<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 15, 1998
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>
------------------------
13439 NORTH BROADWAY EXTENSION BRUCE R. KNOOIHUIZEN
SUITE 200 13439 NORTH BROADWAY EXTENSION
SUITE 200
OKLAHOMA CITY, OKLAHOMA 73114 OKLAHOMA CITY, OKLAHOMA 73114
(405) 391-8500 (405) 391-8500
(Address, including Zip Code, and (Name, address, including Zip
telephone Code, and telephone number,
number, including area code, of including area code, of
registrant's principal agent for service)
executive offices)
------------------------
COPIES TO:
THEODORE M. ELAM, ESQ.
BRICE TARZWELL, 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 TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
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>
12 1/4% Senior Exchangeable Preferred
Stock............................... 185,575 shares $1,000 $61,858,333 $18,248(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 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, MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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>
PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED APRIL 15, 1998
OFFER TO EXCHANGE
ALL OUTSTANDING
SHARES OF 12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
(179,942.535 SHARES OUTSTANDING)
FOR
SHARES OF 12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
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 June ,
1998, unless extended (if and as extended, the "Expiration Date"). Tenders of
Old Shares may be withdrawn at any time prior to 5:00 pm, New York City time, on
the Expiration Date. Subject to certain conditions (which are stated herein),
the Company will accept for exchange any and all Old Shares which are properly
tendered prior to 5:00 p.m., New York City time, on the Expiration Date.
--------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE FOR A DISCUSSION OF CERTAIN FACTORS
WHICH INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE NEW SHARES 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 (the "Letter of Transmittal"), to exchange new shares of its 12 1/4%
Senior Exchangeable Preferred Stock ("New Shares"), which have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), for all
outstanding shares of its 12 1/4% Senior Exchangeable Preferred Stock ("Old
Shares"). As of April 15, 1998, there were 179,942.535 Old Shares outstanding.
(COVER PAGE CONTINUED ON PAGE II.)
--------------------------
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.
--------------------------
Dividends on the New Shares will be cumulative from the date of issuance and
are payable quarterly in cash or, on or prior to January 15, 2003, at the option
of the Company, in additional New Shares (calculated to the fifth decimal
place), on each January 15, April 15, July 15 and October 15, commencing July
15, 1998. Accrued but unpaid dividends on Old Shares tendered and accepted in
the Exchange Offer will not be paid at the time of the exchange but will be paid
in New Shares on the first dividend payment date applicable to the New Shares.
The New Shares may be redeemed at the option of the Company, in whole or in
part, at any time on or after January 15, 2003 at 106.125% of their liquidation
preference amount, plus accumulated and unpaid dividends, declining ratably to
100% of their liquidation preference amount, plus accumulated and unpaid
dividends, on or after January 15, 2006. In addition, at any time prior to
January 15, 2001, the Company may redeem up to $61,250,000 of the aggregate
liquidation preference amount of the New Shares with the net proceeds of one or
more sales of Common Stock of the Company, at 112.250% of the liquidation
preference amount, plus accumulated and unpaid dividends; provided that after
any such redemption at least $113 million aggregate liquidation preference
amount of Senior Preferred Stock remains outstanding. See "Description of Senior
Preferred Stock."
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Shares as of May , 1998. The Company will not
receive any proceeds from this Exchange Offer. No dealer-manager is being used
in connection with this Exchange Offer. See "Plan of Distribution."
--------------------------
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
--------------------------
THE DATE OF THIS PROSPECTUS IS MAY , 1998.
<PAGE>
The New Shares will rank pari passu with the Old Shares with respect to
dividends, voting and upon redemption. The New Shares will rank (i) senior to
all of the Company's Common Stock, Class A Preferred Stock, Class B Preferred
Stock and Class C Preferred Stock, and to all other capital stock of the Company
unless the terms of such stock expressly provide that it ranks senior to or on a
parity with the New Shares; (ii) on a parity with any capital stock of the
Company the terms of which expressly provide that it will rank on a parity with
the New Shares; and (iii) junior to all capital stock of the Company the terms
of which expressly provide that such stock will rank senior to the New Shares.
The Company is a holding company and the Old Shares and the New Shares will
be effectively subordinated to all existing and future liabilities (including
trade payables) of the Company's subsidiaries. The form and terms of the New
Shares are identical in all material respects to the form and terms of the Old
Shares except that the New Shares have been registered under the Securities Act.
Any Old Shares 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. Following consummation of the
Exchange Offer, the holders of the Old Shares 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 Shares held by them. Following the completion of the Exchange
Offer, none of the Senior Preferred Stock will be entitled to the contingent
increase in the dividend rate applicable to the Old Shares.
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 Shares issued pursuant to the Exchange
Offer 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 Shares 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 Shares. 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 Shares 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 Shares 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 affiliates of the Company who are subject to
the additional restrictions set forth below) that receives New Shares for its
own account pursuant to the Exchange Offer must acknowledge that it will deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Shares. 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 Shares received in
exchange for Old Shares where such Old Shares 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 last
date Old Shares are accepted for exchange pursuant to the Exchange Offer (the
"Exchange Date"), 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.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Certain Terms.............................................................................................. iv
Available Information...................................................................................... v
Periodic Reports........................................................................................... vi
Summary.................................................................................................... 1
Risk Factors............................................................................................... 16
The Exchange Offer......................................................................................... 27
Selected Consolidated Financial and Other Data............................................................. 35
Pro Forma Condensed Consolidated Financial Data............................................................ 37
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 42
Business................................................................................................... 55
Management................................................................................................. 78
Principal Shareholders.....................................................................................
Description of Senior Preferred Stock...................................................................... 88
Description of Exchange Debentures......................................................................... 113
Description of Indebtedness................................................................................ 139
Description of Capital Stock............................................................................... 146
Federal Income Tax Considerations.......................................................................... 150
Legal Matters.............................................................................................. 163
Experts.................................................................................................... 163
Index to Financial Statements.............................................................................. F-1
</TABLE>
------------------------
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.
------------------------
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD SHARES 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. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
iii
<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 Prospectus, 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:
1997 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 an
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 "ATM" means a synchronous transfer mode. 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 Wireless Acquisitions" means the Company's acquisition of
(i) the FCC licenses for and assets related to the Kansas 5 RSA, Missouri 1 RSA,
Missouri 4 RSA and Missouri 5 RSA (collectively, the "Kansas/Missouri Cluster")
completed on March 19, 1996, (ii) the FCC licenses for and assets related to the
Cumberland MSA, Hagerstown MSA, Maryland 3 RSA and Pennsylvania 10 West RSA
(collectively, the "Western Maryland Properties" and, together with Maryland 2,
the "Maryland/ Pennsylvania Cluster") (the "Western Maryland Properties
Acquisition") completed on February 28, 1997, (iii) the FCC licenses for and
assets related to the Maryland 2 RSA ("Maryland 2") (the "Maryland 2
Acquisition") completed on March 3, 1997, (iv) the FCC license for and a 75%
interest in the partnership (the "Arizona 5 Partnership") which owns the system
for the Arizona 5 RSA ("Arizona 5") (the "Arizona 5 Acquisition") completed on
October 1, 1997, (v) the FCC license for and assets related to the Texas 16 RSA
("Texas 16") (the "Texas 16 Acquisition") completed on January 26, 1998, and
(vi) the two entities which own a 100% interest in the partnership (the
"California 4 Partnership") which owns the FCC license and systems for the
California 4 RSA ("California 4") (the "California 4 Acquisition") completed on
April 1, 1998.
The term "Santa Cruz Acquisition" means the acquisition of 70% of the
outstanding stock of a corporation that owns the FCC license for and assets
related to the Santa Cruz MSA ("Santa Cruz"). The term "Acquisitions" means the
Recent Wireless Acquisitions and the Santa Cruz Acquisition. Other wireless
acquisitions referred to in this Prospectus include the (i) the FCC license for
and assets related to the California 7 RSA ("California 7") (the "California 7
Acquisition"), (ii) the FCC license for and assets related to the Texas 7 RSA
("Texas 7") (the "Texas 7 Acquisition") and (iii) the FCC license for and assets
related to the Arkansas 11 RSA ("Arkansas 11") (the "Arkansas 11 Acquisition").
The term "Pending Wireline Acquisitions" means (a) the acquisition of the stock
of American Telco, Inc. ("ATI") and (b) the acquisition of certain assets of
Zenex Long Distance, Inc. ("Zenex"). The term "Senior Notes" means the Company's
11 3/4% Senior Notes due 2007 issued on February 28, 1997, and the term "Senior
Preferred Stock" means the Company 12 1/4% Senior Exchangeable Preferred Stock.
iv
<PAGE>
The term "Operations" means Dobson's wholly owned subsidiary, Dobson
Cellular Operations Company, and "DOC" means Dobson's wholly owned subsidiary,
Dobson Operating Company.
The term "Other Preferred Stock" means the Company's Class A, Class B and
Class C Preferred Stock.
The term "Transactions" means, collectively, the Recent Wireless
Acquisitions and related financing, establishment of and borrowings under the
the DOC Facility and the Operations Facility (each as defined herein) and the
proposed Santa Cruz Acquisition. 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, amortization, extraordinary items and changes in accounting
principles.
As used herein the following companies and businesses are identified as
indicated: "ACSI" means American Communications Services, Inc.; "AirTouch" means
AirTouch Communications, Inc.; "Allegiance" means Allegiance Telecom, Inc.;
"ALLTEL" means ALLTEL Corporation and its affiliates; "AT&T" means AT&T Corp.;
"AT&T Wireless" means AT&T Wireless Services, Inc. and its affiliates; "ATTI"
means Associated Telecommunications and Technologies, Inc., an affiliate of the
Company; "BAM" means Bell Atlantic Mobile; "Brooks" means Brooks Fiber
Properties, Inc.; "BellSouth Mobility" means BellSouth Mobility, Inc.; "Chariton
Cellular" means Missouri RSA 5 Partnership d/b/a Chariton Valley Cellular; "CMT"
means CMT Partners, a partnership between AT&T Wireless and AirTouch; "Enid
Cellular" means Enid MSA Partnership d/b/a Enid Cellular; "Ericsson" means
Telefonaktiebolaget LM Ericsson and its affiliates; "Excel" means Excel
Communications, Inc.; "Fleet Investors" means, collectively, Fleet Venture
Resources, Inc., Fleet Equity Partners VI, L.P. and Kennedy Plaza Partners;
"GTE" means GTE Corporation and its affiliates; "Houston Cellular" means a
partnership between AT&T Wireless and BellSouth Mobility; "ICG" means ICG
Telecom Group, Inc.; "Intermedia" means Intermedia Communications, Inc.; "Kansas
Cellular" means Independent Networks, Inc., d/b/a Kansas Cellular; "LCI" means
LCI International, Inc.; "MCI" means MCI Communications Corporation; "Motorola"
means Motorola, Inc.; "NTS" means NTS Communications, Inc.; "OmniPoint" means
OmniPoint Communications Corporation and its affiliates; "PacTel" means Pacific
Telesis Mobile Services; "Sprint" means Sprint Corporation and affiliated
companies; "SWBM" means Southwestern Bell Mobile Systems, Inc.; "SWBT" means
Southwestern Bell Telephone Company; "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.; "Western Wireless" means Western Wireless Corporation; "WMC" means WMC
Partners, L.P., an affiliate of AirTouch and U S WEST; and "WorldCom" means
WorldCom, Inc.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement"), which term includes all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the
rules and regulations promulgated thereunder, covering the New Shares being
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. Statements made in this
Prospectus as to the contents of any contracts, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
The Company is subject to the informational requirements of the Exchange Act
and, in accordance with the Exchange Act, the Company files periodic reports
with the Commission. Such reports filed by the
v
<PAGE>
Company with the Commission can be inspected and copied (at prescribed rates) at
the Commission's Public Reference Section, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the
Commission located at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511 and 7 World Trade Center, 13th Floor, New York, New
York 10048. Such material may also be accessed electronically by means of the
Commission's home page on the internet located at http://www.sec.gov.
PERIODIC REPORTS
The Company has agreed that, whether or not required by the rules and
regulations of the Commission, so long as any shares of Senior Preferred Stock
or any Exchange Debentures 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 Section 13(a) or 15(d) under the Securities Exchange
Act of 1934 (the "Securities Exchange Act") as if it were subject thereto. The
Company will supply the Transfer Agent for the Senior Preferred Stock, each
holder of Senior Preferred Stock, the Trustee appointed with respect to the
Exchange Debentures and each holder of Exchange Debentures, without cost, copies
of such report and other information.
vi
<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. ADDITIONAL DEFINITIONS ARE CONTAINED UNDER "CERTAIN TERMS" AND,
WITH RESPECT TO THE SENIOR PREFERRED STOCK, "DESCRIPTION OF SENIOR PREFERRED
STOCK-- CERTAIN DEFINITIONS," AND, WITH RESPECT TO THE EXCHANGE DEBENTURES,
"DESCRIPTION OF EXCHANGE DEBENTURES-- CERTAIN DEFINITIONS."
THE COMPANY
Dobson Communications Corporation provides diversified telecommunications
products and services in eight states across the country. The Company is the
successor to Dobson Telephone Company which was organized in Oklahoma in 1936.
The Company operates in two telecommunications business segments: wireless and
wireline.
Dobson's wireless operations focus on the ownership, operation and
development of rural cellular systems. The Company currently provides rural
cellular telephone services in RSAs and small MSAs in western Oklahoma and the
Texas panhandle, in northeastern Kansas and northwestern Missouri near Kansas
City, in Maryland and Pennsylvania near the Washington-Baltimore metropolitan
area, in Arizona between Phoenix and Tucson, in south-central Texas and northern
California between Fresno and Modesto. Upon consummation of the proposed
wireless acquisition of Santa Cruz, the Company will also own and operate a
rural cellular system in southern California. In addition, the Company recently
purchased PCS licenses covering 9 BTAs in Oklahoma, Kansas and Missouri.
Dobson's wireline operations include competitive local exchange carrier
("CLEC") operations which began providing services in October 1997 and currently
operate in Oklahoma City, Tulsa and Amarillo. Upon consummation of the Pending
Wireline Acquisitions the Company will also provide services in five major Texas
markets: Houston, Dallas, Fort Worth, San Antonio and Austin. Dobson's wireline
operations also include local telephone exchange ("local exchange") services in
Oklahoma and regional fiber optic transmission networks ("fiber") in Oklahoma,
Texas and Colorado.
The Company was incorporated under the laws of the State of Oklahoma in
February 1997 and adopted its current organizational structure in 1998. The
principal executive offices of the Company are located at 13439 North Broadway
Extension, Suite 200, Oklahoma City, OK 73114 and its telephone number is (405)
391-8500.
WIRELESS OPERATIONS
The Company's wireless business began in 1990 when it initiated operations
in part of the Oklahoma/ Texas Cluster. Since then, 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 by adding retail outlets and
participating in community affairs, expanding coverage through the addition of
cell sites, enhancing system technology and offering simplified rate plans.
Roaming is a substantial source of revenue for the Company. The Company
focuses on systems that are adjacent to major metropolitan areas and include a
high concentration of expressway corridors that tend to result in a significant
amount of roaming activity. The Company has entered into roaming agreements with
operators of cellular systems in adjoining MSAs and others which provide for
reciprocal roaming rates that allow customers to roam at competitive prices
which, in certain instances, are comparable to home area rates.
<PAGE>
For the years ended December 31, 1995, 1996 and 1997, and for the year ended
December 31, 1997 on a pro forma basis giving effect to the Recent Wireless
Acquisitions and the proposed acquisition of Santa Cruz, wireless service
revenue accounted for 40%, 41%, 45% and 43%, respectively, of the Company's
consolidated revenue, while wireless roaming revenue accounted for 13%, 18%, 31%
and 40%, respectively, of the Company's consolidated revenue.
RECENT EVENTS
On January 20, 1998, the Company consummated the purchase of the FCC
cellular license for, and certain assets relating to, Texas 16 for an aggregate
purchase price of $56.6 million. On April 1, 1998, the Company also consummated
the purchase of all of the stock of two corporations which, together, own the
California 4 Partnership, for an aggregate purchase price of $90.9 million.
On March 25, 1998, the revolving credit facility of the Company's
subsidiary, Dobson Operating Company ("DOC"), was amended and restated and the
amount of credit available thereunder was increased to $250 million (the "DOC
Facility"). In addition, the Company's subsidiary, Dobson Cellular Operations
Company ("Operations"), entered into a $120 million revolving credit facility
and an $80 million 364-day revolving credit and term loan agreement with a group
of banks led by NationsBank, N.A. (together, the "Operations Facility"). As used
herein, the term "Bank Credit Facilities" refers to the DOC Facility and the
Operations Facility.
The following table sets forth certain data with respect to the Company's
existing cellular systems as of April 1, 1998:
<TABLE>
<CAPTION>
TOTAL MARKET
CELLULAR SYSTEMS TOTAL POPS OWNERSHIP NET POPS SUBSCRIBERS PENETRATION(1)
- -------------------------------------------- ----------- ---------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Oklahoma/Texas Cluster(2)................... 344,300 (3) 256,484 37,786 11.0%
Kansas/Missouri Cluster(4).................. 243,800 100% 243,800 7,010 2.9
Maryland/Pennsylvania Cluster(5)............ 874,200 100% 874,200 50,450 5.8
Arizona 5................................... 184,400 75% 138,300 9,096 4.9
Texas 16.................................... 326,300 100% 326,300 4,513 1.4
California 4................................ 363,400 100% 363,400 16,472 4.5
----------- ---------- ------------- ---
Total....................................... 2,336,400 2,202,484 125,327 5.4%
----------- ---------- ------------- ---
-----------
</TABLE>
- ------------------------
(1) Market penetration is determined by dividing total subscribers by the total
Pops covered by the applicable FCC cellular license.
(2) The Oklahoma/Texas Cluster includes Oklahoma 5 RSA, Oklahoma 7 RSA, Texas 2
RSA, Enid, OK MSA and Oklahoma 2 RSA. 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.
(3) The Company is the operating manager for partnerships which own the FCC
licenses for, and assets relating to, the Oklahoma 5 RSA, Oklahoma 7 RSA and
Texas 2 RSA. The Company's ownership interests in these partnerships are
64.4%, 64.4% and 61.0%, respectively. The Company owns 100% of the Enid, OK
MSA and Oklahoma 2 RSA.
(4) The Kansas/Missouri Cluster includes Kansas 5 RSA, Missouri 1 RSA, Missouri
4 RSA and Missouri 5 RSA. The Company also operates Missouri 2 RSA under an
interim operating authority granted by the FCC which will terminate after
the permanent licensee commences commercial service in the market. The FCC
has issued a license for Missouri 2 RSA to a permanent licensee, but the
issuance has been challenged. The 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.
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(5) The Company's Maryland/Pennsylvania Cluster includes Maryland 2 RSA,
Cumberland, MD MSA, Hagerstown, MD MSA, Maryland 3 RSA, and Pennsylvania 10
West RSA. 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.
WIRELESS BUSINESS STRATEGY
The wireless operations' primary business strategy is to focus on the
development and acquisition of rural cellular systems. The principal elements of
the Company's strategy include the following:
- LEVERAGE STRATEGIC RELATIONSHIPS. The Company develops strategic
relationships with operators of cellular systems in major MSAs near the
Company's systems. These relationships include reciprocal roaming
agreements which allow the Company's subscribers to use the system in the
neighboring MSA at favorable rates which, in certain circumstances, are
comparable to the subscriber's home rates. By entering into these
strategic agreements, the Company is able to increase its roaming revenue,
offer its subscribers larger home rate areas and leverage the recognized
brand names of its partners and their extensive marketing efforts.
- AGGRESSIVE LOCAL MARKETING AND PROMOTION OF WIRELESS SERVICES. The
Company's marketing objective is to distinguish the Company as the local
market's leading wireless services provider, stressing its service
quality, local sales offices staffed with local personnel, and commitment
to the community. Management believes that, as an operator 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 market requirements and community involvement. The Company intends
to continue to open new retail outlets and introduce simplified rate plans
in each of its market areas.
- TARGETED SALES EFFORTS. The Company focuses its marketing programs on
attracting subscribers who are likely to generate high monthly revenue and
low churn rates. In addition, the Company has implemented a sales force
compensation system designed to maximize the acquisition of these high
use, reduced churn subscribers, which is intended to result in higher
monthly revenue per subscriber and lower marketing and selling costs per
gross additional subscriber.
- 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. The Company believes that its emphasis on superior customer
service has enabled it to achieve an average monthly churn rate of 1.89%
for the year ended December 31, 1997.
- CONTINUED SYSTEM DEVELOPMENT AND EXPANSION. The Company intends to
continue to expand and improve coverage, increase capacity and build out
its 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 roaming activity
due to the larger geographic area covered by the cellular network and
further enhance the overall efficiency of the network. The Company is
upgrading its systems with digital technology to enable it to increase
roaming and provide enhanced capabilities including caller ID, longer
battery life and zone billing.
- DISCIPLINED EXPANSION THROUGH ACQUISITIONS. The Company continuously
evaluates opportunities to create new cellular clusters or expand current
clusters by acquisitions of additional cellular systems. In evaluating
acquisitions, the Company targets RSAs and small MSAs that have some or
all of the following characteristics: (i) are adjacent to major
metropolitan areas; (ii) have a strong demographic profile, including
positive population growth trends; (iii) include a high concentration of
expressway corridors that facilitate a significant amount of roaming
activity; (iv) are large enough, or offer clustering opportunities, to
obtain certain economies of scale; (v) have underdeveloped
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areas with low penetration levels; (vi) generate positive operating cash
flow; (vii) have the potential to develop a strategic relationship with
operators of neighboring cellular systems and the ability to offer
services under a leading brand name; and (viii) are likely to have fewer
PCS competitors. The Company is presently evaluating, and in discussions
with, a number of acquisition candidates.
SANTA CRUZ ACQUISITION
The Company has entered into a definitive agreement to purchase 70% of the
outstanding stock of the corporation that owns the FCC cellular license for, and
the assets relating to, the Santa Cruz MSA, for $25.2 million, subject to
adjustment, and is negotiating to acquire the remaining 30% of the outstanding
stock of such corporation. The Santa Cruz MSA is adjacent to California 4 and is
located southwest of San Jose and north of the Monterey Peninsula, on
California's Pacific coastline. Santa Cruz has 242,000 total Pops (169,400 Net
Pops) and, as of December 31, 1997, there were approximately 14,300 subscribers
(representing a 5.9% market penetration).
OTHER WIRELESS ACQUISITIONS
The Company continuously evaluates opportunities to create new cellular
clusters or expand current clusters by acquisitions of additional cellular
systems. The Company is evaluating, and in discussions with, a number of
potential acquisition candidates. The Company recently entered into non-binding
letters of intent with respect to California 7 and Texas 7 for a purchase price
of approximately $21.0 million and $61.0 million, respectively. These
acquisitions will be subject to the satisfaction of a number of significant
conditions, including the satisfactory completion of due diligence, the
satisfactory resolution of certain pending claims with respect to the FCC
license for Texas 7, the negotiation and execution of definitive purchase
agreements, the receipt of board and shareholder approval and the receipt of all
required regulatory approvals. There can be no assurance that the Company will
consummate these or any other acquisitions.
An affiliate of the seller of Texas 7 is presently negotiating to purchase
the FCC license for, and certain assets relating to, the Arkansas 11 RSA for not
more than $6.0 million. Pursuant to the letter of intent for Texas 7, the
Company would receive an assignment of such affiliate's rights, if any, to
acquire Arkansas 11 upon the execution of a definitive agreement for the
Company's acquisition of Texas 7. The Company would pay the seller of Texas 7
$1.0 million for such assignment upon the closing of the Arkansas 11
acquisition. The letter of intent with respect to Texas 7 has expired, but
negotiations with the seller are continuing.
WIRELINE OPERATIONS
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, 1997, the Company's local
telephone exchanges served 12,633 access lines. The Company provides local and
long-distance telecommunications services with enhanced and value-added calling
and billing features. For the three years ended December 31, 1995, 1996 and
1997, local exchange service revenue accounted for 37%, 31%, and 16% of the
Company's consolidated revenue.
Dobson Wireline Company ("Dobson Wireline"), the Company's subsidiary which
owns the Company's local exchange carrier, fiber and CLEC operations, has been
designated an "Unrestricted Subsidiary" under the Company's outstanding Senior
Notes and Senior Preferred Stock and, therefore, is not subject to certain
covenant restrictions which apply to the rest of the Company's operations.
The Company intends to leverage its reputation, knowledge of local markets
and its local exchange experience by reselling local, long distance and wireless
services. The Company commenced offering these services in October 1997 and
currently operates in three markets, including Oklahoma City, Tulsa and
Amarillo. The Company uses its own switches and leases local exchange lines in
these markets. The
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Company has an integrated billing system designed to provide a single bill to
customers for all services provided.
The Company operates over 545 miles of long-haul fiber optic facilities. It
owns and operates approximately 360 miles of long-haul fiber optic facilities
between Oklahoma City and Amarillo which link the Company's local exchanges. The
Company also is a 20% partner in, and manages, a partnership which owns and
operates approximately 185 miles of long-haul fiber optic facilities between
Springfield, Colorado and Colorado Springs. The Company's fiber networks are
linked to other networks through interconnection agreements that allow it to
provide voice and data telecommunications services to cities in Washington,
Idaho, Montana, Wyoming, North Dakota, South Dakota, Minnesota, Wisconsin, Iowa,
Illinois, Missouri, Nebraska, Colorado, Kansas, New Mexico, Oklahoma and Texas.
These networks utilize advanced technologies capable of efficiently transmitting
capacity-intensive services, such as internet, multimedia applications, frame
relay and ATM services. 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.
WIRELINE BUSINESS STRATEGY
In its wireline operations, the Company intends to leverage its reputation
and knowledge of local markets and its local exchange experience by offering
CLEC services, including local, long distance and wireless services initially in
the greater Oklahoma City, Tulsa and Amarillo areas. The Company targets small
and mid-sized business customers with needs for a wide range of
telecommunications services and a preference for a simplified, single bill. The
Company intends to resell local services initially and leverage off of the
existing infrastructure of ATI, thereby limiting capital expenditures required
in the near term, and to install infrastructure to support local switched
services as market conditions warrant.
The Company intends to initiate additional marketing programs to increase
its customer base and to increase the use of its long-haul fiber optic networks
by its existing customers. While the Company has no plans to expand its
long-haul fiber optic infrastructure, it will seek to expand its networks to
additional cities through new interconnection agreements.
PENDING WIRELINE ACQUISITIONS
On April 7, 1998, the Company entered into a non-binding letter of intent
with Zenex Communications, Inc. ("Zenex") to purchase contractual rights,
information data and other rights with respect to its long distance resale
customers in Oklahoma for approximately $7.0 million, subject to adjustment. The
Zenex transaction will be subject to the satisfaction of a number of significant
conditions, including satisfactory completion of due diligence, the negotiation
and execution of a definitive purchase agreement, the receipt of board and
shareholder approval and the receipt of all required regulatory approvals. There
can be no assurance that the Company will satisfy itself as to these conditions
or that the acquisition will be consummated.
In March 1998, the Company entered into a definitive agreement to purchase
substantially all of the assets of American Telco, Inc. ("ATI") for $130.0
million, subject to adjustment. The Company has placed $5.0 million into escrow
pending closing of the acquisition which is expected to occur late in the second
quarter of 1998. ATI is a Houston-based CLEC which provides resale services to
primarily commercial customers in five major Texas markets: Houston, Dallas,
Fort Worth, San Antonio and Austin.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
This 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, Merrill Lynch, Pierce, Fenner &
Smith Incorporated and NationsBanc Montgomery LLC (the "Placement Agents")
pursuant to the terms of the Placement Agreement dated January 16, 1998 between
the Company and the Placement Agents. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer."
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The Exchange Offer................ Pursuant to the Exchange Offer, New Shares (calculated
to the fifth decimal point) will be issued in exchange
for Old Shares validly tendered and not withdrawn on a
one for one basis. Holders of Old Shares whose Old
Shares are not tendered and accepted in the Exchange
Offer will continue to hold such Old Shares and will be
entitled to all the rights and preferences and will be
subject to the limitations applicable thereto. Following
consummation of the Exchange Offer, the holders of Old
Shares 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
Shares held by them. Following the completion of the
Exchange Offer, none of the shares of Senior Preferred
Stock will be entitled to the contingent increase in
dividend rate provided with respect to the Old Shares.
Resale............................ Based on interpretations by the staff of the Commission
set forth in no-action letters issued to third parties,
the Company believes the New Shares issued pursuant to
the Exchange Offer 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 Shares 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 Shares. 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 Shares 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
Shares for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in
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connection with any resale of such New Shares. 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 180 days after the Exchange Date,
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 Shares 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 June , 1998, 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 Shares being tendered.
Procedures for Tendering
Old Shares...................... Each holder of Old Shares 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 Shares 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 Shares acquired
pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such
New Shares, 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 Shares 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
Shares" and "The Exchange Offer--Terms of the Exchange
Offer--Guaranteed Delivery Procedures."
Special Procedures for Beneficial
Owners.......................... Any beneficial owner whose Old Shares are registered in
the name of a broker, dealer, commercial bank, trust
company or
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other nominee and who wishes to tender such Old Shares
in the 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 Shares,
either make appropriate arrangements to register
ownership of the Old Shares in such owner's name or
obtain a properly completed stock 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 Shares."
Guaranteed Delivery Procedures.... Holders of Old Shares who wish to tender their Old
Shares and whose Old Shares are not immediately
available or who cannot deliver their Old Shares, 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 Shares
according to the guaranteed delivery procedures set
forth in "The Exchange Offer--Terms of the Exchange
Offer-- Guaranteed Delivery Procedures."
Acceptance of Old Shares and
Delivery of New Shares.......... 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 Shares 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 Shares
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
Shares 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 Shares."
Certain Federal Income Tax
Considerations.................. For a discussion of certain federal income tax
considerations relating to the exchange of New Shares
for Old Shares, 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."
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TERMS OF THE NEW SHARES
The Exchange Offer applies to all outstanding Old Shares. The form and terms
of the New Shares will be identical in all material respects to the form and
terms of the Old Shares except that the New Shares are registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof. The New Shares will be entitled to the benefits of the Certificate of
Designation and will be treated as a single class thereunder with any Old Shares
that remain outstanding. Following the Exchange Offer, no shares of Senior
Preferred Stock will be entitled to the contingent increase in dividend rate
provided for in
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accordance with the terms of the Registration Rights Agreement which rights will
terminate upon consummation of the Exchange Offer. See "Description of Senior
Preferred Stock."
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Dividends......................... Dividends will be payable quarterly in cash or, on or
prior to January 15, 2003, at the sole option of the
Company, in additional shares of Senior Preferred Stock
(calculated to the fifth decimal place), on each January
15, April 15, July 15 and October 15, commencing April
15, 1998. Dividends on the New Shares will accrue and be
cumulative from the date of issuance thereof. Accrued
but unpaid dividends on Old Shares tendered and accepted
in the Exchange Offer will not be paid in the Exchange
Offer. However, such dividends will be paid in New
Shares on the first interest payment date applicable to
the New Shares. For federal income tax purposes,
distributions with respect to the Senior Preferred Stock
are not expected to qualify as dividends and will be
treated as a return of capital until the Company has
earnings and profits as determined under applicable
federal income tax principles. See "Federal Income Tax
Considerations--Tax Consequences to United States
Holders--Distributions on the Senior Preferred Stock."
Liquidation Preference............ $1,000 per share, plus accrued and unpaid dividends.
Voting............................ Holders of the Senior Preferred Stock will have no
voting rights except as provided by law and as provided
in the Certificate of Designation for the Senior
Preferred Stock (the "Certificate of Designation"). In
the event that dividends are not paid for any four
quarters, whether or not consecutive, or upon certain
other events (including failure to comply with covenants
and failure to pay the mandatory redemption price when
due), then the number of directors constituting the
Company's Board of Directors will be adjusted to permit
the holders of the majority of the then outstanding
Senior Preferred Stock, voting separately as a class, to
elect two directors. See "Description of Senior
Preferred Stock--Voting Rights."
Mandatory Redemption.............. The Company is required to redeem the Senior Preferred
Stock on January 15, 2008 (subject to the legal
availability of funds therefor), at a redemption price
equal to the liquidation preference, plus accrued and
unpaid dividends to the redemption date. See
"Description of Senior Preferred Stock--Mandatory
Redemption."
Optional Redemption............... On or after January 15, 2003, the Senior Preferred Stock
is redeemable, at the option of the Company, in whole or
in part, at the redemption prices set forth herein, plus
accrued and unpaid dividends to the redemption date. In
addition, at any time, or from time to time, on or prior
to January 15, 2001, the Company may, at its option,
redeem shares of Senior Preferred Stock having an
aggregate liquidation preference of up to $61,250,000,
at a redemption price equal to 112.250% of the
liquidation preference thereof, plus accrued and unpaid
dividends to the redemption date, with the proceeds of
one or more sales of its Common Stock, provided that
such redemption occurs within
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180 days after consummation of such sale and at least
$113 million aggregate liquidation preference of Senior
Preferred Stock remains outstanding after each such
redemption. See "Description of Senior Preferred
Stock--Optional Redemption."
Ranking........................... The Senior Preferred Stock will rank (i) senior to all
of the Company's Common Stock, Class A Preferred Stock,
Class B Preferred Stock and Class C Preferred Stock, and
to all other capital stock of the Company unless the
terms of such stock expressly provide that it ranks
senior to or on a parity with the Senior Preferred
Stock; (ii) on a parity with any capital stock of the
Company the terms of which expressly provide that it
will rank on a parity with the Senior Preferred Stock;
and (iii) junior to all capital stock of the Company the
terms of which expressly provide that it will rank
senior to the Senior Preferred Stock. As of the date of
this Prospectus, all outstanding capital stock of the
Company ranks junior to the Senior Preferred Stock. See
"Description of Senior Preferred Stock--Ranking."
Optional Exchange Feature......... The Senior Preferred Stock is exchangeable into Exchange
Debentures at the option of the Company, in whole but
not in part, subject to the conditions described in the
Certificate of Designation being satisfied. See
"Description of Senior Preferred Stock--Exchange " and
"Description of Exchange Debentures."
Transfer Restrictions............. The New Shares of Senior Preferred Stock offered hereby
have been registered under the Securities Act and are
not subject to any restrictions on transfer.
Certain Covenants................. The Certificate of Designation contains certain
covenants which, among other things, restrict the
ability of the Company and its Restricted Subsidiaries
to incur additional indebtedness and issue Disqualified
Stock (as defined); create liens; pay dividends or make
distributions in respect of their capital stock; make
investments or make certain other restricted payments;
create restrictions on the ability of Restricted
Subsidiaries to make certain payments; issue or sell
stock of Restricted Subsidiaries; enter into
transactions with stockholders or affiliates; incur
senior subordinated indebtedness; and consolidate, merge
or sell all or substantially all of its assets. See
"Description of Senior Preferred Stock--Covenants."
Dobson Wireline, the Company's subsidiary which conducts
the Company's wireline, fiber and resale operations, is
an Unrestricted Subsidiary and therefore is not subject
to the covenants contained in the Certificate of
Designation. Accordingly, there is no limit on the
amount of debt Dobson Wireline would be able to incur or
on its ability to create liens or on the Company's
ability to distribute Dobson Wireline to its common
stockholders.
Registration Requirements......... The Company is obligated to consummate the Exchange
Offer pursuant to an effective registration statement or
cause the Senior Preferred Stock to be registered under
the Securities Act pursuant to a shelf registration
statement and, if the Exchange
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Offer is not consummated and such registration statement
is not declared effective on or prior to July 22, 1998,
the per annum dividend rate on the Senior Preferred
Stock will be increased by .5% payable in additional
shares of Senior Preferred Stock on each dividend
payment date until the date the Exchange Offer is
consummated or such shelf registration statement is
declared effective. See "Description of Senior Preferred
Stock--Exchange Offer Registration."
Book-Entry; Delivery and Form..... The New Shares will be represented by permanent global
certificates in definitive, fully registered form
deposited with a custodian for, and registered in the
name of, a nominee of The Depository Trust Company
("DTC"). See "Description of Senior Preferred
Stock--Senior Preferred Stock Book-Entry; Delivery and
Form."
Change of Control................. Upon a Change of Control as (defined herein), the
Company is required to make an offer to purchase the
shares of Senior Preferred Stock at a purchase price
equal to 101% of their liquidation preference on the
date of purchase, plus accrued and unpaid dividends to
the date of purchase. See "Description of Senior
Preferred Stock--Change of Control."
TERMS OF THE EXCHANGE DEBENTURES
Securities Description............ 12 1/4% Senior Subordinated Debentures due 2008 in an
aggregate principal amount equal to the aggregate
liquidation preference of, and accrued but unpaid
dividends on, the Senior Preferred Stock outstanding on
the Exchange Date (as defined herein).
Maturity.......................... January 15, 2008.
Interest Payment Dates............ January 15 and July 15 of each year, commencing with the
first of such dates to occur after the Exchange Date. On
or prior to January 15, 2003, the Company may pay
interest on the Exchange Debentures by issuing
additional Exchange Debentures.
Optional Redemption............... On or after January 15, 2003, the Exchange Debentures
are redeemable, at the option of the Company, in whole
or in part, at the redemption prices set forth herein,
plus accrued and unpaid interest to the redemption date.
In addition, at any time, or from time to time, on or
prior to January 15, 2001, the Company may, at its
option, redeem Exchange Debentures having a principal
amount of up to $61,250,000 at a redemption price equal
to 112.250% of the principal amount thereof, plus
accrued and unpaid interest to the redemption date, with
the proceeds of one or more sales of its Common Stock;
provided that such redemption occurs within 180 days
after consummation of such sale and at least $113
million aggregate principal amount of Exchange
Debentures remains outstanding after each such
redemption. See "Description of Exchange Debentures--
Optional Redemption."
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Ranking........................... The Exchange Debentures will be senior subordinated
Indebtedness of the Company, subordinated to the prior
payment when due of the principal of, and premium, if
any, and accrued and unpaid interest on, all existing
and future Senior Indebtedness (as defined herein) of
the Company (including the Senior Notes and indebtedness
under the Bank Credit Facilities) and senior to the
prior payment when due of the principal and premium, if
any, and accrued and unpaid interest on, all
subordinated indebtedness of the Company. As of December
31, 1997, on a pro forma basis after giving effect to
the Transactions, the Company would have had $369.4
million of indebtedness outstanding, all of which would
have constituted Senior Indebtedness or would have been
effectively senior to the Exchange Debentures.
Certain Covenants................. The indenture under which the Exchange Debentures will
be issued (the "Exchange Debenture Indenture") will
contain certain covenants which, among other things,
will restrict the ability of the Company and its
Restricted Subsidiaries to incur additional
indebtedness; create liens; pay dividends or make
distributions in respect of their capital stock; make
investments or make certain other restricted payments;
sell assets; create restrictions on the ability of
Restricted Subsidiaries to make certain payments; issue
or sell stock of certain subsidiaires; enter into
transactions with stockholders or affiliates; incur
senior subordinated indebtedness; and consolidate, merge
or sell all or substantially all of their assets. See
"Description of Exchange Debentures--Covenants."
Registration Requirements......... The Exchange Debentures may not be issued unless such
issuance is registered under the Securities Act or is
exempt from registration.
Change of Control................. Upon a Change of Control, the Company will be required
to make an offer to purchase the Exchange Debentures at
a purchase price equal to 101% of their principal amount
plus accrued interest, if any. See "Description of
Exchange Debentures--Repurchase of Exchange Debentures
upon a Change of Control."
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RISK FACTORS
See "Risk Factors," immediately following this Summary, for a discussion of
certain factors that should be considered in conjunction with an investment in
the Senior Preferred Stock.
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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, 1997. The
consolidated financial data as of and for each of the years in the period 1993
to 1997 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, 1997 and the pro forma balance
sheet data give effect to the Transactions as if they occurred on December 31,
1997. 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 consolidated data should be read in conjunction with "Selected
Consolidated Financial and Other Data," "Pro Forma Condensed 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
1993 1994 1995 1996(1) 1997(2) 1997(3)
----------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
($ IN THOUSANDS, EXCEPT PER SHARE AND PER SUBSCRIBER DATA)
STATEMENT OF OPERATIONS DATA:
Revenue:
Wireless revenue......................................... $ 11,089 $ 15,169 $ 18,990 $ 26,107 $ 66,128 $ 121,969
Wireline revenue......................................... 11,550 12,871 14,766 16,286 18,455 18,455
Other revenue............................................ 158 206 693 832 586 586
----------- --------- --------- --------- --------- -----------
Total revenue.......................................... 22,797 28,246 34,449 43,225 85,169 141,010
Costs and expenses:
Cost of service and equipment sales...................... 4,965 5,418 7,014 9,076 21,344 37,304
Marketing and selling.................................... 2,552 3,098 3,157 4,908 11,762 17,124
General and administrative............................... 7,971 9,621 10,138 12,087 19,877 29,465
Depreciation and amortization............................ 4,563 5,534 6,653 9,720 21,729 42,636
----------- --------- --------- --------- --------- -----------
Total costs and expenses............................... 20,051 23,671 26,962 35,791 74,712 126,529
Operating income........................................... 2,746 4,575 7,487 7,434 10,457 14,481
Interest expense........................................... (2,567) (2,970) (3,833) (6,478) (30,098) (36,164)
Other income (expense), net................................ 145 (147) (478) (1,586) 2,880 3,390
Minority interests in (income) losses of subsidiaries(4)... (502) (1,105) (1,334) (675) (1,693) (1,907)
Income tax (provision) benefit............................. 78 (119) (738) 411 3,287 7,675
----------- --------- --------- --------- --------- -----------
Income (loss) before extraordinary items................... 541 234 1,104 (894) (15,167) (12,525)
Extraordinary items(5)..................................... -- 228 -- (527) (1,567) (1,567)
----------- --------- --------- --------- --------- -----------
Net income (loss).......................................... 541(6) 462 1,104 (1,421) (16,734) (14,092)
Dividends on senior preferred stock........................ -- (83) (591) (849) (2,603) (25,846)
----------- --------- --------- --------- --------- -----------
Net income (loss) applicable to common stockholders........ $ 541 $ 379 $ 513 $ (2,270) $ (19,337) $ (39,938)
----------- --------- --------- --------- --------- -----------
Basic net income (loss) applicable to common stockholders
per common share......................................... $ 1.14 $ .80 $ 1.08 $ (4.80) $ (40.87) $ (84.41)
----------- --------- --------- --------- --------- -----------
Dividends per average common share......................... $ -- $ .11 $ 1.40 $ 1.18 $ 16.13 $ 16.13
----------- --------- --------- --------- --------- -----------
Basic weighted average common shares outstanding........... 473,152 473,152 473,152 473,152 473,152 473,152
----------- --------- --------- --------- --------- -----------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------- PRO FORMA
1993 1994 1995 1996(1) 1997(2) 1997(3)
----------- --------- --------- --------- --------- -----------
($ IN THOUSANDS, EXCEPT PER SHARE AND PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA(7):
Wireless(8).............................................. 2,680 3,923 5,439 7,005 $ 21,977 $ 46,908
Wireline................................................. 5,158 5,518 7,262 7,270 8,173 8,173
Other.................................................... (529) 669 1,439 2,880 2,036 2,036
----------- --------- --------- --------- --------- -----------
Total.................................................. $ 7,309 $ 10,110 $ 14,140 $ 17,155 $ 32,186 $ 57,117
----------- --------- --------- --------- --------- -----------
----------- --------- --------- --------- --------- -----------
Ratio of earnings to fixed charges(9)...................... -- 1.12x 1.47x -- -- --
Ratio of earnings to combined fixed charges and senior
preferred stock dividends(9)............................. -- 1.09x 1.28x -- -- --
Capital expenditures, excluding cost of acquisitions....... $ 7,353 $ 5,267 $ 3,925 $ 17,438 $ 23,216 $ 34,265
OTHER DATA:
Ending cellular subscribers................................ 15,283 21,481 26,614 33,955 100,093 134,273
Cellular penetration(10)................................... 4.63% 6.45% 8.02% 5.77% 6.08% 5.21%
Cellular churn(11)......................................... .45% .92% 1.52% 1.84% 1.89% 1.96%
Average monthly revenue per cellular subscriber(12)........ $ 52.77 $ 50.45 $ 50.00 $ 48.31 $ 41.05 $ 42.08
Marketing and selling costs per gross additional cellular
subscriber(13)........................................... $ 392.04 $ 429.06 $ 451.23 $ 539.57 $ 397.55 $ 357.22
Cellular cell sites (at period end)........................ 26 36 46 67 135 203
Wireline access lines (at period end)...................... 10,899 11,322 11,806 11,959 12,633 12,633
Route miles (at period end)(14)............................ 485 485 516 545 545 545
Fiber miles (at period end)(15)............................ 10,817 10,817 11,189 11,537 11,554 11,554
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
ACTUAL PRO FORMA
--------- -----------
<S> <C> <C>
($ IN THOUSANDS)
BALANCE SHEET DATA:
Net fixed assets......................................................................................... $ 88,350 $ 100,214
Total assets............................................................................................. 383,214 638,668
Long-term debt, net of current portion................................................................... 363,069 368,237
Mandatorily redeemable preferred stock................................................................... 11,623 186,623
Stockholders' equity (deficit)........................................................................... (36,773) (38,877)
</TABLE>
- ------------------------------
(1) Includes the operations of Kansas/Missouri Cluster from March 19, 1996, the
date of its acquisition by the Company.
(2) Includes the operations of the Western Maryland Properties, Maryland 2 and
Arizona 5 from February 28, 1997, March 3, 1997 and October 1, 1997,
respectively, the dates they were acquired by the Company.
(3) Gives pro forma effect to the Transactions. See "Pro Forma Condensed
Consolidated Financial Data."
(4) Reflects minority interests in partnerships in which the Company owns the
majority interests.
(5) Extraordinary items reflect the gain or (loss), net of tax related to early
extinguishment of debt.
(6) 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."
(7) 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.
(8) Includes EBITDA attributable to minority interests in subsidiaries in which
the Company owns a majority interest. Each such subsidiary has outstanding
indebtedness to the Company and all of the subsidiaries' cash flow is used
to service such indebtedness and is not available for distributions to the
holders of the minority interests. The portion of EBITDA attributable to
minority interests was $.9 million, $1.5 million, $2.0 million, $2.3 million
and $2.9 million for the years ended December 31, 1993, 1994, 1995, 1996 and
1997, respectively and $5.0 million for the year ended December 31, 1997, on
a pro forma basis.
(9) For the years ended December 31, 1993, 1996 and 1997, earnings were
insufficient to cover fixed charges by $.2 million, $1.3 million and $18.5
million, respectively. For the years ended December 31, 1993, 1996 and 1997,
earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $.2 million, $2.2 million and $21.1 million,
respectively. On
14
<PAGE>
a pro forma basis for the year ended December 31, 1997, earnings were
insufficient to cover fixed charges by $20.2 million and were insufficient
to cover combined fixed charges and preferred stock dividends by $46.0
million. "Earnings" is 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.
(10) 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.
(11) "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.
(12) Excludes roaming revenue.
(13) 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.
(14) Route miles refers to the number of miles over which fiber optic cables are
installed.
(15) Fiber miles refers to the number of route miles multiplied by the number of
fibers installed along that path.
15
<PAGE>
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
The Company is highly leveraged. At December 31, 1997, the Company had
approximately $364.2 million of indebtedness, $11.6 million of mandatorily
redeemable preferred stock and a deficit in stockholders' equity of $36.8
million. On a pro forma basis, after giving effect to the Transactions, for the
year ended December 31, 1997, the Company's EBITDA minus interest expense,
Senior Preferred Stock dividends and capital expenditures (excluding acquisition
costs incurred in the Recent Wireless Acquisitions and Santa Cruz Acquisition)
would have been $(39.2) million. In the event the Santa Cruz Acquisition is not
consummated, the Company's EBITDA minus interest expense, Senior Preferred Stock
dividends and capital expenditures (excluding acquisition costs incurred in the
Recent Wireless Acquisitions) would have been $(37.8 ) million. For the year
ended December 31, 1997, on a pro forma basis, after giving effect to the
Transactions, the Company's earnings would have been insufficient to cover
combined fixed charges and Senior Preferred Stock dividends by $46.0 million.
See "Description of Senior Preferred Stock," "Description of Exchange
Debentures," "Description of Indebtedness" and "Description of Capital Stock."
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.
SIGNIFICANT CAPITAL REQUIREMENTS
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
1998 will be approximately $41.2 million, including expenditures related to the
Acquisitions other than acquisition costs. The Company has not budgeted any
amounts to be expended in 1998 with respect to the systems acquired in the
Acquisitions or the buildout of the Company's PCS systems. See "--PCS Risks."
The Company believes that borrowings under its current credit facilities and
cash flow from operations will be sufficient to fund the Santa Cruz Acquisition
and the Company's capital expenditure, working capital, preferred dividends and
debt service requirements.
The Company may require additional financing for future acquisitions and for
buildout requirements related to its PCS licenses. Sources of additional capital
may include public and private equity and debt financings, including vendor
financing, by the Company or its subsidiaries. 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 relating to the Senior Notes
(the "Senior Note Indenture"), the Bank Credit Facilities, the Certificate of
Designation and the certificates of designation for the Company's outstanding
Class A, Class B and Class C Preferred Stock (the "Other Preferred Stock"), the
Company's other indebtedness or any future financing arrangements. See
"Description of Senior Preferred Stock," "Description of Exchange Debentures,"
"Description of Indebtedness" and "Description of Capital Stock."
ABILITY TO MEET REQUIRED DEBT SERVICE AND DIVIDEND OBLIGATIONS
The Company has experienced and will experience a substantial increase in
total indebtedness and debt service and dividend requirements as a result of the
Transactions, and the Company and its subsidiaries are subject to significant
financial restrictions and limitations. The successful implementation of the
Company's strategy, including further development, expansion and integration of
its systems, and
16
<PAGE>
significant and sustained growth in the Company's cash flow are necessary for
the Company to be able to meet its debt service and dividend requirements,
including its obligations under the Senior Notes and the Senior Preferred Stock.
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, dividend and working capital
requirements. Furthermore, if the Company is unable to satisfy any of the
covenants under the Bank Credit Facilities, including financial covenants, the
Company will be unable to borrow under such facilities during such time period
to fund planned capital expenditures, its ongoing operations or other
permissible uses. The inability to access 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 and dividend obligations
(including obligations with respect to the Senior Notes and the Senior Preferred
Stock) 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 and its
subsidiaries to borrow under the DOC Facility will be limited by the requirement
that, on a quarterly basis beginning June 30, 2000, the amount available under
each facility will reduce until the DOC Facility terminates in June 2006. The
reduction in availability may require the Company to make significant principal
payments thereunder. See "--Covenant Restrictions," "Description of Senior
Preferred Stock," "Description of Exchange Debentures" and "Description of
Indebtedness."
REFINANCING RISKS
The indebtedness under the Bank Credit Facilities and the Senior Notes may
need to be refinanced at their respective maturities. 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
Company is required to redeem the Senior Preferred Stock on January 15, 2008 at
a redemption price of 100% of its liquidation preference plus accrued but unpaid
dividends. The holders of the Company's outstanding Class B Preferred Stock have
the right to require the Company to purchase one-half of their Class B Preferred
Stock for an aggregate purchase price of not less than $5.0 million, beginning
in 2001, and all of the Class B Preferred Stock for not less than $10.0 million,
beginning in 2002, in each case plus accrued dividends, and the Company is
required to redeem the Class C Preferred Stock in 2002 at an aggregate
redemption price of $1.7 million plus accrued dividends or, in both cases,
earlier under certain circumstances. See "Description of Senior Preferred
Stock," "Description of Exchange Debentures," "Description of Indebtedness" and
"Description of Capital 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 the Senior Preferred Stock and the Other 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 or the Senior Preferred Stock
under circumstances that might not be favorable to realizing the highest price
for such assets. At December 31, 1997, approximately 59.9% of the Company's
total assets consisted of intangible assets (73.1% on a pro forma basis, after
giving effect to the Transactions), 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 Senior
Preferred Stock.
17
<PAGE>
RANKING OF SENIOR PREFERRED STOCK AND EXCHANGE DEBENTURES
The Senior Preferred Stock ranks junior in right of payment to all present
and future indebtedness and other liabilities of the Company and, with respect
to dividend rights and rights on liquidation, winding-up and dissolution, ranks
senior to all classes of Common Stock of the Company and all currently
outstanding preferred stock of the Company. In the event of the bankruptcy,
liquidation or reorganization of the Company, the assets of the Company will be
available to pay obligations on the Senior Preferred Stock only after all the
outstanding indebtedness and other liabilities of the Company have been paid in
full, and there may not be sufficient assets remaining to pay amounts payable on
the Senior Preferred Stock. At December 31, 1997, the Company had approximately
$405.5 million of indebtedness and other liabilities outstanding, excluding
deferred credits for income taxes. See "--Leverage," "--Significant Capital
Requirements," "--Ability to Meet Required Debt Service and Dividend
Obligations,"
"--Refinancing Risk" and "Description of Senior Preferred Stock--Ranking."
If the Senior Preferred Stock is exchanged for Exchange Debentures, the
Exchange Debentures will be subordinated in right of payment to all Senior
Indebtedness (as defined under "Description of Exchange Debentures") of the
Company, including indebtedness under the Senior Notes and the Bank Credit
Facilities, and senior in right of payment to all future subordinated
indebtedness of the Company, if any. In the event of the bankruptcy, liquidation
or reorganization of the Company, the assets of the Company will be available to
pay obligations on the Exchange Debentures only after all the outstanding Senior
Indebtedness of the Company has been paid in full, and there may not be
sufficient assets remaining to pay amounts payable on the Exchange Debentures.
The Senior Preferred Stock permits the Company to issue additional preferred
stock which may rank PARI PASSU with the Senior Preferred Stock. The Preferred
Stock and the Exchange Debentures permit the incurrence of additional
indebtedness by the Company and its subsidiaries. Such additional indebtedness
may rank senior to, PARI PASSU with or subordinate to the Exchange Debentures,
while additional indebtedness of the subsidiaries will effectively rank senior
to the Exchange Debentures.
HOLDING COMPANY STRUCTURE
The Company is a holding company with no direct operations and no
significant assets other than the stock of its subsidiaries. The Company is
dependent on the cash flows of its subsidiaries to meet its obligations,
including the payment of interest and principal on the Senior Notes and
dividends on the Senior Preferred Stock. Receipt of funds from its subsidiaries
will be restricted by the terms of existing and future indebtedness including
the Bank Credit Facilities. See "Description of Indebtedness--Bank Credit
Facilities." The Company's subsidiaries are separate legal entities that have no
obligation to pay any amounts due with respect to the Senior Preferred Stock
and, if issued, the Exchange Debentures or to make any funds available therefor,
whether by dividends, loans or other payments. Because the Company's
subsidiaries have not guaranteed the Company's obligations on the Senior
Preferred Stock or the Exchange Debentures, 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 Senior Preferred Stock and, if
issued, the Exchange Debentures 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.
ABILITY OF THE COMPANY TO PAY CASH DIVIDENDS OR CASH INTEREST
Dividends on the Senior Preferred Stock must be paid in cash commencing
after January 15, 2003. Under the Senior Note Indenture, the Company may pay
cash dividends and make other distributions on or in respect of its capital
stock, including the Senior Preferred Stock, only if certain financial tests are
met.
18
<PAGE>
In addition, the Bank Credit Facilities limit the amount of cash available for
dividends, loans and cash distributions to the Company from the Company's
subsidiaries. Currently, the restrictions contained in the Senior Note Indenture
would restrict and, under certain circumstances, may prohibit the Company from
paying dividends other than dividends payable in additional shares of Senior
Preferred Stock and would also prohibit the issuance of the Exchange Debentures
in exchange for the Senior Preferred Stock. There can be no assurance that the
Company's existing or future financing arrangements will permit the Company to
pay cash dividends on the Senior Preferred Stock after January 15, 2003. In the
event that any of the Company's financing agreements limit the Company's ability
to pay cash dividends on the Senior Preferred Stock when required, the Company
will need to refinance amounts outstanding under such agreements to make such
dividend payments. There can be no assurance that the Company would be able to
refinance amounts outstanding under such agreements. The failure of the Company
to pay cash dividends on the Senior Preferred Stock could result in a Voting
Rights Triggering Event (as defined herein).
Under Oklahoma law, cash dividends on capital stock may only be paid from
"surplus" or, if there is no "surplus," from the corporation's net profits for
the then current or the preceding fiscal year. Until the Company achieves
profitability, the ability of the Company to pay cash dividends on the Senior
Preferred Stock will require the availability of adequate "surplus," which is
defined as the excess, if any, of the Company's net assets (total assets less
total liabilities) over its capital (generally the par value of its issued
capital stock). As a result, there can be no assurance that adequate surplus
will be available to pay cash dividends on the Senior Preferred Stock or that,
even if such surplus is available, the Company will have sufficient cash to pay
dividends on the Senior Preferred Stock. In addition under Oklahoma law, the
Senior Preferred Stock cannot be redeemed if the redemption will cause any
impairment of the capital of the Company.
COVENANT RESTRICTIONS
The instruments governing the indebtedness of the Company and its
subsidiaries, the terms of and agreements with respect to the Other Preferred
Stock and the Certificate of Designation 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 Credit Facilities require the maintenance of
certain financial ratios. See "Description of Indebtedness." 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 notwithstanding the ability of the Company to meet its debt service
and dividend 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, if issued, the Exchange
Debentures) 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 DOC Facility is secured by a pledge of the capital stock
and assets of DOC and its subsidiaries, Operations indebtedness under the
Operations Facility is secured by a pledge of the assets of Operations and the
stock and assets of its subsidiaries, and the indebtedness of Dobson Telephone
Company, Inc. ("Telco"), the Company's subsidiary that conducts its local
exchange business, 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 Other
19
<PAGE>
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 Indebtedness."
RISKS ASSOCIATED WITH ACQUISITIONS; ABILITY TO MANAGE GROWTH
The Company is subject to risks that acquired systems (including those
acquired in the Recent Wireless Acquisitions and those that may be acquired in
the future) will not perform as expected and that the returns from such systems
will not support the indebtedness incurred or capital stock issued 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 April 1997, the Company was granted PCS licenses for nine markets in the
FCC "F" Block auction. The Company's right to hold and utilize each license is
subject to the buildout of the PCS system to cover at least 25% of the Pops
covered by the license 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, at its expense, 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 Senior Note Indenture, the
Bank Credit Facilities, the Certificate of Designation, the terms of and
agreements with respect to the Other Preferred Stock and the Company's other
indebtedness. If the Company's subsidiary which holds the PCS licenses fails to
satisfy its installment financing obligations to the FCC, the PCS licenses may
be canceled, the Company would forfeit its investment in such PCS licenses, and
the FCC could sue the subsidiary for collection of any unpaid sums due to the
FCC on the FCC licenses plus additional forfeiture penalties. 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. 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
20
<PAGE>
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 may
not be operable on other systems, the ability to offer PCS roamer service will
be impacted. While the Company believes that dual-mode and dual band handsets
that will work on different PCS networks and on PCS and cellular networks will
be commercially available in the future, there can be no assurance 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. The Company has not yet finalized its plans with respect
to the buildout of its PCS licensed systems, nor has it selected the digital
technology to be utilized in such systems.
RISKS RELATED TO CLEC OPERATIONS
The Company recently began reselling local, long distance and wireless
service. The local dial tone services market has only recently opened to
competition due to the passage of the Telecommunications Act of 1996 (the "1996
Act") and subsequent state and federal regulatory rulings designed to implement
the 1996 Act. The Company believes that offering a full-service portfolio of
local, long distance and wireless services is the best method for gaining market
share among business customers and reducing customer churn. However, the Company
has only recently begun reselling local, long distance and wireless services.
The Company will have to make significant operating and capital investments and
marketing and advertising expenditures in order to expand its resale business.
As a result, the Company incurred losses and negative cash flows in its resale
business in 1997, which are expected to continue in 1998 and until it develops
and expands its customer base. There are numerous operating complexities
associated with providing these services. The Company will be required to
develop new products, services and systems and will need to develop new
marketing initiatives and hire and train a new sales force responsible for
selling these services. The Company will also need to implement the necessary
billing and collection systems for these services. The Company may face
significant competition from the Regional Bell Operating Companies ("RBOCs"),
whose core business is providing local dial tone service. The RBOCs, which
currently are the dominant providers of services in their markets, are expected
to mount a significant competitive response to new entrants in their markets,
such as the Company. The Company may face significant competitive product and
pricing pressures from the RBOCs in these markets, as well as from other
competitive local exchange carriers as they enter these markets.
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, system coverage and capacity. 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.
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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. At
least four broadband PCS licensees have been authorized to provide services in
each of the Company's markets, although not all of these licensees have
initiated commercial service. The Company is unable to predict whether any of
such competing technologies will be successful within its markets 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 believes that other companies are building
new nationwide long-haul fiberoptic networks. 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 competes in Oklahoma City, Tulsa and Amarillo 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."
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."
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RELIANCE ON USE OF THIRD-PARTY SERVICE MARKS
The Company uses the registered service mark CELLULAR ONE-Registered
Trademark- to promote the services it offers in many of its license areas. The
Company uses the service mark AIRTOUCH-TM- CELLULAR in its Arizona 5 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, significantly reduced its use of the brand name
as a primary service mark. If for any 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. The Company intends to use a national brand to promote the
services it will offer in Santa Cruz upon completion of the Santa Cruz
Acquisition; however, the Company has not entered into any definitive agreements
with respect thereto. Although no assurance can be given, the Company expects to
enter into such agreements in connection with or following the completion of the
Santa Cruz Acquisition.
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 at varying dates beginning in October 1998. 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 which
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,
1997, support revenue accounted for $5.2 million (36.1%) of the Company's
revenue from its wireline operations.
The Oklahoma Telecommunications Act of 1997 (the "Oklahoma Telecom Act")
which became effective in July 1997, created the Oklahoma Universal Service Fund
("OUSF") with one of its stated purposes to promote and ensure the availability
of both primary universal services, at rates that are reasonable and affordable,
and special universal services, and to provide for reasonably comparable
services at affordable rates in rural areas as well as in urban areas. The OUSF
is to be implemented so that funds can be made available to eligible local
exchange telecommunications service providers in the second quarter of 1998. The
Company's local exchange operations have been determined by the OCC to be
eligible to receive both federal universal funds and OUSF funds. The Oklahoma
Telecom Act specifically
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provides that eligible local exchange telecommunications service providers are
to receive OUSF funding to reimburse them for their reasonable investment and
expenses incurred in providing universal services which are not recovered from
the federal universal service fund or any other state or federal fund, for
infrastructure expenditures or costs incurred in response to facility or service
requirements established by governmental mandate and for other purposes deemed
necessary by the OCC to preserve and advance universal service. The OCC is
promulgating rules to implement the Oklahoma Telecom Act. The interpre-
tation of the Oklahoma Telecom Act and application of the OCC rules implementing
the OUSF could have a material effect on Company's wireline operations. With
respect to federal support revenue, the FCC has adopted changes that may, over
time, reduce or eliminate subsidies to telephone companies in areas where the
cost of connecting and maintaining phone lines is higher than the norm. Such
changes could have a material adverse effect on the Company's wireline
operations.
In addition, in May 1997, the FCC released an order revising its access
charge rate structure. The new rules substantially increase the costs that local
exchange carriers, including the Company, which are subject to the FCC's price
cap rules ("price cap LECs"), recover through monthly, non-traffic sensitive
access charges and substantially decrease the costs that price cap LECs recover
through traffic sensitive access charges. In the order, the FCC also announced
its plan to bring interstate access rate levels more in line with cost. The FCC
has stated that this plan will grant price cap LECs increased pricing
flexibility upon demonstrations of increased competition (or potential
competition) in relevant markets. The manner in which the FCC further implements
this approach to lowering access charge levels could have a material effect on
the Company's ability to compete in providing interstate access services and on
the Company's wireline operations. An October 1997 FCC access charge decision,
for example, requires local exchange carriers to provide interexchange carriers
with certain information about the number and types of charges they impose on
interexchange carriers' presubscribed customers. Several parties have appealed
the May 1997 order. Those appeals have been consolidated and transferred to the
United States Court of Appeals for the Eighth Circuit where they are currently
pending.
EQUIPMENT FAILURE AND NATURAL DISASTER
The Company carries business interruption, casualty and property insurance
in amounts it believes adequate to cover the financial risks associated with any
major equipment failure or natural disaster. However, a major equipment failure
or a natural disaster affecting the Company's central switching offices, its
microwave links or certain of its cell sites could have a material adverse
effect on the Company's operations.
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. The FCC released a Report and
Order which became effective in September 1997 that revises 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
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decisions concerning the operations or financial structure of the Company may
present conflicts of interest between the holders of the Company's Common Stock
and the holders of the Senior Preferred Stock and, if issued, the Exchange
Debentures. In addition, holders of the Common Stock 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 Senior Preferred Stock
and, if issued, the Exchange Debentures.
ABSENCE OF A PUBLIC MARKET
The Senior Preferred Stock is, and the Exchange Debentures, if issued, will
be, a new issue of securities for which there is currently no market and the
Company does not intend to apply for listing of such securities 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 Senior Preferred Stock, 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 Senior Preferred Stock and, if issued, the Exchange Debentures.
If a market for such securities were to develop, such securities 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.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES FOR HOLDERS OF SENIOR PREFERRED STOCK
AND EXCHANGE DEBENTURES
Distributions of cash or, to the extent of their issue price, distributions
of additional shares of Senior Preferred Stock will be treated as dividends,
taxable as ordinary income to holders thereof, to the extent of the Company's
current and accumulated earnings and profits as determined under U.S. federal
income tax principles. The Company presently does not have any current or
accumulated earnings and profits as determined under U.S. federal income tax
principles and it is unlikely to have current or accumulated earnings and
profits in the foreseeable future. As a result, until such time as the Company
does have earnings and profits, distributions of cash and additional Senior
Preferred Stock on the Senior Preferred Stock will be treated as a nontaxable
return of capital and will be applied against and reduce the adjusted tax basis
(but not below zero) in the hands of each holder of the shares of Senior
Preferred Stock on which such distribution is made, thus increasing the amount
of any gain (or reducing the amount of any loss) which would otherwise be
realized by such holder upon the sale or other disposition of such shares of
Senior Preferred Stock. In the case of distributions of additional Senior
Preferred Stock, however, such basis reduction largely should be offset from an
overall standpoint by a corresponding amount of tax basis for a holder in the
additional Senior Preferred Stock. A United States holder would recognize gain
to the extent that any distributions were to exceed current or accumulated
earnings and profits of the Company and the adjusted tax basis of the holder in
the Senior Preferred Stock.
Upon a redemption of Senior Preferred Stock in exchange for Exchange
Debentures, the holder generally will have a capital gain or loss equal to the
difference between the issue price of the Exchange Debentures received and the
holder's adjusted tax basis in the Senior Preferred Stock redeemed, except to
the extent all or a portion of the Exchange Debentures received is treated as a
dividend payment. Because of the Company's option through January 15, 2003 to
pay interest on the Exchange Debentures by issuing additional Exchange
Debentures, any Exchange Debentures issued prior to that date will be treated as
issued with original issue discount ("OID") for U.S. federal income tax
purposes, unless under special rules for interest holidays the amount of OID is
treated as de minimis. Holders would have to accrue all such OID into income
over the entire term of the Exchange Debentures, but would not treat the receipt
of stated interest on the Exchange Debentures as interest for U.S. federal
income tax purposes.
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The Exchange Debentures may be subject to the rules for "applicable high
yield discount obligations," in which case the Company's deduction for OID on
the Exchange Debentures will be substantially deferred, and a portion of such
deduction may be disallowed.
For a discussion of these and other relevant tax issues, see "Federal Income
Tax Considerations."
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements other than statements of historical facts included and incorporated
by reference in this Prospectus, including without limitation statements under
"Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" regarding planned capital
expenditures, the Acquisitions (as defined), the Company's financial position,
business strategy and other plans and objectives for future operations, are
forward-looking statements. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to have been correct. The Company
cautions prospective investors that actual results could differ materially from
those expected by the Company, depending on the outcome of certain factors,
including, without imitation, factors discussed under "Risk Factors" such as
leverage, significant capital requirements, ability to meet required debt
service and dividend obligations, refinancing risks, ranking of Senior Preferred
Stock and Exchange Debentures, holding company structure, ability of Company to
pay cash dividends or cash interest, covenant restrictions, risks associated
with acquisitions and ability to manage growth, PCS risks, risks related to CLEC
operations, competition, rapid technological changes, dependence on key
personnel, potential for adverse regulatory change and the need for regulatory
approvals, equipment failure and natural disaster, radio frequency emission
concerns, conflicts of interest, absence of a public market and certain federal
income tax consequences for holders of Senior Preferred Stock and Exchange
Debentures. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to release publicly the result of any revisions to
these forward-looking statements that may be made to reflect events or
circumstances after the date hereof, including, without limitation, changes in
the Company's business strategy or planned capital expenditures, or to reflect
the occurrence of unanticipated events.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Shares were sold by Dobson on January 22, 1998 to Morgan Stanley &
Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and
NationsBanc Montgomery Securities LLC (together, the "Placement Agents") in
reliance on Section 4(2) of the Securities Act. The Placement Agents offered and
sold the Old Shares 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 Shares,
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 includes 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 Shares, the Company and the Placement
Agents entered into a Registration Rights Agreement dated as of January 16, 1998
(the "Registration Rights Agreement"), which requires the Company (i) to cause
the Old Shares 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 Shares of the Company identical in all material respects to the
Old Shares 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 Shares the
opportunity to exchange their Old Shares for a like principal amount of New
Shares, 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. The term "holder" with respect to
the Exchange Offer means any person in whose name Old Shares are registered on
the Company's books or any other person who has obtained a properly completed
stock power from the registered holder, or any person whose Old Shares are held
of record by The Depository Trust Company ("DTC") who desires to deliver such
Old Share 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
Shares issued pursuant to the Exchange Offer in exchange for the Old Shares 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
Shares issued pursuant to the Exchange Offer in exchange for Old Shares 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 Shares 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 Shares. 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 Shares 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 Shares for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus meeting
the requirements of the Securities Act in connection with any resale of such New
Shares. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a
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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 Exchange 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 Shares 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 Shares will represent
to the Company that, among other things, (i) the New Shares acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of business of the
person receiving such New Shares, whether or not such person is the holder, (ii)
neither the holder of Old Shares nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Shares, (iii) if the holder is not a broker-dealer, or is a broker-dealer but
will not receive New Shares for its own account in exchange for Old Shares,
neither the holder nor any such other person is engaged in or intends to
participate in the distribution of such New Shares, 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 shares of Senior
Preferred Stock will be entitled to the contingent increase in dividend rate
applicable to the Old Shares. Following the consummation of the Exchange Offer,
holders of Senior Preferred Stock will not have any further registration rights,
and the Old Shares 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 Shares could be adversely affected. See
"Risk Factors--Consequences of the Exchange Offer on Non-Tendering Holders of
the Old Shares."
Participation in the Exchange Offer is voluntary and holders should
carefully consider whether to accept. Holders of the Old Shares 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 Shares validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Company will issue one New Share in exchange
for each Old Share accepted in the Exchange Offer. Holders may tender some or
all of their Old Shares pursuant to the Exchange Offer. Registered holders
tendering fractional Old Shares will receive fractional New Shares calculated to
the fifth decimal place.
The form and terms of the New Shares will be identical in all material
respects to the form and terms of the Old Shares except that the New Shares will
be registered under the Securities Act and, therefore, certificates representing
New Shares will not bear legends restricting the transfer thereof. The New
Shares will be treated as a single class with any Old Shares that remain
outstanding. The Exchange Offer is not conditioned upon any minimum number of
Old Shares being tendered for exchange.
As of April 15, 1998, 179,942.535 Old Shares were outstanding. This
Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders.
Holders of Old Shares do not have any appraisal or dissenters' rights under
the Oklahoma General Corporation Act or the Certificate of Designation 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
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Commission thereunder. Old Shares which are not tendered for exchange in the
Exchange Offer will remain outstanding and dividends thereon will continue to
accrue, but such Old Shares will not be entitled to any rights or benefits under
the Registration Rights Agreement.
The Company will be deemed to have accepted validly tendered Old Shares
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 Shares from the Company. If any tendered
Old Shares 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 Shares will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Shares 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 Shares
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 [June 1998], 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 Shares 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 Shares for Old Shares will
be as soon as practicable following the Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Shares, 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 Shares for Old Shares 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 Shares. If any tendered
Old Shares are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer or if Old Shares are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged Old
Shares or substitute Old Shares evidencing the unaccepted portion, as
appropriate, will be returned without expense 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.
DIVIDENDS ON THE NEW SHARES. Holders of Old Shares that are accepted for
exchange will not receive accrued dividends thereon at the time of exchange.
However, accrued but unpaid dividends on exchanged
29
<PAGE>
Old Shares (calculated to the fifth decimal place) will be paid in New Shares on
the first interest payment date following consummation of the Exchange Offer.
PROCEDURES FOR TENDERING OLD SHARES. The tender to the Company of Old
Shares 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 Shares may tender such Old Shares by (i)
properly completing and signing a Letter of Transmittal or a facsimile thereof
(all references 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 Shares 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 Shares are registered in the name of the signer of the
Letter of Transmittal and the New Shares to be issued in exchange therefor are
to be issued (and any untendered Old Shares 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 Shares), the signature of
such signer need not be guaranteed. In any other case, the tendered Old Shares
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 Shares or Old Shares not exchanged are to
be delivered to an address other than that of the registered holder appearing on
the note register for the Old Shares, the signature in the Letter of Transmittal
must be guaranteed by an Eligible Institution.
THE METHOD OF DELIVERY OF OLD SHARES, 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 SHARES 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 has confirmed with DTC that
any financial institution that is a participant in DTC's system may utilize
DTC's Automated Tender Offer Program ("ATOP") to tender Old Shares. The Company
further understands that the Exchange Agent will request, within two business
days after the date the Exchange Offer commences, that DTC establish an account
with respect to the Old Shares for the purpose of facilitating the Exchange
Offer, and any participant may make book-entry delivery of Old Shares by causing
DTC to transfer such Old Shares into the Exchange Agent's account in accordance
with DTC's ATOP procedures for transfer. However, the exchange of the Old Shares
so tendered will only be made after timely confirmation (a "Book-Entry
Confirmation") of such book-entry transfer and timely receipt by the Exchange
Agent of an Agent's Message (as defined in the next sentence), and any other
documents required by the Letter of Transmittal. The term "Agent's Message"
means a message, transmitted by DTC and received by the Exchange Agent and
forming part of Book-Entry Confirmation, which states that DTC has received an
express acknowledgment from a participant tendering Old Shares which are the
subject of such Book-Entry Confirmation and that such
30
<PAGE>
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Company may enforce such agreement against such
participant.
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 Shares (or a confirmation of book-entry transfer of such
Old Shares 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 Shares in
exchange for Old Shares 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 Shares.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Shares 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 Shares. 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 Shares 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 Shares are submitted in principal amount greater than the
principal amount of Old Shares being tendered by such tendering holder, such
unaccepted or non-exchanged Old Shares 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 Shares that remain outstanding subsequent to
the Expiration Date, and (b) to the extent permitted by applicable law, to
purchase Old Shares 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 Shares 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 Shares are registered and the certificate number(s) of
the Old Shares 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 Shares, in proper form for transfer (or a
confirmation of book-entry transfer of such Old Shares 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 Shares 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.
The party tendering Old Shares for exchange (the "Transferor") exchanges,
assigns and transfers the Old Shares to the Company and irrevocably constitutes
and appoints the Exchange Agent as the
31
<PAGE>
Transferor's agent and attorney-in-fact to cause the Old Shares 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 Shares
and to acquire New Shares issuable upon the exchange of such tendered Old
Shares, and that, when the same are accepted for exchange, the Company will
acquire good and unencumbered title to the tendered Old Shares, 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
Shares or to transfer ownership of such Old Shares 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 SHARES. Except as otherwise provided herein,
tenders of Old Shares 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 Shares 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 Shares to be withdrawn (the "Depositor"),
(ii) identify the Old Shares to be withdrawn (including the certificate number
or numbers and principal amount of such Old Shares), (iii) contain a statement
that such holder is withdrawing its election to have such Old Shares exchanged,
(iv) be signed by the holder in the same manner as the original signature on the
Letter of Transmittal by which such Old Shares were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Old Shares register the
transfer of such Old Shares in the name of the person withdrawing the tender,
and (v) specify the name in which any such Old Shares are to be registered, if
different from that of the Depositor. If Old Shares 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 Shares so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer and no New
Shares will be issued with respect thereto unless the Old Shares so withdrawn
are validly retendered. Any Old Shares 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 Shares may be
retendered by following one of the procedures described above under
"--Procedures for Tendering Old Shares" 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 Shares for, any Old Shares, and may terminate the Exchange Offer as
provided herein before the acceptance of such Old Shares, 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
(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
32
<PAGE>
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
Shares and return all tendered Old Shares to the tendering holders, (ii) extend
the Exchange Offer and retain all Old Shares tendered prior to the Expiration
Date, subject, however, to the right of holders to withdraw such Old Shares (see
"--Terms of the Exchange Offer--Withdrawal of Tenders of Old Shares"), or (iii)
waive such unsatisfied conditions with respect to the Exchange Offer and accept
all validly tendered Old Shares 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
Attn: Corporate Trust New York, NY 10003 Attn: Corporate Trust
Services Services
(registered or certified mail
recommended)
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 Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable
33
<PAGE>
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 Shares 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 Shares pursuant to the Exchange Offer. If, however, New Shares, or
Old Shares 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 Shares tendered or if a transfer tax is imposed for
any reason other than the exchange of the Old Shares 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 Shares that are not exchanged for New Shares pursuant to the
Exchange Offer will remain restricted securities within the meaning of Rule 144
of the Securities Act. Accordingly, such Old Shares may be resold only (i) to
the Company or any subsidiary thereof, (ii) to a qualified institutional buyer
in compliance with Rule 144A, (iii) 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 Shares (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 Shares at the time of transfer of less than $100,000, an opinion of counsel
acceptable to the Company that such transfer is in compliance with the
Securities Act, (iv) outside the United States in compliance with Rule 904 under
the Securities Act, (v) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available), or (vi) pursuant to an
effective registration statement under the Securities Act. The liquidity of the
Old Shares could be adversely affected by the Exchange Offer. Following the
consummation of the Exchange Offer, holders of the Senior Preferred Stock will
have no further registration rights under the Registration Rights Agreement and
will not be entitled to the contingent increase in the dividend rate applicable
to the Old Shares.
34
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth certain historical consolidated financial
data with respect to each of the five years ended December 31, 1997 which have
been derived from the Company's audited consolidated financial statements. The
historical consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the audited consolidated financial statements and related notes
thereto included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1993 1994 1995 1996(1) 1997(2)
----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
($ IN THOUSANDS, EXCEPT PER SHARE AND PER SUBSCRIBER
DATA)
STATEMENT OF OPERATIONS DATA:
Revenue:
Wireless revenue...................................................... $ 11,089 $ 15,169 $ 18,990 $ 26,107 $ 66,128
Wireline revenue...................................................... 11,550 12,871 14,766 16,286 18,455
Other revenue......................................................... 158 206 693 832 586
----------- --------- --------- --------- ---------
Total revenue....................................................... 22,797 28,246 34,449 43,225 85,169
Costs and expenses:
Cost of service and equipment sales................................... 4,965 5,418 7,014 9,076 21,344
Marketing and selling................................................. 2,552 3,098 3,157 4,908 11,762
General and administrative............................................ 7,971 9,621 10,138 12,087 19,877
Depreciation and amortization......................................... 4,563 5,534 6,653 9,720 21,729
----------- --------- --------- --------- ---------
Total costs and expenses............................................ 20,051 23,671 26,962 35,791 74,712
Operating income........................................................ 2,746 4,575 7,487 7,434 10,457
Interest expense........................................................ (2,567) (2,970) (3,833) (6,478) (30,098)
Other income (expense), net............................................. 145 (147) (478) (1,586) 2,880
Minority interests in (income) losses of subsidiaries(3)................ (502) (1,105) (1,334) (675) (1,693)
Income tax (provision) benefit.......................................... 78 (119) (738) 411 3,287
----------- --------- --------- --------- ---------
Income (loss) before extraordinary items................................ 541 234 1,104 (894) (15,167)
Extraordinary items(4).................................................. -- 228 -- (527) (1,567)
----------- --------- --------- --------- ---------
Net income (loss)....................................................... 541(5) 462 1,104 (1,421) (16,734)
Dividends on senior preferred stock..................................... -- (83) (591) (849) (2,603)
----------- --------- --------- --------- ---------
Net income (loss) applicable to common stockholders..................... $ 541 $ 379 $ 513 $ (2,270) $ (19,337)
----------- --------- --------- --------- ---------
Basic net income (loss) applicable to common stockholders per common
share................................................................. $ 1.14 $ .80 $ 1.08 $ (4.80) $ (40.87)
----------- --------- --------- --------- ---------
Dividends per average common share...................................... $ -- $ .11 $ 1.40 $ 1.18 $ 16.13
----------- --------- --------- --------- ---------
Basic weighted average common shares outstanding........................ 473,152 473,152 473,152 473,152 473,152
----------- --------- --------- --------- ---------
OTHER FINANCIAL DATA:
EBITDA(6):
Wireless(7)........................................................... 2,680 3,923 5,439 7,005 $ 21,977
Wireline.............................................................. 5,158 5,518 7,262 7,270 8,173
Other................................................................. (529) 669 1,439 2,880 2,036
----------- --------- --------- --------- ---------
Total............................................................... $ 7,309 $ 10,110 $ 14,140 $ 17,155 $ 32,186
----------- --------- --------- --------- ---------
----------- --------- --------- --------- ---------
Ratio of earnings to fixed charges(8)................................... -- 1.12x 1.47x -- --
Ratio of earnings to combined fixed charges and senior preferred stock
dividends(8).......................................................... -- 1.09x 1.28x -- --
Capital expenditures, excluding cost of acquisitions.................... $ 7,353 $ 5,267 $ 3,925 $ 17,438 $ 23,216
OTHER DATA:
Ending cellular subscribers............................................. 15,283 21,481 26,614 33,955 100,093
Cellular penetration(9)................................................. 4.63% 6.45% 8.02% 5.77% 6.08%
Cellular churn(10)...................................................... .45% .92% 1.52% 1.84% 1.89%
Average monthly revenue per cellular subscriber(11)..................... $ 52.77 $ 50.45 $ 50.00 $ 48.31 $ 41.05
Marketing and selling costs per gross additional cellular
subscriber(12)........................................................ $ 392.04 $ 429.06 $ 451.23 $ 539.57 $ 397.55
Cellular cell sites (at period end)..................................... 26 36 46 67 135
Wireline access lines (at period end)................................... 10,899 11,322 11,806 11,959 12,633
Route miles (at period end)(13)......................................... 485 485 516 545 545
Fiber miles (at period end)(14)......................................... 10,817 10,817 11,189 11,537 11,554
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
($ IN THOUSANDS)
BALANCE SHEET DATA:
Net fixed assets......................................................... $ 48,469 $ 48,834 $ 46,987 $ 61,930 $ 88,350
Total assets............................................................. 67,250 69,647 73,490 116,948 383,214
Long-term debt, net of current portion................................... 53,051 60,727 64,405 104,304 363,069
Mandatorily redeemable preferred stock(15)............................... -- 5,913 5,913 10,000 11,623
Stockholders' equity (deficit)........................................... 4,760 (6,824) (6,972) (9,802) (36,773)
</TABLE>
- ------------------------------
(1) Includes the operations of Kansas/Missouri Cluster from March 19, 1996, the
date of its acquisition by the Company.
(2) Includes the operations of the Western Maryland Properties, Maryland 2 and
Arizona 5 from February 28, 1997, March 3, 1997 and October 1, 1997,
respectively, the dates they were acquired by the Company.
(3) Reflects minority interests in partnerships in which the Company owns the
majority interests.
(4) Extraordinary items reflect the gain or (loss), net of tax related to early
extinguishment of debt.
(5) 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."
(6) 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.
(7) Includes EBITDA attributable to minority interests in subsidiaries in which
the Company owns a majority interest. Each such subsidiary has outstanding
indebtedness to the Company and all of the subsidiaries' cash flow is used
to service such indebtedness and is not available for distributions to the
holders of the minority interests. The portion of EBITDA attributable to
minority interests was $.9 million, $1.5 million, $2.0 million, $2.3 million
and $2.9 million for the years ended December 31, 1993, 1994, 1995, 1996 and
1997, respectively.
(8) For the years ended December 31, 1993 1996 and 1997, earnings were
insufficient to cover fixed charges by $.2 million, $1.3 million and $18.5
million, respectively. For the years ended December 31, 1993, 1996 and 1997,
earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $.2 million, $2.2 million and $21.1 million,
respectively. "Earnings" is 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.
(9) 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.
(10) "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.
(11) Excludes roaming revenue.
(12) 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.
(13) Route miles refers to the number of miles over which fiber optic cables are
installed.
(14) Fiber miles refers to the number of route miles multiplied by the number of
fibers installed along that path.
(15) On January 22, 1998, the Company issued Senior Preferred Stock having an
aggregate liquidation preference of $175.0 million.
36
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma condensed consolidated financial
statements have been prepared to give effect to the Transactions. The
accompanying unaudited pro forma condensed consolidated statements of operations
of the Company for the year ended December 31, 1997 give effect to the
Transactions as if they occurred on January 1, 1997. The accompanying unaudited
pro forma condensed consolidated balance sheet as of December 31, 1997 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 condensed 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 to the assets and liabilities acquired, based
on estimates of fair values using available information provided by the
management of Texas 16, the California 4 Partnership and Santa Cruz.
The unaudited pro forma condensed 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 condensed 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.
37
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
RECENT AND PROPOSED WIRELESS ACQUISITIONS
-------------------------------------------------------------------------------------
WESTERN
MARYLAND
PROPERTIES MARYLAND 2 ARIZONA 5 CALIFORNIA SANTA CRUZ
DOBSON (1) (1) (1) TEXAS 16 4 (2)
--------- ----------- ----------- ----------- --------- ----------- -----------
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenue:
Wireless revenue....................... $ 66,128 $ 2,426 $ 2,636 $ 7,637 $ 11,147 $ 19,721 $ 12,274
Wireline revenue....................... 18,455 -- -- -- -- -- --
Other.................................. 586 -- -- -- -- -- --
--------- ----------- ----------- ----------- --------- ----------- -----------
Total operating revenue................ 85,169 2,426 2,636 7,637 11,147 19,721 12,274
--------- ----------- ----------- ----------- --------- ----------- -----------
Operating expenses:
Wireless cost of service............... 18,755 492 878 1,304 2,442 7,069 3,775
Wireline cost of service............... 2,589 -- -- -- -- -- --
General and administrative............. 19,877 740 333 965 1,824 2,698 3,697
Marketing and selling.................. 11,762 357 461 627 371 1,105 2,441
Depreciation and amortization.......... 21,729 405 -- 904 672 2,011 899
--------- ----------- ----------- ----------- --------- ----------- -----------
Total operating expenses............. 74,712 1,994 1,672 3,800 5,309 12,883 10,812
--------- ----------- ----------- ----------- --------- ----------- -----------
Operating income......................... 10,457 432 964 3,837 5,838 6,838 1,462
Interest expense......................... (30,098) -- -- -- -- (831) (246)
Other income (expense), net.............. 2,880 126 -- 150 211 (19) 37
--------- ----------- ----------- ----------- --------- ----------- -----------
Income (loss) before minority interests
and income taxes....................... (16,761) 558 964 3,987 6,049 5,988 1,253
Minority interests in (income) loss of
subsidiaries........................... (1,693) -- -- -- -- -- --
--------- ----------- ----------- ----------- --------- ----------- -----------
Income (loss) before income taxes........ (18,454) 558 964 3,987 6,049 5,988 1,253
Income tax (provision) benefit........... 3,287 -- -- -- -- -- (251)
--------- ----------- ----------- ----------- --------- ----------- -----------
Income (loss) from continuing
operations............................. $ (15,167) $ 558 $ 964 $ 3,987 $ 6,049 $ 5,988 $ 1,002
--------- ----------- ----------- ----------- --------- ----------- -----------
--------- ----------- ----------- ----------- --------- ----------- -----------
Dividends on senior preferred stock...... $ (2,603)
---------
Income (loss) from continuing operations
applicable to common stockholders...... $ (17,770)
---------
---------
Basic income (loss) from continuing
operations applicable to common
stockholders (per share)............... $ (37.56)
---------
---------
Basic weighted average common shares
outstanding............................ 473,152
---------
---------
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
------------- ---------
<S> <C> <C>
Operating revenue:
Wireless revenue....................... $ -- $ 121,969
Wireline revenue....................... -- 18,455
Other.................................. -- 586
------------- ---------
Total operating revenue................ -- 141,010
------------- ---------
Operating expenses:
Wireless cost of service............... -- 34,715
Wireline cost of service............... -- 2,589
General and administrative............. (669)(3) 29,465
Marketing and selling.................. -- 17,124
Depreciation and amortization.......... 16,016(4) 42,636
------------- ---------
Total operating expenses............. 15,347 126,529
------------- ---------
Operating income......................... (15,347) 14,481
Interest expense......................... (4,989)(5) (36,164)
Other income (expense), net.............. 5(3) 3,390
------------- ---------
Income (loss) before minority interests
and income taxes....................... (20,331) (18,293)
Minority interests in (income) loss of
subsidiaries........................... (214)(6) (1,907)
------------- ---------
Income (loss) before income taxes........ (20,545) (20,200)
Income tax (provision) benefit........... 4,639(7) 7,675
------------- ---------
Income (loss) from continuing
operations............................. $ (15,906) $ (12,525)
------------- ---------
------------- ---------
Dividends on senior preferred stock...... $ (23,243)(8) $ (25,846)
------------- ---------
Income (loss) from continuing operations
applicable to common stockholders...... $ (38,371)
---------
---------
Basic income (loss) from continuing
operations applicable to common
stockholders (per share)............... $ (81.10)
---------
---------
Basic weighted average common shares
outstanding............................ 473,152
---------
---------
</TABLE>
See accompanying notes to the unaudited pro forma condensed consolidated
statement of operations.
38
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(1) To reflect the results of operations for the Western Maryland Properties and
Maryland 2 for the two month period in 1997 and to reflect the results of
operations for Arizona 5 for the nine month period in 1997 during which the
properties were not owned by the Company.
(2) Certain reclassifications have been made to the Santa Cruz financial
statements to conform them to the Company's presentation.
(3) In 1995, Santa Cruz formed Unitel Communications LLP ("Unitel") to provide
cellular service system management and explore other telecommunication
opportunities on behalf of Santa Cruz. As a part of the Santa Cruz
Acquisition, the Company will also acquire Unitel. To reflect the combined
1997 Santa Cruz and Unitel operations, the following adjustments have been
made: (i) $177,000 of general and administrative expense, (ii) the
elimination of $846,000 of intercompany general and administrative expenses
on Santa Cruz's financial statements and (ii) $5,000 of other expense.
(4) To reflect the additional depreciation and amortization resulting from the
change in the property and equipment and cellular license acquisition costs
due to the allocation of the purchase price. Property and equipment is being
depreciated over five to eight years, cellular license acquisition costs
over 15 years and intangible assets over five years. The 15-year period used
for cellular license acquisition costs is based primarily on the Company's
internal analysis of the recovery period for its cellular investments, which
indicates that such costs will be recovered through operations over a period
of not more than 15 years. Other factors considered include the competitive
nature of the cellular industry, the rate of technological change and risk
of obsolescence, and the specific terms and characteristics of the licenses.
See "Risk Factors--Competition" and "--Rapid Technological Changes" and
"Business--Competition" and "--Regulation."
(5) To reflect (i) $5.8 million of interest expense relating to indebtedness
incurred under the Senior Notes and the then existing DOC Facility in
connection with the Recent Wireless Acquisitions, (ii) $.1 million of
amortization of deferred financing costs relating to the Senior Notes, (iii)
$.1 million of amortization of deferred financing costs relating to the then
existing DOC Facility, (iv) the elimination of $15.8 million of interest
expense (including $.4 million of amortization of deferred financing costs)
associated with the then existing DOC Facility which was repaid with a
portion of the proceeds from the Senior Preferred Stock and borrowings under
the Operations Facility, (v) the elimination of $1.1 million of interest
expense associated with the indebtedness of California 4 and Santa Cruz
which will not be assumed by the Company, (vi) $9.7 million of interest
expense relating to the $107.6 million of indebtedness to be incurred under
the Operations Facility in connection with the Texas 16, California 4 and
Santa Cruz Acquisitions (assuming an interest rate of 9.0% per annum), (vii)
$5.8 million of interest expense relating to the indebtedness to be incurred
under the DOC Facility (assuming an interest rate of 9.0% per annum) and
(viii) $.4 million of amortization of deferred financing costs relating to
the DOC Facility and the Operations Facility.
(6) To reflect the 25% equity interest in the pro forma loss of the Arizona 5
Partnership not owned by the Company and the 30% equity interest in the pro
forma income of Santa Cruz not owned by the Company.
(7) To reflect an adjustment to income tax expense for the effects of the Recent
Wireless Acquisitions and proposed Santa Cruz Acquisition. Net operating
loss carryforwards generated have been recognized as an income tax benefit,
assuming a 38% effective tax rate, due to the Company's ability to realize
the benefit of these carryforwards through the reduction of the deferred tax
liabilities created as part of the Recent Wireless Acquisitions.
(8) To reflect dividends on the Senior Preferred Stock, including the
amortization of the issuance costs with respect thereto.
39
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
RECENT WIRELESS
ACQUISITIONS
------------------------
CALIFORNIA SANTA PRO FORMA
DOBSON TEXAS 16 4 CRUZ ADJUSTMENTS PRO FORMA
--------- ----------- ----------- --------- ------------------ ---------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets........................ $ 41,791 $ 4,864 $ 4,238 $ 3,040 $ (541)(1)(2) $ 53,392
Property, plant and equipment, net.... 88,350 1,801 19,334 4,354 (13,625)(3) 100,214
Receivables--affiliate................ 6,381 -- -- -- -- 6,381
Non-current investments--restricted... 9,216 -- -- -- -- 9,216
Cellular license acquisition cost,
net................................. 206,694 -- -- 79 228,804 (2)(3 435,577
Other intangible assets, net.......... 11,013 -- -- 159 8,147 (3)(5 19,319
Other assets.......................... 19,769 1 322 724 (6,247)(3)(4) 14,569
--------- ----------- ----------- --------- ---------- ---------
Total assets...................... $ 383,214 $ 6,666 $ 23,894 $ 8,356 $ 216,538 $ 638,668
--------- ----------- ----------- --------- ---------- ---------
--------- ----------- ----------- --------- ---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities................... $ 25,468 $ 904 $ 5,718 $ 3,203 $ (1,818)(2)(6) $ 33,475
Long-term debt, net of current
portion............................. 363,069 -- 12,800 3,435 (11,067)(7) 368,237
Deferred credits...................... 2,873 550 -- -- 68,318(8) 71,741
Minority interests.................... 16,954 -- -- -- 515(9) 17,469
Mandatorily redeemable preferred
stock............................... 11,623 -- -- -- 175,000 (10 186,623
Stockholders' equity (deficit)/
partners' capital................... (36,773) 5,212 5,376 1,718 (14,410)(11) (38,877)
--------- ----------- ----------- --------- ---------- ---------
Total liabilities and
stockholders' equity............ $ 383,214 $ 6,666 $ 23,894 $ 8,356 $ 216,538 $ 638,668
--------- ----------- ----------- --------- ---------- ---------
--------- ----------- ----------- --------- ---------- ---------
</TABLE>
40
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(1) To reflect the elimination of $.7 million of cash associated with Texas 16
that will not be acquired by the Company as part of the Texas 16
Acquisition.
(2) In 1995, Santa Cruz formed Unitel Communications LLP ("Unitel") to provide
cellular service system management and explore other telecommunication
opportunities on behalf of Santa Cruz. As a part of the Santa Cruz
Acquisition, the Comany will also acquire Unitel. To reflect the combined
1997 Santa Cruz and Unitel balance sheet activities, the following
adjustments have been made: (i) $135,000 of current assets, consisting of
$358,000 in cash and the elimination of $223,000 of intercompany
receivables on Santa Cruz's financial statements, (ii) the elimination of
$128,000 of cellular license acquisition costs; and (iii) $7,000 of current
liabilities.
(3) To allocate the purchase price of the Texas 16, California 4 and Santa Cruz
Acquisitions to the assets acquired.
(4) To reflect the application of previously paid escrow deposits of $2.7
million and $2.5 million to the purchase price of the Texas 16 Acquisition
and California 4 Acquisition, respectively.
(5) To reflect (i) an estimated $8.0 million of offering costs incurred with
the Senior Preferred Stock, (ii) an estimated $3.7 million of costs related
to the DOC Facility and the Operations Facility and (iii) the writeoff of
$3.4 million of unamortized debt issuance costs relating to the then
existing DOC Facility which was repaid with a portion of the proceeds from
the Senior Preferred Stock and borrowings under the DOC Facility.
(6) To reflect the elimination of $1.8 million of accounts payable and accrued
expenses associated with California 4 that was not assumed by the Company
as part of the California 4 Acquisition.
(7) To reflect (i) the elimination of $12.8 million of debt associated with
California 4 not assumed by the Company as part of the California 4
Acquisition, (ii) the elimination of $2.4 million of debt associated with
Santa Cruz that will not be assumed by the Company as part of the Santa
Cruz Acquisition, (iii) the repayment of all indebtedness under the then
existing DOC Facility with $107.0 million of proceeds from the Offering and
the incurrence of $64.5 million of indebtedness under the DOC Facility,
(iv) the incurrence of $107.4 million of indebtedness under the Operations
Facility in connection with the Texas 16, California 4 and Santa Cruz
Acquisitions and (v) the incurrence of $3.7 million of indebtedness to
finance the debt issuance costs related to the DOC Facility and the
Operations Facility.
(8) To reflect deferred tax liabilities created with the California 4
Acquisition and the Santa Cruz Acquisition.
(9) To reflect the 30% minority interest in Santa Cruz not owned by the
Company.
(10) To reflect the issuance of the Senior Preferred Stock.
(11) To eliminate partners' capital and stockholders' equity of the acquired
companies and to reflect the writeoff of $3.4 million of unamortized debt
issuance costs (net of income tax benefit of $1.3 million) related to the
then existing DOC Facility.
41
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company provides diversified telecommunication products and services. At
December 31, 1997 the Company provided wireless telecommunication services in
its Oklahoma/Texas Cluster, its Kansas/ Missouri Cluster, its
Maryland/Pennsylvania Cluster and in Arizona 5. Subsequent to year end, the
Company completed the acquisition of California 4, which is located in northern
California, and Texas 16, which is located in south-central Texas. Upon
consummation of the Santa Cruz Acquisition, the Company will also own and
operate cellular systems in southern California. The Company's wireline
telecommunication operations include local telephone exchange services in
Oklahoma, regional long-haul fiber optic transmission networks in Oklahoma,
Texas and Colorado and CLEC operations which began to resell local, long
distance and wireless services in 1997 and currently operates Oklahoma City,
Tulsa and Amarillo. Upon consummation of the pending Santa Cruz Acquisition, the
Company will also resell services in Houston, Dallas, Fort Worth, San Antonio
and Austin.
OVERVIEW
SIGNIFICANT EVENTS IN 1997
The following events materially impacted the Company's results of operations
and financial position in 1997.
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 $77.6 million. The properties are located immediately outside
the Washington/Baltimore metropolitan area. On March 3, 1997, the Company
purchased the FCC cellular license for, and certain assets relating to, Maryland
RSA 2 for $75.8 million. The property is located to the east of the
Washington/Baltimore metropolitan area.
On February 28, 1997, the Company's bank credit agreement was amended and
restated to provide the Company with a $200 million revolving credit facility
maturing in 2005 (the "Bank Facility"). Interest on borrowings under the Bank
Facility accrued at a variable rate (weighted average rate of 8.43% at December
31, 1997). Initial loan proceeds were used to refinance existing indebtedness,
finance the Maryland/Pennsylvania Cluster acquisitions described above and for
general corporate purposes, including the payment of a $7.5 million dividend in
February 1997 to holders of the Company's Class A Common Stock. The principal
stockholder used $6.0 million of the dividend to repay a loan which had been
guaranteed by the Company and approximately $.5 million to repay indebtedness
owed to the Company with respect to certain legal fees. As a result of the $7.5
million dividend, the holders of Class B Convertible Preferred Stock were issued
100,000 shares of Class C Preferred Stock, having a liquidation preference of
approximately $1.6 million. See Item 13. Certain Relationships and Related
Transactions. In connection with the closing of the Bank Facility, the Company
extinguished its then existing credit facility. The Company financed the Arizona
5 Partnership acquisition discussed below with borrowings under the Bank
Facility.
On February 28, 1997, the Company issued pursuant to a private offering $160
million of 11 3/4% Senior Notes maturing in 2007 and used the net proceeds
($155.2 million) to finance the Maryland/ Pennsylvania Cluster acquisitions
($116.9 million) and to purchase securities ($38.4 million) which were pledged
and escrowed to secure payment of the first four semi-annual interest payments
on the notes, which began on October 15, 1997. Except for the first four
interest payments, the Senior Notes are unsecured obligations of the Company,
redeemable at the option of the Company, in whole or in part, on or after April
15, 2002. In addition, at any time prior to April 15, 2000, the Company may
redeem up to 35% of the aggregate principal amount with the net proceeds of
sales of capital stock of the Company. In
42
<PAGE>
June 1997, the Company completed an offer to exchange all of the outstanding
senior notes for substantially identical notes registered under the Securities
Act of 1933.
On October 1, 1997, the Company purchased for $39.8 million a 75% interest
in the Arizona 5 Partnership, which owns the cellular license for Arizona 5 as
well as the associated tangible operating assets. Certain affiliates of the
Company indirectly owned a 20.6% interest in the Arizona 5 Partnership and
received approximately $9.5 million in connection with the acquisition. See Item
13. Certain Relationships and Related Transactions. In addition, the Company
loaned $5.2 million to the current partner which acquired a 25% interest in the
Arizona 5 Partnership.
SIGNIFICANT RECENT EVENTS
On January 22, 1998, the Company issued, in a private offering, 175,000
shares of Senior Preferred Stock. The net proceeds to the Company were
approximately $167 million. Dividends on the Senior Preferred Stock are
cumulative and payable quarterly, commencing April 15, 1998, in cash or, until
January 15, 2003 at the option of the Company, in additional shares of Senior
Preferred Stock. The Senior Preferred Stock is exchangeable, in whole but not in
part, at the option of the Company, into Exchange Debentures of the Company. The
Company may redeem the Senior Preferred Stock or, if issued, the Exchange
Debentures, in whole or in part, at any time on or after January 15, 2003. In
addition, at any time prior to January 15, 2001, the Company may redeem up to
35% of the Senior Preferred Stock or Exchange Debentures originally issued from
the proceeds of sales of the Company's Common Stock.
On January 26, 1998, the Company purchased the FCC cellular license for, and
certain assets relating to, Texas 16 for $56.6 million, using proceeds from the
Senior Preferred Stock offering. Texas 16 is located in south-central Texas
between Houston, San Antonio and Austin.
On March 25, 1998, the Company entered into a definitive agreement to
purchase 70% of the outstanding stock of the corporation that owns the FCC
cellular license for, and the assets relating to, the Santa Cruz, CA MSA for
$25.2 million, subject to adjustment. The Company is negotiating to acquire the
remaining 30% of the outstanding stock of such corporation.
On March 25, 1998, the Company established the $200 million senior secured
credit facility for Operations (consisting of a $120 million revolving facility
and an $80 million 364-day facility) and amended its existing DOC Facility
revolving credit facility to provide for a $250 million revolving credit
facility. These Bank Credit facilities will be used primarily to finance capital
expenditures, consummate acquisitions, finance interest payments on the Senior
Notes, and fund general corporate operations. Interest on the facilities will
accrue at variable rates and will terminate in 2006.
On March 26, 1998, the Company entered into a definitive agreement to
purchase the Common Stock of ATI for approximately $130.0 million. ATI is based
in Houston, Texas and provides resale services to primarily commercial customers
in five major Texas markets, including Houston, Dallas, Fort Worth, San Antonio
and Austin.
SUBSEQUENT EVENT
On April 1, 1998, the Company acquired a 100% interest in the Cellular 2000
Partnership which owns the cellular license and system for the California 4 RSA.
The total purchase price paid by the Company was $90.9 million. California 4 is
located in northern California between Fresno and Modesto.
WIRELESS OPERATIONS
The Company's wireless or cellular revenues consist of service, roaming and
equipment sales revenues. There has been an industry trend of declining average
revenue per minute, as competition among 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
43
<PAGE>
telecommunications subscribers and the number of minutes of usage per
subscriber. There has also been a broad trend in the wireless telecommunications
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, which has
increased revenue and encouraged additional usage to a limited extent.
Roaming accounted for 39.7% of the Company's cellular revenue for the year
ended December 31, 1997. 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 (excludes Arizona 5 for 1997, for
which the roaming minutes of use were not available), $.75 and $.70 per minute
for the years ended December 31, 1997, 1996 and 1995, respectively.
The Company's cellular churn rate increased from 1996 to 1997 due to
increased competition among cellular providers and the addition of the
Maryland/Pennsylvania Cluster in March 1997, which has higher churn rates than
in the Company's other market areas. The Company's overall cellular penetration
rates decreased in 1996 and 1997 compared to 1995 as a result of the Company's
acquisition of the cellular systems in the Kansas/Missouri Cluster and the
Maryland/Pennsylvania Cluster, and will decrease further after giving effect to
the California 4 and Santa Cruz Acquisitions. Cellular penetration rates in the
Oklahoma/Texas Cluster increased in 1995, 1996 and 1997. The Company believes
that as its cellular penetration rates increase, the increase in new subscriber
revenue will exceed the loss of revenue attributable to increases in the
cellular churn rate.
In recent years, the Company, and other cellular companies, have increased
the use of discounts on phone equipment and free phone promotions, as
competition between service providers has intensified. As a result, the Company
has incurred, and expects to continue to incur, losses on cellular equipment
sales, which have resulted in increased marketing and selling costs per gross
additional cellular subscriber. While the Company expects to continue these
discounts and promotions, the Company believes that related losses on equipment
sales will be mitigated by increased revenue from increases in the number of
cellular subscribers.
The size and scope of the Company's wireless operations increased
substantially upon consummation of the acquisitions in 1997 (Maryland 2, Western
Maryland Properties and Arizona 5), another in January 1998 (Texas 16), and
another in April 1998 (California 4) and will increase further upon consummation
of the Santa Cruz Acquisition and any of the proposed acquisitions (California 7
or Texas 7). Although the Company expects its earnings before interest, taxes,
depreciation and amortization (EBITDA) will increase as a result of
acquisitions, the increased amortization and interest expense associated with
the Senior Notes and additional bank borrowings resulted in increased losses in
1997, which are expected to continue in 1998 and thereafter until the Company
expands the acquired systems and increases the subscriber base.
WIRELINE OPERATIONS
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 local exchange 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
44
<PAGE>
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 36% of the Company's
revenue from its wireline operations, or $5.5 million, for the year ended
December 31, 1997.
The 1996 Act potentially impacts the Company's sources of support revenue.
Under previous regulation, access charges contained implicit support for high
cost areas. Regulations adopted pursuant to the 1996 Act would remove implicit
support from access revenues and place more emphasis for such support on
HCF/USF. In May 1997, the FCC adopted changes that may, over time, reduce or
eliminate subsidies to telephone companies in areas where the cost of connecting
and maintaining phone lines is demonstrated to be above the industry or area
norm. The Company will continue to pursue its strategy to lessen the impact of
any future regulatory changes by reducing its operating costs through
consolidation of operational functions at the Company level in order to achieve
economies of scale.
The Company began reselling local, long distance and wireless services in
October 1997 and currently operates in three markets, including Oklahoma City
and Tulsa, Oklahoma and Amarillo, Texas. The Company uses its own switch and
leases local exchange lines in the Oklahoma markets. In the Amarillo, Texas
market, the Company leases both switch services and local exchange lines. The
Company expects to commence offering these services in other metropolitan areas
in the region based on market demand. The Company has entered into an agreement
with SWBT and GTE, pursuant to which the Company may resell local exchange and
other services in all markets served by SWBT and GTE in Oklahoma. The Company
has also established an agreement with SWBT for the markets served by SWBT in
Texas and is currently awaiting approval by the Texas Public Utility Commission
on the agreement with GTE for the markets served by GTE in Texas. The Company
incurred losses and negative cash flows in its resale business in 1997, which
are expected to continue in 1998 and until it develops and expands its
subscriber base, primarily as a result of marketing and advertising costs.
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 the year ended December 31, 1997, approximately 41%
of the Company's gross fiber revenue was attributable to NTS and approximately
27% of its gross fiber revenue was attributable to the Company's subsidiaries.
During 1997, the Company's operating income and EBITDA 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 more fiber optic 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).
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
OPERATING REVENUE. For the year ended December 31, 1997, total operating
revenue increased $42.0 million, or 97.2%, to $85.2 million from $43.2 million
in 1996. Total wireless revenue, local exchange revenue, fiber revenue and
resale revenue represented 77.6%, 16.4%, 4.0% and .1% of total operating
revenue, respectively, in 1997 and 60.4%, 31.2%, 5.4% and 0% of total operating
revenue, respectively, in 1996.
45
<PAGE>
The following table sets forth the components of the Company's wireless and
wireline revenue for the years ended December 31:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Wireless revenue:
Cellular service....................................................... $ 17,593 $ 38,410
Cellular roaming....................................................... 7,852 26,263
Cellular equipment..................................................... 662 1,455
--------- ---------
26,107 66,128
Wireline revenue:
Local exchange......................................................... 13,472 13,993
Fiber.................................................................. 2,313 3,439
CLEC................................................................... -- 102
Other.................................................................. 501 921
--------- ---------
16,286 18,455
Other.................................................................... 832 586
--------- ---------
Total................................................................ $ 43,225 $ 85,169
--------- ---------
--------- ---------
</TABLE>
CELLULAR. The Company's operating revenue from its cellular operations
(service, roaming and equipment) increased $40.0 million, or 153.3%, to $66.1
million for the year ended December 31, 1997 from $26.1 million in 1996.
Cellular service revenue increased $20.8 million, or 118.3%, to $38.4 million
for the year ended December 31, 1997 from $17.6 million in 1996. Of the
increase, $15.0 million was attributable to the acquisition of the
Maryland/Pennsylvania Cluster and Arizona 5 in 1997 and the inclusion of the
operations of the Kansas/Missouri Cluster, which was acquired March 19, 1996,
for all of 1997. The remaining increase was primarily attributable to increased
penetration and usage in the Oklahoma/Texas Cluster and Kansas/Missouri Cluster.
The Company's cellular subscriber base increased 194.8% to 100,093 at December
31, 1997 from 33,955 at December 31, 1996. 42,608 subscribers were added as a
result of the acquisition of the Maryland/Pennsylvania Cluster. The Company's
average monthly cellular service revenue per subscriber decreased 15.0% to
$41.05 for the year ended December 31, 1997 from $48.31 for 1996 due to the
addition of new lower rate subscribers in the Maryland/Pennsylvania Cluster and
competitive market pressures.
Cellular roaming revenue increased $18.4 million, or 234.4%, to $26.3
million for the year ended December 31, 1997 from $7.9 million in 1996. Of the
increase, $16.4 million was attributable to the acquisition of the
Maryland/Pennsylvania Cluster and Arizona 5 in 1997 and the inclusion of the
operations of the Kansas/Missouri Cluster for all of 1997. The remaining
increase was primarily attributable to increased roaming minutes in the
Oklahoma/Texas Cluster and Kansas/Missouri Cluster due to expanded coverage
areas in these markets and an increase in cellular minutes of use. Cellular
equipment sales of $1.5 million in 1997 represented an increase of $.8 million,
or 119.8%, from $.7 million in 1996, as the Company sold more equipment in 1997.
LOCAL EXCHANGE. Local exchange revenue increased $.5 million, or 3.9%, to
$14.0 million for the year ended December 31, 1997 compared to $13.5 million for
1996 due primarily to an increase in toll charges and an increase in the number
of access lines from 11,959 as of December 31, 1996 to 12,633 as of December 31,
1997.
FIBER. The Company's revenue from its fiber operations increased $1.1
million, or 48.7%, to $3.4 million in 1997 from $2.3 million in 1996 due
primarily to an increase in the number of fiber lines, bringing the total lines
leased to an equivalent of 53 DS3s at December 31, 1997 compared to 46 at
December 31, 1996.
CLEC. The Company launched its CLEC operations in October 1997, generating
$.1 million of service revenue primarily related to equipment, local and long
distance sales.
46
<PAGE>
COST OF SERVICE AND EQUIPMENT SALES. For the year ended December 31, 1997,
the total cost of service and equipment sales increased $12.3 million, or
135.2%, to $21.3 million from $9.1 million in 1996.
The following table sets forth the components of the Company's wireless cost
of service and equipment sales and wireline cost of service and equipment sales
for the years ended December 31:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Wireless cost of service and equipment sales:
Cellular service....................................................... $ 4,503 $ 14,709
Cellular equipment..................................................... 2,571 4,046
--------- ---------
7,074 18,755
Wireline cost of service and equipment sales:
Local exchange service................................................. 1,877 1,868
Fiber service.......................................................... 125 309
CLEC service........................................................... -- 365
CLEC equipment......................................................... -- 47
--------- ---------
2,002 2,589
--------- ---------
Total................................................................ $ 9,076 $ 21,344
--------- ---------
--------- ---------
</TABLE>
CELLULAR. Cost of cellular service increased $10.2 million, or 226.7%, to
$14.7 million during the year ended December 31, 1997 from $4.5 million in 1996.
Of the increase, $8.4 million was attributable to the acquisition of the
Maryland/Pennsylvania Cluster and Arizona 5 in 1997 and the inclusion of the
operations of the Kansas/Missouri Cluster for all of 1997. The remaining
increase was primarily attributable to increased subscribers and minutes of use
in the Oklahoma/Texas Cluster and Kansas/Missouri Cluster and expanded use of
rerating agreements with cellular providers adjacent to the Company's markets.
As a percentage of cellular service and roaming revenue, cost of cellular
service increased to 22.7% in 1997 from 17.7% in 1996. This is primarily due to
the expanded use of rerating agreements noted above, as well as additional
facility lease costs relating to the Maryland 2 Acquisition. Cost of cellular
equipment increased $1.5 million, or 57.4%, to $4.1 million in 1997 from $2.6
million in 1996, primarily from increases in the volume of equipment sold due to
the growth in subscribers.
LOCAL EXCHANGE. Cost of wireline telephone service remained consistent at
$1.9 million for both 1997 and 1996. As a percentage of wireline telephone
service revenue, cost of wireline telephone service decreased slightly from
13.9% in 1996 to 13.3% in 1997.
FIBER. Cost of fiber service increased $.2 million, or 147.6%, to $.3
million in 1997 from $.1 million in 1996. The increase was the result of
increased DS3 equivalents.
CLEC. Cost of CLEC service and equipment associated with the Company's
October 1997 launch of its resale operations totaled $.4 million.
MARKETING AND SELLING COSTS. Marketing and selling costs increased $6.9
million, or 139.7%, to $11.8 million in 1997 from $4.9 million in 1996. The
increase was primarily due to the higher level of cellular subscribers added
period to period. Gross cellular subscribers added in 1997 was 33,354 with
subscribers added in the Maryland/Pennsylvania Cluster and Arizona 5 since their
acquisition making up 16,469 and 1,307, respectively, of the gross cellular
subscribers added. The number of gross cellular subscribers added in 1996 was
11,970. Additionally, the Company incurred $.9 million of marketing costs in
1997 associated with the October 1997 launch of its resale operations. As a
percentage of total operating revenue, marketing and selling costs increased to
13.8% in 1997 from 11.4% in 1996.
GENERAL AND ADMINISTRATIVE COSTS. For the year ended December 31, 1997,
general and administrative costs increased $7.8 million, or 64.5%, to $19.9
million from $12.1 million for the same period of 1996. The increase was
primarily due to increased billing costs as a result of the growth in cellular
subscribers, the
47
<PAGE>
acquisition of the Maryland/Pennsylvania Cluster and Arizona 5, the inclusion of
the Kansas/Missouri Cluster for all of 1997, and increased salary costs
resulting from additional personnel in the Company's cellular, fiber and resale
operations. As a percentage of total operating revenue, general and
administrative costs decreased to 23.3% in 1997 from 28.0% in 1996. The decrease
is a result of economies of scale realized as the Company integrated its new
cellular operations into its existing management structure.
DEPRECIATION AND AMORTIZATION EXPENSE. For the year ended December 31,
1997, depreciation and amortization expense increased $12.0 million, or 123.5%,
to $21.7 million from $9.7 million in 1996. Approximately $12.1 million of the
increase was the result of the amortization of assets acquired in the
Maryland/Pennsylvania and Kansas/Missouri Clusters and Arizona 5. The remaining
decrease relates to assets in the Oklahoma/Texas Cluster and local exchange
operations becoming fully depreciated.
OTHER EXPENSE. For the year ended December 31, 1997, total other expense
(consisting of interest income, interest expense, and other income/expense)
increased $19.2 million, or 237.6%, to $27.2 million from $8.1 million in 1996.
Interest income of $2.8 million for 1997 was a result of interest earned on
securities purchased which were pledged to secure payment of the first four
semi-annual interest payments on the Senior Notes. For the year ended December
31, 1997, interest expense increased $23.6 million to $30.1 million from $6.5
million in 1996. The increase was primarily the result of increased borrowings
during 1997 to finance the Maryland/Pennsylvania Cluster and Arizona 5
acquisitions. For the year ended December 31, 1997, other expense decreased $1.4
million to $.2 million from $1.6 million in 1996. This is primarily the result
of a $2.0 million loss relating to a sale of assets recognized during 1996
offset by the Company's share of income related to investments in unconsolidated
subsidiaries.
EXTRAORDINARY EXPENSE. In 1997 and 1996, the Company incurred an
extraordinary pretax loss of approximately $2.5 million and $.9 million,
respectively, as a result of writing off previously capitalized financing costs
associated with a revolving credit facility that was refinanced in February 1997
and March 1996.
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 in
1995. Total cellular revenue, wireline revenue and fiber revenue represented
60.4%, 31.2% and 5.4% of total operating revenue, respectively, in 1996 and
55.1%, 37.2% and 4.1% of total operating revenue, respectively, in 1995.
The following table sets forth the components of the Company's wireless
revenue and wireline revenue for the years ended December 31:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Wireless revenue:
Cellular service....................................................... $ 13,949 $ 17,593
Cellular roaming....................................................... 4,369 7,852
Cellular equipment..................................................... 672 662
--------- ---------
18,990 26,107
Wireline revenue:
Local exchange......................................................... 12,807 13,472
Fiber.................................................................. 1,415 2,313
Other.................................................................. 544 501
--------- ---------
14,766 16,286
Other.................................................................... 693 832
--------- ---------
Total................................................................ $ 34,449 $ 43,225
--------- ---------
--------- ---------
</TABLE>
48
<PAGE>
CELLULAR. The Company's operating revenue from its cellular operations
increased $7.1 million, or 37.5%, in 1996 to $26.1 million from $19.0 million in
1995. Cellular service revenue increased $3.6 million, or 26.1%, to $17.6
million in 1996 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 27.6% to 33,955 at December 31, 1996, from 26,614 at December 31,
1995, of which 58.6% (4,301 subscribers) of the increase was attributable to
increased penetration in the Oklahoma/ Texas Cluster. However, the Company's
average monthly cellular service revenue per subscriber decreased 3.4% to $48.31
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 1996 from $4.4 million in 1995. Of the $3.5 million increase, $1.9
million, or 54.3%, was the result of the inclusion of the Kansas/Missouri
Cluster with roaming minutes of use totaling 1.3 million from the acquisition
date in March 1996 to December 31, 1996. The remaining $1.6 million of the
increase, or 45.7%, resulted from a 44.9% increase in roaming minutes of use in
1996 for the Oklahoma/Texas Cluster due to improved coverage areas and an
increase in cellular minutes of use.
LOCAL EXCHANGE. Telco service revenue increased $.7 million, or 5.2%, to
$13.5 million for the year ended December 31, 1996 from $12.8 million in 1995
due to a 1.3% increase in the number of access lines.
FIBER. The Company's revenue from its fiber operations increased $.9
million, or 63.5%, 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 SERVICE AND EQUIPMENT SALES. For the year ended December 31, 1996,
the total cost of service and equipment sales increased $2.1 million, or 30.0%,
to $9.1 million from $7.0 million in 1995.
The following table sets forth the components of the Company's wireless cost
of service and equipment sales and wireline cost of service for the years ended
December 31:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Wireless cost of service and equipment sales:
Cellular service...................................................... $ 3,155 $ 4,503
Cellular equipment.................................................... 2,013 2,571
--------- ---------
5,168 7,074
Wireline cost of service and equipment sales:
Local exchange service................................................ 1,730 1,877
Fiber service......................................................... 116 125
--------- ---------
1,846 2,002
--------- ---------
Total............................................................... $ 7,014 $ 9,076
--------- ---------
--------- ---------
</TABLE>
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 cellular services
includes costs incurred for access to 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
was 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
49
<PAGE>
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 1995. Cost
of cellular equipment increased $.6 million, or 27.8%, 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.
LOCAL EXCHANGE. 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.
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 11,970 with the Kansas/Missouri Cluster making up 1,511 of the
gross cellular subscribers added. The gross number of cellular subscribers added
in 1995 was 9,653. As a percentage of total operating revenue, marketing and
selling costs increased to 11.4% in 1996 from 9.2% in 1995.
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.
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.
IMPACT OF YEAR 2000 ISSUE
The "Year 2000 Issue" is the result of computer programming being written
using two digits rather than four to define the applicable year. Any of the
Company's systems, as well as those of key suppliers and customers, that have
date sensitive logic may interpret a date using "00" as the year 1900 rather
than 2000. This may result in inaccurate processing or possible system failure
causing potential disruption of operations including among other things a
temporary inability to process transactions, send invoices, supply services or
engage in similar normal business activities.
50
<PAGE>
The Company recognizes the Year 2000 Issue stems from the information
systems currently used or that may come into use by the Company, its suppliers
and customers. However, the Company believes that the issue is a business
continuation issue not just an information technology problem. In 1997, the
Company initiated and participated in communications with various customers,
suppliers and regulatory agencies regarding the Year 2000 Issue. In early 1998,
the Company established a multi-disciplined team to perform an impact assessment
for the corporation. The team consists of representatives from each of the lines
of business, as well as representative from key corporate departments. The team
is currently headed by the Chief Information Officer. This in-house team will be
assisted by an outside firm which will provide Year 2000 assessment methodology
and will bring a structured approach to the assessment and management reporting
process.
The specific objectives of the impact assessment team include:
- Identification of key risk areas by line of business
- Identification and prioritization of specific compliance activities by
risk area and line of business
- Identification of costs and schedule for required compliance activities
The scope of the impact assessment includes:
- Systems used internally (licensed and internally developed)
- Service providers such as billing service bureaus
- Key supplier relationships
- Key customer contact points
- Embedded systems
From an information systems standpoint, the Company has historically relied
on outsourcing relationships for many of its business and operational
applications, including billing and customer service. Those applications which
have not been outsourced have been deployed using packaged software from outside
vendors. As a result, the amount of internally developed software that needs to
be analyzed and potentially remediated is believed to be relatively less
compared to other companies in this industry. As such, the key focus of the
impact assessment team will be on the service providers and the vendors whose
software the company is using. Core business applications including the general
ledger, fixed assets, procurement and accounts payable have been recently
replaced (January 1998) using new software which is certified by the vendor to
be year 2000 compliant. In addition, the Company has recently undertaken a
project to replace the human resources and payroll applications using the same
software and hardware platform. This project is scheduled for completion in
calendar 1998.
While the primary focus of the impact assessment team involves looking into
risk areas that exist and identifying remediation activities to change existing
conditions, the team will also be developing recommendations and standards for
future activities of the Company that are aimed at preventing the introduction
of new risk between now and the year 2000.
The Company recognizes that future acquisitions in any part of the business
may introduce new Year 2000 risk into the Company. As a result the company has
included Year 2000 impact assessment analysis and reporting into the due
diligence process for acquisitions beginning in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's Wireless Operations require substantial capital to acquire,
construct and expand cellular telephone systems and to fund operating
requirements. The Company historically has financed its Wireless Operations
through bank debt and proceeds from the sale of debt and equity. While the
Company's Wireline Operations have historically been financed through government
loans, other sources
51
<PAGE>
of financing will be required for the ATI acquisition. Wireline Operations
include the Company's subsidiary, Dobson Wireline Company and its subsidiaries
which own the Company's local exchange, fiber and CLEC operations.
At December 31, 1997, the Company had working capital of $16.3 million (a
ratio of current assets to current liabilities of 1.6:1) and a cash balance of
$3.0 million, which compares to working capital of $11.0 million (a ratio of
current assets to current liabilities of 2.2:1) and $6.9 million (a ratio of
current assets to current liabilities of 2.0:1) and a cash balance of $1.6
million and $1.1 million at December 31, 1996 and 1995, respectively.
The Company's net cash provided by operating activities totaled $12.3
million for 1997 compared to $11.6 million for 1996 and $8.6 million for 1995.
The increase of $.7 million from 1996 to 1997 was primarily due to net changes
in current assets and liabilities, depreciation and amortization and deferred
income taxes and investment tax credits, offset by the Company's net loss for
the period. The increase of $3.0 million from 1995 to 1996 was primarily due to
depreciation and amortization and a loss on the disposition of assets offset by
the Company's net loss for the period.
Net cash used in investing activities, which totaled $221.1 million, $49.4
million and $11.1 million for the years ended December 31, 1997, 1996 and 1995,
respectively, principally related to the acquisition of the
Maryland/Pennsylvania Cluster and Arizona 5 cellular systems in 1997, the
Kansas/Missouri Cluster in 1996, and deposits made in 1995 related to the
Maryland/Pennsylvania Cluster and PCS license acquisitions, as well as capital
expenditures in all periods. Acquisitions accounted for $190.7 million and $30.0
million in 1997 and 1996 and capital expenditures were $23.2 million, $17.4
million and $3.9 million in 1997, 1996 and 1995, respectively.
The Company's capital expenditures (excluding the purchase price and related
costs incurred to consummate acquisitions) were $23.2 million for the year ended
December 31, 1997, and the Company expects its capital expenditures (excluding
the purchase price and related costs incurred to consummate acquisitions) to
total approximately $41.2 million for 1998 (including $5.0 million associated
with the California 4 and Santa Cruz Acquisitions). Of the capital expenditures
expected to be made in 1998, $26.0 million is expected to be made in the
Company's Wireless Operations and $13.8 million is expected to be made in its
Wireline Operations. The Company has not budgeted any amounts to be expended in
1998 with respect to the systems which may be acquired in future wireless
acquisitions (including, but not limited to, California 7, Texas 7 and Arkansas
11), the Pending Wireline Acquisitions or the Company's PCS systems. The amount
and timing of capital expenditures may vary depending on the rate at which the
Company expands and develops its cellular systems, whether the Company
consummates additional acquisitions, whether the Company expands its fiber optic
network or local exchange operations and the adoption of new regulations
relating to support revenue.
In January 1998, the Company entered into an agreement with Lucent
Technologies Inc. ("Lucent") to purchase, over a four-year period, 300 cell
sites, two switches and certain related hardware and software. The agreement
also requires the Company to pay an annual software maintenance fee and to make
certain additional payments based on the number of subscribers added in the
areas serviced by the cell sites. The aggregate net cost to the Company under
this agreement is estimated to be $81 million, of which $8.2 million has been
budgeted for 1998.
