telecommunications industry and the
regulatory patterns relating to that industry have resulted in overlaps or
conflicts between licensees of the Marks with regard to certain promotional
activities. In order to permit licensees of the Marks to make full use of such
Marks in their promotional and other activities and in order to reduce conflicts
between or the expense of resolving conflicts between such licensees, this
License Agreement permits licensees of the Marks to make certain incidental use
of the Marks outside of their respective licensed territories while permitting
Licensor to impose reasonably necessary restrictions, including requiring the
use of tag lines or other identifying mechanisms, where necessary to maintain
the integrity of the licensed territories and to avoid customer confusion
regarding the providers of Cellular Telephone Services or other Primary Services
therein. In addition, because the markets for wireless telecommunications
services vary from geographic area to geographic area for economic, demographic,
topographic, legal and other reasons, and because Licensor expects that certain
markets may develop at different rates from others,
-4-
<PAGE>
this License Agreement permits Licensor to vary definitions of Cellular
Telephone Services or other Primary Services, Core Products, Additional
Services and Additional Products and to vary the Quality Standards and
certain of the fees payable hereunder in order to achieve or maintain
progress toward the National Brand Goal.
The foregoing is intended as an explanation of Licensor's goals and
planning, and shall not be deemed to affect the meaning or construction of any
of the following provisions. In the event of any conflict between the foregoing
and the following provisions, the following provisions shall prevail.
DEFINED TERMS
As used in this License Agreement, the capitalized terms set forth below
shall have the following meanings:
"1-800-CELL ONE MARK" shall mean the service mark denoted as such on
Exhibit A hereto.
"800 NUMBER SUPPLEMENT" shall have the meaning set forth in
Section IV.J. 1.tb) of this License Agreement.
""A" SIDE" shall mean the Block A (nonwireline) cellular frequencies as
designated by the FCC.
"ADDITIONAL FEES" shall mean any fees determined in accordance with
Section V.G. of this License Agreement.
"ADDITIONAL PRODUCTS" shall mean the products described as "Additional
Products" on Exhibit D hereto.
"ADDITIONAL SERVICES" shall mean the services described as "Additional
Services" on Exhibit D hereto.
"ADVISORY COUNCIL" shall have the meaning set forth in Section III.D. of
this License Agreement.
"AFFILIATE" shall have the meaning set forth in Section X.C. of this
License Agreement.
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<PAGE>
"ALTERNATE WIRELESS SERVICES" shall mean any telecommunications service
offering simultaneous, two-way wireless transmission and receipt of voice or
data, other than Cellular Telephone Services.
"ANNUAL ADMINISTRATIVE FEE" shall mean the fee determined in accordance
with Section V.D. of this License Agreement.
"ANNUAL ADVERTISING FEE" shall mean the fee determined in accordance with
Section V.C. of this License Agreement.
"ANNUAL LICENSE FEE" shall mean the fee determined in accordance with
Section V.B. of this License Agreement.
"APPLICATION FEE" shall mean the fee determined in accordance with
Section V.A. of this License Agreement.
""B" SIDE" shall mean the Block B (wireline) cellular frequencies as
designated by the FCC.
"CELLULAR ONE MARK" shall mean the trademark or service mark "Cellular One"
denoted as such on Exhibit A hereto.
"CELLULAR ONE PROMOTIONAL FUND" shall have the meaning set forth in
Sections III.E. and VIII.C. of this License Agreement.
"CELLULAR TELEPHONE SERVICES" shall have the meaning set forth in the
Introductory Statement to this License Agreement.
"CERTIFICATES OF INSURANCE" shall mean certificates designating insurance
coverages required to be delivered to Licensor pursuant to Section IX.C. of this
License Agreement.
"C.F.R." shall mean the Code of Federal Regulations, as may be amended from
time to time.
"CHANGE OF CONTROL" shall have the meaning set forth in Section X.D. of
this License Agreement.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section
VII.A. of this License Agreement.
-6-
<PAGE>
"CONSUMER SERVICE NUMBER" shall have the meaning set forth in Section IV.J.
of this License Agreement.
"CONSUMER SERVICE NUMBER FEE" shall mean the fee determined in accordance
with Section V.F. of this License Agreement.
"CORE PRODUCTS" shall mean those Additional Products and Additional
Services designated as "Core Products" on Exhibit D to this License Agreement,
as amended from time to time.
"CTIA" shall mean the Cellular Telecommunications Industry Association, or
any successor thereto recognized by Licensor as such.
"EFFECTIVE DATE" shall mean the date shown adjacent to Licensor's signature
on this License Agreement.
"FCC" shall have the meaning set forth in the Introductory Statement to
this License Agreement.
"FUND" shall have the meaning set forth in Section VIII.C. of this License
Agreement.
"GRAPHIC STANDARDS MANUAL" shall have the meaning set forth in Section
III.A. of this License Agreement.
"GUIDE TO QUALITY OPERATIONS" shall mean the guide and other materials
provided by Licensor to Licensee pursuant to Section III.B. hereto.
"INCIDENTAL USE" shall have the meaning set forth in Section VI.C. of this
License Agreement.
"INITIAL YEAR" shall have the meaning set forth in Section II.A.2. of this
License Agreement.
"LICENSED TERRITORY" shall mean the market(s) described on Exhibit B, as
amended from time to time pursuant to the provisions of this License Agreement.
"LICENSEE" shall have the meaning set forth in the first paragraph of this
License Agreement.
-7-
<PAGE>
"LICENSOR" shall mean Cellular One Group, a Delaware general partnership,
and its permitted successors and assigns under this License Agreement.
"LONG DISTANCE CARRIER" shall have the meaning set forth in
Section IV.J.1.(a) of this License Agreement.
"MSA" shall mean the cellular Metropolitan Statistical Areas as referred to
in 47 C.F.R. Section 22.909.
"MARKS" shall have the meaning set forth in the Preamble to this License
Agreement.
"NATIONAL BRAND GOAL" shall have the meaning set forth in the Introductory
Statement to this License Agreement.
"OTHER 800 PROGRAMS" shall have the meaning set forth in Section V.F. of
this License Agreement.
"PARTNERSHIP" shall have the meaning set forth in the Preamble to this
License Agreement.
"PARTNERSHIP PARTNERS" shall have the meaning set forth in the Preamble to
this License Agreement.
"PERMITS" shall have the meaning set forth in Section IV.B. of this License
Agreement.
"PERSONAL COMMUNICATION SERVICES" shall have the meaning set forth in
Exhibit D hereto.
"POTENTIAL CUSTOMER CONFUSION" shall have the meaning set forth in
Section VI.D. of this License Agreement.
"PRIMARY SERVICES" shall mean the services specifically described on
Exhibit C hereto.
"QUALITY STANDARDS" shall mean the technical standards and service
standards applicable to Primary Services, Core Products, Additional Services and
Additional Products set forth on Exhibit E to this License Agreement, as amended
from time to time.
-8-
<PAGE>
"RSA" shall mean the cellular Rural Service Areas as referred to in
47 C.F.R. Section 22.909.
"REVISED LICENSES" shall mean the license agreements between Licensor and
its licensees, which are entered into after July 31, 1996 as part of Licensor's
general licensing program utilizing the Marks for or in conjunction with the
provision of telecommunication services, including, without limitation, the
provision of Cellular Telephone Services and/or other telecommunication services
substantially the same as or reasonably similar to the Primary Services being
licensed to Licensee hereunder.
"STRATEGIC MARKET CHANGE" shall have the meaning set forth in
Section III.H.4. of this License Agreement.
"SUBSEQUENT YEAR" shall have the meaning set forth in Section II.A.2. of
this License Agreement.
"SURVEY COMPANY" shall have the meaning set forth in Section III.C. of this
License Agreement.
"TERM" shall have the meaning set forth in Section II of this License
Agreement.
"TERMINATED MARKET(S)" shall have the meaning set forth in the introduction
to Section XII of this License Agreement.
The parties therefore agree as follows:
I. GRANT, LIMITATIONS AND ACKNOWLEDGMENTS
A. GRANT
1. Subject to the remainder of this License Agreement
(including without limitation, Licensor's rights described in Section I.B and
Sections III.E. through III.J. below), Licensor grants to Licensee, upon the
terrns and conditions of this License Agreement, the exclusive right, license
and privilege to use the Marks in the Licensed Territory described on Exhibit
B during the Term of this License Agreement to promote the Primary
-9-
<PAGE>
Services, consisting of Cellular Telephone Services on the "A" side, "B" side
and/or the other services described on Exhibit C hereto.
2. Subject to the remainder of this License Agreement,
Licensor grants to Licensee, upon the terms and conditions of this License
Agreement, the exclusive right, license and privilege to use the Marks during
the Term in connection with the promotion and sale of the Additional Services
and the Additional Products in the Licensed Territory.
3. Subject to the terms of this License Agreement, Licensor
grants to Licensee, upon the terms and conditions of this License Agreement,
the right, license and privilege to make Incidental Use (as defined in
Section VI.C.) of the Marks.
B. LIMITATIONS ON GRANT
1. If the Licensed Territory as described on Exhibit B
consists of multiple markets and the Licensee's rights under this License
Agreement are terminated with respect to one or more of such markets in
accordance with the provisions of this License Agreement, Exhibit B to this
License Agreement and specifically the term "Licensed Territory" shall
thereafter be deemed to apply only to the remaining market(s) as to which
Licensee's rights under this License Agreement continue. In addition, the
Licensed Territory may be modified, in accordance with the provisions of
Section VI.D., in the event that Licensor determines that Potential Customer
Confusion exists.
2. Notwithstanding Licensee's exclusive right to utilize the
Marks to promote the Primary Services, Additional Services and Additional
Products in the Licensed Territory, other persons possessing a license to use
the Marks may promote the Primary Services, Additional Products and
Additional Services provided by such parties outside of the Licensed
Territory in media receiving distribution within or accessible by persons
located in the Licensed Territory, such as regional magazines or newspapers,
regional television and radio and World Wide Web pages.
3. Subject to the provisions of Sections III.H. and III.I.
of this License Agreement, Licensor may terminate
-10-
<PAGE>
Licensee's right to use the Marks to designate or promote certain Core
Products, Additional Products and Additional Services.
C. ACKNOWLEDGMENTS
1. Subject to the specific grants to Licensee set forth in
this Section I, Licensee acknowledges that Licensor has and retains the right
to use and license the Marks anywhere in the world, within or outside of the
Licensed Territory and that Licensee shall have no rights with regard to such
use or any benefits therefrom.
2. Licensor and Licensee agree that effective with the
commencement of the Term of this License Agreement, all prior licenses to
which Licensee is a party relating to the use of the Marks, or any of them,
in the Licensed Territory or any part thereof shall terminate, together with
all of Licensee's rights thereunder.
II. TERM AND RENEWAL
A. TERM
1. Except as otherwise provided in Section II.B. of this
License Agreement, the term (the "Term") of this License Agreement is five
(5) years, beginning on the Effective Date and ending on the day preceding
the fifth anniversary thereof. Licensee recognizes and agrees that Licensor
may modify or terminate the Term as it applies to Additional Products and
Additional Services or Core Products in accordance with Articles III and VI
hereof.
2. The period from the Effective Date of this License
Agreement until December 31 of that calendar year shall be referred to herein
as the "Initial Year." Each subsequent calendar year commencing after the end
of the Initial Year shall be referred to herein as a "Subsequent Year."
B. RENEWAL
Licensee may, at its option, renew the license granted by this License
Agreement for two (2) additional terms (each, in turn, the "Term") of five
(5) years each provided that:
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<PAGE>
1. Licensee gives Licensor written notice of its election to
renew not less than six (6) months nor more than twelve (12) months before
the end of the expiring Term;
2. Licensee is neither in default of any of its obligations
under this License Agreement, nor on probation pursuant to Section XI.E.;
3. Licensee has not during the expiring Term received any
notice of default under Section XI.D. which relates to a default which has
not been cured;
4. At the end of the expiring Term, Licensee continues to
hold all of the Permits (as defined in Section IV.B.) necessary to provide
the Primary Services and those of the Core Products, Additional Services and
Additional Products being provided, sold or distributed by it;
5. No later than ninety (90) days before the end of the
expiring Term, Licensee executes Licensor's then-current form of license
renewal agreement, which agreement will supersede this License Agreement in
all respects, provided that such license renewal agreement shall not contain
any terms, provisions or conditions which differ materially from the terms,
provisions or conditions of this License Agreement, except terms, provisions
and conditions (i) which in the good faith judgment of Licensor are not
materially adverse to Licensee, (ii) which are appropriate, in the good faith
judgment of Licensor, to accommodate any material economic, technological,
demographic, or other market changes occurring during the prior five (5) year
Term, (iii) which Licensor determines in good faith are necessary to protect
the Marks, (iv) which Licensor determines in good faith are necessary to
prevent Potential Customer Confusion (as defined in Section -TM-I.D.), (v)
which relate to charges and fees (including increases) which Licensor
believes in good faith are necessary to provide adequate support for the
promotion of the Marks consistent with the National Brand Goal during the
renewal Term in question, (vi) which are reasonably necessary in Licensor's
determination to maintain or achieve the National Brand Goal, (vii) which
Licensor adopts pursuant to Sections III.G., III.H. or III.I. hereof, or
(viii) which relate or are enacted pursuant to Section IV.E.;
-12-
<PAGE>
6. At the end of the expiring Term, Licensee shall be in
compliance with the provisions of Section IV.A.2. If Licensee has been
assigned probation status at such time as described in Section IV.A.2., then
such probation status shall continue and the required timely improvements
shall be a condition of effective renewal;
7. At the end of the expiring Term, Licensee is offering on
a good faith commercial basis the Primary Services and all of the Core
Products for which Licensee is authorized to utilize the Marks, in
substantially all of the Licensed Territory in accordance with the Quality
Standards and is promoting such Primary Services and Core Products utilizing
the applicable Marks in accordance with the Graphic Standards Manual; and
8. At the end of the expiring Term, Licensee shall have
satisfied all monetary obligations owed by Licensee to Licensor, and shall
have timely met such obligations throughout the term of this License
Agreement.
III. RIGHTS AND DUTIES OF LICENSOR
All duties of Licensor under this License Agreement are to Licensee, and
no other party is entitled to rely on, enforce or obtain relief for breach of
any such obligation, either directly or by subrogation. This License
Agreement is not intended to and shall not create any partnership, joint
venture or other business relationship, other than that of Licensor and
Licensee, between the parties hereto, or to vest any rights in any third
party or group of third parties. This License Agreement shall not create any
rights on behalf of Licensee against any third party, including any other
licensee of the Marks. Subject to the foregoing, and to the remainder of this
License Agreement, Licensor shall undertake the following duties:
A. MARKS USAGE GUIDELINES
1. Licensor will provide Licensee, from time to time, with a
Graphic Standards Manual (the "Graphic Standards Manual") containing written
and graphic guidelines for the correct reproduction, application and
presentation of the Marks. The Graphic Standards Manual may include, among
other things, Mark specimens, samples of advertisements and clip art
indicating color,
-13-
<PAGE>
proportion, and format. The Graphic Standards Manual may also provide for
the use of one or more tag lines to be used to differentiate or highlight a
particular service or offering or group of services or offerings, such as
"Paging By Cellular One" and require its usage in specific circumstances,
including use on signage and promotional materials referenced in Section
IV.F. The Graphic Standards Manual may also provide guidelines for the
proper use of tag lines and require such usage in the event that two or more
licensees of the Marks are permitted to make use thereof within the Licensed
Territory, or any part thereof, pursuant to Sections VI.C. or VI.D.
2. From time to time, upon not less than one (1) year's
notice, Licensee shall be entitled to designate one or more icons to be used
with one or more of the Marks and the manner of their usage to signify an
association of such icon or icons with such Marks.
B. TECHNICAL GUIDELINES, QUALITY STANDARDS
1. Licensor will provide Licensee with a Guide to Quality
Operations (the "Guide to Quality Operations") containing suggestions for
providing customers with high quality Primary Services, Core Products,
Additional Services and Additional Products, and other materials, as Licensor
deems appropriate. The Guide to Quality Operations may be modified and
supplemented from time to time as Licensor deems appropriate.
2. Attached to this License Agreement as Exhibit E are the
Quality Standards (the "Quality Standards"), as of the date hereof,
applicable to Primary Services, Core Products, Additional Services and
Additional Products, respectively, to be sold or provided, as the case may
be, utilizing the Marks. The Quality Standards include, as a general matter,
criteria for minimum acceptable service delivery levels and encompass such
matters as geographic coverage requirements, participation in a nationwide
call delivery network, standardized dialing patterns and the availability of
telephone customer assistance. The Quality Standards also include required
features and technical guidelines for minimum acceptable system functionality
(although specific equipment or system designs will not be required) and may
encompass such matters as required functionality for telephones and other
devices constituting Additional Products, required compliance by
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<PAGE>
equipment with designated industry standards, compliance by switching
equipment with uniform handoff requirements, and similar requirements
relating to the delivery of Primary Services and Additional Services or the
operation of Additional Products.
3. From time to time, Licensor, by written notice to
Licensee in accordance with Section IV.A., shall have the right to amend the
Quality Standards with regard to any Mark to require added features or
functionality for Primary Services, to modify the minimum technical or
operating standards relating thereto or to require coordination and
uniformity in the delivery of Primary Services, Additional Services,
Additional Products and Core Products within the Licensed Territory and
beyond. Licensor shall not be obligated to consider the particular needs of
Licensee or any group of licensees of the Marks in connection with any
amendment to the Quality Standards, except that Licensor shall not propose
amendments to the Quality Standards applicable to Licensee only.
4. From time to time, Licensor, by written notice to
Licensee in accordance with Section IV.A., shall have the right to amend
Exhibit E with regard to any Mark to designate features, technical or
operating standards or functionality appropriate under existing economic,
market, demographic and technological conditions in similarly situated
markets directed to the achievement and maintenance of the National Brand
Goal. Although uniformity and consistency will normally be required by
Licensor throughout the Licensed Territory and among the various territories
or markets in which Licensee and others are licensed to use the Marks, the
Licensor may, from time to time, make certain distinctions, based upon
demographic, topographic, legal or other considerations, and provide for
differing Quality Standards with regard thereto.
5. In addition, Licensor may, upon at least six (6) months
written notice to Licensee, amend Exhibit E to amend the Quality Standards
for Additional Products, Additional Services and Core Products, to designate
Quality Standards for any new Marks added to Exhibit A hereto or to designate
Quality Standards for Additional Products, Additional Services and Core
Products for which separate Quality Standards do not exist. In the event
that an Additional Product or Additional Service becomes a Core Product,
Licensor may further amend Exhibit E to establish Quality Standards for the
offering and delivery of the Core Products, as a whole or
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as a package of Core Products or Primary Services and Core Products.
6. Exhibit E to this License Agreement, as amended from time
to time, is incorporated herein by reference. All references to the Quality
Standards shall mean those standards established, as of such time, by Exhibit
E.
7. At Licensee's request, Licensor shall be entitled, but in
no event shall be required, to waive compliance by Licensee with one or more
of the Quality Standards in one or more of the markets constituting a part of
the Licensed Territory, in the event that Licensor believes such a waiver to
be consistent with the National Brand Goal. Any waiver by Licensor of a
Quality Standard must be in writing and may, at Licensor's election, be for a
limited period or subject to one or more conditions.
C. CUSTOMER SATISFACTION SURVEYS
Licensor shall have the right, at its own expense, commission an
independent survey company ("Survey Company") to conduct a customer
satisfaction survey of Licensee's customers on a yearly basis for purposes of
assessing the quality of Licensee's Primary Services, Additional Services,
Additional Products or Core Products, or all of them. The methodology of the
survey will be determined by the Survey Company and Licensor. An outline of
current survey methodology for Primary Services, which may change from time
to time, is attached as Exhibit F. The results of all surveys of Licensee's
customers will be shared with Licensee to assist Licensee in improving its
business and complying with Licensee's obligations under this License
Agreement, including its obligations with regard to the Quality Standards
described herein. The results of surveys will be used to evaluate the
general level of customer satisfaction and to assist Licensor in determining
whether or not Licensee is meeting the Quality Standards. Licensor will
instruct the Survey Company to obtain all required survey information
directly from the Licensee and not through or in conjunction with Licensor.
The Survey Company will be required to execute an appropriate confidentiality
agreement for the benefit of Licensee and the other licensees of the Marks,
which shall provide that the Survey Company will not disclose any
Confidential Information of Licensee to Licensor, the Partnership Partners or
affiliates, or their employees or to any other party (except that
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the results of the survey for each market and other survey information which
is applicable generally to all licensees of the Marks or any of them may be
disclosed to Licensor and used by Licensor in connection with its business
operations).
D. LICENSEE ADVISORY COUNCIL
Licensor has established an elected council of licensees ("Advisory
Council") comprised of licensees other than Partnership Partners from a broad
cross-section of markets throughout the United States, to advise and consult
with Licensor regarding material matters such as advertising, marketing and
Quality Standards relating to the Marks and to act as a liaison organization
between Licensor and the licensees of the Marks. The procedures and
responsibilities adopted for the operation of the Advisory Council are
subject to change, from time to time, as may be appropriate in the judgment
of Licensor to provide the most effective organization for performing the
contemplated functions of the Advisory Council. The representative of any
licensee serving on the Advisory Council shall be an officer of such licensee
or other person reasonably acceptable to Licensor. The charter of
responsibility of the Advisory Council provides that all members of the
Advisory Council will be informed of applicable antitrust laws and shall
abide by any decisions of Licensor's antitrust counsel in such regard.
E. NATIONAL AND REGIONAL ADVERTISING
Licensor has established and maintains the Cellular One Promotional
Fund, as described in Section VIII.C. of this License Agreement. Licensor
administers the Fund with the goal of enhancing the image of the Marks and
achieving or maintaining the National Brand Goal. Licensor, in connection
with the Cellular One Promotional Fund, or otherwise, shall have the right,
from time to time, to promote the Marks in local, regional or national
advertising receiving distribution within the Licensed Territory and to
engage in any other promotional activities, including sponsoring sporting or
other public events within the Licensed Territory, as Licensor deems
appropriate in connection with the National Brand Goal. No consent of
Licensee shall be necessary to any such promotional activities.
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F. NATIONAL/REGIONAL PROGRAMS
Licensor may, in its discretion, make available a national and/or
one or more regional account programs under which, through the voluntary
cooperation of its licensees in various markets, client companies with
multiple market operations may enter into a single contract arrangement for
one or more of the Primary Services or any of the Core Products, Additional
Services or Additional Products for their employees located in such markets.
Licensor or its designee may administer any such national or regional
accounts program(s). In addition, Licensor may, from time to time, utilize
the Marks or permit third party licensees of the Marks to utilize the Marks
to promote the sale and distribution of Additional Products or Additional
Services in or by means of media, such as, but not limited to, direct mail
catalogs, World Wide Web pages and radio and television broadcasts receiving
wide distribution, both within and outside of the Licensed Territory;
provided, however, that no such promotional activity shall have as its
primary purpose the targeting of any single market or territory. In
addition, Licensor may also, from time to time, utilize the Marks or permit
third party licensees of the Marks to promote and sell Additional Products or
Additional Services as part of a coordinated regional or national marketing
effort including all or part of the Licensed Territory; provided, however,
that no such promotional activity shall have as its primary purpose the
targeting of any single market or territory.
G. DESIGNATION OF PRIMARY SERVICES
1. Set forth on Exhibit C hereto are descriptions of the
Primary Services applicable to Licensee as of the date of this License
Agreement. From and after the date hereof, Licensor and Licensee, by
executing an amendment to Exhibit C, shall be entitled to amend the
description of the Primary Services and to add or delete services therefrom.
Licensor shall be entitled to group the Primary Services into categories (for
use, among other things, in defining Quality Standards applicable to
particular Primary Services) and, with the consent of Licensee, to add or
omit one or more services from the definition of Primary Services with regard
to one or more markets constituting part of the Licensed Territory.
2. Consistent with Section VI.D., to the extent necessary to
prevent Potential Customer Confusion, Licensor shall be entitled, with or
without the consent of Licensee, to amend
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Exhibit C hereto to modify the description of Primary Services or to separate
Primary Services into classes or categories for the purpose of
differentiating between the Primary Services (by means of tag lines or
otherwise) to be rendered in one or more markets constituting a part of the
Licensed Territory; provided, however, that any such amendment of Exhibit C
shall only become effective upon at least six (6) months written notice to
Licensee thereof.
H. DESIGNATION AND DELETION OF ADDITIONAL PRODUCTS AND SERVICES
1. Set forth on Exhibit D hereto under the headings
"Additional Products" and "Additional Services," respectively, are
descriptions of products and services which, upon thirty (30) days written
notice to Licensor, Licensee may promote or sell utilizing the Marks which
are applicable to the Additional Product or Additional Service in question,
as may be designated in Licensor's Graphic Standards Manual. Licensor may
review, from time to time, Exhibit D to this License Agreement in light of
current demographic, technological, regulatory and other circumstances
(including, without limitation, Strategic Market Changes) for the purpose of
adding or deleting products and services from the descriptions of Additional
Products and Additional Services, modifying the definitions assigned to one
or more Additional Products or Additional Services or modifying the Term of
this License Agreement or any Licensed Territory with regard thereto. In
undertaking such review, the Licensor shall consider Exhibit D in light of
the National Brand Goal. Licensor shall not be obligated to consider the
needs of any particular licensee or group of licensees in connection with its
review of Exhibit D, nor shall it have an obligation, other than as
specifically provided for herein, to inform Licensee of the progress of such
review. Any such amendment of Exhibit D shall be made pursuant to Sections
III.H.2 through III.H.5 below or pursuant to Section VI.D. hereof.
2. Based upon the review contemplated by Section III.H. 1.
above, or otherwise as deemed appropriate by Licensor in its sole discretion,
Licensor may at any time, or from time to time, during the Term, upon not
less than thirty (30) days written notice to Licensee designate one or more
new or additional services or products as Additional Services or Additional
Products.
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3. Based upon the review contemplated by Section m.H. 1.
above, or as otherwise deemed appropriate by Licensor, at any time from and
after January 1, 1999, Licensor may modify or amend Exhibit D hereto, or any
description set forth therein, and may delete products or services
constituting Additional Products or Additional Services, reduce or extend the
Term with respect to one or more Additional Products or Additional Services
or modify the Licensed Territory with regard thereto (i) immediately upon
written notice to Licensee with respect to any Additional Product or
Additional Service not then being offered to the public throughout the
Licensed Territory on a good faith, nondiscriminatory commercial basis by
Licensee under the specified Marks at the time of such written notice, (ii)
upon not less than six (6) months written notice with respect to any
Additional Product or Additional Service which is being offered to the public
throughout the Licensed Territory on a good faith, nondiscriminatory
commercial basis by Licensee under the specified Marks at the time of such
written notice, provided that in the event of modification or amendment
pursuant to either (i) or (ii) preceding, Licensor shall have determined that
a Strategic Market Change has occurred and that such modification or
amendment is required to reasonably permit appropriate response thereto. A
written explanation of the reason for such modification or amendment shall
accompany the written notice referred to in (i) or (ii) preceding. During
such time as Licensee can demonstrate to the satisfaction of Licensor that
Licensee is offering and actively promoting the Primary Services, long
distance service and local calling service (as further described on Exhibit
D) under the specified Marks to the public (including business, residential
and mobile consumers) throughout the Licensed Territory on a good faith,
nondiscriminatory commercial basis, Licensor may agree to refrain from
licensing others to use the Marks for other Additional Products and
Additional Services in the Licensed Territory. Any such agreement shall be
subject to those conditions and limitations as Licensor may establish.
4. For the purposes of this Section m.H., a "Strategic
Market Change" shall mean any change in economic, demographic, technological,
regulatory or competitive conditions which Licensor reasonably believes
requires a material modification in the manner in which the Primary Services,
the Core Products, the Additional Products or the Additional Services, or any
of them, are marketed or delivered, in order to continue the successful
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promotion of the Marks to achieve or maintain the National Brand Goal. While
it is anticipated that a Strategic Market Change will be national in scope,
and that Licensor's response thereto will be similarly uniform, Licensor
shall be entitled, subject to Section III.B.4., to respond under this Section
III.H. to Strategic Market Changes affecting a more limited class or classes
of markets.
5. Notwithstanding Section III.H.3. above, Licensee shall
have a limited right to have Exhibit D amended to restore Additional Services
or Additional Products deleted under Section III.H.3. For the ninety (90)
day period following delivery of a notice of modification or amendment under
Section III.H.3., Licensee may submit a request to Licensor to reinstate an
Additional Product or Additional Service on Exhibit D or to rescind any other
modification of Exhibit D adopted pursuant to Section m.H.3, stating its
reasons therefor. Licensor shall consider Licensee's request for
reinstatement in good faith, but shall not be obligated to amend Exhibit D.
Any reinstatement of an Additional Product or Additional Service under this
Section III.H.5. shall be subject to such conditions as Licensor shall
believe appropriate under the circumstances, consistent with the achievement
or maintenance of the National Brand Goal.
I. DESIGNATION AND DELETION OF CORE PRODUCTS
1. From time to time after the date hereof, to the extent
that Licensor determines that consumers have come to expect that one or more
of the Additional Products and Additional Services described on Exhibit D, as
amended from time to time, are commonly offered as a part of any offering of
nationwide, dependable, high quality telecommunications services or are
otherwise fundamental to the achievement or maintenance of the National Brand
Goal, Licensor may, upon six (6) months written notice to Licensee, amend
Exhibit D hereto to designate those Additional Products and Additional
Services as "Core Products" and may further designate an effective date for
such designation. However, nationwide call delivery and nationwide roaming as
further described on Exhibit D are existing required Core Products, and need
not be further designated as such pursuant to this Section III.H.1.
2. From and after the effective date of any designation of
an Additional Product or Additional Service as a Core Product, Licensee shall
offer such Additional Service or
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Additional Product under the specified Marks on a good faith commercial basis
in substantially all of the Licensed Territory, or shall have adopted and
provided to Licensor in writing a good faith plan acceptable to Licensor for
doing so promptly. Licensee shall promote using the specified Marks and make
all the Core Products available to its customers and to the public generally
in the Licensed Territory, in connection with promoting and making the
Primary Services available and shall not discriminate in terms of price,
availability or promotional efforts in favor of similar products or services
designated by other trademarks or service marks. Upon Licensor's request,
Licensee shall promptly provide a copy of its plans for offering any Core
Products under the specified Marks which it does not then offer.
3. In the event that Licensee shall fail to comply with its
obligations under Section III.I.2 above, or shall fail within six (6) months
of the effectiveness of the designation of any Additional Product or
Additional Service as a Core Product to offer (or plan to offer pursuant to a
plan submitted to and approved by Licensor and promptly thereafter
implemented by Licensee) such Core Product under the specified Marks in good
faith, on a nondiscriminatory, commercial basis in substantially all of the
Licensed Territory, Licensor shall be entitled to immediately amend Exhibit D
hereto to delete therefrom the Core Products not being offered by Licensee
under the specified Marks on a good faith, nondiscriminatory, commercial
basis in substantially all of the Licensed Territory, and shall be entitled
to use or license others to use the Marks in connection with such Core
Products in the Licensed Territory. With respect to the existing Core
Products of nationwide call delivery and nationwide roaming as further
described in Exhibit D, Licensor shall also be entitled to terminate this
License Agreement pursuant to Section XI.D. if, within six (6) months from
the Effective Date, such Core Products are not being offered by Licensee
under the specified Marks on a good faith, nondiscriminatory, commercial
basis in substantially all of the Licensed Territory.
J. OTHER LICENSES, COMPENSATION TO LICENSOR
Licensor has and may continue to license the Marks, or any of them,
to third parties for use in connection with products or services other than
Primary Services, Core Products, Additional Products, or Additional Services.
(For example,
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Licensor has licensed one of the Marks to a third party marketer of
children's toys). Such licenses, subject to Licensee's rights set forth in
Section I, may permit use of the Marks by such third party licensees to
promote and sell products and services, other than Primary Services, Core
Products, Additional Services and Additional Products, within the Licensed
Territory. As part of such licensing arrangements, Licensor has, and may,
from time to time hereafter, receive fees or other consideration from third
parties who provide goods and services to licensees of the Marks in
connection with promotional or other programs arranged by Licensor. Licensee
shall have no claim or right with regard to any such fee or consideration or
the arrangements giving rise thereto.
K. RESELLER ARRANGEMENTS
In the event this License Agreement is being executed and delivered
by a licensee who is being licensed to resell Cellular Telephone Services or
an Alternate Wireless Service, it is anticipated that certain terms and
conditions applicable herein to providers of such services will need to be
modified and that certain additional terms and conditions may need to be
added hereto to accommodate the differences between the provision of such
services directly by a provider and by a reseller of such services.
Accordingly, as necessary, in any such event, the parties hereto shall
complete and attach hereto an appropriate Exhibit G to reflect such modified
or additional terms and conditions and such Exhibit G shall thereafter be
deemed to be incorporated herein and made a part hereof for all purposes.
IV. DUTIES OF LICENSEE
All duties of Licensee under this License Agreement are to Licensor, and
no other party is entitled to rely on, enforce or obtain relief for breach of
any such obligation, either directly or by subrogation. Licensee understands
and acknowledges that the high quality operation of its business under the
Marks is important to Licensee, Licensor and other licensees of the Marks in
order to maintain high operating standards and to protect the reputation of,
and goodwill associated with, the Marks. Toward that end, Licensee
acknowledges and accepts the following duties:
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A. QUALITY OF SERVICE
1. Licensee agrees to provide high quality Primary Services
and Core Products and, to the extent provided, high quality Additional
Services and Additional Products, to its customers by, among other things,
complying with this License Agreement and the applicable Quality Standards.
Upon six (6) months written notice of the modification of or addition to the
Quality Standards, Licensee shall cause its Primary Services, Core Products,
Additional Services or Additional Products to comply therewith; provided,
however, that Licensee shall be entitled to adopt a plan reasonably acceptable
to Licensor to discontinue the offering of any Additional Services or
Additional Products in lieu of complying with the Quality Standards relating
thereto, provided such Additional Products or Additional Services do not
constitute Core Products.
2. Licensee shall attain and maintain an overall minimum
customer satisfaction rating of at least 85% (or such increased level as may
be required pursuant to the provisions of this Section IV.A.) with regard to
the Licensed Territory as a whole (on a population weighted basis) and more
than 70% with respect to any market constituting a part thereof, with regard
to Licensee's Primary Services and Core Products. If Licensee has licenses
to use the Marks in more than one Licensed Territory pursuant to additional
license agreements with Licensor, Licensee shall be obligated to achieve an
overall minimum customer satisfaction rating of 85% (or any increased level
adopted) for all of such Licensed Territories (on a population weighted
basis), and more than 70% with respect to any market constituting a part
thereof. Licensor reserves the right to increase the overall minimum
acceptable customer satisfaction rating to a percentage greater than 85% if
Licensor, in its reasonable discretion, determines that such higher
percentage is appropriate given the technical state of the industry
delivering Primary Services, Core Products, Additional Products and/or
Additional Services at such time; provided, however, that the Advisory
Council must approve any such increase in the minimum acceptable customer
satisfaction rating, and such increase shall not be effective until the
beginning of the next calendar year following the Advisory Council's
approval. In the event that a customer satisfaction survey conducted by
Licensor pursuant to Section III.C. of this License Agreement results in an
overall minimum customer satisfaction rating below 85% (or below any higher
percentage established by Licensor as described above), but more than 70%, in
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Licensee's Licensed Territory or Licensed Territories as a whole (on a
population weighted basis), then Licensee will be assigned probation status
under Section XI.E. of this License Agreement and surveys will be
commissioned in the market(s) in the Licensed Territory or Licensed
Territories, as the case may be, which did not achieve a rating of at least
85% (or any higher percentage established by Licensor), from time to time
thereafter as Licensor deems appropriate until Licensee has achieved an
overall minimum customer satisfaction rating of at least 85% (or any higher
percentage established by Licensor as described above) and the probation
status is removed, or until this License Agreement is terminated, as herein
provided, whichever shall first occur. Licensee agrees to pay the reasonable
direct costs of conducting such additional customer satisfaction survey(s).
3. During the Term, Licensee shall provide the Primary
Services and Core Products throughout the Licensed Territory, and shall
maintain, or cause others to maintain on its behalf, a sufficient number of
customer service locations and other facilities, including retail storefronts
or similar facilities, to permit customers and potential customers convenient
access to Primary Services, Core Products, Additional Products and Additional
Services, consistent with existing competitive conditions and in accordance
with the Quality Standards.
B. LEGAL COMPLIANCE
1. Licensee agrees to comply, at its own expense, with all
applicable laws, ordinances and regulations of federal, state, county or
municipal authorities. Licensee will also obtain and maintain, at its own
expense, all permits, approvals, licenses and franchises and shall make all
required filings, applications and reports to all government or
administrative entities or self-regulatory organizations as shall be
necessary, from time to time, to provide those of the Primary Services, the
Core Products, the Additional Services or the Additional Products as Licensee
may then be providing, and to otherwise engage in business, generally,
throughout the Licensed Territory (collectively, the "Permits"). Without
limiting the generality of the foregoing, Licensee's obligation under this
Section IV.B. shall include the maintaining of Licensee's qualification to do
business throughout the Licensed Territory, and the filing of all income and
franchise tax returns with respect to Licensee's operations. In the event
that any of
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Licensee's Material Permits is scheduled to expire during the Term, including
any renewal of such Term, Licensee agrees to comply with all requirements for
extension of said Permit prior to such expiration. Licensee shall notify
Licensor in writing within five (5) days after receipt of any notice from the
FCC or any other governmental authority regarding an actual or threatened
termination or revocation of any Permit material to the provision of the
Primary Services, Core Products, Additional Products or Additional Services
by Licensee within the Licensed Territory, including any license by the FCC
to conduct business as a provider of telecommunications services or necessary
to construct facilities relating to telecommunications services, and shall
within such time provide a copy of any such notice to Licensor. In addition,
Licensee shall notify Licensor within five (5) days after becoming aware of
the commencement of any action, suit or proceeding, or the issuance of any
order, writ, injunction, award or decree of any court, agency or other
governmental instrumentality which could have a material adverse effect on
the operation or financial condition of Licensee's business as it relates to
the Primary Services, the Core Products, the Additional Services or the
Additional Products.
2. To the extent that Licensee's business is dependent upon
one or more agreements with a provider of Primary Services, Core Products,
Additional Services or Additional Products for which Licensee acts as a
reseller, "Permits" shall include such contractual relationship and the
license granted hereunder shall be dependent upon the continuation thereof in
good standing.
3. Licensee represents and warrants that it possesses all
Permits necessary to the conduct of its business and to the business of
providing the Primary Services, Core Products, Additional Services and
Additional Products within the Licensed Territory, including, if applicable,
any Permits necessary to permit it to act as a reseller of services provided
by others.
C. BUSINESS PRACTICES
Licensee shall maintain a competent, conscientious, trained staff.
Neither Licensor nor Licensee shall engage in any trade practice or other
activity which is harmful to the goodwill or reflects unfavorably on the
Marks or on the reputation of Licensee, Licensor, Licensee's business or
other licensees of
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Licensor, or which constitutes deceptive or unfair competition, consumer
fraud or misrepresentation.
D. INFORMATION TO LICENSOR
1. Upon Licensor's request, subject to the confidentiality
requirements described in Section m.c., Licensee must, in connection with any
customer satisfaction survey Licensor elects to conduct in accordance with
Section III.C., promptly furnish to the Survey Company designated by Licensor a
complete and accurate customer list of all of its subscribers and customers for
its Primary Services, Core Products, Additional Products and Additional
Services, as a whole or separately, in a format reasonably prescribed by
Licensor, including computerized magnetic media, together with such reasonable
information which the Survey Company shall require in connection with the
performance of its duties. Licensee hereby gives the Survey Company permission
to contact any and all of its subscribers and customers in conducting a customer
survey to ascertain the quality level of Licensee's services and products and
obtain related market research data in accordance with the methodology set forth
in Exhibit F or as Licensor may reasonably deem appropriate. Licensee shall
promptly provide Licensor with additional information reasonably requested by
Licensor regarding matters such as Licensee's legal status (for example, any
Change in Control), affiliated companies, dealers, agents, retailers, Primary
Services, Core Products, Additional Products and Additional Services being
provided or sold utilizing the Marks, Licensee's use of the Marks, including
Incidental Use and Potential Customer Confusion, and other matters which
Licensor may reasonably determine are relevant to Licensee's performance under
this License Agreement.
2. At Licensor's request, Licensee shall promptly provide
Licensor with a copy of each Permit necessary or related to its business of
providing Primary Services, Core Products, Additional Services or Additional
Products using the Marks (with the financial details thereof deleted or
redacted if Licensee so chooses), together with any amendments, termination
or other notices relating thereto.
3. At Licensor's request, Licensee shall promptly provide
Licensor with a copy of Licensee's most recent financial statements for the
most recently completed fiscal year and any
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subsequent interim periods, including reports of auditors, if any, and
supporting schedules, relating to Licensee's business of providing Primary
Services, Core Products, Additional Services or Additional Products using the
Marks.
E. VOTING BY LICENSEES
Licensor shall be entitled, from time to time, during the Term, or
at any time with regard to a Term to commence in the future, to submit a
proposed amendment to this License Agreement and any Exhibits hereto, to all
of its licensees which have executed Revised Licenses, with a request that
such licensees indicate their approval or disapproval thereof by written
ballot. Unless licensees which have executed Revised Licenses with Licensor
and which are obligated to pay in excess of 50% of the aggregate of all
Annual License Fees payable by all similarly situated licensees shall vote
against such amendment, this License Agreement, and the applicable Exhibits
hereto, shall be amended as proposed by Licensor in the material submitted to
the licensees. Notwithstanding the foregoing, without the express written
consent of Licensee, no amendment to this License Agreement approved under
this Section IV.E. shall, with regard to prior time periods or events taking
place prior to the adoption thereof, increase Licensee's obligations to pay
any amounts to Licensor or otherwise undertake any obligations to Licensor or
any other party. In addition, no amendment to this License Agreement
approved solely pursuant to this Section IV.E. shall (i) modify the Licensed
Territory, (ii) prohibit or prevent Licensee from providing the Primary
Services under the Marks in the Licensed Territory, or (iii) permit Licensor
to license others to use the Marks for providing Alternate Wireless Services
or Cellular Telephone Services in the Licensed Territory. Any notice
provided by Licensor hereunder requiring an approval or disapproval of an
amendment to this License Agreement or any Exhibits hereto shall be delivered
to Licensee in accordance with the notice provisions of this License
Agreement not less than ninety (90) days prior to the proposed effectiveness
thereof. Licensor shall be entitled to set forth in any notice proposing an
amendment to this License Agreement or any Exhibits hereto an effective date
more than ninety (90) days following the delivery of notice with regard
thereto. Licensees which fail to respond to a request by Licensor to approve
or disapprove of an amendment to this License Agreement or any Exhibits
hereto within sixty (60) days after delivery of the
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proposed amendment shall be deemed to have consented to such amendment. This
Section IV.E. shall not modify or limit any of Licensor's other rights
provided for in this License Agreement, including but not limited to
Licensor's rights to amend Exhibits to this Agreement under Sections III or
IV, to the extent permitted therein, or to modify or impose the fees or other
charges, to the extent such modification is permitted, required of Licensee
under Sections V or VIII hereof. Only Licensor shall have the right to
propose an amendment to this License Agreement or any Exhibits under this
Section IV.E.
F. SIGNAGE, PROMOTION
1. For each market in the Licensed Territory, Licensee
shall, at its own expense, cause the Cellular One Mark to be used or
incorporated with such reasonable prominence in such advertising and other
business references to Licensee as may be appropriate to create a clear
impression, among the general public, that Licensee is affiliated with the
Cellular One program. Without limiting Licensee's obligation to comply with
the foregoing, Licensee shall, for each market in the Licensed Territory,
associate Licensee and the Cellular One name in the telephone "yellow pages"
and "white pages" directory listings, and at least cause the Cellular One
Mark to be used or incorporated on or in each of the following, insofar as
they relate to Licensee's business utilizing the Marks:
(i) Licensee's customer billing statements and the
accompanying envelopes;
(ii) Licensee's advertising media, including without
limitation, print advertising, brochures, marketing materials,
point-of-sale materials, billboards and broadcast media such as
radio and television advertising, on line advertising, home pages
on the World Wide Web and other computer accessible information;
(iii) The greetings, introductions or opening messages of
Licensee's telephone operators, voice mail, telephone answering
machines and other call answering services, in response to customer
and prospective customer inquiries;
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(iv) Licensee's stationery, business cards, notices and
other mailouts, and, to the extent practicable, any press or other
media coverage afforded Licensee; and
(v) Signs or displays on the exterior and interior of each
of Licensee's facilities which interface with customers or prospective
customers in the Licensed Territory.
2. To the extent required by this License Agreement,
pursuant to Sections III.A., VI.B., VI.D. or otherwise, Licensee shall, at
its own expense, modify its usage of the Marks and adopt tag lines, icons or
similar marks or variations, and modify the signage and other items described
in Section IV.F. 1. above as may be appropriate, within one (1) year or such
shorter period as Licensor may reasonably require or as may be otherwise
provided in this License Agreement.
3. Licensee shall use the Cellular One Mark (or any mark
substituted therefor by Licensor) as the principal service mark or trademark,
as appropriate, designating Primary Services and Core Products sold or
distributed by it within the Licensed Territory and shall otherwise use the
applicable Marks in connection with Additional Products and Additional
Services in the Licensed Territory to the extent commercially reasonable and
as required by this License Agreement. Use of the Marks shall be strictly in
accordance with the Graphic Standards Manual as amended from time to time.
Licensee shall only use those Marks as are specified by Licensor in
connection with each of the Additional Products and Additional Services.
G. DEALERS, AGENTS AND RETAILERS
In the event that, pursuant to this License Agreement, Licensee
permits its authorized dealers, agents or retailers to use the Marks in the
Licensed Territory, such dealers, agents and retailers shall be subject to
the obligations set forth in this License Agreement and those imposed upon
such parties by Licensee; provided, however, that unless required by
Licensee, such dealers, agents and retailers need not necessarily comply with
the specific obligations of Sections IV.F.1.(i), IV.F.1.(iii) and
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IV.F.1.(iv) hereof in connection with each dealers', agents' or retailers'
use or incorporation of the Marks on or in the items therein listed.
H. ADDITIONAL PRODUCTS AND SERVICES
1. Set forth on Exhibit D hereto under the headings
"Additional Products" and "Additional Services," respectively, are certain
products and services relating to the Primary Services with regard to which,
upon notice to Licensor, Licensee may promote or sell utilizing the Marks as
therein specified.
2. In the event that Licensee shall elect to use the Marks
within all or any part of the Licensed Territory in connection with one or
more of the specified Additional Products or Additional Services, Licensee
shall provide Licensor not less than thirty (30) days written notice of such
intended use, together with a description of Licensee's business and
promotional plans with regard thereto and the portion of the Licensed
Territory to which such use will relate.
I. USE OF THE CELLULAR ONE TRADEMARK
In order to protect and enhance the Cellular One Mark and the
goodwill pertaining thereto, Licensee shall, consistent with Exhibit D, use
the Cellular One Mark only on or in connection with first class, high quality
telecommunications equipment and related devices further described as an
Additional Product on Exhibit D hereto (collectively, the "Wireless
Communications Equipment"). Any such Wireless Communications Equipment shall
be sold or distributed only in accordance with all applicable federal, state
and local laws, including, without limitation, all applicable FCC directives
and other industry standards issued from time to time by the CTIA, the
Electronics Industries Association and comparable industry groups, and which,
if available for the type of Wireless Communications Equipment in question,
has earned a certification seal issued by the CTIA. Licensee shall, upon
execution of this Agreement, and from time to time thereafter upon request by
Licensor, promptly furnish to Licensor, at no charge, a listing of all of the
various types of Wireless Communications Equipment sold or otherwise
distributed by Licensee, and upon which or in connection with which the
Cellular
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One Mark is used. The nature and quality of such Wireless Communications
Equipment shall be subject to review by Licensor to insure compliance with
this Agreement.
J. CONSUMER SERVICE NUMBER
Licensee shall have the obligation to use and promote and a
nonexclusive right to make use of a toll free national consumer service
number designated by Licensor (the "Consumer Service Number") as a toll free
service to Licensee's customers and prospective customers in the Licensed
Territory, to use the 1-800-CELL ONE Mark and marks associated therewith and
to pay an annual fee to Licensor described in Section V.E. and in accordance
with the following terms and conditions:
1. (a) Licensor will, from time to time, establish and
maintain a national consumer service telephone number, operated twenty-four
hours a day, seven days a week. Currently the number established by Licensor
is 1-800 CELL ONE (1-800 235-5663). Licensee shall arrange with a long
distance carrier (the "Long Distance Carrier") for a network-based routing
system to cause such calls to the Consumer Service Number from customers and
prospective customers of Licensee in the Licensed Territory (including
customers of Licensee roaming from the Licensed Territory) to be
automatically (i) routed to Licensee, or to a designated center as further
described below or (ii) provided with a prerecorded intercept announcement or
(iii) routed as may be required pursuant to Section IV.J.3. or any agreement
entered into by Licensee pursuant thereto. All arrangements necessary for
the routing of calls to Licensee or the delivery of prerecorded intercept
announcements shall be made between Licensee and the Long Distance Carrier.
In no event will Licensor route calls made to the Consumer Service Number to
Licensee, or cause any such calls to be so routed. It is anticipated that
Licensee will provide customers and prospective customers calling the
Consumer Service Number with assistance, information and/or promotional
literature in response to inquiries concerning such matters as activation,
suspension or disconnection of service, service plans, promotions, billing,
pricing, roaming, dialing instructions, access numbers, feature codes, the
locations, hours of operation and telephone numbers of offices, authorized
repair facilities and sources for batteries, parts and accessories, and such
other matters as may be set forth in the 800 Number Supplement (hereinafter
defined).
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(b) Licensor will provide Licensee with a supplement to
Exhibit E (the Quality Standards) and the Guide to Quality Operations
(collectively, the "800 Number Supplement"), containing requirements and
suggestions for the operation of the Consumer Service Number program,
including the services which Licensee must have the capability of offering
during various times to callers to the Consumer Service Number which are
routed to the Licensee by the Long Distance Carrier, and other materials as
Licensor deems appropriate. Licensor may from time to time, in its
discretion, issue additional supplements, modifications and additions to the
Guide to Quality Operations or the 800 Number Supplement. Licensor may, in
its discretion, expand or introduce new features to the Consumer Service
Number program and may afford Licensee the opportunity to participate therein
by executing an addendum to this Agreement or other suitable document.
(c) From time to time, at its sole election, Licensor may
select and designate a substitute telephone number to serve as the Consumer
Service Number and Licensee shall take such steps as shall be necessary to
utilize such substituted number in place of the prior telephone number
serving as the Consumer Service Number and shall cease any use of such prior
number in accordance with any schedule reasonably promulgated by Licensor
with regard thereto.
2. Licensee shall establish and maintain adequate staffing
and telephone capacity in relation to the subscriber base and call volume of
the Licensed Territory, in order to promptly and adequately receive and
respond to calls routed to Licensee through the Consumer Service Number;
provided however, that Licensee may establish a centralized location with
such capabilities to serve multiple markets for which Licensee has entered
into a License Agreement with Licensor, if applicable. Licensee agrees that
it will not impose any airtime charges or other charges upon the caller for
calls made to the Consumer Service Number, whether such calls are made by
customers, prospective customers, roamers or otherwise. Licensee shall cause
its billing department or, if applicable, use its best efforts to cause each
of its billing companies or providers of Primary Services, to nonrate calls
to the Consumer Service Number made from the Licensed Territory, and to
delete any per diem roaming fees if calls from the Licensed Territory to the
Consumer Service Number are the only roamer calls made during the twenty-four
hour daily billing period. Licensee
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shall offer credit card roaming capability for its customers, with respect to
the Licensed Territory, for the purpose of allowing call processing for
customers with validation problems when the serving switch in the home market
is not accessible.
3. Within thirty (30) days of the Effective Date of this
License Agreement, Licensee shall make appropriate arrangements with the Long
Distance Carrier for the routing of calls to the Licensed Territory and, in
conjunction therewith, shall be providing service to customers and
prospective customers in accordance with the Quality Standards and the Guide
to Quality Operations (including the 800 Number Supplement) twenty four hours
a day, three hundred sixty-five days a year. Licensee may phase in such
customer service operations over a period not to exceed six (6) months
following the Effective Date hereof, but within (30) days after the Effective
Date of this Agreement, Licensee shall, at a minimum, promptly accept and
fully respond to all calls routed to Licensee through the Consumer Service
Number from 8:00 a.m. to 6:00 p.m., local time, Monday through Friday,
excluding national holidays. During such times, the calls routed to the
Licensed Territory by the Long Distance Carrier must be handled by Licensee's
own or contracted service personnel (other than answering services) unless
other arrangements satisfactory to Licensor are made, and the various types
of callers (customers, roamers, prospects, etc.) must be provided with
service respecting at least those categories as set forth in the Guide to
Quality Operations (including the 800 Number Supplement). Outside of such
times, (i) Licensee has the option of handling the calls with its own or
contracted service personnel (other than answering services), arranging for
other licensees in good standing of the Marks to handle the calls, arranging
for third parties acceptable to Licensor to handle the calls, or arranging
for the calls to be answered by an automated voice response system, with live
operator backup preferred (although a response system with the capability for
the caller to leave a recorded message will be acceptable); and (ii) not
later than six (6) complete calendar months following the Effective Date of
this License Agreement, such callers must be provided with service respecting
at least those categories as set forth in the Guide to Quality Operations
(including the 800 Number Supplement) for such times.
4. Licensee shall at its own expense include the Consumer
Service Number in Licensee's telephone directory listings
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for the Licensed Territory, including "White Pages" and "Yellow Pages"
listings (under "Cellular Telephones", "Mobile Telephones," "Radiotelephones"
or other category denoting telecommunications services and equipment, as
appropriate), and in Licensee's promotional and marketing materials.
Licensee agrees to actively promote the Consumer Service Number in the
Licensed Territory, but may also utilize its own toll free numbers or other
numbers in the Licensed Territory.
5. Licensor shall in no event be liable by reason of any act
or omission of Licensee or any third party licensee in the conduct of its
business or for any claim or judgment arising therefrom or for any claim or
judgment by third parties (including without limitation, the Long Distance
Carrier, Licensee's customers, prospective customers, dealers, retailers,
agents, resellers, or the like) arising from or relating to the establishment
and the operation of the Consumer Service Number, and Licensee shall
indemnify and hold Licensor, Licensor's employees, the Partnership Partners
and their affiliates, and their respective officers, directors, employees and
stockholders, harmless from and against any and all claims and judgments, as
well as the costs, including attorneys' fees, of defending against them.
Licensee acknowledges that Licensor shall not be responsible for any direct,
consequential or incidental damages of any kind resulting from or relating to
the Consumer Service Number, the related program or the operation thereof, or
the acts or omissions of the Long Distance Carrier, including without
limitation, damages relating to possible loss of customers or prospective
customers by Licensee or its dealers, retailers, agents, resellers, or the
like.
6. Licensee agrees to promptly provide the Long Distance
Carrier with such complete current and reserve cellular NPA/NXX listings and
other information and data as may be reasonably requested by the Long
Distance Carrier to permit the Long Distance Carrier to provide an efficient
and effective routing of calls and delivery of intercept announcements to
Licensee and to assure that calls which should be routed to other licensees
of the Consumer Service Number are not being affected by Licensee's
arrangements with the Long Distance Carrier. All payments and other similar
arrangements which may be necessary to permit the Long Distance Carrier to
route calls or provide intercept services and prerecorded announcements to
callers shall also be the responsibility of Licensee, shall be determined by
and between
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Licensee and the Long Distance Carrier, and Licensor shall have no obligation
or liability whatsoever with respect thereto. Licensee agrees to promptly
provide directly to Licensor and/or to cause the Long Distance Carrier to
promptly provide to Licensor such information as Licensor may from time to
time reasonably request in order to permit Licensor to protect the Marks
and/or to ascertain Licensee's compliance with Licensee's obligations under
this Agreement.
7. In the event Licensee's agreement with the Long Distance
Carrier expires or is terminated for any reason with respect to any market in
the Licensed Territory, Licensee's rights with respect to the Consumer
Service Number and the 1-800-CELL ONE Mark shall automatically terminate with
respect to such market. In the event Licensor decides to discontinue the
Consumer Service Number or the related program, Licensor may terminate
Licensee's rights with respect to the Consumer Service Number and the
1-800 CELL ONE Mark upon ninety (90) days prior written notice to Licensee.
8. The parties agree that Licensor is not offering herein to
resell 800 service or other telecommunications services, and no portion of
the annual Consumer Service Number Fee is compensation for any such resale.
Licensee shall have no right to resell 800 service using the Consumer Service
Number to any other person or entity. If Licensee chooses to permit its
authorized dealers, retailers or agents in the Licensed Territory to use the
Consumer Service Number and the 1-800-CELL ONE Mark, Licensee acknowledges,
for itself and on behalf of its dealers, retailers and agents, that the
applicable calls by callers to the Consumer Service Number will be routed by
the Long Distance Carrier to Licensee, and not to any such dealers, retailers
and agents of Licensee, and that the calls will be toll free and free of
roaming and airtime charges upon the callers as set forth above.
9. Licensee acknowledges and agrees that it shall have no
ownership interest in the Consumer Service Number, any telephone number, Mark
or acronym serving as or associated with a current or previous Consumer
Service Number or any agreements relating thereto, notwithstanding any actual
or implied agreements between Licensee and the Long Distance Carrier, any
tariffs or permits applicable or related to the Consumer Service Number or
any contract or course of dealing relating thereto. Without modifying
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the foregoing, Licensee hereby grants Licensor an irrevocable power of
attorney, which shall be coupled with an interest, to act in Licensee's place
and stead and to execute and deliver any agreements, instruments,
certificates, pleadings or the like reasonably necessary to disclaim any
interest by Licensee in the Consumer Service Number, any telephone number,
Mark or acronym serving as or associated with a current or previous Consumer
Service Number or any agreements relating thereto, and to vest in Licensor
full title thereto. In addition, Licensee shall, from time to time, at the
request of Licensor or the Long Distance Carrier, promptly execute and
deliver such further agreements, instruments, certificates, pleadings and the
like as Licensor shall reasonably deem necessary to give effect to this
Section IV.J.9.
V. FEES AND REPORTING
A. APPLICATION FEE
Upon execution of this License Agreement by Licensee, Licensee
shall pay to Licensor a nonrefundable application fee (the "Application Fee")
of five hundred dollars ($500.00) per market in the Licensed Territory;
provided, however, that no Application Fee with respect to a particular
market shall be payable in the event that this License Agreement is being
executed as a renewal, extension or modification of an outstanding Cellular
One License Agreement between Licensee and Licensor covering such market in
the Licensed Territory or in the event of a market transfer or Change of
Control (the latter events being subject, however, to the transfer fee
described in Section V.H. hereof).
B. ANNUAL LICENSE FEE
Licensee agrees to pay to Licensor an annual license fee (the
"Annual License Fee") based on the total population of each of the markets in
the Licensed Territory (the "Pops") as determined by the most recent
population estimates produced by an independent company selected in good
faith by Licensor, with a minimum Annual License Fee of three thousand
dollars ($3,000.00) per market in the Licensed Territory for each year during
the Term. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is on or before December 31, 1997, the
Annual License Fee for the Initial Year or the Subsequent Year, as the
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case may be, shall be equal to two cents ($0.02) per person in the Licensed
Territory, but not less than the foregoing minimum. If the Effective Date of
this License Agreement or the commencement of a Subsequent Year is after
December 31, 1997, the Annual License Fee for the Initial Year or the
Subsequent Year, as the case may be, shall be calculated in accordance with
Section V.E. below, but shall not be less than the foregoing minimum. The
Annual License Fee shall be due on each January 1 and payable on or before
each January 31 of each Subsequent Year during the Term, for the full
calendar year; provided however, that the Annual License Fee for the Initial
Year shall be paid upon execution of this License Agreement by Licensee.
Notwithstanding the foregoing, if the Initial Year commences on a day other
than January 1, the Annual License Fee for the Initial Year (including the
foregoing minimum fee, if applicable) shall be prorated to reflect the
portion of that calendar year included within the Initial Year. The Annual
License Fee will not be prorated or refunded in whole or in part under any
other circumstances; provided, however, that upon the normal expiration of
this License Agreement at the end of the Term or any renewal Term (but in no
other event, including without limitation, upon the voluntary or involuntary
termination of this License Agreement for any reason), Licensor agrees to
refund a prorated portion of the Annual License Fee reflecting that portion
of that calendar year remaining after the date of expiration, less any set
off for any other fees owing to Licensor.
C. ANNUAL ADVERTISING FEE
Licensee agrees to pay to Licensor's Cellular One Promotional Fund
an annual advertising fee (the "Annual Advertising Fee") based upon the
population estimates described in Section V. B. above. If the Effective Date
of the License Agreement is on or before December 31, 1996, the Annual
Advertising Fee for the Initial Year shall be equal to five cents ($0.05) per
person in the Licensed Territory. If the Effective Date of this License
Agreement or the commencement of a Subsequent Year is between January 1, 1997
and December 31, 1991, then the Annual Advertising Fee for the Initial Year
or Subsequent Year, as the case may be, shall be equal to six cents ($0.06)
per person in the Licensed Territory. If the Effective Date of this License
Agreement or the commencement of a Subsequent Year is between January 1, 1998
and December 31, 1998, then the Annual Advertising Fee for the Initial Year
or Subsequent Year, as the case may be, shall be equal to
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seven cents ($0.07) per person in the Licensed Territory. If the Effective
Date of this License Agreement or the commencement of a Subsequent Year is
after December 31, 1998, then the Annual Advertising Fee for the Initial Year
or the Subsequent Year, as the case may be, shall be calculated in accordance
with Section V.E. below. The Annual Advertising Fee shall be due on each
January 1 and payable on or before each January 31 of each Subsequent Year
during the Term, for the full calendar year; provided, however, the Annual
Advertising Fee for the Initial Year shall be paid upon execution of this
License Agreement by Licensee. Notwithstanding the foregoing, if the Initial
Year commences on a day other than January 1, the Annual Advertising Fee for
the Initial Year shall be prorated to reflect the portion of that calendar
year included within the Initial Year. The Annual Advertising Fee will not
be prorated or refunded in whole or in part under any other circumstances.
For any Initial Year or Subsequent Year beginning on or before January 1,
1998, if Licensee can demonstrate to the satisfaction of Licensor that
Licensee had less than three hundred thousand (300,000) billable minutes of
air time for each month in the preceding calendar year in a market in the
Licensed Territory, Licensee shall not be obligated to pay the Annual
Advertising Fee with respect to such market for such Initial Year or
Subsequent Year, as the case may be. Licensor agrees to accept, and may
require, the bona fide report of Licensee's independent outside auditing firm
as appropriate confirmation that Licensee has less than the three hundred
thousand (300,000) billable minutes of air time for each month as described
above. The foregoing exemption from payment of the Annual Advertising Fee
shall in no event extend beyond the Annual Advertising Fee due for 1998. To
the extent that geographic, demographic or social factors (such as a location
of a market outside of the continental U.S. or the use in a particular market
in the Licensed Territory of a dominant language other than English) limit
the effectiveness of Licensor's promotional efforts with respect to such
market in the Licensed Territory, Licensor may, but shall not be obligated
to, consider an adjustment to the Annual Advertising Fee payable under this
Section V.C. or adjusting its promotional activities to improve the
effectiveness thereof in such market in the Licensed Territory.
D. ANNUAL ADMINISTRATIVE FEE
From time to time, upon not less than thirty (30) days written notice
to Licensee, Licensor shall be entitled to
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levy, and Licensee shall pay, a nonrefundable annual administrative fee (the
"Annual Administrative Fee"), not to exceed, each calendar year, one-half of
one cent ($0.005) per person in the Licensed Territory as determined in a
manner consistent with that applied to the determination of the Annual
License Fee, in the event that Licensor determines that such a fee is
necessary to defray Licensor's administrative costs, including costs
associated with professional fees and expenses, incurred in connection with
performing Licensor's duties under this License Agreement and otherwise
protecting and promoting the Marks and assuring that the Quality Standards
continue to be consistent with changing market conditions and technological
change. In the event that Licensee provides Primary Services as a reseller
for more than one provider of Cellular Telephone Services or any form of
Alternate- Wireless Service, Licensor shall be entitled to receive an
additional Annual Administrative Fee (or such part thereof as Licensor shall
deem appropriate) with regard to each such reseller relationship, reflecting
the increased costs of conducting customer surveys and otherwise monitoring
Licensee's performance under this License Agreement.
E. ESCALATION OF LICENSE AND ADVERTISING FEES
In addition to any other increases in the Annual License Fee and
the Annual Advertising Fee which are permitted herein, Licensor may, in its
sole discretion, increase the Annual License Fee payable for any Initial Year
or Subsequent Year commencing on or after January 1, 1998, and/or increase
the Annual Advertising Fee payable for any Initial Year or Subsequent Year
commencing on or after January 1, 1999, by amounts commensurate with the
increases in the Consumer Price Index or media expenses, as the case may be,
in accordance with the following:
1. Annual License Fee for the applicable Initial Year or
Subsequent Year (subject to the minimum Annual License Fee of $3,000.00 per
market in the Licensed Territory)=
$0.02 X CPI-2 X Pops
-------
CPI-1
where:
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(a) "CPI" shall mean the monthly National Consumer Price
Index for All Urban Consumers, U.S. City Average (All Items; 1982-84 equals
100) issued by the U.S. Department of Labor, Bureau of Labor Statistics, or
its successor agency, or if such index is no longer in effect, the successor
index thereto;
(b) "CPI-l" shall mean the monthly CPI for the month of
June, 1996;
and
(c) "CPI-2" shall mean the higher of (i) CPI-1 or (ii)
the monthly CPI for the latest calendar month which ends at least six (6)
months before the commencement of the applicable Initial Year or Subsequent
Year for which the adjustment of fee(s) is being computed.
2. Annual Advertising Fee for the applicable Initial Year or
Subsequent Year=
$0.07 X MC-2 X Pops
------
MC-1
where:
(a) "MC-1" shall mean the actual media buy liabilities
incurred by Licensor in connection with Licensor's obligations and activities
under Section VIII of this License Agreement for the immediately preceding
annual period;
(b) "MC-2" shall mean the higher of (i) MC-1 or (ii) the
media buy liabilities Licensor would incur in the following annual period if
it engaged in the activities and purchased the goods and services giving rise
to the media buy liabilities constituting MC-1. In making the determination
required by the preceding sentence, Licensor shall utilize the
"netcosts(-TM-)" reports publication describing Broadcast Network, Cable
Network and Syndication CPM and CPP projections published by Ephron, Papazian
& Ephron, Inc., or any successor or equivalent index generally utilized by
the industry to estimate future costs associated with promotional activities.
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F. CONSUMER SERVICE NUMBER FEE
During such time as Licensor makes the Consumer Service Number
program available to licensees, Licensee shall pay to Licensor an annual
Consumer Service Number fee (the "Consumer Service Number Fee") equal to one
thousand dollars ($1,000.00) for each MSA and five hundred dollars ($500.00)
for each RSA constituting a part of the Licensed Territory, subject to a
maximum fee payable under this Section V. F. of thirty thousand dollars
($30,000.00) with respect to the Licensed Territory or all of Licensee's
Licensed Territories under other License Agreements with Licensor. The
Consumer Service Number Fee shall be due on each January 1 and payable on or
before each January 31 of each Subsequent Year during the Term, for the full
calendar year; provided however, the Consumer Service Number Fee for the
Initial Year shall be paid upon execution of this License Agreement by
Licensee. Notwithstanding the foregoing, if the Initial Year commences on a
day other than January l, the Consumer Service Number Fee for the Initial
Year shall be prorated to reflect the portion of that calendar year included
within the Initial Year. The Consumer Service Number Fee will not be
prorated or refunded in whole or in part under any other circumstances. The
Consumer Service Number Fee shall be in addition to any other charges or fees
that may be payable by Licensee to any Long Distance Carrier for the Consumer
Service Number program, as contemplated by Section IV.J. hereof. In addition
to the Consumer Service Number program, Licensor may establish similar
programs for other forms of wireless telephony (the "Other 800 Programs").
To the extent that the Primary Services or Core Products include such forms
of wireless telephony, Licensee shall participate in the Other 800 Programs
designed therefor. Licensor shall be entitled to receive fees from Licensee
for the Other 800 Programs calculated in a similar manner as those for the
Consumer Service Number program.
G. ADDITIONAL FEES
From time to time following the date hereof, Licensor may propose,
pursuant to Section IV.E. hereof, changes to or the implementation of one or
more periodic fees to be payable by licensees with regard to the Primary
Services, Core Products, Additional Products or Additional Services, or other
fees deemed appropriate by Licensor. Upon approval thereof in accordance
with Section IV.E., such fees shall become an obligation of Licensee
hereunder.
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H. SPECIAL LICENSEE RELATED EXPENSES
Licensor shall be entitled to levy, and Licensee shall promptly
pay, a fee of not less than five hundred dollars ($500.00) per market with
regard to any Change of Control of Licensee or assignment by Licensee of its
rights and obligations hereunder (including any transfer or Change of Control
of a market constituting part of the Licensed Territory) or upon any other
assignment, transfer, pledge, Change of Control or other transaction
contemplated or permitted under Article X.
I. PAYMENTS, INTEREST ON LATE PAYMENTS
All fees and charges payable under this License Agreement shall be
payable in good funds at Licensor's address specified herein, or at such
other address as Licensor shall from time to time designate in writing.
Notwithstanding any other provision of this Article V, Licensor shall be
entitled for reasons of administrative convenience or otherwise to defer the
date by which any fee or charge payable by Licensee hereunder may be due. No
such deferral shall be a waiver of any of Licensor's rights hereunder. If
payment of any Application Fee, Annual License Fee, Annual Advertising Fee,
Consumer Service Number Fee, Annual Administrative Fee or other fee or charge
under this License Agreement is overdue, Licensee shall pay Licensor, in
addition to the overdue amount, interest on such overdue amount from the date
it was payable until paid at the rate which is two (2) points above the prime
rate published by the Wall Street Journal on the date payment was due, or the
maximum rate permitted by applicable law, whichever is less. Entitlement to
such interest shall be in addition to any other remedies Licensor may have.
VI. MARKS
A. OWNERSHIP OF MARKS
Licensor is the owner of all right, title and interest in and to
the Marks (which shall include for the purposes of this Section VI. all of
the permits and contractual or other arrangements (including registrations of
trademarks, service marks and domain names) relating to ownership or control
of the Marks, the Consumer Service Number and the like). No sublicense by
Licensee pursuant to Sections IV.G. or X.C. shall create any
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ownership interest in the Marks in Licensee or any sublicensee thereof nor
any right by Licensee to sublicense use of the Marks in the future.
B. GENERAL USE
With respect to Licensee's use of the Marks pursuant to this
License Agreement, Licensee acknowledges and agrees to the following:
1. Licensee shall use only the Marks designated by Licensor
and shall use them only in the manner authorized and permitted by Licensor
herein, and only in accordance with the Graphic Standards Manual. Without
limiting the generality of the foregoing, Licensee shall comply with
Licensor's guidelines and directives (i) for use of certain Marks with
specified Additional Products and Additional Services, and (ii) concerning
the use of the Marks or derivatives thereof in, or as a part of, the domain
name of any World Wide Web pages or the names of any similar Internet locales
or addresses owned by or on behalf of Licensee.
2. Except to the extent permitted as Incidental Use,
Licensee shall use the Marks only in connection with providing Primary
Services, Core Products, Additional Services and Additional Products in the
Licensed Territory, in accordance with the Quality Standards and as otherwise
set forth in this License Agreement.
3. Licensee shall identify the Licensor as the registered
owner of the Marks in such ways as Licensor may direct, including but not
limited to the identification of Licensor as such on Licensee's invoices,
order forms, receipts and contracts.
4. Except as provided in Section IV.G. above and Section
X.C. below, Licensee shall have no right to sublicense the Marks to any other
person or entity, and Licensee shall have no right to allow its resellers, if
any, to make use of the Marks. Any use by a dealer, retailer or agent under
Section IV.G. or by an Affiliate under Section X.C. shall be consistent with
Licensee's rights and responsibilities hereunder with respect to the use of
the Marks and, in no event, shall any such permitted use exceed or extend
beyond Licensee's rights hereunder to use the Marks. Licensee agrees to
monitor and be responsible for the use of the Marks by its agents, retailers
and dealers and its Affiliates and
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to promptly provide or cause to be provided to Licensor upon request, from
time to time, such reasonable information concerning the use of the Marks by
such dealers, retailers and agents and Affiliates to permit Licensor to
ascertain Licensee's compliance hereunder. From time to time upon the
reasonable request of Licensor, Licensee shall promptly supply Licensor with
a list of dealers, retailers, agents and Affiliates authorized to use the
Marks and/or promptly confirm whether any particular dealers, retailers,
agents or Affiliates remain authorized and in good standing with respect to
use of the Marks.
5. Licensee's right to use the Marks is limited to the uses
specifically authorized under this License Agreement.
6. Licensee shall not use the Marks or any of their
derivatives, or any marks confusingly similar thereto, as part of Licensee's
corporate or other legal name. Licensee and any dealers, retailers or agents
designated under Section IV.G. or Affiliates designated under Section X.C.
may file and maintain trade name or fictitious name registrations in the
jurisdictions within the Licensed Territory where legally required or
otherwise appropriate to reflect the fact that Licensee is doing business as
"Cellular One." If other licensees desire to file and maintain such a trade
name or fictitious name registration pursuant to a license agreement with
Licensor, Licensee shall consent or otherwise cooperate with Licensor and
such licensees in meeting the state or local requirements to permit such
trade or fictitious name registrations to coexist. Licensee shall execute
any documents deemed necessary or desirable by Licensor or its counsel to
assist Licensor in the protection or registration of the Marks or to maintain
or defend Licensor's title thereto, or their continued validity and
enforceability.
7. Licensee shall promptly notify Licensor of any suspected
infringement of, or challenge to the validity, registration, or Licensor's
ownership of the Marks, which occurs in the Licensed Territory, or elsewhere,
should Licensee become aware. Licensor agrees, at its sole cost and expense,
to institute or otherwise defend proceedings as may be appropriate to protect
the Marks, including, to the extent necessary, defense of such proceedings
following termination of this License Agreement. In connection with any such
proceedings, Licensee agrees to execute any and all documents and to do
whatever reasonable acts and things
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as may, in the opinion of counsel for Licensor, be necessary or advisable to
assist Licensor in carrying out the prosecution or defense, and Licensor
agrees to reimburse Licensee for all direct costs incurred by Licensee in
doing these acts and things, except that Licensee shall bear the salary costs
of its employees. Licensor shall have the sole right to institute, defend
and direct proceedings relating to the Marks and Licensee shall not file or
institute any proceedings relating to the Marks without the prior written
consent of Licensor. In the event that Licensee does file or institute any
proceedings relating to the Marks, Licensee shall promptly supply Licensor
with copies of any and all papers and materials relating to such proceedings,
together with such information relating thereto as Licensor may reasonably
request. Notwithstanding anything to the contrary in Section VI.B., and
whether or not Licensor undertakes the prosecution or defense of a legal
proceeding relating to one or more of the Marks, Licensor's liability for
damages and losses to Licensee relating to use of one or more of the Marks
(including any loss resulting from Licensor's loss of title or ownership of
the Marks or the rights thereto) shall be limited to the amount of the
Application Fee plus the Annual License Fee paid by Licensee under this
License Agreement for the market(s) in which such liability is determined,
for the year during which such liability is determined.
8. The Marks are valid and serve to identify the Primary
Services, the Core Products, the Additional Services and the Additional
Products provided by those who are authorized to operate under the Marks.
Licensee shall not directly or indirectly contest the validity, registration
or Licensor's ownership of the Marks, any of their derivatives, any of the
icons or other marks owned by Licensor, and Licensee shall not directly or
indirectly apply for or otherwise seek to register as a trademark, service
mark or design any mark or other designation which incorporates, which is the
same as or confusingly similar to, or which may dilute Licensor's rights in
and to, any of the Marks or their derivatives, any of the icons or other
marks owned by Licensor.
9. Licensee's use of the Marks, and the use thereof by its
agents, retailers, dealers and Affiliates, if any, pursuant to this License
Agreement does not give Licensee or any agent, retailer, dealer or Affiliate,
any ownership interest or other interest in or to the Marks, except the
license granted in this License Agreement. Any and all goodwill arising from
use of
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the Marks shall inure solely and exclusively to the benefit of Licensor, and
upon expiration or termination of this License Agreement and the license
granted by it, no monetary amount shall be assigned as attributable to any
goodwill associated with use of the Marks by Licensee or its agents,
retailers, dealers or Affiliates.
10. Licensor has and retains the following rights, among others:
(i) To use the Marks itself, in connection with local,
regional and national advertising and promotion, including conducting
activities designed to enhance the goodwill associated with the Marks,
and, subject to the provisions of Section I hereof, with directly or
indirectly selling products and services (including telecommunications
products and services) both within and outside the Licensed Territory;
(ii) To grant licenses for use of the Marks in addition to
those licenses already granted to existing licensees of the Marks;
(iii) To use the Marks in any manner reserved for Licensor
pursuant to Section I; and
(iv) To create derivatives of the Marks and exploit, promote
and license such derivatives.
11. In the event that any of the Marks or icons, including any
trademarks, service marks and design logos adopted after execution of this
License Agreement which become Marks, can no longer be used, Licensor reserves
the right to provide a substitute mark or design with reasonable notice to
Licensee.
C. INCIDENTAL USE
1. For the purposes of this License Agreement, the promotion,
sale and delivery of Primary Services, the Core Products, Additional Services
and Additional Products in accordance with this Section VI.C. shall be
considered "Incidental Use" of the Marks.
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2. During the Term, and subject to the other provisions of
this License Agreement, Licensee shall be entitled to conduct its business of
providing Primary Services, Core Products, Additional Services and Additional
Products throughout the Licensed Territory, without the necessity of
abandoning or failing to serve any part of the Licensed Territory because
such business might become known to, or because Licensee might from time to
time sell products or services to, persons or businesses resident or located
outside of the Licensed Territory. Licensee shall not be prohibited by the
terms of this License Agreement from promoting Primary Services outside of
the Licensed Territory to the extent necessary to provide Primary Services in
accordance with the Quality Standards throughout the Licensed Territory. In
addition, except that Licensee shall not specifically direct its promotional
activities to potential customers outside of the Licensed Territory, Licensee
shall be entitled to utilize regional or other media in connection with
promoting its Primary Services, Core Products, Additional Services and
Additional Products within the Licensed Territory. Licensee shall not adopt
promotional pricing or otherwise seek to distribute Primary Services, Core
Products, Additional Services or Additional Products outside of the Licensed
Territory, but shall not be precluded from doing business with persons or
entities it knows to be resident outside of the Licensed Territory.
3. This Section VI.C. does not entitle Licensee to utilize
the Marks for products or services other than Primary Services, Core
Products, Additional Services and Additional Products, nor does it allow use
of the Marks by Licensee outside of the Licensed Territory except strictly in
accordance with Section VI.C.2. above. Licensor shall have the sole right to
restrict Licensee's Incidental Use of the Marks at any time and in such
manner as Licensor shall determine necessary or appropriate to prevent such
Incidental Use from breaching, infringing upon, or otherwise conflicting
with, the rights of any other current or future licensee of the Mark(s).
Licensee's Incidental Use of the Marks may also be restricted under-Section
VI.D. below, notwithstanding this Section VI.C., to avoid or mitigate
Potential Customer Confusion (as subsequently defined).
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D. POTENTIAL CUSTOMER CONFUSION
1. Notwithstanding any other provision of this Section VI.
to the contrary, in the event that as a result of economic, demographic or
technological changes within or affecting the Licensed Territory from and
after the date of this License Agreement, Licensor reasonably determines that
actual or potential customers of another licensee of the Marks, or any of
them, are or are likely to consider Licensee to be, or to be affiliated with,
such other licensee of the Marks or not readily distinguishable therefrom
(such circumstances being referred to as "Potential Customer Confusion"),
Licensor shall be entitled to modify the provisions of this License Agreement
and any Exhibit hereto for the purpose of reducing the circumstances giving
rise to the Potential Customer Confusion.
2. In seeking to reduce Potential Customer Confusion,
Licensor shall consider requiring providers (including Licensee) of products
or services which are the source of Potential Customer Confusion to adopt tag
lines or otherwise differentiate such products or services before amending
this License Agreement in a manner that would require a material modification
in the conduct of Licensee's telecommunications business relating to the
Marks.
3. Without limiting the generality of the foregoing, and
without limiting any other rights which Licensor may have hereunder with
respect to Additional Products or Additional Services, Licensor shall be
entitled, with or without the consent of Licensee, to reduce the size of the
Licensed Territory with regard to Additional Products or Additional Services
or to delete or modify the description of any Additional Product or
Additional Service set forth on Exhibit D hereto for the purpose of
mitigating or eliminating Potential Customer Confusion. Upon such reasonable
written notice to Licensee as Licensor in its discretion determines, but in
no event to exceed sixty (60) days, regarding the existence of Potential
Customer Confusion resulting, in whole or in part, from Licensee's
promotional activities, Licensee shall modify such-promotional activities to
the extent reasonably necessary to prevent or mitigate, to the extent
possible, the continuation of events or circumstances previously giving rise
to Potential Customer Confusion.
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VII. CONFIDENTIAL INFORMATION
A. DEFINITION
Any and all information, knowledge, know-how, and techniques which
Licensor or Licensee designates as confidential shall be deemed "Confidential
Information" for purposes of this License Agreement, except:
1. Information which either party can demonstrate was known
to it prior to disclosure thereof by the other party; or
2. Information which, at or after the time of disclosure by
one party to the other, had become or later becomes a part of the public
domain, through publication or communication by others through no fault of
the party receiving the information.
B. PROHIBITIONS
Licensor and Licensee each agree that it will use its best efforts,
during the term of this License Agreement and for one year following
expiration or termination of this License Agreement, to prevent the
communication or divulgence, to any other person, partnership, association,
corporation or business enterprise of any Confidential Information which may
be communicated to it or of which it may be apprised pursuant to this License
Agreement. Licensor shall be deemed to have used its best efforts to prevent
such communication or divulgence if it has distributed guidelines to its
employees in an effort to maintain an information separation between Licensor
and the Partnership Partners and their affiliates, and, specifically, it has
instructed its employees not to divulge any Confidential Information,
including customer information, to the Partnership Partners or their
affiliates, and shall have obtained the executed confidentiality agreements
referred to in Section VII.C. from those persons designated in such Section.
In circumstances where Licensee is in direct competition with one of the
Partnership Partners or their affiliates in any one or more of the market(s)
in the Licensed Territory, Licensor will instruct its employees that no
information regarding Licensee's business of providing Primary Services, Core
Products, Additional Products or Additional Services in that market should be
disclosed to that Partnership Partner or its affiliates. The parties agree
that statistical performance information regarding licensees of the Marks
which does not identify individual markets may be reported to the Partnership
Partners and their affiliates and shall not be considered Confidential
Information. Notwithstanding the foregoing, either
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party to this License Agreement and the Partnership Partners and their
affiliates may disclose any Confidential Information which any such party may
be legally required to disclose to a government agency or in the context of
litigation or arbitration.
C. LICENSOR CONFIDENTIALITY AGREEMENTS
Licensor will execute, and will cause its employees, agents and
representatives, who are reasonably expected to have access to Confidential
Information of Licensee to execute, an appropriate confidentiality agreement,
which shall provide that any Confidential Information of Licensee made
available to Licensor, Licensor's employees, agents or representatives,
pursuant to this License Agreement, will be kept confidential by all such
persons.
D. CONSEQUENCES OF BREACH
Licensor and Licensee each acknowledges that any failure to comply
with this Section VII will cause the other party irreparable injury, and each
party agrees to pay all court costs and reasonable attorneys' fees incurred
by the other party in obtaining specific performance of, or an injunction
against violation of, this Section VII.
VIII. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising programs to the furtherance of the goodwill
and public image of the Marks, the parties agree as follows:
A. LICENSEE'S ADVERTISING
All advertising and promotion by Licensee in any manner or medium
must be conducted in a dignified manner and must conform to the written and
graphic guidelines specified by Licensor from time to time, including the
Graphic Standards Manual. Licensee shall display or otherwise employ the
Marks in the manner prescribed by Licensor on all signs and all other
advertising and promotional materials used in connection with Licensee's
business, to the extent relating to Primary Services, Core Products,
Additional Services and Additional Products. If requested by Licensor,
Licensee at its own expense shall promptly provide to
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Licensor photocopies or other photographic, mechanical, magnetic or other
representations of all print advertisements and promotional materials,
radio/television advertising sequences, graphical interface presentations and
other media presentations using the Marks which Licensee has used at any time
during the six (6) months preceding Licensor's request.
B. MATERIALS PROVIDED BY LICENSOR
Licensor may provide from time to time, in its sole discretion,
advertising and promotional plans and materials, including without
limitation, newspaper mats, television and radio tapes, graphical interface
files, promotional brochures and sales aids. Licensee may use all or any of
these materials in its sole discretion.
C. CELLULAR ONE PROMOTIONAL FUND, OTHER ADVERTISING FUNDS
Licensor has established, and Licensee agrees to participate in a
fund for national, local and regional advertising and promotional and other
public programs and activities (the "Cellular One Promotional Fund" or the
"Fund") for licensees of the Marks. Licensor shall have the right to
determine, in accordance with Section V.C. hereof, the amount of
contributions to be made by Licensee with respect thereto for any year or
years during the Term hereof, including any renewal Term. Licensee agrees to
make contributions to the Cellular One Promotional Fund as required hereunder
and under Section V.C. hereof, and agrees that the Fund is to be maintained
and administered by Licensor or its designee as follows:
1. Licensor or its designee shall direct all advertising
and/or promotional programs with sole discretion over the concepts,
materials, and media used in such programs and the placement and allocation
thereof. Licensee agrees and acknowledges that the Cellular One Promotional
Fund is intended to maximize general public recognition, acceptance, and use
of the Marks for the benefit of all licensees of the Marks, and that Licensor
or its designee are not obligated, in administering the Fund, to undertake
expenditures for Licensee which are equivalent or proportionate to Licensee's
contribution, or to ensure that any particular licensee benefits directly or
PRO RATA from expenditures by the Fund.
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2. The Cellular One Promotional Fund, all contributions
thereto, and any interest earnings thereon, shall be used for the purpose of
meeting any and all costs of administering, researching, directing, and
preparing advertising and/or promotional activities including the cost of
preparing and conducting television, radio, magazine, World Wide Web, e-mail
and newspaper advertising campaigns; direct mail and outdoor billboard
advertising; marketing surveys and other public relations activities; use of
advertising agencies to assist therein; promotional brochures and other
marketing materials for licensees of the Marks; and indirect costs, including
reasonable allocation of Licensor's administrative, personnel and overhead
expenses, associated with the implementation of advertising programs, such as
equipment costs and similar costs relating to special national or regional
programs or other similar programs contemplated by Section III.E. All
reasonable costs incurred by Licensor or charged to Licensor by third parties
for the production and dissemination of such advertising and promotional
materials may be charged to the Fund.
3. Licensee shall contribute to the Cellular One Promotional
Fund in accordance with Section V.C. All sums paid by licensees of the Marks
to the Fund shall be maintained in an account separate from the other monies
of Licensor and shall not be used to defray any of Licensor's administrative
expenses, except for such reasonable administrative costs and overhead as
Licensor may incur in activities reasonably related to the administration or
direction of the Fund and advertising programs for licensees of the Marks,
and as further set forth in Section VIII.C.2. Except as set forth in this
Section VIII.C., the Fund and any incidental earnings shall not otherwise
inure to the benefit of Licensor. Licensor or its designee shall maintain
separate bookkeeping accounts for the Fund.
4. It is anticipated that all Licensee contributions to, and
incidental interest earned by, the Cellular One Promotional Fund shall be
expended for advertising and/or promotional purposes during the taxable year
within which the contributions and earnings are received. If, however,
excess amounts remain in the Fund at the end of such taxable year, all
expenditures in the following taxable year(s) shall be made first out of
accumulated interest earnings from previous years, next out
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of interest earnings in the current year, and finally from contributions.
5. The Cellular One Promotional Fund is not and shall not be
an asset of Licensor or its designee. A statement of the operations of the
Fund as shown on the books of the Fund shall be prepared annually by an
independent certified public accountant selected by Licensor and shall be
made available to Licensee upon written request.
6. Although the Fund is intended to be of perpetual
duration, Licensor maintains the right to terminate the Fund. The Fund shall
not be terminated, however, until all monies in the Fund have been expended
for advertising and/or promotional purposes or returned to contributors on
the basis of their respective contributions.
In addition, Licensor may establish and Licensee shall
contribute to one or more separate advertising funds for the purpose of
promoting types or groups of Primary Services, Core Products, Additional
Products or Additional Services, utilizing all or part of the fees collected
pursuant to Section V. C. hereof. Except as specifically provided by
Licensor when establishing such fund, or as may be permitted under this
License Agreement. such additional funds shall be subject to provisions
identical to those applicable to the Cellular One Promotional Fund described
herein.
D. PRICE DISCRETION
Licensee shall have the right to sell its products and offer
services at any price Licensee may determine, and shall in no way be bound by
any price which may be recommended or suggested by Licensor.
IX. INSURANCE
A. REQUIREMENT
Licensee shall promptly procure, and shall maintain in full force
and effect at all times during the Term of this License Agreement, at
Licensee's expense, an insurance policy or policies protecting Licensee,
Licensor, and the Partnership
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Partners, and their respective affiliates, agents, officers, directors,
shareholders, and employees, against any demand or claim with respect to
personal injury, death, or property damage, or any loss, liability, or
expense whatsoever arising or occurring upon or in connection with Licensee's
business of providing and goods or services utilizing or in connection with
the Marks. Licensor and the Partnership Partners, and their respective
affiliates, agents, officers, directors, shareholders, and employees, shall
be named additional insureds in each such policy.
B. MINIMUM COVERAGE
The policy or policies shall be written by an insurance company
with an Alfred M. Best rating of A or A+, or such other insurance company as
Licensor may reasonably approve, and shall include, at a minimum, such
coverages and policy limits as may reasonably be specified by Licensor from
time to time, which coverages may include, without limitation, comprehensive
general liability insurance, including personal injury, as well as
comprehensive automobile liability coverage for both owned and non-owned
vehicles, and property damage liability coverage, naming Licensor and the
Partnership Partners, and their respective affiliates, agents, officers,
directors, shareholders and employees, as additional insureds in each such
policy or policies. Until such time as Licensor shall in good faith
determine that economic or other circumstances affecting the Cellular One
license program require increased insurance coverage, the following minimum
insurance requirements shall be applicable.
1. General liability: $1,000,000 per occurrence or
$2,000,000 in the aggregate;
2. Personal liability: $1,000,000;
3. Property damage: $1,000,000;
4. Automobile liability: $1,000,000 per occurrence for
owned and operated vehicles;
5. Workers' compensation/Employers' liability: $500,000 policy
limit;
6. Disease: $500,000; and
7. Accident: $500,000
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C. CERTIFICATES OF INSURANCE
Within thirty (30) days after this License Agreement is executed,
and thereafter at least thirty (30) days prior to the expiration of any such
policy, Licensee shall deliver to Licensor Certificates of Insurance
evidencing the proper coverage with limits not less than those required
hereunder. All Certificates shall expressly provide that not less than
thirty (30) days' prior written notice shall be given Licensor in the event
of material alteration to, or cancellation of, the coverages evidenced by
such Certificates.
X. TRANSFER OF INTEREST
A. TRANSFER BY LICENSOR
Licensor shall have the right to transfer or assign all or any part
of its rights or obligations herein to any person or legal entity. If
Licensor's assignee assumes all of the obligations of Licensor under this
License Agreement and sends written notice of the assignment so attesting,
Licensee shall promptly execute a general release of Licensor and the
Partnership Partners, and any affiliates thereof, from any claims against or
liabilities of Licensor, the Partnership Partners or such affiliates arising
under this License Agreement.
B. TRANSFER AND PLEDGE BY LICENSEE
If Licensee desires in the Licensed Territory (i) to sell its
Primary-Services business for one or more markets and assign its rights under
this License Agreement with respect to such market(s), (ii) to pledge or
assign its rights under this License Agreement to a financial institution or
other party in connection with a financing transaction involving Licensee, or
(iii) enter into a transaction resulting in a Change of Control of Licensee,
Licensee shall notify Licensor in writing and Licensee shall be entitled to
transfer, assign, or pledge its rights under this License Agreement, or
effect the Change of Control, as the case may be, provided:
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1. Licensee shall not be in default under this License
Agreement.
2. The transferee shall enter into a written assignment, in
a form satisfactory to Licensor, assuming and agreeing to comply with, at
Licensor's option, either this License Agreement or Licensor's then current
form or forms of license agreement relating to the Marks, except that in the
case of a pledge or collateral assignment to a financial institution referred
to in Section X.B.(ii), such pledge or collateral assignment need only be
made subject to all of the terms and conditions of this License Agreement.
In the case of a Change of Control, Licensee and the new controlling entity
shall enter into a written agreement, in a form satisfactory to Licensor,
agreeing that Licensee shall continue to be entitled to the rights and
subject to the obligations of a licensee hereunder.
3. Licensee shall remain liable for all of the obligations
to Licensor under this License Agreement prior to the effective date of
transfer and shall execute any and all instruments reasonably requested by
Licensor to evidence such liability. The transfer or Change of Control shall
not affect any of the terrns or provisions of this License Agreement or the
status of the market(s) in the Licensed Territory pursuant hereto (including
without limitation, a market's default or probation status under this License
Agreement), all of which shall be or remain fully applicable to the
transferee or Licensee, as the case may be.
4. Where Licensee provides Primary Services in more than one
market and the transfer or Change of Control involves market(s) comprising
less than all of the markets in the Licensed Territory, the transferee or
Licensee, as the case may be, shall, at Licensor's option, enter into
Licensor's then current form of license agreement for the market(s) being
transferred or to which the Change of Control relates; in such event, this
License Agreement shall remain in full force and effect with respect to
Licensee's remaining market(s), if any, following the transfer or Change of
Control.
5. The transferee or new controlling entity, or proposed
transferee or new controlling entity, as the case may be, shall provide
Licensor with such financial data, certificates of
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insurance, copies of Permits, and other information as are required to be
provided by Licensee hereunder in connection with entering into this License
Agreement, or otherwise, and such materials and information shall be current
and complete as of the effective date of such transfer or Change of Control.
6. The transferee shall promptly pay Licensor any transfer
fees or charges then being charged generally by Licensor to transferees of
licenses to use the Marks. In the case of a Change of Control, Licensee
shall pay Licensor any similar fees then being charged generally by Licensor
for such Changes of Control with respect to licensees of the Marks.
Licensee shall be entitled to transfer, assign or pledge its rights
under this License Agreement, or enter into a transaction resulting in a
Change of Control of Licensee, with respect to a portion of a market in the
Licensed Territory, pursuant to the provisions of this Section X.B.
Licensee shall not be entitled to transfer, assign or pledge any of its
rights or obligations under this License Agreement, except by complying with
the provisions of this Section X.B. relating thereto, nor shall Licensee
permit a Change of Control to occur without complying with the provisions of
this Section X.B.
C. RIGHT TO ADD AFFILIATE AS PARTY
Subject to Section V.H., with the consent of Licensor, Licensee
shall be entitled to assign any or all of its rights under this License
Agreement to use the Marks in connection with the provision of Primary
Services, Core Products, Additional Services or Additional Products in the
Licensed Territory, or any part thereof, to an "Affiliate," which shall mean
any business entity Controlling, under the Control of, or under common
Control with Licensee. No assignment by Licensee of any rights pursuant to
this Section X.C. shall relieve Licensee of its obligations hereunder. In
addition, Licensor's consent to such assignment shall cease to be effective
upon the occurrence of a Change of Control with regard to Licensee or its
assignee which results in Licensee or its assignee no longer being
Affiliates. Licensor shall be entitled, from time to time and upon its
reasonable request, to receive from Licensee and any assignee thereof a
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certification that assignee continues to be entitled, under this Section X.C.
to utilize the Marks, together with the facts supporting such entitlement.
No assignee of Licensee shall be entitled to any vote pursuant to Section
IV.E. or to any notices from Licensor hereunder. No conduct on the part of
Licensor with regard to any assignee of Licensee shall be deemed to cause
such assignee to become a licensee hereunder or to have any ownership
interest in this License Agreement. Licensee shall give Licensor prior
written notice of any Change of Control, as defined below, of Licensee or any
assignee of Licensee.
D. CHANGE OF CONTROL
For the purposes of this License Agreement, a "Change of Control"
with regard to any entity shall mean the disposition or acquisition, directly
or indirectly, of Control with regard to such entity. "Control" or
"Controlling" with regard to an entity shall mean the record or beneficial
ownership, directly or indirectly, by any person or entity, or group of
persons or entities, of in excess of a majority of the equity securities of
the entity in question, or the power to designate a majority of the members
of the Board of Directors or other governing body thereof or to otherwise
determine the management and policies of the entity in question.
XI. DEFAULT AND TERMINATION
A. TERMINATION BY LICENSEE
Licensee shall have the right to terminate this License Agreement
without cause at any time upon at least one hundred eighty (180) days advance
written notice to Licensor. Licensee shall remain fully responsible for any
fees and other obligations accruing to Licensor during such notice period.
B. TERMINATION BY LICENSOR -- WITHOUT NOTICE
Licensee shall be deemed to be in default under this License
Agreement, and all rights granted herein shall automatically terminate
without notice to Licensee, if Licensee becomes insolvent or makes a general
assignment for the benefit of creditors; or if a petition in bankruptcy is
filed by Licensee or against Licensee and not actively opposed by Licensee;
or if
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Licensee is adjudicated as bankrupt or insolvent; or if a bill in equity or
other proceeding for the appointment of a receiver of Licensee or other
custodian for Licensee's business or assets is filed and consented to by
Licensee: or if a receiver or other permanent or temporary custodian of
Licensee's assets or property, or any part thereof, is appointed by any court
of competent jurisdiction; or if proceedings for a composition with creditors
under any state or federal law should be instituted by Licensee or against
Licensee and not actively opposed by Licensee; or if a final judgment remains
unsatisfied or of record for thirty (30) days or longer (unless supersedeas
bond is filed); or if Licensee is dissolved except where the Licensee is a
limited partnership and, promptly following dissolution, such limited
partnership is reconstituted with the same general partners: or if a suit to
foreclose any lien or mortgage against real or personal property used in the
operation of Licensee's Primary Services business is instituted against
Licensee and not dismissed within thirty (30) days or, if actively being
opposed by Licensee, within one hundred eighty (180) days; or if execution is
levied against Licensee's Primary Services business, or any of the property
related thereto; or if any material real or personal property of Licensee
used in its Primary Services business shall be sold after levy thereupon by
any sheriff, marshal, or constable; or if Licensee at any time ceases to
operate or otherwise abandons its Primary Services business or otherwise
forfeits the right to do or transact business in any market(s) in the
Licensed Territory; or if Licensee loses its FCC license or FCC construction
permit or any other material Permit for one or more market(s) in the Licensed
Territory or otherwise forfeits the right to do or transact business in one
or more market(s), in which event Licensee's rights under this License
Agreement with respect to such market(s) shall automatically terminate and
this License Agreement shall continue with respect to the remaining market(s)
in the Licensed Territory for which Licensee continues to hold all necessary
FCC license(s) and Permits.
C. TERMINATION BY LICENSOR--UPON NOTICE
Upon the occurrence of any of the following events, Licensee shall
be deemed to be in default and Licensor may, at its option, terminate this
License Agreement and all rights granted hereunder without affording Licensee
any opportunity to cure the default. Said termination shall be effective
immediately upon
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receipt of notice by Licensee (and Licensee shall remain fully responsible
for any fees and other obligations accruing to Licensor until such
termination becomes effective):
1. If Licensee has been advised of its probation status
pursuant to Section XI.E. and Licensee does not make a good faith effort to
formulate and implement a plan during the term of probation, or, at the end
of the term of probation, Licensee fails to meet the 85% overall minimum
customer satisfaction rating (or the higher percentage established by
Licensor under Section IV.A.) required in the Licensed Territory as a whole
by the Quality Standards for Primary Services and Core Products;
2. If with regard to the Licensed Territory or any market
constituting a part thereof, Licensee fails in any customer satisfaction
survey conducted pursuant to Section III.C. to attain an overall customer
satisfaction rating of more than 70%, regardless of the terms of any
probation;
3. If any principal stockholder or officer of Licensee is
convicted of a felony, a fraud, or any other crime or offense that Licensor
believes is reasonably likely to have an adverse effect on the Marks, the
goodwill associated therewith, or Licensor's interest therein;
4. If a threat or danger to public health or safety results
from the operation of the Licensee's Primary Services business or any of its
businesses relating to the delivery of any Primary Services, Core Products,
Additional Products or Additional Services;
5. If Licensee purports to assign or transfer any rights or
obligations under this License Agreement to any third party (including
without limitation, any reseller) or to effect a Change of Control, contrary
to the terms of Sections VI.B.4 or X.B. of this License Agreement;
6. If, contrary to the terms of Section VII. hereof,
Licensee discloses or divulges Confidential Information provided to Licensee
by Licensor;
7. If Licensee knowingly submits any false reports of
information to Licensor or any entity conducting a customer
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satisfaction survey either during the application process or subsequent to
the execution of this License Agreement; or
8. If Licensee directly or indirectly contests in any court
or proceeding the validity or registration of, or Licensor's ownership of,
any of the Marks or other rights licensed hereunder.
D. TERMINATION BY LICENSOR--AFTER NOTICE AND OPPORTUNITY TO CURE
Except as provided in Sections XI.B. and XI.C. of this License
Agreement, Licensee shall have thirty (30) days after its receipt from
Licensor of a written notice of termination within which to remedy any
default hereunder (or, if the default cannot reasonably be cured within such
thirty (30) days, to initiate within that time substantial and continuing
action to cure the default), and to provide evidence thereof to Licensor. If
any such default is not cured within that time (or, if appropriate,
substantial and continuing action to cure the default is not initiated within
that time), or such longer period as applicable law may require, this License
Agreement shall terminate without further notice to Licensee effective
immediately upon expiration of the thirty (30) day period or such longer
period as applicable law may require (and Licensee shall remain fully
responsible for any fees and other obligations accruing to Licensor until
such termination occurs). Licensee shall be in default hereunder for any
failure to comply with any of the requirements imposed by this License
Agreement or to carry out the terms of this License Agreement in good faith.
Such defaults shall include, without limitation, the occurrence of any of the
following events:
1. If Licensee fails to offer the Primary Services and the
Core Products of nationwide call delivery and nationwide roaming, or any of
them, under the specified Marks on a continuous basis and in a manner
reasonably appropriate to promote and further the goodwill of the Marks,
throughout the Licensed Territory in accordance with this License Agreement;
2. If Licensee fails, refuses or neglects promptly to pay
when due any monies, fees or charges due to Licensor or the Fund, or under
this License Agreement, or fails, refuses or neglects promptly to submit
information as required under this
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License Agreement, or makes any false statements in connection therewith;
3. If Licensee fails to comply, in any material respect,
with the Graphic Standards Manual or the Quality Standards;
4. If Licensee directly or indirectly misuses or makes any
unauthorized use of the Marks or otherwise materially impairs the goodwill
associated therewith or Licensor's rights therein;
5. If Licensee directly or indirectly engages in any
business or markets any service or product under a name or mark which, in
Licensor's opinion, is confusingly similar to, or may have a tendency to
dilute, the Marks;
6. If Licensee shall breach or fail to timely perform any of
its covenants or obligations under this License Agreement including, without
limitation, the covenants of Licensee relating to the Consumer Service Number
program and the Other 800 Programs;
7. If Licensee fails, refuses or neglects promptly to pay
when due any fees or charges or otherwise timely perform its obligations to
the Long Distance Carrier with regard to the Consumer Service Number;
8. If Licensee, by act or omission, permits a continued
violation in connection with the operation of its business of any Permit,
law, ordinance, rule or regulation of a governmental agency, in the absence
of a good faith dispute over its application or legality and without promptly
resorting to an appropriate administrative or judicial forum for relief
therefrom; or
9. If any dealer, agent, retailer or Affiliate of Licensee
misuses the Marks or otherwise fails to comply with this License Agreement,
and Licensee, upon request by Licensor, does not promptly (i) cause such
dealer, agent, retailer or Affiliate to cease the misuse and to otherwise
fully comply with this License Agreement, or (ii) terminate its business
relationship with such dealer, agent, retailer or Affiliate.
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E. PROBATION
In the event that a customer satisfaction survey, conducted
pursuant to Section III.C., reveals an overall minimum customer satisfaction
rating less than required pursuant to Section IV.A.2., Licensor shall advise
Licensee of an imposition of probation status for a stated period of time,
typically one (1) year for Primary Services and Core Products. Promptly on
receipt of this written notice, Licensee agrees to formulate and implement a
written plan to improve the quality of Licensee's Primary Services and Core
Products, so that a subsequent customer satisfaction survey will indicate
compliance with the provisions of this License Agreement. Licensor shall be
entitled to review Licensee's plan upon reasonable request therefor. The
guidelines contained in the Guide to Quality Operations provided to Licensee
by Licensor and the Quality Standards set forth in Exhibit E are designed to
assist Licensee in improving its customer satisfaction rating. If Licensor
determines, in its sole discretion, that Licensee is not making a good faith
effort to formulate and implement such a plan, or after a reasonable
probation period the goals of the plan are not achieved, then Licensor may
elect to extend the term of the probation or terminate this License Agreement
effective upon written notice to Licensee pursuant to Section XI.C. Any
extension of the Term of this License Agreement by Licensor during any
probationary period shall not waive Licensor's rights under this Section
XI.E. or under Section XI.C., and such probationary period, and any
agreements relating thereto, shall continue unaffected.
F. PARTIAL TERMINATION
In addition to any other rights Licensor may have under this
License Agreement with respect to the termination of Licensee's right to
utilize the Marks in connection with Additional Services or Additional
Products, or to amend Exhibit D to delete Additional Services or Additional
Products therefrom, Licensor shall have the rights set forth in this Section
XI.F. From time to time, Licensor may conduct customer satisfaction surveys
specifically relating to Additional Products or Additional Services. In
addition, surveys conducted by Licensor with regard to the Primary Services
may be designed to determine customer satisfaction levels with regard to
Licensee's Additional Products or Additional Services. In the event that any
such customer
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satisfaction survey reveals an overall minimum customer satisfaction rating
of less than 85% (or such higher percentage as may be established by Licensor
under Section IV.A.), but more than 70%, with regard to one or more markets
constituting a part of the Licensed Territory, Licensor shall be entitled to
impose a probation status with regard to the Additional Product or Additional
Service and the market or markets in question. Licensor shall advise
Licensee of the period of time, typically one (1) year, of such probation.
Promptly upon receipt of this written notice, Licensee agrees to formulate
and implement a written plan to improve the quality of Licensee's Additional
Product or Additional Service in question in the market or markets in
question, so that a subsequent customer satisfaction survey will indicate
compliance with the provisions of this License Agreement. Licensor shall be
entitled to review Licensee's plan upon reasonable request therefor. The
Guide to Quality Operations provided to Licensee by Licensor and the Quality
Standards set forth in Exhibit E hereto are designed to assist Licensee in
improving its customer satisfaction rating. Additional customer satisfaction
surveys will be commissioned in the market or markets in question from time
to time thereafter as Licensor deems appropriate, and Licensee agrees to pay
the reasonable direct costs of conducting such additional customer
satisfaction surveys. If Licensor determines, in its sole discretion, that
Licensee is not making a good faith effort to formulate and implement such a
plan, or after a reasonable probation period the goals of the plan are not
achieved, then Licensor may elect to extend the term of the probation or
terminate Licensee's right to utilize the Marks in connection with the
Additional Products or Additional Services in question in the market or
markets in question or in the Licensed Territory as a whole. In the event of
such a termination, Exhibit D hereto shall be amended appropriately. In
addition, if a customer satisfaction survey shall reveal an overall customer
satisfaction rating of 70% or less with regard to any Additional Product or
Additional Service in any market or markets in the Licensed Territory,
Licensor, upon thirty (30) days prior written notice to Licensee, shall be
entitled to terminate Licensee's right to utilize the Marks in connection
with such Additional Services or Additional Products, or any of them, in the
market or markets in question or in the Licensed Territory as a whole, and
Exhibit D hereto shall be amended to delete such Additional Products or
Additional Services therefrom. Any extension of the Tenn of this License
Agreement by Licensor during any such probationary period
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shall not waive Licensor's rights under this Section XI.F., and such
probationary period, and any agreements relating thereto, shall continue
unaffected.
G. FORCE MAJEURE
Neither Licensor nor Licensee shall be liable or deemed to be in
default for a delay in or failure of performance that results from any of the
following causes beyond the reasonable control of such party: strikes, work
stoppages, shortages of equipment, supplies or energy, war, insurrection, or
acts of God or the public enemy. Any delay resulting from any such cause
shall extend performance accordingly or excuse performance, in whole or in
part, as may be reasonable; provided however, that (i) said causes shall not
excuse payment of any amount due or owed at the time of such occurrence or
payment of Annual License Fees, Annual Advertising Fees, Consumer Service
Number Fees or other amounts due thereafter, (ii) the party asserting any
such cause shall promptly commence and diligently pursue action to remedy its
inability or failure to perform hereunder, and (iii) in no event shall said
causes extend or excuse performance for more than one hundred twenty (120)
days from the time of performance set forth in this License Agreement. The
party asserting the existence of a force majeure condition under this Section
XI.G. shall promptly notify the other party in writing of the occurrence and
nature of any such cause and shall thereafter regularly inform the other
party in writing of the progress of actions to remedy the inability or
failure to perform hereunder.
XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION
Upon termination or expiration of this License Agreement with respect to
one or more of the market(s) in the Licensed Territory (the "Terminated
Market(s), all rights granted hereunder to Licensee with respect to each
Terminated Market shall forthwith terminate, and:
A. DEIDENTIFICATION
1. Licensee shall immediately cease to hold itself out as a
present or former licensee of Licensor with respect to the Terminated
Market(s).
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2. Licensee shall immediately cease to participate in the
Consumer Service Number program, any Other 800 Programs or any similar
national call or customer routing program utilizing the Marks.
3. Licensee shall immediately and permanently cease to use,
in any manner whatsoever, in the Terminated Market(s) any of the Marks and
derivatives thereof, and all other marks and distinctive forms, slogans,
signs, icons, symbols, monograms and devices associated with the Marks.
Without limiting the foregoing, Licensee shall cease to use all signs,
advertising materials, World Wide Web sites, displays, stationery, forms, and
any other articles or clothing which display or incorporate any of the Marks
or any derivatives thereof.
4. Licensee shall take such action as may be necessary to
cancel in the Terminated Market(s) any trade name, fictitious name or
equivalent registration which contains any of the Marks or any other service
mark or trademark of Licensor, and Licensee shall furnish Licensor with proof
of compliance with this obligation within thirty (30) days after termination
or expiration of this License Agreement with respect to the Terminated
Market(s).
5. Licensee agrees, in the event it continues to operate a
business in the Terminated Market(s), not to use any reproduction,
counterfeit, copy, or colorable imitation of the Marks or derivatives
thereof, either in connection with such other business or the promotion
thereof, which is likely to cause confusion, mistake, or deception, or which
is likely to dilute Licensor's rights in and to the Marks or derivatives
thereof. Further, Licensee agrees not to utilize any designation of origin
or description or representation which falsely suggests or represents an
association or connection with Licensor or any of the Marks or derivatives
thereof in the Terminated Market(s).
6. Licensee shall immediately notify and cause its dealers,
agents, retailers and Affiliates that are using the Marks in the Terminated
Market(s) to immediately cease all use of the Marks and participation in the
Consumer Service Number program and any Other 800 Programs, and further cause
its dealers, agents, retailers and Affiliates to fully comply with all the
obligations applicable to Licensee under this Section XII. with respect to
the Terminated Market(s).
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B. PAYMENT OF MONIES DUE
1. Licensee shall promptly pay all sums owing to Licensor,
the Cellular One Promotional Fund and any other advertising fund established
hereunder. If and when this License Agreement is terminated as a result of
any default of Licensee, such sums shall include all damages, costs and
expenses, including reasonable attorney's fees, incurred by Licensor as a
result of the default.
2. Licensee shall pay to Licensor all damages, costs and
expenses, including reasonable attorney's fees, incurred by Licensor
subsequent to the termination or expiration of this License Agreement in
obtaining injunctive or other relief for the enforcement of any provisions of
this Section XII.
C. RETURN OF CERTAIN CONFIDENTIAL DOCUMENTS
If this License Agreement has expired or been terminated with
respect to all of the market(s) in the Licensed Territory, then Licensor and
Licensee shall immediately deliver to the other party all documents which
contain Confidential Information of the other party as defined in Section
VII. hereof, including without limitation, the Guide to Quality Operations
(including the 800 Number Supplement) and the Graphic Standards Manual.
XIII. INDEPENDENT STATUS AND INDEMNIFICATION
A. It is understood and agreed by the parties hereto that this License
Agreement does not create a fiduciary relationship between them; that
Licensee shall remain an independent business: and that nothing in this
License Agreement is intended to constitute either party as an agent, legal
representative subsidiary, joint venturer, partner, employee or servant of
the other for any purpose whatsoever.
B. During the term of this License Agreement and any renewal hereof,
Licensee shall hold itself out to the public as an independent business using
the Marks p _ t to a license from Licensor. Licensee agrees to take such
action as may be necessary to so notify the public.
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C. It is understood and agreed that nothing in this License Agreement
authorizes Licensee to make any contract, agreement, warranty or
representation on Licensor's behalf, or to incur any debt or other obligation
in Licensor's name. Licensor shall in no event assume liability for, or be
deemed liable hereunder as a result of, any such action; nor shall Licensor
be liable by reason of any act or omission of Licensee, its dealers, agents,
retailers or Affiliates in the conduct of their businesses or for any claim
or judgment arising therefrom against Licensee or Licensor. Licensee shall
indemnify and hold Licensor, Licensor's employees, the Partnership Partners
and their affiliates, and their respective officers, directors, employees and
stockholders, harmless from and against any and all claims arising directly
or indirectly from, as a result of, or in connection with, the operation of
the businesses of Licensee, its dealers, agents, retailers and Affiliates, as
well as the costs, including attorney's fees, of defending against them.
D. It is understood and agreed that Licensor does not establish or
certify manufacturing, technical or performance standards for
telecommunications equipment or customer premises equipment and Licensee will
not represent otherwise to third parties.
XIV. APPROVAL AND WAIVERS
A. Whenever this License Agreement requires the prior approval or
consent of Licensor, Licensee shall make a timely written request to Licensor
therefor, and such approval or consent shall be obtained in writing.
Licensor will process all such requests for approvals and consents in a
reasonable and timely manner.
B. Licensor makes no warranties or guarantees upon which Licensee may
rely, and assumes no liability or obligation to Licensee, by providing any
waiver, approval, consent or suggestion to Licensee in connection with this
License Agreement, or by reason of any neglect, delay or denial of any
request therefor.
C. No failure of Licensor or Licensee to exercise any power reserved
to it in this License Agreement, or to insist upon compliance by the other
party with any obligation or condition in this Agreement, and no custom or
practice of the parties at
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variance with the terms hereof, shall constitute a waiver of either party's
rights to demand exact compliance with any of the terms of this License
Agreement. Waiver by Licensor or Licensee of any particular default on the
part of the other party shall not affect or impair the non-defaulting party's
right with respect to any subsequent default of the same or of a different
nature; nor shall any delay, forbearance or omission by Licensor or Licensee
to exercise any power or right arising out of any breach or default by the
other party of any of the terms, provisions or covenants of this License
Agreement affect or impair such party's rights, nor shall such constitute a
waiver by Licensor or Licensee, as the case may be, of any rights hereunder
or rights to declare any subsequent breach or default.
D. Subsequent acceptance by Licensor of any payments due to it shall
not be deemed to be a waiver by Licensor of any preceding breach by Licensee
of any terms, covenants or conditions of this License Agreement.
XV. NOTICES
Any and all notices required or permitted under this License Agreement
shall be in writing and shall be personally delivered, delivered by reputable
overnight courier, proof of delivery requested, or by certified mail, postage
prepaid and return receipt requested, to the respective parties at the
following addresses unless and until a different address has been designated
by written notice to the other party:
Notices to Licensor: CELLULAR ONE GROUP
5001 LBJ Freeway
Suite 700
Dallas, Texas 75244
Attn: President
Copy (which shall not
constitute notice) to: Arter & Hadden
1717 Main Street, Suite 4100
Dallas, Texas 75201
Attn: Cellular One Group
Notices to Licensee: At the address shown on the signature
page hereof.
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Any notice by overnight courier or certified mail shall be deemed to
have been given at the date and time such notice is accepted by the overnight
courier or deposited with the U.S. Postal Service, respectively. No failure
to address any notice hereunder to a particular individual shall render such
notice invalid.
XVI. ENTIRE AGREEMENT
This License Agreement, the documents referred to herein, and the
attachments hereto, if any, constitute the entire, full and complete License
Agreement between Licensor and Licensee concerning the subject matter hereof,
and supersede all prior agreements. Without limiting the foregoing, this
License Agreement shall be deemed to amend and restate in its entirety and to
supersede, for all purposes, any prior license agreement between the parties
hereto which contemplates or has as its primary purpose the grant of a
license to use any of the Marks. Except for those permitted to be made
unilaterally by Licensor hereunder, no amendment, change or variance from
this License Agreement shall be binding on either party unless mutually
agreed to by the parties and executed by their authorized officers or agents
in writing.
XVII. SEVERABILITY AND CONSTRUCTION
A. Except as expressly provided to the contrary herein, each portion,
section, part, term and/or provision of this License Agreement shall be
considered severable; and if, for any reason, a portion, section, part, term
and/or provision herein is determined to be invalid and contrary to, or in
conflict with, any existing or future law or regulation by a court or agency
having valid jurisdiction, such shall not impair the operation of, or have
any other effect upon, such other portions, sections, parts, terms and/or
provisions of this License Agreement as may remain otherwise intelligible;
and the latter shall continue to be given full force and effect and bind the
parties hereof; and said invalid portions, sections, parts, terms and/or
provisions shall be deemed not to be a part of this License Agreement.
B. Nothing in this License Agreement is intended, nor shall be deemed,
to confer any rights or remedies upon any person or legal entity other than
Licensor or Licensee, and their respective successors and assigns as
permitted by this License Agreement.
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C. In the event a court in a final decision rules that any provision
of this License Agreement or portion thereof is unenforceable, Licensee
agrees to be bound by the maximum duty ruled enforceable by the court.
D. All captions in this License Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
E. All references herein to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural, where
applicable.
F. This License Agreement may be executed in several counterparts, and
each copy so executed shall be deemed an original.
XVIII. APPLICABLE LAW
A. THIS LICENSE AGREEMENT TAKES EFFECT UPON ITS ACCEPTANCE AND
EXECUTION BY LICENSOR IN THE STATE OF TEXAS AND SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED UNDER, THE LAWS THEREOF, WHICH LAWS SHALL PREVAIL
IN THE EVENT OF ANY CONFLICT OF LAW; PROVIDED, HOWEVER, THAT IF ANY OF THE
PROVISIONS OF THIS LICENSE AGREEMENT WOULD NOT BE ENFORCEABLE UNDER THE LAWS
OF THE STATE OF TEXAS, THEN SUCH PROVISIONS SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED UNDER, THE LAWS OF THE STATE IN WHICH THE LICENSED
TERRITORY IS LOCATED (IF THE LICENSED TERRITORY CONTAINS PORTIONS OF MORE
THAN ONE STATE OR THE DISTRICT OF COLUMBIA, THEN THE APPLICABLE LAW SHALL BE
THAT OF THE STATE IN WHICH THE LARGEST PORTION OF THE LICENSED TERRITORY IS
LOCATED).
B. No right or remedy conferred upon or reserved to Licensor or
Licensee by this License Agreement is intended to be, nor shall be deemed,
exclusive of any other right or remedy herein or by law or equity provided or
permitted, but each shall be cumulative of every other right or remedy.
C. Nothing herein contained shall bar Licensor's right to apply for
injunctive relief against threatened conduct that will cause it loss or
damages, under applicable equity rules, including the applicable rules for
obtaining restraining orders and preliminary injunctions.
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XIX. ACKNOWLEDGMENTS
A. Licensee acknowledges that it is currently engaged in the
telecommunications business and that such business involves substantial
investment and risks and that its success is largely dependent upon the
ability of Licensee's management and technical personnel. Licensor expressly
disclaims the making of, and Licensee acknowledges that it has not received,
any warranty or guarantee, express or implied, as to the potential volume,
profits, or success resulting from the utilization of the Marks by Licensee
in its telecommunications business.
B. Licensee acknowledges that it received a copy of the complete
Cellular One License Agreement and the Exhibits thereto at least five (5)
business days prior to the date on which this License Agreement is signed by
Licensee. Licensee further acknowledges that it received the disclosure
document required by the Trade Regulation Rule of the Federal Trade
Commission entitled "Disclosure Requirements and Prohibitions Concerning
Franchising and Business Opportunity Ventures" at least ten (10) business
days prior to the date on which this License Agreement is signed by Licensee.
C. Licensee acknowledges that it has read and understood this License
Agreement and the attachments hereto, and that Licensor has accorded Licensee
ample time and opportunity to consult with advisors of Licensee's own
choosing about the potential benefit and risks of entering into this License
Agreement on the effective date set forth below.
WITNESS WHEREOF, the parties hereto have duly executed this License
Agreement to be effective on the date shown below.
CELLULAR ONE GROUP
By: Richard J. Lyons
------------------------
Title: President
Effective Date: 2/25/97
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Primary Contact in Ordinary Course of
Business
Richard J. Lyons, President
Cellular One Group
5001 LBJ Freeway, Suite 700
Dallas, TX 75244
972/387-5225
972/387-5275 (Fax)
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LICENSEE: Dobson Cellular of Enid, Inc.
By: G. Edward Evans
--------------------------
Title: President
Date of Signature: 1/13/97
PRIMARY CONTACT IN ORDINARY COURT OF
BUSINESS:
Jamie L. Horn Director of Revenue
Assurance
Dobson Cellular of Enid, Inc.
13439 N. Broadway Extension, Suite 100
Oklahoma City, OK 73114
Phone: 405/479-0500 Fax: 405/749-8258
ADDRESS FOR NOTICE AND VOTING PURPOSES:
Jamie L. Horn Director of Revenue
Assurance
Dobson Cellular, Inc.
13439 N. Broadway Extension, Suite 100
Oklahoma City, OK 73114
Phone: 405/749-0500 Fax: 405/749-8258
CONTACT FOR BILLING PURPOSES:
G. Edward Evans, President
Dobson Cellular, Inc.
13439 N. Broadway Extension, Suite 100
Oklahoma City, OK 73114
Phone: 405/391-8500 Fax: 405/749-8258
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EXHIBIT A
CELLULAR ONE LICENSE AGREEMENT
The Marks currently designated by Licensor for use hereunder are as follows:
Registration or
Marks Application Number
- ----- ------------------
CELLULAR ONE (service mark) 1,839,076
1-800-CELL ONE(1) 75/105,170
CELLULAR ONE NETWORK(2) 74/495,960
LONG DISTANCE BY CELLULAR ONE(2) 75/017,997
PCS BY CELLULAR ONE(2) 75/010,430
PAGING BY CELLULAR ONE(2) 75/010,429
TELCOM BY CELLULAR ONE(2) 75/010,427
DISPATCH BY CELLULAR ONE(2) 75/010,428
DATA BY CELLULAR ONE(2) 75/079,447
VIDEO BY CELLULAR ONE(2) 75/079,445
INTERNET BY CELLULAR ONE(2) 75/088,362
LOCAL CALLING BY CELLULAR ONE(2) -
CELLULAR ONE (trademark)(2) 1,947,105
(1) Licensor may delete this Mark and/or Licensee's rights with respect to
this Mark may terminate under certain circumstances, as further described
in Section IV.J. of this License Agreement.
(2) Licensor may delete or modify any of these Marks or vary the Additional
Services or Additional Products in connection with which these Marks may
be used by Licensee, in accordance with the provisions of this License
Agreement or in furtherance of Licensor's rights hereunder.
OPTIONAL MARKS*
CLEAR ACROSS AMERICA 1,907,932
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- ------------------
* Licensee may utilize the optional Marks in accordance with the terms and
provisions of this License Agreement and the Graphic Standards Manual, but
Licensor shall have the right in its sole discretion to terminate
Licensee's use of any of the optional Marks upon thirty (30) days written
notice to Licensee.
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EXHIBIT B
CELLULAR ONE LICENSE AGREEMENT
LICENSED TERRITORY
Other
Market
Market Name MSA/RSA Market No. Description
- ------------ ------- ---------- -----------
Enid OK RSA 302A1
Total Population: 57017
<PAGE>
EXHIBIT B
CELLULAR ONE LICENSE AGREEMENT
LICENSED TERRITORY
Other
Market
Market Name MSA/RSA Market No. Description
- ------------ ------- ---------- -----------
Oklahoma 02 RSA 597A1
Total Population: 48793
<PAGE>
EXHIBIT B
CELLULAR ONE LICENSE AGREEMENT
LICENSED TERRITORY
Other
Market
Market Name MSA/RSA Market No. Description
- ------------ ------- ---------- -----------
Kansas 05 RSA 432A1
Total Population: 117381
<PAGE>
EXHIBIT B
CELLULAR ONE LICENSE AGREEMENT
LICENSED TERRITORY
Other
Market
Market Name MSA/RSA Market No. Description
- ------------ ------- ---------- -----------
Missouri 01 RSA 505A1
Total Population: 42617
<PAGE>
EXHIBIT B
CELLULAR ONE LICENSE AGREEMENT
LICENSED TERRITORY
Other
Market
Market Name MSA/RSA Market No. Description
- ------------ ------- ---------- -----------
Missouri 02 RSA 505A1
Total Population: 34132
<PAGE>
EXHIBIT B
CELLULAR ONE LICENSE AGREEMENT
LICENSED TERRITORY
Other
Market
Market Name MSA/RSA Market No. Description
- ------------ ------- ---------- -----------
Missouri 04-DeKalb RSA 507A1
Total Population: 69073
<PAGE>
EXHIBIT B
CELLULAR ONE LICENSE AGREEMENT
LICENSED TERRITORY
Other
Market
Market Name MSA/RSA Market No. Description
- ------------ ------- ---------- -----------
Missouri 05 RSA 508A1
Total Population: 68322
<PAGE>
ASSET PURCHASE AGREEMENT
among
HORIZON CELLULAR TELEPHONE COMPANY OF HAGERSTOWN, L.P.,
CUMBERLAND CELLULAR PARTNERSHIP,
DOBSON CELLULAR OF MARYLAND, INC.
and
DOBSON COMMUNICATIONS CORPORATION
DATED AS OF NOVEMBER 19, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I PURCHASE AND SALE ............................................ 1
ARTICLE II DESCRIPTION OF ASSETS; EXCLUDED ASSETS ....................... 2
Section 2.01 Assets ....................................................... 2
Section 2.02 Excluded Assets .............................................. 3
ARTICLE III ASSUMPTION OF LIABILITIES .................................... 3
ARTICLE IV INSTRUMENTS OF TRANSFER ...................................... 4
Section 4.01 Transfer Documents ........................................... 4
Section 4.02 Assumption Documents ......................................... 4
ARTICLE V PURCHASE PRICE; ALLOCATION ................................... 4
Section 5.01 Purchase Price ............................................... 4
Section 5.02 Deposit ...................................................... 4
Section 5.03 Payment of Purchase Price .................................... 5
Section 5.04 Allocation of Purchase Price ................................. 5
Section 5.05 Purchase Price Adjustment .................................... 5
ARTICLE VI CLOSING ...................................................... 8
ARTICLE VII SELLERS' REPRESENTATIONS ..................................... 9
Section 7.01 Organization; Qualification .................................. 9
i
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Section 7.02 Consents; Authorization; Execution and
Delivery of Agreement ........................................ 9
Section 7.03 Subsidiaries and Interests in Other Companies ................ 9
Section 7.04 Title to Assets; Condition of Assets ........................ 10
Section 7.05 Real Property-Owned ......................................... 10
Section 7.06 Real and Personal Property-Leased ........................... 10
Section 7.07 Existing Contracts .......................................... 10
Section 7.08 Governmental Licenses ....................................... 11
Section 7.09 Compliance with Law ......................................... 11
Section 7.10 No Violation of Existing Agreements ......................... 11
Section 7.11 Litigation and Legal Proceedings ............................ 12
Section 7.12 Environmental Compliance .................................... 12
Section 7.13 Labor Matters ............................................... 13
Section 7.14 Employee Benefits ........................................... 13
Section 7.15 Tax Matters ................................................. 14
Section 7.16 Financial Statements ........................................ 14
Section 7.17 Subscribers; Agents ......................................... 16
Section 7.18 Insurance ................................................... 16
Section 7.19 Brokers ..................................................... 16
Section 7.20 Undisclosed Liabilities ..................................... 16
Section 7.21 Pricing of Services ......................................... 17
Section 7.22 Proprietary Rights .......................................... 17
Section 7.23 Accounts Receivable and Bad Debts ........................... 17
Section 7.24 Product Information ......................................... 17
Section 7.25 Certain Business Relationships with Sellers ................. 17
ARTICLE VIII PURCHASER'S REPRESENTATIONS ................................. 17
Section 8.01 Organization; Qualification ................................. 17
Section 8.02 Consents; Authorization; Execution
and Delivery of Agreement ................................... 18
Section 8.03 Litigation and Legal Proceedings ............................ 18
Section 8.04 Brokers ..................................................... 18
Section 8.05 Compliance with Law ......................................... 18
Section 8.06 FCC Matters ................................................. 18
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Section 8.07 Financial Ability to Close .................................. 18
ARTICLE IX SELLERS', DOBSON'S, AND PURCHASER'S
COVENANTS ................................................... 19
Section 9.01 Financial Statements and Cellular System Information ........ 19
Section 9.02 Governmental Approvals ...................................... 19
Section 9.03 Third Party Consents; Closing Conditions .................... 20
Section 9.04 Audit of Seller's 1996 Financial Statements ................. 21
Section 9.05 Access ...................................................... 22
Section 9.06 Conduct of Business ......................................... 23
Section 9.07 No Shopping ................................................. 25
Section 9.08 Employees; Employee Compensation ............................ 26
Section 9.09 Restrictions on Certain Actions ............................. 26
Section 9.10 Supplemental Disclosure ..................................... 26
Section 9.11 Disclaimer of Other Representations and Warranties .......... 26
Section 9.12 Guaranty by Dobson of Purchaser's Obligations ............... 27
Section 9.13 Rescission .................................................. 27
ARTICLE X CONDITIONS PRECEDENT TO PURCHASER'S
OBLIGATION TO CLOSE ......................................... 27
Section 10.01 Accuracy of Representations and Warranties; ................. 27
Performance of this Agreement ............................... 27
Section 10.02 Partner Resolutions ......................................... 28
Section 10.03 Incumbency Certificate ...................................... 28
Section 10.04 Third Party Consents; FCC; Hart-Scott Act ................... 28
Section 10.05 Due Diligence ............................................... 29
Section 10.06 No Material Adverse Change .................................. 29
Section 10.07 Opinion of Counsel to Sellers ............................... 30
Section 10.08 Opinion of FCC Counsel to Sellers ........................... 30
Section 10.09 Subscribers ................................................. 30
Section 10.10 Operating Cash Flow ......................................... 30
Section 10.11 Escrow Agreement ............................................ 31
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ARTICLE XI CONDITIONS PRECEDENT TO SELLERS'
OBLIGATION TO CLOSE ......................................... 31
Section 11.01 Accuracy of Representations and Warranties;
Performance of this Agreement ............................... 31
Section 11.02 Directors' Resolutions ...................................... 31
Section 11.03 Incumbency Certificate ...................................... 31
Section 11.04 Third Party Consents; FCC; Hart-Scott Act ................... 31
Section 11.05 Opinion of Counsel to Purchaser ............................. 32
ARTICLE XII CASUALTY LOSSES ............................................. 32
ARTICLE XIII INDEMNIFICATION ............................................. 32
Section 13.01 Indemnification by Sellers .................................. 32
Section 13.02 Indemnification by Purchaser ................................ 33
Section 13.03 Notice of Claims; Defense of Third Party Claims ............. 33
Section 13.04 Non Recourse to Sellers' Partners ........................... 35
Section 13.05 Limitations ................................................. 35
ARTICLE XIV CONFIDENTIALITY AND PRESS RELEASES .......................... 36
Section 14.01 Confidentiality ............................................. 36
Section 14.02 Press Release ............................................... 36
Section 14.03 Disclosures Required By Law ................................. 36
ARTICLE XV TERMINATION ................................................. 36
Section 15.01 Breaches and Defaults; Opportunity to Cure .................. 36
Section 15.02 Termination ................................................. 37
ARTICLE XVI BROKERS' FEES ............................................... 38
ARTICLE XVII ARBITRATION ................................................. 38
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ARTICLE XVIII MISCELLANEOUS ............................................... 39
Section 18.01 Additional Instruments of Transfer .......................... 39
Section 18.02 Notices ..................................................... 39
Section 18.03 Expenses .................................................... 40
Section 18.04 Transfer Taxes .............................................. 41
Section 18.05 Collection Procedures ....................................... 41
Section 18.06 Specific Performance ........................................ 41
Section 18.07 Governing Law ............................................... 41
Section 18.08 Assignment .................................................. 41
Section 18.09 Successors and Assigns ...................................... 41
Section 18.10 Amendments; Waivers ......................................... 41
Section 18.11 Entire Agreement ............................................ 41
Section 18.12 Counterparts ................................................ 42
Section 18.13 Severability ................................................ 42
Section 18.14 Section Headings ............................................ 42
Section 18.15 Interpretation .............................................. 42
Section 18.16 Further Assurances .......................................... 42
Section 18.17 Third Parties ............................................... 42
Section 18.18 Certain Defined Terms ....................................... 42
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DEFINED TERMS
Term Section Cite
---- ------------
AAA Article XVII
Accountants 7.04(a)
Acquisition Proposal 9.07
Adjustment Date 6.01(a)
Adjustments 5.05(e)
Asserting Party 13.03
Assets 2.01
Assumed Contracts Article III
Assumption Agreement 4.02
Assumed Liabilities Article III
Audit 9.04(b)
Audited Historical Financial Statements 7.16(a)(i)
August Balance Sheet 7.16(a)(iii)
Authorizations 7.08
Balance Sheet Date 7.16(a)(iii)
Base Price 5.01
Bill of Sale 4.01
Breaching Party 15.01
Budget 7.16(a)(iv)
Business Recitals
Capex Adjustment 5.05(c)
CCP Introduction
Cellular Areas Recitals
Cellular Systems Recitals
CERCLA 7.12(b)
Claims Article XII
Closing Article VII
Closing Certificate 5.05(e)
Closing Date Article VII
Closing Statement 6.01(a)
Closing Subscribers 5.05(d)
Code 7.14
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Controlled Group Member 7.14
Current Assets 5.05(a)
Current Financial Statements 7.16(a)(ii)
Current Liabilities 5.05(a)
Defending Party 13.03
Defined Benefit Pension Plan 7.14
Deposit 5.02
Deposit Escrow Agent 5.02
Deposit Escrow Agreement 5.02
Dispute Article XVII
Dispute Note 5.02
Dobson Introduction
DOJ 10.04
Employee Benefit Plans 7.14
Environmental Laws 7.12(c)
ERISA 7.14
ERISA Affiliate 7.14
Escrow Agent 5.03
Escrow Agreement 5.03
Escrow Payment 5.03
Excluded Assets 2.02
Existing Contracts 7.07
FCC Recitals
FCC Authorizations 2.01(a)
Final Order 10.04
FTC 10.04
GAAP 5.05(a)
Guaranty 10.07
Hart-Scott Act 9.02(a)
Hazardous Substances 7.12(a)
HCTC Introduction
Historical Financial Statements 7.16(a)(ii)
Horizon Corporate 10.01
Indemnified Purchase Parties 14.01(a)
Independent Accounts 9.04(a)
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Intangible Property 7.24
Interest 9.03
Interim Financial Statements 9.01
KCCGP 7.04
Liquidated Damages Amount 5.02
Liens Article I
Losses 13.01
MSA Recitals
Material Adverse Effect 10.01
Multiemployer Plan 7.14
Necessary Financing 11.07
Nonassumed Liabilities Article III
Non-Breaching Party 15.01
Objection Notice 9.04(c)
OCF Calculation 9.04(c)
Offering Memorandum 9.11
Operating Budget 9.01
Other Applicable Period 10.10
Permitted Liens Article I
Phase I Assessment 9.05(b)
Phase II Assessment 9.05(b)
Purchase Price 5.01
Purchaser Introduction
Purchaser Obligations 9.12
Purchaser's Accountant 9.04(a)
Purchaser's Estimate 5.05(e)
RCLA 7.12(b)
RCRA 7.12(b)
Recipient Party 14.01
Response Period 5.05(e)
RSA Recitals
Sellers Introduction
Sellers' Accountant 9.04(a)
Sellers' Estimate 5.05(e)
Six Month Income Statement 7.16(a)(i)
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Special Temporary Authority 10.04
Subscriber 5.05(a)
Subscriber Adjustment 5.05(d)
System Capex 5.05(a)
Target Number of Subscribers 5.05(a)
Tax 7.15
Third Party Claim 13.03
Unaudited Historical Financial Statements 7.16(a)(ii)
Working Capital Adjustment 5.05(b)
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SCHEDULES
- ---------
1 Permitted Liens
2.01(a) Contracts and Licenses
2.01(c) Tangible Asset List
2.01(d) Interests in Real Property
2.01(f) Intangible Personal Property
2.02 Excluded Assets
5.05(a) 1996 Marketing/Promotional Plans
7.01 Sellers' Partners
7.04 Encumbrances
7.08 Governmental Licenses
7.09 Compliance with Laws
7.10 Consents
7.11 Litigation
7.12 Environmental Compliance
7.13 Employees
7.14 Employee Benefits
7.15 Tax Matters
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7.16(a)(i) Audited Historical Financial Statements
7.16(a)(ii) Unaudited Historical Financial Statements
7.16(a)(iii) Current Financial Statements
7.16(a)(iv) Budget
7.16(c) Certain Transactions Since August 31, 1996
7.17 Subscribers; Agents
7.21 Pricing of Services
7.23 Accounts Receivable Aging
7.24 Product Information
7.25 Certain Business Relationships
9.01 Operating Budget
10.04 Material Consents
EXHIBITS
- --------
A. Bill of Sale
B. Assumption Agreement
C. Deposit Escrow Agreement
D. Escrow Agreement
E Opinion of Counsel for Sellers
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F. Opinion of FCC Counsel for Sellers
G. Opinion of Counsel for Purchaser
iii
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of November 19, 1996 by and
among HORIZON CELLULAR TELEPHONE COMPANY OF HAGERSTOWN, L.P., a Delaware limited
partnership ("HCTC"), CUMBERLAND CELLULAR PARTNERSHIP, a Pennsylvania general
partnership ("CCP"; and together with HCTC, individually "Seller" and
collectively "Sellers"), DOBSON COMMUNICATIONS CORPORATION, an Oklahoma
corporation ("Dobson"), and DOBSON CELLULAR OF MARYLAND, INC., an Oklahoma
corporation ("Purchaser").
R E C I T A L S
WHEREAS, Sellers own all right, title and interest in those certain
licenses listed on Schedule 2.01(a) granted by the Federal Communications
Commission ("FCC") to provide cellular radio telephone service in each of
(i) the FCC's rural service area ("RSA") #3 in the State of Maryland, (ii) the
Cumberland, Maryland metropolitan statistical area ("MSA"), (iii) the
Hagerstown, Maryland MSA and (iv) the Pennsylvania 10 West, RSA (collectively,
the "Cellular Areas") and own and operate the non-wireless cellular telephone
systems in the Cellular Areas (individually a "Cellular System" and
collectively the "Cellular Systems"); and
WHEREAS, Purchaser desires to purchase from Sellers, and Sellers desire to
sell to Purchaser, substantially all of the assets and rights of Sellers
relating to the ownership and operation of the cellular radio telephone
businesses in the Cellular Areas (the "Business"), all subject to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein set forth and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE
Except as otherwise provided and subject to the terms and conditions set
forth in this Agreement, Sellers agree to sell, convey, assign, transfer and
deliver to Purchaser, and Purchaser agrees to purchase from Sellers at the
Closing, all of Sellers' right, title and interest in and to the
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Assets (as defined in Section 2.01 hereof), free and clear of all debts,
liabilities, obligations, taxes, security interests, liens, pledges, charges,
rights of third parties and encumbrances of every kind (collectively,
"Liens") other than Permitted Liens. As used herein, the term "Permitted
Liens" means (i) any lien or other encumbrance for taxes and assessments, not
yet past due or otherwise being contested in good faith and for which
appropriate reserves have been established to the extent taken into account
in the Working Capital Adjustment, (ii) any lien or other encumbrance arising
out of deposits made to secure leases or other obligations of a like nature
arising in the ordinary course of business, (iii) any lien or other
encumbrance provided for in any contract listed on the disclosure schedules
hereto and not related to any indebtedness for borrowed money, (iv) any lien
or other encumbrance that does not materially interfere with the use by
Sellers of the property subject thereto or affected thereby (including any
easements, rights of way, restrictions, installations or public utilities,
title imperfections and restrictions, reservations in land patents, zoning
ordinances or other similar liens or other encumbrances) and (v) any lien or
other encumbrance set forth on SCHEDULE 1 attached hereto.
ARTICLE II
DESCRIPTION OF ASSETS; EXCLUDED ASSETS
SECTION 2.01. ASSETS. The assets to be conveyed to Purchaser shall
include all real and personal tangible and intangible assets, properties, rights
and business owned by Sellers of whatever description which relate in any way to
the ownership, use or operation of the Business, except assets excluded pursuant
to Section 2.02 hereof, but including all property and rights acquired or
obtained by Sellers from the date hereof through the date of Closing, to the end
that, except as set forth herein, all of the Sellers' assets, properties, rights
and business owned at the Closing and related in any way to the ownership, use
or operation of the Business, other than the assets excluded pursuant to
Section 2.02 hereof, shall pass to Purchaser (collectively, the "Assets"). Such
Assets shall be free and clear of all Liens other than Permitted Liens as of the
Closing. Such Assets shall include, without limitation:
(a) Sellers' licenses, including the FCC authorizations to operate a
cellular radio telephone system in the Cellular Areas (the "Cellular
Authorizations") and microwave paths used in connection with such cellular
operations (the "Microwave Authorizations" and together with the Cellular
Authorizations, the "FCC Authorizations"), leases, agreements, permits,
consents, revenue sharing agreements, agreements for the reception or
transmission of signals by microwave, easements, appurtenances, rights-of-way
and construction permits, if any are in
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effect on the Closing Date, all right, title and interest, if any, in and to
all streets, roads and public places, open or proposed, all agreements
between a Seller and any suppliers, cellular telephone service companies and
subscribers (including subscriber deposits), and all other similar rights and
agreements (including so-called roaming agreements), including all
applications therefor, which in any way may relate to or concern the
operation by Sellers of the Business, as more particularly described and
categorized by each Cellular System on SCHEDULE 2.01(a) attached hereto.
(b) Originals or copies (at Sellers' option) of all of Sellers' files
of correspondence, lists, records and reports concerning (i) customers and
prospective customers of the Business and (ii) all dealings with Federal, state
and local regulatory agencies with respect to the Business, including, but not
limited to, all reports filed by or on behalf of any Seller with the FCC;
(c) All of Sellers' right, title and interest to towers, tower
equipment, antennas, switching and cell site equipment and buildings,
construction in progress, microwave equipment, testing equipment, motor
vehicles, office equipment, furniture and fixtures, supplies, inventory and
other physical assets, if any, used in or relating to the Business, and all
modifications, additions, restorations or replacements of the whole or any part
thereof, substantially all of which tangible assets as of the date hereof are
described and categorized by each Cellular System on SCHEDULE 2.01(c) attached
hereto;
(d) All interests in real property of Sellers used in or relating to
the Business, as described and categorized by each Cellular System on
SCHEDULE 2.01(d) attached hereto;
(e) All of Sellers' right, title and interest to engineering records,
files, data, drawings, blueprints, schematics, maps, reports, lists and plans
and processes intended for use in connection with the Business provided that
Sellers may retain the originals thereof so long as Purchaser is provided with
copies thereof;
(f) All of Sellers' right, title and interest in and to intangible
personal property used in or relating to the Business, including without
limitation, all rights, trademarks, trade names, patents and copyrights used by
Sellers, and all of the rights of Sellers associated therewith (including any
and all applications, registrations, extensions and renewals thereof), and such
rights, trademarks, trade names, patents and copyrights as of the date hereof
are described and categorized by each Cellular System on SCHEDULE 2.01(f)
attached hereto; and
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(g) Any assets of the type-described above which are acquired after
the date hereof but prior to the Closing.
SECTION 2.02. EXCLUDED ASSETS. (a) The properties and assets described in
SCHEDULE 2.02 attached hereto and in Section 2.02(b) of this Agreement which
relate to the Business shall be retained by Sellers and shall not be sold,
assigned or transferred to Purchaser (the "Excluded Assets").
(b) Anything in this Agreement to the contrary notwithstanding, the
Assets sold to the Purchaser pursuant to the terms of this Agreement shall not
include the Sellers' partnership records, books of account, cash, bank deposits
and cash equivalents at the time of the Closing.
ARTICLE III
ASSUMPTION OF LIABILITIES
Purchaser shall assume and agree to perform and discharge as of the Closing
the following to the extent not previously performed or discharged: (i) all
obligations of Sellers which accrue and are to be performed from and after the
Closing under those permits, authorizations, licenses, leases, rights of way,
easements and other agreements either set forth on SCHEDULES 2.01(a) AND (d)
attached hereto or those agreements of a non-material nature which are not
required to be disclosed on SCHEDULES 2.01(a) AND (d) and (ii) all other
obligations of Sellers entered into during the period from the date hereof to
the Closing by any Seller in the ordinary course of its business in accordance
with the provisions of Section 9.06 below or that were identified to and
consented by Purchaser (all of such permits, authorizations, licenses, leases,
rights of way, easements and other agreements referred to in items (i) and (ii)
being referred to hereinafter as the "Assumed Contracts"); and (iii) all
"Current Liabilities" (as defined in Section 5.05(a) hereof) but only if and to
the extent that Purchaser receives a credit against the Purchase Price at the
Closing (such items (i) through (iii) are collectively referred to herein as the
"Assumed Liabilities"). Purchaser shall not be liable for any liabilities,
debts, contracts, agreements, including without limitation any contracts or
agreements set forth on SCHEDULE 2.02, or other obligations of Sellers of any
nature whatsoever other than the Assumed Liabilities (such other liabilities,
debts, contracts, agreements or obligations of Sellers other than the Assumed
Liabilities being referred to as "the Nonassumed Liabilities").
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ARTICLE IV
INSTRUMENTS OF TRANSFER
AND ASSUMPTION
SECTION 4.01. TRANSFER DOCUMENTS. At the Closing, Sellers will deliver to
Purchaser (a) one or more Bills of Sale in substantially the form attached
hereto as EXHIBIT A (a "Bill of Sale"), (b) all such other good and sufficient
instruments of sale, transfer and conveyance, including, without limitation,
assignments of leases, in such form and including such matters as Purchaser
shall reasonably request, as shall be effective to vest in Purchaser all of
Sellers' right and title to, and interest in, the Assets; and (c) all contracts
and commitments, instruments, books and records (except as otherwise provided in
Section 2.02 hereof) and other data relating to the Assets, Business and
operations of Sellers.
SECTION 4.02. ASSUMPTION DOCUMENTS. At the Closing, Purchaser and Sellers
will execute and deliver an Assumption Agreement in substantially the form
attached hereto as EXHIBIT B (the "Assumption Agreement") in order to effect the
assumption of the Assumed Liabilities by Purchaser.
ARTICLE V
PURCHASE PRICE; ALLOCATION
SECTION 5.01. PURCHASE PRICE. The total purchase price for the Assets
shall be Seventy-Five Million Dollars ($75,000,000) (the "Base Price"), as
adjusted in accordance with the provisions of Section 5.05 hereof (as adjusted,
the "Purchase Price").
SECTION 5.02. DEPOSIT. Simultaneously with the execution of this
Agreement, Purchaser is depositing as a good faith deposit $3.75 million (the
"Deposit") with CoreStates Bank, N.A. (the "Deposit Escrow Agent"), to be held,
invested and disbursed pursuant to the terms of the Deposit Escrow Agreement
substantially in the form of EXHIBIT C attached hereto (the "Deposit Escrow
Agreement"). If the Closing occurs, then the Deposit and all earnings on the
Deposit shall be paid to Sellers pursuant to the Deposit Escrow Agreement and
the full amount of the Deposit and the earnings thereon shall be credited
against and deducted from the Purchase Price to be paid at the Closing by
Purchaser for the Assets. If Sellers terminate this Agreement in accordance
with the provisions of Section 15.02(d), at the time of such termination Sellers
are not then in breach of any of their representations, warranties, covenants or
agreements to such an extent that
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Sellers' breaches, in the aggregate, would reasonably be expected to have a
Material Adverse Effect and the conditions set forth in Sections 10.04 (only
FCC and Hart-Scott-Rodino Act consents), 10.06, (provided that the applicable
period shall be from August 31, 1996 through the date of termination of this
Agreement), 10.09 and 10.10 shall have been satisfied, then Sellers shall be
entitled to (i) $1,500,000 of the Deposit as liquidated damages (the
"Liquidated Damages Amount") without the necessity for proof by Sellers of
actual damages, which Liquidated Damages Amount the parties agree is a fair
and reasonable measure of the damages that Sellers would sustain as a result
of such termination, and (ii) up to an additional $2,250,000 from Purchaser
and Dobson (in the aggregate) upon proof by Sellers of actual damages greater
than the Liquidated Damages Amount. Notwithstanding anything else set forth
in this Section 5.02, Sellers' sole and exclusive recourse for Purchaser's or
Dobson's breach of their representations or obligations under this Agreement
prior to Closing shall only be to receive an amount up to $3.75 million. In
any other case if the Closing does not occur, then, pursuant to the Deposit
Escrow Agreement, the Deposit and all earnings thereon shall be paid to
Purchaser. All determinations of breach and satisfaction of conditions shall
be made, and all payments by the Deposit Escrow Agent shall be made, in
accordance with the procedures and other provisions set forth in the Deposit
Escrow Agreement.
SECTION 5.03. PAYMENT OF PURCHASE PRICE. The Purchase Price, less the
Deposit and all earning thereon and less an amount equal to $3.75 million (the
"Escrow Payment"), shall be payable by wire transfer of immediately available
funds to Sellers at Closing. The Escrow Payment shall be paid by the Purchaser
at Closing to CoreStates Bank, N.A., as escrow agent (the "Escrow Agent") to be
held, invested and disbursed pursuant to the terms of the Escrow Agreement
substantially in the form of EXHIBIT D attached hereto (the "Escrow Agreement').
SECTION 5.04. ALLOCATION OF PURCHASE PRICE. Within thirty (30) days prior
to the Closing, Purchaser and Sellers in good faith shall agree on an allocation
of the Purchase Price in accordance with the respective fair market value of the
Assets being purchased and as provided for under Section 1060 of the Code.
Purchaser and Sellers each further agree to file their income tax returns and
their other tax returns and IRS Form 8594 reflecting the allocation as
determined in this Section 5.04. If no agreement on an allocation of the
Purchase Price with respect to the Assets is reached within such thirty (30) day
period, such allocation of the Purchase Price to the Assets shall be determined
by a nationally recognized appraisal firm mutually agreeable to Sellers and
Purchaser and the costs of such appraisal shall be borne equally by Sellers and
Purchaser.
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SECTION 5.05. PURCHASE PRICE ADJUSTMENT.
(a) As used in this Section 5.05, the following terms shall have the
meaning set forth below:
"CURRENT ASSETS" means the Cellular Systems' (i) accounts receivable,
including all roaming receivables (without any reserves therefor) and subscriber
receivables (net of reserves for subscriber receivables calculated as follows:
2.5% for subscriber receivables that are current to less than or equal to 30
days past due; 15% for subscriber receivables that are between 31 and 60 days
past due; 50% for subscriber receivables that are between 61 and 90 days past
due; and 100% for subscriber receivables that are more than 90 days past due);
(ii) inventory of cellular telephone handsets and ancillary equipment held for
sale for subscriber and which will reasonably be expected based on past
practices to be consumed in the normal course of business within six months
after the Closing, reflected at net book value (provided that if the
manufacturer's price of an inventory item is 10% below the net book value of
such inventory item, the manufacturer's price shall be used) and (iii) prepaid
items which Purchaser will receive the benefit of after the Closing such as
prepaid rent, insurance, property taxes, utility charges, fees and deposits
paid, all determined as of 12:01 a.m. on the Closing Date in accordance with
GAAP.
"CURRENT LIABILITIES" means the Cellular Systems' (i) subscriber deposits
received, (ii) deferred revenue, (iii) employee vacation expense (whether or not
to be paid or vacation time to be taken by the employee after the Closing),
(iv) salaries, bonuses, fringe benefits and other remuneration payable to
employees to be hired by Purchaser, (v) expenses for goods and services
received in the normal course of business including taxes, utility charges,
special assessments, commissions, fees and (vi) other trade payables and
accrued expenses incurred in the normal course of business, all determined as
of 12:01 a.m. on the Closing Date in accordance with GAAP.
"GAAP" means generally accepted accounting principles consistently applied.
"SUBSCRIBER" means a person or entity subscribing for cellular telephone
service on a Cellular System (i) who pays for service under such Cellular
System's normal rate plan for that category of subscriber, (ii) whose account is
active within the normal practices and procedures of the Cellular System and in
no case is more than 70 days past due from the due date and (iii) who was
obtained as a subscriber in the normal course of business of such Cellular
System consistent with past practice and not as a result of (A) marketing
efforts that are not customary in the cellular telephone industry generally or
which were not utilized by Sellers during 1995 or 1996 on a regular basis or
(B) any
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other plans for which the Sellers failed to obtain Purchaser's prior written
consent, which consent will not be unreasonably withheld. SCHEDULE 5.05(a)
attached hereto sets forth all marketing and promotional plans Sellers have
used, are using or propose to use during 1996 to acquire subscribers.
"SYSTEM CAPEX" means the dollar amount incurred or paid for by Sellers
between September 1, 1996 and the Closing Date for equipment and other capital
expenditures (determined in accordance with GAAP and which shall include capital
expenditures for which payment has not yet been made by Sellers but for which a
current liability has been established in Sellers' books and records and which
will be taken into account in the Working Capital Adjustment) for the purpose of
developing and building out the Cellular Systems, provided that no such
expenditure shall be considered a System Capex unless (i) those expenditures are
set forth on Schedule 7.16(a)(iv) or (ii) Purchaser shall have given Seller
written approval for the type and purpose of the property or service to be
purchased or obtained and the amount to be expended therefor.
"TARGET NUMBER OF SUBSCRIBERS" means 21,719 subscribers if the Closing
occurs prior to the end of the normal billing cycle of the Cellular Systems for
January, 1997; or if the Closing occurs after the end of the January, 1997
billing cycle, but prior to the end of the February, 1997 billing cycle, 22,119
subscribers; or if the Closing occurs after the end of the February, 1997
billing cycle but prior to the end of the March, 1997 billing cycle, 22,619
subscribers; or if the Closing occurs after the end of the March, 1997, billing
cycle but prior to the end of the April, 1997 billing cycle, 23,219 subscribers.
(b) The Base Price shall be increased (or decreased) by the amount by
which Current Assets exceeds (or is less than) Current Liabilities as of the
Closing Date (the "Working Capital Adjustment").
(c) The Base Price will be increased at the Closing by the dollar amount
of System Capex up to a maximum increase of $3,000,000 (the "Capex Adjustment").
(d) The Base Price shall be decreased (or increased) to the extent that
the aggregate number of subscribers on the Cellular Systems as of the last day
of the billing cycle for the month preceding the Closing Date (the "Closing
Subscribers") are less than 90% of (or exceed 110% of) the Target Number of
Subscribers in an amount equal to such deficiency (or excess) multiplied by
$300.00; it being agreed that there shall be no decrease from (or increase to)
the Base Price under this Section
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5.05(d) in the event that the Closing Subscribers are between 90%-110% of the
Target Number of Subscribers (such increase or decrease being referred to as
the "Subscriber Adjustment").
(e) Sellers shall prepare and submit to Purchaser, not later than 5
business days prior to the Closing Date, a written good faith estimate of the
amount of the Working Capital Adjustment, Capex Adjustment and Subscriber
Adjustment (collectively, the "Adjustments") in accordance with this
Section 5.05 and Seller's estimate of the Purchase Price resulting from the
Adjustment ("Sellers' Estimate"). Sellers' Estimate shall be accompanied by
detailed supporting documents, work papers, subscriber records and other data
supporting each Adjustment and Sellers' Estimate. The Sellers' Estimate
shall be based upon the books and records of the Cellular Systems. The
Sellers' Estimate shall be accompanied by a certificate signed by a senior
officer of the general partner of each Seller certifying that the Sellers'
Estimate was calculated in good faith and in accordance with the provisions
of this Section 5.05. After the delivery of Sellers' Estimate and prior to
the Closing, Purchaser and Sellers shall attempt to resolve any disputes
between Sellers and Purchaser with respect to Sellers' proposed Adjustments.
In connection therewith, Purchaser shall have full access to all Sellers'
records related to Sellers' proposed Adjustments. Prior to Closing,
Purchaser shall advise Sellers in writing as to any dispute Purchaser has
with Sellers' Estimate and provide Sellers Purchaser's calculation of the
Adjustments and the Purchase Price, accompanied by a certificate signed by a
senior officer of Purchaser certifying that Purchaser's calculation was made
in good faith and supporting documents and information, to the extent the
same is available to Purchaser ("Purchaser's Estimate"). In the event
Purchaser's Estimate of the Purchase Price is less than $25,000 less than
Sellers' Estimate, the Closing shall proceed with the Purchase Price based
upon Sellers' Estimate. In the event the Purchaser's Estimate of the
Purchase Price is more than $25,000 less than Sellers' Estimate, then the
mid-point between Sellers' Estimate and Purchaser's Estimate shall be used as
the Purchase Price for purposes of Closing.
Within 60 days after the Closing Date, Purchaser shall deliver to Sellers a
certificate (the "Closing Certificate") signed by a senior officer of Purchaser
providing a compilation of the Adjustments to be made pursuant to this
Section 5.05 including any changes in the Adjustments used to determine the
Purchase Price at Closing, together with a copy of any supporting documents,
work papers, subscriber records and other data relating to such Closing
Certificate and such other supporting evidence as Sellers may reasonably
request either prior to or after delivery thereof. If Sellers shall conclude
that the Closing Certificate does not accurately reflect the Adjustments to
be made to the Base Price in accordance with this Section 5.05, Sellers
shall, within 40 days after their receipt of the Closing Certificate (such 40
day period being referred to as the "Response Period"),
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deliver to Purchaser a written statement of any discrepancies believed to
exist. If Sellers fail to so notify Purchaser of any discrepancies, then the
calculation of the Purchase Price set forth in the Purchaser's Closing
Certificate shall be controlling for all purposes hereof and Purchaser or
Sellers, as the case may be, shall on or before the fifth day following the
expiration of the Response Period pay to the other the amount which it is
obligated to pay in accordance with the Closing Certificate. On or before
the fifth day following the earlier to occur of the expiration of the
Response Period and the date Purchaser receives Sellers' statement of
discrepancies, Purchaser or Sellers, as the case may be, shall pay the other
the amount, if any, as to which there is no discrepancy. Purchaser and
Sellers shall use good faith efforts to jointly resolve their discrepancies
within 15 days of Purchaser's receipt of Sellers' written statement of
discrepancies, which resolution, if achieved, shall be binding upon all
parties to this Agreement and not subject to further dispute or review. If
Purchaser and Sellers cannot resolve the discrepancies to their mutual
satisfaction within such 15 day period, then the matter shall be submitted to
the Independent Accountants (as defined in Section 9.04). The Independent
Accountants shall resolve the dispute substantially in accordance with the
procedures set forth in Section 9.04 hereof and the decision of the
Independent Accountants with respect to the Adjustments shall be final and
binding on the parties. Within 5 days of receipt of the Independent
Accountants' decision with respect to such dispute, if Purchaser is
determined to owe an amount to Sellers, Purchaser shall pay such amount
thereof to Sellers, and if Sellers are determined to owe an amount to
Purchaser, Sellers shall pay such amount thereof to Purchaser. All amounts
owed by Purchaser or Sellers to the other in accordance with this
Section 5.05(e) shall be paid by wire transfer of immediately available funds
and shall not bear any interest. Any amount due Purchaser from Sellers under
this Section 5.05 and not paid when due may also be paid from the funds held
pursuant to the Escrow Agreement.
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ARTICLE VI
CLOSING
Subject to the terms and conditions hereof, the Closing (the "Closing")
shall take place at the offices of Edwards & Angell, 2800 Hospital Trust Tower,
Providence, Rhode Island 02903, on the date (the "Closing Date") which is the
latest of (a) the tenth (10th) day after the date that (i) the FCC granted its
consent to the assignment of the Cellular Authorizations, from Sellers to the
Purchaser by a Final Order (as defined in Section 10.04) or (ii) if applicable,
Sellers receive from Purchaser the Finality Waiver Notice, (b) the fifth (5th)
day after the completion of the Audit (as defined in Section 9.04 hereof),
(c) the fifth (5th) day after the expiration or early termination of the
waiting period under the Hart-Scott Act; or (d) the tenth (10th) day after
the date that the FCC granted a Special Temporary Authority (as defined in
Section 10.04) for Purchaser to operate the microwave facilities that are the
subject of the Microwave Authorizations on a temporary basis; provided if
such latest date is not a business date, the Closing Date shall be the next
following business day.
ARTICLE VII
SELLERS' REPRESENTATIONS
Sellers hereby jointly and severally represent, warrant, covenant and
agree, which representations, warranties, covenants and agreements, together
with all other representations, warranties, covenants and agreements of Sellers
in this Agreement, shall survive the execution and delivery of this Agreement
and the payment of the Purchase Price hereunder until June 30, 1998 (PROVIDED,
HOWEVER, that such survival period shall not in any way preclude Purchaser from
seeking indemnification from Sellers for claims related to or arising out of the
Nonassumed Liabilities), that:
SECTION 7.01. ORGANIZATION, QUALIFICATION. (a) Each Seller is a limited
partnership or general partnership (as applicable) duly organized, validly
existing and (with respect to HCTC solely) in good standing under the laws of
the state of its organization and has all necessary power and authority to own
and operate its properties and to carry on its Business as now being conducted
or proposed to be conducted and to carry out the transactions contemplated by
this Agreement. Each Seller has the power and authority to execute and deliver
and, subject to obtaining the FCC's approval to assign the FCC Authorizations
and the other governmental and third-party consents referred to in
Section 10.04, perform its obligations under this Agreement and to
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undertake the transactions contemplated hereby. Each Seller's partners are
as set forth on SCHEDULE 7.01 attached hereto.
SECTION 7.02. CONSENTS, AUTHORIZATION, EXECUTION AND DELIVERY OF
AGREEMENT. All necessary consents and approvals have been obtained by
Sellers for the execution and delivery of this Agreement. The execution,
delivery and performance of this Agreement by Sellers and the transfer of the
Assets to Purchaser have been duly and validly authorized and approved by all
necessary partnership and partner action of each Seller, the general partner
of HCTC and the managing general partner of CCP. This Agreement is a valid
and binding obligation of each Seller, enforceable against it in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws now or hereafter in effect affecting creditors' rights
generally.
SECTION 7.03. SUBSIDIARIES AND INTERESTS IN OTHER COMPANIES. Neither
Seller has any subsidiaries, and does not own or control any shares or other
securities of, or have any other proprietary interest in, any corporation,
partnership, limited liability company, joint venture, business association or
other person.
SECTION 7.04. TITLE TO ASSETS; CONDITION OF ASSETS. Except as set forth
on SCHEDULE 7.04, Sellers have full power, right and authority to sell and
convey to Purchaser good and marketable title to the Assets, free and clear of
all Liens other than Permitted Liens. All Liens in effect on the date hereof
which are to be discharged at Closing are listed on SCHEDULE 7.04 hereto. The
tangible property included among the Assets as of the date hereof is in good
working order and repair, reasonable wear and tear excepted. The Assets
constitute all of the assets which are necessary, used or useful in the
operation of the Business other than the Microwave Authorizations issued to
KCCGP, L.P., a Delaware limited partnership and affiliate of Sellers ("KCCGP"),
which are identified on SCHEDULE 2.01(a) and that will be included within the
Assets to be transferred to Purchaser and other than the Excluded Assets. No
partner of any Seller except KCCGP with respect to the Microwave Authorizations
or any other individual, partnership, corporation, person or entity (a "Person")
other than the Sellers owns, leases or has any rights in any property, license
or other assets related to the Business other than the Excluded Assets. Except
for factors typically affecting propogation and reception in the cellular
telephone industry generally, the Assets are technically sufficient and capable
of providing cellular telephone service in the Cellular Areas for which Sellers
are licensed in accordance with applicable FCC regulations except as set forth
on SCHEDULE 7.08.
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SECTION 7.05. REAL PROPERTY - OWNED. Sellers own no real property.
SECTION 7.06. REAL AND PERSONAL PROPERTY - LEASED. Set forth on
SCHEDULE 2.01(d) (in the case of real property) and SCHEDULE 2.01(a) (in the
case of personal property), are true and accurate listings of all real and
personal property leases (other than personal property leases with annual
payments of less than $12,000 and which leases, together with the other
contracts and agreements not required to be disclosed on SCHEDULES 2.01(a) AND
(d), in the aggregate have annual payments of less than $150,000 or which are
terminable without penalty on six months or less notice) of Sellers used or
useful in the ownership or operation of the Assets and the Business setting
forth (i) the name of the lessor and (ii) with respect to the real property
leases, a description of the property leased. Except as set forth on
SCHEDULE 2.01(d) (in the case of leased real property) and SCHEDULE 2.01(a) (in
the case of leased personal property), with respect to such leases, the Sellers
hold valid leasehold interests therein, such leases are in full force and
effect, and will be free and clear of all Liens other than Permitted Liens at
the Closing.
SECTION 7.07. EXISTING CONTRACTS. SCHEDULES 2.01(a) AND (d) hereto sets
forth all agreements (other than standard subscriber agreements for cellular
service) in effect on the date hereof with each Seller's subscribers, all leases
(other than personal property leases with annual payments of less than $12,000
and which leases, together with the other contracts and agreements not required
to be disclosed on SCHEDULES 2.01(a) AND (d), in the aggregate have annual
payments of less than $150,000 or which are terminable without penalty on six
months or less notice) to which each Seller is a party and which relate to the
ownership of the Assets or the operation of the Business, and all other
agreements (other than agreements with annual payments of less than $12,000 and
which agreements, together with the other leases and contracts not required to
be disclosed on SCHEDULES 2.01(a) AND (d), in the aggregate have annual payments
of less than $150,000 or which are terminable without penalty on six months or
less notice) or commitments (written or oral) to which each Seller is a party
which relate to the ownership of the Assets or the operation of the Business
(the "Existing Contracts") except for outstanding purchase orders that are
included in the Budgets (the "Purchase Orders"). No partner of any Seller or
any Person (other than Seller) controlling, controlled by or affiliated with any
such partner has any contractual relationship relating to the ownership or
operation of the Business. Sellers have heretofore delivered to Purchaser true
and correct copies of the Existing Contracts. Except as disclosed on
SCHEDULES 2.01(a) AND (d), Sellers have no knowledge of any breach or
anticipated breach by the other parties to any Existing Contracts. The Existing
Contracts are in full force and effect and Sellers are in compliance with the
terms of such Existing Contracts. Except for the Existing
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Contracts and the Purchase Orders, neither Seller has entered into any other
agreements (other than agreements with annual payments of less than $12,000
and which agreements, together with the other leases and contracts not
required to be disclosed on SCHEDULES 2.01(a) AND (d), in the aggregate have
annual payments of less than $150,000 or which are terminable without penalty
on six months or less notice) relating to the ownership of the Assets and the
operation of the Business, including, but not limited to, rights-of-way,
rights of entry, licenses, easements, leases (real property or equipment), or
guaranty agreements. There are no claims by third parties that either Seller
is required to enter into other agreements to enable it to continue owning
the Assets and the operation of the Business as it is presently being
operated.
SECTION 7.08. GOVERNMENTAL LICENSES. Except as set forth on
SCHEDULE 7.08, Sellers and KCCGP hold all necessary licenses, consents, permits,
approvals and authorizations of public or governmental bodies including, without
limitation, the FCC Authorizations and the state, counties and municipalities
served by the Business, which are required in connection with the ownership of
the Assets (collectively referred to as the "Authorizations"). All
Authorizations are in full force and effect. Each Seller has complied with the
terms of the Authorizations to which it holds and there are no pending
modifications, amendments or revocations of the Authorizations which would
adversely affect the ownership of the Assets and the operation of the Business.
All fees of Sellers due and payable to governmental authorities pursuant to the
Authorizations have been paid. All reports required of Sellers to be filed in
connection with the Authorizations have been timely filed and are accurate and
complete. True and correct copies of the Authorizations, and all amendments
thereto to the date hereof, have been delivered by Sellers to Purchaser and are
identified on SCHEDULE 2.01(a) hereto. The ownership of the Assets and the
operation of the Business by Sellers are not subject to regulation or
supervision by any applicable state public utilities commission or other similar
state governmental instrumentality.
SECTION 7.09. COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 7.09,
Sellers are currently complying with and have so complied with, and are not in
default under or in violation of, and neither the Business nor any of the Assets
nor the operation or maintenance thereof, contravenes in any respect any
statute, law (including environmental or employment laws), ordinance, decree,
order, rule, regulation of any governmental body applicable to the Assets or the
Business, including, without limitation, rules and regulations of the FCC.
SECTION 7.10. NO VIOLATION OF EXISTING AGREEMENTS. The execution,
delivery and performance of this Agreement by Sellers will not violate any
provisions of law and will not,
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with or without the giving of notice or the passage of time, or both,
conflict with or result in any breach of any of the terms or conditions of,
or constitute a default under any Existing Contracts. Subject to the consents
for the Existing Contracts identified in SCHEDULE 7.10, the execution,
delivery and performance of this Agreement by Sellers will not result in the
creation of any Lien upon the Assets or the Business other than Permitted
Liens.
SECTION 7.11. LITIGATION AND LEGAL PROCEEDINGS. Except as set forth on
SCHEDULE 7.11, there is no outstanding judgment against Sellers or any partner
of a Seller affecting the Business or the Assets or which question the validity
of any action taken or to be taken pursuant to or in connection with the
provisions of this Agreement and there is no litigation, proceeding or
investigation pending, or, to any Seller's knowledge, threatened, against any
Seller or the partners of any Seller affecting the Business or the Assets or
which questions the validity of any action taken or to be taken pursuant to or
in connection with the provisions of this Agreement. Except as set forth on
SCHEDULE 7.11, there are no proceedings pending to which any Seller or any
partner of a Seller is a party or, to any Seller's knowledge, threatened, nor
any demands by any governmental agency, utility or other party, to terminate,
modify or adversely change the terms and conditions of any Seller's rights with
respect to the Authorizations or Existing Contracts.
SECTION 7.12. ENVIRONMENTAL COMPLIANCE. (a) Except as set forth on
SCHEDULE 7.12 hereto, (i) neither Seller has generated, used, transported,
treated, stored, released or disposed of, or has not suffered or permitted
anyone else to generate, use, transport, treat, store, release or dispose of any
Hazardous Substance (as hereinafter defined) with respect to the Assets or the
Business in violation of any Environmental Laws (as hereinafter defined); (ii)
there has not been any generation, use, transportation, treatment, storage,
release or disposal of any Hazardous Substance in connection with their
ownership of the Assets, the conduct of the Business or the use of any property
or facility which relates to their ownership of the Assets, the Business, or,
any adjacent properties or facilities, which has created or might reasonably be
expected to create any liability under any Environmental Laws or which would
require reporting to or notification of any governmental entity; (iii) no
friable asbestos or polychlorinated biphenyl, and no underground storage tank,
is contained in or located at any facility of a Seller relating to the Business
in violation of any Environmental Laws; and (iv) any Hazardous Substance handled
or dealt with in any way with respect to the Assets or the Business by either
Seller, or during either Seller's ownership of the Assets or the Business has
been and is being handled or dealt with in compliance with any Environmental
Laws.
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(b) For purposes of this Agreement, the term "Hazardous Substance"
shall mean any substance which, as of the date of this Agreement, is listed as
hazardous or toxic in the regulations implementing the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended
("CERCLA"), the Response Compensation and Liability Act ("RCLA"), the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), or listed as a
hazardous substance under any applicable state environmental laws, or any
substance which has been determined by regulation, ruling or otherwise by any
agency or court to be a hazardous or toxic substance regulated under federal or
state law.
(c) For purposes of this Agreement, the term "Environmental Laws"
shall mean CERCLA, RCRA, RCLA and any applicable statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, approvals, plans, authorizations,
concessions, franchises and similar items of all governmental authorities and
all applicable judicial, administrative and regulatory decrees, judgments and
orders, any of which relate to the protection of human health or the environment
from the effects of Hazardous Substances, including but not limited to those
pertaining to reporting, licensing, permitting, investigating and remediating
emissions, discharges, releases or threatened releases of Hazardous Substances
into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
SECTION 7.13. EMPLOYEES. SCHEDULE 7.13 sets forth a true and complete
list of the names and salaries of all employees of the Sellers involved in the
operation of the Business. Such employees are employees at will. Each Seller
has withheld all amounts required by law or agreement to be withheld by it from
the wages, salaries and other payments to its employees and is not liable for
any arrears of wages or any taxes for failure to comply with any of the
foregoing. There are no collective bargaining agreements covering any of the
employees of any Seller. The Sellers have not breached or otherwise failed to
comply with any provision of any collective bargaining agreement or other labor
union contract applicable to any of its employees. No consent of any union (or
similar group or organization) is required in connection with the consummation
of the transactions contemplated hereby. There are no pending, or, to Sellers'
knowledge threatened or anticipated, and, there is no factual basis for any (a)
employment discrimination (including age, sex, racial or handicap
discrimination) charges or complaints against or involving any Seller, before
any federal, state, or local board, department, commission or agency or (b)
unfair labor practice charges or complaints, disputes or grievances affecting
any Seller. There are no pending, or, to Sellers' knowledge threatened or
anticipated (a) union
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representation petitions respecting the employees of any Seller, (b) efforts
being made to organize any of the employees of any Seller, or (c) strikes,
slow downs, work stoppages, or lockouts or threats affecting any Seller.
SECTION 7.14. EMPLOYEE BENEFITS. Except as set forth on SCHEDULE 7.14
attached hereto, neither Seller has any Employee Benefit Plans in which any one
or more partners or employees of any Seller, with respect to the Business,
participate or are eligible to participate as of the date hereof and is not a
party to any employment contract. The term "Employee Benefit Plans" means all
employee benefit plans as that term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Except as set
forth on SCHEDULE 7.14 attached hereto, no partner or employee of any Seller
participates or is eligible to participate in a "defined benefit pension plan"
as defined in Section 3(35) of ERISA, maintained or made available by any
Seller. Except as set forth on SCHEDULE 7.14 attached hereto, neither Seller
nor any Controlled Group Member maintains or contributes to, or ever maintained
or contributed to, a plan under which any employee of any Seller participates or
is eligible to participate subject to Section 412 of the Internal Revenue Code
of 1986, as amended (the "Code"). The term "Controlled Group Member" means any
trade or business (whether or not incorporated) which is, or was at any relevant
time, aggregated with the Seller pursuant to Section 414(b), (c), (m) or (o) of
the Code. Except as set forth on SCHEDULE 7.14 attached hereto, neither Seller
nor any ERISA Affiliate has participated in or made contributions to any
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA. The term "ERISA
Affiliate" means each trade or business (whether or not incorporated) which is,
or was at any relevant time, treated as a single employer any Seller pursuant to
Section 4001(b)(1) of ERISA.