In April 1997, the Company was granted PCS licenses in nine markets in
Oklahoma, Kansas and Missouri. The aggregate bid for these licenses was $5.1
million after an FCC authorized discount of 15% by reason of the Company's
status as a "small business." The Company has financed $4.1 million of the
purchase price with government loans secured by liens on the PCS licenses at an
annual interest rate of 6.25%, amortizing quarterly over eight years beginning
in 1999. The Company is required to build out systems covering 25% of the
population covered by each of the PCS licenses by 2002. The Company currently
anticipates that the cost to build out the minimum PCS system will be $10.0
million to $30.0 million. The actual amount of the expenditures will depend on
the PCS technology selected by the
52
<PAGE>
Company, the extent of the Company's buildout, the costs at the time of buildout
and the extent the Company must bear the expense of relocating incumbent
microwave licensees, as mandated by FCC rules. The Company has not budgeted any
amounts for capital expenditures in 1998 with respect to the buildout of a PCS
system.
Net cash provided by financing activities was $210.2 million for 1997
compared to $38.3 million for 1996 and $1.8 million for 1995. Financing
activities for the year ended December 31, 1997 consisted primarily of $343.5
million of proceeds from long-term debt, including the issuance of $160.0
million principal amount of Senior Notes and borrowings under the Bank Facility.
Proceeds from long-term debt exceeded repayment thereof by $254.7 million, $39.8
million and $2.7 million in 1997, 1996, and 1995 respectively.
In March 1998, the Company's subsidiary, Dobson Cellular Operations Company
("Operations"), established a $200.0 million senior secured credit facility (the
"Operations Facility"). Operation's obligations under the Operations Facility
are secured by all current and future assets of Operations, including the Texas
16 assets and assets acquired in any of future wireless acquisitions, and are
guaranteed by Operation's subsidiaries. The Company's subsidiary, Dobson
Operating Company ("DOC"), established a $250.0 million senior secured credit
facility (the "DOC Facility") to replace the then existing bank facility. The
DOC Facility continues to be secured by all of DOC's stock and the stock or
partnership interests of its restricted subsidiaries and all assets of DOC and
its restricted subsidiaries. The Company and DOC's subsidiaries other than
Operations, Operation's subsidiaries, the Arizona 5 Partnership and the Wireline
Operations have guaranteed DOC's obligations under the DOC Facility. The
Operations Facility and the DOC Facility require the Company to maintain certain
financial ratios. The failure to maintain such ratios would constitute an event
of default, notwithstanding the Company's ability to meet its debt service
obligations.
In March 1998, the Company entered into a definitive agreement to purchase
the stock of ATI for approximately $130.0 million. At the time of the agreement,
the Company placed $5.0 million into an escrow account pending closing. The
Company has obtained a commitment letter for a $155.0 million bridge facility
("Bridge Notes") to be established at Dobson Wireline Company. The Bridge Notes
will be used to finance the ATI acquisition, to fund the Zenex purchase, and to
provide additional operating capital. The facility will bear interest at 13%,
increasing by 1% after six months from the issuance date and increasing by an
additional .5% at the end of each subsequent three-month period. Interest is
payable quarterly in arrears and the Bridge Notes mature one year from the date
of issuance. The Bridge Notes are secured by substantially all of the assets of
the Dobson Wireline Company, including the Pending Wireline Acquisitions. The
Bridge Notes are expected to be extinguished with proceeds from either a private
debt offering to be completed during 1998 or through the issuance of senior
rollover notes (the "Rollover Notes"). The Rollover Notes would be used in their
entirety to redeem 100% of the outstanding principal amount of the Bridge Notes.
The Rollover Notes would bear interest at a variable rate and mature ten years
after the date of issuance. The Rollover Notes would be secured with the same
assets secured under the Bridge Notes.
In April 1997, the Company entered into an interest rate hedge agreement to
hedge the Company's interest expense on its indebtedness under the Bank
Facility. The agreement provides for a rate cap of 8.0% plus a factor, based on
the Company's leverage ratio (cap at December 31, 1997 was 10.5%), terminating
on the earlier of April 24, 2000 or the date an option to enter into an interest
rate swap transaction is exercised by the counterparty. Under the swap
agreement, the interest rate would be fixed at 6.13% plus the same factor used
to determine the rate cap or a floating LIBOR rate, terminating on April 24,
2002. The Company accounts for this as a hedge.
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 1997, 1996 and 1995, the minority
partners received distributions of $.5 million, $.1 million and $.9 million,
respectively. Under the Company's bank credit agreements, the Company's minority
partners are not
53
<PAGE>
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 in amounts sufficient to fund the interest
and principal payments owed by certain of its beneficial owners of its stock
with respect to debt incurred in November 1994 to purchase Common Stock. In 1997
and 1996, the Company paid aggregate dividends on its Common Stock of $7.6
million and $.6 million, respectively. Of the amount paid in 1997, $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.
The Company's Wireline Operations have been designated as Unrestricted
Subsidiaries and, therefore, will not be subject to the covenants in the
Indenture for the Senior Notes, the Certificate of Designation for the Senior
Preferred Stock or the Amended Bank Facility. Accordingly, there is no limit on
the amount of debt the Wireline Operations would be able to incur or on its
ability to create liens.
The DOC Facility and Operations Facility each amortize quarterly beginning
June 30, 2000 and terminate on June 30, 2006. The Company's government loans
have scheduled maturities until 2028 and the Senior Notes mature in February
2007. Such indebtedness may need to be refinanced at their respective
maturities. 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.
Although there can be no assurance, management believes the proceeds from
the sale of the Senior Preferred Stock, together with borrowings under the Bank
Credit Facilities, the Bridge Notes, cash on hand, and cash flow from operations
will be sufficient to fund the Santa Cruz, California 7, Texas 7 and Arkansas 11
Acquisitions, the Pending Wireline Acquisitions, the Company's capital
expenditures and its working capital and debt service requirements. The Company
will require additional financing to pursue other future acquisitions and to
meet the required PCS buildout. Sources of additional capital may include public
or private debt or equity financings, vendor financing and a potential $75
million future increase in commitment contemplated by the Operations Facility.
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 flows, is necessary for the Company to meet its
debt service and dividend requirements, including its obligations on the Senior
Preferred Stock.
FORWARD-LOOKING STATEMENTS
The description of the Company's plans set forth herein, including planned
capital expenditures and acquisitions, are forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. These plans involve a number of risks and uncertainties.
Important factors that could cause actual capital expenditures, acquisition
activity or the Company's performance to differ materially from the plans
include, without limitation, the Company's ability to satisfy the financial
covenants of its outstanding debt and preferred stock instruments and to raise
additional capital; the Company's ability to manage its rapid growth
successfully and to compete effectively in its cellular, fiber and resale
businesses against competitors with greater financial, technical, marketing and
other resources; changes in end-user requirements and preferences; the
development of other technologies and products that may gain more commercial
acceptance than those of the Company; and adverse regulatory changes. Readers
are cautioned not to place undue reliance on these forward-looking statements
which speak only as of the date hereof. The Company undertakes no obligation to
update or revise these forward-looking statements to reflect events or
circumstances after the date hereof including, without limitation, changes in
the Company's business strategy or planned capital expenditures, or to reflect
the occurrence of unanticipated events.
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<PAGE>
BUSINESS
Dobson Communications Corporation provides diversified telecommunications
products and services in eight states across the country. The Company was
organized in Oklahoma in 1936 as Dobson Telephone Company and adopted its
current organizational structure in 1998. The Company operates in two
telecommunications business segments: wireless and wireline. Segment reporting
information may be found in Note 12 to the consolidated financial statements
included elsewhere herein.
Dobson's wireless operations focus on the ownership, operation and
development of rural cellular systems. The Company currently provides rural
cellular telephone services in RSAs and small MSAs in western Oklahoma and the
Texas panhandle, in northeastern Kansas and northwestern Missouri near Kansas
City, in Maryland and Pennsylvania near the Washington-Baltimore metropolitan
area, in Arizona between Phoenix and Tucson and in south-central Texas. Upon
consummation of the proposed wireless acquisitions of California 4 and Santa
Cruz, the Company will also own and operate rural cellular systems in northern
and southern California. In addition, the Company recently purchased PCS
licenses covering 9 BTAs in Oklahoma, Kansas and Missouri.
Dobson's wireline operations include competitive local exchange carrier
("CLEC") operations which recently began providing services in October 1997 and
currently operates in three markets, including Oklahoma City and Tulsa, Oklahoma
and Amarillo, Texas. Upon consummation of the Pending Wireline Acquisitions, the
Company will also provide services in five major Texas markets, including
Houston, Dallas, Fort Worth, San Antonio and Austin. Dobson's wireline
operations also include local telephone exchange ("local exchange") services in
Oklahoma and regional fiber optic transmission networks ("fiber") in Oklahoma,
Texas and Colorado.
The Company was incorporated under the laws of the State of Oklahoma in
February 1997. The principal executive offices of the Company are located at
13439 North Broadway Extension, Suite 200, Oklahoma City, OK 73114 and its
telephone number is (405) 391-8500.
WIRELESS OPERATIONS
The Company's wireless business began in 1990 when it initiated operations
in part of the Oklahoma/ Texas Cluster. Since then, 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 by adding retail outlets and
participating in community affairs, expanding coverage through the addition of
cell sites, enhancing system technology and offering simplified rate plans. For
the years ended December 31, 1997, 1996 and 1995, wireless service revenue
accounted for 45%, 41% and 40%, respectively, of the Company's consolidated
revenue, while wireless roaming revenue accounted for 31%, 18% and 13%,
respectively, of the Company's consolidated revenue.
The following table sets forth the chronology of wireless acquisitions made
by the Company:
<TABLE>
<CAPTION>
CELLULAR SYSTEMS DATE ACQUIRED
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Oklahoma/Texas Cluster............................. August 1989--September 1991
Kansas/Missouri Cluster............................ March 1996
Maryland/Pennsylvania Cluster...................... February--March 1997
Arizona 5.......................................... October 1997
Texas 16........................................... January 1998
California 4....................................... April 1998
</TABLE>
WIRELESS BUSINESS STRATEGY
The wireless operations' primary business strategy is to focus on the
development and acquisition of rural cellular systems. The principal elements of
the Company's strategy include the following:
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LEVERAGE STRATEGIC RELATIONSHIPS. The Company develops strategic
relationships with operators of cellular systems in major MSAs near the
Company's systems. These relationships include reciprocal roaming agreements
which allow the Company's subscribers to use the system in the neighboring MSA
at favorable rates which, in certain circumstances, are comparable to the
subscriber's home rates. Under these agreements, similar benefits are available
to the MSA operator's subscribers roaming in the Company's areas. The Company
seeks to enter into agreements with the operator marketing its cellular services
under the predominant brand name in the neighboring MSA. As part of these
relationships, the Company will implement the digital technology in its system
area which is selected in the neighboring MSA. By entering into these strategic
agreements, the Company is able to increase its roaming revenue, offer its
subscribers larger home rate areas and leverage the recognized brand names of
its partners and their extensive marketing efforts.
AGGRESSIVE LOCAL MARKETING AND PROMOTION OF WIRELESS SERVICES. The
Company's marketing objective is to distinguish the Company as the local
market's leading wireless services provider, stressing its service quality,
local sales offices staffed with local personnel, and 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 an operator 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 market requirements and community involvement. The
Company intends to continue to open new retail outlets and introduce simplified
rate plans in each of its market areas.
TARGETED SALES EFFORTS. The Company focuses its marketing programs on
attracting subscribers who are likely to generate high monthly revenue and low
churn rates. Local management 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 quality, value and
advantage of the Company's cellular service. In addition, the Company has
implemented a sales force compensation system designed to maximize the
acquisition of these high use, reduced churn subscribers, which is intended to
result in higher monthly revenue per subscriber and lower marketing and selling
costs per gross additional subscriber.
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 regional customer service centers. The
Company believes that its emphasis on superior customer service has enabled it
to achieve an average monthly churn rate of 1.89% for the year ended December
31, 1997.
CONTINUED SYSTEM DEVELOPMENT AND EXPANSION. The Company intends to continue
to expand and improve coverage, increase capacity and build out its 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 roaming activity due to the larger geographic
area covered by the cellular network and further enhance the overall efficiency
of the network.
The Company is upgrading its systems with digital technology to enable it to
increase roaming (by servicing the increasing number of digital cellular
subscribers and PCS subscribers with dual mode phones) and provide enhanced
capabilities, including caller ID, longer battery life and zone billing. The
Company recently completed upgrading its system in the Oklahoma/Texas Cluster to
analog/IS-136 TDMA digital technology, and is currently upgrading its
Maryland/Pennsylvania Cluster to analog/IS-136 TDMA. In Arizona 5, the Company
has completed the upgrade of its core cell sites to analog/CDMA. The timing and
extent of the upgrading of the Company's other systems will depend upon the
technology selected by the Company's neighboring strategic partners, market
conditions and financial considerations.
DISCIPLINED EXPANSION THROUGH ACQUISITIONS. The Company continuously
evaluates opportunities to create new cellular clusters or expand current
clusters by acquisitions of additional cellular systems. In
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<PAGE>
evaluating acquisitions, the Company targets RSAs and small MSAs that have some
or all of the following characteristics: (i) are adjacent to major metropolitan
areas; (ii) have a strong demographic profile, including positive population
growth trends; (iii) include a high concentration of expressway corridors that
facilitate a significant amount of roaming activity; (iv) are large enough, or
offer clustering opportunities, to obtain certain economies of scale; (v) have
underdeveloped areas with low penetration levels; (vi) generate positive
operating cash flow; (vii) have the potential to develop a strategic
relationship with operators of neighboring cellular systems and the ability to
offer services under a leading brand name; and (viii) are likely to have fewer
PCS competitors.
The Company is presently evaluating, and in discussions with, a number of
acquisition candidates. The Company has recently entered into definitive
agreements to purchase the FCC licenses for, and certain assets relating to,
California 4 and Santa Cruz and has also entered into non-binding letters of
intent to purchase the FCC license for, and certain assets relating to,
California 7 and Texas 7. Even though the letter of intent with respect to the
Texas 7 Acquisition has expired, negotiations are continuing.
MARKETS AND SYSTEMS
The following table sets forth certain data with respect to the Company's
existing cellular systems as of April 1, 1998:
<TABLE>
<CAPTION>
TOTAL MARKET
CELLULAR SYSTEMS TOTAL POPS OWNERSHIP NET POPS SUBSCRIBERS PENETRATION(1)
- -------------------------------------------- ----------- ---------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Oklahoma/Texas Cluster(2)................... 344,300 (3) 256,484 37,786 11.0%
Kansas/Missouri Cluster(4).................. 243,800 100% 243,800 7,010 2.9
Maryland/Pennsylvania Cluster(5)............ 874,200 100% 874,200 50,450 5.8
Arizona 5................................... 184,400 75% 138,300 9,096 4.9
Texas 16.................................... 326,300 100% 326,300 4,513 1.4
California 4................................ 363,400 100% 363,400 16,472 4.5
----------- ---------- ------------- ---
Total....................................... 2,336,400 2,202,484 125,327 5.4%
----------- ---------- ------------- ---
-----------
</TABLE>
- ------------------------
(1) Market presentation is determined by dividing total subscribers by the total
Pops covered by the applicable FCC cellular license.
(2) The Oklahoma/Texas Cluster includes Oklahoma 5 RSA, Oklahoma 7 RSA, Texas 2
RSA, Enid, OK MSA and Oklahoma 2 RSA and. 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.
(3) The Company is the operating manager for partnerships which own the FCC
licenses for, and assets relating to, the Oklahoma 5 RSA, Oklahoma 7 RSA and
Texas 2 RSA. The Company's ownership interests in these partnerships are
64.4%, 64.4% and 61.0%, respectively. The Company owns 100% of the Enid, OK
MSA and Oklahoma 2 RSA.
(4) The Kansas/Missouri Cluster includes Kansas 5 RSA, Missouri 1 RSA, Missouri
4 RSA and Missouri 5 RSA. The Company also operates Missouri 2 RSA under an
interim operating authority granted by the FCC which will terminate after
the permanent licensee commences commercial service in the market. The FCC
has issued a license for Missouri 2 RSA to a permanent licensee, but the
issuance has been challenged. The 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.
(5) The Company's Maryland/Pennsylvania Cluster includes Maryland 2 RSA,
Cumberland, MD MSA, Hagerstown, MD MSA, Maryland 3 RSA, and Pennsylvania 10
West RSA. The FCC license for the Cumberland, MD MSA covers only the towns
of Cumberland and Frostburg and surrounding areas
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(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.
The following is a description of the Company's existing cellular markets
and systems.
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 subsequent to the
issuance of the FCC licenses. 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 Enid, Oklahoma MSA and the Oklahoma 2 RSA were acquired by the Company
in 1991 from owners who had not developed the market area.
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 I-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 city in the Oklahoma/Texas Cluster. The Oklahoma/ Texas Cluster is
primarily agricultural and oil and gas industry oriented.
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 a portion of the
Missouri 5 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.
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 Kansas/Missouri Cluster also includes Linn County,
Missouri in the northwest corner of the Missouri 5 RSA, which is contiguous to
the Missouri 4 RSA.
MARYLAND/PENNSYLVANIA CLUSTER
GENERAL. On March 3, 1997, the Company purchased the FCC cellular license
for, and certain assets relating to, the Maryland 2 RSA. The prior owner of the
Maryland 2 RSA license had no employees, distribution facilities or cell sites,
and the RSA was serviced by Washington Baltimore Cellular Limited Partnership
("WBCLP"), an affiliate of SWBM, under an interim operating authority. WBCLP
continues to operate Maryland 2 under its interim operating authority on behalf
of the Company, and the Company leases the existing cell sites and related
equipment from WBCLP. In October 1997, the Company assumed control of customer
service, billing and activations in Maryland 2. The Company intends to build out
its own infrastructure in Maryland 2 and assume control of the remaining
operations conducted by WBCLP in the second quarter of 1998. On February 28,
1997, the Company also purchased the FCC cellular licenses for, and certain
assets relating to, the Western Maryland Properties. Cellular service has been
provided in the Western Maryland Properties since 1991.
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
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<PAGE>
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 Western Maryland Properties are within 50 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.
ARIZONA 5
GENERAL. On October 1, 1997, the Company acquired a 75% interest in the
Arizona 5 Partnership, which owns the FCC license for and the system for the
Arizona 5 RSA. At the same time, Gila River Telecommunications Subsidiary, Inc.,
a wholly owned subsidiary of the Gila River Indian Community, acquired a 25%
interest in the Partnership. The Company is the operating manager of the Arizona
5 Partnership. See Item 13. Certain Relationships and Related Transactions.
DEMOGRAPHICS. Arizona 5 is located southeast of Phoenix and northwest of
Tucson, covering an area of approximately 10,100 square miles in southern
Arizona. The principal industries in Arizona 5 are mining and smelting. In
addition, the area experiences significant tourist traffic to the local Indian
dwellings and commuter traffic to Phoenix and Tucson. The service area includes
approximately 100 miles of I-10.
TEXAS 16
GENERAL. On January 26, 1998, the Company purchased the FCC cellular
license for, and certain assets relating to, the Texas 16 RSA for an aggregate
purchase price of $56.6 million. The property is located in south-central Texas
in an area bordered by Austin, Houston and San Antonio, Texas 16 has 326,300
total Pops and, as of December 31, 1997, there were over 4,000 subscribers
(representing a 1.2% market penetration).
DEMOGRAPHICS. Texas 16 covers an area of approximately 10,900 square miles
in south-central Texas. The principal industries in Texas 16 are agriculture,
oil and gas, steel and plastics. The service area includes approximately 98
miles of I-10, which connects Houston and San Antonio, 60 miles of US-59, and 90
miles of US-290. US-290 runs parallel to I-10 and connects Houston to the state
capital in Austin.
CALIFORNIA 4
GENERAL. On April 1, 1998, the Company purchased California 4 for an
aggregate purchase price of $90.9 million. California 4 is located in northern
California approximately 50 miles inland from California's central coast in an
area between Fresno and Modesto. California 4 has 363,400 total Pops and, as of
December 31, 1997, there were approximately 15,800 subscribers (representing a
4.4% market penetration).
DEMOGRAPHICS. California 4 covers an area of approximately 5,500 square
miles in northern California. The principal industries in California 4 are
manufacturing and agriculture. In addition, the area experiences significant
tourist traffic as one of the entrances to Yosemite National Park is located in
the eastern segment of the market. The service area includes approximately 37
miles of Route 99 between Sacramento and Los Angeles as well as 60 miles of I-25
between San Francisco and Los Angeles.
MARKETING AND ROAMING. The Company expects to enter into roaming agreements
with AT&T Wireless which will permit the Company to include AT&T Wireless'
service area in its home rate area, allowing the Company to offer a wider
service area. The AT&T Wireless service area includes San Francisco, Fresno and
Modesto. The Company's principal competitor will be GTE. The Company intends to
use a national brand name to market the services it offers in California 4;
however, the Company has not yet entered into any definitive license agreement.
See "--Service Marks."
At present, California 4 has five retail locations. The Company intends to
open additional stores in 1998.
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<PAGE>
SYSTEMS. California 4 has one switch and 29 cell sites which cover more
than 95% of the population in the market area. The Company intends to upgrade
the system's existing equipment to analog/IS-136 TDMA digital technology in
1999.
SANTA CRUZ
GENERAL. The Company has entered into a definitive agreement to purchase
70% of the outstanding stock of the corporation that owns the FCC cellular
license for, and the assets relating to, the Santa Cruz MSA, for $25.2 million,
subject to adjustment, and is negotiating to acquire the remaining 30% of the
outstanding stock of such corporation. The Company has placed $1.0 million into
escrow pending closing of the acquisition which is expected to occur late in the
second quarter of 1998. The property is adjacent to California 4 and is located
southwest of San Jose and north of the Monterey Peninsula, on California's
Pacific coastline. Santa Cruz has 242,000 total Pops (169,400 Net Pops) and, as
of December 31, 1997, there were approximately 14,300 subscribers (representing
a 5.9% market penetration).
DEMOGRAPHICS. Santa Cruz covers approximately 446 square miles in central
California. The service area includes 37 miles of State Highway 1 that runs
along the California Pacific coastline and 13 miles of State Highway 17 that
connects Santa Cruz to San Jose.
MARKETING AND ROAMING. The Company expects to enter into roaming agreements
with AT&T Wireless and Bay Area Cellular (a partnership between AT&T Wireless
and AirTouch). The Company's principal competitor will be GTE. The Company
intends to use a national brand name to market the services it offers in Santa
Cruz; however, the Company has not yet entered into any definitive license
agreement. See "--Service Marks."
At present, Santa Cruz has three retail locations. The Company intends to
open additional retail locations in 1998.
SYSTEMS. Santa Cruz has 12 cell sites which cover approximately 99% of the
population in the market area. The Company intends to replace all of this
equipment and install additional cell sites over the next several years
utilizing analog/IS-136 TDMA digital technology.
OTHER WIRELESS ACQUISITIONS
The Company has recently entered into non-binding letters of intent with
respect to California 7 and Texas 7 for a purchase price of approximately $21.0
million and $61.0 million, respectively. These acquisitions will be subject to
the satisfaction of a number of significant conditions, including the
satisfactory completion of due diligence, the satisfactory resolution of certain
pending claims with respect to the FCC license for Texas 7, the negotiation and
execution of definitive purchase agreements, the receipt of board and
shareholder approval and the receipt of all required regulatory approvals. There
can be no assurance that the Company will consummate these or any other
acquisitions.
An affiliate of the seller of Texas 7 is presently negotiating to purchase
the FCC license for, and certain assets relating to, the Arkansas 11 RSA for not
more than $6.0 million. Pursuant to the letter of intent for Texas 7, the
Company would receive an assignment of such affiliate's rights, if any, to
acquire Arkansas 11 upon the execution of a definitive agreement for the
Company's acquisition of Texas 7. The Company would pay the seller of Texas 7
$1.0 million for such assignment upon the closing of the Arkansas 11
acquisition. The letter of intent with respect to Texas 7 has expired, but
negotiations with the seller are continuing.
PRODUCTS AND SERVICES
The Company provides a variety of cellular services and products designed to
address a range of consumer, business and personal 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
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<PAGE>
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 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 service plan pricing
is maintained and, as appropriate, revisions to pricing 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 roaming (by servicing the increased number of digital
cellular subscribers and PCS subscribers with dual mode phones) and provide
enhanced capabilities, including caller ID, longer battery life and zone
billing. The Company has completed the upgrade to digital technology in the
Oklahoma/Texas Cluster, and is in the process of upgrading its
Maryland/Pennsylvania Cluster to analog/IS-136 TDMA. The Company has completed
the upgrade of the core cell sites in Arizona 5 to analog/CDMA. The Company
expects to upgrade its technology in the Kansas/Missouri Cluster to analog/CDMA.
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. 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
regional customer service centers located in Oklahoma City, OK and Frederick, MD
on a toll-free access number (with no airtime charge). Upon completion of the
California 4 Acquisition, the Company intends to open a regional customer
service center in California. 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 focuses its marketing program on attracting subscribers who are
likely to generate high monthly revenue and low churn rates. 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 quality, value and 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
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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 both national brand names and a Company
brand name. See "--Service Marks." The service mark selected for use by the
Company in each of its clusters depends, to a large extent, 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.
The Company operated 27 retail stores and thirteen other retail outlets as
of February 28, 1998. 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 agreements that allow customers to roam at
competitive prices. The Company believes this increases usage on all cellular
systems, including the Company's. Roaming is a substantial source of revenue for
the Company. The Company focuses on systems that are adjacent to major
metropolitan areas and include a high concentration of expressway corridors that
tend to result in a significant amount of roaming activity. The Company has
entered into roaming agreements with operators of cellular systems in adjoining
MSAs and others which provide for reciprocal roaming rates that allow customers
to roam at competitive prices which, in certain instances, are comparable to
home area rates. The following table lists the Company's principal roaming
partners in each of its cellular clusters:
<TABLE>
<CAPTION>
CELLULAR SYSTEMS CELLULAR ROAMING PARTNERS
- --------------------------------------------------- ---------------------------------------------------
<S> <C>
Oklahoma/Texas Cluster............................. SWBM, AT&T Wireless
Kansas/Missouri Cluster............................ CMT, Western Wireless, U.S. Cellular
Maryland/Pennsylvania Cluster...................... SWBM, Vanguard, AT&T Wireless
Arizona 5.......................................... WMC
Texas 16........................................... Houston Cellular, AT&T Wireless
California 4....................................... AT&T Wireless, Bay Area Cellular
</TABLE>
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
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United States and Canada. In addition, special services such as call forwarding
and call waiting automatically follow subscribers as they travel.
PCS
In April 1997, the Company was granted PCS licenses in nine markets in
Oklahoma, Kansas and Missouri that are adjacent to or overlap the Company's
existing cellular markets. The PCS licenses 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 cover an aggregate
of approximately 4.2 million Pops.
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 complex data
transmission features, such as "mobile office" applications (including
facsimile, electronic mail and connecting notebook computers with computer/data
networks).
While digital technology generally serves 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 developed by vendors for digital cellular
systems became available in late 1997. These new handsets offer 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 for 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. In January 1998, the Company entered into an
agreement with Lucent to purchase, over a four-year period, 300 cell sites, two
switches and certain related hardware and software. The agreement also requires
the Company to pay an annual software maintenance fee and to make certain
additional payments based on the number of subscribers added in the areas
serviced by the cell sites. The aggregate net cost to the Company under this
agreement is estimated to be $81 million, of which $8.2 million has been
budgeted for 1998.
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. See "--Business Strategy" and
"--Proposed Wireless Acquisitions."
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
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comprises a signal (CDMA). While the FCC has mandated that licensed cellular
systems in the United States 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 able to use a handset in an area
served by CDMA, only if it is a dual-mode handset that permits the subscriber to
use the cellular system in that area. Dual-mode handsets for TDMA/CDMA are not
yet available and analog/TDMA handsets have only recently become available.
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, it may not be
possible to complete certain calls, especially during peak hours. Digital
technology increases system capacity and offers other advantages, often
including improved overall average signal quality, improved call security,
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, market conditions and financial
considerations. The Company's systems in its Oklahoma/Texas Cluster have been
upgraded to enable the Company to offer analog/IS-136 TDMA digital services. The
systems in the Maryland/Pennsylvania Cluster (including Cumberland, MD MSA,
Hagerstown, MD MSA, Maryland 3 RSA and Pennsylvania 10 West RSA) have been
upgraded to analog/IS-136 TDMA technology and the Company is in the process of
upgrading to analog/IS-136 TDMA technology for Maryland 2 RSA. The Company's
core cell sites in Arizona 5 have been upgraded to analog/CDMA digital
technology. The Company expects to convert its systems in the Kansas/Missouri
Cluster to analog/CDMA digital technology, which is the digital technology for
the Kansas City and St. Joseph MSAs chosen by CMT, and in Texas 16 to
analog/IS-136 TDMA technology. Upon completion of the California 4 and Santa
Cruz acquisitions, the Company expects to convert the acquired to analog/IS-136
TDMA digital technology.
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INFORMATION SYSTEMS. All billing functions for the Company's cellular
operations are currently provided by International Telecommunications Data
Service ("ITDS"). Proprietary software furnished by ITDS serves all functions of
billing for 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.
REGULATION
OVERVIEW. The wireless telecommunications 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 Telecommunications Act of 1996 (the "1996 Act") and are
currently the subject of administrative rulemakings and judicial proceedings
that are significant to the Company. For example, a number of incumbent local
exchange carriers ("ILECs") and state commissions have challlenged the FCC's
rules governing interconnection in the 8th Circuit Court of Appeals. While the
8th Circuit Court of Appeals left the FCC's rules governing local exchange
carrier ("LEC")--commercial mobile radio service ("CMRS") interconnection in
tact, review of other aspects of the rules is currently pending before the U.S.
Supreme Court. In addition, SWBT and other ILECs have challenged the 1996 Act's
restrictions on RBOC provision of in-region interexchange services in Federal
District Court in Wichita Falls, Texas. The district court held the 1996 Act's
restrictions unconstitutional, and review of the court's decision is pending
before the 5th Circuit Court of Appeals in New Orleans. 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 wireless telecommunications
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 wireless telecommunications 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. Block B licenses initially were reserved for wireline telephone
companies, such as the Company, while non-wireline licenses (Block A 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. 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 (as defined in FCC rules) in a total of
more than 45 MHz of licensed broadband PCS, cellular and ESMR spectrum regulated
as CMRS with significant overlap in any geographic area (significant overlap
will occur when at least 10% of the 1990 census
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population of the PCS licensed service area 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 if a licensee has chosen not to provide
services to certain areas. 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 most licensees (Maryland 2 being an exception)
and the FCC has granted several "unserved area" applications filed by parties
other than the original MSA or RSA licensee.
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 fees and assessments
to the FCC in connection with its cellular operations including regulatory fees
and assessments for Telecommunications Relay Services, numbering administration
and universal service.
The Communications Act requires prior FCC approval for substantive,
non-proforma transfers or assignments 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 present 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 to better locate callers that have used
wireless 911 features. Under these requirements, such implementation began in
December 1997 and will continue in stages through October 2001. Cellular and PCS
carriers are also required to provide law enforcement agencies with capacity by
March 12, 2001 and technical assistance for wiretaps by October 25, 1998. These
wireless 911 and law enforcement requirements may create additional capital
obligations for the Company to make necessary system changes.
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, 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; however, the Company currently has not
budgeted for any such expenditures.
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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 Regional Bell
Operating Companies ("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 for the interconnection of networks and interchange of traffic, a
category that will, for these purposes, include cellular carriers and PCS
licensees, 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 have been
overturned by a federal court, which decision remains subject to further review.
However, the FCC's orders remain in effect as to interconnection of CMRS
carriers to the local exchange. 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. The FCC's universal service rules require
cellular and PCS licensees to pay monetary contributions to support federal
universal service programs based on gross revenues earned from
telecommunications services and could result in increased costs for the
Company's cellular operations. These provisions may also impact the Company's
wireline operations. The 1996 Act also eases the restrictions on the provision
of interexchange telephone services by wireless carriers affiliated with RBOCs.
RBOC-affiliated wireless carriers have interpreted the legislation to permit
immediate provision of in region 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 other mechanisms, 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. New limitations on local
zoning requirements may facilitate the construction of new cell sites and
related facilities. See "--State, Local and Other Regulation." However, these
restrictions on zoning authority may provide only limited assistance to cellular
carriers, and other provisions of the new statute relating to interconnection,
telephone number portability, universal service, 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 petitions 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
states in which the Company operates, and in which it will operate upon
completion of the proposed wireless acquisitions, maintain nominal oversight
jurisdiction, primarily focusing upon prior approval of acquisitions and
transfers and resolution of customer complaints.
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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 building permit approvals for the cell site microwave tower
locations. 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. Additionally, any proposed site must comply
with the FCC's environmental rules.
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 facilities some relief from state and local laws that
arbitrarily restrict the construction 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 personal wireless service
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. Many wireless telecommunications
carriers are challenging local zoning laws that restrict construction, but it
remains 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 for
services that compete with the Company's business could adversely affect the
Company's operating results. In this regard, the FCC has allocated and licensed
an additional 30 MHz for wireless communications services, and will soon license
an additional 1.3 GHz in the 28 GHz band which can be used for fixed wireless
services.
LICENSES
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 1998, and the licenses to
be acquired in the California 4 and Santa Cruz Acquisitions will expire at
varying dates beginning in October 1998. 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 Company expects to file for and anticipates being granted a renewal
expectancy for all FCC licenses due to expire in 1998. 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
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expectancy, competing applications for the license will be accepted by the FCC.
The parties will be subject to a comparative hearing 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 all CMRS licensees, including 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 based upon Rand McNally's 493
BTAs, all of which are included in the 51 MTAs. 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 blocks, 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 standards to apply to PCS renewals under which the FCC
will award a renewal expectancy using standards similar to those applied to
cellular licensees. 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. All 10 MHz licensees must provide service to at least 25% of the
service area within five years of their initial license. 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
certain licenses awarded to "small businesses" with bidding enhancements in the
C Block and F Block auctions. 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, met the same eligibility criteria at the
time of receipt of such licenses. Any transfers or assignments by licensees that
qualified for installment payments during the entire ten-year initial license
terms are subject to unjust enrichment penalties; i.e., acceleration of any
installment payment plans should the assignee or transferee not qualify for the
same benefits. Any transfers or assignments by licensees that qualified for
bidding credits during the first five years of the license term are subject to
unjust enrichment penalties; i.e., forfeiture of any bidding credit based upon
the amount of time the initial license has been held should the assignee or
transferee not qualify for these 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. The Company was qualified to hold C and F licenses at the time such
licenses were awarded, and anticipates remaining so qualified throughout the
term of the PCS licenses awarded to it.
For a period of up to five years after the grant of a PCS license (subject
to extension), a PCS licensee will be prohibited from interfering 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
therefore need to relocate many of these incumbent licensees, at the Company's
expense, to other frequencies or to reimburse other PCS entrants for expenses
they have incurred in relocating incumbent licensees in a manner that benefits
the Company. 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 one-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
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negotiation period is three years, with an additional two-year mandatory
negotiation period. After the voluntary and mandatory negotiation periods
expire, the microwave user continues to hold primary status until April 4, 2005.
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 for the relocation of microwave
incumbents in order to provide PCS services using the PCS licenses it has been
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 also
requires licensees to comply with statutory restrictions regarding the direct or
indirect ownership or control of certain FCC licenses by foreign persons or
entities.
SERVICE MARKS
The Company owns the service mark DOBSON CELLULAR-SM- which it uses in its
cellular telephone systems in western Oklahoma. While the Company has not
attempted to federally register the brand name "Dobson Cellular," the Company
believes that its prior use of this brand name in the limited areas where it is
used will enable the Company to effectively police against any infringing uses
of such brand name.
The following table sets forth the service mark the Company uses for
products and services in each of its cellular clusters:
<TABLE>
<CAPTION>
CELLULAR SYSTEMS SERVICE MARK
- ------------------------------------------------ ------------------------------------------------------
<S> <C>
Oklahoma/Texas Cluster.......................... DOBSON CELLULAR-SM-, CELLULAR
ONE-Registered Trademark-
Kansas/Missouri Cluster......................... CELLULAR ONE-Registered Trademark-
Maryland/Pennsylvania Cluster................... CELLULAR ONE-Registered Trademark-
Arizona 5....................................... AIRTOUCH-SM- CELLULAR
Texas 16........................................ CELLULAR ONE-Registered Trademark-
California 4.................................... CELLULAR ONE-Registered Trademark-
</TABLE>
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, 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. 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 have original five-year terms expiring in 2002 and may be renewed at
the Company's option, subject to the satisfaction of certain operating
standards, for two additional five-year terms.
AIRTOUCH-SM- 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 entered into a licensing agreement which permits the
Company to use the AIRTOUCH-SM- 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-SM- CELLULAR mark requires the Company to
provide high-quality cellular telephone services to its customers and
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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.
Following the completion of the California 4 and Santa Cruz Acquisitions,
the Company intends to market its services in the California 4 and Santa Cruz
markets using a national brand name. However, the Company has not yet entered
into any license agreements, and there can be no assurance that the Company will
be able to do so.
COMPETITION
The wireless telecommunications industry is experiencing significant
technological changes, as evidenced by the increasing pace of improvements in
the capacity and quality of digital technology, shorter cycles for new products
and enhancements, and changes in consumer preferences and expectations.
Accordingly, the Company expects competition in the wireless telecommunications
industry 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 or internet 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. Competition for customers between
cellular licensees is based principally upon price, the services and
enhancements offered, the quality of the cellular system, customer service,
system coverage and capacity. 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. The following table lists the Company's
cellular competitors in each of its cellular clusters:
<TABLE>
<CAPTION>
CELLULAR SYSTEMS PRINCIPAL CELLULAR COMPETITORS
- ------------------------------------------------ ------------------------------------------------------
<S> <C>
Oklahoma/Texas Cluster.......................... AT&T Wireless, Western Wireless, Enid Cellular
Kansas/Missouri Cluster......................... SWBM, Kansas Cellular, ALLTEL, Chariton Cellular
Maryland/Pennsylvania Cluster................... BAM, Sprint, U.S. Cellular
Arizona 5....................................... BAM
Texas 16........................................ GTE
California 4.................................... GTE
</TABLE>
FUTURE COMPETITION. The FCC requires that all cellular system operators
provide service to resellers on a nondiscriminatory basis until five years after
the D.E.F. Block PCS licenses were awarded. 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 telecommuncations
companies resell cellular service as a complement to their long distance, local
telephone, paging, cable television or internet offerings.
A growing 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
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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 of the
PCS licensees that compete, or will compete, with the Company have access to
substantial capital resources. In addition, many of these companies or their
affiliates already operate large cellular telephone systems and thus bring
significant wireless experience to this new marketplace.
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 provided by companies such as Nextel Communications, Inc. 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 ("MSS"). In addition, Motorola has been licensed by the FCC for a low
earth-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
Company is aware of one low earth-orbit satellite based ("LEO") system which has
commenced commercial operations. While the Company may experience increased
competition from LEO systems in the future, to date, such systems have not
affected the Company's operations.
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.
The Company believes that its cellular subscription rates and roaming rates are
generally competitive with the rates of competitors in its markets.
WIRELINE OPERATIONS
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, 1997, the Company's local
telephone exchanges served 12,633 access lines. The Company provides local and
long-distance telecommunications services with enhanced and value-added calling
and billing features. For the three years ended December 31, 1997, 1996 and
1995, local exchange service revenue accounted for 16%, 31%, and 37% of the
Company's consolidated revenue.
The Company intends to leverage its reputation, knowledge of local markets
and its local exchange experience by reselling local, long distance and wireless
services. The Company commenced offering these services in October 1997 and
currently operates in Oklahoma City, Tulsa and Amarillo. The Company uses
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its own switches and leases local exchange lines in these markets. The Company
has an integrated billing system designed to provide a single bill to customers
for all services provided.
The Company operates over 545 miles of long-haul fiber optic facilities. It
owns and operates approximately 360 miles of long-haul fiber optic facilities
between Oklahoma City and Amarillo which link the Company's local exchanges. The
Company also is a 20% partner in, and manages, a partnership which owns and
operates approximately 185 miles of long-haul fiber optic facilities between
Springfield, Colorado and Colorado Springs. The Company's fiber networks are
linked to other networks through interconnection agreements that allow it to
provide voice and data telecommunications services to cities in Washington,
Idaho, Montana, Wyoming, North Dakota, South Dakota, Minnesota, Wisconsin, Iowa,
Illinois, Missouri, Nebraska, Colorado, Kansas, New Mexico, Oklahoma and Texas.
These networks utilize advanced technologies capable of efficiently transmitting
capacity-intensive services, such as internet, multimedia applications, frame
relay and ATM services. 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.
WIRELINE BUSINESS STRATEGY
In its wireline operations, the Company intends to leverage its reputation
and knowledge of local markets and its local exchange experience by offering
CLEC services, including local, long distance and wireless services initially in
the greater Oklahoma City, Tulsa and Amarillo areas. The Company recently signed
a definitive agreement to acquire, American Telco, Inc. ("ATI"), a CLEC which
provides services in five major markets: Houston, Dallas, Fort Worth, San
Antonio and Austin. The Company targets small and mid-sized business customers
with needs for a wide range of telecommunications services and a preference for
a simplified, single bill. The Company intends to resell local services
initially and leverage off of the existing infrastructure of ATI, thereby
limiting capital expenditures required in the near term, and to install
infrastructure to support local switched services as market conditions warrant.
The Company intends to initiate additional marketing programs to increase
its customer base and to increase the use of its long-haul fiber optic networks
by its existing customers. While the Company has no plans to expand its
long-haul fiber optic infrastructure, it will seek to expand its networks to
additional cities through new interconnection agreements.
Dobson Wireline, the Company's subsidiary which owns the Company's local
exchange carrier, fiber and CLEC operations, has been designated an
"Unrestricted Subsidiary" under the Company's outstanding Senior Notes and
Senior Preferred Stock and, therefore, is not subject to covenant restrictions
which apply to the rest of the Company's operations.
LOCAL EXCHANGE CARRIER
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 a subsidiary of the Company, Dobson Telephone Company, Inc. (Telco). At
December 31, 1997, the Company's local telephone exchanges served 12,633 access
lines.
Telco, like other wireline companies that operate in areas where, due to
factors such as geographic conditions or subscriber density, the cost to provide
service is higher than normal, receives reimbursement from state high cost
support funds (HCF) and from the federal universal service fund (USF).
Approximately 36% of the Company's revenue from its wireline local exchange
operations for the year ended December 31, 1997 was from these two sources.
Telco's other primary sources of revenue consist of end user revenue and access
revenue. End user revenue includes charges for local service and enhanced
services such as call waiting and call forwarding. Access revenue represents
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.
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The Telecommunications Act of 1996 (the "1996 Act") potentially impacts all
of these revenue sources. Under previous regulation, access charges contained
implicit support for high cost areas. The FCC recently adopted rules that would
remove implicit support from access revenues and place more emphasis for such
support on HCF/USF. The FCC's recently adopted changes may, over time, reduce or
eliminate subsidies to telephone companies. The Company will continue to pursue
its strategy to lessen the impact of any future regulatory changes 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.
CLEC
The Company commenced reselling local exchange, long-distance and wireless
services in October 1997 and currently operates in Oklahoma City, Tulsa and
Amarillo with plans to commence offering these services in other metropolitan
areas in the Company's regions based on market demand. The Company has an
agreement which allows the Company to provide these services in all markets
served by SWBT and GTE in Oklahoma. The Company has also established an
agreement with SWBT for the markets served by SWBT in Texas and is currently
awaiting approval by the Texas Public Utility Commission on the agreement with
GTE for the markets served by GTE in Texas. Initially, however, the Company will
focus on Oklahoma City and Tulsa, where the Company can leverage off of its
existing wireline operations in McLoud, Oklahoma. 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-SM- brand name. The Company will
focus primarily on small and mid-sized businesses.
FIBER
The Company operates over 545 miles of long-haul fiber optic facilities. The
Company entered the fiber business in 1990 when it joined with AT&T to place
fiber between Oklahoma City and Amarillo, which links the Company's local
exchanges. 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 Albuquerque, Amarillo, Colorado Springs, Dallas, Denver, Kansas City,
Lubbock, Oklahoma City, Omaha, Midland, Wichita and Wichita Falls. 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 other businesses. Substantially all of the
Company's revenues from its fiber business is generated from its long-haul
services, including those of the Company's other businesses.
The Company has long-haul service contracts with various long-distance
carriers, including AT&T, SWBT, Sprint and NTS. NTS, which, in turn, resells to
MCI and WorldCom, is the largest customer of the Company's fiber business,
accounting for approximately 41% and 49% of its gross fiber revenue for
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the years ended December 31, 1997 and 1996, respectively. The Company also
provides services to the State of Oklahoma and Vyvx.
The Company currently markets its fiber services through one full-time sales
employee and an independent marketing agent. The Company intends to initiate
additional marketing programs to increase its customer base and the use of its
fiber network by its existing customers. While the Company has no plans to add
additional fiber optic lines, it 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 long-haul 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 increase its fiber revenue.
PENDING WIRELINE ACQUISITIONS
On April 7, 1998, the Company entered into a non-binding letter of intent
with Zenex to purchase contractual rights, information data and other rights
with respect to its commercial long distance resale customers in Oklahoma for
approximately $7.0 million, subject to adjustment. The Zenex transaction will be
subject to the satisfaction of a number of significant conditions, including
satisfactory completion of due diligence, the negotiation and execution of a
definitive purchase agreement, the receipt of board and shareholder approval and
the receipt of all required regulatory approvals. These can be no assurance that
the Company will satisfy itself as to these conditions or that the acquisition
will be consummated.
In March 1998, the Company entered into a definitive agreement to purchase
substantially all of the assets of ATI for $130.0 million, subject to
adjustment. The Company has placed $5.0 million into escrow pending closing of
the acquisition which is expected to occur late in the second quarter of 1998.
ATI is a Houston-based CLEC which provides resale services to primarily
commercial customers in five major Texas markets including Houston, Dallas, Fort
Worth, San Antonio and Austin.
REGULATION
Telco is subject to the regulatory authority of the Oklahoma Corporation
Commission (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. The Company has received authority to provide competitive
local exchange telecommunications services and to resell intrastate long
distance services within Oklahoma. The Company has received authority to resell
intrastate long distance services within Texas and has an application pending to
provide facility-based intrastate services in Texas.
The Oklahoma Telecom Act created the Oklahoma Universal Service Fund
("OUSF") with one of its stated purposes to promote and ensure the availability
of both primary universal services, at rates that are reasonable and affordable,
and special universal services, and to provide for reasonably comparable
services at affordable rates in rural areas as well as in urban areas. The
Company's local exchange operations have been determined by the OCC to be
eligible to receive both federal universal funds and OUSF funds. The Oklahoma
Telecom Act specifically provides that eligible local exchange
telecommunications service providers are to receive OUSF funding to reimburse
them for their reasonable investment and expenses incurred in providing
universal services which are not recovered from the federal universal service
fund or any other state or federal fund, for infrastructure expenditures or
costs incurred in response to facility or service requirements established by
governmental mandate and for other purposes deemed
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necessary by the OCC to preserve and advance universal service. The OCC is
promulgating rules to implement the Oklahoma Telecom Act. The interpretation of
the Oklahoma Telecom Act and application of the OCC rules implementing the OUSF
could have a material effect on Company's wireline operations.
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. Recently adopted rules would remove implicit
support from access revenues and place more emphasis for such support on
HCF/USF. In May 1997, the FCC adopted changes that may, over time, reduce or
eliminate subsidies to telephone companies in areas where the cost of connecting
and maintaining phone lines is demonstrated to be above the industry or area
norm. While it is too early to predict the effect of FCC orders, the rules
ultimately adopted by the FCC may have a material adverse effect on the
Company's wireline operations.
In addition, on May 16, 1997, the FCC released an order revising its access
charge rate structure. The new rules substantially increase the costs that local
exchange carriers, including the Company, which are subject to the FCC's price
cap rules ("price cap LECs"), recover through monthly, non-traffic sensitive
access charges and substantially decrease the costs that price cap LECs recover
through traffic sensitive access charges. In the order, the FCC also announced
its plan to bring interstate access rate levels more in line with cost. The FCC
has stated that this plan will grant price cap LECs increased pricing
flexibility upon demonstrations of increased competition (or potential
competition) in relevant markets. The manner in which the FCC further implements
this approach to lowering access charge levels could have a material effect on
the Company's ability to compete in providing interstate access services and on
the Company's wireline operations. An October 1997 FCC access charge decision,
for example, requires local exchange carriers to provide interexchange carriers
with certain information about the number and types of charges they impose on
interexchange carriers' presubscribed customers. Several parties have appealed
the May 16, 1997 order. Those appeals have been consolidated and transferred to
the United States Court of Appeals for the Eighth Circuit where they are
currently pending.
SERVICE MARKS
The Company owns the service mark LOGIX-SM- which it uses in its competitive
local exchange operations in the Oklahoma City and Tulsa areas.
COMPETITION
There are currently no competitors in the areas served by the Company's
local exchanges. In connection with its CLEC resale services, including local,
long distance and wireless services, the Company competes 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. Upon completion of the ATI acquisition and planned
expansion, the Company's CLEC operations will also compete in seven Texas
markets including Houston, Dallas, Fort Worth, San Antonio, Austin, Amarillo and
Lubbock. Local competition in the Texas markets will include SWBT, GTE,
WorldCom, ACSI and ICG. Long distance competition in the Texas markets will
include AT&T, Sprint, MCI, Excel and LCI. Other competitors in the CLEC
operations may include Brooks, Allegience, Intermediate 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. Finally, a number of RBOCs have challenged the 1996 Acts
restrictions on RBOC provision of in-region interexchange services in Federal
courts. The resolution of these judicial challenges may alter the Company's
ability to compete effectively with SWBT and other carriers in connection with
its CLEC resale services.
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In providing bulk long-haul circuit capacity, the Company's primary
competitors are IXC Communications, Inc., QWest Communications International
Inc. 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 RBOCs, GTE and others such as electric utilities and
cable television companies.
EMPLOYEES AND AGENTS
As of December 31, 1997, the Company had approximately 369 employees. In
addition, as of such date, the Company had agreements with 160 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.
PROPERTIES
The Company maintains its corporate headquarters in Oklahoma City, Oklahoma.
The Company leases this space, which is approximately 24,600 square feet, from
an affiliate of the Company at a monthly rental of approximately $23,000. See
Item 13. Certain Relationships and Related Transactions. As of February 28,
1998, the Company's wireless operations leased 35 and owned four sales and
administrative offices, at aggregate annual rentals of approximately $.8
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 in connection with proposed wireless acquisitions. The Company does not
anticipate that it will encounter any material difficulties in meeting its
future needs for any leased space. The Company also owns and leases cell sites,
162 as of February 28, 1998.
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 and
the OCC relating to its operations.
In addition, on May 16, 1997, the FCC released an order revising its access
charge rate structure. The new rules substantially increase the costs that local
exchange carriers, including the Company, which are subject to the FCC's price
cap rules ("price cap LECs"), recover through monthly, non-traffic sensitive
access charges and substantially decrease the costs that price cap LECs recover
through traffic sensitive access charges. In the order, the FCC also announced
its plan to bring interstate access rate levels more in line with cost. The FCC
has stated that this plan will grant price cap LECs increased pricing
flexibility upon demonstrations of increased competition (or potential
competition) in relevant markets. The manner in which the FCC further implements
this approach to lowering access charge levels could have a material effect on
the Company's ability to compete in providing interstate access services and on
the Company's wireline operations. An October 1997 FCC access charge decision,
for example, requires local exchange carriers to provide interexchange carriers
with certain information about the number and types of charges they impose on
interexchange carriers' presubscribed customers. Several parties have appealed
the May 16, 1997 order. Those appeals have been consolidated and transferred to
the United States Court of Appeals for the Eighth Circuit where they are
currently pending. See "Risk Factors--Potential for Adverse Regulatory Change
and the Need for Regulatory Approvals."
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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, and two designated by holders of the Class B
Preferred Stock (the "Fleet Investors"). See "--Security Ownership of Certain
Beneficial Owners and Management". An additional two directors may be designated
by Senior Preferred Stock holders in the event certain voting rights triggering
events occur.
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
March 31, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION(1)
- --------------------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Everett R. Dobson(2)......................... 38 Chairman of the Board, President and Chief
Executive Officer and Director
G. Edward Evans.............................. 37 President and Chief Operating Officer of cellular
subsidiaries
Robert J. Mirabito........................... 43 President of fiber subsidiaries
William J. Hoffman, Jr....................... 36 Vice President and Chief Operating Officer of
resale subsidiaries
Bruce R. Knooihuizen......................... 42 Vice President and Chief Financial Officer
R. Thomas Morgan............................. 42 Vice President and Chief Information Officer
Stephen T. Dobson(2)......................... 35 Treasurer, Secretary and Director and President of
resale subsidiaries
Russell L. Dobson(2)......................... 63 Director
Justin L. Jaschke(3)......................... 39 Director
Thadeus J. Mocarski(3)....................... 36 Director
</TABLE>
- ------------------------
(1) Unless otherwise indicated, position is held with the Company.
(2) Everett R. Dobson and Stephen T. Dobson are sons of Russell L. Dobson.
(3) Director designee of holders of Class B 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. 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 served as a director and officer of the Company since
1982. From 1990 to 1996, he served as a director, President and Chief Operating
Officer of the Company and President of the
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Company's cellular subsidiaries. He was elected Chairman of the Board and Chief
Executive Officer of the Company in April 1996. Mr. Dobson served on the board
of the Cellular Telecommunications Industry Association ("CTIA") in 1993 and
1994. He holds a B.A. in Economics from Southwestern Oklahoma State University
and currently sits on its Foundation Board and chairs the investment committee.
G. EDWARD EVANS joined the Company as President and 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 serves on the board of CTIA. He has an
M.B.A. from Georgia State University.
ROBERT J. MIRABITO became President 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 Oklahoma Telephone Association ("OTA") and has published numerous
articles in telecommunications and fiber optic trade journals. He serves on the
board of OK Five L.L.C., which is a network and wholesale internet service
provider for the State of Oklahoma. 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.
WILLIAM J. HOFFMAN, JR. joined the Company as Vice President and Chief
Operating Officer of the resale subsidiaries in October 1997. Prior to joining
the Company, Mr. Hoffman was employed by Intermedia Communications, Inc. as
Division Vice President--Florida Division from 1995 to 1997 and from 1987 to
1995 by Sprint Communications, serving as Branch Manager, Senior National
Account Manager, Product Marketing Manager and National Account Consultant. He
was a Captain in the U.S. Army in Europe working in military intelligence from
1983 to 1987. Mr. Hoffman holds a B.S. in electrical engineering from Auburn
University.
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 The Westlink Co. 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.
R. THOMAS MORGAN joined the Company as Vice President and Chief Information
Officer in December 1997. During 1996 and 1997, Mr. Morgan was Director of
Corporate Services in the Information Services Department of American Electric
Power in Columbus, Ohio, an electric utility serving 3 million customers in the
Midwest. Previously, he was Manager of Accounting and Human Resources Systems
from 1994 through 1995 and held various positions in the Information Services
Department of American Electric Power from 1985. Mr. Morgan was Manager of
Software Engineering for Access Corporation, a software development company, in
Cincinnati, Ohio from 1981 to 1985 and worked as a Senior Consultant with Arthur
Andersen & Co. in Columbus, Ohio from 1978 to 1981. Mr. Morgan holds a B.S. in
systems analysis from Miami University in Oxford, Ohio.
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
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Telecommunications Resellers 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 Organization
for the Protection and Advancement of Small Telephone Companies.
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 Verio 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 managing director 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. From 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 is a director of
Exodus Communications, Inc., an operator of internet data centers, headquartered
in Santa Clara, California. Mr. Mocarski received a B.A. from Colby College and
a J.D. from the Washington College of Law.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------ SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEAR SALARY ($) ($)(1) ($)(2) (# OF SHARES) ($)(3)
- --------------------------------------- --------- ---------- --------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Everett R. Dobson ..................... 1997 $ 300,000 -- $ 54,800(4) -- $ 9,500
Chairman of the Board, President and 1996 300,000 142,400 77,100(4) -- 6,000
Chief Executive Officer
Bruce R. Knooihuizen .................. 1997 152,500 82,500 -- -- 1,400
Vice President and Chief Financial 1996 65,900 37,500 57,600(5) 7,541 --
Officer
Stephen T. Dobson ..................... 1997 100,000 23,500(6) 13,800(7) -- 6,500
Treasurer and Secretary 1996 97,000 75,000 20,600(7) -- 3,900
G. Edward Evans ....................... 1997 113,600 80,000(8) -- 6,033 --
President and Chief Operating Officer 1996 -- -- -- -- --
of cellular subsidiaries
Robert J. Mirabito .................... 1997 85,000 -- -- 1,207 4,400
President of fiber subsidiaries 1996 80,000 25,000 -- -- 3,200
</TABLE>
- ------------------------
(1) For 1996, represents the amount of bonus paid in 1997 with respect to
services performed in 1996, but 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. Bonus amounts for Everett R. Dobson,
Stephen T. Dobson and Robert J. Mirabito with respect to services performed
in 1997 have not yet been determined.
(2) Represents the value of perquisites and other personal benefits in excess of
10% of annual salary and bonus.
(3) Includes the matching contributions made by the Company to the account of
the executive officer under the Company's 401(k) Profit Sharing Plan.
(4) Includes $36,600 and $62,900 for personal use of Company aircraft and
$18,200 and $12,500 for a Company-provided vehicle in 1997 and 1996,
respectively.
(5) Includes $5,600 for interim housing expenses, $24,300 for home mortgage
closing costs and $27,700 for tax reimbursements for such expenses and
costs.
(6) Represents an advance on bonus to be awarded.
(7) Includes $10,400 and $7,400 for personal use of Company aircraft and $3,400
and $6,500 for a Company-provided vehicle in 1997 and 1996, respectively.
(8) Includes $20,000 received upon commencement of employment.
The Named Executive Officers listed below were granted options to purchase
shares of the Company's Class B Common Stock in 1997. No stock options were
exercised by the Named Executive Officers in 1997.
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<PAGE>
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ANNUAL RATES
TOTAL OPTIONS OF STOCK APPRECIATION
NUMBER OF GRANTED TO EXERCISE FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME GRANTED 1997 ($/SHARE) DATE 5%($) 10%($)
- -------------------------- ----------- --------------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
G. Edward Evans........... 6,033(2) 42.9% $ 100 01/06/07 $ 379,412 $ 961,505
Robert J. Mirabito........ 1,207(3) 8.6 100 03/25/07 75,908 192,365
</TABLE>
- ------------------------
(1) The assumed annual rates of stock price appreciation of 5% and 10% are set
by the Securities and Exchange Commission and are not intended as a forecast
of possible future appreciation in stock prices.
(2) Options to purchase 12% of such shares first become exercisable on each of
the first five anniversaries of the grant date; options to purchase an
additional 8% of such shares first become exercisable on the same dates if
annual performance objectives are achieved.
(3) Options to purchase 20% of such shares first become exercisable on each of
the first five anniversaries of the grant date.
1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT 12/31/97(#) OPTIONS AT 12/31/97($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE (1)
- ---------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
Bruce R. Knooihuizen.............. 1,508/6,033 $ 301,600/$1,206,600
G. Edward Evans................... -0-/6,033 -0-/1,206,600
Robert J. Mirabito................ -0-/1,207 -0-/241,400
</TABLE>
- ------------------------
(1) The value of unexercised in-the-money options at December 31, 1997 is
computed as the product of (i) stock value at December 31, 1997 less stock
option exercise price and (ii) number of underlying securities at December
31, 1997.
EMPLOYMENT AGREEMENTS
In connection with the employment of Bruce R. Knooihuizen in 1996 and G.
Edward Evans in 1997, the Company agreed to provide them compensation in the
form of salary, bonus, stock options and other benefits. The terms of Mr.
Knooihuizen's employment are 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 terms of Mr. Evans' employment are 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 of $300,000 at an annual interest rate of
4%, and a ten-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. The Company also agreed to a severance payment equal to one year's
salary in the event of termination of employment of Messrs. Knooihuizen or Evans
without cause. The options to purchase shares of Class B Common Stock held by
these officers 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 not to
exceed $250,000, which is payable irrespective of the time required for Mr.
Dobson's services.
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The Purchase Agreement executed in connection with the Fleet Investors'
purchase of Class B Preferred Stock imposes limitations on the amount of base
compensation 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.
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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company
determines the compensation of the Company's executive officers. During fiscal
year 1997, the members of the Compensation Committee were Russell L. Dobson,
Justin L. Jaschke and Thadeus J. Mocarski, all of whom are members of the
Company's Board of Directors. Russell L. Dobson previously served as Chairman of
the Board and Chief Executive Officer from 1990 to 1996. For a description of
certain transactions between Mr. Dobson and the Company, see "--Certain
Relationships and Related Transactions".
STOCK OPTION PLAN
In February 1997, Dobson adopted DOC's 1996 Stock Option Plan (the "Plan"),
substituting Dobson Class B Common Stock for the stock subject to the Plan. The
Class B Common Stock is non-voting. The purpose of the Plan is to encourage key
employees of the Company (including Dobson and any present or future parent or
subsidiary of Dobson) by providing opportunities to participate in the ownership
of Dobson and its future growth through the grant of incentive stock options and
nonqualified stock options. The Plan also permits the grant of options to
directors. The Plan is presently administered by the Board of Directors, but in
the future may be administered by a committee of the Board (whether the Board or
a committee, the "Committee").
The maximum number of shares of Class B Common Stock for which options may
be granted under the Plan is 30,166, subject to adjustment in the event of any
stock dividend, stock split, recapitalization, reorganization or certain defined
change in control events. Shares subject to previously expired or terminated
options become available again for grants of options. The shares to be issued
under the Plan will be newly issued shares.
The number of shares and other terms of each grant are determined by the
Committee. The price payable upon the exercise of an incentive stock option may
not be less than 100% of the fair market value of the Class B Common Stock at
the time of grant, or in the case of an incentive stock option granted to an
employee owning stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (a "10% Shareholder"), 110% of the
fair market value on the date of grant. Incentive stock options may be granted
to an employee only to the extent that the aggregate exercise price of all such
options under all Company plans becoming exercisable for the first time by the
employee during any calendar year does not exceed $100,000. The price payable
upon the exercise of a nonqualified stock option must be at least the minimum
legal consideration required under the laws of Oklahoma.
Each option granted under the Plan will expire on the date specified by the
Committee, but not more than ten years from the date of grant or, in the case of
a 10% Shareholder, not more than five years from
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<PAGE>
the date of grant. Unless otherwise agreed, an incentive stock option will
terminate not more than 90 days (or twelve months in the event of death or
disability) after the optionee's termination of employment.
An optionee may exercise an option by giving notice to the Company,
accompanied by an instrument of accession providing that the optionee agrees to
be bound by the terms applicable to shareholders under the Shareholders'
Agreement and full payment of the purchase price in cash or, at the discretion
of the Committee, (i) Common Stock having a fair market value equal to the
exercise price, (ii) the optionee's personal recourse note bearing interest
payable not less than annually at no less than 100% of the lowest applicable
federal rate (as defined in Section 1274(d) of the Internal Revenue Code), (iii)
an assignment of proceeds from the sale of a portion of the stock subject to the
option being exercised, or (iv) a combination of the foregoing.
Outstanding options become nonforfeitable and exercisable in full
immediately prior to certain defined change of control events. Unless otherwise
determined by the Committee, outstanding options will terminate immediately
prior to the consummation of the dissolution or liquidation of Dobson.
The Plan may be terminated or amended by the Board of Directors at any time
subject, in the case of certain amendments, to shareholder approval. If not
earlier terminated, the Plan expires on June 1, 2006.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information, as of December 31, 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 beneficially own
more than 5% of such stock, (b) each director and Named Executive Officer 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 CLASS B
COMMON STOCK PREFERRED STOCK
------------------------ ------------------------ PERCENT OF
NAME AND ADDRESS NUMBER OF PERCENT OF NUMBER OF PERCENT OF TOTAL VOTING
OF BENEFICIAL OWNER SHARES CLASS SHARES CLASS POWER(1)
- ------------------------------------------------ ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Everett R. Dobson .............................. 469,998(2) 99.3% 40,000(3) 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(4) 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
(10 persons).................................. 473,152 100.0 100,000 00.0 100.0
</TABLE>
- ------------------------
* Less than 1%.
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<PAGE>
(1) 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.
(2) 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.
(3) 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").
(4) 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.
Bruce R. Knooihuizen and Justin L. Jaschke also hold presently exercisable
options to purchase 1,508 and 166 shares, respectively, of the Company's Class B
Common Stock. No executive officer or director of the Company, other than those
listed in the table above and Messrs. Knooihuizen, Mirabito and Jaschke, owns
any of the Company's equity securities, including the right to acquire such
securities presently or within 60 days after March 15, 1998.
CERTAIN RELATIONSHIPS AND RELATED 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 the Reorganization in February 1997, the shareholders of DOC exchanged
their DOC stock for the following stock of Dobson: Dobson CC Limited
Partnership, 469,998 shares of Class A Common Stock; Russell L. Dobson, 3,154
shares of Class A Common Stock; Telco, 100,000 shares of Class A Preferred
Stock; Fleet Venture Resources, Inc., 69,446 shares of 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 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. Also, in February 1997, Dobson issued 100,000
shares of its Class C Preferred Stock to the Fleet Investors (each holding the
same number of shares as it holds of Class B Preferred Stock).
Transactions with the Company described below refer to DOC if they occurred
prior to February 1997.
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.
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
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<PAGE>
Company and certain of its subsidiaries under a 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 Item 12. 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
prior bank facility. 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. The
Dobson Trusts incurred legal fees totaling approximately $.5 million in
connection with the negotiation and closing of the credit agreement for the
prior bank facility in 1994 and an amendment effected in 1996. Such fees were
paid by the Company. In connection with the Reorganization, 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 owned 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 provided for interest at an annual rate of 10%. The consolidation
refinanced earlier loans made prior to 1994. At September 30, 1997, 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 was evidenced by an unsecured promissory note which provided for
interest at an annual rate of 10%. The ATTI and Natelco loans (combined
principal amount of $570,000) were paid in full on October 1, 1997 in connection
with the closing of the Arizona 5 Acquisition. 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.
Through September 30, 1997, the Company performed certain management
services for ATTI and its subsidiaries, including accounting, plant and central
office management and engineering. Billings for the services were based on the
time spent by, and hourly rates of, Company personnel and expenses incurred.
During 1995, 1996 and the nine months ended September 30, 1997, the aggregate
amounts billed for management fees and expenses to ATTI and its subsidiaries
were approximately $210,000, $333,000 and $110,000, respectively. The amounts
owed by these entities to the Company for management fees at December 31, 1995
and 1996 and September 30, 1997 were $1.0 million, $1.2 million and $1.3
million, respectively. All amounts owed by ATTI and its subsidiaries for
management services rendered prior to September 30, 1997 were paid in October
1997 in connection with the closing of the Arizona 5 Acquisition. In connection
with the Arizona 5 Acquisition, ATTI became a wholly owned subsidiary of the
Company, and a new company NATELCO, LLC (an affiliate of Everett R. Dobson and
Russell L. Dobson) was created. For the three months ended December 31, 1997 the
amount billed for management fees and expenses to NATELCO, LLC was approximately
$21,000. The amount owed by NATELCO, LLC to the Company for management fees at
December 31, 1997 was $8,900.
ATTI beneficially owned a 20.55% partnership interest in the Arizona 5
Partnership. In connection with the Arizona 5 Acquisition, the Company purchased
all of the outstanding capital stock of ATTI for $14.2 million, of which Everett
R. Dobson and Russell L. Dobson, together, received $9.5 million. The purchase
price for the ATTI stock was based on ATTI's beneficial ownership in the Arizona
5 Partnership and negotiations between the Company and the other partner of the
Arizona 5 Partnership.
In March 1996, the Company made a $1.4 million unsecured loan to Everett R.
Dobson. The loan was repaid on October 1, 1997 in connection with the Arizona 5
Acquisition. Interest on the amount borrowed
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<PAGE>
was 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.
In June 1997, Everett R. Dobson executed a promissory note in favor of the
Company in the amount of approximately $354,000, which refinanced loans made to
him by the Company during 1996, together with accrued interest. The loan was
repaid on October 1, 1997 in connection with the Arizona 5 Acquisition. The loan
bore interest at 8% per annum. In December 1996, the Company made a one-year
loan in the amount of $12,900 to Russell L. Dobson which bore interest at 9% per
annum. In June 1997, the Company made an additional loan to Russell L. Dobson in
the principal amount of $423,000, of which $304,000 consolidated amounts owed to
the Company since prior to 1994, and $119,000 refinanced a loan made to him in
November 1996, in each case together with accrued interest. This loan bore
interest at an annual rate of 9.07%. Both loans to Russell L. Dobson were paid
in full on October 1, 1997 in connection with the Arizona 5 Acquisition. The
interest rate charged on the loan to Everett R. Dobson represented the Company's
costs of borrowed funds. The interest rate on the loans to Russell L. Dobson
approximated the prevailing market rates at the time the loans were first made.
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.
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
$23,000, or $.93 per square foot. The Company believes that the terms of this
lease are no less favorable to the Company than could be obtained in a lease
from an unrelated party. 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%.
The Company made a $300,000 home mortgage loan to G. Edward Evans in
February 1997 in connection with his employment. See "Employment Agreements" in
Item 11. Executive Compensation. The loan is payable in 60 monthly installments
of $1,400, including interest at the annual rate of 4%, with the balance due at
maturity in February 2002.
In 1995, the Company bought 75,000 shares of common shares of Zenex for
$75,000 and 400,000 shares of Zenex preferred stock for $400,000, and received
an option to purchase additional shares of Zenex common stock. In early 1996,
the Company purchased an additional 275,000 shares of Zenex preferred stock for
$275,000. In October 1996, Zenex redeemed all shares of Zenex preferred stock
held by the Company and purchased the Company's option for an aggregate of
$825,000. At the same time, the Company sold 30,000 shares of Zenex common stock
to an unrelated party for $142,000. In July 1997, the Company purchased 30,000
shares of Zenex common stock for $150,000 and resold the shares in November 1997
to Everett R. Dobson at a price equal to the Company's cost. In September 1997,
the Company purchased a loan for $263,882 made by a bank to Zenex and resold
such loan to Everett R. Dobson in November 1997 at a price equal to the
Company's cost plus accrued interest. Everett R. Dobson, an executive officer,
director and principal shareholder of the Company, was a director of Zenex from
August 1995 to September 1997.
In January 1998, a subsidiary of the Company purchased contractual rights,
information data and other rights with respect to certain of Zenex's long
distance customers located in areas served by Telco for $105,000. In addition,
on April 7, 1998, the Company entered into a non-binding letter of intent with
Zenex to purchase all of Zenex's assets (except for Zenex's switch and those
assets relating to the business of prepaid long distance cards) for
approximately $7.0 million, subject to adjustment. Under the Zenex letter of
intent, the Company will pay $500,000 in cash at the closing and will assume
various Zenex obligations including the Zenex bank loan held by Everett R.
Dobson (approximately $263,881 together with accrued interest). The purchase of
assets from Zenex and the related transactions are subject to the negotiation
and execution of a definitive agreement and other customary closing conditions.
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DESCRIPTION OF SENIOR PREFERRED STOCK
The summary contained herein of certain provisions of the Senior Preferred
Stock does not purport to be complete and is qualified in its entirety by
reference to the provisions of the Certificate of Designation, the form of which
is available from the Company upon request. The definitions of certain terms
used in the Certificate of Designation and in the following summary are set
forth under "--Certain Definitions."
GENERAL
The Certificate of Incorporation of the Company authorizes the Board of
Directors to issue classes of preferred stock from time to time in one or more
series, with such designations, voting powers, preferences and relative,
participating, optional or other special rights, qualifications, limitations or
restrictions as may be determined by the Board of Directors. Pursuant to the
Certificate of Designation, up to 550,000 shares of Senior Preferred Stock with
a liquidation preference of $1,000 per share have been authorized for issuance.
Such shares include the 179,942.535 Old Shares currently outstanding, the New
Shares to be issued pursuant to this Exchange Offer and additional shares of
Senior Preferred Stock which may be used to pay dividends on the Senior
Preferred Stock if the Company elects to pay dividends in additional Senior
Preferred Stock. The Senior Preferred Stock will be exchangeable, at the option
of the Company, into the Exchange Debentures, at any time. See "--Exchange." The
Old Shares are and New Shares will be, when issued by the Company, fully paid
and nonassessable and the holders thereof will not have any subscription or
preemptive rights related thereto. United States Trust Company of New York is
the transfer agent and registrar for the Senior Preferred Stock (the "Transfer
Agent" and "Registrar").
RANKING
The Senior Preferred Stock, with respect to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the Company,
ranks (i) senior to all classes of Common Stock of the Company, the Class A
Preferred Stock, the Class B Preferred Stock, the Class C Preferred Stock and to
each other class of capital stock or series of preferred stock established after
the date of this Prospectus by the Board of Directors, the terms of which do not
expressly provide that it ranks senior to or on a parity with the Senior
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred
to, together with all classes of Common Stock of the Company, as the "Junior
Securities"); (ii) subject to certain conditions, on a parity with any class of
capital stock or series of preferred stock issued by the Company established
after January 16, 1998 by the Board of Directors, the terms of which expressly
provide that such class or series will rank on a parity with the Senior
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred to
as "Parity Securities"); and (iii) subject to certain conditions, junior to each
class of capital stock or series of preferred stock issued by the Company
established after January 16, 1998 by the Board of Directors, the terms of which
expressly provide that such class or series will rank senior to the Senior
Preferred Stock as to dividend distributions and distributions upon liquidation,
winding-up and dissolution of the Company (collectively referred to as "Senior
Securities"). The Senior Preferred Stock will be subject to the issuance of
series of Junior Securities, Parity Securities and Senior Securities, PROVIDED
that the Company may not issue any new class of Senior Securities without the
approval of the holders of at least a majority of the shares of Senior Preferred
Stock then outstanding, voting or consenting, as the case may be, separately as
one class, except that, without the approval of holders of the Senior Preferred
Stock, the Company may issue shares of Senior Securities in exchange for, or the
proceeds of which are used to redeem or repurchase, (1) all (but not less than
all) shares of Senior Preferred Stock then outstanding or (2) indebtedness of
the Company.
DIVIDENDS
Holders of Senior Preferred Stock will be entitled to receive, when, as and
if declared by the Board of Directors, out of funds legally available therefor,
dividends on the Senior Preferred Stock at a rate per
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annum equal to 12 1/4% of the liquidation preference per share, payable
quarterly. All dividends will be cumulative, whether or not earned or declared,
on a daily basis from the date of issuance of the Senior Preferred Stock and
will be payable quarterly in arrears on January 15, April 15, July 15 and
October 15 of each year, commencing on April 15, 1998. On and before January 15,
2003, the Company may pay dividends, at its option, in cash or in additional
fully paid and nonassessable Senior Preferred Stock having an aggregate
liquidation preference equal to the amount of such dividends. Dividends paid in
additional shares of Senior Preferred Stock will be calculated and paid to
registered holders to the fifth decimal point. After January 15, 2003, dividends
may be paid only in cash. However, the Senior Note Indenture and the Bank Credit
Facilities restrict the payment of cash dividends by the Company, and future
agreements may provide the same. If any dividend (or portion thereof) payable on
any dividend payment date is not declared or paid in full in cash (or on or
prior to January 15, 2003, in cash or Senior Preferred Stock) on such dividend
payment date, the amount of accrued and unpaid dividends will bear interest at
the dividend rate on the Senior Preferred Stock, compounding quarterly, until
declared and paid in full.
Accrued but unpaid dividends on Old Shares tendered and accepted in the
Exchange Offer will not be paid at the time of the exchange. However, such
dividends will be paid in New Shares on the first interest payment date
following consummation of the Exchange Offer.
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Parity Securities for any period unless full cumulative
dividends shall have been or contemporaneously shall be declared and paid in
full or declared and, if payable in cash, a sum in cash shall be set apart for
such payments on the Senior Preferred Stock. If full dividends are not so paid,
the Senior Preferred Stock shall share dividends PRO RATA with the Parity
Securities. No dividends may be paid or set apart for such payment on Junior
Securities (except dividends on Junior Securities in additional shares of Junior
Securities) and no Junior Securities or Parity Securities may be repurchased,
redeemed or otherwise retired nor may funds be set apart for payment with
respect thereto if full cumulative dividends shall not have been paid on the
Senior Preferred Stock.
OPTIONAL REDEMPTION
The Senior Preferred Stock may be redeemed (subject to contractual and other
restrictions with respect thereto and to the legal availability of funds
therefor) at any time on or after January 15, 2003, at the Company's option, in
whole or in part, at the redemption prices (expressed as a percentage of the
liquidation preference thereof) set forth below, plus an amount in cash equal to
all accumulated and unpaid dividends (including an amount in cash equal to a
prorated dividend for the period from the dividend payment date immediately
prior to the redemption date to the redemption date, but subject to the right of
holders of Senior Preferred Stock on a record date to receive dividends on a
dividend payment date), if redeemed during the 12-month period beginning January
15 of each of the years set forth below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2003............................................................................. 106.125%
2004............................................................................. 104.084%
2005............................................................................. 102.042%
2006 and thereafter.............................................................. 100.000%
</TABLE>
- ------------------------
In addition, on or prior to January 15, 2001, the Company may redeem Senior
Preferred Stock having an aggregate liquidation preference of up to $61,250,000
of the aggregate liquidation preference of all Senior Preferred Stock at a
redemption price equal to 112.250% of the liquidation preference, plus an amount
in cash equal to all accumulated and unpaid dividends (including an amount in
cash equal to a prorated dividend for the period from the dividend payment date
immediately prior to the redemption date to the redemption date, but subject to
the right of holders of Senior Preferred Stock on a record date to receive
dividends due on a dividend payment date), with the proceeds of any sale of its
Common Stock,
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PROVIDED that such redemption date occurs within 180 days after consummation of
such sale and at least $113 million aggregate liquidation preference of Senior
Preferred Stock remains outstanding after each such redemption.
No optional redemption may be authorized or made unless prior thereto full
unpaid cumulative dividends shall have been paid or a sum set apart for such
payment on the Senior Preferred Stock.
In the event of partial redemptions of Senior Preferred Stock, the shares to
be redeemed will be determined PRO RATA or by lot, as determined by the Company,
except that the Company may redeem such shares held by any holder of fewer than
100 shares without regard to such PRO RATA redemption requirement. The Senior
Note Indenture, the New DOC Facility Agreement and the New Credit Facility
Agreement restrict the Company's ability to redeem the Senior Preferred Stock
and future agreements may contain similar provisions. See "Description of
Indebtedness--The Senior Notes," ["--The Bank Facility"] and "--The New Credit
Facility." Notice of redemption will be mailed by first-class mail to each
holder's registered address at least 30 but no more than 60 days prior to the
redemption date. If any Senior Preferred Stock is to be redeemed in part, the
notice of redemption that related to such Senior Preferred Stock shall state the
portion of the liquidation preference to be redeemed. New shares of Senior
Preferred Stock having an aggregate liquidation preference equal to the
unredeemed portion will be issued in the name of the holder thereof upon
cancellation of the original Senior Preferred Stock and, unless the Company
fails to pay the redemption price on the redemption date, after the redemption
date, dividends will cease to accrue on the Senior Preferred Stock called for
redemption.
MANDATORY REDEMPTION
The Senior Preferred Stock will be subject to mandatory redemption (subject
to the legal availability of funds therefor but without regard to any
contractual or other restrictions with respect thereto) in whole on January 15,
2008 (the "Mandatory Redemption Date") at a price, payable in cash, equal to the
liquidation preference thereof plus all accumulated and unpaid dividends to the
date of redemption.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company will be required
(subject to any contractual and other restrictions with respect thereto existing
on the Closing Date and the legal availability of funds therefor) to make an
Offer to Purchase (the "Change of Control Offer") to each holder of Senior
Preferred Stock to repurchase all or any part of such holder's Senior Preferred
Stock at a cash purchase price equal to 101% of the liquidation preference
thereof, plus an amount in cash equal to all accumulated and unpaid dividends
(including an amount in cash equal to a prorated dividend for the period from
the dividend payment date immediately prior to the date of purchase to the date
of purchase) (the "Change of Control Payment"). The Change of Control Offer must
be made within 30 days following a Change of Control, must remain open for at
least 30 and not more than 40 days and must comply with the requirements of Rule
14e-1 under the Exchange Act and any other applicable securities laws and
regulations. Notwithstanding the foregoing, the Company shall not be required to
make a Change of Control Offer if any Indebtedness outstanding on the Closing
Date which would prohibit such Change of Control Offer or any Indebtedness under
the DOC Facility is outstanding upon the occurrence of a Change of Control until
such Indebtedness is repaid, redeemed or repurchased in full, in which case the
date on which all such Indebtedness is so repaid, redeemed or repurchased will,
under the Certificate of Designation, be deemed to be the date on which such
Change of Control shall have occurred.
None of the provisions in the Certificate of Designation relating to a
purchase upon a Change of Control are waivable by the Board of Directors. The
Company could, in the future, enter into certain transactions, including certain
recapitalizations of the Company, that would not constitute a Change of Control,
but would increase the amount of indebtedness outstanding at such time. If a
Change of Control were to occur, the Company would be obligated to offer to
repurchase all Indebtedness outstanding on the
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Closing Date which would prohibit a Change of Control Offer prior to making an
offer to repurchase Senior Preferred Stock, and there can be no assurance that
the Company would have sufficient funds to pay the purchase price for all Senior
Preferred Stock that the Company would be required to purchase. In the event
that the Company were required to purchase outstanding Senior Preferred Stock
pursuant to a Change of Control Offer, the Company expects that it would need to
seek third-party financing to the extent it does not have available funds to
meet its purchase obligations. However, there can be no assurance that the
Company would be able to obtain such financing. In addition, the Company's
ability to purchase the Senior Preferred Stock may be limited by other
then-existing agreements and by restrictions imposed by Oklahoma law.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, holders of Senior Preferred Stock will be entitled to be paid, out
of the assets of the Company available for distribution, $1,000 per share, plus
an amount in cash equal to accumulated and unpaid dividends thereon to the date
fixed for liquidation, dissolution or winding-up (including an amount equal to a
prorated dividend for the period from the last dividend payment date to the date
fixed for liquidation, dissolution or winding-up), before any distribution is
made on any Junior Securities, including, without limitation, the Class A
Preferred Stock, the Class B Preferred Stock, the Class C Preferred Stock and
Common Stock of the Company. If, upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the amounts payable with respect to
the Senior Preferred Stock and all other Parity Securities are not paid in full,
the holders of the Senior Preferred Stock and the Parity Securities will share
equally and ratably in any distribution of assets of the Company in proportion
to the full liquidation preference and accumulated and unpaid dividends to which
each is entitled. After payment of the full amount of the liquidation
preferences and accumulated and unpaid dividends to which they are entitled, the
holders of Senior Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company. However, a merger,
consolidation or sale, of all or substantially all of the assets of the Company
that complies with the provisions described below under "Consolidation, Merger
and Sale of Assets" shall not be deemed to be a liquidation, dissolution or
winding-up of the Company.
The Certificate of Designation for the Senior Preferred Stock does not
contain any provision requiring funds to be set aside to protect the liquidation
preference of the Senior Preferred Stock, although such liquidation preference
will be substantially in excess of the par value of such Senior Preferred Stock.
In addition, the Company is not aware of any provision of Oklahoma law or any
controlling decision of the courts of the State of Oklahoma (the state of
incorporation of the Company) that requires a restriction upon the surplus of
the Company solely because the liquidation preference of the Senior Preferred
Stock will exceed its par value. Consequently, there will be no restriction upon
the surplus of the Company solely because the liquidation preference of the
Senior Preferred Stock will exceed the par value and there will be no remedies
available to holders of the Senior Preferred Stock before or after the payment
of any dividend, other than in connection with the liquidation of the Company,
solely by reason of the fact that such dividend would reduce the surplus of the
Company to an amount less than the difference between the liquidation preference
of the Senior Preferred Stock and its par value.
VOTING RIGHTS
The holders of Senior Preferred Stock will have no voting rights with
respect to general corporate matters except as provided by law or as set forth
in the Certificate of Designation. The Certificate of Designation provides that
if (a) dividends on the Senior Preferred Stock are in arrears and unpaid (and,
with respect to dividends that become payable after January 15, 2003, are not
paid in cash) for four quarterly periods (whether or not consecutive), (b) the
Company fails to discharge any redemption obligation with respect to the Senior
Preferred Stock, (c) the Company fails to make an offer to purchase (and
complete such purchase of) all of the outstanding shares of Senior Preferred
Stock following a
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Change of Control, if such offer to purchase is required by the provisions set
forth above under the caption "--Change of Control," (d) a breach or violation
of the provisions described under the caption "-- Covenants" occurs and such
breach or violation continues for a period of 30 consecutive days or more after
notice thereof to the Company by holders of 25% or more of the shares of Senior
Preferred Stock then outstanding or (e) there occurs with respect to any issue
or issues of Indebtedness of the Company and/or any Significant Subsidiary
having an outstanding principal amount of $10 million or more in the aggregate
for all such issues of the Company and/or any Significant Subsidiary, 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, then the number of directors constituting the Board of
Directors will be adjusted to permit the holders of the majority of the then
outstanding shares of Senior Preferred Stock, voting separately as a class, to
elect two directors. Such voting rights and the term of office of such elected
directors will continue until such time as all dividends in arrears on the
Senior Preferred Stock are paid in full (and, in the case of dividends payable
after January 15, 2003, paid in cash) and any failure, breach or default
referred to in clause (b), (c), (d) or (e) is remedied, at which time the term
of any directors elected pursuant to the provisions of this paragraph shall
terminate. For the purpose of determining the number of quarterly periods for
which accrued dividends have not been paid, any accrued and unpaid dividend that
is subsequently paid shall not be treated as unpaid. Each such event described
in clauses (a) through (e) above is referred to herein as a "Voting Rights
Triggering Event." Within 15 days of the time the Company becomes aware of the
occurrence of any default referred to in clause (d) or (e) above, the Company
shall give written notice thereof to holders of the Senior Preferred Stock.
The Certificate of Designation provides that, upon the occurrence of a
Voting Rights Triggering Event, the number of directors constituting the Board
of Directors will be increased by two directors, whom the holders of Senior
Preferred Stock are entitled to elect. Whenever the right of the holders of
Senior Preferred Stock to elect directors shall cease, the number of directors
constituting the Board of Directors will be restored to the number of directors
constituting the Board of Directors prior to the time or event that entitled the
holders of Senior Preferred Stock to elect directors.
Any vacancy occurring in the office of a director elected by the holders of
Senior Preferred Stock may be filled by the remaining director elected by such
holders unless and until such vacancy shall be filled by such holders.
The Certificate of Designation provides that, except as stated above under
"--Ranking," the Company will not authorize any class of Senior Securities
without the affirmative vote or consent of the holders of at least a majority of
the shares of Senior Preferred Stock then outstanding, voting or consenting, as
the case may be, separately as one class. The Certificate of Designation also
provides that the Company may not amend the Certificate of Designation so as to
affect adversely the specific rights, preferences, privileges or voting rights
of holders of the Senior Preferred Stock, or authorize the issuance of any
additional shares of Senior Preferred Stock, without the affirmative vote or
consent of the holders of at least a majority of the outstanding shares of
Senior Preferred Stock, voting or consenting, as the case may be, separately as
one class. The holders of at least a majority of the outstanding shares of
Senior Preferred Stock, voting or consenting, as the case may be, separately as
one class, may also waive compliance with any provision of the Certificate of
Designation. The Certificate of Designation also provides that, except as set
forth above, (a) the creation, authorization or issuance of any shares of Junior
Securities, Parity Securities or Senior Securities or (b) the increase or
decrease in the amount of authorized capital stock of any class, including any
preferred stock, shall not require the consent of the holders of Senior
Preferred Stock and shall not be deemed to affect adversely the rights,
preferences, privileges or voting rights of the holders of Senior Preferred
Stock.
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Under Oklahoma law, the holders of Senior Preferred Stock will be entitled
to vote as a class upon a proposed amendment to the Certificate of
Incorporation, whether or not entitled to vote thereon by the Certificate of
Incorporation, if the amendment would increase or decrease the par value of the
shares of such class, or alter or change the powers, preferences or special
rights of the shares of such class so as to affect them adversely.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Certificate of Designation. Reference is
made to the Certificate of Designation for the full definitions of all such
terms as well as any other capitalized terms 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) except in the case of any restriction or encumbrance
permitted under clause (vi) of the "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant, 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 the "Limitation on Restricted Payments"
covenant described below, any amount paid or accrued as dividends on Senior
Preferred Shares 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.
"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.
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"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 the provisions
described under "Consolidation, Merger and Sale of Assets"; 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) sales, transfers or other
dispositions of assets constituting a Restricted Payment permitted to be made
under the "Limitation on Restricted Payments" covenant.
"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 Facility Agreement" means the DOC Facility Agreement, 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.
"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 Senior Preferred Shares.
"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.
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"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 constituted
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 A Preferred Stock" means the Class A Non-Voting, Non-Convertible
Preferred 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 January 22, 1998, the date on which the Preferred Stock
was originally issued.
"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 Shares 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
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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 Senior Notes and the Senior Preferred Stock, 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, plus,
solely for purpose of calculating whether a Restricted Payment may be made
pursuant to clause (vi) or (vii) of the "Limitation on Restricted Payments"
covenant, the maximum fixed redemption or repurchase price of the Senior
Preferred Stock and any Senior Securities or Parity Securities at the time of
determination, 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 of 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.
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"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 Mandatory Redemption Date, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Mandatory
Redemption Date 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 Mandatory Redemption Date; 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 a "change of control" occurring prior to
the Mandatory Redemption Date shall not constitute Disqualified Stock if the
"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
the "Change of Control" covenant 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 Senior Preferred Stock as is
required to be repurchased pursuant to the "Change of Control" covenant.
"Dobson Wireline" means Dobson Wireline Company.
"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; PROVIDED that for purposes of clause (viii) of
the second paragraph of the "Limitation on Indebtedness" covenant, (x) the fair
market value of any security registered under the Exchange Act shall be the
average of the closing prices, regular way, of such security for the 20
consecutive trading days immediately preceding the sale of Capital Stock and (y)
in the event the aggregate fair market value of any other property received by
the Company exceeds $10 million, the fair market value of such property shall be
determined by a nationally recognized investment banking firm and set forth in
their written opinion which shall be delivered to the Transfer Agent.
"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 Certificate of Designation 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
Certificate of Designation shall be made without giving effect to (i) the
amortization of any expenses incurred in connection with the offering of the
Senior Notes and the Senior Preferred Stock 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
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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.
"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),
(vii) or (viii) 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, (viii) the maximum fixed redemption
or repurchase price of Disqualified Stock of such Person at the time of
determination and (ix) 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.
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"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 (other than as a result of being designated as an
Unrestricted Subsidiary under clause (i) above), 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 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).
"Mandatory Redemption Date" means January 15, 2008.
"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
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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.
"New Credit Facility Agreement" means the Operations Facility, together with
all other agreements, instruments and documents executed or delivered pursuant
thereto or in connection therewith, in each case as such credit agreement, other
agreements, instruments or documents may be amended, supplemented, extended,
renewed, replaced or otherwise modified from time to time.
"New Credit Facility Commitment Letter" means the commitment letter
(including the Summary of Terms and Conditions attached thereto) dated January
7, 1998 among Dobson Communications Corporation, Operations, NationsBank of
Texas, N.A. and NationsBanc Montgomery Securities LLC.
"New DOC Facility Agreement" means the DOC Facility, together with all other
agreements, instruments and documents executed or delivered pursuant thereto or
in connection therewith, in each case as such credit agreement, other
agreements, instruments or documents may be amended, supplemented, extended,
renewed, replaced or otherwise modified from time to time.
"New DOC Facility Commitment Letter" means the commitment letter (including
the Summary of Terms and Conditions attached thereto) dated January 7, 1998
among Dobson Communications Corporation, Dobson Operating Company, NationsBank
of Texas, N.A. and NationsBanc Montgomery Securities LLC.
"Offer to Purchase" means an offer by the Company to purchase Senior
Preferred Stock from the Holders commenced by mailing a notice to the Transfer
Agent and each Holder stating: (i) the covenant pursuant to which the offer is
being made and that all Senior Preferred Stock 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 Senior Preferred Stock not tendered will continue to accrue dividends
pursuant to its terms; (iv) that, unless the Company defaults in the payment of
the purchase price, any Senior Preferred Stock accepted for payment pursuant to
the Offer to Purchase shall cease to accrue dividends on and after the Payment
Date; (v) that Holders electing to have Senior Preferred Stock purchased
pursuant to the Offer to Purchase will be required to surrender the Senior
Preferred Stock, together with the form entitled "Option of the Holder to Elect
Purchase" on the reverse side of the Senior Preferred Stock 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 liquidation preference of
Senior Preferred Stock delivered for purchase and a statement that such Holder
is withdrawing its election to have such Senior Preferred Stock purchased; and
(vii) that Holders whose Senior Preferred Stock is being purchased only in part
will be issued new shares of Senior Preferred Stock equal in liquidation
preference to the unpurchased portion of the Senior Preferred Stock surrendered;
PROVIDED that each share of Senior Preferred Stock purchased and each new share
of Senior Preferred Stock issued shall be in a liquidation preference of $1,000
or integral multiples thereof. On the Payment Date, the Company shall (i) accept
for payment on a PRO RATA basis Senior Preferred Stock 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 Senior Preferred Stock
or portions thereof so accepted; and (iii) deliver, or cause to be delivered, to
the Transfer Agent all Senior Preferred Stock or portions thereof so accepted
together with an Officers' Certificate specifying the Senior Preferred Stock or
portions thereof accepted for payment by the Company. The Paying Agent shall
promptly mail to the Holders of Senior Preferred Stock so accepted payment in an
amount equal to the purchase price, and
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the Transfer Agent shall promptly countersign and mail to such Holders new
shares of Senior Preferred Stock equal in liquidation preference to any
unpurchased portion of the Senior Preferred Stock surrendered; PROVIDED that
each share of Senior Preferred Stock purchased and each new share of Senior
Preferred Stock issued shall be in a liquidation preference 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 Transfer
Agent 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 Senior Preferred Stock
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.
"Preferred Shares" 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.
"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 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.
"Senior Indebtedness" means (i) Indebtedness of the Company under the Senior
Notes, the Senior Note Indenture, the Bank Facility Agreement and the New Credit
Facility Agreement and all fees, expenses and indemnities payable in connection
with any of the foregoing and (ii) all other Indebtedness of the Company,
including principal and interest on such Indebtedness, unless such Indebtedness,
by its terms or by the terms of any agreement or instrument pursuant to which
such Indebtedness is issued, would be PARI PASSU with, or subordinated in right
of payment to, the Exchange Debentures; PROVIDED that the term "Senior
Indebtedness" shall not include (a) any Indebtedness of the Company that, when
Incurred and without respect to any election under Section 1111(b) of the United
States Bankruptcy Code, was without recourse to the Company, (b) any
Indebtedness of the Company to a Subsidiary of the Company or to a joint venture
in which the Company has an interest, (c) any Indebtedness of the Company, to
the extent not permitted by the "Limitation on Indebtedness" or the "Senior
Subordinated Indebtedness" covenants described below, (d) any repurchase,
redemption or other obligation in respect of Disqualified Stock, (e) any
Indebtedness to any employee of the Company or any of its Subsidiaries, (f) any
liability for federal, state, local or other taxes owed or owing by the Company
or (g) any Trade Payables. Senior Indebtedness will also include interest
accruing subsequent to events of bankruptcy of the Company at the rate provided
for in the document governing such Senior Indebtedness, whether or not such
interest is an allowed claim enforceable against the debtor in a bankruptcy case
under federal bankruptcy law.
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"Senior Note Indenture" means the Indenture dated as of February 28, 1997
between the Company and United States Trust Company of New York, relating to the
Senior Notes, as such indenture may be amended, supplemented, extended, renewed,
replaced or otherwise modified from time to time.
"Senior Notes" means the 11 3/4% Senior Notes due 2007 issued by the Company
under the Senior Note Indenture.
"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 Services 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.
"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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"Unrestricted Subsidiary" means (i) Dobson Wireline or any other 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 Certificate of
Designation and (y) no Voting Rights Triggering Event, or an event which with
the giving of notice or the passage of time, or both, would become a Voting
Rights Triggering Event, shall have occurred and be continuing. Any such
designation by the Board of Directors shall be evidenced to the Transfer Agent
by promptly providing the Transfer Agent 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 Certificate of Designation will contain, 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 Indebtedness existing on the
Closing Date); PROVIDED that the Company and any Restricted Subsidiary may Incur
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; (ii) Indebtedness (A) to the Company evidenced by a
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
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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, accrued dividends, fees and expenses); PROVIDED that such new
Indebtedness, determined as of the date of Incurrence of such new Indebtedness,
does not mature or have a mandatory redemption or repurchase date 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 Senior Preferred Stock
tendered in an Offer to Purchase made as a result of a Change in Control or (B)
deposited to defease the Senior Notes; (vi) Guarantees of Indebtedness of the
Company by any Restricted Subsidiary; (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 sum of (x) the Net Cash Proceeds received by the Company on or
after the Closing Date from the issuance and sale of its Capital Stock (other
than Disqualified Stock), including the Senior Preferred 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, or clause (ix) of
the second paragraph, of the "Limitation on Restricted Payments" covenant
described below to make a Restricted Payment and (y) 80% of the fair market
value of property other than cash 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; PROVIDED that such
Indebtedness does not mature prior to the Mandatory Redemption Date; and (ix)
Indebtedness outstanding at any time in an aggregate principal amount not to
exceed $25 million.
(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, 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. 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, the Company, in its
sole discretion, shall classify, and from time to time may reclassify, such item
of Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses.
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LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS
The Company shall not Incur any Indebtedness that is subordinate in right of
payment to any Senior Indebtedness unless such Indebtedness would be PARI PASSU
with, or subordinated in right of payment to, the Exchange Debentures; PROVIDED
that the foregoing limitation shall not apply to distinctions between categories
of Senior Indebtedness of the Company that exist by reason of any Liens or
Guarantees arising or created in respect of some but not all such Senior
Indebtedness.
LIMITATION ON LIENS
The Company shall not Incur any Indebtedness secured by a Lien ("Secured
Indebtedness") which is not Senior Indebtedness unless effective provision is
made to have the Exchange Debentures (if and when issued) secured equally and
ratably with (or, if the Secured Indebtedness would be subordinated in right of
payment to the Exchange Debentures, prior to) such Secured Indebtedness for so
long as such Secured Indebtedness is secured by a Lien.
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 Junior Securities (other than (x) dividends or
distributions payable solely in shares of its Junior Securities (other than
Disqualified Stock) or in options, warrants or other rights to acquire shares of
such Junior Securities 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 Junior Securities of
(A) the Company or an Unrestricted Subsidiary (including options, warrants or
other rights to acquire such shares of Junior Securities) held by any Person or
(B) a Restricted Subsidiary (including options, warrants or other rights to
acquire such shares of Junior Securities) 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, or
(iii) make any Investment, other than a Permitted Investment, in any Person
(such payments or any other actions described in clauses (i) through (iii) being
collectively "Restricted Payments") if, at the time of, and after giving effect
to, the proposed Restricted Payment: (A) a Voting Rights Triggering Event, or an
event which with the giving of notice or the passage of time, or both, would
become a Voting Rights Triggering Event, shall have occurred and be continuing,
(B) the Company could not Incur at least $1.00 of Indebtedness under the first
paragraph of the "Limitation on Indebtedness" covenant, (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 Certificate of Designation 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 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
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option of the holder, or are required to be redeemed, prior to the Mandatory
Redemption Date) PLUS (3) an amount equal to the net reduction in Investments
(other than reductions in Permitted Investments and reductions in Investments
made pursuant to clause (ix) of the second paragraph of this "Limitation on
Restricted Payments" covenant) 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 or (D) dividends on the Senior Preferred Stock
shall not have been paid in full as provided in the Certificate of Designation.
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 repurchase, redemption or other acquisition of Junior Securities of the
Company (or options, warrants or other rights to acquire such Junior Securities)
in exchange for, or out of the proceeds of a substantially concurrent offering
of, shares of Junior Securities (other than Disqualified Stock) of the Company;
(iii) 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;
(iv) 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 described under
"Consolidation, Merger and Sale of Assets"; (v) the purchase, redemption,
acquisition, cancellation or other retirement for value of shares of Junior
Securities 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; (vi) 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 a
Change of Control, no such repurchase shall be made prior to the Company's
repurchase of such Senior Preferred Stock as is required to be repurchased
pursuant to the "Change of Control" covenant; (vii) 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 Junior Securities;
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
(iii) and this clause (vii) shall not exceed 6% of the Net Cash Proceeds
received by the Company in the Public Equity Offering; (viii) the purchase,
redemption, retirement or other acquisition for value of Junior Securities 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 Junior Securities or options were issued; PROVIDED
that the aggregate consideration paid for such purchase, redemption,
acquisition, cancellation or other retirement of such shares of Junior
Securities or options after the Closing Date does not exceed $500,000 in any
calendar year, or $1.5 million in the aggregate; (ix) Investments in any Person
or Persons, the primary business of which is related, ancillary or complementary
to the business of the Company and its Restricted Subsidiaries on the date of
such Investments, in an aggregate amount not to exceed $30 million plus an
amount not to exceed 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
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Subsidiary of the Company, except to the extent such Net Cash Proceeds are used
to Incur Indebtedness outstanding pursuant to clause (viii) of the "Limitation
on Indebtedness" covenant or to make Restricted Payments pursuant to clause
(C)(2) of the first paragraph, or clause (ii) of this paragraph, of this
"Limitation on Restricted Payments" covenant; or (x) the distribution on or with
respect to the holders of the Company's Junior Securities of the Capital Stock
of an Unrestricted Subsidiary; PROVIDED that, except in the case of clauses (i)
and (ii), no Voting Rights Triggering Event, or an event which with the giving
of notice or the passage of time, or both, would become a Voting Rights
Triggering Event, 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 an exchange of Junior Securities for Junior Securities referred to in
clause (ii) thereof) and the Net Cash Proceeds from any issuance of Junior
Securities referred to in clause (ii) or Capital Stock referred to in clause
(ix) 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.
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 Certificate of
Designation, the Bank Facility Agreement, the Senior Note Indenture or any other
agreements in effect on the Closing Date, and any amendments, extensions,
refinancings, renewals or replacements of such agreements; PROVIDED that, other
than as contemplated in clause (vi) below, 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 Certificate of Designation 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; or (vi)
contained in the terms of (A) the New DOC Facility Agreement or the New Credit
Facility Agreement, PROVIDED any encumbrance or restriction that would prevent
payments of dividends or other distributions to the Company to pay cash interest
on the Exchange Debentures or cash dividends on the Senior Preferred Stock
applies on or prior to January 15, 2003, or applies thereafter 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 New DOC Facility Agreement or
the New Credit Facility Agreement; PROVIDED (x) with respect to any event of
default (other
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than a payment default (including by way of acceleration), 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 which create such encumbrance or restriction on dividends or
other distributions in the New DOC Facility Agreement or the New Credit Facility
Agreement are no less favorable to the Company or its Subsidiaries than the
financial covenants set forth in the New DOC Facility Commitment Letter or the
New Credit Facility Commitment Letter; or (B) 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 Senior Preferred Stock 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 dividend payments on the Senior Preferred Stock or
principal or interest payments on the Exchange Debentures. 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; and (iv) 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.
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 Transfer Agent 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
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Company is part of a consolidated group for tax purposes; or (v) any Restricted
Payments not prohibited by the "Limitation on Restricted Payments" covenant.
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 (v) 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.
COMMISSION REPORTS AND REPORTS TO HOLDERS
Whether or not the Company is required to file reports with the Commission,
for so long as any Senior Preferred Stock is 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 Transfer Agent and each Holder or shall supply to the Transfer Agent
for forwarding to each such Holder, without cost to such Holder, copies of such
reports and other information.
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 the Senior
Preferred Stock shall be converted into or exchanged for and shall become shares
of such successor company, having in respect of such successor company or
resulting company substantially the same powers, preferences and relative
participating, optional or other special rights and the qualifications,
limitations or restrictions thereon that the Senior Preferred Stock had
immediately prior to such transaction; (ii) immediately after giving effect to
such transaction, no Voting Rights Triggering Event, or an event which with the
giving of notice or the passage of time, or both, would become a Voting Rights
Triggering Event, shall have occurred and be continuing; (iii) immediately after
giving effect to such transaction on a pro forma basis, the Company, or, if
other than the Company, the successor company or resulting company, as the case
may be, 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, if other than the Company, the successor company or resulting
company, 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 Transfer Agent 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
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 any such
transaction shall not have as one of its purposes the evasion of the foregoing
limitations.
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EXCHANGE
The Company may, at the sole option of the Board of Directors (subject to
the legal availability of funds therefor), exchange all, but not less than all,
of the outstanding Senior Preferred Stock, including any Senior Preferred Stock
issued as payment for dividends, into Exchange Debentures, subject to the
conditions set forth in the next succeeding paragraph. Presently, the exchange
of the Senior Preferred Stock for Exchange Debentures would be restricted by
covenants in the Senior Note Indenture and the Bank Facility Agreement and the
New DOC Facility Agreement and the New Credit Facility Agreement will restrict
such exchange. There can be no assurance that the conditions in such covenants
for the exchange of Senior Preferred Stock for Exchange Debentures will be
satisfied or that the exchange will occur or that future Indebtedness of the
Company would not also restrict an exchange. See "Description of
Indebtedness--The Senior Notes" and "--The Bank Facility." In order to effect
such exchange, the Company shall (a) if necessary to satisfy the condition set
forth in clause (B) in the following paragraph based upon the written advice of
counsel to the Company, file a registration statement with the Commission
relating to the exchange, and (b) if a registration statement is filed with the
Commission pursuant to clause (a), use its best efforts to cause such
registration statement to be declared effective as soon as practicable by the
Commission unless the opinion referred to in clause (B) in the following
paragraph shall have been subsequently delivered.
In order to effectuate such exchange, the Company shall send a written
notice of exchange by mail to each holder of record of Senior Preferred Stock,
which notice shall state (i) that the Company is exchanging the Senior Preferred
Stock into Exchange Debentures pursuant to the Certificate of Designation and
(ii) the date fixed for exchange (the "Exchange Date"), which date shall not be
less than 15 days nor more than 60 days following the date on which such notice
is mailed (except as provided in the last sentence of this paragraph). On the
Exchange Date, if the conditions set forth in clauses (A) through (E) below are
satisfied and the exchange is permitted under the Company's then outstanding
indebtedness, the Company shall issue Exchange Debentures in exchange for the
Senior Preferred Stock as provided in the next paragraph, PROVIDED that on the
Exchange Date: (A) there shall be legally available funds sufficient therefor
(including, without limitation, legally available funds sufficient therefor
under Oklahoma law); (B) a registration statement relating to the Exchange
Debentures shall have been declared effective under the Securities Act prior to
such exchange and shall continue to be effective on the Exchange Date or the
Company shall have obtained a written opinion of counsel that an exemption from
the registration requirements of the Securities Act is available for such
exchange and that upon receipt of such Exchange Debentures pursuant to such
exchange made in accordance with such exemption, each holder of an Exchange
Debenture that is not an Affiliate of the Company will not be subject to any
restrictions imposed by the Securities Act upon the resale of such Exchange
Debenture, and such exemption is relied upon by the Company for such exchange;
(C) the Exchange Debenture Indenture and the trustee thereunder shall have been
qualified under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"); (D) immediately after giving effect to such exchange, no
Default or Event of Default (each as defined in the Exchange Debenture
Indenture) would exist under the Exchange Debenture Indenture; and (E) the
Company shall have delivered to the Trustee under the Exchange Debenture
Indenture a written opinion of counsel, dated the date of exchange, regarding
the satisfaction of the conditions set forth in clauses (A), (B) and (C). In the
event that (i) the issuance of the Exchange Debentures is not permitted on the
Exchange Date or (ii) any of the conditions set forth in clause (A) through (E)
of the preceding sentence are not satisfied on the Exchange Date, the Company
shall use its best efforts to satisfy such conditions and effect such exchange
as soon as practicable.
Upon any exchange pursuant to the preceding paragraph, the holders of
outstanding Senior Preferred Stock will be entitled to receive a principal
amount of Exchange Debentures for Senior Preferred Stock, the liquidation
preference of which, plus the amount of accumulated and unpaid dividends
(including a prorated dividend for the period from the immediately preceding
dividend payment date to the Exchange Date) with respect to which, equals such
principal amount; PROVIDED that the Company at its option may
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pay cash for any or all accrued and unpaid dividends in lieu of issuing Exchange
Debentures in respect of such dividends. The Exchange Debentures will be issued
in registered form, without coupons. Exchange Debentures issued in exchange for
Senior Preferred Stock will be in principal amounts of $1,000 and integral
multiples thereof to the extent practicable, and will also be issued in
principal amounts less than $1,000 so that each holder of Senior Preferred Stock
will receive certificates representing the entire principal amount of Exchange
Debentures to which its Senior Preferred Stock entitle it, PROVIDED that the
Company may, at the sole option of the Board of Directors, subject to the
restrictions in the Senior Note Indenture and any of its other then-existing
Indebtedness, pay cash in lieu of issuing an Exchange Debenture in a principal
amount less than $1,000. On and after the date of exchange, dividends will cease
to accrue on the outstanding Senior Preferred Stock, and all rights of the
holders of Senior Preferred Stock (except the right to receive the Exchange
Debentures, an amount in cash, to the extent applicable, equal to the accrued
and unpaid dividends to the Exchange Date, and, if the Company so elects, cash
in lieu of any Exchange Debenture which is in an amount that is less than
$1,000) will terminate. The person entitled to receive the Exchange Debentures
issuable upon such exchange will be treated for all purposes as the registered
holder of such Exchange Debentures.
The Company will comply with the provisions of Rule 13e-4 promulgated
pursuant to the Exchange Act in connection with any exchange, to the extent
applicable.
REGISTRATION REQUIREMENT
The Company agreed with the Placement Agents, for the benefit of the holders
of Old Shares, that the Company will use its best efforts, at its cost, to file
and cause to become effective a registration statement with respect to a
registered offer to exchange the Old Shares for the New Shares with terms
identical to the Old Shares. The Exchange Offer will remain open for not less
than 20 business days after the date that notice of the Exchange Offer is mailed
to holders of the Old Shares. In the event that applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer, or under certain other circumstances, the Company shall, at its cost, use
its best efforts to cause to become effective a shelf registration statement
with respect to resales of the Old Shares and to keep such registration
statement effective until January 22, 2000. The Company shall, in the event of
such shelf registration, provide to each holder of Old Shares copies of the
prospectus, notify each holder of Old Shares when a registration statement for
the Old Shares has become effective and take certain other actions as are
required to permit resales of the Old Shares. In the event that the Exchange
Offer is not consummated and a shelf registration statement is not declared
effective on or prior to July 22, 1998, additional dividends will accrue at an
annual rate of .5% of the liquidation preference thereof on the Senior Preferred
Stock from July 22, 1998, payable in additional shares of Senior Preferred Stock
quarterly in arrears on each January 15, April 15, July 15 and October 15,
commencing October 15, 1998, until the Exchange Offer is consummated or such
shelf registration statement is declared effective. The Company anticipates that
it will consummate the Exchange Offer and that a shelf registration statement
will not be required. Holders of Old Shares who do not participate in the
Exchange Offer may thereafter hold a less liquid security.
SENIOR PREFERRED STOCK BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Shares will be represented by a
single, permanent global Senior Preferred Stock certificate, in definitive,
fully registered form (the "Global Preferred Stock Certificate") and will be
deposited with a custodian for DTC and registered in the name of a nominee of
DTC.
THE GLOBAL PREFERRED STOCK CERTIFICATE
Upon the issuance of the Global Preferred Stock Certificate, DTC or its
custodian will credit, on its internal system, the respective liquidation
preference of the individual beneficial interests represented by such Global
Preferred Stock Certificate, to the accounts of persons who have accounts with
such
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depositary. Ownership of beneficial interests in a Global Preferred Stock
Certificate will be limited to persons who have accounts with DTC
("participants") or persons who hold interests through participants. Ownership
of beneficial interests in the Global Preferred Stock Certificate 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 Preferred Stock Certificate, DTC or such nominee, as the case may be,
will be considered the sole owner or holder of the Senior Preferred Stock
represented by such Global Preferred Stock Certificate for all purposes under
the Certificate of Designation and the Senior Preferred Stock. No beneficial
owner of an interest in a Global Preferred Stock Certificate will be able to
transfer that interest except in accordance with DTC's applicable procedures, in
addition to those provided for under the Certificate of Designation.
Payments made with respect to a Global Preferred Stock Certificate will be
made to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company nor the Placement Agents will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Preferred Stock Certificate 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 payments
made with respect to the Global Preferred Stock Certificate, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the amount of such Global Preferred Stock
Certificate 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 Preferred Stock Certificates 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.
The Company understands that DTC will take any action permitted to be taken
by a holder of Senior Preferred Stock (including the presentation of Senior
Preferred Stock for exchange as described below) only at the direction of one or
more participants to whose account the interests in the Global Preferred Stock
Certificate are credited and only in respect of such portion of the aggregate
liquidation preference of Senior Preferred Stock as to which such participant or
participants has or have given such direction.
The Company understands: 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 of 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 companies that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in the Global Preferred Stock Certificate
among participants of DTC, it is 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 Placement Agents will have any responsibility for
the performance by DTC
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or its respective participants or indirect participants of its or their
respective obligations under the rules and procedures governing their
operations.
CERTIFICATED SENIOR PREFERRED STOCK
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Preferred Stock Certificate and a successor depositary is not
appointed by the Company within 90 days, the Company will issue certificated
Senior Preferred Stock in exchange for the Global Preferred Stock Certificate.
DESCRIPTION OF EXCHANGE DEBENTURES
The Exchange Debentures, if issued, will be issued under the Exchange
Debenture Indenture between the Company and United States Trust Company of New
York, as trustee (the "Trustee"), the form of which is available from the
Company upon request. The terms of the Exchange Debentures include those stated
in the Exchange Debenture Indenture and those made part of the Exchange
Debenture Indenture by reference to the Trust Indenture Act. The Exchange
Debentures will be subject to all such terms, and prospective holders of the
Exchange Debentures are referred to the Exchange Debenture Indenture and the
Trust Indenture Act for a statement of such terms. The following summary of
certain provisions of the Exchange Debenture Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Trust Indenture Act and to all of the provisions of the Exchange Debenture
Indenture, including the definitions of certain terms therein and those terms
made a part of the Exchange Debenture Indenture by reference to the Trust
Indenture Act. The definitions of certain terms used in the Exchange Debentures
and the Exchange Debenture Indenture and in the following summary are set forth
below under "--Certain Definitions."
GENERAL
The Exchange Debentures will be unsecured obligations of the Company, will
be initially limited in aggregate principal amount to the aggregate liquidation
preference of the Senior Preferred Stock (including any Senior Preferred Stock
issued in payment of dividends), plus accrued and unpaid dividends, on the date
of exchange of the Senior Preferred Stock into Exchange Debentures (plus any
additional Exchange Debentures issued in lieu of cash interest as described
herein). The Exchange Debentures will be issued in fully registered form only in
denominations of $1,000 and integral multiples thereof (other than as described
in "Description of Senior Preferred Stock--Exchange" or with respect to
additional Exchange Debentures issued in lieu of cash interest as described
herein). The Exchange Debentures will be senior subordinated obligations of the
Company, subordinated to all existing and future Senior Indebtedness of the
Company and senior to all subordinated obligations of the Company.
Principal of, premium, if any, and interest on the Exchange Debentures will
be payable, and the Exchange Debentures may be presented for registration of
transfer or exchange, at the office of the Paying Agent and Registrar. At the
Company's option, interest, to the extent paid in cash, may be paid by check
mailed to the registered address of holders of the Exchange Debentures as shown
on the register for the Exchange Debentures. The Trustee will initially act as
Paying Agent and Registrar. The Company may change any Paying Agent and
Registrar without prior notice to Holders of the Exchange Debentures. Holders of
the Exchange Debentures must surrender Exchange Debentures to the Paying Agent
to collect principal payments.
The Exchange Debentures will mature on January 15, 2008. Each Exchange
Debenture will bear interest at the same rate in effect with respect to the
Senior Preferred Stock on the date the Exchange Debentures are issued from the
Exchange Debenture Issue Date or from the most recent interest payment date to
which interest has been paid or provided for. Interest will be payable
semi-annually in cash (or, on or prior to January 15, 2003, at the option of the
Company, in additional Exchange Debentures) in arrears on each of January 15 and
July 15 commencing with the first such date after the Exchange Debenture Issue
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Date. Interest on the Exchange Debentures will be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days elapsed.
Because of the Company's option through January 15, 2003 to pay interest on
the Exchange Debentures by issuing additional Exchange Debentures, any Exchange
Debentures issued prior to that date will be treated as issued with original
issue discount unless under special rules for interest holidays the amount of
original issue discount is treated as de minimis. See "Federal Income Tax
Considerations."
The Company may, subject to the covenants described below under "Covenants"
and applicable law, issue additional Exchange Debentures under the Exchange
Debenture Indenture. Exchange Debentures issued in exchange for Senior Preferred
Stock and any additional Exchange Debentures subsequently issued would be
treated as a single class for all purposes under the Exchange Debenture
Indenture.
SUBORDINATION
The Exchange Debentures will be senior subordinated Indebtedness of the
Company, subordinated to the prior payment when due of the principal of, and
premium, if any, and accrued and unpaid interest on, all existing and future
Senior Indebtedness of the Company and senior to the prior payment when due of
the principal of, and premium, if any, and accrued and unpaid interest on, all
subordinated Indebtedness of the Company.
Upon (a) any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property or
(b) an assignment for the benefit of creditors or any marshalling of the
Company's assets and liabilities, the holders of Senior Indebtedness will be
entitled to receive payment in full of all obligations due in respect of such
Senior Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior Indebtedness) before
holders of the Exchange Debentures will be entitled to receive any payment with
respect to the Exchange Debentures. Until all obligations with respect to Senior
Indebtedness are paid in full, any distribution to which holders of the Exchange
Debentures would be entitled will be made to holders of Senior Indebtedness.
Notwithstanding the foregoing, holders of the Exchange Debentures may receive
securities that are subordinated, at least to the same extent as the Exchange
Debentures, to Senior Indebtedness and any securities issued in exchange for
Senior Indebtedness.
In addition, the Company may not make any payment upon or in respect of the
Exchange Debentures (except in such subordinated securities) if (a) a default in
the payment of any principal, premium, if any, interest or other obligations
with respect to any Designated Senior Indebtedness occurs and is continuing
beyond any applicable grace period (whether upon maturity, as a result of
acceleration or otherwise) or (b) any other default occurs and is continuing
with respect to any Designated Senior Indebtedness that permits holders of such
Designated Senior Indebtedness to accelerate its maturity, and the Company and
the Trustee receive a notice of such default (a "Payment Blockage Notice") from
the holders, or from the trustee, agent or other representative of the holders,
of any such Designated Senior Indebtedness. Payments on the Exchange Debentures
may and shall be resumed upon the earlier of (i) the date upon which the default
is cured or waived or (ii) in the case of a default referred to in clause (b)
above, 179 days after the date on which the applicable Payment Blockage Notice
is received, unless the maturity of any Designated Senior Indebtedness has been
accelerated. No new period of payment blockage may be commenced within 360 days
after the receipt by the Trustee of any prior Payment Blockage Notice. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice unless such default shall have been cured or
waived for a period of not less than 180 days.
The Exchange Debenture Indenture will further require that the Company
promptly notify holders of Senior Indebtedness if payment on the Exchange
Debentures is accelerated because of an Event of Default.
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As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of the Exchange Debentures may recover less
ratably than other creditors of the Company. The Company is expected to incur
substantial amounts of additional indebtedness in the future.
OPTIONAL REDEMPTION
The Exchange Debentures will be redeemable at any time on or after January
15, 2003, at the Company's option, in whole or in part, upon not less than 30
nor more than 60 days' prior written notice mailed by first-class mail to each
holder's last address as it appears in the Security Register, at the redemption
prices (expressed as a percentage of the principal amount thereof) set forth
below, plus accrued and unpaid interest thereon to the redemption date (subject
to the right of holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the redemption
date), if redeemed during the 12-month period beginning January 15 of each of
the years set forth below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2003............................................................................. 106.125%
2004............................................................................. 104.084%
2005............................................................................. 102.042%
2006 and thereafter.............................................................. 100.000%
</TABLE>
In addition, on or prior to January 15, 2001, the Company may redeem
Exchange Debentures having an aggregate principal amount of up to 35% of the
aggregate liquidation preference of the Senior Preferred Stock originally issued
at a redemption price equal to 112.250% of the principal amount thereof, plus
accrued and unpaid interest to the redemption date, with the proceeds of any
sale of its Common Stock, PROVIDED that such redemption occurs within 180 days
after consummation of such sale and at least $113 million principal amount of
Exchange Debentures remains outstanding after each such redemption.
In the case of any partial redemption, selection of the Exchange Debentures
for redemption will be made by the Trustee in compliance with the requirements
of the principal national securities exchange, if any, on which the Exchange
Debentures are listed or, if the Exchange Debentures 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 Exchange Debenture of $1,000 in principal amount
or less shall be redeemed in part. If any Exchange Debenture is to be redeemed
in part only, the notice of redemption relating to such Exchange Debenture shall
state the portion of the principal amount thereof to be redeemed. A new Exchange
Debenture in principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original
Exchange Debenture.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Exchange Debenture Indenture. Reference is
made to the Exchange Debenture Indenture for the full definitions of all such
terms as well as any other capitalized terms 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.
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"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) except in the case of any restriction or encumbrance
permitted under clause (vi) of the "'Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant, 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 the "Limitation on Restricted Payments"
covenant described below, any amount paid or accrued as dividends on Senior
Preferred Shares 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.
"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.
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"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 the provisions
of the Exchange Debenture 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) sales, transfers or other
dispositions of assets constituting a Restricted Payment permitted to be made
under the "Limitation on Restricted Payments" covenant.
"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 Facility Agreement" means the DOC Facility Agreement, 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.
"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 Senior Preferred Shares.
"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
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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 constituted 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 A Preferred Stock" means the Class A Non-Voting, Non-Convertible
Preferred 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 January 22, 1998, the date on which the Preferred Stock
was originally issued under the Certificate of Designation.
"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 Senior Preferred
Shares 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.
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"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 Senior Notes and the Senior Preferred Stock, 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 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 of 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.
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"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" under the Exchange Debenture Indenture is
defined to mean (x) the Indebtedness specified in clause (i) of the definition
of Senior Indebtedness and (y) any other Indebtedness constituting Senior
Indebtedness that, at the date of determination, has an aggregate principal
amount of at least $25 million and that is specifically designated by the
Company in the instrument creating or evidencing such Senior Indebtedness as
"Designated Senior Indebtedness."
"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 Exchange Debentures, (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 Exchange Debentures 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
Exchange Debentures; 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 Exchange Debentures 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
Exchange Debentures 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 Exchange Debentures as are required to be repurchased
pursuant to the "Limitation on Asset Sales" and "Repurchase of Exchange
Debentures upon a Change of Control" covenants described below.
"Dobson Wireline" means Dobson Wireline Company.
"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; PROVIDED that for purposes of clause (viii) of
the second paragraph of the "Limitation on Indebtedness" covenant, (x) the fair
market value of any security registered under the Exchange Act shall be the
average of the closing prices, regular way, of such security for the 20
consecutive trading days immediately preceding the sale of Capital Stock and (y)
in the event the aggregate fair market value of any other property received by
the Company exceeds $10 million, the fair market value of such property shall be
determined by a nationally recognized investment banking firm and set forth in
their written opinion which shall be delivered to the Trustee.
"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 Exchange Debenture Indenture shall be computed in conformity with GAAP
applied on a consistent basis, except that calculations made for purposes of
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determining compliance with the terms of the covenants and with other provisions
of the Exchange Debenture Indenture shall be made without giving effect to (i)
the amortization of any expenses incurred in connection with the offering of the
Senior Notes and the Senior Preferred Stock 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.
"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.
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"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 (other than as a result of being designated as an
Unrestricted Subsidiary under clause (i) above), 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 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).
"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
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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.
"New Credit Facility Agreement" means the Operations Facility, together with
all other agreements, instruments and documents executed or delivered pursuant
thereto or in connection therewith, in each case as such credit agreement, other
agreements, instruments or documents may be amended, supplemented, extended,
renewed, replaced or otherwise modified from time to time.
"New Credit Facility Commitment Letter" means the commitment letter
(including the Summary of Terms and Conditions attached thereto) dated January
7, 1998 among Dobson Communications Corporation, Operations, NationsBank of
Texas, N.A. and NationsBanc Montgomery Securities LLC.
"New DOC Facility Agreement" means the DOC Facility, together with all other
agreements, instruments and documents executed or delivered pursuant thereto or
in connection therewith, in each case as such credit agreement, other
agreements, instruments or documents may be amended, supplemented, extended,
renewed, replaced or otherwise modified from time to time.
"New DOC Facility Commitment Letter" means the commitment letter (including
the Summary of Terms and Conditions attached thereto) dated January 7, 1998
among Dobson Communications Corporation, Dobson Operating Company, NationsBank
of Texas, N.A. and NationsBanc Montgomery Securities LLC.
"Offer to Purchase" means an offer by the Company to purchase Exchange
Debentures 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 Exchange Debentures 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 Exchange
Debenture 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
Exchange Debenture 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 an Exchange Debenture purchased pursuant to the Offer to
Purchase will be required to surrender the Exchange Debenture, together with the
form entitled "Option of the Holder to Elect Purchase" on the reverse side of
the Exchange Debenture 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 Exchange Debentures delivered for purchase and a statement
that such Holder is withdrawing its election to have such Exchange Debentures
purchased; and (vii) that Holders whose Exchange Debentures are being purchased
only in part will be issued new Exchange Debentures equal in principal amount to
the unpurchased portion of the Exchange Debentures surrendered; PROVIDED that
each Exchange Debenture purchased and each new Exchange Debenture 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 Exchange
Debentures 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 Exchange Debentures or portions thereof so accepted; and
(iii) deliver, or cause to be delivered, to the Trustee all Exchange Debentures
or portions thereof so accepted together with an Officers' Certificate
specifying the Exchange Debentures or portions thereof accepted for payment by
the Company. The Paying Agent shall promptly mail to the Holders of Exchange
Debentures so accepted payment in an amount equal to the purchase price, and the
Trustee shall promptly authenticate and mail to such Holders a new Exchange
Debenture equal in principal amount to any unpurchased portion of the Exchange
Debenture surrendered; PROVIDED that each Exchange Debenture purchased and each
new Exchange Debenture issued shall
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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 Exchange Debentures 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.
"Preferred Shares" 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.
"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 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.
"Senior Indebtedness" means (i) Indebtedness of the Company under the Senior
Notes, the Senior Note Indenture, the Bank Facility Agreement and the New Credit
Facility Agreement and all fees, expenses and indemnities payable in connection
with any of the foregoing and (ii) all other Indebtedness of the Company (other
than the Exchange Debentures), including principal and interest on such
Indebtedness, unless such Indebtedness, by its terms or by the terms of any
agreement or instrument pursuant to which such Indebtedness is issued, is PARI
PASSU with, or subordinated in right of payment to, the Exchange Debentures;
PROVIDED that the term "Senior Indebtedness" shall not include (a) any
Indebtedness of the Company that, when Incurred and without respect to any
election under Section 1111(b) of the United States Bankruptcy Code, was without
recourse to the Company, (b) any Indebtedness of the Company to a Subsidiary of
the Company or to a joint venture in which the Company has an interest, (c) any
Indebtedness of the Company, to the extent not permitted by the "Limitation on
Indebtedness" or the "Senior Subordinated Indebtedness" covenants described
below, (d) any repurchase, redemption or other obligation in respect of
Disqualified Stock, (e) any Indebtedness to any employee of the Company or any
of its Subsidiaries, (f) any liability for federal, state, local or other taxes
owed or owing by the Company or (g) any Trade Payables. Senior Indebtedness will
also include interest accruing subsequent to events of bankruptcy of the Company
at the rate provided for in the document governing such Senior Indebtedness,
whether or not such interest is an allowed claim enforceable against the debtor
in a bankruptcy case under federal bankruptcy law.
"Senior Note Indenture" means the Indenture dated as of February 28, 1997
between the Company and United States Trust Company of New York, relating to the
Senior Notes, as such indenture may be amended, supplemented, extended, renewed,
replaced or otherwise modified from time to time.
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"Senior Notes" means the 11 3/4% Senior Notes due 2007 issued by the Company
under the Senior Note Indenture.
"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 Services 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.
"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.
"Unrestricted Subsidiary" means (i) Dobson Wireline or any other 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
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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 Exchange Debenture Indenture will contain, 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 Exchange Debentures and
Indebtedness existing on the Closing Date); PROVIDED that the Company and any
Restricted Subsidiary may Incur 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 a 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
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 Exchange Debentures or Indebtedness
that is PARI PASSU with,
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or subordinated in right of payment to, the Exchange Debentures shall only be
permitted under this clause (iii) if (A) in case the Exchange Debentures are
refinanced in part or the Indebtedness to be refinanced is PARI PASSU with the
Exchange Debentures, 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 Exchange Debentures, (B) in case the Indebtedness to be refinanced is
subordinated in right of payment to the Exchange Debentures, 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 Exchange Debentures at
least to the extent that the Indebtedness to be refinanced is subordinated to
the Exchange Debentures 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 Exchange Debentures tendered
in an Offer to Purchase made as a result of a Change in Control or (B) deposited
to defease the Senior Notes or to defease the Exchange Debentures as described
below under "Defeasance"; (vi) Guarantees of the Exchange Debentures 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 sum of
(x) the Net Cash Proceeds received by the Company on or after the Closing Date
from the issuance and sale of its Capital Stock (other than Disqualified Stock),
including the Senior Preferred 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, or clause (xi) of the second paragraph, of
the "Limitation on Restricted Payments" covenant described below to make a
Restricted Payment and (y) 80% of the fair market value of property other than
cash 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; PROVIDED that such Indebtedness does not mature prior
to the Stated Maturity of the Exchange Debentures and has an Average Life longer
than the Exchange Debentures; and (ix) Indebtedness outstanding at any time in
an aggregate principal amount not to exceed $25 million, less any amount of such
Indebtedness permanently repaid as provided under the "Limitation on Asset
Sales" covenant described below.
(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
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"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) 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 (2) 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, the Company, in its sole discretion, shall classify, and from time to
time may reclassify, such item of Indebtedness and only be required to include
the amount and type of such Indebtedness in one of such clauses.
LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS
The Company shall not Incur any Indebtedness that is subordinate in right of
payment to any Senior Indebtedness unless such Indebtedness is PARI PASSU with,
or subordinated in right of payment to, the Exchange Debentures; PROVIDED that
the foregoing limitation shall not apply to distinctions between categories of
Senior Indebtedness of the Company that exist by reason of any Liens or
Guarantees arising or created in respect of some but not all such Senior
Indebtedness.
LIMITATION ON LIENS
The Company shall not Incur any Indebtedness secured by a Lien ("Secured
Indebtedness") which is not Senior Indebtedness unless effective provision is
made to have the Exchange Debentures secured equally and ratably with (or, if
the Secured Indebtedness is subordinated in right of payment to the Exchange
Debentures, prior to) such Secured Indebtedness for so long as such Secured
Indebtedness is secured by a Lien.
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
Exchange Debentures 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) 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
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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 Exchange Debenture 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 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 Exchange Debentures) PLUS (3) an
amount equal to the net reduction in Investments (other than reductions in
Permitted Investments and reductions in Investments made pursuant to clause (xi)
of the second paragraph of this "Limitation on Restricted Payments" covenant) 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
Exchange Debentures 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 Exchange Debentures 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 Exchange Debenture
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 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'
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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 Exchange Debentures as are required to be
repurchased pursuant to the "Limitation on Asset Sales" and "Repurchase of
Exchange Debentures upon a Change of Control" covenants described below; (ix)
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 (ix) shall not exceed 6% of the Net
Cash Proceeds received by the Company in the Public Equity Offering; (x) 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; or (xi) Investments in any Person or Persons, the
primary business of which is related, ancillary or complementary to the business
of the Company and its Restricted Subsidiaries on the date of such Investments,
in an aggregate amount not to exceed $30 million plus an amount not to exceed
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, except to the extent such Net
Cash Proceeds are used to Incur Indebtedness outstanding pursuant to clause
(viii) of the "Limitation on Indebtedness" covenant or to make Restricted
Payments pursuant to clause (C)(2) of the first paragraph, or clause (ii) or
(iii) of this paragraph, of the "Limitation on Restricted Payments" covenant; or
(xii) the distribution on or with respect to the holders of the Company's
Capital Stock of the Capital Stock of an Unrestricted Subsidiary; 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), (iv), and (xi) 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 Exchange Debentures, or Indebtedness that is PARI PASSU with the Exchange
Debentures, 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.
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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 Bank Facility Agreement,
the Senior Note Indenture or any other agreements in effect on the Closing Date,
and any amendments, extensions, refinancings, renewals or replacements of such
agreements; PROVIDED that, other than as contemplated in clause (vi) below, 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 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; or (vi)
contained in the terms of (A) the New DOC Facility Agreement or the New Credit
Facility Agreement, PROVIDED any encumbrance or restriction that would prevent
payments of dividends or other distributions to the Company to pay cash interest
on the Exchange Debentures applies on or prior to January 15, 2003, or applies
thereafter 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 New DOC Facility Agreement or the New Credit Facility Agreement; PROVIDED
(x) with respect to any event of default (other than a payment default
(including by way of acceleration), 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 which create
such encumbrance or restriction on dividends or other distributions in the New
DOC Facility Agreement or the New Credit Facility Agreement are no less
favorable to the Company or its Subsidiaries than the financial covenants set
forth in the New DOC Facility Commitment Letter or the New Credit Facility
Commitment Letter; or (B) 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 Exchange Debentures 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 Exchange Debentures. 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
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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; and (iv) 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 Exchange Debentures ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to the Exchange Debenture Indenture
providing for a Guarantee (a "Subsidiary Guarantee") of payment of the Exchange
Debentures 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 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. If the Guaranteed Indebtedness is (A) PARI
PASSU with the Exchange Debentures, then the Guarantee of such Guaranteed
Indebtedness shall be PARI PASSU with, or subordinated to, the Subsidiary
Guarantee or (B) subordinated to the Exchange Debentures, 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
Exchange Debentures.
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 Exchange Debenture 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
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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; or (v) any Restricted Payments not
prohibited by the "Limitation on Restricted Payments" covenant. 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 (v) 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 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 Senior
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 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
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consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Exchange Debentures 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 EXCHANGE DEBENTURES 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 Exchange Debentures 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 Exchange Debentures) 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 Exchange Debentures will, unless consents are obtained, require
the Company to repay all indebtedness then outstanding which by its terms would
prohibit such Exchange Debenture repurchase, either prior to or concurrently
with such Exchange Debenture 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 Exchange Debentures 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 will be defined as "Events of Default" in the Exchange
Debenture Indenture: (a) default in the payment of principal of (or premium, if
any, on) any Exchange Debenture when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise, whether or not such
payment is prohibited by the provisions described above under "--Ranking"; (b)
default in the payment of interest on any Exchange Debenture when the same
becomes due and payable, and such default continues for a period of 30 days,
whether or not such payment is prohibited by the provisions described above
under "--Ranking"; (c) default in the performance or breach of the provisions of
the Exchange Debenture 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 Exchange Debentures 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 Exchange Debenture
Indenture or under the Exchange Debentures (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 Exchange Debentures; (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 $10 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 $10 million in the aggregate for all such
final judgments or orders against all such Persons (treating any deductibles,
self-
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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 $10
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; or (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.
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 Exchange Debenture Indenture, the Trustee or the Holders of
at least 25% in aggregate principal amount of the Exchange Debentures, 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
Exchange Debentures 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 PROVIDED that so long as the Bank Facility Agreement
and the New Credit Facility Agreement are in effect, such declaration shall not
become effective until the earlier of (i) five Business Days after the receipt
of the acceleration notice by the agents thereunder and the Company and (ii)
acceleration of the Indebtedness under either the Bank Facility Agreement or the
New Credit Facility Agreement. 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 Exchange
Debentures 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 Exchange
Debentures 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 Exchange Debentures 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. 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 Exchange Debentures 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 Exchange Debenture
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the
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rights of Holders of Exchange Debentures 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 Exchange Debentures. A Holder
may not pursue any remedy with respect to the Exchange Debenture Indenture or
the Exchange Debentures 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 Exchange Debentures 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
Exchange Debentures 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 Exchange Debenture to receive payment of the principal of, premium,
if any, or interest on, such Exchange Debenture or to bring suit for the
enforcement of any such payment, on or after the due date expressed in the
Exchange Debentures, which right shall not be impaired or affected without the
consent of the Holder.
The Exchange Debenture 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 Exchange Debenture 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 Exchange Debenture 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 Exchange Debentures
and under the Exchange Debenture 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
Exchange Debentures 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 Exchange
Debentures, 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 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
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state of incorporation of the Company and any such transaction shall not have as
one of its purposes the evasion of the foregoing limitations.
DEFEASANCE
DEFEASANCE AND DISCHARGE. The Exchange Debenture Indenture provides that
the Company will be deemed to have paid and will be discharged from any and all
obligations in respect of the Exchange Debentures on the 123rd day after the
deposit referred to below, and the provisions of the Exchange Debenture
Indenture will no longer be in effect with respect to the Exchange Debentures
(except for, among other matters, certain obligations to register the transfer
or exchange of the Exchange Debentures, to replace stolen, lost or mutilated
Exchange Debentures, 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 Exchange Debentures on the Stated
Maturity of such payments in accordance with the terms of the Exchange Debenture
Indenture and the Exchange Debentures, (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, (D) the
Company is not prohibited from making payments in respect of the Exchange
Debentures by the provisions described above under "--Ranking" and (E) if at
such time the Exchange Debentures are listed on a national securities exchange,
the Company has delivered to the Trustee an Opinion of Counsel to the effect
that the Exchange Debentures will not be delisted as a result of such deposit,
defeasance and discharge.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT. The Exchange
Debenture Indenture further provides that the provisions of the Exchange
Debenture 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
Exchange Debentures on the Stated Maturity of such payments in accordance with
the terms of the Exchange Debenture Indenture and the Exchange Debentures, the
satisfaction of the provisions described in clauses (B)(ii), (C), (D) and (E) of
the preceding paragraph and the delivery by the Company to the Trustee of an
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Opinion of Counsel to the effect that, among other things, the Holders will not
recognize income, gain 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 Exchange Debenture Indenture with respect to the Exchange Debentures as
described in the immediately preceding paragraphs and the Exchange Debentures
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
Exchange Debentures at the time of their Stated Maturity but may not be
sufficient to pay amounts due on the Exchange Debentures 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 Exchange Debenture 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 Exchange Debentures;
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 Exchange Debenture, (ii)
reduce the principal amount of, premium, if any, or interest on, any Exchange
Debenture, (iii) change the place or currency of payment of principal of
premium, if any, or interest on, any Exchange Debenture, (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 Exchange Debenture, (v) modify the subordination provisions in a manner
adverse to the holders in any material respect, (vi) reduce the above-stated
percentage of outstanding Exchange Debentures the consent of whose holders is
necessary to modify or amend the Exchange Debenture Indenture, (vii) waive a
default in the payment of principal of, premium, if any, or interest on, the
Exchange Debentures, (viii) modify any of the provisions of the Exchange
Debenture Indenture described under "--Ranking" in a manner adverse to the
Holders, or (ix) reduce the percentage of aggregate principal amount of
outstanding Exchange Debentures the consent of whose holders is necessary for
waiver of compliance with certain provisions of the Exchange Debenture Indenture
or for waiver of certain defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Exchange Debenture Indenture will provide that no recourse for the
payment of the principal of, premium, if any, or interest on, any of the
Exchange Debentures, 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 the exchange Indenture or in any of the Exchange
Debentures, or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator or past, present or future shareholder,
officer, director, employee or controlling person of the Company. Each holder,
by accepting such Exchange Debenture, waives and releases all such liability.
CONCERNING THE TRUSTEE
The Exchange Debenture Indenture provides that, except during the
continuance of an Event of Default, the Trustee will perform only such duties as
are specifically set forth in the Exchange Debenture Indenture. If an Event of
Default has occurred and is continuing, the Trustee will exercise those rights
and powers vested in it under such Exchange Debenture Indenture and use the same
degree of care and skill in its exercise of such rights and powers as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
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The Exchange Debenture Indenture and provisions of the Trust Indenture Act
of 1939, as amended, incorporated by reference in the Exchange Debenture
Indenture, contain limitations on the rights of the Trustee thereunder, 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 engaged in other
transactions; PROVIDED, HOWEVER, that if it acquires any conflicting interest,
it must eliminate such conflict or resign.
DESCRIPTION OF INDEBTEDNESS
BANK CREDIT FACILITIES
THE DOC FACILITY
On March 25, 1998, the Company amended and restated the existing credit
facility among DOC and CoreStates Bank, N.A., First Union National Bank of North
Carolina and Nations Bank of Texas, N.A. as co-agents and lenders to provide,
among other things, for a $250.0 million senior secured revolving credit (the
"DOC Facility"). The following summary of the material provisions of the DOC
Facility does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, the DOC Facility. Capitalized terms that are used
but not defined in this section have the meanings that are given such terms in
the DOC Facility.
The DOC Facility matures on June 30, 2006. Borrowings under the DOC Facility
bears 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 NationsBank, plus in each case a percentage per annum ranging
from 0% to 1 1/4%, or (ii) a LIBOR-based rate plus a percentage per annum
ranging from 1% to 2 1/4%. The amount of additional interest applicable to
either option is based on the Company's quarterly Total Leverage Ratio. In the
event DOC's Senior Leverage Ratio is greater than 5.0 to 1, the additional
interest applicable to either option will be increased by .125%
Commencing with the quarter ending June 30, 2000, the borrowing commitment
under the DOC Facility will reduce quarterly in percentage increments of 3.33%
for the three quarters ending December 31, 2000, 3.75% for the eight quarters
ending December 31, 2002, 4.375% for the eight quarters ending December 31,
2004, 3.75% for the four quarters ending December 31, 2005 and 5% for the two
quarters ending June 30, 2006. A mandatory prepayment and reduction of the
borrowing commitment will be required at the time of, and in an amount equal to
100% of the net proceeds from, certain sales of material assets of DOC and its
Restricted Subsidiaries and in connection with the incurrence of certain
indebtedness by DOC. In addition, if DOC's Senior Leverage Ratio is greater than
5.5 to 1, the proceeds from any issuance of unsecured indebtedness by the
Company must be used to repay borrowings under the DOC Facility and reduce the
borrowing commitment thereunder.
The DOC Facility contains a number of covenants including, among others,
covenants limiting the ability of the Company, DOC and DOC's Restricted
Subsidiaries to incur debt, make loans or guarantees, create liens, pay
dividends, make distributions or stock repurchases, make investments, enter into
sale and lease-back transactions, change their business, sell assets, engage in
mergers and acquisitions and enter into transactions with affiliates.
Acquisitions must be limited to the domestic cellular industry and approval of
the lenders is required for any acquisition in excess of $75 million, if the
Total Leverage Ratio of the Company (including Restricted and Unrestricted
Subsidiaries) is greater than 8.5 to 1 (giving pro forma effect to the
acquisition). For 1998, DOC's capital expenditures will be limited to 110% of
its capital expenditures budget for such period. The DOC 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.
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The DOC Facility restricts DOC from declaring and paying dividends or
distributions, including dividends to pay cash dividends on the Senior Preferred
Stock and to pay scheduled interest on the Senior Notes and, if issued, the
Exchange Debentures. However, DOC will be permitted to pay dividends or
distributions to the Company to pay cash dividends on the Senior Preferred Stock
(or interest on the Exchange Debentures, if issued) after January 15, 2003, and
scheduled interest on the Senior Notes commencing after the first four interest
payments on the Senior Notes, unless at the time of such dividend or
distribution an event of default (other than an event of 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 (including by way of
acceleration), 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 Senior Notes or
Exchange Debentures, if issued, or dividends on the Senior Preferred Stock for
more than 180 days. In addition, DOC may pay dividends to the Company of up to
$7.5 million per year, not to exceed $25 million in the aggregate when DOC's
Senior Leverage Ratio is less than 6.5 to 1 (giving pro forma effect to the
payment); PROVIDED, however, to the extent funds are contributed to DOC in the
form of equity or unsecured subordinated loans, the amount of dividends DOC may
pay to the Company may be increased by the amount so contributed, but in no
event not to exceed $25 million per year and $50 million in the aggregate,
without regard to DOC's Senior Leverage Ratio.
The Company will be required to comply with certain financial tests and
maintain certain financial ratios, including, among others, a requirement that
(i) DOC's Senior Leverage Ratio not exceed 7.5 to 1 through June 30, 1998, 6.5
to 1 from July 1 to December 31, 1998, 6.25 to 1 from January 1 to June 30,
1999, 6.0 to 1 from July 1 to December 31, 1999, 5.5 to 1 from January 1 to June
30, 2000, 5.0 to 1 from July 1 to December 31, 2000 and 4.5 to 1 from January 1,
2001 and thereafter, (ii) the ratio of DOC's Operating Cash Flow to its Pro
Forma Debt Service exceed 1.15 to 1; (iii) the ratio of DOC's Operating Cash
Flow to its Cash Interest Expense (with an add-back for escrowed interest
payments on the Senior Notes) for the most recently ended four quarters exceed
2.0 to 1; (iv) DOC's Fixed Charge Coverage Ratio be greater than 1.0 to 1; (v)
the Company's Total Leverage Ratio not exceed 9.5 to 1 through June 30, 1998,
9.0 to 1 from July 1 to December 31, 1998, 8.5 to 1 from January 1 to June 30,
1999, 8.0 to 1 from July 1 to December 31, 1999, 7.0 to 1 from January 1 to June
30, 2000, 6.0 to 1 from July 1 to December 31, 2000 and 5.0 to 1 from January 1,
2001 and thereafter; and (vi) the Company's Consolidated Operating Cash Flow to
its Consolidated Interest Expense for the most recently ended four quarters
exceed 1.25 to 1.
For purposes of the financial covenants, "Operating Cash Flow" for DOC is
defined as Operating Cash Flow of DOC and its Restricted Subsidiaries, including
certain cash flow of the "Cellular Operating Partnerships" (defined as Oklahoma
RSA 5 Limited Partnership, Oklahoma RSA 7 Limited Partnership, Texas RSA No. 2
Limited Partnership, Gila River Cellular General Partnership and any other
entity in which DOC or one of its Restricted Subsidiaries owns a partnership
interest and serves as the managing general partner) multiplied by DOC's
ownership interest in the partnerships, except if DOC provides financing to any
of the Cellular Operating Partnerships that are not 100% owned by DOC, 100% of
the Operating Cash Flow of the partnership will be included in the definition of
DOC's Operating Cash Flow, and for the Company is defined as Operating Cash Flow
of the Company and its Restricted Subsidiaries, in each case for the four most
recently completed quarters. "Operating Cash Flow" for any period is defined as
the (i) sum of pre-tax income, without giving effect to extraordinary losses or
gains, interest, depreciation and amortization expenses and non-cash charges,
minus (ii) interest and dividend income, reductions in deferred taxes and other
non-cash components of income. "Total Debt" of DOC and its Restricted
Subsidiaries 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 and its Restricted
Subsidiaries is defined as the sum of all obligations for borrowed money
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(less the amount escrowed for interest payments on the Senior Notes), all
payments required under noncompete 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 Restricted Subsidiaries are contingently liable to provide as equity or
debt advances to other parties. At such time as the Senior Preferred Stock is
exchanged for Exchange Debentures, the obligations under the Exchange Debentures
will be included in the calculation of Total Debt. "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 minus payments 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 quarters to (ii) the sum of all
payments of DOC's Total Debt required to be paid, cash interest expense and
capital expenditures of DOC, cash taxes, and distributions and dividends paid by
DOC, in each case for the most recently ended four quarters. DOC's "Senior
Leverage Ratio" is defined as the ratio of Total Debt of DOC and its Restricted
Subsidiaries to Operating Cash Flow of DOC and its Restricted Subsidiaries. The
Company's "Total Leverage Ratio" is defined as the ratio of its Total Debt to
its Operating Cash Flow. "Restricted Subsidiaries" is defined as Dobson Cellular
of Arizona, Inc., Dobson Cellular of Enid, Inc., Dobson Cellular of
Kansas/Missouri, Inc., Dobson Cellular of Maryland, Inc., Dobson Cellular of
Woodward, Inc. and Dobson Cellular Systems, Inc. and its subsidiaries.
Failure to satisfy any of the financial convenants will constitute an Event
of Default under the DOC Facility, permitting the lenders, after notice, to
terminate this commitment and/or accelerate payment of outstanding indebtedness
notwithstanding the ability of the Company to meet its debt service obligations.
The DOC Facility also includes other customary events of default, including,
without limitation, a cross-default to other indebtedness, loss of any material
license, material adverse change, bankruptcy and change of control. In addition,
the definition of events of default includes the loss of Everett Dobson as part
of the senior managment team.
DOC's obligations under the DOC Facility are guaranteed by the Company and
DOC's Restricted Subsidiaries. Borrowings under the DOC 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 Restricted
Subsidiaries.
THE OPERATIONS FACILITY
On March 25, 1998, the Company entered into a revolving credit agreement
with a group of banks led by NationsBank, pursuant to which the banks have
agreed to provide a $200.0 million senior secured revolving credit facility to
Operations to be used to finance acquisitions, capital expenditures, permitted
investments and restricted payments and for general corporate purposes of
Operations and its subsidiaries. Borrowings under the Operations Facility were
used to fund the Texas 16 and California 4 Acquisitions. The following summary
of the material provisions of the Operations Facility does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Operations Facility. Capitalized terms that are used but not defined in this
section have the meanings that are given such terms in the Operations Facility.
The Operations Facility consists of (a) a $120 million eight and one-half
year reducing revolving credit facility and (b) an $80 million 364-day revolving
credit facility which, at Operations' option, may be converted into a term loan
maturing no later than eight and one-half years from the closing date of the
Operations Facility or, with the consent of the lenders, may be renewed for an
additional 364-day period. In addition, the Operations Facility contemplates an
additional $75 million revolving credit facility may be established in the
future, although the lenders will have no obligation to provide such additional
financing.
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The uncommitted acquisition revolver facility may not be established unless
two-thirds of the commitment amount under the committed facilities is
outstanding.
The facilities comprising the Operations Facility mature on June 30, 2006.
Borrowings under the Operations Facility bear interest, payable at least
quarterly, at Operations' 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
NationsBank, plus in each case a percentage per annum ranging from 1/8% to
1 3/8%, or (ii) a LIBOR-based rate plus a percentage per annum ranging from
1 1/8% to 2 3/8%. The amount of additional interest applicable to either option
is based on Operations' Leverage Ratio.
Commencing with the quarter ending June 30, 2000, the borrowing commitment
under the Operations Facility will reduce quarterly in percentage increments of
3.33% for the three quarters ending December 31, 2000, 3.75% for the eight
quarters ending December 31, 2002, 4.375% for the eight quarters ending December
31, 2004, 3.75% for the four quarters ending December 31, 2005 and 5% for the
two quarters ending June 30, 2006. A mandatory prepayment and reduction of the
borrowing commitment will be required at the time, and in an amount equal to
100% of the net proceeds from certain sales of material assets of Operations and
its subsidiaries and the issuance of certain indebtedness by Operations.
The Operations Facility contains a number of covenants including, among
others, covenants limiting the ability of Operations and its subsidiaries to
incur debt, make loans or guarantees, create liens, pay dividends, make
distributions or stock repurchases, make investments, enter into sale and
lease-back transactions, change their business, sell, exchange, lease or
otherwise dispose of assets, engage in mergers, make acquisitions and enter into
transactions with affiliates. Approval of the lenders is required for any
acquisition in excess of $75 million when the Company's Total Leverage Ratio
(including Restricted and Unrestricted Subsidiaries) is greater than 8.5 to 1
(giving pro forma effect to the acquisition). For 1998, Operations' capital
expenditures will be limited to 110% of its capital expenditures budget for such
period. The Operations Facility contains other covenants customary for similar
credit facilities.
The Operations Facility prohibits distributions or restricted payments,
except that, after giving pro forma effect to any such distribution or payment,
when Operations' Leverage Ratio is less than 5.0 to 1, payments may be made with
up to 100% of Free Cash Flow and when Operations' Leverage Ratio is greater than
or equal to 5.0 to 1, payments may be made with up to 50% of Free Cash Flow. In
addition, the Operations Facility restricts Operations from declaring and paying
dividends or distributions, including dividends to pay cash dividends on the
Senior Preferred Stock and to pay scheduled interest on the Senior Notes and, if
issued, the Exchange Debentures. However, after January 15, 2003 Operations will
be permitted to pay dividends or distributions to the Company to pay cash
dividends on the Senior Preferred Stock and scheduled interest on the Exchange
Debentures, if issued, unless at the time of such dividend or distribution an
event of default (other than an event of 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 (including by way of acceleration), a bankruptcy
event with respect to the Company or Operations or the loss of a material
license or cellular system), Operations will not be prohibited from paying
dividends to the Company to pay dividends on the Senior Preferred Stock or
scheduled interest on the Exchange Debentures, if issued, for more than 180
days.
Operations is required to comply with certain financial tests and maintain
certain financial ratios, including, among others, a requirement that (i)
Operations' Leverage Ratio not exceed 7.5 to 1 through September 30, 1998, 7.0
to 1 from October 1, 1998 to June 30, 1999, 6.5 to 1 from July 1 to December 31,
1999, 5.5 to 1 from January 1 to December 31, 2000, and 4.5 to 1 from January 1,
2001 and thereafter, PROVIDED that when Operating Cash Flow for the most
recently ended four quarters exceeds $20.0 million, the applicable ratios range
from 8.0 to 1 for the first period to 5.0 to 1 for the last period and when
Operating Cash Flow for the most recently ended four quarters exceeds $25
million, the applicable ratios range from 8.5 to 1 for the first period to 5.5
to 1 for the last period; (ii) the ratio of Operations' Operating
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Cash Flow to its Pro Forma Debt Service shall exceed 1.25 to 1; (iii) the ratio
of Operations' Operating Cash Flow to its Cash Interest Expense for the most
recently ended four quarters exceed 1.75 to 1 until December 31, 1998 and 2.0 to
1 thereafter; and (iv) the Fixed Charge Coverage Ratio be greater than 1.0 to 1.
For purposes of the financial covenants, "Operating Cash Flow" for
Operations includes the Operating Cash Flow of any "Cellular Operating
Partnership" (defined as any entity in which Operations or one of its
subsidiaries owns a partnership interest or serves as the managing general
partner) multiplied by Operations' ownership interest in the partnership, except
if Operations provides financing to any of the Cellular Operating Partnerships
that are not 100% owned by Operations, 100% of the Operating Cash Flow of the
partnership will be included in the definition of Operations' Operating Cash
Flow. Operating Cash Flow for the Company includes the Operating Cash Flow of
the Company and its Restricted Subsidiaries. "Operating Cash Flow" for any
period is defined as the (i) sum of pre-tax income, without giving effect to any
extraordinary losses or gains, interest, depreciation and amortization expenses
and non-cash charges, minus (ii) interest and dividend income, reductions in
deferred taxes and other non-cash components of income. "Total Debt" of
Operations is defined as the sum of all obligations of Operations and its
subsidiaries 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 Operations, and any
amounts for which Operations is contingently liable to provide as equity or debt
advances to other parties, but does not include intercompany subordinated debt
owed by Operations to the Company. "Total Debt" of the Company and its
Restricted Subsidiaries is defined as the sum of all obligations for borrowed
money (less the amount escrowed for interest payments on the Senior Notes), all
payments required under noncompete 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 Restricted Subsidiaries are contingently liable to provide as equity or
debt advances to other parties. At such time as the Senior Preferred Stock is
exchanged for Exchange Debentures, the obligations under the Exchange Debentures
will be included in the calculation of Total Debt. "Pro Forma Debt Service" is
defined as the sum of Pro Forma Interest Expense and payments scheduled to be
made on Operations' Total Debt for the succeeding twelve months. "Pro Forma
Interest Expense" is the result obtained by multiplying (x) the sum of (a)
Operations' Total Debt at the beginning of the period plus (b) such Total Debt
minus payments scheduled to be made thereon during the period, divided by two)
by (y) the interest rate in effect at the time of calculation. "Fixed Charge
Coverage Ratio" is defined as the ratio of (i) Operations' Operating Cash Flow
for the most recently ended four quarters to (ii) the sum of all payments on
Operations' Total Debt required to be paid, its cash interest expense, capital
expenditures, and cash taxes, and distributions and dividends paid by
Operations, in each case for the most recently ended four quarters. "Free Cash
Flow" is defined as the Operating Cash Flow for any fiscal year less cash taxes,
required principal and interest payments on all debt for such fiscal year,
capital expenditures and $2.5 million. Operations' "Leverage Ratio" is defined
as the ratio of its Total Debt to its Operating Cash Flow. The Company's "Total
Leverage Ratio" is defined as the ratio 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 Operations Facility, permitting the lenders, 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 Operations Facility also includes other customary events of
default, including, without limitation, a cross-default to other material
indebtedness, loss of any material license, material adverse change, bankruptcy,
change of control and a change of management resulting in less than two-thirds
of existing management being in control of Operations.
Operations' obligations under the Operations Facility are guaranteed by all
of Operations' subsidiaries. Borrowings under the Operations Facility are
secured by all assets of Operations and its present and future subsidiaries, and
by a pledge of the stock of and partnership interests in Operations'
subsidiaries.
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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") (the "RUS/RTB
Facility"). At December 31, 1997, the aggregate unpaid principal balance of
these loans was $28.6 million. The loans bear interest at annual rates varying
from 2% to 10 3/4% and with scheduled maturities until 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 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.
THE SENIOR NOTES
GENERAL. The Company presently has outstanding $160.0 million in aggregate
principal amount of Senior Notes which mature in April 2007. The Senior Notes
were issued under the Senior Note Indenture between the Company and United
States Trust Company of New York, as Trustee. The Senior Notes bear interest at
an annual rate of 11 3/4%, payable semi-annually on each April 15 and October
15. Capitalized terms hereafter used in this summary have the meanings set forth
in the Senior Note Indenture.
RANKING. The Senior 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 existing and
future subordinated indebtedness of the Company.
OPTIONAL REDEMPTION. The Company may, at its option, redeem all or any
portion of the Senior Notes at the redemption prices (expressed as percentages
of the principal amount of the Senior Notes) set
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forth below, plus, in each case, accrued interest thereon to the applicable
redemption date, if redeemed during the 12-month period beginning April 15 of
the years indicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------- ------------
<S> <C>
2002............................................................................ 105.8750%
2003............................................................................ 102.9375%
2004 and thereafter............................................................. 100.0000%
</TABLE>
CHANGE OF CONTROL. The Senior Note Indenture provides that, following the
occurrence of any Change of Control (as defined therein), the Company must offer
to purchase all outstanding Senior Notes at a purchase price equal to 101% of
their principal amount, plus accrued interest to the date of purchase.
RESTRICTIVE COVENANTS. The Senior Note Indenture contains certain
restrictive covenants which, among other things, limit the ability of the
Company and its Restricted Subsidiaries to incur additional indebtedness, create
liens, engage in sale-leaseback transactions, pay dividends or make
distributions in respect of their capital stock (including the Senior Preferred
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. Presently all
the Company's subsidiaries are Restricted Subsidiaries.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 1,031,000 shares of
Common Stock, par value $1.00 per share ("Common Stock"), consisting of
1,000,000 shares of Class A Common Stock and 31,000 shares of Class B Non-Voting
Common Stock ("Class B Common Stock"), 550,000 shares of Senior Preferred Stock
and 300,000 shares of preferred stock, par value of $1.00 per share, consisting
of 100,000 shares of Class A 5% Non-Cumulative, Non-Voting, Non-Convertible
Preferred Stock ("Class A Preferred Stock"), 100,000 shares of Class B
Convertible Preferred Stock ("Class B Preferred Stock"), and 100,000 shares of
Class C 8% Cumulative, Non-Voting, Non-Convertible Preferred Stock ("Class C
Preferred Stock" and together with the Class A Preferred Stock and the Class B
Preferred Stock, the "Other Preferred Stock"). At April 15, 1998, the issued and
outstanding capital stock of the Company consisted of 179,942.535 shares of
Senior Preferred Stock, 100,000 shares of Class A Preferred Stock, 100,000
shares of Class B Preferred Stock, 100,000 shares of Class C Preferred Stock,
and 473,152 shares of Class A Common Stock. The Company has reserved 30,166
shares of Class B Common Stock for issuance upon exercise of options granted and
which may be granted under the Company's Stock Option Plan.
The following description of certain matters relating to the capital stock
of the Company is a summary and is qualified in its entirety by the provisions
of the Company's Certificate of Incorporation ("Certificate of Incorporation")
and Bylaws.
COMMON STOCK
The holders of Class A Common Stock are entitled to one vote per share on
all matters submitted to a vote of stockholders of the Company. Holders of Class
B Common Stock have no voting rights except when a class vote is required by
law. Holders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available
therefor, subject to the payment of preferential dividends with respect to any
outstanding preferred stock and subject to the terms of the Bank Facility, the
Senior Note Indenture, the Certificate of Designation and, if the Exchange
Debentures are issued, the Exchange Debenture Indenture. The holders of Common
Stock do not have cumulative voting rights or preemptive or other rights to
acquire or subscribe for additional, unissued or treasury shares.
OTHER PREFERRED STOCK
CLASS A PREFERRED STOCK
The Company's subsidiary, Telco, holds 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 Senior
Note Indenture, the Certificate of Designation and, if the Exchange Debentures
are issued, the Exchange Debenture Indenture 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.
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CLASS B AND CLASS C 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 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"). In connection with the Senior Note Offering and the Maryland 2
and Western Maryland Properties Acquisitions, the DOC Class B Preferred Stock
was exchanged for 100,000 shares of the Company's Class B Preferred Stock and
the Fleet Investors were also issued 100,000 shares of the Company's Class C
Preferred Stock (together with the Company's Class B Preferred Stock, 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.
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 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 a 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
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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 Senior Note Indenture, the Certificate of Designation and, if the
Exchange Debentures are issued, the Exchange Debenture Indenture 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.
In February 1997, a $7.5 million dividend was paid on the Class A Common
Stock. 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 $1.6 million. In lieu of such Make-Whole Dividend, the Fleet
Investors received 100,000 shares of Class C Preferred Stock having a
liquidation preference of $1,623,329.
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 $16.23 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 Senior Note
Indenture and the Certificate of Designation 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 must redeem all the outstanding
shares of Class C Preferred Stock at the Liquidation Value thereof plus Accrued
Dividends.
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The Fleet Investors have acknowledged that the Senior Note 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 Senior 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. Notwithstanding the foregoing, upon the
issuance of the Senior Preferred Stock offered hereby, an additional two
directors may be designated by the holders of Senior Preferred Stock in the
event certain Voting Rights Triggering Events occur.
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 have waived this right with respect to the Senior Preferred Stock. 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.
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 in clauses (ii), (iii) and
(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) the 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
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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 Senior Note Indenture, the Certificate of Designation and, if the
Exchange Debentures are issued, the Exchange Debenture Indenture limit the
ability of the Company to repurchase shares of Class B Preferred Stock or Common
Stock. See "Description of Senior Preferred Stock," "Description of Exchange
Debentures" and "Description of Indebtedness--The Senior 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.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes the anticipated material U.S. federal income
tax consequences of the purchase, ownership and disposition of the Senior
Preferred Stock and the Exchange Debentures. Except where noted, it deals only
with Senior Preferred Stock and Exchange Debentures held as capital assets by
United States Holders and does not deal with special situations, such as those
of dealers in securities or currencies, financial institutions, life insurance
companies, persons holding Senior Preferred Stock or Exchange Debentures as a
part of a hedging or conversion transaction or a straddle or United States
Holders whose "functional currency" is not the U.S. dollar. Furthermore, the
discussion below is based upon the provisions of the U.S. Internal Revenue Code
of 1986, as amended (the "Code"), and regulations, including final Treasury
regulations addressing debt instruments issued with OID (the "OID Regulations"),
rulings and judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified, possibly with retroactive
effect, so as to result in U.S. federal income tax consequences different from
those discussed below. ALL PROSPECTIVE PURCHASERS ARE ADVISED TO CONSULT THEIR
OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE SENIOR PREFERRED
STOCK OR THE EXCHANGE DEBENTURES.
TAX CONSEQUENCES TO UNITED STATES HOLDERS
As used herein, a "United States Holder" means a beneficial owner that is a
citizen or resident of the United States, a corporation, partnership (unless
Treasury regulations provide otherwise) or other entity created or organized in
or under the laws of the United States or any political subdivision thereof, an
estate the income of which is subject to U.S. federal income taxation regardless
of its source or a trust if both (i) a court within the United States is able to
exercise primary supervision over the administration of such trust and (ii) one
or more United States persons have the authority to control all substantial
decisions of such trust. An individual may, subject to certain exceptions, be
deemed to be a resident (as opposed to a non-resident alien) of the United
States by virtue of being present in the United States on at least 31 days in
the calendar year and for an aggregate of at least 183 days during a three-year
period ending in the current calendar year (counting for such purposes all of
the days present in the current year, one-third of the days present in the
immediately preceding year, and one-sixth of the days present in the second
preceding year). A "Non-United States Holder" is a holder that is not a United
States Holder.
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DISTRIBUTIONS ON THE SENIOR PREFERRED STOCK
Distributions of cash or of additional Senior Preferred Stock on the Senior
Preferred Stock will be treated as dividends to United States Holders to the
extent of the Company's current and accumulated earnings and profits as
determined under U.S. federal income tax principles. The amount of the Company's
earnings and profits at any time will depend upon the future actions and
financial performance of the Company. The amount of a distribution of additional
Senior Preferred Stock will equal the fair market value of the Senior Preferred
Stock distributed on the date of the distribution. To the extent that the amount
of a distribution on the Senior Preferred Stock exceeds the Company's current
and accumulated earnings and profits, such distributions will be treated as a
nontaxable return of capital and will be applied against and reduce the adjusted
tax basis of the Senior Preferred Stock in the hands of each United States
Holder (but not below zero), thus increasing the amount of any gain (or reducing
the amount of any loss) which would otherwise be recognized by such United
States Holder upon the sale or other taxable disposition of such Senior
Preferred Stock. The amount of any such distribution which exceeds the adjusted
tax basis of the Senior Preferred Stock in the hands of the United States Holder
will be treated as capital gain and will be either long-term or short-term
capital gain depending on the United States Holder's holding period for the
Senior Preferred Stock. The initial tax basis of additional Senior Preferred
Stock in the hands of a holder who received such additional Senior Preferred
Stock as a distribution on Senior Preferred Stock will equal the fair market
value of such additional Senior Preferred Stock at the time of distribution.
The Company presently does not have any current or accumulated earnings and
profits as determined under U.S. federal income tax principles and it is
unlikely to have current or accumulated earnings and profits in the foreseeable
future. As a result, until such time as the Company does have earnings and
profits, distributions of cash and additional Senior Preferred Stock on the
Senior Preferred Stock will not be treated as dividends, and instead will
constitute a nontaxable return of capital that reduces a holder's adjusted tax
basis in the Senior Preferred Stock. In the case of distributions of additional
Senior Preferred Stock, such basis reduction should be offset on an overall
standpoint by a corresponding amount of tax basis for a holder in the additional
Senior Preferred Stock. A United States Holder would recognize gain to the
extent that any distribution were to exceed current or accumulated earnings and
profits and the adjusted tax basis of the holder in the Senior Preferred Stock.
Under Section 243 of the Code, corporate United States Holders generally
will be able to deduct 70% of the amount of any distribution qualifying as a
dividend. There are, however, many exceptions and restrictions relating to the
availability of such dividends-received deduction. Section 246A of the Code
reduces the dividends-received deduction allowed to a corporate United States
Holder that has indebtedness "directly attributable" to its investment in
portfolio stock. Section 246(c) of the Code requires that in order to be
eligible for the dividends-received deduction, a corporate United States Holder
generally must hold the shares of Senior Preferred Stock for a 46-day minimum
holding period or a 91-day period in certain circumstances. A taxpayer's holding
period for these purposes is suspended during any period in which a United
States Holder has certain options or contractual obligations with respect to
substantially identical stock or holds one or more other positions with respect
to substantially identical stock that diminishes the risk of loss from holding
the Senior Preferred Stock. A recent legislative enactment modified the manner
in which the 46- or 91-day minimum holding period is determined, and requires
that the applicable holding period be determined with respect to each dividend
payment date on an "unhedged" basis.
Under Section 1059 of the Code, a corporate United States Holder is required
to reduce its tax basis (but not below zero) in the Senior Preferred Stock by
the nontaxed portion of any "extraordinary dividend" if such stock has not been
held for more than two years before the earliest of the date such dividend is
declared, announced or agreed to. Generally, the nontaxed portion of an
extraordinary dividend is the amount excluded from income by operation of the
dividends-received deduction provisions of Section 243 of the Code. An
extraordinary dividend on the Senior Preferred Stock generally would be a
dividend that (i) equals or exceeds 5% of the corporate United States Holder's
adjusted tax basis in the
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Senior Preferred Stock, generally treating all dividends received by the United
States Holder and having ex-dividend dates within an 85 day period as one
dividend or (ii) exceeds 20% of the corporate United States Holder's adjusted
tax basis in such Senior Preferred Stock; generally treating all dividends
received by the United States Holder having ex-dividend dates within a 365-day
period as one dividend. In determining whether a dividend paid on the Senior
Preferred Stock is an extraordinary dividend, a corporate United States Holder
may elect to substitute the fair market value of the Senior Preferred Stock for
such United States Holder's tax basis for purposes of applying these tests,
provided such fair market value is established to the satisfaction of the
Secretary of Treasury (the "Secretary") as of the day before the ex-dividend
date. An extraordinary dividend also includes any amount treated as a dividend
in the case of a redemption that is either non-pro rata as to all stockholders
or in partial liquidation of the Company, regardless of the stockholder's
holding period and regardless of the size of the dividend. If any part of the
nontaxed portion of an extraordinary dividend is not applied to reduce the
corporate United States Holder's tax basis as a result of the limitation on
reducing such basis below zero, such part will be treated as gain from the sale
or exchange of the Senior Preferred Stock, which must be recognized at the time
when the extraordinary dividend is paid. Special rules exist with respect to
"qualified preferred dividends." A qualified preferred dividend is any fixed
dividend payable with respect to any share of stock which (i) provides for fixed
preferred dividends payable not less frequently than annually and (ii) is not in
arrears as to dividends at the time the United States Holder acquires such
stock. A qualified preferred dividend does not include any dividend payable with
respect to any share of stock if the actual rate of return of such stock exceeds
15%. Section 1059 does not apply to qualified preferred dividends if the
corporate United States Holder holds such stock for more than five years. If the
United States Holder disposes of such stock before it has been held for more
than five years, the amount subject to extraordinary dividend treatment with
respect to qualified preferred dividends is limited to the excess of the actual
rate of return over the stated rate of return. Actual or stated rates of return
are the actual or stated dividends expressed as a percentage of the lesser of
(i) the United States Holder's tax basis in such stock or (ii) the liquidation
preference of such stock. Corporate United States Holders are urged to consult
their tax advisors with respect to the possible application of Section 1059 to
their ownership and disposition of the Senior Preferred Stock.
A corporate United States Holder's liability for alternative minimum tax may
be affected by the portion of the dividends received which such corporate United
States Holder deducts in computing taxable income. This results from the fact
that corporate stockholders are required to increase alternative minimum taxable
income by 75% of the excess of current earnings (with certain adjustments) over
alternative minimum taxable income (determined without regard to earnings and
profit adjustments or the alternative tax net operating loss deduction).
Prospective corporate investors should be aware that distributions paid by the
Company in respect of the Senior Preferred Stock (whether payable in cash or
additional shares of Senior Preferred Stock) will not be eligible for the
dividends- received deduction under Section 243 of the Code until such time as
the Company has current or accumulated earnings and profits.
REDEMPTION PREMIUM
Under Section 305 of the Code and the applicable Treasury regulations
thereunder, if the redemption price of Senior Preferred Stock exceeds its issue
price, the difference ("redemption premium") may be taxable as a constructive
distribution of additional Senior Preferred Stock to the United States Holder
(treated as a dividend to the extent of the Company's current and accumulated
earnings and profits and otherwise subject to the treatment described above for
distributions) over a certain period. Because the Senior Preferred Stock
provides for an optional right of redemption by the Company at prices in excess
of the issue price, United States Holders could be required to recognize such
redemption premium under a constant interest rate method similar to that
described below for accruing OID (see "--Original Issue Discount") if, based on
all of the facts and circumstances, the optional redemption is more likely than
not to occur. If stock may be redeemed at more than one time, the time and price
at which such redemption is most likely to occur must be determined based on all
of the facts and circumstances. Applicable Treasury
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regulations provide a "safe harbor" under which a right to redeem will not be
treated as more likely than not to occur if (i) the issuer and the holder are
not related within the meaning of the Treasury regulations, (ii) there are no
plans, arrangements or agreements that effectively require or are intended to
compel the issuer to redeem the stock (disregarding, for this purpose, a
separate mandatory redemption) and (iii) exercise of the right to redeem would
not reduce the yield of the stock, as determined under the Treasury regulations.
Further, the Treasury regulations provide that such redemption premium is not
taxable as a constructive distribution if it is solely in the nature of a
penalty for premature redemption. A redemption premium is solely in the nature
of a penalty for premature redemption if it is paid as a result of changes in
economic or market conditions over which neither the issuer nor the holder have
control. Regardless of whether the optional redemption is more likely than not
to occur or whether the redemption premium is solely in the nature of a penalty
for premature redemption, constructive dividend treatment will not result if the
redemption premium does not exceed a de minimis amount. Based on the Treasury
regulations, the Company intends to take the position that the existence of the
Company's optional redemption right does not result in a constructive
distribution to the United States Holders.
Further, because the Senior Preferred Stock provides for an optional right
of the United States Holders to require the Company to acquire the Senior
Preferred Stock at a price equal to 101% of the liquidation value upon a Change
of Control, United States Holders could be required to recognize such redemption
premium under the constant yield method discussed above unless, very generally,
the likelihood of redemption is remote. Here, too, regardless of whether the
likelihood of redemption is remote, constructive dividend treatment will not
result if the redemption premium does not exceed a de minimis amount of 1/4 of
1% of the stated redemption price at maturity multiplied by the number of
complete years to maturity. The Company intends to take the position that the
existence of United States Holders' optional redemption right does not result in
a constructive distribution to the Holders.
Moreover, the Senior Preferred Stock provides for a mandatory redemption at
a redemption price equal to the liquidation value of the Senior Preferred Stock,
plus accrued and unpaid dividends. If at the time of issuance of Senior
Preferred Stock, there is no intention for dividends to be paid currently, the
IRS may treat the payment of such dividends on redemption as disguised
redemption premium subject to the constant yield rules discussed above.
Dividends on the Senior Preferred Stock are payable in cash or, on or prior to
January 15, 2003, in additional shares of Senior Preferred Stock. The Company
intends to pay all such dividends currently. Thus, while the appropriate
treatment of unpaid cumulative dividends has not yet been addressed in Treasury
regulations and no assurance can be given as to the outcome of such guidance,
the Company intends to take the position that the terms of the mandatory
redemption should not result in a constructive distribution to the United States
Holders.
Finally, in the event that additional Senior Preferred Stock is distributed
on the Senior Preferred Stock and such additional Senior Preferred Stock has a
fair market value at the time of distribution that is less than its redemption
price, such additional Senior Preferred Stock would have a redemption premium
that may be taxable as a constructive distribution of additional stock to a
United States Holder (treated as a dividend to the extent of the Company's
current and accumulated earnings and profits) under the constant yield method
over the term of such additional Senior Preferred Stock.
REDEMPTION AND EXCHANGE FOR EXCHANGE DEBENTURES
A redemption of shares of the Senior Preferred Stock for cash or an exchange
of the Senior Preferred Stock for Exchange Debentures will be a taxable
transaction on which a United States Holder generally will recognize capital
gain or loss (except to the extent of amounts received on the exchange that are
attributable to declared dividends, which will be treated in the same manner as
distributions described above) provided that the redemption (i) results in
complete termination of the holder's stock interest in the Company or (ii)
results in a "meaningful reduction" in a United States Holder's stock interest
in the Company. Whether a redemption will result in a meaningful reduction
depends on the particular holder's facts and circumstances. In determining
whether a United States Holder's interest in the Company has
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been reduced or terminated, the holder is deemed, under the constructive
ownership rules of Section 302(c) of the Code, to own any shares of Company
stock that are owned, or deemed owned, by certain related persons and entities
and any shares that such holder, or related person or entity, has the right to
acquire by exercise of an option. If the redemption of the Senior Preferred
Stock does not result in a complete termination or meaningful reduction, as
described above, the transaction will be treated as a distribution of cash or
Exchange Debentures, as the case may be. The amount of such distribution will be
measured by the amount of cash received by the United States Holder or the
"issue price," as defined below, of the Exchange Debentures received by the
United States Holder, and such distribution will be treated in the same manner
as distributions described above. However, corporate holders should be aware
that to the extent such distribution is treated as a dividend it may be an
extraordinary dividend under Section 1059 of the Code. If the redemption of the
Senior Preferred Stock does result in a complete termination or meaningful
reduction, the gain or loss recognized on such exchange will generally be equal
to the difference between the amount realized by the United States Holder of the
Senior Preferred Stock and such United States Holder's adjusted tax basis in the
Senior Preferred Stock surrendered in the redemption.
In the case of a redemption for cash, the amount realized will be the cash
received on the redemption. In the case of an exchange of Senior Preferred Stock
for Exchange Debentures, the amount realized on receipt of the Exchange
Debentures will be equal to the "issue price" of the Exchange Debentures. Thus,
the amount realized on the exchange will be equal to the issue price of the
Exchange Debentures plus any cash received on the exchange (other than cash
received with respect to declared dividends). If, as of the exchange date,
either the Exchange Debentures or the Senior Preferred Stock are traded on an
established securities market on or at any time during the 60 day period ending
30 days after the exchange date, then the issue price of the Exchange Debentures
would equal the fair market value of the property so traded. If neither the
Senior Preferred Stock nor the Exchange Debentures are so traded, the issue
price of the Exchange Debentures would be the stated principal amount of the
Exchange Debentures provided that the yield on the Exchange Debentures is equal
to or greater than the "applicable federal rate" in effect at the time the
Exchange Debenture is issued. If the yield on the Exchange Debentures is less
than such applicable federal rate, its issue price under Section 1274 of the
Code would be equal to the present value as of the issue date of all payments to
be made on the Exchange Debentures, discounted at the applicable federal rate.
It cannot be determined at the present time whether the Senior Preferred Stock
or the Exchange Debentures will be, at the relevant time, traded on an
established securities market within the meaning of the OID Regulations or
whether the yield on the Exchange Debentures will equal or exceed the applicable
federal rate.
SALE OR OTHER DISPOSITION OF SENIOR PREFERRED STOCK
A United States Holder's adjusted tax basis in the Senior Preferred Stock
will equal the amount paid for such stock plus the fair market value of any
distributions of additional Senior Preferred Stock and any amount included in
gross income as a constructive distribution of redemption premium, in each case
under Section 305 of the Code, as described in "--Distributions on the Senior
Preferred Stock" and "--Redemption Premium," and reduced by the amount of any
distribution treated as a nontaxable return of capital that reduced the adjusted
tax basis of the Senior Preferred Stock, as described in "--Distributions on the
Senior Preferred Stock." In general, a United States Holder will recognize
capital gain or loss upon the sale or other taxable disposition of Senior
Preferred Stock based upon the difference between the amount realized in such
sale or other disposition, and the holder's adjusted tax basis in the Senior
Preferred Stock. Such gain or loss will be either long-term or short-term
capital gain depending on the United States Holder's holding period for the
Senior Preferred Stock at the time of redemption, sale, exchange or retirement
of the Senior Preferred Stock. In the case of an individual United States
Holder, any such capital gain will be taxable at various preferential rates
depending on the extent to which such United States Holder's holding period for
the Senior Preferred Stock exceeds one year. The deduction of capital losses is
subject to certain limitations. Prospective investors should consult their own
tax advisors in this regard.
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Depending upon a United States Holder's particular circumstances, the tax
consequences of holding Exchange Debentures may be less advantageous than the
tax consequences of holding Senior Preferred Stock because, for example,
payments of interest on the Exchange Debentures will not be eligible for any
dividends-received deduction that may be available to corporate United States
Holders (subject to the Company having earnings and profits) and because, as
discussed below, the Exchange Debentures will be issued with OID.
PAYMENTS OF INTEREST AND OID ON THE EXCHANGE DEBENTURES
The tax treatment of the Exchange Debentures will turn on whether or not
they are issued with OID. Exchange Debentures issued on or before January 15,
2003 likely will be treated as having been issued with OID. Exchange Debentures
issued after January 15, 2003 will not be issued with OID unless, generally,
their stated redemption price at maturity, as defined below, exceeds their issue
price, as defined above.
Because the Company has the option through January 15, 2003 to pay interest
on the Exchange Debentures by issuing additional Exchange Debentures, Exchange
Debentures (including Exchange Debentures issued in exchange for Senior
Preferred Stock) issued prior to that date likely will be treated as issued with
OID. Accordingly, the stated interest on an Exchange Debenture would not be
treated as interest for U.S. federal income tax purposes, but instead will be
subject to the OID rules described below. In the case of Exchange Debentures
that are not issued with OID, payments of stated interest generally will be
includible in a United States Holder's income as ordinary income under the
holder's regular method of accounting.
ORIGINAL ISSUE DISCOUNT
The Exchange Debentures, if issued in exchange for Senior Preferred Stock,
may be issued with OID, as further discussed below. Holders of such Exchange
Debentures should be aware that they generally must include OID in gross income
for U.S. federal income tax purposes on an annual basis under a constant yield
accrual method. As a result, Holders will include OID in income in advance of
the receipt of cash attributable to that income. However, United States Holders
of Exchange Debentures issued with OID generally will not be required to include
separately in income cash payments received on such Exchange Debentures, even if
denominated as interest, to the extent such payments do not constitute qualified
stated interest (as defined below). The Exchange Debentures issued with OID will
be referred to as "OID Debentures." The Company will report to United States
Holders of any Exchange Debentures which are issued with OID, on a timely basis
the reportable amount of OID and interest income based on its understanding of
applicable law.
The amount of OID, if any, on a debt instrument is the excess of its "stated
redemption price at maturity" over its "issue price" subject to a statutorily
defined de minimis exception. The issue price of a debt instrument issued for
cash is equal to the first price (excluding sales to bond houses and brokers) at
which a substantial amount of such debt instruments were sold. The "stated
redemption price at maturity" of a debt instrument is the sum of its principal
amount plus all other payments required thereunder, other than payments of
"qualified stated interest" (defined generally as stated interest that is
unconditionally payable in cash or in property (other than the debt instruments
of the issuer), at least annually at a single fixed rate that appropriately
takes into account the length of intervals between payments).
Because the Company has the option through January 15, 2003 to pay interest
on the Exchange Debentures by issuing additional Exchange Debentures, with
respect to any Exchange Debentures issued on or prior to that date, none of the
stated interest would be treated as qualified stated interest unless under
special rules for interest holidays the amount of OID is treated as de minimis.
Any Exchange Debentures so issued would be treated as having been issued with
OID equal to the excess of their stated redemption price at maturity (which will
be equal to the sum of the principal amount plus all payments of stated
interest) over their issue price (which will be as described under "--Redemption
and Exchange for Exchange Debentures" above). Any additional Exchange Debentures
issued in lieu of cash would not be
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treated as debt instruments separate from the Exchange Debentures upon which
they were issued, but instead are aggregated with such Exchange Debentures for
OID purposes.
The right to issue additional Exchange Debentures in lieu of paying cash
interest through January 15, 2003 is treated for purposes of the OID provisions
of the Code as an option to defer the interest payments on the Exchange
Debentures. The OID regulations provide that in the case of a debt instrument
that provides the issuer with an unconditional option or options exercisable
during the term of the debt instrument that, if exercised, require payments to
be made on the debt instrument under an alternative payment schedule, the yield
and maturity of such debt instrument for purposes of calculating OID are
determined by assuming the issuer exercises or does not exercise the option in a
manner that minimizes the yield on the debt instrument.
If the issue price of the Exchange Debentures is equal to their principal
amount, the yield to maturity of the Exchange Debentures, if the option to pay
interest with additional Exchange Debentures is exercised, will be no less than
the yield to maturity would be if the option is not exercised. Accordingly, for
purposes of calculating OID, it would be assumed that the Company will not
exercise the option because exercise of the option will not minimize the yield.
If the option was in fact subsequently exercised and additional Exchange
Debentures were issued by the Company in lieu of cash, such additional Exchange
Debentures would be aggregated with the Exchange Debentures upon which they were
issued, and OID would be recalculated for the remainder of the term of the
Exchange Debentures based upon a stated redemption price at maturity which
includes the amount of all payments due under the additional Exchange
Debentures. As a result of such exercise, United States Holders of Exchange
Debentures would include OID in income in advance of the receipt of cash,
regardless of such United States Holders' regular methods of accounting.
If the issue price of the Exchange Debentures is less than their principal
amount, the yield to maturity of the Exchange Debentures, if the option to pay
interest with additional Exchange Debentures is exercised, will be less than the
yield to maturity if the option is not exercised. Accordingly, for purposes of
calculating OID, it would be assumed that the Company will exercise the option
because to do so will minimize the yield. If the Company subsequently makes a
cash payment instead of exercising its option to issue an additional Exchange
Debenture, the cash payment made will be treated as a prepayment of the Exchange
Debentures, partially retiring such Exchange Debentures on a pro rata basis on
the date of such payment. Such retirement would be a taxable exchange to the
Holder of the Exchange Debenture.
If the Exchange Debentures are issued after January 15, 2003, the Company
would not have the option to pay interest with additional Exchange Debentures.
In such event, (i) all interest payments on any Exchange Debenture issued will
be qualified stated interest, (ii) the stated redemption price at maturity of
any Exchange Debenture will be equal to its principal amount, and (iii) any
Exchange Debenture will therefore be issued with OID only to the extent its
principal amount exceeds its issue price by more than a de minimis amount.
The amount of OID includible in income by the initial United States Holder
of an OID Debenture is the sum of the "daily portions" of OID with respect to
the OID Debenture for each day during the taxable year or portion of the taxable
year in which such United States Holder held such OID Debenture ("accrued OID").
The daily portion is determined by allocating to each day in any "accrual
period" a pro rata portion of the OID allocable to that accrual period. The
"accrual period" for an OID Debenture may be of any length and may vary in
length over the term of the OID Debenture, provided that each accrual period is
no longer than one year and each scheduled payment of principal or interest
occurs on the first day or the final day of an accrual period. The amount of OID
allocable to any accrual period is an amount equal to the excess, if any, of (a)
the product of the OID Debenture's adjusted issue price at the beginning of such
accrual period and its yield to maturity (determined on the basis of compounding
at the close of each accrual period and properly adjusted for the length of the
accrual period) over (b) the sum of any qualified stated interest allocable to
the accrual period. OID allocable to a final accrual period is the difference
between the amount payable at maturity (other than a payment of qualified stated
interest) and
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the adjusted issue price at the beginning of the final accrual period. The
calculation of OID for an initial short accrual period may be determined using
any reasonable method. The "adjusted issue price" of an OID Debenture at the
beginning of any accrual period is equal to its issue price increased by the
accrued OID for each prior accrual period (determined without regard to the
amortization of any acquisition or bond premium, as described below) and reduced
by any payment made on such OID Debenture (other than qualified stated interest)
on or before the first day of the accrual period.
Exchange Debentures may be redeemed prior to their stated maturity at the
option of the Company. For purposes of computing the yield of such instrument,
the Company will be deemed to exercise or not exercise its option to redeem the
OID Debentures in a manner that minimizes the yield on the OID Debentures. It is
not anticipated that the Company's ability to redeem prior to stated maturity
would affect the yield of such instrument.
In the event of a change of control, the Company will be required to offer
to repurchase all of the Exchange Debentures. The right of holders to require
repurchase upon a Change of Control will not affect the yield or maturity date
of the Exchange Debentures unless, based on all the facts and circumstances as
of the issue date, it is more likely than not that such an event giving rise to
the repurchase will occur. The Company does not intend to treat the change of
control provisions of the Exchange Debentures as affecting the computation of
the yield to maturity of any Exchange Debentures.
United States Holders may elect to treat all interest on any Exchange
Debenture as OID and calculate the amount to be included in gross income under
the constant yield method described above. For the purposes of this election,
interest includes stated interest, acquisition discount, OID, de minimis OID,
market discount, de minimis market discount and unstated interest, as adjusted
by any amortizable bond premium or acquisition premium. The election is to be
made for the taxable year in which the United States Holder acquired the
Exchange Debenture, and may not be revoked without the consent of the U.S.
Internal Revenue Service (the "IRS"). United States Holders should consult with
their own tax advisors about this election.
MARKET DISCOUNT ON RESALE OF EXCHANGE DEBENTURES
If a United States Holder acquires an Exchange Debenture (other than an OID
Debenture) for an amount less than its stated redemption price at maturity or,
in the case of an OID Debenture, for an amount that is less than its adjusted
issue price, the amount of the difference will be treated as "market discount"
for U.S. federal income tax purposes, unless such difference is less than a
specified de minimis amount. Under the market discount rules, a United States
Holder will be required to treat any principal payment on an Exchange Debenture,
or any gain on the sale, exchange, retirement or other disposition of an
Exchange Debenture as ordinary income to the extent of the market discount which
has not previously been included in income and is treated as having accrued on
such Exchange Debenture at the time of such payment or disposition. In addition,
the United States Holder may be required to defer, until the maturity of the
Exchange Debenture or its earlier disposition in a taxable transaction, the
deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such Exchange Debenture.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Exchange Debenture,
unless the United States Holder elects to accrue on a constant interest method.
A United States Holder of an Exchange Debenture may elect to include market
discount in income currently as it accrues (on either a ratable or constant
interest method), in which case the rule described above regarding deferral of
interest deductions will not apply. This election to include market discount in
income currently, once made, applies to all market discount obligations acquired
on or after the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
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ACQUISITION PREMIUM; AMORTIZABLE BOND PREMIUM
A United States Holder that purchases an Exchange Debenture for an amount
that is greater than its adjusted issue price but equal to or less than the sum
of all amounts payable on the Exchange Debenture after the purchase date, other
than qualified stated interest, will be considered to have purchased such
Exchange Debenture at an "acquisition premium." Under the acquisition premium
rules, the amount of OID, if any, which such United States Holder must include
in its gross income with respect to such Exchange Debenture for any taxable year
will be reduced by the portion of such acquisition premium properly allocable to
such year.
If immediately after the time the Senior Preferred Stock is exchanged for
Exchange Debentures or immediately after the time a subsequent United States
Holder acquires Exchange Debentures, the United States Holder's tax basis in any
such Exchange Debenture exceeds the sum of all amounts payable on the Exchange
Debenture after the exchange date or purchase date, other than qualified stated
interest, such excess may constitute "premium" and such United States Holder
will not be required to include any OID in income. A United States Holder
generally may elect to amortize bond premium over the remaining term of the
Exchange Debenture on a constant yield method. The amount amortized in any year
will be treated as a reduction of the United States Holder's interest income
from the Exchange Debenture. Bond premium on an Exchange Debenture held by a
United States Holder that does not make such an election will decrease the gain
or increase the loss otherwise recognized on disposition of the Exchange
Debenture. The election to amortize bond premium on a constant yield method once
made applies to all debt obligations held or subsequently acquired by the
electing United States 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 IRS.
REDEMPTION, SALE OR EXCHANGE OF EXCHANGE DEBENTURES
The adjusted tax basis of a United States Holder who receives Exchange
Debentures in exchange for Senior Preferred Stock will, in general, be equal to
the issue price of such Exchange Debentures, increased by OID and market
discount previously included in income by the United States Holder and reduced
by any amortized premium and any cash payments on the Exchange Debentures other
than qualified stated interest. Upon the redemption, sale, exchange or
retirement of an Exchange Debenture, a United States Holder will recognize gain
or loss equal to the difference between the amount realized upon the redemption,
sale, exchange or retirement (less any accrued qualified stated interest, not
previously taken into account, which will be taxable as such) and the adjusted
tax basis of the Exchange Debenture. Such gain or loss will be capital gain or
loss and will be long-term capital gain or loss if at the time of redemption,
sale, exchange or retirement the Exchange Debenture has been held for more than
one year. In the case of an individual United States Holder, any such capital
gain will be taxable at various preferential rates depending on the extent to
which such United States Holder's holding period for the Exchange Debenture
exceeds one year. The deduction of capital losses is subject to certain
limitations. Prospective investors should consult their own tax advisors in this
regard.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS
If the yield-to-maturity on OID Debentures equals or exceeds the sum of (x)
the "applicable federal rate" (as determined under Section 1274(d) of the Code)
in effect for the month in which the OID Debentures are issued (the "AFR") and
(y) 5% and the OID on such OID Debentures is "significant", the OID Debentures
will be considered "applicable high yield discount obligations" ("AHYDOs") under
Section 163(i) of the Code. OID is significant if the aggregate amount
includible in gross income for periods before the close of any accrual period
ending more than five years after the issue date exceeds the sum of the
aggregate amount of interest to be paid before the close of such accrual period
plus the product of the issue price and the yield to maturity. If the OID
Debentures are AHYDOs, the Company will not be allowed to take a deduction for
OID accrued on the OID Debentures for U.S. federal income tax purposes until
such time as the Company actually pays such OID in cash or in other property
(other than stock or
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debt of the Company or a person deemed to be related to the Company under
Section 453(f)(1) of the Code).
Moreover, if the yield-to-maturity on the OID Debenture exceeds the sum of
(x) the AFR and (y) 6% (such excess shall be referred to hereinafter as the
"Disqualified Yield"), the deduction for OID accrued on the OID Debentures will
be permanently disallowed (regardless of whether the Company actually pays such
OID in cash or in other property) for U.S. federal income tax purposes to the
extent such OID is attributable to the Disqualified Yield on the OID Debentures
("Dividend-Equivalent Interest"). For purposes of the dividends received
deduction, such Dividend-Equivalent Interest will be treated as a dividend to
the extent it is deemed to have been paid out of the Company's current or
accumulated earnings and profits.
Because the amount of OID, if any, attributable to the Exchange Debentures
will be determined at the time such Exchange Debentures are issued, and the AFR
at such time is not predictable, it is impossible to determine at the present
time whether an OID Debenture will be treated as an AHYDO.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of dividends, principal, interest, OID, and premium and to the proceeds
of sales of Exchange Debentures and Senior Preferred Stock made to United States
Holders other than certain exempt recipients (such as corporations). A 31%
backup withholding tax will apply to such payments if the United States Holder
fails to provide a taxpayer identification number or certification of foreign or
other exempt status or fails to report in full dividend and interest income.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such United States Holder's U.S. federal income tax
liability provided the required information is timely furnished to the IRS.
TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
DISTRIBUTIONS ON THE SENIOR PREFERRED STOCK
Distributions received by a Non-United States Holder in respect of the
Senior Preferred Stock (whether in cash or additional shares of Senior Preferred
Stock), to the extent considered dividends for U.S. federal income tax purposes
(see "--Tax Consequences to United States Holders--Distributions on the Senior
Preferred Stock"), generally will be subject to U.S. federal withholding tax at
a 30% rate (or a lower rate prescribed by an applicable income tax treaty)
unless such distributions are effectively connected with a trade or business
carried on by the Non-United States Holder within the United States and, if an
income tax treaty applies, are attributable to a permanent establishment
maintained by the Non-United States Holder within the United States. For
purposes of obtaining a reduced rate of withholding under an income tax treaty,
a Non-United States Holder may be required (and, after December 31, 1998, will
be required) to provide certain information concerning such holder's country of
residence and entitlement to income tax treaty benefits. A Non-United States
Holder that is eligible for a reduced rate of U.S. federal withholding tax
pursuant to an income tax treaty may obtain a refund of any excess amounts
currently withheld by timely filing an appropriate claim for refund.
Dividends effectively connected with a U.S. trade or business and, if a
treaty applies, attributable to a U.S. permanent establishment generally will
not be subject to the 30% U.S. withholding tax provided that the Non-United
States Holder provides appropriate certifications (currently IRS Form 4224, and
after December 31, 1998, subject to certain transition rules, IRS Form W-8) to
the Company or its paying agent. Such effectively connected income instead will
be subject to U.S. federal income tax on a net income basis in the same manner
as if the Non-United States Holder were a resident of the United States. In
addition, if such holder is a foreign corporation, such effectively connected
income may be subject to a branch profits
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tax equal to 30% (or such lower rate as specified by an applicable income tax
treaty) of its effectively connected earnings and profits for the taxable year,
subject to certain adjustments.
Constructive distributions on the Senior Preferred Stock (see "--Tax
Consequences to United States Holders--Redemption Premium") may be subject to
the 30% U.S. withholding tax in the year in which the distributions are deemed
to have occurred. Prospective investors are urged to consult their own tax
advisors with respect to the application of the withholding tax rules to
constructive distributions on the Senior Preferred Stock.
PAYMENTS OF INTEREST AND OID ON THE EXCHANGE DEBENTURES
A Non-United States Holder generally will not be subject to the 30% U.S.
federal withholding tax with respect to the payment of interest (including OID)
on an Exchange Debenture owned by a Non-United States Holder (the "Portfolio
Interest Exception"), provided that such Non-United States Holder (a) does not
actually or constructively own 10% or more of the total combined voting power of
all classes of stock of the Company entitled to vote, (b) is not a controlled
foreign corporation that is related, directly or indirectly, to the Company
through stock ownership, (c) is not a bank receiving OID or interest pursuant to
a loan agreement entered into in the ordinary course of its trade or business,
and (d) satisfies certain certification requirements (described generally below)
designed to enable the Company or other withholding agent to verify that a
holder is in fact a Non-United States Holder.
To satisfy the certification requirement referred to above, the beneficial
owner of such Exchange Debenture (or a financial institution that holds
customers' securities in the ordinary course of its trade or business) must
provide the Company or its paying agent with a statement to the effect that the
beneficial owner is not a United States Holder. These requirements generally
will be met if (i) the beneficial owner provides his name, address and certain
other information, and certifies under penalties of perjury that he is not a
United States Holder (which certification may be made on an IRS Form W-8) or
(ii) a financial institution that holds customers' securities in the ordinary
course of its trade or business certifies under penalties of perjury that such
statement has been received by it and furnishes the Company or its paying agent
with a copy thereof.
If a Non-United States Holder is engaged in a trade or business within the
United States, and interest (including OID) on an Exchange Debenture is
effectively connected with the conduct of such trade or business (and, if a
treaty applies, is attributable to a permanent establishment maintained by such
Non-United States Holder in the United States), such holder will be subject to
U.S. federal income tax on such payment on a net income basis in the same manner
as if it were a United States Holder. In addition, if such holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% (or such
lower rate as specified by an applicable income tax treaty) of its effectively
connected earnings and profits for the taxable year, subject to certain
adjustments.
A Non-United States Holder that is not eligible for the Portfolio Interest
Exception instead may be eligible to secure a reduced rate of withholding under
a valid income tax treaty entered into between the United States and such
Non-United States Holder's country of residence. Such a Non-United States Holder
generally will be required to provide certain certifications to the Company or
its paying agent in order to claim entitlement to the benefits of the applicable
income tax treaty.
SALE OR DISPOSITION OF THE SENIOR PREFERRED STOCK OR THE EXCHANGE DEBENTURES
Subject to the discussion below in "--Consequences to Non-United States
Holders--FIRPTA Treatment," any gain or income realized upon the sale, exchange,
retirement or other disposition of the Senior Preferred Stock or the Exchange
Debentures generally will not be subject to U.S. federal income tax unless (i)
such gain or income is effectively connected with a trade or business in the
United States of the Non-United States Holder and, if a treaty applies,
attributable to a U.S. permanent establishment maintained by the Non-United
States Holder, or (ii) in the case of an individual who is a Non-United States
Holder,
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such individual is present in the United States for 183 days or more in the
taxable year of such sale, exchange, retirement or other disposition, and
certain other conditions are met.
FIRPTA TREATMENT
At present, the Company believes that it is not a U.S. real property holding
company within the meaning of Section 897(c)(2) of the Code, and that it does
not expect to become a U.S. real property holding company in the forseeable
future. No assurance can be given, however, that the IRS will not reach a
different conclusion or that the Company's expectation for the future will not
change. If the Company is found to be a U.S. real property holding company, then
a Non-United States Holder of Senior Preferred Stock may be subject to U.S.
federal income tax in respect of gain realized on the sale or other disposition
of the Senior Preferred Stock (including an exchange for Exchange Debentures or
a redemption) as if the gain represented income effectively connected with a
U.S. trade or business. A Non-United States Holder will not be subject to such
tax, however, if the Senior Preferred Stock is regularly traded on an
established securities market at the time of a sale or other disposition, and
the holder has not owned more than 5% of the Senior Preferred Stock at any time
during the five-year period (or shorter holding period for the Senior Preferred
Stock) ending on the sale or disposition date.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of dividends (other than dividends paid prior to January 1, 1999 to an
address of a Non-United States Holder outside of the United States), interest,
OID and premium and to the proceeds of sales of Exchange Debentures and Senior
Preferred Stock made to Non-United States Holders, other than certain exempt
recipients (such as corporations). In addition, a backup withholding tax of 31%
may apply to such payments unless the Non-United States Holder provides
appropriate certification of foreign status. Under recently-finalized Treasury
regulations, the certification requirements were modified in certain respects
for payments made on or after January 1, 1999. Prospective Non-United States
Holders should consult their own tax advisors regarding the application of the
new Treasury regulations to an investment in the Senior Preferred Stock and
Exchange Debentures.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF SENIOR PREFERRED STOCK
AND EXCHANGE DEBENTURES IN LIGHT OF ITS PARTICULAR CIRCUMSTANCES AND INCOME TAX
SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES THAT WOULD RESULT FROM THEIR PURCHASE, OWNERSHIP AND DISPOSITION OF
THE SENIOR PREFERRED STOCK AND THE EXCHANGE DEBENTURES, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE
POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
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PLAN OF DISTRIBUTION
There has previously been only a limited secondary market and no public
market for the Old Shares. The Company does not intend to apply for the listing
of the Shares on a national securities exchange or for their quotation through
The Nasdaq Stock Market. The Shares are eligible for trading in the PORTAL
market. The Company has been advised by the Placement Agents that the Placement
Agents currently intend to make a market in the Shares; however, no Placement
Agent is obligated to do so and any market making may be discontinued by any
Placement Agent at any time. In addition, such market making activity may be
limited during the Exchange Offer. Therefore, there can be no assurance that an
active market for the Old Shares or the New Shares will develop. If a trading
market does not develop or is not maintained, holders of Shares may experience
difficulty in reselling Shares. If a trading market develops for the Shares,
future trading prices of such securities will depend on many factors, including,
among other things, prevailing interest rates, the Company's results of
operations and the market for similar securities. Depending on such factors,
such securities may trade at a discount from their offering price.
BROKER-DEALERS WHO DID NOT ACQUIRE OLD SHARES AS A RESULT OF MARKET MAKING
ACTIVITIES OR TRADING ACTIVITIES MAY NOT PARTICIPATE IN THE EXCHANGE OFFER.
With respect to resale of New Shares, based on an interpretation by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company believes that a holder (other than a person that is an affiliate of
the Company within the meaning of Rule 405 under the Securities Act or a
"broker" or "dealer" registered under the Exchange Act) who exchanges Old Shares
for New Shares in the ordinary course of business and who is not participating,
does not intend to participate, and has no arrangement or understanding with any
person to participate, in the distribution of the New Shares, will be allowed to
resell the New Shares to the public without further registration under the
Securities Act and without delivering to the purchasers of the New Shares a
prospectus that satisfies the requirements of Section 10 thereof. However, if
any holder acquires New Shares in the Exchange Offer for the purpose of
distributing or participating in a distribution of the New Shares, such holder
cannot rely on the position of the staff of the Commission enunciated in EXXON
CAPITAL HOLDINGS CORPORATION (available May 13, 1988) or similar no-action
letters or any similar interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, unless an exemption from
registration is otherwise available.
As contemplated by the no-action letters mentioned above and the
Registration Rights Agreement, each holder accepting the Exchange Offer is
required to represent to the Company in the Letter of Transmittal that (i) the
New Shares are to be acquired by the holder in the ordinary course of business,
(ii) the holder is not engaging and does not intend to engage in the
distribution of the New Shares, and (iii) the holder acknowledges that, if such
holder participates in the Exchange Offer for the purpose of distributing the
New Shares, such holder must comply with the registration and prospectus
delivery requirements of the Securities Act and cannot rely on the above
no-action letters.
Any broker or dealer registered under the Exchange Act (each a
"Broker-Dealer") who holds Old Shares that were acquired for its own account as
a result of market-making activities or other trading activities (other than Old
Shares acquired directly from the Company or an affiliate of the Company) may
exchange such Old Shares for New Shares pursuant to the Exchange Offer; however,
such Broker-Dealer may be deemed an underwriter within the meaning of the
Securities Act and, therefore, must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the New
Shares received by it in the Exchange Offer, which prospectus delivery
requirement may be satisfied by the delivery by such Broker-Dealer of this
Prospectus. The Company has agreed to cause the Exchange Offer Registration
Statement, of which this Prospectus is a part, to remain continuously effective
for a period of 180 days, if required, from the Exchange Date, and to make this
Prospectus, as amended or supplemented, available to any such Broker-Dealer for
use in connection with resales. Any Broker-Dealer participating in
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the Exchange Offer will be required to acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of New Shares received by it in the Exchange Offer. The delivery by a
Broker-Dealer of a prospectus in connection with resales of New Shares shall not
be deemed to be an admission by such Broker-Dealer that it is an underwriter
within the meaning of the Securities Act. The Company will not receive any
proceeds from any sale of New Shares by a Broker-Dealer.
New Shares 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 Shares 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 Shares.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Senior Preferred
Stock are being passed upon for the Company by McAfee & Taft A Professional
Corporation, Oklahoma City, Oklahoma.
EXPERTS
The following financial statements and schedule included in this Prospectus
and elsewhere in the Registration Statement 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 the
authority of said firm as experts in giving said reports:
-- The consolidated balance sheets of Dobson Communications Corporation and
subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' deficit and cash
flows for each of the three years in the period ended December 31, 1997.
-- The balance sheet of Texas 16 Cellular Telephone Company as of December
31, 1997 and the related statement of income, changes in stockholders'
equity and cash flows for the year ended December 31, 1997.
-- The balance sheets of Santa Cruz Cellular Telephone, Inc. as of December
31, 1997 and 1996, and the related statements of operations, changes in
shareholders' (deficit) and cash flows for the years then ended.
-- Schedule of Valuation Allowance Accounts of Dobson Communications
Corporation and Subsidiaries for the years ended December 31, 1997, 1996
and 1995.
The following financial statements appearing in this Prospectus and
Registration Statement have been audited by Holliday, Lemons, Thomas & Cox,
P.C., independent auditors, as set forth in their reports thereon as of the
indicated dates, appearing elsewhere herein, and are included in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing:
-- The balance sheets of Cellular 2000 (A Partnership) as of December 31,
1997 and 1996, and the related statements of income, changes in partners'
equity and cash flows for the years ended December 31, 1997 and 1996.
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INDEX TO CONSOLIDATED 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, 1997 and 1996............................................. F-3
Consolidated statements of operations for the years ended December 31, 1997, 1996 and 1995............... F-5
Consolidated statements of stockholders' deficit for the years ended December 31, 1997, 1996 and 1995.... F-6
Consolidated statements of cash flows for the years ended December 31, 1997, 1996 and 1995............... F-7
Notes to consolidated financial statements............................................................... F-9
TEXAS 16 CELLULAR TELEPHONE COMPANY
Report of independent public accounts.................................................................... F-29
Balance sheet as of December 31, 1997.................................................................... F-30
Statement of income for the year ended December 31, 1997................................................. F-31
Statement of stockholders' equity for the year ended December 31, 1997................................... F-32
Statement of cash flow for the year ended December 31, 1997.............................................. F-33
Notes to financial statements............................................................................ F-34
CELLULAR 2000 (A PARTNERSHIP)
Report of independent auditors........................................................................... F-37
Balance sheets as of December 31, 1997 and 1996.......................................................... F-38
Statements of income for the years ended December 31, 1997 and 1996...................................... F-39
Statements of changes in partners' equity for the years ended December 31, 1997 and 1996................. F-40
Statements of cash flows for the years ended December 31, 1997 and 1996.................................. F-41
Notes to financial statements............................................................................ F-42
SANTA CRUZ CELLULAR TELEPHONE, INC.
Report of independent public accountants................................................................. F-50
Balance sheets as of December 31, 1997 and 1996.......................................................... F-51
Statement of operations for the years ended December 31, 1997 and 1996................................... F-53
Statement of changes in shareholders' (deficit) for the years ended December 31, 1997 and 1996........... F-54
Statement of Cash Flows for the years ended December 31, 1997 and 1996................................... F-55
Notes to financial statements............................................................................ F-56
</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, 1997 and 1996, and the related consolidated statements of
operations, stockholders' deficit and cash flows for each of the three years in
the period ended December 31, 1997. 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, 1997 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
March 26, 1998
F-2
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................................................... $ 3,006,668 $ 1,609,221
Accounts receivable-
Due from customers, net of allowance for doubtful accounts of $648,919 and
$339,144 in 1997 and 1996, respectively.................................... 15,795,919 6,584,103
Affiliates................................................................... 633,146 1,704,033
Restricted cash and investments................................................ 17,561,231 --
Inventory...................................................................... 1,470,207 1,012,589
Deposits....................................................................... -- 6,350,000
RTFC subordinated capital certificates......................................... -- 1,051,057
Income taxes receivable........................................................ 845,000 1,133,063
Prepaid expenses and other..................................................... 2,264,191 121,836
Deferred income taxes.......................................................... 214,000 390,553
-------------- --------------
Total current assets....................................................... 41,790,362 19,956,455
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT, net............................................... 88,350,278 61,929,904
-------------- --------------
OTHER ASSETS:
Receivables--Affiliates........................................................ 529,107 228,041
Notes receivable--Affiliates................................................... 5,852,282 3,266,765
Restricted investments......................................................... 9,216,202 --
Cellular license acquisition costs, net of accumulated amortization of
$13,814,229 and $3,286,104 in 1997 and 1996, respectively.................... 206,694,474 23,465,128
Deferred costs, net of accumulated amortization of $2,850,109 and $1,948,443 in
1997 and 1996, respectively.................................................. 11,012,755 3,952,155
Excess of cost over original cost of assets acquired, net of accumulated
amortization of $1,130,769 and $1,035,529 in 1997 and 1996, respectively..... 2,676,203 2,771,443
Other intangibles, net of accumulated amortization of $851,107................. 9,328,031 --
Investments in unconsolidated subsidiaries and other........................... 7,764,566 1,378,134
-------------- --------------
Total other assets......................................................... 253,073,620 35,061,666
-------------- --------------
Total assets............................................................... $ 383,214,260 $ 116,948,025
-------------- --------------
-------------- --------------
</TABLE>
F-3
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable............................................................... $ 12,839,605 $ 4,718,124
Accrued expenses............................................................... 7,845,401 1,633,834
Deferred revenue............................................................... 1,720,024 499,982
Customer deposits.............................................................. 326,932 148,530
Current portion of long-term debt.............................................. 1,140,824 1,190,924
Accrued dividends payable...................................................... 1,595,238 732,391
-------------- --------------
Total current liabilities.................................................... 25,468,024 8,923,785
-------------- --------------
LONG-TERM DEBT, net of current portion........................................... 363,068,594 104,303,802
DEFERRED CREDITS:
Income taxes................................................................... 2,739,000 916,252
Investment tax credits and other............................................... 133,817 161,612
-------------- --------------
Total deferred credits....................................................... 2,872,817 1,077,864
-------------- --------------
MINORITY INTERESTS............................................................... 16,954,165 2,444,176
COMMITMENTS (Note 13)
CLASS B CONVERTIBLE PREFERRED STOCK.............................................. 10,000,000 10,000,000
CLASS C PREFERRED STOCK.......................................................... 1,623,329 --
STOCKHOLDERS' DEFICIT:
Class A preferred stock........................................................ 100,000 --
Class A Common Stock, $1 par value, 1,000,000 shares authorized and 473,152
issued and outstanding in 1997 and 1996...................................... 473,152 473,152
Paid-in capital................................................................ 5,508,285 5,508,285
Retained deficit............................................................... (30,841,106) (3,870,039)
-------------- --------------
(24,759,669) 2,111,398
Less--
Class A Common Stock held in treasury, at cost................................. (11,913,000) (11,913,000)
Class A Preferred Stock owned by Dobson Telephone.............................. (100,000) --
-------------- --------------
Total stockholders' deficit.................................................. (36,772,669) (9,801,602)
-------------- --------------
Total liabilities and stockholders' deficit.................................. $ 383,214,260 $ 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 STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
OPERATING REVENUE:
Wireless revenue..................................................... $ 66,127,721 $ 26,107,481 $ 18,989,791
Wireline revenue..................................................... 18,455,210 16,286,190 14,765,620
Other................................................................ 586,206 831,802 693,411
------------- ------------ ------------
Total operating revenue............................................ 85,169,137 43,225,473 34,448,822
------------- ------------ ------------
OPERATING EXPENSES:
Wireless cost of service............................................. 18,754,603 7,074,207 5,167,817
Wireline cost of service............................................. 2,588,797 2,001,764 1,846,460
Marketing and selling................................................ 11,762,279 4,908,050 3,156,620
General and administrative........................................... 19,877,030 12,086,509 10,138,379
Depreciation and amortization........................................ 21,729,095 9,720,379 6,652,792
------------- ------------ ------------
Total operating expenses........................................... 74,711,804 35,790,909 26,962,068
------------- ------------ ------------
OPERATING INCOME....................................................... 10,457,333 7,434,564 7,486,754
------------- ------------ ------------
OTHER INCOME (EXPENSES):
Equity in income (losses) of unconsolidated partnerships............. 222,348 21,576 (98,288)
Interest income...................................................... 2,840,533 1,075 9,884
Interest expense..................................................... (30,098,327) (6,477,651) (3,833,189)
Other................................................................ (183,193) (1,608,538) (388,591)
------------- ------------ ------------
Total other expenses............................................... (27,218,639) (8,063,538) (4,310,184)
------------- ------------ ------------
INCOME (LOSS) BEFORE MINORITY INTERESTS IN INCOME OF SUBSIDIARIES,
INCOME TAXES AND EXTRAORDINARY ITEMS................................. (16,761,306) (628,974) 3,176,570
MINORITY INTERESTS IN INCOME OF SUBSIDIARIES........................... $ (1,693,372) $ (675,098) $ (1,334,155)
------------- ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS.............. (18,454,678) (1,304,072) 1,842,415
INCOME TAX (PROVISION) BENEFIT......................................... 3,287,740 410,795 (738,235)
------------- ------------ ------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS............................... (15,166,938) (893,277) 1,104,180
EXTRAORDINARY EXPENSE, net of income tax expense of $960,508 in 1997
and $323,205 in 1996 (Note 4)........................................ (1,567,147) (527,334) --
------------- ------------ ------------
NET INCOME (LOSS)...................................................... (16,734,085) (1,420,611) 1,104,180
DIVIDENDS ON SENIOR PREFERRED STOCK.................................... (2,603,362) (849,137) (591,300)
------------- ------------ ------------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS.................... $ (19,337,447) $ (2,269,748) $ 512,880
------------- ------------ ------------
------------- ------------ ------------
BASIC NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS PER COMMON
SHARE
Before extraordinary expense......................................... (37.56) (3.68) 1.08
Extraordinary expense................................................ (3.31) (1.12) --
------------- ------------ ------------
BASIC NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS PER COMMON
SHARE................................................................ $ (40.87) $ (4.80) $ 1.08
------------- ------------ ------------
------------- ------------ ------------
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING....................... 473,152 473,152 473,152
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
STOCK
OWNED
CLASS A CLASS A CLASS B BY
PREFERRED STOCK COMMON STOCK COMMON STOCK SUBSIDIARY
-------------------- -------------------- -------------------- ---------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1994................................. -- $ -- 300 $ 1,000 1,000 $ 1,000 1,000
Net income...................................... -- -- -- -- -- -- --
Cash dividends declared on senior preferred
stock......................................... -- -- -- -- -- -- --
Cash dividends declared on Common Stock......... -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
DECEMBER 31, 1995................................. -- -- 300 1,000 1,000 1,000 1,000
Net loss........................................ -- -- -- -- -- -- --
Recapitalization (Note 6)....................... -- -- 472,852 472,152 (1,000) (1,000) (1,000)
Cash dividends declared on senior preferred
stock......................................... -- -- -- -- -- -- --
Cash dividends declared on Common Stock......... -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
DECEMBER 31, 1996................................. -- -- 473,152 473,152 -- -- --
Net loss........................................ -- -- -- -- -- -- --
Cash dividends declared on senior preferred
stock......................................... -- -- -- -- -- -- --
Cash dividends declared on Common Stock......... -- -- -- -- -- -- --
Senior preferred stock dividend................. -- -- -- -- -- -- --
Issuance of senior preferred stock.............. 100,000 100,000 -- -- -- -- 100,000
--------- --------- --------- --------- --------- --------- ---------
DECEMBER 31, 1997................................. 100,000 $ 100,000 473,152 $ 473,152 -- $ -- 100,000
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
TREASURY RETAINED
PAID-IN STOCK, AT EARNINGS
AMOUNT CAPITAL COST (DEFICIT)
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1994................................. $ (1,000) $5,980,437 $(11,913,000) $ (892,022)
Net income...................................... -- -- -- 1,104,180
Cash dividends declared on senior preferred
stock......................................... -- -- -- (591,300)
Cash dividends declared on Common Stock......... -- -- -- (660,858)
--------- --------- ----------- -----------
DECEMBER 31, 1995................................. (1,000) 5,980,437 (11,913,000) (1,040,000)
Net loss........................................ -- -- -- (1,420,611)
Recapitalization (Note 6)....................... 1,000 (472,152) -- --
Cash dividends declared on senior preferred
stock......................................... -- -- -- (849,137)
Cash dividends declared on Common Stock......... -- -- -- (560,291)
--------- --------- ----------- -----------
DECEMBER 31, 1996................................. -- 5,508,285 (11,913,000) (3,870,039)
Net loss........................................ -- -- -- (16,734,085)
Cash dividends declared on senior preferred
stock......................................... -- -- -- (980,033)
Cash dividends declared on Common Stock......... -- -- -- (7,633,620)
Senior preferred stock dividend................. -- -- -- (1,623,329)
Issuance of senior preferred stock.............. (100,000) -- -- --
--------- --------- ----------- -----------
DECEMBER 31, 1997................................. $(100,000) $5,508,285 $(11,913,000) $(30,841,106)
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
--------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................. $ (16,734,085) $ (1,420,611) $ 1,104,180
Adjustments to reconcile net income (loss) to net cash
provided by operating activities--
Depreciation and amortization............................... 21,729,095 9,720,379 6,652,792
Amortization of bond premium and financing cost............. 1,663,818 -- --
Deferred income taxes and investment tax credits, net....... (4,072,494) (361,003) 276,432
Loss on disposition of assets, net.......................... 205,694 1,799,570 --
Extraordinary loss on financing cost........................ 2,527,655 850,539 --
Minority interests in income of subsidiaries................ 1,693,372 675,098 1,334,155
Equity in losses (income) of unconsolidated partnerships.... (222,348) (21,576) 98,288
Changes in current assets and liabilities--
Accounts receivable......................................... (7,017,005) (360,480) (1,814,510)
Inventory................................................... (267,292) (540,295) 88,862
Income taxes receivable..................................... 288,063 (1,133,063) 274,207
Prepaid expenses and other.................................. (2,070,762) 90,684 257,904
Accounts payable............................................ 8,121,481 1,904,193 (132,794)
Accrued expenses............................................ 5,616,066 283,650 403,132
Deferred revenue............................................ 636,135 79,166 74,426
Customer deposits........................................... 178,402 21,030 16,291
--------------- -------------- --------------
Net cash provided by operating activities................. 12,275,795 11,587,281 8,633,365
--------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................................... (23,215,535) (17,437,774) (3,924,961)
Purchase of cellular license and properties................... (190,719,765) (30,000,000) --
Proceeds from sale of property, plant and equipment........... 332,331 377,178 23,500
Proceeds from sale of investment in unconsolidated
subsidiary.................................................. -- 967,000 --
(Increase) decrease in deposits............................... 1,583,706 (1,350,000) (5,000,000)
(Increase) decrease in receivable--affiliate.................. 769,821 (468,054) (340,606)
Increase in notes receivable.................................. (2,585,517) (1,004,435) (1,164,290)
Deferred start-up costs....................................... (1,101,322) -- --
Investment in unconsolidated partnerships and other, net...... (6,164,084) (463,668) (663,122)
--------------- -------------- --------------
Net cash used in investing activities..................... (221,100,365) (49,379,753) (11,069,479)
--------------- -------------- --------------
--------------- -------------- --------------
</TABLE>
F-7
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
-------------- -------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable..................................... $ -- $ 100,000 $ 700,000
Repayments of notes payable..................................... -- (800,000) --
Proceeds from long-term debt.................................... 343,500,000 75,750,000 7,373,499
Repayments of long-term debt.................................... (88,841,512) (35,910,470) (4,723,198)
Dividend distributions--
Senior preferred stock........................................ (117,186) (176,748) (591,300)
Common stock.................................................. (7,633,620) (549,564) (660,858)
Distributions to partners....................................... (458,378) (145,005) (877,122)
Issuance of senior preferred stock.............................. -- 10,000,000 --
Purchase of treasury stock...................................... -- (5,913,000) --
Purchase of restricted investments.............................. (38,389,299) -- --
Proceeds from restricted investments............................ 10,836,243 -- --
Redemption of RTFC subordinated capital certificates............ 1,051,057 57,632 866,283
Deferred financing costs........................................ (9,725,288) (4,127,925) (297,087)
-------------- -------------- -------------
Net cash provided by financing activities................... 210,222,017 38,284,920 1,790,217
-------------- -------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH.......................... 1,397,447 492,448 (645,897)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of year...................... 1,609,221 1,116,773 1,762,670
-------------- -------------- -------------
CASH AND CASH EQUIVALENTS, end of year............................ $ 3,006,668 $ 1,609,221 $ 1,116,773
-------------- -------------- -------------
-------------- -------------- -------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for--
Interest (net of amounts capitalized)......................... $ 22,679,047 $ 6,784,154 $ 3,415,088
Income taxes.................................................. $ -- $ 838,100 $ 303,031
SUPPLEMENTAL DISCLOSURE OF NONCASH AND FINANCING ACTIVITIES:
1997
----
Purchase of PCS Licenses with debt issuance................... $ 4,056,204
Allocation of noncash purchase price to license cost.......... $ 3,747,000
Stock dividend paid through the issuance of senior preferred
stock....................................................... $ 1,623,329
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
Dobson Communications Corporation ("DCC" or the "Company") was incorporated
as an Oklahoma corporation in February 1997, under an Agreement and Plan of
Reorganization effective February 28, 1997. Under this plan, DCC acquired all of
the outstanding Class A Common Stock, Class C Common Stock and Class B
Convertible Preferred Stock of Dobson Operating Company ("DOC"). In exchange,
the holders of the Class A Common Stock and Class B Convertible Preferred Stock
of DOC received equivalent shares of stock of DCC. The holders of Class C Common
Stock received 100,000 shares of Class A Preferred Stock of DCC. In addition,
DCC assumed all DOC outstanding stock options, substituting shares of DCC Class
B Common Stock for the DOC stock subject to options. As a result of the
reorganization, DCC is the parent company of DOC.
As part of the reorganization, the stock of certain subsidiaries of DOC was
distributed to DCC. DOC continues to be the holding company for the Company's
cellular, local exchange and wholly-owned fiber subsidiaries. See Note 16 for
discussion of the Company's reorganization subsequent to December 31, 1997.
CAPITAL RESOURCES AND GROWTH
The Company's total indebtedness and debt service requirements will
substantially increase as a result of the transactions described in Notes 7 and
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
credit facilities described in Note 16, including financial covenants, the
Company will be unable to borrow under the credit facilities 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.
WIRELESS TELECOMMUNICATIONS
The Wireless Telecommunications segment is comprised of the cellular
entities of DCC listed below, which operate cellular telephone systems servicing
areas in Oklahoma, Texas, Kansas, Missouri, Maryland, Pennsylvania and Arizona.
The name of the entity/partnership, metropolitan statistical area ("MSA")/rural
service 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 and 4, and the Linn 100
County portion of Missouri RSA 5
Dobson Cellular of Maryland, Inc. Maryland RSA 2; Cumberland, MD MSA; Hagerstown, MD 100
MSA; Maryland RSA 3; Bedford County portion of
Pennsylvania 10 West RSA
Gila River Cellular General Partnership Arizona RSA 5 75
</TABLE>
F-9
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION: (CONTINUED)
The Company is responsible for managing and providing administrative
services to the Oklahoma Independent RSA 5 and 7 Partnerships, Texas RSA 2
Limited Partnership ("Texas Partnership") and the Gila River Cellular General
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 TELECOMMUNICATIONS
LOCAL EXCHANGE
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 authority of the Federal
Communications Commission ("FCC"). Rates charged by Dobson Telephone are
regulated by the FCC and the Oklahoma Corporation Commission. Dobson Telephone,
like other wireline companies that operate in rural areas where the cost to
provide service is higher than normal, receives high cost support funds from
state jurisdictions and the federal universal service funds. Approximately 36%
of the Company's revenue from its wireline local exchange operations for the
year ended December 31, 1997, was from these two sources.
FIBER OPTIC TELECOMMUNICATIONS
The Company provides fiber optic telecommunications 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.
COMPETITIVE LOCAL EXCHANGE CARRIER ("CLEC")
The Company commenced its CLEC operations in October 1997 through Logix
Communications Corporation ("Logix"). Logix provides and resells integrated
services including local exchange, long distance, wireless, paging and internet
in Oklahoma City, Oklahoma and Tulsa, Oklahoma. On March 26, 1998, the Company
and Logix entered into a definitive agreement to purchase substantially all of
the assets of American Telco, Inc. ("ATI") for approximately $130 million as
discussed in Note 16.
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
wireless telecommunications 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.
F-10
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company assesses potential impairments of long-lived assets, certain
identifiable intangibles and goodwill when there is evidence that events or
changes in circumstances indicate that an asset's carrying value may not be
recoverable. An impairment loss is recognized when the sum of the expected
future net cash flows is less than the carrying amount of the asset. The amount
of any recognized impairment would be based on the estimated fair value of the
asset subject to impairment compared to the carrying amount of such asset. No
such losses have been identified by the Company.
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 $10,528,125, $1,596,794 and $413,486 was recorded in 1997, 1996 and
1995, respectively.
The ongoing value and remaining useful lives of intangible and other
long-term assets are subject to periodic evaluation and the Company currently
expects the carrying amounts to be fully recoverable. When events and
circumstances indicate that intangible and other long-term assets might be
impaired, an undiscounted cash flow methodology would be used to determine
whether an impairment loss would be recognized.
DEFERRED COSTS
Deferred costs consist primarily of fees incurred to secure long-term debt,
start-up costs and organizational costs. Deferred start-up costs are amortized
on a straight-line basis over three 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 $1,238,355, $405,493 and $412,384
was recorded in 1997, 1996 and 1995, respectively.
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 1997, 1996 and 1995.
F-11
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
OTHER INTANGIBLES
Other intangibles consist of amounts paid to acquire FCC licenses to provide
PCS service and amounts paid to acquire cellular customer lists in 1997. PCS
license acquisition costs are not being amortized until the Company's PCS
service becomes operational. Customer list acquisition costs are being amortized
on a straight-line basis over five years. Amortization expense of $851,107 was
recorded in 1997.
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. The Company accrued estimated
unbilled revenues for services provided of approximately $1,209,000 and $858,000
as of December 31, 1997 and 1996, respectively, which are included in accounts
receivable in the accompanying consolidated balance sheets. Monthly access
charges are billed in advance and are reflected as deferred revenue on 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
Basic income (loss) per common share is computed by the weighted average
number of shares of Common Stock outstanding during the year. Primary loss per
common share for 1996 was determined on the assumption that shares of Class B
convertible preferred stock 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. In 1997, the Company adopted
SFAS No. 128, "Earnings Per Share." As a result, the Company's reported net
income (loss) per common share for 1996 and 1995 were restated.
Diluted net loss per common share has been omitted because the impact of
stock options and convertible preferred stock on the Company's net loss per
common share is anti-dilutive.
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
F-12
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
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
45% of the Company's cellular roaming revenue was earned from three cellular
carriers during the year ended December 31, 1997, while 56% and 54% of the
Company's cellular roaming revenue was earned from two cellular carriers during
the years ended December 31, 1996 and 1995, respectively.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income," effective for fiscal years beginning
after December 15, 1997. Management of the Company plans to adopt this
accounting standard as of January 1, 1998. SFAS No. 130 requires that all items
required to be recognized under accounting standards as components of
comprehensive income (loss), consisting of both net income (loss) and those
items that bypass the statement of operations and are reported as a separate
component of stockholders' deficit, be reported in a financial statement that is
displayed with the same prominence as other financial statements. The Company
does not believe that its comprehensive income (loss) through December 31, 1997,
will differ materially from net income (loss).
At December 31, 1997, the Company adopted SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information," which requires a new basis
of determining reportable segments (i.e., the management approach). This
approach (as contrasted with the prior requirement which utilized a specified
classification system for determining segments) designates the Company's
internal organization as used by management for making operating decisions and
assessing performance as the source of business segments. DCC and its
subsidiaries are organized into two business segments to facilitate the delivery
of service to customers: Wireless Telecommunications and Wireline
Telecommunications. Segment results are presented on this new basis in Note 12
at December 31, 1997, 1996 and 1995.
RECLASSIFICATIONS
Certain reclassifications have been made to the previously presented 1996
and 1995 balances to conform them to the 1997 presentation.
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. For the years ended December
31, 1997, 1996 and 1995, interest capitalized was not material. Existing
property, plant and equipment purchased through acquisitions is recorded at its
fair value at the date of the purchase. 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.
F-13
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT: (CONTINUED)
Listed below are the major classes of property, plant and equipment and
their estimated useful lives, in years, as of December 31, 1997 and 1996:
<TABLE>
<CAPTION>
USEFUL
LIFE 1997 1996
---------- -------------- -------------
<S> <C> <C> <C>
Wireless systems and equipment........................................ 2-10 $ 42,279,323 $ 21,441,766
Wireline systems and equipment........................................ 5-40 62,071,415 58,302,894
Buildings and improvements............................................ 5-40 13,767,179 8,631,772
Vehicles, aircraft and other work equipment........................... 3-10 4,670,379 4,106,869
Furniture and office equipment........................................ 5-10 5,883,602 2,848,049
Plant under construction.............................................. 4,518,490 2,147,321
Land.................................................................. 429,386 201,494
-------------- -------------
Property, plant and equipment....................................... 133,619,774 97,680,165
Accumulated depreciation.............................................. 45,269,496 35,750,261
-------------- -------------
Property, plant and equipment, net.................................. $ 88,350,278 $ 61,929,904
-------------- -------------
-------------- -------------
</TABLE>
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, 1997 and 1996, consisted of
the following:
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
<S> <C> <C>
Revolving credit facility.............................................. $ 171,513,855 $ 75,750,000
Senior notes........................................................... 160,000,000 --
Mortgage notes payable................................................. 28,639,359 29,744,726
Other notes payable.................................................... 4,056,204 --
-------------- --------------
Total debt........................................................... 364,209,418 105,494,726
Less--Current maturities............................................... 1,140,824 1,190,924
-------------- --------------
Total long-term debt................................................. $ 363,068,594 $ 104,303,802
-------------- --------------
-------------- --------------
</TABLE>
REVOLVING CREDIT FACILITY
On February 28, 1997, the Company's bank credit agreement was amended and
restated to provide the Company with a $200 million revolving credit facility
maturing in 2005. Interest on borrowings under the new credit agreement accrues
at variable rates (weighted average rate of 8.43% at December 31, 1997). Initial
proceeds were used to refinance existing indebtedness, finance the
Maryland/Pennsylvania Acquisition described in Note 7 and for general corporate
purposes, including $7.5 million to pay a dividend to holders of its Class A
Common Stock. 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
F-14
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT: (CONTINUED)
$2.5 million as a result of writing off previously capitalized financing costs
associated with the old revolving credit facility. This loss has been reflected
as an extraordinary item, net of tax, in the Company's consolidated statement of
operations for the year ended December 31, 1997.
On March 19, 1996, the Company amended and restated the old revolving credit
agreement. In connection with this amendment, the Company recorded a pretax loss
of approximately $.8 million as a result of writing off previously capitalized
financing costs. This loss has been reflected as an extraordinary item, net of
tax, in the accompanying consolidated statement of operations for the year ended
December 31, 1996.
In April 1997, the Company entered into an interest rate hedge agreement to
hedge the Company's interest expense on its indebtedness under the revolving
credit facility. The agreement provides for a rate cap of 8% plus a factor,
based on the Company's leverage ratio (cap at December 31, 1997, was 10.5%),
terminating on the earlier of April 24, 2000, or the date an option to enter
into an interest rate swap transaction is exercised by the counterparty. Under
the swap agreement, the interest rate would be fixed at 6.13% plus the factor
used to determine the rate cap or a floating LIBOR rate, terminating on April
24, 2002. The Company accounts for this instrument as a hedge.
SENIOR NOTES
On February 25, 1997, the Company issued $160 million principal amount of
11.75% senior notes maturing in 2007. The net proceeds were used to finance the
Maryland/Pennsylvania Acquisition described in Note 7 and to purchase securities
pledged to secure payment of the first four semi-annual interest payments on the
notes, which began on October 15, 1997. The pledged securities are reflected as
"restricted investments" in the Company's consolidated balance sheet. 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%. Prior to April 15, 2000, the
Company may redeem up to 35% of the principal amount of the senior notes at
111.750% with proceeds from sales of stock, provided that after any such
redemption at least $104 million remains outstanding.
MORTGAGE NOTES
The mortgage notes payable to the United States of America, through the
Rural Utilities Service ("RUS") and the Rural Telephone Bank ("RTB") with
interest rates ranging from 2% to 10.75% due in quarterly or monthly
installments maturing at various dates from 1998 to 2028. The mortgage notes 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.
F-15
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT: (CONTINUED)
OTHER NOTES PAYABLE
Other notes payable represents the amount financed with United States
Government for nine PCS licenses as discussed in Note 7.
Minimum future payments of long-term debt for years subsequent to December
31, 1997, are as follows:
<TABLE>
<S> <C>
1998.................................................. $ 1,140,824
1999.................................................. 1,370,385
2000.................................................. 20,921,231
2001.................................................. 29,973,554
2002.................................................. 32,189,678
2003 and thereafter................................... 278,613,746
-----------
$364,209,418
-----------
-----------
</TABLE>
5. RESTRICTED CASH AND INVESTMENTS:
Restricted cash and investments consist of an interest pledge deposit of
approximately $26.8 million which includes an initial deposit of $38.4 million
(as discussed in Note 4), net of interest earned and payments issued to
bondholders. Amortization expense of $322,850 was recorded in 1997 for bond
premiums recorded with the purchase of the restricted investments. At December
31, 1997, the carrying value of these investments exceeded the market value by
approximately $404,000.
6. STOCKHOLDERS' DEFICIT:
Effective February 28, 1997, the stockholders of DCC 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 DCC. In exchange, the holders of the Class A Common Stock and Class
B Preferred of DCC 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 DCC
outstanding stock options, substituting shares of Dobson Holdings Class B Common
Stock for the stock subject to options. As a result, Dobson Holdings is the
parent company of DCC.
As part of the reorganization, the stock of certain subsidiaries was
distributed to Dobson Holdings so that DCC is the holding company for the
wireline and wireless subsidiaries. Additionally, DCC changed its corporate name
to DOC and Dobson Holdings changed its corporate name to DCC.
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.
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,
F-16
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' DEFICIT: (CONTINUED)
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 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 in exchange for its shares of
Class B Common Stock. In 1997, the Company issued these shares of Class C Common
Stock to Dobson Telephone.
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 Senior 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 stockholders
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.
In February 1997, a $7.5 million dividend was paid on the Class A Common
Stock. As a result of the $7.5 million dividend, holders of Class B Preferred
were entitled to a "Make-Whole Dividend" of approximately $1.6 million. In lieu
of such Make-Whole Dividend, the holders of Class B Preferred received 100,000
shares of Class C Preferred Stock having a liquidation preference of $1,623,329.
Holders of Class C Preferred are entitled to 8% cumulative dividends as and
when declared by the board of directors of the Company and a liquidation
preference over the other classes of Common Stock and equity securities. The
Class C Preferred is not convertible and has no voting rights.
The Company may redeem, by vote of the board of directors, the Class C
Preferred at any time and from time to time, in whole or in part. Upon the
earlier of the occurrence of certain events or February 28, 2002, the Company
must redeem all the outstanding shares of Class C Preferred at the liquidation
value thereof plus accrued dividends.
7. ACQUISITIONS:
RECENT WIRELESS ACQUISITIONS
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 $77.6 million. The properties are located immediately outside
the Washington/Baltimore metropolitan area.
F-17
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. ACQUISITIONS: (CONTINUED)
On March 3, 1997, the Company purchased the FCC cellular license for, and
certain assets relating to, Maryland RSA 2 for $75.8 million. The property is
located to the east of the Washington/Baltimore metropolitan area. This
acquisition and the one completed on February 28, 1997, are referred to together
as the "Maryland/Pennsylvania Acquisition."
On October 1, 1997, the Company purchased a 75% 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, and Gila River Telecommunications Subsidiary, Inc. ("GRTSI") purchased a
25% interest in the Arizona 5 Partnership. As part of this transaction, the
Company purchased the stock of Associated Telecommunications and Technologies,
Inc. ("ATTI"), which owned 49% of one of the partners of the Arizona 5
Partnership (with a 41.95% interest). Of the $14.2 million purchase price for
ATTI, $9.5 million was paid to a director and the chief executive officer and
the chairman of the board of the Company, who together owned two-thirds of the
ATTI stock. Contemporaneously, the Company received the following payments on
outstanding loans from affiliates: $1.9 million from the chairman of the board
of directors, president and chief executive officer of the Company, $446,000
from a director and $1.9 million from an affiliate. Upon completion of these
transactions, the Company paid a net purchase price of $39.8 million for its 75%
interest in the Arizona 5 Partnership. In addition, the Company financed
approximately $5.2 million of the $13.3 million purchase price paid by GRTSI for
its 25% interest in the Arizona 5 Partnership. The $5.2 million note receivable
bears interest at the Company's available rate under its revolving credit
facility. Principal and interest will be paid from 60% of partnership
distributions beginning after September 30, 1998. Any unpaid amounts of
principal and interest are due on December 31, 2013.
On March 19, 1996, the Company purchased the FCC cellular licenses for, and
certain assets relating to, one RSA located in Kansas and three RSAs and a
portion of another RSA located in Missouri for $30 million. The properties (the
"Kansas/Missouri Cluster") are located in northeastern Kansas and northwestern
Missouri near Kansas City.
The acquisition transactions were accounted for as purchases and,
accordingly, their results of operations have been included in the accompanying
consolidated statements of operations from the respective dates of acquisition.
The unaudited pro forma information set forth below includes all acquisitions
for for the years ended 1997 and 1996, respectively, as if the purchases
occurred at the beginning of 1996. The unaudited pro forma information is
presented for informational purposes only and is not necessarily indicative of
the results of operations that actually would have been achieved had the
acquisitions been consummated at that time:
<TABLE>
<CAPTION>
1997 1996
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Operating revenue....................................................... $ 97,868,743 $ 80,121,663
Loss before extraordinary items......................................... (13,337,341) (19,130,988)
Net loss applicable to common stockholders.............................. (17,507,850) (20,507,459)
Basic net loss applicable to common stockholders per common share....... (37.00) (43.34)
</TABLE>
F-18
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. ACQUISITIONS: (CONTINUED)
SUBSEQUENT WIRELESS ACQUISITIONS
On January 26, 1998, the Company purchased the FCC cellular license for and
certain assets relating to the Texas RSA 16 for $56.6 million, subject to
adjustment. The property is located in south central Texas between Houston, San
Antonio and Austin. As of December 31, 1997, the Company had placed $2.7 million
into escrow pending closing the acquisition and is included in investments in
unconsolidated subsidiaries and other in the accompanying balance sheet.
PROPOSED WIRELESS ACQUISITIONS
On November 17, 1997, the Company entered into a definitive agreement to
purchase the stock of a corporation which owns a 75% interest in a partnership
("the California 4 Partnership"), and on March 19, 1998, it entered into a
definitive agreement to purchase the corporation owning the remaining 25%
interest in the California 4 Partnership for a combined purchase price of
approximately $87 million, subject to adjustment. The California 4 Partnership
owns the FCC cellular license and system for, and certain assets relating to,
California RSA 4. California RSA 4 is located in northern California
approximately 50 miles inland from California's central coast in an area between
Fresno and Modesto.
Upon the execution of the definitive agreement, the Company placed $2.5
million into escrow pending closing the acquisition and is included in
investments in unconsolidated subsidiaries and other in the accompanying balance
sheet at December 31, 1997.
On March 25, 1998, the Company entered into a definitive agreement to
purchase 70% of the outstanding stock of a corporation that owns the FCC
cellular license for, and the assets relating to, the Santa Cruz MSA for a
purchase price of approximately $25.2 million, subject to adjustment. The
Company is currently negotiating to acquire the remaining 30% of the outstanding
stock of such corporation. The property is adjacent to California RSA 4 and is
located southwest of San Jose and north of the Monterey Peninsula on
California's coastline.
PCS LICENSES
In the second quarter of 1997, the Company was granted PCS licenses in the
FCC "F" Block auction for nine markets adjacent to or overlapping the Company's
existing cellular footprint in Oklahoma, Kansas and Missouri. The aggregate bid
for these licenses was $5.1 million after a 15% discount. The Company financed
approximately $4.1 million of the purchase price in July 1997 by notes payable
to the United States Government at an annual interest rate of 6.25% (see Note
4). This represented a noncash financing activity, and accordingly, is not
reflected in the accompanying consolidated statement of cash flows. Interest
payments are due quarterly beginning no earlier than April 30, 1998. The
obligations will be amortized quarterly over an eight-year period beginning in
1999.
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
F-19
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. EMPLOYEE BENEFIT PLANS: (CONTINUED)
were approximately $225,000, $149,000 and $149,000 during the years ended
December 31, 1997, 1996 and 1995, respectively.
STOCK OPTION PLAN
The Company has adopted a stock option plan, the 1996 Stock Option Plan
("1996 Plan"). The Company accounts for this plan under APB Opinion 25, under
which no compensation cost is recognized in the accompanying consolidated
financial statements if the option price is equal to or greater than the fair
market value of the stock at the time the option is granted.
Under the Company's 1996 Plan, the Board of Directors may grant both
incentive and non-incentive stock options for employees, officers and directors
to acquire Class B Common Stock. Since the 1996 Plan's adoption, stock options
have been issued at the market price on the date of grant with an expiration of
ten years from the grant date. Options granted to one employee during 1997
representing 42.9% of total options granted in 1997 vest as follows: options to
purchase 12% of such shares first become exercisable on each of the first five
anniversaries of the grant date; options to purchase an additional 8% of such
shares first become exercisable on the same dates if annual performance
objectives are achieved. The remaining options issued in 1997 and all of the
options issued in 1996 vest at a rate of 20% per year. The Company has reserved
30,166 shares of authorized but unissued Class B Common Stock for issuance under
the 1996 Plan.
Stock options outstanding under the 1996 Plan are presented for the periods
indicated.
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES RANGE
----------- -------------
<S> <C> <C>
Outstanding December 31, 1995.......................................................... -- --
----------- -------------
Granted.............................................................................. 8,374 $100
Exercised............................................................................ -- --
Canceled............................................................................... -- --
----------- -------------
Outstanding December 31, 1996.......................................................... 8,374 $100
----------- -------------
Granted.............................................................................. 14,059 $100-$150
Exercised............................................................................ -- --
Canceled............................................................................. -- --
----------- -------------
Outstanding December 31, 1997.......................................................... 22,433 $100-$150
----------- -------------
----------- -------------
Exercisable at December 31, 1997....................................................... 1,675 $100
----------- -------------
----------- -------------
</TABLE>
The following schedule shows the Company's net loss and net loss per share
for each of the years ended December 31, had compensation expense been
determined consistent with SFAS No. 123. The pro
F-20
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. EMPLOYEE BENEFIT PLANS: (CONTINUED)
forma information presented below is based on several assumptions and should not
be viewed as indicative of the Company in future periods.
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
($ IN THOUSANDS,
EXCEPT FOR PER SHARE
AMOUNTS)
Net loss applicable to common stockholders:
As reported............................................................................... $ (19,337) $ (2,270)
Pro forma................................................................................. $ (19,540) $ (2,309)
Basic net loss applicable to common stockholders per common share:
As reported............................................................................... $ (40.87) $ (4.80)
Pro forma................................................................................. $ (41.30) $ (4.88)
</TABLE>
Diluted net loss per common share has been omitted because the impact of
Common Stock equivalents is anti-dilutive.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1997 and 1996, respectively:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
(AMOUNTS EXPRESSED IN
PERCENTAGES)
Interest rate...................................................................... 6.60% 6.98%
Dividend yield..................................................................... -- --
Expected volatility................................................................ 40.27% 39.88%
</TABLE>
The weighted average fair value of options granted using the Black-Scholes
option pricing model was $71.42 for 1997 and $64.84 for 1996.
9. TAXES:
Provision (benefit) for income taxes for the years ended December 31, 1997,
1996 and 1995, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ----------- ----------
<S> <C> <C> <C>
Federal income taxes--
Current....................................................... $ -- $ (45,000) $ 394,000
Deferred...................................................... (2,730,000) (280,000) 245,000
Deferred investment tax credits amortized..................... (39,000) (48,000) (48,000)
State income taxes (current and deferred)....................... (519,000) (38,000) 147,000
------------- ----------- ----------
Total income tax provision (benefit)........................ $ (3,288,000) $ (411,000) $ 738,000
------------- ----------- ----------
------------- ----------- ----------
</TABLE>
F-21
<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, 1997, 1996
and 1995, differ from amounts computed at the statutory rate as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------- ----------- ----------
<S> <C> <C> <C>
Income taxes at statutory rate (34%)............................ $ (6,241,000) $ (444,000) $ 625,000
Deferred investment credits amortized........................... (39,000) (48,000) (48,000)
Amortization of excess of cost over original cost of assets
acquired...................................................... 32,000 32,000 32,000
State income taxes, net of Federal income tax effect............ (734,000) (52,000) 71,000
Loss on redemption of executive life insurance policy........... -- -- 48,000
Purchase price adjustment....................................... 3,747,000 -- --
Other, net...................................................... (53,000) 101,000 10,000
------------- ----------- ----------
$ (3,288,000) $ (411,000) $ 738,000
------------- ----------- ----------
------------- ----------- ----------
</TABLE>
The tax effects of the temporary differences which gave rise to deferred tax
assets and liabilities at December 31, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Current deferred income taxes:
Allowance for doubtful accounts receivable.............................. $ 152,000 $ 92,000
Accrued liabilities..................................................... 45,000 --
Deferred expenses....................................................... 17,000 298,000
------------- -------------
Net current deferred income tax asset................................. 214,000 390,000
------------- -------------
Noncurrent deferred income taxes:
Fixed assets............................................................ (3,266,000) (1,710,000)
Intangible assets....................................................... (9,859,000) --
Tax credits and carryforwards........................................... 10,386,000 794,000
------------- -------------
Net noncurrent deferred income tax asset (liability).................. (2,739,000) (916,000)
------------- -------------
Total deferred income taxes........................................... $ (2,525,000) $ (526,000)
------------- -------------
------------- -------------
</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 $39,000 in 1997 and $48,000 for each of
the years ended December 31, 1996 and 1995, respectively.
At December 31, 1997, the Company had investment tax credit carryforwards
for tax purposes of $134,000, 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, 1997, the Company had alternative minimum tax credit
carryforwards of $659,000 that may be utilized to reduce future regular Federal
income taxes payable.
At December 31, 1997, the Company had NOL carryforwards of $23,600,000,
which may be utilized to reduce future Federal income taxes payable.
F-22
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. RELATED PARTY TRANSACTIONS:
At December 31, 1997 and 1996, the Company had notes and interest receivable
of $5,888,054 and $3,308,438, respectively, of which $5,852,282 and $3,266,765
was due from related parties, including $295,612 and $2,253,892 at December 31,
1997 and 1996, respectively, from the Company's directors and officers. The
notes bear interest at various interest rates ranging from 4% to 14.5% at
December 31, 1997.
The Company leases its corporate office space from a related party, as
discussed in Note 13.
During 1995, the Company purchased 75,000 shares of Common Stock of Zenex
Communications, Inc. ("Zenex") a long distance carrier serving customers
primarily in Oklahoma, for $75,000 and purchased 400,000 shares of Zenex Class B
preferred stock for $400,000. In 1996, the Company purchased 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.
In July 1997, the Company purchased 30,000 shares of Zenex common stock for
$150,000 and resold the shares in November 1997 to the Company's chairman of the
board of directors, president and chief executive officer at a price equal to
the Company's cost.
In September 1997, the Company purchased a loan for $263,882 made by a bank
to Zenex and resold such loan to the Company's chairman of the board of
directors, president and chief executive officer in November 1997 at a price
equal to the Company's cost.
11. ACCRUED EXPENSES:
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Interest.......................................................... $ 6,006,257 $ 179,682
Property tax...................................................... 55,660 472,914
Vacation, wages and other......................................... 1,783,484 981,238
------------ ------------
Total accrued expenses.......................................... $ 7,845,401 $ 1,633,834
------------ ------------
------------ ------------
</TABLE>
12. REPORT OF BUSINESS SEGMENTS:
The Company operates in two reportable segments: Wireless Telecommunications
and Wireline Telecommunications. These segments are strategic business units
that offer different products and services. They are managed separately because
each business requires different technology and marketing strategies. The
accounting policies of the segments are the same as those described in the
summary of significant accounting policies in Note 2. The Company evaluates and
measures performance of each segment based on operating cash flow (2). The
Company accounts for intersegment sales and transfers as if the sales or
transfers were to third parties, that is, at current market prices. The Company
allocates corporate overhead, income taxes and amortization of deferred
financing cost to each segment. Not all segments
F-23
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. REPORT OF BUSINESS SEGMENTS: (CONTINUED)
have significant noncash items other than depreciation and amortization in
reported profit or loss. A summary of the Company's operations by segment is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------- --------------- --------------
<S> <C> <C> <C>
OPERATING INFORMATION:
Operating revenue--
Wireless Telecommunications
External............................................................... $ 66,127,721 $ 26,107,481 $ 18,989,791
Wireline Telecommunications
External............................................................... 18,455,210 16,286,190 14,765,620
Intersegment........................................................... 1,721,500 1,609,901 1,499,023
Other(1)
External............................................................... 586,206 831,802 693,411
Intersegment........................................................... 4,189,815 7,547,421 4,061,098
Intersegment revenue..................................................... (5,911,315) (9,157,322) (5,560,121)
---------------- --------------- --------------
Total operating revenue................................................ 85,169,137 43,225,473 34,448,822
---------------- --------------- --------------
OPERATING INFORMATION:
Operating income--
Wireless Telecommunications.............................................. $ 5,395,846 $ 1,947,026 $ 3,045,258
Wireline Telecommunications.............................................. 3,242,129 2,790,850 3,137,466
Other.................................................................... 1,819,358 2,696,688 1,304,030
---------------- --------------- --------------
Total operating income................................................. 10,457,333 7,434,564 7,486,754
---------------- --------------- --------------
Operating cash flow--(2)
Wireless Telecommunications.............................................. 21,976,600 7,005,374 5,438,764
Wireline Telecommunications.............................................. 8,173,444 7,269,783 7,261,512
Other.................................................................... 2,036,384 2,879,786 1,439,270
---------------- --------------- --------------
Total operating cash flow.............................................. 32,186,428 17,154,943 14,139,546
---------------- --------------- --------------
Interest, net--(3)
Wireless Telecommunications.............................................. 21,065,157 3,743,736 1,229,821
Wireline Telecommunications.............................................. 2,443,914 2,194,170 1,975,071
Other.................................................................... 3,748,723 538,670 618,413
---------------- --------------- --------------
Total interest, net.................................................... 27,257,794 6,476,576 3,823,305
---------------- --------------- --------------
Income (loss) before income taxes and extraordinary items
Wireless Telecommunications.............................................. (17,168,160) (3,908,951) 266,107
Wireline Telecommunications.............................................. 886,499 438,355 890,692
Other.................................................................... (2,173,017) 2,166,524 685,616
---------------- --------------- --------------
Total income (loss) before income taxes and extraordinary items........ (18,454,678) (1,304,072) 1,842,415
---------------- --------------- --------------
INVESTMENT INFORMATION:
Segment assets--
Wireless Telecommunications.............................................. 299,223,415 60,858,579 19,749,045
Wireline Telecommunications.............................................. 56,905,807 54,651,888 53,128,878
Other unallocated assets(4).............................................. 333,055,938 87,563,393 17,731,407
Intersegment receivables................................................. (305,970,900) (86,125,835) (17,119,231)
---------------- --------------- --------------
Total segment assets................................................... 383,214,260 116,948,025 73,490,099
---------------- --------------- --------------
</TABLE>
F-24
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. REPORT OF BUSINESS SEGMENTS: (CONTINUED)
<TABLE>
<CAPTION>
1997 1996 1995
---------------- --------------- --------------
OTHER INFORMATION:
<S> <C> <C> <C>
Depreciation and amortization--
Wireless Telecommunications.............................................. 16,580,754 5,058,348 2,393,506
Wireline Telecommunications.............................................. 4,931,315 4,478,933 4,124,046
Other.................................................................... 217,026 183,098 135,240
---------------- --------------- --------------
Total depreciation and amortization.................................... 21,729,095 9,720,379 6,652,792
---------------- --------------- --------------
Capital expenditures--
Wireless Telecommunications.............................................. 16,231,189 12,619,701 1,412,033
Wireline Telecommunications.............................................. 5,463,631 3,544,133 2,357,483
Other.................................................................... 1,520,715 1,273,940 155,445
---------------- --------------- --------------
Total capital expenditures............................................. 23,215,535 17,437,774 3,924,961
---------------- --------------- --------------
Other significant noncash items(6)--
Wireless Telecommunications.............................................. 1,693,372 675,098 1,334,155
Wireline Telecommunications.............................................. -- -- --
Other.................................................................... -- -- --
</TABLE>
- --------------------------
(1) Revenue from segments below the quantitative thresholds are attributable to
two entities of the Company. Those entities include a small finance and
leasing company and a corporate holding company.