SECTION 7.15. TAX MATTERS. Except as set forth on SCHEDULE 7.15 attached
hereto, (a) each Seller has timely filed all Tax (as defined below) returns and
statements which it is required to file; (b) all such returns are complete and
accurate and disclose all Taxes required to be paid for the periods covered
thereby; (c) neither Seller has waived any statute of limitations in respect of
Taxes or agreed to an extension of time with respect to a Tax assessment or
deficiency; (d) no assessment of any additional Taxes for periods for which
returns have been filed has been asserted and no basis exists therefor; (e) to
Sellers' knowledge, there are no unresolved questions or claims raised by any
Taxing authority concerning the Tax liability of any Seller and (f) all Taxes
which each Seller is required by law to withhold or to collect for payment have
been duly withheld and collected, and have been paid. Each Seller has paid all
Taxes due prior to the date hereof and will pay when due (or contest in good
faith by appropriate proceedings) all Taxes
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which may become due on or before the Closing Date. For purposes of this
Section 7.15, the term "Tax" or "Taxes" means all taxes, charges, fees,
levies, inposts and other assessments including all income, sales, use, goods
and services, value added, capital, capital gains, alternative net worth,
transfer, profits, withholding, payroll, employer health, excise, real
property and personal property taxes, and any other taxes, customs duties,
stamp duties, fees, assessments or similar charges in the nature of a tax,
together with any interest, fines and penalties imposed by any governmental
authority (including federal, state, provincial, municipal and foreign
governmental authorities), and whether disputed or not.
SECTION 7.16. FINANCIAL STATEMENTS.
(a) The Purchaser has heretofore been furnished with the following:
(i) true and complete copies of the audited balance sheet of
Horizon Cellular Telephone Company, L.P. ("Horizon") as of
December 31, 1994 and December 31, 1995 and the related audited
statements of income, cash flows and partners' capital for the
years then ended, each of such balance sheets and income
statements being attached hereto as SCHEDULE 7.16(a)(i)
(collectively, the "Audited Historical Financial Statements");
(ii) true and complete copies of the unaudited balance sheet of
each Seller as of December 31, 1994 and December 31, 1995 and the
related unaudited statements of income for the years then ended,
each of such balance sheets and income statements being attached
hereto on Schedule 7.16(a)(ii) (collectively, the "Unaudited
Historical Financial Statements"; and together with the Audited
Historical Financial Statements, the "Historical Financial
Statements;)
(iii) true and complete copies of the unaudited balance
sheet (the "August Balance Sheet") of each Seller at August 31,
l996 (the "Balance Sheet Date") and the related unaudited statement
of income for the eight-month period then ended (the "Eight Month
Income Statement; and together with the August Balance Sheet, the
"Current Financial Statements"), such balance sheet and income
statements being attached hereto as SCHEDULE 7.16(a)(iii);
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(iv) the Capital Expenditure budget for each Cellular System
providing for expenditure of capital items in each month for the
period from July 1, 1996 through March 31, 1997 and attached
hereto as SCHEDULE 7.16(a)(iv) (the "Budgets").
(b) Each of the Historical and Current Financial Statements delivered
under Section 7.16(a)(i) through (iii) hereof was prepared in accordance with
GAAP applied on a basis consistent with prior periods and past practices except
as otherwise stated therein and, with respect to the Current Financial
Statements and the Unaudited Historical Financial Statements, subject to normal
recurring year-end adjustments and except for the omission of certain footnotes
and other presentation items required by GAAP with respect to audited financial
statements; each of the balance sheets included in such Historical and Current
Financial Statements fairly presents the financial condition of Horizon and each
Seller, as applicable, as at the close of business on the date thereof; and
each of the statements of income included in such Historical and Current
Financial Statements fairly presents the results of operations of Horizon and
each Seller, as applicable, for the fiscal period then ended.
(c) Except as set forth on SCHEDULE 7.16(c) attached hereto, since the
Balance Sheet Date, neither Seller has:
(i) sold, assigned or transferred any of its tangible assets
(except for the Excluded Assets and except pursuant to existing
contracts or commitments disclosed on any Schedule to this
Agreement or inventory in the ordinary course of business
consistent with past practice); or canceled any material debts or
material claims;
(ii) waived any material rights, whether or not in the
ordinary course of business;
(iii) entered into any other transaction, except in the
ordinary course of business, or entered into any transaction with
any of the partners of any Seller, or any affiliate of any such
partner, relating primarily to the Business or the Assets except
in the ordinary course of business in accordance with past
practices;
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(iv) suffered any material damage, destruction or casualty
loss with respect to the Assets, whether or not covered by
insurance;
(v) made any distribution of any of the Assets to any
partner of any Seller or any affiliate of such partner;
(vi) except as disclosed in writing by Sellers to Purchaser,
obligated itself or the Business to give free or reduced price
service to customers with respect to the Business other than
promotions offered in the ordinary course of business and set
forth on SCHEDULE 5.05(a) or occasionally free and temporary
price reductions, entered into any agreement with any
governmental or regulatory authority granting the authorization
to freeze fees charged to customers of the Business; or
(vii) entered into any agreement or understanding to do any
of the foregoing.
SECTION 7.17. SUBSCRIBERS/AGENTS. SCHEDULE 7.17 attached hereto sets
forth (a) the number of subscribers in service for each Cellular System as of a
date within 5 days prior to the date hereof and (b) a list (categorized by each
Cellular System) of all agents who sell cellular telephone equipment and/or
service on behalf of any Seller as of the date hereof, together with such
agent's address and the number of gross activations produced by each agent from
January 1, 1996 to September 30, 1996.
SECTION 7.18. INSURANCE. Sellers have delivered previously to Purchaser
all policies of title, liability, fire, worker's compensation and other forms of
insurance (including bonds) which insure against risks and liabilities to an
extent and in a manner customary in the cellular industry and which are adequate
to provide coverage against risks of a material nature to which each Seller
would normally be exposed in the operation of the Business. All such insurance
policies and binders are in full force and effect. Sellers have complied in all
material respects with each of such insurance policies and binders and have not
failed to give any notice or present any claim thereunder in a due and timely
manner. There are no outstanding unpaid claims under any of such insurance
policies or binders and Sellers have not received any notice of cancellation or
non-renewal of any such policy or binder. There is no inaccuracy in any
application for such policies or binders which would reasonably be expected to
materially adversely affect coverage
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thereunder. No insurance carrier has canceled or reduced any insurance
coverage for Sellers or has given any notice or other indication of its
intention to cancel or reduce any such coverage. All premiums due and
payable under any such insurance policies or binders of Sellers have been
duly paid or accrued to the extent taken into account in the Working Capital
Adjustment.
SECTION 7.19. BROKERS. Except for Morgan Stanley & Co. Incorporated,
neither Seller has engaged any agent, broker or other person acting pursuant to
the express or implied authority of any Seller which is or may be entitled to a
commission or broker or finder's fee in connection with the transactions
contemplated by this Agreement or otherwise with respect to the sale of the
Assets or the Business.
SECTION 7.20. UNDISCLOSED LIABILITIES. Neither Seller has any liabilities
or obligations of any nature, whether absolute, accrued, contingent or
otherwise, which are not reflected or reserved against the August Balance Sheet
except for liabilities and obligations that have arisen in the ordinary and
usual course of business and consistent with past practice (none of which
results from, arises out of, relates to, is in the nature of, or not caused by
any breach of contract, breach of warranty, tort, infringement or violation of
law).
SECTION 7.21. PRICING OF SERVICES. SCHEDULE 7.21 sets forth a description
of all rate plans currently offered to subscribers of each Cellular System.
SECTION 7.22. PROPRIETARY RIGHTS. Sellers lawfully possess, and (except
for rights with respect to the "CellularOne" trademarks and trade names and the
software licenses utilized by Sellers for fraud protection) the Assets will
include, all intellectual property rights that are necessary to the conduct of
the Business.
SECTION 7.23. ACCOUNTS RECEIVABLE AND BAD DEBTS. All notes and accounts
receivable of Sellers shown on the August Balance Sheet or thereafter acquired
were or (to the extent not heretofore collected) are valid and genuine, were
acquired in the ordinary course of business and are subject to no asserted
counterclaims, defenses or setoffs (subject to reserves therefor as will be
taken into account in the determination of Current Assets at Closing in
accordance with Section 5.05). SCHEDULE 7.23 attached hereto sets forth a true,
complete and accurate list as of the end of the most recent normal billing cycle
of each Cellular System listing the total amounts of subscriber receivables and
the aging of such subscriber receivables based on the following Schedule: 0-30
days, 31-60 days, 61-90 days and over 90 days, from the date thereof.
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SECTION 7.24. PRODUCT INFORMATION. Sellers have not sold and do not have
in their inventory any refurbished telephone handsets. SCHEDULE 7.24 sets forth
a list of manufacturers of telephone handsets presently in Sellers' inventory.
SECTION 7.25. CERTAIN BUSINESS RELATIONSHIPS WITH SELLERS. Except as set
forth in SCHEDULE 7.25 attached hereto, none of the partners of the Sellers and
their affiliates have been involved in any business arrangement or relationship
with any Seller within the past 12 months.
ARTICLE VIII
PURCHASER'S AND DOBSON'S REPRESENTATIONS
Purchaser and Dobson hereby jointly and severally represent, warrant,
covenant and agree, which representations, warranties, covenants and agreements,
together with all other representations, warranties, covenants and agreements of
Purchaser and Dobson in this Agreement, shall survive the execution and delivery
of this Agreement and the payment of the Purchase Price hereunder until June 30,
1998, that:
SECTION 8.01. ORGANIZATION; QUALIFICATION. Each of Purchaser and Dobson
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Oklahoma. Purchaser has all power and authority to (i) own
and operate its properties, (ii) carry on its business as it is now being
conducted, and (iii) carry out the transactions contemplated by this Agreement
and to own and operate the Assets and the Business, subject to obtaining all
necessary consents required for the transfer by Sellers of the Assets.
SECTION 8.02. CONSENTS; AUTHORIZATION; EXECUTION AND DELIVERY OF AGREEMENT.
All necessary consents and approvals have been obtained by Dobson and Purchaser
for the execution and delivery of this Agreement. The execution and delivery of
this Agreement by each of Purchaser and Dobson has been duly and validly
authorized and approved by all necessary corporate action. Each of Purchaser and
Dobson has full power and authority to execute and deliver and perform its
obligations under this Agreement. This Agreement is a valid and binding
obligation of Purchaser and Dobson, enforceable against it in accordance with
its terms.
SECTION 8.03. LITIGATION AND LEGAL PROCEEDINGS. There is no outstanding
judgment against Purchaser or Dobson and there is no litigation, proceeding or
investigation pending, or, to Purchaser's or Dobson's knowledge, threatened,
against Purchaser or Dobson or their assets
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which individually or in the aggregate would, if adversely determined, result
in a material adverse change in the business condition (financial or
otherwise), properties, prospects or assets of Purchaser or Dobson or which
questions the validity of any action taken or to be taken pursuant to or in
connection with the provisions of this Agreement or the consummation of the
transactions contemplated hereby by the Purchaser or Dobson.
SECTION 8.04. BROKERS. Except for Daniels & Associates, neither Purchaser
nor Dobson has engaged any agent, broker or other person acting pursuant to the
express or implied authority of Purchaser or Dobson which is or may be entitled
to a commission or broker or finder's fee in connection with the transactions
contemplated by this Agreement or otherwise with respect to the sale of the
Assets or the Business.
SECTION 8.05. COMPLIANCE WITH LAWS. Each of Purchaser and Dobson is
currently complying with and has so complied with, and is not in default under
or in violation of, and neither of its respective businesses nor any of their
respective assets nor the operation or maintenance thereof, contravenes in any
respect any statute, law (including environmental or employment laws),
ordinance, decree, order, rule, regulation of any governmental body applicable
to its assets or its business, including, without limitation, rules and
regulations of the FCC.
SECTION 8.06. FCC MATTERS. Each of Purchaser and Dobson is fully
qualified under the Communications Act to be an FCC licensee, and to be approved
as the assignee of the FCC Authorizations. Each of Purchaser and Dobson knows
of no reason why the FCC will not grant its consent to the assignment of the FCC
Authorizations from Sellers and KCCGP, as applicable, to Purchaser. Neither
Purchaser, Dobson, nor any "real party in interest" (as defined by Section 22.13
of the FCC's rules) (i) has had the FCC deny an application for an
authorization, (ii) has had the FCC revoke an authorization granted to it, or
(iii) has been the subject of an investigation by the FCC.
SECTION 8.07. FINANCIAL ABILITY TO CLOSE. Each of Purchaser and Dobson
specifically represents and warrants to Sellers that Dobson and Purchaser at
Closing will have the financial ability to perform their respective obligations
under this Agreement. Furthermore, each of Purchaser and Dobson specifically
agrees with Sellers that the obligation of Purchaser and Dobson to consummate
the transactions contemplated hereby is not subject to any financing
contingency.
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ARTICLE IX
SELLERS', DOBSON'S, AND PURCHASER'S COVENANTS
SECTION 9.01. FINANCIAL STATEMENTS AND CELLULAR SYSTEM INFORMATION.
Sellers covenant and agree that during the period after the execution of this
Agreement and prior to the Closing, Sellers shall provide Purchaser, within 21
days of the end of each calendar month, each Seller's unaudited balance sheet
and income statement for such month ("Interim Financial Statements"). The
Interim Financial Statements will be true and correct in all material respects,
will be prepared using the same accounting methods and procedures as used in the
preparation of the Historical Financial Statements except for the absence of
footnotes, subject to normal recurring adjustments, and will present fairly the
financial position of each Seller at the date indicated and the results of such
Seller's operations for such period. Sellers also shall provide Purchaser
within 21 days of the end of each calendar month (i) a comparison of the results
of each Seller's income from operations for such month as reflected in the
Interim Financial Statements to the amount budgeted for such month and the year
to date (as reflected in the Budget delivered to Purchaser, a copy of which is
annexed hereto as SCHEDULE 9.01 (the "Operating Budget"), (ii) the number of
subscribers on each Cellular System at the beginning and end of such month with
a comparison to the Operating Budget, (iii) an accounts receivable aging report
for each Cellular System, (iv) a description of the amount and purpose of the
System Capex for such month with a comparison to the Budget and (v) other
reports generated by the Sellers' billing system as reasonably requested by
Purchaser.
SECTION 9.02. GOVERNMENTAL APPROVALS. (a) Each of Dobson and Purchaser
covenants and agrees that it will fully cooperate with Sellers, and do all
things reasonably necessary to assist Sellers to obtain all consents and
approvals necessary for assignment to Purchaser of the FCC Authorizations,
including the furnishing of financial and other information specifically with
respect to Dobson or Purchaser reasonably required by the Person whose consent
or approval is being sought. Sellers shall use all reasonable efforts to
provide adequate prior written notice to Purchaser of any meeting with
governmental authorities the purpose of which is to seek a consent or approval
to the transactions contemplated hereby, and Purchaser shall use all reasonable
efforts to furnish a representative to attend meetings with appropriate
government authorities for the purpose of obtaining such consents or approvals.
Each of Purchaser and Sellers hereby agrees to file the necessary Form(s) 490
and 702 with the FCC transferring or assigning control of the FCC Authorization
for the Business to Purchaser and diligently pursue
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the processing of the assignment of the FCC Authorization to Purchaser and to
file for all other necessary regulatory approvals for the consummation of the
transactions contemplated by this Agreement within five business days of the
date of execution of this Agreement to the extent any such filings have not
been made prior to the date of execution of this Agreement. Sellers and
Purchaser shall share equally all filing fees in connection with any filings
pursuant to this Section 9.02(a).
(b) Sellers and Purchaser shall each cooperate and use their
reasonable best efforts to prepare and file with the Federal Trade Commission
and the Department of Justice and other regulatory authorities as promptly as
possible all requisite applications and amendments thereto together with related
information, data and exhibits necessary to satisfy the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act ("Hart-Scott Act"). Sellers and
Purchaser shall share equally all filing fees in connection with any filings
pursuant to this Section 9.02(b).
(c)(i) Sellers shall, at their sole expense, undertake to
obtain (or modify, if appropriate) licenses, permits or authorizations for the
microwave facilities listed on SCHEDULE 7.09; (ii) if licenses, permits or
authorizations are obtained (or modified, as appropriate) for the microwave
facilities listed on SCHEDULE 7.09, Purchaser and Sellers shall cooperate in the
preparation and submission of any filings necessary to obtain FCC consent to
assign such licenses, permits or authorizations to Purchaser (including, if
requested by the FCC, any amendments to such filings to have such licenses,
permits or authorizations issued directly in the name of Purchaser); (iii) in
the event that Sellers have not obtained, or the FCC has not granted its consent
to the assignment of, such licenses, permits or authorizations to Purchaser
before Closing, Purchaser and Sellers shall cooperate to obtain a Special
Temporary Authority permitting Purchaser to operate the microwave facilities
listed on SCHEDULE 7.09 on a temporary basis; and (iv) in the event that the
Special Temporary Authority is obtained, Purchaser and Sellers shall cooperate
after the Closing in obtaining FCC consent to the assignment to Purchaser of
such licenses, permits or authorizations on a permanent basis. Sellers shall
not enter into any agreements or understandings with any party relating to the
microwave facilities listed on SCHEDULE 7.09 without the prior written consent
of the Purchaser, which consent shall not be unreasonably withheld.
SECTION 9.03. THIRD PARTY CONSENTS; CLOSING CONDITIONS. (a) Purchaser and
Dobson and Sellers covenant and agree that each of them will reasonably
cooperate with each other, and Purchaser and Dobson will do all things
reasonably necessary to assist Seller, to obtain all
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consents and approvals necessary for the transfer or assignment to Purchaser
of the Assumed Contracts, including the furnishing of financial and other
information specifically with respect to Dobson, Purchaser, their affiliates,
or Sellers, as the case may be, reasonably required by the Person whose
consent or approval is being sought. Notwithstanding the foregoing, to the
extent that any Assumed Contracts listed on SCHEDULE 2.01(a) to be sold,
assigned, transferred or conveyed to Purchaser, or any claim, right or
benefit arising thereunder or resulting therefrom (individually, an
"Interest" and collectively, the "Interests"), is not capable of being sold,
assigned, transferred or conveyed without the approval, consent or waiver of
the issuer thereof or the other party thereto, or any third Person (including
a government or governmental unit), and such approval, consent or waiver has
not been obtained, or if such sale, assignment, transfer or conveyance or
attempted assignment, transfer or conveyance would constitute a breach
thereof, and such approval, consent or waiver has not been obtained, this
Agreement shall not constitute a sale, assignment, transfer or conveyance
thereof, or an attempted assignment, transfer or conveyance thereof; provided
Sellers shall use their reasonable best efforts to provide Purchaser the
benefits of any such Interest as provided in Section 18.01(b). Purchaser and
Sellers shall use all reasonable efforts to consummate the transactions
contemplated hereby.
(b) Purchaser and Sellers hereby covenant and agree to use all
reasonable efforts to satisfy, or assist the other party in satisfying, the
closing conditions applicable to the Purchaser in Article X hereof and the
Sellers in Article XI hereof prior to the Closing Date.
SECTION 9.04. AUDIT OF SELLERS' 1996 FINANCIAL STATEMENTS.
Purchaser and Sellers covenant and agree as follows:
(a) As soon as reasonably practical after December 31, 1996, Ernst & Young
LLP ("Sellers' Accountants") shall conduct an audit (the "Audit") of the
financial statements of each Seller in accordance with GAAP and generally
accepted auditing standards for the 12 month period ending December 31, 1996,
including a balance sheet, a statement of income and cash flow, and consistent
with past practices.
(b) As soon as possible after December 31, 1996 Sellers' Accountants shall
deliver to Arthur Andersen LLP ("Purchaser's Accountant"), Purchaser and Sellers
(i) the Audit and, based upon such Audit, a calculation of the Cellular Systems
combined Operating Cash Flow (as defined in Section 10.10) for the calendar year
1996 certifying the accuracy thereof (the "OCF Calculation").
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Purchaser's Accountant shall be given reasonable access to the work papers,
notes and other data compiled by Sellers' Accountant in connection with the
Audit. If the Closing has not occurred by March 31, 1997, Sellers'
Accountants shall bring forth the Audit to cover the Other Applicable Period
following the same procedures set forth in subparagraphs (a) and (b) above
and shall revise the OCF Calculation accordingly for the Other Applicable
Period. If either party objects to the OCF Calculation, such party shall
within ten (10) calendar days after receipt of the delivery of the OCF
Calculation notify the other party in writing of its objection and shall
specify the basis for such objection (the "Objection Notice"). Sellers and
Purchaser shall attempt to resolve their differences within the ten (10) day
period following either party's receipt of any Objection Notice. In the
event Purchaser and Sellers are unable to resolve their differences within
such ten (10) day period, then, either party may request that the matter be
resolved by Price Waterhouse (the "Independent Accountants").
(c) In submitting a dispute to the Independent Accountant, each of the
parties shall furnish, at its own expense, the Independent Accountants and the
other party with such documents and information as the Independent Accountants
may reasonably request. Each party may also furnish to the Independent
Accountants such other information and documents as it deems relevant with the
appropriate copies and notification being given to the other party. The
Independent Accountants may conduct a conference concerning the disagreements
between Sellers and Purchaser at which conference each party shall have the
right to present additional documents, materials and other evidence and to have
present its or their advisors, accountants or counsel. The Independent
Accountants shall promptly render a decision on the issues presented, and such
decision shall be final and binding on the parties. The Audit shall not be
considered completed for purposes of the Closing until all disputes have been
finally resolved by the parties or the Independent Accountants.
(d) Fees and expenses of the Audit shall be split evenly between Purchaser
and Sellers, and the fees and expenses of the Independent Accountants relating
to the matters provided for in this Agreement shall be split evenly between
Sellers and Purchaser.
(e) In the event Purchaser requires additional audits (other than the
Audit) of Sellers' financial statements or any financial services in connection
with its financing arrangements, Purchaser shall bear all fees and expenses of
such additional audits and financial services.
SECTION 9.05. ACCESS. (a) Purchaser shall have the right, itself or
through its representatives, during normal business hours, after reasonable
notice (which may be oral) to
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Bruce Hernandez or Michael Kalogris, and without undue disruption to Sellers'
normal business activities, to inspect the Assets and properties of Sellers
and to inspect and make abstracts and reproductions of all books and records
of Sellers including, without limitation, applications and reports to the
FCC, all financial information relevant to the determination of Operating
Cash Flow, employee records, and engineering and environmental reports and
Sellers shall furnish Purchaser with such information respecting the Assets
and Business and financial records as Purchaser may, from time to time,
reasonably request. Purchaser agrees to provide either Bruce Hernandez or
Michael Kalogris with prompt written notice if Purchaser determines that,
based upon information provided to Purchaser or through its own
investigation, any of the Sellers is in breach of any representation,
warranty or covenant of Sellers set forth in this Agreement.
(b) Sellers acknowledge and agree, subject to any restrictions placed
thereon by an owner or lessor of any real property involved, that Purchaser may
commission, at Purchaser's cost and expense, a so-called "Phase I" site
assessment of the Assets (the "Phase I Assessment"). If the Phase I Assessment
indicates that a so-called "Phase II" assessment (the "Phase II Assessment") or
other additional testing or analysis of the Assets is advisable, the Purchaser
may elect to cause its agents to conduct such testing and analysis. Any such
additional testing and analysis Purchaser elects to conduct will be diligently
pursued and completed. Sellers will comply with any reasonable request for
information made by Purchaser or its agents in connection with any such
investigation. Sellers covenant that any response to any such request for
information will be complete and correct in all material respects. Sellers will
afford Purchaser and its agents access to all operations of the Sellers at all
reasonable times after reasonable notice to Bruce Hernandez or Michael Kalogris
and in a reasonable manner in connection with any such investigation subject to
any required approval of Sellers' landlords, which approval Sellers will use
reasonable best efforts to obtain. Should Purchaser commission such an
investigation, such investigation will have no effect upon the representations
and warranties made by Sellers to Purchaser under this Agreement except that if
any Phase I or Phase II uncovers an environmental condition which then comprises
a breach of Sellers' representations or warranties herein, Sellers shall not
have breached such representation or warranty if Sellers cure such breach in
accordance with the provisions of this Agreement. Notwithstanding the foregoing
to the contrary, if the aggregate estimated remediation costs for matters
disclosed in the Phase I or Phase II assessments exceed $1,000,000, then either
Sellers or Purchaser may elect to terminate this Agreement; PROVIDED, however,
that if Sellers elect to terminate this Agreement pursuant to this Section
9.05(b), Sellers shall pay Purchaser the Purchaser's allocable share of out-of-
pocket costs and expenses resulting from termination of this Agreement,
including, without limitation,
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reasonable attorney's and accountant's fees and expenses and expenses
incurred by Purchaser in obtaining financing commitments necessary to pay the
Purchase Price. Purchaser will provide Sellers a copy of the Phase I
Assessment (and, if conducted, the Phase II Assessment) and any other reports
related to such investigation as soon as they are available to Purchaser.
(c) Sellers shall allow Purchaser the opportunity to conduct an
engineering review of the Assets to confirm that the Assets comply with the FCC
Authorizations and the regulations of the FCC and are otherwise in good
condition and repair, reasonable wear and tear excepted.
SECTION 9.06. CONDUCT OF BUSINESS. From and after the date hereof, each
Seller shall:
(a) operate the Cellular Systems in accordance with the FCC
Authorizations, and comply in all material respect with all laws,
rules and regulations applicable to them, including the
regulations of the FCC;
(b) except as disclosed on SCHEDULE 2.03(c), and except for inventory
sold in the ordinary course of business, refrain from making any
sale, lease, transfer or other disposition of any of the Assets
other than in connection with replacements with assets of like
use and value, or with the prior written approval of Purchaser,
which approval will not be unreasonably withheld;
(c) refrain from modifying, amending or altering in any
material respect, or terminating any of the Assumed Contracts,
and from waiving or canceling any default or breach or
modifying, altering or terminating any right or asset relating
to or included in the Assets without Purchaser's prior written
approval, which approval will not be unreasonably withheld;
(d) maintain insurance on the Assets comparable to that
maintained prior to the date hereof, and use the proceeds of
any claims for loss under such policies, together with such
other funds as may be required, to repair, replace, or restore
to their former condition any Assets which may be damaged by fire
or other casualty, all as soon as reasonably possible;
(e) maintain its books and records in accordance with prior
practice; maintain all of its property and assets in their
present condition, ordinary wear and tear excepted; maintain
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supplies of inventory and spare parts consistent with past
practice; and otherwise operate its business in the ordinary course
in accordance with past practices;
(f) refrain from changing each Cellular System's agents'
commission rate, sales practices (including the quality of the
credit of subscribers contracting for cellular telephone service)
or marketing practices without Purchaser's approval, which approval
will not be unreasonably withheld;
(g) except for annual increases in compensation (not to exceed
5% in the aggregate), refrain from increasing the compensation
payable or to become payable to any employee or agent without
Purchaser's approval, which approval will not be unreasonably
withheld;
(h) refrain from entering into any contract or renewal of any
existing contract for the employment of any employee or agent of
such Seller other than "at-will" employees and agents;
(i) use all reasonable efforts to (x) keep its business
organization intact, (y) retain the services of the key employees
of the Cellular Systems, and (z) maintain good relationships with
its employees, suppliers, advertisers, subscribers, agents and
others having business relations with it, in each case in
accordance with past practices;
(j) refrain from changing its partnership agreement in any way
which would materially adversely affect its power or authority to
enter into and perform this Agreement, or which would otherwise
materially adversely affect its performance of this Agreement;
(k) continue to advertise, promote and market the Cellular
Systems and their services in a manner consistent with past
practice, and in any event from the date hereof through the
Closing, spend on advertising, marketing and promotion, on an
aggregate basis from the date hereof to the Closing, the amounts
set forth in the Operating Budget.
(l) refrain from subjecting any of the Assets to any new Lien
other than Permitted Liens;
(m) refrain from doing or omitting to do any act which will
cause a material breach of, or material default under, or termination of
(except in accordance with its terms), any contract, agreement,
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lease, commitment, or obligation to which a Seller is a
party or by which it is bound and which is to be assumed by
Purchaser hereunder;
(n) provide to the Purchaser, concurrently with filing
thereof, copies of all reports to and other filings with the FCC;
(o) not permit any of the FCC Authorizations to expire or to
be surrendered or voluntarily modified in a matter adverse to the
Business, or take any action which would reasonably be expected to
cause the FCC Authorizations or any other governmental authority to
institute proceedings for the suspension, revocation or limitation
of rights under any of the FCC Authorizations; or fail to prosecute
with due diligence any pending applications to any governmental
authority;
(p) notify Purchaser in writing promptly after learning of the
institution or threat of any material action against such Seller in
any court, or any action against such Seller before the FCC or any
other governmental agency, and notify Purchaser in writing promptly
upon receipt of any administrative or court order relating to the
Assets or the Business;
(q) if Sellers deem it to be prudent promptly replace any
employee who leaves the employ of any of the Cellular Systems;
notify Purchaser of the hiring of any new employees, any material
change in job function, and termination of any employees;
(r) pay or cause to be paid or provide for all Taxes of or
relating to such Seller, the Assets and the employees required to
be paid to city, county, state, Federal and other governmental
units up to the Closing Date;
(s) refrain from taking any action not in such Seller's
usual course of business regarding the Cellular Systems or the
Assets without Purchaser's prior approval, which approval shall not
be unreasonably withheld; and
(t) subject to the provisions of Section 9.08 cooperate with
Purchaser in connection with Purchaser's efforts to identify the
current employees of such Seller that Purchaser would like to hire
following the Closing consistent with all applicable federal, state
and/or local employment laws, rules and regulations.
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SECTION 9.07. NO SHOPPING. Prior to November 21, 1996 none of Sellers nor
any of their affiliates, advisors or representatives shall, directly or
indirectly, solicit, encourage or initiate any contact with, negotiate with, or
provide any information to, endorse or enter into any agreement with respect to,
or take any other action to facilitate any person or group, other than Purchaser
and its representatives, concerning any inquiries or the making of any proposals
concerning any merger, sale of all or substantially all of the Assets,
acquisition of a substantial equity interest in either Seller or any similar
transaction involving either Seller (collectively an "Acquisition Proposal").
SECTION 9.08. EMPLOYEES; EMPLOYEE COMPENSATION. At least thirty (30) days
prior to the Closing Date, Purchaser shall provide written notice to Sellers
identifying any employees of Sellers listed on Schedule 7.13 to whom Purchaser
does not intend to extend offers of employment. Nothing contained in this
Agreement shall confer upon any such employee any right with respect to
continued employment by Sellers or Purchaser. No provision of this Agreement
shall create any third-party rights in any such employee, or any beneficiary or
dependent thereof, with respect to the compensation, terms and conditions of
employment and benefits that may be provided to such employee by Purchaser or
under any benefit plan that Purchaser may maintain.
SECTION 9.09. RESTRICTIONS ON CERTAIN ACTIONS. From the date hereof until
the earlier to occur of the Closing Date or the termination of this Agreement,
each of Purchaser and Dobson will not, and each of Purchaser and Dobson will use
its best efforts to ensure that all persons whose actions or ownership interests
would be attributable to Purchaser or Dobson under the Communications Act will
not, in any manner, directly or indirectly, solicit, initiate, encourage or
participate in applications, bids, purchases or negotiations with respect to the
acquisition of any interest in an FCC license, permit, approval or authorization
that, if consummated, would have the effect under the Communications Act of
preventing or delaying Purchaser or Dobson from consummating the acquisition of
the Purchased Assets as contemplated by this Agreement.
SECTION 9.10. SUPPLEMENTAL DISCLOSURE. Sellers shall have the right from
time to time prior to the Closing Date to supplement in writing the Schedules
hereto with respect to any matter hereafter arising that, if existing or known
as of the date of this Agreement, would have been required to be set forth or
described in the Schedules hereto; provided, however, that no such supplemental
disclosure shall be deemed to cure any breach of any representation or warranty
of
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Sellers made in this Agreement unless Purchaser fails to object in writing to
Sellers to any such supplemental disclosure within ten (10) business days after
Purchaser's receipt thereof.
SECTION 9.11. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Each of
Purchaser and Dobson acknowledges and agrees that Sellers do not make, and have
not made, any representations or warranties relating to Sellers, the Business or
the Assets other than the representations and warranties of Sellers expressly
set forth in this Agreement. Without limiting the generality of the disclaimer
set forth in the preceding sentence, Sellers do not make, and Sellers, their
officers, employees and agents have not made, and shall not be deemed to have
made any representations or warranties in the Confidential Offering Memorandum
dated September 1995, and any supplements or addenda thereto (collectively, the
"Offering Memorandum"), any presentation relating to Sellers, the Business or
the Assets given in connection with the transactions contemplated by this
Agreement, in any filing made by or on behalf of Sellers with any governmental
agency or in any other information provided to or made available to Purchaser or
Dobson, and no statement contained in the Offering Memorandum, made in any such
presentation, made in any such filing or contained in any such other information
shall be deemed to be a representation or warranty of Sellers hereunder or
otherwise. No person has been authorized by Sellers to make any representation
or warranty in respect of Sellers, the Business or the Assets in connection with
the transactions contemplated by this Agreement that is inconsistent with or in
addition to the representations and warranties of Sellers expressly set forth in
this Agreement.
SECTION 9.12. GUARANTY BY DOBSON OF PURCHASER'S OBLIGATIONS. Subject to
Section 5.02 hereof, Dobson agrees to take all action necessary or appropriate
to cause and enable Purchaser to perform all of its covenants, obligations and
agreements under this Agreement. In addition, subject to the cap in Section
5.02 on amounts which Sellers may recover from Purchaser and Dobson for breaches
of their obligations under this Agreement, Dobson hereby irrevocably, absolutely
and unconditionally guarantees as surety the prompt and full discharge by
Purchaser of all of Purchaser's covenants, obligations and agreements under this
Agreement, including the due and punctual payment of all amounts that are or may
become due and payable by Purchaser hereunder when and as the same become due
and payable (collectively, "Purchaser Obligations"), in accordance with the
terms hereof. Dobson acknowledges and agrees that, with respect to all
Purchaser Obligations to pay money, such guaranty shall be a guaranty of payment
and performance and not of collection and shall not be conditioned or contingent
upon the pursuit of any remedies against Purchaser. Notwithstanding anything to
the contrary set forth in
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this Section 9.12, Dobson shall in no event be liable for Purchaser
Obligations in an amount in excess of $3.75 million (i.e. the amount in the
Deposit Escrow) except as otherwise set forth in Section 13.05(b).
SECTION 9.13. RESCISSION. If (i) Purchaser waives the Final Order
condition set forth in Section 10.04, (ii) the transactions contemplated hereby
are consummated prior to the receipt of such Final Order, (iii) the FCC's
consent to the assignment of the Cellular Authorizations is subsequently
withdrawn and (iv) the parties are legally obligated to rescind the
transactions, then the parties shall rescind the transactions in a manner that
puts each party in the position it would have been as of the Closing Date had
the transactions contemplated hereby not been consummated. Purchaser further
covenants that in such event it will transfer, assign and deliver the Assets to
Sellers in substantially the same condition (normal wear and tear excepted) as
the Assets existed on the Closing Date, and Purchaser will replace any Assets
that were sold, disposed of, lost or destroyed prior to such Recision.
ARTICLE X
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
The obligation of Purchaser under this Agreement with respect to the
purchase and sale of the Assets shall be subject to the fulfillment on or prior
to the Closing of each of the following conditions, any of which may be waived
in writing by Purchaser (provided that if any condition shall not have been
satisfied due primarily to the actions or inaction of Purchaser or Dobson or any
of their affiliates that constitutes a breach of this Agreement, such condition
shall be deemed to have been satisfied or waived by Purchaser):
SECTION 10.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
THIS AGREEMENT. All of the representations and warranties made by Sellers in
this Agreement shall be true and correct at and as of the Closing except for
such breaches which, in the aggregate, have not and would not reasonably be
expected to have a Material Adverse Effect (as defined below). Sellers shall
have complied with and performed all of the agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the Closing
except for such noncompliances which, in the aggregate, have not and would not
reasonably be expected to have a Material Adverse Effect. Purchaser shall have
been furnished with a certificate or certificates of Horizon G.P., Inc., a
Delaware corporation ("Horizon Corporate"), dated as of the Closing,
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certifying to the fulfillment of the foregoing conditions. As used in this
Agreement, the term "Material Adverse Effect" means a material adverse effect
on the Business taken as a whole; provided, however, that neither (i) the
effects of any events, circumstances or conditions resulting solely from
changes, developments or circumstances in worldwide or national conditions
(political, economic, or regulatory) that adversely affect generally the
markets where the Cellular Systems are operated or affect generally
industries engaged in the telecommunications business (including proposed
legislation or regulation by any governmental or regulatory body or the
introduction of any technological changes in the telecommunications
industry), or adversely affect a broad group of industries generally, nor
(ii) any effects of competition resulting from the offering of Personal
Communication Services will constitute a Material Adverse Effect.
SECTION 10.02. PARTNER RESOLUTIONS. Each Seller shall deliver to
Purchaser copies of the resolutions of the board of directors of Horizon
Corporate authorizing the execution, delivery and performance of this Agreement
by such Seller and all instruments and documents to be delivered in connection
herewith and the transactions contemplated hereby, duly certified by an officer
of Horizon Corporate.
SECTION 10.03. INCUMBENCY CERTIFICATE. Purchaser shall have received a
certificate or certificates of an officer of Horizon Corporate, certifying as to
the genuineness of the signatures of officers of Horizon Corporate authorized to
take certain actions or execute any certificate, document, instrument or
agreement to be delivered pursuant to this Agreement, which incumbency
certificate shall include the true signatures of such officers.
SECTION 10.04. THIRD PARTY CONSENT; FCC; HART-SCOTT ACT. Sellers shall
have delivered to Purchaser such instruments, material consents and approvals of
third parties (the form and substance of which shall be reasonably satisfactory
to Purchaser) as are necessary to assign to Purchaser without modification
thereof, as of the Closing, the Assets and the Assumed Contracts (such material
consents being set forth on SCHEDULE 10.04) and Purchaser shall have obtained
all FCC Authorizations necessary for the consummation of the transactions
contemplated by this Agreement. Prior to assignment, the FCC shall have issued
(i) a Final Order granting the FCC's consent to the assignment of the Cellular
Authorizations to Purchaser and (ii) a Special Temporary Authority granting
FCC's consent to Purchaser to operate the microwave facilities that are the
subject of the Microwave Authorizations, including authorizations for those
facilities listed in SCHEDULE 7.09, each without any material conditions,
excepting conditions applied on an
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industry-wide basis, which the Purchaser reasonably deems to be adverse.
Anything herein to the contrary notwithstanding, but subject to the
provisions of Section 9.13, the Purchaser shall have the right (in its sole
discretion) to waive the requirement set forth in the preceding sentence by
delivery to Sellers of a written notice to such effect (the "Finality Waiver
Notice"). In addition, all applicable waiting periods under the Hart-Scott
Act (if applicable to the transactions contemplated by this Agreement) shall
have expired or been terminated and no objection shall have been made by the
Federal Trade Commission ("FTC") or the United States Department of Justice
("DOJ"). For the purposes of this Agreement, the term "Final Order" shall
mean action by the FCC as to which (i) no request for stay by the FCC, as
applicable, of the action is pending, no such stay is in effect, and, if any
deadline for filing any such request is designated by statute or regulation,
such deadline has passed; (ii) no petition for rehearing or reconsideration
of the action is pending before the FCC, and the time for filing any such
petition has passed; (iii) the FCC, does not have the action under
reconsideration on its own motion and the time for such reconsideration has
passed; and (iv) no appeal to a court, or request for stay by a court, of the
FCC's action, as applicable, is pending or in effect, and, if any deadline
for filing any such appeal or request is designated by statute or rule, it
has passed. For purposes of this Agreement, the term "Special Temporary
Authority" shall mean the applications assigning the Microwave Authorizations
to Purchaser have been filed, the public notice period for comments has
expired, no petitions to deny the assignment of the Microwave Authorizations
to Purchaser are on file and the FCC has either granted such applications or
the FCC has granted a special temporary authority permitting the Purchaser to
operate the microwave facilities that are the subject of the Microwave
Authorizations on a temporary basis.
SECTION 10.05. DUE DILIGENCE. Purchaser and its agents and representative
shall have conducted a satisfactory legal, regulatory and business due diligence
review of the Assets, the Business and the Cellular Systems including, without
limitation, the Cellular Systems' properties, cellsites, subscriber base and
revenue potential, the results of which shall be satisfactory to the Purchaser.
Without limiting the generality of the foregoing, Purchaser shall be satisfied
that the Assets constitute all assets, licenses and property necessary to the
operation of the Cellular Systems as contemplated to be conducted by Purchaser,
PROVIDED, HOWEVER, that if Purchaser has not advised Seller in writing prior to
the close of business on November 19, 1996 that the results of such due
diligence review are not satisfactory, the conditions set forth in this
Section 10.05 shall no longer apply and shall have been satisfied.
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SECTION 10.06. NO MATERIAL ADVERSE CHANGE. There shall not have been any
material adverse change in the financial condition, assets, business or
properties of the Cellular Systems or Assets, from August 31, 1996 to the
Closing provided, however, that neither (i) the effects of any events,
circumstances or conditions resulting solely from changes, developments or
circumstances in worldwide or national conditions (political, economic, or
regulatory) that adversely affect generally the markets where the Cellular
Systems are operated or affect generally industries engaged in the
telecommunications business (including proposed legislation or regulations by
any governmental or regulatory body or the introduction of any technological
changes in the telecommunications industry), or adversely affect a broad group
of industries generally, nor (ii) any effects of competition resulting from the
offering of Personal Communications Services shall be deemed to give rise to a
material adverse change.
SECTION 10.07. OPINION OF COUNSEL TO SELLERS. Purchaser shall have been
furnished with an opinion of Kleinbard, Bell & Brecker, counsel to Sellers,
dated as of the Closing and addressed to Purchaser, and to any institution
designated by Purchaser which has provided financing in connection with the
transactions contemplated by this Agreement in substantially the form of
EXHIBIT E hereto.
SECTION 10.08. OPINIONS OF FCC COUNSEL TO SELLERS. Purchaser shall have
been furnished with opinions of Latham & Watkins, FCC counsel for Sellers, dated
as of the Closing and addressed to Purchaser, and to any financial institution
designated by Purchaser which has provided the financing in connection with the
transactions contemplated by this Agreement, in substantially the form of
EXHIBIT F attached hereto.
SECTION 10.09. SUBSCRIBERS. The aggregate number of "subscribers" (as
defined in Section 5.05(a)) on Sellers' Cellular Systems as of December 31, 1996
shall be at least 19,000.
SECTION 10.10. OPERATING CASH FLOW. The combined "Operating Cash Flow" of
the Cellular Systems as of December 31, 1996 shall be at least $5 million or if
the Closing occurs after March 31, 1997 and before July 1, 1997, the combined
Operating Cash Flow of the Cellular Systems for the 12 month period ending March
31, 1997 shall be at least $5.2 million or if the Closing occurs after June 30,
1997 and before October 1, 1997, the combined Operating Cash Flow of the
Cellular Systems for the 12 month period ending June 30, 1997 shall be at least
5.6 million (such twelve month period other then the twelve month period ending
December 31, 1996 being referred to as the "Other Applicable Period"). For
purposes of this Section 10.09 the term "Operating Cash Flow"
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means (i) the total operating revenue of the Cellular Systems less (ii) all
expenses (other than interest expense, income taxes, depreciation and
amortization) related to the ownership and operation of the Cellular System
for the calendar year ending December 31, 1996 or the Other Applicable
Period, as the case may be, determined in accordance with GAAP, provided,
however, notwithstanding anything in this Agreement or GAAP to the contrary
(A) if the Cellular Systems' gross advertising, marketing and promotional
expenses are less than $2,195,676 for the applicable calculation period, the
Operating Cash Flow for such period shall be reduced by the dollar amount of
such shortfall, (B) employee bonuses related to performance in 1996 shall be
accrued in 1996 notwithstanding that they maybe payable in 1997, (C) employee
vacation pay shall be accrued in accordance with GAAP during the period
earned notwithstanding that vacation pay is paid or vacation days are taken
in a subsequent period, (D) the cost and expense needed to cause the Assets
to be in good working order and repair consistent with past practices at
December 31, 1996 or the Other Applicable Period, as the case may be, shall
be accrued as an expense even if such expenditure is deferred (other than the
Northern Telecom maintenance agreement which expenses will be amortized over
the life of the maintenance agreement), (E) all subscriber acquisition costs,
subscriber handset costs and marketing costs shall be accrued as an expense
in the period incurred (but in no case later than 90 days) and not
capitalized, (F) any reciprocal trade expenses, such as the provision of
cellular service in exchange for advertising shall be accrued as an expense,
(G) an accrual for the normal accounting fees consistent with past practices,
(H) any expenses related to the normal operations of a cellular system
(including insurance, legal, accounting, payroll and fringe benefits) borne
by any affiliate of Sellers and related to the operation of the Cellular
Systems shall be accrued as an expense and (ix) all accounting practices used
by Sellers (except as modified by clauses (i-viii) above) shall be consistent
with the practices used in preparing the financial statements of the Cellular
Systems referred to in Section 7.16 hereof. The Operating Cash Flow of the
Cellular Systems shall be determined pursuant to the Audit as provided for in
Section 9.04 hereof.
SECTION 10.11. ESCROW AGREEMENT. Sellers shall have executed and
delivered the Escrow Agreement to Purchaser.
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ARTICLE XI
CONDITIONS PRECEDENT TO
SELLERS' OBLIGATION TO CLOSE.
The obligations of Sellers under this Agreement with respect to the sale of
the Assets shall be subject to the fulfillment on or prior to the Closing of
each of the following conditions, any of which may be waived in writing by
Sellers (provided that if any condition shall not have been satisfied due
primarily to the actions or inaction of either Seller or any of their affiliates
that constitutes a breach of this Agreement, such condition shall be deemed to
have been satisfied or waived by Sellers):
SECTION 11.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
THIS AGREEMENT. All of the representations and warranties by Dobson and
Purchaser contained in this Agreement shall be true and correct in all material
respects at and as of the Closing. Dobson and Purchaser shall have complied
with and performed in all material respects all of the agreements and covenants
required by this Agreement to be performed and complied with by it on or prior
to the Closing. Sellers shall have been furnished with a certificate of an
officer of Dobson and Purchaser, dated as of the Closing, certifying to the
fulfillment of the foregoing conditions.
SECTION 11.02. DIRECTORS' RESOLUTIONS. Dobson and Purchaser shall deliver
to Sellers copies of the resolutions of its Board of Directors authorizing the
execution, delivery and performance of this Agreement and all instruments and
documents to be delivered in connection herewith and the transactions
contemplated hereby, duly certified by an authorized officer of Dobson and
Purchaser.
SECTION 11.03. INCUMBENCY CERTIFICATE. Sellers shall have received a
certificate of a secretary of Dobson and Purchaser, certifying as to the
genuineness of the signatures of representatives of Dobson and Purchaser
authorized to take certain actions or execute any certificate, document,
instrument or agreement to be delivered pursuant to this Agreement, which
incumbency certificate shall include the true signatures of such
representatives.
SECTION 11.04. FCC; HART-SCOTT ACT. The FCC shall have issued an order
granting the FCC's consent to the assignment of the Cellular Authorizations to
Purchaser and (ii) a Special Temporary Authority granting the FCC's consent to
the operation by Purchaser of the microwave facilities that are the subject of
the Microwave Authorizations, including authorizations for those facilities
listed in SCHEDULE 7.09. In addition, all applicable waiting periods under the
Hart-Scott
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Act (if applicable to the transactions contemplated by this Agreement) shall
have expired or been terminated and no objection shall have been made by the
FTC or DOJ.
SECTION 11.05. OPINION OF COUNSEL TO DOBSON AND PURCHASER. Sellers shall
have been furnished with an opinion of Edwards & Angell, counsel to Dobson and
Purchaser, dated as of the Closing and addressed to Sellers in substantially the
form of EXHIBIT G hereto.
ARTICLE XII
CASUALTY LOSSES
In the event that there shall have been suffered between the date hereof
and the Closing any casualty loss relating to the Assets or the Business Sellers
will promptly notify Purchaser of such event. Sellers shall, at their option,
(i) repair, rebuild or replace the portion of the Assets damaged, destroyed or
lost prior to the Closing Date, or (ii) assign to Purchaser at Closing all
claims to insurance proceeds or other rights of Sellers against third parties
arising from such casualty loss (the "Claims"); PROVIDED, HOWEVER that if such
insurance proceeds do not cover the entire casualty loss, then the Sellers shall
pay the difference. To the extent any Claim is not assignable, such claim may
be pursued by Purchaser, for its own account and benefit, in the name of
Sellers.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. INDEMNIFICATION BY SELLERS. (a) Notwithstanding the
Closing, and regardless of any investigation made at any time by or on behalf of
Purchaser or any information Purchaser may have, but subject to the terms of
this Article XIII, Sellers, jointly and severally, agree to indemnify and to
hold Purchaser, its shareholders, officers, directors, and employees (the
"Indemnified Purchaser Parties") harmless from and against and in respect of any
losses (including lost revenues), damages, costs, expenses (including costs of
investigations and reasonable attorney fees), suits, demands, judgments and
diminutions in value suffered or incurred (collectively, "Losses") by Purchaser
arising from or related to:
(i) Any Nonassumed Liability, whether or not
known or asserted at or prior to Closing, relating to or arising
from the ownership, operation, control or sale of the Assets of the
Cellular Systems or the
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Business other than the Assumed Liabilities, or any other state of
facts which existed at or prior to Closing, including fines or
forfeitures imposed or threatened to be imposed by the FCC for the
operation, at or prior to Closing, of the Cellular Systems or the
Business other than the Assumed Liabilities;
(ii) Any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of
Sellers under this Agreement, the exhibits hereto, the Escrow
Agreement, the Deposit Escrow Agreement, the Bill of Sale, the
Assumption Agreement or in any closing certificate delivered by
Sellers to Purchaser pursuant to Article X hereof; and
(iii) All costs and expenses (including reasonable
attorneys' fees) incurred by Purchaser in connection with
any action, suit, proceeding, demand, assessment or
judgment incident to any of the matters Purchaser is
indemnified against by Sellers in this Agreement.
(b) In addition and subject to the terms of this Article XIII,
Sellers shall indemnify Purchaser against and hold it harmless from
any and all Losses which Purchaser may incur by reason of the
failure (if any) of Sellers to comply with the Bulk Transfers
Article of the Uniform Commercial Code of any state.
SECTION 13.02. INDEMNIFICATION BY DOBSON AND PURCHASER. Notwithstanding
the Closing, and regardless of any investigation made at any time by or on
behalf of Sellers or any information Sellers may have, but subject to the terms
of this Article XIII each of Dobson and Purchaser agrees to indemnify and to
hold Sellers, and their respective partners and their affiliates, directors,
officers, stockholders, employees, representatives and agents harmless from and
against and in respect of any Losses incurred by Sellers from:
(i) All liabilities and obligations of Dobson
or Purchaser, and all claims and demands made in respect thereof
relating to or arising from, Dobson's or Purchaser's ownership,
operation or control of the Assets or the Business after the
Closing, including on account of the Assumed Liabilities; and;
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(ii) Any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of
Dobson or Purchaser under this Agreement, the exhibits
hereto, including the Escrow Agreement, the Deposit Escrow
Agreement, the Assumption Agreement or in any closing
certificate delivered by Dobson or Purchaser to Sellers
pursuant to Article XI hereof; and
(iii) All reasonable costs and expenses (including
reasonable attorneys' fees) incurred by Sellers in connection with
any action, suit, proceeding, demand, assessment or judgment
incident to any of the matters Sellers are indemnified against by
Purchaser in this Agreement.
SECTION 13.03. NOTICE OF CLAIMS; DEFENSE OF THIRD PARTY. Except for
claims for indemnification by Purchaser resulting from claims and actions
involving a Nonassumed Liability, a party claiming indemnification under this
Article XIII (the "Asserting Party") must promptly notify (in writing and in
reasonable detail) the party from which indemnification is sought (the
"Defending Party") of the nature and basis of such claim for indemnification not
later than June 30, 1998. If such claim relates to a claim, suit, litigation or
other action by a third party against the Asserting Party or any fixed or
contingent liability to a third party (a "Third Party Claim"), the Defending
Party may elect to assume and control the defense of the Third Party Claim at
its own expense with counsel selected by the Defending Party from and after such
time as the Defending Party unconditionally agrees in writing to accept, as
against the Asserting Party, all liabilities on account of such Third Party
Claim. Assumption of such liability, as against the Asserting Party, shall not
be deemed an admission of liability as against any such third party.
Notwithstanding the foregoing, the Defending Party may not assume or control the
defense if the named parties to the Third Party Claim (including any impleaded
parties) include both the Defending Party and the Asserting Party and
representation of both parties by the same counsel (in such counsel's reasonable
determination) would be inappropriate due to actual or potential differing
interests between them, in which case the Asserting Party shall have the right
to defend the Third Party Claim and to employ counsel reasonably approved by the
Defending Party, and to the extent the matter is determined to be subject to
indemnification hereunder, the Defending Party shall reimburse the Asserting
Party for the reasonable costs of its counsel. If the Defending Party assumes
liability for the Third Party Claim as against the Asserting Party and assumes
the defense and control of the Third Party Claim pursuant to this Section 13.03,
the Defending Party shall not be liable for any fees and expenses of counsel for
the Asserting Party
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incurred thereafter in connection with the Third Party Claim (except in the
case of actual or potential differing interests, as provided in the preceding
sentence), but shall not agree to any settlement of such Third Party Claim
which does not include an unconditional release of the Asserting Party by the
third party claimant on account thereof, PROVIDED that such requirement shall
be deemed waived to the extent that the Asserting Party does not undertake to
provide and promptly execute and, concurrently with the delivery of any such
release, deliver a corresponding release of the third party claimant with
respect to such Third Party Claim. If the Defending Party does not assume
liability for and the defense of the Third Party Claim pursuant to this
Section 13.03, the Asserting Party shall have the right (i) to control the
defense thereof and (ii), if the Asserting Party shall have notified the
Defending Party of the Asserting Party's intention to negotiate a settlement
of the Third Party Claim (at the Defending Party's expense to the extent the
matter is determined to be subject to indemnification hereunder), which
notice shall include the material terms of any proposed settlement in
reasonable detail, to settle the Third Party Claim (at the Defending Party's
expense to the extent the matter is determined to be subject to
indemnification hereunder) on terms not materially inconsistent with those
set forth in such notice, unless the Defending Party shall have notified the
Asserting Party in writing of the Defending Party's election to assume
liability for and the defense of the Third Party Claim pursuant to this
Section 13.03 within ten days after receipt of such notice, and the Defending
Party promptly thereafter shall have taken appropriate action to implement
such defense. The Asserting Party shall not be entitled to settle any such
Third Party Claim pursuant to the preceding sentence unless such settlement
includes an unconditional release of the Defending Party by the Third party
claimant on account thereof, PROVIDED that such requirement shall be deemed
waived to the extent that the Defending Party does not undertake to provide
and promptly execute and, concurrently with delivery of any such release,
deliver a corresponding release of the third party claimant with respect to
such Third Party Claim. The Asserting Party and the Defending Party shall
use all reasonable efforts to cooperate fully with respect to the defense and
settlement of any Third Party Claim covered by this Article XIII.
SECTION 13.04. NON RECOURSE TO SELLERS' PARTNERS. The obligations of
Sellers to Purchaser under this Agreement and any related agreements,
instruments, documents or certificates are non recourse to Sellers' partners and
if Sellers are in default hereof or under such other agreements, instruments,
documents or certificates, Purchaser shall not have any recourse to the personal
assets of any partner of Sellers, and Purchaser's recourse shall be limited
solely (i) prior to Closing, as provided in Section 18.06, and (ii) following
Closing, to the Escrow Payment.
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SECTION 13.05. LIMITATIONS. The Defending Party's obligations to
indemnify the Asserting Party pursuant to this Article XIII shall be subject to
the following limitations:
(a) No Indemnification shall be required to be made by the
Defending Party until the aggregate amount of the Asserting Party's Losses
exceeds $500,000 (the "Deductible") and then indemnification shall only be
required to be made by the Defending Party to the extent of such Losses that
exceed the Deductible; provided, however, the Deductible shall not be
applicable to (i) Sellers' obligation to indemnify Purchaser for Non-Assumed
Liabilities, (ii) Purchaser's and Dobson's obligation to indemnify Sellers for
Assumed Liabilities or (iii) adjustments to the Purchase Price provided for in
Section 5.05.
(b) No indemnification shall be required to be made by the
Defending Party of the amount of the Asserting Party's Losses that is in excess
of $3,750,000 except for (i) Sellers' obligation to indemnify Purchaser for
Non-Assumed Liabilities and (ii) Purchaser's and Dobson's obligation to
indemnify Sellers for Assumed Liabilities, as to which there is no limitation.
(c) The indemnification obligation of a Defending Party shall be
reduced so as to give effect to any net reduction in federal, state, local or
foreign income or franchise tax liability realized at any time by the Asserting
Party in connection with the satisfaction by the Defending Party of a claim with
respect to which indemnification is sought hereunder. The indemnification
obligation of a Defending Party shall also be reduced to the extent of any
available insurance proceeds; provided, however that such reduction shall not be
effective until the Asserting Party has realized the benefit of any such tax
reduction or has received any such insurance proceeds. The Defending Party
shall pay its indemnification obligations as and when required by this Article
XIII and the Asserting Party shall refund to the Defending Party any such
amounts determined to be in excess of the Defending Party's obligations due to
reductions pursuant to this Section 13.05(c). Additionally, the Asserting Party
shall refund promptly to the Defending Party any amount of the Asserting Party's
Losses that are subsequently recovered by the Asserting Party pursuant to a
settlement or otherwise.
(d) From and after the Closing Date, the indemnification rights
contained in this Article XIII shall constitute the sole and exclusive remedies
of the parties hereunder an shall supersede and displace all other rights that
either party may have under statute or common law.
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ARTICLE XIV
CONFIDENTIALITY AND PRESS RELEASES
SECTION 14.01. CONFIDENTIALITY. Each party (in such capacity, a
"Recipient Party") shall hold in strict confidence all documents and information
concerning the other (in such capacity, a "Disclosing Party") and its business
and properties and, if the transaction contemplated hereby should not be
consummated, such confidence shall be maintained, and all such documents and
information (in written form) shall immediately thereafter be returned to the
Disclosing Party. In furtherance of the foregoing, without the express prior
written consent of the Disclosing Party, the Recipient Party shall not, directly
or indirectly, disclose, disseminate, publish, reproduce, retain, use (for its
benefit or for the benefit of others) or otherwise make available in any manner
whatsoever, any such documents or information to anyone except as provided in
Section 14.03. If the Recipient Party breaches, or threatens to commit a breach
of, any of the provisions of this Article XIV, the Disclosing Party shall have
the right (in addition to any other rights and remedies available at law or in
equity) to equitable relief (including injunctions) against such breach or
threatened breach, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable harm to the Disclosing Party and that
money damages would not be an adequate remedy.
SECTION 14.02. PRESS RELEASES. No press release or public disclosure,
either written or oral, of the existence or terms of this Agreement shall be
made by either Purchaser or Sellers without the consent of the other subject to
the provisions of Section 14.03, and Purchaser and Sellers shall each furnish to
the other advance copies of any release which it proposes to make public
concerning this Agreement or the transactions contemplated hereby and the date
upon which Purchaser or Sellers, as the case may be, proposes to make such press
release.
SECTION 14.03. DISCLOSURES REQUIRED BY LAW. This Article XIV shall not,
however, be construed to prohibit any party from making any disclosures to any
governmental authority that it is required to make by law or from filing this
Agreement with, or disclosing the terms of this Agreement to, any institutional
lender to such party, or prohibit Sellers, Purchaser or any of their affiliates
from disclosing to its investors, partners, accountants, auditors, attorneys,
parent company and broker/dealers such terms of this transaction as are
customarily disclosed to them in connection with the sale or acquisition of a
cellular telephone system; PROVIDED, HOWEVER, that any such party shall be
informed of the confidential nature of such information and shall agree to keep
such information confidential; and PROVIDED, HOWEVER, that each party shall
provide to the
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other reasonable advance copies of any public release except where the provision
of such advance notice is not permissible.
ARTICLE XV
TERMINATION
SECTION 15.01. BREACHES AND DEFAULTS; OPPORTUNITY TO CURE. Prior to the
exercise by a party of any termination rights afforded under this Agreement, if
either party (the "Non-Breaching Party") believes the other (the "Breaching
Party") to be in breach hereunder, the Non-Breaching Party shall provide the
Breaching Party with written notice specifying in reasonable detail the nature
of such breach, whereupon the Breaching Party shall have [thirty (30)] days from
the receipt of such notice to cure such breach to the reasonable satisfaction of
the Non-Breaching Party; PROVIDED, HOWEVER, that if such breach is curable but
is not capable of being cured within such period and if the Breaching Party
shall have commenced action to cure such breach within such period and is
diligently attempting to cure such breach, then the Breaching Party shall be
afforded an additional sixty(60) days to cure such breach, PROVIDED, HOWEVER,
Purchaser shall have no opportunity to cure the breach of its obligations to
deliver any required portion of the Purchase Price to be delivered to Sellers at
Closing; and PROVIDED, FURTHER, HOWEVER, that the cure period for a breach shall
in no event extend beyond the Outside Date. If the breach is not cured within
such time period, then the Breaching Party shall be in default hereunder and the
Non-Breaching Party shall be entitled to terminate this Agreement (as provided
in Section 15.02). This right of termination shall be in addition to, and not
in lieu of, any legal or equitable remedies available to the Non-Breaching
Party.
SECTION 15.02. TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned, by written notice given to
the other party hereto, at any time prior to the Closing:
(a) by mutual written consent of Sellers and Purchaser;
(b) by either Purchaser or Sellers, if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise permanently prohibiting the sale of the
Assets to Purchaser (which Sellers and Purchaser shall have used all
46
<PAGE>
reasonable efforts to have lifted or reversed) and such order, decree, ruling or
other action shall have become final and nonappealable;
(c) subject to Section 15.01, by Purchaser, if Sellers shall
have breached any of their representations herein and such breaches would
reasonably be expected to have a Material Adverse Effect or if Sellers shall
have materially breached any of their covenants;
(d) subject to Section 15.01, by Sellers, if Purchaser or Dobson
shall have materially breached any of their representations or covenants herein;
(e) by either Sellers or Purchaser if the Closing shall not have
occurred on or before November 18, 1997 (the "Outside Date"), unless the failure
to have the Closing shall be due to the failure of the party seeking to
terminate this Agreement to perform in any material respect its obligations
under this Agreement required to be performed by it at or prior to the Closing;
or
(f) by either party in accordance with the provisions of Section
9.5(b).
ARTICLE XVI
BROKERS' FEES
Each party represents and warrants to the other that it shall be solely
responsible for the payment of any fee or commission due to any broker or finder
it has engaged with respect to this transaction and the other party hereto shall
be indemnified for any liability with respect thereto pursuant to Article XIII
hereof.
47
<PAGE>
ARTICLE XVII
ARBITRATION
Any controversy, dispute or claim (collectively, a "Dispute") between the
parties arising out of or relating to this Agreement, or the breach, termination
or validity thereof, shall be finally settled by arbitration in accordance with
the commercial arbitration rules of the American Arbitration Association ("AAA")
then obtaining. However, in all events, these arbitration provisions shall
govern over any conflicting rules that may now or hereafter be contained in the
AAA rules. The arbitration shall be held in Baltimore, Maryland unless the
parties mutually agree to have the arbitration held elsewhere, and judgment upon
the award made therein may be entered by any court having jurisdiction in
Baltimore, Maryland; provided however, that nothing contained in this Article
XVII shall be construed to limit or preclude a party from bringing any action in
any court of competent jurisdiction for injunctive or other provisional relief
to compel another party to comply with its obligations under this Agreement
during the pendency of the arbitration proceedings. Any judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction over
the subject matter hereof. The arbitrator shall have the authority to grant any
equitable and legal remedies that would be available in any judicial proceeding
instituted to resolve any claim hereunder.
Any such arbitration will be conducted before three (3) arbitrators, one of
which shall be chosen by Sellers, one of which shall be chosen by Purchaser, and
the third chosen by the other two arbitrators. The decision of a majority of
the arbitrators will be the decision of the arbitrators. The arbitrators shall
permit such discovery as they shall determine is appropriate in the
circumstances, taking into account the needs of the parties and the desirability
of making discovery expeditious and cost-effective. Any such discovery shall be
limited to information directly related to the controversy or claim in
arbitration and shall be concluded within sixty (60) days after appointment of
the third arbitrator.
The prevailing party in any arbitration hereunder shall be entitled to an
award of its reasonable costs incurred in connection therewith, including
attorneys' fees.
For any Dispute submitted to arbitration, the burden of proof will be as it
would be if the claim were litigated in a judicial proceeding.
48
<PAGE>
Upon the conclusion of any arbitration proceedings hereunder, the
arbitrators will render findings of fact and conclusions of law and a written
opinion setting forth the basis and reasons for any decision reached and will
deliver such documents to each party to this Agreement along with a signed copy
of the award.
The arbitrators chosen in accordance with these provisions will not have
the power to alter, amend or otherwise affect the terms of these arbitration
provisions or the provisions of this Agreement.
ARTICLE XVIII
MISCELLANEOUS
SECTION 18.01. ADDITIONAL INSTRUMENTS OF TRANSFER. (a) From time to time
after the Closing, each party shall, if requested by another party, make,
execute and deliver such additional assignments, bills of sale, deeds and other
instruments, as may be reasonably necessary or proper to carry out the specific
provisions of this Agreement, including transfer to Purchaser all of Sellers'
right, title and interest in and to the Assets. Such efforts and assistance
shall be at the cost of the requesting party.
(b) Anything in this Agreement to the contrary notwithstanding,
Sellers are not obligated to sell, assign, transfer or convey to Purchaser any
of their rights and obligations in and to any Interest without first obtaining
all necessary approvals, consents or waivers. To the extent any of the
approvals, consents or waivers listed on SCHEDULE 10.04 have not been obtained
by Sellers as of the Closing and Purchaser elects to proceed with the Closing,
Sellers shall, for a period equal to the shorter of twelve months after the
Closing, or the remaining term of such Interest, use all reasonable efforts to
(i) obtain the consent of any such third party; (ii) cooperate with Purchaser in
any reasonable and lawful arrangements designed to provide the benefits
(including, without limitation, the payment to Purchaser of any monies received
by Sellers in connection therewith) of such Interest to Purchaser so long as
Purchaser performs all obligations with respect to the Interest (and the payment
of all expenses in connection therewith); and (iii) enforce, at the request of
Purchaser and at the expense and for the account of Purchaser, any rights of
Sellers arising from such Interest against such issuer thereof or the other
party or parties thereto (including the right to elect to terminate any such
Interest in accordance with the terms thereof upon the request of Purchaser);
provided, however, that none of Purchaser or Sellers shall be obligated to pay
any consideration or other sums therefor (except for filing fees and other
49
<PAGE>
ordinary administrative charges and except as set forth above) to the third
party from whom such approval, consent or waiver is requested.
SECTION 18.02. NOTICES. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered, sent by telecopier, recognized overnight delivery
service or registered or certified mail, return receipt requested, postage
prepaid, to the following addresses:
(i) If to Purchaser:
13439 N. Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
Attention: Everett Dobson
Facsimile No.: (405) 391-8515
with a required copy to:
Edwards & Angell
2800 Hospital Trust Tower
Providence, Rhode Island 02903
Attention: David K. Duffell, Esq.
Facsimile No.: (401) 276-6602
(ii) If to Sellers:
101 Lindenwood Drive, Suite 125
Malvern, PA 19355
Attention: Bruce Hernandez
Facsimile No.: 610-993-2683
with a required copy to:
Kleinbard, Bell & Brecker
1900 Market Street, Suite 700
50
<PAGE>
Philadelphia, PA 19103
Attention: Howard J. Davis, Esquire
Facsimile No.: 215-568-0140
Notices delivered personally shall be effective upon delivery against
receipt. Notices transmitted by telecopy shall be effective when received,
provided that the burden of proving notice when notice is transmitted by
telecopy shall be the responsibility of the party providing such notice .
Notices delivered by overnight mail shall be effective when received. Notices
delivered by registered or certified mail shall be effective on the date set
forth on the receipt of registered or certified mail, or 72 hours after mailing,
whichever is earlier.
SECTION 18.03. EXPENSES. Each party shall bear its own expenses and
costs, including the fees of any corporate, FCC attorney retained by it,
incurred in connection with the preparation of this Agreement and the
consummation of the transactions contemplated hereby; provided that Sellers and
Purchaser shall bear equally FCC, Hart-Scott Act and other governmental filing
fees.
SECTION 18.04. TRANSFER TAXES. Sellers and Purchaser shall bear equally
all use, sales and transfer taxes, if any, imposed in connection with the sale
and delivery of the Assets acquired by Purchaser under this Agreement.
Notwithstanding anything else to the contrary set forth in this Section 18.04,
Purchaser shall in no event be responsible in any manner for the payment of any
Taxes on any income or gain which Sellers may realize as a result of the sale of
the Assets or otherwise related to the transactions contemplated by this
Agreement.
SECTION 18.05. COLLECTION PROCEDURES. From and after the Closing,
Purchaser shall have the right and authority, at its expense, to collect for its
account all items to which it is entitled as provided in this Agreement and to
endorse with the name of the Sellers any checks or drafts received on account of
any such items.
SECTION 18.06. SPECIFIC PERFORMANCE. The parties recognize and
acknowledge that in the event Sellers shall fail to perform their obligations
under the terms of this Agreement, money damages alone will not be adequate to
compensate the Purchaser. The parties, therefore, agree and acknowledge that in
the event the Sellers fail to perform their obligations under this Agreement
prior to Closing, the Purchaser shall be entitled, in addition to any action for
monetary damages, in addition to any other rights and remedies on account of
such failure, to
51
<PAGE>
specific performance of the terms of this Agreement and of the covenants and
obligations hereunder.
SECTION 18.07. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania
(without application of principles of conflicts of law).
SECTION 18.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties, which consent
will not be unreasonably withheld.
SECTION 18.09. SUCCESSORS AND ASSIGNS. All agreements made and entered
into in connection with this transaction shall be binding upon and inure to the
benefit of the parties hereto, their successors and permitted assigns.
SECTION 18.10. AMENDMENTS; WAIVERS. No alteration, modification or change
of this Agreement shall be valid except by an agreement in writing executed by
the parties hereto. No failure or delay by any party hereto in exercising any
right, power or privilege hereunder (and no course of dealing between or among
any of the parties) shall operate as a waiver of any such right, power or
privilege. No waiver of any default on any one occasion shall constitute a
waiver of any subsequent or other default. No single or partial exercise of any
such right, power or privilege shall preclude the further or full exercise
thereof.
SECTION 18.11. ENTIRE AGREEMENT. This Agreement merges all previous
negotiations and agreements between the parties hereto, either verbal or
written, and constitutes the entire agreement and understanding between the
parties with respect to the subject matter of this Agreement.
SECTION 18.12. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be an original, but all
of which together shall constitute one agreement. Facsimile signatures shall be
deemed original signatures.
SECTION 18.13. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be
52
<PAGE>
affected thereby and shall be enforced to the greatest extent permitted by law,
but only as long as the continued validity, legality and enforceability of such
provision or application does not materially (a) alter the terms of this
Agreement, (b) diminish the benefits of this Agreement or (c) increase the
burdens of this Agreement, for any person.
SECTION 18.14. SECTION HEADINGS. The section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
SECTION 18.15. INTERPRETATION. As both parties have participated in the
drafting of this Agreement, any ambiguity shall not be construed against either
party as the drafter.
SECTION 18.16. FURTHER ASSURANCES. For a period of twelve (12) months
after Closing, Sellers agree to provide to Purchaser from time to time any
information that Sellers possess with respect to the operation of the Business
and Assets prior to the Closing which the Purchaser reasonably requests in the
future in connection with the Purchaser's financing efforts now or in the future
or in connection with any FCC or other regulatory filing.
SECTION 18.17. THIRD PARTIES. Nothing herein, expressed or implied, is
intended to or shall confer on any person other than the parties hereto any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
SECTION 18.18 CERTAIN DEFINED TERMS. As used in this Agreement the term
(a) "to Sellers' knowledge" or any similar phrase means the actual knowledge of
one of the Executive Officers or R.A. Robinson, the general manager of the
Cellular Systems and (b) "Executive Officers" shall mean Messrs. Michael E.
Kalogris, Steven R. Skinner and Bruce M. Hernandez.
53
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized representative as of the day and year first
above written.
SELLERS:
HORIZON CELLULAR TELEPHONE COMPANY
OF HAGERSTOWN, L.P.
By: KCCGP, L.P., its general partner
By: Horizon G.P., Inc., its general partner
By: Bruce M. Hernandez
------------------------------
Title: President
CUMBERLAND CELLULAR PARTNERSHIP
By: Horizon Cellular Telephone Company of
Cumberland, L.P., its managing
general partner
By: KCCGP, L.P., its general partner
By: Horizon G.P., Inc., its general partner
By: Bruce M. Hernandez
------------------------------
Title: President
PURCHASER:
DOBSON CELLULAR OF MARYLAND, INC.
<PAGE>
By: Everett R. Dobson
------------------------------
Everett Dobson
President
GUARANTOR:
DOBSON COMMUNICATIONS CORPORATION
By: Everett R. Dobson
------------------------------
Everett Dobson
President
2
<PAGE>
AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 1 TO ASSET PURCHASE AGREEMENT ("Amendment") is dated as
of January 17, 1997 among Horizon Cellular Telephone Company of Hagerstown,
L.P., a Delaware limited partnership ("HCTC"), Cumberland Cellular Partnership,
a Pennsylvania general partnership ("CCP" and together with HCTC, "Sellers"),
Dobson Communications Corporaiton, an Oklahoma Corporation ("Dobson"), and
Dobson Cellular of Maryland, Inc., an Oklahoma corporation and wholly-owned
subsidiary of Dobson ("Purchaser").
BACKGROUND. Sellers, Dobson and Purchaser are parties to that certain
Asset Purchase Agreement dated as of November 19, 1996 (the "Purchase
Agreement"). The parties desire to amend the Purchase Agreement as provided
herein. Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing Background, the mutual
promises and agreements made herein and inn the Purchase Agreement and other
good and valuable consideration, the receipt of which is hereby acknowledged,
the parties, intending to be legally bound hereby, agree as follows:
1. CUMBERLAND PHASE II AUCTIONS. CCP was the winning bidder at certain
auctions conducted by the FCC relating to certain unserved areas near
Cumberland, MD (the "Cumberland Phase II Auction Area"). CCP agrees to transfer
to Purchaser at closing all of CCP's right, title and interest (including any
FCC Authorizations) with respect thereto (which, subject to the provisions
contained herein, shall constitute Assets as provided in the Purchase
Agreement). In consideration therefor, Purchaser shall pay to Seller at Closing
the amount of $12,000 in connection with such auctions, and Purchaser shall
assume all liabilities and obligations of CCP with respect thereto (which shall
constitute Assumed Liabilities as provided in the Purchase Agreement), including
the payment of any deposits or other payments required after the Closing Date.
Notwithstanding anything to the contrary contained herein or in the Purchase
Agreement, (i) CCP's conveyance of its right, title and interest in and to the
Cumberland Phase II Auction Area to Purchaser shall be made on an "AS-IS" basis
without any representations or warranties by Sellers of any kind or nature, (ii)
CCP's failure to acquire any rights with respect to the Cumberland Phase II
Auction Area shall not constitute a failure of any condition precedent to
Purchaser's obligation to close as set forth in ARTICLE X of the Purchase
Agreement, and (iii)
<PAGE>
no FCC authorization granted in connection with such auctions shall be required
to have been granted by Final Order as required by SECTION 10.04 of the
Purchase Agreement.
2. INDEMNITY. Purchaser and Dobson agree to indemnify Seller, in
accordance with the terms of ARTICLE XIII of the Purchase Agreement, for any
Losses incurred by Sellers in connection with CCP's participation in the
auctions.
3. MISCELLANEOUS. Except for the modifications stated above, all other
terms and conditions of the Purchase Agreement and the Deposit Escrow Agreement
shall remain the same and continue in full force and effect and shall constitute
the legally valid and binding obligations of the parties thereto enforceable in
accordance with their terms.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first above written.
HORIZON CELLULAR TELEPHONE COMPANY OF
HAGERSTOWN, L.P.
By: KCCGP, L.P., its general partner
By: HORIZON G.P., INC., its general partner
By: Bruce M. Hernandez
-------------------------------
Bruce M. Hernandez, Vice President
CUMBERLAND CELLULAR PARTNERSHIP
By: HORIZON CELLULAR TELEPHONE COMPANY
OF CUMBER LAND, L.P., its managing general partner
By: Bruce M. Hernandez
-------------------------------
Bruce M. Hernandez, Vice President
4
<PAGE>
DOBSON CELLULAR OF MARYLAND, INC.
By: Everett R. Dobson
-------------------------------
Name: Everett R. Dobson
Title: Chairman
DOBSON COMMUNICATIONS CORPORATION
By: Everett R. Dobson
-------------------------------
Name: Everett R. Dobson
Title: President
<PAGE>
AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT
This AMENDMENT NO. 2 TO ASSET PURCHASE AGREEMENT ("Amendment") is dated as
of February 6, 1997 among Horizon Cellular Telephone Company of Hagerstown,
L.P., a Delaware limited partnership ("HCTC"), Cumberland Cellular Partnership,
a Pennsylvania general partnership ("CCP" and together with HCTC, "Sellers"),
Dobson Communications Corporation, an Oklahoma corporation ("Dobson"), and
Dobson Cellular of Maryland, Inc., an Oklahoma corporation and wholly-owned
subsidiary of Dobson ("Purchaser").
BACKGROUND. Sellers, Dobson and Purchaser are parties to that certain
Asset Purchase Agreement dated as of November 19, 1996, as amended by that
certain Amendment No. 1 to Asset Purchase Agreement dated as of January 17, 1997
(as so amended, the "Purchase Agreement") and the related Deposit Escrow
Agreement. The parties desire to further amend the Purchase Agreement and to
amend the Deposit Escrow Agreement as provided herein. Capitalized terms used
but not defined herein shall have the meanings given to such terms in the
Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing Background, the mutual
promises and agreements made herein and in the Purchase Agreement and other good
and valuable consideration, the receipt of which is hereby acknowledged, the
parties, intending to be legally bound hereby, agree as follows:
4. CLOSING DATE. The parties covenant that the Closing (as defined in
ARTICLE VI of the Purchase Agreement) shall occur on February 28, 1997 and that
such date shall be deemed to be the Closing Date for all purposes under the
Purchase Agreement.
5. AMENDMENTS REGARDING DEPOSIT.
2.1. The parties have agreed to increase the amount of the Deposit by
$1.25 million from $3.75 million to $5 million and to consider such aggregate
amount as liquidated damages in the event of certain breaches by Dobson or
Purchaser of the Purchase Agreement on the terms provided herein. Therefore, on
the date hereof, Purchaser is depositing with the Deposit Escrow Agreement the
additional amount of $1.25 million to be held, invested and disbursed pursuant
to the terms of the Deposit Escrow Agreement (as amended hereby).
6
<PAGE>
2.2 SECTION 5.02 of the Purchase Agreement is hereby deleted in its
entirety and replaced with the following:
"SECTION 5.02. DEPOSIT. Purchaser has deposited as a good faith
deposit $5 million (the "Deposit") with CoreStates Bank, N.A. (the "Deposit
Escrow Agent"), to be held, invested and disbursed pursuant to the terms of
the Deposit Escrow Agreement substantially in the form of EXHIBIT C
attached hereto (the "Deposit Escrow Agreement"). If the Closing occurs,
then the Deposit and all earnings on the deposit shall be paid to Sellers
pursuant to the Deposit Escrow Agreement and the full amount of the Deposit
and the earnings thereon shall be credited against and deducted from the
Purchase Price to be paid at the closing by Purchaser for the Assets. If
Sellers terminate this Agreement in accordance with the provisions of
Section 15.02(d), and provided at the time of such termination Sellers are
not then in breach of any of their representations, warranties, covenants
or agrements to such an extent the Sellers' breaches, in the aggregate,
would reasonably be expected to have a Material Adverse Effect and the
conditions set forth in Sections 10.04 (only FCC and Hart-Scott-Rodino Act
consents), 10.06 (provided that the applicable period shall be from August
31, 1996 through the date of termination of this Agreement), 10.09 and
10.10 shall have been satisfied, then Sellers shall be entitled to the
Deposit as liquidated damages (the "Liquidated Damages Amount") without the
necessity for proof by Sellers of actual damages, which damages that
Sellers would sustain as a result of such termination. Notwithstanding
anything else set forth in this Section 5.02, Sellers' sole and exclusive
recourse for Purchaser's or Dobson's breach of their representations or
obligations under this Agreement prior to Closing shall only be to receive
an amount of $5 million. In any other case if the Closing does not occur,
then, pursuant to the Deposit Escrow Agreement, the Deposit and all
earnings thereon shall be paid to Purchaser. All determinations of breach
and satisfaction of conditions shall be made, and all payments by the
Deposit Escrow Agent shall be made, in accordance with the procedures and
other provisions set forth in the Deposit Escrow Agreement."
2.3 SECTION 1(a) of the Deposit Escrow Agreement is hereby deleted in
its entirety and replaced with the following:
"SECTION 1. ESCROW DEPOSIT. (a) The Escrow Agent acknowledges receipt
of $5,000,000 (the "Deposit") from the Purchaser."
<PAGE>
2.4 SECTION 4(b) of the Deposit Escrow Agreement is hereby deleted in
its entirety and replaced with the following:
"(b) If Escrow Agent receives written notice that the Acquisition
Agreement has been terminated by Sellers under Section 15.02(d), and
provided at the time of such termination, Sellers are not then in
breach of any of their representations, warranties, covenants or
agreements to such an extent the Sellers' breaches, in the aggregate,
would reasonably be expected to have a Material Adverse effect (as
defined in the Acquisition Agreement) and the conditions set forth in
Sections 10.04 (only FCC and Hart-Scott-Rodino Act consents), 10.06
(provided that the applicable period shall be from August 31, 1996
through the date of termination of this Agreement), 10.09 and 10.10 of
the Acquisition Agreement shall have been satisfied, then upon such
claim for payment made by the Sellers and subject to Section 4(d)
hereof, the Escrow Agent shall pay to Sellers out of the Escrowed
Funds the amount of $5 million. All claims and payments under this
Section 4(b) shall be made in accordance with the procedures set forth
in Section 4(d) below."
6. MISCELLANEOUS. Except for the modifications stated above, all
otherterms and conditions of the Purchase Agreement and the Deposit Escrow
Agreement shall remain the same and continue in full force and effect and shall
constitute the legally valid and binding obligations of the parties thereto
enforceable in accordance with their terms.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
HORIZON CELLULAR TELEPHONE COMPANY OF
HAGERSTOWN, L.P.
By: KCCGP, L.P., its general partner
By: HORIZON G.P., INC., its general partner
By: Bruce M. Hernandez
----------------------------------
Bruce M. Hernandez, Vice President
CUMBERLAND CELLULAR PARTNERSHIP
8
<PAGE>
By: HORIZON CELLULAR TELEPHONE COMPANY
OF CUMBER LAND, L.P., its managing general partner
By: Bruce M. Hernandez
-------------------------------
Bruce M. Hernandez, Vice President
DOBSON CELLULAR OF MARYLAND, INC.
By: Everett R. Dobson
-------------------------------
Name: Everett R. Dobson
Title: Chairman
DOBSON COMMUNICATIONS CORPORATION
By: Everett R. Dobson
-------------------------------
Name: Everett R. Dobson
Title: President
<PAGE>
ASSET PURCHASE AGREEMENT
among
MARYLAND WIRELESS COMMUNICATIONS, L.P.
(the "SELLER"),
WENDY COLEMAN
("COLEMAN"),
DOBSON CELLULAR OF MARYLAND, INC.
("PURCHASER")
and
DOBSON COMMUNICATIONS CORPORATION
("DCC")
DATED AS OF SEPTEMBER 25, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I PURCHASE AND SALE ........................................1
ARTICLE II DESCRIPTION OF ASSETS; EXCLUDED ASSETS ...................2
Section 2.01 Assets ................................................. 2
Section 2.02 Excluded Assets ........................................ 3
ARTICLE III ASSUMPTION OF LIABILITIES .............................. 3
ARTICLE IV INSTRUMENTS OF TRANSFER ................................ 4
Section 4.01 Transfer Documents ..................................... 4
Section 4.02 Assumption Documents ................................... 4
ARTICLE V PURCHASE PRICE; ALLOCATION ............................. 4
Section 5.01 Purchase Price ......................................... 4
Section 5.02 Payment of Purchase Price .............................. 4
Section 5.03 Allocation of Purchase Price ........................... 4
Section 5.04 Purchase Price Adjustment .............................. 5
ARTICLE VI PURCHASE PRICE ADJUSTMENTS; CLOSING
STATEMENT ............................................. 6
Section 6.01 Prorations; Closing Statement .......................... 6
ARTICLE VII CLOSING ................................................ 6
i
<PAGE>
ARTICLE VIII SELLER'S REPRESENTATIONS ............................... 7
Section 8.01 Organization; Qualification ............................ 7
Section 8.02 Consents; Authorization; Execution and
Delivery of Agreement .................................. 7
Section 8.03 Title to Assets; Condition of Assets ................... 7
Section 8.04 Real Property-Owned .................................... 8
Section 8.05 Real and Personal Property-Leased ...................... 8
Section 8.06 Existing Contracts ..................................... 8
Section 8.07 Governmental Licenses .................................. 9
Section 8.08 Compliance with Law .................................... 9
Section 8.09 No Violation of Existing Agreements .................... 9
Section 8.10 Litigation and Legal Proceedings ....................... 9
Section 8.11 Environmental Compliance ............................... 10
Section 8.12 Labor Matters .......................................... 11
Section 8.13 Employee Benefits ...................................... 11
Section 8.14 Tax Matters ............................................ 11
Section 8.15 Financial Statements ................................... 11
Section 8.16 Customers .............................................. 12
Section 8.17 Insurance .............................................. 12
Section 8.18 Brokers ................................................ 12
Section 8.19 Disclosure of Material Information ..................... 13
Section 8.20 Assignment ............................................. 13
ARTICLE IX PURCHASER'S REPRESENTATIONS ............................ 13
Section 9.01 Organization; Qualification ............................ 13
Section 9.02 Consents; Authorization; Execution
and Delivery of Agreement .............................. 13
Section 9.03 Litigation and Legal Proceedings ....................... 13
Section 9.04 Brokers ................................................ 14
Section 9.05 Purchaser's Qualification .............................. 14
Section 9.06 Disclosure of Material Information ..................... 14
Section 9.07 Financial Statement of Purchaser's Parent .............. 14
ARTICLE X SELLER'S AND PURCHASER'S
AFFIRMATIVE COVENANTS .................................. 15
Section 10.01 Covenants Prior to Closing ............................. 15
Section 10.02 Interim Financial Statements ........................... 15
ii
<PAGE>
Section 10.03 Governmental Approvals ................................. 16
Section 10.04 Third Party Consents; Closing Conditions ............... 16
Section 10.05 Line of Credit ......................................... 17
Section 10.06 Customer Information ................................... 17
Section 10.07 Required Notice; Certain Distributions ................. 17
ARTICLE XI CONDITIONS PRECEDENT TO PURCHASER'S
OBLIGATION TO CLOSE .................................... 18
Section 11.01 Accuracy of Representations and Warranties;
Performance of this Agreement .......................... 18
Section 11.02 Partner Resolutions .................................... 18
Section 11.03 Incumbency Certificate ................................. 18
Section 11.04 Delivery of Interim Financial Statements ............... 18
Section 11.05 Third Party Consents; FCC; Hart-Scott Act .............. 18
Section 11.06 Due Diligence .......................................... 19
Section 11.07 Necessary Financing .................................... 19
Section 11.08 No Material Adverse Change ............................. 19
Section 11.09 Opinion of Counsel to Seller ........................... 20
Section 11.10 Opinion of FCC Counsel to Seller ....................... 20
Section 11.11 Subscribers ............................................ 20
ARTICLE XII CONDITIONS PRECEDENT TO SELLER'S
OBLIGATION TO CLOSE .................................... 20
Section 12.01 Accuracy of Representations and Warranties;
Performance of this Agreement .......................... 20
Section 12.02 Directors' Resolutions ................................. 20
Section 12.03 Incumbency Certificate ................................. 21
Section 12.04 Third Party Consents; FCC; Hart-Scott Act .............. 21
Section 12.05 Opinion of Counsel to Purchaser ........................ 21
ARTICLE XIII CASUALTY LOSSES ........................................ 21
ARTICLE XIV INDEMNIFICATION ........................................ 21
Section 14.01 Indemnification by Seller and Coleman .................. 21
Section 14.02 Indemnification by Purchaser ........................... 22
Section 14.03 Notice of Claims; Defense of Third Party Claims ........ 23
Section 14.04 Escrow; Set-Off ........................................ 24
Section 14.05 Further Remedies ....................................... 24
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ARTICLE XV CONFIDENTIALITY AND PRESS RELEASES ..................... 24
Section 15.01 Confidentiality ........................................ 24
Section 15.02 Press Release .......................................... 24
Section 15.03 Disclosures Required By Law ............................ 25
ARTICLE XVI TERMINATION ............................................ 25
ARTICLE XVII BROKERS' FEES .......................................... 26
ARTICLE XVIII CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL .......... 26
ARTICLE XIX MISCELLANEOUS .......................................... 26
Section 19.01 Additional Instruments of Transfer ..................... 26
Section 19.02 Notices ................................................ 27
Section 19.03 Expenses ............................................... 28
Section 19.04 Transfer Taxes ......................................... 28
Section 19.05 Collection Procedures .................................. 28
Section 19.06 Specific Performance ................................... 28
Section 19.07 Governing Law .......................................... 28
Section 19.08 Assignment ............................................. 28
Section 19.09 Successors and Assigns ................................. 29
Section 19.10 Amendments; Waivers .................................... 29
Section 19.11 Standstill ............................................. 29
Section 19.12 Entire Agreement ....................................... 29
Section 19.13 Counterparts ........................................... 29
Section 19.14 Severability ........................................... 29
Section 19.15 Section Headings ....................................... 29
Section 19.16 Interpretation ......................................... 29
Section 19.17 Further Assurances ..................................... 30
Section 19.18 Third Parties .......................................... 30
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DEFINED TERMS
TERM SECTION CITE
AAA 6.01(b)
Adjustment Date 6.01(a)
Asserting Party 14.03
Assets 2.01
Assumed Contracts Article III
Assumption Agreement 4.02
Assumed Liabilities Article III
Authorizations 8.07
Bill of Sale 4.01
Buildout Assets 5.04(a)
Buildout Costs 5.04(a)
Business Recitals
Capitalized System Costs 5.04(a)
Cellular System Introduction
CERCLA 8.11(b)
Claims Article XIII
Closing Article VII
Closing Date Article VII
Closing Statement 6.01(a)
Code 8.13
Coleman Introduction
Controlled Group Member 8.13
Deposit 1.02
DCC Introduction
Defending Party 14.03
Defined Benefit Pension Plan 8.13
Determination Date 5.04
Dispute Note 5.02
Employee Benefit Plans 8.13
Environmental Laws 8.11(c)
ERISA 8.13
ERISA Affiliate 8.13
Escrow Agent 5.02
Escrow Agreement 5.02
Escrow Payment 5.02
Excluded Assets 2.02
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Existing Contracts 8.06
FCC 2.01(b)
FCC Authorization Recitals
Final Order 11.06
Financial Statements 8.15
GAAP 9.07
General Partner 8.01
Governmental Consents 5.04(c)
Guaranty 10.07
Hart-Scott Act 10.03(b)
Hazardous Substances 8.11(a)
Historical Financial Statements 9.07
Indemnified Purchase Parties 14.01(a)
Interest 10.04
Interim Financial Statements 10.02
Interim Financials 9.07
Interim Loan 10.05
JAJ 8.01
Management Agreement 10.01(a)
Multiemployer Plan 8.13
Necessary Financing 11.07
Other Assets 5.04(a)
Partners 8.01
Permitted Liens Article I
Purchase Price 5.01
Purchaser Introduction
RCLA 8.11(b)
RCRA 8.11(b)
SBC 5.04(a)
SBC Subscriber Costs 5.04(a)
Seller Introduction
Third Party Claim 14.03
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SCHEDULES
2.01(a) Contracts and Licenses
2.01(c) Tangible Asset List
2.01(d) Interests in Real Property
2.01(f) Intangible Personal Property
2.02 Excluded Assets
8.03 Liens
8.07 Governmental Licenses
8.08 Compliance with Laws
8.10 Litigation
8.11 Environmental Compliance
8.14 Tax Matters
8.15 Certain Transactions Since March 1, 1996
8.17 Insurance
8.18 Brokers
EXHIBITS
A. Bill of Sale
B. Assumption Agreement
C. Escrow Agreement
D. Management Agreement
E Opinion of Counsel for Seller
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F. Opinion of FCC Counsel for Seller
G. Opinion of Counsel for Purchaser
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of September 25, 1996 by and
among MARYLAND WIRELESS COMMUNICATIONS, L.P., a Delaware limited partnership
("Seller"), WENDY C. COLEMAN ("Coleman"), DOBSON CELLULAR OF MARYLAND, INC.,
an Oklahoma corporation ("Purchaser"), and DOBSON COMMUNICATIONS CORPORATION
("DCC"), as guarantor.
R E C I T A L S
WHEREAS, Coleman is the owner of that certain FCC license (the "FCC
Authorization") to provide Cellular Radiotelephone Service on Frequency Block A,
in Market 468, Kent County, Maryland (the "Cellular System"), which market area
is known as Maryland RSA #2 (the "RSA"); and
WHEREAS, not later than five (5) business days following the execution of
this Agreement, Coleman will make application to assign the FCC Authorization to
the General Partner and the General Partner shall simultaneously make
application to assign the FCC Application to Seller, and, thereafter, Seller
will own all right, title and interest in the FCC Authorization and all rights
to develop, construct, own and operate the Cellular System in the RSA (the
"Business"); and
WHEREAS, the Business will be managed by Purchaser on behalf of Coleman
prior to the assignment of the FCC Authorization to Seller, and thereafter on
behalf of Seller, pursuant to the Management Agreement (as defined in Section
10.01(a));
WHEREAS, Purchaser desires to purchase from the Seller, and the Seller
desires to sell to Purchaser, substantially all of the assets of the Seller
relating to the Business, including assets acquired by Seller after the date
hereof from Coleman and as contemplated by the Management Agreement, all subject
to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein set forth and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE
Except as otherwise provided and subject to the terms and conditions set
forth in this Agreement, Coleman agrees to cause Seller, and the Seller agrees,
to sell, convey, assign, transfer and deliver to Purchaser, and Purchaser agrees
to purchase from the Seller at the Closing,
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all of Seller's right, title and interest in and to the Assets (as defined in
Section 2.01 hereof), free and clear of all security interests, liens,
pledges, charges, rights of third parties and encumbrances of every kind,
except those encumbrances in favor of Purchaser provided for in the
Management Agreement (the "Permitted Liens").
ARTICLE II
DESCRIPTION OF ASSETS; EXCLUDED ASSETS
SECTION 2.01. ASSETS. The assets to be conveyed to Purchaser shall
include all real and personal tangible and intangible assets, properties and
business owned by the Seller of whatever description, which relate in any way
to the ownership, use or operation of the Business, except assets excluded
pursuant to Section 2.02 hereof, but including all property and rights
acquired or obtained by Seller from the date hereof through the date of
Closing, to the end that, except as set forth herein, all of the Seller's
assets owned at the Closing and related in any way to the ownership, use or
operation of the Business, other than the assets excluded pursuant to Section
2.02 hereof, shall pass to Purchaser (collectively, the "Assets"). Such
Assets shall be free and clear of all debts, liabilities, obligations, taxes,
liens and encumbrances of any kind, character or description, except for the
Permitted Liens. Such Assets shall include, without limitation:
(a) The Seller's licenses (including the FCC Authorization),
leases, agreements, permits, consents and other contracts of any other nature
if any are in effect on the Closing Date, agreements for the reception or
transmission of signals by microwave, easements, appurtenances, rights-of-way
and construction permits, if any are in effect on the Closing Date, all
right, title and interest, if any, in and to all streets, roads and public
places, open or proposed, all agreements between the Seller, suppliers,
cellular telephone service companies, and subscribers (including subscriber
deposits), and all other similar rights and agreements (including so-called
roaming agreements), including all applications therefor, which in any way
may relate to or concern the operation by the Seller of the Business, as more
particularly described on SCHEDULE 2.01(a) attached hereto.
(b) All of the Seller's files of correspondence, lists, records and
reports concerning (i) customers and prospective customers of the Business
and (ii) all dealings with Federal, state and local regulatory agencies with
respect to the Business, including, but not limited to, all reports filed by
or on behalf of the Seller with the Federal Communications Commission (the
"FCC");
(c) All of the Seller's towers, tower equipment, antennas,
switching and cell site equipment and buildings, construction in progress,
microwave equipment, testing equipment, motor vehicles, office equipment,
furniture and fixtures, supplies, inventory and other physical assets, if
any, used in or relating to the Business, and all modifications, additions,
restorations or
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replacements of the whole or any part thereof, substantially all of which
tangible assets as of the date hereof are described on SCHEDULE 2.01(c)
attached hereto;
(d) All interests in real property of Seller used in or relating to
the Business, as described on SCHEDULE 2.01(d) attached hereto;
(e) All of Seller's right, title and interest to engineering records,
files, data, drawings, blueprints, schematics, maps, reports, lists and plans
and processes intended for use in connection with the Business;
(f) All of the Seller's right, title and interest to intangible
personal property used in or relating to the Business, including all rights,
patents and copyrights used by the Seller, and all of the rights of the
Seller associated therewith (including any and all applications,
registrations, extensions and renewals thereof), and such rights, patents and
copyrights as of the date hereof are described on SCHEDULE 2.01(f) attached
hereto; and
(g) Any of the above-described Assets which are acquired, with the
prior written consent of the Purchaser, after the date hereof but prior to the
Closing.
SECTION 2.02. EXCLUDED ASSETS. (a) The properties and assets described in
SCHEDULE 2.02 attached hereto and in Section 2.02(b) of this Agreement which
relate to the Business shall be retained by the Seller and shall not be sold,
assigned or transferred to Purchaser (the "Excluded Assets").
(b) Anything in this Agreement to the contrary notwithstanding, the
Assets sold to the Purchaser pursuant to the terms of this Agreement shall not
include the Seller's partnership records, books of account, cash, accounts
receivable, bank deposits and cash equivalents of the Seller at the time of the
Closing.
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ARTICLE III
ASSUMPTION OF LIABILITIES
Purchaser shall assume and agree to perform and discharge as of the
Closing the following as they become due for all periods from and after the
Closing, to the extent not previously performed or discharged: (i) all
obligations of the Seller which accrue and are to be performed from and after
the Closing (x) under those permits, authorizations, licenses, leases, rights
of way, easements and other agreements, including, without limitation,
agreements with customers and suppliers in existence on the Closing set forth
on Schedules 2.01(a) AND (d) attached hereto and (y) under those permits,
authorizations, licenses, leases, rights of way, easements, subscriber and
other agreements related to the Business which Purchaser on behalf of Seller
entered into in accordance with the terms and conditions of the Management
Agreement; (ii) all other obligations of Seller entered into during the
period from the date hereof to the Closing by Seller and identified to and
consented by Purchaser (all of such permits, authorizations, licenses,
leases, rights of way, easements and other agreements referred to in items
(i) and (ii) being referred to hereinafter as the "Assumed Contracts"); and
(iii) all liabilities of Seller which are properly allocated to Purchaser as
part of the prorations pursuant to Section 6.01 hereof for which Purchaser
received a credit against the Purchase Price (such items (i) through (iii)
are collectively referred to herein as the "Assumed Liabilities"). Purchaser
shall not be liable for any liabilities, debts, contracts, agreements or
other obligations of Seller or Coleman other than the Assumed Liabilities.
ARTICLE IV
INSTRUMENTS OF TRANSFER
AND ASSUMPTION
SECTION 4.01. TRANSFER DOCUMENTS. At the Closing, Seller will deliver
to Purchaser (a) a Bill of Sale in substantially the form attached hereto as
EXHIBIT A (the "Bill of Sale"), (b) all such other good and sufficient
instruments of sale, transfer and conveyance, including, without limitation,
assignments of leases, in such form and including such matters as Purchaser
shall reasonably request, as shall be effective to vest in Purchaser all of
the Seller's right and title to, and interest in, the Assets; and (c) all
contracts and commitments, instruments, books and records (except as
otherwise provided in Section 2.02 hereof) and other data relating to the
Assets, business and operations of the Seller.
SECTION 4.02. ASSUMPTION DOCUMENTS. At the Closing, Purchaser and
Seller will execute and deliver an Assumption Agreement in substantially the
form attached hereto as EXHIBIT B (the "Assumption Agreement") in order to
effect the assumption of the Assumed Liabilities by Purchaser.
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ARTICLE V
PURCHASE PRICE; ALLOCATION
SECTION 5.01. PURCHASE PRICE. Subject to the adjustments, if any, to be
made in accordance with Section 5.04 hereof, the total purchase price for the
Assets shall be Seventy Million Dollars ($70,000,000) (as adjusted, the
"Purchase Price").
SECTION 5.02. PAYMENT OF PURCHASE PRICE. The Purchase Price, minus an
amount equal to $2 million (the "Escrow Payment"), shall be payable by wire
transfer of immediately available funds to the Seller at Closing. The Escrow
Payment shall be paid by the Purchaser to a national bank with capital in
excess of $500 million mutually acceptable to Purchaser and Seller (the
"Escrow Agent") at the Closing to be held, invested and disbursed pursuant to
the terms of the Escrow Agreement substantially in the form of EXHIBIT C
attached hereto (the "Escrow Agreement').
SECTION 5.03. ALLOCATION OF PURCHASE PRICE. Purchaser, Seller and
Coleman agree that the fair market value of the FCC Authorization is Seventy
Million Dollars ($70,000,000) and that portion of the Purchase Price
allocable thereto shall be Seventy Million Dollars ($70,000,000). Within
thirty (30) days prior to the Closing, Purchaser and Seller in good faith
shall agree on an allocation of the Purchase Price in accordance with the
respective fair market value of the Assets being purchased other than the FCC
Authorization. Purchaser, Seller and Coleman each further agree to file
their income tax returns and their other tax returns reflecting the
allocation as determined in this Section 5.03. If no agreement on an
allocation of the Purchase Price with respect to the Assets other than the
FCC Authorization is reached within such thirty (30) day period, such
allocation of the Purchase Price to the Assets other than the FCC
Authorization shall be determined by a nationally recognized appraisal firm
mutually agreeable to Seller and Purchaser and the costs of such appraisal
shall be borne equally by Seller and Purchaser.
SECTION 5.04. PURCHASE PRICE ADJUSTMENT. The Purchase Price shall be
adjusted as follows:
(a) The Purchase Price shall be increased to the extent of any
amounts expended from the date hereof to the Closing for "Buildout Costs",
"SBC Subscribers Costs" and "Capitalized System Costs", as such terms are
hereinafter defined. As used in this Agreement "Buildout Costs" means (i)
the amount expended by Seller or Coleman at Purchaser's request after the
date hereof to the Closing in accordance with the Management Agreement to
purchase from Southwest Bell Corporation ("SBC") or other parties cellsites
and other capital assets used or to be used in connection with the Business
in order to replace SBC's cellular system in the RSA ("Buildout Assets") and
(ii) the amount expended by Coleman or Seller for assets of the type referred
to in clause (i) after the date hereof until the Closing other than at
Purchaser's request ("Other Assets"); provided, however, that the Purchase
Price shall be increased with
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respect to Other Assets only (A) if Purchaser agrees in writing after the
date hereof to purchase such Other Assets at the Closing and (B) only to the
extent of the reasonable direct cost incurred by Seller or Coleman for such
Other Assets as mutually agreed by Seller and Purchaser. The term Buildout
Costs shall not include the ordinary operating costs and expenses of the
Cellular System prior to the Closing, including, without limitation,
professional fees, billing and collection expenses, agent fees and other
subscriber acquisition costs, rents for retail and other locations, media and
other marketing expenses, personnel costs, payments to Coleman and Seller
under the Management Agreement, maintenance expenses, commissions, taxes, and
utility costs, all of which shall be borne by Seller for the period prior to
Closing. "SBC Subscriber Costs" means the amounts paid to SBC with funds
advanced under the Interim Loan to purchase SBC's subscribers active on the
Cellular System as of the effective date of such payment. The term
"Capitalized System Costs" means Purchaser's costs (exclusive of any Buildout
Costs and SBC Subscriber Costs) to construct and develop the Cellular System
pursuant to the Management Agreement and which (x) were paid to Purchaser
with funds provided under the Interim Loan or from Cellular System revenue
and (y) which are the type usually capitalized in accordance with generally
accepted accounting principles by a licensee of a cellular telephone system.
(b) In the event that the Closing pursuant to Article VII occurs
after the tenth (10th) business day following receipt of the Final Order, the
Purchase Price shall be decreased by an amount equal to $100,000 for each
30-day period up to the Closing Date after the later of (i) the tenth (10th)
business day following receipt of the Final Order or (ii) the receipt of any
governmental consent Purchaser is required to obtain as a condition to the
consummation of the transactions contemplated by this Agreement
("Governmental Consents"). In the event a period is less than thirty (30)
days, the purchase price adjustment for such period shall be prorated based
on the actual number of days elapsed in such period.
(c) The Purchase Price shall be increased to the extent of any
management fee payable to Purchaser pursuant to Section 12(b) of the
Management Agreement.
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ARTICLE VI
PURCHASE PRICE ADJUSTMENTS; CLOSING STATEMENT
SECTION 6.01. PRORATIONS; CLOSING STATEMENT. (a) The operation of the
Business and the income, expense and liabilities attributable thereto through
12:01 a.m. of the Closing Date (the "Adjustment Date"), determined on an
accrual basis in accordance with generally accepted accounting principles,
shall be for the account of Seller and thereafter for the account of
Purchaser. Prepaid expenses of the Seller relating to the Assumed Contracts
and all other customarily prorated items shall be prorated as of the
Adjustment Date in accordance with the foregoing principles. Five (5)
business days prior to the Closing, the Seller shall provide Purchaser with a
preliminary calculation of the prorations provided for in this Section
6.01(a) (the "Closing Statement"), together with any supporting documentation
reasonably requested by Purchaser. Purchaser, as part of its obligations
pursuant to the Management Agreement, shall make available to Seller all
information within its possession necessary to permit Seller to timely comply
with Seller's obligation in the immediately preceding sentence. If the
amounts set forth in the Closing Statement under reimbursements to Seller
exceed the reimbursements to Purchaser, then the difference between such
amounts shall be paid to Seller by Purchaser at the Closing. If the amounts
set forth in the Closing Statement under reimbursements to Purchaser exceed
the reimbursements to Seller, then the difference between such amounts shall
be paid to Purchaser by Seller at the Closing by way of a credit against the
Purchase Price. The Closing Statement shall be considered preliminary and
such Closing Statement shall not discharge either party from any obligation
it might otherwise have hereunder with respect thereto in the event that any
amounts reflected thereon subsequently prove to be incorrect. There shall be
a continuing duty on the parties to make appropriate credits and payments to
the other party once the amounts are finally determined in accordance
subsection (b) of this Section 6.01.
(b) Within sixty (60) days after the Closing, either party shall
notify the other in writing (the "Dispute Notice") of any disputes as to the
Closing Statement or any supporting documentation furnished therewith.
Purchaser and Seller shall provide one another with such additional
information relating to such Closing Statement as each party shall reasonably
request. Within fifteen (15) days after delivery of the Dispute Notice, the
Seller and Purchaser shall attempt to resolve such dispute in good faith. If
the parties cannot agree within thirty (30) days after the delivery of the
Dispute Notice such dispute shall be resolved by Price Waterhouse or another
independent accounting firm mutually acceptable to the parties. Any fees or
expenses payable to such an accounting firm shall be shared equally between
Seller and Purchaser.
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ARTICLE VII
CLOSING
Subject to the terms and conditions hereof, the Closing (the "Closing")
shall take place at the offices of Edwards & Angell, 2800 Hospital Trust
Tower, Providence, Rhode Island 02903, on the later of (a) the tenth (10th)
business day after the FCC approved the transfer of the Assets from the
Seller to the Purchaser by a Final Order (as defined in Section 11.05 hereof)
or (b) March 3, 1997 (the "Closing Date"). If the Closing occurs after the
tenth (10th) business day of the issuance of the Final Order, the Purchase
Price shall be adjusted in accordance with Section 5.04(b).
ARTICLE VIII
SELLER'S REPRESENTATIONS
Seller and Coleman hereby jointly and severally represent, warrant,
covenant and agree, which representations, warranties, covenants and
agreements, together with all other representations, warranties, covenants
and agreements of Seller and Coleman in this Agreement, shall survive the
execution and delivery of this Agreement and the payment of the Purchase
Price hereunder for a period of 18 months from the Closing; PROVIDED,
HOWEVER, that any tax-related representation, warranty, covenant and
agreement shall survive until the expiration of the statute of limitations
for the assessment and collection of any such tax; and PROVIDED, FURTHER,
HOWEVER, that each representation, warranty, covenant and agreement relating
to good title to Assets and there being no lien or other encumbrance thereon
shall survive the execution and delivery of this Agreement and the payment of
the Purchase Price without any limitation as to time, that:
SECTION 8.01. ORGANIZATION, QUALIFICATION. (a) Seller is a limited
partnership duly organized, validly existing and in good standing under the
laws of the state of its organization and has all power and authority to own
and operate its properties and to carry on its business as now being
conducted or proposed to be conducted by Seller and to carry out the
transactions contemplated by this Agreement. Seller has the power and
authority to execute and deliver and, subject to obtaining the FCC's approval
to assign the FCC Authorization, perform its obligations under this Agreement
and to undertake the transactions contemplated hereby. Seller's general
partner is Maryland Communications Service, LLC (the "General Partner") and
Seller's sole limited partner is JAJ Cellular Communications General
Partnership ("JAJ") (collectively, the "Partners"). At least ninety-nine
percent (99%) of the General Partner's equity and voting securities are owned
by Coleman.
SECTION 8.02. CONSENTS, AUTHORIZATION, EXECUTION AND DELIVERY OF
AGREEMENT. All necessary consents and approvals have been obtained by Seller
for the execution and delivery of this Agreement. The execution, delivery
and performance of this Agreement by Seller and the transfer of the Assets to
Purchaser have been duly and validly authorized and approved by all
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necessary partnership and partner action of Seller. This Agreement is a
valid and binding obligation of the Seller and Coleman, enforceable against
them in accordance with its terms.
SECTION 8.03. TITLE TO ASSETS; CONDITION OF ASSETS. Except as set forth
on SCHEDULE 8.03, Seller has full power, right and authority to sell and
convey to Purchaser good and marketable title to the Assets, free and clear
of all security interests, liens, pledges, charges and encumbrances of every
kind. Security interests, mortgages, equipment leases and other liens and
encumbrances in effect on the date hereof which are to be discharged at
Closing are listed on SCHEDULE 8.03 hereto. The tangible property included
among the Assets as of the date hereof, if any, are in good working order and
repair, reasonable wear and tear excepted. The Assets constitute all of the
assets owned by Coleman or Seller and used in connection with the operation
of the Business other than the Excluded Assets. No Partner owns, leases or
has any rights in any property, license or other assets related to the
Business, except on the date hereof Coleman owns the FCC Authorization. To
the best of Seller's knowledge, the Assets, together with the assets owned or
used by SBC in connection with its provision of cellular services in the RSA,
are technically sufficient and capable of providing cellular telephone
service in the RSA for which the Seller is licensed in accordance with
applicable FCC regulations.
SECTION 8.04. REAL PROPERTY - OWNED. Seller does not own any real
property or interests in real property in fee simple. Coleman does not own any
real property or interest in real property that is used in the Business.
SECTION 8.05. REAL AND PERSONAL PROPERTY - LEASED. Set forth on
SCHEDULE 2.01(d) (in the case of real property) and SCHEDULE 2.01(a) (in the
case of personal property), are true and accurate descriptions of all real
and personal property leased by Coleman and/ or Seller and used or useful in
the ownership or operation of the Assets and the Business setting forth (i)
the name of the lessor and (ii) a description of the property leased. Except
as set forth on SCHEDULE 2.01(d) (in the case of leased real property) and
SCHEDULE 2.01(a) (in the case of leased personal property), with respect to
such leases, the property described in such leases is presently used by
Coleman and/or Seller as indicated in SCHEDULES 2.01(a) AND (d) as lessee
under the terms of such leases, and such leases are in full force and effect,
and will be free and clear of all liens and encumbrances at the Closing.
SECTION 8.06. EXISTING CONTRACTS. SCHEDULES 2.01(a) AND (d) hereto sets
forth all agreements in effect on the date hereof with Seller's or Coleman's
customers, all leases to which Seller and/or Coleman is a party and which
relate to the ownership of the Assets or the operation of the Business, all
agreements, commitments and understandings to which Coleman or Seller is a
party with SBC (other than such agreements, commitments and understandings
subject to a confidentiality agreement with SBC and SBC has not released from
the provisions thereof) and all other agreements or commitments (written or
oral) to which Coleman or Seller is a party which relate to the ownership of
the Assets or the operation of the Business (the "Existing
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Contracts"). No Partner or any person or entity (other than Seller)
controlled or affiliated with any Partner has any contractual relationship
relating to the ownership or operation of the Business. Seller has heretofore
delivered to Purchaser true and correct copies of the Existing Contracts.
Except as disclosed on SCHEDULES 2.01(a) AND (d), Seller has no knowledge of
any breach or anticipated breach by the other parties to any Existing
Contracts. The Existing Contracts are in full force and effect and Coleman
and Seller, as applicable, is in compliance with the terms of such Existing
Contracts. Except for the Existing Contracts, neither Coleman nor Seller has
entered into any other agreements relating to the ownership of the Assets and
the operation of the Business, including, but not limited to, rights-of-way,
rights of entry, licenses, easements, leases (real property or equipment), or
guaranty agreements. To the best of Seller's and Coleman's knowledge, there
are no claims by third parties that Seller or Coleman are required to enter
into other agreements to enable it to continue owning the Assets and the
operation of the Business as it is presently being operated.
SECTION 8.07. GOVERNMENTAL LICENSES. Except as set forth on SCHEDULE
8.07, Coleman or Seller holds all necessary licenses, consents, permits,
approvals and authorizations of public or governmental bodies including,
without limitation, the FCC and the state, counties and municipalities served
by the Business, which are required in connection with the ownership of the
Assets (collectively referred to as the "Authorizations"). All
Authorizations are in full force and effect. Each of Coleman and Seller has
complied with the terms of the Authorizations and there are no pending
modifications, amendments or revocations of the Authorizations which would
adversely affect the ownership of the Assets and the operation of the
Business. Coleman will promptly transfer all of her interest in the
Authorizations to Seller upon receiving necessary approval therefor. All
fees of Seller and Coleman due and payable to governmental authorities
pursuant to the Authorizations have been paid. All reports required of
Seller or Coleman to be filed in connection with the Authorizations have been
timely filed and are accurate and complete. True and correct copies of the
Authorizations, and all amendments thereto to the date hereof, have been
delivered by Seller to Purchaser and are identified on SCHEDULE 2.01(a)
hereto. The ownership of the Assets and the operation of the Business by
Seller and/or Coleman are not subject to regulation or supervision by any
applicable state public utilities commission or other similar state
governmental instrumentality.
SECTION 8.08. COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE
8.08, each of Coleman and Seller is currently complying with and has so
complied with, and is not in default under or in violation of, and neither
the Business nor any of the Assets nor the operation or maintenance thereof,
contravenes in any respect any statute, law (including environmental or
employment laws), ordinance, decree, order, rule, regulation of any
governmental body applicable to the Assets or the Business, including,
without limitation, rules and regulations of the FCC, except for
noncompliance, defaults and violations which will not in the aggregate have a
material adverse effect on the Assets or the Business.
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SECTION 8.09. NO VIOLATION OF EXISTING AGREEMENTS. The execution,
delivery and performance of this Agreement by Seller and Coleman will not
violate any provisions of law and will not, with or without the giving of
notice or the passage of time, or both, conflict with or result in any breach
of any of the terms or conditions of, or constitute a default under any
Existing Contracts. Subject to the consents identified in SCHEDULE 2.01(a),
the execution, delivery and performance of this Agreement by Seller and
Coleman will not result in the creation of any security interest, lien,
pledge, charge or encumbrance upon the Assets or the Business.
SECTION 8.10. LITIGATION AND LEGAL PROCEEDINGS. Except as set forth on
SCHEDULE 8.10, there is no outstanding judgment against Seller or any Partner
and there is no litigation, proceeding or investigation pending, or, to the
Seller's knowledge, threatened, against the Seller or the Partners affecting the
Business or the Assets which questions the validity of any action taken or to be
taken pursuant to or in connection with the provisions of this Agreement.
Except as set forth on SCHEDULE 8.10, there are no proceedings pending to which
Coleman, the Seller or any Partner is a party or, to Seller's or Coleman's
knowledge, threatened, nor any demands by any governmental agency, utility or
other party, to terminate, modify or adversely change the terms and conditions
of Seller's rights with respect to the Authorizations or Existing Contracts
whereby such termination or modification would result in an adverse effect on
the Business or the Assets.
SECTION 8.11. ENVIRONMENTAL COMPLIANCE. (a) Except as set forth on
Schedule 8.11 hereto, (i) neither Coleman nor Seller has generated, used,
transported, treated, stored, released or disposed of, or has not suffered or
permitted anyone else to generate, use, transport, treat, store, release or
dispose of any Hazardous Substance (as hereinafter defined) with respect to
the Assets or the Business in violation of any Environmental Laws (as
hereinafter defined); (ii) there has not been any generation, use,
transportation, treatment, storage, release or disposal of any Hazardous
Substance in connection with their ownership of the Assets, the conduct of
the Business or the use of any property or facility which relates to their
ownership of the Assets, the Business, or, to the best of Seller's and
Coleman's knowledge, any adjacent properties or facilities, which has created
or might reasonably be expected to create any liability under any
Environmental Laws or which would require reporting to or notification of any
governmental entity; (iii) no friable asbestos or polychlorinated biphenyl,
and no underground storage tank, is contained in or located at any facility
of Seller or Coleman relating to the Business in violation of any
Environmental Laws; and (iv) any Hazardous Substance handled or dealt with in
any way with respect to the Assets or the Business by the Seller or Coleman,
or during Seller's or Coleman's ownership of the Assets or the Business
(except any actions taken directly or indirectly by Purchaser as "Manager"
under the Management Agreement or any omissions that were specifically
Purchaser's responsibility under the Management Agreement), has been and is
being handled or dealt with in compliance with any Environmental Laws.
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(b) For purposes of this Agreement, the term "Hazardous Substance"
shall mean any substance which, as of the date of this Agreement, is listed
as hazardous or toxic in the regulations implementing the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended
("CERCLA"), the Response Compensation and Liability Act ("RCLA"), the
Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), or
listed as a hazardous substance under any applicable state environmental
laws, or any substance which has been determined by regulation, ruling or
otherwise by any agency or court to be a hazardous or toxic substance
regulated under federal or state law.
(c) For purposes of this Agreement, the term "Environmental Laws"
shall mean CERCLA, RCRA, RCLA and any applicable statutes, regulations,
rules, ordinances, codes, licenses, permits, orders, approvals, plans,
authorizations, concessions, franchises and similar items of all governmental
authorities and all applicable judicial, administrative and regulatory
decrees, judgments and orders, any of which relate to the protection of human
health or the environment from the effects of Hazardous Substances, including
but not limited to those pertaining to reporting, licensing, permitting,
investigating and remediating emissions, discharges, releases or threatened
releases of Hazardous Substances into the air, surface water, groundwater or
land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances.
SECTION 8.12. LABOR MATTERS. Seller has no employees. Coleman has no
employees with respect to the Business.
SECTION 8.13. EMPLOYEE BENEFITS. Neither Coleman nor Seller has any
Employee Benefit Plans in which any one or more Partners or employees of the
Seller or Coleman, with respect to the Business, participate or are eligible
to participate as of the date hereof and is not a party to any employment
contract. The term "Employee Benefit Plans" means all employee benefit plans
as that term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). No Partner or employee of the
Seller participates or is eligible to participate in a "defined benefit
pension plan" as defined in Section 3(35) of ERISA, maintained or made
available by Seller. Neither Seller nor any Controlled Group Member
maintains or contributes to, or ever maintained or contributed to, a plan
under which any employee of the Seller participates or is eligible to
participate subject to Section 412 of the Internal Revenue Code of 1986, as
amended (the "Code"). The term "Controlled Group Member" means any trade or
business (whether or not incorporated) which is, or was at any relevant time,
aggregated with the Seller pursuant to Section 414(b), (c), (m) or (o) of the
Code. Neither Seller, Coleman nor any ERISA Affiliate has participated in or
made contributions to any "multiemployer plan" as defined in Section
4001(a)(3) of ERISA. The term "ERISA Affiliate" means each trade or business
(whether or not incorporated) which is, or was at any relevant time, treated
as a single employer with Seller pursuant to Section 4001(b)(1) of ERISA.
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SECTION 8.14. TAX MATTERS. Except as disclosed on SCHEDULE 8.14
attached hereto, Coleman, Seller and the General Partner has timely filed all
federal, state, county and local tax returns required to be filed as of the
date hereof and will file all such returns required to be filed from the date
hereof to the Closing, and has paid and will pay all taxes due and owing for
all such periods. There are no suits, actions, claims, investigations,
inquiries or proceedings pending or, to Coleman's or Seller's knowledge,
threatened against Coleman or Seller in respect of any taxes, interest,
assessments, governmental charges or penalties.
SECTION 8.15. FINANCIAL STATEMENTS.
(a) Coleman has delivered to Purchaser copies of the following
financial statements of the Business (the "Financial Statements") through the
periods indicated:
(i) The unaudited balance sheet of the Business as of
August 31, 1996; and
(ii) The unaudited statement of income setting forth the
results of the operation of the Business for the eight (8) months ended
August 31, 1996.
(b) The Financial Statements (i) are true and correct in all
material respects, (ii) present fairly the financial position of the Business at
the date indicated and the results of operations of the Business for the period
indicated and (iii) have been compiled in accordance with generally accepted
accounting principles consistently applied (subject to normal recurring
adjustments).
(c) Except as set forth on Schedule 8.15 attached hereto, since
March 1, 1996, neither Coleman, with respect to the Business only, nor the
Seller has:
(i) sold, assigned or transferred any of its tangible
assets (except for the Excluded Assets ) or canceled any material debts or
material claims;
(ii) waived any rights, whether or not in the ordinary
course of business;
(iii) entered into any other transaction, except in the
ordinary course of business, or entered into any transaction with any of the
Partners, or any affiliate of any such Partner, except in the ordinary course of
business in accordance with past practices;
(iv) suffered any material damage, destruction or casualty
loss with respect to the Assets, whether or not covered by insurance;
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(v) made any distribution of any of the Assets of Seller to
any Partner or any affiliate of a Partner;
(vi) except as disclosed in writing by Seller to
Purchaser, obligated itself or the Business to give free or reduced price
service to customers with respect to the Business or except as set forth on
SCHEDULE 2.01(b), entered into any agreement with any governmental or
regulatory authority granting the authorization to freeze fees charged to
customers of the Business; or
(vii) entered into any agreement or understanding to do any
of the foregoing.
SECTION 8.16. CUSTOMERS. As of the date hereof, the Business does not
have any subscribers.
SECTION 8.17. INSURANCE. SCHEDULE 8.17 attached hereto is an accurate
and complete list in all material respects of all insurance policies, bonds
and letters of credit which relate in any way to the ownership, use or
operation of the Assets and the Business.
SECTION 8.18. BROKERS. Except as set forth on SCHEDULE 8.18 attached
hereto, neither Seller nor Coleman has engaged any agent, broker or other
person acting pursuant to the express or implied authority of Seller or
Coleman which is or may be entitled to a commission or broker or finder's fee
in connection with the transactions contemplated by this Agreement or
otherwise with respect to the sale of the Assets or the Business.
SECTION 8.19. DISCLOSURE OF MATERIAL INFORMATION. No representation or
warranty by Seller or Coleman hereunder or in the exhibits hereto, the Bill
of Sale, the Assumption Agreement, the Escrow Agreement, the Management
Agreement, in the exhibits thereto, or in any closing certificate delivered
to the Purchaser pursuant to Article XI hereof, contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained therein not misleading.
SECTION 8.20. ASSIGNMENT. Within five (5) business days following the
execution of this Agreement, Coleman shall make application to assign to the
General Partner the FCC Authorization and all real and personal tangible and
intangible assets, properties and business currently owned by Coleman which
relate in any way to the ownership, use or operation of the Business, and the
General Partner shall simultaneously make application to assign to Seller the
FCC Authorization and all real and personal tangible and intangible assets,
properties and business which relate in any way to the ownership, use or
operation of the Business; and Coleman shall cause (i) at least ninety-nine
percent (99%) of the voting interests of the General Partner to be owned at
all times by Coleman and (ii) JAJ to be the sole limited partner of Seller
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and (iii) the General Partner to have the only voting interests in the Seller
(except for voting rights required to be provided to limited partners under
applicable law).
ARTICLE IX
PURCHASER'S REPRESENTATIONS
Purchaser hereby represents, warrants, covenants and agrees, which
representations, warranties, covenants and agreements, together with all
other representations, warranties, covenants and agreements of Purchaser in
this Agreement, shall survive the execution and delivery of this Agreement
and the payment of the Purchase Price hereunder for a period of 18 months,
that:
SECTION 9.01. ORGANIZATION; QUALIFICATION. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Oklahoma. Purchaser has all power and authority to (i) own and
operate its properties, (ii) carry on its business as it is now being
conducted, and (iii) carry out the transactions contemplated by this
Agreement and to own and operate the Assets and the Business, subject to
obtaining all necessary consents required for the transfer by the Seller of
the Assets.
SECTION 9.02. CONSENTS; AUTHORIZATION; EXECUTION AND DELIVERY OF
AGREEMENT. The execution and delivery of this Agreement by Purchaser has
been duly and validly authorized and approved by all necessary corporate
action. The Purchaser has full power and authority to execute and deliver
and perform its obligations under this Agreement. This Agreement is a valid
and binding obligation of Purchaser, enforceable against it in accordance
with its terms.
SECTION 9.03. LITIGATION AND LEGAL PROCEEDINGS. There is no outstanding
judgment against Purchaser and there is no litigation, proceeding or
investigation pending, or, to Purchaser's knowledge, threatened, against
Purchaser or its assets which individually or in the aggregate would, if
adversely determined, result in a material adverse change in the business
condition (financial or otherwise), properties, prospects or assets of
Purchaser or which questions the validity of any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement or the
consummation of the transactions contemplated hereby by the Purchaser.
SECTION 9.04. BROKERS. Purchaser has not engaged any agent, broker or
other person acting pursuant to the express or implied authority of Purchaser
which is or may be entitled to a commission or broker or finder's fee in
connection with the transactions contemplated by this Agreement or otherwise
with respect to the sale of the Assets or the Business.
SECTION 9.05. PURCHASER'S QUALIFICATION. Purchaser is qualified to hold
the FCC Authorization for the RSA.
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SECTION 9.06. DISCLOSURE OF MATERIAL INFORMATION. No representation or
warranty by Purchaser hereunder, in the exhibits hereto, the Bill of Sale,
the Assumption Agreement, the Escrow Agreement, the Management Agreement, in
the exhibits thereto, or in any closing certificate delivered to the
Purchaser pursuant to Article XII hereof, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
SECTION 9.07. FINANCIAL STATEMENTS OF PURCHASER'S PARENT. Purchaser has
provided Coleman and Seller with the following:
(i) the consolidated balance sheets of DCC and its
subsidiaries as of December 31, 1995 and December 31, 1994 and the related
consolidated statements of operations, stockholders' equity and cash flows
for the years then ended, as audited by Arthur Andersen LLP (the "Historical
Financial Statements"); and
(ii) the consolidated balance sheet of DCC and its
subsidiaries as of June 30, 1996 and the related consolidated statement of
operations for the six (6) month period ended June 30, 1996 (the "Interim
Financials").
DCC owns directly or indirectly all of the outstanding common stock of
Purchaser. The Historical Financial Statements are true and correct in all
material respects, were prepared in accordance with generally accepted
accounting principles ("GAAP") and fairly present, in all material respects,
the financial condition of DCC and its subsidiaries as of December 31, 1995
and 1994, and the results of its operations and its cash flows for the years
then ended. The Interim Financial Statements are true and correct in all
material respects, were prepared in accordance with GAAP (except for footnote
disclosure and year-end adjustments), and fairly present, in all material
respects, the financial condition of DCC and its subsidiaries as of June 30,
1996 and the results of operations for the six (6) month period ended June
30, 1996.
ARTICLE X
SELLER'S AND PURCHASER'S AFFIRMATIVE COVENANTS
SECTION 10.01. COVENANTS PRIOR TO CLOSING. Seller hereby covenants, and
Coleman covenants to cause Seller and herself to comply with such covenants and
agreements, and agrees that from and after the execution and delivery of this
Agreement to and including the Closing:
(a) Simultaneously with the execution of this Agreement,
Purchaser and Seller shall enter into a Management Agreement in the form
attached hereto as Exhibit D (the "Management Agreement") pursuant to which
Purchaser or an affiliate of Purchaser shall provide management
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services to Seller from the date hereof to the Closing in connection with the
operation of the Business pursuant to the terms of the Management Agreement.
(b) Seller shall give Purchaser and its counsel, accountants
and other representatives access during normal business hours to inspect all
of the properties, books and records of Seller as they pertain to the Assets
and the Business, wherever located, and furnish Purchaser with such available
and existing documentation concerning the Assets and the Business as
Purchaser may reasonably request, other than such documentation provided by
SBC to Seller under a confidentiality agreement and which SBC has not
released from the provisions thereof.
(c) Seller and Coleman shall use all reasonable efforts to
assist Purchaser in obtaining SBC's consent to permit Purchaser to conduct a
due diligence review of the properties owned or operated by SBC in connection
with SBC's provision of cellular services in the RSA.
(d) Seller shall use all reasonable efforts to preserve intact
the Assets and the Business, including, but not limited to, maintaining in
effect casualty and liability insurance coverage on the Assets and the
Business customary in the industry for similar cellular telephone businesses,
complying in all material respects with applicable Federal, state and local
laws, rules and regulations and pertinent provisions of all Existing
Contracts and Authorizations. Coleman and Seller shall use all reasonable
efforts to preserve the goodwill of the persons having business relations
with them in connection with the Business.
(e) None of the Assets shall be sold, transferred, conveyed or
otherwise disposed of without the prior written consent of Purchaser,
provided that, with respect to a sale, transfer, conveyance or disposition to
a person or entity controlled by Coleman, Purchaser's written consent will
not be unreasonably withheld. None of the Assets shall be pledged or
otherwise encumbered without the prior written consent of Purchaser. Seller
shall not make any distribution of any Assets to any of its Partners or any
affiliate of any of its Partners.
(f) Without Purchaser's prior written consent, Seller shall
not hire any employees.
SECTION 10.02. FINANCIAL STATEMENTS. Seller covenants and agrees that
during the period after the execution of this Agreement and prior to the
Closing, Seller shall provide Purchaser, within 45 days of the end of each
calendar month, Seller's unaudited balance sheet and income statement for
such month ("Interim Financial Statements"). The Interim Financial
Statements will be true and correct in all material respects, will be
prepared using the same accounting methods and procedures as used in the
preparation of the Financial Statements except for the absence of footnotes,
subject to normal recurring adjustments, and will present fairly the
financial position of Seller at the date indicated and the results of
Seller's operations for such period.
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SECTION 10.03. GOVERNMENTAL APPROVALS. (a) Purchaser covenants and
agrees that it will fully cooperate with Seller, and do all things reasonably
necessary to assist Seller to obtain all consents and approvals necessary for
assignment to Purchaser of the Authorizations, including the furnishing of
financial and other information specifically with respect to Purchaser
reasonably required by the person whose consent or approval is being sought.
Seller shall use all reasonable efforts to provide adequate prior written
notice to Purchaser of any meeting with governmental authorities the purpose
of which is to seek a consent or approval to the transactions contemplated
hereby, and Purchaser shall use all reasonable efforts to furnish a
representative to attend meetings with appropriate government authorities for
the purpose of obtaining such consents or approvals. Seller hereby agrees to
file the necessary Form(s) 490 with the FCC transferring or assigning control
of the FCC license for the Business to Purchaser and diligently pursue the
processing of the assignment of the FCC license to Purchaser and to file for
all other necessary regulatory approvals for the consummation of the
transactions contemplated by this Agreement within five business days of the
date of execution of this Agreement to the extent any such filings have not
been made prior to the date of execution of this Agreement. Seller shall be
responsible for all filing fees in connection with any filings pursuant to
this Section 10.03(a).
(b) Seller, Coleman and Purchaser shall each cooperate and use
their reasonable efforts to prepare and file with the Federal Trade
Commission and other regulatory authorities as promptly as possible after
October 23, 1996 all requisite applications and amendments thereto together
with related information, data and exhibits necessary to satisfy the
requirements of the Hart-Scott-Rodino Antitrust Improvements Act ("Hart-Scott
Act").
SECTION 10.04. THIRD PARTY CONSENTS; CLOSING CONDITIONS. (a) Each of
Purchaser, Coleman and Seller covenants and agrees that each of them will
reasonably cooperate with each other, and Purchaser will do all things
reasonably necessary to assist Seller, to obtain all consents and approvals
necessary for the transfer or assignment to Purchaser of the Assumed
Contracts, including the furnishing of financial and other information
specifically with respect to Purchaser, its affiliates, or Seller, as the
case may be, reasonably required by the person whose consent or approval is
being sought. Notwithstanding the foregoing, to the extent that any Assumed
Contracts listed on SCHEDULE 2.01(a) to be sold, assigned, transferred or
conveyed to Purchaser, or any claim, right or benefit arising thereunder or
resulting therefrom (individually, an "Interest" and collectively, the
"Interests"), is not capable of being sold, assigned, transferred or conveyed
without the approval, consent or waiver of the issuer thereof or the other
party thereto, or any third person (including a government or governmental
unit), and such approval, consent or waiver has not been obtained, or if such
sale, assignment, transfer or conveyance or attempted assignment, transfer or
conveyance would constitute a breach thereof, and such approval, consent or
waiver has not been obtained, this Agreement shall not constitute a sale,
assignment, transfer or conveyance thereof, or an attempted assignment,
transfer or conveyance thereof; provided Seller shall use its best efforts to
provide Purchaser the benefits of any such Interest as provided
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in Section 19.01(b). Each of Purchaser and Seller shall use all reasonable
efforts to consummate the transactions contemplated hereby.
(b) Purchaser, Coleman and Seller hereby covenant and agree to
use all reasonable efforts to satisfy, or assist the other party in
satisfying, the closing conditions applicable to the Purchaser in Article XII
hereof and the Seller in Article XI hereof prior to the Closing Date.
SECTION 10.05. LINE OF CREDIT. Purchaser shall provide a line of credit
to Seller and Coleman in accordance with the terms of the Management
Agreement pursuant to which the Purchaser may provide advances to the Seller
from time to time up to a maximum of $5.0 million to be used only (i) to
purchase Buildout Assets, (ii) to pay SBC Subscriber Costs and Capitalized
System Costs, (iii) to reimburse Purchaser for any Operating Costs (as
defined in the Management Agreement) incurred by Purchaser and (iv) for other
purposes which Purchaser and Seller mutually agree (the "Interim Loan").
Such Interim Loan shall be secured by (i) a first priority security interest
in all Seller's Assets including, to the extent permitted by law, the
Authorizations, whether now owned or subsequently acquired, (ii) a first
priority security interest in all Assets now owned or subsequently acquired
by Coleman relating to the Business including, to the extent permitted by
law, the FCC Authorization and (iii) by a non-recourse guaranty of the
Partners, secured by pledges of their ownership interests in Seller.
SECTION 10.06. CUSTOMER INFORMATION. Within ten business days from the
date of this Agreement and monthly thereafter, Seller shall deliver to the
Purchaser a computer tape and/or other form of information having a list of
the Seller's customers, if any, and the existing billing and accounts
receivable aging information relating to each such customer to the extent
such information is not subject to a confidentiality agreement with SBC or
has not been released from the provisions of such confidentiality agreement.
SECTION 10.07. REQUIRED NOTICE; CERTAIN DISTRIBUTIONS.
(a) Purchaser covenants and agrees, from the date hereof until
payment of the Purchase Price, to provide Coleman and Seller written notice
at least thirty (30) business days prior to DCC effecting any reorganization
of its corporate structure, sale of assets, spin-off of assets, merger,
consolidation, acquisition or distribution to stockholders which,
individually or taken in the aggregate, would be reasonably likely to have a
materially adverse effect on DCC's ability to perform its obligations under
its guaranty of Purchaser's obligations under this Agreement (the "Guaranty").
(b) Purchaser covenants and agrees that prior to the Closing and
the payment of the Purchase Price, DCC will not make any distributions to its
stockholders which individually or in the aggregate will have a materially
adverse effect on DCC's ability to perform its obligations under the Guaranty.
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ARTICLE XI
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
The obligation of Purchaser under this Agreement with respect to the
purchase and sale of the Assets shall be subject to the fulfillment on or
prior to the Closing of each of the following conditions:
SECTION 11.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE
OF THIS AGREEMENT. All of the representations and warranties by Seller and
Coleman contained in this Agreement shall be true and correct at and as of
the Closing in all material respects. Seller shall have complied with and
performed in all material respects all of the agreements and covenants
required by this Agreement to be performed or complied with by it on or prior
to the Closing. Purchaser shall have been furnished with a certificate or
certificates of Coleman, as manager of the General Partner, dated as of the
Closing, certifying to the fulfillment of the foregoing conditions.
SECTION 11.02. PARTNER RESOLUTIONS. The Seller shall deliver to
Purchaser copies of the resolutions of the Partners of Seller authorizing the
execution, delivery and performance of this Agreement by Seller and all
instruments and documents to be delivered in connection herewith and the
transactions contemplated hereby, duly certified by Coleman, as manager of
the General Partner.
SECTION 11.03. INCUMBENCY CERTIFICATE. Purchaser shall have received a
certificate or certificates of Coleman, as manager of the General Partner,
certifying as to the genuineness of the signatures of officers or managers of
Seller authorized to take certain actions or execute any certificate,
document, instrument or agreement to be delivered pursuant to this Agreement,
which incumbency certificate shall include the true signatures of such
officers and managers.
SECTION 11.04. DELIVERY OF INTERIM FINANCIAL STATEMENTS. Seller shall
have delivered to Purchaser the Interim Financial Statements required of it
by Section 10.02 hereof.
SECTION 11.05. THIRD PARTY CONSENT; FCC; HART-SCOTT ACT. Seller shall
have delivered to Purchaser such instruments, consents and approvals of third
parties (the form and substance of which shall be reasonably satisfactory to
Purchaser) as are necessary to assign to Purchaser without modification
thereof, as of the Closing, the Assets and the Assumed Contracts and
Purchaser shall have obtained all Governmental Consents necessary for the
consummation of the transactions contemplated by this Agreement. Prior to
assignment, the FCC shall have issued a Final Order granting the FCC's
consent to the assignment of the FCC Authorization and other Assets to
Purchaser without any material conditions, excepting conditions applied on an
industry-wide basis, which the Purchaser reasonably deems to be adverse.
Anything herein to the contrary notwithstanding, the Purchaser shall have the
right (in its sole discretion) to waive
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the requirement set forth in the preceding sentence, except that Purchaser 's
waiver thereof shall not cause the adjustment to the Purchase Price under
Section 5.04(b) to be greater than if Purchaser had not waived receipt of the
Final Order. In addition, all applicable waiting periods under the
Hart-Scott Act (if applicable to the transactions contemplated by this
Agreement) shall have expired or been terminated and no objection shall have
been made by the Federal Trade Commission. For the purposes of this
Agreement, the term "Final Order" shall mean action by the FCC as to which
(i) no request for stay by the FCC, as applicable, of the action is pending,
no such stay is in effect, and, if any deadline for filing any such request
is designated by statute or regulation, such deadline has passed; (ii) no
petition for rehearing or reconsideration of the action is pending before the
FCC, and the time for filing any such petition has passed; (iii) the FCC,
does not have the action under reconsideration on its own motion and the time
for such reconsideration has passed; and (iv) no appeal to a court, or
request for stay by a court, of the FCC's action, as applicable, is pending
or in effect, and, if any deadline for filing any such appeal or request is
designated by statute or rule, it has passed.
SECTION 11.06. DUE DILIGENCE. Purchaser and its agents and
representative shall have conducted a satisfactory legal, regulatory and
business due diligence review of the Assets, Business and Cellular System
(whether owned or operated by Seller or SBC), including, without limitation,
the Cellular System's properties, cellsites, customer base and revenue
potential, the results of which shall be satisfactory to the Purchaser.
Without limiting the generality of the foregoing, Purchaser shall be
satisfied (a) that the assets related to the Cellular System owned by SBC,
together with Seller's Assets, constitutes all assets, licenses and property
necessary to the operation of the Cellular System as contemplated to be
conducted by Purchaser, and (b) that SBC owns twenty (20) cellsites that are
legally and technically capable of continuing to generate the revenue that
they now generate with respect to the Cellular System; PROVIDED, HOWEVER,
that if the Purchaser has not advised Seller in writing prior to October 23,
1996 that the results of such due diligence review are not satisfactory, the
conditions set forth in this Section 11.06 shall no longer apply and shall
have been satisfied.
SECTION 11.07. NECESSARY FINANCING. Purchaser shall have arranged for
debt and equity financing in amounts and on terms and conditions satisfactory
to Purchaser in its discretion sufficient (a) to pay the Purchaser Price, (b)
provide Purchaser with working capital for Purchaser's operation of the
Cellular System after the Closing and (c) for the purchase of the assets and
business related to the Cellular System owned by SBC or to construct a
comparable self-sufficient cellular system (the "Necessary Financing"), and
the proceeds of the Necessary Financing shall be available to Purchaser at
the Closing; PROVIDED, HOWEVER, that if Purchaser has not advised Seller in
writing prior to October 23, 1996 that the Necessary Financing cannot be
obtained, the conditions set forth in this Section 11.07 shall no longer
apply and shall have been satisfied.
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SECTION 11.08. NO MATERIAL ADVERSE CHANGE. There shall not have been
any material adverse change in the financial condition, assets, business,
properties or prospects of the Cellular System, whether owned or operated by
Seller or SBC, from March 1, 1996 to the Closing other than changes that
affect the cellular telephone industry generally and normal seasonal
fluctuations in the RSA and except for those matters addressed in Section
11.11.
SECTION 11.09. OPINION OF COUNSEL TO SELLER. Purchaser shall have been
furnished with an opinion of Lukas, McGowan, Nace & Gutierrez, counsel to
Seller, dated as of the Closing and addressed to Purchaser and to any
institution designated by Purchaser which has provided the Necessary
Financing in substantially the form of EXHIBIT E hereto.
SECTION 11.10. OPINIONS OF FCC COUNSEL TO SELLER. Purchaser shall have
been furnished with opinions of Lukas, McGowan, Nace & Gutierrez, FCC counsel
for Seller, dated as of the Closing and addressed to Purchaser and to any
financial institution designated by Purchaser which has provided the
Necessary Financing in substantially the form of EXHIBIT F attached hereto.
SECTION 11.11. SUBSCRIBERS. Seller shall have at least 11,500
subscribers (as defined below) of the Cellular System as of October 23 ,1996;
PROVIDED, HOWEVER, that if Purchaser has not advised Seller in writing prior
to October 23, 1996 that the number of subscribers is less than 11,500, the
condition set forth in this Section 11.11 shall no longer apply and shall
have been satisfied. For purposes of this Section 11.11, a "subscriber" is a
person or entity (i) who has contracted for cellular telephone service on the
Cellular System for at least thirty (30) days at a prevailing rate for
service, (ii) whose account is no more than thirty (30) days past due, and
(iii) who has a telephone number from a local exchange company that is in the
Cellular System's market.
ARTICLE XII
CONDITIONS PRECEDENT TO
SELLER'S OBLIGATION TO CLOSE.
The obligations of Seller under this Agreement with respect to the
purchase and sale of the Assets shall be subject to the fulfillment on or
prior to the Closing of each of the following conditions:
SECTION 12.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE
OF THIS AGREEMENT. All of the representations and warranties by Purchaser
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing. Purchaser shall have complied with and
performed in all material respects all of the agreements and covenants
required by this Agreement to be performed and complied with by it on or
prior to the Closing.
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Seller shall have been furnished with a certificate of an officer of
Purchaser, dated as of the Closing, certifying to the fulfillment of the
foregoing conditions.
SECTION 12.02. DIRECTORS' RESOLUTIONS. Purchaser shall deliver to
Seller copies of the resolutions of its Board of Directors authorizing the
execution, delivery and performance of this Agreement and all instruments and
documents to be delivered in connection herewith and the transactions
contemplated hereby, duly certified by an authorized officer of Purchaser.
SECTION 12.03. INCUMBENCY CERTIFICATE. Seller shall have received a
certificate of a secretary of Purchaser, certifying as to the genuineness of
the signatures of representatives of Purchaser authorized to take certain
actions or execute any certificate, document, instrument or agreement to be
delivered pursuant to this Agreement, which incumbency certificate shall
include the true signatures of such representatives.
SECTION 12.04. THIRD PARTY CONSENTS; FCC; HART-SCOTT ACT. Seller shall
have obtained consents and approvals of third parties as are necessary to
assign to Purchaser without modification thereof, as of the Closing, the
Assets and the Assumed Contracts. Prior to assignment, the FCC shall have
issued a Final Order granting the FCC's consent to the assignment of the FCC
Authorization and other Assets to Purchaser. In addition, all applicable
waiting periods under the Hart-Scott Act (if applicable to the transactions
contemplated by this Agreement) shall have expired or been terminated and no
objection shall have been made by the Federal Trade Commission.
SECTION 12.05. OPINION OF COUNSEL TO PURCHASER. Seller shall have been
furnished with an opinion of Edwards & Angell, counsel to Purchaser, dated as
of the Closing and addressed to Seller in substantially the form of EXHIBIT G
hereto.
ARTICLE XIII
CASUALTY LOSSES
In the event that there shall have been suffered between the date hereof
and the Closing any casualty loss relating to the Assets or the Business
which does not materially and adversely affect the Business, then at the
Closing all claims to insurance proceeds or other rights of the Seller
against third parties arising from such casualty loss (the "Claims") shall
(to the extent assignable) be separately assigned by Seller to Purchaser. To
the extent any Claim is not assignable, such claim may be pursued by
Purchaser, for its own account and benefit, in the name of Seller.
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ARTICLE XIV
INDEMNIFICATION
SECTION 14.01. INDEMNIFICATION BY SELLER AND COLEMAN. (a)
Notwithstanding the Closing, and regardless of any investigation made at any
time by or on behalf of Purchaser or any information Purchaser may have, but
subject to the terms of Section 14.03 each of the Seller and Coleman agrees
to indemnify and to hold Purchaser, its shareholders, officers, directors,
and employees (the "Indemnified Purchaser Parties") harmless from and against
and in respect of any losses (including lost revenues), damages, costs,
expenses (including costs of investigations), suits, demands, judgments and
diminution in value suffered or incurred by Purchaser arising from or related
to:
(i) Any liability, debt, obligation, tax, claim or
demand, whether or not known or asserted at or prior to Closing, relating to
or arising from the ownership, operation, control or sale of the Assets or
the Business other than the Assumed Liabilities, or any other state of facts
which existed at or prior to Closing, including fines or forfeitures imposed
or threatened to be imposed by the FCC for the operation, at or prior to
Closing, of the Business;
(ii) Any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of Coleman or Seller
under this Agreement (such representations and warranties to be read without
regard to any materiality qualifications), the exhibits hereto, the
Management Agreement including exhibits thereto, the Escrow Agreement, the
Bill of Sale, the Assumption Agreement or in any closing certificate
delivered by Seller to Purchaser pursuant to Article XI hereof; and
(iii) All costs and expenses (including reasonable attorneys'
fees) incurred by Purchaser in connection with any action, suit, proceeding,
demand, assessment or judgment incident to any of the matters Purchaser is
indemnified against by the Seller in this Agreement.
(b) In addition and subject to the terms of Section 14.03, Seller
shall indemnify Purchaser against and hold it harmless from any and all
liabilities in respect of suits, proceedings, damages, expenses and costs
(including, without limitation, reasonable counsel fees) which Purchaser may
incur by reason of the failure (if any) of Seller to comply with the Bulk
Transfers Article of the Uniform Commercial Code of any state.
SECTION 14.02. INDEMNIFICATION BY PURCHASER. Notwithstanding the Closing,
and regardless of any investigation made at any time by or on behalf of Coleman
or Seller or any information Coleman or Seller may have, but subject to the
terms of Section 14.03, Purchaser agrees to indemnify and to hold Coleman and
Seller, and its respective partners harmless from and against and in respect of
any losses (including lost revenues), damages, costs, expenses, suits, demands,
judgments and diminution in value incurred by Seller from:
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(i) All liabilities and obligations of Purchaser, and all
claims and demands made in respect thereof relating to or arising from,
Purchaser's ownership, operation or control of the Assets or the Business
after the Closing, or any other state of facts which exist after the Closing,
including fines or forfeitures imposed or threatened to be imposed by the FCC
for the operation, after the Closing of the Business;
(ii) Any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of Purchaser under
this Agreement (such representations and warranties to be read without regard
to any materiality qualifications), (including Purchaser's failure to perform
and discharge all of the liabilities and obligations assumed by Purchaser
under Article III hereof), the exhibits hereto, the Management Agreement
including exhibits thereto, the Escrow Agreement, the Assumption Agreement or
in any closing certificate delivered by Purchaser to Seller pursuant to
Article XII hereof; and
(iii) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Coleman and Seller in connection with any
action, suit, proceeding, demand, assessment or judgment incident to any of
the matters Coleman or Seller is indemnified against by Purchaser in this
Agreement.
SECTION 14.03. NOTICE OF CLAIMS; DEFENSE OF THIRD PARTY. A party
claiming indemnification under this Article XIV (the "Asserting Party") must
promptly notify (in writing and in reasonable detail) the party from which
indemnification is sought (the "Defending Party") of the nature and basis of
such claim for indemnification not later than 18 months after the Closing,
or, with respect to any tax related claim, prior to the expiration of the
statute of limitations for the assessment and collection of the applicable
tax, or, with respect to each representation, warranty, covenant and
agreement relating to good title to Assets and there being no lien or other
encumbrance thereon, such claim may be brought at any time without any
expiration. If such claim relates to a claim, suit, litigation or other
action by a third party against the Asserting Party or any fixed or
contingent liability to a third party (a "Third Party Claim"), the Defending
Party may elect to assume and control the defense of the Third Party Claim at
its own expense with counsel selected by the Defending Party from and after
such time as the Defending Party unconditionally agrees in writing to accept,
as against the Asserting Party, all liabilities on account of such Third
Party Claim. Assumption of such liability, as against the Asserting Party,
shall not be deemed an admission of liability as against any such third
party. Notwithstanding the foregoing, the Defending Party may not assume or
control the defense if the named parties to the Third Party Claim (including
any impleaded parties) include both the Defending Party and the Asserting
Party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, in
which case the Asserting Party shall have the right to defend the Third Party
Claim and to employ counsel reasonably approved by the Defending Party, and
to the extent the matter is determined to be subject to indemnification
hereunder, the Defending Party shall reimburse the Asserting Party for
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the reasonable costs of its counsel. If the Defending Party assumes
liability for the Third Party Claim as against the Asserting Party and
assumes the defense and control of the Third Party Claim pursuant to this
Section 14.03, the Defending Party shall not be liable for any fees and
expenses of counsel for the Asserting Party incurred thereafter in connection
with the Third Party Claim (except in the case of actual or potential
differing interests, as provided in the preceding sentence), but shall not
agree to any settlement of such Third Party Claim which does not include an
unconditional release of the Asserting Party by the third party claimant on
account thereof, PROVIDED that such requirement shall be deemed waived to the
extent that the Asserting Party does not undertake to provide and promptly
execute and, concurrently with the delivery of any such release, deliver a
corresponding release of the third party claimant with respect to such Third
Party Claim. If the Defending Party does not assume liability for and the
defense of the Third Party Claim pursuant to this Section 14.03, the
Asserting Party shall have the right (i) to control the defense thereof and
(ii), if the Asserting Party shall have notified the Defending Party of the
Asserting Party's intention to negotiate a settlement of the Third Party
Claim (at the Defending Party's expense to the extent the matter is
determined to be subject to indemnification hereunder), which notice shall
include the material terms of any proposed settlement in reasonable detail,
to settle the Third Party Claim (at the Defending Party's expense to the
extent the matter is determined to be subject to indemnification hereunder)
on terms not materially inconsistent with those set forth in such notice,
unless the Defending Party shall have notified the Asserting Party in writing
of the Defending Party's election to assume liability for and the defense of
the Third Party Claim pursuant to this Section 14.03 within ten days after
receipt of such notice, and the Defending Party promptly thereafter shall
have taken appropriate action to implement such defense. The Asserting Party
shall not be entitled to settle any such Third Party Claim pursuant to the
preceding sentence unless such settlement includes an unconditional release
of the Defending Party by the third party claimant on account thereof,
PROVIDED that such requirement shall be deemed waived to the extent that the
Defending Party does not undertake to provide and promptly execute and,
concurrently with delivery of any such release, deliver a corresponding
release of the third party claimant with respect to such Third Party Claim.
The Asserting Party and the Defending Party shall use all reasonable efforts
to cooperate fully with respect to the defense and settlement of any third
Party Claim covered by this Article XIV.
SECTION 14.04. ESCROW; SET-OFF. In addition to any other available
remedies, any Indemnified Purchaser Party shall be entitled to recover funds
pursuant to the Escrow Agreement in an amount equal to any losses to which it
is entitled under this Agreement. In addition, Purchaser shall have the
right, notwithstanding any other rights it might have against any other
person, to set-off against amounts Purchaser may owe Seller or Coleman, any
unpaid indemnification obligation of Seller or Coleman to Purchaser to which
Purchaser has been deemed by appropriate tribunal to be entitled under this
Agreement.
SECTION 14.05. FURTHER REMEDIES. The remedies provided to Seller and
Purchaser by this indemnity shall be in addition to, and not in lieu of, any
other remedies to which the respective
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party is entitled at law or in equity for any breach of or noncompliance with
the provisions of this Agreement by the other party; PROVIDED, HOWEVER that
the time period during which to assert a claim provided for in Articles VIII
and IX hereof shall apply in all instances.
ARTICLE XV
CONFIDENTIALITY AND PRESS RELEASES
SECTION 15.01. CONFIDENTIALITY. Each party shall hold in strict
confidence all documents and information concerning the other and its
business and properties and, if the transaction contemplated hereby should
not be consummated, such confidence shall be maintained, and all such
documents and information (in written form) shall immediately thereafter be
returned to the party originally furnishing the same.
SECTION 15.02. PRESS RELEASES. No press release or public disclosure,
either written or oral, of the existence or terms of this Agreement shall be
made by either Purchaser or Seller without the consent of the other subject
to the provisions of Section 15.03, and Purchaser and Seller shall each
furnish to the other advance copies of any release which it proposes to make
public concerning this Agreement or the transactions contemplated hereby and
the date upon which Purchaser or Seller, as the case may be, proposes to make
such press release.
SECTION 15.03. DISCLOSURES REQUIRED BY LAW. This Article XV shall not,
however, be construed to prohibit any party from making any disclosures to
any governmental authority that it is required to make by law or from filing
this Agreement with, or disclosing the terms of this Agreement to, any
institutional lender to such party, or prohibit Seller, Purchaser or any of
their affiliates from disclosing to its investors, partners, accountants,
auditors, attorneys, parent company and broker/dealers such terms of this
transaction as are customarily disclosed to them in connection with the sale
or acquisition of a cellular telephone system; PROVIDED, HOWEVER, that each
party shall provide to the other reasonable advance copies of any public
release except where the provision of such advance notice is not permissible.
ARTICLE XVI
TERMINATION
This Agreement may be terminated and the transactions contemplated herein
may be abandoned, by written notice given to the other party hereto, at any
time prior to the Closing:
(a) by mutual written consent of Seller and Purchaser;
(b) by either Purchaser or Seller, if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise permanently prohibiting the
sale
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of the Assets to Purchaser (which Seller and Purchaser shall have used
all reasonable efforts to have lifted or reversed) and such order, decree,
ruling or other action shall have become final and nonappealable;
(c) by Purchaser, if Seller or Coleman shall have materially
breached any of their material covenants herein, and said breach is not cured
within 10 business days after written notice of the breach is received by
Seller, or if Seller or Coleman shall have made a material misrepresentation
herein;
(d) by Seller, if Purchaser shall have materially breached any
of its material covenants herein, and said breach is not cured within 10
business days after written notice of the breach is received by Purchaser, or
if Purchaser shall have made a material misrepresentation herein; or
(e) by the Seller or Purchaser if, on or before October 23,
1996, Purchaser (x) notifies Seller pursuant to Section 11.06 that its due
diligence review was not satisfactory to Purchaser or (y) notifies Seller
pursuant to Section 11.07 that the Necessary Financing cannot be arranged by
Purchaser.
(f) by either Seller or Purchaser if the Closing shall not
have occurred on or before October 1, 1997, unless the failure to have the
Closing shall be due to the failure of the party seeking to terminate this
Agreement to perform in any material respect its obligations under this
Agreement required to be performed by it at or prior to the Closing.
ARTICLE XVII
BROKERS' FEES
Each party represents and warrants to the other that it shall be solely
responsible for the payment of any fee or commission due to any broker or
finder it has engaged with respect to this transaction and the other party
hereto shall be indemnified for any liability with respect thereto pursuant
to Article XIV hereof.
ARTICLE XVIII
CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
Purchaser, Seller and Coleman hereby consent to the jurisdiction of the
Federal and State courts of the State of Maryland, as well as to the
jurisdiction of all courts from which an appeal may be taken from the
aforesaid courts, for the purpose of any suit, action or other proceeding
arising out of any of the transactions contemplated by this Agreement.
Purchaser, Seller and Coleman also waive trial by jury in any action brought
on or with respect to this Agreement.
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ARTICLE XIX
MISCELLANEOUS
SECTION 19.01. ADDITIONAL INSTRUMENTS OF TRANSFER. (a) From time to
time after the Closing, each party shall, if requested by another party,
make, execute and deliver such additional assignments, bills of sale, deeds
and other instruments, as may be reasonably necessary or proper to carry out
the specific provisions of this Agreement, including transfer to Purchaser
all of Seller's right, title and interest in and to the Assets. Such efforts
and assistance shall be without cost to any party.
(b) Anything in this Agreement to the contrary
notwithstanding, Seller is not obligated to sell, assign, transfer or convey
to Purchaser any of their rights and obligations in and to any Interest
without first obtaining all necessary approvals, consents or waivers. To the
extent any of the approvals, consents or waivers listed on Schedule 2.01(a)
have not been obtained by Seller as of the Closing and Purchaser elects to
proceed with the Closing, Seller and Coleman shall, for a period equal to the
longer of six months after the Closing, or the remaining term of such
Interest, use all reasonable efforts to (i) obtain the consent of any such
third party; (ii) cooperate with Purchaser in any reasonable and lawful
arrangements designed to provide the benefits (including, without limitation,
the payment to Purchaser of any monies received by Seller in connection
therewith) of such Interest to Purchaser so long as Purchaser performs all
obligations with respect to the Interest (and the payment of all expenses in
connection therewith); and (iii) enforce, at the request of Purchaser and at
the expense and for the account of Purchaser, any rights of Seller or Coleman
arising from such Interest against such issuer thereof or the other party or
parties thereto (including the right to elect to terminate any such Interest
in accordance with the terms thereof upon the request of Purchaser);
provided, however, that none of Purchaser, Coleman or Seller shall be
obligated to pay any consideration or other sums therefor (except for filing
fees and other ordinary administrative charges and except as set forth above)
to the third party from whom such approval, consent or waiver is requested.
SECTION 19.02. NOTICES. All notices and other communications required
or permitted to be given hereunder shall be in writing and shall be deemed to
have been duly given if delivered, sent by telecopier, recognized overnight
delivery service or registered or certified mail, return receipt requested,
postage prepaid, to the following addresses:
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(i) If to Purchaser:
13439 N. Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
Attention: Everett Dobson
Facsimile No.: (405) 391-8515
with a copy to:
Edwards & Angell
2800 Hospital Trust Tower
Providence, Rhode Island 02903
Attention: David K. Duffell, Esq.
Facsimile No.: (401) 276-6602
(ii) If to Seller:
15600 NE 8th Street
Suite B1165
Bellevue, WA 98008
Attention: Wendy Coleman
with a copy to:
Lukas, McGowan, Nace & Gutierrez
1111 Nineteenth Street, N.W.
Suite 1200
Washington, DC 20036
Attention: Thomas Gutierrez, Esq.
Facsimile No.: (202) 842-4485
Notices delivered personally shall be effective upon delivery. Notices
transmitted by telecopy shall be effective when received, provided that the
burden of proving notice when notice is transmitted by telecopy shall be the
responsibility of the party seeking such notice . Notices delivered by
overnight mail shall be effective when received. Notices delivered by
registered or certified mail shall be effective on the date set forth on the
receipt of registered or certified mail, or 72 hours after mailing, whichever
is earlier.
SECTION 19.03. EXPENSES. Each party shall bear its own expenses and
costs, including the fees of any corporate, FCC attorney retained by it,
incurred in connection with the preparation of
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this Agreement and the consummation of the transactions contemplated hereby;
provided that Purchaser shall be responsible for the Hart-Scott Act filing
fee.
SECTION 19.04. TRANSFER TAXES. Purchaser and Seller shall each pay
one-half of the use, sales and transfer taxes, if any, imposed in connection
with the sale and delivery of that portion of the Assets acquired by
Purchaser under this Agreement which are purchased by Seller after the date
hereof with the proceeds of the Interim Loan. Purchaser shall pay the use,
sale and transfer taxes, if any, imposed in connection with the sale and
delivery of any other Assets acquired by Purchaser under this Agreement.
Notwithstanding anything else to the contrary set forth in this Section
19.04, Purchaser shall in no event be responsible in any manner for the
payment of any taxes on any income or gain which Seller or Coleman may
realize as a result of the sale of the Assets or otherwise related to the
transactions contemplated by this Agreement.
SECTION 19.05. COLLECTION PROCEDURES. From and after the Closing,
Purchaser shall have the right and authority, at its expense, to collect for
its account all items to which it is entitled as provided in this Agreement
and to endorse with the name of the Seller any checks or drafts received on
account of any such items. Purchaser agrees for a period of ninety (90) days
after the Closing that Purchaser will use commercially reasonable efforts to
collect for Seller's account all accounts receivable that accrued prior to
the time of the Closing and remit to Seller monthly any and all amounts
collected by Purchaser with respect to such accounts receivable. Collections
on the Seller's accounts receivable shall be maintained in a separate bank
account.
SECTION 19.06. SPECIFIC PERFORMANCE. The parties recognize and
acknowledge that in the event Seller shall fail to perform its obligations
under the terms of this Agreement, money damages alone will not be adequate
to compensate the Purchaser. The parties, therefore, agree and acknowledge
that in the event the Seller fails to perform its obligations under this
Agreement, the Purchaser shall be entitled, in addition to any action for
monetary damages, in addition to any other rights and remedies on account of
such failure, to specific performance of the terms of this Agreement and of
the covenants and obligations hereunder.
SECTION 19.07. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland (without
application of principles of conflicts of law).
SECTION 19.08. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto prior to Closing without the prior written consent of the
other parties, which consent will not be unreasonably withheld.
SECTION 19.09. SUCCESSORS AND ASSIGNS. All agreements made and entered
into in connection with this transaction shall be binding upon and inure to
the benefit of the parties hereto, their successors and assigns.
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SECTION 19.10. AMENDMENTS; WAIVERS. No alteration, modification or
change of this Agreement shall be valid except by an agreement in writing
executed by the parties hereto. No failure or delay by any party hereto in
exercising any right, power or privilege hereunder (and no course of dealing
between or among any of the parties) shall operate as a waiver of any such
right, power or privilege. No waiver of any default on any one occasion
shall constitute a waiver of any subsequent or other default. No single or
partial exercise of any such right, power or privilege shall preclude the
further or full exercise thereof.
SECTION 19.11. STANDSTILL. The Seller hereby agrees that it shall not
offer the Assets or any direct or indirect interest in the Assets or the
Business for sale to any other party until the earlier to occur of the
Closing or the termination of this Agreement. In addition, the Seller hereby
agrees that it shall take no action, directly or indirectly, to solicit
indications of interest in, or offers for the sale of, any interest in the
Assets or the Business until the earlier to occur of the Closing or the
termination of this Agreement.
SECTION 19.12. ENTIRE AGREEMENT. This Agreement merges all previous
negotiations and agreements between the parties hereto, either verbal or
written, and constitutes the entire agreement and understanding between the
parties with respect to the subject matter of this Agreement.
SECTION 19.13. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be an original, but
all of which together shall constitute one agreement.
SECTION 19.14. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by
law, but only as long as the continued validity, legality and enforceability
of such provision or application does not materially (a) alter the terms of
this Agreement, (b) diminish the benefits of this Agreement or (c) increase
the burdens of this Agreement, for any person.
SECTION 19.15. SECTION HEADINGS. The section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 19.16. INTERPRETATION. As both parties have participated in the
drafting of this Agreement, any ambiguity shall not be construed against
either party as the drafter.
SECTION 19.17. FURTHER ASSURANCES. Seller agrees to provide to
Purchaser from time to time any information that Seller possesses with
respect to the operation of the Business and
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Assets prior to the Closing which the Purchaser requests in the future in
connection with the Purchaser's financing efforts now or in the future or in
connection with any FCC or other regulatory filing.
SECTION 19.18. THIRD PARTIES. Nothing herein, expressed or implied, is
intended to or shall confer on any person other than the parties hereto any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized representative as of the day
and year first above written.
SELLER:
MARYLAND WIRELESS COMMUNICATIONS, L.P.
By: Maryland Communications Service, LLC,
Its General Partner
By: Wendy C. Coleman
-------------------------------
Wendy C. Coleman
Manager
COLEMAN:
Wendy C. Coleman
- -----------------------------------
Wendy C. Coleman
PURCHASER:
DOBSON CELLULAR OF MARYLAND, INC.
By: Everett Dobson
-------------------------------
Everett Dobson
President
DCC hereby guarantees the performance of Purchaser's obligations under
this Agreement and, along with Purchaser, shall be jointly and severally
liable therefor, (including, without limitation, representations, covenants,
agreements and conditions as well as the provisions of Section 10.07 hereof)
and Seller and Coleman may jointly or severally, bring an action for
enforcement of this guaranty at the same time and in the same forum as an
action is commenced by Seller and/or Coleman for enforcement of Purchaser's
performance of any of its obligations under this Agreement.
34
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DOBSON COMMUNICATIONS CORPORATION
By: Everett Dobson
-------------------------------
Everett Dobson
President
35
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PURCHASE AGREEMENT
among
AZTEL, INC.,
GILA RIVER TELECOMMUNICATIONS, INC.,
U S WEST NEWVECTOR GROUP, INC.,
TOHONO O'ODHAM UTILITY AUTHORITY
and
DOBSON CELLULAR OF ARIZONA, INC.
dated as of February 28, 1997
<PAGE>
TABLE OF CONTENTS
Description
- -----------
SECTION 1. Definitions.......................................................1
SECTION 2. Acquisition of the Interests by the Purchaser.....................6
2.1 Purchase and Sale of the Interests................................6
2.2 Purchase Price....................................................6
2.3 Deposit...........................................................7
2.4 Payment of the Purchase Price.....................................7
2.5 Purchase Price Adjustment.........................................7
2.6 System Manager's Loans............................................8
2.7 Closing Date......................................................8
2.8 Closing Date Deliveries...........................................8
2.9 Further Assurances...............................................10
SECTION 3. Representations and Warranties of the Sellers....................10
3.1 Legal Existence; Authority.......................................10
3.2 Ownership of the Partnership.....................................11
3.3 Subsidiaries and Interests In Other Companies....................11
3.4 Authorization, Execution and Delivery of Agreement...............11
3.5 Reports and Financial Statements.................................12
3.6 Tax Matters......................................................13
3.7 Undisclosed Liabilities..........................................13
3.8 Absence of Certain Developments..................................13
3.9 Operation of Business............................................14
3.10 Governmental Consent, Etc. ......................................15
3.11 Licenses and Permits.............................................15
3.12 Contracts........................................................15
3.13 Condition of Cellular Assets.....................................16
3.14 Real Property-Owned..............................................16
3.15 Personal Property-Owned..........................................16
3.16 Real and Personal Property-Leased or Licensed....................16
3.17 Employees........................................................16
3.18 ERISA............................................................17
3.19 Litigation, Claims and Legal Proceedings.........................17
3.20 Customers; Agents................................................17
3.21 Finders' and Brokers' Fees.......................................17
3.22 Accounts Receivable; Inventories.................................18
3.23 Insurance........................................................18
3.24 Product Liability Claims; Product Warranties.....................18
3.25 Environmental Protection.........................................18
3.26 Intentionally Omitted............................................19
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3.27 Pricing of Services..............................................19
3.28 Certain Business Relationships...................................20
3.29 Intellectual Property Rights.....................................20
3.30 No Material Adverse Effect.......................................20
3.31 Burdensome Obligations...........................................20
3.32 Section 4.9 Property.............................................20
3.33 Disclaimer.......................................................20
3.34 System Manager Loans.............................................21
SECTION 4. Representations and Warranties of the Purchaser..................21
4.1 Legal Existence..................................................21
4.2 Authorization, Execution and Delivery of this Agreement..........21
4.3 Finder's and Broker's Fees.......................................21
4.4 Qualification....................................................21
4.5 Litigation, Claims and Legal Proceedings.........................21
SECTION 5. Events Prior to Closing..........................................22
5.1 Access to Partnership............................................22
5.2 Preserve Accuracy of Representations and Warranties..............22
5.3 Operations Prior to the Closing Date.............................22
5.4 Consents and Approvals...........................................24
5.5 Obligations of the Purchaser Prior to Closing....................24
5.6 Control of the Cellular System...................................25
5.7 FCC and State Regulatory Approval................................25
5.8 Budget...........................................................25
5.9 Transfer of Section 4.9 Property.................................26
5.10 Financial and Other Reports......................................26
5.11 Supplemental Disclosure..........................................27
5.12 Excess Cash Flow.................................................27
SECTION 6. Conditions to the Purchaser's Obligation.........................27
6.1 Opinion of Counsel for the Sellers...............................27
6.2 Opinion of Federal and State Regulatory Counsel for Sellers......27
6.3 Representations and Warranties...................................27
6.4 Performance of this Agreement....................................28
6.5 Officer's Certificate............................................28
6.6 FCC and State Regulatory Authority Final Order...................28
6.7 Litigation.......................................................28
6.8 Additional Closing Items.........................................28
6.9 Consents.........................................................28
6.10 All Interests Tendered...........................................28
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6.11 Due Diligence...................................................28
6.12 Customers; Agents...............................................28
SECTION 7. Conditions to the Sellers' Obligation...........................29
7.1 Opinion of Counsel for the Purchaser............................29
7.2 Representations and Warranties..................................29
7.3 Performance of this Agreement...................................29
7.4 Officer's Certificate...........................................29
7.5 FCC and State Regulatory Authority Final Order..................29
7.6 Litigation......................................................29
7.7 Additional Closing Items........................................29
7.8 Authorization Certificate.......................................29
SECTION 8. 1996 Audited Financials.........................................29
SECTION 9. Survival of Representations and Warranties and Covenants........30
SECTION 10. Indemnification.................................................30
10.1 Indemnification by the Sellers..................................30
10.2 Indemnification by the Purchaser................................31
10.3 Notice of Claims................................................31
10.4 Third Party Claims..............................................31
10.5 Limitations.....................................................32
10.6 Escrow..........................................................33
SECTION 11. Tax Records and Filings.........................................33
SECTION 12. Confidentiality.................................................34
12.1 Prior to Closing................................................34
12.2 Failure to Close................................................34
12.3 Remedies........................................................34
SECTION 13. Notices.........................................................34
SECTION 14. Third Party Rights..............................................36
SECTION 15. Parties in Interest; Assignment.................................36
SECTION 16. Construction; Governing Law.....................................36
SECTION 17. Entire Agreement; Amendment and Waiver..........................36
SECTION 18. Severability....................................................37
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SECTION 19. Counterparts....................................................37
SECTION 20. Expenses and Fees...............................................37
SECTION 21. Schedules and Exhibits..........................................37
SECTION 22. Termination.....................................................37
SECTION 23. Remedies........................................................38
SECTION 24. Purchaser Restructuring.........................................38
SECTION 25. Arbitration.....................................................38
25.1 Claims..........................................................38
25.2 Rules...........................................................38
25.3 No Discovery; Damages; Expenses.................................39
25.4 Judicial or Administrative Action...............................39
SECTION 26. Limitation of Liability.........................................39
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SCHEDULES
---------
Schedule 2 Partnership Interests
Schedule 3.4 Consents
Schedule 3.5(a)(i) Historical Financial Statements
Schedule 3.5(a)(ii) Current Financial Statements
Schedule 3.5(a)(iii) Budget
Schedule 3.7 Other Liabilities
Schedule 3.8 Absence of Certain Developments
Schedule 3.10 Governmental Consents, Etc.
Schedule 3.11 Licenses and Permits
Schedule 3.12 Material Agreements
Schedule 3.13(a) Cellular Assets Exception
Schedule 3.13(b) Cellular Assets
Schedule 3.14 Real Property - Owned
Schedule 3.15 Personal Property - Owned
Schedule 3.16 Real and Personal Property - Leased or Licensed
Schedule 3.18 ERISA
Schedule 3.19 Litigation, Claims and Legal Proceedings
Schedule 3.20(b) Agents
Schedule 3.21 Brokers
Schedule 3.22 Accounts Receivable
Schedule 3.23 Insurance
Schedule 3.24 Product and Service Warranties
Schedule 3.25 Environmental Permits, Licenses, Etc.
Schedule 3.27 Service Packages
Schedule 3.28(a) Certain Business Relationships
Schedule 3.28(b) Title Exceptions
Schedule 3.29 Intellectual Property Rights
Schedule 3.30 No Material Adverse Effect
Schedule 3.32 Section 4.9 Property
Schedule 5.9 NewVector Territory
<PAGE>
EXHIBITS
--------
Exhibit A Deposit Escrow Agreement
Exhibit B Escrow Agreement
Exhibit C Form of Opinion of Sellers' Counsel
Exhibit D Form of Opinion of Sellers' FCC Counsel
Exhibit E Form of Opinion of Purchaser's Counsel
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT is made and entered into as of the 28th day of
February 1997, by and among AZTEL, INC., an Arizona corporation ("Aztel"), GILA
RIVER TELECOMMUNICATIONS, INC., a corporation organized pursuant to Gila River
Indian Community Resolution Number GR-101-88 ("Gila"), U S WEST NEWVECTOR GROUP,
INC., a Colorado corporation ("NewVector"), TOHONO O'ODHAM UTILITY AUTHORITY, a
subsidiary organization of the Tohono O'odham Nation, duly organized pursuant to
a Plan of Operation approved by Resolution No. 91-175 of the Tohono O'odham
Legislative Council ("TOUA") (TOUA, NewVector, Gila and Aztel may sometimes
hereinafter be referred to individually as a "Seller" and collectively as the
"Sellers"), and DOBSON CELLULAR OF ARIZONA, INC., an Oklahoma corporation (the
"Purchaser").
W I T N E S S E T H:
WHEREAS, the Sellers own all of the issued and outstanding partnership
interests (the "Partnership Interests") and voting interests (the "Voting
Rights") of Gila River Cellular General Partnership, an Arizona general
partnership (the "Partnership"); and
WHEREAS, the Partnership holds the wireline cellular telephone license
granted by the FCC for the Arizona RSA and is the owner of one hundred percent
of the Cellular System; and
WHEREAS, the Sellers desire to sell all of the Partnership Interests and
Voting Rights (collectively, the "Interests"), as set forth on SCHEDULE 2
attached hereto, to the Purchaser and the Purchaser desires to purchase the
Interests on the terms and conditions set forth in this Agreement; and
WHEREAS, it is a condition to the closing of the transactions contemplated
by this Agreement that all of the Sellers sell all of the Interests subject to
Section 24 below; and
WHEREAS, the Purchaser and the Sellers believe that it is in their mutual
interest to enter into this Agreement;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein set forth, the parties hereto agree as follows:
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SECTION 1. DEFINITIONS.