(2) Operating cash flow is operating income excluding the charge for
depreciation and amortization expense.
(3) Included in interest expense is amortization expense of deferred financing
cost discussed in (4) below. The amortization expense is allocated to the
wireless and wireline segments based on the segment's pro rata portion of
total debt on the date of debt issuance.
(4) Other unallocated assets primarily consist of corporate receivables from
subsidiaries, restricted cash and investments (see Note 5) and deferred
financing cost.
(5) The intersegment eliminations were included to reconcile reportable segment
activities to the Company's consolidated totals.
(6) Other significant noncash items consist of minority interest in income of
subsidiaries included in income (loss) before income taxes and extraordinary
items.
13. COMMITMENTS:
Effective December 6, 1995 (amended December 20, 1995 and June 24, 1997),
the Company entered into an equipment supply agreement in which the Company
agreed to purchase approximately $30 million of cell site and switching
equipment between June 24, 1997 and June 23, 2001, to update the cellular
systems for the newly acquired and existing MSAs and RSAs. Of the commitment,
approximately $13.8 million remained at December 31, 1997.
The Company entered into an additional equipment supply agreement with a
second vendor on January 13, 1998. The Company agreed to purchase approximately
$81 million of cell sites and switching equipment between January 13, 1998 and
January 12, 2002, to update the cellular systems for the newly acquired and
existing MSAs and RSAs.
F-25
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. COMMITMENTS: (CONTINUED)
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, 1997, are as follows:
<TABLE>
<S> <C>
1998.................................................... $2,108,059
1999.................................................... 1,951,368
2000.................................................... 1,784,527
2001.................................................... 1,601,699
2002.................................................... 1,320,225
2003 and thereafter..................................... 5,798,631
</TABLE>
Included in the annual lease commitments is approximately $277,000, payable
annually to an affiliated entity through July 2005. Lease expense under the
above leases was approximately $1,106,000, $425,000 and $300,000 for the years
ended December 31, 1997, 1996 and 1995, respectively.
14. LITIGATION SETTLEMENT:
On February 16, 1994, a judgment was entered against Dobson Cellular
Systems, Inc. ("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 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. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Unless otherwise noted, the carrying value of the Company's financial
instruments approximates fair value. The Company estimates the fair value of its
long-term debt based on quoted market prices for publicly traded debt or on the
current rates available to the Company for debt with similar terms and remaining
maturation.
Indicated below are the carrying amounts and estimated fair values of the
Company's financial instruments as of December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------------ ----------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Revolving credit facility............... $ 171,513,855 $ 171,513,855 $ 75,750,000 $ 75,750,000
Senior notes............................ 160,000,000 169,200,000 -- --
Mortgage notes payable.................. 28,639,359 26,969,543 29,744,726 24,855,656
Other notes payable..................... 4,056,204 4,200,695 -- --
Interest rate hedge..................... -- (2,644,414) -- --
</TABLE>
F-26
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS:
SENIOR PREFERRED STOCK
In January 1998, the Company issued 175,000 shares of 12.25% senior
exchangeable preferred stock mandatorily redeemable in 2008 for $1,000 per
share. Holders of the preferred stock are entitled to cumulative dividends from
the date of issuance and a liquidation preference over the other classes of
capital stock. Additionally, the preferred stock is redeemable at the option of
the Company on or after January 15, 2003. Holders of the preferred stock have no
voting rights. The preferred stock is not registered under the Securities Act of
1933 and may not be offered or sold in the United States without registration or
absent an applicable exemption from registration requirements. The Company must
make an offer to exchange substantially identical shares registered under the
Securities Act of 1933 for the shares outstanding within six months of the
issuance, or the stated dividend rate will increase by .5%.
REORGANIZATION
In conjunction with the issuance of the preferred stock discussed above, the
Company formed three new subsidiaries: Dobson Cellular Operating Company
("DCOC"), DOC Cellular Subsidiary Company ("DOC Cellular Subsidiary") and Dobson
Wireline Company ("DWC"). DCOC was created as the holding company for
subsidiaries formed to effect cellular acquisitions. DCOC has been designated an
unrestricted subsidiary under the senior note indenture which covers the senior
notes discussed in Note 4. DOC Cellular Subsidiary was created as the holding
company for the then existing cellular subsidiaries. DWC was created as the
holding company for the Company's wireline, fiber and resale operations. DWC was
designated an unrestricted subsidiary under the senior note indenture and the
certificate of designation establishing the preferred stock.
PENDING WIRELINE ACQUISITIONS
On March 26, 1998, a subsidiary of the Company entered into a definitive
agreement to purchase the stock of ATI for approximately $130 million, subject
to adjustment. ATI is based in Houston, Texas and provides resale services to
primarily commercial customers in five major Texas markets, including Houston,
Dallas, Ft. Worth, San Antonio and Austin. At the time of the agreement, the
Company placed $5 million into an escrow account pending closing. The Company
plans to finance the acquisition through the wireline bridge facility discussed
below.
On January 6, 1998, a subsidiary of the Company purchased from Zenex
contractual rights, information data and other rights with respect to certain of
Zenex's long distance customers located in areas served by Dobson Telephone for
$105,000. In addition, on January 6, 1998, the Company entered into a
non-binding letter of intent with Zenex to purchase contractual rights,
information data and other rights with respect to Zenex's commercial long
distance resale customers in Oklahoma for $5.8 million, subject to adjustment.
Even though the letter of intent with respect to the Zenex purchase has expired,
negotiations are continuing.
WIRELINE BRIDGE FACILITY
On March 24, 1998, DWC obtained a commitment letter for a $155 million
bridge facility ("Bridge Notes"). The Bridge Notes will be used to finance the
ATI acquisition, to fund the Zenex purchase, and to provide additional operating
capital. The facility will bear interest at 13%, increasing by 1% after six
months from the issuance date and increasing by an additional 0.5% at the end of
each subsequent three-
F-27
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS: (CONTINUED)
month period. Interest is payable quarterly in arrears and the Bridge Notes
mature one year from the date of issuance. In addition, DWC must pay a
commitment fee equal to 1.25% of the principal amount and a takedown fee of 1.5%
of the principal amount of the Bridge Notes. The Bridge Notes are secured by
substantially all of the assets of DWC, including the Pending Wireline
Acquisitions. The Bridge Notes are expected to be extinguished with proceeds
from either a private debt offering to be completed during 1998 or through the
issuance of senior rollover notes (the "Rollover Notes"). The Rollover Notes
would be used in their entirety to redeem 100% of the outstanding principal
amount of the Bridge Notes. The Rollover Notes would bear interest at a variable
rate and mature ten years after the date of issuance. The Rollover Notes would
be secured with the same assets secured under the Bridge Notes.
CREDIT FACILITY
In March 1998, the Company's subsidiary DCOC established a $200 million
senior secured credit facility (the "DCOC Credit Facility"). DCOC's obligations
under the DCOC Credit Facility are secured by all current and future assets of
DCOC, including the Texas 16 assets and assets acquired in future wireless
acquisitions. The Company's subsidiary DOC also established a $250 million
senior secured credit facility (the "Amended Bank Facility") to replace the
existing revolving credit facility discussed in Note 4. The Amended Bank
Facility continues to be secured by all of DOC's stock and the stock or
partnership interests of its restricted subsidiaries and all assets of DOC and
its restricted subsidiaries. The DCOC Credit Facility and the Amended Bank
Facility requires the Company to maintain certain financial ratios. The failure
to maintain such ratios would constitute an event of default, notwithstanding
the Company's ability to meet its debt service obligations. The credit
facilities will be used primarily to refinance existing indebtedness, finance
capital expenditures, consummate acquisitions, finance interest payments on the
Company's 11.75% senior notes, and fund general corporate operations. The
facilities will terminate in 2006.
In connection with the closing of the Amended Bank Facility, the Company
extinguished its then existing credit facility and recognized a pretax loss of
approximately $3.3 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 at
December 31, 1997.
F-28
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Texas 16 Cellular Telephone Company:
We have audited the accompanying balance sheet of Texas 16 Cellular
Telephone Company (a Texas corporation) as of December 31, 1997, and the related
statements of income, stockholders' equity and cash flows for the year 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 audit.
We conducted our audit 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 audit provides 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 Texas 16 Cellular Telephone
Company as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
January 26, 1998
F-29
<PAGE>
TEXAS 16 CELLULAR TELEPHONE COMPANY
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents..................................................... $ 676,802
Accounts receivable, net of allowance for doubtful accounts of $66,730........ 1,846,768
Marketable securities......................................................... 2,280,713
Cellular telephone and supplies inventory..................................... 49,809
Prepaid expenses and other.................................................... 9,749
---------
Total current assets........................................................ 4,863,841
---------
PROPERTY, PLANT AND EQUIPMENT, net.............................................. 1,801,209
OTHER: 1,251
---------
Total assets................................................................ $6,666,301
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.............................................................. $ 332,173
Accrued expenses.............................................................. 512,182
Deferred revenue.............................................................. 59,632
---------
Total current liabilities................................................... 903,987
DEFERRED COMPENSATION........................................................... 550,000
---------
Total liabilities........................................................... 1,453,987
---------
COMMITMENTS (Note 5)
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 10,000 shares authorized, 1,150 issued and
outstanding................................................................. 1,150
Paid-in capital............................................................... 75,077
Retained earnings............................................................. 5,136,087
---------
Total stockholders' equity.................................................. 5,212,314
---------
Total liabilities and stockholders' equity.................................. $6,666,301
---------
---------
</TABLE>
The accompanying notes are an integral part of this balance sheet.
F-30
<PAGE>
TEXAS 16 CELLULAR TELEPHONE COMPANY
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
OPERATING REVENUE:
Cellular service............................................................. $1,832,169
Roaming...................................................................... 9,230,919
Cellular equipment sales..................................................... 84,387
----------
Total operating revenue.................................................... 11,147,475
----------
OPERATING EXPENSES:
Cellular service............................................................. 2,071,238
Cellular equipment........................................................... 370,620
Marketing and selling........................................................ 371,263
General and administrative................................................... 1,823,603
Depreciation and amortization................................................ 672,240
----------
Total operating expenses................................................... 5,308,964
----------
OPERATING INCOME............................................................... 5,838,511
----------
OTHER INCOME:
Interest income.............................................................. 121,968
Other income................................................................. 88,707
----------
Total other income......................................................... 210,675
----------
NET INCOME..................................................................... $6,049,186
----------
----------
NET INCOME PER COMMON SHARE.................................................... $ 5,260
----------
----------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING..................................... 1,150
----------
----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-31
<PAGE>
TEXAS 16 CELLULAR TELEPHONE COMPANY
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
RETAINED EARNINGS, beginning of year.................................... $6,191,909
NET INCOME.............................................................. 6,049,186
DISTRIBUTIONS TO STOCKHOLDERS........................................... (7,105,008)
----------
RETAINED EARNINGS, end of year.......................................... $5,136,087
----------
----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-32
<PAGE>
TEXAS 16 CELLULAR TELEPHONE COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................................... $6,049,186
Adjustments to reconcile net income to net cash provided by operating
activities--
Depreciation and amortization............................................... 672,240
Deferred compensation....................................................... 100,000
Changes in current assets and liabilities--
Accounts receivable......................................................... (694,079)
Cellular telephone and supplies inventory................................... (2,273)
Prepaid expenses and other.................................................. 28,859
Accounts payable............................................................ 65,508
Accrued expenses............................................................ 122,032
Deferred revenue............................................................ 18,504
----------
Net cash provided by operating activities................................. 6,359,977
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................................................... (678,964)
Proceeds from sale of investments............................................. 1,255,071
Purchase of investments....................................................... (1,184,706)
----------
Net cash used in investing activities..................................... (608,599)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to stockholders................................................. (7,105,008)
----------
Net cash used in financing activities..................................... (7,105,008)
----------
NET DECREASE IN CASH AND CASH EQUIVALENTS....................................... (1,353,630)
CASH AND CASH EQUIVALENTS, beginning of year.................................... 2,030,432
----------
CASH AND CASH EQUIVALENTS, end of year.......................................... $ 676,802
----------
----------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-33
<PAGE>
TEXAS 16 CELLULAR TELEPHONE COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION:
Texas 16 Cellular Telephone Company (the "Company") was incorporated on
January 30, 1991, under the laws of Texas. The Company provides cellular
telephone service to customers in the El Campo, Texas, area.
2. SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents on the accompanying financial statements include
cash and short-term investments with original maturities of three months or
less.
MARKETABLE SECURITIES
Marketable securities on the accompanying balance sheet consist of United
States Treasury Bills, with original maturities longer than three months, for
which management has classified as available for sale. At December 31, 1997, the
carrying value of these investments approximates their market value.
CELLULAR TELEPHONE AND SUPPLIES INVENTORIES
Inventory consists of cellular telephone and equipment for sale in the
course of the Company's activities and is valued using the lower of cost or
market using the specific identification method to determine cost.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company assesses potential impairments of long-lived assets when there
are events or changes in circumstances that indicate that an asset's carrying
value may not be recoverable. An impairment loss is recognized when the sum of
the expected future net cash flows is less than the carrying amount of the
asset. No such losses have been identified by the Company.
ADVERTISING COSTS
Advertising costs are expensed as incurred and are included as marketing and
selling expenses in the accompanying statement of income.
INCOME TAXES
The Company elected S corporation status effective on its date of
incorporation. Earnings of the Company are included in the personal income tax
returns of the stockholders. As a result, no provision for income taxes has been
provided for in the accompanying financial statements.
REVENUE RECOGNITION
The Company records service revenues during the periods in which 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 revenues for services provided
but not yet billed of approximately $471,000 as of December 31, 1997, which is
included in accounts receivable in the accompanying balance sheets. Cellular
equipment sales are recognized when the cellular equipment is delivered to the
customer.
F-34
<PAGE>
TEXAS 16 CELLULAR TELEPHONE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Subscriber acquisition costs (primarily commissions and losses on equipment
sales) are expensed as incurred.
EARNINGS PER SHARE
Basic income per common share is computed by the weighted average number of
shares of Common Stock outstanding during the year. In 1997, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," which replaced the computation of primary and fully diluted earnings per
share with basic and diluted earnings per share. The adoption of this new
standard did not impact the Company's earnings per share.
USE OF ESTIMATES
The preparation of these 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.
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 roaming rates between the parties. Approximately
94% of the Company's cellular roaming revenue was earned from three cellular
carriers during the year ended December 31, 1997. As a result, the Company has a
concentration of credit risk related to the accounts receivable of those
customers. Effective March 1998, the roaming rate charged by the Company to one
of these cellular carriers will decline from $.70 per minute to $.50 per minute
until March 1999, at which time it may be renegotiated.
The Company maintains cash balances at financial institutions which may at
times be in excess of federally insured levels. The Company has not incurred
losses related to these balances to date.
DEFERRED COMPENSATION
The Company may accrue salaries of up to $100,000 per year in the aggregate
for its general manager. During 1997, the Company accrued $100,000 of deferred
compensation. At the point in time in which the Company achieves a positive cash
flow after debt service, it may pay such amount out of available operating cash
flow. The Company had accrued $550,000 of such compensation at December 31,
1997, which is reflected as deferred compensation in the accompanying balance
sheet.
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are recorded at cost. Newly constructed
cellular systems and improvements are capitalized. Repairs, minor replacements
and maintenance are charged to operations as incurred. The provision for
depreciation is provided using the straight-line method and an accelerated
method based on the estimated useful lives of the various classes of depreciable
property. When an asset is disposed of, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is recognized in
the current year.
F-35
<PAGE>
TEXAS 16 CELLULAR TELEPHONE COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
3. PROPERTY, PLANT AND EQUIPMENT: (CONTINUED)
Listed below are the major classes of property, plant and equipment and
their estimated useful lives, in years, as of December 31, 1997:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL LIFE
-----------
<S> <C> <C>
Cellular systems and equipment............................................... 3-15 $ 5,844,779
Buildings and improvements................................................... 5-31.5 363,273
Furniture and office equipment............................................... 5-7 109,204
Vehicles..................................................................... 5 104,384
-------------
Total property, plant and equipment.......................................... 6,421,640
Accumulated depreciation..................................................... (4,620,431)
-------------
Total property, plant and equipment, net..................................... $ 1,801,209
-------------
-------------
</TABLE>
4. ACCRUED EXPENSES:
Accrued expenses consist of the following for the year ended December 31,
1997.
<TABLE>
<S> <C>
Sales taxes..................................... $ 172,000
Franchise taxes................................. 269,946
Other........................................... 70,236
----------
Total accrued expenses........................ $ 512,182
----------
----------
</TABLE>
5. 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, 1997, are as follows:
<TABLE>
<S> <C>
1998............................................ $ 249,140
1999............................................ 198,627
2000............................................ 159,622
2001............................................ 135,999
2002............................................ $ 30,502
----------
Total future minimum lease payments........... $ 773,890
----------
----------
</TABLE>
Included in the above lease commitments is approximately $2,000, payable
monthly to an affiliated entity through April 1999. Lease expense under these
and all other leases was approximately $274,000 for the year ended December 31,
1997.
6. SUBSEQUENT EVENT
On January 26, 1998, the Company completed the sale of its FCC cellular
operating license and certain operating assets relating to the Texas 16 RSA to
Dobson Cellular of Texas, Inc. for $56.6 million, subject to adjustment. The
financial statements do not reflect either the estimated gain, or any expense
incurred or expected to be incurred related to this sale.
F-36
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners
Cellular 2000 (A Partnership)
We have audited the accompanying balance sheet of Cellular 2000 (A
Partnership) as of December 31, 1997 and 1996 and the related statements of
income, changes in partners' equity and cash flows for the years then ended.
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 audit.
We conducted our audit 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 audit provides 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 Cellular 2000 (A
Partnership) as of December 31, 1997 and 1996 and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
HOLLIDAY, LEMONS, THOMAS & COX, P.C.
Texarkana, Texas
February 13, 1998
F-37
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
BALANCE SHEET
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents......................................................... $ 1,079,070 $ 1,142,409
Accounts receivable............................................................... 1,231,461 1,495,970
Accounts receivable--related parties.............................................. 1,396,810 1,201,698
Inventory......................................................................... 160,677 147,551
Prepaid and other current assets.................................................. 370,334 283,112
------------- -------------
Total current assets.......................................................... 4,238,352 4,270,740
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Buildings and towers.............................................................. 7,234,628 5,729,609
Cellular and switching equipment.................................................. 15,059,156 10,899,265
Autos and trucks.................................................................. 126,140 108,233
Office equipment and furniture.................................................... 413,672 405,133
Leasehold improvements............................................................ 333,675 110,976
Construction in progress.......................................................... 2,730,032 241,827
------------- -------------
Total property, plant and equipment........................................... 25,897,303 17,495,043
Less accumulated depreciation..................................................... 6,563,647 4,695,405
------------- -------------
Net property, plant and equipment................................................. 19,333,656 12,799,638
------------- -------------
OTHER ASSETS:
Start up costs 56,827
Loan costs........................................................................ 268,084 246,801
Licensing costs................................................................... 54,169 26,015
------------- -------------
Total other assets............................................................ 322,253 329,643
------------- -------------
TOTAL ASSETS.................................................................. $ 23,894,261 $ 17,400,021
------------- -------------
------------- -------------
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft.................................................................... $ 536,924 $ --
Notes payable..................................................................... -- 1,200,000
Notes payable--related party...................................................... 1,253,381 --
Accounts payable.................................................................. 723,491 714,601
Accounts payable--related parties................................................. 305,437 325,552
Obligation for equipment.......................................................... 1,621,169 --
Accrued management termination fee................................................ -- 1,500,000
Accrued expenses.................................................................. 143,022 62,332
Unearned revenue.................................................................. 297,792 246,738
Federal and state taxes payable................................................... 819,903 324,520
Customer deposits................................................................. 17,600 22,000
------------- -------------
Total current liabilities..................................................... 5,718,719 4,395,743
------------- -------------
LONG-TERM LIABILITIES:
Notes payable, less current portion............................................... 12,800,000 8,900,000
Obligation for equipment.......................................................... -- 1,497,616
------------- -------------
Total long term liabilities................................................... 12,800,000 10,397,616
------------- -------------
Total liabilities............................................................. 18,518,719 14,793,359
PARTNERS' EQUITY.................................................................... 5,375,542 2,606,662
------------- -------------
TOTAL LIABILITIES AND PARTNERS' EQUITY........................................ $ 23,894,261 $ 17,400,021
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-38
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
REVENUES:
Cellular service................................................................. $ 8,539,822 $ 8,580,109
Cellular roaming................................................................. 10,654,382 10,856,424
Equipment sales.................................................................. 351,256 224,504
Other income..................................................................... 175,437 66,089
------------- -------------
Total revenues................................................................... 19,720,897 19,727,126
------------- -------------
COSTS AND EXPENSES:
Cost of services................................................................. 5,914,442 6,103,477
Cost of equipment sales.......................................................... 1,154,816 728,357
Marketing and selling expenses................................................... 1,104,764 1,314,631
General and administrative expenses.............................................. 2,237,552 1,966,416
Legal and professional fees...................................................... 460,320 440,181
Depreciation..................................................................... 1,883,951 1,501,755
Amortization..................................................................... 127,390 188,892
------------- -------------
Total costs and expenses......................................................... 12,883,235 12,243,709
------------- -------------
Net income from operations......................................................... 6,837,662 7,483,417
------------- -------------
OTHER INCOME (EXPENSE):
Interest income.................................................................. 16,440 31,260
Interest expense................................................................. (830,901) (822,573)
Loss on disposition of fixed assets.............................................. (44,199) --
Miscellaneous income............................................................. 9,444 2,265
Management termination fee....................................................... -- (3,000,000)
------------- -------------
Total other income (expense)..................................................... (849,216) (3,789,048)
------------- -------------
Net income......................................................................... $ 5,988,446 $ 3,694,369
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-39
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Partners' equity, beginning of period................................................. $ 2,606,662 $ 3,682,068
Net income............................................................................ 5,988,446 3,694,369
Distributions......................................................................... 3,219,566 4,769,775
------------ ------------
Partners' equity, end of period....................................................... $ 5,375,542 $ 2,606,662
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-40
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................................. $ 5,988,446 $ 3,694,369
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization..................................................... 2,011,341 1,690,647
Loss on disposition of fixed assets............................................... 44,199 --
(Increase) decrease in assets:
Accounts receivable............................................................. 69,397 (526,635)
Inventory....................................................................... (13,126) 26,786
Prepaid and other current assets................................................ (87,222) (178,022)
Loan costs...................................................................... (80,000) --
Licensing costs................................................................. (40,000) --
Increase (decrease) in liabilities:
Accounts payable................................................................ (11,225) 67,338
Accrued management termination fee.............................................. (1,500,000) 500,000
Accrued liabilities............................................................. 80,690 (14,072)
Unearned revenue................................................................ 51,054 51,630
Federal and state taxes payable................................................. 495,383 19,139
Customer deposits............................................................... (4,400) (6,300)
------------- -------------
Net cash provided by operating activities......................................... 7,004,537 5,324,880
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets................................................ 1,976 --
Capital expenditures for property, plant and equipment............................ (7,087,210) (2,214,973)
------------- -------------
Net cash used for investing activities............................................ (7,085,234) (2,214,973)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable....................................................... (300,000) (1,150,000)
Proceeds from notes payable....................................................... 3,000,000 2,000,000
Distributions..................................................................... (3,219,566) (4,769,775)
------------- -------------
Net cash provided (used) by financing activities.................................. (519,566) (3,919,775)
------------- -------------
Net increase (decrease) in cash and cash equivalents.............................. (600,263) (809,868)
Cash and cash equivalents at beginning of period.................................... 1,142,409 1,952,277
------------- -------------
Cash and cash equivalents at end of period.......................................... $ 542,146 $ 1,142,409
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-41
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Partnership is the owner of a license issued by the Federal
Communications Commission (FCC) to provide non-wireline cellular
telecommunications service to the California 4 Rural Service Area. California 4
Rural Service Area includes Merced, Madera and San Benito counties in central
California. The Partnership has a large customer base within this area that
includes individuals, businesses and governments. The Partnership is not
dependent on any single or major group of customers for its sales. Approximately
54% of Partnership revenue is derived from providing cellular service to
customers of other cellular companies 'roaming' through the Company's service
area. Approximately 43% of revenue is derived from providing cellular service to
its own subscriber customers. As more fully described in Note 9 to the financial
statements, in late 1997 the partner which owns the controlling interest in the
Partnership and Dobson Cellular of California, Inc. (Dobson) signed an agreement
in which the Partner agreed to sell their interest in the Partnership and to
transfer the FCC license of the Partnership to Dobson.
PERVASIVENESS OF 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.
CASH AND CASH EQUIVALENTS
Cash equivalents consist of highly liquid unrestricted cash instruments with
original maturities of three months or less. The Partnership places its
temporary cash investments with high credit quality financial institutions. At
times such investments may be in excess of the FDIC insurance limit. The
Partnership has not experienced any losses in such accounts.
REVENUE RECOGNITION
Cellular air time is recorded as revenue as earned. Subscriber acquisition
costs (mainly commissions and loss on equipment sales) are expensed when
incurred. Sales of equipment are recorded at the point of sale. Cellular access
charges generally are billed in advance and recognized as revenue when the
services are provided.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
under the specific identification method.
F-42
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is computed
using the straight-line method over the following estimated useful lives of the
assets:
<TABLE>
<S> <C>
15-20
Buildings and towers............................................ years
Cellular and switching equipment................................ 10 years
Autos and trucks................................................ 5 years
Furniture, fixtures and office equipment........................ 5-7 years
Leasehold Improvements.......................................... 5 years
</TABLE>
Expenditures for repairs and maintenance are charged to operating expense as
incurred. Betterments, replacement equipment and additions are capitalized.
CONSTRUCTION IN PROGRESS
The Partnership's cellular communications system expenditures are recorded
as construction in progress until the system or assets are placed in service.
When the assets are placed in service, they are transferred to the appropriate
property and equipment category and depreciated. All direct, administrative and
interest costs related to the construction are capitalized to construction in
progress during the construction period.
START UP COSTS
Start up costs are administrative costs incurred related to the construction
of the cellular mobile communications system. Such amounts are being amortized
over five years beginning June 1, 1992. Accumulated amortization of start up
costs at December 31, 1997 and 1996 was $681,933 and $625,105, respectively. At
December 31, 1997 the start up costs were fully amortized.
LOAN COSTS
Costs associated with the financing of the Partnership's debt have been
capitalized and are amortized on a straight line basis over the life of the
note. Additional costs incurred with the loan in June 1997 have been capitalized
and amortized over the remaining life of the loan. Accumulated amortization of
loan costs at December 31, 1997 and 1996 was $173,103 and $114,387,
respectively.
LICENSING COSTS
Licensing costs primarily represent costs incurred to acquire the Federal
Communications Commission License. Amortization of these costs began in May,
1992, using the straight-line method over a period of 40 years. In March 1997,
the Partnership entered into an agreement to use licensed software to process
billing information for its cellular communications system. In consideration of
this agreement, the Partnership paid a one-time license fee which is being
amortized using the straight-line method over a three-year period. Accumulated
amortization of licensing costs at December 31, 1997 and 1996 was $15,213 and
$3,367, respectively.
F-43
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Partnership's legal form of organization is that of a partnership. A
partnership as such is not taxed under the Internal Revenue Code, rather the
income or loss of the partnership is required to be reported by each respective
partner on their appropriate tax return.
ADVERTISING EXPENSES
Advertising costs are expensed as incurred and amounted to approximately
$183,690 in 1997 and $122,808 in 1996. The expenses are included as marketing
and selling expenses in the statement of income.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Partnership to
concentrations of credit risk, as defined by FASB Statement No. 105 consist
primarily of trade accounts receivable and cash equivalents.
At December 31, 1997 approximately 54% of trade accounts receivable were
attributable to cellular companies which subscribe to the clearinghouse network.
Of this amount, approximately 72% of these receivables were from AT&T Wireless
Services of California, Inc. (AWS-CA) companies and approximately 19% of these
receivables were from Bay Area Cellular Telephone Company, of which the parent
company of AWS-CA owns an interest. Concentrations of credit risk from these
receivables is limited due to the large number of subscribers, none of which
individually comprise a significant amount of the accounts receivable balance at
December 31, 1997. The Partnership establishes an allowance for doubtful
accounts based upon factors surrounding the credit risk of specific customers,
historical trends and other information. Receivables are not collateralized. The
Partnership is directly affected by the well being of the California economic
climate and the effects of any changes in the cellular telecommunications act.
However, management does not believe significant credit risk exists at December
31, 1997.
RECLASSIFICATIONS
Certain accounts relating to the prior year have been reclassified to
conform to the current year presentation. The reclassifications have no effect
on previously reported net earnings.
NOTE 2--SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash and cash equivalents at December 31, 1997 and 1996 for the statement of
cash flows consist of:
<TABLE>
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
Cash and money market funds...................................... $ 1,079,070 $ 1,142,409
Cash overdrafts.................................................. (536,924) --
------------ -------------
Total............................................................ $ 542,146 $ 1,142,409
------------ -------------
------------ -------------
</TABLE>
At December 31, 1997, the balance sheet presentation of cash and cash
equivalents omits the cash overdrafts.
F-44
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE 2--SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (CONTINUED)
In 1997, noncash investing and financing activities include purchases of
property, plant and equipment and obligation for equipment of $123,553 and
increases to construction in progress and notes payable-related party of
$1,253,381.
For the years ended December 31, 1997 and 1996, interest paid amounted to
$830,901 and $826,780, respectively, net of capitalized interest.
NOTE 3--NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Commercial promissory note due December 31, 1997.
Collateralized by subordinated security interest in property
and assets purchased under contract with AWS and outcollect
revenues..................................................... $ 1,253,381 --
8.09375% Variable rate term loan due September 30, 2001.
Collateralized by all property and assets of the
partnership.................................................. -- $ 7,600,000
8.09375% Variable rate revolving note due September 30, 2001.
Collateralized by all property and assets of the
partnership.................................................. -- 2,500,000
8.16797% Variable rate term loan due December 31, 2003.
Collateralized by all property and assets of the
partnership.................................................. 12,800,000 --
------------- -------------
Total.......................................................... $ 14,053,381 $ 10,100,000
Less current maturities........................................ 1,253,381 1,200,000
------------- -------------
Total long term portion of notes payable....................... $ 12,800,000 $ 8,900,000
------------- -------------
------------- -------------
</TABLE>
On December 31, 1996, the Partnership entered into an agreement which allows
the Partnership to request AT&T Wireless Services, Inc. (AWS) to place orders
for certain equipment, software, materials and services (hereinafter equipment)
intended to be used by the Partnership in the ordinary course of business for
the operation, modification, improvement or expansion of its system. Although it
is under no obligation to do so, if AWS chooses to honor in its sole discretion
any such request from the Partnership, such orders for equipment will be charged
on AWS' account and the dollar amount of such charges shall be deemed for all
purposes as loans or advances from AWS to the Partnership. The unpaid balance of
all loans or advances shall not exceed $750,000. The payment of the loans and
advances is secured by the equipment purchased and all of the Partnership's
outcollect revenues, as they are commonly defined in the cellular telephone
industry. The purchasing agreement contains a provision which allows AWS to
offset roaming revenues owed to the Partnership against amounts owed under this
purchasing agreement if the Partnership defaults in its obligation. Interest is
payable at one and one-half percent per month on the outstanding balance after
specified time intervals have elapsed. No interest cost was incurred on this
loan during 1997.
F-45
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE 3--NOTES PAYABLE (CONTINUED)
On October 14, 1994, the Partnership arranged financing with a financial
institution for a $10,000,000 term loan and a $2,500,000 revolving credit loan.
On September 29, 1996, the Partnership increased the commitment on the revolving
credit loan to $4,500,000. The increased financing was obtained to satisfy a
portion of the termination fee due on the settlement of the management agreement
with RCM. On June 11, 1997, the term loan and the revolving credit loan were
combined and the total commitment on the loan was increased to $16,000,000. The
increased financing was obtained to upgrade equipment and increase the capacity
of the cellular communications system. The credit agreement associated with the
loan contains, among other covenants, provisions which limit capital
expenditures. For the year ended December 31, 1997, capital expenditures cannot
exceed $7,100,000. As of December 31, 1997, the Partnership was not in
compliance with the capital expenditures covenant. This noncompliance would, by
the terms of the loan agreement, constitute an event of default. The agreement
provides that in an event of default the bank may by notice in writing declare
all amounts owing with respect to these agreements immediately due and payable.
Due to the pending sale as discussed in Note 9, management does not expect to
receive such notice. The credit agreement also contains provisions which limit
distributions to partners to no more than $500,000 during any fiscal quarter
except distributions to the partners to pay Federal and State income taxes on
the taxable income allocated by the Borrowers to its partners. Distributions
totaling $3,219,566 and $4,769,775 were made in 1997 and 1996, respectively.
At December 31, 1997, these borrowings bear interest at 2.25% above the
LIBOR rate established for the period. Total interest incurred during the years
ended December 31, 1997 and 1996 was $933,766 and $784,477, respectively. Of
this, $117,216 was capitalized in 1997 as construction costs. No interest
capitalization was required during 1996.
Annual maturities of noncurrent notes payable are as follows:
<TABLE>
<S> <C>
1999........................................................... $ -0-
2000........................................................... 2,400,000
2001........................................................... 3,200,000
2002........................................................... 3,200,000
2003........................................................... 4,000,000
----------
Total.................................................... $12,800,000
----------
----------
</TABLE>
F-46
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE 4--RELATED PARTY TRANSACTIONS
McCaw Communications of the Pacific Inc. and RSA 339, Inc. are subsidiaries
of AT&T Wireless Services, Inc. (AWS), and own minority interests in the
Partnership. AWS owns an interest in Bay Area Cellular Telephone Company.
Norfolk County Internet is owned by Thomas Morse, a member of the Executive
Committee of the Partnership. Cellular 2000 Telephone Co. owns the controlling
interest in the Partnership.
<TABLE>
<CAPTION>
AMOUNT OF
TRANSACTION
TYPE OF ------------------------
RELATED PARTY TRANSACTION 1997 1996
- --------------------------------------------------------------- ---------------------- ------------ ----------
<S> <C> <C> <C>
AT&T Wireless Services......................................... Accounts receivable $ 1,057,000 $ 887,000
of California, Inc. (including systems owned Accounts payable 243,000 268,000
or controlled by AWS) Notes payable 1,253,000 --
Bay Area Cellular Telephone.................................... Accounts receivable 281,000 315,000
Company Accounts payable 51,000 58,000
Norfolk County Internet........................................ Accounts receivable 56,000 --
Cellular 2000 Telephone Co..................................... Accounts receivable 3,000 --
</TABLE>
NOTE 5--OBLIGATION FOR EQUIPMENT
In 1995, the Partnership negotiated a contract with Ericsson Inc. for an
upgrade to the switch. The contract price for this upgrade totaled $1,782,525.
The upgrade was completed and became fully operational in January 1996. By the
terms of the contract, payment of $284,909 was made during 1995 leaving a
balance due Ericsson, Inc. of $1,497,616. The original contract for the
equipment has been adjusted to include sales tax of $123,553 for a total balance
due to Ericsson, Inc. of $1,621,169. This obligation will become due in full if
one of the following conditions are met: when the system reaches 25,000
subscribers; or if the switch is moved from its present location; or if the
switch is taken out of service; or prior to or as an item of closing of the sale
of the system to another business entity. Due to the pending sale of the system
as discussed in Note 9, management expects the obligation for the upgrade to the
switch to become due in full during 1998, therefore this obligation is
classified as a current liability at December 31, 1997 on the balance sheet.
NOTE 6--ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Accounts receivable--roamer....................................... $ 114,270 $ 314,304
Accounts receivable--subscriber................................... 1,216,190 1,233,315
Accounts receivable--other........................................ 27,001 168,351
Less allowance for doubtful accounts.............................. (126,000) (220,000)
------------ ------------
Total........................................................... $ 1,231,461 $ 1,495,970
------------ ------------
------------ ------------
</TABLE>
F-47
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE 7--RETIREMENT PLAN
The Partnership maintains a 401(k) profit sharing plan for its employees.
After meeting eligibility requirements on age and months of service, all
employees are covered. Contributions to the plan consist of the salary reduction
each eligible employee has elected to defer. Additional contributions to the
plan are at the discretion of management. Contributions for the years ended
December 31, 1997 and 1996 were $20,545 and $10,800, respectively.
NOTE 8--COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Partnership is committed under operating leases principally for
facilities, cell sites and office space with remaining terms from one to nine
years with options for additional periods. Certain leases provide for payment by
the lessee of taxes, maintenance and insurance.
The statement of income includes rental expense for operating leases of
approximately $428,000 for the year ended December 31, 1997 and $326,000 for the
year ended December 31, 1996. The partnership's future minimum lease commitments
under noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
REAL ESTATE EQUIPMENT
YEAR LEASES RENTALS
- ------------------------------------------------ ------------ -----------
<S> <C> <C>
12-31-98........................................ $ 399,870 $ 3,807
12-31-99........................................ 346,501 1,586
12-31-00........................................ 326,523 --
12-31-01........................................ 226,151 --
12-31-02........................................ 133,049 --
Thereafter...................................... 432,377 --
------------ -----------
Total......................................... $ 1,864,471 $ 5,393
------------ -----------
------------ -----------
</TABLE>
The Partnership had a management agreement with Rural Cellular Management
(RCM) which terminated on September 1, 1995. Prior to termination, the monthly
management fee was based upon the most current population of the Rural Service
Area (RSA) multiplied by $.1042. In 1996, the Partnership paid $45,350 to RCM
which represented a correction in the calculation of the prior year's management
fee paid. On August 24, 1996, the Partnership and RCM agreed upon a termination
fee of $4,000,000 in settlement of the management agreement. As of December 31,
1996, the partnership had paid $2,500,000 to RCM. The balance of the termination
fee, $1,500,000, was paid during the year ended December 31, 1997.
NOTE 9--SUBSEQUENT EVENT
On November 17, 1997, the shareholders of Cellular 2000 Telephone Co.
entered into a definitive agreement to sell their stock in Cellular 2000
Telephone Co. and to transfer the Federal Communications Commission (FCC)
Operating Licenses to Dobson Cellular of California, Inc. (Dobson). Cellular
2000 Telephone Co. owns 75.018 percent of the outstanding partnership interests
of Cellular 2000 (A Partnership), and thereby owns a controlling interest in the
Partnership. The financial statements do not reflect any expenses incurred or
expected to be incurred related to the sale. The FCC has consented to the
F-48
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997 AND 1996
NOTE 9--SUBSEQUENT EVENT (CONTINUED)
transfer of control of the Partnership's FCC licenses to Dobson and has granted
authorization to Dobson to operate the cellular telephone system. The sale is
expected to close in April, 1998.
On March 19, 1998, RSA 339, Inc. entered into a definitive agreement to sell
their minority interest in the Partnership to Dobson. RSA 339, Inc. owns the
remaining 24.982 percent of the outstanding partnership interests of the
Partnership. The sale is also expected to close in April, 1998.
F-49
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Santa Cruz Cellular Telephone, Inc.:
We have audited the accompanying balance sheets of Santa Cruz Cellular
Telephone, Inc. (a California corporation) as of December 31, 1997 and 1996, and
the related statements of operations, changes in shareholders' investment and
cash flows 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 financial position of Santa Cruz Cellular
Telephone, Inc. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
San Jose, California,
February 16, 1998
F-50
<PAGE>
SANTA CRUZ CELLULAR TELEPHONE, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents......................................................... $ 657,112 $ 1,193,278
Accounts receivable, net of allowance for doubtful accounts of $128,594 in 1997
and $128,808 in 1996............................................................ 1,945,456 1,376,422
Related party receivable.......................................................... 222,672 16,258
Inventories....................................................................... 193,786 152,489
Prepaid expenses and other........................................................ 20,702 220,029
------------- -------------
Total current assets............................................................ 3,039,728 2,958,476
------------- -------------
PROPERTY, PLANT AND EQUIPMENT, at cost:
Cellular systems.................................................................. 7,950,822 5,998,866
Office furniture and equipment.................................................... 1,385,590 981,778
------------- -------------
9,336,412 6,980,644
Less: Accumulated depreciation.................................................... (4,982,027) (4,121,708)
------------- -------------
Net property, plant and equipment............................................... 4,354,385 2,858,936
DEFERRED TAX ASSET.................................................................. 712,501 525,193
------------- -------------
DEFERRED FINANCING COSTS............................................................ 159,273 170,688
------------- -------------
FCC LICENSE, net of accumulated amortization of $64,800 in 1997 and $53,400 in
1996.............................................................................. 79,200 90,600
------------- -------------
OTHER............................................................................... 11,881 9,881
------------- -------------
Total assets.................................................................... $ 8,356,968 $ 6,613,774
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-51
<PAGE>
SANTA CRUZ CELLULAR TELEPHONE, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable.................................................................. $ 1,083,835 $ 1,012,054
Accrued liabilities............................................................... 1,679,605 914,501
Deferred revenue.................................................................. 440,698 441,445
Current portion of long-term debt................................................. -- 825,000
------------- -------------
Total current liabilities....................................................... 3,204,138 3,193,000
LONG-TERM LIABILITIES:
Long-term debt, net of current portion............................................ 3,434,654 2,728,405
------------- -------------
Total liabilities............................................................... 6,638,792 5,921,405
------------- -------------
COMMITMENTS (Note 6)
SHAREHOLDERS' INVESTMENT:
Common stock, no par value, 10,000,000 shares authorized, 24,558 and 24,597 shares
issued and outstanding as of December 31, 1997 and 1996, respectively........... 3,249,453 3,249,453
Preferred stock, $.001 par value, 2,000,000 shares authorized, no shares issued or
outstanding..................................................................... -- --
Deferred compensation............................................................. (70,920) (94,560)
Notes receivable from shareholders................................................ (135,100) (135,100)
Retained deficit.................................................................. (1,325,257) (2,327,424)
------------- -------------
Total shareholders' investment.................................................. 1,718,176 692,369
------------- -------------
Total liabilities and shareholders' investment.................................. $ 8,356,968 $ 6,613,774
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-52
<PAGE>
SANTA CRUZ CELLULAR TELEPHONE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- ------------
<S> <C> <C>
OPERATING REVENUES:
Cellular service................................................................... $ 9,417,689 $ 7,142,591
Equipment sales.................................................................... 1,348,220 853,608
------------- ------------
Total operating revenues......................................................... 10,765,909 7,996,199
------------- ------------
OPERATING EXPENSES:
Cost of cellular service........................................................... 1,061,063 730,117
Cost of equipment sales............................................................ 1,205,495 780,826
General and administrative......................................................... 3,697,419 3,335,166
Marketing and advertising.......................................................... 2,440,825 1,714,791
Depreciation and amortization...................................................... 899,030 691,693
------------- ------------
Total operating expenses......................................................... 9,303,832 7,252,593
------------- ------------
Operating income................................................................. 1,462,077 743,606
------------- ------------
OTHER INCOME (EXPENSE):
Interest expense................................................................... (246,287) (221,178)
Other, net......................................................................... 36,919 32,682
------------- ------------
(209,368) (188,496)
------------- ------------
Net income before provision for income taxes..................................... 1,252,709 555,110
PROVISION FOR INCOME TAXES........................................................... 250,542 111,822
------------- ------------
Net income......................................................................... $ 1,002,167 $ 443,288
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-53
<PAGE>
SANTA CRUZ CELLULAR TELEPHONE, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
COMMON STOCK
----------------------- DEFERRED NOTES RETAINED
SHARES AMOUNT COMPENSATION RECEIVABLE DEFICIT TOTAL
--------- ------------ ------------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995.... 24,616 $ 3,251,961 $ (118,200) $ (135,100) $ (2,759,656) $ 239,005
Repurchase of Common Stock at
$700 per share.............. (19) (2,508) -- -- (11,056) (13,564)
Deferred compensation
expense..................... -- -- 23,640 -- -- 23,640
Net income.................... -- -- -- -- 443,288 443,288
--------- ------------ ------------- ----------- ------------- ------------
BALANCE AT DECEMBER 31, 1996.... 24,597 3,249,453 (94,560) (135,100) (2,327,424) 692,369
Cancellation of escrow
shares...................... (39) -- -- -- -- --
Deferred compensation
expense..................... -- -- 23,640 -- -- 23,640
Net income.................... -- -- -- -- 1,002,167 1,002,167
--------- ------------ ------------- ----------- ------------- ------------
BALANCE AT DECEMBER 31, 1997.... 24,558 $ 3,249,453 $ (70,920) $ (135,100) $ (1,325,257) $ 1,718,176
--------- ------------ ------------- ----------- ------------- ------------
--------- ------------ ------------- ----------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-54
<PAGE>
SANTA CRUZ CELLULAR TELEPHONE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................................................................ $ 1,002,167 $ 443,288
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................... 922,669 715,332
Provision for doubtful accounts................................................. (214) 155,595
Deferred income tax benefit..................................................... (258,607) (239,736)
Changes in operating assets and liabilities--
Accounts receivable............................................................. (775,234) (434,752)
Inventories..................................................................... (41,297) (51,281)
Prepaid expenses and other...................................................... 268,626 (124,343)
Accounts payable................................................................ 71,781 571,615
Deferred revenue and accrued liabilities........................................ 764,357 129,324
------------- -------------
Net cash provided by operating activities..................................... 1,954,248 1,165,042
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment......................................... (2,355,767) (1,657,044)
------------- -------------
Net cash used in investing activities......................................... (2,355,767) (1,657,044)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under long-term debt agreement......................................... 500,000 500,000
Repayment of borrowings under long-term debt agreement............................ (618,750) --
Payment of deferred financing costs............................................... (15,897) --
Repurchase of Common Stock........................................................ -- (13,564)
------------- -------------
Net cash provided by (used in) financing activities........................... (134,647) 486,436
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS........................................... (536,166) (5,566)
CASH AND CASH EQUIVALENTS, beginning of year........................................ 1,193,278 1,198,844
------------- -------------
CASH AND CASH EQUIVALENTS, end of year.............................................. 657,112 1,193,278
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest............................................................ $ 246,288 $ 221,177
------------- -------------
------------- -------------
Cash paid for income taxes........................................................ $ 109,000 $ 522,000
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
F-55
<PAGE>
SANTA CRUZ CELLULAR TELEPHONE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION AND OPERATIONS:
Santa Cruz Cellular Telephone, Inc. (the Company) is a cellular mobile
communications company engaged in operating a cellular telephone system in the
Santa Cruz, California market called Cellular One. On January 27, 1989, the
Company received a certificate of public convenience and necessity from the
Public Utilities Commission of the State of California to provide wholesale and
retail service within Santa Cruz County.
During 1995, certain shareholders of the Company created Unitel
Communications LLC (Unitel) to provide cellular system management and other
telecommunications services. On September 1, 1995, the Company entered into a
management agreement with Unitel, whereby Unitel will manage and supervise the
operations of the Company's cellular system. Concurrent with the consummation of
the management agreement, substantially all of the Company's employees became
employees of Unitel (see Note 5).
The California Public Utilities Commission ("CPUC") is continuing an
investigation into the cellular telephone industry. This investigation has been
underway for five years, and the ultimate outcome of any actions resulting from
this investigation are not currently determinable. While any changes in
regulation will be prospective only, some of the measures may have an adverse
impact on the Company's future operations.
On November 25, 1997, shareholders of the Company entered into a letter of
intent to sell 70% of the stock of the Company to Dobson Communications.
2. SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
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, the
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.
FCC LICENSE
FCC license represents costs of obtaining the certificate of public
convenience and necessity. These costs are being amortized on a straight-line
basis over a 20-year period.
REVENUE RECOGNITION
The Company 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 and is recognized in the following
month when the service is provided. Airtime revenue is recognized in the month
when the service is provided.
F-56
<PAGE>
SANTA CRUZ CELLULAR TELEPHONE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
The Company's property, plant and equipment is stated at cost less
accumulated depreciation. Depreciation is calculated on a straight-line basis.
Estimated useful lives are:
<TABLE>
<S> <C>
Cellular systems 7 years
3 - 5
Office furniture and equipment years
</TABLE>
Betterments and extraordinary repairs that extend the life of the assets are
capitalized. All other repairs and maintenance are expensed when incurred. The
cost and accumulated depreciation applicable to assets retired are removed from
the accounts and any gain or loss on dispositions is recognized in other income.
DEFERRED FINANCING COSTS
Deferred financing costs represent expenditures associated with obtaining
financing (see Note 3). These costs are being amortized over a 7.25-year period.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or net realizable value with
cost determined on a first-in, first-out (FIFO) basis. Inventories consist
primarily of cellular mobile telephone equipment purchased by the Company for
sale to customers.
INCOME TAXES
The Company follows the liability method of accounting for income taxes
whereby deferred income taxes are recognized for the tax consequences of
"temporary differences" to the extent they are not reduced by net operating loss
and tax credit carryforwards by applying enacted statutory rates.
As of December 31, the components of the net deferred tax asset are included
in the following table:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Property related differences........................................ $ 437,792 $ 605,962
Reserves and accruals deductible in a future period................. 398,347 301,476
Deferred state income taxes......................................... 63,580 63,580
----------- -----------
899,719 971,018
Valuation allowance................................................. (187,218) (445,825)
----------- -----------
Net deferred tax asset............................................ $ 712,501 $ 525,193
----------- -----------
----------- -----------
</TABLE>
F-57
<PAGE>
SANTA CRUZ CELLULAR TELEPHONE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
The components of the income tax provision for the years ended December 31
are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Current:
Federal........................................................... $ 344,540 $ 269,812
State............................................................. 93,310 81,746
----------- -----------
437,850 351,558
----------- -----------
Deferred:
Federal........................................................... 46,638 (8,047)
State............................................................. 24,661 (4,024)
----------- -----------
71,299 (12,071)
Change in valuation allowance....................................... (258,607) (227,665)
----------- -----------
Net deferred tax benefit............................................ (187,308) (239,736)
----------- -----------
Total provision for income taxes.................................... $ 250,542 $ 111,822
----------- -----------
----------- -----------
</TABLE>
STOCK-BASED COMPENSATION PLAN
Effective January 1, 1995 the Company adopted the disclosure provisions of
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation." In accordance with the provisions of SFAS 123, the
Company applies Accounting Principles Board Opinion No. 25 (APB 25), "Accounting
for Stock Issued to Employees," and related interpretations in accounting for
its stock option plan.
RECLASSIFICATIONS
Certain reclassifications were made to the prior year presentation to
conform with the current year presentation.
3. INDEBTEDNESS AND CREDIT ARRANGEMENTS:
On December 19, 1995, the Company entered into a credit agreement with a
financial institution which allowed the Company to borrow up to $8.25 million
through a term loan (the "term loan") maturing in March 2003 and $2 million
through revolving credit notes (the "revolving notes") maturing in March 2003.
Concurrent with the above financing, the Company retired its previously existing
debt obligation.
The term loan ($3,053,405 outstanding as of December 31, 1996) accrued
interest at variable rates (6.84% at December 31, 1996) based on the bank's base
rate or LIBOR, as elected by the Company. If the Company did not meet certain
leverage ratios, as defined, additional interest would be charged. The
additional interest ranged up to 1% if the bank base rate was utilized or 2.75%
if LIBOR was utilized. The term loan was payable in 25 consecutive quarterly
installments beginning March 31, 1997. Borrowings under the term loan were
secured by substantially all assets of the Company.
F-58
<PAGE>
SANTA CRUZ CELLULAR TELEPHONE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
3. INDEBTEDNESS AND CREDIT ARRANGEMENTS: (CONTINUED)
In addition to all scheduled payments for the term loan noted above, the
Company was obligated to pay to the lender, annually beginning on May 31, 1998,
an amount equal to 50% of excess cash flow, as defined, for the previous year.
The amounts would be applied to the outstanding principal balance of the loan in
the inverse order of maturity.
The revolving notes ($500,000 outstanding as of December 31, 1996) were in
effect through 2003 and accrued interest at various rates (6.84% at December 31,
1996) based on the bank's base rate or LIBOR, as elected by the Company. If the
Company did not meet certain leverage ratios, as defined, additional interest
was charged. The additional interest ranged up to 1% if the bank base rate was
utilized or 2.75% if LIBOR was utilized. Additionally, the Company was obligated
to pay a .25% commitment fee on the unused balance of the revolving credit
agreement. Borrowings under the revolving notes were secured by substantially
all assets of the Company.
On December 9, 1997, the Company amended its credit described above and
consolidated the revolving notes and term loan into a line of credit agreement
(the "Agreement") which allows the Company to borrow up to $7.0 million through
a senior reducing revolver line of credit maturing in December of 2003.
The line of credit ($3,434,655 outstanding as of December 31, 1997) bears
interest at variable rates (7.1875% at December 31, 1997) based on the bank's
base rate or LIBOR, as elected by the Company. If the Company does not meet
certain leverage ratios, as defined, additional interest will be charged. The
additional interest ranges up to 1% if the bank base rate is utilized or 2.75%
if LIBOR is utilized. Borrowings under the line of credit are secured by
substantially all assets of the Company.
Principal reductions on the note begin quarterly as of September 30, 1999.
In addition to all scheduled payments for the line of credit, the Company shall
pay to the lender, annually beginning on May 31, 1999, an amount equal to 50% of
excess cash flow, as defined, for the previous year. The amounts shall be
applied to the outstanding principal line of credit balance in the inverse order
of maturity.
Future minimum debt principal payments under the Agreement, based on the
outstanding balance as of December 31, 1997, are as follows:
<TABLE>
<S> <C>
1998............................................ $ --
1999............................................ 257,599
2000............................................ 601,065
2001............................................ 772,797
2002............................................ 858,664
Thereafter...................................... 944,530
---------
Total........................................... $3,434,655
---------
---------
</TABLE>
Among other restrictions, the agreement requires the Company to (i) limit
future capital expenditures for each annual period of the agreement to
$3,000,000. (ii) maintain a ratio of debt to annualized cash flow, as defined,
to 3.5 to 1, (iii) maintain a cash interest coverage ratio, as defined, of not
less than 2 to 1, (iv) maintain a ratio of annualized cash flow to annual pro
forma debt service, as defined, of not less than 1.25 to 1 and (v) maintain a
fixed charge coverage ratio, as defined, of greater than 1.05 to 1.
F-59
<PAGE>
SANTA CRUZ CELLULAR TELEPHONE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
3. INDEBTEDNESS AND CREDIT ARRANGEMENTS: (CONTINUED)
As of December 31, 1997, the Company was in compliance with all of the
aforementioned covenants.
4. COMMON STOCK:
STOCK OPTION PLAN
On September 3, 1989, the shareholders adopted the 1989 Stock Option Plan
(the Plan) under which options to purchase Common Stock may be granted to
directors, officers, employees and consultants. The Plan provides for the award
of options for up to 2,000 shares. The Company accounts for the Plan under APB
25 under which no compensation expense has been recognized. Had compensation
expense for the Plan been determined consistent with SFAS 123, the Company's net
income would have been reduced by an immaterial amount, accordingly, pro forma
net income amounts have not been presented.
To determine compensation expense under SFAS 123, the Company used the
following assumptions:
- Risk-free interest rate of 6.5 percent
- Expected lives of 5.5 years
- Expected dividend yields of 0 percent
Option activity under the Plan was as follows:
<TABLE>
<CAPTION>
OPTIONS WEIGHTED AVERAGE
OUTSTANDING EXERCISE PRICE
------------- -----------------
<S> <C> <C>
Balance, December 31, 1995............................................... 1,790 $ 400
Granted................................................................ 210 595
----- -----
Balance, December 31, 1996............................................... 2,000 420
Granted................................................................ -- --
----- -----
Balance, December 31, 1997............................................... 2,000 $ 420
----- -----
----- -----
</TABLE>
1,848 options are exercisable as of December 31, 1997.
As of December 31, 1997, options outstanding have exercise prices between
$400 and $595, with a weighted average remaining contractual life of 4.5 years.
STOCK APPRECIATION RIGHTS
On January 31, 1989, stock appreciation rights were granted in lieu of
$465,737 due to the officers for compensation and unreimbursed business expenses
of the Company that had been incurred prior to the commencement of operations.
The Company granted to key officers 1,351 units of stock appreciation rights
with a base value of $100 per unit.
On December 28, 1995, the Company cancelled the stock appreciation rights
and issued 1,351 shares of Common Stock to the officers for $100 per share, to
be paid via promissory notes. The stock carries certain restrictions which lapse
10 years from the grant date. There was no impact on the results of
F-60
<PAGE>
SANTA CRUZ CELLULAR TELEPHONE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
4. COMMON STOCK: (CONTINUED)
operations for the Company from this transaction, as the base value of the stock
appreciation rights was equal to the price paid for the Common Stock.
RESTRICTED STOCK
On December 4, 1995, the Company extended the restriction period on 591
shares of Common Stock previously issued in 1990. The shares, which were
originally recorded at a value of $500, have been revalued at $700 per share,
based on current stock transactions. Deferred compensation totaling $118,200 was
recorded in the accompanying balance sheet as of December 31, 1995 since the
extension was granted primarily for future services to be provided to the
Company. The deferred compensation is being amortized over the 5-year
restriction period. As of December 31, 1997, the remaining deferred compensation
balance was $70,920.
5. RELATED PARTY TRANSACTIONS:
The Company has transactions with other companies that are shareholders of
the Company. These transactions include operations management provided by Unitel
(see Note 1), switch services (see Note 6) and roaming revenues. Management
believes these transactions were consummated at terms substantially the same as
could have been obtained with unrelated parties.
Under the management agreement with Unitel, the Company is required to pay
all operating costs incurred for the benefit of the Company's operations and a
management fee equal to 7% of the Company's gross revenues. As the Company is
currently Unitel's sole customer, all reimbursed expenses have been reflected in
the accompanying statements of operations for the years ended December 31, 1997
and 1996, as if the expenses had been incurred by the Company. Management fees
totaling $845,656 and $830,884 are reflected in general and administrative
expenses in the accompanying 1997 and 1996 statements of operations,
respectively. During 1997, Unitel waived the management fee for November and
December.
In addition to the fees paid above, the Company advanced certain funds to
Unitel. Outstanding advances of $222,672 and $16,258 are included in accounts
receivable in the accompanying balance sheets as of December 31, 1997 and 1996.
6. COMMITMENTS:
In May 1988, the Company entered into a switching services purchase
agreement with Bay Area Cellular Telephone Company (BACTC) in which BACTC
provides switching services for the Company's cellular systems. Under the terms
of the agreement, the Company pays BACTC a service charge based on minutes of
use. The Company also reimburses BACTC for certain operating expenses incurred
in connection with the cellular systems. The agreement terminated in January
1993. The Company is currently on a month-to-month lease with a twelve-month
cancellation period. Total expenses relating to the agreement were $511,600 and
$356,952 for the years ended December 31, 1997 and 1996, respectively.
The Company has certain agreements that provide wire and interconnection
services between the cellular systems and BACTC's connection. Total expenses
relating to these agreements were $158,728 and $127,554 for the years ended
December 31, 1997 and 1996, respectively.
F-61
<PAGE>
SANTA CRUZ CELLULAR TELEPHONE, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
6. COMMITMENTS: (CONTINUED)
In April 1993, the Company entered into an agreement with International
Telecommunication Data Systems, Inc. (ITDS) in which ITDS is to provide bill
processing services with respect to the generation and invoicing of third party
subscribers. The agreement, which expired in March 1997, was renewed for a
second three-year period. Total expenses incurred under the agreement were
$490,310 and $423,842 for the years ended December 31, 1997 and 1996,
respectively.
The Company is committed under operating leases for office space and various
parcels of land and equipment. In addition to rent, the Company is also
responsible for real estate taxes, insurance, maintenance and other operating
costs associated with the leased facilities. Total rental expenses under all
operating leases were $309,640 and $228,938 for the years ended December 31,
1997 and 1996, respectively.
Future minimum lease payments under leases with initial or remaining terms
of more than one year are as follows:
<TABLE>
<S> <C>
1998............................................ $ 304,684
1999............................................ 267,498
2000............................................ 225,928
2001............................................ 115,371
2002............................................ 60,132
Thereafter...................................... 215,622
---------
Total........................................... $1,189,235
---------
---------
</TABLE>
F-62
<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 Tenth of the Company's Amended and Restated Certificate
of Incorporation provides for indemnification of each of the Company's officers
and directors against (a) expenses, including attorney's fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by him 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 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 with respect to any criminal action,
he had no reasonable cause to believe that his conduct was unlawful and (b)
expenses (including attorney's fees) actually and reasonably incurred by him 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 or not opposed to the best interest of the Company; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged liable to the Company, unless and
only to the extent that the court in which such action or suit was decided has
determined that the person is fairly and reasonably entitled to indemnification
for such expenses which the court shall deem proper. 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 METHOD OF
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- --------- ------------------------------------------------------------------------------ -------------
<C> <S> <C>
2.1 Asset Purchase Agreement dated as of November 19, 1996 as amended by Amendment
No. 1 thereto effective as of January 17, 1997 and Amendment No. 2 thereto
dated February 6, 1997, among Horizon Cellular Telephone Company of
Hagerstown L.P., Cumberland Cellular Partnership and Dobson Cellular of
Maryland, Inc., and Dobson Operating Company. (1) [10.5.1]
2.2 Asset Purchase Agreement dated September 25, 1996 among Maryland Wireless
Communications L.P., Wendy C. Coleman, Dobson Cellular of Maryland, Inc. and
Dobson Operating Company. (1) [10.5.2]
2.3 Purchase Agreement dated February 28, 1997 among Aztel, Inc. Gila River
Telecommunications, Inc., US West New Vector Group, Inc., Tohono O'odham
Utility Authority and Dobson Cellular of Arizona, Inc. (1) [10.5.3]
2.3.1 First Amendment to Purchase Agreement dated August 29, 1997. (4) [2.1.1]
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- --------- ------------------------------------------------------------------------------ -------------
<C> <S> <C>
2.4 Stock Purchase Agreement dated September 30, 1997 among Dobson Operating
Company, Associated TTI Limited Partnership and Hinton CATV relating to the
Company's purchase of the ATTI stock. (4) [2.2]
2.5 Asset Purchase Agreement dated October 9, 1997 between Texas 16 Cellular
Telephone Company and Dobson Cellular of Texas, Inc. (5) [2.1]
2.6.1 Stock Purchase Agreement dated November 17, 1997 as amended by Amendment No. 1
thereto effective as of March 18, 1998 between Cellular 2000 Telephone Co.
and its shareholders listed therein and Dobson Cellular of California, Inc.
2.6.2 Stock Purchase Agreement dated March 19, 1998 between RSA 339, Inc. and AT&T
Wireless Services, Inc. and Dobson Cellular of California, Inc. (6) [2.6.2]
2.7 Stock Purchase Agreement dated March 25, 1998 between Santa Cruz Cellular
Telephone, Inc. and its shareholders and optionholders listed therein and
Dobson Cellular of California, Inc. (6) [2.7]
2.8 Reserved
3.1 Registrant's Amended and Restated Certificate of Incorporation.
3.2 Registrant's Bylaws. (1) [3.2]
4.1 Third Amended and Restated Credit Agreement among the Agents and Lenders named
therein and Dobson Operating Company dated March 25, 1998 (the "DOC
Facility"). (7) [4.1]
4.2 $120 million Revolving Credit Agreement among Dobson Cellular Operations
Company and the Agents and Lenders named therein dated as of March 25, 1998. (7) [4.2]
4.3 $80 million 364-Day Revolving Credit and Term Loan Agreement among Dobson
Cellular Operations Company and the Agents and Lenders named therein dated
as of March 25, 1998 (together with Exhibit 4.2, the "Operations Facility"). (7) [4.3]
4.4 Reserved
4.5 Telephone Loan Contract dated as of November 7, 1958 between Dobson Telephone
Company, Inc. and United States of America. (1) [4.2]
4.6 Telephone Loan Contract dated as of March 19, 1956 between McLoud Telephone
Company and United States of America. (1) [4.3]
4.7 Telephone Loan Contract dated as of January 15, 1993 between Dobson Telephone
Company, Inc., Rural Telephone Bank and United States of America. (1) [4.4]
4.8 Restated Mortgage, Security Agreement and Financing Statement dated as of May
15, 1993 between Dobson Telephone Company and United States of America. (1) [4.5]
4.9 Indenture dated as of February 28, 1997 between the Registrant, as Issuer, and
United States Trust Company of New York, as Trustee. (1) [4.6]
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- --------- ------------------------------------------------------------------------------ -------------
<C> <S> <C>
4.10 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, and NationsBanc Capital Markets,
Inc., as Placement Agents, and United States Trust Company of New York, as
Trustee. (1) [4.9]
4.11 Registration Rights Agreement dated January 16, 1998 between the Registrant
and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and NationsBanc Montgomery Securities LLC. (6) [4.11]
4.12 Agreement to furnish unfiled debt instruments. (6) [4.12]
4.13 Certificate of Designation relating to Senior Preferred Stock is contained in
Exhibit 3.1 and incorporated herein by reference.
4.14 Senior Preferred Stock Certificate. (7) [4.14]
5 Opinion of McAfee & Taft A Professional Corporation. (8)
10.1* Registrant's 1996 Stock Option Plan. (1) [10.1]
10.2.1 Promissory Note dated February 10, 1997 of G. Edward Evans in the amount of
$300,000 in favor of Western Financial Services Corp. (1) [10.2.1]
10.2.2 Lease Agreement dated July 17, 1995 between WillRuss Limited Liability Company
and Western Financial Services Corp. (1) [10.2.7]
10.2.3 Stock Purchase Agreement dated September 30, 1997 among Dobson Operating
Company, Associated TTI Limited Partnership and Hinton CATV Company, Inc. (6) [10.2.3]
10.3.1* Letter dated December 26, 1996 from Registrant to G. Edward Evans describing
employment arrangement. (1) [10.3.1]
10.3.2* Letter dated June 3, 1996 from Registrant to Bruce R. Knooihuizen describing
employment arrangement. (1) [10.3.2]
10.3.3* Letter dated October 15, 1996 from Fleet Equity Partners to Justin L. Jaschke
regarding director compensation. (1) [10.3.3]
10.3.4* Letter dated September 16, 1997 from Registrant to William J. Hoffman, Jr.
describing employment arrangement. (6) [10.3.4]
10.3.5* Letter dated October 28, 1997 from Registrant to R. Thomas Morgan describing
employment arrangement. (6) [10.3.5]
10.4.1 Agreement for DS-3 service dated December 16, 1993 between Dobson Fiber
Company and NTS Communications, Inc. and Addendum thereto dated June 1,
1994. (1) [10.4.1]
10.4.2 North American Cellular Network Services Agreement dated August 26, 1992
between North American Cellular Network, Inc. and Dobson Cellular, Inc. (1) [10.4.2]
10.4.3 Trademark Sublicense Agreement dated February 28, 1997 between WMC Partners
L.P. and Dobson Cellular of Arizona, Inc. (1) [10.4.3]
10.4.4 Affiliation Agreement dated February 28, 1997 among Registrant, Dobson
Cellular of Arizona, Inc. and WMC Partners, L.P. (1) [10.4.4]
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- --------- ------------------------------------------------------------------------------ -------------
<C> <S> <C>
10.4.5 Form of Cellular One License Agreements dated February 25, 1997 between
Cellular One Group and Dobson Cellular of Enid, Inc., Dobson Cellular of
Woodward, Inc. and Dobson Cellular of Kansas/Missouri, Inc. (1) [10.4.5]
10.4.6 Services Agreement dated September 25, 1996 among Dobson Cellular of Maryland,
Inc., Maryland Wireless Communications Limited Partnership, Wendy Coleman
and Washington/Baltimore Cellular One Limited Partnership.
10.4.7 General Purchase Agreement dated January 13, 1998 between Lucent Technologies,
Inc. and Dobson Cellular Systems. (6) [10.4.7]
10.4.8 Second Amended General Purchase Agreement dated June 24, 1997 between Northern
Telecom and Dobson Communications Corporation. (6) [10.4.8]
10.4.9 Term Sheet Operating Agreement dated December 4, 1997 between AT&T Wireless
Services, Inc. and Registrant. (6) [10.4.9]
10.5 Non-Recourse Term Loan Agreement dated September 30, 1997 between the Company
and Gila River Telecommunications Subsidiary, Inc., as borrower, with
respect to $6.1 million loan. (4) [10.7]
10.6 Second Amended and Restated Partnership Agreement of Gila River Cellular
General Partnership dated September 30, 1997. (4) [10.8]
21 Subsidiaries (6) [21]
23.1 Consent of McAfee & Taft A Professional Corporation will be contained in
Exhibit 5 hereto. (8)
23.2.1 Consent of Arthur Andersen LLP (Oklahoma City -- DCC). (7) [23.2.1]
23.2.2 Consent of Arthur Andersen LLP (Oklahoma City -- Texas 16). (7) [23.2.2]
23.3 Consent of Arthur Andersen LLP (San Jose). (7) [23.3]
23.4 Consent of Holliday, Lemons, Thomas & Cox, P.C. (7) [23.4]
24 Power of Attorney. (7) [24]
99.1 Letter of Transmittal. (7) [99.1]
99.2 Notice of Guarantee of Delivery. (7) [99.2]
99.3 Company letter. (7) [99.3]
99.4 Client letter. (7) [99.4]
99.5 Instruction to Beneficial Holders. (7) [99.5]
99.6 Schedule II (Schedule of Valuation Allowance Accounts for the years ended
December 31, 1997, 1996 and 1995). (7) [99.6]
99.7 Report of Independent Public Accountants on Schedule II. (7) [99.7]
</TABLE>
- ------------------------
* Management contract or compensatory plan or arrangement.
(1) Filed as an exhibit to the Company's Registration Statement of Form S-4
(Registration No. 333-23769), as the exhibit number indicated in brackets
and incorporated by reference herein.
(2) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997 as the exhibit number indicated in
brackets and incorporated by reference herein.
II-4
<PAGE>
(3) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1997 as the exhibit number indicated in
brackets and incorporated by reference herein.
(4) Filed as an exhibit to the Company's Current Report on Form 8-K filed on
October 15, 1997 and amended on November 6, 1997, as the exhibit number
indicated in brackets and incorporated by reference herein.
(5) Filed as an exhibit to the Company's Current Report on Form 8-K filed on
February 10, 1998, as the exhibit number indicated in brackets and
incorporated by reference herein.
(6) Filed as an exhibit to the Company's Annual Report as Form 10-K for the year
ended December 31, 1997 as the exhibit number indicated in brackets and
incorporated by reference herein.
(7) Filed herewith as the Exhibit number indicated in brackets.
(8) 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 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;
(iii) 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 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
II-5
<PAGE>
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.
II-6
<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 14th day of April, 1998.
<TABLE>
<S> <C> <C>
DOBSON COMMUNICATIONS CORPORATION
By: /s/ EVERETT R. DOBSON
-----------------------------------------
Everett R. Dobson
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
</TABLE>
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 14th day of April, 1998.
NAME TITLE
- ------------------------------ ----------------------------------------
/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
Bruce R. Knooihuizen Officer (Principal Financial Officer)
/s/ TRENTON W. LEFORCE
- ------------------------------ Corporate Controller (Principal
Trenton W. LeForce Accounting 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
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
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- --------- ------------------------------------------------------------------------------ -------------
<C> <S> <C>
2.1 Asset Purchase Agreement dated as of November 19, 1996 as amended by Amendment
No. 1 thereto effective as of January 17, 1997 and Amendment No. 2 thereto
dated February 6, 1997, among Horizon Cellular Telephone Company of
Hagerstown L.P., Cumberland Cellular Partnership and Dobson Cellular of
Maryland, Inc., and Dobson Operating Company. (1) [10.5.1]
2.2 Asset Purchase Agreement dated September 25, 1996 among Maryland Wireless
Communications L.P., Wendy C. Coleman, Dobson Cellular of Maryland, Inc. and
Dobson Operating Company. (1) [10.5.2]
2.3 Purchase Agreement dated February 28, 1997 among Aztel, Inc. Gila River
Telecommunications, Inc., US West New Vector Group, Inc., Tohono O'odham
Utility Authority and Dobson Cellular of Arizona, Inc. (1) [10.5.3]
2.3.1 First Amendment to Purchase Agreement dated August 29, 1997. (4) [2.1.1]
2.4 Stock Purchase Agreement dated September 30, 1997 among Dobson Operating
Company, Associated TTI Limited Partnership and Hinton CATV relating to the
Company's purchase of the ATTI stock. (4) [2.2]
2.5 Asset Purchase Agreement dated October 9, 1997 between Texas 16 Cellular
Telephone Company and Dobson Cellular of Texas, Inc. (5) [2.1]
2.6.1 Stock Purchase Agreement dated November 17, 1997 as amended by Amendment No. 1
thereto effective as of March 18, 1998 between Cellular 2000 Telephone Co.
and its shareholders listed therein and Dobson Cellular of California, Inc.
2.6.2 Stock Purchase Agreement dated March 19, 1998 between RSA 339, Inc. and AT&T
Wireless Services, Inc. and Dobson Cellular of California, Inc. (6) [2.6.2]
2.7 Stock Purchase Agreement dated March 25, 1998 between Santa Cruz Cellular
Telephone, Inc. and its shareholders and optionholders listed therein and
Dobson Cellular of California, Inc. (6) [2.7]
2.8 Reserved
3.1 Registrant's Amended and Restated Certificate of Incorporation. (6) [3.1]
3.2 Registrant's Bylaws. (1) [3.2]
4.1 Third Amended and Restated Credit Agreement among the Agents and Lenders named
therein and Dobson Operating Company dated March 25, 1998 (the "DOC
Facility"). (7) [4.1]
4.2 $120 million Revolving Credit Agreement among Dobson Cellular Operations
Company and the Agents and Lenders named therein dated as of March 25, 1998. (7) [4.2]
4.3 $80 million 364-Day Revolving Credit and Term Loan Agreement among Dobson
Cellular Operations Company and the Agents and Lenders named therein dated
as of March 25, 1998 (together with Exhibit 4.2, the "Operations Facility"). (7) [4.3]
4.4 Reserved
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- --------- ------------------------------------------------------------------------------ -------------
<C> <S> <C>
4.5 Telephone Loan Contract dated as of November 7, 1958 between Dobson Telephone
Company, Inc. and United States of America. (1) [4.2]
4.6 Telephone Loan Contract dated as of March 19, 1956 between McLoud Telephone
Company and United States of America. (1) [4.3]
4.7 Telephone Loan Contract dated as of January 15, 1993 between Dobson Telephone
Company, Inc., Rural Telephone Bank and United States of America. (1) [4.4]
4.8 Restated Mortgage, Security Agreement and Financing Statement dated as of May
15, 1993 between Dobson Telephone Company and United States of America. (1) [4.5]
4.9 Indenture dated as of February 28, 1997 between the Registrant, as Issuer, and
United States Trust Company of New York, as Trustee. (1) [4.6]
4.10 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, and NationsBanc Capital Markets,
Inc., as Placement Agents, and United States Trust Company of New York, as
Trustee. (1) [4.9]
4.11 Registration Rights Agreement dated January 16, 1998 between the Registrant
and Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and NationsBanc Montgomery Securities LLC. (6) [4.11]
4.12 Agreement to furnish unfiled debt instruments. (6) [4.12]
4.13 Certificate of Designation relating to Senior Preferred Stock is contained in
Exhibit 3.1 and incorporated herein by reference.
4.14 Senior Preferred Stock Certificate. (7) [4.14]
5 Opinion of McAfee & Taft A Professional Corporation. (8)
10.1* Registrant's 1996 Stock Option Plan. (1) [10.1]
10.2.1 Promissory Note dated February 10, 1997 of G. Edward Evans in the amount of
$300,000 in favor of Western Financial Services Corp. (1) [10.2.1]
10.2.2 Lease Agreement dated July 17, 1995 between WillRuss Limited Liability Company
and Western Financial Services Corp. (1) [10.2.7]
10.2.3 Stock Purchase Agreement dated September 30, 1997 among Dobson Operating
Company, Associated TTI Limited Partnership and Hinton CATV Company, Inc. (6) [10.2.3]
10.3.1* Letter dated December 26, 1996 from Registrant to G. Edward Evans describing
employment arrangement. (1) [10.3.1]
10.3.2* Letter dated June 3, 1996 from Registrant to Bruce R. Knooihuizen describing
employment arrangement. (1) [10.3.2]
10.3.3* Letter dated October 15, 1996 from Fleet Equity Partners to Justin L. Jaschke
regarding director compensation. (1) [10.3.3]
10.3.4* Letter dated September 16, 1997 from Registrant to William J. Hoffman, Jr.
describing employment arrangement. (6) [10.3.4]
10.3.5* Letter dated October 28, 1997 from Registrant to R. Thomas Morgan describing
employment arrangement. (6) [10.3.5]
10.4.1 Agreement for DS-3 service dated December 16, 1993 between Dobson Fiber
Company and NTS Communications, Inc. and Addendum thereto dated June 1,
1994. (1) [10.4.1]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- --------- ------------------------------------------------------------------------------ -------------
<C> <S> <C>
10.4.2 North American Cellular Network Services Agreement dated August 26, 1992
between North American Cellular Network, Inc. and Dobson Cellular, Inc. (1) [10.4.2]
10.4.3 Trademark Sublicense Agreement dated February 28, 1997 between WMC Partners
L.P. and Dobson Cellular of Arizona, Inc. (1) [10.4.3]
10.4.4 Affiliation Agreement dated February 28, 1997 among Registrant, Dobson
Cellular of Arizona, Inc. and WMC Partners, L.P. (1) [10.4.4]
10.4.5 Form of Cellular One License Agreements dated February 25, 1997 between
Cellular One Group and Dobson Cellular of Enid, Inc., Dobson Cellular of
Woodward, Inc. and Dobson Cellular of Kansas/Missouri, Inc. (1) [10.4.5]
10.4.6 Services Agreement dated September 25, 1996 among Dobson Cellular of Maryland,
Inc., Maryland Wireless Communications Limited Partnership, Wendy Coleman
and Washington/Baltimore Cellular One Limited Partnership. (6) [10.4.6]
10.4.7 General Purchase Agreement dated January 13, 1998 between Lucent Technologies,
Inc. and Dobson Cellular Systems. (6) [10.4.7]
10.4.8 Second Amended General Purchase Agreement dated June 24, 1997 between Northern
Telecom and Dobson Communications Corporation. (6) [10.4.8]
10.4.9 Term Sheet Operating Agreement dated December 4, 1997 between AT&T Wireless
Services, Inc. and Registrant. (6) [10.4.9]
10.5 Non-Recourse Term Loan Agreement dated September 30, 1997 between the Company
and Gila River Telecommunications Subsidiary, Inc., as borrower, with
respect to $6.1 million loan. (4) [10.7]
10.6 Second Amended and Restated Partnership Agreement of Gila River Cellular
General Partnership dated September 30, 1997. (4) [10.8]
21 Subsidiaries (6) [21]
23.1 Consent of McAfee & Taft A Professional Corporation will be contained in
Exhibit 5 hereto. (8)
23.2.1 Consent of Arthur Andersen LLP (Oklahoma City -- DCC). (7) [23.2.1]
23.2.2 Consent of Arthur Andersen LLP (Oklahoma City -- Texas 16). (7) [23.2.2]
23.3 Consent of Arthur Andersen LLP (San Jose). (7) [23.3]
23.4 Consent of Holliday, Lemons, Thomas & Cox, P.C. (7) [23.4]
24 Power of Attorney. (7) [24]
99.1 Letter of Transmittal. (7) [99.1]
99.2 Notice of Guarantee of Delivery. (7) [99.2]
99.3 Company letter. (7) [99.3]
99.4 Client letter. (7) [99.4]
99.5 Instruction to Beneficial Holders. (7) [99.5]
99.6 Schedule II (Schedule of Valuation Allowance Accounts for the years ended
December 31, 1997, 1996 and 1995). (7) [99.6]
99.7 Report of Independent Public Accountants on Schedule II. (7) [99.7]
</TABLE>
- ------------------------
* Management contract or compensatory plan or arrangement.
(1) Filed as an exhibit to the Company's Registration Statement of Form S-4
(Registration No. 333-23769), as the exhibit number indicated in brackets
and incorporated by reference herein.
<PAGE>
(2) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1997 as the exhibit number indicated in
brackets and incorporated by reference herein.
(3) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1997 as the exhibit number indicated in
brackets and incorporated by reference herein.
(4) Filed as an exhibit to the Company's Current Report on Form 8-K filed on
October 15, 1997 and amended on November 6, 1997, as the exhibit number
indicated in brackets and incorporated by reference herein.
(5) Filed as an exhibit to the Company's Current Report on Form 8-K filed on
February 10, 1998, as the exhibit number indicated in brackets and
incorporated by reference herein.
(6) Filed as an exhibit to the Company's Annual Report as Form 10-K for the year
ended December 31, 1997 as the exhibit number indicated in brackets and
incorporated by reference herein.
(7) Filed herewith as the Exhibit number indicated in brackets.
(8) To be filed by amendment.
<PAGE>
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
AMONG
CORESTATES BANK, N.A.,
AS ADMINISTRATIVE AGENT AND AS AN AGENT
TORONTO DOMINION (TEXAS), INC.,
AS DOCUMENTATION AGENT AND AS AN AGENT,
NATIONSBANK OF TEXAS, N.A.,
AS SYNDICATION AGENT AND AS AN AGENT,
THE MANAGING AGENTS AND CO-AGENTS DEFINED HEREIN,
AND
LENDERS LISTED
ON SCHEDULE 2.1 ATTACHED HERETO
(COLLECTIVELY, THE "LENDERS"),
AND
DOBSON OPERATING COMPANY
("BORROWER")
MARCH 25, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
SECTION 1 DEFINITIONS AND TERMS. . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . 2
1.2 Rules of Construction . . . . . . . . . . . . . . . 21
SECTION 2 REVOLVING CREDIT COMMITMENT. . . . . . . . . . . . . . . 22
2.1 The Facility. . . . . . . . . . . . . . . . . . . . 22
2.2 Promissory Note . . . . . . . . . . . . . . . . . . 22
2.3 Lenders' Commitment . . . . . . . . . . . . . . . . 23
2.4 Use of Proceeds . . . . . . . . . . . . . . . . . . 23
2.5 Reductions in Commitment. . . . . . . . . . . . . . 23
2.6 Interest. . . . . . . . . . . . . . . . . . . . . . 24
2.7 Advances. . . . . . . . . . . . . . . . . . . . . . 26
2.8 Reduction and Termination of Commitment . . . . . . 27
2.9 Prepayment; Repayment . . . . . . . . . . . . . . . 27
2.10 Payments. . . . . . . . . . . . . . . . . . . . . . 28
2.11 Commitment Fee. . . . . . . . . . . . . . . . . . . 28
2.12 Order of Application. . . . . . . . . . . . . . . . 28
2.13 Administrative Fees . . . . . . . . . . . . . . . . 29
SECTION 3 LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . 29
3.1 Availability of Credits . . . . . . . . . . . . . . 29
3.2 Lender Participation in Letter of Credit
Subfacility. . . . . . . . . . . . . . . . . . . . 29
3.3 Commitment Availability . . . . . . . . . . . . . . 31
3.4 Approval and Issuance . . . . . . . . . . . . . . . 31
3.5 Obligations of Borrower . . . . . . . . . . . . . . 31
3.6 Payment by Lenders on Letters of Credit . . . . . . 32
3.7 Collateral Security . . . . . . . . . . . . . . . . 33
3.8 Canceled Letters of Credit. . . . . . . . . . . . . 34
3.9 General Terms of Credits. . . . . . . . . . . . . . 34
SECTION 4 CHANGE IN CIRCUMSTANCES. . . . . . . . . . . . . . . . . 35
4.1 Increased Cost and Reduced Return . . . . . . . . . 35
4.2 Limitation on Types of Loans. . . . . . . . . . . . 37
4.3 Illegality. . . . . . . . . . . . . . . . . . . . . 37
4.4 Treatment of Affected Loans . . . . . . . . . . . . 37
4.5 Compensation. . . . . . . . . . . . . . . . . . . . 38
4.6 Taxes . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 5 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . 40
5.1 Organization and Good Standing. . . . . . . . . . . 40
5.2 Power and Authority; Validity of Agreement. . . . . 40
5.3 No Violation of Laws or Agreements. . . . . . . . . 40
5.4 Material Contracts. . . . . . . . . . . . . . . . . 40
THIRD AMENDED AND
RESTATED CREDIT AGREEMENT
i
<PAGE>
5.5 Compliance. . . . . . . . . . . . . . . . . . . . . 40
5.6 Litigation. . . . . . . . . . . . . . . . . . . . . 41
5.7 Title to Assets . . . . . . . . . . . . . . . . . . 41
5.8 Capital Stock/Partnership Interests . . . . . . . . 41
5.9 Accuracy of Information; Full Disclosure. . . . . . 41
5.10 Taxes and Assessments . . . . . . . . . . . . . . . 42
5.11 Indebtedness. . . . . . . . . . . . . . . . . . . . 42
5.12 Management Agreements . . . . . . . . . . . . . . . 42
5.13 Investments . . . . . . . . . . . . . . . . . . . . 42
5.14 ERISA . . . . . . . . . . . . . . . . . . . . . . . 42
5.15 Permitted Acquisitions. . . . . . . . . . . . . . . 43
5.16 Fees and Commissions. . . . . . . . . . . . . . . . 43
5.17 No Extension of Credit for Securities . . . . . . . 44
5.18 Perfection of Security Interests. . . . . . . . . . 44
5.19 Hazardous Wastes, Substances and Petroleum
Products . . . . . . . . . . . . . . . . . . . . . 44
5.20 Solvency. . . . . . . . . . . . . . . . . . . . . . 44
5.21 Wireline Spinoff. . . . . . . . . . . . . . . . . . 45
SECTION 6 SECURITY; GUARANTIES . . . . . . . . . . . . . . . . . . 45
6.1 Collateral. . . . . . . . . . . . . . . . . . . . . 45
6.2 Communications Pledge . . . . . . . . . . . . . . . 47
6.3 Guaranties. . . . . . . . . . . . . . . . . . . . . 47
6.4 Future Liens. . . . . . . . . . . . . . . . . . . . 47
6.5 Release of Collateral . . . . . . . . . . . . . . . 47
6.6 Negative Pledge . . . . . . . . . . . . . . . . . . 48
6.7 Control; Limitation of Rights . . . . . . . . . . . 49
SECTION 7 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . 49
7.1 First Advance . . . . . . . . . . . . . . . . . . . 49
7.2 Permitted Acquisitions. . . . . . . . . . . . . . . 52
7.3 Subsequent Advances . . . . . . . . . . . . . . . . 52
7.4 Additional Condition to Lenders' Obligations. . . . 52
SECTION 8 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . 53
8.1 Existence and Good Standing . . . . . . . . . . . . 53
8.2 Quarterly Financial Statements. . . . . . . . . . . 53
8.3 Annual Financial Statements . . . . . . . . . . . . 53
8.4 Other Information . . . . . . . . . . . . . . . . . 53
8.5 Budget and Management Reports . . . . . . . . . . . 54
8.6 Books and Records . . . . . . . . . . . . . . . . . 54
8.7 Insurance . . . . . . . . . . . . . . . . . . . . . 54
8.8 Litigation; Event of Default. . . . . . . . . . . . 54
8.9 Taxes . . . . . . . . . . . . . . . . . . . . . . . 55
8.10 Expenses and Costs. . . . . . . . . . . . . . . . . 55
8.11 New Subsidiary Designation. . . . . . . . . . . . . 55
8.12 Compliance; Notification. . . . . . . . . . . . . . 55
8.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . 56
THIRD AMENDED AND
RESTATED CREDIT AGREEMENT
ii
<PAGE>
8.14 Senior Leverage Ratio . . . . . . . . . . . . . . . 56
8.15 Pro Forma Debt Service Coverage . . . . . . . . . . 56
8.16 Interest Coverage . . . . . . . . . . . . . . . . . 56
8.17 Fixed Charge Coverage . . . . . . . . . . . . . . . 57
8.18 Total Leverage Ratio. . . . . . . . . . . . . . . . 57
8.19 Communications Interest Coverage. . . . . . . . . . 57
8.20 Capital Expenditures. . . . . . . . . . . . . . . . 57
8.21 Interest Rate Protection. . . . . . . . . . . . . . 57
8.22 Management Changes. . . . . . . . . . . . . . . . . 57
8.23 Successor Administrative Agent. . . . . . . . . . . 57
8.24 Transactions Among Affiliates . . . . . . . . . . . 58
8.25 Deposit Account . . . . . . . . . . . . . . . . . . 58
8.26 Other Information . . . . . . . . . . . . . . . . . 58
8.27 CoBank Participation. . . . . . . . . . . . . . . . 58
8.28 Designation of Unrestricted Subsidiary. . . . . . . 58
8.29 Year 2000 . . . . . . . . . . . . . . . . . . . . . 58
8.30 Additional Guaranties and Collateral Security
Agreements . . . . . . . . . . . . . . . . . . . . 58
8.31 Wireline Spinoff. . . . . . . . . . . . . . . . . . 59
SECTION 9 NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . 59
9.1 Indebtedness. . . . . . . . . . . . . . . . . . . . 59
9.2 Guaranties. . . . . . . . . . . . . . . . . . . . . 59
9.3 Loans . . . . . . . . . . . . . . . . . . . . . . . 59
9.4 Liens and Encumbrances. . . . . . . . . . . . . . . 60
9.5 Additional Negative Pledge. . . . . . . . . . . . . 60
9.6 Restricted Payments . . . . . . . . . . . . . . . . 60
9.7 Transfer of Assets; Liquidation . . . . . . . . . . 61
9.8 Acquisitions and Investments. . . . . . . . . . . . 62
9.9 Payments to Affiliates. . . . . . . . . . . . . . . 62
9.10 Use of Proceeds . . . . . . . . . . . . . . . . . . 62
9.11 Amendments to Documents . . . . . . . . . . . . . . 62
SECTION 10 NEGATIVE COVENANTS OF COMMUNICATIONS. . . . . . . . . . 63
10.1 Indebtedness . . . . . . . . . . . . . . . . . . . 63
10.2 Guaranties . . . . . . . . . . . . . . . . . . . . 63
10.3 Loans. . . . . . . . . . . . . . . . . . . . . . . 63
10.4 Liens and Encumbrances . . . . . . . . . . . . . . 63
10.5 Additional Negative Pledge . . . . . . . . . . . . 64
10.6 Communications Bond Debt, Preferred Stock,
and Exchange Debentures . . . . . . . . . . . . . 64
10.7 Amendments to Documents. . . . . . . . . . . . . . 64
10.8 Designation of Unrestricted Companies. . . . . . . 64
10.9 Management Expenses. . . . . . . . . . . . . . . . 65
10.10 Affiliate Transactions . . . . . . . . . . . . . . 65
SECTION 11 ADDITIONAL COLLATERAL AND RIGHT OF SET OFF. . . . . . . 65
11.1 Additional Collateral. . . . . . . . . . . . . . . 65
11.2 Right of Setoff. . . . . . . . . . . . . . . . . . 65
THIRD AMENDED AND
RESTATED CREDIT AGREEMENT
iii
<PAGE>
SECTION 12 DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . 65
12.1 Events of Default . . . . . . . . . . . . . . . . . 65
12.2 Remedies. . . . . . . . . . . . . . . . . . . . . . 68
12.3 Limitation of Rights. . . . . . . . . . . . . . . . 68
SECTION 13 AGREEMENT AMONG LENDERS . . . . . . . . . . . . . . . . . 68
13.1 Administrative Agent. . . . . . . . . . . . . . . . 68
13.2 Expenses. . . . . . . . . . . . . . . . . . . . . . 70
13.3 Proportionate Absorption of Losses. . . . . . . . . 70
13.4 Delegation of Duties; Reliance. . . . . . . . . . . 70
13.5 Limitation of Liability . . . . . . . . . . . . . . 71
13.6 Default; Collateral . . . . . . . . . . . . . . . . 72
13.7 Limitation of Liability . . . . . . . . . . . . . . 72
13.8 Relationship of Lenders . . . . . . . . . . . . . . 72
13.9 Benefits of Agreement . . . . . . . . . . . . . . . 72
13.10 Managing Agents and Co-Agents . . . . . . . . . . . 72
13.11 Obligations Several . . . . . . . . . . . . . . . . 73
SECTION 14 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 73
14.1 Indemnification and Release Provisions. . . . . . . 73
14.2 Successors and Assigns; Assignments and
Participations . . . . . . . . . . . . . . . . . . 73
14.3 Binding and Governing Law . . . . . . . . . . . . . 75
14.4 Survival. . . . . . . . . . . . . . . . . . . . . . 76
14.5 No Waiver; Delay. . . . . . . . . . . . . . . . . . 76
14.6 Modification; Waiver. . . . . . . . . . . . . . . . 76
14.7 Headings. . . . . . . . . . . . . . . . . . . . . . 76
14.8 Notices . . . . . . . . . . . . . . . . . . . . . . 76
14.9 Payment on Non-Business Days. . . . . . . . . . . . 77
14.10 Time of Day . . . . . . . . . . . . . . . . . . . . 77
14.11 Severability. . . . . . . . . . . . . . . . . . . . 77
14.12 Counterparts. . . . . . . . . . . . . . . . . . . . 77
14.13 Jurisdiction; Venue; Service of Process;
Jury Trial . . . . . . . . . . . . . . . . . . . . 77
14.14 Entirety. . . . . . . . . . . . . . . . . . . . . . 78
THIRD AMENDED AND
RESTATED CREDIT AGREEMENT
iv
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Schedule 2.1 - Lenders and Commitments
Schedule 5.4 - Material Contracts
Schedule 5.5 - Permits, Licenses, Authorizations, etc.
Schedule 5.8 - Capital Stock and Partnership Interests
Schedule 5.11 - Existing Indebtedness
Schedule 5.12 - Management or Consulting Agreements
Schedule 7.1 - Post-Closing Requirements
Schedule 7.2 - Requirements for a Permitted Acquisition
Schedule 9.8 - Existing Investments
Schedule 10.4 - Existing Liens
Exhibit A - Form of Promissory Note
Exhibit B-1 - Form of Advance Request
Exhibit B-2 - Form of Letter of Credit Request Form
Exhibit C-1 - Form of Compliance Certificate
Exhibit C-2 - Form of Permitted Acquisition Compliance Certificate
Exhibit C-3 - Form of Permitted Acquisition Loan Closing Certificate
Exhibit D - Form of Pledge, Assignment, and Security Agreement
Exhibit E - Form of Pledge Agreement
Exhibit F - Form of Guaranty
Exhibit G - Form of Assignment and Acceptance Agreement
Exhibit H-1 - Form of Opinion of Counsel
Exhibit H-2 - Form of Opinion of Regulatory Counsel
Exhibit H-3 - Form of Opinion of Local Counsel
Exhibit I - [Reserved]
Exhibit J - Form of Affiliate Subordination Agreement
<PAGE>
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT is made this 25th day of
March, 1998, by and among DOBSON OPERATING COMPANY ("BORROWER"), an Oklahoma
corporation, Lenders (hereinafter defined), CORESTATES BANK, N.A., as
Administrative Agent (hereinafter defined), NATIONSBANK OF TEXAS, N.A., as
Syndication Agent (hereinafter defined), TORONTO DOMINION (TEXAS), INC., as
Documentation Agent (hereinafter defined), and the Managing Agents (hereinafter
defined) and Co-Agents (hereinafter defined). Each of the Guarantors
(hereinafter defined), has executed this Credit Agreement for the limited
purpose of making the representations and warranties set forth in SECTION 4 and
agreeing to the covenants set forth in SECTIONS 6, 7, and 8 hereof.
BACKGROUND
WHEREAS, Borrower (under its previous name, Dobson Communications
Corporation), its wholly-owned subsidiary, Dobson Cellular Systems, Inc.
(together with Borrower, 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 (as amended from time to
time, the "ORIGINAL CREDIT AGREEMENT") with CoreStates Bank, N.A., as a lender
and as "ADMINISTRATIVE AGENT" thereunder, and Bank IV Oklahoma, N.A. (the
"ORIGINAL LENDERS"), 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 $25,000,000, and to make a $6,000,000 term
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 CoreStates Bank, N.A., as a lender and as "ADMINISTRATIVE AGENT"
thereunder, and certain additional lenders 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 $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, (a) Borrower changed its name from Dobson Communications
Corporation to Dobson Operating Company, (b) a newly-formed Oklahoma corporation
changed its name to Dobson Communications Corporation ("COMMUNICATIONS"), (c)
all of the issued and outstanding shares of capital stock of Borrower were
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 were transferred from Borrower to
Communications (the "REORGANIZATION"), and (d) Communications issued its Senior
Notes due 2007 pursuant to an Indenture dated February 28, 1997, and sold 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"); and
THIRD AMENDED AND
RESTATED CREDIT AGREEMENT
<PAGE>
WHEREAS, in connection with such Reorganization and the issuance of the
Communications Bond Debt, Borrower entered into a Second Amended and Restated
Credit Agreement dated as of February 28, 1997 (as amended from time to time,
the "SECOND AMENDED AND RESTATED CREDIT AGREEMENT") with CoreStates Bank, N.A.
(in its capacity as "ADMINISTRATIVE AGENT" thereunder and as a lender) and
certain other lenders (the "SECOND AMENDED AND RESTATED LENDERS") and agreed,
among other things, to (a) increase the commitment available to Borrower up to
$200,000,000, (b) finance certain capital expenditures and acquisitions, (c)
refinance all existing indebtedness of the Amended and Restated Borrowers under
the Amended and Restated Credit Agreement (other than the Trust Loan), and (d)
fund certain dividends and distributions to Communications, enabling, among
other things, the repayment of the Trust Loan in full and the payment of
semi-annual interest payments by Communications on the Communications Bond Debt;
and
WHEREAS, subject to the terms and conditions set forth below, Borrower and
Lenders desire to amend and restate the Second Amended and Restated Credit
Agreement in order, among other things, to (a) increase the commitment available
to Borrower up to $250,000,000, (b) extend the Final Maturity Date to June 30,
2006, and (c) refinance all existing indebtedness under the Second Amended and
Restated Credit Agreement; and
WHEREAS, this amendment and restatement of the Second 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 Second
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 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 Second Amended and Restated Credit Agreement is amended and
restated in its entirety as follows:
SECTION 1 DEFINITIONS AND TERMS.
1.1 DEFINITIONS. When used in this Agreement, the following terms have
the respective meanings set forth below.
ACCUMULATED FUNDING DEFICIENCY has the meaning ascribed to that term in
SECTION 302 of ERISA.
ACQUISITION means any transaction or series of related transactions for the
purpose of, or resulting in, directly or indirectly, (a) the acquisition by any
Company of all or substantially all of the assets of a Person or of any business
or division of a Person, (b) the acquisition by any Company of more than 50% of
any class of Voting Stock (or similar ownership interests) of any Person
(PROVIDED THAT, formation or organization of any entity shall not constitute an
"ACQUISITION" to the extent that the amount of the loan, advance, investment, or
capital contribution in such entity constitutes a permitted investment under
SECTION 9.8); or (c) a merger, consolidation, amalgamation, or other combination
by any Company with another Person if a Company is the surviving entity;
PROVIDED THAT, in any merger involving Borrower, Borrower must be the surviving
entity.
ADJUSTED BASE RATE means the Base Rate plus the Applicable Margin, which
rate shall change when and as the Base Rate changes and when and as the
Applicable Margin changes.
THIRD AMENDED AND
2 RESTATED CREDIT AGREEMENT
<PAGE>
ADJUSTED EURODOLLAR RATE means, for any Eurodollar Portion and for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by Administrative Agent to be equal to the
quotient obtained by dividing (a) the Eurodollar Rate for such Eurodollar
Portion for such Interest Period by (b) 1 minus the Reserve Requirement for such
Eurodollar Portion for such Interest Period.
ADMINISTRATIVE AGENT means CoreStates Bank, N.A., in its capacity as
administrative agent for Lenders hereunder, and its successors and assigns in
such capacity.
ADVANCE means a borrowing under the Commitment pursuant to SECTION 2.7 of
this Agreement.
ADVANCE REQUEST FORM means the certificate in the form attached hereto as
EXHIBIT B-1 to be delivered by Borrower to Administrative Agent as a condition
of each Advance.
AFFILIATE means (a) any Person which directly or indirectly owns, controls,
or holds five percent (5%) or more of the outstanding beneficial interest in
Borrower, (b) any Person of which five percent (5%) or more of the outstanding
beneficial interest is directly or indirectly owned, controlled, or held by
Borrower, (c) any Person which directly or indirectly is under common control
with Borrower, (d) any officer or director of Borrower or any Affiliate, or (e)
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 a
Person, whether through the ownership of voting securities, by contract, or
otherwise.
AGENTS means, collectively, Administrative Agent, Syndication Agent, and
Documentation Agent.
AGREEMENT means this Third Amended and Restated Credit Agreement, and all
exhibits and schedules hereto, as each may be amended, modified, or restated
from time to time.
APPLICABLE LENDING OFFICE means, for each Lender and for each Type of
Portion, the "LENDING OFFICE" of such Lender (or of an Affiliate of such Lender)
designated for such Type of Portion on the signature pages hereof, or such other
office of such Lender (or an Affiliate of such Lender) as such Lender may from
time to time specify to Administrative Agent and Borrower by written notice in
accordance with the terms hereof as the office by which its Portions of such
Type are to be made and maintained.
APPLICABLE MARGIN means, on any date of determination, with respect to each
Base Portion or Eurodollar Portion, respectively, the percentage per annum set
forth in the appropriate column below that corresponds to the Total Leverage
Ratio at such date of determination, as calculated based on the quarterly
compliance certificate of Borrower and Communications most recently delivered
pursuant to SECTION 8.2 hereof:
THIRD AMENDED AND
3 RESTATED CREDIT AGREEMENT
<PAGE>
<TABLE>
- ----------------------------------------------------------------------------
APPLICABLE MARGIN
- ----------------------------------------------------------------------------
EURODOLLAR RATE
TOTAL LEVERAGE RATIO BASE RATE BORROWINGS BORROWINGS
- ----------------------------------------------------------------------------
<S> <C> <C>
9.0 or greater 1.250% 2.250%
- ----------------------------------------------------------------------------
8.0 or greater, 0.875% 1.875%
but less than 9.0
- ----------------------------------------------------------------------------
7.0 or greater, 0.625% 1.625%
but less than 8.0
- ----------------------------------------------------------------------------
6.0 or greater, 0.375% 1.500%
but less than 7.0
- ----------------------------------------------------------------------------
5.0 or greater, 0.125% 1.250%
but less than 6.0
- ----------------------------------------------------------------------------
Less than 5.0 0.000% 1.000%
- ----------------------------------------------------------------------------
</TABLE>
(a) On any date of determination of the Applicable Margin, if the
Senior Leverage Ratio, based on the most recently delivered Compliance
Certificate, is greater than 5.00 to 1.00, then the Applicable Margin shall
be increased by 0.125% for so long as the Senior Leverage Ratio exceeds 5.0
to 1.0.
(b) Until the second Business Day after the initial Financial
Statements and Compliance Certificate for the fiscal quarter ending
December 31, 1997, shall have been delivered hereunder, the Applicable
Margin for Base Portions and Eurodollar Portions shall be determined by
reference to the Compliance Certificate provided by Borrower and
Communications on the Closing Date. With respect to any adjustments in the
Applicable Margin as a result of changes in the Total Leverage Ratio, such
adjustment shall be effective commencing on the second Business Day after
the delivery of Financial Statements (and the related Compliance
Certificate) pursuant to SECTIONS 8.2 and 8.3, or the most recent Permitted
Acquisition Compliance Certificate for a Permitted Acquisition, as the case
may be.
(c) If Borrower and Communications fail to timely furnish to Lenders
the Financial Statements and related Compliance Certificates as required to
be delivered pursuant to SECTIONS 8.2 and 8.3, and such failure shall not
be remedied within five days after written notice thereof from
Administrative Agent or any Lender, then the Applicable Margin shall be the
maximum Applicable Margin specified in the table above corresponding to a
Total Leverage Ratio of 9.0 to 1.0.
APPLICABLE MARGIN FOR COMMITMENT FEES means, on any date of determination,
the percentage set forth in the table below which corresponds, on any date of
determination, with the Senior Leverage Ratio at such date of determination, as
calculated based on the quarterly compliance certificates of Borrower most
recently delivered pursuant to SECTION 8.2 hereof.
<TABLE>
- ----------------------------------------------------------------------------
SENIOR LEVERAGE RATIO APPLICABLE MARGIN
- ----------------------------------------------------------------------------
<S> <C>
Greater than or equal to 6.0 to 1.0 0.375%
- ----------------------------------------------------------------------------
Less than 6.0 to 1.0 0.250%
- ----------------------------------------------------------------------------
</TABLE>
THIRD AMENDED AND
4 RESTATED CREDIT AGREEMENT
<PAGE>
(a) Until the second Business Day after the initial Financial
Statements and Compliance Certificate for the fiscal quarter ending
December 31, 1997, shall have been delivered hereunder, the Applicable
Margin for Commitment Fees shall be determined by reference to the
Compliance Certificate provided by Borrower on the Closing Date. With
respect to any adjustments in the Applicable Margin for Commitment Fees as
a result of changes in the Senior Leverage Ratio, such adjustment shall be
effective commencing on the second Business Day after the delivery of
Financial Statements (and related Compliance Certificate) pursuant to
SECTIONS 8.2 and 8.3 or the most recent Permitted Acquisition Compliance
Certificate for a Permitted Acquisition, as the case may be.
(b) If Borrower or Communications fails to timely furnish to Lenders
the Financial Statements and related Compliance Certificates as required to
be delivered pursuant to SECTIONS 8.2 and 8.3, and such failure shall not
be remedied within five days after written notice thereof from the
Administrative Agent or any Lender, then the Applicable Margin for
Commitment Fees shall be the maximum Applicable Margin specified in the
table above.
ASSUMED TAXES means, (a) with respect to any Equity Issuance, an amount
equal to such incremental annual increase in franchise taxes as Borrower
estimates in good faith shall be payable as a result of such Equity Issuance,
and (b) with respect to any Significant Sale, an amount equal to such percentage
as Borrower estimates in good faith to be its effective rate of the taxable gain
for federal and state income tax purposes with respect to such Significant Sale.
BANKS, as referred to in any financing statements or other lien filings
made under or in connection with the Second Amended and Restated Credit
Agreement, the Amended and Restated Credit Agreement (as defined in the Recitals
hereto), or the Original Credit Agreement (as defined in the Recitals hereto),
means "LENDERS" as defined in the Loan Papers.
BASE PORTION means Portions that bear interest at rates based upon the Base
Rate.
BASE RATE means, for any day, the rate per annum equal to the higher of (a)
the Federal Funds Rate for such day plus one-half of one percent (.5%) and (b)
the Prime Rate for such day. Any change in the Base Rate due to a change in the
Prime Rate or the Federal Funds Rate shall be effective on the effective date of
such change in the Prime Rate or Federal Funds Rate.
BORROWER means Dobson Operating Company, an Oklahoma corporation and a
wholly-owned Subsidiary of Communications.
BUDGET means the most recently delivered of (a) the annual financial
budgets for the Companies and Communications and its Restricted Subsidiaries
delivered by the Companies and Communications on the Closing Date as required in
CLAUSE (iii) of SECTION 7.1(i) or (b) the Budgets delivered pursuant to
SECTION 8.5, together with any adjustments to any Budget (whether described in
CLAUSE (a) or (b)) made from time to time based on projections delivered in
connection with Permitted Acquisitions pursuant to SECTION 7.2 and the
requirements of a "PERMITTED ACQUISITION" as set forth in this SECTION 1.1 SO
LONG AS such projections have been approved by Agents.
BUSINESS DAY means (a) for all purposes, any day not a Saturday, Sunday, or
a day on which banks are required or authorized by law to be closed in
Philadelphia, Pennsylvania or Dallas, Texas; and (b) in
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addition to the foregoing, in respect of any Eurodollar Portion, a day on
which dealings in United States dollars are conducted in the London interbank
market and commercial banks are open for international business.
CAPITAL EXPENDITURES means an expenditure for any fixed asset having a
useful life of more than one (1) year, or any improvements or additions thereto,
including the 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 SECTION 9.8 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.
CELLULAR PARTNERSHIP means, individually, and CELLULAR PARTNERSHIPS means,
collectively, any entity in which Borrower or one of its Restricted Subsidiaries
owns, directly or indirectly, a partnership interest.
CELLULAR PARTNERSHIP OBLIGOR means, on any date of determination, those
Cellular Partnerships in which Borrower or one of its Restricted Subsidiaries,
directly or indirectly, serves as the "MANAGING GENERAL PARTNER" or equivalent
position and which have incurred Indebtedness from any Company which
Indebtedness has not been terminated and with respect to which Indebtedness
amounts remain outstanding and unpaid.
CELLULAR PARTNERSHIP PROMISSORY NOTE has the meaning set forth in SECTION
7.1(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.
CO-AGENTS means Fleet National Bank, Banque Paribas, and Key Corporate
Capital Inc.
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 means the collateral security afforded to Administrative Agent
on behalf of Lenders under the Collateral Security Documents.
COLLATERAL SECURITY DOCUMENTS means, collectively, the Security Agreements,
the Pledge Agreements, the Guaranty Agreements, and any additional documents
granting security to Administrative Agent on behalf of Lenders hereunder or any
interest rate hedging agreement with a Lender, as the same may be renewed,
extended, supplemented, amended, or restated.
COMMITMENT means, on any date of determination, the maximum aggregate
principal amount which Lenders on a several basis have agreed to advance (or
issue as Letters of Credit pursuant to SECTION 3) to Borrower under
SECTION 2.1(a) hereof, being $250,000,000 on the Effective Date, as such amount
may be canceled or reduced from time to time in accordance with the terms
hereof.
COMMITMENT REDUCTION DATE shall have the meaning specified in SECTION 2.5
hereof.
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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, as amended from time to time, and the rules and regulations in effect at
any time thereunder.
COMMUNICATIONS BOND DEBT means the 11 3/4 Senior Notes due 2007 in an
aggregate principal amount of $160,000,000, issued by Communications pursuant to
that certain Indenture dated as of February 28, 1997, between Communications and
United States Trust Company of New York, as Trustee, as the same may be amended
from time to time in accordance with the terms thereof and hereof.
COMMUNICATIONS INTEREST EXPENSE, as of any date of determination, means the
Interest Expense of Communications and its Consolidated Subsidiaries for the
four most recently-ended fiscal quarters, as reduced by interest income earned
by Communications under the Escrow Agreement, as determined in accordance with
GAAP; PROVIDED, THAT, interest paid on the Senior Notes with proceeds of the
Escrow Account shall be excluded from Communications Interest Expense.
COMMUNICATIONS OPERATING CASH FLOW, as of any date of determination, means
the Operating Cash Flow of Communications and its Restricted Subsidiaries on a
consolidated basis for the four most recently ended fiscal quarters adjusted as
required, with respect to any Cellular Partnership, to take into account any
minority ownership when (and only when) intercompany Indebtedness to Borrower
from such Cellular Partnerships has been paid in full.
COMMUNICATIONS TOTAL DEBT means the Total Debt of Communications and its
Restricted Subsidiaries; PROVIDED, THAT the Total Debt of Communications and its
Restricted Subsidiaries (a) shall be reduced by (i) amounts on deposit in the
Escrow Account to be used to pay any outstanding [principal] under the
Communications Bond Debt, if any, and (ii) the amount of all immediately
available cash held by Communications and its Restricted Subsidiaries in excess
of $10,000,000 and (b) shall include the principal amount of all Exchange
Debentures, if any, issued in exchange for the Preferred Stock.
COMPANIES means, at any date of determination, Borrower and each of its
Restricted Subsidiaries, and COMPANY means, on any date of determination,
Borrower or any of its Restricted Subsidiaries.
CONSEQUENTIAL LOSS means any loss or expense which any Lender may
reasonably incur in respect of a Eurodollar Portion as a consequence of any
event described in SECTION 4.5.
DEBT ISSUANCE means any Indebtedness of any Company or Communications, as
the case may be, for borrowed money issued or incurred after the Closing Date,
other than, in the case of the Companies, Indebtedness permitted under
SECTION 9.1 (a) - (f).
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.
DEFAULT RATE means a per annum rate of interest equal from day to day to
the LESSER of (a) the sum of the Base Rate PLUS the Applicable Margin for Base
Portions PLUS 2% AND (b) the Maximum Rate.
DOLLARS and the symbol $ means lawful money of the United States of
America.
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<PAGE>
EFFECTIVE DATE means the date on which the conditions set forth in
SECTION 7.1 shall have been satisfied.
ELIGIBLE ASSIGNEE means (a) a Lender; (b) an Affiliate of a Lender (so long
as such assignment is not made in conjunction with the sale of such Affiliate);
and (c) any other Person approved by Administrative Agent (which approval will
not be unreasonably withheld or delayed by Administrative Agent) and, unless a
Default has occurred and is continuing at the time any assignment is effected in
accordance with SECTION 14.16, Borrower, such approval not to be unreasonably
withheld or delayed by Borrower and such approval to be deemed given by Borrower
if no objection is received by the assigning Lender and the Administrative Agent
from Borrower within five Business Days after notice of such proposed assignment
has been provided by the assigning Lender to Borrower; PROVIDED, HOWEVER, that
neither Borrower nor any Affiliate of Borrower shall qualify as an Eligible
Assignee.
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
Clean Air Act (42 U.S.C. Section 7401 ET SEQ.), the Federal Water Pollution
Control Act, as amended by the Clean Water Act (33 U.S.C. Section 1251 ET
SEQ.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section
136 ET SEQ.), the Emergency Planning and Community Right to Know Act of 1986
(42 U.S.C. Section 11001 ET SEQ.), the Hazardous Materials Transportation Act
(49 U.S.C. Section 1801 ET SEQ.), the National Environmental Policy Act of 1969
(42 U.S.C. Section 4321 ET SEQ.), the Oil Pollution Act (33 U.S.C. Section 2701
ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET
SEQ.), the Rivers and Harbors Act (33 U.S.C. Section 401 ET SEQ.), the Safe
Drinking Water Act (42 U.S.C. Section 201 and Section 300f ET SEQ.), 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 (42 U.S.C. Section
6901 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 2601 ET
SEQ.), 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.
EQUITY ISSUANCE means the issuance by any Company of any shares of any
class of stock, warrants, or other equity interests, other than present and
future shares of stock, options, or warrants issued to employees, directors, or
consultants of the Companies, or stock issued upon their exercise.
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 any Company is a member.
ESCROW ACCOUNT means the account established pursuant to the Escrow
Agreement.
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 certain proceeds of the Communications Bond Debt are held in
escrow to secure the special repurchase and the mandatory redemption (if
applicable) of, and two years' interest on, the Communications Bond Debt.
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EURODOLLAR-BASED RATE means the Adjusted Eurodollar Rate plus the
Applicable Margin, such rate to change when and as the Applicable Margin
changes.
EURODOLLAR PORTION means Portions that bear interest at rates based upon
the Adjusted Eurodollar Rate.
EURODOLLAR RATE means, for any Eurodollar Portion for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/100 of 1%) appearing on Dow Jones Markets Page 3750 (or any successor page) as
the London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period. If for any reason such
rate is not available, the term "EURODOLLAR RATE" shall mean, for any Eurodollar
Portion for any Interest Period therefor, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO Page
as the London interbank offered rate for deposits in Dollars at approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period for a term comparable to such Interest Period; PROVIDED,
HOWEVER, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates (rounded upwards,
if necessary, to the nearest 1/100 of 1%).
EVENT OF DEFAULT means an event described in SECTION 12.1 hereof.
EXCHANGE DEBENTURES means any subordinated debentures issued in exchange
for all or any portion of the Preferred Stock, all as more particularly
described in that certain Offering Memorandum issued January 5, 1998, by
Communications.
EXISTING INTEREST RATE AGREEMENT means that certain ISDA Master Agreement
dated as of April 11, 1997, between First Union National Bank (f/k/a First Union
National Bank of North Carolina) and Communications.
FCC means the Federal Communications Commission, or any successor thereto.
FEDERAL FUNDS RATE means, for any day, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published by
the Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day; PROVIDED THAT, (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate charged to the
Administrative Agent (in its individual capacity) on such day on such
transactions determined by the Administrative Agent.
FINAL MATURITY DATE means the earlier of June 30, 2006, or the date on
which the Commitment is terminated pursuant to SECTION 2.8 hereof.
FIXED CHARGE COVERAGE RATIO means, as of any date of determination,
calculated for the most recently-ended Rolling Period, the ratio of: (a) the
Operating Cash Flow of the Companies, to (b) the sum of (i) mandatory
prepayments and regularly scheduled principal payments or Commitment reductions
with
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9 RESTATED CREDIT AGREEMENT
<PAGE>
respect to Total Debt of the Companies required to be paid during such
period, (ii) the amount paid for Capital Expenditures of the Companies, (iii)
cash Interest Expense of the Companies, (iv) cash taxes of the Companies, to
the extent allocable to them pursuant to the Tax Sharing Agreement, and (v)
distributions and dividends paid by Borrower, including, without limitation,
any amounts paid to fund interest on the Communications Bond Debt, the
Preferred Stock, and the Exchange Debentures, but excluding distributions
otherwise permitted by SECTION 9.6(a).
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 Person 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 means the Gila River Cellular General Partnership, an Arizona general
partnership.
GUARANTOR means, individually, and GUARANTORS means, collectively, any
party at any time obligated to Lenders pursuant to a Guaranty.
GUARANTY means, collectively (a) the Guaranty (or with respect to
Guarantors under the Second Amended and Restated Credit Agreement, the Third
Amended and Restated Guaranty), in substantially the form and upon the terms of
EXHIBIT F, executed and delivered by any Person pursuant to the requirements of
the Loan Papers; and (b) any amendments, modifications, supplements,
restatements, ratifications, or reaffirmation of any Guaranty made in accordance
with the Loan Papers.
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.
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 (a)
obligations of such Person for borrowed money or which have been incurred in
connection with the acquisition of property or assets, (b) 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, (c) 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, (d) Capitalized Leases, (e) guaranties, (f)
letters of credit and letter of credit reimbursement obligations, and (g) net
payments under Interest Rate Agreements.
INTEREST EXPENSE means, for any period of calculation thereof, for any
Person, the aggregate amount of all interest (including commitment fees) on all
Indebtedness of such Person, whether paid in cash or accrued as a liability and
payable in cash during such period (including, without limitation, imputed
interest on Capital Lease obligations; the amortization of any original issue
discount on any Indebtedness; the interest portion of any deferred payment
obligation; all commissions, discounts, and other fees and charges owed with
respect to letters of credit or bankers' acceptance financing; net costs
associated with Interest Rate Agreements; and the interest component of any
Indebtedness that is guaranteed or secured
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<PAGE>
by such Person), and all cash premiums or penalties for the repayment,
redemption, or repurchase of Indebtedness.
INTEREST RATE AGREEMENTS 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.
INTEREST PERIOD means, with respect to each Eurodollar Portion, a period of
one, two, three, or six months' duration (or such other periods requested by
Borrower and available from Lenders in their sole discretion), as Borrower may
elect, during which the Eurodollar Rate is applicable; PROVIDED, HOWEVER, that
(a) interest on each Portion (other than Base Portions) shall accrue from and
including the first day of its Interest Period to, but excluding, the day on
which such Interest Period expires; (b) if any Interest Period would otherwise
end on a day which is not a Business Day, such Interest Period shall be extended
to the next succeeding Business Day unless such Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Business Day, as applicable (subject to CLAUSE (iii) below); and (c)
any Interest Period for a Eurodollar Portion which begins on the last 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 Business Day of a calendar month.
LAWS means all applicable statutes, laws, treaties, ordinances, tariff
requirements, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, or interpretations of any Governmental Authority.
LC EXPOSURE means, at any time and without duplication, the SUM of (a) the
aggregate undrawn portion of all uncancelled and unexpired Letters of Credit
PLUS (b) the aggregate unpaid reimbursement obligations of Borrower in respect
of drawings or drafts under any Letter of Credit.
LC SUBFACILITY means a subfacility for the issuance of Letters of Credit
(the LC Exposure in connection with which may never exceed $20,000,000), as
described in and subject to the limitations of SECTION 3.
LENDER means, individually, and LENDERS means, collectively, the lenders
set forth on SCHEDULE 2.1 attached hereto, their respective successors and
assigns, and any additional lenders which become parties to this Agreement after
the date hereof, but shall not include any lender which is replaced hereunder.
LETTER OF CREDIT means, individually, and LETTERS OF CREDIT means,
collectively, the letter(s) of credit issued hereunder in the form agreed upon
among Borrower, Administrative Agent, and the beneficiary thereof at the time of
issuance thereof and participated in by Lenders pursuant to the terms and
conditions of SECTION 3 hereof.
LETTER OF CREDIT AGREEMENT means a letter of credit application and
agreement (in form and substance satisfactory to Administrative Agent) submitted
by Borrower to Administrative Agent for a Letter of Credit for its own account
(and for its benefit or the benefit of any other Company); PROVIDED THAT, this
Agreement shall control any conflict between this Agreement and any such Letter
of Credit Agreement.
THIRD AMENDED AND
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LETTER OF CREDIT REQUEST FORM means the certificate in the form attached as
EXHIBIT B-2 hereto to be delivered by Borrower to Administrative Agent as a
condition of each issuance of a Letter of Credit pursuant to SECTION 3.4 hereof.
LOAN means, on any date of determination, the sum of the outstanding
principal balance under the Commitment and the LC Exposure, together with
interest accrued thereon and fees and expenses incurred in connection therewith.
LOAN PAPERS means (a) this Agreement, the Notes, the Collateral Security
Documents, and all other agreements, documents, and instruments ever delivered
pursuant to, or in connection with, this Agreement, (b) all agreements,
documents, or instruments in favor of Agents, Managing Agents, Co-Agents, or
Lenders ever delivered pursuant to this Agreement or otherwise delivered in
connection with all or any part of the Obligation, (c) all letters of credit and
Letter of Credit Agreements issued hereunder, (d) any Interest Rate Agreements
between any Company or Guarantor and any Lender or any Affiliate of any Lender;
and (e) any and all future renewals, extensions, restatements, reaffirmations,
or amendments of, or supplements to, all or any part of the foregoing.
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 Borrower, a Guarantor, or any
Company.
LOC CONTRIBUTION has the meaning assigned to it in SECTION 3.6 hereof.
MANAGING AGENTS means, collectively, CoBank, ACB; Barclays Bank PLC; and
PNC Bank, National Association.
MATERIAL ADVERSE EFFECT means any set of one or more circumstances or
events, which, individually or collectively, could reasonably be expected to
result in any (a) material impairment of the ability of any Company or any
Guarantor to perform any of its payment or other material obligations under the
Loan Papers or the ability of Agents or any Lender to enforce any such
obligations or any of their respective rights under the Loan Papers,
(b) material and adverse effect on the business, properties, condition
(financial or otherwise) or results of operations of any Company or any
Guarantor, either singly or in the aggregate, or (c) Event of Default or
Default.
MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for each Lender, the
maximum non-usurious amount and the maximum non-usurious rate of interest which,
under applicable Law, such Lender is permitted to contract for, charge, take,
reserve, or receive on the Obligation.
MAXIMUM PRINCIPAL AMOUNT means the maximum principal amount of the Loan
which each Lender has agreed to lend hereunder (including, without limitation,
such Lender's participation in the issuance of Letters of Credit) as set forth
in SECTION 2.3 hereof.
NET CASH PROCEEDS means (a) with respect to any Significant Sale, cash
(freely convertible into Dollars) received, on or after the date of consummation
of such Significant Sale, by any Company from such Significant Sale, after
(i) deduction of Assumed Taxes, (ii) payment of all usual and customary
brokerage commissions and all other reasonable fees and expenses related to such
Significant Sale (including, without limitation, reasonable attorneys' fees and
closing costs incurred in connection with such
THIRD AMENDED AND
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Significant Sale), (iii) deduction of appropriate amounts to be provided by
Borrower or any Company as a reserve, in accordance with GAAP, against any
liabilities retained by any Company after such Significant Sale, which
liabilities are associated with the asset or assets being sold, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with such Significant Sale, and (iv) deduction for the
amount of any Indebtedness (other than the Obligation) secured by the
respective asset or assets being sold, which Indebtedness is required to be
repaid as a result of such Significant Sale; (b) with respect to any
incurrence of Indebtedness, cash (freely convertible into Dollars) received,
on or after the date of incurrence of such Indebtedness, by any Company from
the incurrence of such Indebtedness after (i) payment of all reasonable
attorneys' fees and usual and customary underwriting commissions, closing
costs, and other reasonable expenses associated with such incurrence of
Indebtedness, (ii) deduction of all deposits, escrow amounts, or other
reserves required to be maintained by any Company in connection with such
Indebtedness, and (iii) deductions for the amount of any other Indebtedness
(other than the Obligation) which is required to be repaid concurrently with
or otherwise as a result of the incurrence of such Indebtedness; and (c) with
respect to any Equity Issuance, cash (freely convertible into Dollars)
(including any cash received by way of deferred payment pursuant to a
promissory note, or otherwise, but only as and when received) received, on or
after the date of such Equity Issuance, by the Borrower from such Equity
Issuance, net of usual and customary transaction costs and expenses and
Assumed Taxes.
NEW GRTI means Gila River Telecommunications Subsidiary, Inc., a
corporation organized pursuant to Gila River Indian Resolution Number GR-10-97.
NEW GUARANTOR has the meaning specified in SECTION 8.11(c) hereof.
NOTES means the promissory notes in the form of EXHIBIT A attached hereto
and delivered by Borrower to Lenders pursuant to SECTION 7.1 hereof, as each may
be amended modified, restated or divided from time to time.
OBLIGATION means all present and future indebtedness, liabilities, and
obligations, and all renewals and extensions thereof, or any part thereof, now
or hereafter owed to Administrative Agent, any Agent, any Managing Agent, any
Lender, or any Affiliate of any Lender by any Company or Guarantor arising from,
by virtue of, or pursuant to any Loan Paper, TOGETHER WITH all interest accruing
thereon, fees, costs, and expenses (including, without limitation, all
attorneys' fees and expenses incurred in the enforcement or collection thereof)
payable under the Loan Papers.