Whenever used in this Agreement, the following terms shall have the
meanings assigned to them in this Section 1 unless the context requires
otherwise. Each definition herein shall be deemed to refer to the singular,
plural, masculine, feminine or neuter as the context requires.
ACT. The term "Act" shall have the meaning set forth in Section 3.10 of
this Agreement.
AFFILIATE. The term "Affiliate" means, with respect to any Person, any
other Person which directly or indirectly controls, is controlled by or is under
common control with such Person, and any Person which holds any ownership
interest in, either directly or indirectly, any such Person.
AGENT. The term "Agent" shall mean a Person who has contracted with the
Partnership to sell cellular telephone equipment or services on behalf of the
Partnership.
ARIZONA RSA. The term "Arizona RSA" shall mean the geographic area
contained within the boundaries of the FCC's Rural Service Area No. 322, Arizona
5 - Gila.
AUDITOR. The term "Auditor" shall have the meaning set forth in Section 8
of this Agreement.
AZTEL. The term "Aztel" shall have the meaning set forth in the Preamble
of this Agreement.
BALANCE SHEET DATE. The term "Balance Sheet Date" shall have the meaning
set forth in Section 3.5(a)(ii) of this Agreement.
BUDGET. The term "Budget" shall have the meaning set forth in Section
3.5(a)(iv) of this Agreement.
BUSINESS DAY. The term "business day" shall have the meaning set forth in
Section 13 of this Agreement.
CAPITAL EXPENDITURES. The term "Capital Expenditures" shall mean capital
expenditures determined in accordance with GAAP.
CELLULAR ASSETS. The term "Cellular Assets" shall have the meaning set
forth in Section 3.15 of this Agreement.
CELLULAR SYSTEM. The term "Cellular System" shall mean the wireline
cellular radio telephone system licensed by the FCC in the Arizona RSA.
CLOSING. The term "Closing" shall have the meaning set forth in
Section 2.7 of this Agreement.
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CLOSING DATE. The term "Closing Date" shall have the meaning set forth in
Section 2.7 of this Agreement.
CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended.
CURRENT FINANCIAL STATEMENTS. The term "Current Financial Statements"
shall have the meaning set forth in Section 3.5(a)(ii) of this Agreement.
CUSTOMER. The term "Customer" shall have the meaning set forth in Section
3.20(a) of this Agreement.
EMPLOYEE PLAN. The term "Employee Plan" shall have the meaning set forth
in Section 3.20 of this Agreement.
ENCUMBRANCE. The term "Encumbrance" means any lien, claim, charge,
security interest, mortgage, pledge, easement, conditional sale or other title
retention agreement, defect in title, covenant or other restriction of any kind,
whether arising by contract, operation of law or otherwise.
ENVIRONMENTAL LAWS. The term "Environmental Laws" shall have the meaning
set forth in Section 3.27 of this Agreement.
ERISA. The term "ERISA" shall have the meaning set forth in Section 3.18
of this Agreement.
ERISA AFFILIATE. The term "ERISA Affiliate" shall have the meaning set
forth in Section 3.20 of this Agreement.
ESCROW AGENT. The term "Escrow Agent" shall have the meaning set forth in
Section 2.4 of this Agreement.
ESCROW AGREEMENT. The term "Escrow Agreement" shall have the meaning set
forth in Section 2.4 of this Agreement.
ESCROW PAYMENT. The term "Escrow Payment" shall have the meaning set forth
in Section 2.4 of this Agreement.
EXPENSES. The term "Expenses" shall mean any and all expenses (i) incurred
in connection with investigating, preparing, defending, bringing or prosecuting
any claim, action, suit or proceeding (including, without limitation, court
filing fees, court costs, arbitration fees or costs, witness fees, and fees and
disbursements of legal counsel, investigators, expert witnesses,
3
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accountants and other professionals) and (ii) incurred by a governmental body
to investigate, study or reclaim any environmental damage and payable by any
Indemnified Party.
FCC. The term "FCC" shall mean the Federal Communications Commission and
any successor federal agency having principal jurisdiction over the regulation
of the communications authorizations of the Cellular System.
FCC AND STATE APPROVALS. The term "FCC and State Approvals" shall have the
meaning set forth in Section 3.10 of this Agreement.
FINAL ORDER. The term "Final Order" shall have the meaning set forth in
Section 5.7 of this Agreement.
GAAP. The term "GAAP" shall mean generally accepted accounting principles
set forth in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of determination and which are, as to any Person, consistently applied to
such Person.
GILA. The term "Gila" shall have the meaning set forth in the Preamble to
this Agreement.
HISTORICAL FINANCIAL STATEMENTS. The term "Historical Financial
Statements" shall have the meaning set forth in Section 3.5(a)(i) of this
Agreement.
INDEMNIFIED PARTY. The term "Indemnified Party" shall have the meaning set
forth in Section 10.2 of this Agreement.
INDEMNIFYING PARTY. The term "Indemnifying Party" shall have the meaning
set forth in Section 10.3 of this Agreement.
INTERIM PERIOD. The term "Interim Period" shall have the meaning set forth
in Section 2.5 of this Agreement.
JUNE BALANCE SHEET. The term "June Balance Sheet" shall have the meaning
set forth in Section 3.5(a)(ii) of this Agreement.
LEGAL PROCEEDINGS. The term "legal proceedings" shall have the meaning set
forth in Section 3.19 of this Agreement.
LETTER OF INTENT. The term "Letter of Intent" shall mean that certain
letter dated September 10, 1996 between the Purchaser's parent company and the
Sellers, outlining the
4
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general terms and conditions pursuant to which the Interests will be
acquired, which letter is being superseded by this Agreement as contemplated
hereby.
LOSSES. The term "Losses" shall mean any and all losses, costs,
obligations, liabilities, diminutions in value, settlement payments, awards,
judgments, fines, penalties, damages, expenses, deficiencies or other charges,
but shall not include Expenses.
MATERIAL ADVERSE EFFECT. The term "Material Adverse Effect" shall have the
meaning set forth in Section 3.30 of this Agreement.
NATION. The term "Nation" shall have the meaning set forth in
Section 3.1(a) of this Agreement.
NEWVECTOR. The term "NewVector" shall have the meaning set forth in the
Preamble to this Agreement.
PARTNERS' COMMITTEE. The term "Partners' Committee" shall have the meaning
set forth in the Partnership Agreement.
PARTNERSHIP. The term "Partnership" shall have the meaning set forth in
the recital clauses of this Agreement.
PARTNERSHIP AGREEMENT. The term "Partnership Agreement" shall mean that
certain Amended and Restated Partnership Agreement of Gila River Cellular
General Partnership dated October 13, 1994, as amended.
PERMITTED ENCUMBRANCE. The term "Permitted Encumbrance" shall mean
statutory liens not yet past due, and Encumbrances that do not materially
interfere with the use by Sellers of the property subject thereto or affected
thereby.
PERSON. The term "Person" shall mean an individual, partnership,
corporation, limited liability company, association, trust, joint venture,
unincorporated organization, and any government, including an Indian nation, and
any governmental council, department or agency or political subdivision thereof.
PROJECTIONS. The term "Projections" shall have the meaning set forth in
Section 3.5(a)(iv) of this Agreement.
PURCHASE PRICE. The term "Purchase Price" shall have the meaning set forth
in Section 2.2 of this Agreement.
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PURCHASER. The term "Purchaser" shall mean have the meaning set forth in
the Preamble of this Agreement.
PURCHASER INDEMNIFIED PARTY. The term "Purchaser Indemnified Party" shall
have the meaning set forth in Section 10.1 of this Agreement.
RESTRUCTURING. The term "Restructuring" shall have the meaning set forth
in Section 24 of this Agreement.
SECTION 4.9 PROPERTY. The term "Section 4.9 Property" shall have the
meaning set forth in Section 5.9 of this Agreement.
SELLER INDEMNIFIED PARTY. The term "Seller Indemnified Party" shall have
the meaning set forth in Section 10.2 of this Agreement.
SELLERS. The term "Sellers" shall have the meaning set forth in the
Preamble of this Agreement.
SELLER'S KNOWLEDGE OR KNOWLEDGE OF ANY SELLER. The term "Seller's
Knowledge" or "Knowledge of any Seller" shall mean the existence of actual
knowledge of a matter by, in the case of NewVector, Dan Blakeman or NewVector's
Partners' Committee representative and, in the case of any other Seller, such
other Seller's Partners' Committee representative.
SIX MONTH INCOME STATEMENT. The term "Six Month Income Statement" shall
have the meaning set forth in Section 3.5(a)(ii) of this Agreement.
SYSTEM MANAGER. The term "System Manager" shall have the meaning set forth
in the Partnership Agreement.
TAXES. The Term "Tax" or "Taxes" means all taxes, charges, fees, levies,
inposts and other assessments including all income, sales, use, goods and
services, value added, capital, capital gains, alternative net worth, transfer,
profits, withholding, payroll, employer health, excise, real property and
personal property taxes, and any other taxes, customs duties, stamp duties,
fees, assessments or similar charges in the nature of a tax, together with any
interest, fines and penalties imposed by any governmental authority (including
federal, state, provincial, municipal and foreign governmental authorities), and
whether disputed or not.
TOUA. The term "TOUA" shall have the meaning set forth in the Preamble to
this Agreement.
UNSERVED AREA. The term "Unserved Area" shall have the meaning set forth
in Section 5.9 of this Agreement.
6
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SECTION 2. ACQUISITION OF THE INTERESTS BY THE PURCHASER.
2.1 PURCHASE AND SALE OF THE INTERESTS. Subject to the terms and
conditions of this Agreement and in reliance upon the representations,
warranties, covenants and agreements herein contained, on the Closing Date, each
of the Sellers shall sell, assign, transfer and deliver to the Purchaser, free
and clear of all Encumbrances, the Interests set forth opposite such Seller's
name on SCHEDULE 2 attached hereto, in exchange for the payment by the Purchaser
of the Purchase Price therefor, all as set forth in this Section 2, and the
Purchaser shall purchase the Interests from the Sellers at the price and in the
manner set forth in this Section 2.
2.2 PURCHASE PRICE. Subject to the adjustments, if any, to be made in
accordance with Section 2.5 hereof, the total purchase price for the Interests
shall be Fifty-Three Million One Hundred Thousand Dollars ($53,100,000) (as
adjusted, the "Purchase Price"). Each Seller's portion of the Purchase Price
shall be as set forth on SCHEDULE 2 attached hereto.
2.3 DEPOSIT. Within three (3) days of the execution of this Agreement,
Purchaser is depositing as a good faith deposit $2.65 million (the "Deposit")
with CoreStates Bank, N.A. (the "Deposit Escrow Agent"), to be held, invested
and disbursed pursuant to the terms of the Deposit Escrow Agreement
substantially in the form of EXHIBIT A attached hereto (the "Deposit Escrow
Agreement"). If the Closing occurs, then the Deposit and all earnings on the
Deposit shall be paid to Sellers (on a pro rata basis based on each Seller's
percentage ownership of outstanding Partnership Interests) pursuant to the
Deposit Escrow Agreement and the full amount of the Deposit and the earnings
thereon shall be credited against and deducted from the Purchase Price to be
paid at the Closing by Purchaser for the Interests. If Sellers terminate this
Agreement in accordance with the provisions of Section 22(a)(iv) and, at the
time of such termination, Sellers are not then in breach of any of their
representations, warranties, covenants or agreements in any material respect and
the conditions set forth in Sections 6.6 and 6.12 shall have been satisfied,
then Sellers (on a pro rata basis based on each Seller's percentage ownership of
outstanding Partnership Interests) shall be paid the Deposit and all earnings on
the Deposit as liquidated damages. Notwithstanding anything else set forth in
this Section 2.3, Sellers' sole and exclusive recourse for Purchaser's breach of
its representations or obligations under this Agreement prior to Closing shall
only be to receive the Deposit and all earnings thereon. In any other case if
the Closing does not occur, then, pursuant to the Deposit Escrow Agreement, the
Deposit and all earnings thereon shall be paid to Purchaser. All determinations
of breach and satisfaction of conditions shall be made, and all payments by the
Deposit Escrow Agent shall be made, in accordance with the procedures and other
provisions set forth in the Deposit Escrow Agreement.
2.4 PAYMENT OF THE PURCHASE PRICE. The Purchase Price, less the Deposit
and all earnings thereon and less an amount equal to $1.5 million (the "Escrow
Payment"), shall be payable on the Closing Date by wire transfer of immediately
available funds. The Escrow Payment shall
7
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reduce the amount of the Purchase Price that each Seller shall receive on the
Closing Date pro rata based on such Seller's portion of the Purchase Price.
The Escrow Payment shall be paid by the Purchaser to a national bank with
capital in excess of $500 million mutually acceptable to the Purchaser and
the Sellers (the "Escrow Agent") on the Closing Date to be held, invested and
disbursed pursuant to the terms of the Escrow Agreement substantially in the
form of EXHIBIT B attached hereto (the "Escrow Agreement").
2.5 PURCHASE PRICE ADJUSTMENT. Each Seller's portion of the Purchase
Price shall be (i) increased by the amount of any capital contributions actually
paid in cash by such Seller to the Partnership during the period commencing on
September 10, 1996 to the Closing Date (the "Interim Period") and (ii) decreased
by the sum of (x) the amount of any cash distributions made by the Partnership
to such Seller during the Interim Period or which are payable to such Seller as
of the Closing Date (except for those cash distributions permitted by Section
5.12 below) and (y) the fair market value of any Cellular Assets distributed to
such Seller during the Interim Period or which is receivable by such Seller as
of the Closing Date. Notwithstanding the foregoing, the transfer of Section 4.9
Property to the Partnership as required by Section 5.9 hereof shall not be
treated as a capital contribution which results in an increase in the Purchase
Price under this Agreement.
2.6 SYSTEM MANAGER'S LOANS. On the Closing Date, the Purchaser shall pay
NewVector as System Manager any amounts owed by the Partnership to NewVector
pursuant to Section 4.4 of the Partnership Agreement as of the Closing Date.
2.7 CLOSING DATE. The closing of the purchase and sale of the Interests
as contemplated hereby (the "Closing") shall take place at the offices of
Pepper, Hamilton & Scheetz, 3000 Two Logan Square, Eighteenth and Arch Streets,
Philadelphia, Pennsylvania 19103-2799 or such other site as is mutually agreed
upon on the tenth (10th) business day after the date on which all FCC and State
Approvals for the sale of the Interests have been received and shall have become
a Final Order, or on such other date to which the parties hereto mutually agree.
For purposes of this Agreement, the date on which the Closing occurs is referred
to herein as the "Closing Date."
2.8 CLOSING DATE DELIVERIES.
(a) THE SELLERS' DELIVERIES. At the Closing, concurrently with the
discharge of the Purchaser's closing obligations, the Sellers shall deliver to
the Purchaser:
(i) such bills of sale, assignments and other good and
sufficient instruments of conveyance, transfer and assignment as shall
be necessary to vest in Purchaser good and marketable title in and to
the Interests, free and clear of all Encumbrances;
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(ii) written resignations of the System Manager and all
members (other than Everett Dobson) of the Partners' Committee
effective as of the Closing Date;
(iii) the opinions of counsel and certificates required by
Sections 6.1, 6.2, 6.5 and 6.10 of this Agreement;
(iv) the consents required by Sections 3.4 and 3.10 of this
Agreement;
(v) all minute books and partnership books and records
relating to the Partnership;
(vi) general releases in form reasonably acceptable to the
Purchaser and the Sellers executed by each Seller, the System Manager
and all members (other than Everett Dobson) of the Partners' Committee
immediately prior to the Closing pursuant to which such Persons
release the Partnership from any and all debts, liabilities and
obligations of the Partnership, including, without limitation, the
Partnership's indemnification obligations pursuant to Section 12.2 of
the Partnership Agreement, to such Persons existing at or prior to the
Closing;
(vii) the Escrow Agreement;
(viii) copies of such bills of sale, assignments and other
good and sufficient instruments of conveyance, transfer and assignment
which were necessary to vest in the Partnership good and marketable
title in and to (x) all Section 4.9 Property, including evidence of
filings with governmental authorities if required in connection
therewith, and (y) all contracts and other assets set forth on
SCHEDULE 3.28(b) (other than those contracts which are not assignable)
which the Purchaser has given written notice to the System Manager
that such assets and contracts should be assigned to the Partnership.
(ix) copies of the resolutions of the Board of Directors
and shareholders of Aztel and NewVector authorizing Aztel's and
NewVector's execution and delivery of this Agreement and sale of their
Interests to Purchaser, certified by the Secretary of each of Aztel
and NewVector;
(x) a copy of the resolution of the Board of Directors of
TOUA authorizing TOUA's execution and delivery of this Agreement and
sale of its Interest to Purchaser, certified by a duly authorized
officer of TOUA;
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(xi) a copy of the resolution of the Gila River Indian
Community authorizing Gila's execution and delivery of this Agreement
and the sale of its Interest to Purchaser, certified by a duly
authorized officer of Gila;
(xii) the waiver by each Seller of its right of first
refusal pursuant to Section 10.3 of the Partnership Agreement in
connection with the transactions contemplated by this Agreement; and
(xiii) the pro forma balance sheet of the Partnership as of
the Closing Date, taking into account all transactions contemplated
hereby to take effect on such date.
(b) THE PURCHASER'S DELIVERIES. At the Closing, concurrently with
the discharge of the Sellers' closing obligations, the Purchaser shall deliver
to the Sellers:
(i) by bank wire transfer of immediately available funds
as directed by each Seller on or prior to the Closing Date an amount
equal to the Purchase Price less the Deposit and all earnings thereon
and the Escrow Payment;
(ii) the opinion of counsel and certificates required by
Sections 7.1, 7.4 and 7.8 of this Agreement;
(iii) a copy of the resolutions of the Board of Directors of
the Purchaser authorizing the Purchaser's execution and delivery of
this Agreement and the purchase of the Interests, certified by the
Secretary of the Purchaser;
(iv) the Escrow Agreement;
(v) the consents, if any, needed to be obtained by the
Purchaser in connection with the consummation of the transactions
contemplated by this Agreement; and
(vi) a general release in form acceptable to the Purchaser
and executed by the Partnership releasing NewVector in its capacity as
System Manager from any claims, liabilities and obligations the
Partnership may have against NewVector in its capacity as System
Manager.
2.9 FURTHER ASSURANCES. The Sellers shall, at any time and from time to
time on and after the Closing Date, upon request by the Purchaser and without
further consideration, take or cause to be executed, acknowledged and delivered,
such transfers, conveyances and assurances as may be reasonably required or
desirable for the better conveying, transferring, assigning, delivering,
assuring and confirming to the Purchaser the Interests to be sold and
transferred to the Purchaser
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hereunder, and for reducing to the possession of the Purchaser any of the
Partnership's assets or properties not in the Purchaser's possession on the
Closing Date.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each Seller,
individually with respect to the representations and warranties set forth in
Section 3.1(a)(i) (as applicable), Section 3.2, Section 3.4, Section 3.6,
Section 3.18, the last sentence of Section 3.19, Section 3.21, the last sentence
of Section 3.30 and Section 3.32, and severally for all other representations
and warranties set forth in this Section 3, represents and warrants to
Purchaser, which representations and warranties shall survive the execution and
delivery of this Agreement and the consummation of the transactions herein
contemplated, as follows:
3.1 LEGAL EXISTENCE; AUTHORITY.
(a) ORGANIZATION; GOOD STANDING.
(i) Each of the Sellers (other than TOUA) is a corporation
duly organized, validly existing and in good standing under the laws
of its State of incorporation. TOUA is a subsidiary organization of
the Tohono O'odham Nation (the "Nation") duly organized pursuant to a
legal and valid resolution of the Nation's Legislation Council. Each
of the Sellers has the full power and authority to own and use its
properties and to transact the business in which it is engaged, to
enter into this Agreement and the other agreements contemplated by
this Agreement, to sell its Interests to Purchaser and to consummate
the transactions contemplated hereby.
(ii) The Partnership is a general partnership duly
organized, validly existing and in good standing under the laws of the
State of Arizona. The Partnership is duly qualified to transact
business as a foreign partnership and is in good standing in each
jurisdiction where the ownership or leasing of its properties or the
conduct of its business requires such qualification. The Partnership
has the full power and authority to own and use its properties and to
transact the business in which it is engaged.
(b) PARTNERSHIP ORGANIZATION DOCUMENTS. True, correct and complete
copies of the Partnership Agreement, as in effect on the date hereof, and minute
book of the Partners' Committee and partnership transfer records and other
records of the Partnership have been delivered to the Purchaser for inspection.
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3.2 OWNERSHIP OF THE PARTNERSHIP.
Each Seller is the owner of the Interests set forth opposite such Seller's
name on SCHEDULE 2 attached hereto. Each Seller holds good and marketable title
to the Interests reflected opposite its name on SCHEDULE 2 free of all
Encumbrances. The Partnership Interests and Voting Rights constitute all of the
outstanding voting, ownership and other interests of, and rights in, the
Partnership. Each Seller has satisfied all capital calls, contribution
requirements and similar obligations to make contributions or investments in the
Partnership and is not in default under the Partnership Agreement or similar
instrument setting forth the rights and obligations of the partners of the
Partnership. There are no (i) outstanding subscriptions, options, warrants,
rights or convertible or exchangeable securities issued by the Partnership or
(ii) other agreements or commitments to which the Partnership or any of the
Sellers is a party or by which the Partnership or any of the Sellers are bound
or affected of any character relating to the Interests, including, without
limitation, any agreement or commitment obligating any Seller to deliver or
sell, or cause to be delivered or sold, any of the Interests or rights therein
or obligating the Partnership to issue, a partnership interest or other equity
interest to any other Person.
3.3 SUBSIDIARIES AND INTERESTS IN OTHER COMPANIES. The Partnership does
not have any subsidiaries, and does not own or control any shares or other
securities of, or have any other proprietary interest in, any corporation,
partnership, limited liability company, joint venture, business association or
other Person.
3.4 AUTHORIZATION, EXECUTION AND DELIVERY OF AGREEMENT. The execution,
delivery and performance of this Agreement and all other agreements and
transactions contemplated hereby have been duly authorized by all necessary
action by each Seller and its shareholders or other equity owners and do not
violate the corporate charter, by-laws or other organizational documents or
resolutions of such Seller. This Agreement constitutes a legal, valid and
binding obligation of each Seller, enforceable against such Seller in accordance
with its terms; subject, however, to bankruptcy, insolvency, reorganization or
similar laws relating to or affecting the enforcement of creditors' rights
generally or principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law).
Except as set forth on SCHEDULE 3.4 attached hereto, neither the execution,
delivery or performance of this Agreement nor the consummation of any of the
transactions provided for hereby (i) will violate or conflict with any
provision of the corporate charters, by-laws or other organizational documents
or resolutions of any Seller, (ii) will violate or conflict with any provision
of the Partnership Agreement, (iii) assuming the consents of the Persons
referenced in SCHEDULE 3.4 are obtained, will result in any violation or breach
of or default under, will create any rights of acceleration, termination or
cancellation or cause any loss of rights under, or will result in the creation
or imposition of any Encumbrance on the Partnership's assets or properties under
any contract, trust agreement, mortgage, indenture or other agreement or
instrument to which any Seller or the Partnership is a party or by which any
Seller or the Partnership is bound,
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or to which any Seller or the Partnership or any of their respective
properties is subject or (iv) require the consent or authorization of any
other Person.
3.5 REPORTS AND FINANCIAL STATEMENTS.
(a) The Purchaser has heretofore been furnished with the following:
(i) true and complete copies of the audited balance sheet
of the Partnership as of December 31, 1994 and December 31, 1995 and
the related audited statements of income, cash flows and partners'
capital for the years then ended, each of such balance sheets and
income statements being attached hereto as SCHEDULE 3.5(a)(i)
(collectively, the "Historical Financial Statements");
(ii) true and complete copies of the unaudited balance
sheet (the "June Balance Sheet") of the Partnership at June 30, l996
(the "Balance Sheet Date") and the related unaudited statement of
income, cash flows and partners' capital for the six-month period then
ended (the "Six Month Income Statement; and together with the June
Balance Sheet, the "Current Financial Statements"), such balance sheet
and income and cash flow statements being attached hereto as
SCHEDULE 3.5(a)(ii);
(iii) the Capital Expenditure budget of the Partnership
approved by the Partners' Committee providing for expenditure of
capital items for the twelve-month fiscal period ending December 31,
1997 dated as of December 13, 1996 and attached hereto as
SCHEDULE 3.5 (a)(iii) (the "Budget").
(b) Each of the Historical and Current Financial Statements delivered
under Section 3.5 (a)(i) and (ii) hereof was prepared in accordance with GAAP
applied on a basis consistent with prior periods except as otherwise stated
therein; each of the balance sheets included in such Historical and Current
Financial Statements fairly presents, in all material respects, the financial
condition of the Partnership as at the close of business on the date thereof;
and each of the statements of income included in such Historical and Current
Financial Statements fairly presents, in all material respects, the results of
operations of the Partnership for the fiscal period then ended (subject to
normal recurring year-end adjustments in the case of any unaudited interim
financial statements).
(c) The pro forma balance sheet of the Partnership referred to in
Section 2.8(a)(xiii) will be prepared by management of the Partnership taking
into consideration the effect of the transactions contemplated by this
Agreement, and as of the date of such pro forma balance sheet none of the
Sellers will be aware of any fact which casts doubt on the accuracy or
completeness thereof. Such pro forma balance sheet of the Partnership will
fairly present in all material
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respects the financial condition of the Partnership as of the date thereof
taking into consideration the effect of the transactions contemplated by the
Agreement.
3.6 TAX MATTERS. (a) Each of the Sellers and the Partnership has timely
filed all Tax returns and statements which it is required to file; (b) all such
returns are complete and accurate in all material respects and disclose all
Taxes required to be paid for the periods covered thereby; (c) the Partnership
has not waived any statute of limitations in respect of Taxes or agreed to an
extension of time with respect to a Tax assessment or deficiency; (d) no
assessment of any additional Taxes for periods for which returns have been filed
has been asserted and no basis exists therefor; (e) there are no unresolved
questions or claims raised by any Taxing authority concerning the Tax liability
of the Partnership or any Seller and (f) all Taxes which the Partnership is
required by law to withhold or to collect for payment have been duly withheld
and collected, and have been paid. Since the date of its formation the
Partnership has qualified in all respects to be classified for federal income
tax purposes as a partnership (and not as an association or publicly-traded
partnership taxable as a corporation). The Partnership has paid all Taxes due
prior to the date hereof and will pay when due all Taxes which may become due on
or before the Closing Date.
3.7 UNDISCLOSED LIABILITIES. The Partnership does not have any material
liabilities, whether accrued, absolute, contingent or otherwise, and whether due
or to become due, except (i) to the extent set forth in SCHEDULE 3.7 hereto or
as to account category in excess of the amounts shown for such account category
in the Current Financial Statements, (ii) liabilities, debts or obligations of
the same nature as those set forth in the Current Financial Statements
reasonably incurred in the ordinary course of business of the Partnership since
the Balance Sheet Date, none of which, individually or in the aggregate, is
material and (iii) liabilities not required under GAAP to be shown in the
Current Financial Statements.
3.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except for the transactions
contemplated by this Agreement or as set forth in the Schedules to this
Agreement, since the Balance Sheet Date, the Partnership has conducted its
business only in the ordinary course and in conformity with good business
practice. Without limiting the generality of the foregoing, except as set forth
on SCHEDULE 3.8 attached hereto, the Partnership has not since the Balance Sheet
Date:
(a) sold, leased, transferred or otherwise disposed of, or mortgaged
or pledged, or imposed or suffered to be imposed any Encumbrance other than
Permitted Encumbrances on, any of its assets reflected on the Current Financial
Statements or any assets acquired after the Balance Sheet Date, except for sales
of inventory in the ordinary course of its business consistent with past
practices.
(b) granted any bonus or other special compensation or increased the
compensation or benefits payable or to become payable to the System Manager, any
Partners' Committee members or officers or instituted any increase in or
otherwise amended any profit sharing, bonus,
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incentive, deferred compensation, insurance, pension, retirement, medical,
hospital, disability, welfare or other employee benefit plan;
(c) suffered any material damage, destruction or casualty loss
(whether or not covered by insurance) or condemnation or other taking which
materially and adversely affects its assets, properties or business;
(d) canceled without payment in full or compromised any claims,
notes, loans, or obligations or other material right of value receivable from
any Person except in the ordinary course of its business consistent with past
practices;
(e) sold, assigned or transferred any copyrights, trademarks, trade
names, patents, licenses or other intangible assets;
(f) issued or authorized the issuance of additional partnership
interests or any options, warrants or rights to acquire any partnership
interests;
(g) except to comply with the Partnership's Budget, made or suffered
any amendment or termination of any agreement, contract, commitment or lease,
involving more than $50,000 to which it is or was a party, beneficiary or
designee or by which it is or was bound or canceled, modified or waived any
debts owed to or claims held by it (including the settlement of any claims or
litigation) or waived any right in each case having material value and except in
the ordinary course of business;
(h) incurred any indebtedness for borrowed money to any Seller, an
Affiliate of any Seller or any other Person;
(i) other than in connection with the purchase of equipment in the
ordinary course of its business consistent with past practices or in accordance
with the Budget, created, incurred, guaranteed or assumed any indebtedness for
borrowed money or entered into any capitalized leases;
(j) delayed payment of any material account payable or other material
liability beyond its due date or the date when such liability would have been
paid in the ordinary course of its business consistent with past practices;
(k) except as permitted by Section 5.12, declared, set aside or paid
or made any distribution (whether in cash, equity or other property) to the
Sellers in respect of the Partnership Interests or any Indebtedness of the
Partnership to any Seller or an Affiliate of any Seller;
(l) purchased, redeemed, called for purchase or redemption or
otherwise acquired any Partnership Interests or any other securities; or
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(m) agreed, committed to do, authorized or entered into any agreement
or understanding to do any of the foregoing.
3.9 OPERATION OF BUSINESS. The Partnership is not in violation of any
applicable order, regulation or requirement relating to its operations, except
as would not reasonably be expected to have a Material Adverse Effect (as
defined in Section 3.30 below).
3.10 GOVERNMENTAL CONSENT, ETC. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration, or
filing with, any federal or state governmental authority is required to be
obtained by any Seller or the Partnership in connection with the transactions
contemplated by this Agreement, except such consents, approvals or filings as
may be required under the Communications Act of 1934, as amended, and Title 47
of the Code of Federal Regulations, as amended (collectively the "Act") and
applicable state laws (collectively, the "FCC and State Approvals"), as more
particularly described on SCHEDULE 3.10 attached hereto.
3.11 LICENSES AND PERMITS. The Partnership has validly and legally
obtained and duly holds all necessary and material licenses, certificates,
consents, permits, approvals and authorizations of federal and state public or
governmental bodies including, without limitation, the FCC and applicable state
regulatory bodies, which are required in connection with the operation of the
Cellular System (collectively referred to as the "Cellular Licenses").
SCHEDULE 3.11 attached hereto sets forth a true and accurate description
(including the expiration date) of each Cellular License issued by the FCC as in
effect on the date of this Agreement. All Cellular Licenses are in full force
and effect and there are no pending modifications, amendments or revocation
proceedings which would materially and adversely affect the operation of the
Cellular System. All reports required to be filed with the FCC and all other
governmental or administrative authorities by the Partnership have been timely
filed and are accurate and complete in all respects. All fees due and payable
to governmental authorities pursuant to the Cellular Licenses have been paid and
no event has occurred which, with the giving of notice or the lapse of time or
both, would constitute grounds for revocation thereof. The Partnership is in
compliance in all material respects with the terms of the Cellular Licenses, as
applicable, and there is no condition, event or occurrence existing, or any
proceeding being conducted or, to the knowledge of any Seller, threatened by any
governmental authority, which would cause the termination, suspension,
cancellation or nonrenewal of any of the Cellular Licenses.
3.12 CONTRACTS.
(a) SCHEDULE 3.12 attached hereto sets forth all of the contracts
(other than standard contracts with subscribers for cellular services), leases
or other agreements, written and oral, to which the Partnership is a party or by
which it is bound. Each listed contract constitutes a valid and binding
obligation of the Partnership, and is in full force and effect.
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(b) The Partnership has performed all material obligations required
to be performed and is not in material default under, or in receipt of any claim
of material default under, any contract or agreement listed on SCHEDULE 3.12 and
to the knowledge of any Seller no event has occurred which, with the lapse of
time or the giving of notice, or both, would constitute a default of any such
contract or agreement; to the knowledge of any Seller, there has been no default
by the other parties to any contract or agreement listed on SCHEDULE 3.12.
(c) The Partnership has complied with (except for matters which the
applicable statute of limitations has expired) and is not in default under or in
violation of any applicable statute, law (including, without limitation,
environmental and occupational safety laws), ordinance, decree, order, rule or
regulation of any governmental body, including, without limitation, rules and
regulations of any authority which granted the Cellular Licenses, except, in
each case, as would not reasonably be expected to have a Material Adverse
Effect.
3.13 CONDITION OF CELLULAR ASSETS. Except as set forth on
SCHEDULE 3.13(a), the operating assets, contracts, leases and licenses of the
Partnership (collectively, the "Cellular Assets") include all of the assets,
contracts, leases and licenses which are used or held for use in connection with
the operation of the Cellular System (as operated on the date hereof), including
cellular telephones held as inventory, customer accounts, customer contracts,
customer lists, accounts receivable and other cellular telephone equipment. Set
forth on SCHEDULE 3.13(b) is a true and accurate list of the personal property
included in the Cellular Assets with an original cost in excess of $10,000 The
Cellular Assets are in a state of good repair and maintenance, normal wear and
tear excepted.
3.14 REAL PROPERTY - OWNED. SCHEDULE 3.14 attached hereto contains a
description of all real property owned by the Partnership, including all
buildings, plant, improvements or structures located thereon; the Partnership,
as indicated on SCHEDULE 3.14, has good and marketable title to the real
property and improvements listed in SCHEDULE 3.14, free and clear of all
Encumbrances, other than Permitted Encumbrances. The buildings, plant and
improvements located on the premises described in SCHEDULE 3.14 and the present
use thereof comply with all zoning laws, building codes, fire codes, ordinances
and regulations of governmental authorities having jurisdiction thereof, except,
in each case, as would not reasonably be expected to have a Material Adverse
Effect.
3.15 PERSONAL PROPERTY - OWNED. Except as set forth on SCHEDULE 3.15
attached hereto and excluding the leased property described in SCHEDULE 3.16
attached hereto, the Partnership has good and marketable title to the Cellular
Assets constituting personal property in the Cellular System, free and clear of
all Encumbrances other than Permitted Encumbrances.
3.16 REAL AND PERSONAL PROPERTY - LEASED OR LICENSED. Set forth in
SCHEDULE 3.16 attached hereto is a description of all personal property leased
or licensed by the Partnership and all real property leased or licensed by the
Partnership, in each case, setting forth the name of the lessor or
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licensor, as the case may be, and (ii) in the case of real property, a
description of the lease. With respect to such leases, the property
described in such leases is presently used by the Partnership as indicated in
SCHEDULE 3.16 attached hereto as lessee under the terms of such leases, and
such leases are legal, valid and binding on the Partnership, are in full
force and effect, and are free and clear of all Encumbrances upon the
leasehold interests created thereby other than Permitted Encumbrances and no
defaults by the Partnership, or to the knowledge of any Seller, any other
party thereto, exist under any such lease nor have any events occurred which,
with the giving of notice or the lapses of time, or both, would be a default
under any such lease. The Sellers have delivered to the Purchaser for
inspection a true and correct copy of all leases set forth in SCHEDULE 3.16.
3.17 EMPLOYEES. The Partnership does not have, and has never had, any
employees.
3.18 ERISA. Except as set forth on SCHEDULE 3.18, neither the Partnership
nor any entity with which the Partnership would now be (or ever has been)
aggregated pursuant to Section 414(B), (c), (m), or (o) of the Code ("ERISA
Affiliate") is maintaining or ever has maintained any employee pension benefit
plan (within the meaning of Section 3(2) of the Employee Retirement Income
Security Act of l974, as amended ("ERISA")) which is subject to Title IV of
ERISA. Except as set forth on SCHEDULE 3.18, neither the Partnership nor any
ERISA Affiliate has ever contributed (nor was ever obligated to contribute) to
any multiemployer plan (within the meaning of Section 400l(a)(3) of ERISA).
Except as set forth on SCHEDULE 3.18, neither the Partnership nor any ERISA
Affiliate administers and operates or has ever administered and operated any
employee benefit plan (within the meaning of Section 3(3) of ERISA).
3.19 LITIGATION, CLAIMS AND LEGAL PROCEEDINGS. Except as set forth on
SCHEDULE 3.19 attached hereto, there are no suits, claims, actions or
administrative, arbitration, governmental investigations or other similar
proceedings of a similar nature relating to the Partnership (including
proceedings concerning labor disputes or grievances, civil rights discrimination
cases and affirmative action proceedings) pending; and there are no judgments,
orders, injunctions, decrees or awards relating to the Partnership (whether
rendered by a court, administrative agency or by arbitration pursuant to a
grievance or other procedure) to which it is a party which is unsatisfied or
requires continuing compliance therewith. Except as set forth on Schedule 3.19
attached hereto, to any Seller's knowledge there are no threatened suits,
claims, actions or administrative, arbitration, governmental investigations or
other threatened similar proceedings of a similar nature involving the
Partnership (including threatened proceedings concerning labor disputes or
grievances, civil rights discrimination cases and affirmative action
proceedings), nor, to any Seller's knowledge is there any factual basis
therefor; and to any Seller's knowledge there is no factual basis for any
judgments, orders, injunction, decrees or awards relating to the Partnership
(whether rendered by a court, administrative agency or by arbitration pursuant
to a grievance or other procedure) (such suits, actions, claims, judgments,
orders, injunctions, decrees and awards are herein referred to as "Legal
Proceedings").
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3.20 CUSTOMERS; AGENTS. (a) As of December 31, 1996, the Partnership had
5,667 Customers in service on the Cellular System. For purposes of this
Agreement, a "Customer" is a Person (i) who has contracted for cellular
telephone service on the Cellular System for at least forty-five (45) days at a
prevailing rate for service, (ii) whose account is no more than thirty (30) days
past due and (iii) who has a cellular telephone number from a local exchange
company that is in the Cellular System's market.
(b) SCHEDULE 3.20(b) attached hereto set forth a list of all Agents
who sell cellular telephone equipment and/or service on behalf of the
Partnership as of the date hereof, together with such Agent's address and the
dollar amount of commissions paid by the Partnership to such Agent from June 30,
1996 to January 1, 1997.
3.21 FINDERS' AND BROKERS' FEES. Except as set forth on SCHEDULE 3.21
attached hereto, neither the Sellers nor the Partnership, nor anyone on behalf
of any of such parties, has retained any broker, finder or agent or agreed to
pay any brokerage fee, finder's fee or commission with respect to the
transactions contemplated by this Agreement. The Sellers, jointly and
severally, will hold the Purchaser harmless against any claim for brokerage and
finder's fees or agent's commissions which was contracted for or incurred by any
Seller incident to or in connection with the transactions contemplated by this
Agreement from any party.
3.22 ACCOUNTS RECEIVABLE; INVENTORIES. (a) All accounts receivable of the
Partnership have arisen from bona fide transactions by it in the ordinary course
of business and constitute only valid claims which, to any Seller's knowledge,
are not subject to counterclaims or setoffs. Except as set forth in
SCHEDULE 3.22 attached hereto, no such receivable has been outstanding for more
than sixty (60) days beyond its date of invoice. All accounts receivable
reflected in the Current Financial Statements are good and collectible in the
ordinary course of business and consistent with past practice at the aggregate
amounts recorded in respect thereof, net of an allowance for doubtful accounts
reflected in the Current Financial Statements.
(b) The inventories of the Partnership are in good, merchantable and
useable condition in all material respects and are reflected in the Current
Financial Statements and reflected in the books and records of the Partnership
at the lower of average cost or market value. The quantities of inventory
recorded by the Partnership are usable in the ordinary course of business.
3.23 INSURANCE. SCHEDULE 3.23 attached hereto contains a description of
all the Partnership's policies of title, liability, fire, worker's compensation
and other forms of insurance (including bonds) which are held by the
Partnership. All premiums due and payable under any such insurance policies or
binders of the Partnership have been duly paid.
3.24 PRODUCT LIABILITY CLAIMS; PRODUCT WARRANTIES. There are no product
liability or product warranty claims pending or, to the knowledge of any Seller,
threatened against the
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Partnership; nor to any Seller's knowledge is there any factual basis
therefor. Except as set forth in the form of customer service agreement
attached hereto as SCHEDULE 3.24, the Partnership has not given or offered
any warranty covering any class or group of products or services sold or
distributed by the Partnership, which warranty is in effect on the date
hereof or will be in effect on the Closing Date.
3.25 ENVIRONMENTAL PROTECTION.
(a) All facilities and property owned or leased by the Partnership
have been, and continue to be, owned or leased by the Partnership in material
compliance with all applicable federal, state or local statutes, laws,
ordinances, codes, rules, regulations and guidelines (including consent decrees
and administrative orders) relating to public health and safety and protection
of the environment (collectively, "Environmental Laws").
(b) There has been no past and there are no pending or, to the
knowledge of any Seller, threatened, nor to the knowledge of any Seller is there
any factual basis for any:
(i) claims, complaints, notices or requests for information
received by the Partnership with respect to any alleged violation of
any Environmental Law; or
(ii) complaints, notices or inquiries to the Partnership
regarding potential liability under any Environmental Law.
(c) There have been no "releases" of any "hazardous substances,"
"hazardous wastes" (each as defined in CERCLA as referred to below), petroleum
products or any pollutant or contaminant or hazardous, dangerous or toxic
chemical, material or substance within the meaning or any other applicable
federal, state or local law, regulation, ordinance or requirement (including
consent decrees and administrative orders) relating to or imposing liability or
standards of conduct concerning any hazardous, toxic or dangerous waste,
substance or material, all as amended or hereafter amended, at, on or under any
property now or previously owned or leased by the Partnership except for
releases which would not reasonably be expected to have a Material Adverse
Effect.
(d) The Partnership has been issued and is in material compliance
with all permits, certificates, approvals, licenses and other authorizations
relating to environmental matters and necessary for its business, a list of
which is set forth on SCHEDULE 3.25 attached hereto.
(e) No property now or previously owned or leased by the Partnership
is listed or, with respect to real property owned by the Partnership, proposed
for listing on the National Priorities List pursuant to the Comprehensive
Environmental Response Compensation and Liability Act, as amended ("CERCLA"), on
the Comprehensive Environmental Response
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Compensation Liability Information System List ("CERCLIS") or on any similar
state list of sites requiring investigation or clean-up.
(f) There are no underground storage tanks, active or abandoned,
including petroleum storage tanks, on or under any property now or previously
owned or leased by the Partnership.
(g) The Partnership has not transported or arranged for the
transportation of any hazardous substances or hazardous wastes to any location
which is listed or proposed for listing on the National Priorities List pursuant
to CERCLA, on CERCLIS or on any similar state list or which is the subject of
federal, state or local enforcement actions or other investigations which may
lead to claims against the Partnership for any remedial work, damage to natural
resources or personal injury, including, but not limited to, claims under
CERCLA.
3.26 Intentionally Omitted.
3.27 PRICING OF SERVICES. SCHEDULE 3.27 attached hereto sets forth a list
of the service packages offered to Customers of the Cellular System and the
prices charged therefor.
3.28 CERTAIN BUSINESS RELATIONSHIPS. Except for NewVector in its capacity
as System Manager and except as set forth on SCHEDULE 3.28(a), none of the
Sellers and their Affiliates have been involved in any business arrangement or
relationship with the Partnership within the past 12 months. Except as set
forth on SCHEDULE 3.28(b), none of the Sellers and their Affiliates own any
material assets, tangible or intangible, or have entered into any contract on
behalf of the Partnership in such Seller's or such Affiliate's name, which is
used in the business of the Partnership.
3.29 INTELLECTUAL PROPERTY RIGHTS. All of the patents, trademarks, service
marks, tradenames, trade secrets, copyrights, licenses and other intellectual
property rights used in the operation of the Cellular System or owned or held by
the Partnership are described in SCHEDULE 3.29 attached hereto. Except as set
forth on SCHEDULE 3.29 attached hereto, to the knowledge of any Seller the
Partnership's operation of the Cellular System does not infringe upon or violate
any patents, trademarks, service marks, tradenames, trade secrets, copyrights,
licenses or rights of anyone, and no claim is pending or threatened to the
effect that the conduct by the Partnership of its business infringes upon or
violates any patents, trademarks, service marks, tradenames, trade secrets,
copyrights, licenses or rights of anyone.
3.30 NO MATERIAL ADVERSE EFFECT. Except as set forth on SCHEDULE 3.30
attached hereto, since the Balance Sheet Date, there has occurred no material
adverse effect (a "Material Adverse Effect") in the business, assets, properties
(tangible and intangible), operating condition (financial or otherwise) or
liabilities of the Partnership, taken as a whole, whether or not in the ordinary
course of business, whether separately or in the aggregate with other
occurrences or developments, and whether insured against or not (other than
changes, in each case, affecting the
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cellular industry generally or changes attributable to general economic
conditions). None of the Sellers has any knowledge of any occurrence or
development which might reasonably be expected to result in a Material
Adverse Effect on the Partnership.
3.31 BURDENSOME OBLIGATIONS. The Partnership is not a party to or bound by
any agreement, deed, lease or other instrument or subject to any order, writ,
injunction or decree or other action of any court or governmental department,
commission, bureau, board or other administrative agency or official, or any
partnership or contractual restriction, which is so unusual or burdensome as
could reasonably be expected to have a Material Adverse Effect.
3.32 SECTION 4.9 PROPERTY. SCHEDULE 3.32 attached hereto sets forth all
Section 4.9 Property which provides or will provide service in an Unserved Area
as defined in Section 5.9 of this Agreement, which each Seller owns or has an
interest in as of the date hereof, together with a brief description of each
item, including its location, use and owner. The Sellers also agree not to file
any applications with the FCC from the date hereof to the Closing Date
requesting approval to provide cellular service in any of the Unserved Areas.
3.33 DISCLAIMER. Except as specifically set forth herein, the Sellers make
no representation or warranty, express or implied, in connection with the
Cellular Assets or business of the Partnership or the transactions contemplated
by this Agreement.
3.34 SYSTEM MANAGER LOANS. As of the date hereof, the Partnership does not
owe any amounts to NewVector in its capacity as System Manager.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Sellers that:
4.1 LEGAL EXISTENCE. The Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Oklahoma,
with full power and authority to enter into this Agreement and to consummate the
transactions contemplated hereunder. The Purchaser will be on the Closing Date
duly qualified to transact business as a foreign corporation and will be in good
standing in the State of Arizona.
4.2 AUTHORIZATION, EXECUTION AND DELIVERY OF THIS AGREEMENT. The
execution, delivery and performance of this Agreement and all other agreements
and transactions contemplated hereby have been duly authorized by all necessary
corporate action by the Purchaser. This Agreement constitutes the legal, valid
and binding obligation of the Purchaser, enforceable against it in accordance
with its terms; subject, however, to bankruptcy, insolvency, reorganization or
other similar laws relating to or affecting the enforcement of creditors' rights
generally or principles of equity (regardless of whether enforcement is sought
in a proceeding in equity or at law).
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Neither the execution, delivery or performance of this Agreement nor the
consummation of any of the transactions provided for hereby by the Purchaser (i)
will conflict with or constitute a violation of any provisions of the
Purchaser's charter or by-laws, (ii) will result in any violation or breach of
or default under, will create any rights of acceleration, termination or
cancellation or cause any loss of rights under or result in the creation or
imposition of any Encumbrance on any of the assets of the Purchaser under any
material contract, trust agreement, mortgage, indenture or other agreement or
instrument to which the Purchaser is a party or by which the Purchaser is bound
or to which the Purchaser or any of its properties is subject, or (iii) require
the consent or authorization of any other Person.
4.3 FINDER'S AND BROKER'S FEES. No Person is entitled to any finder's or
brokerage fee or commission or other like payment in connection with the
transactions contemplated by this Agreement based on agreements, arrangements or
understandings with the Purchaser, or any of the Purchaser's respective
officers, directors, representatives, agents or employees. The Purchaser will
hold the Sellers harmless against any claim for brokerage and finder's fees or
agent's commissions which was contracted for or incurred by the Purchaser
incident to or in connection with the transactions contemplated by this
Agreement from any party.
4.4 QUALIFICATION. The Purchaser is qualified under the rules,
regulations and policies of the FCC and applicable state regulatory authorities
to acquire the Interests.
4.5 LITIGATION, CLAIMS AND LEGAL PROCEEDINGS. There are no Legal
Proceedings against the Purchaser or any pending or, to Purchaser's knowledge,
threatened Legal Proceedings which would have an adverse impact on the
Purchaser's ability to consummate the transaction contemplated by this
Agreement.
SECTION 5. EVENTS PRIOR TO CLOSING.
5.1 ACCESS TO PARTNERSHIP. During the Interim Period, the Sellers shall,
and shall cause the Partnership to, afford the Purchaser, its accountants,
counsel and other representatives, access, upon reasonable notice, to the
Partnership's offices, equipment, records, files, contracts, agreements, books
of account and tax returns and to make copies thereof and furnish the Purchaser
with all such information concerning the Partnership as the Purchaser shall
reasonably request.
5.2 PRESERVE ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each of the
parties hereto shall refrain from taking any action which would render any
representation or warranty contained in Sections 3 or 4 of this Agreement
inaccurate as of the Closing Date. Each party shall promptly notify the other
of any action, suit or proceeding that shall be instituted or threatened against
such party to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement. The Sellers shall promptly notify
the Purchaser of any lawsuit, claim, proceeding or investigation that may be
threatened, brought, asserted or commenced after
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the date hereof against the Partnership or any Seller with respect to the
Partnership, and of any facts or circumstances causing any of Sellers'
representations and warranties contained herein or relating to any matters
required to be set forth in the Schedules hereto to be untrue.
5.3 OPERATIONS PRIOR TO THE CLOSING DATE.
(a) Sellers shall cause the Partnership to operate and carry on its
business only in the ordinary course substantially as presently operated. In
furtherance and not in limitation of the foregoing, the Sellers shall cause the
Partnership to (i) keep and maintain its assets and properties in good operating
condition and repair (normal wear and tear excepted), (ii) use commercially
reasonable efforts consistent with good business practice to maintain the
business organization of the Partnership intact and to preserve the goodwill of
the suppliers, contractors, licensors, employees, customers, distributors and
others having business relations with the Partnership, and (iii) use
commercially reasonable efforts to continue up to and including the Closing Date
all existing policies of insurance in full force and effect and at least at such
levels as are in effect on the date hereof.
(b) Notwithstanding Section 5.3(a), except as expressly contemplated
by this Agreement or except with the express prior written approval of the
Purchaser, Sellers shall not permit or cause the Partnership to:
(i) amend the Partnership Agreement;
(ii) issue or agree to issue (by the issuance or granting of
options, warrants or rights to purchase any partnership interest or
other equity interest of the Partnership or otherwise) any partnership
interest or other equity interest of the Partnership or securities
exchangeable for or convertible into any partnership interest or other
equity interest of the Partnership or other securities;
(iii) split, combine or reclassify any Partnership Interest
or except as permitted under Section 5.12, declare, set aside or pay or
make any distributions (whether in cash, equity interests or other
property) in respect of the Partnership Interests;
(iv) make any material change in the Partnership's business
or its operations not contemplated in the Budget or, other than in the
ordinary course of business or as contemplated in the Budget, make any
expenditure in respect thereof or in respect of the purchase of assets
which shall exceed $10,000 in the aggregate.
(v) enter into any material contract, agreement,
undertaking or commitment (or any extension or renewal thereof) unless
such material contract,
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agreement, undertaking or commitment permits the Partnership the change in
control contemplated in this Agreement;
(vi) amend or consent to the amendment of any contract,
agreement, undertaking or commitment listed in SCHEDULE 3.12 except for
amendments in the ordinary course of the Partnership's business
consistent with past practices;
(vii) cancel any existing policies or binders of insurance
or take or fail to take any action as a result of which insurers under
such policies or binders could avoid liability for claims arising
thereunder;
(viii) enter into any contract for the purchase of real
estate or for the sale of any of the real estate listed in SCHEDULE
3.14 or exercise any option to purchase real estate or enter into any
lease of real estate or terminate any lease of real estate listed in
SCHEDULE 3.16 or exercise any option to extend a lease listed in
SCHEDULE 3.16 without the prior written consent of Purchaser, which
consent will not be unreasonably withheld;
(ix) enter into any discussion, negotiation or transaction
relating to the merger or consolidation of, or the sale of any
partnership interests or other equity interests of the Partnership, or
the sale, lease or other disposition of any portion of its properties
or business or provide any information to any Person in connection
therewith;
(x) initiate or acquiesce in any zoning variation or
reclassification of the real estate listed in SCHEDULE 3.14 or SCHEDULE
3.16;
(xi) take any action referred to in clauses (a) though (m)
of Section 3.8;
(xii) make any change in the accounting policies applied in
the preparation of the financial statements included in SCHEDULE 3.5;
(xiii) modify any of the rates charged for cellular service
on the Cellular System except for modifications made in the ordinary
course of the Partnership's business consistent with past practices;
(xiv) hire any manager or employee;
(xv) enter into or modify any agreements for roaming service
except for modifications made in the ordinary course of the
Partnership's business consistent with past practices;
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(xvi) enter into any lease or agreement to purchase goods
or services involving more than $200,000 which has a term greater than
six (6) months or which cannot be terminated by the Partnership without
cost or penalty;
(xvii) transfer, assign, pledge, dispose of or encumber any
Interest directly, by operation of law, merger, consolidation,
liquidation or otherwise;
(xviii) incur any indebtedness to any Seller (other than the
System Manager), an Affiliate of any Seller or any other Person;
(xix) terminate any Agent except upon a breach by such
Agent of its agency contract with the Partnership; or
(xx) agree, or commit to do, or authorize any of the
foregoing.
5.4 CONSENTS AND APPROVALS. The Sellers shall use commercially reasonable
efforts to obtain all consents of third parties required to be obtained by the
Sellers and the Partnership with respect to their performance of this Agreement
and cooperate fully with the Purchaser in connection with the Purchaser's
requests and applications for the FCC and State Approvals which are necessary
for the ownership of the Partnership and operation of the Cellular System
following the Closing Date. By its execution of this Agreement each Seller
hereby irrevocably waives its right of first refusal to purchase the Interests
to be sold to the Purchaser set forth in Section 10.3 of the Partnership
Agreement unless this Agreement is terminated in accordance with Section 22
below. Notwithstanding the provisions of Section 10.4 of the Partnership
Agreement, each Seller hereby consents to the transfer of the Interests to the
Purchaser even if such transfer will result in a termination of the Partnership
for federal income tax purposes.
5.5 OBLIGATIONS OF THE PURCHASER PRIOR TO CLOSING. During the Interim
Period, the Purchaser shall:
(a) not knowingly take any action or omit to take any action which
will result in the violation by the Purchaser of any law, the violation of which
would have a material adverse effect on the ability of the Purchaser to perform
its obligations under this Agreement or cause a material breach by the Purchaser
of any of the representations and warranties of the Purchaser set forth in this
Agreement; and
(b) use commercially reasonable efforts to obtain timely all consents
by third parties and all FCC and State Approvals which are necessary for the
Purchaser's performance of this Agreement or for the Purchaser's ownership of
the Interests.
5.6 CONTROL OF THE CELLULAR SYSTEM. Notwithstanding any provision of this
Agreement that may be construed to the contrary, pending the Closing, the
Sellers shall maintain actual
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(DE FACTO) and legal (DE JURE) control over the Cellular System and the
Cellular Licenses controlled and operated by the Partnership. Specifically,
and without limitation, the responsibility for the operation of the Cellular
System shall, pending such Closing, reside with the Sellers including, but
not limited to, responsibility for the following matters: (a) access to and
the use of facilities and equipment; (b) control of daily operation; (c)
creation and implementation of policy decisions; (d) employment, supervision
and dismissal of employees; (e) payment of financing obligations and expenses
incurred in the operation and construction of the Cellular System; (f)
receipt and distribution of monies and profits derived from the operation of
the Cellular System; and (g) execution and approval of all contracts and
applications prepared and filed before regulatory agencies.
5.7 FCC AND STATE REGULATORY APPROVAL. The Sellers and the Purchaser
shall cooperate and use their respective commercially reasonable best efforts to
prepare and file with the FCC and state regulatory authorities as promptly as
practicable after the date of this Agreement, and in any event within fifteen
business days after the date hereof, all requisite applications, together with
related information, data and exhibits necessary to request issuance of orders
approving the transactions contemplated by this Agreement by the FCC and such
state regulatory authorities each of which shall become a Final Order satisfying
the conditions set forth in Sections 6.6 and 7.5 of this Agreement. For the
purposes of this Agreement, the term "Final Order" shall mean action by the FCC
or a state regulatory authority as to which (i) no request for stay by the FCC
or state regulatory authority, as applicable, of the action is pending, no such
stay is in effect, and, if any deadline for filing any such request is
designated by statute or regulation, it has passed; (ii) no petition for
rehearing or reconsideration of the action is pending before the FCC or state
regulatory authority, as applicable, and the time for filing any such petition
has passed; (iii) the FCC or state regulatory authority, as applicable, does
not have the action under reconsideration on its own motion and the time for
such reconsideration has passed; and (iv) no appeal to a court, or request for
stay by a court, of the FCC's or state regulatory authority's action, as
applicable, is pending or in effect, and, if any deadline for filing any such
appeal or request is designated by statute or rule, it has passed.
5.8 BUDGET. During the Interim Period, the Partnership shall continue to
make Capital Expenditures in accordance with the Budget. The Partnership shall
not, without the prior written consent of the Purchaser which consent will not
be unreasonably withheld, make any Capital Expenditure for any item in excess of
such item's budgeted amount as set forth in the Budget. The Sellers shall cause
the System Manager to deliver to the Purchaser monthly reports of the
Partnership's Capital Expenditures for each month (including providing a
comparison of the Partnership's actual Capital Expenditures for such month to
that set forth in the Budget) in form and substance satisfactory to the
Purchaser within ten (10) days after the expiration of such month.
5.9 TRANSFER OF SECTION 4.9 PROPERTY. Prior to the Closing, each Seller
who, pursuant to Section 4.9 of the Partnership Agreement or otherwise, is
building or has built and is operating a
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cellular system in an area located in or which provides service within the
RSA where the Partnership does not currently provide cellular service (an
"Unserved Area") shall transfer to the Partnership, at no consideration, all
right, title and interest of such Seller in all real and personal tangible
and intangible assets, properties, equipment, licenses, rights and business
related in any manner to the operation of such cellular system in the
Unserved Area (the "Section 4.9 Property"), free and clear of all
Encumbrances. In no event shall the transfer of the Section 4.9 Property to
the Partnership increase the Purchase Price. The bills of sale, assignments
and other instruments of conveyance required to assign and transfer all of
the Section 4.9 Property to the Partnership shall be in such form and on such
terms as is satisfactory to the Purchaser. Notwithstanding the foregoing (i)
any areas within the RSA for which NewVector is currently authorized by the
FCC, or has applied for authorization from the FCC, to provide cellular
service in such areas ("NewVector Territory"), such licenses and applications
for licenses for NewVector Territory being set forth on SCHEDULE 5.9 hereto,
are not considered Unserved Areas for purposes of this Agreement, and (ii)
Purchaser agrees that NewVector shall retain all right, title and interest in
all real and personal tangible and intangible assets, properties, equipment,
licenses, rights and business related to the operation of a cellular system
in the NewVector Territory and such assets, properties, equipment, licenses,
rights and business are not considered Section 4.9 Property for purposes of
this Agreement.
5.10 FINANCIAL AND OTHER REPORTS. During the Interim Period, the Sellers
shall cause the System Manager to deliver on behalf of the Partnership to the
Purchaser the following financial and other reports:
(a) Within fifteen (15) days after the end of each calendar month
during the Interim Period commencing with the calendar month ending January 31,
1997, the Partnership will deliver to the Purchaser an unaudited balance sheet
of the Partnership and the related unaudited statement of income, cash flow and
partners' capital as of the end of such month and for the period of the then
current fiscal year to the end of such month, certified by the chief financial
officer of the System Manager to be true and correct and to have been prepared
in accordance with GAAP subject to normal year-end adjustments described in
reasonable detail.
(b) Within fifteen (15) days after the end of each calendar month
during the Interim Period commencing with the calendar month ending January 31,
1997, the Partnership shall deliver to the Purchaser monthly and year-to-date
summaries of (i) the number of Customers, (ii) gross activations, (iii) net
activations, (iv) deactivations (and setting forth the reason therefor), (v)
acquisition cost per gross activation, (vi) average monthly revenue per
Customer, (vii) total number of roaming minutes, (viii) total roaming revenue
and (ix) number of Agents.
5.11 SUPPLEMENTAL DISCLOSURE. Sellers shall have the right from time to
time prior to the Closing Date to supplement in writing the Schedules hereto;
provided, however, that no such supplemental disclosure shall be deemed to cure
any breach of any representation or warranty of
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Sellers made in this Agreement unless Purchaser fails to object in writing to
Sellers to any such supplemental disclosure within fifteen (15) business days
after Purchaser's receipt thereof If the Purchaser does not object to such
supplemental disclosure within such 15-day period, such supplemental
disclosure shall be deemed accepted by the Purchaser.
5.12 EXCESS CASH FLOW. Any positive net cash flow after payment of
operating expenses generated by the Partnership during the Interim Period shall
be used for the following purposes in the following order of priority:
(a) First, the first $2 million of such excess cash flow generated
during the Interim Period shall be used to fund the Partnership's capital
expenditures incurred and paid during the Interim Period in accordance with the
Budget, provided, however, that if the Partnership uses less than $2 million to
fund the entire Budget, such portion of the $2 million which is not used to fund
the Budget shall remain in the Partnership at the Closing;
(b) Second, after the first $2 million of such excess cash flow is
used in accordance with Section 5.12(a), to pay amounts owed to the System
Manager pursuant to Section 4.4 of the Partnership Agreement; and
(c) Finally, after clauses (a) and (b) of this Section 5.12 have been
satisfied, any remaining excess cash flow generated by the Partnership after
payment of operating expenses may be distributed to the Sellers prior to the
Closing.
SECTION 6. CONDITIONS TO THE PURCHASER'S OBLIGATION. The obligation of
the Purchaser to consummate the transactions contemplated by this Agreement on
the Closing Date will be subject to the satisfaction of each of the following
conditions on or prior to the Closing Date, unless expressly waived by the
Purchaser:
6.1 OPINION OF COUNSEL FOR THE SELLERS. The Purchaser shall have received
the written opinion of a lawyer in NewVector's legal department, counsel to the
Sellers, dated as of the Closing Date, in the form attached hereto as EXHIBIT C,
provided, however, that each Seller's counsel shall give those opinions set
forth on EXHIBIT C with respect to such Seller that are specific to such Seller.
6.2 OPINION OF FEDERAL AND STATE REGULATORY COUNSEL FOR THE SELLERS. The
Purchaser shall have received the written opinion of Don Mukai, FCC counsel to
the Sellers, dated as of the Closing Date, in the form attached hereto as
EXHIBIT D.
6.3 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Sellers contained in this Agreement shall be true and correct in all
material respects (provided that those representations and warranties which
already have a Material Adverse Effect qualification or
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other materiality qualification shall be true in all respects) on and as of
the Closing Date as if made on and as of the Closing Date, except for changes
not prohibited by this Agreement.
6.4 PERFORMANCE OF THIS AGREEMENT. The Sellers shall have performed and
observed in all material respects their covenants and obligations as set forth
in this Agreement prior to or on the Closing Date.
6.5 OFFICER'S CERTIFICATE. Each of the Sellers shall have delivered an
officer's certificate, in form and substance reasonably satisfactory to the
Purchaser, signed by an officer of such Seller in his capacity as such and
certifying as to the matters set forth in Sections 6.3 and 6.4 of this
Agreement.
6.6 FCC AND STATE REGULATORY AUTHORITY FINAL ORDER. Each of the FCC and,
if applicable, state regulatory authorities shall have issued Final Orders
granting the FCC's and such state regulatory authority's consent to the transfer
of control of the Partnership to the Purchaser without any conditions which the
Purchaser reasonably deems to be adverse. Anything herein to the contrary
notwithstanding, the Purchaser shall have the right (in its sole discretion) to
waive the requirement set forth in the preceding sentence.
6.7 LITIGATION. There shall be no injunction, decree or order issued by
any court, governmental agency or authority, or any litigation instituted by any
governmental agency or authority challenging or seeking to prohibit or enjoin
any of the transactions contemplated by this Agreement.
6.8 ADDITIONAL CLOSING ITEMS. At the Closing, the Sellers shall deliver
to the Purchaser the items specified in Section 2.8(a) hereof.
6.9 CONSENTS. On or prior to the Closing Date, the Sellers shall have
received all consents, waivers and approvals required by Sections 3.4 and 3.10
hereof.
6.10 ALL INTERESTS TENDERED. Subject to Section 24 hereof, all of the
Sellers shall have tendered their Interests free and clear of all Encumbrances.
6.11 DUE DILIGENCE. Purchaser and its agents and representatives shall
have conducted a satisfactory legal, regulatory, engineering, financial and
business due diligence review of the Cellular Assets, the Cellular System and
the Partnership's business, the results of which shall be satisfactory to the
Purchaser; PROVIDED, HOWEVER, that if Purchaser has not advised Sellers in
writing prior to the forty-sixth (46th) day after the date hereof that the
results of such due diligence are not satisfactory, the condition set forth in
this Section 6.11 shall no longer apply and shall have been satisfied.
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6.12 CUSTOMERS; AGENTS. The Partnership shall have at least 5,500
Customers and 8 Agents as of the Closing Date.
SECTION 7. CONDITIONS TO THE SELLERS' OBLIGATION. The obligations of the
Sellers to consummate on the Closing Date the transactions contemplated by this
Agreement will be subject to the satisfaction of each of the following
conditions on or prior to such Closing Date, unless expressly waived by the
Sellers:
7.1 OPINION OF COUNSEL FOR THE PURCHASER. The Seller shall have received
the written opinion of Edwards & Angell, counsel to the Purchaser, dated as of
the Closing Date, in the form attached hereto as EXHIBIT E.
7.2 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Purchaser contained in Section 4 of this Agreement shall be true and correct
in all material respects on and as of such Closing Date as if made on and as of
the Closing Date, except for changes not prohibited by this Agreement.
7.3 PERFORMANCE OF THIS AGREEMENT. The Purchaser shall have performed and
observed in all material respects its covenants and obligations under this
Agreement prior to or on the Closing Date.
7.4 OFFICER'S CERTIFICATE. The Purchaser shall have delivered an
officer's certificate, in form and substance reasonably satisfactory to the
Seller, signed by an officer of the Purchaser in his capacity as such and
certifying as to the matters set forth in Sections 7.2 and 7.3 of this
Agreement.
7.5 FCC AND STATE REGULATORY AUTHORITY FINAL ORDER. The FCC and, if
applicable, state regulatory authorities shall have issued a Final Order,
granting the FCC's and such applicable state regulatory authority's consent to
the transfer of control of the Partnership to the Purchaser.
7.6 LITIGATION. There shall be no injunction, decree or order issued by
any court, governmental agency or authority, or any litigation instituted by any
governmental agency or authority, challenging or seeking to prohibit or enjoin
any of the transactions contemplated by this Agreement.
7.7 ADDITIONAL CLOSING ITEMS. At the Closing, the Purchaser shall deliver
to the Sellers the items specified in Section 2.8(b) of this Agreement to which
the Purchaser is a party.
7.8 AUTHORIZATION CERTIFICATE. The Purchaser shall deliver to the Sellers
a certificate of the secretary of the Purchaser as to the authority of the
Purchaser to execute, deliver and perform its obligations under this Agreement.
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SECTION 8. 1996 AUDITED FINANCIALS. The Sellers hereby agree, and the
Sellers hereby agree to cause the System Manager, the Partners' Committee
members and the Partnership's employees, to cooperate fully with the Partnership
and its accountants and the Purchaser in the preparation of an audited balance
sheet of the Partnership as of December 31, 1996 and the related audited
statement of income, cash flow and partners' capital for the twelve (12) month
period ending December 31, 1996. The System Manager shall commence the
preparation of such financial statements, and shall engage Arthur Andersen LLP
(the "Auditor") to commence the financial audit of the Partnership in connection
therewith, no later than March 31, 1997. Fees and expenses of such audit shall
be borne solely by the Partnership. The Sellers shall cause the System Manager
to provide the Purchaser and the Auditor with full access to the Partnership's
books, records, work papers, schedules, facilities, employees, Partners'
Committee members and the System Manager, and to cause such Persons to provide
on a timely basis all information necessary or useful in preparing such audited
financial statements.
SECTION 9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS. All
representations, warranties and covenants made by the Sellers (whether jointly
or severally) and the Purchaser in this Agreement or in any certificate or other
instrument delivered by or on behalf of the Sellers or the Purchaser pursuant to
this Agreement shall survive the Closing for a period of eighteen months after
the Closing Date; PROVIDED, HOWEVER, that the representations and warranties set
forth in Section 3.25 shall survive the Closing for a period of thirty-six
months after the Closing Date and the representations and warranties set forth
in Sections 3.1, 3.4, 3.6, 3.14, 3.15, 3.32, 4.1 and 4.2 shall survive for the
applicable statute of limitations with respect to a claim that could be brought
against the Partnership, the Sellers, or the Purchaser, as the case may be, with
respect to the subject matter of such representations and warranties, and the
representations and warranties contained in Section 3.2 shall survive without
limitation as to time.
SECTION 10. INDEMNIFICATION.
10.1. INDEMNIFICATION BY THE SELLERS. With respect to the
representations in Section 3.1(a)(i) (as applicable), Section 3.2, Section 3.4,
Section 3.6, Section 3.18, the last sentence of Section 3.19, Section 3.21, the
last sentence of Section 3.30 and Section 3.32, each Seller individually, and
with respect to all other representations, each Seller severally (based on such
Seller's percentage ownership of the outstanding Partnership Interests), agrees
to indemnify and hold harmless the Purchaser and its Affiliates, successors and
assigns (each, a "Purchaser Indemnified Party") from and against any and all
Losses and Expenses incurred by such Indemnified Party in connection with or
arising from:
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(a) any breach by the Sellers of, or any other failure of the Sellers
to perform, any of its covenants, agreements or obligations in this Agreement or
in any agreement or instrument contemplated hereby;
(b) any breach of any warranty or the inaccuracy, or alleged
inaccuracy, of any representation of the Sellers contained or referred to in
this Agreement or any certificate delivered by or on behalf of the Sellers
pursuant hereto;
(c) any failure of the Seller or the Partnership to obtain prior to
the Closing any consent set forth in SCHEDULE 3.4; or
(d) any claims arising from the Partnership being aggregated with
NewVector for purposes of NewVector's employee pension benefit plan.
10.2 INDEMNIFICATION BY THE PURCHASER. Subject to the provisions of
Section 22, the Purchaser agrees to indemnify and hold harmless the Sellers and
their Affiliates (each a "Seller Indemnified Party; and together with a
Purchaser Indemnified Party, an "Indemnified Party") from and against all Losses
and Expenses to which it or any of them may become subject in connection with or
arising from:
(a) any breach by the Purchaser of, or any other failure of the
Purchaser to perform, any of its covenants, agreements or obligations in this
Agreement or in any agreement or instrument contemplated hereby; or
(b) any breach of any warranty on the inaccuracy, or alleged
inaccuracy, of any representation of the Purchaser contained or referred to in
this Agreement or any certificate delivered by or on behalf of the Purchaser
pursuant thereto.
10.3 NOTICE OF CLAIMS. If an Indemnified Party believes that it has
suffered or incurred any Losses or Expenses, such Indemnified Party shall so
notify the party or parties from whom indemnification is sought (the
"Indemnifying Party") with reasonable promptness and reasonable particularity in
light of the circumstances then existing.
If any action at law or suit in equity is instituted by or against a third
party with respect to which any Indemnified Party intends to claim any Losses or
Expenses, such Indemnified Party shall promptly notify the Indemnifying Party or
Parties of such action or suit. The failure of an Indemnified Party to give any
notice required by this Section 10.3 shall not affect any of such party's rights
under this Section 10 except to the extent such failure is actually prejudicial
to the rights or obligations of the Indemnifying Party.
10.4 THIRD PARTY CLAIMS. The Indemnifying Party shall have 30 business
days after receipt of the notice referred to in Section 10.3 to notify the
Indemnified Party that it elects to conduct
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and control such action or suit and that it agrees to comply with clauses (i)
through (iv) of this Section 10.4. If the Indemnifying Party does not give
the foregoing notice, the Indemnified Party shall have the right to defend,
contest, settle or compromise such action or suit in the exercise of its
reasonable discretion, and the Indemnifying Party shall, upon request from
the Indemnified Party, promptly pay to such Indemnified Party in accordance
with the other terms of this Section 10 the amount of any Losses and Expenses
for which indemnification is provided hereunder. If the Indemnifying Party
gives the foregoing notice, the Indemnifying Party shall have the right to
undertake, conduct and control, through counsel of its own choosing and at
the sole expense of the Indemnifying Party, defense, contest, settlement or
compromise of such action or suit, and the Indemnified Party shall cooperate
with the Indemnifying Party in connection therewith; provided that (i) the
Indemnifying Party shall not thereby permit to exist any Encumbrance upon any
asset of the Indemnified Party; (ii) the Indemnifying Party shall not
consent to any defense, contest, settlement or compromise that does not
include as an unconditional term thereof the giving of a complete release
from liability with respect to such action or suit to the Indemnified Party;
(iii) the Indemnifying Party shall permit the Indemnified Party to
participate in such defense, contest, settlement or compromise through
counsel chosen by the Indemnified Party, but the fees and expenses of such
counsel shall be borne by the Indemnified Party except as provided in clause
(iv) below; and (iv) the Indemnifying Party shall agree promptly to
reimburse the Indemnified Party for the amount of any Losses resulting from
such action or suit and all related Expenses incurred by the Indemnified
Party, including reasonable fees and expenses of counsel for the Indemnified
Party incurred after giving the foregoing notice to the Indemnifying Party
and prior to the assumption of the conduct and control of such action or suit
by the Indemnifying Party but excluding fees and expenses of counsel for the
Indemnified Party incurred after the assumption of the conduct and control of
such action or suit by the Indemnifying Party for which the Indemnifying
Party is required to indemnify the Indemnified Party in accordance with the
provisions of Section 10.1 or 10.2, as applicable. So long as the
Indemnifying Party is contesting any such action or suit in good faith, the
Indemnified Party shall not pay, settle or compromise any such action or
suit. Notwithstanding the foregoing, the Indemnified Party shall have the
right to pay, settle or compromise any such action or suit, provided that in
such event the Indemnified Party shall waive any right to indemnity therefor
by the Indemnifying Party, and no amount in respect thereof shall be claimed
as Losses or Expenses under this Section 10.
10.5. LIMITATIONS. (a) BASKET. No Indemnification shall be required
to be made by the Indemnifying Party until the aggregate amount of the
Indemnified Party's Losses and Expenses exceeds $350,000 (the "Deductible") and
then indemnification shall only be required to be made by the Indemnifying Party
to the extent of such Losses and Expenses that exceed the Deductible; provided,
however, the Deductable shall not be applicable to adjustments to the Purchase
Price provided for in Section 2.5.
(b) MATERIALITY QUALIFICATIONS. Notwithstanding anything to the
contrary set forth in this Section 10, any qualification as to materiality or
Material Adverse Effect contained in any
34
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representation or warranty under this Agreement shall be given effect for
purposes of determining whether such representation or warranty has been
breached; PROVIDED, HOWEVER, that notwithstanding the foregoing, if any such
representation or warranty has been breached, the amount of any Losses
incurred by Purchaser as a result of any such breach, and required to be
indemnified for pursuant to this Section 10 shall be determined as though no
such qualification as to materiality or Material Adverse Effect were
contained in the representation or warranty so breached.
(c) INDEMNIFICATION CAP. The aggregate amount of the indemnification
obligation under Section 10.1 or 10.2 for Losses or Expenses to which Purchaser
or Sellers may be entitled shall be limited in both cases to $7.5 million (in
the case of the Sellers' indemnification obligation on a pro rata basis based on
each Seller's percentage ownership of outstanding Partnership Interests).
(d) INSURANCE PROCEEDS. The indemnification obligation, if any, of
the Indemnifying Party shall be reduced to the extent of any available insurance
proceeds; provided, however, that such reduction shall not be effective until
the Indemnified Party has realized the benefit of any such insurance proceeds.
The Indemnifying Party shall pay its indemnification obligations as and when
required by this Section 10 and the Indemnified Party shall refund to the
Indemnifying Party any such amounts determined to be in excess of the
Indemnifying Party's obligations due to reductions pursuant to this Section
10.05(d).
(e) SOLE REMEDY. From and after the Closing Date, the
indemnification rights contained in this Section 10 shall constitute the sole
and exclusive remedies of the parties hereunder, including, without limitation,
any claim arising out of this Agreement.
10.6 ESCROW. In addition to any other available remedies, any
Purchaser Indemnified Party shall be entitled to recover funds pursuant to the
Escrow Agreement in an amount equal to any Losses and Expenses to which it is
entitled under this Agreement. The Purchaser shall first seek to recover funds
(to the extent thereof) pursuant to the Escrow Agreement (and to exhaust such
funds) in respect of any Losses and Expenses to which it is entitled under this
Agreement before the Purchaser seeks recourse against the Sellers and their
assets.
SECTION 11. TAX RECORDS AND FILINGS. (a) After the Closing, each of the
Sellers and the Purchaser shall make available to the other on reasonable
request during regular business hours such books and records of that party or
the Partnership, as the case may be, as may be appropriate for use in connection
with the preparation of their respective tax returns, including any review
thereof, and for any other reasonable purpose. Such books and records shall be
retained for a period of ten years from the date of such Closing;
PROVIDED, HOWEVER, that after three years any portion of such books and records
may be destroyed in whole or in part, by the party in possession thereof upon
thirty (30) days prior written notice to the other party, unless the
35
<PAGE>
party to whom such notice is given shall object, in which event the objecting
party shall be given such records in lieu of destruction thereof.
(b) Pursuant to Section 708 of the Code, the transaction contemplated
by this Agreement shall cause a termination of the Partnership for federal
income tax purposes. Accordingly, Sellers shall be responsible, and shall have
sole authority, for the preparation and filing of the Partnership's federal,
state and local income tax returns attributable to all taxable periods ending on
or before the date of the Partnership's termination as determined for federal
income tax purposes. Sellers shall retain copies of all books and records
reasonably necessary for the preparation of such income tax returns.
SECTION 12. CONFIDENTIALITY.
12.1 PRIOR TO CLOSING. Unless and until the transactions contemplated
hereby shall have been consummated, and except as may be otherwise required by
applicable law or regulation, each of the Sellers and the Purchaser shall and
shall cause its employees, agents and representatives to, maintain in confidence
and not otherwise use information, documents and data furnished to it, or to any
person or entity on its behalf, by the Purchaser, the Sellers or the
Partnership, as the case may be, in connection herewith.
12.2 FAILURE TO CLOSE. Upon termination of this Agreement pursuant to
Section 22 hereof, the Purchaser shall return all written information, documents
and data furnished to the Purchaser or to any Person on its behalf and all
copies thereof with respect to the Partnership.
12.3 REMEDIES. The Purchaser and the Sellers hereby acknowledge that there
may not be an adequate remedy at law for the breach of this Section 12 and that,
in addition to any other remedies available to the Seller, the Seller shall be
entitled to injunctive relief for such breach.
SECTION 13. NOTICES. All notices, requests, consents and other
communications under this Agreement shall be in writing and shall be mailed by
first class, registered or certified mail, postage prepaid, or sent via
overnight courier service, or delivered personally or sent by telecopy:
If to the Purchaser: 13439 N. Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
Attention: Everett Dobson
Facsimile No.: (405) 391-0515
36
<PAGE>
with copies to: David K. Duffell, Esq.
Edwards & Angell
2800 Hospital Trust Tower
Providence, Rhode Island 02903
Facsimile No.: (401) 276-6602
If to Aztel: c/o Telephone & Data Systems, Inc.
30 North LaSalle Street, Suite 4000
Chicago, Illinois 60602-1900
Attention: Mike Chesney
Facsimile No.: (312) 630-9299
with a copy to: William DeCarlo, Esq.
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Facsimile No.: (312) 853-4100
If to Gila: c/o Gila River Indian Community
Tribal Administration
7065 West Allison
Chandler, Arizona 85226-5135
Attention: Robert Porter
Facsimile No.: (520) 796-7534
with a copy to: Karen Liepmann, Esq.
O'Connor, Cavanagh, Anderson, Westover, Killingsworth &
Beshears
Suite 1100
One East Camelback Road
Phoenix, AZ 85012-1656
Facsimile No.: (602) 263-2900
37
<PAGE>
If to NewVector: 7800 East Orchard Road
Suite 490
Englewood, CO 80111
Attention: Christine Doyle
Facsimile No.: (303) 793-6491
with a copy to: Laura Reilly, Esq.
U S WEST, Inc.
7800 East Orchard Road, Suite 490
Englewood, CO 80111
Facsimile No.: (303) 793-6707
If to TOUA: c/o Tohono O'odham Nation
P.O. Box 816
Sells, Arizona 85634
Attention: Charles Wiese
Facsimile No.:
with a copy to: Stephen G. Kraskin, Esq.
Kraskin & Lesse
2120 L Street, NW
Suite 520
Washington, DC 20037
Facsimile No.: (202) 296-8893
or to such other address of which the addressee shall have notified the sender
in writing. Notices mailed in accordance with this Section 13 shall be deemed
given on the third business day after they are mailed, notices sent by overnight
courier service shall be deemed given on the first business day after they are
placed in the hands of a representative of such service and notices sent by
telecopy shall be deemed given when sent if sent between 9 a.m. and 5 p.m.
Oklahoma City time or the next business day thereafter if sent after 5 p.m.
Oklahoma City time. For purposes of this Agreement, the term "business day"
refers to a day which is not a Saturday, Sunday or legal holiday in the State of
Arizona.
SECTION 14. THIRD PARTY RIGHTS. It is the intention of the parties that
nothing in this Agreement shall be deemed to create any right with respect to
any Person not a party to this Agreement.
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<PAGE>
SECTION 15. PARTIES IN INTEREST; ASSIGNMENT. All covenants and agreements
contained in this Agreement by or on behalf of any of the parties to this
Agreement shall bind and inure to the benefit of their respective successors and
assigns, whether so expressed or not. No party to this Agreement may, however,
assign its rights or delegate its obligations under this Agreement (whether by
operation of law or otherwise) to any other Person without the express prior
written consent of the other parties hereto, except Purchaser may assign its
rights hereunder to its lenders and Purchaser shall have the right to assign all
or any portion of its rights in accordance with the provisions of Section 24
hereof. Following the Closing Date, any Person who succeeds to all or any
portion of the Partnership's assets, either by sale, assignment, operation of
law or otherwise, shall enjoy all of the benefits of the representations,
warranties and covenants of the Sellers set forth herein with respect to the
assets of the Partnership.
SECTION 16. CONSTRUCTION; GOVERNING LAW. The section headings contained
in this Agreement are inserted as a matter of convenience and shall not affect
in any way the construction of the terms of this Agreement. This Agreement
shall be governed by and interpreted in accordance with the laws of the State of
Arizona without giving effect to the provisions thereof regarding conflict of
law.
SECTION 17. ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement,
including the Schedules and Exhibits hereto, constitutes and contains the entire
agreement between the parties hereto with respect to the transactions
contemplated hereby and supersedes any prior oral or written understanding or
agreement of the parties with respect to the transactions contemplated hereby,
including specifically and without limitation, the Letter of Intent. The
parties may, by mutual agreement in writing, amend this Agreement in any
respect, and any party, as to such party, may (i) extend the time for the
performance of any obligations of any other party; (ii) waive any inaccuracies
in representations and warranties by any other party; (iii) waive performance of
any obligations by any other party; and (iv) waive the fulfillment of any
condition that is precedent to the performance by such party of any of its
obligations hereunder. Any such amendment or waiver must be in writing and
signed by an officer of the parties or party to such amendment or waiver.
SECTION 18. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
the remaining provisions.
SECTION 19. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party but all of which taken together shall constitute one and the same
agreement.
39
<PAGE>
SECTION 20. EXPENSES AND FEES. Each party to this Agreement shall pay any
and all fees and expenses that such party may incur in connection with the
negotiation, execution or closing of the transactions contemplated by this
Agreement, including the preparation, filing and prosecution of its portion of
the applications and other materials required under Section 5.7 of this
Agreement, and any application fee or grant fee which may be charged or assessed
by the FCC or any state regulatory authority as a result of the transactions
shall be borne equally by the Sellers on the one hand and the Purchaser on the
other hand. Notwithstanding the foregoing, the Sellers shall pay any federal,
local and state income Taxes assessed against the Sellers or the Partnership or
due from the Sellers or the Partnership in connection with the sale of the
Interests to the Purchaser. Sellers also shall bear any sales, use, transfer,
stamp and other similar Taxes arising from the sale of the Interests to the
Purchaser.
SECTION 21. SCHEDULES AND EXHIBITS. The Schedules and Exhibits attached
to this Agreement constitute a part of this Agreement and are incorporated
herein by reference in their entirety as if fully set forth in this Agreement.
SECTION 22. TERMINATION.
(a) Anything contained in this Agreement to the contrary
notwithstanding, this Agreement (i) may be terminated at any time by the mutual
consent of the Sellers and the Purchaser; (ii) may be terminated by either
Purchaser or any two of the Sellers if the Closing shall not have occurred on or
before September 1, 1997 by reason of the failure of any of the conditions set
forth in Sections 6.6 or 7.5 to be satisfied by such date, provided Sellers or
Purchaser, as the case may be, shall not have the right to so terminate this
Agreement if such party's breach of this Agreement contributed in a material way
to the failure of such conditions to be satisfied; (iii) by Purchaser if Sellers
shall have materially breached any of their representations (provided that those
representations that have a Material Adverse Effect qualification or other
materiality qualification shall be read without regard to such Material Adverse
Effect Qualification or other materiality qualification) or covenants herein;
(iv) by any two of the Sellers if Purchaser shall have materially breached any
of its representations or covenants herein; and (v) if Purchaser provides
written notice to the Sellers within the forty-five (45) day period referenced
in Section 6.11 that the results of its due diligence review were
unsatisfactory.
(b) In the event that this Agreement shall be terminated pursuant to
Section 22 (a)(i), (ii) or (v), all further obligations of the parties under
this Agreement (other than Section 2.3, Section 12 and Section 20) shall be
terminated without further liability of any party to the other, provided that
nothing herein shall relieve any party from liability for the breach of its
representations, warranties, covenants and other obligations arising under this
Agreement and Purchaser shall be entitled to receive the Deposit and all
earnings thereon.
40
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SECTION 23. REMEDIES. The Seller and the Purchaser acknowledge and agree
that, because of the unique nature of the Cellular System and the business
operations conducted by the Partnership, the failure of the Sellers to carry out
their obligations to perform this Agreement and to sell the Interests in
accordance with the terms and conditions of this Agreement would cause the
Purchaser to incur damages for which there is no adequate remedy at law; the
Sellers and the Purchaser accordingly agree that, in addition to any other
remedies available to the Purchaser either at law or in equity, the Purchaser
shall be entitled to the remedy of specific performance upon any failure by the
Sellers to perform their obligations in accordance with the terms and conditions
of this Agreement.
SECTION 24. PURCHASER RESTRUCTURING. Purchaser and its Affiliates are
currently contemplating an internal restructuring (the "Restructuring") which
may or may not involve the Gila River Indian Community (which holds an interest
in Gila) becoming a partner of the Partnership. Notwithstanding anything else
set forth herein to the contrary, Purchaser shall have the right in connection
with the Restructuring to assign any of its rights under this Agreement to any
Affiliate and/or the Gila River Indian Community.
SECTION 25. ARBITRATION.
25.1 CLAIMS. All claims by Purchaser or Seller(s) by one against the other
arising out of or related in any manner to this Agreement or any of the assets
or the transactions shall be resolved by arbitration, as prescribed herein.
This transaction shall be deemed to include and impact matters of interstate
commerce and therefore the Federal Arbitration Act, 9, U.S.C. Sections 1 to 15,
not state law, will govern the arbitrability of all claims.
25.2 RULES. A single arbitrator engaged in the practice of law, who is
knowledgeable about the cellular industry, cellular law and who has at least
eight (8) years of experience litigating in federal district court, shall
conduct the arbitration under the then current commercial arbitration rules of
the American Arbitration Association ("AAA"), unless otherwise provided herein.
The arbitrator shall be selected in accordance with AAA procedures. The
arbitration shall be conducted in the AAA office in Phoenix, Arizona.
25.3 NO DISCOVERY; DAMAGES; EXPENSES. The Buyers and Seller shall allow
and participate in discovery in accordance with the Federal Rules of Civil
Procedure. The arbitrator shall rule on unresolved discovery disputes. Each
party shall bear its own costs and attorneys' fees. The arbitrator's decision
and award shall be final and binding, and judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof.
25.4 JUDICIAL OR ADMINISTRATIVE ACTION. If any party files a judicial or
administrative action asserting claims subject to arbitration, as prescribed
herein, and the other party successfully stays such action and/or compels
arbitration of said claims, the party filing said action shall pay the
41
<PAGE>
other party's costs and expenses incurred in seeking such stay and/or
compelling arbitration, including reasonable attorneys' fees.
SECTION 26. LIMITATION OF LIABILITY. Neither party shall be liable to the
other for any incidental, indirect, special or consequential damages of any kind
including but not limited to any loss of use, loss of business, or loss of
profit arising out of any claim whether arising in contract or tort for any
breach of an obligation under this Agreement; PROVIDED, HOWEVER, that this
Section 26 shall not apply to any party's breaches of its indemnification
obligations pursuant to Section 10 above.
42
<PAGE>
IN WITNESS WHEREOF, the Sellers and the Purchaser have caused this Purchase
Agreement to be executed by their duly authorized representatives as of the day
and year first written above.
PURCHASER:
DOBSON CELLULAR OF ARIZONA, INC.
By: Everett Dobson
------------------------
Everett Dobson
President
SELLERS:
AZTEL, INC.
By: Leroy T. Cavlson
------------------------
Title: Authorized Representative
GILA RIVER TELECOMMUNICATIONS, INC.
By: Name Unreadable
------------------------
Title: Chairman of the Board of
Directors
U S WEST NEWVECTOR GROUP, INC.
By: Name Unreadable
------------------------
Title: Vice President
TOHONO O'ODHAM UTILITY AUTHORITY
By: Charles W. Wiene
------------------------
Title: General Manager
43
<PAGE>
Schedule 2
EQUITY OWNERSHIP OF PARTNERSHIP
Investor Partnership Interest Voting Rights Purchase Price
- -------- -------------------- ------------- --------------
Aztel 22.2525% 25% $11,816,077
Gila 41.9500% 25% $22,275,450
NewVector 13.5450% 25% $ 7,192,395
TOUA 22.2525% 25% $11,816,077
-------- --- -----------
100% 100% $53,100,000
-------- --- -----------
-------- --- -----------
1
<PAGE>
SECURITIES PURCHASE AGREEMENT
by and among
FLEET VENTURE RESOURCES, INC.,
FLEET EQUITY PARTNERS VI, L.P.,
KENNEDY PLAZA PARTNERS
and
DOBSON COMMUNICATIONS CORPORATION,
an Oklahoma corporation
Dated as of March 19,1996
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS
Section 1.1 Definitions.................................................
Section 1.2 Construction................................................
Section 1.3 Payments....................................................
ARTICLE II SALE AND PURCHASE OF PURCHASED SECURITIES
Section 2.1 Sale and Purchase of Purchased Securities...................
Section 2.2 Purchase Price..............................................
Section 2.3 Closing.....................................................
Section 2.4 Use of Proceeds.............................................
ARTICLE III REPRESENTATIONS AND WARRANTIES
Section 3.1 Authority of the Company....................................
Section 3.2 Capitalization; Subsidiaries................................
Section 3.3 Outstanding Equity; Subsidiaries............................
Section 3.4 Reports and Financial Statements;
Undisclosed Liabilities...................................
Section 3.5 Cellular Business...........................................
Section 3.6 Landline Business...........................................
Section 3 7 Absence of Certain Developments.............................
Section 3.8 Indebtedness to and from Officers,
Directors and Others......................................
Section 3.9 Accounts Receivable and Bad Debts...........................
Section 3.10 Taxes.......................................................
Section 3.11 Solvency....................................................
Section 3.12 Title to Assets.............................................
Section 3.13 Real Property Owned.........................................
Section 3.14 Real and Personal Property - Leased.........................
Section 3.15 Proprietary Rights..........................................
Section 3.16 Necessary Property; Condition of Property...................
Section 3.17 Compliance With Law.........................................
Section 3.18 Environmental Compliance....................................
Section 3.19 Litigation..................................................
Section 3.20 No Material Adverse Effect..................................
Section 3.21 Employee Benefit Plans......................................
Section 3.22 Withholding, Contracts, Labor Relations.....................
Section 3.23 Insurance...................................................
-i-
<PAGE>
Section 3.24 Burdensome Obligations......................................
Section 3.25 Certain Governmental Regulations............................
Section 3.26 Corporate Documents, Books and Records......................
Section 3.27 Transaction Costs...........................................
Section 3.28 Equity Interests............................................
Section 3.29 Disclosure..................................................
Section 3.30 Senior Management Compensation..............................
Section 3.31 Representations and Warranties under
Related Agreements........................................
Section 3.32 Small Business Concern......................................
Section 3.33 Machinery and Equipment - Owned and Leased..................
Section 3.34 Necessary Licenses and Permits..............................
ARTICLE IV PURCHASERS' REPRESENTATIONS
Section 4.1 Investment Intent...........................................
Section 4 2 Authorization...............................................
ARTICLE V CONDITIONS TO PURCHASE AND SALE
Section 5.1 Related Agreements..........................................
Section 5.2 Charter Documents; Certificates.............................
Section 5.3 Proof of Corporate or Partnership Action....................
Section 5.4 Legal Opinions..............................................
Section 5.5 Representations and Warranties..............................
Section 5.6 Legality; Governmental and Other
Authorizations............................................
Section 5.7 Stock Split.................................................
Section 5.8 Payment of Certain Fees and Disbursements...................
Section 5.9 Other Closings..............................................
Section 5.10 Key Man Life Insurance......................................
Section 5.11 General.....................................................
Section 5.12 Dobson Note.................................................
ARTICLE VI COVENANTS
Section 6.1 Records and Accounts........................................
Section 6.2 Existence; Subsidiaries; Maintenance
of Properties.............................................
Section 6.3 Insurance...................................................
Section 6.4 Taxes.......................................................
Section 6.5 Inspection of Properties and Books..........................
Section 6.6 Compliance with Laws, Contracts,
-ii-
<PAGE>
Licenses and Permits......................................
Section 6.7 Employee Benefit Plans......................................
Section 6.8 Further Assurances..........................................
Section 6.9 Notices.....................................................
Section 6.10 Distributions...............................................
Section 6.11 Dilution Protection.........................................
Section 6.12 Merger, Consolidation, Sale of Assets
or Other Dispositions.....................................
Section 6.13 Transactions with Affiliates................................
Section 6.14 Sale and Leaseback of Property..............................
Section 6.15 Joint Ventures..............................................
Section 6.16 Investments.................................................
Section 6.17 Senior Management; Compensation.............................
Section 6.18 Compliance with Capital Budget..............................
Section 6.19 Response Actions............................................
Section 6.20 Merger, Consolidation or Other Acquisitions.................
Section 6.21 Charter Amendments..........................................
Section 6.22 Control of Systems..........................................
Section 6.23 Trust Loan Repayment........................................
Section 6.24 Payment of Affiliate Notes..................................
ARTICLE VII REPORTING COVENANTS
Section 7.1
Section 7.2
Section 7 3
ARTICLE VIII NONCOMPLIANCE EVENTS
Section 8.1
Section 8.2
Section 8.3
ARTICLE IX REGISTRATION AND TRANSFER OF
PURCHASED SECURITIES
Section 9.1
Section 9.2
ARTICLE X EXPENSES; INDEMNITY; MISCELLANEOUS
Section 10.1
Section 10.2
-iii-
<PAGE>
Section 10.3
Section 10.4
Section 10.5
Section 10.6
ARTICLE XI NOTICES.....................................................
ARTICLE XII SURVIVAL OF COVENANTS, AGREEMENTS,
REPRESENTATIONS AND WARRANTIES..............................
ARTICLE XIII AMENDMENTS AND WAIVERS......................................
ARTICLE XIV CONSENT TO JURISDICTION.....................................
ARTICLE XV WAIVER OF JURY TRIAL........................................
ARTICLE XVI GOVERNING LAW...............................................
ARTICLE XVII RIGHT TO PUBLICIZE..........................................
ARTICLE XVIII FURTHER ASSURANCES..........................................
ARTICLE XVIX TIME OF THE ESSENCE.........................................
ARTICLE XX ENTIRE AGREEMENT; COUNTERPARTS;
SECTION HEADINGS............................................
LIST OF SCHEDULES AND EXHIBITS
SCHEDULE 1 Purchasers
SCHEDULE 1.1 Permitted Liens
SCHEDULE 2 Related Entities
SCHEDULE 3.2 Capital Structure Schedule
-iv-
<PAGE>
SCHEDULE 3.4(a)(i) Historical Financial Statements
SCHEDULE 3.4(a)(ii) Current Financial Statements
SCHEDULE 3.4(a)(iii) Pro Forma Balance Sheet
SCHEDULE 3.4(a)(iv) Projections
SCHEDULE 3.5(c) Pricing of Services
SCHEDULE 3.5(e) Customers
SCHEDULE 3.6(b) Access Lines
SCHEDULE 3.6(d) Capital Improvements Required by State Authorities
SCHEDULE 3.7 Absence of Certain Developments
SCHEDULE 3.8 Certain Indebtedness
SCHEDULE 3.13 Real Property
SCHEDULE 3.14 Leased Property
SCHEDULE 3.17 Compliance with Law
SCHEDULE 3.19 Litigation
SCHEDULE 3.20 Material Adverse Effect
SCHEDULE 3.23 Insurance
SCHEDULE 3.27 Transaction Costs
SCHEDULE 3.30 Senior Management Compensation
SCHEDULE 3.34 Necessary Licenses and Permits
SCHEDULE 6.17 Executive Compensation
-v-
<PAGE>
EXHIBIT A Form of Certificate of Designation
EXHIBIT B Form of Option Agreement
EXHIBIT C Form of Shareholders' Agreement
EXHIBIT D Form of Texas 2 Option Agreement
EXHIBIT E Form of Opinion of Counsel to the Company
EXHIBIT F Form of Opinion of FCC Counsel to the Company
EXHIBIT G Form of Charter Amendment
-vi-
<PAGE>
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement, dated as of March 19, 1996, is
entered into by and between Dobson Communications Corporation, an Oklahoma
corporation (the "Company"), and each of the Purchasers listed on SCHEDULE 1.
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. For all purposes of this Agreement the
following terms shall have the meanings set forth in this ARTICLE I.
"AFFILIATE" shall mean, with respect to any Person directly or
indirectly controlling, controlled by or under direct or indirect common
control with the Company, including, without limitation, (a) any Person who
is a director, limited partner or executive officer of the Company or the
beneficial owner of at least 5% of the then outstanding equity interests (on
a fully diluted basis) of the Company (or other specified Person) and Family
Members of any of such Persons, (b) any Person of which the Company (or other
specified Person) or an Affiliate (as defined in clause (a) above) of the
Company (or other specified Person) shall, directly or indirectly, either
beneficially own at least 5% of the then outstanding equity securities (on a
fully diluted basis) or constitute at least a 5% equity participant, and (c)
in the case a specified Person is an individual, Family Members of such
Person; PROVIDED, HOWEVER, that in no event shall any of the Purchasers be
considered an Affiliate of the Company or any Related Entity.
"AGREEMENT" shall mean this Securities Purchase Agreement, as the same
may be amended, supplemented, restated, replaced or otherwise modified, in
each case from time to time and whether in whole or in part.
"ACQUIRING SUBSIDIARY" means the Company's Cellular Subsidiaries that
will acquire the USCC cellular systems.
"BALANCE SHEET DATE" shall have the meaning specified in SECTION 3.4.
<PAGE>
"BASIC SUBSCRIBERS" shall have the meaning specified in SECTION 3.5.
"BUDGETS" shall have the meaning specified in SECTION 6.18.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or any
other day when Fleet is closed for business.
"CAPITAL EXPENDITURES" means capital expenditures determined in
accordance with GAAP, including in any event capital lease obligations.
"CAPITALIZED LEASE OBLIGATION" shall mean any rental obligation which,
under GAAP, is or will be required to be capitalized on the books of the
Company or any Subsidiary, taken at the amount thereof accounted for as
indebtedness (net of interest expense) in accordance with such principles.
"CAPITAL STRUCTURE SCHEDULE" shall have the meaning specified in SECTION
3.2.
"CELLULAR ACQUISITION" shall mean the acquisition by the Company of
certain cellular systems owned by USCC pursuant to the terms and provisions
of that certain Acquisition Agreement dated as of October 27, 1995 by and
between the Company and USCC.
"CELLULAR SUBSIDIARIES" means the Company's Subsidiaries which own the
cellular systems currently owned by the Company.
"CERTIFICATE OF DESIGNATION" shall mean that certain Certificate of
Designation of the Company providing for the authorization of Class B
Convertible Preferred Stock of the Company, in the form of EXHIBIT A hereto.
"CHARTER" shall include the articles or certificate of incorporation,
statute, constitution, joint venture or partnership agreement or articles or
other organizational document of any Person other than an individual, each as
from time to time amended or modified.
"CHARTER AMENDMENT" shall mean that certain Certificate of Amendment to
Certificate of Incorporation of the Company, providing for the increase in
the number of shares of Common Stock and
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Preferred Stock the Company is authorized to issue, in the form of
EXHIBIT G HERETO.
"CLOSING DATE" shall have the meaning specified in SECTION 2.3.
"CODE" shall mean the Internal Revenue Code of 1986, any successor
statute of similar import, and the rules and regulations thereunder,
collectively and as from time to time amended and in effect.
"COMMON SHARES" shall mean the shares of Class A Voting Common Stock of
the Company, $1.00 par value per share, issued or issuable upon conversion of
the Preferred Shares.
"COMPANY" shall mean Dobson Communications Corporation, an Oklahoma
corporation.
"CONSOLIDATED", "CONSOLIDATED" and "COMBINED" shall mean, with reference
to any financial statement, such financial statements of the Company and each
Subsidiary, if any, consolidated or combined, as the case may be, in
accordance with GAAP.
"CORESTATES FINANCING" shall mean that certain $84,000,000
revolving/term loan facility and that certain $6,000,000 term loan facility
pursuant to that certain Amended and Restated Credit Agreement of even date
herewith by and among CoreStates Bank, N.A., in its capacity as
Administrative Agent and a Bank, the other Banks listed therein, the
Corporate Borrowers listed therein and the Trust Borrowers listed therein, or
any credit agreement evidencing a senior debt facility which replaces the
facility evidenced by such Amended and Restated Credit Agreement.
"CURRENT FINANCIAL STATEMENTS" shall have the meaning specified in
SECTION 3.4.
"DECEMBER BALANCE SHEET DATE" shall have the meaning specified in
SECTION 3.4.
"DISTRIBUTION" shall mean (a) the declaration or payment of any dividend
of cash or property on or in respect of any shares of any class of capital
stock or other equity security of the Company or any of the Subsidiaries; (b)
the purchase, redemption or other
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retirement of any shares of any class of capital stock ___________ security
of the Company or any of the ___________________________ or otherwise; or (c)
any other distribution on or in respect of any shares of any class of capital
stock or other equity security of the Company or any of the Subsidiaries.
"DOBSON" shall mean Everett R. Dobson, an individual residing, on the
date hereof, at 1905 Mission Hills, Edmond, Oklahoma 73038.
"EMPLOYEE BENEFIT PLAN" shall mean the employee benefit plan within the
meaning of Section 3(3) of ERISA maintained or contributed to by the Company
or any ERISA Affiliate, other than a Multiemployer Plan or fringe benefit
plan within the meaning of Section 6039D of the Code maintained or
contributed to by the Company or an ERISA Affiliate.
"ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Resources
Conservation and Recovery Act of 1976, as amended, and any applicable
statutes, regulations, rules, ordinances, codes, licenses, permits, orders,
policies, guidelines, by-laws, approvals, plans, authorizations, concessions,
and similar items of all governmental authorities and all applicable
judicial, administrative and regulatory decrees, judgments and orders, any of
which relate to the protection of human health or the environment from the
effects of Hazardous Substances, including, but not limited to, those
pertaining to reporting, licensing, permitting, investigating and remediating
emissions, discharges, releases or threatened releases of Hazardous
Substances into the air, surface water, groundwater or land, or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
"ERISA" shall mean the federal Employee Retirement Income Security Act
of 1974, any successor statute of similar import, and the rules and
regulations thereunder, collectively and as from time to time amended and in
effect.
"ERISA AFFILIATE" shall mean any Person which is treated as a single
employer with the Company under Section 414 of the Code.
"FAMILY MEMBERS" shall mean, as applied to any Person who is an
individual, a spouse, parent, grandparent, ancestor, descendent,
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cousin, sibling or heir thereof and any spouse of any of the foregoing, and
each trust created for the benefit of one or more of such Persons and each
custodian of property of one or more such Persons.
"FCC" shall mean the Federal Communications Commission.
"FEP" shall mean Fleet Equity Partners VI, L.P., a Delaware limited
partnership.
"FINANCING AGREEMENTS" shall mean this Agreement, the Certificate of
Designation, the Charter Amendment, the Shareholders' Agreement, the Option
Agreement, the Texas 2 Option Agreement and any other agreements, documents
or instruments executed in connection with or pursuant to this Agreement or
any of the foregoing.
"FLEET" shall mean collectively FVR, FEP and KPP.
"FVR" shall mean Fleet Venture Resources, Inc., a Rhode Island corporation.
"GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board and the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment
of the accounting profession, which are applicable to the circumstances as of
the date of determination and which are, as to any Person, consistently
applied to such Person.
"GUARANTEED PENSION PLAN" shall mean any employee pension benefit plan
within the meaning of Section 3(2) of ERISA maintained or contributed to be
the Company or any ERISA Affiliate the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA,
other than a Multiemployer Plan.
"HAZARDOUS SUBSTANCES" shall mean (but shall not be limited to)
substances that are defined or listed in, or otherwise classified pursuant
to, any applicable Environmental Laws as "hazardous substances," "hazardous
materials" "hazardous wastes" or
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"toxic substances," or any other formulation intended to define, list or
classify substances by reason of deleterious properties such as ignitability,
corrosively, reactivity, radioactivity, carcinogenicity, reproductive
toxicity or "EP toxicity," and petroleum and drilling fluids, produced waters
and other wastes associated with the exploration, development, or production
of crude oil, natural gas or geothermal energy.
"HISTORICAL FINANCIAL STATEMENTS" shall have the meaning specified in
SECTION 3.4.
"INDEBTEDNESS" shall mean, with respect to any Person, all obligations,
contingent (to the extent required to be reflected in financial statements
prepared in accordance with GAAP) and otherwise, which in accordance with
GAAP should be classified on the balance sheet of such Person as liabilities,
or to which reference should be made by footnotes thereto, including, without
limitation, in any event and whether or not so classified: (a) all debt and
similar monetary obligations of such Person, whether direct or indirect, (b)
all liabilities of such Person secured by any Lien existing on property owned
or acquired subject thereto, whether or not the liability secured thereby
shall have been assumed; (c) all guarantees, endorsements and other
contingent obligations of such Person whether direct or indirect in respect
of Indebtedness or performance of any other Person, including any obligation
to supply funds to or in any manner to invest in, directly or indirectly,
such other Person, to purchase Indebtedness owed by such other Person, or to
assure the owner of Indebtedness owed by such other Person against loss,
through an agreement to purchase goods, supplies or services for the purpose
of enabling such other Person to r-TM-lake payment of the Indebtedness held
by such owner or otherwise, and (d) obligations of such Person to reimburse
issuers of any letters of credit.
"INTANGIBLE PROPERTY" shall have the meaning specified in SECTION 3.20.
"INVESTMENTS" shall mean ____________________, direct or indirect
purchase or other acquisition by such Person of any share of capital stock,
evidence of Indebtedness or other security issued to such Person by any other
Person, (b) any loan, advance or extension of credit to, or contribution to
the capital of, any other Person, (c) any direct or indirect purchase or
other
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acquisition by such Person of the securities or business or integral part of
the business of any other Person, or commitment to make such purchase, and
(d) any other investment in any other Person; PROVIDED, HOWEVER, that the
term "Investment" shall not include (i) trade and customer accounts
receivable for services rendered in the ordinary course of business and
payable in accordance with customary trade terms, and all letters of credit
or other instruments securing or evidencing the same, (ii) advances to
employees for travel expenses, drawing accounts and similar expenditures but
only to the extent all such advances outstanding at any particular time do
not exceeds $25,000, and (iii) stock or other securities acquired in
connection with the satisfaction or enforcement of Indebtedness or claims due
or owing to the Company or any of the Subsidiaries or as security for any
such Indebtedness or claim.
"KPP" means Kennedy Plaza Partners, a Rhode Island general partnership.
"LANDLINE BUSINESS" means the Company's landline telephone business.
"LANDLINE SUBSIDIARIES" means the Company's Subsidiaries through which the
Company conducts the Landline Business.
"LIEN" shall mean (a) any encumbrance, mortgage, pledge, lien, charge or
other security interest of any kind upon any property or assets of any
character, or upon the income or profits therefrom; (b) any acquisition of or
agreement to have an option to acquire any property or assets upon
conditional sale or other title retention agreement, device or arrangement
(including a capitalized lease); or (c) any sale, assignment, pledge or other
transfer for security of any accounts, general intangibles or chattel paper,
with or without recourse.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect in the
business, assets, properties (tangible and intangible), operations, condition
(financial or otherwise), liabilities or prospects of the Company and the
Subsidiaries, taken as a whole, whether or not in the ordinary course of
business, whether separately or in the aggregate with other occurrences or
developments, and whether insured against or not.
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<PAGE>
"MULTIEMPLOYER PLAN" shall mean any multiemployer plan within the
meaning of Section 3(37) of ERISA at any time maintained or contributed to by
the Company or any ERISA Affiliate or to which the Company or any ERISA
Affiliate is or was obligated to contribute.
"NONCOMPLIANCE EVENT" shall have the meaning specified in SECTION 8.1.
"OPTION AGREEMENT" shall mean that certain Option Agreement by and among
the Purchasers and Dobson CC Limited Partnership, an Oklahoma limited
partnership, in the form of EXHIBIT B hereto.
"PARTNERSHIP BLOCK" SHALL have the meaning _______________.
"PBGC" shall mean the Pension Benefit Guaranty Corporation created by
Section 4002 of ERISA and any successor entity or entities having similar
responsibilities.
"PCS" shall mean personal communications services.
"PERMITTED LIENS" shall mean THE following:
(a) Liens to secure taxes, assessments and other government charges
or claims for labor, material or supplies in respect of obligations not
overdue or due but being contested to the extent permitted by SECTION 6.4;
(b) Deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age pensions
or other social security obligations;
(c) Liens of carriers, warehousemen, mechanics and materialmen, and
other like Liens,
(d) Encumbrances consisting of easements, rights of way, zoning
restrictions, restrictions on the use of real property and irregularities in
the title thereto, landlord's or lessor's Liens under leases to which the
Company or any Subsidiary is a party, and other minor Liens or encumbrances
none of which interferes materially with the use of the property affected in
the ordinary conduct of the business of the Company and the Subsidiaries and
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<PAGE>
which defects do not individually or in the aggregate have a Material Adverse
Effect; and
(e) Any Liens on the assets and property of the Company or the
Subsidiaries existing on the date hereof and set forth on Schedule 1.1.
"PERSON" shall mean an individual, partnership, corporation, association,
trust, joint venture, unincorporated organization, and any government,
governmental department or agency or political subdivision thereof.
"POPS" shall mean the total number of population equivalents in a defined
market.
"PREFERRED SHARES" shall mean the 100,000 shares of Class B Convertible
Preferred Stock of the Company being purchased by the Purchasers pursuant to
this Agreement.
"PROJECTIONS" shall have the meaning specified in SECTION 3.4.
"PURCHASE PRICE" shall have the meaning specified in SECTION 2.2.
"PURCHASED SECURITIES" shall mean the Preferred Shares being purchased by
the Purchasers pursuant to this Agreement.
"PURCHASERS" shall mean each Person listed on SCHEDULE 1 together with ____
respective successors and assigns.
"QUALIFIED OPTIONS" shall mean those certain options for the right to
purchase up to 30,166 shares of Class B Common Stock of the Company issued to
key employees acceptable to the Purchasers and in the amounts, at the price and
on other terms and conditions acceptable to the Purchasers.
"RELATED AGREEMENTS" shall mean the Financing Agreements, the documents,
instruments and agreements executed in connection with the CoreStates Financing,
the Cellular Acquisition, the Stock Option Plan and the redemption of all of the
shares of 10% Cumulative, Compounded, Convertible, Redeemable, Class A Preferred
Stock of the Company held by TDS.
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"RELATED ENTITIES" shall mean each Subsidiary and each Person listed on
SCHEDULE 2.
"RESTRICTED PAYMENT" shall mean any payment to any Affiliate of the Company
or any of its Subsidiaries in respect of any Indebtedness owed by, or other
obligations of, the Company or such Subsidiary to such Affiliate.
"RETURNS" shall have the meaning specified in SECTION 3.10.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Securities and
Exchange Commission thereunder, all as the same shall be in effect at the time.
"SHAREHOLDERS' AGREEMENT" shall mean that certain Shareholders' Agreement,
dated as of the date hereof, by and among the Company, the Purchasers and
certain other stockholders of the Company, in the form of EXHIBIT C hereto, as
the same may be amended, supplemented, restated, replaced or otherwise modified,
in each case from time to time and whether in whole or in part.
"SUBSIDIARY" shall mean any Person listed on SCHEDULE 3.2 and (a) any
corporation in which the Company or such Person, directly or indirectly, owns
more than fifty percent (50%) of the outstanding capital stock or other equity
interests of the class or classes having general voting power under ordinary
circumstances to elect at least a majority of the directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency); (b) any partnership, association, joint venture
or other unincorporated organization or entity with respect to which the Company
or such Person, directly or indirectly, owns equity securities in an amount
sufficient to control the management of such partnership, association, joint
venture or other unincorporated organization or entity; and (c) any corporation,
partnership, association, joint venture or other unincorporated organization or
entity in which the Company or such Person, directly or indirectly, has more
than a fifty percent (50%) equity interest
"SYSTEMS" means the cellular systems currently owned by the Company.
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"TAXES" shall have the meaning specified in SECTION 3.10.
"TDS" means TDS Oklahoma Holdings, Inc., an Oklahoma corporation.
"TEXAS 2 EVENT" means the purchase by the Company of the entire interest in
Texas RSA 2 Limited Partnership, a Texas limited partnership, formed pursuant to
that certain Limited Partnership Agreement dated August 13, 1989, as amended,
which is not owned by the Company as of the date hereof (other than the interest
owned by Southwestern Bell Mobil Systems, Inc.) for a purchase price less than
or equal to $7.5 million and as such other terms and conditions as are
reasonably satisfactory to holders of at least 50% of the outstanding Purchased
Securities.
"TEXAS 2 OPTION AGREEMENT" shall mean that certain Option Agreement by and
among the Purchasers and the Company, in the form of EXHIBIT D hereto.
"TRANSACTION COSTS" shall have the meaning specified in SECTION 3.27.
"TRUST LOAN" shall mean that certain $6 million term loan to the Everett R.
Dobson Irrevocable Family Trust, Stephen T. Dobson Irrevocable Family Trust and
Robin L. Dobson Irrevocable Family Trust pursuant to the CoreStates Financing.
"TRUSTS" shall mean the trusts referred to in the definition of Trust Loan.
"TWELVE-MONTH INCOME STATEMENT" shall have the meaning specified in SECTION
3.4.
"USCC" shall mean United States Cellular Corporation, a Delaware
corporation.
"USCC ENTITIES" means the sellers of the USCC cellular systems.
SECTION 1.2. CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise (i) references to the plural include the singular and to the
singular include the plural, (ii) the term "including" is not limiting, and
(iii) the term "or" has
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the inclusive meaning represented by the term "and/or". The terms "hereof',
"herein", "hereby", "hereunder" and similar terms in this Agreement refer to
this Agreement as a whole and not to any particular provision of this
Agreement. Article, Section, Subsection, clause, Schedule and Exhibit
references are to Articles, Sections, Subsections, clauses, Schedules and
Exhibits (as each such Schedule or Exhibit may be amended, modified or
supplemented from time to time) of this Agreement unless otherwise specified.
SECTION 1.3. PAYMENTS. All payments required to be made hereunder by the
Company to any Purchaser shall be made by the Company on the applicable due date
to such Purchaser in U.S. dollars in immediately available funds for credit to
such Purchaser's account set forth on SCHEDULE 1 or to such other account as
such Purchaser may designate in writing to the Company. All payments required to
be made hereunder by a Purchaser to the Company shall be made by such Purchaser
on the applicable due date to the Company in U.S. dollars by transfer of
immediately available funds for credit to the Company's account number:
338200002800 at Bank IV, Nicholas Hills, Oklahoma, ABA number 1039 12480.
ARTICLE II
SALE AND PURCHASE OF PURCHASED SECURITIES
SECTION 2.1. SALE AND PURCHASE OF PURCHASED SECURITIES. Subject to all of
the terms and conditions hereof and in reliance on the representations and
warranties set forth or referred to herein, the Company agrees to issue and sell
to the Purchasers and each of the Purchasers agrees to purchase from the Company
on the Closing Date the number of Preferred Shares set forth opposite its name
on SCHEDULE 1 hereto.
SECTION 2.2. PURCHASE PRICE. The purchase price (the "Purchase Price")
for the Purchased Securities shall be the aggregate of Ten Million Dollars
($10,000,000).
SECTION 2.3. CLOSING. The closing of the purchase and sale of the Purchased
Securities contemplated by SECTION 2.1 (the "Closing") will take place at the
offices of Pepper, Hamilton & Scheetz, 3000 Two Logan Square, Eighteenth and
Arch Streets, Philadelphia, Pennsylvania 19103-2799 at 10:00 a.m. on March 19,
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1996, or at such other time, date and place as the parties hereto may agree upon
(the "Closing Date").
SECTION 2.4. USE OF PROCEEDS. The proceeds from the sale of the Purchased
Securities will be used solely (i) to finance the Cellular Acquisition, (ii) to
pay the expenses of the transactions contemplated by this Agreement and the
Related Agreements, (iii) as a deposit for the PCS auctions and (iv) the
remaining portion of the proceeds from the sale of Purchased Securities will be
used for working capital purposes. The Company agrees to provide the Purchasers
with reasonable access to the Company's records for purposes of verifying that
the proceeds from the sale of the Purchased Securities are used solely for the
purposes set forth in this SECTION 2.4.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
It is understood and agreed by and between the parties hereto that, as an
inducement to each Purchaser to enter into this Agreement and to purchase the
Purchased Securities as contemplated by SECTION 2.1, the Company has made to
each Purchaser the representations and warranties hereinafter set forth in this
ARTICLE m, all of which are true and correct on the date hereof and, except as
otherwise indicated, all of which will be true and correct on the Closing Date
as if made on and as of such Closing Date, that the representations and
warranties shall survive the Closing, and that each Purchaser has relied on such
representations and warranties.
SECTION 3.1. AUTHORITY OF THE COMPANY. The Company (a) is a corporation,
duly organized, legally existing and in good standing under the laws of the
State of Oklahoma (b) has the corporate power and authority to own its
properties and carry on its business as now being conducted and is qualified to
do business in every jurisdiction in which the nature of its business or the
ownership or leasing of its property requires such qualification; and (c) has
the corporate power and authority to enter into and perform its obligations
under this Agreement and each of the other Related Agreements to which it is a
party and to undertake the transactions contemplated hereby and thereby. All
necessary and proper corporate action has been taken by the Company with respect
to the
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authorization, execution and delivery of this Agreement and the other Related
Agreements to which it is a party and this Agreement and such other Related
Agreements constitute the legal, valid and binding obligations of the Company
enforceable against it in accordance with their terms except to the extent
enforceability may be subject to bankruptcy, insolvency, moratorium and
similar laws affecting the rights of creditors generally or the application
of principles of equity, whether in an action at law or proceeding in equity,
and subject to the availability of the remedy of specific performance or of
any other equitable remedy or relief to enforce any right under any such
agreement. The execution, delivery and performance of this Agreement and the
other Related Agreements to which the Company is a party will not violate any
provision of law applicable to the Company, any order of any court or other
agency of government applicable to the Company, the Company's corporate
charter or by-laws or any indenture, agreement or other instrument to which
the Company is a party or by which it is bound or be in conflict with, result
in a breach of, or constitute (with due notice or lapse of time or both) a
default under, or except as may be provided in this Agreement, result in the
creation or imposition of any Lien upon any of the property or assets of the
Company pursuant to, any such indenture, agreement or instrument. No
registrations, filings, applications, notices, transfers, consents,
approvals, audits, qualifications, waivers or other action of any kind is
required by virtue of the execution and delivery of this Agreement or any of
the other Related Agreements or of the consummation of the transactions
contemplated hereby or thereby.
SECTION 3.2. CAPITALIZATION: RELATED ENTITY. A statement of the capital
structure of the Company and each Related Entity, indicating its authorized
and issued debt and equity interests, and identifying the holders of such
interests, as of the date of this Agreement giving effect to the transactions
contemplated by the Related Agreements, is annexed hereto as SCHEDULE 3.2
(the "Capital Structure Schedule"). The Capital Structure Schedule also
indicates (a) which securities, if any, carry preemptive rights; (b) whether
there are any outstanding subscriptions, warrants, options or other
agreements to purchase any securities; (c) whether the Company or a Related
Entity is obligated to redeem any of its securities, and the details of any
such committed redemption; (d) all commitments, loan agreements or
arrangements by the Company or a Related Entity to incur indebtedness; (e)
any commitment to convert debt into equity interests of the Company or a
Related Entity; (f) capital
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call arrangements; and (g) any other agreement, arrangement or plan which
will directly or indirectly affect the capital structure of the Company or a
Related Entity.
SECTION 3.3. OUTSTANDING EQUITY; SUBSIDIARIES; BUSINESS. As of the
Closing Date, the only outstanding equity interests of the Company and each
Related Entity will be as described in the Capital Structure Schedule and
owned by the Persons listed on said Schedule, all of which equity interests
(i) have been validly issued in conformity with all applicable state and
federal laws, (ii) are fully paid and non-assessable, and (iii) are free and
clear of all Liens other than the pledge of shares of Common Stock of the
Company in connection with the CoreStates Financing. Except as set forth on
SCHEDULE 2 and SCHEDULE 3.2, the Company has no Subsidiaries nor does it own
or hold of record or beneficially any shares of any class of the capital of
any corporation or any legal or beneficial ownership interest in any general
or limited partnership, association, joint venture or in any other
unincorporated organization or entity. There are no commitments for the
purchase or sale of, and except as set forth on the Capital Structure
Schedule, no options, warrants or other rights to subscribe for or purchase,
any equity securities of the Company or any Related Entity. The Company and
each Related Entity other than Western Financial Services Corp. is engaged
solely in the business of owning, operating or investing in telephone systems
(including long distance) and cellular systems and Western Financial Services
Corp. is engaged in miscellaneous investments, including-TM- real estate.
SECTION 3.4. REPORTS AND FINANCIAL STATEMENTS: UNDISCLOSED LIABILITIES.
(a) Each Purchaser has heretofore been furnished with the following:
(i) true and complete copies of the audited consolidated balance sheet
of the Company as of December 31,1993 and December 31,1994 (the "Balance
Sheet Date") and the related audited statements of earnings, retained
earnings and cash flows for the years then ended, each of such balance
sheets and income statements being attached hereto as SCHEDULE 3.4
(a!(i! (collectively, the "Historical Financial Statements");
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(ii) true and complete copies of the unaudited consolidated balance
sheet of the Company at December 31, 1995 (the "December Balance Sheet")
and the related unaudited statement of earnings and cash flow for the
twelve-month period then ended (the "Twelve Month Income Statement, and
together with the December Balance Sheet, the "Current Financial
Statements"), such balance sheet and income and cash flow statements
being attached hereto as SCHEDULE 3.4 (a)(ii);
(iii) the PRO FORMA consolidated balance sheet of the Company as at the
Closing Date, based on the Company's December Balance Sheet, taking into
account all transactions contemplated hereby to ta-TM-e effect on such
date and by the Transaction Documents, such balance sheet being attached
hereto as SCHEDULE 3.4 (a)(iii); and
(iv) the projections of the Company's future performance for the five
fiscal year period ending December 31, 2001, on a consolidated basis,
dated as of January 31, 1996 and attached hereto as SCHEDULE 3.4 (a!(iv!
(the "Projections").
(b) Each of the Historical and Current Financial Statements delivered
under SECTION 3.4 (a)(i) AND (ii) hereof was prepared in accordance with GAAP
applied on a basis consistent with prior periods except as otherwise stated
therein; each of the balance sheets included in such Historical and Current
Financial Statements fairly presents the financial condition of the Company
and its Subsidiaries as at the close of business on the date thereof; and
each of the statements of income included in such Historical and Current
Financial Statements fairly presents the results of operations of the Company
and its Subsidiaries for the fiscal period then ended. None of the Company or
any of its Subsidiaries has any liabilities or obligations of any nature,
whether absolute, accrued, contingent or otherwise, which are not reflected
or reserved against in the December Balance Sheet except for liabilities and
obligations that have arisen in the ordinary and usual course of business and
consistent with past practice and that individually or in the aggregate do
not have and could not reasonably be expected to have a Material Adverse
Effect.
(c) The PRO FORMA consolidated balance sheet of the Company referred
to in SECTION 3.4 (a!(iii! has been prepared by management of the Company
taking into consideration the effect of
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the transactions contemplated by the Related Agreements, and none of the
Company, the Subsidiaries and their management is aware of any fact which
casts doubt on the accuracy or completeness thereof. Such pro forma
consolidated balance sheet of the Company fairly presents the financial
condition of the Company and its Subsidiaries as of the date hereof taking
into consideration the effect of the transactions contemplated by the Related
Agreements.
(d) The Projections have been prepared in good faith and are based on
what the Company and its management believe to be a reasonable assessment of
the future performance of the Company and its Subsidiaries. All material
assumptions used in the preparation of the Projections are as set forth in
the notes thereto.
SECTION 3.5. CELLULAR BUSINESS.
(a) SYSTEMS. Each Cellular Subsidiary owns, and each Acquiring
Subsidiary as of the Closing will own, free and clear of any Liens except for
Permitted Liens, all right and title to its respective percentage in the
interest in the Systems as set forth in the Capital Structure Schedule. Each
Cellular Subsidiary is licensed, and each Acquiring Subsidiary as of the
Closing will be licensed, by the FCC and by any and all state governmental
authorities to operate a cellular telephone communication systems in each
specific MSA or RSA, as the case may be, in which each such System operates.
(b) OPERATION OF BUSINESS. Each of the Cellular Subsidiaries and
Acquiring Subsidiaries, and, to the best of the Company's knowledge, each of
the USCC Entities, has operated its business in accordance with cellular
industry standards in all material respects. None of the Cellular
Subsidiaries or Acquiring Subsidiaries, and, to the best of the Company's
knowledge, none of the USCC Entities, is in violation of any applicable
order, regulation or requirement relating to its operations which, if
enforced, would materially and adversely affect such Cellular Subsidiary,
Acquiring Subsidiary or USCC Entity, or its respective System.
(c) PRICING OF SERVICES. Attached hereto as SCHEDULE 3.s(c! is a list
of the service packages offered to customers of each of the Systems and the
prices charged therefor.
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(d) FCC AND OTHER GOVERNMENTAL REPORTS. All reports required to be
filed with the FCC and other governmental or administrative authorities by
each of the Subsidiaries and Acquiring Subsidiaries, and each of the USCC
Entities, have been timely filed and are accurate and complete in all
material respects.
(e) CUSTOMERS. SCHEDULE 3.5(e) sets forth the number of customers the
Systems had in service in the aggregate (as categorized by System on SCHEDULE
3 .5(e! hereto) as of January 1, 1996, February 1, 1996 and February 8, 1996.
SECTION 3.6. LANDLINE BUSINESS.
(a) TARIFFS. The regulatory tariffs applicable to the Landline Business
stand in full force and effect in accordance with all of their terms, and
there is no outstanding notice of cancellation or termination or, to the best
of the Company's knowledge after due inquiry, any threatened cancellation or
termination in connection therewith, nor is any Landline Subsidiary subject
to any restrictions or conditions applicable to its regulatory tariffs that
limit or would limit the operation of the Landline Business (other than
restrictions or conditions generally applicable to tariffs of that type).
Each such tariff has been duly and validly approved by the appropriate
regulatory agency. No Landline Subsidiary is in material violation under the
terms and conditions of any such tariff, and there is no basis of any claim
of material violation by any Landline Subsidiary under any such tariff. There
are no applications by any Landline Subsidiary or complaints or petitions by
others or proceedings pending or threatened before the state regulatory
authority relating to the Landline Business or its operations or the
regulatory tariffs. To the best of the Company's knowledge after due inquiry,
there are no material violations by subscribers or others under any such
tariff. A true and correct copy of each tariff applicable to the Landline
Business has been delivered to the Purchasers.
(b) ACCESS LINES. SCHEDULE 3.6(b) sets forth a true and complete list
of the number of access lines of the Landline Business, by exchange, in
service as of January 1, 1996 and February 8, 1996.
(c) RATE BASE. No Landline Subsidiary has any material amount of
inventory, plant or equipment used in the Landline Business that
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has been disallowed from rate base or excluded from the revenue calculations
for any pool, and no Landline Subsidiary has received notification that the
FCC or any state regulatory authority or pool administrator proposes to
exclude any material assets from rate base or revenue calculations for the
pools
(d) CAPITAL IMPROVEMENTS REQUIRED BY STATE AUTHORITIES. Except as set
forth in SCHEDULE 3.6(d!, no Landline Subsidiary is required by any state
regulatory authority to make any changes, upgrades or enhancements with
respect to the Landline Business and the Company has no reason to believe
that any such changes, upgrades or enhancements will be so required in the
foreseeable future.
SECTION 3.7. ABSENCE OF CERTAIN DEVELOPMENTS. Except for entering into
this Agreement and ___________ SCHEDULE 3.7 hereof, since the December
Balance Sheet Date:
(a) Neither the Company nor any Subsidiary has, whether or not in the
ordinary course of business:
(i) issued any capital stock or other equity interest or any
right, option or warrant with respect thereto;
(ii) declared, set aside, paid to a reserve fund or made any
payment or distribution of cash or other property to its shareholders or
equity holders with respect to any class of its capital stock or other equity
interest or purchased or redeemed any shares of its capital stock or other
equity interests;
(iii) suffered any substantial operating loss;
(iv) made any increases in the base compensation, bonuses, paid
vacation time allowed or fringe benefits for its directors, officers,
partners, employees or consultants, except for normal periodic increases in
base compensation for employees made pursuant to established compensation
policies applied on a basis consistent with that of prior years;
(v) suffered damage, destruction or other casualty loss, or
forfeiture of, any property or assets, whether or not covered by insurance,
which has had or may reasonably be expected to have a Material Adverse Effect;
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(vi) made any capital expenditures, additions or improvements or
commitments for the same, except those which do not individually exceed
$100,000 in the aggregate;
(vii) except with respect to the CoreStates Financing entered into any
contract, commitment or agreement under which it has outstanding indebtedness
for borrowed money or for the deferred purchase price of property in excess of
$5,000, or has the right or obligation to incur any such indebtedness or
obligation, or made any loan or advance to any Person other than advances to
employees for business expenses not exceeding $2,000 in the aggregate;
(viii) paid any bonuses, deferred or otherwise, or deferred any
compensation to any of its directors, officers, partners or employees;
(ix) made any material change in accounting procedures or practices;
(x) except for Permitted Liens, mortgaged or pledged any of its
properties or assets, tangible or intangible, or subjected them to any Lien;
(xi) entered into any agreement or arrangement granting any rights
to purchase or lease any of its assets, properties or rights or requiring the
consent of any Person to the transfer, assignment or lease of any such
assets, properties or rights; or
(xii) entered into any agreement or understanding to lo any of the
foregoing.
(b) Other than in the ordinary course of business consistent with past
practice, none of the Company nor any Subsidiary has:
(i) sold, leased, subleased, assigned or transferred any of its
tangible or intangible properties or assets, or canceled, waived or
compromised any debts or claims,
(ii) entered into any other material transaction, or any amendment
of any contract, lease, agreement or license which is material to its
business; or
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(iii) entered into any agreement or understanding to do any of
the foregoing.
SECTION 3.8. INDEBTEDNESS TO AND FROM OFFICERS. DIRECTORS AND OTHERS.
Except as set forth on SCHEDULE 3.8, neither the Company nor any Subsidiary
is indebted to any of its directors, officers, partners, managers, employees
or consultants or to any of its Affiliates except for amounts due as normal
salaries, wages or reimbursement of ordinary business expenses or routine
employee advances for expenses not exceeding $50,000 in the aggregate for all
such directors, officers, partners, managers, employees and consultants and
not exceeding $10,000 for any such Person. Except as set forth on SCHEDULE
3.8, no director, officer, partner, manager, employee or consultant of the
Company or any Subsidiary nor any Affiliate of the Company or any Subsidiary,
is now, or on the Closing Date will be, indebted to the Company or any
Subsidiary except for ordinary business expense advances.
SECTION 3.9. ACCOUNTS RECEIVABLE AND BAD DEBTS. All notes and accounts
receivable of the Company and the Subsidiaries shown on the Company's balance
sheets as at the Balance Sheet Date and the December Balance Sheet Date or
thereafter acquired are valid, genuine and subsisting, were acquired in the
ordinary course of business and are subject to no asserted counterclaims,
defenses or setoffs and are current and collectible (subject to reserves
therefor as reflected on said balance sheets). The Company has previously
delivered to the Purchasers a true, complete and accurate list as of March 1,
1996 of any account receivable of the Company or any Subsidiary in excess of
$1,000 which had not been paid within 30 days of the date due therefor, and
the amount thereof which had not been paid within 60 days and 90 days of the
date due.
SECTION 3.10. TAXES.(a) The Company and each of its Subsidiaries has
timely filed all federal, state, county, local and foreign income and other
tax returns, reports and declarations (collectively, "Returns") relating to
Taxes which are required by applicable law to be filed. No audits of federal
income tax Returns of the Company or any of its Subsidiaries have been
conducted at any time since the formation of the Company. All Returns,
including any amendments thereto, heretofore filed by the Company or any of
its Subsidiaries, have been prepared with reasonable care and in good faith
and are complete and accurate in all material respects.
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(b) The Company and each of its Subsidiaries paid, or where payment is
not required to be made, has made ?d : .,, J ,i_ - ,n ICKIEST nd financial
statements for the payment of, all Taxes in respect of all periods covered
by the Returns and any other taxable period ending on or before the date
hereof. Neither the Company nor any of its Subsidiaries will have any
liability with respect to any Taxes with respect to periods prior to the date
hereof in excess of the amount so paid. No deficiencies for any Tax,
assessment or governmental charge have been asserted or assessed against the
Company or any of its Subsidiaries which have not been paid, settled or
adequately provided for and there is no basis for any such deficiency,
assessment or charge.
(c) As used herein, "Tax" means any of the Taxes and "Taxes" means (A)
all net income, gross income, gross receipts, sales, use, ad valorem,
transfer, franchise, profits, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property or windfall profits
taxes, or other taxes of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign) upon the Company with respect to all periods
or portions thereof ending on or before the date hereof and/or (B) any
liability of the Company for the payment of any amounts of the type described
in the immediately preceding clause (A) as a result of being a member of an
affiliated or combined group.
(d) No property or assets of the Company or any Subsidiaries have been
used by any shareholder, officer, director or employee for their personal use
or otherwise in a manner which would increase the Company's liability for
Taxes, and all expense deductions from the Company's income have been proper
and such expenses were incurred for a valid business purpose.
SECTION 3.11. SOLVENCY. Each of the Company and the Subsidiaries is solvent
and has tangible and intangible assets having a fair value in excess of the
amount required to pay its probable liabilities on its existing debts as they
become absolute and matured, and has access to adequate capital for the conduct
of its business and the ability to pay its debts from time to time incurred in
connection therewith as such debts mature. Neither the Company nor any
Subsidiary is contemplating either the fling of a petition by it under any state
or federal bankruptcy or insolvency laws or the liquidating of all or a
substantial portion of its
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property, and neither the Company nor any Subsidiary has any knowledge of any
Person contemplating the filing of any such petition against it.
SECTION 3.12. TITLE TO ASSETS. The Company and the Subsidiaries own all
of their respective assets, and have good and marketable title with respect
thereto, reflected in the pro forma consolidated balance sheet of the Company
as at the Closing Date subject to no Liens other than Permitted Liens.
SECTION 3.13. REAL PROPERTY OWNED.(a) SCHEDULE 3.13 sets forth all real
estate owned by the Company or any Subsidiary and a description of the type
of use of each such parcel. All such real estate and the structures located
thereon conform to all existing zoning and other applicable laws and
ordinances and there are no encroachments thereon and there are no
encroachments by the structures located thereon on any adjacent parcel of
real estate. Except for Permitted Liens, the Company or a Subsidiary is the c
al and equitable) of and _________________________. The Company or a
Subsidiary has good and marketable _________________________. The Company or
a Subsidiary of land included in the real estate listed on SCHEDULE 3.13
necessary for the conduct ama operation of the Systems; all utilities and
related services necessary for the conduct and operation of the Systems have
been installed or are otherwise being delivered to such real estate and such
utilities and services were installed or are being delivered to such real
estate pursuant to easements and right-of-way agreements permitting such use.
(b) The premises, improvements and fixtures owned by the Company and
each Subsidiary are structurally sound and have no material defects and are
in good operating condition and repair.
SECTION 3.14. REAL AND PERSONAL PROPERTY - LEASED. Set forth in SCHEDULE
3.14 is a true and accurate description of all real and material personal
property leased by the Company and each Subsidiary, setting forth (a) the
name of the lessor, and (b) a description of the property leased. With
respect to such leases, the property described in such leases is presently
used by the Company or such Subsidiary as indicated in SCHEDULE 3.14 as
lessee under the terms of such leases, and such leases are in full force and
effect, and will be free and clear of all Liens created by the Company or any
Subsidiary except for Permitted Liens, and neither
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the Company nor any Subsidiary is in default of the terms of any such lease
nor, to the best of the Company's knowledge, is any lessor in default under
any such lease nor have any events occurred which, with the giving of notice
or the lapse of time, or both, would be a default under any such lease. There
are no developments, to the Company's best knowledge, affecting any of the
leasehold or other interests therein identified in SCHEDULE 3.14 pending or
threatened which might curtail or interfere with the use of such property for
the purpose for which it is now used. The Company has furnished to the
Purchasers a true and correct copy of all leases set fonh in SCHEDULE 3.14.
SECTION 3.15. PROPRIETARY RIGHTS. The Company or a Subsidiary owns or
has legal right to use all patents, trademarks, tradenames, service marks,
logos, copyrights, including applications therefor, inventions, formulas,
methods and processes (all such items being hereinafter referred to as
"Intangible Property") presently used in the operation of the Systems without
any infringement upon the proprietary rights of others. All patents, patent
applications, registered trademarks, trademark applications, trade names,
service marks, logos, licenses and copyrights used or owned by or licensed to
the Company or a Subsidiary in connection with the operation of the Systems
have been duly registered in, filed in, or issued by the United States Patent
Office, United States Register of Copyrights and have been properly
maintained or renewed in accordance with all applicable provisions of
applicable law. No royalties or fees are payable by the Company or any
Subsidiary to any Person by reason of the ownership or use of any of the
Intangible Property. All items of Intangible Property are adequate and
sufficient to permit the Company and each Subsidiary to conduct its business
as presently conducted, and no other rights of any kind in respect of the
Intangible Property are required by the Company or any Subsidiary for its
operations as presently conducted. The Company and each Subsidiary has the
sole and exclusive right to use the Intangible Property and none of the
Company nor any Subsidiary has entered into any licenses, sublicenses or
agreements relating.to the use by any other Person of any Intangible Property
now in effect, and no infringement exists upon the Intangible Property by any
other Person. No charge or ______________________________ as any charge or
___________________________________ to the effect that, nor does the
operation of the business of the Company or any Subsidiary,
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infringe upon or conflict in any way with any rights or properties of the
type enumerated above owned or held by any other Person.
SECTION 3.16. NECESSARY PROPERTY; CONDITION OF PROPERTY. The properties
and assets owned by or leased or licensed to the Company and each Subsidiary
and reflected in the Current Financial Statements and any properties and
assets acquired since the December Balance Sheet Date constitute all of the
real and personal properties, tangible and intangible, which are necessary,
used or useful in the conduct of its business in the manner and to the extent
presently conducted and as proposed in the Projections to be conducted by
them. No other material real or personal properties are required for the
conduct of the business of the Company or any Subsidiary as presently
conducted. The real and personal property owned or leased by the Company or
any Subsidiary has no material defects and is in good operating condition and
repair.
SECTION 3.17. COMPLIANCE WITH LAW.(a) Except as may be set forth on
SCHEDULE 3.17, neither the Company nor any Subsidiary is in default under, or
in violation of, or has violated (and not cured) any law (including, without
limitation, laws relating to the issuance or sale of securities, antitrust,
occupational safety, the protection of the environment, transportation,
storage or disposal of hazardous waste, anti-pollution and air and water
quality laws), or any material licenses, franchises, permits, authorizations
or concessions granted by, or any judgment, decree, writ, injunction or order
of, any governmental or regulatory authority, applicable to its business or
any of its properties or assets. Neither the Company nor any Subsidiary has
received any notification alleging any violations of any of the foregoing
within the last five years with respect to which adequate corrective action
has not been taken.
(b) Neither the Company nor any Subsidiary has received a notice of
non-compliance from any governmental authority within five years prior to the
date hereof, including, without limitation, citations (i) from the
Environmental Protection Agency (or any agency of any state or foreign
country performing a similar function), and (ii) for material violations of
the Occupational Safety and Health Act.
SECTION 3.18. ENVIRONMENTAL COMPLIANCE.(a) Neither the Company nor any
Subsidiary has generated, used, transported,
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treated, stored, released or disposed of, and has not suffered or permitted
anyone else to generate, use, transport, treat, store, release or dispose of
any Hazardous Substance in violation of any Environmental Laws; (b) there has
not been any generation, use, transportation, treatment, storage, release or
disposal of any Hazardous Substance in connection with the conduct of the
Company or any Subsidiary or the use of any property or facility by the
Company or any Subsidiary or to the best of the Company's knowledge, any
nearby or adjacent properties or facilities, which has created or might
reasonably be expected to create any liability under any Environmental Laws
or which would require reporting to or notification of any governmental
entity; (c) no asbestos which is or has some reasonable likelihood of
becoming friable or polychlorinated biphenyl or underground storage tank is
contained in or located at any facility owned, leased or used by the Company
or any Subsidiary; and (d) any Hazardous Substance handled or dealt with in
any way in connection with the business of the Company or any Subsidiary,
whether before or during the ownership by the Company ____________ been and
is being handled or dealt __________________________ any environmental Laws
in accept at the time such activities - are being conducted.
SECTION 3.19. LITIGATION. Except as set forth in SCHEDULE 3.19 hereto,
there is no suit, claim, action, proceeding or investigation pending or
threatened against or affecting the Company or any Subsidiary or any of its
or their respective assets or properties, or the consummation of the
transactions contemplated hereby, at law or in equity or before any
governmental authority or instrumentality or before any arbitrator of any
kind which suit, claim, action, proceeding or investigation seeks damages,
fines and other amounts, or could reasonably be likely to result in damages,
fines and other amounts, against the Company or any of its Subsidiaries.
Except as set forth on SCHEDULE 3.19, none of the Company or any of its
Subsidiaries has been a party to any such suit, claim, action, proceeding or
investigation during the past two years involving its business, assets or
properties which suit, claim, action, proceeding or investigation seeks
damages, fines and other amounts, or has resulted in the imposition of
damages, fines and other amounts, against the Company or any of its
Subsidiaries in excess of $50,000 in each case, nor has any such suit, claim,
action, proceeding or investigation been threatened. Except as set forth on
SCHEDULE 3.19, none of the Company nor any of its Subsidiaries is a party to
or subject to any judgment, order, writ,
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injunction or decree affecting it or any of its assets or properties. No
judgment, decree or order of any court, board or other governmental or
administrative agency or arbitrator is currently outstanding against the
Company, any of its Subsidiaries or their respective
SECTION 3.20. NO MATERIAL ADVERSE EFFECT. Except as set forth on
SCHEDULE 3.20, since the December Balance Sheet Date, there has occurred no
Material Adverse Effect and the Company has no knowledge of any occurrence or
development which might reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.21. EMPLOYEE BENEFIT PLANS.
(a) IN GENERAL. Each Employee Benefit Plan has been maintained and
operated in compliance in all material respects with the provisions of ERISA
and, to the extent applicable, the Code, including but not limited to the
provisions thereunder respecting prohibited transactions. The Company has
heretofore delivered to each of you the most recently completed annual
report, Form 5500, with all required attachments, and actuarial statement
required to be submitted under Section 103(d) of ERISA, with respect to each
Guaranteed Pension Plan. There are no pending or threatened claims, lawsuits,
actions or arbitrations which have been instituted or asserted with respect
to any Employee Benefit Plan (other than routine claims for benefits) or any
fiduciary thereof.
(b) TERMINABILITY OF WELFARE PLANS. Under each Employee Benefit Plan
which is an employee welfare benefit plan within the meaning of Section 3(1)
or Section 3(2)(B) of ERISA, no benefits are due unless the event giving rise
to the benefit entitlement occurs prior to plan termination (except as
required by Title I, Part 6 of ERISA). The Company or an ERISA Affiliate, as
appropriate, has reserved the right in its discretion to terminate each such
Plan and the benefits provided thereunder at any time (or at any time
subsequent to the expiration of any __________________ bargaining agreement.
(c) GUARANTEED PENSION PLANS. Each contribution required to be made to
a Guaranteed Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the notice or lien
provisions of Section 302(f) of ERISA, or otherwise, has been timely made. No
waiver of an accumulated funding deficiency or extension of amortization
periods has been received with respect to
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any Guaranteed Pension Plan. No liability to the PBGC (other than required
insurance premiums, all of which have been paid) has been incurred by the
Company or any ERISA Affiliate with respect to any Guaranteed Pension Plan,
and there has not been any ERISA Reportable Event (other than an Event as to
which the requirement of 30 days notice has been waived), or any other event
or condition which presents a material risk of termination of any Guaranteed
Pension Plan by the PBGC. Based on the latest valuation of each Guaranteed
Pension Plan (which in each case occurred within twelve months of the date of
this representation) and on the actuarial methods and assumptions employed
for that valuation, the aggregate benefit liabilities of each such Guaranteed
Pension Plan within the meaning of Section 4001 of ERISA did not exceed the
aggregate value of the assets of all such Plans.
(d) MULTIEMPLOYER PLANS. None of the Company or any ERISA Affiliate has
incurred any material liability (including contingent or secondary liability)
to any Multiemployer Plan as a result of a complete or partial withdrawal
from such Multiemployer Plan under Section 4201 of ERISA or as a result of a
sale of assets described in Section 4204 of ERISA.
SECTION 3.22. WITHHOLDING, CONTRACTS, LABOR RELATIONS. The Company and
each Subsidiary has withheld all amounts required by law or agreement to be
withheld by it from the wages, salaries and other payments to its employees
and is not liable for any arrears of wages or any taxes or penalties for
failure to comply with any of the foregoing. Neither the Company nor any
Subsidiary is a party to any written employment agreement, arrangement or
understanding with any of its officers, employees, partners or shareholders.
There are no collective bargaining agreements covering any of the employees
of the Company or any Subsidiary. Neither the Company nor any Subsidiary has
breached or otherwise failed to comply in any material respect with any
provision of any collective bargaining agreement or other labor union
contract applicable to any of its employees. No consent of any union (or any
similar group or organization) is required in connection with the
consummation of the transactions contemplated hereby. There are no pending,
threatened or anticipated (a) employment discrimination charges or complaints
against or involving the Company or any Subsidiary, before any federal,
state, or local board, department, commission or agency, (b) unfair labor
practice charges or complaints, disputes or grievances affecting the Company
or any Subsidiary, (c)
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union representation petitionsrespecting the employees of the Company or any
Subsidiary, (d) efforts being made to organize any of the employees of the
Company or any Subsidiary, or (e) strikes, slow downs, work stoppages, or
lockouts or threats thereof affecting the Company or any Subsidiary.
SECTION 3.23. INSURANCE. SCHEDULE 3.23 contains a description of all
policies of title, liability, fire, worker's compensation and other forms of
insurance (including bonds) insuring the properties, assets and operations of
the business of the Company and each Subsidiary are in full force and effect,
have been underwritten by unaffiliated insurers and are sufficient for all
applicable requirements of ______. All such policies shall continue in full
force and effect _________________________ with respect to
_______________________________________ which would have been covered by such
policies prior to the Closing Date.
SECTION 3.24. BURDENSOME OBLIGATIONS. Neither the Company nor any of its
Subsidiaries is party to or bound by any agreement, deed, lease or other
instrument or subject to any order, writ, injunction or decree or other
action of any court or governmental department, commission, bureau, board or
other administrative agency or official, or any Charter or other corporate or
contractual restriction, which is so unusual or burdensome as could
reasonably be expected to affect or impair the business, assets, financial
condition or prospects of the Company and its Subsidiaries taken as a whole
in the foreseeable future. None of the Company or its Subsidiaries is a party
to any contract or agreement with any Affiliate the terms of which are not
commercially reasonable or are less favorable to it than it would obtain in a
comparable arm's length transaction with a Person other than an Affiliate at
the time entered into.
SECTION 3.25. CERTAIN GOVERNMENTAL REGULATIONS. Neither the Company nor
any Subsidiary is a "holding company", or a "subsidiary company" of a
"holding company" or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is the Company
or any of its Subsidiaries a "registered investment company", or an
"affiliated person" or a "principal underwriter" of a "registered investment
company", as such terms are defined in the Investment Company Act of 1940, as
amended.
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SECTION 3.26. CORPORATE DOCUMENTS, BOOKS AND RECORDS. (a) Complete and
correct copies of the Charter and by-laws, and of all amendments thereto, of
the Company and each Related Entity have been previously delivered to the
Purchasers by the Company, and no changes in said documents will be made on
or before the Closing Date. The books and records of the Company and each
Subsidiary accurately reflect the transactions to which the Company and each
Subsidiary is a party or by which its properties are subject or bound, and
such books and records have been properly kept and maintained.
(b) The financial records, ledgers, account books and other accounting
records of the Company, the Cellular Subsidiaries, the Acquiring Subsidiaries
and the Landline Subsidiaries, are current, correct and complete in all
material respects and, if required by applicable law, conform in all material
respects with the rules and regulations of the FCC and any applicable state
governmental authorities.
SECTION 3.27. TRANSACTION COSTS. Except as set forth on SCHEDULE 3.27,
there are no Transaction Costs, as defined below, that will be payable by the
Company or any Subsidiary with respect to the transactions contemplated by
this Agreement or any Related Agreement. The term "Transaction Costs" shall
mean all of the costs, fees, and expenses incurred by the Company or any
Subsidiary in connection with the transactions contemplated by this Agreement
or any other Related Agreement, as set forth in SCHEDULE 3.27, including
without limitation, broker's, finder's or placement fees or commissions,
attorneys' fees and fees of other professionals.
SECTION 3.28. EQUITY INTERESTS. The Purchased Securities issued to the
Purchasers pursuant to SECTION 2.1 have been duly authorized and issued, are
______________________ assessable _________________________________________
the equity interests of the Company on a fully diluted basis.
SECTION 3.29. DISCLOSURE. No representation, warranty or statement made
in this Agreement or any other Related Agreement or any agreement,
certificate, statement or document furnished by or on behalf of the Company
or any Subsidiary in connection herewith or therewith contains any untrue
statement of material fact or omits to state a material fact necessary in
order to make the
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statements contained herein or therein, in light of the circumstances in which
they were made, not misleading.
SECTION 3.30. SENIOR MANAGEMENT COMPENSATION. SCHEDULE 3.30
accurately sets forth the annual compensation, including, without limitation,
advisor, consultant, employee fees, salaries, bonuses and other amounts paid
by the Company or any Related Entity, of each officer of the Company and each
employee of the Company who was paid in excess of $50,000 in any year for
each of the 1994 and 1995 fiscal years and as projected for the 1996 fiscal
year.
SECTION 3.31. REPRESENTATIONS AND WARRANTIES UNDER RELATED AGREEMENTS.
All representations and warranties made by the Company or any of its
Subsidiaries in any of the Related Agreements or in the certificates
delivered in connection therewith are true and correct in all respects as of
the date hereof with the same force and effect as though made on and as of
the date hereof, and such representations and warranties are hereby confirmed
to the Purchasers and made representations and warranties of the Company
hereunder as fully as if set forth herein. To the best of the Company's
knowledge, all representations and warranties made in the Related Agreements
by or on behalf of any party thereto other than the Company or any of its
Subsidiaries are true and correct.
SECTION 3.32. SMALL BUSINESS CONCERN. The Company, together with its
"affiliates" (as defined in 13 CFR 121.401), qualify as a "small business
concern" within the meaning of the Small Business Investment Act of 1958, as
amended, and as a "small concern" within the meaning of the rules and
regulations thereunder pertaining to financing by small business investment
companies. The Company and its Subsidiaries conduct their business in all
respects and maintains their properties and facilities in such a manner that
the financing and financial assistance provided by the Purchasers will comply
with 13 CFR 107.901 The Company acknowledges that FVR and FEP are federal
licensees under the Small Business Investment Act of 1958, as amended.
SECTION 3.33. MACHINERY AND EQUIPMENT-OWNED AND LEASED. Each item of
machinery and equipment owned or leased by the Company and each Subsidiary
which is material to the conduct of the Company's or any Subsidiary's
business is in good repair and is in good working order (subject to ordinary
wear and tear).
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SECTION 3.34. NECESSARY LICENSES AND PERMITS. The Company and each
Subsidiary has all licenses, permits, consents, concessions and other
authorizations of governmental, regulatory or administrative agencies or
authorities, whether foreign, federal, state, or local, required to own and
lease its Properties and assets and to conduct its business as now conducted.
Schedule 3.34 sets forth a true and accurate description of each license
issued by the _____________________ state governmental authorities in
connection with the operation of the Systems and the Landline Business. All
FCC licenses are in full force and effect and there are no pending
modifications, amendments or revocation proceedings which would adversely
affect the operation of any of the Systems. All fees due and payable to
governmental authorities pursuant to the FCC licenses have been paid and no
event has occurred with respect to the FCC licenses held by the Cellular
Subsidiaries or to be acquired by the Acquiring Subsidiaries, which, with the
giving of notice or the lapse of time or both, would constitute grounds for
revocation thereof. Each of the Cellular Subsidiaries and Acquiring
Subsidiaries and, to the best of the Company's knowledge, each of the USCC
Entities, is in compliance in all material respects with the terms of the FCC
licenses, as applicable, and there is no condition, event or occurrence
existing, nor is there any proceeding being conducted of which the Company
has received notice, nor, to the Company's knowledge, is there any proceeding
threatened, by any governmental authority, which would cause the termination,
suspension, cancellation or nonrenewal of any of the FCC licenses, or the
imposition of any penalty or fine by any regulatory authority. Except as
specified in SCHEDULE 3.34, no registrations, filings, applications, notices,
transfers, consents, approvals, audits, qualifications, waivers or other
action of any kind is required by virtue of the execution and delivery of
this Agreement, or of the consummation of the transactions contemplated
hereby or by the Related Agreements (a) to avoid the loss of any such
license, permit, consent, concession or other authorization or any asset,
property or right pursuant to the terms thereof, or the violation or breach
of any Law applicable thereto or (b) to enable the Company or any Subsidiary
to hold and enjoy the same after the Closing Date in the conduct of its
business as conducted prior to the Closing Date.
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ARTICLE IV
PURCHASERS' REPRESENTATIONS
SECTION 4.1. INVESTMENT INTENT. Each Purchaser hereby represents and
warrants to the Company that it is acquiring the Purchased Securities to be
purchased by it pursuant to SECTION 2.1 for investment and not with a view
towards the sale or distribution of its rights hereunder or thereunder.
SECTION 4.2. AUTHORIZATION. Each Purchaser represents that this
Agreement and the other Related Agreements to which it is a party have been
executed by a duly authorized Person on its behalf and the execution,
delivery and performance hereof and thereof have been duly authorized by all
appropriate action.
ARTICLE V
CONDITIONS TO PURCHASE AND SALE
Each Purchaser's obligation to purchase the Purchased Securities
pursuant to SECTION 2.1 is subject to compliance by the Company with its
agreements contained herein and in each other Related Agreement, and to the
satisfaction, on or prior to the Closing Date, of the following conditions:
SECTION 5.1. RELATED AGREEMENTS. Each of the Related Agreements shall
have been executed and delivered on the Closing Date in a form satisfactory
to the Purchasers. All covenants, agreements and conditions contained in the
Related Agreements which are to be performed or complied with on or prior to
the Closing Date shall have been performed or complied with in all material
respects.
SECTION 5.2. CHARTER DOCUMENTS: CERTIFICATES. The Purchasers shall have
received (a) from the Company and each Subsidiary a copy, certified by the
relevant governmental authority in which it is incorporated or registered as
a limited partnership to be true and complete as of a date no more than 10
days prior to the Closing Date, of its articles or certificate of
incorporation or certificate of limited partnership, as the case may be, (b)
from the Company and each Subsidiary that is or corporation a copy, certified
by its duly authorized officer to be true and complete as of the Closing
Date, of the by-laws thereof; and (c) from the Company and each Subsidiary a
certificate, dated not more than ten days prior to the Closing Date, of the
relevant governmental authority or other appropriate official of each state
in which it
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is incorporated, registered as a limited partnership or qualified to do
business, as to such Person's partnership or corporate good standing in such
state or qualification to do business, as the case may be. The Purchasers
shall have received from the Company an incumbency certificate, dated the
Closing Date, signed by a duly authorized officer thereof and giving the name
and bearing a specimen signature of each individual who shall be authorized
to sign, in the name and on behalf of the Company, this Agreement and each
other Related Agreement to which the Company is or is to become a party.
SECTION 5.3. PROOF OF CORPORATE OR PARTNERSHIP ACTION. The Purchasers
shall have received from the Company copies certified by a duly authorized
representative thereof to be true and complete as of the Closing Date, of the
records of all corporate action taken to authorize the execution, delivery
and performance of this Agreement and each other Related Agreement to which
the Company is a party.
SECTION 5.4. LEGAL OPINIONS. The Purchasers shall have received from
Pate, Kempf & Knarr, counsel to the Company, a favorable opinion
substantially in the form of EXHIBIT E, and from Wilkinson, Barker, Knauer &
Quinn, FCC Counsel to the Company, a favorable opinion substantially in the
form of EXHIBIT F.
SECTION 5.5. REPRESENTATIONS AND WARRANTIES. The representations and
warranties contained or incorporated by reference herein shall be true and
correct in all respects on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date except for those
representations and warranties which relate specifically to a particular date
provided that such representations and warranties were true and correct in
all respects as of such date; no event or condition shall have occurred or
would result from the issuance of any of the Preferred Shares which would be
a Noncompliance Event, and the Company shall have performed and complied with
all conditions and agreements required to be performed or complied with by it
______________ and the Purchasers shall have received on the Closing Date a
certificate to these effects signed by the Company.
SECTION 5.6. LEGALITY; GOVERNMENTAL AND OTHER AUTHORIZATIONS. The
purchase and sale of the Preferred Shares pursuant to SECTION 2.1 shall not
be prohibited by any law or governmental order or
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regulation, and shall not subject any Purchaser to any penalty, special tax,
or other onerous condition. All necessary consents, approvals, licenses,
permits, orders and authorizations of, and registrations, declarations and
filings with, any governmental or administrative agency or of or with any
other Person, with respect to any of the transactions contemplated by this
Agreement or any other Related Agreement, shall have been duly obtained or
made, as the case may be, and shall be in full force and effect.
SECTION 5.7. STOCK SPLIT. Prior to the Closing Date the Company shall
have effected a stock split with respect to its outstanding shares of Common
Stock so that the Common Stock Shareholders of the Company immediately prior
to the Closing shall own an aggregate of 473,152 shares of Class A Common
stock.
SECTION 5.8. PAYMENT OF CERTAIN FEES AND DISBURSEMENTS. The Purchasers
shall have been reimbursed for all reasonable fees, costs and expenses
(including, but not limited to, legal and accounting fees, costs and
expenses) incurred by them through the Closing Date in connection with the
transactions contemplated by this Agreement and the other Related Agreements.
SECTION 5.9. OTHER CLOSINGS. The closing relating to the Cellular
Acquisition, the CoreStates Financing and the redemption of all of the shares
of 10% Cumulative, Compounded, Convertible, Redeemable Class A Preferred
Stock of the Company held by TDS shall occur simultaneously with the Closing
on terms and conditions satisfactory to the Purchasers.
SECTION 5.10. KEY MAN LIFE INSURANCE. The Company shall have obtained a
key man life insurance policy in a face amount of not less than Ten Million
Dollars ($10,000,000) on the life of Dobson, the proceeds of which shall be
divided equally between the Banks (as defined in the Financing Agreement) on
one hand and the Purchasers on the other hand. The dollar amount, terms and
issuer of such policy shall be acceptable to the Purchasers and $5,000,000 of
such policy shall be assigned on the Closing Date to the Purchasers and
$5,000,000 of such policy shall be assigned on the Closing Date to the Banks.
SECTION 5.11. GENERAL. All instruments and corporate and partnership
proceedings in connection with the transactions contemplated by this
Agreement and the other Related Agreements
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shall be satisfactory in form and substance to the Purchasers, and the
Purchasers shall have received copies of all documents, including, without
limitation, records of corporate or other proceedings, opinions of counsel
and consents which the Purchaser may have requested in connection therewith
SECTION 5.12. DOBSON NOTE. Dobson shall have executed and delivered a
promissory note to the Company ________ principal amount of $1,400,000, which
promissory note shall _________ conditions satisfactory to the Purchasers.
ARTICLE VI
COVENANTS
The Company covenants that while any of the Purchased Securities or any
of the Common Shares are held by any Purchaser, it will comply, and the
Company will cause each of the Subsidiaries to comply, with the following
provisions unless otherwise consented to in writing by the Purchasers:
SECTION 6.1. RECORDS AND ACCOUNTS. Each of the Company and the
Subsidiaries will keep true and accurate records and books of account in
which full, true and correct entries will be made in accordance with GAAP and
in all other respects consistent with industry practices.
SECTION 6.2. EXISTENCE: RELATED SECURITIES; MAINTENANCE OF PROPERTIES.
Each of the Company and the Related Entities will preserve and keep in full
force and effect and in good standing its corporate or partnership existence,
as the case may be, rights and franchises except for any Related Entity which
is combined or merged with and into another Related Entity or the Company.
The Company shall at all times own, directly or indirectly, the equity
interest in each Related Entity as reflected in the Capital Structure
Schedule except for any Related Entity which is combined or merged with and
into another Related Entity or the Company. The Company and the Related
Entities will not engage in any business or business ventures other than (a)
those presently conducted by such Person, (b) those businesses reasonably
ancillary or similar thereto and (c) those businesses which require
investments by such Person of less than $50,000 in the aggregate. Each of the
Company and the Related Entities will maintain all of its properties used
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or useful in the conduct of its business in conformity with industry
standards and cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company
may be necessary so that the business carried on is consistent with industry
standards.
SECTION 6.3. INSURANCE. Each of the Company and the Subsidiaries will
maintain with financially sound and reputable insurance companies, funds or
underwriters insurance of the kinds, covering the risks and in the relative
proportionate amounts usually carried by reasonable and prudent companies
conducting businesses similar to that of the Company and the Subsidiaries.
SECTION 6.4. TAXES. Each of the Company and the Subsidiaries will pay
and discharge, or cause to be paid and discharged, before the same shall
become overdue, all Taxes, assessments and other governmental charges imposed
upon it and its real properties, sales and activities, or any part thereof,
or upon the income or profits therefrom, as well as all claims for labor,
materials or' supplies, which if unpaid might by law become a Lien upon any
of their properties; PROVIDED, HOWEVER, that any such Tax, assessment,
charge, levy or claim need not be paid if the validity or amount thereof
shall currently be contested in good faith by appropriate proceedings and if
the Company or the applicable ____________ have set aside on its books
adequate reserves with _____________________; PROVIDED, FURTHER, that the
company and the applicable Subsidiary will pay or cause to be paid all such
Taxes, assessments, charges, levies or claims forthwith upon the commencement
of foreclosure on any Lien which may have attached as security therefor.
SECTION 6.5. INSPECTION OF PROPERTIES AND BOOKS. Each of the Company and
the Subsidiaries shall permit each Purchaser or any of its designated
representatives, at the Company's cost, to visit and inspect any of its
properties, to examine its books of account (and to make copies thereof and
extracts therefrom), and to discuss its affairs, finances and accounts with,
and to be advised as to the same by, officers or partners of such Persons,
all at such times and intervals as such Purchaser may reasonably request.
SECTION 6.6. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES AND PERMITS. Each
of the Company and the Subsidiaries will comply with (a) all FCC laws and
regulations, all Oklahoma Corporations
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Commission laws and regulations and all other material laws and regulations
wherever its business is conducted, (b) the provisions of its Charter and
by-laws, (c) the Franchises, Necessary Contracts and all other material
agreements and instruments by which it or any of its properties may be bound
(including, without limitation, the Related Agreements and the agreements,
documents and instruments executed and delivered by it in connection with the
CoreStates Financing), (d) all applicable decrees, orders and judgments, and
(e) all required FCC and Oklahoma Corporations Commission approvals, permits
and licenses and all other material approvals, permits and licenses. If at
any time any authorization, consent, approval, permit or license from any
officer, agency or instrumentality of any government shall become necessary
or be required in order that any of the Company or the Subsidiaries may
fulfill any of their respective obligations hereunder, each of the Company
and the Subsidiaries will promptly take or cause to be taken all reasonable
steps within its power to obtain such authorization, consent, approval,
permit or license and furnish the Purchasers with evidence thereof.
SECTION 6.7. EMPLOYEE BENEFIT PLANS. Neither of the Company nor any
ERISA Affiliate
(a) engage in any "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code,
(b) permit any Guaranteed Pension Plan to incur an "accumulated funding
deficiency", as such term is defined in Section 302 of ERISA, whether or not
such deficiency is or may be waived,
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the
Company or any of its Subsidiaries pursuant to Section 302(f or Section 4068
of ERISA; or
(d) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of Section 4001 of ERISA) of
_______________ Pension Plans exceeding the value of
___________________________, disregarding for this purpose the benefit
liabilities and assets of any such Plan with assets in excess of benefit
liabilities.
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The Company will (i) promptly upon filing the same with the Department
of Labor or Internal Revenue Service, furnish to Fleet a copy of the most
recent actuarial statement required to be submitted under Section 103(d) of
ERISA and Annual Report, Form 5500, with all required attachments, in respect
of each Guaranteed Pension Plan and (ii) promptly upon receipt or dispatch,
furnish to each Purchaser any notice, report or demand sent or received in
respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042, 4043,
4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan,
under Section 4041A, 4202, 4219, 4242 or 4245 of ERISA.
SECTION 6.8. FURTHER ASSURANCES. Each of the Company and the
Subsidiaries will cooperate with the Purchasers and execute such further
instruments and documents as the Purchasers shall reasonably request to carry
out to the satisfaction of the Purchasers the transactions contemplated by
this Agreement or any other Related Agreement.
SECTION 6.9. NOTICES. The Company will promptly notify the Purchasers in
writing of the occurrence of a Noncompliance Event or if any Person shall
give any notice or take any other action in respect of a claimed default with
respect to any material agreement to which the Company or any of the
Subsidiaries is a party. The Company also covenants and agrees to promptly
provide the Purchasers with written notice: (a) upon the Company or any of
the Subsidiaries obtaining knowledge of any violation of any Environmental
Law regarding the property or the operations of the Company or any of the
Subsidiaries; (b) upon the Company or any of its Subsidiaries obtaining
knowledge of any potential or known release, or threat of release, of any
Hazardous Substances at, from, or into the property which it reports in
writing or is reportable by it in writing to any governmental authority; (c)
upon the Company or any of the Subsidiaries receipt of any notice of
violation of any Environmental Laws or of any release or threatened release
of Hazardous Substances, including a notice or claim of liability or
potential responsibility from any third party (including, without limitation,
any federal, state or local governmental officials) and including notice of
any formal inquiry, proceeding, demand, investigation or other action with
regard to (i) the Company's, any of the Subsidiaries' or any other Person's
operation of the property, (ii) contamination on, from or into the property,
or (iii) investigation or remediation of off site locations at which the
Company, any of the Subsidiaries or any of
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their predecessors are alleged to have directly or indirectly disposed of
Hazardous Substances; or (d) upon the Company or any of the Subsidiaries
obtaining knowledge that any expense or loss has been incurred by such
governmental] authority in connection with the assessment, containment,
removal or remediation of any Hazardous Substances with respect to which the
Company or any of its Subsidiaries may be liable or for which a Lien may be
imposed on the property.
SECTION 6.10. DISTRIBUTIONS. Neither the Company nor any Related Entity
shall make any Distribution except (a) the Company may redeem from TDS the
outstanding shares of 10% Cumulative, Compounded, Convertible, Redeemable
Class A Preferred Stock of the Company, (b) the Company may pay dividends, in
accordance with the Certificate of Designation, to Dobson CC Limited
Partnership, the majority shareholder of the Company (the "Partnership"), for
the purpose of making distribution ____________________________ to service
the Trust and ____________________ pro rata dividends are simultaneously
declared to the holder of Class B Preferred Stock and paid in accordance with
the Certificate of Designation and the other holders of Common Stock as
provided in the Certificate of Designation and (c) the Company may redeem the
Purchased Securities in accordance with the terms of the Financing Agreements.
SECTION 6.11. DILUTION PROTECTION. Except for the issuance of Purchased
Securities set forth in SECTION 2.1 and except for the issuance of the
Qualified Options, neither the Company nor any Subsidiary will (a) issue,
sell, give away or otherwise transfer, (b) grant any rights (either
preemptive or other) or options to subscribe for or purchase, or (c) enter
into any agreements or issue any warrants providing for the issuance of, any
of its capital stock or other equity interest (or any stock or securities
convertible into or exchangeable for any of their capital stock or other
equity interest). Neither the Company nor any of the Subsidiaries shall
authorize any additional class or series of shares or increase the number of
shares of authorized capital from that set forth in SCHEDULE 3.2 hereto.
SECTION 6.12. MERGER, CONSOLIDATION, SALE OF ASSETS OR OTHER
DISPOSITIONS. Except for the merger of a Subsidiary with and into the Company
or any other Subsidiary, neither the Company nor any Subsidiary will become a
party to any merger or consolidation, or sell, lease, sublease or otherwise
transfer or dispose of any
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shares of or other equity interests in a Subsidiary or any substantial
portion of its assets, rights and licenses to any Person, whether directly or
indirectly or in a single transaction or a series of related transactions,
other than (a) sales of inventory, used equipment and other assets not in the
aggregate material to the business in the ordinary course of business and
transfers constituting Permitted Liens or turn over the management of, or
enter into a management contract with respect to, any of its assets or
properties, rights and licenses
SECTION 6.13. TRANSACTIONS WITH AFFILIATES. Neither the Company nor any
Subsidiary will engage in any transaction with any of its Affiliates other
than the Purchasers and their Affiliates except for (a) transactions
permitted under the Related Agreements and (b) arms length transactions not
exceeding $100,000 in the aggregate in any fiscal year.
SECTION 6.14. SALE AND LEASEBACK OF PROPERTY. Neither the Company nor
any Subsidiary will enter into any arrangement, directly or indirectly, with
any Person whereby it shall sell or transfer any property, whether real,
personal or a combination thereof, used or useful in its business, whether
now owned or hereinafter acquired, and thereafter rent or lease such property.
SECTION 6.15. JOINT VENTURES. Neither the Company nor any Subsidiary
will cause or consent to any joint venture engaging in any activity which
would result in the joint venture being in breach of any representation,
warranty, covenant or agreement set forth in this Agreement or any other
Related Agreement as if the joint venture were a Subsidiary.
SECTION 6.16. INVESTMENTS. The Company will not, and will not permit any
Subsidiary to, have outstanding or acquire or commit itself to acquire or
hold any Investment except Investments in: (a) marketable direct obligations
issued or guaranteed by the United States of America which mature within one
year from ______________ are subject to a repurchase agreement, exercisable
within 90 days from the date of acquisition of such agreement, with any
commercial bank or trust company __________ under the laws of the United
States of America or any State thereof or the District of Columbia, (b)
commercial paper maturing within one year from the date of acquisition
thereof and having, at the date of acquisition thereof, the highest rating
obtainable from Moody's Investors Service, Inc.
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or Standard & Poor's Corporation, (c) bankers' acceptances eligible for
rediscount under Federal Reserve Board requirements accepted by any
commercial bank or trust company referred to in clause (a) hereof, (d)
certificates of deposit maturing within one year from the date of acquisition
thereof issued by any commercial bank or trust company referred to in clause
(a) hereof and having capital and surplus of at least $25,000,000, (e)
certificates of deposit issued by banks organized under the laws of any other
jurisdiction, each having combined capital and surplus of not less than
$25,000,000, and (f) Investments by the Company and each Subsidiary existing
on the date of this Agreement.
SECTION 6.17. SENIOR MANAGEMENT; COMPENSATION. (a) The aggregate
compensation paid by the Company to any officer set forth in SCHEDULE 6.17
for any fiscal year of the Company shall not be greater than the amount set
forth opposite such Person's name on such Schedule.
SECTION 6.18. COMPLIANCE WITH CAPITAL BUDGET.(a) Except as set forth in
Section 6.18(b) below, the Company and each Subsidiary shall at all times
comply with the Budget approved by the Company and the Purchasers prior to
the beginning of each fiscal year in accordance with SECTION 7.3(a). In the
event any Budget for a particular fiscal year is not approved by the Company
and the Purchasers in accordance with this SECTION 6.18, then the applicable
expenditures for such fiscal year shall not exceed the greater of (x) the
amount set forth in the Projections for such fiscal year or (y) the amount
set forth in the most recent Budget which was approved by the Company and the
Purchasers pursuant to Section 7.3(a) for such fiscal year.
(b) Neither the Company nor any Subsidiary will incur expenditures for
any capital expenditure item in any fiscal year if as a result thereof the
amount which would be expended for such item would exceed 115% of the amount
budgeted for such item in the Budget for such fiscal year; provided that the
Company or any Subsidiary may incur expenditures for a capital expenditure
item in excess of 115% of the amount budgeted for such item in the Budget
(the "Excess Amount") for such fiscal year so long as the aggregate Excess
Amount for all such items which exceed 115% of the amount budgeted therefor
does not exceed $300,000 in any fiscal year.
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SECTION 6.19. RESPONSE ACTIONS. The Company covenants and agrees that if
any release or disposal of Hazardous Substances shall occur or shall have
occurred on the premises occupied by the Company or any Subsidiary, the
Company will cause the prompt containment and removal of such Hazardous
Substances and remediation of the property as necessary to comply in all
material respects with all Environmental Laws or to preserve in all material
respects the value of the property.
SECTION 6.20. MERGER, CONSOLIDATION OR OTHER ACQUISITIONS. Neither the
Company nor any Subsidiary shall directly or indirectly, by operation of law
___________________ consolidate with, acquire all or _____________________
(other than purchases of inventory made in the ordinary course of the
Company's business) _______________-- of, otherwise combine with, any Person
except for a merger, consolidation or acquisition having a purchase price
less than $500,000 in any single transaction or for mergers, consolidations
and acquisitions having an aggregate purchase price less than $1.0 million in
any twelve-month period.