OPERATING CASH FLOW means, for any Person and, unless otherwise indicated,
as calculated at any date of determination with respect to the most recently
ended Rolling Period, the SUM (without duplication and without giving effect to
any extraordinary losses or gains during such period) of (a) pre-tax income or
deficit during such period, PLUS (b) to the extent already deducted in computing
such pre-tax income, (i) Interest Expense during such period and
(ii) depreciation, amortization, and other non-cash expense items during such
period, LESS (c) interest and dividend income, LESS (d) reductions in deferred
taxes, LESS (e) other non-cash components of income. In determining the
Operating Cash Flow of the Companies, such amount shall be adjusted, as
required, with respect to Cellular Partnerships to take into account any
minority ownership when (and only when) intercompany Debt to Borrower from such
Cellular Partnership has been repaid in full; PROVIDED THAT, to the extent that
Borrower has extended financing to any Cellular Partnership or Cellular
Partnership Obligor (other than GRCGP) which is not 100% owned by Borrower and
SO LONG AS such financing has not been repaid in full, then 100% of the
Operating Cash Flow of such
THIRD AMENDED AND
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Cellular Partnership or Cellular Partnership Obligor for the applicable
period of determination shall be included in Operating Cash Flow; PROVIDED
FURTHER THAT, to the extent a "NEW GUARANTOR" has been designated in
accordance with SECTION 8.11, the Operating Cash Flow of such New Guarantor
shall be included in the Company's Operating Cash Flow commencing with the
fiscal quarter determined in accordance with SECTION 8.11. Additionally, in
calculating Operating Cash Flow, (a) Borrower may include: (i) 100% of the
Operating Cash Flow of GRCGP on or prior to September 30, 1998; (ii)
thereafter and for so long as Borrower has not been repaid in full on the
loan to New GRTI permitted under SECTION 9.3(c) (the "GRTI LOAN"), Borrower
may include 90% of the Operating Cash Flow of GRCGP; and (iii) after
repayment of the GRTI Loan, Borrower may include 75% of the Operating Cash
Flow of GRCGP; PROVIDED THAT, to the extent Operating Cash Flow attributable
to minority partners is included in the calculations under CLAUSES (i) or
(ii) preceding, such amount may only be included if (i) such minority
partners have pledged their partnership interests in GRCGP to Borrower as
security for a loan to such minority partners (which loan and related liens
shall have been collaterally assigned to Administrative Agent for the benefit
of Lenders); and (ii) such minority partners have agreed (and have notified
GRCGP of such agreement) that a percentage of the distributions of GRCGP
attributable to their respective interests are to be paid directly to
Borrower. The provision for income taxes and reductions in deferred taxes
shall be adjusted in accordance with the Tax Sharing Agreement. In
determining Operating Cash Flow of the Companies, such amount shall be
calculated after giving effect to Acquisitions and divestitures of Companies
permitted by the Loan Papers during such period as if such transactions had
occurred on the first day of such period, regardless of whether the effect is
positive or negative. In the case of any Permitted Acquisition during any
period of calculation, Operating Cash Flow of the Companies shall, for the
purposes of the foregoing calculations, be adjusted to give effect to such
Permitted Acquisition, as if such Permitted Acquisition occurred on the first
day of such period, by increasing, if positive, or decreasing, if negative,
the Operating Cash Flow of the Companies by the Operating Cash Flow of such
newly-acquired business during such period of calculation occurring prior to
the date of such Permitted Acquisition. In the case of any Company being
sold, transferred, or otherwise disposed of by any Company as permitted under
the Loan Papers (a "PERMITTED DISPOSITION") during any period of calculation,
Operating Cash Flow shall, for the purposes of the foregoing calculations, be
adjusted to give effect to such Permitted Disposition, as if such Permitted
Disposition occurred on the first day of such period, by decreasing, if
positive, or increasing, if negative, the Operating Cash Flow of the
Companies by the Operating Cash Flow of such newly-sold Companies during such
period prior to the date of the Permitted Disposition.
OPERATIONS means Dobson Cellular Operations Company, a wholly-owned
Subsidiary of Communications.
PARTICIPATION CERTIFICATES is defined in SECTION 8.27.
PARTNERSHIP AGREEMENT means, individually, and PARTNERSHIP AGREEMENTS
means, collectively, on any date of determination the partnership agreements
which create the Cellular Partnerships, 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.
THIRD AMENDED AND
14 RESTATED CREDIT AGREEMENT
<PAGE>
PERMITTED ACQUISITION means:
(a) Acquisitions by any Company (other than GRCGP) of businesses which
are engaged in the domestic cellular industry, with respect to which each of
the following requirements shall have been satisfied:
(i) For so long as the Total Leverage Ratio (calculated for this
purpose only on a consolidated basis for Communications and its Restricted
Subsidiaries and Unrestricted Subsidiaries, after giving pro forma effect to
any proposed Acquisition) is greater than 8.5 to 1.0, the purchase price for
such Acquisition must be less than or equal to $75,000,000;
(ii) as of the closing of any Acquisition, the Acquisition has been
approved and recommended by the board of directors of the Person to be
acquired or from which such business is to be acquired;
(iii) not less than 30 Business Days prior to the closing of any
Acquisition, Borrower shall have delivered to Administrative Agent a
Permitted Acquisition Compliance Certificate, demonstrating pro forma
compliance with the terms and conditions of the Loan Papers, after giving
effect to the Acquisition, including (A) pro forma income and balance sheet
projections for the Companies (after giving effect to the proposed
Acquisition); and (B) ten year cash flow projections for the Acquisition
demonstrating compliance with the Companies' applicable financial covenants
and debt amortization schedules;
(iv) prior to consummation of any Acquisition, Borrower shall have
satisfied the conditions precedent set forth in SECTION 7;
(v) as of the closing of any Acquisition, after giving effect to
such Acquisition, the acquiring party must be Solvent and the Companies, on a
Consolidated basis, must be Solvent;
(vi) as of the closing of any Acquisition, no Default or Event of
Default shall exist or occur as a result of, and after giving effect to, such
Acquisition; and
(vii) as of the closing of any Acquisition, (A) if such Acquisition is
structured as a merger, Borrower, (or if such merger is with any Subsidiary
of Borrower, then such Subsidiary) must be the surviving entity after giving
effect to such merger; and (B) if such Acquisition is structured as a
stock/equity acquisition, the acquiring Company shall own not less than a 75%
interest in the entity being acquired; or
(b) any other Acquisition for which the prior written consent of
Required Lenders has been obtained.
PERMITTED ACQUISITION COMPLIANCE CERTIFICATE means a certificate signed by
a Responsible Officer of Borrower, substantially in the form of EXHIBIT C-2.
THIRD AMENDED AND
15 RESTATED CREDIT AGREEMENT
<PAGE>
PERMITTED ACQUISITION LOAN CLOSING CERTIFICATE means a certificate signed
by a Responsible Officer of Borrower, substantially in the form of EXHIBIT C-3.
PERMITTED INVESTMENT means an investment in (a) short term certificates of
deposit, (b) obligations fully guaranteed by the United States government, (c)
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, (d) 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, (e) Participation Certificates in CoBank (as defined in
SECTION 8.27 hereof), (f) unsecured and unguaranteed subordinated loans and
advances to Communications, on terms and conditions satisfactory to Agents,
(g) capital contributions and other investments in or between Restricted
Companies; and (h) investments in Unrestricted Companies existing on the
Effective Date and identified on SCHEDULE 9.8.
PERSON means any individual, entity, or governmental authority.
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 Restricted Subsidiary of
Borrower, or any ERISA Affiliate.
PLEDGE AGREEMENT means, individually, and PLEDGE AGREEMENTS means,
collectively, (a) the Amended and Restated Pledge Agreement (substantially in
the form and upon the terms of EXHIBIT E) executed and delivered by
Communications or any other Person pursuant to the requirements of the Loan
Papers; and (b) any amendments, modifications, supplements, ratifications, or
restatements of any Pledge Agreement made in accordance with the Loan Papers.
PORTION means a portion of a Loan as to which Borrower has elected a
specific interest rate and, with respect to a Portion bearing interest at the
Eurodollar-Based Rate, an Interest Period.
PREFERRED STOCK means the Senior Exchangeable Preferred Stock issued by
Communications which is mandatorily redeemable in 2008, together with additional
Preferred Stock issued in lieu of dividends on such Preferred Stock, all as more
particularly described in that certain Offering Memorandum issued January 5,
1998 by Communications.
PRO FORMA DEBT SERVICE means, with respect to the Companies, on any date of
determination, the sum of (a) Pro Forma Interest Expense as of such date, PLUS
(b) principal payments scheduled to be made on Total Debt of the Companies for
the twelve months following the date of determination and with respect to the
Loan as of any date of determination, 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.
PRO FORMA INTEREST EXPENSE means, on any date of determination, with
respect to the most recently ended Rolling Period (the "SUBJECT PERIOD"), as
calculated for the Companies on a consolidated basis, the SUM of the results of
the following calculation made separately with respect to each Portion of the
Loan and each other loan or other evidence of Indebtedness of any Company (each
a "SUBJECT LOAN") for the purposes hereof:
THIRD AMENDED AND
16 RESTATED CREDIT AGREEMENT
<PAGE>
{[A + B] /2} x C
where:
A = The aggregate outstanding principal Indebtedness under the
Subject Loan at the beginning of the Subject Period.
B = The aggregate outstanding principal Indebtedness under the
Subject Loan, at the end of the Subject Period, taking into
account all scheduled payments and any required commitment
reductions within such Subject Period.
C = With respect to the Subject Loan, the applicable interest
rate thereon determined as the rate in effect on the date of
determination.
PRO RATA SHARE means, as to a Lender, 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; or if no indebtedness is outstanding
under the Loan, the ratio which such Lender's Maximum Principal Amount bears to
the Commitment.
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.
RELEASE means any spill, leak, emission, discharge, or the pumping,
pouring, emptying, disposing, injecting, escaping, leaching, or dumping of a
Hazardous Substance.
REPRESENTATIVES means representatives, officers, directors, employees,
attorneys, and agents.
REQUIRED LENDERS means (a) on any date of determination prior to
termination of the Commitment, those Lenders holding 51% or more of the
Commitment, or (b) on any date of determination occurring after the Commitment
has terminated, those Lenders holding 51% or more of the aggregate unpaid
principal balance of all Advances hereunder, together with the aggregate unpaid
reimbursement obligations of Borrower in respect of drawings or drafts under
Letters of Credit.
RESERVE REQUIREMENT means, at any time, the maximum rate at which reserves
(including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against, in the case of
Eurodollar Loans, "EUROCURRENCY LIABILITIES" (as such terms is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks with respect to (a) any category of liabilities which includes
deposits by reference to which the Adjusted Eurodollar Rate is to be determined,
or (b) any category of extensions of credit or other assets which include
Eurodollar Portions. The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Requirement.
THIRD AMENDED AND
17 RESTATED CREDIT AGREEMENT
<PAGE>
RESPONSIBLE OFFICER means the chairman, president, chief executive officer,
chief financial officer, senior vice president, or treasurer of Borrower, or,
for all purposes under the Loan Papers, any other officer designated from time
to time by the Board of Directors of Borrower, which designated officer is
acceptable to Agents.
RESTRICTED PAYMENTS means (a) redemptions, repurchases, dividends, and
distributions of any kind in respect of Borrower's or Communications' capital
stock (including, without limitation, any class of common or preferred shares);
(b) distributions of any kind in respect of partnership interests of any Company
that is a Cellular Partnership or any Cellular Partnership Obligor; and (c)
payments of principal and interest on, and any redemptions or repurchases of,
Subordinated Debt.
RESTRICTED SUBSIDIARY means, at any time of determination, (a) with respect
to Borrower, all Subsidiaries of Borrower, OTHER THAN Unrestricted Subsidiaries
of Borrower; and (b) with respect to Communications, all Subsidiaries of
Communications, OTHER THAN Unrestricted Subsidiaries of Communications.
ROLLING PERIOD means, on any date of determination, the most recent four
fiscal quarters ended March 31, June 30, September 30, or December 31.
SECOND AMENDED AND RESTATED AGREEMENT has the meaning given to such term in
the Recitals to this Agreement.
SECOND AMENDED AND RESTATED LENDER means any lender party to the Second
Amended and Restated Agreement immediately prior to the Effective Date.
SECURITY AGREEMENT means, individually, and SECURITY AGREEMENTS means,
collectively, (a) the Pledge, Assignment, and Security Agreement (or with
respect to the Companies and Cellular Partnership Obligors party to the Second
Amended and Restated Credit Agreement, the Third Amended and Restated Security
Agreement), substantially in the form and upon the terms of EXHIBIT D, executed
and delivered by any Person pursuant to the requirements of the Loan Papers; and
(b) any amendments, modifications, supplements, ratifications, or restatements
of any Security Agreement made in accordance with the Loan Papers.
SENIOR LEVERAGE RATIO means, on any date of determination thereof, the
ratio of (a) Total Debt of the Companies to (b) Operating Cash Flow of the
Companies.
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.
SIGNIFICANT SALE means any sale, lease, transfer, or other disposition of
any property or assets (tangible or intangible) by any Company to any other
Person (other than any sale, lease, transfer, or other disposition contemplated
by SECTIONS 9.7(a) with respect to which the Net Cash Proceeds realized by the
Companies for such asset disposition (or when aggregated with the Net Cash
Proceeds from all such other asset dispositions occurring in the same calendar
year) equals or exceeds $1,000,000; PROVIDED THAT, the disposition of assets
pursuant to SECTION 9.7(a)(iii) and (iv) shall not be considered a Significant
Sale.
THIRD AMENDED AND
18 RESTATED CREDIT AGREEMENT
<PAGE>
SOLVENT means, as to a Person, that (a) the aggregate fair market value of
such Person's assets exceeds its liabilities (whether contingent, subordinated,
unmatured, unliquidated, or otherwise), (b) such Person has sufficient cash flow
to enable it to pay its Indebtedness as it matures, and (c) such Person does not
have unreasonably small capital to conduct such Person's businesses.
SUBORDINATED DEBT means any indebtedness of Borrower, Communications, or
any Guarantor subordinated to the Loan with subordination provisions, in form
and substance satisfactory to Agents.
SUBORDINATION AGREEMENT means, individually, and AFFILIATE SUBORDINATION
AGREEMENTS means, collectively, (a) the Affiliate Subordination Agreements and
reconfirmations thereof executed and delivered by Affiliates of Borrower and
Guarantors pursuant to the Second Amended and Restated Agreement, as amended and
ratified pursuant to this Agreement; (b) any other Affiliate Subordination
Agreement (in form and substance satisfactory to Agents) executed and delivered
by any Person pursuant to the requirements of the Loan Papers; and (c) any
amendments, modifications, supplements, ratifications, or restatements of any
Affiliate Subordination Agreement made in accordance with the Loan Papers.
SUBSIDIARY means, individually, and SUBSIDIARIES means, collectively, with
respect to Borrower or any Guarantor, (a) 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, and (b) 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.
SYSTEM means, individually, and SYSTEMS means, collectively, the wireless
cellular communication systems and personal communications systems owned,
operated, or managed by any Company on the Effective Date and any additional
communications system acquired by Borrower or a Guarantor to the extent
permitted by SECTION 9.8 after the Effective Date.
TAX SHARING AGREEMENT means that certain consolidated income tax payment
agreement dated February 28, 1997, entered into by Communications and the
Subsidiaries of Communications.
TOTAL DEBT means, as of any date of determination with respect to any
Person, 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 obligations of others
guaranteed by such Person, any amounts for which such Person is contingently
liable to provide, as equity or debt, advances to other parties, any class or
series of capital stock that by its terms is required to be redeemed prior to
its stated final redemption date or otherwise requires cash dividend payments to
be made prior to the final redemption of such stock. With respect to the
Companies, TOTAL DEBT shall exclude any Subordinated Debt owed by any Company to
Communications or any Subsidiary of Communications not owned by Borrower and
shall include any Indebtedness of any New Guarantor designated pursuant to
SECTION 8.11, commencing with the fiscal quarter determined in accordance with
SECTION 8.11.
THIRD AMENDED AND
19 RESTATED CREDIT AGREEMENT
<PAGE>
TOTAL LEVERAGE RATIO means, as of the last day of the most recently ended
fiscal quarter, with respect to Communications and its Restricted Subsidiaries,
the ratio of (a) Communications Total Debt to (b) Communications Operating Cash
Flow.
TRIGGERING EVENT means the occurrence of any Event of Default, other than
an Event of Default resulting from the breach of any representation or warranty
set forth in SECTION 5; PROVIDED, HOWEVER, that (a) with respect to the
Communications Bond Debt, noncompliance with any covenant (i) relating to
payment of dividends or other distributions to Communications or its Restricted
Subsidiaries, (ii) relating to inter-company loans to Communications and its
Restricted Subsidiaries, (iii) restricting payments on inter-company loans from
Communications and its Restricted Subsidiaries, or (iv) restricting the transfer
of assets to Communications and its Restricted Subsidiaries, shall be a
TRIGGERING EVENT only upon Borrower's non-compliance with the financial
covenants as set forth in the Commitment Letter and Summary of Terms and
Conditions for the Second Amended and Restated Credit Agreement dated as of
February 5, 1997, notwithstanding any amendments or modifications thereto after
February 5, 1997 (including any modifications thereto contemplated herein or in
any other Loan Paper); and (b) with respect to the Preferred Stock or any
Exchange Debenture, any Event of Default that results from Borrower's failure to
comply with the financial covenants in SECTIONS 8.14 through 8.20 and that
restricts dividends or distributions from Borrower to Communications shall only
constitute a TRIGGERING EVENT to the extent of pro forma non-compliance with the
financial covenants on the terms as specified in SECTIONS 8.14 through 8.20 on
the Closing Date, notwithstanding any future amendments or modifications of such
provisions.
TYPE shall mean any type of Portion (I.E., a Base Rate Portion or a
Eurodollar Portion).
UNRESTRICTED SUBSIDIARY means, at any time of determination thereof, (a)
with respect to Borrower, (i) Dobson Wireline Company, (ii) any other Subsidiary
of Borrower designated from time to time as an "UNRESTRICTED SUBSIDIARY" by
Borrower's Board of Directors, and (iii) any Subsidiary of an Unrestricted
Subsidiary of Borrower; and (b) with respect to Communications, (i) Operations,
(ii) any other Subsidiary of Communications designated from time to time as an
"UNRESTRICTED SUBSIDIARY" by Communications' Board of Directors, and (iii) any
Subsidiary of an Unrestricted Subsidiary of Communications; PROVIDED THAT, the
Boards of Directors of Borrower and Communications may make such designation of
an "UNRESTRICTED SUBSIDIARY" only if (A) immediately before and after giving pro
forma effect to such designation, no Default or Event of Default then exists or
arises as a result thereof; (B) such designated Unrestricted Subsidiary does not
own any capital stock of Borrower, Communications, or any Restricted Subsidiary
of Borrower or Communications; PROVIDED THAT, determinations to be made
"IMMEDIATELY BEFORE" such designation shall be made (and all calculations with
respect to financial covenant compliance shall be calculated) as of the Business
Day immediately preceding the proposed date of designation of the Unrestricted
Subsidiary; (C) such designated Unrestricted Subsidiary does not hold a Lien on
any assets of Borrower, Communications, or any Restricted Subsidiary of Borrower
or Communications; (D) after giving pro forma effect to such designation, any
investment of Borrower or any Restricted Subsidiary of Borrower in such
Unrestricted Subsidiary would constitute an investment permitted under SECTION
9.8; (E) neither Borrower, Communications, nor any Restricted Subsidiary of
Borrower or Communications shall have issued any guaranty or credit support or
be subject to any recourse with respect to the obligations of the designated
Unrestricted Subsidiary; (F) on and after the date such Subsidiary is designated
as an Unrestricted Subsidiary, any Indebtedness owed to such designated
Unrestricted Subsidiary by Communications, Borrower, or any Restricted
Subsidiary of Communications or Borrower, shall be included in the calculation
of "COMMUNICATIONS TOTAL DEBT" or "TOTAL DEBT," as the case may be, and shall
THIRD AMENDED AND
20 RESTATED CREDIT AGREEMENT
<PAGE>
be incurred or maintained in compliance with SECTIONS 9.1(f), 2.5(b), and
2.9(b), including any commitment reductions or mandatory prepayments required
thereunder; and (G) Required Lenders shall have consented to such designation
in writing.
WIRELINE SPINOFF means the proposed transaction or series of transactions
pursuant to which the stock or assets of Dobson Wireline Company and its
Subsidiaries are transferred to any Person other than Borrower and its
Subsidiaries, SO LONG AS (i) no Event of Default or Default exists or arises as
a result of such transaction, (ii) such transaction is structured on an
arms-length basis and on such terms and conditions as are customary between and
among unrelated entities, and (iii) all Indebtedness owed by Dobson Wireline
Company or any Subsidiary thereof to Communications or any Restricted Subsidiary
thereof is repaid in full on or prior to consummation of such Wireline Spinoff.
VOTING STOCK means securities (as such term is defined in SECTION 2(1) of
the Securities Act of 1933, as amended) of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
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 Borrower or any
Lender 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 Borrower and Required
Lenders 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 SECTION 1.1
hereof, when modified by the word "CONSOLIDATED," shall have the meaning
given to such term herein as to Communications or 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 Borrower, as applicable,
in accordance with GAAP.
(c) NUMBER AND GENDER OF WORDS; OTHER REFERENCES. Unless otherwise
specified in the Loan Papers, (a) where appropriate, the singular
includes the plural and VICE VERSA, and words of any gender include each
other gender, (b) heading and caption references may not be construed in
interpreting provisions, (c) monetary references are to currency of the
United States of America, (d) section, paragraph, annex, schedule,
exhibit, and similar references are to the particular Loan Paper in which
they are used, (e) references to "TELECOPY," "FACSIMILE," "FAX," or
similar terms are to facsimile or telecopy transmissions, (f) references
to "INCLUDING" mean including without limiting the generality of any
description preceding that word, (g) the rule of construction that
references to general items that follow references to specific items are
limited to the same type or character of those specific items is not
applicable in the Loan Papers, (h) references to any Person include that
Person's heirs, personal representatives, successors, trustees,
receivers, and permitted assigns, (i) references to any Law include every
amendment or supplement to it, rule and
THIRD AMENDED AND
21 RESTATED CREDIT AGREEMENT
<PAGE>
regulation adopted under it, and successor or replacement for it, and (j)
references to any Loan Paper or other document include every renewal and
extension of it, amendment and supplement to it, and replacement or
substitution for it.
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
7 hereof and the provisions below, each Lender on a several basis shall
make Advances to Borrower up to such Lender's respective Maximum
Principal Amount, which Borrower may repay and reborrow, up to the amount
of the Commitment (as reduced by the LC Exposure), 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 Second Amended and Restated Credit
Agreement; PROVIDED, HOWEVER, that the execution and delivery of this
Agreement and the other Loan Papers shall not in any circumstances be
deemed to have terminated, extinguished, or discharged the indebtedness
under the Second 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 and the other Loan
Papers. On the Effective Date, each Lender shall Advance its respective
Pro Rata Share of the first Advance, which may be netted against its
outstandings under the Second Amended and Restated Credit Agreement and
shall be used to repay all outstanding indebtedness under the Second
Amended and Restated Credit Agreement due the Second Amended and Restated
Lenders which are not Lenders.
(c) ASSIGNMENTS AND ASSUMPTIONS AMONG LENDERS. The Lenders hereby
agree among themselves (and Borrower and Guarantors hereby consent to
such agreement) that, concurrently with the Effective Date, there shall
be deemed to have occurred assignments and assumptions with respect to
the Obligation, liens, rights, and obligations under this Agreement and
the other Loan Papers (including, without limitation, the Commitment, the
Advances, and the Letters of Credit) such that, after giving effect to
such assignments and assumptions, the Maximum Principal Amount of each
Lender's Commitment and the Commitment percentage of each Lender are as
stated on SCHEDULE 2.1, and the Lenders hereby make such assignments and
assumptions. The Lenders shall make all appropriate payments and
adjustments among themselves to effectuate the appropriate purchase price
for and other amounts payable with respect to such assignments and
assumptions.
2.2 PROMISSORY NOTE. The indebtedness of Borrower to each Lender under
the Loan will be evidenced by a Note executed by Borrower in favor of such
Lender in the form of EXHIBIT A hereto. The original principal amount of each
Lender's Note from Borrower will be such Lender's Maximum Principal Amount;
PROVIDED, HOWEVER, that notwithstanding the face amount of each such Note,
Borrower's liability under each such Note shall be limited at all times to its
aggregate actual indebtedness, including principal, interest, fees, and
obligations with respect to the LC Exposure.
The Notes issued hereunder amend and restate in their entirety, and are
substituted for, the Third Amended and Restated Promissory Note held by the
Second Amended and Restated Lenders, without any
THIRD AMENDED AND
22 RESTATED CREDIT AGREEMENT
<PAGE>
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 and the related Loan Papers.
2.3 LENDERS' COMMITMENT. SCHEDULE 2.1 attached hereto sets forth the
names and addresses of Lenders and the Pro Rata Shares and Maximum Principal
Amounts in which Lenders shall participate in the Loan.
2.4 USE OF PROCEEDS. Funds advanced under the Loan shall be used by
Borrower to (a) refinance all existing indebtedness of Borrower under the Second
Amended and Restated Credit Agreement, (b) finance Capital Expenditures and
general corporate purposes of Borrower and each Restricted Subsidiary of
Borrower executing a guaranty, (c) finance Permitted Acquisitions, and (d) in
the absence of any Triggering Event (i) fund distributions and dividends to
Communications to enable Communications to pay regularly-scheduled, semi-annual
interest payments on the Communications Bond Debt to the extent permitted
herein, and (ii) after January 15, 2003, fund distributions and dividends to
Communications to enable Communications to pay required dividends or
distributions on the Preferred Stock or interest on the Exchange Debentures,
subject to acceptable terms and conditions as determined by Agents.
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 June 30, 2006
(each, a "COMMITMENT REDUCTION DATE"), the Commitment shall be reduced
by an amount equal to the Commitment as in effect on June 30, 2000,
multiplied by the percentage set forth below corresponding to the
respective Commitment Reduction Date:
<TABLE>
FOR THE PERIOD ENDING QUARTERLY COMMITMENT
ON THE FOLLOWING DATE REDUCTION
--------------------- ---------
<S> <C> <C>
6/30/00 - 12/31/2000 3.333%
12/31/2001 3.750%
12/31/2002 3.750%
12/31/2003 4.375%
12/31/2004 4.375%
12/31/2005 3.750%
6/30/2006 5.000%
</TABLE>
(b) MANDATORY COMMITMENT REDUCTION. Until such time as the Principal
Debt has been repaid in full and the Commitment has been terminated in
full, the Commitment shall be permanently reduced in the amounts and upon
the occurrence of the following events:
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(i) Concurrently with any Debt Issuance by Borrower or any
Restricted Subsidiary of Borrower, the Commitment shall be permanently
reduced by an amount equal to 100% of the Net Cash Proceeds realized
by Borrower or any Restricted Subsidiary of Borrower from such Debt
Issuance;
(ii) Concurrently with the consummation of any Significant Sale
by any Company (which Significant Sale must be otherwise permitted
under the Loan Papers or shall have been consented to by Required
Lenders), the Commitment shall be permanently reduced by an amount
equal to 100% of the Net Cash Proceeds realized by Borrower or any
Company from such Significant Sale; or
(iii) Concurrently with any Debt Issuance by Communications
(excluding the Communications Bond Debt), if the Total Leverage Ratio
is greater than 5.50 to 1.0, the Commitment shall be permanently
reduced by an amount equal to 100% of the Net Cash Proceeds realized
by Communications from such Debt Issuance.
(c) COMMITMENT REDUCTION PAYMENTS. On each Commitment reduction date
arising under CLAUSES (a) or (b) preceding, Borrower shall also make a
mandatory prepayment of the Principal Debt, if required pursuant to
SECTION 2.8 or 2.9(b) hereof, TOGETHER WITH (x) all accrued and unpaid
interest on the principal amount so prepaid and (y) any Consequential Loss
arising as a result thereof. All Commitment reductions under
SECTION 2.5(b) shall be applied to the regularly-scheduled Commitment
reductions under SECTION 2.5(a) in inverse order of maturity.
(d) MANDATORY PREPAYMENTS. In addition, the Loan will be subject to
prepayments in connection with certain events, as set forth in SECTIONS 2.8
and 2.9 hereof.
(e) ACCELERATION. Notwithstanding the immediately preceding
subparagraphs, all indebtedness and obligations under the Loan Papers 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) INTEREST ON LOAN.
(i) At the election of Borrower, in accordance with the
provisions of SECTION 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 Adjusted
Eurodollar 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, at the option
of Required Lenders and to the extent permitted by Law, the
outstanding principal balance of the Loan, and accrued interest
thereon, shall bear interest at the Default Rate; PROVIDED THAT, the
Default Rate shall automatically apply in the case of SECTION 3.2
where the Default Rate is specified.
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(b) PROCEDURE FOR DETERMINING INTEREST PERIODS AND RATES OF INTEREST.
(i) If Borrower elects the Adjusted Base Rate to be applicable
to a Portion, such Borrower must notify Administrative Agent of such
election no later than 2:00 p.m. (Dallas, Texas time) on the Business
Day preceding the Business Day on which such Advance is to be made.
If Borrower elects the Eurodollar-Based Rate to be applicable to a
Portion, Borrower must notify Administrative Agent of (A) such
election and (B) the Interest Period selected prior to 10:00 a.m.,
Dallas, Texas time, at least three (3) Business Days prior to the date
of the applicable Advance or the commencement of the proposed Interest
Period. If Borrower does not provide the required notice for the
Eurodollar-Based Rate, then Borrower shall be deemed to have requested
that the Adjusted Base Rate shall apply to any Portion as to which the
Interest Period is expiring and to any new Advance until Borrower
shall have given proper notice of a change in or determination of the
rate of interest in accordance with this SECTION 2.6(b).
(ii) Borrower shall not elect more than six (6) different
Eurodollar Portions to be applicable to the Loan at one time.
(c) PAYMENT AND CALCULATION OF INTEREST. Interest shall be due and
payable on the last day of each Interest Period for each Eurodollar
Portion; PROVIDED, HOWEVER, that (i) with respect to Portions having an
Interest Period in excess of three (3) months, 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 Base Portions,
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
Base Portion is advanced hereunder. Interest shall be calculated in
accordance with the provisions of SECTION 2.6(a) hereof and (x) with
respect to Eurodollar Portions, on the basis of the actual number of days
elapsed over a year of three hundred sixty (360) days and (y) with respect
to Base Portions, on the basis of the actual number of days elapsed over a
year of 365 days (or, if appropriate, 366 days).
(d) MAXIMUM RATE. Regardless of any provision contained in any Loan
Paper, neither Administrative Agent nor any Lender shall ever be entitled
to contract for, charge, take, reserve, receive, or apply, as interest on
the Obligations, or any part thereof, any amount in excess of the Maximum
Rate, and, if Lenders ever do so, then such excess shall be deemed a
partial prepayment of principal and treated hereunder as such and any
remaining excess shall be refunded to Borrower. In determining if the
interest paid or payable exceeds the Maximum Rate, Borrower and Lenders
shall, to the maximum extent permitted under applicable Law, (a) treat all
Advances as but a single extension of credit (and Lender and Borrower agree
that such is the case and that provision herein for multiple Advances is
for convenience only), (b) characterize any nonprincipal payment as an
expense, fee, or premium rather than as interest, (c) exclude voluntary
prepayments and the effects thereof, and (d) amortize, prorate, allocate,
and spread the total amount of interest throughout the entire contemplated
term of the Obligation; PROVIDED THAT, if the Obligation is paid and
performed in full prior to the end of the full contemplated term thereof,
and if the interest received for the actual period of existence thereof
exceeds the Maximum Amount, Lenders shall
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refund such excess, and, in such event, Lenders shall not, to the extent
permitted by Law, be subject to any penalties provided by any Laws for
contracting for, charging, taking, reserving, or receiving interest in
excess of the Maximum Amount.
2.7 ADVANCES.
(a) 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 SECTION 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 B-1, shall be certified by
the chief executive and chief financial officers of Borrower, and shall
contain the following information and 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 shall
be in multiples of not less than $5,000,000, or a greater integral
multiple 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) 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 Eurodollar Portion, the Interest Period
selected;
(v) statements that the representations and warranties set
forth in SECTION 5 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 Restricted
Subsidiaries or the Companies' financial condition, operations or
business since the date of the quarterly and audited annual
financial statements most recently delivered by Borrower to Lenders
pursuant to SECTIONS 7.1, 8.2 and 8.3 of this Agreement; and
(vi) if the requested Advance is to finance a Permitted
Acquisition, Borrower has complied with and delivered the items
required by SECTION 8.11(c), if applicable, and 9.8 hereof.
(b) Upon receiving a request for an Advance in accordance with ITEM
(a) above, Administrative Agent shall promptly request that each Lender
advance its Pro Rata Share of the requested Advance to Administrative
Agent. Each Lender 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 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 Borrower by crediting such amount to Borrower's deposit
account with Administrative Agent not later than two o'clock p.m. on the
day of the requested Advance; PROVIDED, HOWEVER, that in the event
Administrative Agent does not receive a Lender's share of the
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requested Advance by such time as provided above, Administrative Agent
shall not be obligated to Advance such Lender's share.
(c) Unless Administrative Agent shall have been notified by a Lender
prior to the date such Lender's share of any such Advance is to be made by
such Lender that such Lender does not intend to make its share of such
requested Advance available to Administrative Agent, Administrative Agent
may assume that such Lender 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 Borrower a corresponding amount. If such corresponding amount
is not in fact made available to Administrative Agent by such Lender on the
date the Advance is made, Administrative Agent shall be entitled to recover
such amount, on demand from such Lender, together with interest thereon in
respect of each day during the period commencing on the date such amount
was made available to Borrower and ending on (but excluding) the date
Administrative Agent recovers such amount, from such Lender, 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 Lender (other than a Lender which is 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.
(d) Each request for an Advance pursuant to this SECTION 2.7 shall be
irrevocable and binding on Borrower.
2.8 REDUCTION AND TERMINATION OF COMMITMENT.
(a) BORROWER. 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 Lenders
in increments aggregating $1,000,000 or multiples thereof without penalty
or premium; PROVIDED THAT, on the effective date of such reduction,
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
then-existing LC Exposure, 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 SECTION 2.10 hereof;
and PROVIDED FURTHER THAT, any voluntary Commitment reduction hereunder
shall be applied to the regularly-scheduled Commitment reductions under
SECTION 2.5(a) in inverse order of maturity.
(b) LENDERS. Pursuant to SECTION 12.2 hereof, Required Lenders 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 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 SECTION 2.10 hereof.
(c) RESTORATION ONLY WITH CONSENT. Any termination or reduction of
the Commitment pursuant to SECTION 2.8(a) and (b) shall be permanent, and
the Commitment cannot thereafter be restored or increased without the
written consent of all Lenders.
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2.9 PREPAYMENT; REPAYMENT.
(a) VOLUNTARY. Upon three (3) Business Day's prior written notice by
Borrower to Administrative Agent, with respect to any Eurodollar Portion
(and same day notice with respect to any Base Portion), 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 SECTION 2.9(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
SECTION 4.5 hereof.
(b) MANDATORY. If an event described in SECTION 2.5(a) or (b) 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 LC Exposure, exceeds
the Commitment as then reduced, the amount of such excess shall be paid by
Borrower as a prepayment of the Loan, TOGETHER WITH (i) all accrued and
unpaid interest on the principal amount so paid and (ii) any Consequential
Loss arising as a result thereof.
(c) APPLICATION. Required payments and reductions in the Commitment
shall be applied on the basis of each Lender's Pro Rata Share thereof.
2.10 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 noon on any Business Day at the principal office of Administrative Agent
as set forth in SECTION 14.8. Borrower hereby authorizes Administrative Agent
to charge Borrower's account with Administrative Agent for all payments of
principal, interest, and fees when due hereunder.
2.11 COMMITMENT FEE. Following the date hereof, Borrower shall pay to
Administrative Agent, for the ratable account of Lenders, a commitment fee,
payable in installments in arrears, on each March 31, June 30, September 30, and
December 31, and on the Final Maturity Date, commencing March 31, 1998. Each
installment shall be in an amount equal to the Applicable Margin for Commitment
Fees MULTIPLIED BY the amount by which (i) the average daily Commitment exceeds
(ii) the sum of the principal amount then outstanding under the Loan plus the
LC Exposure in each case during the period from and including the last payment
date to and excluding the payment date for such installments. Commitment fees
shall be calculated on the basis of the actual number of days (including the
first day but excluding the last day) elapsed, but computed as if each calendar
year consisted of 360 days, unless such computation would result in interest
being computed in excess of the Maximum Rate, in which event such computation
shall be made on the basis of a year of 365 or 366 days, as the case may be.
2.12 ORDER OF APPLICATION.
(a) Payments and prepayments of the Obligation shall be applied in
the order and manner specified in this Agreement; PROVIDED, HOWEVER, if no
order is otherwise specified and no Default or Event of Default has
occurred and is continuing, payments and prepayments of the Obligation
shall be applied first to fees, second to accrued interest then due and
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<PAGE>
payable on the principal balance hereof, and then to the remaining
Obligation in the order and manner as Borrower may direct.
(b) If a Default or Event of Default has occurred and is continuing
(or if Borrower fails to give directions as permitted under
SECTION 2.12(a)), any payment or prepayment (including proceeds from the
exercise of any rights) shall be applied in the following order: (i) to
the ratable payment of all fees, expenses, and indemnities for which
Administrative Agent or Lenders have not been paid or reimbursed in
accordance with the Loan Papers (as used in this SECTION 2.12(b)(i), a
"RATABLE PAYMENT" for any Lender or Administrative Agent shall be, on any
date of determination, that proportion which the portion of the total fees,
expenses, and indemnities owed to such Lender or Administrative Agent bears
to the total aggregate fees and indemnities owed to all Lenders and
Administrative Agent on such date of determination); (ii) to the ratable
payment of accrued and unpaid interest on the principal balance hereunder
(as used in this SECTION 2.12(b)(ii), "RATABLE PAYMENT" means, for any
Lender, on any date of determination, that proportion which the accrued and
unpaid interest owed to such Lender bears to the total accrued and unpaid
interest under the Loan Papers); (iii) to the ratable payment of any
reimbursement obligation with respect to any Letter of Credit issued
pursuant hereto which is due and payable and which remains unfunded by any
Advance hereunder; PROVIDED THAT, such payments shall be allocated ratably
among Administrative Agent (as the issuer of Letter of Credits) and the
Lenders which have funded their participation in such Letter of Credit;
(iv) to the ratable payment of the outstanding principal balance hereunder
(as used in this SECTION 2.12(b)(iv), "RATABLE PAYMENT" means for any
Lender, on any date of determination, that proportion which the outstanding
principal balance owed to such Lender hereunder bears to the aggregate
outstanding principal balance owed to all Lenders hereunder; (v) to the Pro
Rata payment of the remaining Obligation in such order as Required Lenders
may elect (PROVIDED THAT, Required Lenders will apply such proceeds in an
order that will minimize any Consequential Loss); and (vi) as a deposit
with Administrative Agent, for the benefit of Lenders, as security for, and
to provide for the payment of, any reimbursement obligations, if any,
thereafter arising with respect to any issued and outstanding Letter of
Credits issued pursuant hereto.
2.13 ADMINISTRATIVE FEES. Borrower shall pay to Syndication Agent, solely
for its account, the Administrative Fees described in that certain letter
agreement dated as of January 7, 1998, among Borrower, Communications,
NationsBanc Montgomery Securities LLC, and Syndication Agent, which payments
shall be made on the dates specified and in amounts calculated in accordance
with such letter agreement.
SECTION 3 LETTERS OF CREDIT
3.1 AVAILABILITY OF CREDITS. Subject to the terms and conditions of this
Agreement and applicable Law, Administrative Agent agrees to issue Letters of
Credit upon Borrower's application therefor (denominated in Dollars), PROVIDED
THAT, (a) on any date of determination and after giving effect to any Letter of
Credit to be issued on such date, the sum of the borrowed portion of the
Commitment and the LC Exposure shall never exceed the Commitment then in effect,
(b) on any date of determination and after giving effect to any Letter of Credit
to be issued on such date, the LC Exposure shall never exceed $20,000,000,
(c) at the time of issuance of such Letter of Credit, no default or potential
Default shall have occurred and be continuing, and (d) each Letter of Credit
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must expire NO LATER than the EARLIER of the thirtieth (30th) day prior to the
Final Maturity Date or one year from its issuance; PROVIDED THAT, any Letter of
Credit may provide for automatic renewal for successive twelve month periods
(but no renewal period may extend beyond the thirtieth (30th) day prior to the
Final Maturity Date) unless Administrative Agent has given prior notice to the
applicable beneficiary of its election not to extend such Letter of Credit.
3.2 LENDER PARTICIPATION IN LETTER OF CREDIT SUBFACILITY.
(a) Immediately upon the issuance by Administrative Agent of any
Letter of Credit, Administrative Agent shall be deemed to have sold and
transferred to each other Lender, and each other such Lender shall be
deemed irrevocably and unconditionally to have purchased and received from
Administrative Agent, without recourse or warranty, an undivided interest
and participation, to the extent of such Lender's Commitment percentage as
set forth on SCHEDULE 2.1, in such Letter of Credit, and all rights of
Administrative Agent in respect thereof (OTHER THAN rights to receive
certain fees payable solely to Administrative Agent in connection with any
Letter of Credit). Upon the issuance, renewal, or extension of a Letter of
Credit, Administrative Agent shall provide copies of such Letter of Credit
to each other Lender.
(b) In order to induce Administrative Agent to issue and maintain
Letters of Credit and Lenders to participate therein, Borrower agrees to
pay or reimburse Administrative Agent (i) on the date on which any draft is
presented under any Letter of Credit, the amount of any draft paid or to be
paid by Administrative Agent and (ii) promptly, upon demand, the amount of
any fees (in addition to the fees described in SECTION 7) which
Administrative Agent customarily charges to a Person similarly situated in
the ordinary course of its business for amending the Letter of Credit
Agreements, for honoring drafts, and for taking similar action in
connection with letters of credit. Borrower's obligations under this
SECTION 3.2 shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim, or defense to
payment which Borrower may have at any time against Administrative Agent or
any other Person, and shall be made in accordance with the terms and
conditions of this Agreement under all circumstances, including, without
limitation, any of the following circumstances: (A) any lack of validity or
enforceability of this Agreement or any of the Loan Papers; (B) the
existence of any claim, setoff, defense, or other right which Borrower may
have at any time against a beneficiary named in a Letter of Credit, any
transferee of any Letter of Credit (or any person for whom any such
transferee may be acting), Administrative Agent, any Lender, or any other
Person, whether in connection with this Agreement, any Letter of Credit,
the transactions contemplated herein, or any unrelated transactions
(including any underlying transaction between Borrower and the beneficiary
named in any such Letter of Credit); (C) any draft, certificate, or other
document presented under the Letter of Credit proving to be forged,
fraudulent, invalid, or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect; and (D) the occurrence
of any Potential Default or Default. To the extent any funding of a draft
has been made by Lenders pursuant to SECTION 3.6, Administrative Agent
shall promptly distribute any such payments received from Borrower with
respect to such draft to all Lenders funding such draft according to their
ratable share. Interest on any amounts remaining unpaid by Borrower under
this clause at any time from and after the date such amounts become payable
until paid in full shall be payable by Borrower to Administrative
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<PAGE>
Agent at the rate specified and calculated in accordance with SECTION
2.6(a)(ii). In the event any payment by Borrower received by
Administrative Agent with respect to any Letter of Credit and
distributed to Lenders on account of their participations therein is
thereafter set aside, avoided, or recovered from Administrative Agent in
connection with any receivership, liquidation, or bankruptcy proceeding,
each Lender which received such distribution shall, upon demand by
Administrative Agent, contribute such Lender's ratable portion of the
amount set aside, avoided, or recovered, TOGETHER WITH interest at the
rate required to be paid by Administrative Agent upon the amount
required to be repaid by it; and
(c) Each Letter of Credit issued under this SECTION 3 shall be
required by Borrower or a Guarantor in the ordinary course of its business.
3.3 COMMITMENT AVAILABILITY. The amount available under the Commitment as
from time to time in effect shall be reduced by the LC Exposure from time to
time in effect. The amount by which the Commitment is so reduced shall not be
available for Advances under SECTION 2.7 hereof, except Advances thereunder
which are made to reimburse Administrative Agent for draws under the Letters of
Credit as permitted pursuant to SECTION 3.5(b) hereof.
3.4 APPROVAL AND ISSUANCE.
(a) Borrower shall provide Administrative Agent not later than 10:00
a.m. Dallas, Texas time, three (3) Business Days before any Letter of
Credit is to be issued, 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 B-2 hereto and a Letter of Credit
Agreement with respect thereto. 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 Borrower, and shall, in addition to the matters
described in SECTION 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 a Letter of Credit Agreement as described above and that the conditions
set forth in SECTION 7 shall be satisfied.
(b) Administrative Agent will promptly provide to Lenders written or
telephonic notification of Administrative Agent's receipt of the Letter of
Credit Request Form and the Letter of Credit Agreement which shall state
(i) the amount of the Letter of Credit requested and (ii) the expiration
date of the requested Letter of Credit.
3.5 OBLIGATIONS OF 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 Lenders, the amount paid by each
Lender with respect to such Letter of Credit; (ii) immediately upon demand
of Administrative 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
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terms of SECTION 3.8 (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 Lender or other party or to resort to any
Collateral before obtaining payment from Borrower); (iii) 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 Portions
under SECTION 2.6(a)(i) 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 specified in SECTION 2.6(a)(ii) hereof; and
(iv) the following fees:
(A) For the ratable benefit of Lenders, in accordance with their
respective Pro Rata Share, a fee for each Letter of Credit, payable in
installments in arrears, so long as such Letter of Credit remains
outstanding. Such installments shall be paid for the period from and
including the date of issuance of the applicable Letter of Credit, to
but excluding the next quarterly payment date (as hereinafter
specified), and thereafter for the period from and including such
quarterly payment date to but excluding the next quarterly payment
date or (if earlier) the expiry date of such Letter of Credit; such
installments shall be paid on each March 31, June 30, September 30,
December 31, and (if earlier) the expiry date of such Letter of
Credit. Each such installment shall be in an amount equal to the
product of (a) the Applicable Margin for Eurodollar Portions in effect
on the date of payment of such fee (and applied on a per annum basis)
MULTIPLIED BY (b) the face amount of such Letter of Credit, and pro
rated for the period for which such installment is due;
(B) For the individual account of Administrative Agent, as
issuer of the Letters of Credit, a Letter of Credit issuance and
fronting fee for each Letter of Credit, payable in installments in
arrears, SO LONG as such Letter of Credit remains outstanding. Such
installments shall be paid for the period from and including the date
of issuance of the applicable Letter of Credit, to but excluding the
next quarterly payment date (as hereinafter specified), and thereafter
for the period from and including such quarterly payment date to but
excluding the next quarterly payment date or (if earlier) the expiry
date of such Letter of Credit; such installments shall be paid on each
March 31, June 30, September 30, December 31, and (if earlier) the
expiry date of such Letter of Credit. Each such installment shall be
in an amount equal to the product of (a) 0.250% per annum MULTIPLIED
BY (b) the face amount of such Letter of Credit, and pro rated for the
period for which such installment is due; and
(C) For the individual account of Administrative Agent, standard
administrative charges for Letter of Credit amendments.
Interest under the preceding CLAUSE (iii) shall be paid at the times and in
the manner set forth in SECTION 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
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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 SECTION 2.7 hereof,
Lenders hereby agree to advance funds to Borrower under the Loan to make
the payments required under SECTION 3.5(a)(i) and (ii) hereof. If any
payment by 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 SECTION 2.7 hereof
but payable upon the demand of Administrative Agent at the direction of
Required Lenders. Such demand reimbursement obligation shall be otherwise
subject to all the terms and conditions thereof as if advanced by Lenders
pursuant to SECTION 2.7 hereof (but without duplication).
3.6 PAYMENT BY LENDERS ON LETTERS OF CREDIT.
(a) With respect to each Letter of Credit, each Lender agrees that it
is irrevocably obligated to pay to Administrative Agent, for each such
Letter of Credit, such Lender's percentage share of the Commitment as set
forth in SCHEDULE 2.1 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 Lender's LOC Contribution shall be due
from such Lender immediately upon, and in any event no later than the same
day as, receipt of written notice (which may be sent by telex or facsimile)
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 Bank 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 Lender 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
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.
3.7 COLLATERAL SECURITY.
(a) The indebtedness, liabilities, and obligations of Borrower under
this SECTION 3, 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
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33 RESTATED CREDIT AGREEMENT
<PAGE>
and Lenders are entitled to the benefit of the Collateral 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 Borrower under this SECTION 3 until all Letters of Credit
shall have expired and all indebtedness, liabilities, and obligations under
this SECTION 3 shall have been paid in full.
(c) On the termination of the Commitment (or any partial termination
of the Commitment which reduces the Commitment to less than the LC
Exposure), the Final Maturity Date, and the occurrence of an Event of
Default, Required Lenders may require (or in the case of an Event of
Default occurring under SECTION 12.1(k), it shall be required
automatically) that 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 Letter of Credit Exposure, 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 Lenders shall be entitled to liquidate such of the other
Collateral for the Loan (if any) as is necessary or appropriate in its sole
judgment so as to create such cash Collateral.
(d) any cash Collateral deposited under CLAUSE (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 Borrower, in
U.S. Treasury Bills with maturities of no more than ninety (90) days from
the date of investment.
3.8 CANCELED LETTERS OF CREDIT. Borrower acknowledges that each Letter of
Credit will be deemed issued upon delivery to its beneficiary or Borrower. If
Borrower requests any Letter of Credit be delivered to Borrower rather than the
beneficiary, and Borrower subsequently cancels such Letter of Credit, Borrower
agrees to return it to Administrative Agent together with Borrower's written
certification that it has never been delivered to such beneficiary. If any
Letter of Credit is delivered to its beneficiary pursuant to Borrower's
instructions, no cancellation thereof by Borrower shall be effective without
written consent of such beneficiary to Administrative Agent and return of such
Letter of Credit to Administrative Agent. Borrower hereby agrees that if
Administrative Agent becomes involved in any dispute as a result of Borrower's
cancellation of any Letter of Credit, it shall indemnify Administrative Agent
and Lenders for all losses, costs, damages, expenses, and reasonable attorneys'
fees suffered or incurred by Administrative Agent and Lenders as a direct result
thereof.
3.9 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) Borrower assumes all risks of the acts or omissions of the
beneficiary of each Letter of Credit with respect to the use of the Letter
of Credit or with respect to the beneficiary's obligations to Borrower.
Administrative Agent agrees with each Lender that it will exercise and give
the same care and attention to each Letter of Credit as it gives to its
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other letters of credit, and Administrative Agent's sole liability to each
Lender with respect to such Letter of Credit (OTHER THAN liability arising
from the gross negligence or willful misconduct of Administrative Agent)
shall be to distribute promptly to each Lender who has acquired a
participating interest therein such Lender's ratable portion of any
payments made to Administrative Agent by Borrower pursuant to this
SECTION 3. None of Lenders nor any of their officers or directors shall be
liable or responsible for, and Lenders hereby agree to indemnify and hold
Administrative Agent and any issuer of a Letter of Credit harmless (except
for the issuer's gross negligence or willful misconduct) with respect to:
(i) the use which may be made of the Letter of 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 Letter
of Credit, including failure of any documents to bear any reference or
adequate reference to a Letter of Credit; (iv) any other circumstances
whatsoever in making or failing to make payment under a Letter of 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.
(b) notwithstanding the foregoing, with respect to any Letter of
Credit, Borrower shall have a claim against Administrative Agent, and
Administrative Agent shall be liable to Borrower, to the extent, but only
to the extent, of any direct, as opposed to indirect or consequential,
damages suffered by Borrower caused by 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 (as in effect on the date of
issue of any Letter of Credit) published by the international Chamber of
Commerce are hereby made a part of this Agreement with respect to
obligations in connection with each Credit.
(d) IN ADDITION TO AMOUNTS PAYABLE AS ELSEWHERE PROVIDED IN THIS
AGREEMENT, BORROWER HEREBY AGREES TO PROTECT, INDEMNIFY, PAY, AND SAVE
ADMINISTRATIVE AGENT AND EACH LENDER HARMLESS FROM AND AGAINST ANY AND ALL
CLAIMS, DEMANDS, LIABILITIES, DAMAGES, OR LOSSES OF, OR OWED TO THIRD
PARTIES, AND ANY AND ALL RELATED COSTS, CHARGES, AND EXPENSES (INCLUDING
REASONABLE ATTORNEYS' FEES, INCLUDING ALLOCATED COSTS OF INTERNAL COUNSEL),
WHICH ADMINISTRATIVE AGENT OR ANY LENDER MAY INCUR OR BE SUBJECT TO AS A
CONSEQUENCE, DIRECT OR INDIRECT, OF (A) THE ISSUANCE OF ANY LETTER OF
CREDIT, OR (B) THE FAILURE OF ADMINISTRATIVE AGENT TO HONOR A DRAFT UNDER
SUCH LETTER OF CREDIT AS A RESULT OF ANY ACT OR OMISSION, WHETHER RIGHTFUL
OR WRONGFUL, OF ANY PRESENT OR FUTURE GOVERNMENTAL AUTHORITY; PROVIDED
THAT, BORROWER SHALL HAVE NO LIABILITY TO INDEMNIFY ADMINISTRATIVE AGENT OR
ANY LENDER IN RESPECT OF ANY LIABILITY ARISING OUT OF THE GROSS NEGLIGENCE
OR WILFUL MISCONDUCT OF SUCH PARTY OR ANY REPRESENTATIVES OF SUCH PARTY.
THE PROVISIONS OF AND UNDERTAKINGS AND INDEMNIFICATIONS SET FORTH IN THIS
SECTION 3.9(d)
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<PAGE>
SHALL SURVIVE THE SATISFACTION AND PAYMENT OF THE OBLIGATION AND
TERMINATION OF THIS AGREEMENT.
(e) Although referenced in any Letter of Credit, terms of any
particular agreement or other obligation to the beneficiary are not in any
manner incorporated herein. The fees and other amounts payable with
respect to each Letter of Credit shall be as provided in this Agreement,
drafts under any Letter of Credit shall be deemed part of the Obligation,
and in the event of any conflict between the terms of this Agreement and
any Letter of Credit Agreement, the terms of this Agreement shall be
controlling.
SECTION 4 CHANGE IN CIRCUMSTANCES.
4.1 INCREASED COST AND REDUCED RETURN.
(a) If, after the date hereof, the adoption of any applicable Law or
any change in any applicable Law or any change in the interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or its Applicable Lending Office)
with any request or directive (whether or not having the force of Law) of
any such governmental authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable Lending Office)
to any tax, duty, or other charge with respect to any Eurodollar
Portion, its Note, or its obligation to loan any Eurodollar Portion,
or change the basis of taxation of any amounts payable to such Lender
(or its Applicable Lending Office) under this Agreement or its Note in
respect of any Eurodollar Portions (other than taxes imposed on the
overall net income of such Lender by the jurisdiction in which such
Lender has its principal office or such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other than the
Reserve Requirement utilized in the determination of the Adjusted
Eurodollar Rate) relating to any extensions of credit or other assets
of, or any deposits with or other liabilities or commitments of, such
Lender (or its Applicable Lending Office), including the Commitment of
such Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable Lending
Office) or the London interbank market any other condition affecting
this Agreement or its Note or any of such extensions of credit or
liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making, converting into,
continuing, or maintaining any Eurodollar Portions or to reduce any sum
received or receivable by such Lender (or its Applicable Lending Office)
under this Agreement or its Note with respect to any Eurodollar Portions,
then Borrower shall pay to such Lender on demand such amount or amounts as
will compensate such Lender for such increased cost or reduction. If any
Lender requests compensation by Borrower under this SECTION 4.1(a),
Borrower may, by notice to such Lender
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<PAGE>
(with a copy to Administrative Agent), suspend the obligation of such
Lender to loan or continue Eurodollar Portions with respect to which such
compensation is requested, or to convert Base Portions into Eurodollar
Portions, until the event or condition giving rise to such request ceases
to be in effect (in which case the provisions of SECTION 4.4 shall be
applicable); PROVIDED THAT, such suspension shall not affect the right of
such Lender to receive the compensation so requested.
(b) If, after the date hereof, any Lender shall have determined that
the adoption of any applicable Law regarding capital adequacy or any change
therein or in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of Law) of any
such governmental authority, central bank, or comparable agency, has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of such
Lender's obligations hereunder to a level below that which such Lender or
such corporation could have achieved but for such adoption, change,
request, or directive (taking into consideration its policies with respect
to capital adequacy), then from time to time upon demand Borrower shall pay
to such Lender such additional amount or amounts as will compensate such
Lender for such reduction.
(c) Each Lender shall promptly notify Borrower and Administrative
Agent of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Lender to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Lender, be otherwise
disadvantageous to it. Any Lender claiming compensation under this Section
shall furnish to Borrower and Administrative Agent a statement setting
forth the additional amount or amounts to be paid to it hereunder which
shall be conclusive in the absence of manifest error. In determining such
amount, such Lender may use any reasonable averaging and attribution
methods.
4.2 LIMITATION ON TYPES OF LOANS. If on or prior to the first day of any
Interest Period for any Eurodollar Portion:
(a) Administrative Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar
Rate for such Interest Period; or
(b) Required Lenders determine (which determination shall be
conclusive) and notify Administrative Agent that the Adjusted Eurodollar
Rate will not adequately and fairly reflect the cost to the Lenders of
funding Eurodollar Portions for such Interest Period;
then Administrative Agent shall give Borrower prompt notice thereof
specifying the relevant Eurodollar Portions and the relevant amounts or
periods, and so long as such condition remains in effect, the Lenders shall
be under no obligation to fund additional Eurodollar Portions, continue
Eurodollar Portions, or to convert any Base Portions into Eurodollar
Portions, and Borrower shall, on the last day(s) of the then current
Interest Period(s) for the
THIRD AMENDED AND
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<PAGE>
outstanding Eurodollar Portions, either prepay such Eurodollar Portions
or convert such Eurodollar Portions into Base Portions in accordance with
the terms of this Agreement.
4.3 ILLEGALITY. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Lender or its Applicable Lending
Office to make, maintain, or fund Eurodollar Portions hereunder, then such
Lender shall promptly notify Borrower thereof, and such Lender's obligation to
make or continue Eurodollar Portions and to convert other Base Portions into
Eurodollar Portions shall be suspended until such time as such Lender may again
make, maintain, and fund Eurodollar Portions (in which case the provisions of
SECTION 4.4 shall be applicable).
4.4 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to fund
Eurodollar Portions or to continue, or to convert Base Portions into Eurodollar
Portions shall be suspended pursuant to SECTION 4.1 or 4.3 hereof, such Lender's
Eurodollar Portions shall be automatically converted into Base Portions on the
last day(s) of the then current Interest Period(s) for the Eurodollar Portions
(or, in the case of a conversion required by SECTION 4.3 hereof, on such earlier
date as such Lender may specify to Borrower with a copy to Administrative Agent)
and, unless and until such Lender gives notice as provided below that the
circumstances specified in SECTION 4.1 or 4.3 hereof that gave rise to such
conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Portions have been so
converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Eurodollar Portions shall be applied instead to
its Base Portions; and
(b) all Portions that would otherwise be made or continued by such
Lender as Eurodollar Portions shall be made or continued instead as Base
Portions of such Lender and any Portion that would otherwise be converted
into Eurodollar Portions shall be converted instead into (or shall remain
as) Base Portions.
If such Lender gives notice to Borrower (with a copy to Administrative Agent)
that the circumstances specified in SECTION 4.1 or 4.3 hereof that gave rise to
the conversion of such Lender's Eurodollar Portions pursuant to this SECTION 4.4
no longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Portions made by other Lenders are
outstanding, such Lender's Base Portions shall be automatically converted, on
the first day(s) of the next succeeding Interest Period(s) for such outstanding
Eurodollar Portions, to the extent necessary so that, after giving effect
thereto, all Portions held by the Lenders holding Eurodollar Portions and by
such Lender are held pro rata (as to principal amounts, Types, and Interest
Periods) in accordance with their respective Commitments.
4.5 COMPENSATION. Upon the request of any Lender, Borrower shall pay to
such Lender such amount or amounts as shall be sufficient (in the reasonable
opinion of such Lender) to compensate it for any loss, cost, or expense
(including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or conversion of a Eurodollar Portion
for any reason (including, without limitation, the acceleration of the Loan
pursuant to SECTION 12.2) on a date other than the last day of the
Interest Period for such Eurodollar Portion; or
THIRD AMENDED AND
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<PAGE>
(b) any failure by Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in SECTION 7
to be satisfied) to borrow, convert, continue, or prepay a Eurodollar
Portion on the date for such borrowing, conversion, continuation, or
prepayment specified in the relevant notice of borrowing, prepayment,
continuation, or conversion under this Agreement.
4.6 TAXES.
(a) Any and all payments by Borrower to or for the account of any
Lender or Administrative Agent hereunder or under any other Loan Paper
shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges, or
withholdings, and all liabilities with respect thereto, EXCLUDING, in the
case of each Lender and Administrative Agent, taxes imposed on its income,
and franchise taxes imposed on it, by the jurisdiction under the Laws of
which such Lender (or its Applicable Lending Office) or Administrative
Agent (as the case may be) is organized or any political subdivision
thereof (all such non-excluded taxes, duties, levies, imposts, deductions,
charges, withholdings, and liabilities being hereinafter referred to as
"TAXES"). If Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable under this Agreement or any other Loan Paper
to any Lender or Administrative Agent, (i) the sum payable shall be
increased as necessary, so that after making all required deductions
(including deductions applicable to additional sums payable under this
SECTION 4.6), such Lender or Administrative Agent receives an amount equal
to the sum it would have received had no such deductions been made, (ii)
Borrower shall make such deductions, (iii) Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable Law, and (iv) Borrower shall furnish to
Administrative Agent, at its address referred to in SECTION 14.8, the
original or a certified copy of a receipt evidencing payment thereof.
(b) In addition, Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under this
Agreement or any other Loan Paper or from the execution or delivery of, or
otherwise with respect to, this Agreement or any other Loan Paper
(hereinafter referred to as "OTHER TAXES").
(c) Borrower agrees to indemnify each Lender and Administrative Agent
for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this SECTION 4.6) paid by such Lender
or Administrative Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect
thereto.
(d) Each Lender organized under the Laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of
this Agreement in the case of each Lender listed on the signature pages
hereof and on or prior to the date on which it becomes a Lender in the case
of each other Lender, and from time to time thereafter if requested in
writing by Borrower or Administrative Agent (but only so long as such
Lender remains lawfully able to do so), shall provide Borrower and
Administrative Agent with (i) INTERNAL REVENUE SERVICE FORM 1001 or 4224,
as appropriate, or any successor form
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<PAGE>
prescribed by the Internal Revenue Service, certifying that such Lender
is entitled to benefits under an income tax treaty to which the United
States is a party which reduces the rate of withholding tax on payments
of interest or certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of a trade or
business in the United States, (ii) INTERNAL REVENUE SERVICE FORM W-8 or
W-9, as appropriate, or any successor form prescribed by the Internal
Revenue Service, and (iii) any other form or certificate required by any
taxing authority (including any certificate required by SECTIONS 871(h)
and 881(c) of the Internal Revenue Code), certifying that such Lender is
entitled to an exemption from or a reduced rate of tax on payments
pursuant to this agreement or any of the other Loan Papers.
(e) for any period with respect to which a Lender has failed to
provide Borrower and Administrative Agent with the appropriate form
pursuant to SECTION 4.6(d) (unless such failure is due to a change in
treaty, Law, or regulation occurring subsequent to the date on which a form
originally was required to be provided), such Lender shall not be entitled
to indemnification under SECTION 4.6(a) or 4.6(b) with respect to Taxes
imposed by the United States; PROVIDED, HOWEVER, that should a Lender,
which is otherwise exempt from or subject to a reduced rate of withholding
tax, become subject to Taxes because of its failure to deliver a form
required hereunder, Borrower shall take such steps as such Lender shall
reasonably request to assist such Lender to recover such Taxes.
(f) If Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this SECTION 4.6, then such Lender will
agree to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of such
Lender, is not otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of Taxes,
Borrower shall furnish to Administrative Agent the original or a certified
copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in
this SECTION 4.6 shall survive the termination of the Commitment and the
payment in full of the Notes.
SECTION 5 REPRESENTATIONS AND WARRANTIES.
Borrower, Communications, and the Guarantors, jointly and severally,
represent and warrant, as to themselves and, as applicable, their Subsidiaries
as follows:
5.1 ORGANIZATION AND GOOD STANDING. Each of Borrower, the Guarantors
(other than any Company that is a Cellular Partnership), Communications, and
each of their respective Subsidiaries is a corporation duly organized, 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 Borrower, the
Guarantors, Communications, and each of their respective Subsidiaries has the
power and authority to carry on
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<PAGE>
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.
5.2 POWER AND AUTHORITY; VALIDITY OF AGREEMENT. Each of Borrower, the
Guarantors, Communications, and their respective Restricted Subsidiaries has the
power and authority under the Laws of its state of incorporation and under its
articles of incorporation and bylaws or its Partnership Agreement, as
applicable, to enter into and perform this Agreement and the other Loan Papers
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 and the other Loan Papers by Borrower, the Guarantors, Communications,
and their respective Restricted 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.
5.3 NO VIOLATION OF LAWS OR AGREEMENTS. The making and performance of
this Agreement and the other Loan Papers by Borrower, the Guarantors,
Communications, and their respective Restricted Subsidiaries will not violate
any provisions of any Law, or the respective articles of incorporation and
bylaws, 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.
5.4 MATERIAL CONTRACTS. SCHEDULE 5.4 hereto sets forth a list of all
contracts material to the respective business of Borrower, the Guarantors,
Communications, and their respective Restricted Subsidiaries (including with
respect to the Systems), and there exists no material default under any of such
contracts.
5.5 COMPLIANCE. Each of Borrower, the Guarantors, Communications, and
their respective Restricted Subsidiaries is in compliance in all material
respects with all applicable Laws (including, without limitation, the
Communications Act, the Environmental Control Statutes, and those administered
by 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 approvals and grants of authority necessary,
including, without limitation, any license or permit issued by the FCC, all of
which are described on SCHEDULE 5.5 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 the Loan Papers by Borrower,
the Guarantors, Communications, and their respective Subsidiaries.
5.6 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,
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<PAGE>
Communications, or their respective Subsidiaries which, if adversely
resolved, would have a Material Adverse Effect.
5.7 TITLE TO ASSETS. Each of Borrower, the Guarantors, Communications,
and their respective Restricted 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 Lenders hereunder and liens and
security interests permitted pursuant to SECTIONS 9.4 and 10.4 hereof; and all
such assets are in good order and repair and are fully covered by the insurance
required under SECTION 8.7 hereof.
5.8 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 any Company that is a Cellular Partnership), and the
ownership thereof, are accurately set forth on SCHEDULE 5.8 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 Lenders hereunder. The number and
percentage of shares of partnership interests in each of the Cellular
Partnerships, and the ownership thereof, are accurately set forth on SCHEDULE
5.8 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 Lenders, as set forth on SCHEDULE 5.8
attached hereto.
5.9 ACCURACY OF INFORMATION; FULL DISCLOSURE.
(a) All information furnished to Lenders concerning the financial
condition of the Companies and Communications and its Restricted
Subsidiaries, including the annual audited financial statements for the
period ending December 31, 1996, and the consolidated unaudited financial
statements for the three-quarter period ending September 30, 1997, copies
of which have been furnished to Lenders, has been prepared in accordance
with GAAP, and fairly presents the financial condition of the Companies and
Communications and its Restricted Subsidiaries as of the dates and for the
periods covered and discloses all liabilities of the Companies and
Communications and its Restricted Subsidiaries, and there have been no
material adverse changes in the financial conditions or businesses of the
Companies or Communications and its Restricted Subsidiaries from the date
of such statements to the date hereof; and
(b) All financial statements and other documents furnished by
Communications and Borrower to Lenders in connection with the Loan Papers
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 Borrower have
disclosed to Lenders in writing any and all facts which materially and
adversely affect the business, properties, operations, or condition,
financial or otherwise, of Communications and Borrower or of Communications
and Borrower and their Subsidiaries, considered as a whole,
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<PAGE>
or Communications' and Borrower's ability to perform their obligations
under this Agreement and the Note.
5.10 TAXES AND ASSESSMENTS. (a) Each of 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.
5.11 INDEBTEDNESS. Each of Borrower, the Guarantors, Communications, and
their respective Restricted Subsidiaries has no presently outstanding
Indebtedness or obligations, including contingent obligations and obligations
under leases of property from others, except the Indebtedness and obligations
described in SCHEDULE 5.11 hereto and in Borrower's, the Guarantors', and
Communications' financial statements which have been furnished to Lenders from
time to time pursuant to SECTION 7.1, 8.2, and 8.3 hereof.
5.12 MANAGEMENT AGREEMENTS. Neither Borrower, the Guarantors,
Communications, nor their respective Restricted Subsidiaries is a party to any
management or consulting agreement for the provision of services to it, except
as described in SCHEDULE 5.12 hereto.
5.13 INVESTMENTS. Neither Borrower, the Guarantors, Communications, nor
their respective Restricted Subsidiaries has any investments in or loans to any
other individuals or business entities, other than the investments described in
SECTION 5.8, and such loans and investments as are permitted pursuant to
SECTIONS 9.3 and 9.8 hereof.
5.14 ERISA. Each of Borrower, the Guarantors, Communications, 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 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, their
respective Subsidiaries, or any ERISA Affiliate could have any withdrawal
liability;
(b) Neither 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
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-
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43 RESTATED CREDIT AGREEMENT
<PAGE>
employer defined benefit plans under Title IV of ERISA) does not exceed the
aggregate fair market value of the assets under each such defined benefit
pension Plan;
(d) The aggregate liability of 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 Borrower, the Guarantors,
Communications, their respective Subsidiaries, or any ERISA Affiliate under
any Plan providing post-retirement life or health benefits.
5.15 PERMITTED ACQUISITIONS.
(a) VALIDITY. With respect to any Permitted Acquisitions, each of
Borrower, the Guarantors, Communications, and their respective Restricted
Subsidiaries has the power and authority under the Laws of its state of
incorporation and under its articles of incorporation and bylaws or
Partnership Agreement, as applicable, to enter into and perform the related
Acquisition agreement to which it is a party and all other agreements,
documents, and actions required thereunder; and all actions (corporate or
otherwise) necessary or appropriate by Borrower, the Guarantors,
Communications, or their respective Restricted Subsidiaries (as the case
may be) for the execution and performance of said Acquisition agreements,
and all other documents, agreements, and actions required thereunder, have
been taken, and, upon their execution, such Acquisition agreements will
constitute the valid and binding obligation of Borrower, the Guarantors,
Communications, and their respective Restricted Subsidiaries, enforceable
in accordance with their respective terms.
(b) NO VIOLATIONS. With respect to any Permitted Acquisition, the
making and performance of the related Acquisition agreements, and all other
agreements, documents, and actions required thereunder, will not violate
any provision of any Law, including, without limitation, all state
corporate laws and judicial precedents of the states of incorporation or
formation of Borrower, the Guarantors, Communications, and their respective
Restricted Subsidiaries, and will not violate any provisions of the
articles of incorporation and bylaws or Partnership Agreements of Borrower,
the Guarantors, Communications, or their respective Subsidiaries, or
constitute a default under any agreement by which Borrower, the Guarantors,
Communications, or their respective Subsidiaries or their respective
property may be bound.
5.16 FEES AND COMMISSIONS. Neither Borrower, the Guarantors,
Communications, nor their respective Subsidiaries owe any brokers' or finders'
fees or commissions of any kind, and Borrower, the Guarantors, Communications,
and their respective Subsidiaries know of no claim for any brokers' or finders'
fees or commissions in connection with Borrower obtaining the Commitment or the
Loan from Lenders, except those provided herein.
5.17 NO EXTENSION OF CREDIT FOR SECURITIES. Neither Borrower, the
Guarantors, Communications, nor their respective Subsidiaries is now, nor at any
time has been, engaged
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44 RESTATED CREDIT AGREEMENT
<PAGE>
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 Borrower, directly or indirectly, for such
purposes. "MARGIN STOCK" (as defined in Regulation U) constitutes less than
25% of the assets of any of Borrower, the Guarantors, Communications, or
their respective Subsidiaries, which are subject to any limitation on the
sale, pledge, or other restrictions hereunder.
5.18 PERFECTION OF SECURITY INTERESTS. The financing statements against
Borrower, the Guarantors, their respective Restricted Subsidiaries, the Cellular
Partnership Obligors, and the respective partners of the Cellular Partnership
Obligors, covering all the security interests created by the Collateral Security
Documents (the "EXISTING FINANCING STATEMENTS"), have been filed in all places
as, in the opinion of counsel for Borrower, are necessary to perfect said
security interests, and all the outstanding shares of stock of Borrower, the
Guarantors (other than the Cellular Partnership Obligors), and their respective
Restricted Subsidiaries (other than the Cellular Partnerships) have been pledged
to Administrative Agent, for the benefit of Lenders, pursuant to the Collateral
Security Documents. No further action, including any filing or recording of any
document, is necessary in order to establish, perfect, and maintain Lenders'
first priority security interests in the assets and the stock created by the
Security Agreements and the Pledge Agreement, respectively, except for the
periodic filing of continuation statements with respect to financing statements
filed under the Uniform Commercial Code of the applicable jurisdiction.
5.19 HAZARDOUS WASTES, SUBSTANCES AND PETROLEUM PRODUCTS.
(a) Each of Borrower, the Guarantors, Communications, and their
respective Subsidiaries (i) has received all permits and filed all
notifications necessary to carry on its respective business(es), and
(ii) is in compliance in all respects with all Environmental Control
Statutes.
(b) Neither Borrower, the Guarantors, Communications, nor any of
their respective Subsidiaries has given any written or oral notice, nor has
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 Borrower, the
Guarantors, Communications, or any of their respective Subsidiaries, or
used in connection with the conduct of its business and operations.
(c) Neither Borrower, the Guarantors, Communications, nor any of
their respective Subsidiaries has received notice that it is potentially
responsible for the costs of clean-up or remediation of any actual or
imminently threatened Release of Hazardous Substances pursuant to any
Environmental Control Statute.
5.20 SOLVENCY. At the time of each Borrowing hereunder and on the date of
each Permitted Acquisition, Communications is, and each Company is (and after
giving effect to the transactions contemplated by the Loan Papers, any Permitted
Acquisition, and any incurrence of additional Indebtedness, will be), Solvent.
5.21 WIRELINE SPINOFF. Borrower's business plan contemplates consummation
of the Wireline Spinoff upon receipt of favorable revenue rulings from the
Internal Revenue Service and
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45 RESTATED CREDIT AGREEMENT
<PAGE>
upon determination by Communications that favorable market conditions exist
to support an initial public offering of securities of Communications (the
"PROPOSED IPO"). Borrower and Communications have made the request for a
ruling from, and has timely filed all related documents with, the Internal
Revenue Service relative to tax issues relating to the Wireless Spinoff.
SECTION 6 SECURITY; GUARANTIES.
6.1 COLLATERAL. To secure the full and complete payment and performance
of the Obligation, the Companies (other than GRCGP) and each Cellular
Partnership Obligor hereby, jointly and severally, grant and convey to, and
create in favor, of Collateral Agent, for the ratable benefit of Lenders, first
priority liens in, to, and on the following items and types of property
(collectively, herein called the "COLLATERAL"), all as more particularly
described in the Loan Papers (PROVIDED THAT, no Managing Agent or Lender hereby
assumes or is made the transferee of any obligations of any Company or any
Cellular Partnership Obligor regarding any of the Collateral):
(a) All present and future accounts, contract rights, general
intangibles, investment property, chattel paper, documents, instruments,
inventory, equipment, fixtures, other goods, minerals, money, and deposit
accounts, wherever located, now owned or hereafter acquired by any Company
or any Cellular Partnership Obligor and any and all present and future tax
refunds of any kind whatsoever to which any Company or any Cellular
Partnership Obligor is now or shall hereafter become entitled.
(b) All present and future issued and outstanding shares of capital
stock or other equity or investment securities now owned or hereafter
acquired by any Company or any Cellular Partnership Obligor, including,
without limitation, all capital stock of, or partnership interests in, the
Subsidiaries of any Company or any Cellular Partnership Obligor, together
with all distributions thereon and any securities issued in substitution or
replacement thereof, but expressly excluding the stock of Dobson Wireline
Company and its Subsidiaries, SO LONG AS such entities remain Unrestricted
Subsidiaries of the Companies.
(c) All rights, titles, and interests of any Company in and to all
promissory notes and other instruments payable to the Companies, now or
hereafter existing, including, without limitation, any Cellular Partnership
Promissory Notes or other inter-company notes, and all rights in, to, and
under all other loan and collateral documents relating to such instruments.
(d) All present and future rights, titles, interests, and liens (but
none of the obligations) now owned or hereafter acquired by any Company or
any Cellular Partnership Obligor in any partnership or joint venture,
including, without limitation, any Cellular Partnership.
(e) All present and future rights, titles, interests, and Liens (but
none of the obligations) now owned or hereafter acquired by any Company or
any Cellular Partnership Obligor, as lessee or landlord, in and to each
lease covering real property or any interest therein, and equipment or
other personal property or any interest therein (each such lease herein
called an "ASSIGNED LEASE").
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46 RESTATED CREDIT AGREEMENT
<PAGE>
(f) Substantially all of the real estate now owned or hereafter
acquired by any Company or any Cellular Partnership Obligor, TOGETHER WITH
all improvements thereon and fixtures attached thereto.
(g) The balance of every deposit account of any Company or any
Cellular Partnership Obligor and any other claim of any Company or any
Cellular Partnership Obligor against any depository, now or hereafter
existing, whether liquidated or unliquidated, including, without
limitation, certificates of deposit and other deposit instruments.
(h) All present and future automobiles, trucks, truck tractors,
trailers, semi-trailers, or other motor vehicles or rolling stock now owned
or hereafter acquired by any Company or any Cellular Partnership Obligor
(collectively, the "VEHICLES").
(i) All present and future rights, awards, and judgments to which any
Company or any Cellular Partnership Obligor is entitled under any
litigation (whether arising in equity, contract, or tort) now existing or
hereafter arising.
(j) All present and future rights (including, without limitation, the
right to sue for past, present, or future infringements), titles, and
interests of any Company or any Cellular Partnership Obligor in and to all
trademark applications, trademarks, corporate names, company names,
tradenames, business names, fictitious business names, tradestyles, service
marks, logos, other source of business identifiers, copyrights, designs,
rights, or licenses to use any trademarks, and all registrations and
recordings thereof (collectively, the "TRADEMARKS"), and the goodwill of
each business to which each Trademark relates.
(k) All present and future rights (including, without limitation, the
right to sue for past, present, and future infringements), titles, and
interests of any Company or any Cellular Partnership Obligor in and to all
patents, patent applications, utility models, industrial models, designs,
and any other forms of industrial intellectual property, including all
grants, applications, reissues, continuations, and divisions with respect
thereto and any rights to use, manufacture, or sell any patent.
(l) All licenses and permits issued by the FCC or any PUC to any
Company or any Cellular Partnership Obligor, to the extent permitted by
applicable Law.
(m) All proceeds of any sale or other disposition of any license or
permit issued by the FCC or any PUC issued to any Company or any Cellular
Partnership Obligor, whether or not any such license or permit may lawfully
be included as Collateral and whether or not the grant of a security
interest in any such license or permit is otherwise prohibited.
(n) All present and future increases, profits, combinations,
reclassifications, improvements, and products of, and accessions,
attachments, and other additions to, tools, parts, and equipment used in
connection with, and substitutes and replacements for, all or part of the
Collateral heretofore described.
THIRD AMENDED AND
47 RESTATED CREDIT AGREEMENT
<PAGE>
(o) All present and future accounts, contract rights, general
intangibles, chattel paper, documents, instruments, cash and noncash
proceeds, and other rights arising from or by virtue of, or from the
voluntary or involuntary sale or other disposition of, or collections with
respect to, or insurance proceeds payable with respect to, or proceeds
payable by virtue of warranty or other claims against the manufacturer of,
or claims against any other Person with respect to, all or any part of the
Collateral heretofore described in this clause or otherwise.
(p) All present and future security for the payment to any Company of
any of the Collateral heretofore described and goods which gave or will
give rise to any of such Collateral or are evidenced, identified, or
represented therein or thereby.
6.2 COMMUNICATIONS PLEDGE. To secure the full and complete payment of the
Obligation, Communications hereby grants, pledges, and conveys to, and creates
in favor of Administrative Agent (for the ratable benefit of Lenders) liens and
security interest in, to, and on all the issued and outstanding Shares of
Borrower, TOGETHER WITH all distributions thereon, all cash and noncash proceeds
thereof, and any securities issued in substitution or replacement thereof.
6.3 GUARANTIES. As an inducement to Agents, Managing Agents, Co-Agents,
and Lenders to enter into this Agreement, Borrower shall cause each Company
(other than GRCGP), Communications, and each Cellular Partnership Obligor, to
execute and deliver to Administrative Agent a Guaranty providing for the
guarantee of the payment and performance of the Obligation.
6.4 FUTURE LIENS. Promptly, upon (a) the acquisition of any assets (real,
personal, tangible, or intangible) by any Company or any Cellular Partnership
Obligor, (b) the removal, termination, or expiration of any prohibitions upon
the granting of a lien in any asset (real, personal, tangible, or intangible) of
any Company (the stock and assets of such new Restricted Subsidiary and the
assets described in CLAUSES (a) and (b) being herein referred to as the
"ADDITIONAL ASSETS"), or (c) upon the designation, formation, or acquisition of
any new Restricted Subsidiary, Borrower shall (or shall cause such other Company
or Cellular Partnership Obligor to) execute and deliver to Administrative Agent
all further instruments and documents (including, without limitation,
certificates and instruments representing shares of stock or evidencing
indebtedness and any realty appraisals as Agents may require with respect to any
such Additional Assets), and shall take all such further action that may be
necessary or desirable, or that Administrative Agent may reasonably request, to
grant, perfect, and protect liens in favor of Administrative Agent for the
benefit of Lenders in such Additional Assets, as security for the Obligation; IT
BEING EXPRESSLY UNDERSTOOD that the granting of such additional security for the
Obligation is a material inducement to the execution and delivery of this
Agreement by each Lender. Upon satisfying the terms and conditions hereof, such
Additional Assets shall be included in the "COLLATERAL" for all purposes under
the Loan Papers, and all references to the "COLLATERAL" in the Loan Papers shall
include the Additional Assets.
6.5 RELEASE OF COLLATERAL.
(a) UPON SALE OR DISPOSITION OF COLLATERAL OR DESIGNATION OF AN
UNRESTRICTED SUBSIDIARY. Upon any sale, transfer, or disposition of
Collateral which is expressly permitted pursuant to the Loan Papers (or is
otherwise authorized by Required Lenders) or upon the
THIRD AMENDED AND
48 RESTATED CREDIT AGREEMENT
<PAGE>
designation of an Unrestricted Subsidiary in accordance with SECTION
8.28, and upon ten (10) Business Days' prior written request by Borrower
(which request must be accompanied by true and correct copies of (a) all
documents of transfer or disposition, including any contract of sale, (b)
a preliminary closing statement and instructions to the title company, if
any, and (c) all requested release instruments, Administrative Agent
shall (and is hereby irrevocably authorized by the Lenders to) execute
such documents as may be necessary to evidence the release of liens
granted to Administrative Agent for the benefit of Lenders pursuant
hereto in such Collateral; PROVIDED THAT, (x) no such release of Lien
shall be granted if any Default or Event of Default has occurred and is
continuing, including, without limitation, the failure to make certain
mandatory prepayments in accordance with SECTION 2.9 in conjunction with
the sale or transfer of such Collateral; (y) Administrative Agent shall
not be required to execute any such document on terms which, in
Administrative Agent's opinion, would expose Administrative Agent to
liability or create any obligation or entail any consequence, OTHER THAN
the release of such Liens without recourse or warranty; and (z) such
release shall not in any manner discharge, affect, or impair the
Obligation, or liens upon (or obligations of any Company or any Cellular
Partnership Obligor in respect of) all interests retained by the
Companies or the Cellular Partnership Obligors, including, without
limitation, the proceeds of any sale, all of which shall continue to
constitute Collateral.
(b) CELLULAR PARTNERSHIP OBLIGOR COLLATERAL. With respect to liens
on the assets of the Cellular Partnership Obligors, such liens and security
interests (as well as any liens on partnership interests therein pledged by
Persons other than any Company or any Guarantor) shall be released in the
event all intercompany Indebtedness to any Company has been paid in full
and terminated; PROVIDED FURTHER, HOWEVER, that from the date of such
repayment until the Obligation has been paid in full and the Commitment has
been terminated, no Company may, directly or indirectly through a
Subsidiary, advance funds to any such Cellular Partnership. In regard to
repayment of such intercompany Indebtedness, Administrative Agent is hereby
authorized by Lenders to execute and deliver such releases, upon ten (10)
Business Days prior written request by Borrower supported by evidence that
such intercompany Indebtedness has been repaid and accompanied by
appropriate release instruments, which must be in form satisfactory to
Administrative Agent.
(c) WIRELINE SPINOFF. With respect to liens and security interests
in the shares of stock issued by Dobson Wireline Company, on and as of the
Effective Date of the Wireline Spinoff, all liens and security interest on
such pledged securities held by Administrative Agent FOR the benefit of
Lenders hereunder shall be released upon written certification from
Borrower and Communications certifying and confirming that the Wireline
Spinoff has been consummated, together with such documentation evidencing
the Wireline Spinoff as Agents may request.
(d) LIENS ON ASSETS OF DOBSON TELEPHONE COMPANY, INC. AND DOBSON
FIBER COMPANY, INC. on the Effective Date, Administrative Agent shall
release all liens and security interests previously created pursuant to the
Second Amended and Restated Agreement (or prior loan documents amended and
restated by such agreement) in and to the assets or stock of Dobson
Telephone Company, Inc. and Dobson Fiber Company, Inc., which companies
have been designated as Unrestricted Subsidiaries pursuant to this
Agreement.
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49 RESTATED CREDIT AGREEMENT
<PAGE>
6.6 NEGATIVE PLEDGE. Notwithstanding the provisions of SECTION 6.1
hereof, until such time as Agents or Required Lenders otherwise require, the
Companies and the Cellular Partnership Obligors shall not be required to perfect
Liens on any assets described in SECTIONS 6.1(e), (f), (g), and (h) or to grant
specific assignments of easements, licenses, permits, certificates of
compliance, and certificates of approval issued by regulatory authorities,
franchises, or like grants of authority or service agreements. To the extent
Agents or Required Lenders agree to delay the perfection or attachment of any
Lien granted pursuant to SECTION 6.1 hereof, pursuant to the foregoing sentence
or for any other reason, the Companies and the Cellular Partnership Obligors
hereby covenant and agree not to directly create, incur, grant, suffer, or
permit to be created or incurred any Lien on any such assets, OTHER THAN
Permitted Liens. Furthermore, within thirty (30) days of the request of Agents,
Borrower shall (or shall cause each Company or Cellular Partnership Obligor to)
execute and deliver to Administrative Agent all instruments and documents
(including, without limitation, certificates, instruments, and documents
representing shares of stock or evidencing Indebtedness) and shall take all
further action that may be necessary or desirable, or that Administrative Agent
may reasonably request, to grant, perfect, and protect liens in favor of
Administrative Agent, for the benefit of Lenders, in such assets, as security
for the Obligation; IT BEING EXPRESSLY UNDERSTOOD that the provisions of this
negative pledge are a material inducement to the execution and delivery of this
Agreement by each Lender.
6.7 CONTROL; LIMITATION OF RIGHTS. Notwithstanding anything herein or in
any other Loan Paper to the contrary, (a) the transactions contemplated hereby
(i) do not and will not constitute, create, or have the effect of constituting
or creating, directly or indirectly, actual or practical ownership of the
Companies or the Cellular Partnership Obligors by Agents, Managing Agents,
Co-Agents, or Lenders, or control, affirmative or negative or direct or
indirect, by Agents, Managing Agents, Co-Agents, or Lenders over the management
or any other aspect of the operation of the Companies or the Cellular
Partnership Obligors, which ownership or control remains exclusively and at all
times in the Companies or the Cellular Partnership Obligors, and (ii) do not and
will not constitute the transfer, assignment, or disposition in any manner,
voluntary or involuntary or directly or indirectly, of any license or
certificate at any time issued by the FCC or any PUC to the Companies or the
Cellular Partnership Obligors, or the transfer of control of the Companies or
the Cellular Partnership Obligors within the meaning of SECTION 310(d) of the
Communications Act of 1934, as amended; and (b) Administrative Agent shall not,
without first obtaining the approval of the FCC or any applicable PUC, take any
action pursuant to this Agreement or any other Loan Paper that would constitute
or result in any assignment of a license or any change of control of the
Companies or the Cellular Partnership Obligors, if such assignment or change of
control would require, under then existing law (inc.uding the written rules and
regulations promulgated by the FCC or any such PUC), the prior approval of the
FCC or any such PUC.
SECTION 7 CONDITIONS PRECEDENT.
7.1 FIRST ADVANCE. This Agreement shall not be effective until, and
Lenders shall have no obligation to make the first Advance of the Loan (or to
issue any Letter of Credit) unless, the following conditions have been satisfied
and Administrative Agent has received each of the following documents (OTHER
THAN each item, if any, listed on SCHEDULE 7.1, which items are hereby permitted
to be delivered after the Effective Date but not later than the respective date
for delivery of each such item specified on SCHEDULE 7.1):
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<PAGE>
(a) PROMISSORY NOTE. A Note in favor of each Lender in the form of
EXHIBIT A hereto duly executed by Borrower.
(b) AUTHORIZATION DOCUMENTS. A certified copy of the articles of
incorporation, bylaws, and resolutions of the boards of directors of
Borrower, the Guarantors (other than any Company or Guarantor that is a
partnership), and Communications, and a certified copy of each Partnership
Agreement and evidence of authorization by the applicable partners of each
Company or Guarantor that is a partnership, in each case authorizing the
execution and full performance of the Loan Papers, 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 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 substantially in the
form of EXHIBIT D executed, jointly and severally, by Borrower and each
Guarantor; each such Security Agreement shall be accompanied by (i) all
promissory notes executed by Cellular Partnership Obligors in favor of any
Company executing such Security Agreement (each, a "CELLULAR PARTNERSHIP
PROMISSORY NOTE"), endorsed by the appropriate Company to Administrative
Agent, on behalf of Lenders, (ii) all stock certificates issued to any
Company or Guarantor executing a Security Agreement, together with stock
powers executed by such Company in blank; and (iii) such financing
statements or amendments to financing statements, as the case may be,
landlord waivers, mortgagee consents, and evidence of any other recordation
required by applicable Law or by Agents to perfect or continue the
perfected status of the liens and security interests created by such
Security Agreement.
(d) PLEDGE AGREEMENT. A Pledge Agreement substantially in the form
of EXHIBIT E executed and delivered by Communications; such Pledge
Agreement shall be accompanied by the stock certificates, stock powers
executed by Communications in blank, financing statements, or amendments to
financing statements, as the case may be, and evidence of any other
recordation required by applicable Law or by Agents to perfect or continue
the perfected status of the liens and security interests created by such
Pledge Agreement, together with copies of any shareholder agreements
related thereto in order to perfect or continue the perfected status of the
liens and security interests created by the Pledge Agreement.
(e) GUARANTY. A Guaranty substantially in the form of EXHIBIT E
executed by Communications, each Company, other than Borrower, and each
Cellular Partnership Obligor.
(f) OPINIONS OF COUNSEL. Opinion letters from counsel for Borrower
(including FCC and such local counsel opinions as Agents and their counsel
may reasonably require) in the form of EXHIBITS H-1, H-2, [and H-3].
(g) INSURANCE. Certificates of insurance and evidence of loss payee
endorsements in favor of Administrative Agent, for the benefit of Lenders,
with respect to all fire, casualty, liability, and other insurance covering
the Systems.
THIRD AMENDED AND
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(h) AN AFFILIATE SUBORDINATION AGREEMENT. An Affiliate Subordination
Agreement substantially in the form of EXHIBIT J executed by any Affiliate
of Borrower or any Guarantor to which Borrower or any Guarantor is indebted
(the "AFFILIATE OBLIGEE"); each Affiliate Subordination Agreement shall be
accompanied by copies of all documents creating or evidencing such
Indebtedness and appropriate certified board resolutions and legal opinions
as required by Agents.
(i) FINANCIAL INFORMATION. (i) Pro forma schedule of consolidated
assets and liabilities of (A) the Companies and (B) Communications and its
Restricted Subsidiaries, as of the date hereof, setting forth all
indebtedness of Borrower, Communications, and such Subsidiaries, certified
as accurate by the chief financial officer of Borrower and Communications;
(ii) cash flow projections for (A) the Companies and (B) Communications and
its Restricted Subsidiaries, each on a consolidated and consolidating
basis, for the three (3) year period immediately following the date hereof,
satisfactory to Agents and certified as being true and correct and 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 having identified the
sources of cash that Borrower and Communications and their respective
Subsidiaries or Restricted Subsidiaries (as the case may be) intend to use
to meet their cash needs during such three year period); (iii) a Budget for
(A) the Companies and (B) Communications and its Restricted Subsidiaries,
certified by the chief financial officer of Borrower and Communications,
respectively, as having been prepared based on assumptions which, in light
of the historical performances of Borrower and Communications, as
applicable, are realistic and achievable; and (iv) a Compliance Certificate
prepared as of the Closing Date on a pro forma basis, after giving effect
to the closing of the Loan Papers and the related transactions.
(j) ADVANCE REQUEST. A completed Advance Request Form (or Letter of
Request Notices, as the case may be) required under SECTION 2.7(a) or
SECTION 3 hereof, and any other documents or information reasonably
required by Lenders in connection therewith.
(k) FEES. Payment to (i) Syndication Agent and Administrative Agent
of all fees payable on the Closing Date as described in the letter
agreements dated March 25, 1998, by and among Borrower, Communications, and
Syndication Agent or Administrative Agent, as the case may be, and
(ii) each Lender of all the fees specified in the letter dated March 24,
1998, addressed to such Lender from Syndications Agent on behalf of
Borrower, all such fees shall be in the amounts calculated in accordance
with such letter agreements.
(l) SEARCHES. Uniform Commercial Code, tax, judgment, PBGC, and EPA
searches against Communications, any Company, and any Cellular Partnership
Obligor, in such offices and jurisdictions as Agents may reasonably
request.
(m) COMMUNICATIONS BOND DEBT. Evidence that the indebtedness
Incurred under this Agreement and the related Loan Documents (i) have been
incurred or entered into in compliance with the requirements of the
Communications Bond Debt and the Certificate of Designation for Preferred
Stock; (ii) constitute the "BANK FACILITY AGREEMENT" as such term is
defined under the Communications Bond Debt and Certificate of Designation
For Preferred Stock; (iii) constitute "SENIOR INDEBTEDNESS" under the terms
of the Certificate of Designation
THIRD AMENDED AND
52 RESTATED CREDIT AGREEMENT
<PAGE>
for the Preferred Stock; (iv) evidence that Operations and its
Subsidiaries have been designated as "UNRESTRICTED SUBSIDIARIES" in
compliance with the requirements of the Communications Bond Debt and the
Certificate of Designation for the Preferred Stock; and (v) evidence that
the subordinated loan from Communications to Operations dated as of
January 23, 1998, in the princpal amount of $63,000,000 constitutes a
permitted "RESTRICTED PAYMENT" in compliance with the requirements of the
Communications Bond Debt and the Certificate of Designation for the
Preferred Stock.
(n) TAX SHARING AGREEMENT. Confirmation that there have been no
amendments or modifications to the Tax Sharing Agreement among Borrower,
Communications, and the Guarantors from the form executed in connection
with the Second Amended and Restated Credit Agreement.
(o) APPOINTMENT OF AGENT. Evidence satisfactory to Agents that
Borrower has appointed an agent for service of process in Texas pursuant
to the requirements of SECTION 14.13.
(p) OTHER DOCUMENTS. All management agreements, Partnership
Agreements, FCC licenses, and Cellular Partnership Notes must be in form
and substance reasonably acceptable to Administrative Agent and its
counsel.
(q) ADDITIONAL DOCUMENTS. Such additional documents as Lenders
reasonably may request.
7.2 PERMITTED ACQUISITIONS. On or prior to the consummation of any
Acquisition (whether or not the purchase price for such Acquisition is funded by
Advances), Borrower shall have satisfied the conditions and delivered, or caused
to be delivered, to Administrative Agent, all documents and certificates set
forth on SCHEDULE 7.2 by no later than the dates specified for satisfaction of
such condition on SCHEDULE 7.2. Promptly upon receipt of each Permitted
Acquisition Compliance Certificate and each Permitted Acquisition Loan Closing
Certificate, Administrative Agent shall provide copies of such certificates to
Lenders. All documentation delivered and satisfaction of conditions pursuant to
the requirements of SECTION 7.2 must be satisfactory to Agents. To the extent
any Advance is being requested in connection with the consummation of the
Acquisition, the conditions set forth in SECTIONS 7.3 and 7.4 hereof must be
satisfied prior to the making of any such Advance.
7.3 SUBSEQUENT ADVANCES. The obligation of Lenders to make additional
Advances under the Commitment or to issue Letters of Credit shall be subject to
Lenders' receipt of a completed Advance Request Form or Letter of Credit Request
Form (together with a completed Letter of Credit Agreement).
7.4 ADDITIONAL CONDITION TO LENDERS' OBLIGATIONS. Lenders shall not be
obligated to make any Advance hereunder unless (a) no Event of Default or
Default shall have occurred and be continuing on the date of such Advance or be
caused by such Advance; (b) all of the representations and warranties of any
Company or Guarantor set forth in the Loan Papers are true and correct in all
material respects (except to the extent that (i) the representations and
warranties speak to a specific date or (ii) the facts on which such
representations and warranties are based have been
THIRD AMENDED AND
53 RESTATED CREDIT AGREEMENT
<PAGE>
changed by transactions contemplated or permitted by the Loan Papers) and, if
applicable, supplemental Schedules have been delivered with respect thereto,
and when necessary, approved by Lenders; (c) all fees required pursuant to
their Agreement and the Fee Letters have been paid as and when due; (d) there
shall have been no material adverse change in Borrower's, any Guarantor's, or
Communications' and its Restricted Subsidiaries' financial condition or
business since the Effective Date; (e) the funding of such Advance and
issuance of any Letter of Credit, as the case may be, is permitted by Law; (f)
in the event all or any part of the proceeds of any Advance will be used to
fund dividends or distributions, Agents shall have received all such
certifications, financial information, and projections as Agents may
reasonably; and (g) all matters relating to such Advance must be satisfactory
to Required Lenders and their respective counsel in their reasonable
determination, and upon the reasonable request of Administrative Agent
evidence substantiating any of the matters in the Loan Papers which are
necessary to enable Borrower to qualify for such Advance. Each Advance
Request and Letter of Credit Agreement delivered to Administrative Agent shall
constitute the representation and warranty by Borrower to Administrative Agent
that the statements above are true and correct in all respects. Each
condition precedent in this Agreement is material to the transactions
contemplated in this Agreement, and time is of the essence in respect of each
thereof. Subject to the prior approval of Required Lenders, Lender may fund
any Advance, and Administrative Agent may issue any Letter of Credit, without
all conditions being satisfied, but to the extent permitted by Law, the same
shall not be deemed to be a waiver of the requirement that each such condition
precedent be satisfied as a prerequisite for any subsequent funding or
issuance, unless Required Lenders specifically waive each such item in writing.
SECTION 8 AFFIRMATIVE COVENANTS.
Each of Borrower, Communications, and each Guarantor covenants and agrees
that so long as the Commitment or any part of the Obligation remains
outstanding, Borrower, Communications, and each Guarantor will, and will cause
their respective Restricted Subsidiaries (and with respect to SECTION 8.13, will
cause each ERISA Affiliate) to:
8.1 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.
8.2 QUARTERLY FINANCIAL STATEMENTS. Furnish to Lenders in respect of each
of Borrower, Communications, and their respective Restricted Subsidiaries,
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 Lenders, including (a) a Consolidated balance sheet,
(b) a Consolidated statement of income, (c) a statement of cash flows,
(d) non-consolidated information with respect to Borrower and Communications, to
the extent used in calculating the financial covenants set forth in
SECTIONS 8.14 through 8.20 and SECTIONS 9.1, 9.3, 9.6, 9.7 and 10.1 hereof, and
(e) a compliance certificate in the form of EXHIBIT C-1 attached hereto showing
the calculation of the covenants set forth in SECTIONS 8.14 through 8.20 and
SECTIONS 9.1, 9.3, 9.6, 9.7, and 10.1 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,
respectively, stating that the financial statements fairly present the financial
condition of the Companies and Communications and its Restricted Subsidiaries as
of the date and for the periods covered and that
THIRD AMENDED AND
54 RESTATED CREDIT AGREEMENT
<PAGE>
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.
8.3 ANNUAL FINANCIAL STATEMENTS. Furnish to Lenders in respect of
Borrower, Communications, and their respective Restricted Subsidiaries within
120 days after the close of each fiscal year (or sooner if available),
commencing with fiscal year 1997, audited consolidated and consolidating annual
financial statements, including the financial statements and information
required under SECTION 8.2 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 Communications' or Borrower's respective
independent certified public accountants have concurred) by an independent
certified public accounting firm satisfactory to Lenders; and, at the time of
completion of the annual audit, cause to be furnished to Lenders, a certificate
signed by such accountants to the effect that to the best of their knowledge,
there exist no violations of any provision of this Agreement and no Event of
Default or Default has occurred hereunder.
8.4 OTHER INFORMATION. Deliver to Lenders (a) promptly upon transmission
thereof, copies of all such financial statements, proxy statements, notices, and
reports as it shall send to its stockholders, partners, any trustee, or any
beneficiary, as applicable, (b) copies of all auditors' annual management
letters delivered to Borrower or Communications, (c) promptly after any of the
information or disclosures provided on any of the Schedules delivered pursuant
to this Agreement or any Annexes to any of the Collateral Security Documents
becomes outdated or incorrect in any material respect, such revised or updated
Schedule(s) or Annex(es) as may be necessary or appropriate to update or correct
such information or disclosures; PROVIDED THAT, in the case of SCHEDULES 5.11,
9.8, and 10.4, the information thereon shall not be deemed accepted for purposes
of this Agreement or become part of the Loan Papers unless approved by Required
Lenders; PROVIDED FURTHER, that no deletions may be made to any Annex(es)
describing Collateral in any of the Collateral Security Documents unless
approved by Required Lenders, and (d) with respect to the post-closing
requirements set forth on SCHEDULE 7.1, deliver, or cause to be delivered, to
Administrative Agent all agreements, documents, instruments, or other items
listed on SCHEDULE 7.1 on or prior to the date specified for delivery thereof on
SCHEDULE 7.1.
8.5 BUDGET AND MANAGEMENT REPORTS. (a) On or prior to March 31 of each
fiscal year of Borrower, deliver to Lenders financial Budgets for the Companies
and Communications and its Restricted Subsidiaries for such fiscal year,
accompanied by a certificate executed by a Responsible Officer of Borrower and
Communications, as the case may be, certifying that each Budget was prepared by
Borrower or Communications, as the case may be, based on assumptions which, in
light of the historical performance of the Companies or Communications, as the
case may be, and their prospects for the future, are realistic and achievable;
and (b) deliver to Lenders within 60 days after the end of each quarter, a
management report showing, for each System, results of operations and subscriber
counts, discussing the financial results and comparing actual results to the
Budget for such period, and outlining princpal factors affecting performance in
each market, and detailing the outstanding princpal amount of intercompany
loans and advances from Borrower to each of the Cellular Partnership Obligors,
all in form and substance satisfactory to Lenders.
8.6 BOOKS AND RECORDS.
THIRD AMENDED AND
55 RESTATED CREDIT AGREEMENT
<PAGE>
(a) Keep and maintain satisfactory and adequate books and records of
accounts in accordance with GAAP and make or cause the same to be made
available to Administrative Agent or Lenders 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 Lender to discuss
the contents of same with senior officers of Borrower and Communications
and also with outside auditors and accountants of Borrower and
Communications.
(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.
8.7 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 Lenders and opportunity to cure any non-payment of premiums
prior to the termination of coverage; and, as required above, furnish
Administrative Agent with certificates of such insurance and cause
Administrative Agent (for the ratable benefit of Lenders) to be named as an
additional insured and the lender loss payee thereunder, as its interest may
appear under a standard mortgagee clause.
8.8 LITIGATION; EVENT OF DEFAULT. Notify Administrative Agent in writing
immediately of (a) 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, (b) the
occurrence of any Event of Default or Default hereunder, or (c) default under
any material contract.
8.9 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 Lenders 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.
8.10 EXPENSES and COSTS. Pay or reimburse Administrative Agent and
Syndication Agent for all reasonable out-of-pocket costs and expenses
(including, but not limited to, reasonable attorneys' fees and disbursements)
that Administrative Agent or Syndication Agent may pay or incur in connection
with the preparation and review of this Agreement and all waivers, consents,
amendments, or administration in connection therewith, and all other
documentation related thereto, and the making of the Loan hereunder, and pay or
reimburse each Lender for all reasonable out-of-pocket costs and expenses which
such Lender 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
THIRD AMENDED AND
56 RESTATED CREDIT AGREEMENT
<PAGE>
provided for in this SECTION 8.10 shall survive any termination of this
Agreement or the Commitment and the repayment of the Loan.
8.11 NEW SUBSIDIARY DESIGNATION. In the absence of a Default or an Event
of Default, Borrower may designate any Restricted Subsidiary of Communications
(excluding the Companies) as a new Subsidiary (each a "NEW GUARANTOR"). At the
time of such designation of a New Guarantor, (i) Borrower shall provide
Administrative Agent with not less than ten (10) Business Days prior written
notice, and (ii) the New Guarantor shall deliver to Administrative Agent a
joinder to this Agreement and the other Loan Papers, shall execute all necessary
Collateral Security Documents, and shall deliver all certificates, opinions of
counsel, and such other documents, including, without limitation, searches,
appraisals, and other information as reasonably required by Required Lenders.
Thereafter, commencing with the first full fiscal quarter in which such entity
has met the requirements of CLAUSES (i) and (ii) above, such New Guarantor's
Operating Cash Flow shall be included in the calculation of the Companies'
Operating Cash Flow and such New Guarantor's Indebtedness shall be included in
the calculation of the Companies' Total Debt; 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 Lenders.
8.12 COMPLIANCE; NOTIFICATION.
(a) Comply in all respects with all Laws and regulations applicable
to its business, including, without limitation, Environmental Control
Statutes, the Communications Act, and all Laws and regulations of the FCC
and Local Authorities, and the provisions and requirements of all
franchises, permits, certificates of compliance, and approvals issued by
regulatory authorities, and other like grants of authority; and notify
Lenders immediately in detail of (i) any actual or alleged failure to
comply with or to perform, or any breach, violation, or default under, any
such Laws or regulations or under the terms of any of such franchises,
licenses, grants of authority, or (ii) the occurrence or existence of any
facts or circumstances which with the passage of time or the giving of
notice, or both, could create such a breach, violation, or default or could
cause the termination of any of such franchises or grants of authority.
(b) With respect to Environmental Control Statutes, immediately
notify Administrative Agent when, in connection with the conduct of
Borrower's, Communications', or any Guarantor's business or operations, any
Person (including, without limitation, the EPA or any state or local
agency) provides oral or written notification to Borrower, any Guarantor,
or Communications (or Borrower, Communications, or any Guarantor otherwise
becomes aware) of a condition with regard to an actual or imminently
threatened Release of Hazardous Substances; and notify Lenders in detail
immediately upon the receipt by Borrower, any Guarantor, or Communications
of an assertion of liability under the Environmental Control Statutes, of
any actual or alleged failure to comply with or to perform, or any 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 or the giving of notice, or both, could create such a
breach, violation, or default.
THIRD AMENDED AND
57 RESTATED CREDIT AGREEMENT
<PAGE>
8.13 ERISA. (a) Comply in all material respects with the provisions of
ERISA to the extent applicable to any Plan maintained for the employees of any
Company, 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 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 Lenders 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, any Guarantor, Communications, or any
ERISA Affiliate; and (f) refrain from engaging in any prohibited transactions or
actions causing possible liability under SECTION 5.02 of ERISA.
8.14 SENIOR LEVERAGE RATIO. Maintain at all times during the periods set
forth in the left-hand column below, a ratio of the Total Debt of the Companies
to the Operating Cash Flow of the Companies, 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:
<TABLE>
PERIOD MAXIMUM RATIO
------ -------------
<S> <C>
Date hereof - 6/30/98 7.50: 1.0
7/1/98 - 12/31/98 6.50: 1.0
1/1/99 - 6/30/99 6.25: 1.0
7/1/99 - 12/31/99 6.00: 1.0
1/1/00 - 6/30/00 5.50: 1.0
7/1/00 - 12/31/00 5.00: 1.0
1/1/01 - thereafter 4.50: 1.0
</TABLE>
8.15 PRO FORMA DEBT SERVICE COVERAGE. Maintain at all times a ratio of
(a) the Operating Cash Flow of the Companies measured for the applicable Rolling
Period as of the last day of the most recently ended fiscal quarter to (b) the
Pro Forma Debt Service of the Companies for the twelve-month period commencing
on the first day of the current quarter, of not less than 1.15 to 1.0.
8.16 INTEREST COVERAGE. Maintain at all times a ratio of (a) the Operating
Cash Flow of the Companies measured for the applicable Rolling Period as of the
last day of the most recently ended fiscal quarter to (b) the Companies'
Interest Expense during the Rolling Period (as determined in accordance with
GAAP), of not less than 2.00 to 1.0.
8.17 FIXED CHARGE COVERAGE. Maintain at all times on and after January 1,
1999, a Fixed Charge Coverage Ratio of not less than 1.00 to 1.0 measured for
the applicable Rolling Period as of the last day of the most recently ended
fiscal quarter.
8.18 TOTAL LEVERAGE RATIO. Maintain at all times during the periods set
forth in the left-hand column, a Total Leverage Ratio measured as of the last
day of the most recently ended fiscal quarter of not more than the ratio set
forth in the right-hand column:
THIRD AMENDED AND
58 RESTATED CREDIT AGREEMENT
<PAGE>
<TABLE>
PERIOD MAXIMUM RATIO
------ -------------
<S> <C>
Effective Date - 6/30/98 9.50: 1.0
7/1/98 - 12/31/98 9.00: 1.0
1/1/99 - 6/30/99 8.50: 1.0
7/1/99 - 12/31/99 8.00: 1.0
1/1/00 - 6/30/00 7.00: 1.0
7/1/00 - 12/31/00 6.00: 1.0
1/1/01 - thereafter 5.00: 1.0
</TABLE>
8.19 COMMUNICATIONS INTEREST COVERAGE. Maintain at all times a ratio
measured for the applicable Rolling Period as of the last day of the most
recently ended fiscal quarter of (a) Communications Operating Cash Flow to
(b) Communications Interest Expense, of not less than 1.25 to 1.0.
8.20 CAPITAL EXPENDITURES. Borrower shall not permit Capital Expenditures
of the Companies made during the period from January 1, 1998 through December
31, 1998, to exceed 110% of the amount budgeted for capital expenditures in the
Budget for 1998.
8.21 INTEREST RATE PROTECTION. Within 60 days from the date hereof, enter
into one or more fixed rate Interest Rate Agreements (which may include the
Existing Interest Rate Agreement), in form acceptable to Administrative Agent,
with one or more Lenders or institutions acceptable to Administrative Agent,
with respect to at least fifty percent (50%) of the Communications Total Debt
outstanding on the effective Date, with a duration of at least two years;
PROVIDED, HOWEVER, that (a) the protected rate shall be no greater than 2.5%
above the all-in rate as of the Effective Date hereof; (b) if the institution(s)
providing the interest rate protection is a Lender or Affiliate thereof, such
Lender shall be granted a security interest in the Collateral to the extent of
such Lender's credit exposure under such Interest Rate Agreements, which
security interest is PARI PASSU with that of Administrative Agent, on behalf of
Lenders; (c) each such Lender providing interest rate protection 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 Administrative Agent with respect to intercreditor
issues.
8.22 MANAGEMENT CHANGES. Notify Lenders in writing within thirty (30) days
after any change of Borrower's or Communications' senior management personnel.
8.23 SUCCESSOR ADMINISTRATIVE AGENT. In the event of the appointment of
any successor Administrative Agent pursuant to SECTION 13.1(c) hereof, to
execute and deliver any documents reasonably requested by Lenders 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.
8.24 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.
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59 RESTATED CREDIT AGREEMENT
<PAGE>
8.25 DEPOSIT ACCOUNT. Maintain at least one demand deposit account with
Administrative Agent.
8.26 OTHER INFORMATION. Provide Lenders with any other documents and
information, financial or otherwise, reasonably requested by Lenders from time
to time.
8.27 COBANK PARTICIPATION. At all times during which CoBank, ACB
("COBANK") is a Lender hereunder, acquire and maintain participation
certificates in CoBank (the "PARTICIPATION CERTIFICATES") in such amounts and at
such times as CoBank may from time to time require in accordance with its Bylaws
and Capital Plan (as each may be amended from time to time); PROVIDED, HOWEVER,
that the maximum amount of Participation Certificates that Borrower may be
required to purchase may not exceed the maximum amount permitted by CoBank's
Bylaws on the date hereof. The rights and obligations of the parties with
respect to the Participation Certificates and any other patronage or other
distributions shall be governed by CoBank's Bylaws.
8.28 DESIGNATION OF UNRESTRICTED SUBSIDIARY. So long as no Event of
Default or Default exists or arises as a result thereof, Borrower may from time
to time change the designation of any Subsidiary from a "RESTRICTED SUBSIDIARY"
to an "UNRESTRICTED SUBSIDIARY" or VICE VERSA; PROVIDED THAT, such designation
shall not be effective unless (a) any Subsidiary designated as an "UNRESTRICTED
SUBSIDIARY" satisfies all the requirements of an "UNRESTRICTED SUBSIDIARY" as
set forth in the definition of "UNRESTRICTED SUBSIDIARY" in SECTION 1.1 hereof;
(b) any Subsidiary designated as a "RESTRICTED SUBSIDIARY" is principally
engaged in the domestic cellular business; (c) Borrower shall deliver to
Administrative Agent notice of such designation which notice (i) shall be
delivered no later than 10 Business Days prior to such designation, (ii) shall
include a Compliance Certificate demonstrating pro forma compliance with the
financial covenants hereunder after giving effect to such designation, and
(iii) shall confirm that no Default or Event of Default exists or arises as a
result of such designation; (d) Borrower shall amend SCHEDULE 5.8 to reflect the
change in designation and shall deliver such amended Schedule to Administrative
Agent; and (e) Each Subsidiary designated as a Restricted Subsidiary shall
execute and deliver the Collateral Security Documents required by SECTION 8.30
hereof.
8.29 YEAR 2000. All of the material computer software, computer firmware,
computer hardware (whether general or special purpose), and other similar or
related items of automated, computerized, and/or software systems that are used
or relied on by the Companies in the conduct of their respective businesses will
not malfunction, will not cease to function, will not generate incorrect data,
and will not produce incorrect results when processing, providing, and/or
receiving (a) date-related data into and between the twentieth and twenty-first
centuries and (b) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
8.30 ADDITIONAL GUARANTIES AND COLLATERAL SECURITY AGREEMENTS. The
Companies shall cause each existing Subsidiary of Borrower (other than GRCGP)
and each Subsidiary of any Company hereafter formed, acquired, or designated as
a "RESTRICTED SUBSIDIARY" pursuant to SECTION 8.28 to execute and deliver to
Administrative Agent (a) A GUARANTY, IN SUBSTANTIALLY THE FORM AND UPON THE
TERMS OF EXHIBIT F, unconditionally guaranteeing full payment and performance of
the Obligation, subject to such limitations as are set forth in such Guaranty,
and (b) a Pledge Agreement, substantially in the form and upon the terms of
EXHIBIT E.
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60 RESTATED CREDIT AGREEMENT
<PAGE>
8.31 WIRELINE SPINOFF. So long as no Default or Event of Default then
exists or arises, Borrower shall cause the Wireline Spinoff to be consummated as
soon as (i) Borrower and Communications have received a favorable revenue ruling
from the Internal Revenue Service with respect to such Wireline Spinoff and
(ii) Borrower and Communications determine that favorable market conditions
exist for an initial public offering of the securities of Communications.
SECTION 9 NEGATIVE COVENANTS.
So long as the Commitment has not been terminated or the obligation has not
been paid in full, each of Borrower and each Guarantor (except Communications)
covenant and agree that without Required Lenders' prior written consent it will
not, and will not permit any Restricted Subsidiary to:
9.1 INDEBTEDNESS. Borrow any monies or create any Indebtedness, except
(a) the Loan; (b) intercompany loans and advances from Borrower to any
Restricted Company or to any New Guarantor (subject to the requirements of
SECTION 8.11(c) (other than any Cellular Partnership or GRCGP); (c) borrowings
by any cellular partnership obligor from Borrower, SO LONG AS (i) such
indebtedness is evidenced by Cellular Partnership Promissory Notes whose form
and terms including amortization schedules are acceptable to Agents; (ii) such
Cellular Partnership Promissory Notes and all partnership interests of the
Companies in such Cellular Partnership Obligor are pledged or assigned by
Borrower or the appropriate Company to Administrative Agent, for the benefit of
Lenders, pursuant to appropriate Collateral Security Documents, and (iii) such
Cellular Partnership Obligor has executed a Guaranty and has granted liens and
security interests in all of its assets in favor of Administrative Agent (for
the benefit of Lenders) by execution and delivery of all Collateral Security
Documents required by Administrative Agent; and (iv) such Cellular Partnership
Obligor has delivered all such searches, opinions, financing statements, and
other documents reasonably requested by Agents; (d) indebtedness incurred in
connection with Interest Rate Agreements entered into pursuant to SECTION 8.21
hereof; (e) Indebtedness of Borrower to Communications; PROVIDED THAT, such
Indebtedness (i) is unsecured, (ii) unguaranteed, (iii) is expressly
subordinated to the Obligation pursuant to a Subordination Agreement, and
(iv) which Subordinated Debt and related Subordination Agreement are on terms
acceptable to Borrower and Agents; (f) trade indebtedness incurred in the
ordinary course of business for value received; (g) Indebtedness arising under
Capital Leases not to exceed $10,000,000 in the aggregate on any date of
determination; (h) Indebtedness owed by Borrower to Dobson Wireline Company
existing on the Effective Date in the principal amount of $2,510,533 (which
indebtedness, once repaid, may not be reborrowed); and (i) indebtedness existing
on the Effective Date and listed on SCHEDULE 5.11.
9.2 GUARANTIES. Guarantee or assume or agree to become liable in any way,
either directly or indirectly, for any additional Indebtedness or liability of
others, except (a) to endorse checks or drafts in the ordinary course of
business and (b) the obligations of the Guarantors under the Guaranties.
9.3 LOANS. Make any loans or advances to others, OTHER THAN (a) loans and
advances from Borrower to the Guarantors (other than Communications or GRCGP)
which, in the case of the Cellular Partnership Obligors, shall be to the extent
permitted by SECTION 9.1(c), (b) loans or advances by Borrower to Communications
or any Restricted Subsidiary of Communications to the extent
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permitted in accordance with SECTION 9.6 hereof, and (c) the loan from
Borrower to New GRTI in an aggregate principal amount not to exceed
$6,110,554.75 at any time outstanding.
9.4 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 Administrative Agent (for the ratable
benefit of Lenders) as security for the Obligation, other than (a) 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; (b) pledges or deposits to secure
obligations under workmen's compensation, unemployment insurance, or social
security laws or similar legislation; (c) deposits to secure performance or
payment bonds, bids, tenders, contracts, leases, franchises, or public and
statutory obligations required in the ordinary course of business; (d) deposits
to secure surety, appeal, or custom bonds required in the ordinary course of
business; and (e) statutory liens on the Participation Certificates held by
Borrower pursuant to SECTION 8.27 to secure Borrower's obligations to CoBank
hereunder, SO LONG AS the proceeds of such Participation Certificates (as and
when secured) shall be shared by CoBank among Lenders.
9.5 ADDITIONAL NEGATIVE PLEDGE. Agree or covenant with or promise any
Person, other than Lenders, 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 SECTION 9.4 hereof.
9.6 RESTRICTED PAYMENTS. Make any Restricted Payments; PROVIDED, HOWEVER,
that, 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 after giving
pro forma effect thereto:
(a) To the extent Borrower receives cash dividends, Net Cash Proceeds
from any Equity Issuance, or the proceeds of any Subordinated Debt from
Communications, then Borrower may pay distributions or make loans or
advances to Communications in an aggregate amount equal to the sum of all
such cash dividends, Net Cash Proceeds from Equity Issuances, or proceeds
of intercompany Subordinated Debt, SO LONG AS the aggregate amount of
dividends, distributions, loans, or advances made pursuant to CLAUSES (a)
and (b) does not exceed $25,000,000 in any calendar year or $50,000,000
from the Effective Date to any date of determination;
(b) Borrower may make distributions, including, without limitation,
dividends, advances, or loans (herein collectively referred to as
"DISTRIBUTIONS") to Communications or any Restricted Subsidiary of
Communications if, on the date of such Distribution, the Total Leverage
Ratio is less than 6.50 to 1.0 after giving effect to any such
Distribution, and the aggregate amount of such Distributions does not
exceed $7,500,000 in any calendar year or $25,000,000 from the Effective
Date to any date of determination; PROVIDED THAT, on or prior to the date
of any such Distribution, Borrower shall provide to Administrative Agent a
certificate and related calculations demonstrating and confirming PRO FORMA
compliance with the limitations of this SECTION 9.6(b);
(c) Commencing after the first four interest payments on the
Communications Bond Debt have been made, so long as no Triggering Event has
occurred or is created thereby (as determined on a pro forma basis)
Borrower may pay dividends or make loans or
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advances to Communications in an amount sufficient (when aggregated with
the amounts of all other loans, advances, or dividends for such purposes
from all other Subsidiaries of Communications) (i) to pay
regularly-scheduled interest payments on the Communications Bond Debt as
in accordance with the Communications Bond Debt in effect on the
Effective Date or (ii) after January 15, 2003, to pay regularly-
scheduled cash distributions on the Preferred Stock or cash interest
payments on the Exchange Debentures, if issued; PROVIDED, HOWEVER, in the
event that any Triggering Event has occurred and is continuing, Borrower
may, commencing after the first four interest payments on the
Communications Bond Debt have been made or after January 15, 2003, with
respect to the Preferred Stock, declare and pay cash dividends to
Communications, or make loans or advances to Communications in an amount
which (when aggregated with the amounts of all other loans, advances, or
dividends for such purposes from all other Subsidiaries of Communications)
shall not exceed (A) amounts then required to make any past due payment
of cash interest or cash dividends on the Communications Bond Debt or the
Preferred Stock or, if issued, the Exchange Debentures by reason of such
Triggering Event, and (B) the next regularly scheduled payment of cash
interest or cash dividend, as the case may be, on the Communications Bond
Debt or the Preferred Stock (as the case may be) if, but only if, (1)
such Triggering Event (from the date of notice of the existence of the
earliest such Triggering Event if more than one exists) has continued for
180 days and has not been cured or waived; (2) such Triggering Event is
not an Event of Default set forth in SECTION 12.1(a), (j), or (k) hereof;
and (3) Lenders have not demanded payment in full of all obligations due
and owing by Borrower under this Agreement and the Loan Papers;
(d) Any Company which is a Cellular Partnership and any Cellular
Partnership Obligor 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 Cellular Partnership
attributable to the applicable partner; and
(e) Borrower may make Restricted Payments of the stock or assets of
Dobson Wireline Company and its subsidiaries, to the extent required to
consummate the Wireline Spinoff.
9.7 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 $15,000,000 in any calendar year;
(ii) sales, assignments, exchanges, leases, or other dispositions of
property between and among the Companies (other than GRCGP); (iii) the
transfer, sale, or disposition of non-wireless assets to Operations, so
long as the transfer, sale, or disposition of assets for fair market value
and for which at least 85% of the consideration is received in cash or cash
equivalents; and (iv) the sale or transfer of the stock of Dobson Wireline
Company and its Subsidiaries to the extent required to consummate the
Wireline Spinoff; and
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(b) discontinue, liquidate, or change in any material respect any
part of its operations or business(es).
9.8 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 and Permitted Acquisitions, subject to the conditions and
limitations set forth in the definitions 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 mergers with any of its Restricted Subsidiaries
(other than GRCGP), SO LONG AS in any such merger with Borrower, Borrower is the
surviving entity; PROVIDED THAT, notwithstanding the foregoing limitations on
investments, Borrower may invest in cellular, local exchange, or PCS assets
("SPECIAL INVESTMENTS"), SO LONG AS each such Special Investment does not exceed
the following limitations, determined as of the date such Special Investment is
to be made (each, an "INVESTMENT DATE") and after giving effect to such Special
Investment and SO LONG AS on or prior to the Investment Date for any such
Special Investment, Borrower provides to Administrative Agent a certificate and
related calculations demonstrating and confirming pro forma compliance with the
following limitations (and, to the extent requested by Administrative Agent,
evidence that no approval of any governmental authority is required (which has
not been obtained) in connection with such Special Investments or the financing
thereof):
(a) If the Senior Leverage Ratio on such Investment Date is less than
7.00 to 1.0, (i) the aggregate amount of Special Investments made during
such calendar year shall not exceed $10,000,000 and (ii) the aggregate
amount of Special Investments made from the Effective Date to and including
the Investment Date shall not exceed the LESSER of (x) $50,000,000 or
(y) the SUM of $40,000,000 plus 25% of the Net Cash Proceeds received by
Borrower from any Equity Issuance; or
(b) If the Senior Leverage Ratio on such Investment Date is greater
than or equal to 7.00 to 1.0, (i) the aggregate amount of Special
Investments made during such calendar year shall not exceed $7,500,000 and
(ii) the aggregate amount of Special Investments made from the Effective
Date to and including the Investment Date shall not exceed the LESSER of
(A) $50,000,000 or (B) the SUM of $25,000,000 plus 15% of the Net Cash
Proceeds received by Borrower from any Equity Issuance.
9.9 PAYMENTS TO AFFILIATES. Pay any salaries or other compensation,
consulting fees, or management fees or other like payments to any Affiliate of
Borrower other than in the ordinary course of business for services rendered
without any profit or margin with respect thereto.
9.10 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 principal business in the extension of credit for purchasing or carrying
such securities.
9.11 AMENDMENTS TO DOCUMENTS. (a) Amend or permit any amendments to any
Company's Articles of Incorporation or Bylaws, or any Partnership Agreement of
any Cellular Partnership Obligor or any Company that is a Cellular Partnership,
as in effect on the date of this Agreement, if such action could adversely
affect the rights of Lenders; (b) amend any existing credit arrangement
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or enter into any new credit arrangement (to the extent permitted by the Loan
Papers), if such amended or new credit arrangements contain any provisions
which are materially more restrictive (as reasonably determined by Agents)
than the provisions of the Loan Papers; or (c) amend any credit arrangements
with new GRTI (including any collateral arrangements with respect thereto) in
effect on the Closing Date which would have the effect of releasing,
diminishing, or impairing Borrower's lien on new GRTI'S partnership interest
in GRCGP and on any partnership distributions with respect thereto.
SECTION 10 NEGATIVE COVENANTS OF COMMUNICATIONS.
So long as the Commitment has not been terminated or the Obligation has not
been paid in full, Communications covenants and agrees (and agrees to cause each
other Restricted Subsidiary of Communications, to the extent any covenant is
applicable to such entity) to perform, observe, and comply with each of the
following, UNLESS Communications receives prior written consent to the contrary
from Required Lenders:
10.1 INDEBTEDNESS. Neither Communications nor any Restricted Subsidiary of
Communications (other than the Companies or Guarantors) shall borrow any monies
or create any Indebtedness, except (a) unsecured indebtedness (i) with respect
to which Communications has provided a compliance certificate to Administrative
Agent evidencing pro forma compliance with all terms and conditions of this
Agreement after giving effect to such incurrence of Indebtedness, (ii) which
Indebtedness is on terms no more restrictive than the Loan Papers and otherwise
reasonably acceptable to Agents, and (iii) with respect to which Borrower
complies with the provisions of SECTION 2.5(b)(iii) hereof, and (b) the
Communications Bond Debt; PROVIDED THAT, Restricted Subsidiaries of
Communications (other than the Companies or Guarantors) may incur Indebtedness,
SO LONG AS (x) after giving pro forma effect to such incurrence of Indebtedness,
no Default or Event of Default exists or arises, including, without limitation,
compliance with the Total Leverage Ratio requirement of SECTION 8.18; and
(y) such Indebtedness is incurred and remains on a non-recourse basis to
Borrower and all Guarantors on terms and conditions satisfactory to Agents.