SECTION 6.21. CHARTER AMENDMENTS. The Charter and by-laws of the Company
and each Related Entity shall not be amended or modified if such amendment or
modification has, or would have, directly or indirectly, any material adverse
effect on any holder of any then outstanding Purchased Securities or on the
rights or remedies of such holder hereunder or under any of the Related
Agreements.
SECTION 6.22. CONTROL OF SYSTEMS. Notwithstanding any provision of this
Agreement that may be construed to the contrary, the Cellular Subsidiaries
and Acquiring Subsidiaries shall maintain actual (de facto) and legal (de
jure) control over their respective Systems and FCC licenses. Specifically,
and without limitation, the responsibility for the operation of each of the
Systems shall reside with the Cellular Subsidiary or Acquiring Subsidiary
holding the FCC license therefor, including (but not limited to)
responsibility for the following matters: (a) access to and the use of
facilities and equipment; (b) control of daily operation; (c) creation and
implementation of policy decisions; (d) employment, supervision and dismissal
of employees; (e) payment of financing obligations and expenses incurred in
the operation and construction of the Systems; (f) receipt and distribution
of monies and profits derived from the operation of the Systems; and (g)
execution and
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approval of all contracts and applications prepared and filed before
regulatory agencies.
SECTION 6.23. TRUST LOAN REPAYMENT. So long as the Trusts are the
borrowers under the Trust Loan, the Company shall not make any distributions
to the Trusts to service the Trust Loan except by paying dividends to the
Partnership which shall then distribute such monies to the Trust to make
principal, interest and other payments due in respect of the Trust Loan.
SECTION 6.24. PAYMENT OF AFFILIATE NOTES. None of the promissory notes
listed on SCHEDULE 3.8 will be forgiven, and each such promissory note issued
by an Affiliate listed on SCHEDULE 3.8 will not be amended, extended or
modified and the Company shall cause the applicable payee of such promissory
note to collect all outstanding principal and accrued but unpaid interest on
such promissory note in accordance with the terms set forth in such
promissory note.
ARTICLE VII
REPORTING COVENANTS
The Company hereby agrees that so long as any of the Purchased
Securities or any of the Common Shares are held by any Purchaser, it will
comply with, and it will cause each Subsidiary to comply with, the following
provisions:
SECTION 7.1. ANNUAL STATEMENTS. As soon as available and in any event
within 90 days after the close of each fiscal year of the Company commencing
with the ____________________ ending on December 31, 1995, the Company will
_____ Purchaser audited consolidated and unaudited consolidating balance
sheets and statements of income and retained earnings and of cash flows of
the Company audited by Arthur Andersen, L.L.P. or any other public accounting
firm selected by the Company and reasonably acceptable to the Purchasers,
showing the financial condition of the Company as of the close of such fiscal
year and the results of the Company's operations during such fiscal year, all
on a consolidated basis. Each of the financial statements delivered hereunder
shall be certified without qualification by such accounting firm to have been
prepared in accordance with GAAP consistently applied and if such firm in the
course of its audit shall have obtained knowledge
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of any such Noncompliance Event or so advises the Company, the Company shall
cause such firm to notify each Purchaser in writing of the nature thereof.
SECTION 7.2. QUARTERLY STATEMENTS. Within forty-five (45) days after the
end of each quarter commencing with the quarter ending December 31, 1995, the
Company will deliver to each Purchaser consolidated and consolidating
unaudited balance sheets and statements of income and retained earnings and
of cash flows of the Company as of the end of each such quarter and for the
period of the then current fiscal year to the end of such month, and
presenting on a comparative basis the corresponding figures for such period
in the preceding fiscal year and the then current Budget, in each case by
region, certified by the Chief Financial Officer of the Company to be true
and correct and to have been prepared in accordance with GAAP subject to
normal year-end adjustments described in reasonable detail.
SECTION 7.3. BUDGETS AND OTHER REPORTS. (a) The Company will deliver to
the Purchasers, within thirty (30) days prior to the commencement of each
fiscal year, project spending and capital budgets for the five immediately
succeeding fiscal years, projected monthly statements of income and cash flow
for such fiscal years (the "Budget"), projected quarterly balance sheets for
such fiscal years and as soon as practical after preparation thereof,
complete and correct copies of all quarterly (if any) or annual budgetary
analyses or forecasts of the Company and the Subsidiaries in the form
customarily prepared by management for its own internal use or the use of the
Company. The Company the Purchasers shall once each calendar year, commencing
with the Company's 1996 fiscal year, conduct an annual off-site meeting to
review the Company's projections and business plans with respect to such
fiscal year and the immediately succeeding four fiscal years.
(b) The Company shall also furnish to each Purchaser (i) within five
(5) days of the Company's receipt thereof, copies of all management letters
of the Company's accountants; (ii) within five (5) days of the Company's
receipt thereof, notice with respect to any material pending or threatened
litigation to which the Company or any Subsidiary is or may become a party;
(iii) within five (5) days of the Company's receipt thereof, notice of any
default or event of default with respect to any material agreement to which
the Company or any Subsidiary is a party; (iv) within five
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(S) days of the filing thereof, copies of all material flings made by or on
behalf of the Company or any Subsidiary with any governmental regulatory
agency; and (v) such other information as any Purchaser may reasonably
request from time to time.
(c) Within fifteen (15) days after the end of each calendar month
commencing with the calendar month ending January 31, 1996, the
_______________________________ monthly and year-to-date summaries, on a
consolidated basis broken down for each market in which the Company or any
Subsidiary operates any System, of the following: (a) number of Pops, (b)
number of subscribers, (c) gross activations, (d) net activations, (e)
deactivations (and setting forth the reason therefor), (f) acquisition cost
per gross activation, (g) average monthly revenue per subscriber, (h) total
number of roaming minutes, (i) total roaming revenue and (j) any other
information which the Purchasers may request from time to time.
ARTICLE VIII
NONCOMPLIANCE EVENTS
SECTION 8.1. NONCOMPLIANCE EVENTS. The Purchasers shall be entitled to
exercise the remedies provided in SECTION 8.2 in accordance with the terms
thereof if any one or more of the following events (each a "Noncompliance
Event") shall occur:
(a) the Company or any Subsidiary shall fail to perform or observe any
of the covenants, agreements or provisions to be performed or observed by it
under this Agreement or any of the other Related Agreements, except that for
purposes of Section 9 of the Shareholders' Agreement (i) the failure of the
Company or any Subsidiary to perform or observe the provisions of Sections
6.3, 6.4, 6.5, 6.7, 6.8, 6.9, 6.16, 6.18, 6.19 and/or 7.3 of this Agreement
shall not be a Noncompliance Event and (ii) the failure of the Company to
comply with the provisions of Sections 7.1 and/or 7.2 of this Agreement shall
not be a Noncompliance Event until such failure to so comply has continued
for 60 days; or
(b) any representation or warranty made by the Company or any
Subsidiary to any Purchaser in or in connection with this Agreement or any
other Related Agreement shall prove to have been materially false on the date
as of which it was made; or
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(c) a default with respect to Indebtedness for borrowed money of the
Company or any Subsidiary shall occur, and such default shall continue,
without having been duly cured, waived or consented to, beyond the period of
grace, if any, therein specified and so as to permit the acceleration
thereof, if any acceleration is provided for therein, and such default shall
continue uncured and unwaived for 120 days after the expiration of such grace
period unless, during such 120-day period, the applicable Indebtedness for
borrowed money is accelerated, PROVIDED, HOWEVER, that so long as the
applicable Indebtedness for borrowed money is not accelerated, for purposes
of Section 9 of the Shareholders' Agreement, a violation of this subparagraph
(c) of Section 8.1 shall not be a Noncompliance Event; or
(d) a final judgment which in the aggregate with other outstanding
final judgments against the Company or any Subsidiary exceeds $5.0 million
(in excess of available insurance recoveries) in any 12-month period shall be
rendered against such Person and, within sixty (60) days after entry thereof,
such judgment shall not have been satisfied and discharged o-r stayed pending
appeal or bonded, or within sixty (60) days after expiration of such stay
such judgment shall not have been discharged; PROVIDED, HOWEVER, that for
purposes of Section 9 of the Shareholders' Agreement, a violation of this
subparagraph (d) (of Section ____________ of the Noncompliance Event; or
(e) the Company or any Subsidiary shall:
(i) commence a voluntary case under Title 11 of the United
State Bankruptcy Code as from time to time in effect, or authorize, by
appropriate proceedings of its board of directors or other governing body,
the commencement of such a voluntary case;
(ii) have filed against it a petition commencing an involuntary case
under said Title 11 and such petition shall not have been dismissed or
stayed within sixty (60) days;
(iii) seek relief as a debtor under any applicable law, other than
said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the
rights of creditors, or consent to or acquiesce in such relief; or
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(iv) have entered against it an order by a court of competent
jurisdiction (x) finding it to be bankrupt or insolvent, (y) ordering or
approving its liquidation, reorganization or any modification or alteration
of the rights of its creditors, or (z) assuming custody of, or appointing a
receiver or other custodian for, all or a substantial part of its property;
which order shall not be vacated, denied, set aside or stayed within sixty
(60) days from the date of entry thereof; or
(v) make an assignment of all or a substantial part of its
assets for the benefit of, or enter into a composition with, its creditors,
or appoint or consent to the appointment of a receiver or other custodian
for all or a substantial part of its assets,
(f) Dobson shall die, become disabled or shall other,vise cease for any
reason to serve as the President of the Company unless replaced by a Person of
comparable experience and expertise acceptable to the Purchasers within six
months of the termination of Dobson's service; or
(g) any of the proceeds from the sale of the Preferred Shares are used for
a purpose not set forth in SECTION 2.4 above; or
(h) with respect to any Guaranteed Pension Plan, an ERISA Reportable Event
shall have occurred and the Purchasers shall have determined in their reasonable
discretion that such event reasonably could be expected to result in liability
of the Company or any of its Subsidiaries to the PBGC or the Plan and such event
in the circumstances occurring reasonably could constitute grounds for the
termination of such Plan by the PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer such Plan; or a trustee
shall have been appointed by the United States District Court to administer such
Plan; or the PBGC shall have instituted proceedings to terminate such Plan; or
(i) Dobson does not at all times have voting control over the securities
of the Company owned by the Partnership (the "Partnership Block") or Dobson does
not own at all times, beneficially, at least ninety percent (90%) of the
economic interests of the Partnership Block on a fully diluted basis which
Dobson owned on the Closing Date.
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(j) So long as the Trust Borrowers are the Borrowers under the Trust Loan,
if any document, instrument or agreement executed in connection with the Trust
Loan is amended or modified without the prior written approval of the
Purchasers.
SECTION 8.2. REMEDIES. Upon the occurrence of any Noncompliance Event then
in each and every such case, the Purchasers may proceed to protect and enforce
their rights by suit in equity, action at law or other appropriate proceeding
either for specific performance of any covenant, provision or condition
contained or incorporated by reference in this Agreement or any other Related
Agreement or in aid of the exercise of any power or right granted in this
Agreement or any other Related Agreement.
SECTION 8.3. WAIVERS. Each of the Company and its Subsidiaries hereby
waives, to the extent not prohibited by applicable law, (a) all presentments,
demands for performance and notices on nonperformance (except to the extent
specifically required by the provisions hereof), and (b) any requirement of
diligence or promptness on the part of any holder of Preferred Shares or Common
Shares in the enforcement of its rights under the provisions of this Agreement
or any Related Agreement.
ARTICLE IX
REGISTRATION AND TRANSFER OF PURCHASED SECURITIES
SECTION 9.1. REGISTRATION, TRANSFER AND EXCHANGE OF PURCHASED SECURITIES.
(a) The Company shall keep at its principal office a register in which
shall be entered the names and addresses of the holders of the Preferred Shares
and the Common Shares and the particulars (including without limitation the
class thereof) of the Preferred Shares and the Common Shares held by them and of
all transfers of shares of its Preferred Shares and Common Shares. References to
the "holder" or "holder of record" of any shares of Preferred Shares and Common
Shares shaD mean the holder thereof unless the holder shall have presented the
certificates evidencing same to the Company for transfer and the transferee
shall have been entered in said register as a subsequent holder, in which case
the terms shall mean such subsequent holder. The ownership of any of the
Preferred
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Shares and the Common Shares shall be proven by such register and the Company
may conclusively rely upon such register.
(b) Upon surrender at such office of any certificate representing shares
of Preferred Shares or Common Shares for registration of exchange or transfer,
the Company shall issue, at its expense, one or more new certificates, in such
denomination or denominations as may be requested, for Preferred Shares or
Common Shares (as applicable) and registered as such holder may request. Any
certificate representing shares of Preferred Shares or Common Shares surrendered
for registration of transfer shall be duly endorsed, or accompanied by a written
instrument of transfer duly executed by the holder of such certificate or his
attorney duly authorized in writing. Prior to any transfer of any Preferred
Shares or Common Shares which are not registered under an effective registration
statement under the Securities Act, no holder thereof shall transfer any such
Preferred Shares or Common Shares unless (i) such transfer is effected pursuant
to Rule 144 or any comparable rule under the Securities Act or (ii) prior to
such transfer, the Company shall receive a written opinion reasonably
satisfactory in form and substance to the Company of counsel designated by such
holder and reasonably satisfactory to the Company that the proposed transfer may
be effected without registration under the Securities Act. The Company will pay
shipping and insurance charges, from and to each holder's principal office, upon
any transfer, exchange or conversion provided for in this SECTION 9.1.
(c) Each certificate evidencing Preferred Shares and Common Shares,
whether originally or in substitution for, or upon transfer or exchange of any
Preferred Shares or Common Shares shall be registered on the date of execution
thereof by the Company. The registered holder of record shall be deemed to be
the owner of the Preferred Shares or Common Shares (as applicable) for all
purposes of this Agreement. All notices given hereunder to the holder of record
shall be deemed validly given if given in the manner specified in Article XII
hereof. So long as appropriate, the following legend shall be imprinted on each
certificate evidencing the Preferred Shares and Common Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
AND MAY NOT BE
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SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER."
SECTION 9.2. REPLACEMENT PURCHASED SECURITIES. Upon receipt of evidence and
indemnity reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of any Preferred Share or Common Share and, in the case of any
such mutilation, upon the surrender of such Preferred Share or Common Share for
cancellation to the Company at its principal office, the Company will execute
and deliver, in lieu thereof, a new Preferred Share or Common Share of like
tenor. Any Preferred Share or Common Share in lieu of which any such new
Preferred Share or Common Share has been so executed and delivered by the
Company shall not be deemed to be outstanding for any purpose of this Agreement.
ARTICLE X
EXPENSES; INDEMNITY; MISCELLANEOUS
SECTION 10.1. EXPENSES. The Company hereby agrees to pay on demand all
reasonable fees, costs and expenses incurred by the Purchasers, in connection
with the transactions contemplated by this Agreement and the other Related
Agreements an in connection with any amendments or waivers (whether or not the
same become effective) thereof or thereof and all reasonable expenses incurred
by the Purchasers in connection with the enforcement of any rights hereunder or
under any other Related Agreement including, without limitation, (a) the cost
and expenses of due diligence and of preparing and dupLicating this Agreement
and each other Related Agreement; (b) the fees, expenses and disbursements of
Purchasers' counsel in connection with the preparation, administration or
interpretation of this Agreement and the other Related Agreements and other
instruments mentioned herein, the Closing, any amendments, modifications,
approvals, consents or waivers hereto, thereto, hereunder or thereunder; (c) the
fees, expenses and disbursements of the Purchasers' accountants, in connection
with the Purchasers due diligence investigation of the Company and the
Subsidiaries; and (d) all taxes (other than taxes determined with respect to
income and taxes relating to any transfer of any shares of Preferred Stock other
than to the Company), including any recording fees and filing fees and
documentary stamp and similar taxes at any time payable in respect of this
Agreement or any other
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Related Agreement. Further, the Company agrees to pay all reasonable
out-of-pocket expenses (including, without limitation, reasonable attorneys'
fees and costs, all costs associated with any rights of board attendance,
observation or inspection and travel and lodging expenses related thereto and
accounting fees) incurred by any Purchaser in connection with the enforcement
of or preservation of rights under this Agreement or any other Related
Agreements or the administration thereof whether before or after the
occurrence of a Noncompliance Event.
SECTION 10.2. INDEMNIFICATION. The Company hereby further agrees to
indemnify, exonerate and hold each Purchaser and its (if applicable) general and
limited partners and their respective Affiliates, shareholders, officers,
directors, employees and agents free and harmless from and against any and all
actions, causes of action, suits, losses, liabilities, damages and expenses,
including, without limitation, reasonable attorneys' fees and disbursements,
incurred in any capacity by any of the indemnities as a result of or relating to
(a) any transaction financed or to be financed in whole or in part directly or
indirectly with proceeds from the sale of any of the Preferred Shares, (b) the
execution, delivery, performance or enforcement of this Agreement, any Related
Agreement or any agreement, document or instrument contemplated hereby or
thereby (including, without limitation, any failure by any Person other than the
Purchasers to comply with any of its covenants hereunder or thereunder), (c) any
violation of any Environmental Laws with respect to conditions at the property
owned or used by the Company or a Subsidiary or the operations conducted
thereon, or (d) the investigation or remediation of offsite locations at which
the Company, the Company any of the Subsidiaries or their respective
predecessors are alleged to have directly or indirectly disposed of Hazardous
Substances.
SECTION 10.3. BROKERS' FEES. The Company hereby indemnifies each Purchaser
against and agrees that it will hold it harmless from any claim, demand or
liability for any broker's, finder's or placement fees or lender's incentive
fees alleged to have been incurred by it or any Subsidiary in connection with
the transactions contemplated by this Agreement or any Related Agreement.
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SECTION 10.4. SURVIVAL OF OBLIGATIONS. The obligations of the Company under
this Article X shall survive the termination of this Agreement.
SECTION 10.5. COURSE OF DEALING. No course of dealing between the Company
on the one hand, and the Purchasers, on the other hand, shall operate as a
waiver of any Purchaser's rights under this Agreement or any other Related
Agreement. No delay or omission in exercising any right under this Agreement or
any other Related Agreement shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as a bar to or waiver
of any right or remedy on any other occasion.
SECTION 10.6. BINDING EFFECT. The provisions of this Agreement and the
other Related Agreements that are for the benefit of the Purchasers as the
holders of any Preferred Shares are also for the benefit of, and enforceable by
and binding upon, all subsequent holders of Preferred Shares who may acquire
such shares, and the provisions of this Agreement and the other Related
Agreements that subject the Purchasers, as holders of any Preferred Shares, to
obligations also subject all subsequent holders of any of the Preferred Shares
thereto.
ARTICLE XI
NOTICES
Any notice or other communication in connection with this Agreement or any
Related Agreement shall be deemed to be delivered if in writing (or in the form
of a telex or telecopy) addressed as provided below (a) when actually delivered,
telexed or telecopied to said address, or (b) in the case of a letter, three
Business Days shall have elapsed after the same shall have been deposited in the
United States mails, postage prepaid and registered or certified:
(i) If to the Company, then to it at its address set forth on the
signature pages hereto, or at such other address as such Person shall have
specified by notice actually received by each Purchaser.
(ii) If to a Purchaser, then to it at its address set forth on SCHEDULE 1,
or at such other address as such Purchaser shall have specified by notice
actually received by the addressee.
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ARTICLE XII
SURVIVAL OF COVENANTS, AGREEMENTS,
REPRESENTATIONS AND WARRANTIES
All covenants, agreements, representations and warranties made herein or
in any other Related Agreement or in any other document referred to herein or
therein shall be deemed to have been relied on by each Purchaser,
notwithstanding any investigation made by any Purchaser or on its behalf, and
shall survive the execution and delivery of this Agreement.
ARTICLE XIII
AMENDMENTS AND WAIVERS
Except as otherwise expressly provided herein, any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and each of the
Purchasers.
ARTICLE XIV
CONSENT TO JURISDICTION
THE COMPANY HEREBY AGREES TO SUBMIT TO THE NON EXCLUSIVE JURISDICTION OF
THE COURTS IN AND OF THE STATE OF DELAWARE AND TO JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE AND TO THE COURTS TO WHICH AN
APPEAL OF THE DECISIONS OF SUCH COURTS MAY BE TAKEN, AND CONSENTS THAT SERVICE
OF PROCESS WITH RESPECT TO ALL COURTS IN AND OF THE STATE OF DELAWARE AND THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE MAY BE MADE BY
REGISTERED MAIL TO IT AT THE COMPANY'S ADDRESS SET FORTH ON THE SIGNATURES PAGES
HERETO HEREOF.
ARTICLE XV
WAIVER OF JURY TRIAL
EACH OF THE COMPANY AND THE PURCHASERS HEREBY EXPRESSLY WAIVES ANY RIGHT
IT MAY HAVE TO A JURY TRIAL IN ANY SUIT, ACTION OR
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PROCEEDING EXISTING UNDER OR RELATING TO THIS AGREEMENT OR ANY OF THE RELATED
DOCUMENTS.
ARTICLE XVI
GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH I E
LAWS OF DELAWARE WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW
PROVISION OR RULE THAT WOULD CAUSE TEE APPLICATION OF THE DOMESTIC SUBSTANTIVE
LAWS OF ANY OTHER STATE, AND SHALL BIND AND INURE TO THE BENEFIT OF THE PARTIES
HERETO AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS.
ARTICLE XVII
RIGHT TO PUBLICIZE
The Company hereby acknowledges that the Purchasers will have the right,
subject to the reasonable prior written approval of the Company, to publicize
their investment in the Company as contemplated hereby by means of a tombstone
advertisement or other customary advertisement in newspapers and other
periodicals.
ARTICLE XVIII
FURTHER ASSURANCES
Each of the Company and the Purchasers, upon the request of the other party
hereto, whether before or after the Closing, shall do, execute, acknowledge and
deliver or cause to be done, executed, acknowledged or delivered all such
further acts, deeds, documents, assignments, transfers, conveyances, powers of
attorney and assurances as may be reasonably necessary or desirable to effect
complete consummation of the transactions contemplated by this Agreement.
ARTICLE XIX
TIME OF THE ESSENCE
Time shall be of the essence of this Agreement.
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ARTICLE XX
ENTIRE AGREEMENT; COUNTERPARTS; SECTION HEADINGS
This Agreement, the Preferred Shares and the Related Agreements set forth
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby and supersede any prior written or oral understandings with
respect thereto. This Agreement may be executed simultaneously in one or more
counterparts thereof, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The headings in this
Agreement are for convenience of reference only and shall not alter or otherwise
affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written:
DOBSON COMMUNICATIONS CORPORATION
By: /s/ Everett R. Dobson
------------------------------
Everett R. Dobson
President
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Address for Notices:
13439 N. Broadway Extension
Oklahoma City, Oklahoma 73114
Attn: Everett R. Dobson
Telecopy No.: (405) 391-8515
Telephone No.: (405) 391-8500
[PURCHASERS]
FLEET EQUITY PARTNERS VI, L.P.
By: Fleet Growth Resources II, Inc.,
a General Partner
By: /s/ Thadeus J. Mocarski
------------------------------
Thadeus J. Mocarski
Vice President
Address for Notices:
111 Westminster Street
Providence, Rhode Island 02903
Att: Thadeus J. Mocarski
Telecopy No.: (401) 278-6387
Telephone No.: (401) 278-5678
FLEET VENTURE RESOURCES, INC.
By: /s/ Thadeus J. Mocarski
------------------------------
Thadeus J. Mocarski
Vice President
Address for Notices:
111 Westminster Street
Providence, Rhode Island 02903
Attn: Thadeus J. Mocarski
Telecopy No.: (401) 278-6387
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Telephone No.: (401) 278-5678
KENNEDY PLAZA PARTNERS
By: /s/
------------------------------
Title:
Address for Notices:
c/o Fleet Equity Partners
111 Westrninster Street
Providence, Rhode Island 02903
Att: Thadeus J. Mocarski
Telecopy No.: (401) 278-6387
Telephone No.: (401) 278-5678
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AMENDMENT NO. 1
TO
SECURITIES PURCHASE AGREEMENT
This Amendment No. 1, dated as of February 26, 1997, is entered into by
and among Dobson Communications Corporation, an Oklahoma corporation (the
"Company"), Dobson Holdings Corporation, an Oklahoma corporation
("Holdings"), Fleet Equity Partners VI, L.P., a Delaware limited partnership
("FEP"), Fleet Venture Resources, Inc., a Rhode Island corporation ("FVR"),
and Kennedy Plaza Partners, a Rhode Island general partnership ("KPP" and
together with FEP and FVR, the "Purchasers") (said Amendment being referred
to as "this Amendment") Capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings ascribed thereto in the
Purchase Agreement as amended hereby.
W I T N E S S E T H:
WHEREAS, the Company and the Purchasers are parties to that certain
Securities Purchase Agreement, dated as of March 19, 1996 (the "Purchase
Agreement");
WHEREAS, the Company, Holdings, the Purchasers, Dobson CC Limited
Partnership, an Oklahoma limited partnership ("DCC"), Dobson Telephone
Company, Inc., an Oklahoma corporation ("DTC"), and Russell L. Dobson
("Dobson") have agreed to enter into that certain Agreement and Plan of
Reorganization, dated as of the date hereof (the "Reorganization Agreement"),
pursuant to which, among other things, the Purchasers, DCC, DTC and Dobson
have agreed to exchange all of their shares in the Company for shares issued
by Holdings; and
WHEREAS, the Purchasers have required, as a condition precedent to the
transactions contemplated by the Reorganization Agreement, that the Company
and Holdings enter into this Amendment;
NOW THEREFORE, in consideration of the terms and conditions set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the
parties hereto hereby agree as follows:
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SECTION 1. AMENDMENT TO PURCHASE AGREEMENT. Effective as of the date
hereof, the Purchase Agreement is hereby amended as follows:
1.1 Holdings is hereby added as a party to the Purchase Agreement.
1.2 The definition of the term "Affiliate" is hereby deleted in its
entirety and the following is substituted therefor:
"AFFILIATE" shall mean (i) at any time prior to February 26,
1997, any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with
the Company, including, without limitation, (a) any Person who
is a director, limited partner or executive officer of the
Company or the beneficial owner of at least 5% of the then
outstanding equity interests (on a fully diluted basis) of the
Company (or other specified Person) and Family Members of any
of such Persons, (b) any Person of which the Company (or other
specified Person) or an Affiliate (as defined in the
immediately preceding clause (a) above) of the Company (or
other specified Person) shall, directly or indirectly, either
beneficially own at least 5% of the then outstanding equity
securities (on a fully diluted basis) or constitute at least a
5% equity participant, and (c) in the case a specified Person
is an individual, Family Members of such Person, and (ii) on
or after February 26, 1997, any Person directly or indirectly
controlling, controlled by or under direct or indirect common
control with Holdings, including, without limitation, (a) any
Person who is a director, limited partner or executive officer
of Holdings or the beneficial owner of at least 5% of the then
outstanding equity interests (on a fully diluted basis) of
Holdings (or other specified Person) and Family Members of any
of such Persons, (b) any Person of which Holdings (or other
specified Person) or an Affiliate (as defined in the
immediately preceding clause (a) above) of Holdings (or other
specified Person) shall, directly or indirectly, either
beneficially own at least 5% of the then outstanding equity
securities (on a fully diluted basis) or constitute at least a
5% equity participant, and (c) in the case a specified Person
is an individual, Family Members of such Person; PROVIDED,
HOWEVER, that in no event shall any of the Purchasers be
considered an Affiliate of the Company, Holdings or any
Related Entity.
1.3 The definition of the term "Common Shares" is hereby deleted in its
entirety and the following is substituted therefor:
"COMMON SHARES" shall mean (i) at any time prior to February 26,
1997, the shares of Class A Voting Common Stock of the Company,
$1.00 par value per share, issued or issuable upon conversion of
the Preferred Shares, and (ii) on or after February 26, 1997,
the shares of Class A Voting Common Stock of Holdings, $1.00
par value per share, issued or issuable upon conversion of
Holdings Purchased Securities.
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1.4 The definition of the term "ERISA Affiliate" is hereby deleted in its
entirety and the following is substituted therefor:
"ERISA AFFILIATE" shall mean (i) at any time prior to
February 26, 1997, any Person which is treated as a single
employer with the Company under Section 414 of the Code, and
(ii) at any time on or after February 26, 1997, any Person which
is treated as a single employer with Holdings under Section 414
of the Code.
1.5 The definition of the term "Financing Agreements" is hereby deleted in
its entirety and the following is substituted therefor:
"FINANCING AGREEMENT" shall mean this Agreement, the
Certificate of Designation, the Charter Amendment, the
Shareholders' Agreement, the Option Agreement, the Texas 2
Option Agreement, the Reorganization Agreement, the Holdings
Shareholders' Agreement, the Holdings Certificates of
Designation and the Holdings Charter Amendment.
1.6 The definition of the term "Guaranteed Pension Plan" is hereby
deleted in its entirety and the following is substituted therefor:
"GUARANTEED PENSION PLAN" shall mean (i) at any time prior to
February 26, 1997, any employee pension benefit plan within
the meaning of Section 3(2) of ERISA maintained or contributed
to by the Company or any ERISA Affiliate the benefits of which
are guaranteed on termination in full or in part by the PBGC
pursuant to Title IV of ERISA, other than a Multiemployer
Plan, and (ii) at any time on or after February 26, 1997, any
employee pension benefit plan within the meaning of Section 3(2)
of ERISA maintained or contributed to by Holdings or any ERISA
Affiliate the benefits of which are guaranteed on termination
in full or in part by the PBGC pursuant to Title IV of ERISA,
other than a Multiemployer Plan.
1.7 The definition of the term "Multiemployer Plan" is hereby deleted in
its entirety and the following is substituted therefor:
"MULTIEMPLOYER PLAN" shall mean (i) at any time prior to
February 26, 1997, any multiemployer plan within the meaning
of Section 3(37) of ERISA at any time maintained or
contributed to by the Company or any ERISA Affiliate or to
which the Company or any ERISA Affiliate is or was obligated
to contribute, and (ii) at any time on or after February 26,
1997, any multiemployer plan within the meaning of Section 3(37)
of ERISA at any time maintained or contributed to by Holdings
or any ERISA Affiliate or to which Holdings or any ERISA
Affiliate is or was obligated to contribute.
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1.8 The definition of the term "Purchased Securities" is hereby deleted in
its entirety and the following is substituted therefor:
"PURCHASED SECURITIES" shall mean (i) at any time prior to
February 26, 1997, the Preferred Shares being purchased by the
Purchasers pursuant to this Agreement, and (ii) on or after
February 26, 1997, the Holdings Purchased Securities.
1.9 The definition of the term "Subsidiary" is hereby deleted in its
entirety and the following is substituted therefor:
"SUBSIDIARY" shall mean any Person listed on SCHEDULE 3.2 and
(a) any corporation in which Holdings or such Person, directly
or indirectly, owns more than fifty percent (50%) of the
outstanding capital stock or other equity interests of the
class or classes having general voting power under ordinary
circumstances to elect at least a majority of the directors of
such corporation (irrespective of whether at the time capital
stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of
any contingency); (b) any partnership, association, joint
venture or other unincorporated organization or entity with
respect to which Holdings or such Person, directly or
indirectly, owns equity securities in an amount sufficient to
control the management of such partnership, association, joint
venture or other unincorporated organization or entity; and
(c) any corporation, partnership, association, joint venture
or other unincorporated organization or entity in which
Holdings or such Person, directly or indirectly, has more than
a fifty percent (50%) equity interest.
1.10 The following definitions are hereby added to SECTION 1.1 of the
Purchase Agreement in the correct alphabetical order:
"HOLDINGS" shall mean Dobson Holdings Corporation, an Oklahoma corporation.
"HOLDINGS CERTIFICATES OF DESIGNATION" shall mean,
collectively, (i) that certain Certificate of Designation of
Holdings providing for the authorization of Class B
Convertible Preferred Stock of Holdings, in the form of
EXHIBIT H hereto, and (ii) that certain Certificate of
Designation of Holdings providing for the authorization of
Class C Preferred Stock of the Company, in the form of
EXHIBIT A hereto
"HOLDINGS CHARTER AMENDMENT" shall mean that certain
Certificate of Amendment to Certificate of Incorporation of
Holdings in the form of EXHIBIT I hereto.
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"HOLDINGS PURCHASED SECURITIES" shall mean the 100,000 shares
of Class B Convertible Preferred Stock of Holdings issued to
the Purchasers pursuant to the Reorganization Agreement, and
the 100,000 shares of Class C Preferred Stock of Holdings
issued to Purchasers as of February 26, 1997.
"HOLDINGS SHAREHOLDERS' AGREEMENT" shall mean that certain
Shareholders' Agreement, dated as of February 26, 1997, by and
among Holdings, the Purchasers and certain other stockholders
of Holdings, in the form of EXHIBIT J hereto, as the same may
be amended, supplemented, restated, replaced or otherwise
modified, in each case from time to time and whether in whole
or in part.
"REORGANIZATION AGREEMENT" shall mean that certain Agreement
and Plan of Reorganization, dated as of the date hereof, by
and among the Company, Holdings, the Purchasers, Dobson CC
Limited Partnership, an Oklahoma limited partnership ("DCC"),
Dobson Telephone Company, Inc., an Oklahoma corporation
("DTC"), and Russell L. Dobson, in the form of EXHIBIT K
hereto, as the same may be amended, supplemented, restated,
replaced or otherwise modified, in each case from time to time
and whether in whole or in part.
1.11 The Purchase Agreement is hereby amended to add a copy of the
Holdings Certificates of Designation (copies of which are attached hereto as
EXHIBIT A and made a part hereof) as EXHIBIT H thereto.
1.12 The Purchase Agreement is hereby amended to add a copy of the
Holdings Charter Amendment (a copy of which is attached hereto as EXHIBIT B and
made a part hereof) as EXHIBIT I thereto.
1.13 The Purchase Agreement is hereby amended to add a copy of the
Holdings Shareholders' Agreement (a copy of which is attached hereto as EXHIBIT
C and made a part hereof) as EXHIBIT J thereto.
1.14 The Purchase Agreement is hereby amended to add a copy of the
Reorganization Agreement (a copy of which is attached hereto as EXHIBIT D and
made a part hereof) as EXHIBIT K thereto.
1.15 The Purchase Agreement is hereby amended to add (a) SCHEDULE 6.2, a
copy of which is attached hereto as SCHEDULE 6.2 and made a part hereof, (b)
SCHEDULE 6.11, a copy of which is attached hereto as SCHEDULE 6.11 and made a
part hereof, and (c) SCHEDULE 6.17, a copy of which is attached hereto as
SCHEDULE 6.17 and made a part hereof.
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1.16 The second sentence of SECTION 2.4 of the Purchase Agreement is
hereby deleted in its entirety and the following is substituted therefor:
Holdings agrees to provide the Purchasers with reasonable
access to the records of the Company and Holdings for
purposes of verifying that the proceeds from the sale of the
Purchased Securities are used solely for the purposes set
forth in this SECTION 2.4.
1.17 ARTICLE VI of the Purchase Agreement is hereby deleted in its
entirety and the following is substituted therefor:
Holdings covenants that while any of the Purchased Securities
or any of the Common Shares are held by any Purchaser, it
will comply, and Holdings will cause each of the Subsidiaries
to comply, with the following provisions unless otherwise
consented to in writing by the Purchasers:
SECTION 6.1. RECORDS AND ACCOUNTS. Each of Holdings and the
Subsidiaries will keep true and accurate records and books of
account in which full, true and correct entries will be made
in accordance with GAAP and in all other respects consistent
with industry practices.
SECTION 6.2. EXISTENCE; RELATED SECURITIES; MAINTENANCE OF
PROPERTIES. Each of Holdings and the Related Entities will
preserve and keep in full force and effect and in good
standing its corporate or partnership existence, as the case
may be, rights and franchises except for any Related Entity
which is combined or merged with and into another Related
Entity, Holdings or the Company. Holdings shall at all times
own, directly or indirectly, the equity interest in the
Company and each Related Entity as reflected in SCHEDULE 6.2
except for any Related Entity which is combined or merged
with and into another Related Entity, Holdings or the
Company. Holdings, the Company and the Related Entities will
not engage in any business or business ventures other than
(a) those presently conducted by such Person, (b) those
businesses reasonably ancillary or similar thereto, and (c)
those businesses which require investments by such Person of
less than $50,000 in the aggregate. Each of Holdings, the
Company and the Related Entities will maintain all of its
properties used or useful in the conduct of its business in
conformity with industry standards and cause to be made all
necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of Holdings may
be necessary so that the business carried on is consistent
with industry standards.
SECTION 6.3. INSURANCE. Each of Holdings and the
Subsidiaries will maintain with financially sound and
reputable insurance companies, funds or underwriters
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insurance of the kinds, covering the risks and in the
relative proportionate amounts usually carried by reasonable
and prudent companies conducting businesses similar to that
of Holdings and the Subsidiaries.
SECTION 6.4. TAXES. Each of Holdings and the Subsidiaries
will pay and discharge, or cause to be paid and discharged,
before the same shall become overdue, all Taxes, assessments
and other governmental charges imposed upon it and its real
properties, sales and activities, or any part thereof, or
upon the income or profits therefrom, as well as all claims
for labor, materials or supplies, which if unpaid might by
law become a Lien upon any of their properties; PROVIDED,
HOWEVER, that any such Tax, assessment, charge, levy or claim
need not be paid if the validity or amount thereof shall
currently be contested in good faith by appropriate
proceedings and if Holdings or the applicable Subsidiary
shall have set aside on its books adequate reserves with
respect thereto; and PROVIDED, FURTHER, that Holdings and the
applicable Subsidiary will pay or cause to be paid all such
Taxes, assessments, charges, levies or claims forthwith upon
the commencement of foreclosure on any Lien which may have
attached as security therefor.
SECTION 6.5. INSPECTION OF PROPERTIES AND BOOKS. Each of
Holdings and the Subsidiaries shall permit each Purchaser or
any of its designated representatives, at the Holdings's
cost, to visit and inspect any of its properties, to examine
its books of account (and to make copies thereof and extracts
therefrom), and to discuss its affairs, finances and accounts
with, and to be advised as to the same by, officers or
partners of such Persons, all at such times and intervals as
such Purchaser may reasonably request.
SECTION 6.6. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES AND
PERMITS. Each of Holdings and the Subsidiaries will comply
with (a) all FCC laws and regulations, all Oklahoma
Corporations Commission laws and regulations and all other
material laws and regulations wherever its business is
conducted, (b) the provisions of its Charter and by-laws, (c)
the Franchises, Necessary Contracts and all other material
agreements and instruments by which it or any of its
properties may be bound (including, without limitation, the
Related Agreements and the agreements, documents and
instruments executed and delivered by it in connection with
the CoreStates Financing), (d) all applicable decrees, orders
and judgments, and (e) all required FCC and Oklahoma
Corporations Commission approvals, permits and licenses and
all other material approvals, permits and licenses. If at
any time any authorization, consent, approval, permit or
license from any officer, agency or instrumentality of any
government shall become necessary or be required in order
that any of Holdings or the Subsidiaries may fulfill any of
their respective obligations hereunder, each of Holdings and
the Subsidiaries will promptly take or cause to be
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taken all reasonable steps within its power to obtain such
authorization, consent, approval, permit or license and
furnish the Purchasers with evidence thereof.
SECTION 6.7. EMPLOYEE BENEFIT PLANS. Neither Holdings nor
any ERISA Affiliate will:
(a) engage in any "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code;
(b) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in
Section 302 of ERISA, whether or not such deficiency is or
may be waived;
(c) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a
manner which, could result in the imposition of a lien or
encumbrance on the assets of Holdings or any of the
Subsidiaries pursuant to Section 302(f) or Section 4068 of
ERISA; or
(d) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of Section
4001 of ERISA) of all Guaranteed Pension Plans exceeding the
value of the aggregate assets of such Plans, disregarding for
this purpose the benefit liabilities and assets of any such
Plan with assets in excess of benefit liabilities.
Holdings will (i) promptly upon filing the same with the
Department of Labor or Internal Revenue Service, furnish to
Fleet a copy of the most recent actuarial statement required
to be submitted under Section 103(d) of ERISA and Annual
Report, Form 5500, with all required attachments, in respect
of each Guaranteed Pension Plan, and (ii) promptly upon
receipt or dispatch, furnish to each Purchaser any notice,
report or demand sent or received in respect of a Guaranteed
Pension Plan under Sections 302, 4041, 4042, 4043, 4063,
4065, 4066 and 4068 of ERISA, or in respect of a
Multiemployer Plan, under Section 4041A, 4202, 4219, 4242 or
4245 of ERISA.
SECTION 6.8. FURTHER ASSURANCES. Each of Holdings and the
Subsidiaries will cooperate with the Purchasers and execute
such further instruments and documents as the Purchasers
shall reasonably request to carry out to the satisfaction of
the Purchasers the transactions contemplated by this
Agreement or any other Related Agreement.
SECTION 6.9. NOTICES. Holdings will promptly notify the
Purchasers in writing of the occurrence of a Noncompliance
Event or if any Person shall give any notice or take
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any other action in respect of a claimed default with respect
to any material agreement to which Holdings or any of the
Subsidiaries is a party. Holdings also covenants and agrees
to promptly provide the Purchasers with written notice: (a)
upon Holdings or any of the Subsidiaries obtaining knowledge
of any violation of any Environmental Law regarding the
property or the operations of Holdings or any of the
Subsidiaries; (b) upon Holdings or any of its Subsidiaries
obtaining knowledge of any potential or known release, or
threat of release, of any Hazardous Substances at, from, or
into the property which it reports in writing or is
reportable by it in writing to any governmental authority;
(c) upon Holdings or any of the Subsidiaries receipt of any
notice of violation of any Environmental Laws or of any
release or threatened release of Hazardous Substances,
including a notice or claim of liability or potential
responsibility from any third party (including, without
limitation, any federal, state or local governmental
officials) and including notice of any formal inquiry,
proceeding, demand, investigation or other action with regard
to (i) Holdings's, any of the Subsidiaries' or any other
Person's operation of the property, (ii) contamination on,
from or into the property, or (iii) investigation or
remediation of off site locations at which Holdings, any of
the Subsidiaries or any of their predecessors are alleged to
have directly or indirectly disposed of Hazardous Substances;
or (d) upon Holdings or any of the Subsidiaries obtaining
knowledge that any expense or loss has been incurred by such
governmental authority in connection with the assessment,
containment, removal or remediation of any Hazardous
Substances with respect to which Holdings or any of its
Subsidiaries may be liable or for which a Lien may be imposed
on the property.
SECTION 6.10. DISTRIBUTIONS. Neither Holdings, the Company
nor any Related Entity shall make any Distribution except (a)
the Company may redeem from TDS the outstanding shares of 10%
Cumulative, Compounded, Convertible, Redeemable Class A
Preferred Stock of the Company, (b) the Company may pay
dividends, in accordance with the Certificate of Designation,
to Dobson CC Limited Partnership, the majority shareholder of
the Company (the "Partnership"), for the purpose of making
distributions to the Trusts in order to permit the Trusts to
service the Trust Loan, provided that pro rata dividends are
simultaneously declared to the holders of Holdings' Class B
Preferred Stock and paid in accordance with the Certificate
of Designation of Holdings for its Class B Preferred Stock
and the other holders of Common Stock as provided in the
Certificate of Designation, and (c) Holdings may redeem the
Purchased Securities in accordance with the terms of the
Financing Agreements.
SECTION 6.11. DILUTION PROTECTION. Except for the issuance
of Purchased Securities and except for the issuance of the
Qualified Options, neither Holdings nor any Subsidiary will
(a) issue, sell, give away or otherwise transfer, (b) grant
any rights
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(either preemptive or other) or options to subscribe for or
purchase, or (c) enter into any agreements or issue any
warrants providing for the issuance of, any of its capital
stock or other equity interest (or any stock or securities
convertible into or exchangeable for any of their capital
stock or other equity interest). Neither Holdings nor any of
the Subsidiaries shall authorize any additional class or
series of shares or increase the number of shares of
authorized capital from that set forth in SCHEDULE 6.11
hereto.
SECTION 6.12. MERGER, CONSOLIDATION, SALE OF ASSETS OR OTHER
DISPOSITIONS. Except for the merger of a Subsidiary with and
into Holdings or any other Subsidiary, neither Holdings nor
any Subsidiary will become a party to any merger or
consolidation, or sell, lease, sublease or otherwise transfer
or dispose of any shares of or other equity interests in a
Subsidiary or any substantial portion of its assets, rights
and licenses to any Person, whether directly or indirectly or
in a single transaction or a series of related transactions,
other than (a) sales of inventory, used equipment and other
assets not in the aggregate material to the business in the
ordinary course of business and transfers constituting
Permitted Liens or turn over the management of, or enter into
a management contract with respect to, any of its assets or
properties, rights and licenses
SECTION 6.13. TRANSACTIONS WITH AFFILIATES. Neither
Holdings nor any Subsidiary will engage in any transaction
with any of its Affiliates other than the Purchasers and
their Affiliates except for (a) transactions permitted under
the Related Agreements, and (b) arms length transactions not
exceeding $100,000 in the aggregate in any fiscal year.
SECTION 6.14. SALE AND LEASEBACK OF PROPERTY. Neither
Holdings nor any Subsidiary will enter into any arrangement,
directly or indirectly, with any Person whereby it shall sell
or transfer any property, whether real, personal or a
combination thereof, used or useful in its business, whether
now owned or hereinafter acquired, and thereafter rent or
lease such property.
SECTION 6.15. JOINT VENTURES. Neither Holdings nor any
Subsidiary will cause or consent to any joint venture
engaging in any activity which would result in the joint
venture being in breach of any representation, warranty,
covenant or agreement set forth in this Agreement or any
other Related Agreement as if the joint venture were a
Subsidiary.
SECTION 6.16. INVESTMENTS. Holdings will not, and will not
permit any Subsidiary to, have outstanding or acquire or
commit itself to acquire or hold any Investment except
Investments in: (a) marketable direct obligations issued or
guaranteed by the
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United States of America which mature within one year from
the date of acquisition thereof or which are subject to a
repurchase agreement, exercisable within 90 days from the
date of acquisition of such agreement, with any commercial
bank or trust company incorporated under the laws of the
United States of America or any State thereof or the District
of Columbia, (b) commercial paper maturing within one year
from the date of acquisition thereof and having, at the date
of acquisition thereof, the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's
Corporation, (c) bankers' acceptances eligible for rediscount
under Federal Reserve Board requirements accepted by any
commercial bank or trust company referred to in clause (a)
hereof, (d) certificates of deposit maturing within one year
from the date of acquisition thereof issued by any commercial
bank or trust company referred to in clause (a) hereof and
having capital and surplus of at least $25,000,000, (e)
certificates of deposit issued by banks organized under the
laws of any other jurisdiction, each having combined capital
and surplus of not less than $25,000,000, and (f) Investments
by the Company and each Subsidiary existing on the date of
this Agreement.
SECTION 6.17. SENIOR MANAGEMENT; COMPENSATION. (a) The
aggregate compensation paid by Holdings and its Subsidiaries
to any officer set forth in SCHEDULE 6.17 for any fiscal year
of Holdings shall not be greater than the amount set forth
opposite such Person's name on such Schedule.
SECTION 6.18. COMPLIANCE WITH CAPITAL BUDGET. (a) Except as
set forth in Section 6.18(b) below, Holdings and each
Subsidiary shall at all times comply with the Budget approved
by Holdings and the Purchasers prior to the beginning of each
fiscal year in accordance with SECTION 7.3(a). In the event
any Budget for a particular fiscal year is not approved by
Holdings and the Purchasers in accordance with this SECTION
6.18, then the applicable expenditures for such fiscal year
shall not exceed the greater of (x) the amount set forth in
the Projections for such fiscal year or (y) the amount set
forth in the most recent Budget which was approved by
Holdings and the Purchasers pursuant to SECTION 7.3(a) for
such fiscal year.
(b) Neither Holdings nor any Subsidiary will incur
expenditures for any capital expenditure item in any fiscal
year if as a result thereof the amount which would be
expended for such item would exceed 115% of the amount
budgeted for such item in the Budget for such fiscal year;
provided that Holdings or any Subsidiary may incur
expenditures for a capital expenditure item in excess of 115%
of the amount budgeted for such item in the Budget (the
"Excess Amount") for such fiscal year so long as the
aggregate Excess Amount for all such items which exceed 115%
of the amount budgeted therefor does not exceed $300,000 in
any fiscal year.
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SECTION 6.19. RESPONSE ACTIONS. Holdings covenants and
agrees that if any release or disposal of Hazardous
Substances shall occur or shall have occurred on the premises
occupied by Holdings or any Subsidiary, Holdings will cause
the prompt containment and removal of such Hazardous
Substances and remediation of the property as necessary to
comply in all material respects with all Environmental Laws
or to preserve in all material respects the value of the
property.
SECTION 6.20. MERGER, CONSOLIDATION OR OTHER ACQUISITIONS.
Neither Holdings nor any Subsidiary shall directly or
indirectly, by operation of law or otherwise, merge with,
consolidate with, acquire all or substantially all of the
assets (other than purchases of inventory made in the
ordinary course of its business) or capital stock of, or
otherwise combine with, any Person except for a merger,
consolidation or acquisition having a purchase price less
than $500,000 in any single transaction or for mergers,
consolidations and acquisitions having an aggregate purchase
price less than $1.0 million in any twelve-month period.
SECTION 6.21. CHARTER AMENDMENTS. The Charter and by-laws
of Holdings, the Company and each Related Entity shall not be
amended or modified if such amendment or modification has, or
would have, directly or indirectly, any material adverse
effect on any holder of any then outstanding Purchased
Securities or on the rights or remedies of such holder
hereunder or under any of the Related Agreements.
SECTION 6.22. CONTROL OF SYSTEMS. Notwithstanding any
provision of this Agreement that may be construed to the
contrary, the Cellular Subsidiaries and Acquiring
Subsidiaries shall maintain actual (DE FACTO) and legal (DE
JURE) control over their respective Systems and FCC licenses.
Specifically, and without limitation, the responsibility for
the operation of each of the Systems shall reside with the
Cellular Subsidiary or Acquiring Subsidiary holding the FCC
license therefor, including (but not limited to)
responsibility for the following matters: (a) access to and
the use of facilities and equipment; (b) control of daily
operation; (c) creation and implementation of policy
decisions; (d) employment, supervision and dismissal of
employees; (e) payment of financing obligations and expenses
incurred in the operation and construction of the Systems;
(f) receipt and distribution of monies and profits derived
from the operation of the Systems; and (g) execution and
approval of all contracts and applications prepared and filed
before regulatory agencies.
SECTION 6.23. TRUST LOAN REPAYMENT. So long as the Trusts
are the borrowers under the Trust Loan, the Company shall not
make any distributions to the Trusts to service the Trust
Loan except by paying dividends to the Partnership which
shall then distribute such monies to the Trust to make
principal, interest and other payments due in respect of the
Trust Loan.
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SECTION 6.24. PAYMENT OF AFFILIATE NOTES. None of the
Promissory Notes listed on SCHEDULE 3.8 will be forgiven, and
each such Promissory Note issued by an Affiliate listed on
SCHEDULE 3.8 will not be amended, extended or modified and
the Company and Holdings shall cause the applicable payee of
such Promissory Note to collect all outstanding principal and
accrued but unpaid interest on such Promissory Note in
accordance with the terms set forth in such Promissory Note.
1.18 ARTICLE VII of the Purchase Agreement is hereby deleted in its
entirety and the following is substituted therefor:
Holdings hereby agrees that so long as any of the Purchased
Securities or any of the Common Shares are held by any
Purchaser, it will comply with, and it will cause each
Subsidiary to comply with, the following provisions:
SECTION 7.1. ANNUAL STATEMENTS. (a) As soon as available
and in any event within 90 days after the close of each
fiscal year of the Company commencing with the fiscal year
ending on December 31, 1995 up to and including the fiscal
year ending on December 31, 1996, the Company will deliver to
each Purchaser audited consolidated and unaudited
consolidating balance sheets and statements of income and
retained earnings and of cash flows of the Company audited by
Arthur Andersen, L.L.P. or any other public accounting firm
selected by Holdings and reasonably acceptable to the
Purchasers, showing the financial condition of the Company as
of the close of such fiscal year and the results of the
Company's operations during such fiscal year, all on a
consolidated basis.
(b) As soon as available and in any event within 90 days
after the close of each fiscal year of Holdings commencing
with the fiscal year ending on December 31, 1997, Holdings
will deliver to each Purchaser audited consolidated and
unaudited consolidating balance sheets and statements of
income and retained earnings and of cash flows of Holdings
audited by Arthur Andersen, L.L.P. or any other public
accounting firm selected by Holdings and reasonably
acceptable to the Purchasers, showing the financial condition
of Holdings as of the close of such fiscal year and the
results of Holdings's operations during such fiscal year, all
on a consolidated basis.
(c) Each of the financial statements delivered pursuant to
this SECTION 7.1 shall be certified without qualification by
the applicable accounting firm to have been prepared in
accordance with GAAP consistently applied and if such firm in
the course of its audit shall have obtained knowledge of any
Noncompliance Event or so
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advises the Company or Holdings, Holdings shall cause such
firm to notify each Purchaser in writing of the nature
thereof.
SECTION 7.2. QUARTERLY STATEMENTS. (a) Within forty-five
(45) days after the end of each quarter commencing with the
quarter ending December 31, 1995 up to and including the
quarter ending on December 31, 1996, the Company will deliver
to each Purchaser consolidated and consolidating unaudited
balance sheets and statements of income and retained earnings
and of cash flows of the Company as of the end of each such
quarter and for the period of the then current fiscal year to
the end of such month, and presenting on a comparative basis
the corresponding figures for such period in the preceding
fiscal year and the then current Budget, in each case by
region, certified by the Chief Financial Officer of Holdings
to be true and correct and to have been prepared in
accordance with GAAP subject to normal year-end adjustments
described in reasonable detail.
(b) Within forty-five (45) days after the end of each quarter
commencing with the quarter ending March 31, 1997, Holdings
will deliver to each Purchaser consolidated and consolidating
unaudited balance sheets and statements of income and
retained earnings and of cash flows of Holdings as of the end
of each such quarter and for the period of the then current
fiscal year to the end of such month, and presenting on a
comparative basis the corresponding figures for such period
in the preceding fiscal year and the then current Budget, in
each case by region, certified by the Chief Financial Officer
of Holdings to be true and correct and to have been prepared
in accordance with GAAP subject to normal year-end
adjustments described in reasonable detail.
SECTION 7.3. BUDGETS AND OTHER REPORTS. (a) Holdings will
deliver to the Purchasers, within thirty (30) days prior to
the commencement of each fiscal year project spending and
capital budgets for the five immediately succeeding fiscal
years, projected monthly statements of income and cash flow
for such fiscal years (the "Budget"), projected quarterly
balance sheets for such fiscal years and as soon as practical
after preparation thereof, complete and correct copies of all
quarterly (if any) or annual budgetary analyses or forecasts
of Holdings and the Subsidiaries in the form customarily
prepared by management for its own internal use or the use of
Holdings. Holdings and the Purchasers shall once each
calendar year, commencing with the Holdings's 1997 fiscal
year, conduct an annual off-site meeting to review Holdings's
projections and business plans with respect to such fiscal
year and the immediately succeeding four fiscal years.
(b) Holdings shall also furnish to each Purchaser (i) within
five (5) days of the Holdings's receipt thereof, copies of
all management letters of Holdings's
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accountants; (ii) within five (5) days of Holdings's receipt
thereof, notice with respect to any material pending or
threatened litigation to which Holdings or any Subsidiary is
or may become a party; (iii) within five (5) days of
Holdings's receipt thereof, notice of any default or event of
default with respect to any material agreement to which
Holdings or any Subsidiary is a party; (iv) within five (5)
days of the filing thereof, copies of all material filings
made by or on behalf of Holdings or any Subsidiary with any
governmental regulatory agency; and (v) such other
information as any Purchaser may reasonably request from time
to time.
(c) Within fifteen (15) days after the end of each calendar
month commencing with the calendar month ending February 28,
1997, Holdings will deliver to each Purchaser monthly and
year-to-date summaries, on a consolidated basis broken down
for each market in which Holdings or any Subsidiary operates
any System, of the following: (a) number of Pops, (b) number
of subscribers, (c) gross activations, (d) net activations,
(e) deactivations (and setting forth the reason therefor),
(f) acquisition cost per gross activation, (g) average
monthly revenue per subscriber, (h) total number of roaming
minutes, (i) total roaming revenue and (j) any other
information which the Purchasers may request from time to
time.
1.19 ARTICLE VIII of the Purchase Agreement is hereby deleted in its
entirety and the following is substituted therefor:
SECTION 8.1. NONCOMPLIANCE EVENTS. The Purchasers shall be
entitled to exercise the remedies provided in SECTION 8.2 in
accordance with the terms thereof if any one or more of the
following events (each a "Noncompliance Event") shall occur:
(a) Holdings or any Subsidiary shall fail to perform or
observe any of the covenants, agreements or provisions to be
performed or observed by it under this Agreement or any of
the other Related Agreements, except that for purposes of
SECTION 9 of the Shareholders' Agreement and Section 9 of the
Holdings Shareholders' Agreement (i) the failure of Holdings
or any Subsidiary to perform or observe the provisions of
Sections 6.3, 6.4, 6.5, 6.7, 6.8, 6.9, 6.16, 6.18, 6.19
and/or 7.3 of this Agreement shall not be a Noncompliance
Event and (ii) the failure of Holdings or the Company to
comply with the provisions of SECTIONS 7.1 and/or 7.2 of this
Agreement shall not be a Noncompliance Event until such
failure to so comply has continued for 60 days; or
(b) any representation or warranty made by Holdings or any
Subsidiary to any Purchaser in or in connection with this
Agreement or any other Related Agreement shall prove to have
been materially false on the date as of which it was made; or
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<PAGE>
(c) a default with respect to Indebtedness for borrowed
money of Holdings or any Subsidiary shall occur, and such
default shall continue, without having been duly cured,
waived or consented to, beyond the period of grace, if any,
therein specified and so as to permit the acceleration
thereof, if any acceleration is provided for therein, and
such default shall continue uncured and unwaived for 120 days
after the expiration of such grace period unless, during such
120-day period, the applicable Indebtedness for borrowed
money is accelerated; PROVIDED, HOWEVER, that so long as the
applicable Indebtedness for borrowed money is not
accelerated, for purposes of SECTION 9 of the Shareholders'
Agreement or SECTION 9 of the Holdings Shareholders'
Agreement, a violation of this subparagraph (c) of SECTION
8.1 shall not be a Noncompliance Event; or
(d) a final judgment which in the aggregate with other
outstanding final judgments against Holdings or any
Subsidiary exceeds $5.0 million (in excess of available
insurance recoveries) in any 12-month period shall be
rendered against such Person and, within sixty (60) days
after entry thereof, such judgment shall not have been
satisfied and discharged or stayed pending appeal or bonded,
or within sixty (60) days after expiration of such stay such
judgment shall not have been discharged; PROVIDED, HOWEVER,
that for purposes of SECTION 9 of the Shareholders' Agreement
and Section 9 of the Holdings Shareholders' Agreement, a
violation of this subparagraph (d) of SECTION 8.1 shall not
be a Noncompliance Event; or
(e) Holdings or any Subsidiary shall:
(i) commence a voluntary case under Title 11 of the United
State Bankruptcy Code as from time to time in effect, or
authorize, by appropriate proceedings of its board of
directors or other governing body, the commencement of such a
voluntary case;
(ii) have filed against it a petition commencing an
involuntary case under said Title 11 and such petition shall
not have been dismissed or stayed within sixty (60) days;
(iii) seek relief as a debtor under any applicable law,
other than said Title 11, of any jurisdiction relating to the
liquidation or reorganization of debtors or to the
modification or alteration of the rights of creditors, or
consent to or acquiesce in such relief; or
(iv) have entered against it an order by a court of
competent jurisdiction (x) finding it to be bankrupt or
insolvent, (y) ordering or approving its liquidation,
reorganization or any modification or alteration of the
rights of its creditors, or (z) assuming custody of, or
appointing a receiver or other custodian for, all or a
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substantial part of its property; which order shall not be
vacated, denied, set aside or stayed within sixty (60) days
from the date of entry thereof; or
(v) make an assignment of all or a substantial part of its
assets for the benefit of, or enter into a composition with,
its creditors, or appoint or consent to the appointment of a
receiver or other custodian for all or a substantial part of
its assets; or
(f) Dobson shall die, become disabled or shall otherwise
cease for any reason to serve as the President of Holdings
unless replaced by a Person of comparable experience and
expertise acceptable to the Purchasers within six months of
the termination of Dobson's service; or
(g) any of the proceeds from the sale of the Preferred
Shares are used for a purpose not set forth in SECTION 2.4
above; or
(h) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Purchasers shall
have determined in their reasonable discretion that such
event reasonably could be expected to result in liability of
Holdings or any of its Subsidiaries to the PBGC or such Plan
and such event in the circumstances occurring reasonably
could constitute grounds for the termination of such Plan by
the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer such Plan;
or a trustee shall have been appointed by the United States
District Court to administer such Plan; or the PBGC shall
have instituted proceedings to terminate such Plan; or
(i) Dobson does not at all times have voting control over
the securities of Holdings owned by the Partnership (the
"Partnership Block") or Dobson does not own at all times,
beneficially, at least ninety percent (90%) of the economic
interests of the Partnership Block on a fully diluted basis
which Dobson owned on March 19, 1996; or
(j) So long as the Trust Borrowers are the Borrowers under
the Trust Loan, if any document, instrument or agreement
executed in connection with the Trust Loan is amended or
modified without the prior approval of the Purchasers.
SECTION 8.2. REMEDIES. Upon the occurrence of any
Noncompliance Event then, in each and every such case, the
Purchasers may proceed to protect and enforce their rights by
suit in equity, action at law or other appropriate proceeding
either for specific performance of any covenant, provision or
condition contained or incorporated by reference in this
Agreement or any other Related Agreement or in
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aid of the exercise of any power or right granted in this
Agreement or any other Related Agreement.
SECTION 8.3. WAIVERS. Each of Holdings and the Subsidiaries
hereby waives, to the extent not prohibited by applicable
law, (a) all presentments, demands for performance and
notices on nonperformance (except to the extent specifically
required by the provisions hereof), and (b) any requirement
of diligence or promptness on the part of any holder of
Preferred Shares or Common Shares in the enforcement of its
rights under the provisions of this Agreement or any Related
Agreement.
1.20 ARTICLE IX of the Purchase Agreement is hereby deleted in its
entirety and the following is substituted therefor:
SECTION 9.1. REGISTRATION, TRANSFER AND EXCHANGE OF
PURCHASED SECURITIES.
(a) Prior to February 26, 1997 the Company shall, and on and
after February 26, 1997 Holdings shall, keep at its principal
office a register in which shall be entered the names and
addresses of the holders of the Purchased Securities and the
Common Shares and the particulars (including without
limitation the class thereof) of the Purchased Securities and
the Common Shares held by them and of all transfers of shares
of its Purchased Securities and Common Shares. References to
the "holder" or "holder of record" of any shares of Purchased
Securities and Common Shares shall mean the holder thereof
unless the holder shall have presented the certificates
evidencing same to the Company for transfer and the
transferee shall have been entered in said register as a
subsequent holder, in which case the terms shall mean such
subsequent holder. The ownership of any of the Purchased
Securities and the Common Shares shall be proven by such
register and the Company and Holdings, as the case may be,
may conclusively rely upon such register.
(b) Upon surrender at the principal office of Holdings of
any certificate representing shares of Purchased Securities
or Common Shares for registration of exchange or transfer,
Holdings shall, or shall cause the Company to, issue, at
Holdings's expense, one or more new certificates, in such
denomination or denominations as may be requested, for
Purchased Securities or Common Shares (as applicable) and
registered as such holder may request. Any certificate
representing shares of Purchased Securities or Common Shares
surrendered for registration of transfer shall be duly
endorsed, or accompanied by a written instrument of transfer
duly executed by the holder of such certificate or his
attorney duly authorized in writing. Prior to any transfer
of any Purchased Securities or Common Shares which are not
registered under an effective registration statement under
the Securities Act, no holder thereof
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shall transfer any such Purchased Securities or Common Shares
unless (i) such transfer is effected pursuant to Rule 144 or
any comparable rule under the Securities Act or (ii) prior to
such transfer, the Company shall receive a written opinion
reasonably satisfactory in form and substance to the Company
of counsel designated by such holder and reasonably
satisfactory to the Company that the proposed transfer may be
effected without registration under the Securities Act.
Holdings will pay shipping and insurance charges, from and to
each holder's principal office, upon any transfer, exchange
or conversion provided for in this SECTION 9.1.
(c) Each certificate evidencing Purchased Securities and
Common Shares, whether originally or in substitution for, or
upon transfer or exchange of any Purchased Securities or
Common Shares shall be registered on the date of execution
thereof by the Company or Holdings, as the case may be. The
registered holder of record shall be deemed to be the owner
of the Purchased Securities or Common Shares (as applicable)
for all purposes of this Agreement. All notices given
hereunder to the holder of record shall be deemed validly
given if given in the manner specified in ARTICLE XII hereof.
So long as appropriate, the following legend shall be
imprinted on each certificate evidencing the Purchased
Securities and Common Shares:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER."
SECTION 9.2. REPLACEMENT PURCHASED SECURITIES. Upon receipt
of evidence and indemnity reasonably satisfactory to Holdings
of the loss, theft, destruction or mutilation of any
Purchased Securities or Common Share and, in the case of any
such mutilation, upon the surrender of such Purchased
Securities or Common Share for cancellation to the Company or
Holdings, as the case may be, at its principal office, the
Company or Holdings, as the case may be, will execute and
deliver, in lieu thereof, a new Purchased Security or Common
Share of like tenor. Any Purchased Security or Common Share
in lieu of which any such new Purchased Security or Common
Share has been so executed and delivered by the Company or
Holdings, as the case may be, shall not be deemed to be
outstanding for any purpose of this Agreement.
1.21 ARTICLE X of the Purchase Agreement is hereby deleted in its entirety
and the following is substituted therefor:
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<PAGE>
SECTION 10.1. EXPENSES. Each of Holdings and the Company
jointly and severally hereby agrees to pay on demand all
reasonable fees, costs and expenses incurred by the
Purchasers, in connection with the transactions contemplated
by this Agreement and the other Related Agreements and in
connection with any amendments or waivers (whether or not the
same become effective) hereof or thereof and all reasonable
expenses incurred by the Purchasers in connection with the
enforcement of any rights hereunder or under any other
Related Agreement including, without limitation, (a) the cost
and expenses of due diligence and of preparing and
duplicating this Agreement and each other Related Agreement;
(b) the fees, expenses and disbursements of Purchasers'
counsel in connection with the preparation, administration or
interpretation of this Agreement and the other Related
Agreements and other instruments mentioned herein, the
Closing, any amendments, modifications, approvals, consents
or waivers hereto, thereto, hereunder or thereunder; (c) the
fees, expenses and disbursements of the Purchasers'
accountants, in connection with the Purchasers due diligence
investigation of Holdings and the Subsidiaries; and (d) all
taxes (other than taxes determined with respect to income and
taxes relating to any transfer of any shares of Purchased
Securities other than to the Company or Holdings), including
any recording fees and filing fees and documentary stamp and
similar taxes at any time payable in respect of this
Agreement or any other Related Agreement. Further, Holdings
agrees to pay all reasonable out-of-pocket expenses
(including, without limitation, reasonable attorneys' fees
and costs, all costs associated with any rights of board
attendance, observation or inspection and travel and lodging
expenses related thereto and accounting fees) incurred by any
Purchaser in connection with the enforcement of or
preservation of rights under this Agreement or any other
Related Agreements or the administration thereof whether
before or after the occurrence of a Noncompliance Event.
SECTION 10.2. INDEMNIFICATION. Each of Holdings and the
Company jointly and severally hereby further agrees to
indemnify, exonerate and hold each Purchaser and its (if
applicable) general and limited partners and their respective
Affiliates, shareholders, officers, directors, employees and
agents free and harmless from and against any and all
actions, causes of action, suits, losses, liabilities,
damages and expenses, including, without limitation,
reasonable attorneys' fees and disbursements, incurred in any
capacity by any of the indemnities as a result of or relating
to (a) any transaction financed or to be financed in whole or
in part directly or indirectly with proceeds from the sale of
any of the Purchased Securities, (b) the execution, delivery,
performance or enforcement of this Agreement, any Related
Agreement or any agreement, document or instrument
contemplated hereby or thereby (including, without
limitation, any failure by any Person other than the
Purchasers to comply with any of its covenants hereunder or
thereunder), (c) any violation of any
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<PAGE>
Environmental Laws with respect to conditions at the property
owned or used by Holdings or a Subsidiary or the operations
conducted thereon, or (d) the investigation or remediation of
offsite locations at which Holdings, any of the Subsidiaries
or their respective predecessors are alleged to have directly
or indirectly disposed of Hazardous Substances.
SECTION 10.3. BROKERS' FEES. Each of Holdings and the
Company jointly and severally hereby indemnifies each
Purchaser against and agrees that it will hold it harmless
from any claim, demand or liability for any broker's,
finder's or placement fees or lender's incentive fees alleged
to have been incurred by it or any Subsidiary in connection
with the transactions contemplated by this Agreement or any
Related Agreement.
SECTION 10.4. SURVIVAL OF OBLIGATIONS. The obligations of
Holdings and the Company under this ARTICLE X shall survive
the termination of this Agreement.
SECTION 10.5. COURSE OF DEALING. No course of dealing
between Holdings on the one hand, and the Purchasers, on the
other hand, shall operate as a waiver of any Purchaser's
rights under this Agreement or any other Related Agreement.
No delay or omission in exercising any right under this
Agreement or any other Related Agreement shall operate as a
waiver of such right or any other right. A waiver on any one
occasion shall not be construed as a bar to or waiver of any
right or remedy on any other occasion.
SECTION 10.6. BINDING EFFECT. The provisions of this
Agreement and the other Related Agreements that are for the
benefit of the Purchasers as the holders of any Purchased
Securities are also for the benefit of, and enforceable by
and binding upon, all subsequent holders of Purchased
Securities who may acquire such shares, and the provisions of
this Agreement and the other Related Agreements that subject
the Purchasers, as holders of any Purchased Securities, to
obligations also subject all subsequent holders of any of the
Purchased Securities thereto.
1.22 Clause (i) of ARTICLE XI of the Purchase Agreement is hereby deleted
in its entirety and the following is substituted therefor:
(i) If to the Company or Holdings, then to it at 13439 N.
Broadway Extension, Oklahoma City, Oklahoma 73114, Attn:
Everett R. Dobson, Telecopy No.: (405) 391-8515, Telephone
No.: (405) 391-8500, or at such other address as such Person
shall have specified by notice actually received by each
Purchaser.
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<PAGE>
1.23 ARTICLE XIII of the Purchase Agreement is hereby deleted in its
entirety and the following is substituted therefor:
Except as otherwise expressly provided herein, any term of
this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in a
particular instance and either retroactively or
prospectively) only with the written consent of Holdings and
each of the Purchasers.
1.24 ARTICLE XIV of the Purchase Agreement is hereby deleted in its
entirety and the following is substituted therefor:
EACH OF HOLDINGS AND THE COMPANY HEREBY AGREES TO SUBMIT TO
THE NON-EXCLUSIVE JURISDICTION OF THE COURTS IN AND OF THE
STATE OF DELAWARE AND TO JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE DISTRICT OF DELAWARE AND TO THE COURTS
TO WHICH AN APPEAL OF THE DECISIONS OF SUCH COURTS MAY BE
TAKEN, AND CONSENTS THAT SERVICE OF PROCESS WITH RESPECT TO
ALL COURTS IN AND OF THE STATE OF DELAWARE AND THE UNITED
STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE MAY BE
MADE BY REGISTERED MAIL TO IT AT ITS ADDRESS SET FORTH IN
ARTICLE XI HEREOF.
1.25 ARTICLE XV of the Purchase Agreement is hereby deleted in its
entirety and the following is substituted therefor:
EACH OF HOLDINGS, THE COMPANY AND THE PURCHASERS HEREBY
EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN ANY
SUIT, ACTION OR PROCEEDING EXISTING UNDER OR RELATING TO THIS
AGREEMENT OR ANY OF THE RELATED DOCUMENTS.
1.26 ARTICLE XVII of the Purchase Agreement is hereby deleted in its
entirety and the following is substituted therefor:
Each of Holdings and the Company hereby acknowledges that the
Purchasers will have the right, subject to the reasonable
prior written approval of the Company and Holdings, to
publicize their investment in the Company and Holdings as
contemplated hereby by means of a tombstone advertisement or
other customary advertisement in newspapers and other
periodicals.
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<PAGE>
1.27 ARTICLE XVIII of the Purchase Agreement is hereby deleted in its
entirety and the following is substituted therefor:
Each of Holdings and the Company, on the one hand, and the
Purchasers, on the other hand, upon the request of the other
party hereto, whether before or after the Closing, shall do,
execute, acknowledge and deliver or cause to be done,
executed, acknowledged or delivered all such further acts,
deeds, documents, assignments, transfers, conveyances, powers
of attorney and assurances as may be reasonably necessary or
desirable to effect complete consummation of the transactions
contemplated by this Agreement.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
2.1 Each of Holdings and the Company hereby represents and warrants that
(i) it has full power and authority to execute and deliver this Amendment and to
perform its obligations hereunder, (ii) it has taken all corporate action
necessary for the execution and delivery by it of this Amendment and the
performance by it of its obligations hereunder, and (iii) this Amendment
constitutes its valid and binding obligation enforceable against it in
accordance with its terms except to the extent enforceability may be subject to
bankruptcy, insolvency, moratorium and other similar laws affecting the rights
of creditors generally or the application of principles of equity, whether in an
action at law or proceeding in equity.
2.2 Holdings (a) is a corporation, duly organized, legally existing and in
good standing under the laws of the State of Oklahoma (b) has the corporate
power and authority to own its properties and carry on its business as now being
conducted and is qualified to do business in every jurisdiction in which the
nature of its business or the ownership or leasing of its property requires such
qualification; and (c) has the corporate power and authority to enter into and
perform its obligations under the Purchase Agreement and each of the other
Related Agreements (as defined in the Purchase Agreement as amended hereby) to
which it is a party and to undertake the transactions contemplated hereby and
thereby. All necessary and proper corporate action has been taken by Holdings
with respect to the authorization, execution and delivery of the Purchase
Agreement and each of the other Related Agreements (as defined in the Purchase
Agreement as amended hereby) to which it is a party and the Purchase Agreement
and each of the other Related Agreements (as defined in the Purchase Agreement
as amended hereby) constitute the legal, valid and binding obligations of
Holdings enforceable against it in accordance with their terms except to the
extent enforceability may be subject to bankruptcy, insolvency, moratorium and
similar laws affecting the rights of creditors generally or the application of
principles of equity, whether in an action at law or proceeding in equity, and
subject to the availability of the remedy of specific performance or of any
other equitable remedy or relief to enforce any right under any such agreement.
The execution, delivery and performance of the Purchase Agreement and each of
the other Related Agreements (as defined in the Purchase Agreement as amended
hereby) to which Holdings is a party will not violate any
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<PAGE>
provision of law applicable to Holdings, any order of any court or other
agency of government applicable to Holdings, Holdings 's corporate charter or
by-laws or any indenture, agreement or other instrument to which Holdings is
a party or by which it is bound or be in conflict with, result in a breach
of, or constitute (with due notice or lapse of time or both) a default under,
or except as may be provided in the Purchase Agreement, result in the
creation or imposition of any Lien upon any of the property or assets of
Holdings pursuant to, any such indenture, agreement or instrument. No
registrations, filings, applications, notices, transfers, consents,
approvals, audits, qualifications, waivers or other action of any kind is
required by virtue of the execution and delivery of the Purchase Agreement
and each of the other Related Agreements (as defined in the Purchase
Agreement as amended hereby) or of the consummation of the transactions
contemplated hereby or thereby.
2.3 A statement of the capital structure of Holdings, the Company and
each Related Entity, indicating its authorized and issued debt and equity
interests, and identifying the holders of such interests, as of the date of
this Agreement giving effect to the transactions contemplated by the Related
Agreements, is annexed hereto as SCHEDULE 2.3 (the "Capital Structure
Schedule"). The Capital Structure Schedule also indicates (a) which
securities, if any, carry preemptive rights; (b) whether there are any
outstanding subscriptions, warrants, options or other agreements to purchase
any securities; (c) whether Holdings, the Company or a Related Entity is
obligated to redeem any of its securities, and the details of any such
committed redemption; (d) all commitments, loan agreements or arrangements by
Holdings, the Company or a Related Entity to incur indebtedness; (e) any
commitment to convert debt into equity interests of Holdings, the Company or
a Related Entity; (f) capital call arrangements; and (g) any other agreement,
arrangement or plan which will directly or indirectly affect the capital
structure of Holdings, the Company or a Related Entity.
2.4 As of the Closing Date, the only outstanding equity interests of
Holdings, the Company and each Related Entity will be as described in the
Capital Structure Schedule and owned by the Persons listed on said Schedule,
all of which equity interests (i) have been validly issued in conformity with
all applicable state and federal laws, (ii) are fully paid and
non-assessable, and (iii) are free and clear of all Liens other than the
pledge of shares of Common Stock of the Company in connection with the
CoreStates Financing. Except as set forth on SCHEDULE 2.3, Holdings has no
Subsidiaries nor does it own or hold of record or beneficially any shares of
any class of the capital of any corporation or any legal or beneficial
ownership interest in any general or limited partnership, association, joint
venture or in any other unincorporated organization or entity. There are no
commitments for the purchase or sale of, and except as set forth on the
Capital Structure Schedule, no options, warrants or other rights to subscribe
for or purchase, any equity securities of Holdings, the Company or any
Related Entity. Holdings, the Company and each Related Entity other than
Western Financial Services Corp. is engaged solely in the business of owning,
operating or investing in telephone systems (including long distance) and
cellular systems and Western Financial Services Corp. is engaged in
miscellaneous investments, including real estate.
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<PAGE>
2.5 Each Purchaser hereby represents and warrants to the Company that
it is acquiring the Purchased Securities to be purchased by it pursuant to
SECTION 2.1 for investment and not with a view towards the sale or
distribution of its rights hereunder or thereunder.
2.6 Each Purchaser represents that this Agreement and the other Related
Agreements (as defined in the Purchase Agreement as amended hereby) to which
it is a party have been executed by a duly authorized Person on its behalf
and the execution, delivery and performance hereof and thereof have been duly
authorized by all appropriate action.
SECTION 3. REFERENCE TO AND EFFECT UPON THE PURCHASE AGREEMENT.
3.1 Except as specifically amended above, the Purchase Agreement shall
remain in full force and effect and is hereby ratified and confirmed.
3.2 The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of any Purchaser under
the Purchase Agreement, nor constitute an amendment of any provision of the
Purchase Agreement, except as specifically set forth herein. Upon the
effectiveness of this Amendment (i) each reference in the Purchase Agreement
to "this Agreement", "hereunder", "hereof", "herein" or words of similar
import shall mean and be a reference to the Purchase Agreement as amended
hereby; and (ii) each reference in any "Related Agreement" (as defined in the
Purchase Agreement as amended hereby) to the Purchase Agreement shall mean
and be a reference to the Purchase Agreement as amended hereby.
SECTION 4. COSTS AND EXPENSES. Holdings hereby agrees to pay on demand
all reasonable fees, costs and expenses (including, without limitation,
reasonable fees, costs and expenses of counsel to the Purchasers ) incurred
by the Purchasers in connection with negotiation, preparation, administration
and enforcement of this Amendment.
SECTION 5. GOVERNING LAW. THIS AMENDMENT SHALL BE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF DELAWARE WITHOUT GIVING EFFECT
TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE THAT WOULD CAUSE THE
APPLICATION OF THE DOMESTIC SUBSTANTIVE LAWS OF ANY OTHER STATE, AND SHALL
BIND AND INURE TO THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE
SUCCESSORS AND ASSIGNS.
SECTION 6. SECTION TITLES. The section titles contained in this
Amendment are and shall be without substance, meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
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<PAGE>
SECTION 7. COUNTERPARTS. This Amendment may be executed in any number
of counterparts, each of which when so executed shall be deemed an original
but all such counterparts shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed and
delivered by the parties hereto as of the day and year first above written.
DOBSON COMMUNICATIONS CORPORATION
BY: /s/ EVERETT R. DOBSON
-----------------------------
EVERETT R. DOBSON
PRESIDENT
DOBSON HOLDINGS CORPORATION
BY:
-----------------------------
NAME:
-----------------------------
TITLE:
-----------------------------
PURCHASERS
FLEET EQUITY PARTNERS VI, L.P.
BY: FLEET GROWTH RESOURCES II, INC.,
A GENERAL PARTNER
BY: /s/ THADEUS J. MOCARSKI
---------------------------------
THADEUS J. MOCARSKI
SENIOR VICE PRESIDENT
Address for Notices:
111 Westminster Street
Providence, Rhode Island 02903
Att: Thadeus J. Mocarski
Telecopy No.: (401) 278-6387
Telephone No.: (401) 278-5678
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<PAGE>
FLEET VENTURE RESOURCES, INC.
BY: /s/ THADEUS J. MOCARSKI
---------------------------------
THADEUS J. MOCARSKI
SENIOR VICE PRESIDENT
Address for Notices:
111 Westminster Street
Providence, Rhode Island 02903
Att: Thadeus J. Mocarski
Telecopy No.: (401) 278-6387
Telephone No.: (401) 278-5678
KENNEDY PLAZA PARTNERS
BY: /s/ THADEUS J. MOCARSKI
---------------------------------
TITLE:
Address for Notices:
c/o Fleet Equity Partners
111 Westminster Street
Providence, Rhode Island 02903
Att: Thadeus J. Mocarski
Telecopy No.: (401) 278-6387
Telephone No.: (401) 278-5678
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<PAGE>
DOBSON COMMUNICATIONS CORPORATION
(FORMERLY, DOBSON HOLDINGS CORPORATION)
AN OKLAHOMA CORPORATION
SHAREHOLDERS' AGREEMENT
DATED AS OF FEBRUARY 26, 1997
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 - RIGHTS OF SHAREHOLDERS 1
SECTION 2 - DEFINITIONS 2
2.1 Definitions
2.2 Construction
SECTION 3 - REGISTRATION RIGHTS 8
3.1 Requested Registration
3.2 Company Registration
3.3 Expenses of Registration
3.4 Registration Procedures
3.5 Registration on Form S-3
3.6 Indemnification
3.7 Information by Holder
3.8 Rule 144 Reporting
3.9 Transfer of Registration Rights
3.10 Termination of Registration Rights
3.11 Other Registration Rights
SECTION 4 - AFFIRMATIVE COVENANTS OF THE COMPANY 18
AND THE SHAREHOLDERS
4.1 Board of Representation and Voting Agreement
of the Shares
SECTION 5 - PREEMPTIVE RIGHTS 20
5.1 Right to Purchase
5.2 Price
5.3 Closing
SECTION 6 - RIGHTS OF REFUSAL 22
6.1 Right of Refusal
6.2 Price
6.3 Closing
6.4 Termination
SECTION 7 - RIGHT OF CO-SALE 24
7.1 Co-Sale
7.2 Exclusions
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SECTION 8 - RESTRICTIONS ON TRANSFER 25
8.1 Transfer Restrictions
8.2 Exceptions
8.3 Termination
SECTION 9 - PUT RIGHTS 25
9.1 Right to Put
9.2 Repurchase Price
9.3 Failure to Purchase
9.4 Payment
SECTION 10 - CALL RIGHTS 28
10.1 Right to Call
10.2 Call Price
10.3 Payment
10.4 Termination
SECTION 11 - MISCELLANEOUS 29
11.1 Waivers and Amendments
11.2 Governing Law
11.3 Successors and Assigns
11.4 Entire Agreement
11.5 Notices
11.6 Severability
11.7 Counterparts
11.8 Descriptive Headings
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SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement is entered into as of February ___, 1997, by
and among Dobson Communications Corporation (formerly, Dobson Holdings
Corporation), an Oklahoma corporation (the "Company"), and the Persons named
in SCHEDULE A attached hereto and made a part hereof (collectively the
"Shareholders").
RECITALS
WHEREAS, the Company has authorized capital stock consisting of 1,000,000
shares of Class A Voting Common Stock, $1.00 par value per share (the "Class
A Common Stock"), 31,000 shares of Class B Common Stock, $1.00 par value per
share (the "Class B Common Stock") (collectively the "Common Shares"),
100,000 shares of Class A 5% Non-Cumulative, Non-Voting, Non-Convertible
Preferred Stock, $1.00 par value per share (the "Class A Preferred Stock"),
100,000 shares of Class B Convertible Preferred Stock (the "Class B Preferred
Stock") and 100,000 shares of Class C 8% Cumulative, Non-Voting,
Non-Convertible Preferred Stock (collectively the "Preferred Shares" and
together with the Common Shares, the "Shares");
WHEREAS, each Shareholder has a substantial investment in the Company by
reason of such Shareholder's ownership of the Shares shown on SCHEDULE A;
WHEREAS, the terms "Shareholder" or "Shareholders" as used herein shall
include the parties hereto other than the Company, and any future holder of
any Shares who become a party to this Agreement; and
WHEREAS, the parties believe that it is in the best interest of the
Company and the Shareholders to make provision for (a) the future disposition
of certain Shares of the Company, and (b) other matters relating to the
governance of the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
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SECTION 1
RIGHTS OF SHAREHOLDERS
The Company hereby grants to the Shareholders the registration rights,
rights of first refusal, rights of transfer, information rights, sale and
co-sale rights, rights regarding representation on the Board of Directors and
the other rights set forth herein (collectively the "Rights"). The
Shareholders accept the Rights and agree to be bound by the obligations
contained herein.
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SECTION 2
DEFINITIONS
2.1 DEFINITIONS. Capitalized terms used herein and not otherwise
defined herein shall have the following meanings:
"AFFILIATE" has the meaning given such term in the Purchase
Agreement.
"AGREEMENT" shall mean this Shareholders' Agreement, as the same may
be amended, supplemented, restated, replaced or otherwise modified, in each
case from time to time and whether in whole or in part.
"APPLICABLE RATE" shall mean 8% per annum, except during any period
a Noncompliance Event exists, the Applicable Rate shall mean 16% per annum.
"CAPITAL TRANSACTION" shall mean (i) a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company, (ii) a
merger or consolidation of the Company into or with another corporation in
which the shareholders of the Company shall own less than 50% of the voting
securities of the surviving corporation or its parent, (iii) the sale,
transfer or lease (but not including a transfer or lease by pledge or
mortgage by a bona fide lender) of all or substantially all of the assets of
the Company, (iv) the consummation of a Public Offering of the Company's
Common Shares, or (v) the sale or transfer (but not including a transfer or
lease by pledge or mortgage by a bona fide lender) of the Purchasers' equity
ownership interest in the Company, whether by redemption or otherwise.
"CHANGE OF CONTROL EVENT" shall mean (i) any merger or consolidation of
the Company with or into another Person as a result of which the Shareholders
shall own less than fifty and one tenth percent (50.1%) of the Voting
Securities of the consolidated or surviving corporation or its parent, (ii)
the sale, transfer or lease of all or substantially all of the assets of the
Company or the consolidated assets of the Company and its Subsidiaries, (iii)
the issuance of Equity Securities of the Company as a result of which the
Shareholders of the Company prior to such issuance own less than fifty and
one tenth percent (50.1%) of the Voting
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Securities of the Company immediately following such issuance, (iv) the
failure of Everett Dobson to control, directly or indirectly through Persons
controlled by him, fifty and one tenth percent (50.1%) of the Company's
Voting Securities, and (v) the failure of the Persons comprising the
Company's Board of Directors as of the date hereof or Persons approved by
fifty and one tenth percent (50.1%) of the Company's incumbent Board of
Directors to comprise the majority of the directors of the Company.
"COMMON SHARES" shall have the meaning ascribed thereto in the
Recitals of this Agreement.
"COMPANY REGISTRATION CUTBACK" shall have the meaning ascribed
thereto in SECTION 3.2(b).
"COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"CONVERTIBLE SECURITIES" shall mean, with respect to any Equity
Securities, (a) any warrants, options or other rights to subscribe for or to
acquire, directly or indirectly, such Equity Securities, and (b) any shares
of stock, partnership interests, other ownership or beneficial interests,
bonds, notes, debentures or other securities convertible into, exchangeable
for, or otherwise entitling the holder thereof to, directly or indirectly,
such Equity Securities, in each case outstanding at any time.