10.2 GUARANTIES. Communications shall not guarantee or assume or agree to
become liable in any way, either directly or indirectly, for any additional
indebtedness or liability of others, including, without limitation, Unrestricted
Subsidiaries, except to endorse checks or drafts in the ordinary course of
business and except for Communications' guarantee of the Loan provided herein.
10.3 LOANS. Communications shall not make any loans or advances to others,
other than (a) loans to Borrower, PROVIDED such loans are unsecured, are
expressly subordinated to the Loan pursuant to a Subordination Agreement, and
are subject to terms and conditions acceptable to Borrower and Agents; (b) loans
and advances to its Restricted Subsidiaries, other than the Companies or
Guarantors; and (c) a $63,000,000 subordinated loan to Operations evidenced by
that certain subordinated promissory note dated January 23, 1998 (as the same
may be renewed, extended, or modified with the consent of Agents, but in no
event shall such loan be increased without the consent of Required Lenders).
10.4 LIENS AND ENCUMBRANCES. Neither Communications nor any Restricted
Subsidiary of Communications (other than the Companies and Guarantors) shall
create, permit, or suffer the creation of any liens, security interests, or any
other encumbrances on any of its property, real or
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personal, EXCEPT in favor of Lenders as security for the Loan, EXCEPT (a) the
liens listed on SCHEDULE 10.4 attached hereto; (b) 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; (c) liens of mechanics,
carriers, warehousemen, or materialmen required in the ordinary course of
business and not yet due and payable; (d) pledges or deposits to secure
obligations under workmen's compensation, unemployment insurance, social
security laws, or similar legislation; (e) deposits to secure performance or
payment bonds, bids, tenders, contracts, leases, franchises, or public and
statutory obligations required in the ordinary course of business; (f)
deposits to secure surety, appeal, or custom bonds required in the ordinary
course of business; (g) liens on the assets (but not the stock) of DCC PCS,
Inc. to secure DCC PCS, Inc.'s Indebtedness; (h) the pledge of the Shares of
Borrower in favor of Lenders; (i) 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; (j) statutory liens on the Participation
Certificates in CoBank held by Borrower to secure Borrower's obligations to
CoBank hereunder, the proceeds of such Participation Certificates (as and
when received) which CoBank hereby agrees shall be shared among Lenders
pursuant to SECTION 14.2 hereof; and (k) liens securing indebtedness and
obligations under this Agreement and the related loan documents.
10.5 ADDITIONAL NEGATIVE PLEDGE. Communications shall not agree or
covenant with or promise any Person, other than Lenders, the trustee for the
holders of the Communications Bond Debt, the trustee for the holders of the
Exchange Debentures, or the holders of the Preferred Stock, 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 SECTION 10.4 hereof.
10.6 COMMUNICATIONS BOND DEBT, PREFERRED STOCK, AND EXCHANGE DEBENTURES.
Communications (a) shall not amend or modify any provision of, or waive any
condition under, any document or instrument evidencing or relating to the
Communications Bond Debt, the Preferred Stock, or the Exchange Debentures,
including, without limitation, the Indenture pursuant to which the
Communications Bond Debt was issued, the Certificate of Designation for the
Preferred Stock, and the Exchange Debenture Indenture; (b) make any optional
redemptions, prepayments, or other payments on the Communications Bond Debt,
Preferred Stock, or any Exchange Debentures, other than (i) regularly scheduled
interest payment on the Communications Bond Debt, or (ii) after January 15,
2003, regularly-scheduled dividends on the Preferred Stock; (c) use dividends
received from Borrower for any purpose, other than to make regularly scheduled
interest payments on the Communications Bond Debt, or after January 15, 2003, to
pay regularly scheduled dividends on the Preferred Stock; (d) use the proceeds
of the Communications Bond Debt for any purpose other than (i) to make a
contribution to the equity of Borrower and (ii) to fund the accounts and
purchase the investments under the Escrow Agreement; and (e) 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.
10.7 AMENDMENTS TO DOCUMENTS. Communications shall not amend or permit any
amendments to Communications' Amended Articles of Incorporation as in effect on
the date of this Agreement.
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10.8 DESIGNATION OF UNRESTRICTED COMPANIES. So long as no Default or Event
of Default exists or arises as a result thereof, Communications may from time to
time change the designation of Subsidiary of Communications from a Restricted
Subsidiary of Communications to an Unrestricted Subsidiary of Communications, or
VICE VERSA; PROVIDED THAT, (a) Communications shall provide Administrative Agent
written notification of such designation not less than 10 Business Days prior to
the effective date of such designation, together with a pro forma Compliance
Certificate demonstrating compliance with the financial covenants after giving
effect to such designation, (b) such designated Unrestricted Subsidiary shall
satisfy all the requirements of an Unrestricted Subsidiary, as set forth in the
definition of such term in SECTION 1.1, and (c) Communications shall deliver to
Administrative Agent a written certification executed by Borrower and
Communications, certifying that no Default or Event of Default exists prior to
or after giving effect to such designation.
10.9 MANAGEMENT EXPENSES. To the extent Communications charges any
Subsidiary for management expenses, such management expenses must be fair and
reasonable and must be allocated among the Subsidiaries on a consistently-
applied basis.
10.10 AFFILIATE TRANSACTIONS. Communications shall cause all
transactions between any Affiliates of Communications 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 and shall not pay any salaries or
other compensation, consulting fees, management fees, or other like payments to
Affiliates of Communications in any fiscal year, other than in the ordinary
course of business for services rendered without any profit or margin with
respect thereto.
SECTION 11 ADDITIONAL COLLATERAL AND RIGHT OF SET OFF.
11.1 ADDITIONAL COLLATERAL. As additional Collateral for the payment of
any and all of Borrower's indebtedness and obligations to Lenders, whether
matured or unmatured, now existing, hereafter incurred or created hereunder, or
otherwise, Borrower, Communications, and each Guarantor hereby grant to
Administrative Agent, for the benefit of Lenders, a security interest in and
lien upon all funds, balances, or other property of any kind of Borrower, or in
which Borrower has an interest, limited to the interest of Borrower therein,
whether now or hereafter in the possession, custody, or control of any Lender.
11.2 RIGHT OF SETOFF. Each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by Law, to apply any and all
deposits (general or special, time or demand, or provisional or final) at any
time held and other indebtedness at any time owing by such Lender to or for the
credit or the account of Borrower, Communications, or any Subsidiary of Borrower
or Communications against any and all of the obligations of Borrower or
Communications or any Subsidiary of Borrower or Communications, now or hereafter
existing under the Loan Papers held by such Lender, irrespective of whether such
Lender shall have made any demand under this Agreement and although such
obligations may be unmatured. Each Lender agrees promptly to notify Borrower
after any such setoff and application made by such Lender; PROVIDED, HOWEVER,
that the failure to give such notice shall not affect the validity of such
setoff and application. The rights of each Lender under this SECTION 9 are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which such Lender may have.
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SECTION 12 DEFAULT.
12.1 EVENTS OF DEFAULT. Each of the following events shall be an Event of
Default hereunder:
(a) The failure or refusal of any Company or Guarantor to pay (a) the
Obligation when the same becomes due (whether by its terms, by
acceleration, or as otherwise provided in the Loan Papers); and (b) the
indemnifications and reimbursement obligations provided for in the Loan
Papers after demand therefor;
(b) 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;
(c) Borrower, Communications, any Guarantor, or any Restricted
Subsidiary of Borrower or Communications 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) There shall be a default in or failure to observe at any date of
determination the covenants set forth in SECTIONS 8.14 through 8.20 hereof,
and SECTION 9 or 10 hereof;
(e) There shall exist any default in the performance of any other
agreement or covenant contained herein (other than as provided in
CLAUSES (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;
(f) There shall exist a "DEFAULT" under (a) the Revolving Credit
Agreement dated of even date herewith, among Operations, NationsBank of
Texas, N.A., as Administrative Agent, and the lenders party thereto (as the
same may be amended, modified, restated, or supplemented from time to time;
or (b) the 364-day Revolving Facility dated of even date herewith among
Operations, NationsBank of TEXAS, N.A., as Administrative Agent, and the
lenders party thereto.
(g) 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 or, on and after any public offering of the
stock of Communications, would cease to be the beneficial owner of 35% or
more of the Voting Stock of Communications; if Communications shall cease
to own (directly or indirectly) one hundred percent (100%) of the issued
and outstanding Shares of Borrower and its Subsidiaries; if Borrower shall
cease to own one hundred percent (100%) of the issued and outstanding
Shares of its Subsidiaries (other than the Cellular Partnerships); or if
Cellular shall cease to own at least the percentage interest in the
Cellular Partnerships that it owns on the Effective Date (as reflected on
SCHEDULE 5.8 as delivered on the Effective Date).
(h) Lenders cease to hold 100% of the issued and outstanding Shares
of common stock of Borrower and its Subsidiaries as Collateral;
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(i) Everett Dobson shall cease to hold a senior management position
with Communications or Borrower and such event shall continue uncured for
60 days;
(j) Custody or control of any substantial part of the property of
Borrower, 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, or
Guarantor 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, or any Guarantor;
(k) Borrower, Communications, any Guarantor, or any Subsidiary of
Borrower becomes insolvent or 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 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
release of debtors is instituted or commenced by Borrower, Communications,
any Guarantor, or any Restricted Subsidiary; if any order for relief is
entered relating to any of the foregoing proceedings; if Borrower,
Communications, any Guarantor, or any Restricted Subsidiary shall call a
meeting of its creditors with a view to arranging a composition or
adjustment of its debts; or if Borrower, Communications, any of 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) 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 Borrower, Communications, any
Guarantor, any of their respective Subsidiaries;
(m) 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 Restricted Subsidiary shall have incurred, or in the
opinion of Lenders be reasonably likely to incur, liability in excess of
$3,000,000 during any consecutive twelve (12) month period;
(n) Any judgment, writ, warrant, attachment, 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, any Restricted Subsidiary, or any
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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) The payment (including, without limitation, any payment by any
Company or Guarantor in respect of any sinking fund, defeasance,
redemption, or payment of any dividend or distribution) by any Company or
Guarantor of any amount of the Communications Bond Debt, any Subordinated
Debt, any Exchange Debenture, or the Preferred Stock in a manner or at a
time during which such payment is not permitted under the terms of the Loan
Papers, the Exchange Debenture Indenture, the Certificate of Designation
for the Preferred Stock, or under any instrument or document evidencing or
creating the Communications Bond Debt or Subordinated Debt, including,
without limitation, any subordination provisions set forth therein;
(p) (i) The occurrence of any "DEFAULT" or "EVENT OF DEFAULT" or
other breach which remains uncured on any date of determination under or
with respect to the Communications Bond Debt, the Exchange Debentures, the
Preferred Stock, or any agreement creating or evidencing any Subordinated
Debt; (ii) the trustee with respect to, or any holder of, the
Communications Bond Debt, the Exchange Debentures, the Preferred Stock, or
any Subordinated Debt shall effectively declare all or any portion of that
Indebtedness or obligation thereunder due and payable prior to the stated
maturity thereof; or (iii) the Subordinated Debt, the Communications Bond
Debt, or Indebtedness or Obligations under the Exchange Debentures or the
Preferred Stock becomes due before its stated maturity by acceleration of
the maturity thereof; or
(q) If an event shall occur, including, without limitation, a "CHANGE
IN CONTROL" as defined in any documents evidencing or creating the
Communications Bond Debt, the Exchange Debentures, or the Preferred Stock,
or any agreement evidencing or creating the Subordinated Debt, and (i) the
trustee or the holders of any such Indebtedness or obligation shall
initiate notice to request or require (or any Company or Guarantor shall
automatically be so required) to redeem or repurchase such Indebtedness or
obligation, or (ii) any Company or Guarantor shall initiate notice to
holders of the Subordinated Debt or the holders of any Communications Bond
Debt, Preferred Stock, or Exchange Debentures, in connection with a
redemption of any Indebtedness or obligation arising under such agreements
or instruments.
12.2 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 Lenders and by notice by Administrative Agent to Borrower
(except if an Event of Default described in SECTION 12.1(k) shall occur, in
which case acceleration shall occur automatically without notice), Required
Lenders may (a) terminate the commitment, and/or (b) declare the entire unpaid
balance, principal, interest, and fees, of all indebtedness of Borrower to
Lenders, hereunder or otherwise, to be immediately due and payable. Upon a
declaration of acceleration, the Commitment shall immediately and automatically
terminate, Lenders 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,
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Lenders shall have all the rights and remedies granted by any applicable law,
all of which shall be cumulative in nature.
12.3 LIMITATION OF RIGHTS. Notwithstanding any other provision of this
Agreement or any other Loan Paper, any action taken or proposed to be taken by
Collateral Agent, any Co-Agent, any Managing Agent, any Agent, or any Lender
under any Loan Paper which would affect the operational, voting, or other
control of any Company or Guarantor, shall be pursuant to SECTION 310(d) of the
COMMUNICATIONS ACT of 1934 (as amended), any applicable state LAW, and the
applicable rules and regulations thereunder and, if and to the extent required
thereby, subject to the prior consent of the FCC or any applicable PUC.
SECTION 13 AGREEMENT AMONG LENDERS.
13.1 ADMINISTRATIVE AGENT.
(a) Each Lender hereby appoints CoreStates Bank, N.A. (and CoreStates
Bank, N.A. hereby accepts such appointment) as its nominee and agent, in
its name and on its behalf: (i) to act as nominee for and on behalf of
such Lender in and under all Loan Papers; (ii) to arrange the means whereby
the funds of lenders are to be made available to Borrower under the Loan
Papers; (iii) to take such action as may be requested by any Lender under
the Loan Papers (when such Lender is entitled to make such request under
the Loan Papers and after such requesting Lender has obtained the
concurrence of such other Lenders as may be required under the Loan
Papers); (iv) to receive all documents and items to be furnished to Lenders
under the Loan Papers; (v) to be the secured party, mortgagee, beneficiary,
and similar party in respect of, and to receive, as the case may be, any
collateral for the benefit of Lenders; (vi) to timely distribute, and
Administrative Agent agrees to so distribute, to each Lender all material
information, requests, documents, and items received from Borrower under
the Loan Papers; (vii) to promptly distribute to each Lender its ratable
part of each payment or prepayment (whether voluntary, as proceeds of
collateral upon or after foreclosure, as proceeds of insurance thereon, or
otherwise) in accordance with the terms of the Loan Papers; (viii) to
deliver to the appropriate persons requests, demands, approvals, and
consents received from Lenders; and (ix) to execute, on behalf of Lenders,
such releases or other documents or instruments as are permitted by the
Loan Papers or as directed by Lenders from time to time; PROVIDED, HOWEVER,
Administrative Agent shall not be required to take any action which exposes
Administrative Agent to personal liability or which is contrary to the Loan
Papers or applicable law.
(b) Each Lender hereby appoints NationsBank of TEXAS, N.A., as
Syndication Agent, and Toronto Dominion (Texas), Inc., as Documentation
Agent (and NationsBank of Texas, N.A. and Toronto Dominion (Texas), Inc.
hereby accept such appointments), to take such actions, if any, as are
delegated to such Syndication Agent and Documentation Agent, respectively,
under the terms of the Loan Papers.
(c) Agents (in their respective agency capacities) may resign at any
time from their respective agent positions under the Loan Papers by giving
written notice thereof to Lenders and may be removed as such Agent under
the Loan Papers at any time with cause by Required Lenders. Should the
initial or any successor Agent ever cease to be a party
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hereto or should the initial or any successor Agent ever resign or be
removed as Agent, then Required Lenders shall elect the successor Agent
from among the Lenders (other than the resigning Agent). If no
successor Agent shall have been so appointed by Required Lenders, within
30 days after the retiring Agent's giving of notice of resignation or
Required Lenders' removal of the retiring Agent, then the retiring Agent
may, on behalf of Lenders, appoint a successor Agent, which shall be a
commercial bank having a combined capital and surplus of at least
$1,000,000,000. Upon the acceptance of any appointment as Agent under
the Loan Papers by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the Rights of the
retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations of Agent under the Loan Papers; PROVIDED, THAT
the predecessor Administrative Agent shall deliver to its successor
Administrative Agent all collateral, documents, and money held by it as
Administrative Agent, if any, whereupon such predecessor Administrative
Agent shall be discharged from its duties and obligations as
Administrative Agent under the Loan Papers (PROVIDED, HOWEVER, THAT when
used in connection with LCs issued and outstanding prior to the
appointment of the successor Administrative Agent, "ADMINISTRATIVE
AGENT" shall continue to refer solely to the bank that issued the
outstanding LC; PROVIDED FURTHER THAT any LCs issued or renewed after
the appointment of any successor Administrative Agent shall be issued by
such successor Administrative Agent), and each lender shall execute such
documents as any Lender may reasonably request to reflect such change in
and under the Loan Papers. After any retiring Agent's resignation or
removal as Agent under the Loan Papers, the provisions of this SECTION
13 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under the Loan Papers.
(d) Each Agent, in its capacity as a Lender, shall have the same
Rights under the Loan Papers as any other Lender and may exercise the same
as though it were not acting as an Agent; the term "LENDER" shall, unless
the context otherwise indicates, include Agents; and any resignation, or
removal of by any Agent hereunder shall not impair or otherwise affect any
Rights which it has or may have in its capacity as an individual Lender.
Each Lender and Borrower agree that Agents are not fiduciaries for Lenders
or for Borrower but simply is acting in the capacity described herein to
alleviate administrative burdens for both Borrower and Lenders, that Agents
have no duties or responsibilities to Lenders or Borrower except those
expressly set forth herein, and that Agents in their capacities as Lenders
have all Rights of any other Lender.
(e) Each Agent and its Affiliates may now or hereafter be engaged in
one or more loan, letter of credit, leasing, or other financing
transactions with Borrower, act as trustee or depositary for Borrower, or
otherwise be engaged in other transactions with Borrower (collectively, the
"OTHER ACTIVITIES") not the subject of the Loan Papers. Without limiting
the Rights of Lenders specifically set forth in the Loan Papers, Agents and
their respective Affiliates shall not be responsible to account to Lenders
for such other activities, and no Lender shall have any interest in any
other activities, any present or future guaranties by or for the account of
Borrower which are not contemplated or included in the Loan Papers, any
present or future offset exercised by any Agent and its Affiliates in
respect of such other activities, any present or future property taken as
security for any such other activities, or any property now or hereafter in
the possession or control of any Agent or its Affiliates which may be or
become security for the obligations of Borrower arising under the Loan
Papers by
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reason of the general description of indebtedness secured or of
property contained in any other agreements, documents or instruments
related to any such other activities; PROVIDED THAT, if any payments in
respect of such guaranties or such property or the proceeds thereof shall
be applied to reduction of the obligations of Borrower arising under the
Loan Papers, then each Lender shall be entitled to share in such
application ratably.
13.2 EXPENSES. Upon demand by Administrative Agent, each Lender shall pay
its Pro Rata Part of any reasonable expenses (including, without limitation,
court costs, reasonable attorneys' fees, and other costs of collection) incurred
by Administrative Agent or Syndication Agent in connection with any of the Loan
Papers if and to the extent such Agents do not receive reimbursement therefor
from other sources within 60 days after incurred; PROVIDED THAT, each Lender
shall be entitled to receive its Pro Rata Part of any reimbursement for such
expenses, or part thereof, which such Agents subsequently receive from such
other sources.
13.3 PROPORTIONATE ABSORPTION OF LOSSES. Except as otherwise provided in
the Loan Papers, nothing in the Loan Papers shall be deemed to give any Lender
any advantage over any other Lender insofar as the obligation arising under the
Loan Papers is concerned, or to relieve any Lender from absorbing its Pro Rata
Part of any losses sustained with respect to the Obligation (except to the
extent such losses result from unilateral actions or inactions of any Lender
that are not made in accordance with the terms and provisions of the Loan
Papers).
13.4 DELEGATION OF DUTIES; RELIANCE. Agents may perform any of their
respective duties or exercise any of their respective rights under the Loan
Papers by or through its Representatives. Agents and their Representatives
shall (a) be entitled to rely upon (and shall be protected in relying upon) any
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telecopy, telegram, telex or teletype message, statement, order, or other
documents or conversation believed by it or them to be genuine and correct and
to have been signed or made by the proper person and, with respect to legal
matters, upon opinion of counsel selected by Administrative Agent, (b) be
entitled to deem and treat each Lender as the owner and holder of the Principal
debt owed to such Lender for all purposes until, subject to SECTION 14.2,
written notice of the assignment or transfer thereof shall have been given to
and received by Administrative Agent (and any request, authorization, consent,
or approval of any Lender shall be conclusive and binding on each subsequent
holder, assignee, or transferee of the Principal Debt owed to such Lender or
portion thereof until such notice is given and received), (c) not be deemed to
have notice of the occurrence of an Event of Default unless a responsible
officer of Administrative Agent, who handles matters associated with the Loan
Papers and transactions thereunder, has received written notice from a Lender or
Borrower and stating that such notice is a "NOTICE OF DEFAULT," and (d) be
entitled to consult with legal counsel (including counsel for Borrower),
independent accountants, and other experts selected by Administrative Agent and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts.
13.5 LIMITATION OF LIABILITY.
(a) No Agent or any of its Representatives shall be liable for any
action taken or omitted to be taken by it or them under the Loan Papers in
good faith and reasonably believed by it or them to be within the
discretion or power conferred upon it or them by the Loan Papers or be
responsible for the consequences of any error of judgment, except for
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fraud, gross negligence, or willful misconduct; and no Agent or any of its
Representatives has a fiduciary relationship with any Lender by virtue of
the Loan Papers (PROVIDED THAT, nothing herein shall negate the obligation
of Administrative Agent to account for funds received by it for the account
of any Lender).
(b) Unless indemnified to its satisfaction against loss, cost,
liability, and expense, no Agent shall be compelled to do any act under
the Loan Papers or to take any action toward the execution or enforcement
of the powers thereby created or to prosecute or defend any suit in respect
of the Loan Papers. If Administrative Agent or any Agent requests
instructions from Lenders or required Lenders, as the case may be, with
respect to any act or action (including, but not limited to, any failure to
act) in connection with any Loan Paper, Administrative Agent or Agents, as
the case may be, shall be entitled (but shall not be required) to refrain
(without incurring any liability to any person by so refraining) from such
act or action unless and until it has received such instructions. Except
where action of required Lenders or all Lenders is required in the Loan
Papers, agents may act hereunder in their own discretion without requesting
instructions. In no event, however, shall Administrative Agent, any Agent,
or any of its respective Representatives be required to take any action
which it or they determine could incur for it or them criminal or onerous
civil liability. Without limiting the generality of the foregoing, no
Lender shall have any right of action against any Agent as a result of such
Agent's acting or refraining from acting hereunder in accordance with the
instructions of Required Lenders.
(c) Neither Administrative Agent nor any other Agent shall be
responsible in any manner to any Lender or any participant for, and each
lender represents and warrants that it has not relied upon Administrative
Agent or any Agent in respect of, (i) the creditworthiness of any Company
or Guarantor and the risks involved to such Lender, (ii) the effectiveness,
enforceability, genuineness, validity, or the due execution of any Loan
Paper, (iii) any representation, warranty, document, certificate, report,
or statement made therein or furnished thereunder or in connection
therewith, (iv) the existence, priority, or perfection of any Lien
hereafter granted or purported to be granted under any Loan Paper, or
(v) observation of or compliance with any of the terms, covenants, or
conditions of any Loan Paper on the part of any Company or Guarantor. Each
Lender agrees to indemnify Agents and their respective Representatives and
hold them harmless from and against (but limited to such Lender's Pro Rata
Part of) any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, reasonable expenses, and reasonable
disbursements of any kind or nature whatsoever which may be imposed on,
asserted against, or incurred by them in any way relating to or arising out
of the Loan Papers or any action taken or omitted by them under the Loan
Papers (including any of the foregoing arising from the negligence of any
Agent), to the extent Agents and their respective Representatives are not
reimbursed for such amounts by any Company (PROVIDED THAT, no Agent or any
respective Representative of an Agent shall have the right to be
indemnified hereunder for its or their own fraud, gross negligence, or
willful misconduct).
13.6 DEFAULT; COLLATERAL. Upon the occurrence and continuance of an Event
of Default, Lenders agree to promptly confer in order that required Lenders or
Lenders, as the case may be, may agree upon a course of action for the
enforcement of the rights of Lenders; and Administrative Agent shall be entitled
to refrain from taking any action (without incurring any liability to any person
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for so refraining) unless and until Administrative Agent shall have received
instructions from Required Lenders or Lenders, as appropriate, in accordance
with the Loan Papers. All rights of action under this Agreement and under the
Notes and all rights to the Collateral, 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 Lender, and the recovery of any judgment shall be for the
benefit of Lenders subject to the expenses of Administrative Agent. In actions
with respect to any property of Borrower, Administrative Agent is acting for the
ratable benefit of each Lender. Any and all agreements to subordinate (whether
made heretofore or hereafter) other indebtedness or obligations of Borrower to
the Obligation shall be construed as being for the ratable benefit of each
Lender.
13.7 LIMITATION OF LIABILITY. To the extent permitted by Law, (a) neither
Administrative Agent nor any other Agent (acting in their respective agent
capacities) shall incur any liability to any other Lender, Managing Agent, or
Participant except for acts or omissions resulting from its own fraud, gross
negligence or wilful misconduct, and (b) no Agent, Managing Agent, Lender, or
Participant shall incur any liability to any other Person for any act or
omission of any other Lender or any other Participant.
13.8 RELATIONSHIP OF LENDERS. Nothing herein shall be construed as
creating a partnership or joint venture among Agents and Lenders.
13.9 BENEFITS OF AGREEMENT. Except for the representations and covenants
in SECTIONS 12.1(c) and 12.9 in favor of Borrower, none of the provisions of
this SECTION 12 shall inure to the benefit of any Company, any Guarantor, or any
other Person other than Lenders; consequently, no Company, no Guarantor, nor any
other Person shall be entitled to rely upon, or to raise as a defense, in any
manner whatsoever, the failure of any Lender to comply with such provisions.
13.10 MANAGING AGENTS AND CO-AGENTS. None of the Lenders identified in
this Agreement as "MANAGING AGENTS" or "CO-AGENTS" shall have any rights,
powers, obligations, liabilities, responsibilities, or duties under this
Agreement other than those applicable to all Lenders as such. Without limiting
the foregoing, none of the Lenders so identified "MANAGING AGENTS" or
"CO-AGENTS" shall have or be deemed to have any fiduciary relationship with any
Lender.
13.11 OBLIGATIONS SEVERAL. The obligations of Lenders hereunder are
several, and each Lender hereunder shall not be responsible for the obligations
of the other Lenders hereunder, nor will the failure of one Lender to perform
any of its obligations hereunder relieve the other Lenders from the performance
of their respective obligations hereunder.
SECTION 14 MISCELLANEOUS.
14.1 INDEMNIFICATION AND RELEASE PROVISIONS. Borrower and each Guarantor
hereby agree to defend Agents and each Lender and their 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,
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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 Statute to Borrower's or any Guarantor's or any
Restricted Subsidiary's properties or assets, except, however, to the extent
resulting from a Lender's own willful misconduct or gross negligence;
PROVIDED, HOWEVER, that Agents, Lenders, 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 Agents and each Lender 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, except, however, to the extent any of the foregoing
results from a Lender's own wilful misconduct or gross negligence. All
obligations provided for in this SECTION 14.1 shall survive any termination of
this Agreement or the Commitment and the repayment of the Loan.
14.2 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS.
(a) This Agreement shall be binding upon, and inure to the benefit of
the parties hereto and their respective successors and assigns, EXCEPT THAT
(i) Borrower may not, directly or indirectly, assign or transfer, or
attempt to assign or transfer, any of its rights, duties or obligations
under any Loan Paper without the express written consent of all Lenders,
and (ii) EXCEPT as permitted under this Section, no Lender may transfer,
pledge, assign, sell any participation in, or otherwise encumber its
portion of the Obligation.
(b) Each Lender may assign to one or more Eligible Assignees all or a
portion of its rights and obligations under this Agreement and the other
Loan Papers (including, without limitation, all or any part of its portion
of the Advances and its Note); PROVIDED, HOWEVER, that:
(i) each such assignment shall be to an Eligible Assignee;
(ii) Except in the case of an assignment to another Lender or an
assignment of all of a Lender's rights and obligations under this
agreement and the other Loan Papers, any such partial assignment (when
aggregated with the amounts of any concurrent assignments by the
assigning Lender to the same assignee under either or both of (A) the
Revolving Credit agreement dated as of March 25, 1998, among
operations, NationsBank of Texas, N.A., as "ADMINISTRATIVE AGENT," and
lenders party thereto [as the same may hereafter be amended, modified,
restated, or supplemented] and (b) the 364-Day Revolving Credit and
Term Loan Agreement dated as of March 25, 1998, among operations,
NationsBank of Texas, N.A., as "ADMINISTRATIVE AGENT," and the lenders
party thereto [as the same may hereafter be amended, modified,
restated, or supplemented]) shall be in an amount at least equal to
$5,000,000;
(iii) each such assignment by a Lender shall be of a constant,
and not varying, percentage of all of its rights and obligations under
this agreement and the note;
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(iv) the parties to such assignment shall execute and deliver to
the Administrative Agent for its acceptance an Assignment and
Acceptance Agreement in the form of EXHIBIT G hereto, together with
any Note subject to such assignment and a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance
Agreement, the assignee thereunder shall be a party hereto and, to the
extent of such assignment, have the obligations, rights, and benefits of a
Lender under the Loan Papers and the assigning Lender shall, to the extent
of such assignment, relinquish its rights and be released from its
obligations under the Loan Papers. Upon the consummation of any assignment
pursuant to this Section, but only upon the request of the assignor or
assignee made through Administrative Agent, Borrower shall issue the
appropriate Note to the assignor and the assignee, reflecting such
Assignment and Acceptance. If the assignee is not incorporated under the
laws of the United States of America or a state thereof, it shall deliver
to Borrower and Administrative Agent certification as to exemption from
deduction or withholding of Taxes in accordance with SECTION 4.6(d).
(c) Administrative Agent shall maintain at its address referred to in
SECTION 14.8 a copy of each Assignment and Acceptance Agreement delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment, and principal amount of the
Loan owing to, each Lender from time to time (the "REGISTER"). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and Borrower, Administrative Agent, and the Lenders may
treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of the Loan Papers. The Register shall be
available for inspection by Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice. Upon the consummation
of any assignment in accordance with this SECTION 14.16, SCHEDULE 2.1 shall
automatically be deemed amended (to the extent required) by Administrative
Agent to reflect the name, address, and respective percentage interest in
the Commitment of the assignor and assignee.
(d) Upon its receipt of an Assignment and Acceptance Agreement
executed by the parties thereto, together with any Note subject to such
assignment and payment of the processing fee, Administrative Agent shall,
if such Assignment and Acceptance has been completed and is in
substantially the form of EXHIBIT G hereto, (i) accept such Assignment and
Acceptance Agreement, (ii) record the information contained therein in the
Register, and (iii) give prompt notice thereof to the parties thereto.
(e) Subject to the provisions of this Section and in accordance with
applicable Law, any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable Law, at any time sell to
one or more Persons (each a "PARTICIPANT") participating interests in its
portion of the Obligation. In the event of any such sale to a Participant,
(i) such Lender shall remain a "LENDER" under this Agreement and the
Participant shall not constitute a "LENDER" hereunder, (ii) such Lender's
obligations under this Agreement shall remain unchanged, (iii) such Lender
shall remain solely responsible for the performance thereof, (iv) such
Lender shall remain the holder of its share of the Loan for
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all purposes under this Agreement, (v) Borrower and Administrative Agent
shall continue to deal solely and directly with such Lender in connection
with such Lender's rights and obligations under the Loan Papers, and (vi)
such Lender shall be solely responsible for any withholding taxes or any
filing or reporting requirements relating to such participation and shall
hold Borrower And Administrative Agent and their respective successors,
permitted assigns, officers, directors, employees, agents, and
representatives harmless against the same. Participants shall have no
rights under the Loan Papers, other than certain voting rights as
provided below. Subject to the following, each Lender shall be entitled
to obtain (on behalf of its Participants) the benefits of SECTION 4 with
respect to all participations in its part of the Obligation outstanding
from time to time so long as Borrower shall not be obligated to pay any
amount in excess of the amount that would be due to such Lender under
SECTION 4 calculated as though no participations have been made. No
Lender shall sell any participating interest under which the Participant
shall have any rights to approve any amendment, modification, or waiver
of any Loan Paper, except to the extent such amendment, modification, or
waiver extends the due date for payment of any amount in respect of
principal (OTHER THAN mandatory prepayments), interest, or fees due under
the Loan Papers, reduces the interest rate or the amount of principal or
fees applicable to the Obligation (EXCEPT such reductions as are
contemplated by this Agreement), or releases any material Guaranty or all
or any substantial portion of the Collateral for the Obligation under the
Loan Papers (EXCEPT such releases as are contemplated by this Agreement);
PROVIDED THAT, in those cases where a Participant is entitled to the
benefits of SECTION 4 or a Lender grants rights to its Participants to
approve amendments to or waivers of the Loan Papers respecting the
matters previously described in this sentence, such Lender must include a
voting mechanism in the relevant participation agreement or agreements,
as the case may be, whereby a majority of such Lender's portion of the
Obligation (whether held by such Lender or Participant) shall control the
vote for all of such Lender's portion of the Obligation. Except in the
case of the sale of a participating interest to another Lender, the
relevant participation agreement shall not permit the Participant to
transfer, pledge, assign, sell participations in, or otherwise encumber
its portion of the Obligation, unless the consent of the transferring
Lender (which consent will not be unreasonably withheld) has been
obtained.
(f) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time assign and pledge all or any part of its
portions of the Loan and its Note to any Federal Reserve Bank as collateral
security pursuant to Regulation A and any Operating Circular issued by such
Federal Reserve Bank. No such assignment shall release the assigning
Lender from its obligations hereunder.
(g) Any Lender may furnish any information concerning Borrower and
each of its Subsidiaries in the possession of such Lender from time to time
to Eligible Assignees and Participants (including prospective Eligible
Assignees and Participants).
14.3 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 State of Texas.
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14.4 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 SECTIONS 8.10 and 14.1 which provide otherwise, will continue in
full force and effect as long as any Indebtedness or other obligation of
Borrower to any Lender remains outstanding.
14.5 NO WAIVER; DELAY. If Lenders 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 Lender or the later occurrence
or recurrence of any of events giving rise to such power, right, or remedy with
respect to any Lender. No delay by Lenders in the exercise of any power, right,
or remedy shall, under any circumstance, 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 Lenders' powers, rights, or remedies. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
14.6 MODIFICATION; WAIVER. No modification or waiver of any provision of
this Agreement or any Note, nor any consent to any departure by Borrower or any
Guarantor herefrom or therefrom, shall in any case be effective unless the same
be in writing and signed by the requisite Lenders, 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 or Guarantor in any
case shall entitle Borrower or any Guarantor to any other or further notice or
demand in any similar or other circumstances. Notwithstanding the foregoing, no
modification or amendment hereof, consent hereunder, or waiver of Event of
Default shall be effective except by written consent of the Required Lenders;
PROVIDED, HOWEVER, that the written consent of all Lenders shall be required to
(a) decrease the rate of interest, (b) modify the amount of the Commitment,
(c) change the dates of required payments of interest and fees hereunder or of
required Commitment reductions, (d) decrease the principal amount of any payment
or Commitment reduction required hereunder; (e) decrease the Commitment fee or
Letter of Credit fees, (f) postpone the Final Maturity Date, (g) release any
Guarantor (except in connection with the redesignation of a "RESTRICTED
SUBSIDIARY" to an "UNRESTRICTED SUBSIDIARY" in accordance with SECTION 8.28) or
Collateral except as expressly permitted to be sold or transferred pursuant to
SECTION 9.7(a) hereof or otherwise expressly specified herein, (h) amend the
definition of Required Lenders, or (i) modify or waive the provisions of this
SECTION 14.6. Without the consent of such Lender, no Lender's Maximum Principal
Amount may be increased. Any amendment or waiver made pursuant to this
SECTION 14.6 shall apply to and bind all of Lenders and any future holder of any
Notes.
14.7 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.
14.8 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:
THIRD AMENDED AND
79 RESTATED CREDIT AGREEMENT
<PAGE>
if to Borrower:
Dobson Operating Company
13439 N. Broadway Extension, Suite 200
Oklahoma City, Oklahoma 73114
Attention: Everett Dobson
Telecopier: 405-391-8515
if to Administrative Agent:
CoreStates Bank, N.A.
F.C. 1-8-11-28
1339 Chestnut Street
Philadelphia, Pennsylvania 19101
Attention: Tony Parisi
Telecopier: 215-786-7721
if to Lenders and Agents:
to the names, addresses, and telecopier numbers set forth on
SCHEDULE 2.1 attached hereto.
14.9 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.
14.10 TIME OF DAY. All time of day restrictions imposed herein shall
be calculated using Administrative Agent's local time.
14.11 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.
14.12 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.
14.13 JURISDICTION; VENUE; SERVICE OF PROCESS; JURY TRIAL. EACH PARTY
HERETO, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY
(A) IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN TEXAS, AND AGREES AND CONSENTS THAT SERVICE OF PROCESS
MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING ARISING OUT OF OR IN CONNECTION WITH
THE LOAN PAPERS AND THE OBLIGATION BY SERVICE OF PROCESS AS PROVIDED BY TEXAS
LAW, (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
THIRD AMENDED AND
80 RESTATED CREDIT AGREEMENT
<PAGE>
LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN PAPERS AND THE
OBLIGATION BROUGHT IN ANY SUCH COURT, (C) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY
LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM,
(D) AGREES TO DESIGNATE AND MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN TEXAS IN
CONNECTION WITH ANY SUCH LITIGATION AND TO DELIVER TO ADMINISTRATIVE AGENT
EVIDENCE THEREOF, IF REQUESTED, (E) IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE
MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE
PREPAID, AT ITS ADDRESS SET FORTH HEREIN, (F) IRREVOCABLY AGREES THAT ANY LEGAL
PROCEEDING AGAINST ANY PARTY HERETO ARISING OUT OF OR IN CONNECTION WITH THE
LOAN PAPERS OR THE OBLIGATION SHALL BE BROUGHT IN ONE OF THE AFOREMENTIONED
COURTS, AND (G) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY LOAN PAPER OR THE TRANSACTIONS CONTEMPLATED THEREBY. The
scope of each of the foregoing waivers is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including, without limitation, contract claims, tort
claims, breach of duty claims, and all other common law and statutory claims.
The Companies, Guarantors, and each other party to this Agreement acknowledge
that this waiver is a material inducement to the Agreement of each party hereto
to enter into a business relationship, that each has already relied on this
waiver in entering into this Agreement, and each will continue to rely on each
of such waivers in related future dealings. The Companies, Guarantors, and each
other party to this Agreement warrant and represent that they have reviewed
these waivers with their legal counsel, and that they knowingly and voluntarily
agree to each such waiver following consultation with legal counsel. THE
WAIVERS IN THIS SECTION 14.13 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THESE WAIVERS SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS, AND REPLACEMENTS TO OR OF THIS OR ANY OTHER
LOAN PAPER. In the event of Litigation, this Agreement may be filed as a
written consent to a trial by the court.
14.14 ENTIRETY. THE RIGHTS AND OBLIGATIONS OF BORROWER, EACH
GUARANTOR, LENDERS, EACH MANAGING AGENT, AND EACH AGENT SHALL BE DETERMINED
SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL
AGREEMENTS BETWEEN SUCH PARTIES ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS.
THIS AGREEMENT (AS AMENDED IN WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN
LOAN PAPERS EXECUTED BY ANY BORROWER, ANY GUARANTOR, ANY LENDER, AND/OR
ADMINISTRATIVE AGENT, (TOGETHER WITH ALL COMMITMENT LETTERS AND FEE LETTERS AS
THEY RELATE TO THE PAYMENT OF FEES AFTER THE CLOSING DATE) REPRESENT THE FINAL
AGREEMENT BETWEEN BORROWER, EACH GUARANTOR, MANAGING AGENT, LENDERS, AND AGENTS,
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS BY SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
SUCH PARTIES.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
THIRD AMENDED AND
81 RESTATED CREDIT AGREEMENT
<PAGE>
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
By: By:
------------------------------ ------------------------------
Name: Stephen Dobson Name: Everett R. Dobson
Title: Secretary Title: President
[CORPORATE SEAL]
CORESTATES BANK, N.A., for itself as
Administrative Agent, as an Agent, and
as a Lender
By:
------------------------------
Name:
-------------------------
Title:
------------------------
[EXECUTIONS CONTINUED]
THIRD AMENDED AND
RESTATED CREDIT AGREEMENT
<PAGE>
Each of the undersigned GUARANTORS
hereby acknowledges that it has reviewed
this Credit Agreement and agrees that
the representations and covenants
contained in SECTIONS 5, 8, 9, and 10
hereof apply to Guarantors:
DOBSON COMMUNICATIONS CORPORATION
By:
---------------------------------
Name: Everett R. Dobson
Title: President
DOBSON CELLULAR SYSTEMS, INC.
By:
---------------------------------
Name: G. Edward Evans
Title: President
DOBSON CELLULAR OF WOODWARD, INC.
By:
---------------------------------
Name: G. Edward Evans
Title: President
DOBSON CELLULAR OF ENID, INC.
By:
---------------------------------
Name: G. Edward Evans
Title: President
DOBSON CELLULAR OF KANSAS/MISSOURI, INC.
By:
---------------------------------
Name: G. Edward Evans
Title: President
THIRD AMENDED AND
RESTATED CREDIT AGREEMENT
<PAGE>
DOBSON CELLULAR OF MARYLAND, INC.
By:
---------------------------------
Name: G. Edward Evans
Title: President
DOBSON CELLULAR OF ARIZONA, INC.
By:
---------------------------------
Name: G. Edward Evans
Title: President
TEXAS RSA NO. 2 LIMITED PARTNERSHIP
By: Dobson Cellular Systems, Inc.,
Its Managing General Partner
By:
---------------------------------
Name: G. Edward Evans
Title: President
OKLAHOMA RSA 5 LIMITED PARTNERSHIP
By: Dobson Cellular Systems, Inc.,
Its Managing General Partner
By:
---------------------------------
Name: G. Edward Evans
Title: President
OKLAHOMA RSA 7 LIMITED PARTNERSHIP
By: Dobson Cellular Systems, Inc.,
Its Managing General Partner
By:
---------------------------------
Name: G. Edward Evans
Title: President
THIRD AMENDED AND
RESTATED CREDIT AGREEMENT
<PAGE>
DOBSON CELLULAR SUBSIDIARY COMPANY
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
ASSOCIATED TELECOMMUNICATIONS &
TECHNOLOGIES, INC.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
DOBSON CELLULAR OF SOUTHERN
CALIFORNIA, INC.
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
THIRD AMENDED AND
RESTATED CREDIT AGREEMENT
<PAGE>
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT is entered into as of March 25, 1998, among
DOBSON CELLULAR OPERATIONS COMPANY, an Oklahoma corporation ("BORROWER"),
Lenders (hereinafter defined), FIRST UNION NATIONAL BANK, as Syndication Agent
(hereinafter defined), TORONTO DOMINION (TEXAS), INC., as Documentation Agent
(hereinafter defined), and NATIONSBANK OF TEXAS, N.A., as Administrative Agent
(hereinafter defined), for itself and the other Lenders, and the Managing Agents
(hereinafter defined) and Co-Agents (hereinafter defined).
RECITALS
A. Borrower is a newly-formed, wholly-owned Subsidiary of Dobson
Communications Corporation and has requested that Lenders extend credit to
Borrower in the form of this Revolving Credit Agreement (the "AGREEMENT"),
providing for a revolving loan facility in the aggregate principal amount of
$120,000,000 and an uncommitted discretionary acquisition revolving facility for
an aggregate principal amount of up to $75,000,000.
B. Additionally, Borrower has requested that Lenders consider extending
additional credit to Borrower in the form of a 364-Day Revolving Credit
Agreement, providing for a 364-day revolving credit and term loan facility in
the aggregate principal amount of $80,000,000.
C. Upon and subject to the terms and conditions of this Agreement,
Lenders are willing to extend such credit to Borrower.
Accordingly, in consideration of the mutual covenants contained herein,
Borrower, Administrative Agent, Documentation Agent, Syndication Agents, and
Lenders agree, as follows:
SECTION 1 DEFINITIONS AND TERMS.
1.1 DEFINITIONS. As used herein:
364-DAY FACILITY means the 364-Day Revolving Credit and Term Loan Agreement
dated of even date herewith among Borrower, the 364-Day Facility Lenders, and
the "ADMINISTRATIVE AGENT" under the 364-Day Facility (as the same may be
amended, modified, restated, and supplemented from time to time).
364-DAY FACILITY AGENTS means the "AGENTS" as such term is defined in the
364-Day Facility.
364-DAY FACILITY COMMITMENT means the "COMMITMENT" as such term is defined
in the 364-Day Facility.
364-DAY FACILITY LENDERS means, on any date of determination, those Lenders
party to the 364-Day Facility.
364-DAY FACILITY LOAN PAPERS means the "LOAN PAPERS" as such term is
defined in the 364-Day Facility.
364-DAY FACILITY OBLIGATION means the "OBLIGATION" as such term is defined
in the 364-Day Facility.
<PAGE>
364-DAY FACILITY PRINCIPAL DEBT means the "PRINCIPAL DEBT" as such term is
defined in the 364-Day Facility.
ACQUISITION means any transaction or series of related transactions for the
purpose of, or resulting in, directly or indirectly, (a) the acquisition by any
Company of all or substantially all of the assets of a Person or of any business
or division of a Person, (b) the acquisition by any Company of more than 50% of
any class of Voting Stock (or similar ownership interests) of any Person
(PROVIDED THAT, formation or organization of any entity shall not constitute an
"ACQUISITION" to the extent that the amount of the loan, advance, investment, or
capital contribution in such entity constitutes a permitted investment under
SECTION 9.20); or (c) a merger, consolidation, amalgamation, or other
combination by any Company with another Person if a Company is the surviving
entity; PROVIDED THAT, in any merger involving Borrower, Borrower must be the
surviving entity.
ACQUISITION COMMITMENT means, for any Acquisition Lender with respect to
any Acquisition Loan under the Acquisition Facility, the commitment amount
designated for such Lender by Borrower and Administrative Agent pursuant to the
procedures described in SECTION 2.3(b).
ACQUISITION CREDIT REQUEST has the meaning as defined in SECTION 2.3(a),
which shall have attached thereto a proposed "Sources and Uses" table and, if
applicable, a revised SCHEDULE 8.3 to this Agreement after giving effect to the
proposed Permitted Acquisition.
ACQUISITION FACILITY means the uncommitted acquisition revolver facility
described in and subject to the limitations of SECTION 2.3.
ACQUISITION LENDER means, at any date of determination, each Lender who has
an Acquisition Commitment or to whom Acquisition Principal Debt is owed.
ACQUISITION LOAN EFFECTIVE DATE is defined in SECTION 2.3(b).
ACQUISITION LOANS has the meaning as defined in SECTION 2.3(a).
ACQUISITION NOTE means a promissory note substantially in the form of
EXHIBIT A-2, and all renewals, extensions, or replacements of all or any part
thereof.
ACQUISITION PRINCIPAL DEBT means, at any date of determination, the
aggregate unpaid principal balance of all Borrowings under the Acquisition
Facility.
ADJUSTED EURODOLLAR RATE means, for any Eurodollar Rate Borrowing for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to
the quotient obtained by dividing (a) the Eurodollar Rate for such Eurodollar
Rate Borrowing for such Interest Period by (b) 1 minus the Reserve Requirement
for such Eurodollar Rate Borrowing for such Interest Period.
ADMINISTRATIVE AGENT means NationsBank of Texas, N.A., and its permitted
successors or assigns as "ADMINISTRATIVE AGENT" for Lenders under this
Agreement.
AFFILIATE of any Person means any other individual or entity who directly
or indirectly controls, or is controlled by, or is under common control with,
such Person, and, for purposes of this definition only, "CONTROL," "CONTROLLED
BY," and "UNDER COMMON CONTROL WITH" mean possession, directly or
2
<PAGE>
indirectly, of the power to direct or cause the direction of management or
policies (whether through ownership of voting securities, by contract, or
otherwise).
AGENTS means, collectively, the Administrative Agent, the Syndication
Agent, the Documentation Agent, the Collateral Agent, Managing Agents, and
Co-Agents.
AGREEMENT means this Revolving Credit Agreement (as the same may hereafter
be amended, modified, supplemented, or restated from time to time).
APPLICABLE LENDING OFFICE means, for each Lender and for each Type of
Borrowing, the "LENDING OFFICE" of such Lender (or an affiliate of such Lender)
designated on SCHEDULE 2.1 attached hereto or such other office that such Lender
(or an affiliate of such Lender) may from time to time specify to Administrative
Agent and Borrower by written notice in accordance with the terms hereof.
APPLICABLE MARGIN means, on any date of determination, with respect to each
Base Rate Borrowing or Eurodollar Rate Borrowing, respectively, the percentage
per annum set forth in the appropriate column below that corresponds to the
Senior Leverage Ratio at such date of determination, as calculated based on the
quarterly compliance certificate of Borrower most recently delivered pursuant to
SECTION 7.2 hereof:
<TABLE>
- --------------------------------------------------------------------------------
APPLICABLE MARGIN
-------------------------------------------------
SENIOR LEVERAGE RATIO EURODOLLAR RATE
BASE RATE BORROWINGS BORROWINGS
- --------------------------------------------------------------------------------
<S> <C> <C>
Less than 4.00:1.0 0.125% 1.125%
- --------------------------------------------------------------------------------
Greater than or equal to
4.00 to 1.0, 0.375% 1.375%
but less than 5.00:1.0
- --------------------------------------------------------------------------------
Greater than or equal to
5.00:1.0, 0.625% 1.625%
but less than 6.00:1.0
- --------------------------------------------------------------------------------
Greater than or equal to
6.00:1.0, 0.875% 1.875%
but less than 7.00:1.0
- --------------------------------------------------------------------------------
Greater than or equal to
7.00:1.0, 1.125% 2.125%
but less than 8.00:1.0
- --------------------------------------------------------------------------------
Greater than or equal to
8.00:1.0 1.375% 2.375%
- --------------------------------------------------------------------------------
</TABLE>
(a) Until the second Business Day after the initial Financial
Statements and Compliance Certificate for the fiscal quarter ending
December 31, 1997, shall have been delivered hereunder, the Applicable
Margin for Base Rate Borrowings and Eurodollar Rate Borrowings shall be
determined by reference to a Compliance Certificate delivered by Borrower
on the Closing Date. With respect to any adjustments in the Applicable
Margin as a result of changes in the Senior Leverage Ratio, such adjustment
shall be effective commencing on the second Business Day after the delivery
of Financial Statements (and related Compliance Certificate) pursuant to
SECTIONS 9.3(a) and 9.3(b) or the most recent Permitted Acquisition
Compliance Certificate for a Permitted Acquisition, as the case may be.
(b) If Borrower fails to timely furnish to Lenders the Financial
Statements and related Compliance Certificates as required to be delivered
pursuant to SECTIONS 9.3(a) and 9.3(b), and such failure shall not be
remedied within five days after written notice thereof from the
3
<PAGE>
Administrative Agent or any Lender, then the Applicable Margin shall be the
maximum Applicable Margin specified in the Table above.
APPLICABLE MARGIN FOR COMMITMENT FEES means, on any date of determination,
the percentage set forth in the table below which corresponds, on any date of
determination, with the Senior Leverage Ratio at such date of determination, as
calculated based on the quarterly compliance certificates of Borrower most
recently delivered pursuant to SECTION 7.2 hereof.
<TABLE>
- -------------------------------------------------------------------------------
SENIOR LEVERAGE RATIO APPLICABLE MARGIN FOR
REQUIREMENT COMMITMENT FEES
- -------------------------------------------------------------------------------
<S> <C>
Greater than or equal to 5.5 to 1.0 0.5000%
- -------------------------------------------------------------------------------
Less than 5.5 to 1.0 0.2500%
- -------------------------------------------------------------------------------
</TABLE>
(a) Until the second Business Day after the initial Financial
Statements and Compliance Certificate for the fiscal quarter ending
December 31, 1997, shall have been delivered hereunder, the Applicable
Margin for Commitment Fees shall be determined by reference to a Compliance
Certificate delivered by Borrower on the Closing Date. With respect to any
adjustments in the Applicable Margin for Commitment Fees as a result of
changes in the Senior Leverage Ratio, such adjustment shall be effective
commencing on the second Business Day after the delivery of Financial
Statements (and related Compliance Certificate) pursuant to SECTIONS 9.3(a)
and 9.3(b) or the most recent Permitted Acquisition Compliance Certificate
for a Permitted Acquisition, as the case may be.
(b) If Borrower fails to timely furnish to Lenders the Financial
Statements and related Compliance Certificates as required to be delivered
pursuant to SECTIONS 9.3(a) and 9.3(b), and such failure shall not be
remedied within five days after written notice thereof from the
Administrative Agent or any Lender, then the Applicable Margin for
Commitment Fees shall be the maximum Applicable Margin specified in the
table above.
ARRANGER means NationsBanc Montgomery Securities LLC, and its successors
and assigns.
ASSUMED TAXES means, (a) with respect to any Equity Issuance, an amount
equal to such incremental annual increase in franchise Taxes as Borrower
estimates in good faith shall be payable as a result of such Equity Issuance,
and (b) with respect to any Significant Sale, an amount equal to such percentage
as Borrower estimates in good faith to be its effective rate of the taxable gain
for federal and state income tax purposes with respect to such Significant Sale.
AUTHORIZATIONS means all filings, recordings, and registrations with, and
all validations or exemptions, approvals, orders, authorizations, consents,
franchises, licenses, certificates, and permits from, any Governmental Authority
(including, without limitation, the FCC and applicable PUCs), including without
limitation, any of the foregoing authorizing or permitting the acquisition,
construction, or operation of any System.
BASE RATE means, for any day, the rate per annum equal to the HIGHER of (a)
the Federal Funds Rate for such day plus one-half of one percent (.5%) and (b)
the Prime Rate for such day. Any change in the
4
<PAGE>
Base Rate due to a change in the Prime Rate or the Federal Funds Rate shall
be effective on the effective date of such change in the Prime Rate or the
Federal Funds Rate.
BASE RATE BORROWING means a Borrowing bearing interest at the SUM of the
Base Rate PLUS the Applicable Margin for Base Rate Borrowings.
BORROWER is defined in the preamble to this Agreement.
BORROWING means any amount disbursed (a) by one or more Lenders to Borrower
under the Loan Papers (under the Revolving Facility or the Acquisition
Facility), whether such amount constitutes an original disbursement of funds,
the continuation of an amount outstanding, or payment of a draft under an LC, or
(b) by any Lender in accordance with, and to satisfy the obligations of any
Company or any Guarantor under, any Loan Paper.
BORROWING DATE is defined in SECTION 2.5(a).
BUDGET means the most recently delivered of the (a) annual financial budget
for the Companies delivered on the Closing Date as required in ITEM 22 on
SCHEDULE 7.1 delivered pursuant to SECTION 7.1 or (b) the Budget delivered
pursuant to SECTION 9.3(d), together with any adjustments to any Budget (whether
described in CLAUSE (a) or (b)) made from time to time based on projections
delivered in connection with Permitted Acquisitions pursuant to SECTION 7.2 and
the requirements of a "PERMITTED ACQUISITION" as set forth in this SECTION 1.1
SO LONG AS such projections have been approved by Administrative Agent.
BUSINESS DAY means (a) for all purposes, any day OTHER THAN Saturday,
Sunday, and any other day on which commercial banking institutions are required
or authorized by Law to be closed in Dallas, Texas, and (b) in addition to the
foregoing, in respect of any Eurodollar Rate Borrowing, a day on which dealings
in United States dollars are conducted in the London interbank market and
commercial banks are open for international business in London.
CAPITAL EXPENDITURES means an expenditure for any fixed asset having a
useful life of more than one (1) year, or any improvements or additions thereto,
including the 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 SECTION 9.20 hereof.
CAPITAL LEASE means any capital lease or sublease which should be
capitalized on a balance sheet in accordance with GAAP.
CELLULAR PARTNERSHIP means any entity in which Borrower owns, directly or
indirectly, a partnership interest.
CELLULAR PARTNERSHIP OBLIGOR means, on any date of determination, those
Cellular Partnerships for which Borrower serves, directly or indirectly, as the
Managing General Partner and which have incurred Debt from any Company, which
Debt has not been terminated or with respect to which amounts remain
outstanding.
5
<PAGE>
CELLULAR PARTNERSHIP PROMISSORY NOTES means certain intercompany notes, now
or hereafter existing, executed by the Cellular Partnership Obligors and payable
to the order of any Company, and CELLULAR PARTNERSHIP PROMISSORY NOTE means any
one of such intercompany notes.
CLOSING DATE means the date upon which this Agreement has been executed by
Borrower, Lenders, and Administrative Agent and all conditions precedent
specified in SECTION 7.1 have been satisfied or waived.
CO-AGENTS means Fleet National Bank, Banque Paribas, and Key Corporate
Capital Inc.
CODE means the INTERNAL REVENUE CODE OF 1986, as amended, TOGETHER WITH the
rules and regulations promulgated thereunder.
COLLATERAL has the meaning set forth in SECTION 6.1.
COLLATERAL AGENT means NationsBank of Texas, N.A., and its permitted
successors and assigns in such capacity under the Intercreditor Agreement.
COLLATERAL DOCUMENTS means all security agreements, pledge agreements,
assignments of partnership interests, and Guaranties at any time delivered to
Administrative Agent or Collateral Agent to create or evidence Liens securing
the Obligation, together with all reaffirmations, amendments, and modifications
thereof or supplements thereto.
COMMITTED SUM means, for any Lender at any date of determination, as the
case may be, (a) with respect to the Revolver Facility, the amount stated beside
each Lender's name on the most-recently amended SCHEDULE 2.1 to the Agreement
(which amount is subject to increase, reduction, or cancellation in accordance
with this Agreement), and (b) with respect to the Acquisition Facility, the
aggregate Acquisition Commitments of any Lender then in effect.
COMMUNICATIONS means Dobson Communications Corporation, an Oklahoma
corporation, which owns all of the issued and outstanding shares of capital
stock of Borrower.
COMMUNICATIONS ACT means, collectively, The Federal Communications Act of
1934, as amended from time to time, and the rules and regulations in effect at
any time thereunder.
COMMUNICATIONS BOND DEBT means the 11 3/4% Senior Notes due 2007 issued by
Communications pursuant to that certain Indenture dated as of February 28, 1997,
between Communications and United States Trust Company of New York, in an
aggregate original principal amount of $160,000,000, and the documents and
agreements evidencing and establishing such Debt, as the same may be amended
from time to time in accordance with the terms thereof and hereof.
COMPANIES means, at any date of determination thereof, Borrower and each of
its Subsidiaries; and COMPANY means, on any date of determination, Borrower or
any of its Subsidiaries.
COMPLIANCE CERTIFICATE means a certificate signed by a Responsible Officer,
substantially in the form of EXHIBIT E-1.
CONSEQUENTIAL LOSS means any loss or expense which any Lender may
reasonably incur in respect of a Eurodollar Rate Borrowing as a consequence of
any event described in SECTION 4.5.
6
<PAGE>
CONSOLIDATED OPERATING CASH FLOW means, on any date of determination for
Communications and its Subsidiaries, the "COMMUNICATIONS OPERATING CASH FLOW" as
such term is defined on the Closing Date in that certain Third Amended and
Restated Revolving Credit Agreement dated as of March 25, 1998, among Dobson
Operating Company, as Borrower, CoreStates Bank, N.A., as Administrative Agent,
and the Lenders party thereto (the "DOC CREDIT AGREEMENT"), to the same extent
as if such term and related definitions incorporated therein were set forth
herein verbatim. If the DOC Credit Agreement shall cease to remain in effect
for any reason whatsoever during which any part of the Obligation remains
unpaid, the definition incorporated herein by reference shall nevertheless
continue in full force and effect herein.
CONSOLIDATED TOTAL DEBT means the Total Debt of Communications and its
Subsidiaries; PROVIDED, THAT Consolidated Total Debt (a) shall be reduced by
amounts on deposit in the Escrow Account to be used to pay any outstanding
principal under the Communications Bond Debt, if any, (b) shall include the
amount of all immediately available cash held by Communications and its
Restricted Subsidiaries in excess of $10,000,000, and (c) shall include the
principal amount of all Exchange Debentures, if any, issued in exchange for the
Preferred Stock.
CURRENT FINANCIALS means, at the time of any determination thereof, the
more recently delivered to Lenders of either (a) the Financial Statements for
the fiscal year ended December 31, 1996, and the nine-month period ended
September 30, 1997, calculated on a consolidated basis for the Companies; or
(b) the Financial Statements required to be delivered under SECTIONS 9.3(a) or
9.3(b), as the case may be, calculated on a consolidated basis for the
Companies.
DEBT means (without duplication), for any Person, the sum of the following:
(a) all liabilities, obligations, and indebtedness of such Person which in
accordance with GAAP should be classified upon such Person's balance sheet as
liabilities in respect of (i) money borrowed, including, without limitation, the
Principal Debt, (ii) obligations of such Person under Capital Leases, and
(iii) obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations, and obligations under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (b) all obligations of the type referred to in
CLAUSES (a)(i) through (a)(iii) preceding of other Persons for the payment of
which such Person is responsible or liable as obligor, guarantor, or otherwise;
(c) all obligations of the type referred to in CLAUSES (a)(i) through
CLAUSE (a)(iii) and CLAUSE (b) preceding of other Persons secured by any Lien
on any property or asset of such Person (whether or not such obligation is
assumed by such Person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets or the amount of the obligation
so secured; (d) the face amount of all letters of credit and banker's
acceptances issued for the account of such Person, and without duplication, all
drafts drawn and unpaid thereunder; and (e) net payments under Financial Hedges.
DEBT ISSUANCE means any Debt of Borrower or any Company for borrowed money
issued or incurred after the Closing Date, other than Permitted Debt.
DEBTOR RELIEF LAWS means the BANKRUPTCY CODE OF THE UNITED STATES OF
AMERICA and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, fraudulent
transfer or conveyance, suspension of payments, or similar Laws from time to
time in effect affecting the Rights of creditors generally.
DEFAULT is defined in SECTION 10.
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DEFAULT RATE means a per annum rate of interest equal from day to day to
the LESSER of (a) the sum of the Base Rate PLUS the Applicable Margin for Base
Rate Borrowings PLUS 2% AND (b) the Maximum Rate.
DETERMINING LENDERS means "DETERMINING LENDERS" as such term is defined in
the Intercreditor Agreement.
DISTRIBUTION for any Person means, with respect to any shares of any
capital stock or other equity securities issued by such Person, (a) the
retirement, redemption, purchase, or other acquisition for value of any such
securities, (b) the declaration or payment of any dividend on or with respect to
any such securities, and (c) any other payment by such Person with respect to
such securities.
DOCUMENTATION AGENT means Toronto Dominion (Texas), Inc. and its permitted
successors or assigns as "DOCUMENTATION AGENT" under this Agreement.
DOLLARS and the symbol $ means lawful money of the United States of
America.
ELIGIBLE ASSIGNEE means (a) a Lender; (b) an Affiliate of a Lender (so long
as such assignment is not made in conjunction with the sale of such Affiliate);
and (c) any other Person approved by Administrative Agent (which approval will
not be unreasonably withheld or delayed by Administrative Agent) and, unless a
Default or Potential Default has occurred and is continuing at the time any
assignment is effected in accordance with SECTION 13.13, Borrower, such approval
not to be unreasonably withheld or delayed by Borrower and such approval to be
deemed given by Borrower if no objection is received by the assigning Lender and
the Administrative Agent from Borrower within five Business Days after notice of
such proposed assignment has been provided by the assigning Lender to Borrower;
PROVIDED, HOWEVER, that neither Borrower nor any Affiliate of Borrower shall
qualify as an Eligible Assignee.
EMPLOYEE PLAN means an employee pension benefit plan covered by TITLE IV of
ERISA and established or maintained by Borrower or any ERISA Affiliate, but not
including any Multiemployer Plan.
ENVIRONMENTAL LAW means any applicable Law that relates to (a) the
condition or protection of air, groundwater, surface water, soil, or other
environmental media, (b) the environment, including natural resources or any
activity which affects the environment, (c) the regulation of any pollutants,
contaminants, wastes, substances, and Hazardous Substances, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 ET SEQ.) ("CERCLA"), the Clean Air Act (42
U.S.C. Section 7401 ET SEQ.), the Federal Water Pollution Control Act, as
amended by the Clean Water Act (33 U.S.C. Section 1251 ET SEQ.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 ET SEQ.), the
Emergency Planning and Community Right to Know Act of 1986 (42 U.S.C. Section
11001 ET SEQ.), the Hazardous Materials Transportation Act (49 U.S.C. Section
1801 ET SEQ.), the National Environmental Policy Act of 1969 (42 U.S.C. Section
4321 ET SEQ.), the Oil Pollution Act (33 U.S.C. Section 2701 ET SEQ.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the
Rivers and Harbors Act (33 U.S.C. Section 401 ET SEQ.), the Safe Drinking Water
Act (42 U.S.C. Section 201 and Section 300f ET SEQ.), 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 (42 U.S.C. Section 6901 ET SEQ.),
the Toxic Substances Control Act (15 U.S.C. Section 2601 ET SEQ.), and analogous
state and local Laws, as any of the foregoing may have been and may be amended
or supplemented from time to time, and any analogous future enacted or adopted
Law, or (d) the Release or threatened Release of Hazardous Substances.
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EQUITY ISSUANCE means the issuance on and after the Closing Date by any
Company of any shares of any class of stock, warrants, or other equity
interests, other than present and future shares of stock, options, or warrants
issued to employees, directors, or consultants of the Companies, or stock issued
upon their exercise.
ERISA means the EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, as
amended, and the regulations and rulings thereunder.
ERISA AFFILIATE means any company or trade or business (whether or not
incorporated) which, for purposes of TITLE IV of ERISA, is a member of
Borrower's controlled group or which is under common control with Borrower
within the meaning of SECTION 414(b), (c), (m), or (o) of the Code.
ESCROW ACCOUNT means the account established pursuant to the Escrow
Agreement.
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 certain proceeds of the Communications Bond Debt are held in
escrow to secure the special repurchase and mandatory redemption requirements
(if applicable) of, and two years interest on, the Communications Bond Debt.
EURODOLLAR RATE means, for any Eurodollar Rate Borrowing for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Dow Jones Markets Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period. If for
any reason such rate is not available, the term "EURODOLLAR RATE" shall mean,
for any Eurodollar Rate Borrowing for any Interest Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest Period;
PROVIDED, HOWEVER, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates
(rounded upwards, if necessary, to the nearest 1/100 of 1%).
EURODOLLAR RATE BORROWING means a Borrowing bearing interest at the SUM of
the Adjusted Eurodollar Rate PLUS the Applicable Margin for Eurodollar Rate
Borrowings.
EXCHANGE DEBENTURES means any subordinated debentures issued in exchange
for all or any portion of the Preferred Stock, all as more particularly
described in that certain Offering Memorandum issued January 5, 1998, by
Communications.
EXECUTIVE MANAGEMENT TEAM means Everett Dobson, Bruce Knooihuizen, and
G. Edward Evans.
EXHIBIT means an exhibit to this Agreement unless otherwise specified.
FACILITIES means, collectively, the Revolver Facility and the Acquisition
Facility; FACILITY means the Revolver Facility or the Acquisition Facility.
FCC means the Federal Communications Commission and any successor
regulatory body.
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FEDERAL FUNDS RATE means, for any day, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined (which determination shall
be conclusive and binding, absent manifest error) by Administrative Agent to be
equal to the weighted average of the rates on overnight Federal funds
transactions with member banks of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day; PROVIDED THAT (a) if such day is
not a Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if no such rate is so published on such next
succeeding Business Day, the Federal Funds Rate for such day shall be the
average rate charged to the Administrative Agent (in its individual capacity) on
such day on such transactions as determined by the Administrative Agent (which
determination shall be conclusive and binding, absent manifest error).
FINANCIAL HEDGE means a swap, collar, floor, cap, or other contract which
is intended to reduce or eliminate the risk of fluctuations in interest rates,
which Financial Hedge is entered into by any Company in accordance with
SECTION 9.27.
FINANCIAL STATEMENTS means balance sheets, statements of operations,
statements of shareholders' investments, and statements of cash flows prepared
in accordance with GAAP, which statements of operations and statements of cash
flows shall be in comparative form to the corresponding period of the preceding
fiscal year, and which balance sheets and statements of shareholders'
investments shall be in comparative form to the prior fiscal year-end figures,
and which statements shall contain information with respect to capitalized
marketing costs.
FIXED CHARGE COVERAGE RATIO means, at any date of determination with
respect to the most recently ended Rolling Period, the ratio of: (a) the
Companies' Operating Cash Flow to (b) the SUM of (i) all mandatory prepayments
and regularly-scheduled principal payments with respect to Total Debt of the
Companies required to be paid, (ii) the amount paid for Capital Expenditures for
the Companies, (iii) cash Interest Expense of the Companies, (iv) cash Taxes of
the Companies, to the extent allocable to them pursuant to the Tax Sharing
Agreement, and (v) distributions and dividends paid in cash by Borrower,
including, without limitation, any amounts paid to fund interest or dividends on
the Preferred Stock and the Exchange Debentures.
FREE CASH FLOW means, on any date of determination with respect to the
fiscal year then most recently ended, Operating Cash Flow, LESS the SUM of,
without duplication, (a) Capital Expenditures made during such fiscal year,
(b) required payments of principal and interest on Debt made during such fiscal
year, (c) the aggregate Taxes actually paid in cash during such fiscal year, and
(d) $2,500,000.
GAAP means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board which are applicable from time to time.
GOVERNMENTAL AUTHORITY means any (a) local, state, municipal, or federal
judicial, executive, or legislative instrumentality, (b) private arbitration
board or panel, or (c) central bank.
GUARANTOR means any Person, including, but not limited to, any Subsidiary
of Borrower, who undertakes to be liable for all or any part of the Obligation
by execution of a Guaranty or otherwise.
GUARANTY means (a) a Guaranty in substantially the form and upon the terms
of EXHIBIT C, executed and delivered by any Person pursuant to the requirements
of the Loan Papers; and (b) any amendments,
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modifications, supplements, restatements, ratifications, or reaffirmations of
any Guaranty made in accordance with the Loan Papers.
HAZARDOUS SUBSTANCE means (a) any substance that is designated, defined, or
classified as a hazardous waste, hazardous material, pollutant, contaminant, or
toxic or hazardous substance under any Environmental Law, including without
limitation, any hazardous substance within the meaning of SECTION 101(14) of
CERCLA, (b) petroleum, oil, gasoline, natural gas, fuel oil, motor oil, waste
oil, diesel fuel, jet fuel, and other petroleum hydrocarbons, (c) regulated
asbestos and asbestos-containing materials in any form, (d) polychlorinated
biphenyls, or (e) urea formaldehyde foam.
INTERCREDITOR AGREEMENT means that certain Intercreditor Agreement,
substantially in the form of EXHIBIT I, dated of even date herewith, executed by
Borrower, the Collateral Agent, Administrative Agent on behalf of the Lenders,
and the "ADMINISTRATIVE AGENT" under the 364-Day Facility on behalf on the
364-Day Facility Lenders, as the same may be amended, modified, supplemented, or
restated.
INTEREST EXPENSE means, for any period of calculation thereof, for any
Person, the aggregate amount of all interest (including commitment fees) on all
Debt of such Person, whether paid in cash or accrued as a liability and payable
in cash during such period (including, without limitation, imputed interest on
Capital Lease obligations; the amortization of any original issue discount on
any Debt; the interest portion of any deferred payment obligation; all
commissions, discounts, and other fees and charges owed with respect to letters
of credit or bankers' acceptance financing; net costs associated with Financial
Hedges; the interest component of any Debt that is guaranteed or secured by such
Person), and all cash premiums or penalties for the repayment, redemption, or
repurchase of Debt.
INTEREST PERIOD is determined in accordance with SECTION 3.9.
LAWS means all applicable statutes, laws, treaties, ordinances, tariff
requirements, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, or interpretations of any Governmental Authority.
LC means the letter(s) of credit issued hereunder in the form agreed upon
among Borrower, Administrative Agent, and the beneficiary thereof at the time of
issuance thereof and participated in by Lenders pursuant to the terms and
conditions of SECTION 2.2 hereof.
LC AGREEMENT means a letter of credit application and agreement (in form
and substance satisfactory to Administrative Agent) submitted by Borrower to
Administrative Agent for an LC for its own account (and for its benefit or the
benefit of any other Company); PROVIDED THAT this Agreement shall control any
conflict between this Agreement and any such LC Agreement.
LC EXPOSURE means, at any time and without duplication, the SUM of (a) the
aggregate undrawn portion of all uncancelled and unexpired LCs PLUS (b) the
aggregate unpaid reimbursement obligations of Borrower in respect of drawings of
drafts under any LC.
LC SUBFACILITY means a subfacility for the issuance of LCs (the LC Exposure
in connection with which may never exceed $20,000,000), as described in and
subject to the limitations of SECTION 2.2.
LENDERS means, on any date of determination, the financial institutions
named on SCHEDULE 2.1 (as the same may be amended from time to time by
Administrative Agent to reflect the assignments made in
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accordance with SECTION 13.13(c) of this Agreement), and subject to the terms
and conditions of this Agreement, and their respective successors and assigns.
LIEN means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement, or encumbrance of any kind, and any other
Right of or arrangement with any creditor (other than under or relating to
subordination or other intercreditor arrangements) to have its claim satisfied
out of any property or assets, or the proceeds therefrom, prior to the general
creditors of the owner thereof.
LITIGATION means any action by or before any Governmental Authority.
LOAN PAPERS means (a) this Agreement, the Notes, the Collateral Documents,
LCs and LC Agreements, (b) all agreements, documents, or instruments in favor of
Agents or Lenders ever delivered pursuant to this Agreement or otherwise
delivered in connection with all or any part of the Obligation, (c) any
Financial Hedge between any Company or Guarantor and any Lender or any Affiliate
of any Lender, and (d) any and all future renewals, extensions, restatements,
reaffirmations, or amendments of, or supplements to, all or any part of the
foregoing.
MANAGING AGENTS means, collectively, CoBank, ACB; Barclays Bank PLC; and
PNC Bank, National Association.
MATERIAL ADVERSE EVENT means any set of one or more circumstances or events
which, individually or collectively, could reasonably be expected to result in
any (a) material impairment of the ability of any Company or any Guarantor to
perform any of its payment or other material obligations under the Loan Papers
or the ability of Administrative Agent or any Lender to enforce any such
obligations or any of their respective Rights under the Loan Papers,
(b) material and adverse effect on the business, properties, condition
(financial or otherwise) or results of operations of any Company or any
Guarantor, either singly or in the aggregate, or (c) Default or Potential
Default.
MAXIMUM ACQUISITION COMMITMENT means an amount (subject to reduction or
cancellation as herein provided) equal to $75,000,000.
MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for each Lender, the
maximum non-usurious amount and the maximum non-usurious rate of interest which,
under applicable Law, such Lender is permitted to contract for, charge, take,
reserve, or receive on the Obligation.
MULTIEMPLOYER PLAN means a multiemployer plan as defined in SECTIONS 3(37)
or 4001(a)(3) of ERISA or SECTION 414(f) of the Code to which any Company or any
ERISA Affiliate is making, or has made, or is accruing, or has accrued, an
obligation to make contributions.
NATIONSBANK means NationsBank of Texas, N.A., in its individual capacity
as a Lender, and its successors and assigns.
NET CASH PROCEEDS means (a) with respect to any Significant Sale, cash
(freely convertible into Dollars) received, on or after the date of consummation
of such Significant Sale, by any Company from such Significant Sale, after
(i) deduction of Assumed Taxes, (ii) payment of all usual and customary
brokerage commissions and all other reasonable fees and expenses related to such
Significant Sale (including, without limitation, reasonable attorneys' fees and
closing costs incurred in connection with such Significant Sale),
(iii) deduction of appropriate amounts to be provided by Borrower or any Company
as a reserve, in accordance with GAAP, against any liabilities retained by any
Company after such Significant
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Sale, which liabilities are associated with the asset or assets being sold,
including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with such Significant Sale, and (iv)
deduction for the amount of any Debt (other than the Obligation) secured by
the respective asset or assets being sold, which Debt is required to be
repaid as a result of such Significant Sale; (b) with respect to any
incurrence of Debt, cash (freely convertible in to Dollars) received, on or
after the date of incurrence of such Debt, by any Company from the incurrence
of such Debt after (i) payment of all reasonable attorneys' fees and usual
and customary underwriting commissions, closing costs, and other reasonable
expenses associated with such incurrence of Debt, (ii) deduction of all
deposits, escrow amounts, or other reserves required to be maintained by any
Company in connection with such Debt, and (iii) deductions for the amount of
any other Debt (other than the Obligation) which is required to be repaid
concurrently with or otherwise as a result of the incurrence of such Debt;
and (c) with respect to any Equity Issuance, cash (freely convertible into
Dollars) (including any cash received by way of deferred payment pursuant to
a promissory note, or otherwise, but only as and when received) received, on
or after the date of such Equity Issuance, by the Borrower from such Equity
Issuance, net of usual and customary transaction costs and expenses and
Assumed Taxes.
NOTES means, at the time of any determination thereof, all outstanding and
unpaid Revolver Notes and Acquisition Notes.
NOTICE OF BORROWING is defined in SECTION 2.5(a).
NOTICE OF CONVERSION is defined in SECTION 3.10.
NOTICE OF LC is defined in SECTION 2.2(a).
OBLIGATION means all present and future indebtedness, liabilities, and
obligations, and all renewals and extensions thereof, or any part thereof, now
or hereafter owed to Administrative Agent, any other Agent, any Lender, or any
Affiliate of any Lender by any Company or Guarantor arising from, by virtue of,
or pursuant to any Loan Paper, TOGETHER WITH all interest accruing thereon,
fees, costs, and expenses (including, without limitation, all attorneys' fees
and expenses incurred in the enforcement or collection thereof) payable under
the Loan Papers.
OPERATING CASH FLOW means, for any Person, as calculated at any date of
determination with respect to the most recently ended Rolling Period (unless
otherwise indicated), the SUM (without duplication and without giving effect to
any extraordinary losses or gains during such period) of (a) pre-tax income or
deficit during such period, PLUS (b) to the extent already deducted in computing
such pre-tax income, (i) Interest Expense during such period and
(ii) depreciation, amortization, and other non-cash expense items during such
period, LESS (c) interest and dividend income, LESS (d) reductions in deferred
taxes, LESS (e) other non-cash components of income. In determining the
Operating Cash Flow of the Companies, such amount shall be adjusted, as
required, with respect to Cellular Partnerships to take into account any
minority ownership when (and only when) intercompany Debt to Borrower from such
Cellular Partnership has been repaid in full; PROVIDED THAT, to the extent that
Borrower has extended financing to any Cellular Partnership or any Cellular
Partnership Obligor which is not 100% owned by Borrower and SO LONG AS such
financing has not been repaid in full, then 100% of the Operating Cash Flow of
such Cellular Partnership or such Cellular Partnership Obligor for the
applicable period of determination shall be included in Operating Cash Flow.
The provision for income taxes and reductions in deferred taxes shall be
adjusted in accordance with the Tax Sharing Agreement. In determining Operating
Cash Flow of the Companies, such amount shall be calculated after giving effect
to Acquisitions and divestitures of Companies permitted
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by the Loan Papers during such period as if such transactions had occurred on
the first day of such period, regardless of whether the effect is positive or
negative. In the case of any Permitted Acquisition during any period of
calculation, Operating Cash Flow of the Companies shall, for the purposes of
the foregoing calculations, be adjusted to give effect to such Permitted
Acquisition, as if such Permitted Acquisition occurred on the first day of
such period, by increasing, if positive, or decreasing, if negative, the
Operating Cash Flow of the Companies by the Operating Cash Flow of such
newly-acquired business during such period of calculation occurring prior to
the date of such Permitted Acquisition. In the case of any Company being
sold, transferred, or otherwise disposed of by any Company as permitted under
the Loan Papers (a "PERMITTED DISPOSITION") during any period of calculation,
Operating Cash Flow shall, for the purposes of the foregoing calculations, be
adjusted to give effect to such Permitted Disposition, as if such Permitted
Disposition occurred on the first day of such period, by decreasing, if
positive, or increasing, if negative, the Operating Cash Flow of the
Companies by the Operating Cash Flow of such newly-sold Companies during such
period prior to the date of the Permitted Disposition.
PARTICIPANT is defined in SECTION 13.13(e).
PARTICIPATION CERTIFICATE is defined in SECTION 9.20(j).
PBGC means the Pension Benefit Guaranty Corporation, or any successor
thereof, established pursuant to ERISA.
PCS SYSTEMS means the wireless cellular communication systems offering
"PERSONAL COMMUNICATION SERVICES" authorized under PART 24 of the FCC Rules (47
C.F.R. Section 24.1 ET SEQ).
PERMITTED ACQUISITION means:
(a) The Acquisitions of Texas 16 RSA, California 4 RSA, and, at
Borrower's option, Santa Cruz MSA, SO LONG AS any such Acquisition from
Communications shall be made in compliance with the Communications Bond
Debt;
(b) Acquisitions by any Company of businesses which are engaged in
the domestic cellular industry, with respect to which each of the following
requirements shall have been satisfied:
(i) For so long as the Total Leverage Ratio (calculated after
giving pro forma effect to any proposed Acquisition) is greater than
8.50 to 1.00, the purchase price for such Acquisition must be less
than or equal to $75,000,000;
(ii) as of the closing of any Acquisition, the Acquisition has
been approved and recommended by the board of directors of the Person
to be acquired or from which such business is to be acquired;
(iii) not less than 30 Business Days prior to the closing of
any Acquisition, Borrower shall have delivered to Administrative Agent
a Permitted Acquisition Compliance Certificate, demonstrating pro
forma compliance with the terms and conditions of the Loan Papers,
after giving effect to the Acquisition, including (A) pro forma income
and balance sheet projections for the Companies (after giving effect
to the Acquisition), and (B) ten year cash flow projections for the
Acquisition demonstrating compliance with the Companies' applicable
financial covenants and debt amortization schedules;
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(iv) prior to consummation of any Acquisition, Borrower shall
have satisfied the conditions precedent set forth in SECTION 7.2;
(v) as of the closing of any Acquisition, after giving effect
to such Acquisition, the acquiring party must be Solvent and the
Companies, on a consolidated basis, must be Solvent;
(vi) as of the closing of any Acquisition, no Default or
Potential Default shall exist or occur as a result of, and after
giving effect to, such Acquisition; and
(vii) as of the closing of any Acquisition, (A) if such
Acquisition is structured as a merger, Borrower, (or if such merger is
with any Subsidiary of Borrower, then such Subsidiary) must be the
surviving entity after giving effect to such merger; and (B) if such
Acquisition is structured as a stock/equity acquisition, the acquiring
Company shall own not less than a 75% interest in the entity being
acquired; or
(c) any other Acquisition for which the prior written consent of
Required Lenders has been obtained.
PERMITTED ACQUISITION COMPLIANCE CERTIFICATE means a certificate signed by
a Responsible Officer of Borrower, substantially in the form of EXHIBIT E-2.
PERMITTED ACQUISITION LOAN CLOSING CERTIFICATE means a certificate signed
by a Responsible Officer of Borrower, substantially in the form of EXHIBIT E-3.
PERMITTED DEBT means Debt permitted under SECTION 9.12 as described in such
Section.
PERMITTED LIENS means Liens permitted under SECTION 9.13 as described in
such Section.
PERSON means any individual, entity, or Governmental Authority.
POTENTIAL DEFAULT means the occurrence of any event or existence of any
circumstance which, with the giving of notice or lapse of time or both, would
become a Default.
PREFERRED STOCK means the Senior Exchangeable Preferred Stock issued by
Communications which is mandatorily redeemable in 2008, together with additional
Preferred Stock issued in lieu of dividends on such Preferred Stock, all as more
particularly described in that certain Offering Memorandum issued January 5,
1998 by Communications.
PRIME RATE means the per annum rate of interest established from time to
time by NationsBank of Texas, N.A., as its prime rate, which rate may not be the
lowest rate of interest charged by NationsBank of Texas, N.A. to its customers.
PRINCIPAL DEBT means, at the time of any determination thereof, the sum of
the Revolver Principal Debt and the Acquisition Principal Debt.
PRO FORMA DEBT SERVICE means, on any date of determination, calculated for
the Companies on a consolidated basis, the SUM of (a) Pro Forma Interest Expense
determined as of such date of determination, PLUS (b) principal payments
scheduled to be made on Total Debt for the twelve months
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following the date of determination and with respect to the Principal Debt,
the difference between the outstanding Principal Debt on any date of
determination, and the amount to which the Total Commitment is to be reduced
within twelve months.
PRO FORMA INTEREST EXPENSE means, on any date of determination with respect
to the most recently ended Rolling Period (the "SUBJECT PERIOD"), calculated for
the Companies on a consolidated basis, the SUM of the results of the following
calculation made separately with respect to each Borrowing and each other loan
or other evidence of Debt of any Company (each a "SUBJECT LOAN") for the
purposes hereof):
{[A + B] /2} x C
where:
A = The aggregate outstanding principal Debt under the Subject
Loan at the beginning of the Subject Period.
B = The aggregate outstanding principal Debt under the Subject
Loan, at the end of the Subject Period, taking into account
all scheduled principal payments and any required commitment
reductions within such Subject Period.
C = With respect to the Subject Loan, the applicable interest
rate thereon determined as the rate in effect on the date of
determination.
PRO RATA or PRO RATA PART, for each Lender, means (a) for purposes of any
commitment to fund (or to purchase participations pursuant to SECTION 2.2) in
respect of the Revolver Facility or the L/C Subfacility, respectively, the
percentage stated opposite such Lender's name as set forth on SCHEDULE 2.1 or on
the most recently amended SCHEDULE 2.1, if any, prepared by Administrative Agent
pursuant to SECTION 13.13, (b) for purposes of any commitment to fund in respect
of the Acquisition Facility, the percentage that such Lender's Acquisition
Commitment for any Acquisition Loan bears to the aggregate Acquisition
Commitments of all Lenders with respect to such Acquisition Loan, (c) for
purposes of sharing any amount or fee payable to any Lender in respect of the
Revolver Facility, the L/C Subfacility, or the Acquisition Facility,
respectively, the proportion (whether held directly or through a participation
therein pursuant to SECTION 2.2 and determined after giving effect thereto)
which the portion of the Revolving Principal Debt, Acquisition Principal Debt,
or LC Exposure, as applicable, owed to such Lender bears to the Revolving
Principal Debt, Acquisition Principal Debt, or LC Exposure, as applicable, owed
to all Lenders at the time in question, and (d) for all other purposes, the
proportion which the portion of the Principal Debt owed to such Lender bears to
the Principal Debt owed to all Lenders at the time in question, or if no
Principal Debt is outstanding, then the proportion that the aggregate of such
Lender's Committed Sums under the Revolver Facility and the Acquisition Facility
bears to the Total Commitment then in effect.
PUC means any state or local regulatory agency or governmental authority
that exercises jurisdiction over the rates or services or the ownership,
construction, or operation of network facilities or telecommunications systems
or over Persons who own, construct, or operate network facilities or
telecommunications systems.
REGISTER is defined in SECTION 13.13(c).
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REGULATION D means Regulation D of the Board of Governors of the Federal
Reserve System, as amended.
REGULATION U means Regulation U of the Board of Governors of the Federal
Reserve System, as amended.
RELEASE means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, disposal, deposit,
dispersal, migrating, or other movement into the air, ground, or surface water,
or soil.
REPORTABLE EVENT shall have the meaning specified in SECTION 4043 of ERISA
or the regulations issued thereunder in connection with an Employee Plan,
excluding events for which the notice requirement is waived under applicable
PBGC regulations other than those events described in SECTIONS 2615.11, 2615.15
and 2615.19 of such regulations, including each such provision as it may
subsequently be renumbered.
REPRESENTATIVES means representatives, officers, directors, employees,
attorneys, and agents.
REQUIRED LENDERS means (a) on any date of determination prior to
termination of the Total Commitment, those Lenders holding 51% or more of the
Total Commitment, or (b) on any date of determination occurring after the Total
Commitment has terminated, those Lenders holding 51% or more of the outstanding
Principal Debt.
RESERVE REQUIREMENT means, at any time, the maximum rate at which reserves
(including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against, in the case of
Eurodollar Rate Borrowings, "EUROCURRENCY LIABILITIES" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks with respect to (a) any category of liabilities which includes
deposits by reference to which the Adjusted Eurodollar Rate is to be determined,
or (b) any category of extensions of credit or other assets which include
Eurodollar Rate Borrowings. The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Requirement.
RESPONSIBLE OFFICER means the chairman, president, chief executive officer,
chief financial officer, senior vice president, or treasurer of Borrower, or,
for all purposes under the Loan Papers, any other officer designated from time
to time by the Board of Directors of Borrower, which designated officer is
acceptable to Administrative Agent.
RESTRICTED PAYMENTS means: (a) redemptions, repurchases, dividends, and
distributions of any kind in respect of Borrower's or Communications' capital
stock (including without limitation any class of common or preferred shares);
(b) Distributions of any kind in respect of partnership interests of any Company
that is a Cellular Partnership or Cellular Partnership Obligor; and (c) payments
of principal and interest on, and any redemptions or repurchases of,
Subordinated Debt.
RESTRICTED SUBSIDIARY means, at any time of determination, all Subsidiaries
of Communications, OTHER THAN Unrestricted Subsidiaries.
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REVOLVER COMMITMENT means an amount (subject to reduction or cancellation
as herein provided) equal to $120,000,000.
REVOLVER COMMITMENT USAGE means, at the time of any determination thereof,
the SUM of (a) the aggregate Revolver Principal Debt PLUS, WITHOUT DUPLICATION,
(b) the LC Exposure.
REVOLVER FACILITY means the credit facility as described in and subject to
the limitations set forth in SECTION 2.1 hereof.
REVOLVER NOTE means a promissory note in substantially the form of EXHIBIT
A-1, and all renewals and extensions of all or any part thereof.
REVOLVER PRINCIPAL DEBT means, on any date of determination, the aggregate
unpaid principal balance of all Borrowings under the Revolver Facility, together
with the aggregate unpaid reimbursement obligations of Borrower in respect of
drawings of drafts under any LC.
RIGHTS means rights, remedies, powers, privileges, and benefits.
ROLLING PERIOD means, on any date of determination, the most recent four
fiscal quarters ended on March 31, June 30, September 30, or December 31 (as the
case may be).
SCHEDULE means, unless specified otherwise, a schedule attached to this
Agreement, as the same may be supplemented and modified from time to time in
accordance with the terms of the Loan Papers.
SENIOR LEVERAGE RATIO means, at any date of determination thereof, the
ratio of (a) Total Debt outstanding to (b) Operating Cash Flow, all calculated
for the Companies on a consolidated basis.
SIGNIFICANT SALE means any sale, lease, transfer, or other disposition of
any property or assets (tangible or intangible) by any Company to any other
Person (other than any sale, lease, transfer, or other disposition contemplated
by SECTIONS 9.23(a) through (e)) with respect to which the Net Cash Proceeds
realized by the Companies for such asset disposition (or when aggregated with
the Net Cash Proceeds from all such other asset dispositions occurring in the
same calendar year) equals or exceeds $1,000,000.
SOLVENT means, as to a Person, that (a) the aggregate fair market value of
such Person's assets exceeds its liabilities (whether contingent, subordinated,
unmatured, unliquidated, or otherwise), (b) such Person has sufficient cash flow
to enable it to pay its Debts as they mature, and (c) such Person does not have
unreasonably small capital to conduct such Person's businesses.
SUBORDINATED DEBT means any Debt of any Company subordinated to the
Obligation, in form and substance satisfactory to Administrative Agent.
SUBSIDIARY of any Person means (a) any entity of which an aggregate of
more than 50% (in number of votes) of the stock is owned of record or
beneficially, directly or indirectly, by such Person, or (b) any partnership
(limited or general) of which such Person shall at any time be the general
partner or own fifty percent (50%) or more of the issued and outstanding
partnership interests.
SYNDICATION AGENT means, collectively, First Union National Bank and its
respective permitted successors or assigns as "SYNDICATION AGENT" under this
Agreement.
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SYSTEM means individually, and SYSTEMS means collectively, the wireless
cellular communication systems and personal communication systems, now or
hereafter owned, operated, or managed by the Companies.
TAX SHARING AGREEMENT means that certain consolidated income tax payment
agreement dated February 28, 1997, entered into between Communications and its
Subsidiaries.
TAXES means, for any Person, taxes, assessments, or other governmental
charges or levies imposed upon such Person, its income, or any of its
properties, franchises, or assets.
TERM CONVERSION DATE means the "TERM CONVERSION DATE" as such term is
defined in the 364-Day Facility.
TERMINATION DATE means the EARLIER of (a) June 30, 2006, and (b) the
effective date of any other termination or cancellation of Lenders' commitments
to lend under, and in accordance with, this Agreement.
TOTAL ACQUISITION COMMITMENT means the aggregate Acquisition Commitments of
all Lenders with respect to all Acquisition Loans under the Acquisition
Facility.
TOTAL COMMITMENT means, on any date of determination, the sum of all
Committed Sums for all Lenders in respect of the Revolver Facility and the Total
Acquisition Commitment (as the same may have been reduced or canceled as
provided in the Loan Papers) then in effect.
TOTAL DEBT means (without duplication), as of any date of determination
with respect to any Person, 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
obligations of others guaranteed by such Person, and any amounts for which such
Person is contingently liable to provide, as equity or debt, advances to other
Persons; PROVIDED, HOWEVER, that in any calculation of Total Debt of Borrower,
any Subordinated Debt owed by Borrower to Communications shall be excluded from
the calculation of Total Debt for Borrower.
TOTAL LEVERAGE RATIO means, at any date of determination thereof, the ratio
of (a) Consolidated Total Debt to (b) Consolidated Operating Cash Flow.
TRIGGERING EVENT means the occurrence of any Default, other than a Default
resulting from the breach of any representation or warranty set forth in
SECTION 8; PROVIDED, HOWEVER, that any Default which results from Borrower's
failure to comply with the financial covenants in SECTION 9.30, and which
restricts dividends or distributions from Borrower to Communications, shall only
constitute a TRIGGERING EVENT to the extent of pro forma non-compliance with the
financial covenants on the terms as specified in SECTION 9.30 on the Closing
Date, notwithstanding any future amendments or modifications of such provisions.
TYPE means any type of Borrowing determined with respect to the interest
option applicable thereto.
UNRESTRICTED SUBSIDIARY means, with respect to Communications, at any time
of determination thereof, (a) Borrower and its Subsidiaries; (b) Dobson Wireline
Company and its Subsidiaries; (c) any Subsidiary designated from time to time by
the Board of Directors of Communications as an "UNRESTRICTED
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SUBSIDIARY"; and (d) any Subsidiary of an Unrestricted Subsidiary; PROVIDED,
THAT the Board of Directors may make such designation of an "UNRESTRICTED
SUBSIDIARY" only if (i) such Unrestricted Subsidiary does not own any capital
stock of Communications, Borrower, or a Restricted Subsidiary and does not
hold a Lien on any assets of Communications, Borrower, or any Restricted
Subsidiary; (ii) any guaranties or credit support issued by Communications or
any Restricted Subsidiary with respect to obligations of the Unrestricted
Subsidiary shall be included in calculations of Consolidated Total Debt, on
and after the date such Subsidiary is designated as an "UNRESTRICTED
SUBSIDIARY"; (iii) any Debt owed by Communications or any Restricted
Subsidiary to the Unrestricted Subsidiary shall be included in the
calculation of Consolidated Total Debt, on and after the date such Subsidiary
is designated as an "UNRESTRICTED SUBSIDIARY"; and (iv) after giving pro
forma effect to such designation, no Default or Potential Default exists or
arises as a result thereof.
VOTING STOCK means securities (as such term is defined in SECTION 2(1) of
the Securities Act of 1933, as amended) of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
WHOLLY-OWNED when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (EXCEPT
shares required as directors' qualifying shares) shall be owned by Borrower or
one or more of its Wholly-owned Subsidiaries.
1.2 NUMBER AND GENDER OF WORDS; OTHER REFERENCES. Unless otherwise
specified in the Loan Papers, (a) where appropriate, the singular includes the
plural and VICE VERSA, and words of any gender include each other gender, (b)
heading and caption references may not be construed in interpreting provisions,
(c) monetary references are to currency of the United States of America, (d)
section, paragraph, annex, schedule, exhibit, and similar references are to the
particular Loan Paper in which they are used, (e) references to "TELECOPY,"
"FACSIMILE," "FAX," or similar terms are to facsimile or telecopy transmissions,
(f) references to "INCLUDING" mean including without limiting the generality of
any description preceding that word, (g) the rule of construction that
references to general items that follow references to specific items are limited
to the same type or character of those specific items is not applicable in the
Loan Papers, (h) references to any Person include that Person's heirs, personal
representatives, successors, trustees, receivers, and permitted assigns, (i)
references to any Law include every amendment or supplement to it, rule and
regulation adopted under it, and successor or replacement for it, and (j)
references to any Loan Paper or other document include every renewal and
extension of it, amendment and supplement to it, and replacement or substitution
for it.
1.3 ACCOUNTING PRINCIPLES. All accounting and financial terms used in the
Loan Papers and the compliance with each financial covenant therein shall be
determined in accordance with GAAP, and, all accounting principles shall be
applied on a consistent basis so that the accounting principles in a current
period are comparable in all material respects to those applied during the
preceding comparable period. If Borrower or any Lender 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
Lenders 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.
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SECTION 2 BORROWING PROVISIONS.
2.1 COMMITMENTS. Subject to and in reliance upon the terms, conditions,
representations, and warranties in the Loan Papers, each Lender severally and
not jointly agrees to lend to Borrower such Lender's Pro Rata Part of one or
more Borrowings under the Revolver Facility not to exceed such Lender's
Committed Sum under the Revolver Facility, which, may be repaid and reborrowed
from time to time in accordance with the terms and provisions of the Loan
Papers; PROVIDED THAT, (a) each such Borrowing must occur on a Business Day and
no later than the Business Day immediately preceding the Termination Date;
(b) each such Borrowing shall be in an amount not less than $5,000,000 or a
greater integral multiple of $1,000,000; and (c) on any date of determination,
the Revolver Commitment Usage shall never exceed the Revolver Commitment.
2.2 LC SUBFACILITY UNDER REVOLVER FACILITY.
(a) Subject to the terms and conditions of this Agreement and
applicable Law, Administrative Agent agrees to issue LCs upon Borrower's
application therefor (denominated in Dollars) by delivering to
Administrative Agent a properly completed notice (a "NOTICE OF LC,"
substantially in the form of EXHIBIT B-3) and an LC Agreement with respect
thereto no later than 10:00 a.m. Dallas, Texas time three Business Days
before such LC is to be issued; PROVIDED THAT, (i) on any date of
determination and after giving effect to any LC to be issued on such date,
the Revolver Commitment Usage shall never exceed the Revolver Commitment
then in effect, (ii) on any date of determination and after giving effect
to any LC to be issued on such date, the LC Exposure shall never exceed
$20,000,000, (iii) at the time of issuance of such LC, no Default or
Potential Default shall have occurred and be continuing, and (iv) each LC
must expire NO LATER than the EARLIER of the thirtieth (30th) day prior to
the Termination Date or one year from its issuance; PROVIDED THAT, any LC
may provide for automatic renewal for successive twelve month periods (but
no renewal period may extend beyond the thirtieth (30th) day prior to the
Termination Date) unless Administrative Agent has given prior notice to the
applicable beneficiary of its election not to extend such LC.
(b) Immediately upon the issuance by Administrative Agent of any LC,
Administrative Agent shall be deemed to have sold and transferred to each
other Lender, and each other such Lender shall be deemed irrevocably and
unconditionally to have purchased and received from Administrative Agent,
without recourse or warranty, an undivided interest and participation, to
the extent of such Lender's Pro Rata Part, in such LC, and all Rights of
Administrative Agent in respect thereof (OTHER THAN Rights to receive
certain fees provided for in SECTION 2.2(c)). Upon the issuance, renewal,
or extension of an LC, Administrative Agent shall provide copies of such LC
to each other Lender.
(c) In order to induce Administrative Agent to issue and maintain LCs
and Lenders to participate therein, Borrower agrees to pay or reimburse
Administrative Agent (i) on the date on which any draft is presented under
any LC, the amount of any draft paid or to be paid by Administrative Agent
and (ii) promptly, upon demand, the amount of any fees (in addition to the
fees described in SECTION 5) which Administrative Agent customarily charges
to a Person similarly situated in the ordinary course of its business for
amending LC Agreements, for honoring drafts, and taking similar action in
connection with letters of credit; PROVIDED THAT, (x) if Borrower has not
reimbursed Administrative Agent for any drafts paid or to be paid within
24 hours of demand therefor by Administrative Agent, Administrative Agent
is hereby irrevocably authorized to fund such reimbursement obligations as
a Borrowing under the Revolver Facility to the extent of
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availability under the Revolver Facility, and the proceeds of such
Borrowing under the Revolver Facility shall be advanced directly to
Administrative Agent in payment of Borrower's reimbursement obligation
with respect to the draft under the LC; and (y) if for any reason, funds
are not advanced pursuant to the Revolver Facility, then Borrower's
reimbursement obligation shall continue to be due and payable.
Borrower's obligations under this SECTION 2.2(c) shall be absolute and
unconditional under any and all circumstances and irrespective of any
setoff, counterclaim, or defense to payment which Borrower may have at
any time against Administrative Agent or any other Person, and shall be
made in accordance with the terms and conditions of this Agreement under
all circumstances, including, without limitation, any of the following
circumstances: (A) any lack of validity or enforceability of this
Agreement or any of the Loan Papers; (B) the existence of any claim,
setoff, defense, or other Right which Borrower may have at any time
against a beneficiary named in a LC, any transferee of any LC (or any
Person for whom any such transferee may be acting), Administrative Agent,
any Lender, or any other Person, whether in connection with this
Agreement, any LC, the transactions contemplated herein, or any unrelated
transactions (including any underlying transaction between Borrower and
the beneficiary named in any such LC); (C) any draft, certificate, or any
other document presented under the LC proving to be forged, fraudulent,
invalid, or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; and (D) the occurrence of any
Potential Default or Default. To the extent any funding of a draft has
been made by Lenders pursuant to SECTION 2.2(e) or under the Revolver
Facility, Administrative Agent shall promptly distribute any such
payments received from Borrower with respect to such draft to all Lenders
funding such draft according to their ratable share. Interest on any
amounts remaining unpaid by Borrower (and unfunded by a Borrowing under
the Revolver Facility) under this clause at any time from and after the
date such amounts become payable until paid in full shall be payable by
Borrower to Administrative Agent at the Default Rate. In the event any
payment by Borrower received by Administrative Agent with respect to an
LC and distributed to Lenders on account of their participations therein
is thereafter set aside, avoided, or recovered from Administrative Agent
in connection with any receivership, liquidation, or bankruptcy
proceeding, each Lender which received such distribution shall, upon
demand by Administrative Agent, contribute such Lender's ratable portion
of the amount set aside, avoided, or recovered, TOGETHER WITH interest at
the rate required to be paid by Administrative Agent upon the amount
required to be repaid by it.
(d) If any draft shall be presented for honor under any LC,
Administrative Agent shall promptly notify Borrower of the date and amount
of such draft; PROVIDED THAT, failure to give any such notice shall not
affect the obligations of Borrower hereunder. Administrative Agent shall
make payment upon presentment of a draft for honor unless it appears that
presentment on its face does not comply with the terms of such LC,
regardless of whether (i) any default or potential default under any other
agreement has occurred and (ii) the obligations under any other agreement
have been performed by the beneficiary or any other Person (and
Administrative Agent shall not be liable for any obligation of any Person
thereunder). Administrative Agent and Lenders shall not be responsible
for, and Borrower's reimbursement obligations for honored drafts shall not
be affected by, any matter or event whatsoever (including, without
limitation, the validity or genuineness of documents or of any endorsements
thereof, even if such documents should in fact prove to be in any respect
invalid, fraudulent, or forged), or any dispute among any Company, the
beneficiary of any LC, or any other Person to whom any LC may be
transferred, or any claims whatsoever of any Company against any
beneficiary of any LC or any such transferee; PROVIDED THAT, nothing in
this Agreement shall constitute a waiver of Borrower's Rights to assert any
claim based upon the gross negligence or wilful misconduct of
Administrative Agent or any Lender.
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(e) If Borrower fails to reimburse Administrative Agent as provided
in SECTION 2.2(c) within 24 hours of the demand therefor by Administrative
Agent, Administrative Agent shall promptly notify each Lender of such
failure, of the date and amount of the draft paid, and of such Lender's Pro
Rata Part thereof. Each Lender shall promptly and unconditionally make
available to Administrative Agent in immediately available funds such
Lender's Pro Rata Part of such unpaid reimbursement obligation, which funds
shall be paid to Administrative Agent on or before the close of business on
the Business Day on which such notice was given by Administrative Agent (if
given prior to 1:00 p.m., Dallas, Texas time) or on the next succeeding
Business Day (if notice was given after 1:00 p.m., Dallas, Texas time).
All such amounts payable by any such Lender shall include interest thereon
accruing at the Federal Funds Rate from the day the applicable draft is
paid by Administrative Agent to (but not including) the date such amount is
paid by such Lender to Administrative Agent. The obligations of Lenders to
make payments to Administrative Agent with respect to LCs shall be
irrevocable and not subject to any qualification or exception whatsoever
(other than the gross negligence or wilful misconduct of Administrative
Agent) and shall be made in accordance with the terms and conditions of
this Agreement under all circumstances, including, without limitation, any
of the following circumstances: (i) any lack of validity or enforceability
of this Agreement or any of the Loan Papers; (ii) the existence of any
claim, setoff, defense, or other Right which Borrower may have at any time
against a beneficiary named in a LC, any transferee of any LC (or any
Person for whom any such transferee may be acting), Administrative Agent,
any Lender, or any other Person, whether in connection with this Agreement,
any LC, the transactions contemplated herein, or any unrelated transactions
(including any underlying transaction between Borrower and the beneficiary
named in any such LC); (iii) any draft, certificate, or any other document
presented under the LC proving to be forged, fraudulent, invalid, or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; and (iv) the occurrence of any Potential Default
or Default.
(f) Borrower acknowledges that each LC will be deemed issued upon
delivery to its beneficiary or Borrower. If Borrower requests any LC be
delivered to Borrower rather than the beneficiary, and Borrower
subsequently cancels such LC, Borrower agrees to return it to
Administrative Agent together with Borrower's written certification that it
has never been delivered to such beneficiary. If any LC is delivered to
its beneficiary pursuant to Borrower's instructions, no cancellation
thereof by Borrower shall be effective without written consent of such
beneficiary to Administrative Agent and return of such LC to Administrative
Agent. Borrower hereby agrees that if Administrative Agent becomes
involved in any dispute as a result of Borrower's cancellation of any LC,
it shall indemnify Administrative Agent and Lenders for all losses, costs,
damages, expenses, and reasonable attorneys' fees suffered or incurred by
Administrative Agent and Lenders as a direct result thereof.
(g) Administrative Agent agrees with each Lender that it will
exercise and give the same care and attention to each LC as it gives to its
other letters of credit, and Administrative Agent's sole liability to each
Lender with respect to such LCs (OTHER THAN liability arising from the
gross negligence or willful misconduct of Administrative Agent) shall be to
distribute promptly to each Lender who has acquired a participating
interest therein such Lender's ratable portion of any payments made to
Administrative Agent by Borrower pursuant to SECTION 2.2(c). Each Lender
and Borrower agree that, in paying any draw under any LC, Administrative
Agent shall not have any responsibility to obtain any document (OTHER THAN
any documents required by the respective LC) or to ascertain or inquire as
to the validity or accuracy of any such document or the authority of the
Person delivering any such document. Administrative Agent, Lenders, and
their respective Representatives shall not be liable to any other Lender or
any Company for the use which may be
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made of any LC or for any acts or omissions of any beneficiary thereof in
connection therewith. Any action, inaction, error, delay, or omission
taken or suffered by Administrative Agent or any of its Representatives
under or in connection with any LC, the draws, drafts, or documents
relating thereto, or the transmission, dispatch, or delivery of any
message or advice related thereto, if in good faith and in conformity
with such Laws as Administrative Agent or any of its Representatives may
deem applicable and in accordance with the standards of care specified in
the UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS issued by the
International Chamber of Commerce, as in effect on the date of issue of
such LC, shall be binding upon the Companies and Lenders and shall not
place Administrative Agent or any of its Representatives under any
resulting liability to any Company or any Lender. Any action taken or
omitted to be taken by Administrative Agent under or in connection with
any LC if taken or omitted in the absence of gross negligence or wilful
misconduct shall not create for Administrative Agent any resulting
liability to any Lender or any Company.
(h) On the Termination Date or upon any demand by Administrative
Agent upon the occurrence and during continuance of a Default, Borrower
shall provide to Administrative Agent, for the benefit of Lenders, (i) cash
collateral in an amount equal to 110% of the LC Exposure existing on such
date, such cash and all interest thereon shall constitute cash collateral
for all LCs, and (ii) such additional cash collateral as Administrative
Agent may from time to time require, so that the cash collateral amount
shall at all times equal or exceed 110% the LC Exposure.
(i) Any cash collateral deposited under CLAUSE (i) above, and all
interest earned thereon, shall be held by Administrative Agent and invested
and reinvested at the expense and the written direction of Borrower, in
U.S. Treasury Bills with maturities of no more than ninety (90) days from
the date of investment.
(j) IN ADDITION TO AMOUNTS PAYABLE AS ELSEWHERE PROVIDED IN THIS
AGREEMENT, BORROWER HEREBY AGREES TO PROTECT, INDEMNIFY, PAY, AND SAVE
ADMINISTRATIVE AGENT AND EACH LENDER HARMLESS FROM AND AGAINST ANY AND ALL
CLAIMS, DEMANDS, LIABILITIES, DAMAGES, OR LOSSES OF, OR OWED TO THIRD
PARTIES, AND ANY AND ALL RELATED COSTS, CHARGES, AND EXPENSES (INCLUDING
REASONABLE ATTORNEYS' FEES, INCLUDING ALLOCATED COSTS OF INTERNAL COUNSEL),
WHICH ADMINISTRATIVE AGENT, OR ANY LENDER MAY INCUR OR BE SUBJECT TO AS A
CONSEQUENCE, DIRECT OR INDIRECT, OF (A) THE ISSUANCE OF ANY LC, OR (B) THE
FAILURE OF ADMINISTRATIVE AGENT TO HONOR A DRAFT UNDER SUCH LC AS A RESULT
OF ANY ACT OR OMISSION, WHETHER RIGHTFUL OR WRONGFUL, OF ANY PRESENT OR
FUTURE GOVERNMENTAL AUTHORITY; PROVIDED THAT, BORROWER SHALL HAVE NO
LIABILITY TO INDEMNIFY ADMINISTRATIVE AGENT OR ANY LENDER IN RESPECT OF ANY
LIABILITY ARISING OUT OF THE GROSS NEGLIGENCE OR WILFUL MISCONDUCT OF SUCH
PARTY OR ANY REPRESENTATIVES OF SUCH PARTY. THE PROVISIONS OF AND
UNDERTAKINGS AND INDEMNIFICATIONS SET FORTH IN THIS SECTION 2.2(i) SHALL
SURVIVE THE SATISFACTION AND PAYMENT OF THE OBLIGATION AND TERMINATION OF
THIS AGREEMENT.
(k) Although referenced in any LC, terms of any particular agreement
or other obligation to the beneficiary are not in any manner incorporated
herein. The fees and other amounts payable with respect to each LC shall
be as provided in this Agreement, drafts under any LC shall be deemed part
of the Obligation, and in the event of any conflict between the terms of
this Agreement and any LC Agreement, the terms of this Agreement shall be
controlling.
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2.3 ACQUISITION REVOLVER FACILITY.
(a) At any time when the Revolver Commitment Usage is equal to or
greater than 66-2/3% of the Revolver Commitment then in effect and SO LONG
AS no Default has occurred and is continuing, Borrower may request from
time to time, subject to the terms and conditions hereof, that Lenders
commit to make Borrowings to Borrower under a revolving acquisition loan
(an "ACQUISITION LOAN"), which Borrowings shall not, in the aggregate,
exceed the Maximum Acquisition Commitment, by giving written notice thereof
to Administrative Agent (an "ACQUISITION CREDIT REQUEST"), (i) specifying
therein the amount of the requested Acquisition Loan under the Acquisition
Facility which must be in an amount of not less than $25,000,000 or a
greater integral multiple thereof; PROVIDED, HOWEVER, that after giving
effect to such Acquisition Loan, the Acquisition Principal Debt shall not
exceed the Total Acquisition Commitment or the Maximum Acquisition
Commitment, (ii) identifying the proposed Acquisition to be financed in
whole or in part by the Acquisition Loan and verifying that such proposed
Acquisition satisfies the criteria for a Permitted Acquisition, and
(iii) designating the date on or before which the proposed Acquisition will
be consummated. Such Acquisition Credit Request shall be accompanied by
the financial information required by SECTION 2.3(b). Upon receipt of any
such Acquisition Credit Request, the financial information required by
SECTION 2.3(b), and such other information as the Administrative Agent
shall reasonably request in connection therewith, and after the
determination by the Administrative Agent that the proposed Acquisition
satisfies the criteria (which shall be within 10 Business Days after
receipt of all such information by the Administrative Agent), the
Administrative Agent shall promptly notify the Lenders thereof. No Lender
shall be obligated to commit to any Acquisition Credit Request.
(b) Together with each Acquisition Credit Request, Borrower shall
deliver to Administrative Agent, with sufficient copies for each Lender,
pro forma financial statements for the preceding four fiscal quarters of
Borrower for which Financial Statements have been delivered to the Lenders
pursuant to SECTIONS 9.3(a) and (b), giving effect to the proposed
Acquisition, consisting of a consolidated balance sheet as at the end of
such most recently-ended fiscal quarter of Borrower and the related
consolidated statements of operations and cash flows for such period of
four fiscal quarters and the notes related thereto, together with a pro
forma Compliance Certificate, giving effect to such proposed Acquisition.
Borrower shall also deliver to each Lender such additional information as
Administrative Agent or any Lender shall request. Within thirty (30)
calendar days after receipt of any Acquisition Credit Request, each Lender
interested in making a commitment to lend with respect to the Acquisition
Credit Request shall notify the Administrative Agent and Borrower of its
intent to so commit and the maximum amount of its proposed commitment to
lend (a "COMMITMENT NOTICE"). Thereafter, after consultation with
Borrower, the Administrative Agent shall advise each Lender submitting a
Commitment Notice of the amount of such Lender's Acquisition Commitment
pursuant to the subject Acquisition Credit Request and designate the date
upon which such Acquisition Commitment shall be effective (the "ACQUISITION
LOAN EFFECTIVE DATE"). On each date that the Revolver Commitment is
reduced hereunder pursuant to SECTION 3.2(b), the Maximum Acquisition
Commitment shall also be reduced by an amount which bears the same
proportion to the Maximum Acquisition Commitment existing on the Closing
Date as the Revolver Commitment reduction required pursuant to
SECTION 3.2(b) bears to the Revolver Commitment existing on the Closing
Date. All mandatory commitment reductions and mandatory prepayments shall
be applied to the Maximum Acquisition Commitment and the Acquisition
Principal Debt (as the case may be) in accordance with SECTIONS 2.4(b) and
3.2(c), respectively. Each Acquisition Loan (i) will be subject to the
terms and conditions of this Agreement and (ii) will be secured and
guaranteed by the Collateral Documents and the
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Guaranties. Each Acquisition Commitment of each Lender will be subject,
among other things, to (x) obtaining agreement with Borrower as to the
fronting fees or other applicable fees payable in respect of such
Acquisition Commitment and (y) the execution and delivery by Borrower,
the Guarantors, and each Lender funding the Acquisition Loan, as
appropriate, of all documents reasonably requested by the applicable
Lenders to evidence and effect the applicable Acquisition Loan,
including, without limitation, a supplement to Credit Agreement
memorializing, among other things, the amount of the Acquisition Loan,
the Acquisition Lenders, and the respective Acquisition Commitments of
such Acquisition Lenders (collectively, the "ACQUISITION CREDIT
DOCUMENTS").
(c) Each Acquisition Loan shall be a revolving loan, which may be
borrowed, repaid, and reborrowed, subject to the terms and conditions of
the Loan Papers. Subject to the terms and conditions hereof and the terms
and conditions of the applicable Acquisition Credit Documents, each Lender
making an Acquisition Commitment severally agrees to make Borrowings to
Borrower with respect to the applicable Acquisition Loan prior to the
Termination Date; PROVIDED THAT, in no event shall the aggregate Borrowings
advanced by any such Lender under the applicable Acquisition Loan exceed
such Lender's Acquisition Commitment for such Acquisition Loan. Prior to
the Termination Date, Borrower may repay any Acquisition Loan made under
the Acquisition Loan, in whole or in part, and reborrow under such
Acquisition Loan, all in accordance with the terms and conditions of this
Agreement and the applicable Acquisition Credit Documents; PROVIDED,
HOWEVER, the proceeds of each Borrowing under the Acquisition Facility may
only be used by Borrower for the purpose of financing in whole or in part a
Permitted Acquisition.
(d) Borrowings under the Acquisition Facility may from time to time
be (i) Base Rate Borrowings or (ii) Adjusted Eurodollar Rate Borrowings, as
determined by Borrower and notified to the Administrative Agent in
accordance with SECTION 2.5.
2.4 TERMINATION OF COMMITMENTS.
(a) VOLUNTARY COMMITMENT REDUCTION. Without premium or penalty, and
upon giving not less than ten (10) Business Days prior written and
irrevocable notice to Administrative Agent, Borrower may terminate in whole
or in part the unused portion of the Revolver Commitment; PROVIDED THAT:
(i) each partial termination shall be in an amount of not less than
$5,000,000 or a greater integral multiple of $1,000,000; (ii) the amount of
the Revolver Commitment may not be reduced below the Revolver Commitment
Usage; and (iii) each reduction shall be allocated Pro Rata among the
Lenders in accordance with their respective Pro Rata Parts. Promptly after
receipt of such notice of termination or reduction, Administrative Agent
shall notify each Lender of the proposed cancellation or reduction. Such
termination or partial reduction of the Revolver Commitment shall be
effective on the Business Day specified in Borrower's notice (which date
must be at least ten Business Days after Borrower's delivery of such
notice). In the event that the Total Commitment is reduced to zero at a
time when there shall be no LC Exposure or Principal Debt, this Agreement
shall be terminated to the extent specified in SECTION 13.15, and all
commitment fees and other fees then earned and unpaid hereunder and all
other amounts of the Obligation then due and owing shall be immediately due
and payable, without notice or demand by Administrative Agent or any
Lender.
(b) MANDATORY COMMITMENT REDUCTIONS/PREPAYMENTS. Until such time as
the Principal Debt has been repaid in full, the Total Commitment and the
364-Day Commitment (or, on and after the Term Conversion Date, the 364-Day
Facility Principal Debt) shall be permanently
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<PAGE>
reduced or prepaid, as the case may be, in the amounts and upon the
occurrence of the following events:
(i) Concurrently with any Debt Issuance by Borrower, the Total
Commitment and the 364-Day Facility Commitment (or, on and after the
Term Conversion Date, the 364-Day Facility Principal Debt) shall be
permanently reduced by an amount equal to 100% of the Net Cash
Proceeds realized by Borrower from such Debt Issuance; or
(ii) Concurrently with the consummation of any Significant Sale
by any Company (which Significant Sale must be otherwise permitted
under the Loan Papers or shall have been consented to by Required
Lenders), the Total Commitment and the 364-Day Facility Commitment
(or, on and after the Term Conversion Date, the 364-Day Facility
Principal Debt) shall be permanently reduced by an amount equal to
100% of the Net Cash Proceeds realized by Borrower or any Company from
such Significant Sale.
On each reduction date, Borrower shall also make a mandatory prepayment of
the Principal Debt, if required pursuant to SECTION 3.2(c), TOGETHER WITH
(x) all accrued and unpaid interest on the principal amount so prepaid and
(y) any Consequential Loss arising as a result thereof. Each commitment
reduction (or, on and after the Term Conversion, each mandatory prepayment)
under this SECTION 2.4(b) shall be applied to the Total Commitment and the
364-Day Facility Commitment (or, on and after the Term Conversion Date, the
364-Day Facility Principal Debt) in the following order: (A) ratably to the
364-Day Facility Commitment (or, on and after the Term Conversion Date, the
364-Day Facility Principal Debt) and the Revolver Commitment (for purposes
of this CLAUSE (A), "RATABLY", for each Facility, on any date of
determination, shall mean the proportion that either the Revolver
Commitment or the 364-Day Facility Commitment [or, on and after the Term
Conversion Date, the 364-Day Facility Principal Debt], as the case may be,
bears to the sum of the Revolver Commitment and the 364-Day Facility
Commitment [or, on and after the Term Conversion Date, the 364-Day Facility
Principal Debt]); and (B) to the Acquisition Commitment; PROVIDED THAT, at
any time that multiple Acquisition Loans are outstanding, any reduction of
the Maximum Acquisition Commitment shall be applied first to the unused
Maximum Acquisition Commitment, then ratably to the Acquisition Commitment
for each Acquisition Loan in the proportion that the Acquisition Commitment
for such Acquisition Loan bears to the Maximum Acquisition Commitment. All
commitment reductions for the Revolver Facility, the 364-Day Facility, or
the Acquisition Loan Facility shall be applied ratably to each Lender's
Commitment under each such Facility and shall be applied to the
regularly-scheduled commitment reductions under such Facilities in inverse
order of maturities.
2.5 BORROWING PROCEDURE. The following procedures apply to Borrowings:
(a) Each Borrowing shall be made on Borrower's notice (a "NOTICE OF
BORROWING," substantially in the form of EXHIBIT B-1) to Administrative
Agent requesting that Lenders fund a Borrowing on a certain date (the
"BORROWING DATE"), which notice (i) shall be irrevocable and binding on
Borrower, (ii) shall specify if it is for a Borrowing under the Revolver
Facility or the Acquisition Facility, (iii) shall specify the Borrowing
Date, amount, Type, and (for a Borrowing comprised of Eurodollar Rate
Borrowings) Interest Period, and (iv) must be received by Administrative
Agent no later than 10:00 a.m. Dallas, Texas time on the third Business Day
preceding the Borrowing Date for any Eurodollar Rate Borrowing or on the
Business Day immediately preceding the Borrowing Date for any Base Rate
Borrowing. Administrative Agent shall timely notify each Lender with
respect to each Notice of Borrowing.
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(b) Each Lender shall remit its Pro Rata Part for the relevant
Facility of each requested Borrowing to Administrative Agent's principal
office in Dallas, in funds which are or will be available for immediate use
by Administrative Agent by 1:00 p.m. Dallas time on the Borrowing Date
therefor. Subject to receipt of such funds, Administrative Agent shall
(unless to its actual knowledge any of the conditions precedent therefor
have not been satisfied by Borrower or waived by Required Lenders) make
such funds available to Borrower by causing such funds to be deposited to
Borrower's account as designated to Administrative Agent by Borrower.
Notwithstanding the foregoing, unless Administrative Agent shall have been
notified by a Lender prior to a Borrowing Date that such Lender does not
intend to make available to Administrative Agent such Lender's Pro Rata
Part of the applicable Borrowing, Administrative Agent may assume that such
Lender has made such proceeds available to Administrative Agent on such
date, as required herein, and Administrative Agent may (unless to its
actual knowledge any of the conditions precedent therefor have not been
satisfied by Borrower or waived by Required Lenders), in reliance upon such
assumption (but shall not be required to), make available to Borrower a
corresponding amount in accordance with the foregoing terms, but, if such
corresponding amount is not in fact made available to Administrative Agent
by such Lender on such Borrowing Date, Administrative Agent shall be
entitled to recover such corresponding amount on demand (i) from such
Lender, together with interest at the Federal Funds Rate during the period
commencing on the date such corresponding amount was made available to
Borrower and ending on (but excluding) the date Administrative Agent
recovers such corresponding amount from such Lender, or (ii) if such Lender
fails to pay such corresponding amount forthwith upon such demand, then
from Borrower, TOGETHER WITH interest at a rate per annum equal to the
applicable rate for such Borrowing during the period commencing on such
Borrowing Date and ending on (but excluding) the date Administrative Agent
recovers such corresponding amount from Borrower. No Lender shall be
responsible for the failure of any other Lender to make its Pro Rata Part
of any Borrowing.
SECTION 3 TERMS OF PAYMENT.
3.1 LOAN ACCOUNTS, NOTES, AND PAYMENTS.
(a) The Revolver Principal Debt owed to each Lender shall be
evidenced by the Revolver Notes, one payable to each Lender in the maximum
stated principal amount of its Committed Sum under the Revolver Facility as
of the Closing Date.
(b) The Principal Debt owed to each Lender under any Acquisition Loan
to which such Lender has committed shall be evidenced by an Acquisition
Note for such Acquisition Loan, payable to such Lender in the maximum
principal amount of such Lender's Acquisition Commitment with respect to
such Acquisition Loan.
(c) Each payment or prepayment on the Obligation is due and must be
paid at Administrative Agent's principal office in Dallas in funds which
are or will be available for immediate use by Administrative Agent by
12:00 noon Dallas, Texas time on the day due. Payments made after
12:00 noon, Dallas, Texas, time shall be deemed made on the Business Day
next following. Administrative Agent shall pay to each Lender any payment
or prepayment to which such Lender is entitled hereunder on the same day
Administrative Agent shall have received the same from Borrower; PROVIDED
such payment or prepayment is received by Administrative Agent prior to
12:00 noon Dallas, Texas time, and otherwise before 12:00 noon Dallas time
on the Business Day next following. If and to the extent Administrative
Agent shall not make such
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payments to Lenders when due as set forth in the preceding sentence, such
unpaid amounts shall accrue interest, payable by Administrative Agent, at
the Federal Funds Rate from the due date until (but not including) the
date on which Administrative Agent makes such payments to Lenders.
3.2 INTEREST AND PRINCIPAL PAYMENTS.
(a) Interest on each Eurodollar Rate Borrowing shall be due and
payable as it accrues on the last day of its respective Interest Period and
on the Termination Date, as applicable; PROVIDED THAT, (i) with respect to
Eurodollar Rate Borrowings having an Interest Period in excess of three (3)
months, 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.
Interest on each Base Rate Borrowing shall be due and payable as it accrues
on each March 31, June 30, September 30, and December 31, and on the
Termination Date.
(b) The Revolver Commitment on June 30, 2000, shall be permanently
reduced by the percentages specified below on the corresponding reduction
date set forth as follows:
<TABLE>
Reduction Date Percentage Reduction
-------------- --------------------
<S> <C>
June 30, 2000 3.333%
September 30, 2000 3.333%
December 31, 2000 3.333%
March 31, 2001 3.750%
June 30, 2001 3.750%
September 30, 2001 3.750%
December 31, 2001 3.750%
March 31, 2002 3.750%
June 30, 2002 3.750%
September 30, 2002 3.750%
December 31, 2002 3.750%
March 31, 2003 4.375%
June 30, 2003 4.375%
September 30, 2003 4.375%
December 31, 2003 4.375%
March 31, 2004 4.375%
June 30, 2004 4.375%
September 30, 2004 4.375%
December 31, 2004 4.375%
March 31, 2005 3.750%
June 30, 2005 3.750%
September 30, 2005 3.750%
December 31, 2005 3.750%
March 31, 2006 5.000%
June 30, 2006 5.000%
</TABLE>
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<PAGE>
On each such reduction date, if the Revolver Commitment Usage exceeds the
Revolver Commitment then in effect, Borrower shall repay or prepay the
Revolver Principal Debt in an amount equal to such excess, TOGETHER WITH
all accrued and unpaid interest on the principal amount so repaid or
prepaid and any Consequential Loss arising as a result thereof.