"DCC" shall mean Dobson CC Limited Partnership, an Oklahoma limited
partnership.
"DEMAND REGISTRATION CUTBACK" shall have the meaning ascribed
thereto in SECTION 3.1(b).
"DOBSON" shall mean Everett Dobson.
"EQUITY SECURITIES" shall mean, with respect to any Person, any
shares of stock of, or partnership interest or other ownership or beneficial
interest in, such Person, in each case outstanding at any time.
"FAIR MARKET VALUE" shall mean with respect to any Common Shares an
amount equal to the greater of (i) the total value of the
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consideration which would be received by a holder of one Common Share upon a
Public Offering by the Company of Common Shares representing at least 25% of
the Common Shares of the Company on a Fully Diluted Basis, and (ii) the total
value of the consideration which would be received by a holder of one Common
Share upon the sale of all of the Equity Securities of the Company in a
single transaction to a buyer willing to pay the highest purchase price which
could be received in an auction conducted by a nationally recognized
investment banking firm which has experience valuing telecommunications
companies, which such buyer is under no compulsion to buy and the holders of
such Equity Securities are under no compulsion to sell, all parties having
reasonable knowledge of all relevant facts, in each case without any discount
for illiquidity, minority ownership, transfer restrictions, call or option
rights to purchase the Common Shares, the existence of Noncompliance Events
or the termination, death or disability of key officers of the Company;
PROVIDED, HOWEVER, that any liability of the Company in respect of the Trust
Loan, whether direct, contingent or otherwise, shall not be included as a
liability of the Company for purposes of calculation Fair Market Value; and
PROVIDED, FURTHER, however, that the face amount plus all accrued but unpaid
interest on any promissory notes outstanding to employees, officers or
directors of the Company shall be included as an asset of the Company for
purposes of calculating Fair Market Value.
"FAMILY MEMBER" shall mean, as applied to any Person who is an
individual, a spouse, parent, sibling, child, grandchild, cousin or other
lineal descendent thereof and a trust created for the exclusive benefit of
one or more of such Persons.
"FEP" shall mean Fleet Equity Partners VI, L.P., a Delaware limited
partnership, and its successors and assigns.
"FINANCING AGREEMENT" shall mean that certain Second Amended and
Restated Credit Agreement of February 26, 1997 herewith by and among
CoreStates Bank, N.A., in its capacity as Administrative Agent and a Bank,
other Banks listed therein, the Corporate Borrower listed therein, or any
credit agreement evidencing a senior debt facility that replaces the facility
evidenced by such Second Amended and Restated Credit Agreement.
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"FULLY DILUTED BASIS" with respect to any Equity Securities issued
or issuable by any Person shall include, without duplication, (a) all shares
or units of, or interests in, such Equity Securities outstanding at the time
of determination, and (b) all Convertible Securities with respect to such
Equity Securities, whether or not exercisable or convertible at the time of
such determination.
"FVR" shall mean Fleet Venture Resources, Inc., a Rhode Island
corporation, and its successors and assigns.
"KPP" shall mean Kennedy Plaza Partners, a Rhode Island general
partnership.
"MAJORITY PURCHASERS" shall mean, at any time of determination
thereof, Purchasers holding at such time at least fifty-one percent (51%) of
the aggregate issued and outstanding Shares held, whether beneficially or of
record, by the Purchasers.
"NEW SHARES" shall mean any Equity Securities or Convertible
Securities of the Company, whether now authorized or not, and any rights,
options or warrants to purchase said Equity Securities or Convertible
Securities, including, without limitation, any Common Shares or Preferred
Shares, PROVIDED, HOWEVER, that "New Shares" does not include (i) securities
offered pursuant to a Public Offering; (ii) Common Shares issued to the
Company's Shareholders in connection with any stock split or stock dividend;
(iii) Common Shares issued to a Purchaser upon conversion of the Class B
Preferred Stock, and (iv) the issuance of a total of 30,166 Common Shares
upon the exercise of Qualified Options.
"NONCOMPLIANCE EVENTS" shall have the meaning given such term in the
Purchase Agreement.
"NOTICE OF PROPOSED ISSUANCE" shall have the meaning ascribed
thereto in SECTION 5.1(a).
"NOTICE OF PROPOSED TRANSFER" shall have the meaning ascribed
thereto in SECTION 6.1(a).
"OFFERED SHARES" shall have the meaning ascribed thereto in SECTION
6.1(a).
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"OFFERED NEW SHARES" shall have the meaning ascribed thereto in
SECTION 5.1(a).
"PCS" shall mean personal communications services.
"PERMITTED TRANSFERS" shall mean, in the case of a Purchaser, (i)
any Transfer of Shares to any Person controlled, directly or indirectly, by
Fleet Financial Group, Inc. ("FFG") or in which FFG, directly or indirectly,
owns a majority of the Equity Securities, (ii) a Transfer of all of the
Shares owned by such Purchaser in connection with a sale by such Purchaser of
50% or more of the fair value of its investment portfolio, (iii) a Transfer
pursuant to a Public Offering, and (iv) Transfer of Shares pursuant to
SECTION 7 or 9 hereof.
"PERSON" shall have the meaning ascribed thereto in the Purchase
Agreement.
"POPS" shall mean the total number of population equivalents in a
defined market.
"PREFERRED SHARES" shall mean the Class B Preferred Stock authorized
as of this date.
"PROPOSED BUYER" shall have the meaning ascribed thereto in SECTION
5.1(a).
"PROPOSED PURCHASER" shall have the meaning ascribed thereto in
SECTION 6.1(a).
"PROPORTIONATE SHARE" shall have the meaning ascribed thereto in
SECTION 5.1(c).
"PUBLIC OFFERING" shall mean the sale or distribution of Common
Shares or other Equity Securities of the Company pursuant to an underwritten
public offering registered under the Securities Act.
"PURCHASERS" shall mean FVR, FEP and KPP, and "PURCHASER" shall mean
any one of them.
"PURCHASE AGREEMENT" shall mean that certain Securities Purchase
Agreement, of March 19, 1996, by and among the Purchasers
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and Dobson Communications Corporation, as amended by that certain Amendment
No.1 to Securities Purchase Agreement dated as of February ___, 1997, and as
the same may be amended, supplemented, restated, replaced or otherwise
modified, in each case from time to time and whether in whole or in part.
"QUALIFIED OPTIONS" shall mean those certain options for the right
to purchase up to 30,166 Common Shares issued to key employees acceptable to
the Majority Purchasers and in the amounts, at the price and on other terms
and conditions acceptable to the Majority Purchasers.
The terms "REGISTER", "REGISTERED" and "REGISTRATION" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRABLE SECURITIES" shall mean (i) the Common Shares held by
any Shareholder, including but not limited to any Common Shares issued or
issuable pursuant to the conversion of Preferred Shares and any Common Shares
issued upon exercise of any warrant or option held by a Shareholder, in each
case which have not been sold to the public, and (ii) any Common Shares or
other securities issued or issuable pursuant to the conversion of, or with
respect to, the Preferred Shares held by any Shareholder, upon any stock
split, stock dividend, recapitalization or similar event, which shares have
not been sold to the public, and (iii) securities issued in replacement or
exchange of any of the securities referred to in clauses (i) or (ii) above.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with SECTION 3.1, 3.2 and 3.5, including, without
limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company,
fees and disbursements of counsel for the Purchasers, blue sky fees and
expenses, and the expense of any special audits incident to or required by
any such registration (but excluding the compensation of regular employees of
the Company which shall be paid in any event by the Company).
"RESTRICTED SHARES" shall have the meaning ascribed thereto in
SECTION 6.1.
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"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the
Commission thereunder, each as in effect from time to time.
"SELLING EXPENSES" shall mean all underwriting fees, discounts,
selling commissions and stock transfer taxes applicable to the Registrable
Securities registered by the Shareholders.
"SHAREHOLDERS" shall have the meaning ascribed thereto in the
Recitals to this Agreement.
"SUBSIDIARY" shall have the meaning ascribed thereto in the Purchase
Agreement.
"TRANSFER" shall mean, with respect to any Share, property, asset or
other right or interest, when used as a verb, to sell, assign, transfer,
exchange, distribute, devise, gift, grant a lien on, encumber or otherwise
dispose of such Share, property, asset or other right or interest, in whole
or in part, or, when used as a noun, the sale, assignment, transfer,
exchange, distribution, devise, gift, granting of a lien, encumbrance or
other disposition of such Share, property, asset or other right or interest,
in whole or in part, in either case, whether pursuant to a sale, merger,
combination, consolidation, reclassification or otherwise, except for pledges
and assignments made pursuant to the Financing Agreement or collateral
documents executed in connection therewith.
"TRUST LOAN" shall mean that certain $6 million term loan to the
Everett R. Dobson Irrevocable Family Trust, Stephen T. Dobson Irrevocable
Family Trust and Robin L. Dobson Irrevocable Family Trust pursuant to the
Financing Agreement.
"VOTING SECURITIES" shall mean equity securities of a Person having
the right to vote generally in the election of the directors of such Person.
2.2 CONSTRUCTION. Unless the context of this Agreement clearly requires
otherwise (i) references to the plural include the singular and to the
singular include the plural, (ii) the term "including" is not limiting, and
(iii) the term "or" has the inclusive meaning represented by the term
"and/or". The terms
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"hereof", "herein", "hereby", "hereunder" and similar terms in this Agreement
refer to this Agreement as a whole and not to any particular provision of
this Agreement. Article, Section, clause, Schedule and Exhibit references
are to Articles, Sections, clauses, Schedules and Exhibits (as each such
Schedule or Exhibit may be amended, modified or supplemented from time to
time) of this Agreement unless otherwise specified.
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SECTION 3
REGISTRATION RIGHTS
3.1 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION BY PURCHASERS. If at any time after the
effective date of a Public Offering the Company shall receive from the
Majority Purchasers a written request that the Company effect the
registration under the Securities Act of the Registrable Securities held by,
or issuable to, the Purchasers (each such request a "Request for
Registration"), the Company will:
(i) promptly, and in any event within fifteen (15) days of its
receipt of such Request for Registration, give written notice of the
proposed registration to all other Shareholders; and
(ii) use its best efforts to effect such registration of the
Registrable Securities (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Securities Act and
any other governmental requirements or regulations) as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in such Request for
Registration, together with all or such portion of the Registrable
Securities of each Shareholder joining in such request as are specified in
a written request received by the Company within fifteen (15) days after
receipt by such Shareholder of such written notice from the Company;
PROVIDED, HOWEVER, that the Company shall not be obligated to take any action
to effect any such registration pursuant to this SECTION 3.1(a):
(A) In any particular state jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting
such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be
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required by the Securities Act, PROVIDED THAT the Company shall be required
to take all such necessary action in the State of New York; or
(B) After the Company has effected three such Requests for
Registration on Form S-1 (or any successor form to Form S-1) pursuant to
this SECTION 3.1(a), such registrations have been declared or ordered
effective and the securities offered pursuant to such registrations have
been sold.
Subject to the foregoing clauses (A) and (B), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable after receipt of a Request for Registration.
The Majority Purchasers may make three Requests for Registration on Form
S-1 (or any successor form to Form S-1); PROVIDED, HOWEVER, that the Majority
Purchasers may not request registration of the Registrable Securities on Form
S-1 (or any successor form to Form S-1) if Form S-3 (or any successor form to
Form S-3) is available for such registration; and PROVIDED FURTHER that at
least nine months shall have elapsed between the date of any Request for
Registration and any subsequent Request for Registration. Any Shareholder
may participate in any offering conducted pursuant to a Request for
Registration so long as all of the Registrable Securities held by the
Purchasers requested to be registered in such registration are permitted to
be included in such registration. If as a result of a Demand Registration
Cutback the Purchasers are not allowed to include in any such registration at
least eighty percent (80%) of their Registrable Securities requested to be
registered, then such registration shall not count as one of the Majority
Purchasers' three Requests for Registration.
(b) UNDERWRITING. The distribution of the Registrable Securities
subject to a Request for Registration shall be effected by means of a firm
commitment underwriting. The right of any Shareholder to registration
pursuant to SECTION 3.1 shall be conditioned upon such Shareholder's
participation in such underwriting and the inclusion of such Shareholder's
Registrable Securities in the underwriting to the extent requested by such
Shareholder, unless otherwise mutually agreed, in writing, by the Majority
Purchasers.
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The Company, together with each Shareholder proposing to distribute his,
her or its securities through such underwriting, shall enter into an
underwriting agreement in customary form with the managing underwriter(s)
selected by such underwriting by the Company which underwriter(s) shall be
reasonably acceptable to the Majority Purchasers. Notwithstanding any other
provision of this SECTION 3.1, if the managing underwriter(s) advises the
Company and the Purchasers in writing that because the number of shares
requested to be included in the registration exceeds the number which can be
sold in an orderly manner in such offering within a price range acceptable to
the Purchasers or that other marketing factors require a limitation of the
number of shares to be underwritten (the "Demand Registration Cutback"), then
the Company will include in such registration, to the extent of the number
and type which the Company is so advised can be sold in (or during the time
of) such offering, FIRST, all Registrable Securities of the Purchasers
requested to be included in such registration, SECOND, the securities
proposed to be sold by the Company for its own account, and THIRD, the
Registrable Securities of Shareholders other than the Purchasers requested to
be included in such registration. In the event a Demand Registration Cutback
results in less than all of the securities of a particular category (i.e.,
Registration Securities of the Purchasers, Registrable Securities of the
Shareholders other than the Purchasers and securities of the Company) that
are requested to be included in such registration actually to be included in
such registration shall be shared pro rata among all of the holders of
securities of such category that were requested to be included in such
registration based on the number of shares held by each such holder of
securities of such category.
If any Purchaser disapproves of the terms of the underwriting, such
Person may elect to withdraw therefrom by written notice to the Company, the
managing underwriter(s) and the other Purchasers. The Registrable Securities
so withdrawn shall be withdrawn from registration; PROVIDED, HOWEVER, that if
by the withdrawal of such Registrable Securities a greater number of
Registrable Securities held by any other Purchaser may be included in such
registration (up to the maximum of any limitation imposed by the
underwriters), then the Company shall offer to each Purchaser who has
included Registrable Securities in the registration the right to include
additional Registrable Securities in the same proportion used in determining
the underwriter limitation in this SECTION 3.1(b).
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3.2 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION TO SHAREHOLDERS. If at any time or from time
to time, the Company shall determine to register any of its Equity
Securities, either for its own account or the account of a holder thereof,
other than (i) a registration relating solely to employee benefit plans or
(ii) a registration relating solely to a Commission Rule 145 transaction, the
Company will:
(i) promptly give to each Shareholder written notice thereof; and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within twenty (20) days after receipt of such written notice
from the Company, by any Shareholder or Shareholders.
(b) UNDERWRITING. If the registration of which the Company gives notice
is for a registered Public Offering involving an underwriting, the Company
shall so advise the Shareholders as a part of the written notice given
pursuant to SECTION 3.2(a)(i). In such event the right of any Shareholder to
registration pursuant to this SECTION 3.2 shall be conditioned upon such
Shareholder's participation in such underwriting and the inclusion of such
Shareholder's Registrable Securities in the underwriting to the extent
provided herein. All Shareholders proposing to distribute their securities
through such underwriting shall (together with the Company and the other
Shareholder distributing their Registrable Securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this SECTION 3.2, if the managing
underwriter determines that the number of shares requested to be included in
the registration exceeds the number which can be sold in an orderly manner in
such offering within a price range acceptable to the Company or that
marketing factors require a limitation of the number of shares to be
underwritten on behalf of the Company (the "Company Registration Cutback"),
then the Company will include in such registration, to the extent of the
number and type which the Company is so advised can be sold in (or during the
time of) such offering without such effect on the price, FIRST, all
securities of
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the Company proposed to be sold by the Company for its own account, SECOND,
the Registrable Securities requested by the Purchasers and the other
Shareholders to be included in such registration, and FINALLY, any other
securities of the Company requested to be included in such registration. In
the event a Company Registration Cutback results in less than all of the
securities of a particular category (i.e., securities proposed to be
registered by the Company; securities proposed to be registered by Purchasers
and the other Shareholders; and securities proposed to be registered by
Persons other than the Shareholders) that are requested to be included in
such registration to actually be included in such registration, then the
number of securities of such category that will be included in such
registration shall be shared pro rata among all of the holders of securities
of such category that were requested to be included in such registration
based on the number of shares held by each holder of securities of such
category.
3.3 EXPENSES OF REGISTRATION. The Company shall bear all
Registration Expenses (exclusive of Selling Expenses) incurred in connection
with registrations pursuant to SECTION 3.1, 3.2 and 3.5 and, in the case of
any registrations in which one or more Purchasers are registering Registrable
Securities, the Company shall pay the fees and expenses of one counsel for
the Purchasers. The one such counsel representing the Purchasers in
connection with any registration under this Agreement shall be selected by
the Majority Purchasers. All Selling Expenses relating to Registrable
Securities registered by the Shareholders shall be borne by such Shareholders
pro rata on the basis of the number of shares so registered.
3.4 REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to this Agreement, the Company will keep each
Shareholder advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. At its
expense the Company will:
(a) keep such registration, qualification or compliance effective and
current for a period of one hundred eighty (180) days (or such longer
period as may be necessary to accommodate the filing of amendments or
supplements necessary to comply with the Securities Act) or until the
Shareholder or Shareholders have completed the distribution described in
the
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registration statement relating thereto, whichever first occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Shareholder from time to time may reasonably request;
(c) use its best efforts to register or qualify the securities
covered by such registration statement under such other securities or blue
sky laws of such jurisdictions as any seller of Registrable Securities
reasonably requests and do any and all other acts and things which may be
reasonably necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned by
such seller;
(d) in the event of any underwritten Public Offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each
Shareholder and the Company participating in such underwriting shall also
enter into and perform its obligations under such an agreement;
(e) notify each Shareholder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing and of any Commission stop orders or other material modifications
in connection therewith;
(f) cause all such Registrable Securities covered by such
registration statement to be listed on each securities exchange on which
the same class of securities issued by the Company are then listed, if the
listing of such Registrable Securities is then permitted under the rules
and regulations of such exchange and, in the case of a Request for
Registration, if requested by the Majority Purchasers of
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Registrable Securities, cause all such Registrable Securities that are of
a different class or series than those Company securities already listed
or traded to be listed on any securities exchange reasonably requested by
the Majority Purchasers;
(g) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration
statement;
(h) in the case of a Request for Registration, enter into such
customary agreements (including underwriting agreements in customary form)
and take all such other actions (including effecting a stock split or a
combination of shares) as the Majority Purchasers reasonably request in
order to expedite or facilitate the disposition of such Registrable
Securities;
(i) make available for inspection by any seller of Registrable
Securities, any managing underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or
other agent retained by any such seller or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
a period of at least twelve months beginning with the first day of the
Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.
(k) permit any Shareholder of Registrable Securities which might be
deemed to be an underwriter or a controlling Person of the Company, to
participate in the preparation of
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such registration or comparable statement and to require the insertion
therein of material, furnished to the Company in writing, which in the
reasonable judgment of such Shareholder and its counsel should be
included;
(l) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the
qualification of any Registrable Securities included in such registration
statement for sale in any jurisdiction, the Company shall use its best
efforts promptly to obtain the withdrawal of such order;
(m) use its best efforts to cause such Registrable Securities covered
by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable
the sellers thereof to consummate the disposition of such Registrable
Securities; and
(n) in the case of a Request for Registration, obtain a cold comfort
letter from the Company's independent public accountants in customary form
and covering such matters of the type customarily covered by cold comfort
letters as the Majority Purchasers may reasonably request.
3.5 REGISTRATION ON FORM S-3. In addition to the rights set
forth in SECTION 3.1 and 3.2, if the Majority Purchasers request that the
Company file a registration statement on Form S-3 (or any successor form
to Form S-3) for a Public Offering of shares of Registrable Securities,
and the Company is a registrant entitled to use Form S-3 to register the
Registrable Securities for such an offering, the Company shall use its
best efforts to cause such shares to be registered for the offering as
soon as practicable on Form S-3 (or any successor form to Form S-3). The
procedures and limitations for effecting the registration of the
Registrable Securities on Form S-3 (or any successor form to Form S-3),
including the procedure used for any underwriting limitation, shall be as
set forth in SECTION 3.1; provided, however, that there shall not be any
limit on the number of registrations that may be requested by the
Majority Purchasers on Form S-3 (or any successors form to Form S-3).
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3.6 INDEMNIFICATION.
(a) The Company will indemnify each Shareholder, each of its
officers and directors and partners and such Shareholder's legal counsel
and independent accountants, and each Person controlling any such Persons
within the meaning of Section 15 of the Securities Act, with respect to
which registration, qualification or compliance has been effected
pursuant to this Agreement, against all expenses, claims, losses, damages
and liabilities (or actions in respect thereof), including any of the
foregoing incurred in the investigation or settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document,
or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein, not misleading, or
any violation by the Company of any rule or regulation promulgated under
the Securities Act or any state securities laws applicable to the Company
and relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will
reimburse each such Shareholder, each of its officers and directors and
such Shareholder's legal counsel and independent accountants, and each
Person controlling any such Persons, each such underwriter and each
Person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating, preparing
or defending any such claim, loss, damage, liability or action, provided
that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by
such Shareholder or underwriter and stated to be specifically for use
therein.
(b) Each Shareholder will, if Registrable Securities held by such
Shareholder are included in the securities as to which such registration is
being effected, indemnify the Company, each of its directors and officers and
its legal counsel and independent accountants, each underwriter, if any, of the
Company's securities
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covered by such a registration statement, each Person who controls the
Company or such underwriter, within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and
directors and each Person controlling such Shareholder within the meaning
of Section 15 of the Securities Act, against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering
circular or other document, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, and will reimburse the
Company, such Shareholders, such directors, officers, legal counsel,
independent accountants, underwriters or control Persons for any legal or
any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, in each
case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made
in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by such
Shareholder and stated to be specifically for use therein; provided,
however, that the obligation of such Shareholder hereunder shall be
limited to an amount equal to the proceeds received by such Shareholder
upon the sale of the Registrable Securities sold in the offering covered
by such registration.
(c) Each party entitled to indemnification under this SECTION 3.6
(the "Indemnified Party") shall give notice to the party required to
provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or litigation, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld). The Indemnified
Party may participate in such defense at such party's expense; provided,
however, that the Indemnifying Party shall bear the expense of such
defense of the Indemnified Party if representation of both parties by the
same counsel would be inappropriate due to actual or potential conflicts
of interest (as determined in good
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faith by the Indemnified Party). The failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Agreement. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof
the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation.
(d) The obligations of the Company and Shareholders under this
SECTION 3.6 shall survive the completion of any offering of Registrable
Securities under this Agreement.
(e) The Company shall make payment in satisfaction of its
obligations under this SECTION 3.6 within thirty (30) days upon receiving
written confirmation from the Indemnified Party of the nature and amount
of the expenses to be indemnified.
(f) If the indemnification provided for in this SECTION 3.6 is
unavailable or insufficient to hold harmless an Indemnified Party, then
each Indemnifying Party shall contribute to the amount paid or payable to
such Indemnified Party as a result of the losses, claims, damages, or
liabilities referred to in this SECTION 3.6 in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party or
parties on the one hand and the Indemnified Party on the other in
connection with the statements or omissions which resulted in such
losses, claims, demands or liabilities as well as any other relevant
equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Indemnifying Party
or parties on the one hand or the Indemnified Party on the other and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The
amount paid to an Indemnified Party as a result of the losses, claims,
damages or liabilities referred to in the first sentence of this SECTION
3.6(f) shall be deemed to include any legal or other expenses reasonably
incurred by such Indemnified Party in connection with investigating or
defending any action or claim which is the subject of this SECTION 3.6.
No Person guilty of fraudulent misrepresentation (within the meaning
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of Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.
(g) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by
or on behalf of the Indemnified Party or any officer, director or
controlling Person of such Indemnified Party and shall survive the
transfer of securities.
3.7 INFORMATION BY SHAREHOLDER. The Shareholder or Shareholders of
Registrable Securities included in any registration shall furnish to the
Company such information regarding such Shareholder or Shareholders and
the distribution proposed by such Shareholder or Shareholders as the
Company may request in writing and as shall be required in connection
with any registration, qualification or compliance referred to in this
Agreement.
3.8 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time
permit the sale of securities of the Company to the public without
registration, after such time as a public market exists for the Common
Stock of the Company, the Company agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
after the effective date of the first registration under the Securities Act
filed by the Company for an offering of its securities to the general
public;
(b) Use its best efforts to then file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (at any
time after it has become subject to such reporting requirements);
(c) So long as a Shareholder owns any Registrable Securities, to
furnish to the Shareholder forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of said
Rule 144 (at any time after 90 days after the effective date of the first
registration statement filed by the Company for an
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offering of its securities to the general public) and of the Securities
Act and the Securities Exchange Act of 1934 (at any time after it has
become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company and such other reports and
documents of the Company as a Shareholder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a
Shareholder to sell any such securities without registration.
3.9 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Company to register securities granted the Purchasers under SECTION 3.1,
3.2 and 3.5 may be assigned to a transferee or assignee in connection
with the transfer or assignment of the Registrable Securities, PROVIDED,
THAT, (i) such transfer may otherwise be effected in accordance with
applicable securities laws, and (ii) the Company is given reasonably
prompt written notice of such assignment.
3.10 TERMINATION OF REGISTRATION RIGHTS. The rights granted
pursuant to this SECTION 3 shall terminate as to any Shareholder at such
time as such Shareholder may sell under Rule 144 in a three month period
all Registrable Securities then held by such Shareholder.
3.11 OTHER REGISTRATION RIGHTS. The Company shall not grant any
Person registration rights for any Shares or other Equity Securities of
the Company, other than as specified in this SECTION 3, without the prior
written consent of the Majority Purchasers.
SECTION 4
AFFIRMATIVE COVENANTS OF THE COMPANY
AND THE SHAREHOLDERS
4.1 BOARD OF REPRESENTATION AND VOTING AGREEMENT OF THE SHARES.
(a) From and after the date hereof and until the provisions of this
Section cease to be effective, each Shareholder shall vote all of the
voting securities of the Company (including the Common Shares and
Preferred Shares) over which such Person has voting control and shall
take all other necessary or desirable actions
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within his or its control (whether in his or its capacity as a
stockholder, director, member of a board, committee or officer of the
Company or otherwise, and including, without limitation, attendance at
meetings in person or by proxy for purposes of obtaining a quorum and
execution of written consents in lieu of meetings), and the Company shall
take all necessary or desirable actions within its control (including,
without limitation, calling special board and shareholders' meetings) so
that:
(i) the authorized number of directors of the Company's Board of
Directors (the "Board") shall be established at six (6) directors;
(ii) the following Persons shall be elected to the Board at each
election of directors during the term of this Agreement:
(A) four (4) representatives designated by DCC, one of whom shall be
Dobson and one of whom (1) shall be reasonably acceptable to the
Majority Purchasers, and (2) is not an Affiliate or employee of the
Company or a Family Member of such Affiliate or employee or of Dobson;
(B) one (1) representative designated by FVR; and
(C) one (1) representative designated by FEP; PROVIDED, HOWEVER, AT
ANY TIME FOLLOWING THE SIX MONTH ANNIVERSARY OF THE DATE OF THIS
AGREEMENT, UPON THE WRITTEN REQUEST OF DOBSON, THE REPRESENTATIVE
DESIGNATED BY FEP SHALL BE A PERSON who is (i) reasonably acceptable
to Dobson and (ii) is not an officer, director or employee of FEP or
FVR;
(iii) FVR shall have the right to (A) designate one representative
to each committee established by the Board, and (B) have an observer,
selected by FVR in its sole discretion, attend each meeting of the Board
and each meeting of any committee of the Board;
(iv) any director designated hereunder shall be removed from the Board
(and thereupon from all committees of the Board) (with or without cause) at
the written request of the Person or Persons which have the right to
designate such
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director hereunder; and a director so designated hereunder shall not be
removed from the Board by any Person other than the Person or Persons which
have the right to designate such director, except if such director has
engaged in conduct constituting "cause" under Oklahoma law, in which case
such director may be removed in accordance with Oklahoma law and such
vacancy shall be filled by the Person or Persons who appointed the removed
director;
(v) in the event that any representative designated hereunder for any
reason ceases to serve as a member of the Board or any committee thereof
during such representative's term of office, the resulting vacancy on the
Board or committee shall be filled by a representative designated by a
Person or Persons which have the right to designate such representative
hereunder; and
(vi) after the date hereof, the Board shall hold bi-monthly meetings.
(b) Each and every transferee or assignee of Shares from any Shareholder
shall be bound by and subject to all terms and conditions of this SECTION
4.1. So long as the provisions of this SECTION 4.1 are in effect, the Company
shall require, as a condition precedent to the Transfer of any Shares subject
to this SECTION 4.1, that the applicable transferee agrees in writing to be
bound by, and subject to, the terms and conditions of this SECTION 4.1 and to
ensure that such transferee's transfers of Shares shall be likewise bound.
(c) The Company and the Shareholders agree that, so long as the
provisions of this SECTION 4.1, SECTIONS 5, 6, 7, 8 OR 9 are in effect, all
Shares now or hereafter held by each Shareholder will be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AGREEMENTS,
COVENANTS AND RESTRICTIONS IN REGARD TO THE VOTING OF SUCH SHARES AND THEIR
TRANSFER, AS PROVIDED IN THE PROVISIONS OF A SHAREHOLDERS' AGREEMENT, DATED
AS OF FEBRUARY ___, 1997, BY AND AMONG DOBSON COMMUNICATIONS CORPORATION,
AN OKLAHOMA CORPORATION (THE "COMPANY") AND THE SHAREHOLDERS
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NAMED THEREIN, A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY
OF THE COMPANY.
(d) Each of the parties acknowledge that all other parties hereto will
be irreparably damaged in the event that the provisions of this Section are
not specifically enforced. Accordingly, should any dispute arise pursuant to
SECTION 4.1, the parties agree that a decree of specific performance shall be
an appropriate remedy. Such remedy shall be cumulative and shall be in
addition to any other remedies which any party may have at law or in equity.
(e) The Company shall pay the out-of-pocket travel, lodging and other
related expenses of the observer selected by FVR pursuant to SECTION
4.1(a)(iii) and all directors elected pursuant to SECTION 4.1 who are not
employees of the Company.
SECTION 5
PREEMPTIVE RIGHTS
5.1 RIGHT TO PURCHASE. The Company shall only issue New Shares in
accordance with the following terms:
(a) In the event the Company desires to issue any New Shares, it shall
first deliver to each Purchaser a written notice (each such notice, a "Notice
of Proposed Issuance") specifying the name and address of the proposed
purchaser of the New Shares (each such purchaser, a "Proposed Buyer"), the
type and total number of such New Shares which the Company then desires to
issue to such Proposed Buyer (such New Shares, the "Offered New Shares"), all
of the terms, including the price, upon which the Company proposes to issue
such Offered New Shares to such Proposed Buyer, and stating that the
Purchasers shall have the right to purchase such Offered New Shares in the
manner specified in SECTION 5.1 at the price and in accordance with the terms
and provisions specified in such Notice of Proposed Issuance.
(b) During the thirty consecutive day period commencing on the date on
which the Purchasers receive the Notice of Proposed Issuance, each Purchaser
shall have the option to purchase the Offered New Shares subject to such
Notice of Proposed Issuance at the price and terms specified in such Notice
of Proposed Issuance and in the amount specified in SECTION 5.1(c). Each
Purchaser
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shall give written notice of its election to the Company on or before the
last day of such thirty (30) day period and if a Purchaser has not given such
written notice within such period, such Purchaser shall be deemed to have
rejected its right to purchase the Offered New Shares. The Purchaser shall
have the right to condition its purchase of the Offered New Shares upon the
closing of the sale of the balance of such Offered New Shares to the Proposed
Buyer.
(c) Each Purchaser shall have the right to purchase that number of the
Offered New Shares as shall be equal to the number of such Offered New Shares
multiplied by a fraction, the numerator of which shall be the number of
Common Shares then owned by such Purchaser (assuming full conversion of all
Preferred Shares owned by such Purchaser), and the denominator of which shall
be the aggregate number of Common Shares then owned by all of the
Shareholders. The amount of such Offered New Shares that each Purchaser is
entitled to purchase under this SECTION 5.1(c) shall be referred to as its
"Proportionate Share."
(d) Each Purchaser shall have a right of oversubscription such that if
any Purchaser fails to elect to purchase its full Proportionate Share of the
Offered New Shares, the remaining Purchasers shall, among them, have the
right to purchase up to the balance of such Offered New Shares not so
purchased. The Purchasers may exercise such right of oversubscription by
electing to purchase more than their Proportionate Share of the Offered New
Shares. If, as a result thereof, such oversubscriptions exceed the total
number of the Offered New Shares available in respect to such
oversubscription privilege, the oversubscribing Purchasers shall be cut back
with respect to oversubscriptions on a PRO RATA basis in accordance with
their respective Proportionate Shares or as they may otherwise agree among
themselves.
(e) The Company shall have the right, until the expiration of ninety
(90) consecutive days commencing on the first day immediately following the
expiration of the thirty (30) day period specified in SECTION 5.1(b) to issue
the remaining Offered New Shares to the applicable Proposed Buyer at the
price and terms specified in the applicable Notice of Proposed Issuance. If
for any reason the remaining Offered New Shares are not issued to such
Proposed Buyer within such period and at such stated price and on such stated
terms, the right to issue in accordance with such
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Notice of Proposed Issuance shall expire and the provisions of this Agreement
shall continue to be applicable to such Offered New Shares.
(f) The Company shall not issue any shares in the name of such Proposed
Buyer unless and until such Proposed Buyer shall have agreed in writing to
become bound by the terms hereof.
(g) The purchase price for any Offered New Shares to be paid by the
Purchasers or the applicable Proposed Buyer shall be the price set forth in
the Notice of Proposed Issuance relating to such Offered New Shares.
(h) The Purchasers purchasing the greatest percentage of any Offered New
Shares shall set the place, time and date for the closing of the purchase of
the Offered New Shares, which closing shall not be later than the date of the
closing of the sale of the Offered New Shares to the Proposed Buyer. In the
event that none or only a portion of the consideration to be paid by a
Proposed Buyer with respect to any Offered New Shares is in cash, the
purchase price therefor shall be the fair value of the consideration to be
paid by such Proposed Buyer. In the event the Purchasers and the Company
cannot agree, acting reasonably, upon the fair value of the consideration to
be paid for such Offered New Shares, such parties shall immediately submit
the issue of determining such fair value to binding arbitration which shall
be held in Chicago, Illinois in accordance with the rules and procedures of
the American Arbitration Association applicable to commercial transactions.
The closing of the sale of the Offered New Shares to the Purchasers and
the Proposed Buyer shall be delayed until at least ten (10) days following
the final determination of such fair value.
5.2 PRICE. The purchase price for any Offered New Shares sold to the
Purchasers shall be paid by the Purchasers in cash or by certified check at
the date of the closing.
5.3 CLOSING. At the closing of the purchase of any Offered New Shares,
the Purchasers and the applicable Proposed Buyer shall deliver the
consideration required by SECTION 5.2, and the Company shall deliver
certificates representing the Offered New Shares.
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SECTION 6
RIGHT OF FIRST REFUSAL
6.1 RIGHT OF FIRST REFUSAL. Except for Permitted Transfers, no
Purchaser shall transfer any Shares or any Convertible Securities with
respect to any Shares held by such Purchaser (each, a "Restricted Share"),
except in accordance with the specific terms of this SECTION 6.1 as follows:
(a) In the event that any Purchaser desires to Transfer all or any
portion of the Restricted Shares owned by such Purchaser (in such capacity,
the "Offeror") pursuant to a bona fide written offer, such Offeror shall
first deliver to the Company a written notice (each, a "Notice of Proposed
Transfer") specifying the name and address of the proposed transferees of the
Restricted Shares (each, a "Proposed Purchaser") the type and total number of
such Restricted Shares which such Offeror then desires to transfer to such
Proposed Purchaser (the "Offered Shares"), all of the terms, including the
price, upon which such Offeror proposes to transfer such Offered Shares to
such Proposed Purchaser, and stating that the Company shall have the right to
purchase such Offered Shares at the price and in accordance with the terms
and provisions specified in such Notice of Proposed Transfer.
(b) During the fifteen (15) consecutive day period commencing on the
date of the Company's receipt of the Notice of Proposed Transfer, the Company
shall have the option to purchase all (but not less than all) of the Offered
Shares, before the same may be Transferred to any other Person. The Company
must give written notice of its election to the applicable Offeror during
such fifteen (15) day period. If the Company does give written notice of its
election to purchase all of the Offered Shares to the applicable Offeror
within such fifteen (15) day period, the closing for the sale of such Offered
Shares shall occur no later than thirty (30) days after the Company provides
such written notice of its election to purchase such Offered Shares to the
applicable Offeror.
(c) If all of the Offered Shares subject to a Notice of Proposed
Transfer have not been purchased by the Company pursuant to SECTION 6.1(b),
then the applicable Offeror shall have the right until the expiration of
three hundred sixty (360) consecutive days
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commencing on the first day immediately following the expiration of the
fifteen (15) day period specified in Section 6.1(b), to Transfer such Offered
Shares to the applicable Proposed Purchaser at the price (or a higher price)
specified in the applicable Notice of Proposed Transfer and on terms not
materially more favorable to the Proposed Purchaser than set forth in the
Notice of Proposed Transfer, provided that such Proposed Purchaser agrees in
writing to become bound by the terms hereof. If for any reason such Offered
Shares are not Transferred to the Proposed Purchaser within such period and
at such price (or a higher price) and on such terms, the right to Transfer in
accordance with such Notice of Proposed Transfer shall expire and the
provisions of this Agreement shall continue to be applicable to such Offered
Shares.
(d) The Company shall not be obligated to issue any shares in the name
of a Proposed Purchaser unless and until such Proposed Purchaser shall have
agreed in writing to become bound by the terms hereof.
(e) The purchase price to be paid by the Company or a Proposed Purchaser
for any Offered Shares shall be the price set forth in the Notice of Proposed
Transfer relating to such Offered Shares.
(f) For purposes of this SECTION 6, if any of the Purchasers transfers
its Shares to an entity (the "New Entity") which is, directly or indirectly,
controlled by FFG or in which FFG, directly or indirectly, owns a majority of
the Equity Securities and the stock of such New Entity is sold or
transferred, the sale of such stock of the New Entity shall be deemed a
Transfer which would trigger the right of first refusal provisions of this
SECTION 6.
6.2 PRICE. The purchase price for any Offered Shares shall be paid in
cash or by certified check at the date of the closing of the sale of such
Offered shares.
6.3 CLOSING. At the closing of the sale of any Offered Shares, the
Company shall deliver the consideration required by SECTION 6.2, and such
Offeror shall deliver certificates representing the Offered Shares together
with stock transfer powers duly endorsed in blank for transfer thereof.
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6.4 TERMINATION. The provisions of this SECTION 6 shall terminate upon
the consummation of an initial Public Offering.
SECTION 7
RIGHT OF CO-SALE
7.1 CO-SALE. At least thirty days prior to any Transfer of Shares by
any Shareholder who, together with Affiliates of such Shareholder, owns 10%
or more of the Common Shares, on a Fully Diluted Basis, such Shareholder (the
"Transferring Shareholder") shall deliver written notice (the "Sale Notice")
to each Purchaser specifying in reasonable detail the identity of the
proposed transferee(s) and the terms and conditions of the Transfer. A
Purchaser may elect to participate in the contemplated Transfer by delivering
written notice to the Transferring Shareholder within fifteen days after
receipt of the Sale Notice. If any Purchaser has elected to participate in
such Transfer, such Purchaser shall be entitled to sell in the contemplated
Transfer, at the price and on the terms upon which the Transferring
Shareholder will make such Transfer, a number of Common Shares equal to the
product of (i) the quotient determined by dividing (A) the number of
outstanding Common Shares owned by such Purchaser by (B) the aggregate number
of Common Shares, on a Fully Diluted Basis, owned or held by the Transferring
Shareholder and all other Purchasers participating in such sale, and (ii) the
number of Common Shares to be sold in the contemplated Transfer; provided,
however, in the event Purchaser owns Preferred Shares, such Purchaser shall
have the right to sell in convertible, at the then conversion price, into the
number of Common Shares which such Purchaser would otherwise have the right
to sell in the proposed Transfer pursuant to this SECTION 7 if all the
Preferred Shares held by such Purchaser had been converted into Common Shares.
7.2 EXCLUSIONS. The provisions of SECTION 7.1 shall not apply to (i)
a Transfer by a Purchaser to any Person or (ii) a Transfer for estate
planning purposes to be made by Dobson or by Family Members of Dobson to
other Family Members of Dobson or their respective Family Members ("Dobson
Estate Planning Transfers"); provided, however, in any case, that any such
transferee shall, as a condition of such Transfer, agree in writing to become
bound by the terms hereof.
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SECTION 8
RESTRICTIONS OF TRANSFER
8.1 TRANSFER RESTRICTIONS. Except as provided in SECTION 8.2 hereof,
no Shareholder other than a Purchaser shall Transfer any Shares of the
Company except as specifically permitted by this Agreement.
8.2 EXCEPTIONS. The restrictions on Transfers set forth in SECTION
8.1 shall not apply to (i) Dobson Estate Planning Transfers, and (ii)
transfers between Family Members of Dobson or entities controlled by the
Family Members of Dobson, so long as such transfers do not violate Section
8.1(i) of the Purchaser Agreement.
8.3 TERMINATION. The provision of this SECTION 8 shall terminate upon
the earliest to occur of (i) the consummation of an Initial Public Offering,
(ii) the sale of all or substantially all of the Company's assets, and (iii)
the consummation of a merger or consolidation of the Company which
constitutes a Change of Control Event.
SECTION 9
PUT RIGHTS
9.1 RIGHT TO PUT. At any time and from time to time after the earliest
to occur of (i) the fifth anniversary of the date hereof, (ii) a Change of
Control Event, (iii) a Noncompliance Event, or (iv) the six month anniversary
of the death of Dobson, each Purchaser shall have the right to sell all of
the Shares held by such Purchaser to the Company (the "Put"), and upon
exercise of such right (the "Put Rights"), the Company shall have the
obligation to purchase the Shares as to which the Put Rights are exercised;
provided, however, a Purchaser may not exercise the Put Rights as to more
than 50% of the Shares then owned by it prior to the sixth anniversary of the
date hereof unless one or more of the events referred to in clauses (ii)-(iv)
above shall have occurred.
Any Purchaser may exercise the Put Rights by providing the Company with a
written request (a "Request Notice") that the Company redeem all or a portion
of the Shares owned by such
32
<PAGE>
Purchaser. The Company shall, within sixty (60) days after the determination
of the Repurchase Price (as defined in SECTION 9.2 below) redeem all of the
Shares then held by such Purchaser as to which the Put Rights have been
exercised, by paying to such Purchaser an amount for each Share held by such
Purchaser equal to the Repurchase Price. The closing of any redemption
pursuant to this SECTION 9.1 shall take place at the office of the Purchaser
which sent the Request Notice. If any required redemption is prohibited by
applicable corporate law restricting the ability of a corporation to
repurchase its shares, the Company shall make such repurchases as, when and
to the extent that it is permitted to do so.
9.2 REPURCHASE PRICE. The "Repurchase Price" for each Common Share
repurchased pursuant to this SECTION 9 shall be the Fair Market Value
thereof. The Repurchase Price for a Preferred Share shall be the greater of
(i) its Liquidation Value (as defined in the Company's Certificate of
Incorporation) plus all accrued but unpaid dividends thereon to the date of
repurchase and (ii) the produce of (x) the Fair Market Value of a Common
Share and (y) the number of Common Shares into which a Preferred Share is
then convertible. The Fair Market Value shall be initially determined by
those directors of the Company who are not Affiliated with any of the
Purchasers, Dobson, Family Members of Dobson or Family Members of any such
Person (the "Disinterested Directors"). The Disinterested Directors shall
provide the Purchasers and the Company with written notice of their
determination with forty-five (45) days after receipt of the Request Notice.
If a Purchaser or the Company shall notify the Disinterested Directors'
determination of Fair Market Value that it objects to such determination of
Fair Market Value (the "Objection Notice"), the Disinterested Directors, the
Company and the Purchasers shall endeavor to agree on the Fair Market Value
of the Shares being repurchased. If the Disinterested Directors, the Company
and the Purchasers fail to agree on a determination of the Fair Market Value
within fifteen (15) days after receipt by the Disinterested Directors of the
Objection Notice, then the Company and the Purchasers shall endeavor to
select a nationally recognized investment banking firm, which has experience
valuing telecommunications companies (the "Appraiser"), to conduct an
appraisal of the relevant Shares being repurchased, such appraisal to be
conducted within sixty (60) days after such Person has been notified of its
selection as the Appraiser. If the
33
<PAGE>
Purchasers and the Company cannot agree on a Person to be the Appraiser
within such fifteen (15) day period, the holders of sixty-six and two-thirds
percent (66 2/3%) of the Shares held by Purchasers exercising the Put Rights,
on the one hand, and the Company on the other, shall then have fifteen (15)
days to each select a Person satisfying the requirements of an Appraiser. If
either party fails to select such a Person within fifteen (15) day period,
the Person who is selected by a party within the fifteen (15) day period
shall be the Appraiser and shall conduct an appraisal of the relevant Shares
being repurchased within sixty (60) days of the expiration of such fifteen
day period. If the Company and the Purchasers each selected a Person within
such fifteen day period, then the two selected Persons shall, within ten (10)
days from the expiration of such fifteen day period, select another Person
satisfying the requirements of an Appraiser who shall then be the Appraiser
and who shall then conduct an appraisal of the relevant Shares being
repurchased within sixty (60) days of being selected. The appraisal being
conducted by the Appraiser shall determine the Fair Market Value of such
Common Shares being repurchased and which determination shall be final and
binding on the parties. The cost of the appraisal shall be borne equally by
the Company on the one hand and the Purchasers on the other.
9.3 FAILURE TO PURCHASE. Notwithstanding anything to the contrary set
forth in this SECTION 9, in the event that the Company fails to redeem all of
the shares requested to be redeemed by the Purchasers exercising the Put
Rights pursuant to SECTION 9.1 above by the later of (i) six months after the
date of the Request Notice or (ii) three months after the determination of
the Fair Market Value but in no event later than nine months after the date
of Request Notice (such latter date being referred to herein as the
"Mandatory Date"), then the Company shall issue to the Purchasers who have
exercised Put Rights that number of Common Shares as is then equal to 1% of
the outstanding Common Shares of the Company determined on a Fully Diluted
Basis, and on each third month anniversary of the Mandatory Date until the
Repurchase Price for all shares as to which Put Rights were exercised is paid
in full, the Company shall issue to the Purchasers who have exercised Put
Rights that number of Common Shares as is on the date of issuance thereof
equal to 1% of the outstanding Common Shares of the Company on a Fully
Diluted Basis. In the event that the Company fails to redeem all of the
Shares requested to be redeemed by the Purchasers exercising the Put Rights
pursuant to SECTION 9.1 above within two
34
<PAGE>
years after the earlier of (x) the date of the determination of the Fair
Market Value or (y) the Mandatory Date, then such Purchasers shall have the
right to immediately designate a majority of the members of the Board until
such time as all of the Shares requested to be redeemed by such Purchasers
are redeemed. All of the parties to this Agreement covenant and agree to
take all action as shall be necessary or appropriate, including, without
limitation, voting all of their Common Shares in favor of any necessary
amendment to the Company's Certificate of Incorporation or otherwise to cause
the Company to issue the Shares required to be issued to the Purchasers
pursuant to this SECTION 9.3.
9.4 PAYMENT. Upon the surrender of the certificate or certificates
evidencing the Shares to be repurchased by the Company, the applicable
Repurchase Price in respect of such Shares shall be paid to the order of the
Person whose name appears on such certificate or certificates in cash by wire
transfer of immediately available funds. Each surrendered certificate
evidencing Shares shall be canceled and/or retired.
SECTION 10
CALL RIGHTS
10.1 RIGHT TO CALL. At any time from and after the seventh anniversary of
the date of this Agreement, the Company shall have the right to purchase all
of the outstanding Shares held by a Purchaser (the "Call") and upon the
exercise of such right ("Call Rights") the Purchaser shall have the
obligation to sell such Shares held by such Purchaser to the Company. The
Company may exercise the Call Rights by providing the Purchasers a written
notice (a "Call Notice") that the Company will repurchase such Shares. The
Company may only exercise the Call Rights as to all of the Shares held by all
of the Purchasers. The Company shall within sixty (60) days after the
determination of the Call Price (as defined in SECTION 10.2 below) redeem all
of the Shares held by such Purchasers by paying to such Purchasers an amount
for each Share held by such Purchaser an amount equal to the Call Price. The
closing of the repurchase of the Shares pursuant to SECTION 10.1 shall take
place at the office of the Purchaser to whom the Call Notice was sent.
35
<PAGE>
10.2 CALL PRICE. The "Call Price" for each Share shall be the
applicable Repurchase Price determined in accordance with the method and
procedures set forth in SECTION 9.2 hereof.
10.3 PAYMENT. Upon the surrender of the certificate or certificates
evidencing the Shares to be repurchased by the Company pursuant to this
SECTION 10 the applicable Call Price in respect of such Shares shall be paid
to the order of the Person whose name appears on such certificate or
certificates in immediately available funds. Each surrendered certificate
evidencing the Shares being repurchased shall be canceled and/or retired.
10.4 TERMINATION. The provisions of this SECTION 10 shall terminate
upon the consummation of an initial Public Offering. The provisions of this
SECTION 10 shall cease to be applicable for any Shares transferred to any
Person pursuant to SECTION 6 or 7 hereof.
SECTION 11
MISCELLANEOUS
11.1 WAIVERS AND AMENDMENTS. The rights and obligations of the Company
and the rights and obligations of the Shareholders under this agreement may
not be waived (either generally or in a particular instance, either
retroactively or prospectively, and either for a specified period of time or
indefinitely) or amended without the written consent of the Company, the
Majority Purchasers and the holders of a majority of the outstanding Class A
Common Stock.
11.2 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to
any choice or conflict of law provisions or rule that would cause the
application of the domestic substantive laws of any other state.
11.3 SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
benefit of, and be binding upon, the successors, assigns, heirs, executors
and administrators of the parties hereto.
36
<PAGE>
11.4 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof.
11.5 NOTICES. Unless otherwise specifically provided herein, any notice,
consent, waiver or other communication required or permitted to be given
hereunder shall be in writing addressed to the applicable party as set forth
below and may be personally served, telecopied or sent by nationally
recognized overnight courier service or United States certified mail, postage
prepaid and return receipt requested, and shall be deemed to have been given;
(i) if delivered in person, when delivered; (ii) if delivered by telecopy, on
the date of transmission if transmitted on a Business Day before 4:00 p.m.
(Oklahoma time) or, if not, on the next succeeding Business Day; (iii) if
delivered by overnight courier, two days after delivery of such courier,
properly addressed; or (iv) if by U.S. Mail, four (4) Business Days after
depositing in the United States mail. Notices shall be addressed as follows:
If to the Company:
Dobson Communications Corporation
13439 N. Broadway Extension
Suite 200
Oklahoma City, OK 73114
Telecopy No.: (405) 391-8515
Telephone No.: (405) 391-8305
Attention: Everett R. Dobson, President
If to the Majority Purchasers:
Fleet Equity Partners
111 Westminster Street
Providence, Rhode Island 02903
Telecopy No.: (401) 278-6387
Telephone No.: (401) 278-5678
Attention: Thadeus J. Mocarski
11.6 SEVERABILITY. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this
37
<PAGE>
Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.
11.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto on separate counterparts and each
counterpart, when so executed and delivered, shall be an original, and all
such counterparts shall together constitute one and the same instrument.
11.8 DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
11.9 CONSENT TO JURISDICTION. THE PARTIES HERETO HEREBY AGREE TO SUBMIT
TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS IN AND OF THE STATE OF
DELAWARE AND TO JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF DELAWARE AND TO THE COURTS TO WHICH AN APPEAL OF THE DECISIONS OF
SUCH COURTS MAY BE TAKEN, AND CONSENTS THAT SERVE OF PROCESS WITH RESPECT TO
ALL COURTS IN AND OF THE STATE OF DELAWARE AND THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF DELAWARE MAY BE MADE BY REGISTERED MAIL TO IT AT
SUCH PARTY'S ADDRESS SET FORTH IN SECTION 11.5.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
38
<PAGE>
DOBSON COMMUNICATIONS
CORPORATION,
By: /s/ Everett R. Dobson
--------------------------------
Everett R. Dobson, President
FLEET VENTURE RESOURCES, INC.
By: /s/ Thadeus J. Mocarski
--------------------------------
Thadeus J. Mocarski
Senior Vice President
FLEET EQUITY PARTNERS VI, L.P.
By: Fleet Growth Resources II, Inc.,
a General Partner
By: /s/ Thadeus J. Mocarski
--------------------------------
Thadeus J. Mocarski,
Senior Vice President
KENNEDY PLAZA PARTNERS
By: /s/
--------------------------------
Name: Robert M. Van
Title: General Partner
DOBSON CC LIMITED PARTNERSHIP
By: RLD, Inc., its General Partner
By: /s/ Everett R. Dobson
--------------------------------
Everett R. Dobson
President
/s/ Russell L. Dobson
--------------------------------
Russell L. Dobson
39
<PAGE>
DOBSON TELEPHONE COMPANY, INC.
By: /s/ Everett R. Dobson
--------------------------------
Everett R. Dobson
President
40
<PAGE>
Schedule A
SHAREHOLDERS
FLEET VENTURE RESOURCES, INC.
FLEET EQUITY PARTNERS VI, L.P.
KENNEDY PLAZA PARTNERS
DOBSON CC LIMITED PARTNERSHIP
DOBSON TELEPHONE COMPANY, INC.
RUSSELL L. DOBSON
41
<PAGE>
OPTION AGREEMENT
----------------
THIS OPTION AGREEMENT (the "Agreement") is entered into as of the 19th
day of March, 1996, among Dobson Communications Corporation, an Oklahoma
corporation ("Dobson"), Kennedy Plaza Partners, a Rhode Island general
partnership ("KPP"), Fleet Venture Resources, Inc., a Rhode Island
corporation ("FVR"), and Fleet Equity Partners VI, L.P., a Delaware limited
partnership ("FEP" and together with KPP and FVR, the "Fleet Investors").
RECITALS:
--------
WHEREAS, the Fleet Investors hold 100,000 shares of the Company's Class
B Convertible Preferred Stock, $1.00 par value per share (the "Preferred
Stock"); and
WHEREAS, the Preferred Stock is convertible into Class A Voting Common
Stock of the Dobson, $1.00 par value per share (the "Common Stock"), pursuant
to the terrns and conditions of Dobson's Certificate of Incorporation, as
amended (the "Charter"); and
WHEREAS, Dobson desires to obtain the right to purchase from the Fleet
Investors up to 452 shares of Common Stock issuable upon conversion of the
Preferred Stock; and
NOW, THEREFORE, for good and valuable consideration, receipt of which is
herewith acknowledged, and the mutual covenants set forth in this Agreement,
it is agreed as follows:
1. GRANT OF OPTION. For the sum of $100.00, receipt of which is
hereby acknowledged, the Fleet Investors hereby grant to Dobson the option
(the "Option") to purchase from the Fleet Investors up to an aggregate of 452
shares (adjusted to give effect to stock splits, stock dividends and similar
events) of the Common Stock issuable upon conversion of the Preferred Stock
held by the Fleet Investors (such shares if and when issued being referred to
herein as the "Option Stock").
2. OPTION PRICE. The amount payable for the Option Stock shall be
$.01 per share (adjusted to give effect to stock splits, stock dividends and
similar events). The purchase price for the Option Stock (the "Option
Price") shall be payable in cash by wire transfer of immediately available
funds or by Dobson's check.
<PAGE>
3. RIGHT TO EXERCISE. Subject to the terms and conditions set forth
in this Agreement, Dobson shall have the right to exercise the Option, in
full but not in part, only if (i) a "Texas 2 Event", as defined in that
certain Securities Purchase Agreement of even date herewith by and among
Dobson and the Fleet Investors, shall have occurred prior to March 19, 1999,
(ii) the Fleet Investors shall have converted the Preferred Stock to Common
Stock as of the consummation of the Texas 2 Event and (iii) Dobson shall have
exercised the Option as provided in Section 5 hereof, within 30 days
following the consummation of the Texas 2 Event. Thirty days following the
consummation of a Texas 2 Event this Option shall expire, terminate and be of
no further force or effect.
4. SHAREHOLDERS AGREEMENT. The parties hereto agree that any Common
Stock purchased pursuant to the exercise of the Option shall be subject to
the provisions of the Stockholders' Agreement of even date herewith by and
among the Company and the stockholders named therein.
5. EXERCISE OF OPTION. The Option may be exercised by delivering to
the Fleet Investors a written notice (the "Option Notice") of exercise in
substantially the form prescribed from time to time by the Fleet Investors.
Such notice shall be signed by Dobson and shall indicate the date on which
the Option Price will be delivered to the Fleet Investors, which date shall
not be later than three business days after receipt by the Fleet Investors of
the Option Notice.
6. ISSUE OR TRANSFER TAX. The transfer by the Fleet Investors of
Common Stock upon the exercise of the Option shall be made subject to payment
by Dobson of any issuance or transfer tax in respect thereof.
7. DELIVERY OF SHARE CERTIFICATES. Subject to the forgoing
conditions, the Fleet Investors promptly after receipt of the Option Price,
shall cause to be delivered to Dobson at the principal office of the Company,
or such other location as may be acceptable to the Fleet Investors and
Dobson, one (1) or more certificates evidencing the Common Stock with respect
to which the Option is exercised, together with executed stock powers.
-2-
<PAGE>
8. NOTICES. Any notice to Dobson or either of the Fleet Investors
shall be addressed to it at the address on file with the Company on the date
hereof or at such other address as either of the Fleet Investors or Dobson
may hereafter designate in writing. Notice shall be deemed to have been given
upon receipt of, or sooner, five (5) days after such notice has been
deposited, postage prepaid, certified or registered mail, return receipt
requested, in the United States mail addressed to the addressee specified in
the immediately preceding sentence.
9. MODIFICATION AND WAIVER. This Option Agreement and any provision
hereof may be changed, waived, discharged or terminated only by an instrument
in writing signed by the party against which enforcement of the same is
sought.
10. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The descriptive headings
of the several sections and paragraphs of this Option Agreement are inserted
for convenience only and do not constitute a part of this Option Agreement.
This Option Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of
Delaware, notwithstanding principles of conflicts of laws.
IN WITNESS WHEREOF, each of the parties hereto has executed this Option
Agreement as of the day and year first above written.
DOBSON COMMUNICATIONS CORPORATION
By: /s/ Everett R. Dobson
--------------------------------
Everett R. Dobson
President
FLEET VENTURE RESOURCES, INC.
By: /s/ Thadeus J. Mocarski
--------------------------------
Thadeus J. Mocarski
Vice President
-3-
<PAGE>
FLEET EQUITY PARTNERS VI, L.P.
By: Fleet Growth Resources II, Inc.
By: /s/ Thadeus J. Mocarski
--------------------------------
Thadeus J. Mocarski
Vice President
KENNEDY PLAZA PARTNERS
By: /s/ Thadeus J. Mocarski
--------------------------------
Title:
--------------------
-4-
<PAGE>
Exhibit 12
Dobson Communications Corporation
Ratio of Earnings to Fixed Charges
<TABLE>
Pro Forma
1992 1993 1994 1995 1996 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) $(1,395) $ 541 $ 462 $1,104 $(1,421) $(31,488)
Extraordinary items (90) - (228) - 527 850
Accounting Change - (641) - - - -
Interest Expense 2,284 2,276 2,926 3,824 6,477 34,160
Amortization of Deferred
Financial Costs 0 0 0 90 267 1,103
Provision for Income Taxes (856) (78) 119 738 (411) (525)
--------------------------------------------------------------
Earnings $ (57) $2,098 $3,279 $5,756 $ 5,439 $ 4,100
--------------------------------------------------------------
--------------------------------------------------------------
Interest Expense and Amortization $ 2,284 $2,276 $2,926 $3,914 $ 6,744 $ 35,263
Ratio of Earnings to Fixed Charges n/a n/a 1.120643 1.470618 n/a n/a
Earnings Deficiency $(2,341) $ (178) n/a n/a $(1,305) $(31,163)
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES
State or Other
Jurisdiction of
Incorporation or
Subsidiary Organization
- ---------- ----------------
Dobson Operating Company Oklahoma
Dobson Wireless, Inc. Oklahoma
DCC PCS, Inc. Oklahoma
Dobson Fiber Forte of Colorado, Inc. Oklahoma
Dobson Telephone Company, Inc. Oklahoma
Dobson Fiber Company, Inc. Oklahoma
Dobson Cellular of Arizona, Inc. Oklahoma
Dobson Cellular Systems, Inc. Oklahoma
Dobson Cellular of Woodward, Inc. Oklahoma
Dobson Cellular of Enid, Inc. Oklahoma
Dobson Cellular of Kansas/Missouri, Inc. Oklahoma
Dobson Cellular of Maryland, Inc. Oklahoma
Independent RSA 5 Partnership Oklahoma
Oklahoma Independent RSA 7 Partnership Oklahoma
Western Financial Services, Inc. Oklahoma
Dobson Network Management, Inc. Oklahoma
Forte of Colorado Colorado
Texas RSA #2 Limited Partnership Texas
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
as it relates to Dobson Communications Corporation (and to all references to
our Firm) included in or made a part of this registration statement.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
March 20, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the inclusion of
our report dated February 1, 1996 (except with respect to Note 10, as to
which the date is March 19, 1996), on the financial statements of Kansas
RSA #5, Inc., USCOC of Missouri RSA #1, Inc., USCOC of Missouri RSA #4,
Inc. and Missouri RSA No. 2, (a division of USCOC of Missouri #5, Inc.) as
of December 31, 1995 and 1994, and for the years then ended (and to all
references to our Firm) included in or made a part of this Registration
Statement.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 20, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
as it relates to Gila River Cellular General Partnership (and to all
references to our Firm) included in or made a part of this registration
statement.
ARTHUR ANDERSEN LLP
Denver, Colorado
March 14, 1997
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 21, 1997, with respect to the statements of
cellular revenue and direct operating expenses of Maryland RSA 2 included in
the Registration Statement (Form S-4, No. 333- ) and the related
Prospectus of Dobson Communications Corporation to be filed on or about March
20, 1997 for the registration $160,000,000 of its 11 3/4% Senior Notes due
2007.
ERNST & YOUNG LLP
San Antonio, Texas
March 19, 1997
<PAGE>
EXHIBIT 23.5
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 27, 1997 with respect to the financial
statements of The Cellular Telephone Business of Selected Systems of Horizon
Cellular Telephone Company, L.P. included in the Registration Statement
(Form S-4 No. 333-______) and related Prospectus of Dobson Communications
Corporation for the registration of $160,000,000 of 11-3/4% Senior Notes
due 2007.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
March 20, 1997
<PAGE>
POWER OF ATTORNEY
(Senior Notes)
We, the undersigned officers and directors of Dobson Communications
Corporation (hereinafter, the "Company"), hereby severally constitute Everett
R. Dobson, Bruce R. Knooihuizen and Stephen T. Dobson, and each of them,
severally, our true and lawful attorneys-in-fact with full power to them and
each of them to sign for us, and in our names as officers or directors, or
both, of the Company, one or more Registration Statements on Form S-4, and
any amendments thereto (including post-effective amendments), for the purpose
of registering under the Securities Act of 1933 the Company's 113/4 Senior
Notes due 2007, granting unto said attorneys-in-fact and agents, and each of
them, full power and authority to do and to perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully
to all intents and purposes as we might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, may lawfully do or cause to be done by virtue hereof.
DATED this 21st day of March, 1997.
/s/ Everett R. Dobson /s/ Stephen T. Dobson
- ------------------------------------ ------------------------------------
Everett R. Dobson, Chairman of Stephen T. Dobson, Treasurer,
the Board, President and Chief Secretary and Director
Executive Officer (Principal
Executive Officer)
/s/ Bruce R. Knooihuizen /s/ Trenton W. LeForce
- ------------------------------------ ------------------------------------
Bruce R. Knooihuizen, Vice President Trenton W. LeForce,
and Chief Financial Officer Controller (Principal
(Principal Financial Officer) Accounting Officer)
/s/ Russell L. Dobson /s/ Justin L. Jaschke
- ------------------------------------ ------------------------------------
Russell L. Dobson, Director Justin L. Jaschke, Director
/s/ Thadeus J. Mocarski
- ------------------------------------
Thadeus J. Mocarski, Director
<PAGE>
FORM T-1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
---------------------
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
--------
---------------------
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-3818954
(Jurisdiction of incorporation (I.R.S. employer
if not a U.S. national bank) identification No.)
114 West 47th Street 10036-1532
New York, NY (Zip Code)
(Address of principal
executive offices)
---------------------
Dobson Communications Corporation
(Exact name of obligor as specified in its charter)
Oklahoma 73-1110531
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
13439 North Broadway
Oklahoma City, OK 73114
(Address of principal executive offices) (Zip Code)
---------------------
11 3/4% Senior Notes due 2007
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GENERAL
1. GENERAL INFORMATION
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York (2nd District), New York, New York
(Board of Governors of the Federal Reserve System)
Federal Deposit Insurance Corporation, Washington, D.C.
New York State Banking Department, Albany, New York
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH THE OBLIGOR
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 AND 15:
Dobson Communications Corporation currently is not in default under any of
its outstanding securities for which United States Trust Company of New
York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10,
11, 12, 13, 14 and 15 of Form T-1 are not required under General
Instruction B.
16. LIST OF EXHIBITS
T-1.1 -- Organization Certificate, as amended, issued by
the State of New York Banking Department to transact
business as a Trust Company, is incorporated by
reference to Exhibit T-1.1 to Form T-1 filed on
September 15, 1995 with the Commission pursuant to
the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990 (Registration
No. 33-97056).
T-1.2 -- Included in Exhibit T-1.1.
T-1.3 -- Included in Exhibit T-1.1.
-2-
<PAGE>
16. LIST OF EXHIBITS
(CONT'D)
T-1.4 -- The By-Laws of United States Trust Company of
New York, as amended, is incorporated by reference
to Exhibit T-1.4 to Form T-1 filed on September 15,
1995 with the Commission pursuant to the Trust
Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990 (Registration
No. 33-97056).
T-1.6 -- The consent of the trustee required by Section 321(b)
of the Trust Indenture Act of 1939, as amended by the
Trust Indenture Reform Act of 1990.
T-1.7 -- A copy of the latest report of condition of the
trustee pursuant to law or the requirements of its
supervising or examining authority.
NOTE
As of March 12, 1997, the trustee had 2,999,020 shares of Common Stock
outstanding, all of which are owned by its parent company, U.S. Trust
Corporation. The term "trustee" in Item 2, refers to each of United States
Trust Company of New York and its parent company, U. S. Trust Corporation.
In answering Item 2 in this statement of eligibility as to matters peculiarly
within the knowledge of the obligor or its directors, the trustee has relied
upon information furnished to it by the obligor and will rely on information
to be furnished by the obligor and the trustee disclaims responsibility for
the accuracy or completeness of such information.
---------------------
Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee,
United States Trust Company of New York, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 12th
day of March, 1997.
UNITED STATES TRUST COMPANY
OF NEW YORK, Trustee
By: /s/ Louis P. Young
---------------------
Louis P. Young
Vice President
-3-
<PAGE>
EXHIBIT T-1.6
The consent of the trustee required by Section 321(b) of the Act.
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
September 1, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of
1939, as amended by the Trust Indenture Reform Act of 1990, and subject to
the limitations set forth therein, United States Trust Company of New York
("U.S. Trust") hereby consents that reports of examinations of U.S. Trust by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon request therefor.
Very truly yours,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/ Gerard F. Ganey
-----------------------
By: Gerard F. Ganey
Senior Vice President
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
SEPTEMBER 30, 1996
(IN THOUSANDS)
ASSETS
Cash and Due from Banks $ 38,257
Short-Term Investments 82,377
Securities, Available for Sale 861,975
Loans 1,404,930
Less: Allowance for Credit Losses 13,048
----------
Net Loans 1,391,882
Premises and Equipment 60,012
Other Assets 133,673
----------
TOTAL ASSETS $2,568,176
----------
----------
LIABILITIES
Deposits:
Non-Interest Bearing $ 466,849
Interest Bearing 1,433,894
----------
Total Deposits 1,900,743
Short-Term Credit Facilities 369,045
Accounts Payable and Accrued Liabilities 143,604
----------
TOTAL LIABILITIES $2,413,392
----------
----------
STOCKHOLDER'S EQUITY
Common Stock 14,995
Capital Surplus 42,394
Retained Earnings 98,402
Unrealized Gains (Losses) on Securities
Available for Sale, Net of Taxes (1,007)
----------
TOTAL STOCKHOLDER'S EQUITY 154,784
----------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $2,568,176
----------
----------
I, Richard E. Brinkman, Senior Vice President & Comptroller of the named bank
do hereby declare that this Statement of Condition has been prepared in
conformance with the instructions issued by the appropriate regulatory
authority and is true to the best of my knowledge and belief.
Richard E. Brinkman, SVP & Controller
October 24, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM DOBSON AUDITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED DEC. 31, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,609,221
<SECURITIES> 0
<RECEIVABLES> 8,627,280
<ALLOWANCES> 339,144
<INVENTORY> 1,012,589
<CURRENT-ASSETS> 19,956,455
<PP&E> 97,680,165
<DEPRECIATION> 35,750,261
<TOTAL-ASSETS> 116,948,025
<CURRENT-LIABILITIES> 8,923,785
<BONDS> 104,303,802
0
10,000,000
<COMMON> 473,152
<OTHER-SE> 5,508,285
<TOTAL-LIABILITY-AND-EQUITY> 116,948,025
<SALES> 41,892,343
<TOTAL-REVENUES> 43,225,473
<CGS> 9,075,971
<TOTAL-COSTS> 35,790,909
<OTHER-EXPENSES> 1,586,962
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,476,576
<INCOME-PRETAX> (1,304,072)
<INCOME-TAX> (410,795)
<INCOME-CONTINUING> (893,277)
<DISCONTINUED> 0
<EXTRAORDINARY> (527,334)
<CHANGES> 0
<NET-INCOME> (1,420,611)
<EPS-PRIMARY> (4.12)
<EPS-DILUTED> (4.12)
</TABLE>
<PAGE>
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
11 3/4% SENIOR NOTES DUE 2007
IN EXCHANGE FOR
11 3/4% SENIOR NOTES DUE 2007
OF
DOBSON COMMUNICATIONS CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997 (THE "EXPIRATION DATE"),
UNLESS EXTENDED BY DOBSON COMMUNICATIONS CORPORATION
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
BY MAIL: BY OVERNIGHT COURIER: BY HAND: BY FACSIMILE:
<S> <C> <C> <C>
United States Trust United States Trust United States Trust (212) 420-6152
Company of New York Company of New York Company of New York (For Eligible Institutions
P.O. Box 844 Corporate Trust Operations 111 Broadway Only)
Cooper Station Department Lower Level
New York, NY 10276-0844 770 Broadway-13th Floor New York, NY 10006 CONFIRM BY TELEPHONE:
(registered or certified mail New York, NY 10003 Attention: Corporate (800) 548-6565
recommended) Trust Services
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated , 1997
(the "Prospectus") of Dobson Communications Corporation ("Dobson") which,
together with this Letter of Transmittal (the "Letter of Transmittal"),
constitutes Dobson's offer (the "Exchange Offer") to exchange $1,000 in
principal amount of a new series of 11 3/4% Senior Notes Due 2007 (the "New
Notes") of Dobson for each $1,000 in principal amount of outstanding 11 3/4%
Senior Notes Due 2007 (the "Old Notes") of Dobson. The terms of the New Notes
are identical in all material respects (including principal amount, interest
rate and maturity) to the terms of the Old Notes for which they may be exchanged
pursuant to the Exchange Offer, except that the New Notes will have been
registered under the Securities Act of 1933, as amended, and, therefore, will
not bear legends restricting the transfer thereof.
The Exchange Offer is being made pursuant to the Registration Rights
Agreement dated as of February 25, 1997 (the "Registration Rights Agreement"),
and all Old Notes validly tendered will be accepted for exchange. Any Old Notes
not tendered will remain outstanding and continue to accrue interest, but will
not retain any rights under the Registration Rights Agreement. Holders electing
to have Old Notes exchanged pursuant to the Exchange Offer will be required to
surrender such Old Notes, together with the Letter of Transmittal, to the
Exchange Agent at the address specified herein prior to the close of business
<PAGE>
on the Expiration Date. Holders will be entitled to withdraw their election,
not later than 5:00 p.m., New York City time on the business day prior to the
Expiration Date, by sending to the Exchange Agent at the address specified
herein a telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Old Notes delivered for exchange
and a statement that such Holder is withdrawing this election to have such
Old Notes exchanged.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY
BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates. If
the space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
- -------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
- -------------------------------------------------------------------------------
Name(s) and Certificate Aggregate Prinicipal
Address(es) of Number(s) Principal Amount Amount
Registered Holder(s) Represented by Notes Tendered*
(Please fill in)
Total
- -------------------------------------------------------------------------------
* Unless otherwise indicated, the holder will be deemed to have tendered
the full aggregate principal amount represented by Old Notes. See
Instruction 2.
- -------------------------------------------------------------------------------
This Letter of Transmittal is to be used if certificates for Old Notes are
to be forwarded herewith.
Unless the context requires otherwise, the term "Holder" for purposes of
this Letter of Transmittal means any person in whose name Old Notes are
registered or any other person who has obtained a properly completed bond power
from the registered holder.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent on
or prior to the Expiration Date may tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under the captions
-2-
<PAGE>
"The Exchange Offer -- Terms of the Exchange Offer -- Procedures for Tendering
Old Notes" and "The Exchange Offer -- Terms of the Exchange Offer -- Guaranteed
Delivery Procedures."
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):
-------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
-------------------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
------------------------------------------------
Address:
----------------------------------------------
-3-
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to Dobson the above-described principal amount of Old
Notes. Subject to, and effective upon, the acceptance for exchange of the Old
Notes tendered herewith, the undersigned hereby exchanges, assigns and transfers
to, or upon the order of, Dobson all right, title and interest in and to such
Old Notes. The undersigned hereby irrevocably constitutes and appoints the
Exchange Agent as the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that said Exchange Agent acts as the agent of
the undersigned in connection with the Exchange Offer) to cause the Old Notes to
be assigned, transferred and exchanged. The undersigned represents and warrants
that it has full power and authority to tender, exchange, assign and transfer
the Old Notes and to acquire New Notes issuable upon the exchange of such
tendered Old Notes, and that, when the same are accepted for exchange, Dobson
will acquire good and unencumbered title to the tendered Old Notes, free and
clear of all liens, restrictions, charges and encumbrances and not subject to
any adverse claim. The undersigned also warrants that it will, upon request,
execute and deliver any additional documents deemed by Dobson to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Old
Notes or to transfer ownership of such Old Notes on the account books maintained
by The Depository Trust Company.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions of the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by Dobson) as more particularly set forth in
the Prospectus, Dobson may not be required to exchange any of the Old Notes
tendered hereby and, in such event, the Old Notes not exchanged will be returned
to the undersigned at the address shown below the signature of the undersigned.
By tendering, each Holder of Old Notes represents to Dobson that (i) the
New Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New Notes, whether or
not such person is such Holder, (ii) neither the Holder of Old Notes nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes, (iii) if the Holder is not a
broker-dealer or is a broker-dealer but will not receive New Notes for its own
account in exchange for Old Notes, neither the Holder nor any such other person
is engaged in or intends to participate in a distribution of the New Notes and
(iv) neither the Holder nor any such other person is an "affiliate" of Dobson
within the meaning of Rule 405 under the Securities Act of 1933, as amended (the
"Securities Act") or, if such Holder is an "affiliate," that such Holder will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable. If the tendering Holder is a
broker-dealer (whether or not it is also an "affiliate" of Dobson within the
meaning of Rule 405 under the Securities Act) that will receive New Notes for
its own account in exchange for Old Notes, it acknowledges that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the
undersigned is not deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
All authority herein conferred or agreed to be conferred shall survive the
death, bankruptcy or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
-4-
<PAGE>
legal representatives of the undersigned. Tendered Old Notes may be withdrawn at
any time prior to 5:00 p.m., New York City Time on the business day prior to the
Expiration Date.
Certificates for all New Notes delivered in exchange for tendered Old Notes
and any Old Notes delivered herewith but not exchanged, in each case registered
in the name of the undersigned, shall be delivered to the undersigned at the
address shown below the signature of the undersigned.
TENDERING HOLDER(S) SIGN HERE
- ------------------------------------------------------------------
Signature(s) of Holder(s)
- ------------------------------------------------------------------
Date: , 1997
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on
certificate(s) for Old Notes or by any person(s) authorized to become
registered Holder(s) by endorsements and documents transmitted herewith. If
signature by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, please set forth the full title of such person.)
See Instruction 3.
Name(s):
-----------------------------------------------------------
- -------------------------------------------------------------------
(Please Print)
Capacity (full title):
---------------------------------------------
Address:
----------------------------------------------------------
- -------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone No.:
---------------------------------------
Tax Identification No.:
--------------------------------------------
-5-
<PAGE>
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTION 3)
Authorized Signature:
-------------------------------------------------
Name:
-----------------------------------------------------------------
Title:
----------------------------------------------------------------
Address:
--------------------------------------------------------------
Name of Firm:
---------------------------------------------------------
Area Code and Telephone No.:
------------------------------------------
Dated: _______________, 1997
-6-
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES. Certificates
for all physically delivered Old Notes, as well as a properly completed and duly
executed copy of this Letter of Transmittal or facsimile thereof, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at any of its addresses set forth herein on or prior to the
Expiration Date.
THE METHOD OF DELIVERY OF OLD NOTES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY
MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other required documents to the Exchange Agent on or
prior to the Expiration Date may tender their Old Notes pursuant to the
guaranteed delivery procedure set forth in the Prospectus under "The Exchange
Offer --Terms of the Exchange Offer -- Guaranteed Delivery Procedures."
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution (as defined in the Prospectus); (ii) on or prior to the
Expiration Date, the Exchange Agent must have received from such Eligible
Institution a letter, telegram or facsimile transmission setting forth the
name and address of the tendering Holder, the name(s) in which such Old Notes
are registered, and the certificate number(s) of the Old Notes to be
tendered; and (iii) all tendered Old Notes as well as this Letter of
Transmittal and all other documents required by this Letter of Transmittal
must be received by the Exchange Agent within three New York Stock Exchange
trading days after the date of execution of such letter, telex, telegram or
facsimile transmission, all as provided in the Prospectus under the caption
"The Exchange Offer -- Terms of the Exchange Offer -- Guaranteed Delivery
Procedures."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Old Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Notes will be accepted
in denominations of $1,000 and integral multiples in excess thereof. If less
than the entire principal amount of Old Notes evidenced by a submitted
certificate is tendered, the tendering Holder must fill in the principal
amount tendered in the column entitled "Principal Amount Tendered." A newly
issued certificate for the principal amount of Old Notes submitted but not
tendered will be sent to such Holder as soon as practicable after the
Expiration Date. All Old Notes delivered to the Exchange Agent will be deemed
to have been tendered unless otherwise indicated. To withdraw a tender of
Old Notes in the Exchange Offer, a written or facsimile transmission notice
of withdrawal must be received by the Exchange Agent at its address set forth
herein prior to 5:00 p.m., New York City time, on the business day prior to
the Expiration Date. Any such notice of withdrawal must (i) specify the name
of the person having deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii)
contain a statement that such holder is withdrawing its election to have such
Old Notes exchanged, (iv) be signed by the Holder in the same manner as the
original signature on the Letter of Transmittal by which such Old Notes were
tendered (including any required signature
-7-
<PAGE>
guarantees) or be accompanied by documents of transfer sufficient to have the
Trustee with respect to the Old Notes register the transfer of such Old Notes
in the name of the person withdrawing the tender and (v) specify the name in
which any such Old Notes are to be registered, if different from that of the
Depositor. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and
number of the account at the book-entry transfer facility. All questions as
to the validity, form and eligibility (including time of receipt) of such
notices will be determined by Dobson, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for purposes of the Exchange Offer and no New Notes
will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the Holder thereof without cost to
such Holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described herein at any time
prior to the business day prior to the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered Holder(s) of the Old Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of certificates without
alteration, enlargement or any change whatsoever.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the New Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (including any participant in The Depository Trust Company
(also referred to as a book-entry facility) whose name appears on a security
listing as the owner of Old Notes), the signature of such signer need not be
guaranteed. In any other case, the tendered Old Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to Dobson
and duly executed by the registered holder and the signature on the endorsement
or instrument of transfer must be guaranteed by an eligible guarantor
institution which is a member of one of the following recognized signature
guarantee programs (an "Eligible Institution"): (i) The Securities Transfer
Agents Medallion Program (STAMP), (ii) The New York Stock Exchange Medallion
Signature Program (MSF), or (iii) The Stock Exchange Medallion Program (SEMP).
If the New Notes or Old Notes not exchanged are to be delivered to an
address other than that of the registered holder appearing on the note register
for the Old Notes, the signature in the Letter of Transmittal must be guaranteed
by an Eligible Institution.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
-8-
<PAGE>
When this Letter of Transmittal is signed by the registered Holder or
Holders of Old Notes listed and tendered hereby, no endorsements of certificates
or separate written instruments of transfer or exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered Holder or Holders of the Old Notes listed, such Old Notes must be
endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to Dobson and duly executed by the registered
Holder or Holders, in either case signed exactly as the name or names of the
registered Holder or Holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should
so indicate when signing, and, unless waived by Dobson, proper evidence
satisfactory to Dobson of their authority so to act must be submitted.
4. TRANSFER TAXES. Dobson shall pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes, or Old Notes for principal
amounts not tendered or accepted for exchange, are to be delivered to, or are
to be issued in the name of, any person other than the registered Holder of
the Old Notes tendered hereby, or if a transfer tax is imposed for any reason
other than the exchange of Old Notes pursuant to the Exchange Offer, then the
amount of any such transfer taxes (whether imposed on the registered Holder
or any other person) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted
herewith, the amount of such transfer taxes will be billed directly to such
tendering Holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS. Dobson reserves the absolute right to waive, in
whole or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any Holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent
at the address and telephone number set forth above. In addition, all questions
relating to the Exchange Offer, as well as requests for assistance or additional
copies of the Prospectus and this Letter of Transmittal, may be directed to the
Exchange Agent at the address specified in the Prospectus.
8. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), and acceptance of Letters of Transmittal or Old
Notes will be resolved by Dobson, whose determination will be final and binding.
Dobson reserves the absolute right to reject any or all Letters of Transmittal
or tenders that are not in proper form or the acceptance of which would, in the
opinion of Dobson's counsel, be unlawful. Dobson also reserves the right to
waive any irregularities or conditions of tender as to the particular Old Notes
covered by any Letter of Transmittal or tendered pursuant to such Letter of
Transmittal. None of Dobson, the Exchange Agent or any other person will be
under any duty to give notification of any defects or
-9-
<PAGE>
irregularities in tenders or incur any liability for failure to give any such
notification. Dobson's interpretation of the terms and conditions of the
Exchange Offer shall be final and binding.
9. DEFINITIONS. Capitalized terms used in this Letter of Transmittal and
not otherwise defined have the meanings given in the Prospectus.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER
WITH CERTIFICATES FOR OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
-10-
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
11 3/4% SENIOR NOTES DUE 2007
IN EXCHANGE FOR
11 3/4% SENIOR NOTES DUE 2007
OF
DOBSON COMMUNICATIONS CORPORATION
Registered holders of outstanding 11 3/4% Senior Notes Due 2007 (the "Old
Notes") of Dobson Communications Corporation ("Dobson") who wish to tender their
Old Notes in exchange for a like principal amount of 11 3/4% Senior Notes Due
2007 (the "New Notes") of Dobson and, in each case, whose Old Notes are not
immediately available or who cannot deliver their Old Notes and Letter of
Transmittal (and any other documents required by the Letter of Transmittal) to
United States Trust Company of New York (the "Exchange Agent"), prior to the
Expiration Date, may use this Notice of Guaranteed Delivery or one substantially
equivalent hereto. This Notice of Guaranteed Delivery may be delivered by hand
or sent by facsimile transmission (receipt confirmed by telephone and an
original delivered by guaranteed overnight delivery) or mail to the Exchange
Agent. See "The Exchange Offer -- Terms of the Exchange Offer -- Guaranteed
Delivery Procedures" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
UNITED STATES TRUST COMPANY OF NEW YORK
<TABLE>
BY MAIL: BY OVERNIGHT COURIER: BY HAND: BY FACSIMILE:
<S> <C> <C> <C>
United States Trust United States Trust United States Trust (212) 420-6152
Company of New York Company of New York Company of New York (For Eligible Institutions
P.O. Box 844 Corporate Trust Operations 111 Broadway Only)
Cooper Station Department Lower Level
New York, NY 10276-0844 770 Broadway-13th Floor New York, NY 10006 CONFIRM BY TELEPHONE:
(registered or certified New York, NY 10003 Attention: Corporate (800) 548-6565
mail recommended) Trust Services
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DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If
a signature on a Letter of Transmittal is required to be guaranteed by an
Eligible Institution, such signature guarantee must appear in the applicable
space provided on the Letter of Transmittal for Guarantee of Signatures.
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Ladies & Gentlemen:
The undersigned hereby tender(s) to Dobson upon the terms and subject to
the conditions set forth in the Exchange Offer and the Letter of Transmittal,
receipt of which is hereby acknowledged, the aggregate principal amount of Old
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus.
The undersigned understands that tenders of Old Notes will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Old Notes pursuant to the Exchange
Offer may not be withdrawn after 5:00 p.m., New York City time on the business
day prior to the Expiration Date. Tenders of Old Notes may also be withdrawn
if the Exchange Offer is terminated without any such Old Notes being exchanged
thereunder or as otherwise provided in the Prospectus.
All authority herein conferred or agreed to be conferred by this Notice of
Guaranteed Delivery shall survive the death, bankruptcy or incapacity of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
PLEASE SIGN AND COMPLETE
Signature(s) of Registered Name(s) of Registered Holder(s):
Owner(s) or Authorized Signatory:
---------------------------------
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---------------------------------
- ---------------------------------
---------------------------------
- ---------------------------------
Address:
Principal Amount of Old Notes -------------------------
Tendered:
---------------------------------
- ---------------------------------
Area Code and Telephone No.:
Certificate No(s). of Old
Notes (if available): ---------------------------------
- --------------------------------- Date:
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This Notice of Guaranteed Delivery must be signed by the
registered holder(s) of Old Notes exactly as its (their) name(s)
appear on certificates for Old Notes or on a security position
listing the owner of Old Notes, or by person(s) authorized to become
registered Holder(s) by endorsements and documents transmitted with
this Notice of Guaranteed Delivery. If signature is by a trustee,
executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such
person must provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
-----------------------------------------------------
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Capacity:
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Address(es):
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DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO
THE EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL.
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GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member firm of a registered national
securities exchange or of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office
or a correspondent in the United States or an "eligible guarantor
institution" as defined by Rule 17Ad-15 under the Exchange Act,
hereby (a) represents that each holder of Old Notes on whose behalf
this tender is being made "own(s)" the Old Notes covered hereby
within the meaning of Rule 14e-4 under the Securities Exchange Act
of 1934, as amended, (b) represents that such tender of Old Notes
complies with such Rule 14e-4, and (c) guarantees that, within three
New York Stock Exchange trading days from the date of this Notice of
Guaranteed Delivery, a properly completed and duly executed Letter
of Transmittal (or a facsimile thereof), together with certificates
representing the Old Notes covered hereby in proper form for
transfer and required documents will be deposited by the undersigned
with the Exchange Agent.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF
TRANSMITTAL AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT
WITHIN THE TIME SET FORTH ABOVE AND THAT FAILURE TO DO SO COULD
RESULT IN FINANCIAL LOSS TO THE UNDERSIGNED.
Name of Firm: Authorized Signature:
---------------
Address: Name:
-------------------- ----------------------------
Title:
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Area Code and Telephone Date:
No.: ----------------------------
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