(c) On any date of determination (i) if the Revolver Commitment Usage
exceeds the Revolver Commitment, (ii) if the Acquisition Principal Debt
exceeds the Total Acquisition Commitment, (iii) if the Acquisition
Principal Debt exceeds the Maximum Acquisition Commitment, (iv) if the
Principal Debt under any Acquisition Loan exceeds the aggregate Acquisition
Commitments of the Lenders for such Acquisition Loan, or (v) if the sum of
the Principal Debt, together (without duplication) with the LC Exposure,
exceeds the Total Commitment, then Borrower shall make a mandatory
prepayment of the Principal Debt under the Revolver Facility and the
Acquisition Facility, as appropriate, in at least the amount of such
excess, TOGETHER WITH (x) all accrued and unpaid interest on the principal
amount so prepaid and (y) any Consequential Loss arising as a result
thereof. All mandatory prepayments hereunder for each Facility shall be
applied Pro Rata to each Lender's Committed Sum thereunder and shall be
applied to the regularly-scheduled Commitment reductions hereunder in
inverse order of maturity; PROVIDED THAT, at any time that multiple
Acquisition Loans are outstanding, any reduction of the Maximum Acquisition
Commitment shall be applied first to the unused Maximum Acquisition
Commitment, then ratably to the Acquisition Commitment for each Acquisition
Loan in the proportion that the Acquisition Commitment for such Acquisition
Loan bears to the Maximum Acquisition Commitment.
(d) After giving Administrative Agent advance written notice of the
intent to prepay, Borrower may voluntarily prepay all or any part of the
Principal Debt from time to time and at any time, in whole or in part,
without premium or penalty; PROVIDED THAT: (i) such notice must be received
by Administrative Agent by 12:00 noon Dallas, Texas time on (A) the third
Business Day preceding the date of prepayment of a Eurodollar Rate
Borrowing, and (B) the Business Day of a prepayment of a Base Rate
Borrowing; (ii) each such partial prepayment must be in a minimum amount of
at least $5,000,000 or a greater integral multiple of $1,000,000 thereof
(if a Eurodollar Rate Borrowing or a Base Rate Borrowing); (iii) all
accrued interest on any Eurodollar Rate Borrowing being prepaid must also
be paid in full, to the date of such prepayment; and (iv) Borrower shall
pay any related Consequential Loss within ten (10) days after demand
therefor. Each notice of prepayment shall specify the prepayment date, the
Facility hereunder being prepaid, and the Type of Borrowing(s) and
amount(s) of such Borrowing(s) to be prepaid and shall constitute a binding
obligation of Borrower to make a prepayment on the date stated therein.
3.3 INTEREST OPTIONS. Except where specifically otherwise provided,
Borrowings shall bear interest at a rate per annum equal to the LESSER OF (a) as
to the respective Type of Borrowing (as designated by Borrower in accordance
with this Agreement), the Base Rate plus the Applicable Margin for Base Rate
Borrowings or the Adjusted Eurodollar Rate plus the Applicable Margin for
Eurodollar Rate Borrowings, AND (b) the Maximum Rate. Each change in the Base
Rate or the Maximum Rate, subject to the terms of this Agreement, will become
effective, without notice to Borrower or any other Person, upon the effective
date of such change.
3.4 QUOTATION OF RATES. It is hereby acknowledged that a Responsible
Officer or other appropriately designated officer of Borrower may call
Administrative Agent on or before the date on which a Notice of Borrowing is to
be delivered by Borrower in order to receive an indication of the rates then
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in effect, but such indicated rates shall neither be binding upon
Administrative Agent or Lenders nor affect the rate of interest which
thereafter is actually in effect when the Notice of Borrowing is given.
3.5 DEFAULT RATE. At the option of Required Lenders and to the extent
permitted by Law, all past-due Principal Debt and accrued interest thereon shall
bear interest from maturity (stated or by acceleration) at the Default Rate
until paid, regardless whether such payment is made before or after entry of a
judgment; PROVIDED THAT, the Default Rate shall automatically apply in the case
of SECTION 2.2(c) where the Default Rate is specified.
3.6 INTEREST RECAPTURE. If the designated rate applicable to any
Borrowing exceeds the Maximum Rate, the rate of interest on such Borrowing shall
be limited to the Maximum Rate, but any subsequent reductions in such designated
rate shall not reduce the rate of interest thereon below the Maximum Rate until
the total amount of interest accrued thereon equals the amount of interest which
would have accrued thereon if such designated rate had at all times been in
effect. In the event that at maturity (stated or by acceleration), or at final
payment of the Principal Debt, the total amount of interest paid or accrued is
less than the amount of interest which would have accrued if such designated
rates had at all times been in effect, then, at such time and to the extent
permitted by Law, Borrower shall pay an amount equal to the difference between
(a) the LESSER OF the amount of interest which would have accrued if such
designated rates had at all times been in effect AND the amount of interest
which would have accrued if the Maximum Rate had at all times been in effect,
and (b) the amount of interest actually paid or accrued on the Principal Debt.
3.7 INTEREST CALCULATIONS.
(a) All payments of interest shall be calculated on the basis of
actual number of days (including the first day but excluding the last day)
elapsed but computed as if each calendar year consisted of 360 days in the
case of a Eurodollar Rate Borrowing (unless such calculation would result
in the interest on the Borrowings exceeding the Maximum Rate, in which
event such interest shall be calculated on the basis of a year of 365 or
366 days, as the case may be), and 365 or 366 days, as the case may be, in
the case of a Base Rate Borrowing. All interest rate determinations and
calculations by Administrative Agent shall be conclusive and binding absent
manifest error.
(b) The provisions of this Agreement relating to the calculation of
the Base Rate and the Adjusted Eurodollar Rate are included only for the
purpose of determining the rate of interest or other amounts to be paid
hereunder that are based upon such rate.
3.8 MAXIMUM RATE. Regardless of any provision contained in any Loan
Paper, neither Administrative Agent nor any Lender shall ever be entitled to
contract for, charge, take, reserve, receive, or apply, as interest on the
Obligation, or any part thereof, any amount in excess of the Maximum Rate, and,
if Lenders ever do so, then such excess shall be deemed a partial prepayment of
principal and treated hereunder as such and any remaining excess shall be
refunded to Borrower. In determining if the interest paid or payable exceeds
the Maximum Rate, Borrower and Lenders shall, to the maximum extent permitted
under applicable Law, (a) treat all Borrowings as but a single extension of
credit (and Lenders and Borrower agree that such is the case and that provision
herein for multiple Borrowings is for convenience only), (b) characterize any
nonprincipal payment as an expense, fee, or premium rather than as interest,
(c) exclude voluntary prepayments and the effects thereof, and (d) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the Obligation; PROVIDED THAT, if the Obligation is paid
and performed in full prior to the end of the full contemplated term thereof,
and if the
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interest received for the actual period of existence thereof exceeds the
Maximum Amount, Lenders shall refund such excess, and, in such event, Lenders
shall not, to the extent permitted by Law, be subject to any penalties
provided by any Laws for contracting for, charging, taking, reserving, or
receiving interest in excess of the Maximum Amount.
3.9 INTEREST PERIODS. When Borrower requests any Eurodollar Rate
Borrowing, Borrower may elect the interest period (each an "INTEREST PERIOD")
applicable thereto, which shall be, at Borrower's option, one, two, three, or
six months (or other periods, if requested by Borrower and available from the
Lenders); PROVIDED, HOWEVER, that: (a) the initial Interest Period for a
Eurodollar Rate Borrowing shall commence on the date of such Borrowing
(including the date of any conversion thereto), and each Interest Period
occurring thereafter in respect of such Borrowing shall commence on the day on
which the next preceding Interest Period applicable thereto expires; (b) if any
Interest Period for a Eurodollar Rate Borrowing begins on a day for which there
is no numerically corresponding Business Day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the next Business Day
immediately following what otherwise would have been such numerically
corresponding day in the calendar month at the end of such Interest Period
(UNLESS such date would be in a different calendar month from what would have
been the month at the end of such Interest Period, or UNLESS there is no
numerically corresponding day in the calendar month at the end of the Interest
Period; whereupon, such Interest Period shall end on the last Business Day in
the calendar month at the end of such Interest Period); (c) no Interest Period
may be chosen with respect to any portion of the Principal Debt which would
extend beyond the scheduled repayment date (including any dates on which
mandatory prepayments are required to be made) for such portion of the Principal
Debt; and (d) no more than an aggregate of six (6) Interest Periods shall be in
effect at one time.
3.10 CONVERSIONS. Borrower may (a) convert a Eurodollar Rate Borrowing on
the last day of an Interest Period to a Base Rate Borrowing, (b) convert a Base
Rate Borrowing at any time to a Eurodollar Rate Borrowing, and (c) elect a new
Interest Period (in the case of a Eurodollar Rate Borrowing), by giving notice
(a "NOTICE OF CONVERSION," substantially in the form of EXHIBIT B-2) of such
intent no later than 10:00 a.m. Dallas, Texas time on the third Business Day
prior to the date of conversion or the last day of the Interest Period, as the
case may be (in the case of a conversion to a Eurodollar Rate Borrowing or an
election of a new Interest Period), and no later than 10:00 a.m. Dallas, Texas
time one Business Day prior to the last day of the Interest Period (in the case
of a conversion to a Base Rate Borrowing); PROVIDED THAT, the principal amount
converted to, or continued as, a Eurodollar Rate Borrowing shall be in an amount
not less than $5,000,000 or a greater integral multiple of $1,000,000.
Administrative Agent shall timely notify each Lender with respect to each Notice
of Conversion. Absent Borrower's Notice of Conversion or election of a new
Interest Period, a Eurodollar Rate Borrowing shall be deemed converted to a Base
Rate Borrowing effective as of the expiration of the Interest Period applicable
thereto. No Eurodollar Rate Borrowing may be either made or continued as a
Eurodollar Rate Borrowing, and no Base Rate Borrowing may be converted to a
Eurodollar Rate Borrowing, if the interest rate for such Eurodollar Rate
Borrowing would exceed the Maximum Rate.
3.11 ORDER OF APPLICATION.
(a) Payments and prepayments of the Obligation shall be applied in
the order and manner specified in this Agreement; PROVIDED, HOWEVER, if no
order is otherwise specified and no Default or Potential Default has
occurred and is continuing, payments and prepayments of the Obligation
shall be applied first to fees, second to accrued interest then due and
payable on the Principal Debt, and then to the remaining Obligation in the
order and manner as Borrower may direct.
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<PAGE>
(b) If a Default or Potential Default has occurred and is continuing
(or if Borrower fails to give directions as permitted under
SECTION 3.11(a)), any payment or prepayment (including proceeds from the
exercise of any Rights) shall be applied to the Obligation and the 364-Day
Facility Obligation in the following order: (i) to the ratable payment of
all fees, expenses, and indemnities for which Agents, 364-Day Facility
Agents, Lenders, or 364-Day Facility Lenders have not been paid or
reimbursed in accordance with the Loan Papers or the 364-Day Facility Loan
Papers (as used in this SECTION 3.11(b)(i), a "RATABLE PAYMENT" for any
Lender, any 364-Day Facility Lender, any 364-Day Facility Agent, or any
Agent shall be, on any date of determination, that proportion which the
portion of the total fees, expenses, and indemnities owed to such Lender,
such 364-Day Facility Lender, such 364-Day Facility Agent, or such Agent
bears to the total aggregate fees and indemnities owed to all Lenders,
364-Day Facility Lenders, 364-Day Facility Agents, and Agents on such date
of determination); (ii) to the ratable payment of accrued and unpaid
interest on the Revolver Principal Debt, the Acquisition Principal Debt,
and the 364-Day Facility Principal Debt (as used in this
SECTION 3.11(b)(ii), "RATABLE PAYMENT" means, for any Lender or 364-Day
Facility Lender, on any date of determination, that proportion which the
accrued and unpaid interest on the Revolver Principal Debt, the 364-Day
Facility Principal Debt, or the Acquisition Principal Debt [as the case may
be] owed to such Lender or 364-Day Facility Lender bears to the total
accrued and unpaid interest under the Loan Papers and the 364-Day Facility
Loan Papers owed to all Lenders and the 364-Day Facility Lenders); (iii) to
the ratable payment of any reimbursement obligation with respect to any LC
issued pursuant to the Revolver Facility which is due and payable and which
remains unfunded by any Borrowing under the Revolver Facility; PROVIDED
THAT, such payments shall be allocated ratably among NationsBank and the
Lenders which have funded their participation in such LC; (iv) to the
ratable payment of the Revolver Principal Debt and the 364-Day Facility
Principal Debt (as used in this SECTION 3.11(b)(iv), "RATABLE PAYMENT"
means for any Lender or any 364-Day Facility Lender, on any date of
determination, that proportion which the Revolver Principal Debt or the
364-Day Facility Principal Debt [as the case may be] owed to such Lender or
364-Day Facility Lender bears to the sum of the Principal Debt and the
364-Day Facility Principal Debt owed to all Lenders and all 364-Day
Facility Lenders; (v) to the ratable payment of the Acquisition Principal
Debt; PROVIDED THAT, at any time that multiple Acquisition Loans are
outstanding, such payments shall be applied to each Acquisition Loan in the
proportion that the Principal Debt outstanding under any Acquisition
Commitment for any such Acquisition Loan bears to the Acquisition Principal
Debt and then distributed, for each Acquisition Loan, to the respective
Acquisition Lender in the proportion that the Principal Debt owed to such
Lender with respect to such Acquisition Loan bears to the Principal Debt of
all Acquisition Lenders under such Acquisition Loan; (vi) to the ratable
payment of the remaining Principal Debt or 364-Day Facility Principal Debt
in such order as Determining Lenders may elect (PROVIDED THAT, Determining
Lenders will apply such proceeds in an order that will minimize any
Consequential Loss); (vii) as a deposit with Administrative Agent, for the
benefit of Lenders, as security for, and to provide for the payment of, any
reimbursement obligations, if any, thereafter arising with respect to any
issued and outstanding LCs issued pursuant to the Revolver Facility; and
(viii) to the payment of the remaining Obligation and the 364-Day Facility
Obligation in the order and manner Determining Lenders deem appropriate.
Subject to the provisions of SECTION 12 and provided that neither Administrative
Agent nor Collateral Agent shall in any event be bound to inquire into or to
determine the validity, scope, or priority of any interest or entitlement of any
Lender or Revolver/Acquisition Lender and may suspend all payments or seek
appropriate relief (including, without limitation, instructions from Determining
Lenders or an action in the nature of interpleader) in the event of any doubt or
dispute as to any apportionment or distribution
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contemplated hereby, Administrative Agent or Collateral Agent, as the case may
be, shall: (x) promptly distribute such amounts to each Lender in accordance
with the Agreement and the related Loan Papers, and (y) promptly distribute
all payments allocable to 364-Day Facility Lenders to the Administrative Agent
under the 364-Day Facility for distribution in accordance with the 364-Day
Facility and the related 364-Day Loan Papers.
3.12 SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment
(whether voluntary, involuntary, or otherwise, including, without limitation, as
a result of exercising its Rights under SECTION 3.13) which is in excess of its
ratable share of any such payment, such Lender shall purchase from the other
Lenders and the 364-Day Facility Lenders such participations as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; PROVIDED, HOWEVER, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery.
Borrower agrees that any Lender so purchasing a participation from another
Lender or 364-Day Facility Lender pursuant to this Section and the Intercreditor
Agreement may, to the fullest extent permitted by Law, exercise all of its
Rights of payment (including the Right of offset) with respect to such
participation as fully as if such Lender or 364-Day Facility Lender were the
direct creditor of Borrower in the amount of such participation.
3.13 OFFSET. Upon the occurrence and during the continuance of a Default,
each Lender shall be entitled to exercise (for the benefit of all Lenders and
364-Day Facility Lenders in accordance with SECTION 3.12 and the Intercreditor
Agreement) the Rights of offset and/or banker's Lien against each and every
account and other property, or any interest therein, which Borrower may now or
hereafter have with, or which is now or hereafter in the possession of, such
Lender to the extent of the full amount of the Obligation and the 364-Day
Facility Obligation.
3.14 BOOKING BORROWINGS. To the extent permitted by Law, any Lender may
make, carry, or transfer its Borrowings at, to, or for the account of any of its
branch offices or the office of any of its Affiliates; PROVIDED THAT, no
Affiliate shall be entitled to receive any greater payment under SECTION 4 than
the transferor Lender would have been entitled to receive with respect to such
Borrowings.
SECTION 4 CHANGE IN CIRCUMSTANCES.
4.1 INCREASED COST AND REDUCED RETURN.
(a) If, after the date hereof, the adoption of any applicable, or any
change in the interpretation or administration thereof by any Governmental
Authority, or compliance by any Lender (or its Applicable Lending Office)
with any request or directive (whether or not having the force of law) of
any such Governmental Authority:
(i) shall subject such Lender (or its Applicable Lending Office)
to any Tax or other charge with respect to any Eurodollar Rate
Borrowing, its Notes, or its obligation to loan Eurodollar Rate
Borrowings, or change the basis of taxation of any amounts payable to
such Lender (or its Applicable Lending Office) under this Agreement or
its Notes in respect of any Eurodollar Rate Borrowings (other than
taxes imposed on the overall net income of such Lender by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office);
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(ii) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other than the
Reserve Requirement utilized in the determination of the Adjusted
Eurodollar Rate) relating to any extensions of credit or other assets
of, or any deposits with or other liabilities or commitments of, such
Lender (or its Applicable Lending Office), including the commitment of
such Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable Lending
Office) or the London interbank market any other condition affecting
this Agreement or its Notes or any of such extensions of credit or
liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making, converting into,
continuing, or maintaining any Eurodollar Rate Borrowings or to reduce any
sum received or receivable by such Lender (or its Applicable Lending
Office) under this Agreement or its Notes with respect to any Eurodollar
Rate Borrowing, then Borrower shall pay to such Lender on demand such
amount or amounts as will compensate such Lender for such increased cost or
reduction. If any Lender requests compensation by Borrower under this
SECTION 4.1(a), Borrower may, by notice to such Lender (with a copy to
Administrative Agent), suspend the obligation of such Lender to loan or
continue Borrowings of the Type with respect to which such compensation is
requested, or to convert Borrowings of any other Type into Borrowings of
such Type, until the event or condition giving rise to such request ceases
to be in effect (in which case the provisions of SECTION 4.4 shall be
applicable); PROVIDED, THAT such suspension shall not affect the right of
such Lender to receive the compensation so requested.
(b) If, after the date hereof, any Lender shall have determined that
the adoption of any applicable Law regarding capital adequacy or any change
therein or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or
not having the force of law) of any such Governmental Authority has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of such
Lender's obligations hereunder to a level below that which such Lender or
such corporation could have achieved but for such adoption, change,
request, or directive (taking into consideration its policies with respect
to capital adequacy), then from time to time upon demand Borrower shall pay
to such Lender such additional amount or amounts as will compensate such
Lender for such reduction.
(c) Each Lender shall promptly notify Borrower and Administrative
Agent of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Lender to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Lender, be otherwise
disadvantageous to it. Any Lender claiming compensation under this Section
shall furnish to Borrower and Administrative Agent a statement setting
forth the additional amount or amounts to be paid to it hereunder which
shall be conclusive in the absence of manifest error. In determining such
amount, such Lender may use any reasonable averaging and attribution
methods.
4.2 LIMITATION ON TYPES OF LOANS. If on or prior to the first day of any
Interest Period for any Eurodollar Rate Borrowing:
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(a) Administrative Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar
Rate for such Interest Period; or
(b) Required Lenders determine (which determination shall be
conclusive) and notify Administrative Agent that the Adjusted Eurodollar
Rate will not adequately and fairly reflect the cost to the Lenders of
funding Eurodollar Rate Borrowings for such Interest Period;
then Administrative Agent shall give Borrower prompt notice thereof specifying
the relevant amounts or periods, and so long as such condition remains in
effect, the Lenders shall be under no obligation to fund additional Eurodollar
Rate Borrowings, continue Eurodollar Rate Borrowings, or to convert Base Rate
Borrowings into Eurodollar Rate Borrowings, and Borrower shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Eurodollar
Rate Borrowings, either prepay such Borrowings or convert such Borrowings into
Base Rate Borrowings in accordance with the terms of this Agreement.
4.3 ILLEGALITY. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Lender or its Applicable Lending
Office to make, maintain, or fund Eurodollar Rate Borrowings hereunder, then
such Lender shall promptly notify Borrower thereof and such Lender's obligation
to make or continue Eurodollar Rate Borrowings and to convert other Base Rate
Borrowings into Eurodollar Rate Borrowings shall be suspended until such time as
such Lender may again make, maintain, and fund Eurodollar Rate Borrowings (in
which case the provisions of SECTION 4.4 shall be applicable).
4.4 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to fund
Eurodollar Rate Borrowings or to continue, or to convert Base Rate Borrowings
into Eurodollar Rate Borrowings, shall be suspended pursuant to SECTIONS 4.1,
4.2, or 4.3 hereof, such Lender's Eurodollar Rate Borrowings shall be
automatically converted into Base Rate Borrowings on the last day(s) of the then
current Interest Period(s) for Eurodollar Rate Borrowings (or, in the case of a
conversion required by SECTION 4.3 hereof, on such earlier date as such Lender
may specify to Borrower with a copy to Administrative Agent) and, unless and
until such Lender gives notice as provided below that the circumstances
specified in SECTIONS 4.1, 4.2, or 4.3 hereof that gave rise to such conversion
no longer exist:
(a) to the extent that such Lender's Eurodollar Rate Borrowings have
been so converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Eurodollar Rate Borrowings shall be
applied instead to its Base Rate Borrowings; and
(b) all Borrowings that would otherwise be made or continued by such
Lender as Eurodollar Rate Borrowings shall be made or continued instead as
Base Rate Borrowings, and all Borrowings of such Lender that would
otherwise be converted into Eurodollar Rate Borrowings shall be converted
instead into (or shall remain as) Base Rate Borrowings.
If such Lender gives notice to Borrower (with a copy to Administrative Agent)
that the circumstances specified in SECTIONS 4.1, 4.2, or 4.3 hereof that gave
rise to the conversion of such Lender's Eurodollar Rate Borrowings pursuant to
this SECTION 4.4 no longer exist (which such Lender agrees to do promptly upon
such circumstances ceasing to exist) at a time when Eurodollar Rate Borrowings
made by other Lenders are outstanding, such Lender's Base Rate Borrowings shall
be automatically converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Eurodollar Rate Borrowings, to the extent
necessary so that, after giving effect thereto, all Eurodollar Rate Borrowings
held by the Lenders and by such Lender are held pro rata (as to principal
amounts, Types, and Interest Periods) in accordance with their respective
Commitments.
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4.5 COMPENSATION. Upon the request of any Lender, Borrower shall pay to
such Lender such amount or amounts as shall be sufficient (in the reasonable
opinion of such Lender) to compensate it for any loss, cost, or expense
(including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or conversion of a Eurodollar Rate
Borrowing for any reason (including, without limitation, the acceleration
of the loan pursuant to SECTION 11.1) on a date other than the last day of
the Interest Period for such Borrowing; or
(b) any failure by Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in SECTION 7.3
to be satisfied) to borrow, convert, continue, or prepay a Eurodollar Rate
Borrowing on the date for such borrowing, conversion, continuation, or
prepayment specified in the relevant notice of borrowing, prepayment,
continuation, or conversion under this Agreement.
4.6 TAXES.
(a) Any and all payments by Borrower to or for the account of any
Lender or Administrative Agent hereunder or under any other Loan Paper
shall be made free and clear of and without deduction for any and all
present or future Taxes, EXCLUDING, in the case of each Lender and
Administrative Agent, Taxes imposed on its income and franchise Taxes
imposed on it by the jurisdiction under the laws of which such Lender (or
its Applicable Lending Office) or Administrative Agent (as the case may be)
is organized, or any political subdivision thereof. If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
under this Agreement or any other Loan Paper to any Lender or
Administrative Agent, (i) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions
applicable to additional sums payable under this SECTION 4.6) such Lender
or Administrative Agent receives an amount equal to the sum it would have
received had no such deductions been made, (ii) Borrower shall make such
deductions, (iii) Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law, and (iv) Borrower shall furnish to Administrative Agent, at
its address listed in SCHEDULE 2.1, the original or a certified copy of a
receipt evidencing payment thereof.
(b) In addition, Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under this
Agreement or any other Loan Paper or from the execution or delivery of, or
otherwise with respect to, this Agreement or any other Loan Paper
(hereinafter referred to as "OTHER TAXES").
(c) Borrower agrees to indemnify each Lender and Administrative Agent
for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or other Taxes imposed or asserted by any
jurisdiction on amounts payable under this SECTION 4.6) paid by such Lender
or Administrative Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect
thereto.
(d) Each Lender organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of
this Agreement in the case of each Lender listed on the signature pages
hereof and on or prior to the date on which it becomes a Lender in the case
of each other Lender, and from time to time thereafter if requested in
writing by Borrower or Administrative Agent (but only so long as such
Lender remains lawfully able to do so), shall
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provide Borrower and Administrative Agent with (i) INTERNAL REVENUE
SERVICE FORM 1001 or 4224, as appropriate, or any successor form
prescribed by the Internal Revenue Service, certifying that such Lender
is entitled to benefits under an income tax treaty to which the United
States is a party which reduces the rate of withholding tax on payments
of interest or certifying that the income receivable pursuant to this
Agreement is effectively connected with the conduct of a trade or
business in the United States, (ii) INTERNAL REVENUE SERVICE FORM W-8 or
W-9, as appropriate, or any successor form prescribed by the Internal
Revenue Service, and (iii) any other form or certificate required by any
taxing authority (including any certificate required by SECTIONS 871(h)
and 881(c) of the Internal Revenue Code), certifying that such Lender is
entitled to an exemption from or a reduced rate of tax on payments
pursuant to this Agreement or any of the other Loan Papers.
(e) For any period with respect to which a Lender has failed to
provide Borrower and Administrative Agent with the appropriate form
pursuant to SECTION 4.6(d) (unless such failure is due to a change in Law
occurring subsequent to the date on which a form originally was required to
be provided), such Lender shall not be entitled to indemnification under
SECTION 4.6(a) or 4.6(b) with respect to Taxes imposed by the United
States; PROVIDED, HOWEVER, that should a Lender, which is otherwise exempt
from or subject to a reduced rate of withholding tax, become subject to
Taxes because of its failure to deliver a form required hereunder, Borrower
shall take such steps as such Lender shall reasonably request to assist
such Lender to recover such Taxes.
(f) If Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this SECTION 4.6, then such Lender will
agree to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such additional
payment which may thereafter accrue if such change, in the judgment of such
Lender, is not otherwise disadvantageous to such Lender.
(g) Within thirty (30) days after the date of any payment of Taxes,
Borrower shall furnish to Administrative Agent the original or a certified
copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in
this SECTION 4.6 shall survive the termination of the Total Commitment and
the payment in full of the Notes.
SECTION 5 FEES.
5.1 TREATMENT OF FEES. Except as otherwise provided by Law, the fees
described in this SECTION 5: (a) do not constitute compensation for the use,
detention, or forbearance of money, (b) are in addition to, and not in lieu of,
interest and expenses otherwise described in this Agreement, (c) shall be
payable in accordance with SECTION 3.1, (d) shall be non-refundable, (e) shall,
to the fullest extent permitted by Law, bear interest, if not paid when due, at
the Default Rate, and (f) shall be calculated on the basis of actual number of
days (including the first day but excluding the last day) elapsed, but computed
as if each calendar year consisted of 360 days, unless such computation would
result in interest being computed in excess of the Maximum Rate in which event
such computation shall be made on the basis of a year of 365 or 366 days, as the
case may be.
5.2 FEES OF ADMINISTRATIVE AGENT AND ARRANGER. Borrower shall pay to
(a) Administrative Agent and Arranger, as the case may be, solely for their
respective accounts, the fees described in that
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certain separate letter agreement dated as of January 7, 1998, between
Borrower, Administrative Agent, and Arranger, and (b) each Lender of all the
fees specified in the letter dated March 24, 1998, addressed to such Lender
from Administrative Agent on behalf of Borrower, which payments shall be made
on the dates specified, and in amounts calculated in accordance with, such
letter agreement.
5.3 LC FEES. Borrower shall pay to Administrative Agent, for the ratable
benefit of Lenders, in accordance with their respective Pro Rata Parts, a fee
for each LC, payable in installments in arrears, SO LONG AS such LC remains
outstanding. Such installments shall be paid for the period from and including
the date of issuance of the applicable LC, to but excluding the next quarterly
payment date (as hereinafter specified), and thereafter for the period from and
including such quarterly payment date to but excluding the next quarterly
payment date or (if earlier) the expiry date of such LC. Such installments
shall be paid on each March 31, June 30, September 30, and December 31. Each
such installment shall be in an amount equal to the product of (a) the
Applicable Margin for Eurodollar Rate Borrowings in effect on the date of
payment of such fee (and applied on a per annum basis) MULTIPLIED BY (b) the
face amount of such LC, and pro rated (in accordance with SECTION 5.1(f)) for
the period for which such installment is due.
5.4 LC ISSUANCE AND FRONTING FEES. Borrower shall pay Administrative
Agent, as the issuer of LCs and for the individual account of Administrative
Agent, an LC issuance and fronting fee for each LC, payable in installments in
arrears, SO LONG AS such LC remains outstanding. Such installments shall be
paid for the period from and including the date of issuance of the applicable
LC, to but excluding the next quarterly payment date (as hereinafter specified),
and thereafter for the period from and including such quarterly payment date to
but excluding the next quarterly payment date or (if earlier) the expiry date of
such LC. Such installments shall be paid on each March 31, June 30, September
30, and December 31. Each such installment shall be in an amount equal to the
product of (a) 0.250% per annum MULTIPLIED BY (b) the face amount of such LC,
and pro rated (in accordance with SECTION 5.1(f)) for the period for which such
installment is due. In addition, Borrower shall pay to Administrative Agent,
for its individual account, standard administrative charges for LC amendments
provided for in SECTION 2.2(c).
5.5 REVOLVER FACILITY COMMITMENT FEES. Following the Closing Date,
Borrower shall pay to Administrative Agent, for the ratable account of Lenders,
a commitment fee, payable in installments in arrears, on each March 31, June 30,
September 30, and December 31 and on the Termination Date, commencing March 31,
1998. Each installment shall be, in an amount equal to the Applicable Margin
for Commitment Fees MULTIPLIED BY the amount by which (a) the average daily
Revolver Commitment exceeds (b) the average daily Revolver Commitment Usage, in
each case during the period from and including the last payment date to and
excluding the payment date for such installment; PROVIDED THAT, each such
installment shall be calculated in accordance with SECTION 5.1(f).
5.6 ACQUISITION FACILITY COMMITMENT FEES. With respect to each
Acquisition Loan, Borrower shall pay Administrative Agent, for the ratable
benefit of the Acquisition Lenders which have committed to make such Acquisition
Loan, an Acquisition Facility commitment fee, payable in installments in arrears
on each March 31, June 30, September 30, and December 31, and on the Termination
Date, commencing on the Acquisition Loan Effective Date for such Acquisition
Loan. Each installment shall be an amount equal to the Applicable Margin for
Commitment Fees MULTIPLIED BY the amount by which (a) the average daily
Acquisition Commitment for such Acquisition Loan exceeds (b) the average daily
Principal Debt outstanding under such Acquisition Loan, in each case during the
period from and including the last payment date to and excluding the payment
date for such installment; PROVIDED THAT, each such installment shall be
calculated in accordance with SECTION 5.1(f).
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5.7 ACQUISITION FACILITY FRONTING FEES. Borrower shall pay to the
Administrative Agent for the account of each Acquisition Lender, the fees in the
amounts and on the dates agreed to in writing by Borrower and the Administrative
Agent or such Lenders, as the case may be, in connection with the activation of
each Acquisition Loan pursuant to SECTION 2.3.
SECTION 6. SECURITY; GUARANTIES.
6.1 COLLATERAL. To secure full and complete payment and performance of
the Obligation and the 364-Day Facility Obligation, the Companies and each
Guarantor hereby jointly and severally grant and convey to, and create in favor
of Collateral Agent for the ratable benefit of Lenders and the 364-Day Facility
Lenders, first priority Liens in, to, and on the following items and types of
property (collectively, herein called the "COLLATERAL"), all as more
particularly described in the Loan Papers (PROVIDED THAT, no Agent or any Lender
hereby assumes or is made the transferee of any obligations of any Company or
any Guarantor regarding any of the Collateral):
(a) All present and future accounts, contract Rights, general
intangibles, investment property, chattel paper, documents, instruments,
inventory, equipment, fixtures, other goods, minerals, money, and deposit
accounts, wherever located, now owned or hereafter acquired by any Company
or any Guarantor and any and all present and future Tax refunds of any kind
whatsoever to which any Company or any Guarantor is now or shall hereafter
become entitled.
(b) All present and future issued and outstanding shares of capital
stock or other equity or investment securities now owned or hereafter
acquired by any Company or any Guarantor, including, without limitation,
all capital stock of the Subsidiaries of any Company or any Guarantor,
together with all distributions thereon and any securities issued in
substitution or replacement thereof.
(c) All Rights, titles, and interests of any Company in and to all
promissory notes and other instruments payable to the Companies, now or
hereafter existing, including, without limitation, any Cellular Partnership
Promissory Notes or other inter-company notes, and all Rights in, to, and
under all other loan and collateral documents relating to such instruments.
(d) All present and future Rights, titles, interests, and Liens (but
none of the obligations) now owned or hereafter acquired by any Company or
any Guarantor in any partnership or joint venture, including, without
limitation, the Cellular Partnerships.
(e) All present and future Rights, titles, interests, and Liens (but
none of the obligations) now owned or hereafter acquired by any Company or
any Guarantor, as lessee or landlord, in and to each lease covering real
property or any interest therein, and equipment or other personal property
or any interest therein (each such lease herein called an "ASSIGNED
LEASE").
(f) Substantially all of the real estate now owned or hereafter
acquired by any Company or any Guarantor, TOGETHER WITH all improvements
thereon and fixtures attached thereto.
(g) The balance of every deposit account of any Company or any
Guarantor and any other claim of any Company or any Guarantor against any
depository, now or hereafter existing, whether liquidated or unliquidated,
including, without limitation, certificates of deposit, and other deposit
instruments.
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(h) All present and future automobiles, trucks, truck tractors,
trailers, semi-trailers, other motor vehicles or rolling stock now owned or
hereafter acquired by any Company or any Guarantor (collectively, the
"VEHICLES").
(i) All present and future Rights, awards, and judgments to which any
Company or Guarantor is entitled under any Litigation (whether arising in
equity, contract, or tort) now existing or hereafter arising.
(j) All present and future Rights (including, without limitation, the
Right to sue for past, present, or future infringements), titles, and
interests of any Company or any Guarantor in and to all trademark
applications, trademarks, corporate names, company names, tradenames,
business names, fictitious business names, tradestyles, service marks,
logos, other source of business identifiers, copyrights, designs, Rights or
licenses to use any trademarks, and all registrations and recordings
thereof (collectively, the "TRADEMARKS"), and the goodwill of each business
to which each Trademark relates.
(k) All present and future Rights (including, without limitation, the
Right to sue for past, present, and future infringements), titles, and
interests of any Company or any Guarantor in and to all patents, patent
applications, utility models, industrial models, designs, and any other
forms of industrial intellectual property, including all grants,
applications, reissues, continuations, and divisions with respect thereto
and any Rights to use, manufacture, or sell any patent.
(l) All Authorizations, licenses, and permits issued by the FCC or
any PUC to any Company or any Guarantor, to the extent permitted by
applicable Law.
(m) All proceeds of any sale or other disposition of any
Authorization, license, or permit issued by the FCC or any PUC to any
Company or any Guarantor, whether or not any such license or permit may
lawfully be included as Collateral and whether or not the grant of a
security interest in any such Authorization, license, or permit is
otherwise prohibited.
(n) All present and future increases, profits, combinations,
reclassifications, improvements, and products of, accessions, attachments,
and other additions to, tools, parts, and equipment used in connection
with, and substitutes and replacements for, all or part of the Collateral
heretofore described.
(o) All present and future accounts, contract Rights, general
intangibles, chattel paper, documents, instruments, cash and noncash
proceeds, and other Rights arising from or by virtue of, or from the
voluntary or involuntary sale or other disposition of, or collections with
respect to, or insurance proceeds payable with respect to, or proceeds
payable by virtue of warranty or other claims against the manufacturer of,
or claims against any other Person with respect to, all or any part of the
Collateral heretofore described in this clause or otherwise.
(p) All present and future security for the payment to any Company or
any Guarantor of any of the Collateral heretofore described and goods which
gave or will give rise to any of such Collateral or are evidenced,
identified, or represented therein or thereby.
6.2 GUARANTIES. As an inducement to Agents and Lenders to enter into this
Agreement, Borrower shall cause each other Company and each Cellular Partnership
Obligor to execute and deliver
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to Administrative Agent a Guaranty substantially in the form and upon the
terms of EXHIBIT C, providing for the guarantee of payment and performance of
the Obligation and the 364-Day Facility Obligation.
6.3 FUTURE LIENS. Promptly after (a) the acquisition of any assets (real,
personal, tangible, or intangible) by any Company or any Guarantor, (b) the
removal, termination, or expiration of any prohibitions upon the granting of a
Lien in any asset (real, personal, tangible, or intangible) of any Company or
any Guarantor, or (c) upon the designation, formation, or acquisition of any new
Subsidiary (the assets and stock of such new Subsidiary and the assets described
in CLAUSES (a) and (b) hereof are referred to herein as the "ADDITIONAL
ASSETS"), Borrower shall (or shall cause such other Company or Guarantor to)
execute and deliver to Collateral Agent all further instruments and documents
(including, without limitation, Collateral Documents and all certificates and
instruments representing shares of stock or evidencing Debt and any realty
appraisals as Collateral Agent may require with respect to any such Additional
Assets), and shall take all further action that may be necessary or desirable,
or that Collateral Agent or Administrative Agent may reasonably request, to
grant, perfect, and protect Liens in favor of Collateral Agent for the benefit
of Lenders and the 364-Day Facility Lenders in such Additional Assets, as
security for the Obligation and the 364-Day Facility Obligation; IT BEING
EXPRESSLY UNDERSTOOD that the granting of such additional security for the
Obligation is a material inducement to the execution and delivery of this
Agreement by each Lender. Upon satisfying the terms and conditions hereof, such
Additional Assets shall be included in the "COLLATERAL" for all purposes under
the Loan Papers, and all references to the "COLLATERAL" in the Loan Papers shall
include the Additional Assets.
6.4 RELEASE OF COLLATERAL.
(a) UPON SALE OR DISPOSITION OF COLLATERAL. Upon any sale, transfer,
or disposition of Collateral which is expressly permitted pursuant to the
Loan Papers and the 364-Day Facility Loan Papers (or is otherwise
authorized by Lenders and the 364-Day Facility Lenders), and upon ten (10)
Business Days' prior written request by Borrower (which request must be
accompanied by true and correct copies of (a) all documents of transfer or
disposition, including any contract of sale, (b) a preliminary closing
statement and instructions to the title company, if any, and (c) all
requested release instruments), Collateral Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents as may be
necessary to evidence the release of Liens granted to Collateral Agent for
the benefit of Lenders and the 364-Day Facility Lenders pursuant hereto in
such Collateral; PROVIDED THAT, (i) no such release of Lien shall be
granted if any Default or Potential Default has occurred and is continuing,
including, without limitation, the failure to make certain mandatory
prepayments in accordance with SECTION 3.2(c) in conjunction with the sale
or transfer of such Collateral; (ii) Collateral Agent shall not be required
to execute any such document on terms which, in Collateral Agent's opinion,
would expose Collateral Agent to liability or create any obligation or
entail any consequence OTHER THAN the release of such Liens without
recourse or warranty; and (iii) such release shall not in any manner
discharge, affect, or impair the Obligation, the 364-Day Facility
Obligation, or Liens upon (or obligations of any Company or any Guarantor
in respect of) all interests retained by the Companies and the Guarantors,
including (without limitation) the proceeds of any sale, all of which shall
continue to constitute Collateral.
(b) CELLULAR PARTNERSHIP OBLIGOR COLLATERAL. With respect to Liens
on the assets of the Cellular Partnership Obligors, such Liens (as well as
any Liens on partnership interests therein pledged by Persons other than
any Company or any Guarantor) shall be released in the event all Debt to
the Companies has been paid in full and terminated; PROVIDED, FURTHER
HOWEVER, that from the date of such repayment until the Obligation has been
paid in full and the Commitment has been terminated, no Company may,
directly or through a Subsidiary, advance funds to any such Cellular
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Partnership. In regard to repayment of such intercompany Debt, Collateral
Agent is hereby authorized by Lenders to execute and deliver such releases
of Cellular Partnership Obligors upon ten (10) Business Days prior written
request by Borrower supported by evidence that such intercompany Debt has
been terminated and repaid in full and accompanied by appropriate release
instruments, which must be in form and substance satisfactory to Collateral
Agent.
6.5 NEGATIVE PLEDGE. Notwithstanding the provisions of SECTION 6.1
hereof, until such time as Administrative Agent or Determining Lenders otherwise
require, the Companies and the Guarantors shall not be required to perfect Liens
on any assets described in SECTIONS 6.1(e), (f), (g), and (h) or to grant
specific assignments of easements, licenses, permits, certificates of
compliance, and certificates of approval issued by regulatory authorities,
franchises, or like grants of authority or service agreements. To the extent
Collateral Agent and Determining Lenders agree to delay the perfection or
attachment of any Lien granted pursuant to SECTION 6.1 hereof, for whatever
reason, the Companies and the Guarantors hereby covenant and agree not to
directly create, incur, grant, suffer, or permit to be created or incurred any
Lien on any such assets, OTHER THAN Permitted Liens. Furthermore, within thirty
(30) days of the request of Collateral Agent, Borrower shall (or shall cause
each Company and each Guarantor to) execute and deliver to Collateral Agent all
instruments and documents (including, without limitation, certificates and
instruments and documents representing shares of stock or evidencing Debt) and
shall take all further action that may be necessary or desirable, or that
Collateral Agent may reasonably request, to grant, perfect, and protect Liens in
favor of Collateral Agent for the benefit of Lenders, in such assets, as
security for the Obligation and the 364-Day Facility Obligation; IT BEING
EXPRESSLY UNDERSTOOD that the provisions of this negative pledge are a material
inducement to the execution and delivery of this Agreement by each Lender.
6.6 CONTROL; LIMITATION OF RIGHTS. Notwithstanding anything herein or in
any other Loan Paper to the contrary, (a) the transactions contemplated hereby
(i) do not and will not constitute, create, or have the effect of constituting
or creating, directly or indirectly, actual or practical ownership of the
Companies or the Guarantors by Agents or Lenders, or control, affirmative or
negative, direct or indirect, by Agents or Lenders over the management or any
other aspect of the operation of the Companies or the Guarantors, which
ownership or control remains exclusively and at all times in the Companies or
the Guarantors, and (ii) do not and will not constitute the transfer,
assignment, or disposition in any manner, voluntary or involuntary, directly or
indirectly, of any Authorization at any time issued by the FCC or any PUC to the
Companies or the Guarantors, or the transfer of control of the Companies or the
Guarantors within the meaning of SECTION 310(d) of the Communications Act of
1934, as amended; and (b) neither Administrative Agent nor Collateral Agent
shall, without first obtaining the approval of the FCC or any applicable PUC,
take any action pursuant to this Agreement or any other Loan Paper that would
constitute or result in any assignment of any Authorization or any change of
control of the Companies or the Guarantors, if such assignment or change of
control would require, under then existing Law (including the written rules and
regulations promulgated by the FCC or any such PUC), the prior approval of the
FCC or any such PUC.
SECTION 7 CONDITIONS PRECEDENT.
7.1 CONDITIONS PRECEDENT TO CLOSING. This Agreement shall not become
effective, and Lenders shall not be obligated to advance any Borrowing or issue
any LC, unless Administrative Agent has received all of the agreements,
documents, instruments, and other items described on SCHEDULE 7.1 (OTHER THAN
each item, if any, listed on SCHEDULE 7.1A, which items are hereby permitted to
be delivered after the Closing Date but not later than the respective date for
delivery of each such item specified on SCHEDULE 7.1A).
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7.2 CONDITIONS PRECEDENT TO A PERMITTED ACQUISITION. On or prior to the
consummation of any Acquisition (whether or not the purchase price for such
Acquisition is funded by Borrowings), Borrower shall have satisfied the
conditions and delivered, or caused to be delivered, to Administrative Agent,
all documents and certificates set forth on SCHEDULE 7.2 by no later than the
dates specified for satisfaction of such conditions on SCHEDULE 7.2; PROVIDED
THAT, with respect to the Acquisition of California 4 RSA, Borrower shall not be
required to deliver the Permitted Acquisition Compliance Certificate 30 days
prior to closing of such Acquisition, SO LONG AS Borrower shall deliver all
certificates and documents required under PART A of SCHEDULE 7.2 on or prior to
the Closing Date. Promptly upon receipt of each Permitted Acquisition
Compliance Certificate and each Permitted Acquisition Loan Closing Certificate,
Administrative Agent shall provide copies of such certificates to Lenders. All
documentation delivered and satisfaction of conditions pursuant to the
requirements of SECTION 7.2 must be satisfactory to Administrative Agent. To
the extent any Borrowing is being requested in connection with the consummation
of the Acquisition, the conditions set forth in SECTIONS 7.2 and 7.3 hereof must
be satisfied prior to the making of any such Borrowing.
7.3 CONDITIONS PRECEDENT TO EACH BORROWING. In addition to the conditions
stated in SECTION 7.1 and SECTION 7.2, Lenders will not be obligated to fund (as
opposed to continue or convert) any Borrowing, and Administrative Agent will not
be obligated to issue any LC, as the case may be, unless on the date of such
Borrowing or issuance (and after giving effect thereto), as the case may be:
(a) Administrative Agent shall have timely received therefor a Notice of
Borrowing or a Notice of LC (together with the applicable LC Agreement), as the
case may be; (b) Administrative Agent shall have received, as applicable, the LC
fees provided for in SECTION 5.3 and 5.4 hereof; (c) all of the representations
and warranties of any Company or any Guarantor set forth in the Loan Papers are
true and correct in all material respects (except to the extent that (i) the
representations and warranties speak to a specific date or (ii) the facts on
which such representations and warranties are based have been changed by
transactions contemplated or permitted by the Loan Papers); (d) no change in the
financial condition or business of any Company or any Guarantor which could be a
Material Adverse Event shall have occurred; (e) no Default or Potential Default
shall have occurred and be continuing; (f) the funding of such Borrowings and
issuance of such LC, as the case may be, is permitted by Law; (g) in the event
all or any part of the proceeds of the Borrowing will be used to finance a
Distribution to the extent permitted by SECTION 9.21, Administrative Agent shall
have received all such certifications, financial information, and projections as
Administrative Agent may reasonably request; and (h) all matters related to such
Borrowing must be satisfactory to Required Lenders and their respective counsel
in their reasonable determination, and upon the reasonable request of
Administrative Agent, Borrower shall deliver to Administrative Agent evidence
substantiating any of the matters in the Loan Papers which are necessary to
enable Borrower to qualify for such Borrowing. Each Notice of Borrowing and LC
Agreement delivered to Administrative Agent shall constitute the representation
and warranty by Borrower to Administrative Agent that the statements above are
true and correct in all respects. Each condition precedent in this Agreement is
material to the transactions contemplated in this Agreement, and time is of the
essence in respect of each thereof. Subject to the prior approval of Required
Lenders, Lenders may fund any Borrowing, and Administrative Agent may issue any
LC, without all conditions being satisfied, but, to the extent permitted by Law,
the same shall not be deemed to be a waiver of the requirement that each such
condition precedent be satisfied as a prerequisite for any subsequent funding or
issuance, unless Required Lenders specifically waive each such item in writing.
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SECTION 8 REPRESENTATIONS AND WARRANTIES. Borrower, each other Company, and
each Guarantor represent and warrant to Administrative Agent and Lenders as
follows:
8.1 PURPOSE OF CREDIT FACILITY. Borrower will use (or will loan such
proceeds to its Companies to so use) all proceeds of Borrowings for one or more
of the following: (a) to finance the Acquisition of California RSA-4, Texas
RSA-16, Santa Cruz MSA, and other Permitted Acquisitions; (b) to finance Capital
Expenditures; (c) to finance certain investments permitted by the Loan Papers;
(d) to finance certain permitted Distributions; and (e) for general corporate
purposes. No Company or Guarantor is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying any "MARGIN STOCK" within the meaning of REGULATION U.
No part of the proceeds of any Borrowing will be used, directly or indirectly,
for a purpose which violates any Law, including, without limitation, the
provisions of REGULATIONS G, T, U, or X (as enacted by the Board of Governors of
the Federal Reserve System, as amended).
8.2 EXISTENCE, GOOD STANDING, AUTHORITY, AND AUTHORIZATIONS. Each Company
and Guarantor is duly organized, validly existing, and in good standing under
the Laws of its jurisdiction of organization (such jurisdictions being
identified on SCHEDULE 8.3, as supplemented and modified in writing from time to
time to reflect any changes to such Schedule as a result of transactions
permitted by the Loan Papers). Each Company is duly qualified to transact
business and is in good standing in each jurisdiction where the nature and
extent of its business and properties require the same. Each of Borrower, the
Guarantors, and the Companies possesses all the Authorizations, franchises,
permits, licenses, certificates of compliance, and approvals and grants of
authority necessary, including, without limitation, any Authorization issued by
the FCC, all of which are described on SCHEDULE 8.2 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
Governmental 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 the Loan Papers by Borrower,
the Guarantors, and the Companies.
8.3 SUBSIDIARIES; CAPITAL STOCK. The Companies and Guarantors have no
Subsidiaries except as disclosed on SCHEDULE 8.3 (as supplemented and modified
in writing from time to time to reflect any changes to such Schedule as a result
of transactions permitted by the Loan Papers). All of the outstanding shares of
capital stock (or similar voting interests) of each Subsidiary are duly
authorized, validly issued, fully paid, and nonassessable and are owned of
record and beneficially as set forth on SCHEDULE 8.3 (as supplemented and
modified in writing from time to time to reflect any changes to such Schedule as
a result of transactions permitted by the Loan Papers), free and clear of any
Liens, restrictions, claims, or Rights of another Person, other than Permitted
Liens, and none of such shares owned by any Company or Guarantor is subject to
any restriction on transfer thereof except for restrictions imposed by
securities Laws and general corporate Laws. No Company or Guarantor has
outstanding any warrant, option, or other Right of any Person to acquire any of
its capital stock or similar equity interests. The number and percentage of
shares of partnership interests in each of the Cellular Partnerships, and the
ownership thereof, are accurately set forth on SCHEDULE 8.3 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 Collateral Agent, on
behalf of Lenders, as set forth on SCHEDULE 8.3 attached hereto.
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8.4 AUTHORIZATION AND CONTRAVENTION. The execution and delivery by each
Company and Guarantor of each Loan Paper to which it is a party and the
performance by such Company and Guarantor of its obligations thereunder (a) are
within the corporate power of such Company or Guarantor, (b) will have been duly
authorized by all necessary corporate or partnership action on the part of such
Company or Guarantor when such Loan Paper is executed and delivered, (c) require
no action by or in respect of, or filing with, any Governmental Authority, which
action or filing has not been taken or made on or prior to the Closing Date (or
if later, the date of execution and delivery of such Loan Paper), (d) will not
violate any provision of the charter, bylaws, or partnership agreement of such
Company or Guarantor, (e) will not violate any provision of Law applicable to
it, other than such violations which individually or collectively could not be a
Material Adverse Event, (f) will not violate any material written or oral
agreements, contracts, commitments, or understandings to which it is a party,
other than such violations which could not be a Material Adverse Event, or
(g) will not result in the creation or imposition of any Lien on any asset of
any Company or Guarantor. The Companies and Guarantors have (or will have upon
consummation thereof) all necessary consents and approvals of any Person or
Governmental Authority required to be obtained in order to effect any asset
transfer, change of control, merger, or consolidations permitted by the Loan
Papers.
8.5 BINDING EFFECT. Upon execution and delivery by all parties thereto,
each Loan Paper will constitute a legal, valid, and binding obligation of each
Company and each Guarantor party thereto, enforceable against each such Company
or Guarantor in accordance with its terms, except as enforceability may be
limited by applicable Debtor Relief Laws and general principles of equity.
8.6 FINANCIAL STATEMENTS. The Current Financials were prepared in
accordance with GAAP and present fairly, in all material respects, the
consolidated financial condition, results of operations, and cash flows of the
Companies as of and for the portion of the fiscal year ending on the date or
dates thereof (subject only to normal year-end audit adjustments). There were
no material liabilities, direct or indirect, fixed or contingent, of the
Companies as of the date or dates of the Current Financials which are required
under GAAP to be reflected therein or in the notes thereto, and are not so
reflected. Except for transactions directly related to, or specifically
contemplated by, the Loan Papers, there have been no changes in the consolidated
financial condition of the Companies from that shown in the Current Financials
after such date which could be a Material Adverse Event, nor has Borrower or any
Company incurred any liability (including, without limitation, any liability
under any Environmental Law), direct or indirect, fixed or contingent, after
such date which could be a Material Adverse Event.
8.7 LITIGATION, CLAIMS, INVESTIGATIONS. No Company or Guarantor is
subject to, or aware of the threat of, any Litigation which is reasonably likely
to be determined adversely to any Company or any Guarantor, and, if so adversely
determined, could (individually or collectively with other Litigation) be a
Material Adverse Event. There are no outstanding orders or judgments for the
payment of money in excess of $1,000,000 (individually or collectively) or any
warrant of attachment, sequestration, or similar proceeding against the assets
of any Company or Guarantor having a value (individually or collectively) of
$1,000,000 or more which is not either (a) stayed on appeal or (b) being
diligently contested in good faith by appropriate proceedings and adequate
reserves have been set aside on the books of such Company in accordance with
GAAP. There are no formal complaints, suits, claims, investigations, or
proceedings initiated at or by any Governmental Authority pending or threatened
by or against any Company or Guarantor which could be a Material Adverse Event,
nor any judgments, decrees, or orders of any Governmental Authority outstanding
against any Company or any Guarantor that could be a Material Adverse Event.
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8.8 TAXES. All Tax returns of each Company and Guarantor required to be
filed have been filed (or extensions have been granted) prior to delinquency,
except for any such returns for which the failure to so file could not be a
Material Adverse Event, and all Taxes imposed upon each Company or Guarantor
which are due and payable have been paid prior to delinquency, OTHER THAN Taxes
for which the criteria for Permitted Liens (as specified in SECTION 9.13(b)(v))
have been satisfied or for which nonpayment thereof could not constitute a
Material Adverse Event.
8.9 ENVIRONMENTAL MATTERS. No Company or Guarantor (a) knows of any
environmental condition or circumstance, such as the presence or Release of any
Hazardous Substance, on any property presently or previously owned by any
Company or any Guarantor that could be a Material Adverse Event, (b) knows of
any violation by any Company or any Guarantor of any Environmental Law, except
for such violations that could not be a Material Adverse Event, or (c) knows
that any Company or any Guarantor is under any obligation to remedy any
violation of any Environmental Law, except for such obligations that could not
be a Material Adverse Event; PROVIDED, HOWEVER, that each Company and each
Guarantor (x) to the best of its knowledge, has in full force and effect all
environmental permits, licenses, and approvals required to conduct its
operations and is operating in substantial compliance thereunder, and (y) has
taken prudent steps to determine that its properties and operations are not in
violation of any Environmental Law.
8.10 EMPLOYEE BENEFIT PLANS. (a) No Employee Plan has incurred an
accumulated funding deficiency, as defined in SECTION 302 of ERISA and
SECTION 412 of the Code, (b) neither Borrower nor any ERISA Affiliate has
incurred material liability which is currently due and remains unpaid under
TITLE IV of ERISA to the PBGC or to an Employee Plan in connection with any such
Employee Plan, (c) neither Borrower nor any ERISA Affiliate has withdrawn in
whole or in part from participation in a Multiemployer Plan, (d) Borrower has
not engaged in any "PROHIBITED TRANSACTION" (as defined in SECTION 406 of ERISA
or SECTION 4975 of the Code) which would be a Material Adverse Event, and (e) no
Reportable Event has occurred which is likely to result in the termination of an
Employee Plan. The present value of all benefit liabilities within the meaning
of TITLE IV of ERISA under each Employee Plan (based on those actuarial
assumptions used to fund such Employee Plan) did not, as of the last annual
valuation date for the 1997 plan year of such Plan, exceed the value of the
assets of such Employee Plan, and the total present values of all benefit
liabilities within the meaning of TITLE IV of ERISA of all Employee Plans (based
on the actuarial assumptions used to fund each such Plan) did not, as of the
respective annual valuation dates for the 1997 plan year of each such Plan,
exceed the value of the assets of all such plans.
8.11 PROPERTIES; LIENS. Each Company and each Guarantor has good and
marketable title to all its property reflected on the Current Financials, EXCEPT
(a) for (i) property that is obsolete, (ii) property that has been disposed of
in the ordinary course of business, or (iii) property with title defects or
failures in title which would not be a Material Adverse Event, or (b) as
otherwise permitted by the Loan Papers. Except for Permitted Liens, there is no
Lien on any property of any Company or any Guarantor, and the execution,
delivery, performance, or observance of the Loan Papers will not require or
result in the creation of any Lien on such property.
8.12 GOVERNMENT REGULATIONS. No Company or Guarantor is subject to
regulation under the INVESTMENT COMPANY ACT OF 1940, as amended, the PUBLIC
UTILITY HOLDING COMPANY ACT OF 1935, as amended, or any other Law (other than
REGULATIONS G, T, U, and X of the Board of Governors of the Federal Reserve
System and the requirements of any PUC or public service commission) which
regulates the incurrence of Debt.
8.13 TRANSACTIONS WITH AFFILIATES. No Company or Guarantor is a party to a
material transaction with any of its Affiliates (excluding transactions between
or among Companies), other than
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transactions in the ordinary course of business and upon fair and reasonable
terms not materially less favorable than such Company could obtain or could
become entitled to in an arm's-length transaction with a Person that was not
its Affiliate.
8.14 DEBT. No Company or Guarantor is an obligor on any Debt other than
Permitted Debt.
8.15 MATERIAL AGREEMENTS; MANAGEMENT AGREEMENTS. SCHEDULE 8.15 hereto sets
forth a list of all contracts material to the respective business of the
Companies and the Guarantors (including with respect to the Systems), and there
exists no material default under any of such contracts. There are no failures
of any material written or oral agreements, contracts, commitments, or
understandings to which any Company or Guarantor is a party to be in full force
and effect which could be a Material Adverse Event, and no default or potential
default exists on the part of any Company or any Guarantor thereunder which
could be a Material Adverse Event. None of Borrower, the Guarantors, or the
Companies is a party to any management or consulting agreement for the provision
of services to it, except as described in SCHEDULE 8.15 hereto.
8.16 INSURANCE. Each Company and each Guarantor maintains, with
financially sound, responsible, and reputable insurance companies or
associations, insurance concerning its properties and businesses against such
casualties and contingencies and of such types and in such amounts (and with
co-insurance and deductibles) as is customary in the case of same or similar
businesses.
8.17 LABOR MATTERS. There are no actual or threatened strikes, labor
disputes, slow downs, walkouts, or other concerted interruptions of operations
by the employees of any Company or any Guarantor that could be a Material
Adverse Event. Hours worked by and payment made to employees of the Companies
and the Guarantors have not been in violation of the FAIR LABOR STANDARDS ACT or
any other applicable Law dealing with such matters, other than any such
violations, individually or collectively, which could not constitute a Material
Adverse Event. All payments due from any Company or any Guarantor on account of
employee health and welfare insurance have been paid or accrued as a liability
on its books, other than any such nonpayments which could not, individually or
collectively, constitute a Material Adverse Event.
8.18 SOLVENCY. At the time of each Borrowing hereunder and on the date of
each Permitted Acquisition, each Company and each Guarantor is (and after giving
effect to the transactions contemplated by the Loan Papers, any Permitted
Acquisition, and any incurrence of additional Debt, will be) Solvent.
8.19 INTELLECTUAL PROPERTY. Each Company and each Guarantor owns or has
sufficient and legally enforceable rights to use all material licenses, patents,
patent applications, copyrights, service marks, trademarks, trademark
applications, and trade names necessary to continue to conduct its businesses as
heretofore conducted by it, now conducted by it, and now proposed to be
conducted by it. Each Company and each Guarantor is conducting its business
without infringement or claim of infringement of any license, patent, copyright,
service mark, trademark, trade name, trade secret, or other intellectual
property right of others, other than any such infringements or claims which, if
successfully asserted against or determined adversely to any Company or any
Guarantor, could not, individually or collectively, constitute a Material
Adverse Event.
8.20 COMPLIANCE WITH LAWS. No Company or Guarantor is in violation of any
Laws (including, without limitation, the Communications Act, Environmental Laws,
and those Laws administered by the FCC and any PUC), other than such violations
which could not, individually or collectively, be a Material Adverse Event. No
Company or Guarantor has received notice alleging any noncompliance with
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any Laws, except for such noncompliance which no longer exists, or which
could not constitute a Material Adverse Event.
8.21 PERMITTED ACQUISITIONS.
(a) VALIDITY. With respect to any Permitted Acquisitions, each of
Borrower, the Companies, and the Guarantors has the power and authority
under the Laws of its state of incorporation and under its articles of
incorporation and bylaws or Partnership Agreement, as applicable, to enter
into and perform the related Acquisition agreement to which it is a party
and all other agreements, documents, and actions required thereunder; and
all actions (corporate or otherwise) necessary or appropriate by Borrower,
the Companies, or the Guarantors (as the case may be) for the execution and
performance of said Acquisition agreements, and all other documents,
agreements, and actions required thereunder, have been taken, and, upon
their execution, such Acquisition agreements will constitute the valid and
binding obligation of Borrower, the Companies, and the Guarantors, as the
case may be, enforceable in accordance with their respective terms.
(b) NO VIOLATIONS. With respect to any Permitted Acquisition, the
making and performance of the related Acquisition agreements, and all other
agreements, documents, and actions required thereunder, will not violate
any provision of any Law, including, without limitation, all state
corporate Laws and judicial precedents of the states of incorporation or
formation of Borrower, the Companies, and the Guarantors, and will not
violate any provisions of the articles of incorporation and bylaws or
Partnership Agreements of Borrower, the Companies, or the Guarantors, or
constitute a default under any agreement by which Borrower, the Companies,
or the Guarantors or their respective property may be bound.
8.22 REGULATION U. "MARGIN STOCK" (as defined in REGULATION U) constitutes
less than 25% of those assets of the Companies or the Guarantors which are
subject to any limitation on sale, pledge, or other restrictions hereunder.
8.23 TRADENAME. No Company or Guarantor has used or transacted business
under any other corporate or trade name in the five-year period preceding the
date hereof.
8.24 FULL DISCLOSURE. There is no material fact or condition relating to
the Loan Papers or the financial condition, business, or property of any Company
or any Guarantor which could be a Material Adverse Event and which has not been
related, in writing, to Administrative Agent. All information heretofore
furnished by any Company or any Guarantor to any Lender or Administrative Agent
in connection with the Loan Papers was, and all such information hereafter
furnished by any Company or any Guarantor to any Lender or Administrative Agent
will be, true and accurate in all material respects or based on reasonable
estimates on the date as of which such information is stated or certified.
SECTION 9 COVENANTS. Borrower and each Guarantor covenant and agree (and agree
to cause their ERISA Affiliates with respect to SECTION 9.10) to perform,
observe, and comply with each of the following covenants, from the Closing Date
and SO LONG THEREAFTER AS Lenders are committed to fund Borrowings and
Administrative Agent is committed to issue LCs under this Agreement and
thereafter until the payment in full of the Principal Debt (and termination of
outstanding LCs, if any) and payment in full of all other interest, fees, and
other amounts of the Obligation then due and owing, UNLESS Borrower receives a
prior written consent to the contrary by Administrative Agent as authorized by
Required Lenders:
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9.1 USE OF PROCEEDS. Borrower shall use the proceeds of Borrowings only
for the purposes represented herein.
9.2 BOOKS AND RECORDS. The Companies and Guarantors shall maintain books,
records, and accounts necessary to prepare financial statements in accordance
with GAAP.
9.3 ITEMS TO BE FURNISHED. Borrower shall cause the following to be
furnished to Administrative Agent for delivery to Lenders:
(a) Promptly after preparation, and no later than 120 days after the
last day of each fiscal year of each of Borrower and Communications,
Financial Statements showing the consolidated and consolidating financial
condition and results of operations calculated separately for each of
(x) the Companies and (y) Communications and its Restricted Subsidiaries,
as of, and for the year ended on, such day, each accompanied by:
(i) the unqualified opinion of a firm of nationally-recognized
independent certified public accountants, based on an audit using
generally accepted auditing standards, that such Financial Statements
(calculated with respect to the Companies or Communications and its
Restricted Subsidiaries, as the case may be) were prepared in
accordance with GAAP and present fairly the consolidated financial
condition and results of operations of the Companies or Communications
and its Restricted Subsidiaries, as the case may be;
(ii) any management letter prepared by such accounting firm;
(iii) with respect to the Financial Statements of the
Companies, a certificate from such accounting firm to Administrative
Agent indicating that during its audit it obtained no knowledge of any
Default or Potential Default or, if it obtained such knowledge, the
nature and period of existence thereof;
(iv) a letter from such accounting firm addressed to Borrower or
Communications (as the case may be), with a copy to Administrative
Agent, acknowledging that (A) Borrower or Communications, as the case
may be, plans to provide Administrative Agent with such audited
Financial Statements and accompanying audit report, (B) Administrative
Agent has informed Borrower or Communications, as the case may be,
that Administrative Agent and Lenders intend to rely on such firm's
audit report accompanying such Financial Statements, and (C) Borrower
or Communications, as the case may be, intends for Administrative
Agent and Lenders to so rely; and
(v) with respect to the Financial Statements of the Companies, a
Compliance Certificate.
(b) Promptly after preparation, and no later than 60 days after the
last day of each fiscal quarter of Borrower, Financial Statements showing
the consolidated financial condition and results of operations calculated
for the Companies for such fiscal quarter and for the period from the
beginning of the then-current fiscal year to, such last day, accompanied by
a Compliance Certificate with respect to such Financial Statements.
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(c) Within 60 days after the end of each fiscal quarter of Borrower,
a management report, showing for each System results of operations and
subscriber counts, discussing the financial results and comparing actual
performance results to the Budget for such period, and outlining principal
factors affecting performances of each market, and detailing the
outstanding principal amount of intercompany loans and advances from
Borrower to any Cellular Partnership Obligor, if any, all in form and
substance satisfactory to Administrative Agent.
(d) On or prior to March 31 of each fiscal year of Borrower, the
financial Budget for such fiscal year, accompanied by a certificate
executed by a Responsible Officer, certifying that such Budget was prepared
by Borrower based on assumptions which, in light of the historical
performance of the Companies and their prospects for the future, are
realistic and achievable.
(e) Promptly upon receipt thereof, copies of all auditor's annual
management letters delivered to Borrower.
(f) Notice, promptly after Borrower knows or has reason to know of
(i) the existence and status of any Litigation which could be a Material
Adverse Event, or of any order or judgment for the payment of money which
(individually or collectively) is in excess of $1,000,000, or any warrant
of attachment, sequestration, or similar proceeding against the assets of
any Company or Guarantor having a value (individually or collectively) of
$1,000,000, (ii) any material change in any material fact or circumstance
represented or warranted in any Loan Paper, (iii) a Default or Potential
Default specifying the nature thereof and what action Borrower or any other
Company or Guarantor has taken, is taking, or proposes to take with respect
thereto, (iv) the receipt by any Company or Guarantor of any notice from
any Governmental Authority of the expiration without renewal, termination,
material modification or suspension of, or institution of any proceedings
to terminate, materially modify, or suspend, any Authorization granted by
the FCC or any applicable PUC, or any other Authorization which any Company
or Guarantor is required to hold in order to operate its business in
compliance with all applicable Laws, other than such expirations,
terminations, suspensions, or modifications which individually or in the
aggregate would not constitute a Material Adverse Event, (v) any federal,
state, or local statute, regulation, or ordinance or judicial or
administrative order limiting or controlling the operations of any Company
or any Guarantor which has been issued or adopted hereafter and which is of
material adverse importance or effect in relation to the operation of any
Company or Guarantor, (vi) the receipt by any Company or any Guarantor of
notice of any violation or alleged violation of any Environmental Law,
which violation or alleged violation could individually or collectively
with other such violations or allegations, constitute a Material Adverse
Event, or (vii) (A) the occurrence of a Reportable Event that, alone or
TOGETHER WITH any other Reportable Event, could reasonably be expected to
result in liability of Borrower or any Company or Guarantor to the PBGC in
an aggregate amount exceeding $1,000,000; (B) any expressed statement in
writing on the part of the PBGC of its intention to terminate any Employee
Plan or Plans; (C) Borrower's or an ERISA Affiliate's becoming obligated to
file with the PBGC a notice of failure to make a required installment or
other payment with respect to an Employee Plan; or (D) the receipt by
Borrower or an ERISA Affiliate from the sponsor of a Multiemployer Plan of
either a notice concerning the imposition of withdrawal liability in an
aggregate amount exceeding $1,000,000 or of the impending termination or
reorganization of such Multiemployer Plan.
(g) Promptly after any of the information or disclosures provided on
any of the Schedules delivered pursuant to this Agreement or any Annexes to
any of the Collateral Documents becomes outdated or incorrect in any
material respect, such revised or updated Schedule(s) or
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Annexes as may be necessary or appropriate to update or correct such
information or disclosures; PROVIDED THAT, no deletions may be made to any
Annexes describing Collateral in any of the Collateral Documents unless
approved by Required Lenders.
(h) Promptly after preparation, true, correct, and complete copies of
all material reports or filings filed by or on behalf of any Company with
any Governmental Authority (including the FCC and the Securities and
Exchange Commission).
(i) Promptly after the filing thereof, a true, correct, and complete
copy of each FORM 10-K, FORM 10-Q, and FORM 8-K filed by or on behalf of
Borrower or any Company or any Guarantor with the Securities and Exchange
Commission.
(j) Promptly upon request therefor by Administrative Agent or
Lenders, such information (not otherwise required to be furnished under the
Loan Papers) respecting the business affairs, assets, and liabilities of
the Companies or the Guarantors, and such opinions, certifications, and
documents, in addition to those mentioned in this Agreement, as reasonably
requested.
(k) With respect to the post-closing requirements set forth on
SCHEDULE 7.1A, deliver, or cause to be delivered, to Administrative Agent
(or Collateral Agent in the case of Collateral Documents), all agreements,
documents, instruments, or other items listed on SCHEDULE 7.1A on or prior
to the date specified for delivery thereof on SCHEDULE 7.1A.
9.4 INSPECTIONS. Upon reasonable notice, the Companies and the Guarantors
shall allow Administrative Agent or any Lender (or their respective
Representatives) to inspect any of their properties, to review reports, files,
and other records and to make and take away copies thereof, to conduct tests or
investigations, and to discuss any of their affairs, conditions, and finances
with other creditors, directors, officers, employees, other representatives, and
independent accountants of the Companies or Guarantors, from time to time,
during reasonable business hours.
9.5 TAXES. Each Company and each Guarantor (a) shall promptly pay when
due any and all Taxes OTHER THAN Taxes the applicability, amount, or validity of
which is being contested in good faith by lawful proceedings diligently
conducted, and against which reserve or other provision required by GAAP has
been made, and in respect of which levy and execution of any lien securing same
have been and continue to be stayed, (b) shall not, directly or indirectly, use
any portion of the proceeds of any Borrowing to pay the wages of employees
unless a timely payment to or deposit with the appropriate Governmental
Authorities of all amounts of Tax required to be deducted and withheld with
respect to such wages is also made, and (c) notify Lenders immediately if the
Internal Revenue Service or any other taxing authority commences or notifies any
Company or any Guarantor of its intention to commence an audit or investigation
with respect to any taxes of any kind due or alleged to be due from any Company
or any Guarantor.
9.6 PAYMENT OF OBLIGATIONS. Borrower shall pay the Obligation in
accordance with the terms and provisions of the Loan Papers. Each Company and
each Guarantor (a) shall promptly pay (or renew and extend) all of its material
obligations as the same become due (unless such obligations [other than the
Obligation or the 364-Day Facility Obligation] are being contested in good faith
by appropriate proceedings), and (b) shall not make any voluntary prepayment of
principal of, or interest on, any other Debt (other than the Obligation or the
364-Day Facility Obligation), whether subordinate to the Obligation or not or
(ii) use proceeds from the Facilities to make any voluntary prepayment of
principal of, or interest
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on, or sinking fund payment in respect of any Debt of any Company or any
Guarantor. Borrower shall not make any payment on any Subordinated Debt when
it violates the subordination provisions thereof.
9.7 MAINTENANCE OF EXISTENCE, ASSETS, AND BUSINESS. Except as otherwise
permitted by SECTION 9.25, each Company and each Guarantor shall at all times:
(a) maintain its existence and good standing in the jurisdiction of its
organization and its authority to transact business in all other jurisdictions
where the failure to so maintain its authority to transact business could be a
Material Adverse Event; (b) maintain all licenses, permits, and franchises
necessary for its business where the failure to so maintain could be a Material
Adverse Event; (c) keep all of its assets which are useful in and necessary to
its business in good working order and condition (ordinary wear and tear
excepted) and make all necessary repairs thereto and replacements thereof; and
(d) do all things necessary to obtain, renew, extend, and continue in effect all
Authorizations issued by the FCC or any applicable PUC which may at any time and
from time to time be necessary for the Companies and Guarantors to operate their
businesses in compliance with applicable Law, where the failure to so renew,
extend, or continue in effect could be a Material Adverse Event.
9.8 INSURANCE. The Companies and Guarantors shall, at their sole cost and
expense, keep and maintain the Collateral owned by such Company or Guarantor
insured for its actual cash value against loss or damage by fire, theft,
explosion, flood, and all other hazards and risks ordinarily insured against by
other owners or users of such properties in similar businesses of comparable
size and notify Agent promptly of any occurrence causing a material loss or
decline in value of the Collateral and the estimated (or actual, if available)
amount of such loss or decline. All policies of insurance on the Collateral
shall be in a form, with such deductibles, and with insurers recognized as
adequate by prudent business Persons in the same businesses as the Companies or
Guarantors and acceptable to Administrative Agent, and all such policies shall
be in such amount as may be satisfactory to Administrative Agent. On the
Closing Date and thereafter as each policy is renewed and extended, the
Companies and Guarantors shall deliver to Collateral Agent a certificate of
insurance for each policy of insurance and evidence of payment of all premiums
therefor. Such policies of insurance and the certificates evidencing the same
shall contain an endorsement, in form and substance acceptable to Collateral
Agent, showing loss payable to Collateral Agent for the benefit of Lenders and
the 364-Day Facility Lenders. Such endorsement, or an independent instrument
furnished to Collateral Agent, shall provide that the insurance companies will
give Collateral Agent at least thirty (30) days prior written notice before any
such policy or policies of insurance shall be altered or canceled and that no
act or default of any Company, any Guarantor, or any other Person shall affect
the Right of Collateral Agent to recover under such policy or policies of
insurance in case of loss or damage. Upon the payment by the insurer of the
proceeds of any such policy of insurance and if no Default has occurred and is
continuing, the Company or Guarantor so insured may retain such insurance if
such proceeds are used to repair or replace the property the damage or
destruction of which gave rise to the payment of such insurance proceeds;
PROVIDED, HOWEVER, that any insurance proceeds not used for repair or
replacement in accordance herewith, UNLESS paid as reimbursement of expenses
incurred and business losses suffered in connection with the loss or damage to
the Collateral, shall be paid to or retained by Collateral Agent for application
as a mandatory prepayment on the Obligation and the 364-Day Facility Obligation
in accordance with the Intercreditor Agreement.
9.9 PRESERVATION AND PROTECTION OF RIGHTS. Each Company and each
Guarantor shall perform such acts and duly authorize, execute, acknowledge,
deliver, file, and record any additional agreements, documents, instruments, and
certificates as Administrative Agent, Collateral Agent, or Required Lenders may
reasonably deem necessary or appropriate in order to preserve and protect the
Rights of Administrative Agent and Lenders under any Loan Paper.
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9.10 EMPLOYEE BENEFIT PLANS. Borrower shall not, directly or indirectly,
engage in any "PROHIBITED TRANSACTION" (as defined in SECTION 406 of ERISA or
SECTION 4975 of the Code), and the Companies, the Guarantors, and their
respective ERISA Affiliates shall not, directly or indirectly, (a) incur any
"ACCUMULATED FUNDING DEFICIENCY" as such term is defined in SECTION 302 of ERISA
with respect to any Employee Plan, (b) permit any Employee Plan to be subject to
involuntary termination proceedings pursuant to TITLE IV of ERISA, or (c) fully
or partially withdraw from any Multiemployer Plan, if such prohibited
transaction, accumulated funding deficiency, termination proceeding, or
withdrawal would result in liability on the part of any Company or any Guarantor
(individually or collectively) in excess of $1,000,000.
9.11 ENVIRONMENTAL LAWS. Each Company and each Guarantor shall (a) conduct
its business so as to comply with all applicable Environmental Laws and shall
promptly take corrective action to remedy any non-compliance with any
Environmental Law, (b) promptly investigate and remediate any known Release or
threatened Release of any Hazardous Substance on any property owned by any
Company or any Guarantor or at any facility operated by any Company or any
Guarantor to the extent and degree necessary to comply with Law and to assure
that any Release or threatened Release does not result in a substantial
endangerment to human health or the environment, and (c) establish and maintain
a management system designed to ensure compliance with applicable Environmental
Laws and minimize financial and other risks to each Company or Guarantor arising
under applicable Environmental Laws or as a result of environmentally-related
injuries to Persons or property.
9.12 DEBT AND GUARANTIES.
(a) No Company or Guarantor shall, directly or indirectly, create,
incur, or suffer to exist any direct, indirect, fixed, or contingent
liability for any Debt, OTHER THAN:
(i) The Obligation;
(ii) The 364-Day Facility Obligation;
(iii) Debt incurred by Borrower under any Financial Hedge;
(iv) Debt between Companies;
(v) Debt of Borrower to Communications SO LONG AS such Debt is
unsecured, unguaranteed, and subordinate in right of payment to the
Obligation upon terms satisfactory to Administrative Agent; PROVIDED
THAT, repayments of such Debt may be made at such times, in such
amounts, for the purposes, and subject to the conditions, as specified
in SECTION 9.21(d); and
(vi) Debt of any Cellular Partnership Obligor owed to Borrower,
SO LONG AS (A) such Debt is evidenced by Cellular Partnership
Promissory Notes whose form and terms, including amortization
schedules, are acceptable to Administrative Agent; (B) such Cellular
Partnership Promissory Notes and all partnership interests of the
Companies in such Cellular Partnership Obligor are pledged or assigned
by the appropriate Companies to Collateral Agent, for the benefit of
Lenders and the 364-Day Facility Lenders, pursuant to appropriate
Collateral Documents; (C) each Cellular Partnership Obligor has
executed a Guaranty and has granted Liens in and to all its assets in
favor of Collateral Agent (for the benefit of Lenders and the 364-Day
Facility Lenders) by execution and delivery to
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Collateral Agent of all Collateral Documents required by Collateral
Agent; and (D) such Cellular Partnership Obligor has delivered all
such searches, opinions, financing statements, and other documents
reasonably requested by Administrative Agent or Collateral Agent;
(vii) Trade Debt incurred in the ordinary course of business
for value received; and
(viii) Debt arising under Capital Leases not to exceed
$5,000,000 in the aggregate on any date of determination.
(b) No Company or Guarantor shall guarantee or assume or agree to
become liable in any way, either directly or indirectly, for any Debt or
liability of others, except (i) endorsements of checks or drafts in the
ordinary course of business and (ii) the obligations of the Companies and
Guarantors under the Guaranty.
9.13 LIENS. No Company or Guarantor will, directly or indirectly,
(a) enter into or permit to exist any arrangement or agreement which directly or
indirectly prohibits any Company or Guarantor from creating or incurring any
Lien on any of its assets, other than the Loan Papers or the 364-Day Facility
Loan Papers, or (b) create, incur, or suffer or permit to be created or incurred
or to exist any Lien upon any of its assets, EXCEPT:
(i) Pledges or deposits made to secure payment of worker's
compensation, or to participate in any fund in connection with worker's
compensation, unemployment insurance, pensions, or other social security
programs;
(ii) Good-faith pledges or deposits made to secure performance of
bids, tenders, insurance or other contracts (OTHER THAN for the repayment
of borrowed money), or leases, or to secure statutory obligations, surety
or appeal bonds, or indemnity, performance, or other similar bonds as all
such Liens arise in the ordinary course of business of the Companies and
Guarantors;
(iii) Encumbrances consisting of zoning restrictions, easements,
or other restrictions on the use of real property, none of which impair in
any material respect the use of such property by the Person in question in
the operation of its business, and none of which is violated by existing or
proposed structures or land use;
(iv) Liens of landlords or of mortgagees of landlords, arising solely
by operation of law, on fixtures and movable property located on premises
leased in the ordinary course of business;
(v) The following, SO LONG AS the validity or amount thereof is
being contested in good faith and by appropriate and lawful proceedings
diligently conducted, reserve or other appropriate provisions (if any)
required by GAAP shall have been made, levy and execution thereon have been
stayed and continue to be stayed, and they do not in the aggregate
materially detract from the value of the property of the Person in
question, or materially impair the use thereof in the operation of its
business: (i) claims and Liens for Taxes (other than Liens relating to
Environmental Laws or ERISA); (ii) claims and Liens upon, and defects of
title to, real or personal property, including any attachment of personal
or real property or other legal process prior to adjudication of a dispute
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of the merits; and (iii) claims and Liens of mechanics, materialmen,
warehousemen, carriers, landlords, or other like Liens; and
(vi) Statutory Liens on the Participation Certificates held by
Borrower to secure Borrower's obligations to CoBank, ACB, hereunder, SO
LONG AS the proceeds of which Participation Certificates (as and when
secured) shall be shared by CoBank, ACB, among Lenders.
9.14 TRANSACTIONS WITH AFFILIATES. No Company or Guarantor shall enter
into any material transaction with any of its Affiliates (excluding transactions
among or between Companies), OTHER THAN transactions in the ordinary course of
business and upon fair and reasonable terms not materially less favorable than
such Company or Guarantor could obtain or could become entitled to in an
arm's-length transaction with a Person that was not its Affiliate.
9.15 COMPLIANCE WITH LAWS AND DOCUMENTS. No Company or Guarantor shall
violate the provisions of any Laws applicable to it, including, without
limitation, all rules and regulations promulgated by the FCC or any applicable
PUC, or any material written or oral agreement, contract, commitment, or
understanding to which it is a party, if such violation alone, or when
aggregated with all other such violations, could be a Material Adverse Event; no
Company or Guarantor shall violate the provisions of its charter, bylaws, or
partnership agreement, or modify, repeal, replace, or amend any provision of its
charter, bylaws, or partnership agreement, if such action could adversely affect
the Rights of Lenders.
9.16 PERMITTED ACQUISITIONS, SUBSIDIARY GUARANTIES, AND COLLATERAL
DOCUMENTS. In connection with each Permitted Acquisition, Borrower shall
deliver, or cause to be delivered to, Administrative Agent each of the items
described on SCHEDULE 7.2, on or before the date specified on such Schedule for
each such item. Borrower shall cause each Subsidiary that becomes a Subsidiary
of any Company after the Closing Date (whether as a result of acquisition,
merger, creation, or otherwise), (a) to execute a Guaranty on the date such
entity becomes a Subsidiary of a Company and promptly deliver (but in no event
later than 10 days following consummation of such creation, acquisition, or
merger) such Guaranty to Collateral Agent and (b) to execute and deliver to
Collateral Agent all required Collateral Documents creating Liens in favor of
Collateral Agent on all the assets of such Subsidiary.
9.17 ASSIGNMENT. No Company or Guarantor shall assign or transfer any of
its Rights, duties, or obligations under any of the Loan Papers.
9.18 FISCAL YEAR AND ACCOUNTING METHODS. No Company or Guarantor will
change its fiscal year for book accounting purposes or its method of accounting,
OTHER THAN (a) immaterial changes in methods or as required by GAAP, or (b) in
connection with a Permitted Acquisition, such changes to the newly-acquired
entity so as to conform its fiscal year and its method of accounting to those of
the Companies.
9.19 GOVERNMENT REGULATIONS. No Company or Guarantor will conduct its
business in such a way that it will become subject to regulation under the
INVESTMENT COMPANY ACT OF 1940, as amended, the PUBLIC UTILITY HOLDING COMPANY
ACT OF 1935, as amended, or any other Law (other than Regulations G, T, U, and X
of the Board of Governors of the Federal Reserve System and the requirements of
any PUC or public service commission) which regulates the incurrence of Debt.
9.20 LOANS, ADVANCES, AND INVESTMENTS. No Company or Guarantor shall make
any loan, advance, extension of credit, or capital contribution to, make any
investment in, or purchase or commit to purchase any stock or other securities
or evidences of Debt of, or interests in, any other Person, OTHER
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THAN (a) readily marketable, direct, full faith and credit obligations of the
United States of America, or obligations guaranteed by the full faith and
credit of the United States of America, maturing within not more than one
year from the date of acquisition; (b) short term certificates of deposit and
time deposits, which mature within one year from the date of issuance and
which are fully insured by the Federal Deposit Insurance Corporation; (c)
commercial paper maturing in 365 days or less from the date of issuance and
rated either "P-1" by Moody's Investors Service, Inc. ("MOODY'S"), or "A-1"
by Standard and Poor's Rating Group (a division of McGraw-Hill, Inc., "S&P");
(d) debt instruments of a domestic issuer which mature in one year or less
and which are rated "A" or better by Moody's or S&P on the date of
acquisition of such investment; (e) demand deposit accounts which are
maintained in the ordinary course of business; (f) loans, advances,
extensions of credit, capital contributions, and other investments between
Companies; (g) loans or advances to Cellular Partnership Obligors, SO LONG AS
such Debt incurrence by the Cellular Partnership Obligor is permitted
pursuant to SECTION 9.12(a)(vi) and each of the conditions for such Debt
incurrence as set forth in SECTION 9.12(a)(vi) have been satisfied; (h)
Permitted Acquisitions; (i) trade accounts receivable which are for goods
furnished or services rendered in the ordinary course of business and are
payable in accordance with customary trade terms; (i) other investments or
commitments to make investments in cellular, local exchange, and PCS Systems
("SPECIAL INVESTMENTS"), SO LONG AS each such Special Investment does not
exceed the following limitations, determined as of the date such Special
Investment is to be made (each, an "INVESTMENT DATE") and after giving effect
to such Special Investment, and SO LONG AS on or prior to the Investment Date
for any such Special Investment, Borrower provides Administrative Agent a
certificate and related PRO FORMA calculations demonstrating and confirming
compliance with the following limitations (and, to the extent requested by
Administrative Agent, evidence that no approval of any Governmental Authority
is required (which has not been obtained) in connection with such Special
Investment or the financing thereof):
(i) If the Senior Leverage Ratio on such Investment Date is less than
6.00 to 1.0, (A) the aggregate amount of Special Investments made during
such calendar year shall not exceed $5,000,000 and (B) the aggregate
amount of Special Investments made from the Effective Date to and including
the Investment Date shall not exceed the LESSER of (x) $25,000,000 or
(y) the SUM of $15,000,000 plus 100% of the Net Cash Proceeds received by
Borrower from any Equity Issuance; or
(ii) If the Senior Leverage Ratio on such Investment Date is greater
than or equal to 6.00 to 1.0, (A) the aggregate amount of Special
Investments made during such calendar year shall not exceed $2,500,000 and
(B) the aggregate amount of Special Investments made from the Effective
Date to and including the Investment Date shall not exceed the LESSER of
(x) $25,000,000 or (y) the SUM of $7,500,000 plus 50% of the Net Cash
Proceeds received by Borrower from any Equity Issuance; and
(j) at such time as CoBank, ACB is a Lender hereunder, the Participation
Certificates in CoBank, ACB required to be acquired and maintained by Borrower
pursuant to SECTION 9.32.
9.21 DISTRIBUTIONS AND RESTRICTED PAYMENTS. No Company or Guarantor may
directly or indirectly declare, make, or pay any Restricted Payment, other than:
(a) Distributions declared, made, or paid by Borrower wholly in the
form of its capital stock;
(b) Distributions by any Company or Guarantor to Borrower or any
other Company;
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(c) If in any fiscal year Borrower generates Free Cash Flow, then
Borrower may make Restricted Payments during the following fiscal year, SO
LONG AS no Default or Potential Default exists and SO LONG AS the aggregate
amount of all such Restricted Payments under this CLAUSE (C) in any fiscal
year does not exceed the following limitations corresponding to the Senior
Leverage Ratio determined as of the date such Restricted Payment is to be
made (the "PAYMENT DATE"), after giving pro forma effect to the Restricted
Payment, and SO LONG AS on or prior to the Payment Date for any such
Restricted Payment, Borrower provides Administrative Agent with a
certificate and related PRO FORMA calculations demonstrating and confirming
compliance with the following limitations:
(i) If the Senior Leverage Ratio is less than 5.00 to 1.0, then
the aggregate amount of permitted Restricted Payments under this
CLAUSE (c) may not exceed 100% of the Free Cash Flow (as calculated
for the immediately preceding fiscal year); or
(ii) If the Senior Leverage Ratio is greater than or equal to
5.00 to 1.0, then the aggregate amount of permitted Restricted
Payments under this CLAUSE (c) may not exceed 50% of the Free Cash
Flow (as calculated for the immediately preceding fiscal year);
(d) SO LONG AS no Triggering Event has occurred or is created thereby
(as determined on a pro forma basis), Distributions made after January 15,
2003, by Borrower to Communications in amounts sufficient (when aggregated
with the amounts of all other loans, advances, or dividends for such
purposes from all other Subsidiaries of Communications) to pay cash
distributions or cash interest payments on the Preferred Stock and Exchange
Debentures, if any; PROVIDED, HOWEVER, in the event that any Triggering
Event has occurred and is continuing, Borrower may declare and pay such
dividends to Communications, or make loans or advances to Communications,
subject to the following terms, conditions, and limitations: (i) the amount
of any such dividends, loans, or advances (when aggregated with the amounts
of all other loans, advances, or dividends for such purposes from all other
Subsidiaries of Communications) shall not exceed (A) amounts then required
to make any payment of dividends on the Preferred Stock or interest on the
Exchange Debentures, if issued, which payments are past due, by reason of
such Triggering Event, and (B) the next regularly scheduled payment of the
required dividend on the Preferred Stock or interest on the Exchange
Debenture; (ii) such Triggering Event (from the date of notice of the
existence of the earliest such Triggering Event if more than one exists)
has continued for 180 days and has not been cured or waived; (iii) such
Triggering Event is not a Default set forth in SECTION 10.1, 10.3, or 10.9
hereof; and (iv) Lenders have not demanded payment in full of all
obligations due and owing by Borrower under the Agreement and the Loan
Papers; PROVIDED FURTHER, that so long as any Debt is owed from Borrower to
Communications, any Restricted Payment permitted under this SECTION 9.21(d)
shall be made as a repayment of such Debt.
Notwithstanding the foregoing, Restricted Payments and Distributions are
permitted hereunder only to the extent such Restricted Payment or Distribution
is made in accordance with applicable Law and constitutes a valid, non-voidable
transaction.
9.22 RESTRICTIONS ON SUBSIDIARIES. No Subsidiary of Borrower nor any
Guarantor shall enter into or permit to exist any material arrangement or
agreement (other than the Loan Papers) which directly or indirectly prohibits
any such Subsidiary from (a) declaring, making, or paying, directly or
indirectly, any Distribution to Borrower or any other Company, (b) paying any
Debt owed to Borrower or any other
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Company, (c) making loans, advances, or investments to Borrower or any other
Company, or (d) transferring any of its property or assets to Borrower or any
other Company.
9.23 SALE OF ASSETS. No Company or Guarantor shall sell, assign, transfer,
or otherwise dispose of any of its assets, OTHER THAN (a) sales of inventory in
the ordinary course of business, (b) the sale, discount, or transfer of
delinquent accounts receivable in the ordinary course of business for purposes
of collection, (c) occasional sales of immaterial assets for consideration not
less than the fair market value thereof, (d) dispositions of obsolete assets,
(e) sale, leases, or other disposition among Companies or from a Guarantor to a
Company; and (f) if no Default or Potential Default then exists or arises as a
result thereof, sales of other assets in the ordinary course of business;
PROVIDED THAT, the fair market value of all assets sold (x) in any calendar year
does not exceed $7,500,000 in the aggregate, and (y) prior to the Termination
Date does not exceed, in the aggregate, more than 49% of the fair market value
of the Companies' assets as determined on the Closing Date.
9.24 SALE-LEASEBACK FINANCINGS. No Company or Guarantor will enter into
any sale-leaseback arrangement with any Person pursuant to which such Company or
Guarantor shall lease any asset (whether now owned or hereafter acquired) if
such asset has been or is to be sold or transferred by any Company to any other
Person.
9.25 MERGERS AND DISSOLUTIONS; SALE OF CAPITAL STOCK. No Company or
Guarantor will, directly or indirectly, merge or consolidate with any other
Person, other than (a) as a result of a Permitted Acquisition, (b) mergers or
consolidations involving Borrower if Borrower is the surviving entity,
(c) mergers among Wholly-owned Companies; PROVIDED THAT, in any merger involving
Borrower (including a Permitted Acquisition effected as a merger), Borrower must
be the surviving entity, and, in any merger involving any other Company
(including a Permitted Acquisition effected as a merger), a Company must be the
surviving entity. No Company or Guarantor shall liquidate, wind up, or dissolve
(or suffer any liquidation or dissolution), other than liquidations, wind ups,
or dissolutions incident to mergers permitted under this SECTION 9.25. No
Company or Guarantor may sell, assign, lease, transfer, or otherwise dispose of
the capital stock (or other ownership interests) of any other Company, EXCEPT
for sales, leases, transfers, or other such distributions to another Company.
9.26 NEW BUSINESS. No Company or Guarantor will, directly or indirectly,
permit or suffer to exist any material change in the type of businesses in which
it is engaged from the businesses of the Companies and Guarantors as conducted
on the Closing Date.
9.27 FINANCIAL HEDGES. The Companies shall, within 60 days from the date
hereof, enter into Financial Hedges in a form and upon terms acceptable to
Administrative Agent, issued by one or more Lenders or an institution acceptable
to Administrative Agent with a duration of a period of at least two years, with
respect to at least fifty percent (50%) of the Total Debt of the Companies
outstanding on the Closing Date; PROVIDED, HOWEVER, that (a) the protected rate
shall be no greater than 2.5% above the all-in rate on the Closing Date hereof;
(b) to the extent any Lender issues a Financial Hedge in compliance with the
requirements of this SECTION 9.27, such Lender shall be granted a Lien in the
Collateral to the extent of such Lender's credit exposure under such Financial
Hedge which is PARI PASSU with that of Collateral Agent on behalf of Lenders and
the 364-Day Facility Lenders; (c) each such Lender issuing a Financial Hedge
shall calculate its credit exposure in a reasonable and customary manner; and
(d) all documentation for such Financial Hedge shall conform to ISDA standards
and must be acceptable to Administrative Agent and Collateral Agent with respect
to intercreditor issues.
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9.28 AFFILIATE SUBORDINATION AGREEMENTS. The Companies and Guarantors
shall, simultaneously with the creation of any and all future Debt of any
Company or any Guarantor to any one or more Affiliates, cause the appropriate
Affiliate or Affiliates to execute and deliver to Administrative Agent an
agreement, substantially in the form of EXHIBIT H, subordinating the payment of
such Debt to the payment of the Obligation.
9.29 AMENDMENTS TO DOCUMENTS. No Company or Guarantor shall (a) amend or
permit any amendments to any Company's Articles of Incorporation or Bylaws, or
any Partnership Agreement of any Cellular Partnership Obligor or any Company
that is a Cellular Partnership as in effect on the date of this Agreement, if
such action could adversely affect the Rights of Lenders; or (b) amend any
existing credit arrangement or enter into any new credit arrangement (to the
extent permitted by the Loan Papers), if such amended or new credit arrangements
contain any provisions which are materially more restrictive (as reasonably
determined by Administrative Agent) than the provisions of the Loan Papers.
9.30 FINANCIAL COVENANTS. As calculated on a consolidated basis for the
Companies:
(a) SENIOR LEVERAGE RATIO. Borrower shall never permit the Senior
Leverage Ratio of the Companies, determined on a quarterly basis at the end
of each fiscal quarter of the Companies, to be greater than the ratio shown
in the table below which corresponds to both the applicable period of
determination and the Companies Operating Cash Flow for the most-recently
ended Rolling Period:
<TABLE>
- ---------------------------------------------------------------------------------
OPERATING SENIOR LEVERAGE RATIO FOR THE APPLICABLE PERIOD
CASH FLOW -------------------------------------------------------------------
FOR ROLLING CLOSING TO 10-1-98 TO 7-1-99 TO 1-1-00 TO 1-1-01 AND
PERIOD 9-30-98 6-30-99 12-31-99 12-31-00 THEREAFTER
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equal to or 7.5:1.0 7.0:10 6.5:10 5.5:10 4.5:10
less than
$20,000,000
- ---------------------------------------------------------------------------------
Greater 8.0:10 7.5:1.0 7.0:1.0 5.5:1.0 5.0:1.0
than
$20,000,000
but less
than or
equal to
$25,000,000
- ---------------------------------------------------------------------------------
Greater 8.5:1.0 8.0:1.0 7.5:1.0 6.5:1.0 5.5:1.0
than
$25,000,000
- ---------------------------------------------------------------------------------
</TABLE>
PROVIDED THAT, the ratios corresponding to Operating Cash Flow in excess of
$20,000,000 or in excess of $25,000,000 (as the case may be) shall only be
applicable after Borrower has delivered to Administrative Agent, in form
and substance satisfactory to Administrative Agent, a certificate
(i) demonstrating pro forma compliance with the covenants of this Agreement
and (ii) providing projections to the Termination Date demonstrating
Borrower's ability to remain in compliance with the Loan Papers and to
amortize the Facilities, as scheduled.
(b) PRO FORMA DEBT SERVICE COVERAGE. Borrower shall never permit the
ratio of the Operating Cash Flow of the Companies to the Pro Forma Debt
Service of the Companies determined on a quarterly basis at the end of each
fiscal quarter of the Companies to be less than or equal to 1.25 to 1.0.
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(c) INTEREST COVERAGE. Borrower shall never permit the ratio of
(i) the Operating Cash Flow of the Companies for any fiscal quarter to
(ii) the cash Interest Expense of the Companies determined on a quarterly
basis at the end of each fiscal quarter of the Companies for the Rolling
Period then-ended, to be less than or equal to (A) 1.75 to 1.0, from the
Closing Date through December 31, 1998, and (B) 2.00 to 1.0, after December
31, 1998.
(d) FIXED CHARGE COVERAGE RATIO. On and after January 1, 1999,
Borrower shall never permit the Companies' Fixed Charge Coverage Ratio,
determined on a quarterly basis on the last day of each fiscal quarter of
the Companies, to be less than or equal to 1.00 to 1.0.
(e) CAPITAL EXPENDITURES. Borrower shall not permit Capital
Expenditures from January 1, 1998 through December 31, 1998 to exceed 110%
of the amount budgeted for capital expenditures in the Budget for 1998.
9.31 YEAR 2000. All of the material computer software, computer firmware,
computer hardware (whether general or special purpose), and other similar or
related items of automated, computerized, and/or software systems that are used
or relied on by the Companies in the conduct of their respective businesses will
not malfunction, will not cease to function, will not generate incorrect data,
and will not produce incorrect results when processing, providing, and/or
receiving (a) date-related data into and between the twentieth and twenty-first
centuries and (b) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
9.32 COBANK PARTICIPATION. At all times during which CoBank, ACB
("COBANK") is a Lender hereunder, Borrower shall acquire and maintain
participation certificates in CoBank (the "PARTICIPATION CERTIFICATES") in such
amounts and at such times as CoBank may from time to time require in accordance
with its Bylaws and Capital Plan (as each may be amended from time to time);
PROVIDED, HOWEVER, that the maximum amount of Participation Certificates that
Borrower may be required to purchase may not exceed the maximum amount permitted
by CoBank's Bylaws on the date hereof. The rights and obligations of the
parties with respect to the Participation Certificates and any other patronage
or other distributions shall be governed by CoBank's Bylaws.
SECTION 10 DEFAULT. The term "DEFAULT" means the occurrence of any one or
more of the following events:
10.1 PAYMENT OF OBLIGATION. The failure or refusal of any Company or
Guarantor to pay (a) the Obligation when the same becomes due (whether by its
terms, by acceleration, or as otherwise provided in the Loan Papers); and
(b) the indemnifications and reimbursement obligations provided for in the Loan
Papers after demand therefor.
10.2 COVENANTS. The failure or refusal of Borrower (and, if applicable,
any other Company or Guarantor) to punctually and properly perform, observe, and
comply with:
(a) Any covenant, agreement, or condition contained in SECTIONS 9.1,
9.3, 9.6, 9.12, 9.13, 9.14, 9.16, 9.17, 9.20 through 9.25, and 9.30; and
(b) Any other covenant, agreement, or condition contained in any Loan
Paper (OTHER THAN the covenants to pay the Obligation set forth in
SECTION 10.1 and the covenants in SECTION 10.2(a)), and such failure or
refusal continues for 20 days.
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10.3 DEBTOR RELIEF. Borrower, Communications, any other Company, or
Guarantor or any Subsidiary of Communications (a) shall not be Solvent,
(b) fails to pay its Debts generally as they become due, (c) voluntarily seeks,
consents to, or acquiesces in the benefit of any Debtor Relief Law, OTHER THAN
as a creditor or claimant, or (d) becomes a party to or is made the subject of
any proceeding provided for by any Debtor Relief Law, OTHER THAN as a creditor
or claimant, that could suspend or otherwise adversely affect the Rights of
Administrative Agent or any Lender granted in the Loan Papers (UNLESS, in the
event such proceeding is involuntary, the petition instituting same is dismissed
within 30 days after its filing).
10.4 JUDGMENTS AND ATTACHMENTS. Any Company or Guarantor fails, within
60 days after entry, to pay, bond, or otherwise discharge any judgment or order
for the payment of money in excess of $1,000,000 (individually or collectively)
or any warrant of attachment, sequestration, or similar proceeding against any
Company's assets having a value (individually or collectively) of $1,000,000
which is not stayed on appeal.
10.5 GOVERNMENT ACTION. (a) A final non-appealable order is issued by any
Governmental Authority, including, but not limited to, the FCC or the United
States Justice Department, seeking to cause any Company or Guarantor to divest a
significant portion of its assets pursuant to any antitrust, restraint of trade,
unfair competition, industry regulation, or similar Laws, or (b) any
Governmental Authority shall condemn, seize, or otherwise appropriate, or take
custody or control of all or any substantial portion of the assets of any
Company or Guarantor.
10.6 MISREPRESENTATION. Any representation or warranty made by any Company
or Guarantor contained in any Loan Paper shall at any time prove to have been
incorrect in any material respect when made.
10.7 CHANGE OF MANAGEMENT. More than one of the three members of the
Executive Management Team of Communications on the Closing Date cease to hold
positions on the Executive Management Team of Communications.
10.8 CHANGE OF CONTROL. If Communications ceases to own 100% of the voting
control (directly or indirectly) of Borrower and the other Companies.
10.9 AUTHORIZATIONS. (a) Any Authorization necessary for the ownership or
operations of any Company or Guarantor shall expire, and on or prior to such
expiration, the same shall not have been renewed or replaced by another
Authorization authorizing substantially the same operations by such Company; or
(b) any Authorization necessary for the ownership or operations of any Company
or Guarantor shall be canceled, revoked, terminated, rescinded, annulled,
suspended, or modified in a materially adverse respect, or shall no longer be in
full force and effect, or the grant or the effectiveness thereof shall have been
stayed, vacated, reversed, or set aside, (c) Borrower or any other Company or
Guarantor is required by any Governmental Authority to halt construction or
operations under any Authorization and such action shall continue uncorrected
for thirty (30) days after the applicable entity has received notice thereof; or
(d) if any Governmental Authority 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 other Company or Guarantor as now conducted.
10.10 DEFAULT UNDER OTHER DEBT AND AGREEMENTS. (a) The occurrence of a
"DEFAULT" under the 364-Day Facility; (b) any Company or Guarantor fails to pay
when due (after lapse of any applicable grace periods) any Debt of such Company
or Guarantor (other than the Obligation or the 364-Day Facility Obligation) in
excess (individually or collectively) of $1,000,000; (c) any default exists
under any material
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written or oral agreement, contract, commitment, or understanding to which a
Company or Guarantor is a party; or (d) the occurrence of an "EVENT OF
DEFAULT" under the Third Amended and Restated Credit Agreement dated of even
date herewith, among Dobson Operating Company, as Borrower, CoreStates Bank,
N.A., as Administrative Agent, NationsBank of Texas, N.A., as Syndication
Agent, Toronto Dominion (Texas), Inc., as Documentation Agent, and certain
Lenders party thereto (as the same may be amended, modified, restated, or
supplemented from time to time).
10.11 EMPLOYEE BENEFIT PLANS. (a) A "REPORTABLE EVENT" or "REPORTABLE
EVENTS," or a failure to make a required installment or other payment (within
the meaning of SECTION 412(n)(1) of the Code), shall have occurred with respect
to any Employee Plan or Plans that is expected to result in liability of
Borrower to the PBGC or to a Plan in an aggregate amount exceeding $1,000,000
and, within 30 days after the reporting of any such Reportable Event to
Administrative Agent or after the receipt by Administrative Agent of a statement
required pursuant to SECTION 8.3(d) hereof, Administrative Agent shall have
notified Borrower in writing that (i) Required Lenders have made a reasonable
determination that, on the basis of such Reportable Event or Reportable Events
or the failure to make a required payment, there are grounds under TITLE IV of
ERISA for the termination of such Employee Plan or Plans by the PBGC, or the
appointment by the appropriate United States district court of a trustee to
administer such Employee Plan or Plans or the imposition of a lien pursuant to
SECTION 412(n) of the Code in favor of an Employee Plan and (ii) as a result
thereof a Default exists hereunder; or (b) Borrower or any ERISA Affiliate has
provided to any affected party a 60-day notice of intent to terminate an
Employee Plan pursuant to a distress termination in accordance with
SECTION 4041(c) of ERISA if the liability expected to be incurred as a result of
such termination will exceed $1,000,000; or (c) a trustee shall be appointed by
a United States district court to administer any such Employee Plan; or (d) the
PBGC shall institute proceedings (including giving notice of intent thereof) to
terminate any such Employee Plan; or (e)(i) Borrower or any ERISA Affiliate
shall have been notified by the sponsor of a Multiemployer Plan that it has
incurred withdrawal liability (within the meaning of SECTION 4201 of ERISA) to
such Multiemployer Plan, (ii) Borrower or such ERISA Affiliate does not have
reasonable grounds for contesting such withdrawal liability or is not contesting
such withdrawal liability in a timely and appropriate manner and (iii) the
amount of such withdrawal liability specified in such notice, when aggregated
with all other amounts required to be paid to Multiemployer Plans in connection
with withdrawal liabilities (determined as of the date or dates of such
notification), exceeds $1,000,000; or (f) Borrower or any ERISA Affiliate shall
have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of TITLE IV of ERISA, if solely as a result of such reorganization or
termination the aggregate annual contributions of Borrower and its ERISA
Affiliates to all Multiemployer Plans that are then in reorganization or have
been or are being terminated have been or will be increased over the amounts
required to be contributed to such Multiemployer Plans for their most recently
completed plan years by an amount exceeding $1,000,000.
10.12 LCS. Administrative Agent shall have been served with, or
becomes otherwise subject to, a court order, injunction, or other process or
decree restraining or seeking to restrain it from paying any amount under any LC
and either (a) there has been a drawing under such LC which Administrative Agent
would otherwise be obligated to pay and Borrower has refused to reimburse
Administrative Agent for such payment or (b) the expiration date of such LC has
occurred but the right of any beneficiary thereunder to draw under such LC has
been extended past the expiration date in connection with the pendency of the
related court action or proceeding AND Borrower has failed to deposit with
Administrative Agent cash collateral in an amount equal to the maximum drawing
which could be made under such LC.
10.13 VALIDITY AND ENFORCEABILITY OF LOAN PAPERS. Any Loan Paper
shall, at any time after its execution and delivery and for any reason, cease to
be in full force and effect in any material respect
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or be declared to be null and void (other than in accordance with the terms
hereof or thereof) or the validity or enforceability thereof be contested by
any Company or Guarantor party thereto or any Company or Guarantor shall deny
in writing that it has any or any further liability or obligations under any
Loan Paper to which it is a party.
10.14 MATERIAL ADVERSE EFFECT. If any event or condition shall exist
which could reasonably be expected to be a Material Adverse Event with respect
to the business, operations, properties, or financial positions of the Borrower,
Communications, any Guarantor, or any of their respective Subsidiaries.
10.15 ENVIRONMENTAL LIABILITY. If any event or condition shall occur
or exist with respect to any activity or substance regulated under the
Environmental Law and as a result of such event or condition, any Company shall
have incurred or in the opinion of the banks be reasonably likely to incur a
liability in excess of $3,000,000 liability during any consecutive twelve (12)
month period.
10.16 PLEDGED STOCK. If the Collateral Agent ceases to hold (for the
benefit of Lenders) 100% of the issued and outstanding shares of common stock of
the Companies as Collateral.
10.17 DISSOLUTION. Borrower, Communications, or any other Company or
Guarantor shall dissolve, liquidate, or otherwise terminate their existence.
10.18 PAYMENT OF CERTAIN OTHER AGREEMENTS. The payment directly or
indirectly (including, without limitation, any payment in respect of any sinking
fund, defeasance, redemption, or payment of any dividend or distribution) by any
Company or Guarantor of any amount of the Communications Bond Debt, any
Subordinated Debt, any Exchange Debenture, or the Preferred Stock in a manner or
at a time during which such payment is not permitted under the terms of the Loan
Papers, the Exchange Debenture Indenture, the Certificate of Designation for the
Preferred Stock, or under any instrument or document evidencing or creating the
Communications Bond Debt or Subordinated Debt, including, without limitation,
any subordination provisions set forth therein.
10.19 DEFAULT OR ACCELERATION UNDER CERTAIN OTHER AGREEMENTS. (i) The
occurrence of any "DEFAULT" or "EVENT OF DEFAULT" or other breach which remains
uncured on any date of determination under or with respect to the Communications
Bond Debt, the Exchange Debentures, the Preferred Stock, or any agreement
creating or evidencing any Subordinated Debt; (ii) the trustee with respect to,
or any holder of, the Communications Bond Debt, the Exchange Debentures, the
Preferred Stock, or any Subordinated Debt shall effectively declare all or any
portion of that Debt or obligation thereunder due and payable prior to the
stated maturity thereof; or (iii) the Subordinated Debt, the Communications Bond
Debt, or Indebtedness or obligations under the Exchange Debentures or the
Preferred Stock becomes due before its stated maturity by acceleration of the
maturity thereof.
10.20 REDEMPTION OF CERTAIN OTHER DEBT OR OBLIGATION. If an event
shall occur, including, without limitation, a "CHANGE IN CONTROL" as defined in
any documents evidencing or creating the Communications Bond Debt, the Exchange
Debentures, the Preferred Stock, or any agreement evidencing or creating the
Subordinated Debt, and (i) the trustee or the holders of any such Debt or
obligation shall initiate notice to request or require (or any Company or
Guarantor shall automatically be so required) to redeem or repurchase such Debt
or obligation, or (ii) any Company or Guarantor shall initiate notice to holders
of the Subordinated Debt or the holders of any Communications Bond Debt,
Preferred Stock, or Exchange Debentures, in connection with a redemption of any
Debt or obligation arising under such agreements or instruments.
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SECTION 11 RIGHTS AND REMEDIES.
11.1 REMEDIES UPON DEFAULT.
(a) If a Default exists under SECTION 10.3(c) or 10.3(d), the
commitment to extend credit hereunder shall automatically terminate and the
entire unpaid balance of the Obligation shall automatically become due and
payable without any action or notice of any kind whatsoever and Borrower
shall be required to provide cash collateral in an amount equal to 110% of
the LC Exposure then existing in accordance with SECTION 2.2(h).
(b) If any Default exists, Administrative Agent may (and, subject to
the terms of SECTION 12, shall upon the request of Required Lenders) or
Required Lenders may, do any one or more of the following: (i) if the
maturity of the Obligation has not already been accelerated under
SECTION 11.1(a), declare the entire unpaid balance of the Obligation, or
any part thereof, immediately due and payable, whereupon it shall be due
and payable; (ii) terminate the commitments of Lenders to extend credit
hereunder; (iii) reduce any claim to judgment; (iv) to the extent permitted
by Law, exercise (or request each Lender to, and each Lender shall be
entitled to, exercise) the Rights of offset or banker's Lien against the
interest of Borrower in and to every account and other property of Borrower
which are in the possession of Administrative Agent or any Lender to the
extent of the full amount of the Obligation (to the extent permitted by
Law, Borrower being deemed directly obligated to each Lender in the full
amount of the Obligation for such purposes); (v) if the maturity of the
Obligation has not already been accelerated under SECTION 11.1(a), demand
Borrower to provide cash collateral in an amount equal to 110% of the LC
Exposure then existing in accordance with SECTION 2.2(h); and (vi) exercise
any and all other legal or equitable Rights afforded by the Loan Papers,
the Laws of the State of Texas, or any other applicable jurisdiction as
Administrative Agent shall deem appropriate, or otherwise, including, but
not limited to, the Right to bring suit or other proceedings before any
Governmental Authority either for specific performance of any covenant or
condition contained in any of the Loan Papers or in aid of the exercise of
any Right granted to Administrative Agent or any Lender in any of the Loan
Papers.
11.2 COMPANY WAIVERS. To the extent permitted by Law, the Companies and
Guarantors hereby waive presentment and demand for payment, protest, notice of
intention to accelerate, notice of acceleration, and notice of protest and
nonpayment, and agree that their respective liability with respect to the
Obligation (or any part thereof) shall not be affected by any renewal or
extension in the time of payment of the Obligation (or any part thereof), by any
indulgence, or by any release or change in any security for the payment of the
Obligation (or any part thereof).
11.3 PERFORMANCE BY ADMINISTRATIVE AGENT. If any covenant, duty, or
agreement of any Company or Guarantor is not performed in accordance with the
terms of the Loan Papers, after the occurrence and during the continuance of a
Default, Administrative Agent or Collateral Agent may, at their option (but
subject to the approval of Required Lenders), perform or attempt to perform such
covenant, duty, or agreement on behalf of such Company or Guarantor. In such
event, any amount expended by Administrative Agent or Collateral Agent in such
performance or attempted performance shall be payable by the Companies and
Guarantors, jointly and severally, to Administrative Agent on demand, shall
become part of the Obligation, and shall bear interest at the Default Rate from
the date of such expenditure by Administrative Agent or Collateral Agent until
paid. Notwithstanding the foregoing, it is expressly understood that
Administrative Agent and Collateral Agent do not assume, and shall never have,
except
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by their express written consent, any liability or responsibility for the
performance of any covenant, duty, or agreement of any Company or any
Guarantor.
11.4 DELEGATION OF DUTIES AND RIGHTS. Lenders may perform any of their
duties or exercise any of their Rights under the Loan Papers by or through their
respective Representatives.
11.5 NOT IN CONTROL. Nothing in any Loan Paper shall, or shall be deemed
to (a) give any Agent or any Lender the Right to exercise control over the
assets (including real property), affairs, or management of any Company or any
Guarantor, (b) preclude or interfere with compliance by any Company or any
Guarantor with any Law, or (c) require any act or omission by any Company or any
Guarantor that may be harmful to Persons or property. Any "MATERIAL ADVERSE
EVENT" or other materiality qualifier in any representation, warranty, covenant,
or other provision of any Loan Paper is included for credit documentation
purposes only and shall not, and shall not be deemed to, mean that any Agent or
any Lender acquiesces in any non-compliance by any Company or Guarantor with
any Law or document, or that any Agent or any Lender does not expect the
Companies or Guarantors to promptly, diligently, and continuously carry out all
appropriate removal, remediation, and termination activities required or
appropriate in accordance with all Environmental Laws. The Agents and the
Lenders have no fiduciary relationship with or fiduciary duty to Borrower or any
Company or Guarantor arising out of or in connection with the Loan Papers, and
the relationship between the Agents and the Lenders, on the one hand, and
Borrower, the Companies, and Guarantors, on the other hand, in connection with
the Loan Papers is solely that of debtor and creditor. The power of the Agents
and Lenders under the Loan Papers is limited to the Rights provided in the Loan
Papers, which Rights exist solely to assure payment and performance of the
Obligation and may be exercised in a manner calculated by the Agents and Lenders
in their respective good faith business judgment.
11.6 COURSE OF DEALING. The acceptance by Administrative Agent or Lenders
at any time and from time to time of partial payment on the Obligation shall not
be deemed to be a waiver of any Default then existing. No waiver by
Administrative Agent, Required Lenders, or Lenders of any Default shall be
deemed to be a waiver of any other then-existing or subsequent Default. No
delay or omission by Administrative Agent, Required Lenders, or Lenders in
exercising any Right under the Loan Papers shall impair such Right or be
construed as a waiver thereof or any acquiescence therein, nor shall any single
or partial exercise of any such Right preclude other or further exercise
thereof, or the exercise of any other Right under the Loan Papers or otherwise.
11.7 CUMULATIVE RIGHTS. All Rights available to Administrative Agent and
Lenders under the Loan Papers are cumulative of and in addition to all other
Rights granted to Administrative Agent and Lenders at law or in equity, whether
or not the Obligation is due and payable and whether or not Administrative Agent
or Lenders have instituted any suit for collection, foreclosure, or other action
in connection with the Loan Papers.
11.8 APPLICATION OF PROCEEDS. Any and all proceeds ever received by
Administrative Agent or Lenders from the exercise of any Rights pertaining to
the Obligation shall be applied to the Obligation in the order and manner set
forth in SECTION 3.11.
11.9 CERTAIN PROCEEDINGS. Borrower will promptly execute and deliver, or
cause the execution and delivery of, all applications, certificates,
instruments, registration statements, and all other documents and papers
Administrative Agent or Lenders may reasonably request in connection with the
obtaining of any consent, approval, registration, qualification, permit,
license, or Authorization of any Governmental Authority or other Person
necessary or appropriate for the effective exercise of any Rights under the Loan
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Papers. Because Borrower agrees that Administrative Agent's and Lenders'
remedies at Law for failure of Borrower to comply with the provisions of this
Section would be inadequate and that such failure would not be adequately
compensable in damages, Borrower agrees that the covenants of this Section may
be specifically enforced.
11.10 LIMITATION OF RIGHTS. Notwithstanding any other provision of
this Agreement or any other Loan Paper, any action taken or proposed to be taken
by Administrative Agent, any Agent, or any Lender under any Loan Paper which
would affect the operational, voting, or other control of any Company or
Guarantor, shall be pursuant to SECTION 310(d) of the COMMUNICATIONS ACT OF 1934
(as amended), any applicable state Law, and the applicable rules and regulations
thereunder and, if and to the extent required thereby, subject to the prior
consent of the FCC or any applicable PUC.
11.11 EXPENDITURES BY LENDERS. Borrower shall promptly pay within
fifteen (15) Business Days after request therefor (a) all reasonable costs,
fees, and expenses paid or incurred by Collateral Agent, Administrative Agent,
and Arranger, incident to any Loan Paper (including, but not limited to, the
reasonable fees and expenses of counsel to Administrative Agent, Collateral
Agent, and Arranger and the allocated cost of internal counsel in connection
with the negotiation, preparation, delivery, execution, coordination and
administration of the Loan Papers and any related amendment, waiver, or consent)
and (b) all reasonable costs and expenses of Lenders, Collateral Agent, and
Administrative Agent incurred by Administrative Agent, Collateral Agent, or any
Lender in connection with the enforcement of the obligations of any Company or
Guarantor arising under the Loan Papers (including, without limitation, costs
and expenses incurred in connection with any workout or bankruptcy) or the
exercise of any Rights arising under the Loan Papers (including, but not limited
to, reasonable attorneys' fees including allocated cost of internal counsel,
court costs and other costs of collection), all of which shall be a part of the
Obligation and shall bear interest at the Default Rate from the date due until
the date repaid.
11.12 INDEMNIFICATION. BORROWER AND EACH GUARANTOR AGREES TO INDEMNIFY
AND HOLD HARMLESS EACH AGENT, ARRANGER, AND EACH LENDER AND EACH OF THEIR
RESPECTIVE AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS, AND ADVISORS (EACH, AN "INDEMNIFIED PARTY") FROM AND AGAINST
ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS, AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES) THAT MAY BE INCURRED
BY OR ASSERTED OR AWARDED AGAINST ANY INDEMNIFIED PARTY, IN EACH CASE ARISING
OUT OF OR IN CONNECTION WITH OR BY REASON OF (INCLUDING, WITHOUT LIMITATION, IN
CONNECTION WITH ANY INVESTIGATION, LITIGATION, OR PROCEEDING OR PREPARATION OF
DEFENSE IN CONNECTION THEREWITH) THE LOAN DOCUMENTS, ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE
BORROWINGS (INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF THE
INDEMNIFIED PARTY), EXCEPT TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS, LIABILITY,
COST, OR EXPENSE IS FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF
COMPETENT JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNIFIED PARTY'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. IN THE CASE OF AN INVESTIGATION, LITIGATION
OR OTHER PROCEEDING TO WHICH THE INDEMNITY IN THIS SECTION 11.12 APPLIES, SUCH
INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT SUCH INVESTIGATION, LITIGATION OR
PROCEEDING IS BROUGHT BY THE BORROWER, ITS DIRECTORS, SHAREHOLDERS OR CREDITORS
OR AN INDEMNIFIED PARTY OR ANY OTHER PERSON OR ANY INDEMNIFIED PARTY IS
OTHERWISE A PARTY THERETO AND WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED
HEREBY ARE CONSUMMATED. THE BORROWER AND EACH GUARANTOR AGREE NOT TO ASSERT ANY
CLAIM AGAINST ANY INDEMNIFIED PARTY ON ANY THEORY OF LIABILITY, FOR SPECIAL,
INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING OUT OF OR OTHERWISE
RELATING TO THE LOAN DOCUMENTS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR
THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE BORROWINGS. WITHOUT PREJUDICE
TO THE SURVIVAL OF ANY
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OTHER AGREEMENT OF THE BORROWER HEREUNDER, THE AGREEMENTS AND OBLIGATIONS OF
THE BORROWER CONTAINED IN THIS SECTION 11.12 SHALL SURVIVE THE PAYMENT IN FULL
OF THE BORROWINGS AND ALL OTHER AMOUNTS PAYABLE UNDER THIS AGREEMENT.
SECTION 12 AGREEMENT AMONG LENDERS.
12.1 ADMINISTRATIVE AGENT.
(a) Each Lender hereby appoints NationsBank of Texas, N.A. (and
NationsBank of Texas, N.A. hereby accepts such appointment) as its nominee
and agent, in its name and on its behalf: (i) to act as nominee for and on
behalf of such Lender in and under all Loan Papers; (ii) to arrange the
means whereby the funds of Lenders are to be made available to Borrower
under the Loan Papers; (iii) to take such action as may be requested by any
Lender under the Loan Papers (when such Lender is entitled to make such
request under the Loan Papers and after such requesting Lender has obtained
the concurrence of such other Lenders as may be required under the Loan
Papers); (iv) to receive all documents and items to be furnished to Lenders
under the Loan Papers; (v) to timely distribute, and Administrative Agent
agrees to so distribute, to each Lender all material information, requests,
documents, and items received from Borrower under the Loan Papers; (vi) to
promptly distribute to each Lender its ratable part of each payment or
prepayment (whether voluntary, as proceeds of collateral upon or after
foreclosure, as proceeds of insurance thereon, or otherwise) in accordance
with the terms of the Loan Papers; (vii) to deliver to the appropriate
Persons requests, demands, approvals, and consents received from Lenders;
and (viii) to execute, on behalf of Lenders, such releases or other
documents or instruments as are permitted by the Loan Papers or as directed
by Lenders from time to time; PROVIDED, HOWEVER, Administrative Agent shall
not be required to take any action which exposes Administrative Agent to
personal liability or which is contrary to the Loan Papers or applicable
Law.
(b) Administrative Agent may resign at any time as Administrative
Agent under the Loan Papers by giving written notice thereof to Lenders and
may be removed as Administrative Agent under the Loan Papers at any time
with cause by Required Lenders. Should the initial or any successor
Administrative Agent ever cease to be a party hereto or should the initial
or any successor Administrative Agent ever resign or be removed as
Administrative Agent, then Required Lenders shall elect the successor
Administrative Agent from among the Lenders (other than the resigning
Administrative Agent). If no successor Administrative Agent shall have
been so appointed by Required Lenders, within 30 days after the retiring
Administrative Agent's giving of notice of resignation or Required Lenders'
removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of Lenders, appoint a successor
Administrative Agent, which shall be a commercial bank having a combined
capital and surplus of at least $1,000,000,000. Upon the acceptance of any
appointment as Administrative Agent under the Loan Papers by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the Rights of the retiring
Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations of Administrative Agent under
the Loan Papers (PROVIDED, HOWEVER, THAT when used in connection with LCs
issued and outstanding prior to the appointment of the successor
Administrative Agent, "ADMINISTRATIVE AGENT" shall continue to refer solely
to the bank that issued the outstanding LC; PROVIDED FURTHER THAT any LCs
issued or renewed after the appointment of any successor Administrative
Agent shall be issued by such successor Administrative Agent), and each
Lender shall execute such documents as any Lender may reasonably request to
reflect such change in and under the Loan Papers. After
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any retiring Administrative Agent's resignation or removal as
Administrative Agent under the Loan Papers, the provisions of this SECTION
12 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under the Loan Papers.
(c) Administrative Agent, in its capacity as a Lender, shall have the
same Rights under the Loan Papers as any other Lender and may exercise the
same as though it were not acting as Administrative Agent; the term
"LENDER" shall, unless the context otherwise indicates, include
Administrative Agent; and any resignation, or removal of by Administrative
Agent hereunder shall not impair or otherwise affect any Rights which it
has or may have in its capacity as an individual Lender. Each Lender and
Borrower agree that Administrative Agent is not a fiduciary for Lenders or
for Borrower but simply is acting in the capacity described herein to
alleviate administrative burdens for both Borrower and Lenders, that
Administrative Agent has no duties or responsibilities to Lenders or
Borrower except those expressly set forth herein, and that Administrative
Agent in its capacity as a Lender has all Rights of any other Lender.
(d) Administrative Agent and its Affiliates may now or hereafter be
engaged in one or more loan, letter of credit, leasing, or other financing
transactions with Borrower, act as trustee or depositary for Borrower, or
otherwise be engaged in other transactions with Borrower (collectively, the
"OTHER ACTIVITIES") not the subject of the Loan Papers. Without limiting
the Rights of Lenders specifically set forth in the Loan Papers,
Administrative Agent and its Affiliates shall not be responsible to account
to Lenders for such other activities, and no Lender shall have any interest
in any other activities, any present or future guaranties by or for the
account of Borrower which are not contemplated or included in the Loan
Papers, any present or future offset exercised by Administrative Agent and
its Affiliates in respect of such other activities, any present or future
property taken as security for any such other activities, or any property
now or hereafter in the possession or control of Administrative Agent or
its Affiliates which may be or become security for the obligations of
Borrower arising under the Loan Papers by reason of the general description
of indebtedness secured or of property contained in any other agreements,
documents or instruments related to any such other activities; PROVIDED
THAT, if any payments in respect of such guaranties or such property or the
proceeds thereof shall be applied to reduction of the obligations of
Borrower arising under the Loan Papers, then each Lender shall be entitled
to share in such application ratably. Each Lender acknowledges that, and
consents to, NationsBank of Texas, N.A. also serving as the Administrative
Agent under the 364-Day Facility and as Collateral Agent under the
Intercreditor Agreement.
12.2 EXPENSES. Upon demand by Administrative Agent, each Lender shall pay
its Pro Rata Part of any reasonable expenses (including, without limitation,
court costs, reasonable attorneys' fees, and other costs of collection) incurred
by Administrative Agent in connection with any of the Loan Papers if and to the
extent Administrative Agent does not receive reimbursement therefor from other
sources within 60 days after incurred; PROVIDED THAT, each Lender shall be
entitled to receive its Pro Rata Part of any reimbursement for such expenses, or
part thereof, which Administrative Agent subsequently receives from such other
sources.
12.3 PROPORTIONATE ABSORPTION OF LOSSES. Except as otherwise provided in
the Loan Papers, nothing in the Loan Papers shall be deemed to give any Lender
any advantage over any other Lender insofar as the Obligation arising under the
Loan Papers is concerned, or to relieve any Lender from absorbing its Pro Rata
Part of any losses sustained with respect to the Obligation (except to the
extent such losses result from unilateral actions or inactions of any Lender
that are not made in accordance with the terms and provisions of the Loan
Papers).
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12.4 Delegation of Duties; Reliance. Administrative Agent may perform any
of its duties or exercise any of its Rights under the Loan Papers by or through
its Representatives. Administrative Agent and its Representatives shall (a) be
entitled to rely upon (and shall be protected in relying upon) any writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telecopy, telegram, telex or teletype message, statement, order, or other
documents or conversation believed by it or them to be genuine and correct and
to have been signed or made by the proper Person and, with respect to legal
matters, upon opinion of counsel selected by Administrative Agent, (b) be
entitled to deem and treat each Lender as the owner and holder of the Principal
Debt owed to such Lender for all purposes until, subject to SECTION 13.13,
written notice of the assignment or transfer thereof shall have been given to
and received by Administrative Agent (and any request, authorization, consent,
or approval of any Lender shall be conclusive and binding on each subsequent
holder, assignee, or transferee of the Principal Debt owed to such Lender or
portion thereof until such notice is given and received), (c) not be deemed to
have notice of the occurrence of a Default unless a responsible officer of
Administrative Agent, who handles matters associated with the Loan Papers and
transactions thereunder, has received written notice from a Lender or Borrower
and stating that such notice is a "NOTICE OF DEFAULT," and (d) be entitled to
consult with legal counsel (including counsel for Borrower), independent
accountants, and other experts selected by Administrative Agent and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts.
12.5 LIMITATION OF LIABILITY.
(a) None of the Agents or any of their respective Representatives
shall be liable for any action taken or omitted to be taken by it or them
under the Loan Papers in good faith and reasonably believed by it or them
to be within the discretion or power conferred upon it or them by the Loan
Papers or be responsible for the consequences of any error of judgment,
except for fraud, gross negligence, or willful misconduct; and none of the
Agents or any of their respective Representatives has a fiduciary
relationship with any Lender by virtue of the Loan Papers (PROVIDED THAT,
nothing herein shall negate the obligation of Administrative Agent or
Collateral Agent to account for funds received by it for the account of any
Lender).
(b) Unless indemnified to its satisfaction against loss, cost,
liability, and expense, neither Administrative Agent nor any other Agent
shall be compelled to do any act under the Loan Papers or to take any
action toward the execution or enforcement of the powers thereby created or
to prosecute or defend any suit in respect of the Loan Papers. If
Administrative Agent requests instructions from Lenders or Required
Lenders, as the case may be, with respect to any act or action (including,
but not limited to, any failure to act) in connection with any Loan Paper,
Administrative Agent shall be entitled (but shall not be required) to
refrain (without incurring any liability to any Person by so refraining)
from such act or action unless and until it has received such instructions.
Except where action of Required Lenders or all Lenders is required in the
Loan Papers, Administrative Agent may act hereunder in its own discretion
without requesting instructions. In no event, however, shall Administrative
Agent or any of its respective Representatives be required to take any
action which it or they determine could incur for it or them criminal or
onerous civil liability. Without limiting the generality of the foregoing,
no Lender shall have any right of action against Administrative Agent as a
result of Administrative Agent's acting or refraining from acting hereunder
in accordance with the instructions of Required Lenders (or all Lenders if
required in the Loan Papers).
(c) Administrative Agent nor any other Agent shall be responsible in
any manner to any Lender or any Participant for, and each Lender represents
and warrants that it has not relied
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upon Administrative Agent or any other Agent in respect of, (i) the
creditworthiness of any Company or any Guarantor and the risks involved
to such Lender, (ii) the effectiveness, enforceability, genuineness,
validity, or the due execution of any Loan Paper, (iii) any
representation, warranty, document, certificate, report, or statement
made therein or furnished thereunder or in connection therewith, (iv) the
existence, priority, or perfection of any Lien hereafter granted or
purported to be granted under any Loan Paper, or (v) observation of or
compliance with any of the terms, covenants, or conditions of any Loan
Paper on the part of any Company or Guarantor. Each Lender agrees to
indemnify Administrative Agent and its respective Representatives and
hold them harmless from and against (but limited to such Lender's Pro
Rata Part of) any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, reasonable expenses, and
reasonable disbursements of any kind or nature whatsoever which may be
imposed on, asserted against, or incurred by them in any way relating to
or arising out of the Loan Papers or any action taken or omitted by them
under the Loan Papers (INCLUDING ANY OF THE FOREGOING ARISING FROM THE
NEGLIGENCE OF ADMINISTRATIVE AGENT OR ITS REPRESENTATIVES), to the extent
Administrative Agent and its respective Representatives are not
reimbursed for such amounts by any Company (PROVIDED THAT, Administrative
Agent, and its respective Representatives shall not have the right to be
indemnified hereunder for its or their own fraud, gross negligence, or
willful misconduct).
12.6 DEFAULT; COLLATERAL. Upon the occurrence and continuance of a
Default, Lenders agree to promptly confer in order that Required Lenders or
Lenders, as the case may be, may agree upon a course of action for the
enforcement of the Rights of Lenders; and Administrative Agent shall be entitled
to refrain from taking any action (without incurring any liability to any Person
for so refraining) unless and until Administrative Agent shall have received
instructions from Required Lenders. All rights of action under this Agreement
and under the Notes and all rights to the Collateral, if any, hereunder may be
enforced by Administrative Agent or Collateral Agent (in accordance with the
Intercreditor Agreement) and any suit or proceeding instituted by Administrative
Agent or Collateral Agent in furtherance of such enforcement shall be brought in
their respective names as Administrative Agent or Collateral Agent (as the case
may be) without the necessity of joining as plaintiffs or defendants any other
Lender, and the recovery of any judgment shall be for the benefit of Lenders
subject to the expenses of Administrative Agent and/or Collateral Agent. In
actions with respect to any property of Borrower, Administrative Agent is acting
for the ratable benefit of each Lender. Any and all agreements to subordinate
(whether made heretofore or hereafter) other indebtedness or obligations of
Borrower to the Obligation shall be construed as being for the ratable benefit
of each Lender.
12.7 LIMITATION OF LIABILITY. To the extent permitted by Law, (a) neither
Administrative Agent nor any other Agent (acting in their respective agent
capacities) shall incur any liability to any other Lender, Agent, or Participant
except for acts or omissions resulting from its own fraud, gross negligence or
wilful misconduct, and (b) neither Administrative Agent nor any other Agent,
Lender, or Participant shall incur any liability to any other Person for any act
or omission of any other Lender, Agent, or Participant.
12.8 RELATIONSHIP OF LENDERS. Nothing herein shall be construed as
creating a partnership or joint venture among Agents and Lenders.
12.9 INTERCREDITOR AGREEMENT. Each Lender authorizes and directs
Administrative Agent to enter into the Intercreditor Agreement (substantially in
the form and upon the terms of EXHIBIT I) for the benefit of the Lenders,
pursuant to which, among other things, (a) NationsBank of Texas, N.A., is
appointed as Collateral Agent for the benefit of Lenders and the 364-Day
Facility Lenders, (b) the relative
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Rights of Lenders and the 364-Day Facility Lenders with respect to the
Collateral are described, and (c) procedures with respect to maintenance and
release of the Collateral are proscribed.
12.10 BENEFITS OF AGREEMENT. Except for the representations and
covenants in SECTIONS 12.1(c) and 12.9 in favor of Borrower, none of the
provisions of this SECTION 12 shall inure to the benefit of any Company,
Guarantor, or any other Person other than Lenders; consequently, no Company,
Guarantor, or any other Person shall be entitled to rely upon, or to raise as a
defense, in any manner whatsoever, the failure of any Agent or any Lender to
comply with such provisions.
12.11 AGENTS. None of the Lenders identified in this Agreement as
"SYNDICATION AGENT," "DOCUMENTATION AGENT," "MANAGING AGENT," or "CO-AGENT"
shall have any rights, powers, obligations, liabilities, responsibilities, or
duties under this Agreement other than those applicable to all Lenders as such.
Without limiting the foregoing, none of the Lenders so identified as a
"SYNDICATION AGENT," "DOCUMENTATION AGENT," "MANAGING AGENT," or "CO-AGENT"
shall have or be deemed to have any fiduciary relationship with any Lender.
12.12 OBLIGATIONS SEVERAL. The obligations of Lenders hereunder are
several, and each Lender hereunder shall not be responsible for the obligations
of the other Lenders hereunder, nor will the failure of one Lender to perform
any of its obligations hereunder relieve the other Lenders from the performance
of their respective obligations hereunder
SECTION 13 MISCELLANEOUS.
13.1 HEADINGS. The headings, captions, and arrangements used in any of the
Loan Papers are, unless specified otherwise, for convenience only and shall not
be deemed to limit, amplify, or modify the terms of the Loan Papers, nor affect
the meaning thereof.
13.2 NONBUSINESS DAYS. In any case where any payment or action is due
under any Loan Paper on a day which is not a Business Day, such payment or
action may be delayed until the next-succeeding Business Day, but interest and
fees shall continue to accrue in respect of any payment to which it is
applicable until such payment is in fact made; PROVIDED THAT, if, in the case of
any such payment in respect of a Eurodollar Rate Borrowing, the next-succeeding
Business Day is in the next calendar month, then such payment shall be made on
the next-preceding Business Day.
13.3 COMMUNICATIONS. Unless specifically otherwise provided, whenever any
Loan Paper requires or permits any consent, approval, notice, request, or demand
from one party to another, such communication must be in writing (which may be
by telex or telecopy) to be effective and shall be deemed to have been given
(a) if by telex, when transmitted to the telex number, if any, for such party,
and the appropriate answer back is received, (b) if by telecopy, when
transmitted to the telecopy number for such party (and all such communications
sent by telecopy shall be confirmed promptly thereafter by personal delivery or
mailing in accordance with the provisions of this section; PROVIDED, THAT any
requirement in this parenthetical shall not affect the date on which such
telecopy shall be deemed to have been delivered), (c) if by mail, on the third
Business Day after it is enclosed in an envelope, properly addressed to such
party, properly stamped, sealed, and deposited in the appropriate official
postal service, or (d) if by any other means, when actually delivered to such
party. Until changed by notice pursuant hereto, the address (and telex and
telecopy numbers, if any) for Administrative Agent and each Lender,
Administrative Agent, and other Agents is set forth on SCHEDULE 2.1, and for
Borrower and each Company is the address set forth by Borrower's signature on
the signature page of this Agreement and for each Guarantor is the address set
forth by such Guarantor's signature on the signature page of its Guaranty. A
copy of each communication
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to Administrative Agent shall also be sent to Haynes and Boone, L.L.P., 901
Main Street, Dallas, Texas 75202, Fax: 214/651-5940, Attn: Karen S. Nelson.
13.4 FORM AND NUMBER OF DOCUMENTS. Each agreement, document, instrument,
or other writing to be furnished under any provision of this Agreement must be
in form and substance and in such number of counterparts as may be reasonably
satisfactory to Administrative Agent and its counsel.
13.5 EXCEPTIONS TO COVENANTS. No Company or Guarantor shall take any
action or fail to take any action which is permitted as an exception to any of
the covenants contained in any Loan Paper if such action or omission would
result in the breach of any other covenant contained in any of the Loan Papers.
13.6 SURVIVAL. All covenants, agreements, undertakings, representations,
and warranties made in any of the Loan Papers shall survive all closings under
the Loan Papers and, except as otherwise indicated, shall not be affected by any
investigation made by any party. All rights of, and provisions relating to,
reimbursement and indemnification of Administrative Agent, any Agent, or any
Lender shall survive termination of this Agreement and payment in full of the
Obligation.
13.7 GOVERNING LAW. THE LAWS OF THE STATE OF TEXAS AND OF THE UNITED
STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES TO THE LOAN
PAPERS AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF THE
LOAN PAPERS.
13.8 INVALID PROVISIONS. If any provision in any Loan Paper is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable; the
appropriate Loan Paper shall be construed and enforced as if such provision had
never comprised a part thereof; and the remaining provisions thereof shall
remain in full force and effect and shall not be affected by such provision or
by its severance therefrom. Administrative Agent, Lenders, and each Company and
Guarantor party to such Loan Paper agree to negotiate, in good faith, the terms
of a replacement provision as similar to the severed provision as may be
possible and be legal, valid, and enforceable.
13.9 ENTIRETY. THE RIGHTS AND OBLIGATIONS OF THE COMPANIES, GUARANTORS,
LENDERS, AND AGENTS SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS,
DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN SUCH PARTIES
ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS AGREEMENT (AS AMENDED IN
WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN PAPERS EXECUTED BY ANY
COMPANY, ANY GUARANTOR, ANY LENDER, AND/OR ANY AGENT, (TOGETHER WITH ALL
COMMITMENT LETTERS AND FEE LETTERS AS THEY RELATE TO THE PAYMENT OF FEES AFTER
THE CLOSING DATE) REPRESENT THE FINAL AGREEMENT BETWEEN THE COMPANIES, THE
GUARANTORS, LENDERS, AND AGENTS, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY SUCH PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN SUCH PARTIES.
13.10 JURISDICTION; VENUE; SERVICE OF PROCESS; JURY TRIAL. EACH PARTY
HERETO, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY
(A) IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN TEXAS, AND AGREES AND CONSENTS THAT SERVICE OF PROCESS
MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING ARISING OUT OF OR IN CONNECTION WITH
THE LOAN PAPERS AND THE OBLIGATION BY SERVICE OF PROCESS AS PROVIDED BY TEXAS
LAW, (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN PAPERS AND THE
OBLIGATION BROUGHT IN ANY SUCH COURT, (C) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY
LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN
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BROUGHT IN AN INCONVENIENT FORUM, (D) AGREES TO DESIGNATE AND MAINTAIN AN
AGENT FOR SERVICE OF PROCESS IN TEXAS IN CONNECTION WITH ANY SUCH LITIGATION
AND TO DELIVER TO ADMINISTRATIVE AGENT EVIDENCE THEREOF, IF REQUESTED, (E)
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING OF COPIES THEREOF
BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, AT ITS ADDRESS
SET FORTH HEREIN, (F) IRREVOCABLY AGREES THAT ANY LEGAL PROCEEDING AGAINST
ANY PARTY HERETO ARISING OUT OF OR IN CONNECTION WITH THE LOAN PAPERS OR THE
OBLIGATION SHALL BE BROUGHT IN ONE OF THE AFOREMENTIONED COURTS, AND (G)
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF ANY LOAN PAPER OR THE TRANSACTIONS CONTEMPLATED THEREBY. The scope of
each of the foregoing waivers is intended to be all-encompassing of any and
all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including, without limitation, contract claims,
tort claims, breach of duty claims, and all other common law and statutory
claims. The Companies, Guarantors, and each other party to this Agreement
acknowledge that this waiver is a material inducement to the agreement of
each party hereto to enter into a business relationship, that each has
already relied on this waiver in entering into this Agreement, and each will
continue to rely on each of such waivers in related future dealings. The
Companies, Guarantors, and each other party to this Agreement warrant and
represent that they have reviewed these waivers with their legal counsel, and
that they knowingly and voluntarily agree to each such waiver following
consultation with legal counsel. THE WAIVERS IN THIS SECTION 13.10 ARE
IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THESE WAIVERS SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
SUPPLEMENTS, AND REPLACEMENTS TO OR OF THIS OR ANY OTHER LOAN PAPER. In the
event of Litigation, this Agreement may be filed as a written consent to a
trial by the court.
13.11 AMENDMENTS, CONSENTS, CONFLICTS, AND WAIVERS.
(a) Except as otherwise specifically provided, (i) this Agreement may
only be amended, modified or waived by an instrument in writing executed
jointly by Borrower and Required Lenders, and, in the case of any matter
affecting Administrative Agent (EXCEPT removal of Administrative Agent as
provided in SECTION 12) by Administrative Agent, and may only be
supplemented by documents delivered or to be delivered in accordance with
the express terms hereof, and (ii) the other Loan Papers may only be the
subject of an amendment, modification, or waiver if Borrower and Required
Lenders, and, in the case of any matter affecting Administrative Agent
(EXCEPT as set forth above), Administrative Agent, have approved same.
(b) Any amendment to or consent or waiver under this Agreement or any
Loan Paper which purports to accomplish any of the following must be by an
instrument in writing executed by Borrower and executed (or approved, as
the case may be) by each Lender, and, in the case of any matter affecting
Administrative Agent, by Administrative Agent: (i) extends the due date or
reduces the amount of any scheduled payment of the Obligation or any
scheduled reduction of the Revolver Commitment or any Acquisition
Commitment beyond the date specified in the Loan Papers; (ii) reduces the
interest rate or decreases the amount of interest, fees, or other sums
payable to Administrative Agent or Lenders hereunder (except such
reductions as are contemplated by this Agreement); (iii) changes the
definition of "APPLICABLE MARGIN" or "APPLICABLE MARGIN FOR COMMITMENT
FEES" (other than changes having the effect of increasing such Applicable
Margin or Applicable Margin for Commitment Fees)," "REQUIRED LENDERS,"
"TOTAL COMMITMENT," "REVOLVER COMMITMENT," "TERMINATION DATE," "PRO RATA,"
or "PRO RATA PART," or (iv) except as otherwise permitted by any Loan
Paper, waives compliance with, amends, or releases (in whole
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or in part) any Guaranty or releases (in whole or in part) any Collateral
for the Obligation; or (v) changes this CLAUSE (b) or any other matter
specifically requiring the consent of all Lenders hereunder. Without the
consent of such Lender, no Lender's "COMMITTED SUM" or "ACQUISITION
COMMITMENT" for any Acquisition Loan may be increased.
(c) Any conflict or ambiguity between the terms and provisions herein
and terms and provisions in any other Loan Paper shall be controlled by the
terms and provisions herein.
(d) No course of dealing nor any failure or delay by Administrative
Agent, any Lender, or any of their respective Representatives with respect
to exercising any Right of Administrative Agent or any Lender hereunder
shall operate as a waiver thereof. A waiver must be in writing and signed
by Administrative Agent and Required Lenders (or by all Lenders, if
required hereunder) to be effective, and such waiver will be effective only
in the specific instance and for the specific purpose for which it is
given.
13.12 MULTIPLE COUNTERPARTS. This Agreement may be executed in a
number of identical counterparts, each of which shall be deemed an original for
all purposes and all of which constitute, collectively, one agreement; but, in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart. It is not necessary that each Lender
execute the same counterpart so long as identical counterparts are executed by
Borrower, each Lender, and Administrative Agent. This Agreement shall become
effective when counterparts hereof shall have been executed and delivered to
Administrative Agent by each Lender, Administrative Agent, and Borrower, or,
when Administrative Agent shall have received telecopied, telexed, or other
evidence satisfactory to it that such party has executed and is delivering to
Administrative Agent a counterpart hereof.
13.13 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS.
(a) This Agreement shall be binding upon, and inure to the benefit of
the parties hereto and their respective successors and assigns, EXCEPT THAT
(i) Borrower may not, directly or indirectly, assign or transfer, or
attempt to assign or transfer, any of its Rights, duties or obligations
under any Loan Papers without the express written consent of all Lenders,
and (ii) EXCEPT as permitted under this Section, no Lender may transfer,
pledge, assign, sell any participation in, or otherwise encumber its
portion of the Obligation.
(b) Each Lender may assign to one or more Eligible Assignees all or a
portion of its Rights and obligations under this Agreement and the other
Loan Papers (including, without limitation, all or a portion of its
Borrowings and its Notes); PROVIDED, HOWEVER, that:
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or an
assignment of all of a Lender's Rights and obligations under this
Agreement and the other Loan Papers, any such partial assignment (when
aggregated with the amount of any concurrent assignments by the
assigning Lender to the same assignee under the 364-Day Facility
and/or under the Third Amended and Restated Credit Agreement dated as
of March 25, 1998, among Dobson Operating Company, CoreStates Bank,
N.A., as Administrative Agent, and the lenders now or hereafter party
thereto [as the same may hereafter be amended, modified, restated, or
supplemented]) shall be in an amount at least equal to $5,000,000,
but, in no event less than $1,000,000;
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<PAGE>
(iii) each such assignment by a Lender shall be of a
constant, and not varying, percentage of all of its Rights and
obligations under this Agreement and the Notes;
(iv) the parties to such assignment shall execute and deliver to
the Administrative Agent for its acceptance an Assignment and
Acceptance Agreement in the form of EXHIBIT F hereto, together with
any Notes subject to such assignment and a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance
Agreement, the assignee thereunder shall be a party hereto and, to the
extent of such assignment, have the obligations, Rights, and benefits of a
Lender under the Loan Papers and the assigning Lender shall, to the extent
of such assignment, relinquish its rights and be released from its
obligations under the Loan Papers. Upon the consummation of any assignment
pursuant to this Section, but only upon the request of the assignor or
assignee made through Administrative Agent, Borrower shall issue
appropriate Notes to the assignor and the assignee, reflecting such
Assignment and Acceptance. If the assignee is not incorporated under the
laws of the United States of America or a state thereof, it shall deliver
to Borrower and Administrative Agent certification as to exemption from
deduction or withholding of Taxes in accordance with SECTION 4.6.
(c) Administrative Agent shall maintain at its address referred to in
SECTION 13.3 a copy of each Assignment and Acceptance Agreement delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment, and principal amount of the
Borrowings owing to, each Lender from time to time (the "REGISTER"). The
entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and Borrower, Administrative Agent and the Lenders
may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of the Loan Papers. The Register shall be
available for inspection by Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice. Upon the consummation
of any assignment in accordance with this SECTION 13.13, SCHEDULE 2.1 shall
automatically be deemed amended (to the extent required) by Administrative
Agent to reflect the name, address, and respective Committed Sums under the
Revolving Facility of the assignor and assignee.
(d) Upon its receipt of an Assignment and Acceptance Agreement
executed by the parties thereto, together with any Notes subject to such
assignment and payment of the processing fee, the Administrative Agent
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of EXHIBIT F hereto, (i) accept such Assignment and
Acceptance Agreement, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the parties thereto.
(e) Subject to the provisions of this Section and in accordance with
applicable Law, any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable Law, at any time sell to
one or more Persons (each a "PARTICIPANT") participating interests in its
portion of the Obligation. In the event of any such sale to a Participant,
(i) such Lender shall remain a "LENDER" under this Agreement and the
Participant shall not constitute a "LENDER" hereunder, (ii) such Lender's
obligations under this Agreement shall remain unchanged, (iii) such Lender
shall remain solely responsible for the performance thereof, (iv) such
Lender shall remain the holder of its share of the Principal Debt for all
purposes under this Agreement, (v) Borrower and Administrative Agent shall
continue to deal solely and directly with such Lender in connection with
such Lender's Rights and obligations under the Loan Papers, and (vi) such
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<PAGE>
Lender shall be solely responsible for any withholding taxes or any filing
or reporting requirements relating to such participation and shall hold
Borrower and Administrative Agent and their respective successors,
permitted assigns, officers, directors, employees, agents, and
representatives harmless against the same. Participants shall have no
Rights under the Loan Papers, other than certain voting Rights as provided
below. Subject to the following, each Lender shall be entitled to obtain
(on behalf of its Participants) the benefits of SECTION 4 with respect to
all participations in its part of the Obligation outstanding from time to
time SO LONG AS Borrower shall not be obligated to pay any amount in excess
of the amount that would be due to such Lender under SECTION 4 calculated
as though no participations have been made. No Lender shall sell any
participating interest under which the Participant shall have any Rights to
approve any amendment, modification, or waiver of any Loan Paper, except to
the extent such amendment, modification, or waiver extends the due date for
payment of any amount in respect of principal (OTHER THAN mandatory
prepayments), interest, or fees due under the Loan Papers, reduces the
interest rate or the amount of principal or fees applicable to the
Obligation (EXCEPT such reductions as are contemplated by this Agreement),
or releases any material Guaranty or all or any substantial portion of the
Collateral for the Obligation under the Loan Papers (EXCEPT such releases
as are contemplated by this Agreement); PROVIDED THAT, in those cases where
a Participant is entitled to the benefits of SECTION 4 or a Lender grants
Rights to its Participants to approve amendments to or waivers of the Loan
Papers respecting the matters previously described in this sentence, such
Lender must include a voting mechanism in the relevant participation
agreement or agreements, as the case may be, whereby a majority of such
Lender's portion of the Obligation (whether held by such Lender or
Participant) shall control the vote for all of such Lender's portion of the
Obligation. Except in the case of the sale of a participating interest to
another Lender, the relevant participation agreement shall not permit the
Participant to transfer, pledge, assign, sell participations in, or
otherwise encumber its portion of the Obligation, unless the consent of the
transferring Lender (which consent will not be unreasonably withheld) has
been obtained.
(f) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time assign and pledge all or any portion of its
Borrowings and its Notes to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning Lender from
its obligations hereunder.
(g) Any Lender may furnish any information concerning the Companies
or the Guarantors in the possession of such Lender from time to time to
Eligible Assignees and Participants (including prospective Eligible
Assignees and Participants).
13.14 DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN
CIRCUMSTANCES. The obligations of each Company and each Guarantor under the
Loan Papers shall remain in full force and effect until termination of the Total
Commitment and payment in full of the Principal Debt and of all interest, fees,
and other amounts of the Obligation then due and owing, (and termination of all
outstanding LCs with any Lender, if any, UNLESS such Lender shall otherwise
consent) EXCEPT that SECTIONS 4, 11, and 13, and any other provisions under the
Loan Papers expressly intended to survive by the terms hereof or by the terms of
the applicable Loan Papers, shall survive such termination. If at any time any
payment of the principal of or interest on any Note or any other amount payable
by Borrower under any Loan Paper is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy, or reorganization of Borrower or
otherwise, the obligations of each Company and each Guarantor under the Loan
Papers with respect to such payment shall be reinstated as though such payment
had been due but not made at such time.
77
<PAGE>
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
78
<PAGE>
Signature Page to that certain Revolving Credit Agreement dated as of March
25, 1998, among Dobson Cellular Operations Company, as Borrower, NationsBank of
Texas, N.A., as Administrative Agent, and certain other Agents and Lenders named
therein.
EXECUTED as of the 25th day of March, 1998, but effective as of the Closing
Date.
Attest: DOBSON CELLULAR OPERATIONS COMPANY
By: By:
-------------------------------- --------------------------------
Name: Name:
--------------------------- ---------------------------
Title: Title:
-------------------------- --------------------------
Mailing Address:
- ----------------------------------
- ----------------------------------
<PAGE>
Signature Page to that certain Revolving Credit Agreement dated as of
March 25, 1998, among Dobson Cellular Operations Company, as Borrower,
NationsBank of Texas, N.A., as Administrative Agent, and certain other Agents
and Lenders named therein.
EXECUTED as of the 25th day of March, 1998, but effective as of the Closing
Date.
NATIONSBANK OF TEXAS, N.A.,
AS ADMINISTRATIVE AGENT AND AS A LENDER
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
Signature Page to that certain Revolving Credit Agreement dated as of
March 25, 1998, among Dobson Cellular Operations Company, as Borrower,
NationsBank of Texas, N.A., as Administrative Agent, and certain other Agents
and Lenders named therein.
EXECUTED as of the 25th day of March, 1998, but effective as of the Closing
Date.
[Name of Lender]
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
Signature Page to that certain Credit Agreement dated as of March 25, 1998,
among Dobson Cellular Operations Company, as Borrower, NationsBank of Texas,
N.A., as Administrative Agent, and certain other Agents and Lenders named
therein.
Each of the undersigned Guarantors hereby acknowledges that it has reviewed
this Credit Agreement and agrees that certain of the representations and
covenants contained in SECTION 8 apply to Guarantors:
DOBSON CELLULAR OF TEXAS, INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
DOBSON CELLULAR OF CALIFORNIA, INC.
By:
------------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT
THIS 364-DAY REVOLVING CREDIT AND TERM LOAN AGREEMENT is entered into as of
March 25, 1998, among DOBSON CELLULAR OPERATIONS COMPANY, an Oklahoma
corporation ("BORROWER"), Lenders (hereinafter defined), FIRST UNION NATIONAL
BANK, as Syndication Agent (hereinafter defined), TORONTO DOMINION (TEXAS),
INC., as Documentation Agent (hereinafter defined), NATIONSBANK OF TEXAS, N.A.,
as Administrative Agent (hereinafter defined), for itself and the other Lenders,
and the Managing Agents (hereinafter defined) and Co-Agents (hereinafter
defined).
RECITALS
A. Borrower is a newly-formed, wholly-owned Subsidiary of Dobson
Communications Corporation and has requested that Lenders extend credit to
Borrower in the form of this 364-Day Revolving Credit and Term Loan Agreement
(the "AGREEMENT"), providing for a 364-day revolving credit and term loan
facility in the aggregate principal amount of $80,000,000.
B. Additionally, Borrower has requested that Lenders extend additional
credit to Borrower in the form of a Revolving Credit Agreement, providing for a
revolving loan facility in the aggregate principal amount of $120,000,000 and an
uncommitted discretionary acquisition revolving facility for an aggregate
principal amount of up to $75,000,000.
C. Upon and subject to the terms and conditions of this Agreement,
Lenders are willing to extend credit to Borrower.
Accordingly, in consideration of the mutual covenants contained herein,
Borrower, Administrative Agent, Documentation Agent, Syndication Agents, and
Lenders agree, as follows:
SECTION 1 DEFINITIONS AND TERMS.
1.1 DEFINITIONS. As used herein:
ACQUISITION means any transaction or series of related transactions for the
purpose of, or resulting in, directly or indirectly, (a) the acquisition by any
Company of all or substantially all of the assets of a Person or of any business
or division of a Person, (b) the acquisition by any Company of more than 50% of
any class of Voting Stock (or similar ownership interests) of any Person
(PROVIDED THAT, formation or organization of any entity shall not constitute an
"ACQUISITION" to the extent that the amount of the loan, advance, investment, or
capital contribution in such entity constitutes a permitted investment under
SECTION 9.20); or (c) a merger, consolidation, amalgamation, or other
combination by any Company with another Person if a Company is the surviving
entity; PROVIDED THAT, in any merger involving Borrower, Borrower must be the
surviving entity.
ACQUISITION COMMITMENT has the meaning given to such term in the
Revolver/Acquisition Agreement.
ACQUISITION FACILITY has the meaning given to such term in the
Revolver/Acquisition Agreement.
<PAGE>
ACQUISITION PRINCIPAL DEBT has the meaning given to such term in the
Revolver/Acquisition Agreement.
ADJUSTED EURODOLLAR RATE means, for any Eurodollar Rate Borrowing for any
Interest Period therefor, the rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to
the quotient obtained by dividing (a) the Eurodollar Rate for such Eurodollar
Rate Borrowing for such Interest Period by (b) 1 minus the Reserve Requirement
for such Eurodollar Rate Borrowing for such Interest Period.
ADMINISTRATIVE AGENT means NationsBank of Texas, N.A., and its permitted
successors or assigns as "ADMINISTRATIVE AGENT" for Lenders under this
Agreement.
AFFILIATE of any Person means any other individual or entity who directly
or indirectly controls, or is controlled by, or is under common control with,
such Person, and, for purposes of this definition only, "CONTROL," "CONTROLLED
BY," and "UNDER COMMON CONTROL WITH" mean possession, directly or indirectly, of
the power to direct or cause the direction of management or policies (whether
through ownership of voting securities, by contract, or otherwise).
AGENTS means, collectively, the Administrative Agent, the Syndication
Agent, the Documentation Agent, the Collateral Agent, Managing Agents, and
Co-Agents.
AGREEMENT means this 364-Day Revolving Credit and Term Loan Agreement (as
the same may hereafter be amended, modified, supplemented, or restated from time
to time).
APPLICABLE LENDING OFFICE means, for each Lender and for each Type of
Borrowing, the "LENDING OFFICE" of such Lender (or an affiliate of such Lender)
designated on SCHEDULE 2.1 attached hereto or such other office that such Lender
(or an affiliate of such Lender) may from time to time specify to Administrative
Agent and Borrower by written notice in accordance with the terms hereof.
APPLICABLE MARGIN means, on any date of determination, with respect to each
Base Rate Borrowing or Eurodollar Rate Borrowing, respectively, the percentage
per annum set forth in the appropriate column below that corresponds to the
Senior Leverage Ratio at such date of determination, as calculated based on the
quarterly compliance certificate of Borrower most recently delivered pursuant to
SECTION 7.2 hereof:
<TABLE>
- -------------------------------------------------------------------------------
APPLICABLE MARGIN
------------------------------------------------
EURODOLLAR RATE
SENIOR LEVERAGE RATIO BASE RATE BORROWINGS BORROWINGS
- -------------------------------------------------------------------------------
<S> <C> <C>
Less than 4.00:1.0 0.125% 1.125%
- -------------------------------------------------------------------------------
Greater than or equal to
4.00 to 1.0, 0.375% 1.375%
but less than 5.00:1.0
- -------------------------------------------------------------------------------
Greater than or equal to
5.00:1.0, 0.625% 1.625%
but less than 6.00:1.0
- -------------------------------------------------------------------------------
Greater than or equal to
6.00:1.0, 0.875% 1.875%
but less than 7.00:1.0
- -------------------------------------------------------------------------------
Greater than or equal to
7.00:1.0, 1.125% 2.125%
but less than 8.00:1.0
- -------------------------------------------------------------------------------
Greater than or equal to
8.00:1.0 1.375% 2.375%
- -------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------
APPLICABLE MARGIN
------------------------------------------------
EURODOLLAR RATE
SENIOR LEVERAGE RATIO BASE RATE BORROWINGS BORROWINGS
- -------------------------------------------------------------------------------
<S> <C> <C>
Greater than or equal to
8.00:1.0 1.375% 2.375%
- -------------------------------------------------------------------------------
</TABLE>
(a) Until the second Business Day after the initial Financial
Statements and Compliance Certificate for the fiscal quarter ending
December 31, 1997, shall have been delivered hereunder, the Applicable
Margin for Base Rate Borrowings and Eurodollar Rate Borrowings shall be
determined by reference to a Compliance Certificate delivered by Borrower
on the Closing Date. With respect to any adjustments in the Applicable
Margin as a result of changes in the Senior Leverage Ratio, such adjustment
shall be effective commencing on the second Business Day after the delivery
of Financial Statements (and related Compliance Certificate) pursuant to
SECTIONS 9.3(a) and 9.3(b) or the most recent Permitted Acquisition
Compliance Certificate for a Permitted Acquisition, as the case may be.
(b) If Borrower fails to timely furnish to Lenders the Financial
Statements and related Compliance Certificates as required to be delivered
pursuant to SECTIONS 9.3(a) and 9.3(b), and such failure shall not be
remedied within five days after written notice thereof from the
Administrative Agent or any Lender, then the Applicable Margin shall be the
maximum Applicable Margin specified in the Table above.
APPLICABLE MARGIN FOR COMMITMENT FEES means, on any date of determination,
the percentage set forth in the table below which corresponds, on any date of
determination, with the Senior Leverage Ratio at such date of determination, as
calculated based on the quarterly compliance certificates of Borrower most
recently delivered pursuant to SECTION 7.2 hereof.
<TABLE>
- -------------------------------------------------------------------------------
SENIOR LEVERAGE RATIO APPLICABLE MARGIN FOR
REQUIREMENT COMMITMENT FEES
- -------------------------------------------------------------------------------
<S> <C>
Greater than or equal to 5.5 to 1.0 0.2500%
- -------------------------------------------------------------------------------
Less than 5.5 to 1.0 0.1875%
- -------------------------------------------------------------------------------
</TABLE>
(a) Until the second Business Day after the initial Financial
Statements and Compliance Certificate for the fiscal quarter ending
December 31, 1997, shall have been delivered hereunder, the Applicable
Margin for Commitment Fees shall be determined by reference to a Compliance
Certificate delivered by Borrower on the Closing Date. With respect to any
adjustments in the Applicable Margin for Commitment Fees as a result of
changes in the Senior Leverage Ratio, such adjustment shall be effective
commencing on the second Business Day after the delivery of Financial
Statements (and related Compliance Certificate) pursuant to SECTIONS 9.3(a)
and 9.3(b) or the most recent Permitted Acquisition Compliance Certificate
for a Permitted Acquisition, as the case may be.
(b) If Borrower fails to timely furnish to Lenders the Financial
Statements and related Compliance Certificates as required to be delivered
pursuant to SECTIONS 9.3(a) and 9.3(b), and such failure shall not be
remedied within five days after written notice thereof from the
Administrative Agent or any Lender, then the Applicable Margin for
Commitment Fees shall be the maximum Applicable Margin specified in the
table above.
3
<PAGE>
ARRANGER means NationsBanc Montgomery Securities LLC, and its successors
and assigns.
ASSUMED TAXES means, (a) with respect to any Equity Issuance, an amount
equal to such incremental annual increase in franchise Taxes as Borrower
estimates in good faith shall be payable as a result of such Equity Issuance,
and (b) with respect to any Significant Sale, an amount equal to such percentage
as Borrower estimates in good faith to be its effective rate of the taxable gain
for federal and state income tax purposes with respect to such Significant Sale.
AUTHORIZATIONS means all filings, recordings, and registrations with, and
all validations or exemptions, approvals, orders, authorizations, consents,
franchises, licenses, certificates, and permits from, any Governmental Authority
(including, without limitation, the FCC and applicable PUCs), including without
limitation, any of the foregoing authorizing or permitting the acquisition,
construction, or operation of any System.
BASE RATE means, for any day, the rate per annum equal to the HIGHER of (a)
the Federal Funds Rate for such day plus one-half of one percent (.5%) and (b)
the Prime Rate for such day. Any change in the Base Rate due to a change in the
Prime Rate or the Federal Funds Rate shall be effective on the effective date of
such change in the Prime Rate or the Federal Funds Rate.
BASE RATE BORROWING means a Borrowing bearing interest at the SUM of the
Base Rate PLUS the Applicable Margin for Base Rate Borrowings.
BORROWER is defined in the preamble to this Agreement.
BORROWING means any amount disbursed (a) by one or more Lenders to Borrower
under the Loan Papers, whether such amount constitutes an original disbursement
of funds or the continuation of an amount outstanding or (b) by any Lender in
accordance with, and to satisfy the obligations of any Company or any Guarantor
under, any Loan Paper.
BORROWING DATE is defined in SECTION 2.3(a).
BUDGET means the most recently delivered of the (a) annual financial budget
for the Companies delivered on the Closing Date as required in ITEM 22 on
SCHEDULE 7.1 delivered pursuant to SECTION 7.1 or (b) the Budget delivered
pursuant to SECTION 9.3(d), together with any adjustments to any Budget (whether
described in CLAUSE (a) or (b)) made from time to time based on projections
delivered in connection with Permitted Acquisitions pursuant to SECTION 7.2 and
the requirements of a "PERMITTED ACQUISITION" as set forth in this SECTION 1.1
SO LONG AS such projections have been approved by Administrative Agent.
BUSINESS DAY means (a) for all purposes, any day OTHER THAN Saturday,
Sunday, and any other day on which commercial banking institutions are required
or authorized by Law to be closed in Dallas, Texas, and (b) in addition to the
foregoing, in respect of any Eurodollar Rate Borrowing, a day on which dealings
in United States dollars are conducted in the London interbank market and
commercial banks are open for international business in London.
CAPITAL EXPENDITURES means an expenditure for any fixed asset having a
useful life of more than one (1) year, or any improvements or additions thereto,
including the direct or indirect acquisition of such assets, and including any
obligations to pay rent or other amounts under a Capital Lease; PROVIDED,
4
<PAGE>
HOWEVER, that Capital Expenditures shall not include acquisitions of stock or
assets which are made in accordance with SECTION 9.20 hereof.
CAPITAL LEASE means any capital lease or sublease which should be
capitalized on a balance sheet in accordance with GAAP.
CELLULAR PARTNERSHIP means any entity in which Borrower owns, directly or
indirectly, a partnership interest.
CELLULAR PARTNERSHIP OBLIGOR means, on any date of determination, those
Cellular Partnerships for which Borrower serves, directly or indirectly, as the
Managing General Partner and which have incurred Debt from any Company, which
Debt has not been terminated or with respect to which amounts remain
outstanding.
CELLULAR PARTNERSHIP PROMISSORY NOTES means certain intercompany notes, now
or hereafter existing, executed by the Cellular Partnership Obligors and payable
to the order of any Company, and CELLULAR PARTNERSHIP PROMISSORY NOTE means any
one of such intercompany notes.
CLOSING DATE means the date upon which this Agreement has been executed by
Borrower, Lenders, and Administrative Agent and all conditions precedent
specified in SECTION 7.1 have been satisfied or waived.
CO-AGENTS means Fleet National Bank, Banque Paribas, and Key Corporate
Capital Inc.
CODE means the INTERNAL REVENUE CODE OF 1986, as amended, TOGETHER WITH the
rules and regulations promulgated thereunder.
COLLATERAL has the meaning set forth in SECTION 6.1.
COLLATERAL AGENT means NationsBank of Texas, N.A., and its permitted
successors and assigns in such capacity under the Intercreditor Agreement.
COLLATERAL DOCUMENTS means all security agreements, pledge agreements,
assignments of partnership interests, and Guaranties at any time delivered to
Administrative Agent or Collateral Agent to create or evidence Liens securing
the Obligation, together with all reaffirmations, amendments, and modifications
thereof or supplements thereto.
COMMITMENT means an amount (subject to reduction or cancellation as herein
provided) equal to $80,000,000.
COMMITTED SUM means, for any Lender at any date of determination, the
amount stated beside each Lender's name on the most-recently amended
SCHEDULE 2.1 to the Agreement (which amount is subject to increase, reduction,
or cancellation in accordance with this Agreement).
COMMUNICATIONS means Dobson Communications Corporation, an Oklahoma
corporation, which owns all of the issued and outstanding shares of capital
stock of Borrower.
COMMUNICATIONS ACT means, collectively, The Federal Communications Act of
1934, as amended from time to time, and the rules and regulations in effect at
any time thereunder.
5
<PAGE>
COMMUNICATIONS BOND DEBT means the 11 3/4% Senior Notes due 2007 issued by
Communications pursuant to that certain Indenture dated as of February 28, 1997,
between Communications and United States Trust Company of New York, in an
aggregate original principal amount of $160,000,000, and the documents and
agreements evidencing and establishing such Debt, as the same may be amended
from time to time in accordance with the terms thereof and hereof.
COMPANIES means, at any date of determination thereof, Borrower and each of
its Subsidiaries; and COMPANY means, on any date of determination, Borrower or
any of its Subsidiaries.
COMPLIANCE CERTIFICATE means a certificate signed by a Responsible Officer,
substantially in the form of EXHIBIT E-1.
CONSEQUENTIAL LOSS means any loss or expense which any Lender may
reasonably incur in respect of a Eurodollar Rate Borrowing as a consequence of
any event described in SECTION 4.5.
CONSOLIDATED OPERATING CASH FLOW means, on any date of determination for
Communications and its Subsidiaries, the "COMMUNICATIONS OPERATING CASH FLOW" as
such term is defined on the Closing Date in that certain Third Amended and
Restated Revolving Credit Agreement dated as of March 25, 1998, among Dobson
Operating Company, as Borrower, CoreStates Bank, N.A., as Administrative Agent,
and the Lenders party thereto (the "DOC CREDIT AGREEMENT"), to the same extent
as if such term and related definitions incorporated therein were set forth
herein verbatim. If the DOC Credit Agreement shall cease to remain in effect
for any reason whatsoever during which any part of the Obligation remains
unpaid, the definition incorporated herein by reference shall nevertheless
continue in full force and effect herein.
CONSOLIDATED TOTAL DEBT means the Total Debt of Communications and its
Subsidiaries; PROVIDED, THAT Consolidated Total Debt (a) shall be reduced by
amounts on deposit in the Escrow Account to be used to pay any outstanding
principal under the Communications Bond Debt, if any, (b) shall include the
amount of all immediately available cash held by Communications and its
Restricted Subsidiaries in excess of $10,000,000, and (c) shall include the
principal amount of all Exchange Debentures, if any, issued in exchange for the
Preferred Stock.
CURRENT FINANCIALS means, at the time of any determination thereof, the
more recently delivered to Lenders of either (a) the Financial Statements for
the fiscal year ended December 31, 1996, and the nine-month period ended
September 30, 1997, calculated on a consolidated basis for the Companies; or
(b) the Financial Statements required to be delivered under SECTIONS 9.3(a) or
9.3(b), as the case may be, calculated on a consolidated basis for the
Companies.
DEBT means (without duplication), for any Person, the sum of the following:
(a) all liabilities, obligations, and indebtedness of such Person which in
accordance with GAAP should be classified upon such Person's balance sheet as
liabilities in respect of (i) money borrowed, including, without limitation, the
Principal Debt, (ii) obligations of such Person under Capital Leases, and
(iii) obligations of such Person issued or assumed as the deferred purchase
price of property, all conditional sale obligations, and obligations under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (b) all obligations of the type referred to in
CLAUSES (a)(i) through (a)(iii) preceding of other Persons for the payment of
which such Person is responsible or liable as obligor, guarantor, or otherwise;
(c) all obligations of the type referred to in CLAUSES (a)(i) through
CLAUSE (a)(iii) and CLAUSE (b) preceding of other Persons secured by any Lien
on any property or asset of such Person (whether or not such obligation is
assumed by such Person), the amount of such obligation being deemed to be the
lesser of the value of such property or assets or the amount of the obligation
so secured; (d) the face amount of
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all letters of credit and banker's acceptances issued for the account of such
Person, and without duplication, all drafts drawn and unpaid thereunder; and
(e) net payments under Financial Hedges.
DEBT ISSUANCE means any Debt of Borrower or any Company for borrowed money
issued or incurred after the Closing Date, other than Permitted Debt.
DEBTOR RELIEF LAWS means the BANKRUPTCY CODE OF THE UNITED STATES OF
AMERICA and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, fraudulent
transfer or conveyance, suspension of payments, or similar Laws from time to
time in effect affecting the Rights of creditors generally.
DEFAULT is defined in SECTION 10.
DEFAULT RATE means a per annum rate of interest equal from day to day to
the LESSER of (a) the sum of the Base Rate PLUS the Applicable Margin for Base
Rate Borrowings PLUS 2% AND (b) the Maximum Rate.
DETERMINING LENDERS means "DETERMINING LENDERS" as such term is defined in
the Intercreditor Agreement.
DISTRIBUTION for any Person means, with respect to any shares of any
capital stock or other equity securities issued by such Person, (a) the
retirement, redemption, purchase, or other acquisition for value of any such
securities, (b) the declaration or payment of any dividend on or with respect to
any such securities, and (c) any other payment by such Person with respect to
such securities.
DOCUMENTATION AGENT means Toronto Dominion (Texas), Inc. and its permitted
successors or assigns as "DOCUMENTATION AGENT" under this Agreement.
DOLLARS and the symbol $ means lawful money of the United States of
America.
ELIGIBLE ASSIGNEE means (a) a Lender; (b) an Affiliate of a Lender (so long
as such assignment is not made in conjunction with the sale of such Affiliate);
and (c) any other Person approved by Administrative Agent (which approval will
not be unreasonably withheld or delayed by Administrative Agent) and, unless a
Default or Potential Default has occurred and is continuing at the time any
assignment is effected in accordance with SECTION 13.13, Borrower, such approval
not to be unreasonably withheld or delayed by Borrower and such approval to be
deemed given by Borrower if no objection is received by the assigning Lender and
the Administrative Agent from Borrower within five Business Days after notice of
such proposed assignment has been provided by the assigning Lender to Borrower;
PROVIDED, HOWEVER, that neither Borrower nor any Affiliate of Borrower shall
qualify as an Eligible Assignee.
EMPLOYEE PLAN means an employee pension benefit plan covered by TITLE IV of
ERISA and established or maintained by Borrower or any ERISA Affiliate, but not
including any Multiemployer Plan.
ENVIRONMENTAL LAW means any applicable Law that relates to (a) the
condition or protection of air, groundwater, surface water, soil, or other
environmental media, (b) the environment, including natural resources or any
activity which affects the environment, (c) the regulation of any pollutants,
contaminants, wastes, substances, and Hazardous Substances, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 ET SEQ.) ("CERCLA"), the Clean Air Act (42
U.S.C. Section 7401 ET SEQ.), the Federal Water Pollution Control Act, as
amended by the
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Clean Water Act (33 U.S.C. Section 1251 ET SEQ.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. Section 136 ET SEQ.), the Emergency
Planning and Community Right to Know Act of 1986 (42 U.S.C. Section 11001 ET
SEQ.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 ET
SEQ.), the National Environmental Policy Act of 1969 (42 U.S.C. Section 4321
ET SEQ.), the Oil Pollution Act (33 U.S.C. Section 2701 ET SEQ.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the
Rivers and Harbors Act (33 U.S.C. Section 401 ET SEQ.), the Safe Drinking
Water Act (42 U.S.C. Section 201 and Section 300f ET SEQ.), 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 (42 U.S.C. Section
6901 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 2601 ET
SEQ.), and analogous state and local Laws, as any of the foregoing may have
been and may be amended or supplemented from time to time, and any analogous
future enacted or adopted Law, or (d) the Release or threatened Release of
Hazardous Substances.
EQUITY ISSUANCE means the issuance on and after the Closing Date by any
Company of any shares of any class of stock, warrants, or other equity
interests, other than present and future shares of stock, options, or warrants
issued to employees, directors, or consultants of the Companies, or stock issued
upon their exercise.
ERISA means the EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, as
amended, and the regulations and rulings thereunder.
ERISA AFFILIATE means any company or trade or business (whether or not
incorporated) which, for purposes of TITLE IV of ERISA, is a member of
Borrower's controlled group or which is under common control with Borrower
within the meaning of SECTION 414(b), (c), (m), or (o) of the Code.
ESCROW ACCOUNT means the account established pursuant to the Escrow
Agreement.
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 certain proceeds of the Communications Bond Debt are held in
escrow to secure the special repurchase and mandatory redemption requirements
(if applicable) of, and two years interest on, the Communications Bond Debt.
EURODOLLAR RATE means, for any Eurodollar Rate Borrowing for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Dow Jones Markets Page 3750 (or any successor
page) as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period for a term comparable to such Interest Period. If for
any reason such rate is not available, the term "EURODOLLAR RATE" shall mean,
for any Eurodollar Rate Borrowing for any Interest Period therefor, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest Period;
PROVIDED, HOWEVER, if more than one rate is specified on Reuters Screen LIBO
Page, the applicable rate shall be the arithmetic mean of all such rates
(rounded upwards, if necessary, to the nearest 1/100 of 1%).
EURODOLLAR RATE BORROWING means a Borrowing bearing interest at the SUM of
the Adjusted Eurodollar Rate PLUS the Applicable Margin for Eurodollar Rate
Borrowings.
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EXCHANGE DEBENTURES means any subordinated debentures issued in exchange
for all or any portion of the Preferred Stock, all as more particularly
described in that certain Offering Memorandum issued January 5, 1998, by
Communications.
EXECUTIVE MANAGEMENT TEAM means Everett Dobson, Bruce Knooihuizen, and
Edward Evans.
EXHIBIT means an exhibit to this Agreement unless otherwise specified.
FACILITY means the credit facility as described in and subject to the
limitations set forth in SECTION 2.1 hereof.
FCC means the Federal Communications Commission and any successor
regulatory body.
FEDERAL FUNDS RATE means, for any day, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100 of 1%) determined (which determination shall
be conclusive and binding, absent manifest error) by Administrative Agent to be
equal to the weighted average of the rates on overnight Federal funds
transactions with member banks of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day; PROVIDED THAT (a) if such day is
not a Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (b) if no such rate is so published on such next
succeeding Business Day, the Federal Funds Rate for such day shall be the
average rate charged to the Administrative Agent (in its individual capacity) on
such day on such transactions as determined by the Administrative Agent (which
determination shall be conclusive and binding, absent manifest error).
FINANCIAL HEDGE means a swap, collar, floor, cap, or other contract which
is intended to reduce or eliminate the risk of fluctuations in interest rates,
which Financial Hedge is entered into by any Company in accordance with
SECTION 9.27.
FINANCIAL STATEMENTS means balance sheets, statements of operations,
statements of shareholders' investments, and statements of cash flows prepared
in accordance with GAAP, which statements of operations and statements of cash
flows shall be in comparative form to the corresponding period of the preceding
fiscal year, and which balance sheets and statements of shareholders'
investments shall be in comparative form to the prior fiscal year-end figures,
and which statements shall contain information with respect to capitalized
marketing costs.
FIXED CHARGE COVERAGE RATIO means, at any date of determination with
respect to the most recently ended Rolling Period, the ratio of: (a) the
Companies' Operating Cash Flow to (b) the SUM of (i) all mandatory prepayments
and regularly-scheduled principal payments with respect to Total Debt of the
Companies required to be paid, (ii) the amount paid for Capital Expenditures for
the Companies, (iii) cash Interest Expense of the Companies, (iv) cash Taxes of
the Companies, to the extent allocable to them pursuant to the Tax Sharing
Agreement, and (v) distributions and dividends paid in cash by Borrower,
including, without limitation, any amounts paid to fund interest or dividends on
the Preferred Stock or the Exchange Debentures.
FREE CASH FLOW means, on any date of determination with respect to the
fiscal year then most recently ended, Operating Cash Flow, LESS the SUM of,
without duplication, (a) Capital Expenditures made during such fiscal year,
(b) required payments of principal and interest on Debt made during such fiscal
year, (c) the aggregate Taxes actually paid in cash during such fiscal year, and
(d) $2,500,000.
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GAAP means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board which are applicable from time to time.
GOVERNMENTAL AUTHORITY means any (a) local, state, municipal, or federal
judicial, executive, or legislative instrumentality, (b) private arbitration
board or panel, or (c) central bank.
GUARANTOR means any Person, including, but not limited to, any Subsidiary
of Borrower, who undertakes to be liable for all or any part of the Obligation
by execution of a Guaranty or otherwise.
GUARANTY means (a) a Guaranty in substantially the form and upon the terms
of EXHIBIT C, executed and delivered by any Person pursuant to the requirements
of the Loan Papers; and (b) any amendments, modifications, supplements,
restatements, ratifications, or reaffirmations of any Guaranty made in
accordance with the Loan Papers.
HAZARDOUS SUBSTANCE means (a) any substance that is designated, defined, or
classified as a hazardous waste, hazardous material, pollutant, contaminant, or
toxic or hazardous substance under any Environmental Law, including without
limitation, any hazardous substance within the meaning of SECTION 101(14) of
CERCLA, (b) petroleum, oil, gasoline, natural gas, fuel oil, motor oil, waste
oil, diesel fuel, jet fuel, and other petroleum hydrocarbons, (c) regulated
asbestos and asbestos-containing materials in any form, (d) polychlorinated
biphenyls, or (e) urea formaldehyde foam.
INTERCREDITOR AGREEMENT means that certain Intercreditor Agreement,
substantially in the form of EXHIBIT I, dated of even date herewith, executed by
Borrower, the Collateral Agent, Administrative Agent on behalf of the Lenders,
and the Revolver/Acquisition Administrative Agent on behalf of the
Revolver/Acquisition Lenders, as the same may be amended, modified,
supplemented, or restated.
INTEREST EXPENSE means, for any period of calculation thereof, for any
Person, the aggregate amount of all interest (including commitment fees) on all
Debt of such Person, whether paid in cash or accrued as a liability and payable
in cash during such period (including, without limitation, imputed interest on
Capital Lease obligations); the amortization of any original issue discount on
any Debt; the interest portion of any deferred payment obligation; all
commissions, discounts, and other fees and charges owed with respect to letters
of credit or bankers' acceptance financing; net costs associated with Financial
Hedges; the interest component of any Debt that is guaranteed or secured by such
Person), and all cash premiums or penalties for the repayment, redemption, or
repurchase of Debt.
INTEREST PERIOD is determined in accordance with SECTION 3.9.
LAWS means all applicable statutes, laws, treaties, ordinances, tariff
requirements, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, or interpretations of any Governmental Authority.
LENDERS means, on any date of determination, the financial institutions
named on SCHEDULE 2.1 (as the same may be amended from time to time by
Administrative Agent to reflect the assignments made in accordance with SECTION
13.13(c) of this Agreement), and subject to the terms and conditions of this
Agreement, and their respective successors and assigns.
LIEN means any lien, mortgage, security interest, pledge, assignment,
charge, title retention agreement, or encumbrance of any kind, and any other
Right of or arrangement with any creditor (other
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than under or relating to subordination or other intercreditor arrangements)
to have its claim satisfied out of any property or assets, or the proceeds
therefrom, prior to the general creditors of the owner thereof.
LITIGATION means any action by or before any Governmental Authority.
LOAN PAPERS means (a) this Agreement, the Notes, and the Collateral
Documents, (b) all agreements, documents, or instruments in favor of Agents or
Lenders ever delivered pursuant to this Agreement or otherwise delivered in
connection with all or any part of the Obligation, (c) any Financial Hedge
between any Company or Guarantor and any Lender or Affiliate of any Lender, and
(d) any and all future renewals, extensions, restatements, reaffirmations, or
amendments of, or supplements to, all or any part of the foregoing.
MANAGING AGENTS means, collectively, CoBank, ACB; Barclays Bank PLC; and
PNC Bank, National Association.
MATERIAL ADVERSE EVENT means any set of one or more circumstances or events
which, individually or collectively, could reasonably be expected to result in
any (a) material impairment of the ability of any Company or any Guarantor to
perform any of its payment or other material obligations under the Loan Papers
or the ability of Administrative Agent or any Lender to enforce any such
obligations or any of their respective Rights under the Loan Papers,
(b) material and adverse effect on the business, properties, condition
(financial or otherwise) or results of operations of any Company or any
Guarantor, either singly or in the aggregate, or (c) Default or Potential
Default.
MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for each Lender, the
maximum non-usurious amount and the maximum non-usurious rate of interest which,
under applicable Law, such Lender is permitted to contract for, charge, take,
reserve, or receive on the Obligation.
MULTIEMPLOYER PLAN means a multiemployer plan as defined in SECTIONS 3(37)
or 4001(a)(3) of ERISA or SECTION 414(f) of the Code to which any Company or any
ERISA Affiliate is making, or has made, or is accruing, or has accrued, an
obligation to make contributions.
NATIONSBANK means NationsBank of Texas, N.A., in its individual capacity
as a Lender, and its successors and assigns.
NET CASH PROCEEDS means (a) with respect to any Significant Sale, cash
(freely convertible into Dollars) received, on or after the date of consummation
of such Significant Sale, by any Company from such Significant Sale, after
(i) deduction of Assumed Taxes, (ii) payment of all usual and customary
brokerage commissions and all other reasonable fees and expenses related to such
Significant Sale (including, without limitation, reasonable attorneys' fees and
closing costs incurred in connection with such Significant Sale),
(iii) deduction of appropriate amounts to be provided by Borrower or any Company
as a reserve, in accordance with GAAP, against any liabilities retained by any
Company after such Significant Sale, which liabilities are associated with the
asset or assets being sold, including, without limitation, pension and other
post-employment benefit liabilities and liabilities related to environmental
matters or against any indemnification obligations associated with such
Significant Sale, and (iv) deduction for the amount of any Debt (other than the
Obligation) secured by the respective asset or assets being sold, which Debt is
required to be repaid as a result of such Significant Sale; (b) with respect to
any incurrence of Debt, cash (freely convertible in to Dollars) received, on or
after the date of incurrence of such Debt, by any Company from the incurrence of
such Debt after (i) payment of all reasonable attorneys' fees and usual and
customary underwriting commissions, closing costs, and other reasonable expenses
associated with
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such incurrence of Debt, (ii) deduction of all deposits, escrow amounts, or
other reserves required to be maintained by any Company in connection with
such Debt, and (iii) deductions for the amount of any other Debt (other than
the Obligation) which is required to be repaid concurrently with or otherwise
as a result of the incurrence of such Debt; and (c) with respect to any
Equity Issuance, cash (freely convertible into Dollars) (including any cash
received by way of deferred payment pursuant to a promissory note, or
otherwise, but only as and when received) received, on or after the date of
such Equity Issuance, by the Borrower from such Equity Issuance, net of usual
and customary transaction costs and expenses and Assumed Taxes.
NOTES means, at the time of any determination thereof, all outstanding and
unpaid Revolver/Term Notes.
NOTICE OF BORROWING is defined in SECTION 2.3(a).
NOTICE OF CONVERSION is defined in SECTION 3.10.
OBLIGATION means all present and future indebtedness, liabilities, and
obligations, and all renewals and extensions thereof, or any part thereof, now
or hereafter owed to Administrative Agent, any other Agent, any Lender, or any
Affiliate of any Lender by any Company or Guarantor arising from, by virtue of,
or pursuant to any Loan Paper, TOGETHER WITH all interest accruing thereon,
fees, costs, and expenses (including, without limitation, all attorneys' fees
and expenses incurred in the enforcement or collection thereof) payable under
the Loan Papers.
OPERATING CASH FLOW means, for any Person, as calculated at any date of
determination with respect to the most recently ended Rolling Period (unless
otherwise indicated), the SUM (without duplication and without giving effect
to any extraordinary losses or gains during such period) of (a) pre-tax
income or deficit during such period, PLUS (b) to the extent already deducted
in computing such pre-tax income, (i) Interest Expense during such period and
(ii) depreciation, amortization, and other non-cash expense items during such
period, LESS (c) interest and dividend income, LESS (d) reductions in
deferred taxes, LESS (e) other non-cash components of income. In determining
the Operating Cash Flow of the Companies, such amount shall be adjusted, as
required, with respect to Cellular Partnerships to take into account any
minority ownership when (and only when) intercompany Debt to Borrower from
such Cellular Partnership has been repaid in full; PROVIDED THAT, to the
extent that Borrower has extended financing to any Cellular Partnership or
any Cellular Partnership Obligor which is not 100% owned by Borrower and SO
LONG AS such financing has not been repaid in full, then 100% of the
Operating Cash Flow of such Cellular Partnership or such Cellular Partnership
Obligor for the applicable period of determination shall be included in
Operating Cash Flow. The provision for income taxes and reductions in
deferred taxes shall be adjusted in accordance with the Tax Sharing
Agreement. In determining Operating Cash Flow of the Companies, such amount
shall be calculated after giving effect to Acquisitions and divestitures of
Companies permitted by the Loan Papers during such period as if such
transactions had occurred on the first day of such period, regardless of
whether the effect is positive or negative. In the case of any Permitted
Acquisition during any period of calculation, Operating Cash Flow of the
Companies shall, for the purposes of the foregoing calculations, be adjusted
to give effect to such Permitted Acquisition, as if such Permitted
Acquisition occurred on the first day of such period, by increasing, if
positive, or decreasing, if negative, the Operating Cash Flow of the
Companies by the Operating Cash Flow of such newly-acquired business during
such period of calculation occurring prior to the date of such Permitted
Acquisition. In the case of any Company being sold, transferred, or
otherwise disposed of by any Company as permitted under the Loan Papers (a
"PERMITTED DISPOSITION") during any period of calculation, Operating Cash
Flow shall, for the purposes of the foregoing calculations, be adjusted to
give effect to such Permitted Disposition, as if such
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Permitted Disposition occurred on the first day of such period, by
decreasing, if positive, or increasing, if negative, the Operating Cash Flow
of the Companies by the Operating Cash Flow of such newly-sold Companies
during such period prior to the date of the Permitted Disposition.
PARTICIPANT is defined in SECTION 13.13(e).
PARTICIPATION CERTIFICATE is defined in SECTION 9.20(j).
PBGC means the Pension Benefit Guaranty Corporation, or any successor
thereof, established pursuant to ERISA.
PCS SYSTEMS means the wireless cellular communication systems offering
"PERSONAL COMMUNICATION SERVICES" authorized under PART 24 of the FCC Rules (47
C.F.R. Section 24.1, ET SEQ).
PERMITTED ACQUISITION means:
(a) The Acquisitions of Texas 16 RSA, California 4 RSA, and, at
Borrower's option, Santa Cruz MSA, SO LONG AS any such Acquisition from
Communications shall be made in compliance with the Communications Bond
Debt;
(b) Acquisitions by any Company of businesses which are engaged in
the domestic cellular industry, with respect to which each of the following
requirements shall have been satisfied:
(i) For so long as the Total Leverage Ratio (calculated after
giving pro forma effect to any proposed Acquisition) is greater than
8.50 to 1.00, the purchase price for such Acquisition must be less
than or equal to $75,000,000;
(ii) as of the closing of any Acquisition, the Acquisition has
been approved and recommended by the board of directors of the Person
to be acquired or from which such business is to be acquired;
(iii) not less than 30 Business Days prior to the closing of
any Acquisition, Borrower shall have delivered to Administrative Agent
a Permitted Acquisition Compliance Certificate, demonstrating pro
forma compliance with the terms and conditions of the Loan Papers,
after giving effect to the Acquisition, including (A) pro forma income
and balance sheet projections for the Companies (after giving effect
to the Acquisition), and (B) ten year cash flow projections for the
Acquisition demonstrating compliance with the Companies' applicable
financial covenants and debt amortization schedules;
(iv) prior to consummation of any Acquisition, Borrower shall
have satisfied the conditions precedent set forth in SECTION 7.2;
(v) as of the closing of any Acquisition, after giving effect to
such Acquisition, the acquiring party must be Solvent and the
Companies, on a consolidated basis, must be Solvent;
(vi) as of the closing of any Acquisition, no Default or
Potential Default shall exist or occur as a result of, and after
giving effect to, such Acquisition; and
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(vii) as of the closing of any Acquisition, (A) if such
Acquisition is structured as a merger, Borrower, (or if such merger is
with any Subsidiary of Borrower, then such Subsidiary) must be the
surviving entity after giving effect to such merger; and (B) if such
Acquisition is structured as a stock/equity acquisition, the acquiring
Company shall own not less than a 75% interest in the entity being
acquired; or
(c) any other Acquisition for which the prior written consent of
Required Lenders has been obtained.
PERMITTED ACQUISITION COMPLIANCE CERTIFICATE means a certificate signed by
a Responsible Officer of Borrower, substantially in the form of EXHIBIT E-2.
PERMITTED ACQUISITION LOAN CLOSING CERTIFICATE means a certificate signed
by a Responsible Officer of Borrower, substantially in the form of EXHIBIT E-3.
PERMITTED DEBT means Debt permitted under SECTION 9.12 as described in such
Section.
PERMITTED LIENS means Liens permitted under SECTION 9.13 as described in
such Section.
PERSON means any individual, entity, or Governmental Authority.
POTENTIAL DEFAULT means the occurrence of any event or existence of any
circumstance which, with the giving of notice or lapse of time or both, would
become a Default.
PREFERRED STOCK means the Senior Exchangeable Preferred Stock issued by
Communications which is mandatorily redeemable in 2008, together with additional
Preferred Stock issued in lieu of dividends on such Preferred Stock, all as more
particularly described in that certain Offering Memorandum issued January 5,
1998 by Communications.
PRIME RATE means the per annum rate of interest established from time to
time by NationsBank of Texas, N.A., as its prime rate, which rate may not be the
lowest rate of interest charged by NationsBank of Texas, N.A. to its customers.
PRINCIPAL DEBT means, on any date of determination, the aggregate unpaid
principal balance of all Borrowings under the Facility.
PRO FORMA DEBT SERVICE means, on any date of determination, calculated for
the Companies on a consolidated basis, the SUM of (a) Pro Forma Interest Expense
determined as of such date of determination, PLUS (b) principal payments
scheduled to be made on Total Debt for the twelve months following the date of
determination and with respect to the Revolver/Acquisition Principal Debt, the
difference between the outstanding Revolver/Acquisition Principal Debt on any
date of determination, and the amount to which the Total Commitment is to be
reduced within twelve months.
PRO FORMA INTEREST EXPENSE means, on any date of determination with respect
to the most recently ended Rolling Period (the "SUBJECT PERIOD"), calculated for
the Companies on a consolidated basis, the SUM of the results of the following
calculation made separately with respect to each Borrowing and each other loan
or other evidence of Debt of any Company (each a "SUBJECT LOAN") for the
purposes hereof):
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{[A + B] /2} x C
where:
A = The aggregate outstanding principal Debt under the Subject
Loan at the beginning of the Subject Period.
B = The aggregate outstanding principal Debt under the Subject
Loan, at the end of the Subject Period, taking into account
all scheduled principal payments and any required commitment
reductions within such Subject Period.
C = With respect to the Subject Loan, the applicable interest
rate thereon determined as the rate in effect on the date of
determination.
PRO RATA or PRO RATA PART means on any date of determination for any
Lender, (a) at any time prior to the termination of the Commitment, the
proportion that such Lender's Committed Sum bears to the Commitment, or (b) at
any time on or after the termination of the Commitment, the proportion that the
Principal Debt owed to such Lender bears to the Principal Debt.
PUC means any state or local regulatory agency or governmental authority
that exercises jurisdiction over the rates or services or the ownership,
construction, or operation of network facilities or telecommunications systems
or over Persons who own, construct, or operate network facilities or
telecommunications systems.
REGISTER is defined in SECTION 13.13(c).
REGULATION D means Regulation D of the Board of Governors of the Federal
Reserve System, as amended.
REGULATION U means Regulation U of the Board of Governors of the Federal
Reserve System, as amended.
RELEASE means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, disposal, deposit,
dispersal, migrating, or other movement into the air, ground, or surface water,
or soil.
REPORTABLE EVENT shall have the meaning specified in SECTION 4043 of ERISA
or the regulations issued thereunder in connection with an Employee Plan,
excluding events for which the notice requirement is waived under applicable
PBGC regulations other than those events described in SECTIONS 2615.11, 2615.15
and 2615.19 of such regulations, including each such provision as it may
subsequently be renumbered.
REPRESENTATIVES means representatives, officers, directors, employees,
attorneys, and agents.
REQUIRED LENDERS means (a) on any date of determination prior to
termination of the Commitment, those Lenders holding 51% or more of the
Commitment, or (b) on any date of determination occurring after the Commitment
has terminated, those Lenders holding 51% or more of the outstanding Principal
Debt.
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RESERVE REQUIREMENT means, at any time, the maximum rate at which reserves
(including, without limitation, any marginal, special, supplemental, or
emergency reserves) are required to be maintained under regulations issued from
time to time by the Board of Governors of the Federal Reserve System (or any
successor) by member banks of the Federal Reserve System against, in the case of
Eurodollar Rate Borrowings, "EUROCURRENCY LIABILITIES" (as such term is used in
Regulation D). Without limiting the effect of the foregoing, the Reserve
Requirement shall reflect any other reserves required to be maintained by such
member banks with respect to (a) any category of liabilities which includes
deposits by reference to which the Adjusted Eurodollar Rate is to be determined,
or (b) any category of extensions of credit or other assets which include
Eurodollar Rate Borrowings. The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Requirement.
RESPONSIBLE OFFICER means the chairman, president, chief executive officer,
chief financial officer, senior vice president, or treasurer of Borrower, or,
for all purposes under the Loan Papers, any other officer designated from time
to time by the Board of Directors of Borrower, which designated officer is
acceptable to Administrative Agent.
RESTRICTED PAYMENTS means: (a) redemptions, repurchases, dividends, and
distributions of any kind in respect of Borrower's or Communications' capital
stock (including without limitation any class of common or preferred shares);
(b) Distributions of any kind in respect of partnership interests of any Company
that is a Cellular Partnership or Cellular Partnership Obligor; and (c) payments
of principal and interest on, and any redemptions or repurchases of,
Subordinated Debt.
RESTRICTED SUBSIDIARY means, at any time of determination, all Subsidiaries
of Communications, OTHER THAN Unrestricted Subsidiaries.
REVOLVER/ACQUISITION ADMINISTRATIVE AGENT means NationsBank of Texas, N.A.,
in its capacity as "ADMINISTRATIVE AGENT" for the Revolver/Acquisition Lenders
pursuant to the Revolver/Acquisition Agreement and its permitted successors and
assigns.
REVOLVER/ACQUISITION AGENTS means the "AGENTS" as such term is defined in
the Revolver/Acquisition Agreement.
REVOLVER/ACQUISITION AGREEMENT means the Revolving Credit Agreement dated
of even date herewith among Borrower, the Revolver/Acquisition Lenders, and the
Revolver/Acquisition Administrative Agent (as the same may be amended, modified,
restated, and supplemented from time to time).
REVOLVER/ACQUISITION COMMITMENT means the "TOTAL COMMITMENT" as such term
is defined in the Revolver/Acquisition Agreement.
REVOLVER/ACQUISITION LENDERS means, on any date of determination, those
Lenders party to the Revolver/Acquisition Agreement.
REVOLVER/ACQUISITION LOAN PAPERS means the "LOAN PAPERS" as such term is
defined in the Revolver/Acquisition Agreement.
REVOLVER/ACQUISITION OBLIGATION means the "OBLIGATION" as such term is
defined in the Revolver/Acquisition Agreement.
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REVOLVER/ACQUISITION PRINCIPAL DEBT means the "PRINCIPAL DEBT" as such term
is defined in the Revolver/Acquisition Agreement.
REVOLVER COMMITMENT has the meaning given to such term in the
Revolver/Acquisition Facility.
REVOLVER FACILITY means the "REVOLVER FACILITY" as such term is defined and
extended pursuant to the Revolver/Acquisition Agreement.
REVOLVER PRINCIPAL DEBT means the "REVOLVER PRINCIPAL DEBT" as such term is
defined in the Revolver/Acquisition Agreement.
REVOLVER/TERM NOTE means a promissory note in substantially the form of
EXHIBIT A, and all renewals and extensions of all or any part thereof.
RIGHTS means rights, remedies, powers, privileges, and benefits.
ROLLING PERIOD means, on any date of determination, the most recent four
fiscal quarters ended on March 31, June 30, September 30, or December 31 (as the
case may be).
SCHEDULE means, unless specified otherwise, a schedule attached to this
Agreement, as the same may be supplemented and modified from time to time in
accordance with the terms of the Loan Papers.
SENIOR LEVERAGE RATIO means, at any date of determination thereof, the
ratio of (a) Total Debt outstanding to (b) Operating Cash Flow, all calculated
for the Companies on a consolidated basis.
SIGNIFICANT SALE means any sale, lease, transfer, or other disposition of
any property or assets (tangible or intangible) by any Company to any other
Person (other than any sale, lease, transfer, or other disposition contemplated
by SECTIONS 9.23(a) through (e)) with respect to which the Net Cash Proceeds
realized by the Companies for such asset disposition (or when aggregated with
the Net Cash Proceeds from all such other asset dispositions occurring in the
same calendar year) equals or exceeds $1,000,000.
SOLVENT means, as to a Person, that (a) the aggregate fair market value of
such Person's assets exceeds its liabilities (whether contingent, subordinated,
unmatured, unliquidated, or otherwise), (b) such Person has sufficient cash flow
to enable it to pay its Debts as they mature, and (c) such Person does not have
unreasonably small capital to conduct such Person's businesses.
SUBORDINATED DEBT means any Debt of any Company subordinated to the
Obligation, in form and substance satisfactory to Administrative Agent.
SUBSIDIARY of any Person means (a) any entity of which an aggregate of
more than 50% (in number of votes) of the stock is owned of record or
beneficially, directly or indirectly, by such Person, or (b) any partnership
(limited or general) of which such Person shall at any time be the general
partner or own fifty percent (50%) or more of the issued and outstanding
partnership interests.
SYNDICATION AGENT means, collectively, First Union National Bank and its
permitted successors or assigns as "SYNDICATION AGENT" under this Agreement.
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SYSTEM means individually, and SYSTEMS means collectively, the wireless
cellular communication systems and personal communication systems, now or
hereafter owned, operated, or managed by the Companies.
TAX SHARING AGREEMENT means that certain consolidated income tax payment
agreement dated February 28, 1997, entered into between Communications and its
Subsidiaries.
TAXES means, for any Person, taxes, assessments, or other governmental
charges or levies imposed upon such Person, its income, or any of its
properties, franchises, or assets.
TERM CONVERSION DATE means the date upon which the Principal Debt is
converted to a term loan in accordance with SECTION 2.5.
TERM CONVERSION REQUEST is defined in SECTION 2.5(a).
TERM LOAN MATURITY DATE is defined in SECTION 2.5.
TERM LOANS means loans made by the Lenders pursuant to SECTION 2.5.
TERMINATION DATE means the EARLIER of (a) March 24, 1999 (or such later
date to which the Commitment is extended in accordance with SECTION 2.3) and
(b) the effective date of any other termination or cancellation of Lenders'
commitments to lend under, and in accordance with, this Agreement.
TOTAL DEBT means (without duplication), as of any date of determination
with respect to any Person, 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
obligations of others guaranteed by such Person, and any amounts for which such
Person is contingently liable to provide, as equity or debt, advances to other
Persons; PROVIDED, HOWEVER, that in any calculation of Total Debt of Borrower,
any Subordinated Debt owed by Borrower to Communications shall be excluded from
the calculation of Total Debt for Borrower.
TOTAL LEVERAGE RATIO means, at any date of determination thereof, the ratio
of (a) Consolidated Total Debt to (b) Consolidated Operating Cash Flow.
TRIGGERING EVENT means the occurrence of any Default, other than a Default
resulting from the breach of any representation or warranty set forth in
SECTION 8; PROVIDED, HOWEVER, that any Default which results from Borrower's
failure to comply with the financial covenants in SECTION 9.30, and which
restricts dividends or distributions from Borrower to Communications, shall only
constitute a TRIGGERING EVENT to the extent of pro forma non-compliance with the
financial covenants on the terms as specified in SECTION 9.30 on the Closing
Date, notwithstanding any future amendments or modifications of such provisions.
TYPE means any type of Borrowing determined with respect to the interest
option applicable thereto.
UNRESTRICTED SUBSIDIARY means, with respect to Communications, at any time
of determination thereof, (a) Borrower and its Subsidiaries; (b) Dobson Wireline
Company and its Subsidiaries; (c) any Subsidiary designated from time to time by
the Board of Directors of Communications as an "UNRESTRICTED SUBSIDIARY"; and
(d) any Subsidiary of an Unrestricted Subsidiary; PROVIDED, THAT the Board of
Directors may make such designation of an "UNRESTRICTED SUBSIDIARY" only if (i)
such Unrestricted Subsidiary does
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<PAGE>
not own any capital stock of Communications, Borrower, or a Restricted
Subsidiary and does not hold a Lien on any assets of Communications, Borrower,
or any Restricted Subsidiary; (ii) any guaranties or credit support issued by
Communications or any Restricted Subsidiary with respect to obligations of the
Unrestricted Subsidiary shall be included in calculations of Consolidated
Total Debt, on and after the date such Subsidiary is designated as an
"UNRESTRICTED SUBSIDIARY"; (iii) any Debt owed by Communications or any
Restricted Subsidiary to the Unrestricted Subsidiary shall be included in the
calculation of Consolidated Total Debt, on and after the date such Subsidiary
is designated as an "UNRESTRICTED SUBSIDIARY"; and (iv) after giving pro forma
effect to such designation, no Default or Potential Default exists or arises
as a result thereof.
VOTING STOCK means securities (as such term is defined in SECTION 2(1) of
the Securities Act of 1933, as amended) of any class or classes, the holders of
which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the corporate directors (or Persons performing similar functions).
WHOLLY-OWNED when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (EXCEPT
shares required as directors' qualifying shares) shall be owned by Borrower or
one or more of its Wholly-owned Subsidiaries.
1.2 NUMBER AND GENDER OF WORDS; OTHER REFERENCES. Unless otherwise
specified in the Loan Papers, (a) where appropriate, the singular includes the
plural and VICE VERSA, and words of any gender include each other gender, (b)
heading and caption references may not be construed in interpreting provisions,
(c) monetary references are to currency of the United States of America, (d)
section, paragraph, annex, schedule, exhibit, and similar references are to the
particular Loan Paper in which they are used, (e) references to "TELECOPY,"
"FACSIMILE," "FAX," or similar terms are to facsimile or telecopy transmissions,
(f) references to "INCLUDING" mean including without limiting the generality of
any description preceding that word, (g) the rule of construction that
references to general items that follow references to specific items are limited
to the same type or character of those specific items is not applicable in the
Loan Papers, (h) references to any Person include that Person's heirs, personal
representatives, successors, trustees, receivers, and permitted assigns, (i)
references to any Law include every amendment or supplement to it, rule and
regulation adopted under it, and successor or replacement for it, and (j)
references to any Loan Paper or other document include every renewal and
extension of it, amendment and supplement to it, and replacement or substitution
for it.
1.3 ACCOUNTING PRINCIPLES. All accounting and financial terms used in the
Loan Papers and the compliance with each financial covenant therein shall be
determined in accordance with GAAP, and, all accounting principles shall be
applied on a consistent basis so that the accounting principles in a current
period are comparable in all material respects to those applied during the
preceding comparable period. If Borrower or any Lender 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
Lenders 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.
SECTION 2 BORROWING PROVISIONS.
2.1 COMMITMENTS. Subject to and in reliance upon the terms, conditions,
representations, and warranties in the Loan Papers, each Lender severally and
not jointly agrees to lend to Borrower such
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Lender's Pro Rata Part of one or more Borrowings not to exceed such Lender's
Committed Sum, which, may be repaid and reborrowed from time to time in
accordance with the terms and provisions of the Loan Papers; PROVIDED THAT,
(a) each such Borrowing must occur on a Business Day and no later than the
Business Day immediately preceding the Termination Date; (b) each such
Borrowing shall be in an amount not less than $5,000,000 or a greater integral
multiple of $1,000,000; and (c) on any date of determination, the Principal
Debt shall never exceed the Commitment.
2.2 TERMINATION OF COMMITMENTS.
(a) VOLUNTARY COMMITMENT REDUCTION. Without premium or penalty, and
upon giving not less than ten (10) Business Days prior written and
irrevocable notice to Administrative Agent, Borrower may terminate in whole
or in part the unused portion of the Commitment; PROVIDED THAT: (i) each
partial termination shall be in an amount of not less than $5,000,000 or a
greater integral multiple of $1,000,000; (ii) the amount of the Commitment
may not be reduced below the Principal Debt; and (iii) each reduction shall
be allocated Pro Rata among the Lenders in accordance with their respective
Pro Rata Parts. Promptly after receipt of such notice of termination or
reduction, Administrative Agent shall notify each Lender of the proposed
cancellation or reduction. Such termination or partial reduction of the
Commitment shall be effective on the Business Day specified in Borrower's
notice (which date must be at least ten Business Days after Borrower's
delivery of such notice). In the event that the Total Commitment is
reduced to zero at a time when there shall be no Principal Debt, this
Agreement shall be terminated to the extent specified in SECTION 13.15, and
all commitment fees and other fees then earned and unpaid hereunder and all
other amounts of the Obligation then due and owing shall be immediately due
and payable, without notice or demand by Administrative Agent or any
Lender.
(b) MANDATORY COMMITMENT REDUCTIONS/PREPAYMENTS. Until such time as
the Principal Debt has been repaid in full, the Commitment (or, on and
after the Term Conversion Date, the Principal Debt) and the
Revolver/Acquisition Commitment shall be permanently reduced or prepaid, as
the case may be, in the amounts and upon the occurrence of the following
events:
(i) Concurrently with any Debt Issuance by Borrower, the
Commitment (or, on and after the Term Conversion Date, the Principal
Debt) and the Revolver/Acquisition Commitment shall be permanently
reduced by an amount equal to 100% of the Net Cash Proceeds realized
by Borrower from such Debt Issuance; or
(ii) Concurrently with the consummation of any Significant Sale
by any Company (which Significant Sale must be otherwise permitted
under the Loan Papers or shall have been consented to by Required
Lenders), the Commitment (or, on and after the Term Conversion Date,
the Principal Debt) and the Revolver/Acquisition Commitment shall be
permanently reduced by an amount equal to 100% of the Net Cash
Proceeds realized by Borrower or any Company from such Significant
Sale.
On each reduction date, Borrower shall also make a mandatory prepayment of
the Principal Debt, if required pursuant to SECTIONS 3.2(c) AND 3.2(d),
TOGETHER WITH (x) all accrued and unpaid interest on the principal amount
so prepaid and (y) any Consequential Loss arising as a result thereof.
Each commitment reduction (or, on and after the Term Conversion date, each
mandatory prepayment) under this SECTION 2.2(b) shall be applied to the
Commitment (or, on and after the Term Conversion Date, the Principal Debt)
and the Revolver/Acquisition Commitment in the following order: (A) ratably
to the Commitment (or, on and after the Term Conversion Date, the
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Principal Debt) and the Revolver Commitment (for purposes of this CLAUSE
(A), "RATABLY," on any date of determination, shall mean the proportion
that either the Commitment [or, on and after the Term Conversion Date,
the Principal Debt] or the Revolver Commitment, as the case may be, bears
to the sum of the Commitment [or, on and after the Term Conversion Date,
the Principal Debt] and the Revolver Commitment); and (B) to the
Acquisition Commitment to be applied in accordance with the Revolver/
Acquisition Agreement. All commitment reductions for the Facility
hereunder, the Revolver Facility, and the Acquisition Facility shall be
applied to each Lender's commitment thereunder ratably for each such
facility and shall be applied to the regularly-scheduled commitment
reductions required under any such Facility in inverse order of maturity.
2.3 OPTIONAL RENEWAL OF FACILITY.
(a) OPTIONAL RENEWAL PROCEDURES. Borrower may request that the
Termination Date be extended for all or a portion of the Commitment to a
date which is no later than the 364th day after the then-current
Termination Date; PROVIDED THAT, (i) any such extension request shall be
made in writing (an "EXTENSION REQUEST") by Borrower and delivered to
Administrative Agent no more than 30 days prior to (but no later than
15 days prior to) the then-current Termination Date; (ii) no more than one
such Extension Request may be made by Borrower; and (iii) no Extension
Request may be made after the Term Conversion Date or which would have the
effect of extending the Termination Date to a date later than the last day
of the second 364-day period following the Closing Date. Promptly upon
receipt of an Extension Request, Administrative Agent shall notify Lenders
of such request.
(i) LENDERS' RESPONSE TO EXTENSION REQUEST. The Lenders may, at
their option, accept or reject such Extension Request by giving
written notice to Administrative Agent delivered no later than 10 days
prior to the then-effective Termination Date (the "RESPONSE DATE").
If any Lender shall fail to give such notice to Administrative Agent
by the Response Date, such Lender shall be deemed to have rejected the
requested extension. If the Extension Request is not consented to by
Lenders holding at least 66 2/3% of the Commitment by the Response
Date, the Extension Request will be rejected, and the Facility will
terminate on the then-current Termination Date. If the Lenders
holding at least 66 2/3% of the Commitment consent to the Extension
Request by the Response Date, the Termination Date for those Lenders
consenting to the extension (for purposes of this SECTION 2.3(a), the
"ACCEPTING LENDERS") shall be automatically extended to the date which
is the 364th day after the then-current Termination Date; PROVIDED
THAT, (A) the Termination Date may never be extended on any one date
for a period greater than 364 days; and (B) no more than one such
364-day extension of the Termination Date may be granted by Lenders.
(ii) ADDITIONAL PROCEDURES TO EXTEND THE REJECTED AMOUNT. If the
Extension Request is consented to by Lenders holding not less than
66 2/3% of the Commitment, but fewer than all Lenders (any Lender not
consenting to the Extension Request being referred to in this SECTION
2.3(a) as a "REJECTING LENDER"), then Administrative Agent shall,
within 48 hours of making such determination, notify the Accepting
Lenders and Borrower of the aggregate Committed Sums held by the
Rejecting Lenders (as used in this SECTION 2.3(a), the "REJECTED
AMOUNT"). Each Accepting Lender shall have the Right, but not the
obligation, to elect to increase its respective Committed Sum by an
amount not to exceed the Rejected Amount, which election shall be made
by notice from each Accepting Lender to the Administrative Agent given
not later than five days after the date notified by
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Administrative Agent, specifying the amount of such proposed
increase in such Accepting Lender's Committed Sum. If the aggregate
amount of the proposed increases in the Committed Sums of all
Accepting Lenders making such an election does not equal or exceed
the Rejected Amount, then Borrower shall have the right to add one
or more financial institutions (which are not Rejecting Lenders and
which are Eligible Assignees) as Lenders (as used in this SECTION
2.3(a), a "PURCHASING LENDER") to replace such Rejecting Lenders,
which Purchasing Lenders shall have aggregate Committed Sums not
greater than those of the Rejecting Lenders (less any increases in
the Committed Sums of Accepting Lenders, as described in the
following CLAUSE (iii)). The transfer of Committed Sums and
outstanding Borrowings from Rejecting Lenders to Purchasing Lenders
or Accepting Lenders shall take place on the effective date of, and
pursuant to the execution, delivery, and acceptance of, Assignment
and Acceptance Agreements in accordance with the procedures set
forth in SECTION 13.13.
(iii) ADJUSTMENTS TO, AND TERMINATIONS OF, COMMITMENTS.
(A) If less than 100% of the Commitment is extended
(whether by virtue of Borrower's failure to request an extension
of the full Commitment or by virtue of any Lender not consenting
to any Extension Request), then the Commitment shall
automatically be reduced on the Termination Date on which the
applicable approved extension is effective by an amount equal to
(as the case may be) (i) the portion of the Commitment not
requested to be extended by Borrower in its Extension Request or
(ii) the amount of the Rejected Amount (to the extent not
replaced by Accepting Lenders or Purchasing Lenders pursuant to
the procedures set forth in the foregoing SECTION 2.3(a)(ii)).
Each Rejecting Lender shall have no further obligation or
Committed Sum following the Termination Date on which the
applicable approved extension is effective, other than any
obligation accruing prior to such date as provided herein.
(B) If the aggregate amount of the proposed increases in
the Committed Sums of all Accepting Lenders making an election to
increase their respective Committed Sums is in excess of the
Rejected Amount, then (i) the Rejected Amount shall be allocated
pro rata among such Accepting Lenders based on the respective
amounts of the proposed increases to Committed Sums elected by
such Accepting Lenders; and (ii) the respective Committed Sums of
each such Accepting Lender shall be increased by the respective
amount allocated pursuant to CLAUSE (i) of this
SECTION 2.3(a)(iii)(b), such that, after giving effect to the
approved extensions and all such terminations and increases, no
reduction will occur in the aggregate amount of the Commitment.
(C) If the aggregate amount of the proposed increases to
the Committed Sums of all Accepting Lenders making such an
election to so increase their respective Committed Sums equals
the Rejected Amount, then the respective Committed Sums of such
Accepting Lenders shall be increased by the respective amounts of
their proposed increases, such that, after giving effect to the
approved extensions and all such terminations and increases, no
reduction will occur in the aggregate amount of the Commitment.
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(D) If the aggregate amount of the proposed increases to
the Committed Sums of all Accepting Lenders making such an
election is less than the Rejected Amount, then (i) the
respective Committed Sums of each such Accepting Lender shall be
increased by the respective amount of its proposed increase; and
(ii) the amount of the Commitment shall be reduced by the amount
of the Rejected Amount (to the extent not replaced by the
Accepting Lenders or the Purchasing Lenders, if any).
(b) NO OBLIGATION TO RENEW. Borrower acknowledges that (i) neither
Administrative Agent nor any Lender has made any representations to
Borrower regarding its intent to agree to any extensions set forth in this
Section, (ii) neither Administrative Agent nor any Lender shall have any
obligation to extend the Commitment (or any portion thereof), and (iii)
Administrative Agent's and Lenders' agreement to one extension shall not
commit Administrative Agent or the Lenders to any additional extensions.
2.4 BORROWING PROCEDURE. The following procedures apply to Borrowings:
(a) Each Borrowing shall be made on Borrower's notice (a "NOTICE OF
BORROWING," substantially in the form of EXHIBIT B-1) to Administrative
Agent requesting that Lenders fund a Borrowing on a certain date (the
"BORROWING DATE"), which notice (i) shall be irrevocable and binding on
Borrower, (ii) shall specify the Borrowing Date, amount, Type, and (for a
Borrowing comprised of Eurodollar Rate Borrowings) Interest Period, and
(iii) must be received by Administrative Agent no later than 10:00 a.m.
Dallas, Texas time on the third Business Day preceding the Borrowing Date
for any Eurodollar Rate Borrowing or on the Business Day immediately
preceding the Borrowing Date for any Base Rate Borrowing. Administrative
Agent shall timely notify each Lender with respect to each Notice of
Borrowing.
(b) Each Lender shall remit its Pro Rata Part for the relevant
Facility of each requested Borrowing to Administrative Agent's principal
office in Dallas, in funds which are or will be available for immediate use
by Administrative Agent by 1:00 p.m. Dallas time on the Borrowing Date
therefor. Subject to receipt of such funds, Administrative Agent shall
(unless to its actual knowledge any of the conditions precedent therefor
have not been satisfied by Borrower or waived by Required Lenders) make
such funds available to Borrower by causing such funds to be deposited to
Borrower's account as designated to Administrative Agent by Borrower.
Notwithstanding the foregoing, unless Administrative Agent shall have been
notified by a Lender prior to a Borrowing Date that such Lender does not
intend to make available to Administrative Agent such Lender's Pro Rata
Part of the applicable Borrowing, Administrative Agent may assume that such
Lender has made such proceeds available to Administrative Agent on such
date, as required herein, and Administrative Agent may (unless to its
actual knowledge any of the conditions precedent therefor have not been
satisfied by Borrower or waived by Required Lenders), in reliance upon such
assumption (but shall not be required to), make available to Borrower a
corresponding amount in accordance with the foregoing terms, but, if such
corresponding amount is not in fact made available to Administrative Agent
by such Lender on such Borrowing Date, Administrative Agent shall be
entitled to recover such corresponding amount on demand (i) from such
Lender, together with interest at the Federal Funds Rate during the period
commencing on the date such corresponding amount was made available to
Borrower and ending on (but excluding) the date Administrative Agent
recovers such corresponding amount from such Lender, or (ii) if such Lender
fails to pay such corresponding amount forthwith upon such demand, then
from Borrower, TOGETHER WITH interest at a rate per annum equal to the
applicable rate for such
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Borrowing during the period commencing on such Borrowing Date and ending
on (but excluding) the date Administrative Agent recovers such
corresponding amount from Borrower. No Lender shall be responsible for
the failure of any other Lender to make its Pro Rata Part of any
Borrowing.
2.5 CONVERSION OF FACILITY TO TERM LOANS. Borrower shall have the option
to convert the Principal Debt outstanding on the Termination Date to a Term Loan
maturing no LATER than June 30, 2006 (the "TERM LOAN MATURITY DATE"), subject to
and on the terms and conditions set forth below:
(a) No sooner than 30 days (and not later than 15 days) preceding the
Termination Date, Borrower shall deliver to Administrative Agent a Term
Conversion Request in substantially the form of EXHIBIT B-2, which, among
other things, shall (i) specify Borrower's election to make such conversion
to a Term Loan, and (ii) specify the Type of Borrowing or Borrowings to
which the Principal Debt shall be converted and the Interest Periods
therefor (if applicable) on the Term Conversion Date; and
(b) No Default or Potential Default shall exist on either the date
such Term Conversion Request is delivered or on the Term Conversion Date;
and no Default or Potential Default shall exist after giving effect to the
Term Loan conversion.
SECTION 3 TERMS OF PAYMENT.
3.1 LOAN ACCOUNTS, NOTES, AND PAYMENTS.
(a) The Principal Debt owed to each Lender shall be evidenced by the
Notes, one payable to each Lender in the maximum stated principal amount of
its Committed Sum as of the Closing Date.
(b) Each payment or prepayment on the Obligation is due and must be
paid at Administrative Agent's principal office in Dallas in funds which
are or will be available for immediate use by Administrative Agent by
12:00 noon Dallas, Texas time on the day due. Payments made after
12:00 noon, Dallas, Texas, time shall be deemed made on the Business Day
next following. Administrative Agent shall pay to each Lender any payment
or prepayment to which such Lender is entitled hereunder on the same day
Administrative Agent shall have received the same from Borrower; PROVIDED
such payment or prepayment is received by Administrative Agent prior to
12:00 noon Dallas, Texas time, and otherwise before 12:00 noon Dallas time
on the Business Day next following. If and to the extent Administrative
Agent shall not make such payments to Lenders when due as set forth in the
preceding sentence, such unpaid amounts shall accrue interest, payable by
Administrative Agent, at the Federal Funds Rate from the due date until
(but not including) the date on which Administrative Agent makes such
payments to Lenders.
3.2 INTEREST AND PRINCIPAL PAYMENTS.
(a) Interest on each Eurodollar Rate Borrowing shall be due and
payable as it accrues on the last day of its respective Interest Period and
on the Termination Date or the Term Loan Maturity Date, as applicable;
PROVIDED THAT, (i) with respect to Eurodollar Rate Borrowings having an
Interest Period in excess of three (3) months, 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
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Business Day of each March, June, September, and December thereafter and
on the expiration of each Interest Period. Interest on each Base Rate
Borrowing shall be due and payable as it accrues on each March 31, June
30, September 30, and December 31, and on the Termination Date or the
Term Loan Maturity Date, as applicable.
(b) In the event the Principal Debt is converted to a Term Loan, the
Principal Debt outstanding on the Term Conversion Date (the "CONVERTED
PRINCIPAL DEBT") shall be repaid in 25 quarterly installments, payable on
each of the "PAYMENT DATES" listed below in an amount equal to the PRODUCT
of the (i) "PAYMENT PERCENTAGE" listed below which corresponds with the
applicable Payment Date as specified below TIMES the Converted Principal
Debt:
<TABLE>
Payment Date Payment Percentage
------------ ------------------
<S> <C>
June 30, 2000 3.333%
September 30, 2000 3.333%
December 31, 2000 3.333%
March 31, 2001 3.750%
June 30, 2001 3.750%
September 30, 2001 3.750%
December 31, 2001 3.750%
March 31, 2002 3.750%
June 30, 2002 3.750%
September 30, 2002 3.750%
December 31, 2002 3.750%
March 31, 2003 4.375%
June 30, 2003 4.375%
September 30, 2003 4.375%
December 31, 2003 4.375%
March 31, 2004 4.375%
June 30, 2004 4.375%
September 30, 2004 4.375%
December 31, 2004 4.375%
March 31, 2005 3.750%
June 30, 2005 3.750%
September 30, 2005 3.750%
December 31, 2005 3.750%
March 31, 2006 5.000%
June 30, 2006 5.000%
</TABLE>
(c) On any date of determination if the Principal Debt exceeds the
Commitment, then Borrower shall make a mandatory prepayment of the
Principal Debt, in at least the amount of such excess, TOGETHER WITH (x)
all accrued and unpaid interest on the principal amount so prepaid and (y)
any Consequential Loss arising as a result thereof. All mandatory
prepayments hereunder shall be allocated Pro Rata among the Lenders
hereunder and shall be applied to the regularly-scheduled principal
installments under SECTION 3.2(b) in inverse order of maturity.
(d) On and after the Term Conversion Date, Borrower shall make
mandatory prepayments of the Principal Debt upon the occurrence of any
events described in SECTION 2.2(b)(i)
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and (ii), in the amounts specified as allocated between the Principal
Debt and the Revolver/Acquisition Commitment as specified in such SECTION
2.2(b). All mandatory prepayments made pursuant to SECTIONS 2.2(b)(i)
and (ii) or 3.2(e) shall be allocated Pro Rata among Lenders and shall be
applied to the regularly-scheduled principal installments under SECTION
3.2(b) in inverse order of maturity.
(e) After giving Administrative Agent advance written notice of the
intent to prepay, Borrower may voluntarily prepay all or any part of the
Principal Debt from time to time and at any time, in whole or in part,
without premium or penalty; PROVIDED THAT: (i) such notice must be received
by Administrative Agent by 12:00 noon Dallas, Texas time on (A) the third
Business Day preceding the date of prepayment of a Eurodollar Rate
Borrowing, and (B) the Business Day of a prepayment of a Base Rate
Borrowing; (ii) each such partial prepayment must be in a minimum amount of
at least $5,000,000 or a greater integral multiple of $1,000,000 thereof
(if a Eurodollar Rate Borrowing or a Base Rate Borrowing); (iii) all
accrued interest on any Eurodollar Rate Borrowing being prepaid must also
be paid in full, to the date of such prepayment; and (iv) Borrower shall
pay any related Consequential Loss within ten (10) days after demand
therefor. Each notice of prepayment shall specify the prepayment date, the
Facility hereunder being prepaid, and the Type of Borrowing(s) and
amount(s) of such Borrowing(s) to be prepaid and shall constitute a binding
obligation of Borrower to make a prepayment on the date stated therein.
3.3 INTEREST OPTIONS. Except where specifically otherwise provided,
Borrowings shall bear interest at a rate per annum equal to the LESSER OF (a) as
to the respective Type of Borrowing (as designated by Borrower in accordance
with this Agreement), the Base Rate plus the Applicable Margin for Base Rate
Borrowings or the Adjusted Eurodollar Rate plus the Applicable Margin for
Eurodollar Rate Borrowings, AND (b) the Maximum Rate. Each change in the Base
Rate or the Maximum Rate, subject to the terms of this Agreement, will become
effective, without notice to Borrower or any other Person, upon the effective
date of such change.
3.4 QUOTATION OF RATES. It is hereby acknowledged that a Responsible
Officer or other appropriately designated officer of Borrower may call
Administrative Agent on or before the date on which a Notice of Borrowing is to
be delivered by Borrower in order to receive an indication of the rates then in
effect, but such indicated rates shall neither be binding upon Administrative
Agent or Lenders nor affect the rate of interest which thereafter is actually in
effect when the Notice of Borrowing is given.
3.5 DEFAULT RATE. At the option of Required Lenders and to the extent
permitted by Law, all past-due Principal Debt and accrued interest thereon shall
bear interest from maturity (stated or by acceleration) at the Default Rate
until paid, regardless whether such payment is made before or after entry of a
judgment.
3.6 INTEREST RECAPTURE. If the designated rate applicable to any
Borrowing exceeds the Maximum Rate, the rate of interest on such Borrowing shall
be limited to the Maximum Rate, but any subsequent reductions in such designated
rate shall not reduce the rate of interest thereon below the Maximum Rate until
the total amount of interest accrued thereon equals the amount of interest which
would have accrued thereon if such designated rate had at all times been in
effect. In the event that at maturity (stated or by acceleration), or at final
payment of the Principal Debt, the total amount of interest paid or accrued is
less than the amount of interest which would have accrued if such designated
rates had at all times been in effect, then, at such time and to the extent
permitted by Law, Borrower shall pay an amount equal to the difference between
(a) the LESSER OF the amount of interest which would have accrued if such
designated rates had at all times been in effect AND the amount of interest
which would have accrued if the
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Maximum Rate had at all times been in effect, and (b) the amount of interest
actually paid or accrued on the Principal Debt.
3.7 INTEREST CALCULATIONS.
(a) All payments of interest shall be calculated on the basis of
actual number of days (including the first day but excluding the last day)
elapsed but computed as if each calendar year consisted of 360 days in the
case of a Eurodollar Rate Borrowing (unless such calculation would result
in the interest on the Borrowings exceeding the Maximum Rate, in which
event such interest shall be calculated on the basis of a year of 365 or
366 days, as the case may be), and 365 or 366 days, as the case may be, in
the case of a Base Rate Borrowing. All interest rate determinations and
calculations by Administrative Agent shall be conclusive and binding absent
manifest error.
(b) The provisions of this Agreement relating to the calculation of
the Base Rate and the Adjusted Eurodollar Rate are included only for the
purpose of determining the rate of interest or other amounts to be paid
hereunder that are based upon such rate.
3.8 MAXIMUM RATE. Regardless of any provision contained in any Loan
Paper, neither Administrative Agent nor any Lender shall ever be entitled to
contract for, charge, take, reserve, receive, or apply, as interest on the
Obligation, or any part thereof, any amount in excess of the Maximum Rate, and,
if Lenders ever do so, then such excess shall be deemed a partial prepayment of
principal and treated hereunder as such and any remaining excess shall be
refunded to Borrower. In determining if the interest paid or payable exceeds
the Maximum Rate, Borrower and Lenders shall, to the maximum extent permitted
under applicable Law, (a) treat all Borrowings as but a single extension of
credit (and Lenders and Borrower agree that such is the case and that provision
herein for multiple Borrowings is for convenience only), (b) characterize any
nonprincipal payment as an expense, fee, or premium rather than as interest,
(c) exclude voluntary prepayments and the effects thereof, and (d) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the Obligation; PROVIDED THAT, if the Obligation is paid
and performed in full prior to the end of the full contemplated term thereof,
and if the interest received for the actual period of existence thereof exceeds
the Maximum Amount, Lenders shall refund such excess, and, in such event,
Lenders shall not, to the extent permitted by Law, be subject to any penalties
provided by any Laws for contracting for, charging, taking, reserving, or
receiving interest in excess of the Maximum Amount.
3.9 INTEREST PERIODS. When Borrower requests any Eurodollar Rate
Borrowing, Borrower may elect the interest period (each an "INTEREST PERIOD")
applicable thereto, which shall be, at Borrower's option, one, two, three, or
six months (or other periods, if requested by Borrower and available from the
Lenders); PROVIDED, HOWEVER, that: (a) the initial Interest Period for a
Eurodollar Rate Borrowing shall commence on the date of such Borrowing
(including the date of any conversion thereto), and each Interest Period
occurring thereafter in respect of such Borrowing shall commence on the day on
which the next preceding Interest Period applicable thereto expires; (b) if any
Interest Period for a Eurodollar Rate Borrowing begins on a day for which there
is no numerically corresponding Business Day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the next Business Day
immediately following what otherwise would have been such numerically
corresponding day in the calendar month at the end of such Interest Period
(UNLESS such date would be in a different calendar month from what would have
been the month at the end of such Interest Period, or UNLESS there is no
numerically corresponding day in the calendar month at the end of the Interest
Period; whereupon, such Interest Period shall end on the last Business Day in
the calendar month at the end of such Interest Period); (c) no Interest
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Period may be chosen with respect to any portion of the Principal Debt which
would extend beyond the scheduled repayment date (including any dates on which
mandatory prepayments are required to be made) for such portion of the
Principal Debt; and (d) no more than an aggregate of six (6) Interest Periods
shall be in effect at one time.
3.10 CONVERSIONS. Borrower may (a) convert a Eurodollar Rate Borrowing on
the last day of an Interest Period to a Base Rate Borrowing, (b) convert a Base
Rate Borrowing at any time to a Eurodollar Rate Borrowing, and (c) elect a new
Interest Period (in the case of a Eurodollar Rate Borrowing), by giving notice
(a "NOTICE OF CONVERSION," substantially in the form of EXHIBIT B-3) of such
intent no later than 10:00 a.m. Dallas, Texas time on the third Business Day
prior to the date of conversion or the last day of the Interest Period, as the
case may be (in the case of a conversion to a Eurodollar Rate Borrowing or an
election of a new Interest Period), and no later than 10:00 a.m. Dallas, Texas
time one Business Day prior to the last day of the Interest Period (in the case
of a conversion to a Base Rate Borrowing); PROVIDED THAT, the principal amount
converted to, or continued as, a Eurodollar Rate Borrowing shall be in an amount
not less than $5,000,000 or a greater integral multiple of $1,000,000.
Administrative Agent shall timely notify each Lender with respect to each Notice
of Conversion. Absent Borrower's Notice of Conversion or election of a new
Interest Period, a Eurodollar Rate Borrowing shall be deemed converted to a Base
Rate Borrowing effective as of the expiration of the Interest Period applicable
thereto. No Eurodollar Rate Borrowing may be either made or continued as a
Eurodollar Rate Borrowing, and no Base Rate Borrowing may be converted to a
Eurodollar Rate Borrowing, if the interest rate for such Eurodollar Rate
Borrowing would exceed the Maximum Rate.
3.11 ORDER OF APPLICATION.
(a) Payments and prepayments of the Obligation shall be applied in
the order and manner specified in this Agreement; PROVIDED, HOWEVER, if no
order is otherwise specified and no Default or Potential Default has
occurred and is continuing, payments and prepayments of the Obligation
shall be applied first to fees, second to accrued interest then due and
payable on the Principal Debt, and then to the remaining Obligation in the
order and manner as Borrower may direct.
(b) If a Default or Potential Default has occurred and is continuing
(or if Borrower fails to give directions as permitted under SECTION
3.11(a)), any payment or prepayment (including proceeds from the exercise
of any Rights) shall be applied to the Obligation and the Revolver/
Acquisition Obligation in the following order: (i) to the ratable payment
of all fees, expenses, and indemnities for which Agents, Revolver/
Acquisition Agents, Lenders, or Revolver/Acquisition Lenders have not
been paid or reimbursed in accordance with the Loan Papers or the
Revolver/Acquisition Loan Papers (as used in this SECTION 3.11(b)(i), a
"RATABLE PAYMENT" for any Lender, any Revolver/Acquisition Lender, any
Revolver/Acquisition Agent, or any Agent shall be, on any date of
determination, that proportion which the portion of the total fees,
expenses, and indemnities owed to such Lender, such Revolver/Acquisition
Lender, such Revolver/Acquisition Agent, or such Agent bears to the total
aggregate fees and indemnities owed to all Lenders, Revolver/Acquisition
Lenders, Revolver/Acquisition Agents, or Agents on such date of
determination); (ii) to the ratable payment of accrued and unpaid
interest on the Principal Debt and the Revolver/Acquisition Principal
Debt (as used in this SECTION 3.11(b)(ii), "RATABLE PAYMENT" means, for
any Lender or Revolver/Acquisition Lender, on any date of determination,
that proportion which the accrued and unpaid interest on the Principal
Debt or the Revolver/Acquisition Principal Debt [as the case may be] owed
to such Lender or Revolver/Acquisition Lender bears to the total accrued
and unpaid interest under the Loan Papers
28
<PAGE>
and the Revolver/Acquisition Loan Papers owed to all Lenders and the
Revolver/Acquisition Lenders); (iii) to the ratable payment of any
reimbursement obligation with respect to any letter of credit issued
pursuant to the Revolver/Acquisition Facility which is due and payable
and which remains unfunded by any Borrowing under the Revolver/
Acquisition Facility; PROVIDED THAT, such payments shall be allocated
ratably among NationsBank and the Revolver/Acquisition Lenders which have
funded their participation in such letter of credit; (iv) to the ratable
payment of the Principal Debt and the Revolver Principal Debt (as used in
this SECTION 3.11(b)(iv), "RATABLE PAYMENT" means for any Lender or any
Revolver/Acquisition Lender, on any date of determination, that
proportion which the Principal Debt or the Revolver Principal Debt
[as the case may be] owed to such Lender or Revolver/Acquisition Lender
bears to the sum of the Principal Debt and the Revolver Principal Debt
owed to all Lenders and all Revolver/Acquisition Lenders; (v) to the
ratable payment of the Acquisition Principal Debt to be applied in the
order and manner specified in the Revolver/Acquisition Agreement; (vi) to
the Pro Rata payment of the remaining Principal Debt and Revolver/
Acquisition Principal Debt in such order as Determining Lenders may elect
(PROVIDED THAT, Determining Lenders will apply such proceeds in an order
that will minimize any Consequential Loss); (vii) as a deposit with
Revolver/Acquisition Administrative Agent, for the benefit of
Revolver/Acquisition Lenders, as security for, and to provide for the
payment of, any reimbursement obligations, if any, thereafter arising
with respect to any issued and outstanding letters of credit issued
pursuant to the Revolver/Acquisition Facility; and (viii) to the payment
of the remaining Obligation and the Revolver/Acquisition Obligation in
the order and manner Determining Lenders deem appropriate.
Subject to the provisions of SECTION 12 and provided that neither Administrative
Agent nor Collateral Agent shall in any event be bound to inquire into or to
determine the validity, scope, or priority of any interest or entitlement of any
Lender or Revolver/Acquisition Lender and may suspend all payments or seek
appropriate relief (including, without limitation, instructions from Determining
Lenders or an action in the nature of interpleader) in the event of any doubt or
dispute as to any apportionment or distribution contemplated hereby,
Administrative Agent or Collateral Agent, as the case may be, shall: (x)
promptly distribute such amounts to each Lender in accordance with the Agreement
and the related Loan Papers, and (y) promptly distribute all payments allocable
to Revolver/Acquisition Lenders to the Revolver/Acquisition Administrative Agent
for distribution in accordance with the Revolver/Acquisition Agreement and the
related Revolver/Acquisition Loan Papers.
3.12 SHARING OF PAYMENTS, ETC. If any Lender shall obtain any payment
(whether voluntary, involuntary, or otherwise, including, without limitation, as
a result of exercising its Rights under SECTION 3.13) which is in excess of its
ratable share of any such payment, such Lender shall purchase from the other
Lenders and Revolver/Acquisition Lenders such participations as shall be
necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; PROVIDED, HOWEVER, that if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery.
Borrower agrees that any Lender so purchasing a participation from another
Lender or Revolver/Acquisition Lender pursuant to this Section and the
Intercreditor Agreement may, to the fullest extent permitted by Law, exercise
all of its Rights of payment (including the Right of offset) with respect to
such participation as fully as if such Lender or Revolver/Acquisition Lender
were the direct creditor of Borrower in the amount of such participation.
3.13 OFFSET. Upon the occurrence and during the continuance of a Default,
each Lender shall be entitled to exercise (for the benefit of all Lenders and
Revolver/Acquisition Lenders in accordance with SECTION 3.12 and the
Intercreditor Agreement) the Rights of offset and/or banker's Lien against each
and
29
<PAGE>
every account and other property, or any interest therein, which Borrower
may now or hereafter have with, or which is now or hereafter in the possession
of, such Lender to the extent of the full amount of the Obligation and the
Revolver/Acquisition Obligation.
3.14 BOOKING BORROWINGS. To the extent permitted by Law, any Lender may
make, carry, or transfer its Borrowings at, to, or for the account of any of its
branch offices or the office of any of its Affiliates; PROVIDED THAT, no
Affiliate shall be entitled to receive any greater payment under SECTION 4 than
the transferor Lender would have been entitled to receive with respect to such
Borrowings.
SECTION 4 CHANGE IN CIRCUMSTANCES.
4.1 INCREASED COST AND REDUCED RETURN.
(a) If, after the date hereof, the adoption of any applicable, or any
change in the interpretation or administration thereof by any Governmental
Authority, or compliance by any Lender (or its Applicable Lending Office)
with any request or directive (whether or not having the force of law) of
any such Governmental Authority:
(i) shall subject such Lender (or its Applicable Lending
Office) to any Tax or other charge with respect to any Eurodollar
Rate Borrowing, its Notes, or its obligation to loan Eurodollar Rate
Borrowings, or change the basis of taxation of any amounts payable to
such Lender (or its Applicable Lending Office) under this Agreement or
its Notes in respect of any Eurodollar Rate Borrowings (other than
taxes imposed on the overall net income of such Lender by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other than the
Reserve Requirement utilized in the determination of the Adjusted
Eurodollar Rate) relating to any extensions of credit or other assets
of, or any deposits with or other liabilities or commitments of, such
Lender (or its Applicable Lending Office), including the commitment of
such Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable Lending
Office) or the London interbank market any other condition affecting
this Agreement or its Notes or any of such extensions of credit or
liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such
Lender (or its Applicable Lending Office) of making, converting into,
continuing, or maintaining any Eurodollar Rate Borrowings or to reduce any
sum received or receivable by such Lender (or its Applicable Lending
Office) under this Agreement or its Notes with respect to any Eurodollar
Rate Borrowing, then Borrower shall pay to such Lender on demand such
amount or amounts as will compensate such Lender for such increased cost or
reduction. If any Lender requests compensation by Borrower under this
SECTION 4.1(a), Borrower may, by notice to such Lender (with a copy to
Administrative Agent), suspend the obligation of such Lender to loan or
continue Borrowings of the Type with respect to which such compensation is
requested, or to convert Borrowings of any other Type into Borrowings of
such Type, until the event or condition giving rise to such request ceases
to be in effect (in which case the provisions of SECTION 4.4 shall be
applicable); PROVIDED, THAT such suspension shall not affect the right of
such Lender to receive the compensation so requested.
30
<PAGE>
(b) If, after the date hereof, any Lender shall have determined that
the adoption of any applicable Law regarding capital adequacy or any change
therein or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or
not having the force of law) of any such Governmental Authority has or
would have the effect of reducing the rate of return on the capital of such
Lender or any corporation controlling such Lender as a consequence of such
Lender's obligations hereunder to a level below that which such Lender or
such corporation could have achieved but for such adoption, change,
request, or directive (taking into consideration its policies with respect
to capital adequacy), then from time to time upon demand Borrower shall pay
to such Lender such additional amount or amounts as will compensate such
Lender for such reduction.
(c) Each Lender shall promptly notify Borrower and Administrative
Agent of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Lender to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Lender, be otherwise
disadvantageous to it. Any Lender claiming compensation under this Section
shall furnish to Borrower and Administrative Agent a statement setting
forth the additional amount or amounts to be paid to it hereunder which
shall be conclusive in the absence of manifest error. In determining such
amount, such Lender may use any reasonable averaging and attribution
methods.
4.2 LIMITATION ON TYPES OF LOANS. If on or prior to the first day of any
Interest Period for any Eurodollar Rate Borrowing:
(a) Administrative Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant market,
adequate and reasonable means do not exist for ascertaining the Eurodollar
Rate for such Interest Period; or
(b) Required Lenders determine (which determination shall be
conclusive) and notify Administrative Agent that the Adjusted Eurodollar
Rate will not adequately and fairly reflect the cost to the Lenders of
funding Eurodollar Rate Borrowings for such Interest Period;
then Administrative Agent shall give Borrower prompt notice thereof specifying
the relevant amounts or periods, and so long as such condition remains in
effect, the Lenders shall be under no obligation to fund additional Eurodollar
Rate Borrowings, continue Eurodollar Rate Borrowings, or to convert Base Rate
Borrowings into Eurodollar Rate Borrowings, and Borrower shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Eurodollar
Rate Borrowings, either prepay such Borrowings or convert such Borrowings into
Base Rate Borrowings in accordance with the terms of this Agreement.
4.3 ILLEGALITY. Notwithstanding any other provision of this Agreement, in
the event that it becomes unlawful for any Lender or its Applicable Lending
Office to make, maintain, or fund Eurodollar Rate Borrowings hereunder, then
such Lender shall promptly notify Borrower thereof and such Lender's obligation
to make or continue Eurodollar Rate Borrowings and to convert other Base Rate
Borrowings into Eurodollar Rate Borrowings shall be suspended until such time as
such Lender may again make, maintain, and fund Eurodollar Rate Borrowings (in
which case the provisions of SECTION 4.4 shall be applicable).
4.4 TREATMENT OF AFFECTED LOANS. If the obligation of any Lender to fund
Eurodollar Rate Borrowings or to continue, or to convert Base Rate Borrowings
into Eurodollar Rate Borrowings, shall be
31
<PAGE>
suspended pursuant to SECTIONS 4.1, 4.2, or 4.3 hereof, such Lender's
Eurodollar Rate Borrowings shall be automatically converted into Base Rate
Borrowings on the last day(s) of the then current Interest Period(s) for
Eurodollar Rate Borrowings (or, in the case of a conversion required by
SECTION 4.3 hereof, on such earlier date as such Lender may specify to
Borrower with a copy to Administrative Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
SECTIONS 4.1, 4.2, or 4.3 hereof that gave rise to such conversion no longer
exist:
(a) to the extent that such Lender's Eurodollar Rate Borrowings have
been so converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Eurodollar Rate Borrowings shall be
applied instead to its Base Rate Borrowings; and
(b) all Borrowings that would otherwise be made or continued by such
Lender as Eurodollar Rate Borrowings shall be made or continued instead as
Base Rate Borrowings, and all Borrowings of such Lender that would
otherwise be converted into Eurodollar Rate Borrowings shall be converted
instead into (or shall remain as) Base Rate Borrowings.
If such Lender gives notice to Borrower (with a copy to Administrative Agent)
that the circumstances specified in SECTIONS 4.1, 4.2, or 4.3 hereof that gave
rise to the conversion of such Lender's Eurodollar Rate Borrowings pursuant to
this SECTION 4.4 no longer exist (which such Lender agrees to do promptly upon
such circumstances ceasing to exist) at a time when Eurodollar Rate Borrowings
made by other Lenders are outstanding, such Lender's Base Rate Borrowings shall
be automatically converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Eurodollar Rate Borrowings, to the extent
necessary so that, after giving effect thereto, all Eurodollar Rate Borrowings
held by the Lenders and by such Lender are held pro rata (as to principal
amounts, Types, and Interest Periods) in accordance with their respective
Commitments.
4.5 COMPENSATION. Upon the request of any Lender, Borrower shall pay to
such Lender such amount or amounts as shall be sufficient (in the reasonable
opinion of such Lender) to compensate it for any loss, cost, or expense
(including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or conversion of a Eurodollar Rate
Borrowing for any reason (including, without limitation, the acceleration
of the loan pursuant to SECTION 11.1) on a date other than the last day of
the Interest Period for such Borrowing; or
(b) any failure by Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in SECTION 7.3
to be satisfied) to borrow, convert, continue, or prepay a Eurodollar Rate
Borrowing on the date for such borrowing, conversion, continuation, or
prepayment specified in the relevant notice of borrowing, prepayment,
continuation, or conversion under this Agreement.
4.6 TAXES.
(a) Any and all payments by Borrower to or for the account of any
Lender or Administrative Agent hereunder or under any other Loan Paper
shall be made free and clear of and without deduction for any and all
present or future Taxes, EXCLUDING, in the case of each Lender and
Administrative Agent, Taxes imposed on its income and franchise Taxes
imposed on it by the jurisdiction under the laws of which such Lender (or
its Applicable Lending Office) or Administrative Agent (as the case may be)
is organized, or any political subdivision thereof. If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
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<PAGE>
under this Agreement or any other Loan Paper to any Lender or
Administrative Agent, (i) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions
applicable to additional sums payable under this SECTION 4.6) such Lender
or Administrative Agent receives an amount equal to the sum it would have
received had no such deductions been made, (ii) Borrower shall make such
deductions, (iii) Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law, and (iv) Borrower shall furnish to Administrative Agent, at
its address listed in SCHEDULE 2.1, the original or a certified copy of a
receipt evidencing payment thereof.
(b) In addition, Borrower agrees to pay any and all present or future
stamp or documentary taxes and any other excise or property taxes or
charges or similar levies which arise from any payment made under this
Agreement or any other Loan Paper or from the execution or delivery of, or
otherwise with respect to, this Agreement or any other Loan Paper
(hereinafter referred to as "OTHER TAXES").
(c) Borrower agrees to indemnify each Lender and Administrative Agent
for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or other Taxes imposed or asserted by any
jurisdiction on amounts payable under this SECTION 4.6) paid by such Lender
or Administrative Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with respect
thereto.
(d) Each Lender organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of
this Agreement in the case of each Lender listed on the signature pages
hereof and on or prior to the date on which it becomes a Lender in the case
of each other Lender, and from time to time thereafter if requested in
writing by Borrower or Administrative Agent (but only so long as such
Lender remains lawfully able to do so), shall provide Borrower and
Administrative Agent with (i) INTERNAL REVENUE SERVICE FORM 1001 or 4224,
as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an
income tax treaty to which the United States is a party which reduces the
rate of withholding tax on payments of interest or certifying that the
income receivable pursuant to this Agreement is effectively connected with
the conduct of a trade or business in the United States, (ii) INTERNAL
REVENUE SERVICE FORM W-8 or W-9, as appropriate, or any successor form
prescribed by the Internal Revenue Service, and (iii) any other form or
certificate required by any taxing authority (including any certificate
required by SECTIONS 871(h) and 881(c) of the Internal Revenue Code),
certifying that such Lender is entitled to an exemption from or a reduced
rate of tax on payments pursuant to this Agreement or any of the other Loan
Papers.
(e) For any period with respect to which a Lender has failed to
provide Borrower and Administrative Agent with the appropriate form
pursuant to SECTION 4.6(d) (unless such failure is due to a change in Law
occurring subsequent to the date on which a form originally was required to
be provided), such Lender shall not be entitled to indemnification under
SECTION 4.6(a) or 4.6(b) with respect to Taxes imposed by the United
States; PROVIDED, HOWEVER, that should a Lender, which is otherwise exempt
from or subject to a reduced rate of withholding tax, become subject to
Taxes because of its failure to deliver a form required hereunder, Borrower
shall take such steps as such Lender shall reasonably request to assist
such Lender to recover such Taxes.
(f) If Borrower is required to pay additional amounts to or for the
account of any Lender pursuant to this SECTION 4.6, then such Lender will
agree to use reasonable efforts to
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change the jurisdiction of its Applicable Lending Office so as to eliminate
or reduce any such additional payment which may thereafter accrue if such
change, in the judgment of such Lender, is not otherwise disadvantageous
to such Lender.
(g) Within thirty (30) days after the date of any payment of Taxes,
Borrower shall furnish to Administrative Agent the original or a certified
copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained in
this SECTION 4.6 shall survive the termination of the Total Commitment and
the payment in full of the Notes.
SECTION 5 FEES.
5.1 TREATMENT OF FEES. Except as otherwise provided by Law, the fees
described in this SECTION 5: (a) do not constitute compensation for the use,
detention, or forbearance of money, (b) are in addition to, and not in lieu of,
interest and expenses otherwise described in this Agreement, (c) shall be
payable in accordance with SECTION 3.1, (d) shall be non-refundable, (e) shall,
to the fullest extent permitted by Law, bear interest, if not paid when due, at
the Default Rate, and (f) shall be calculated on the basis of actual number of
days (including the first day but excluding the last day) elapsed, but computed
as if each calendar year consisted of 360 days, unless such computation would
result in interest being computed in excess of the Maximum Rate in which event
such computation shall be made on the basis of a year of 365 or 366 days, as the
case may be.
5.2 FEES OF ADMINISTRATIVE AGENT AND ARRANGER. Borrower shall pay to
(a) Administrative Agent and Arranger, as the case may be, solely for their
respective accounts, the fees described in that certain separate letter
agreement dated as of January 7, 1998, between Borrower, Administrative Agent,
and Arranger, and (b) each Lender of all the fees specified in the letter dated
March 24, 1998, addressed to such Lender from Administrative Agent on behalf of
Borrower, which payments shall be made on the dates specified, and in amounts
calculated in accordance with, such letter agreement.
5.3 COMMITMENT FEES. Following the Closing Date, Borrower shall pay to
Administrative Agent, for the ratable account of Lenders, a commitment, payable
in installments in arrears, on each March 31, June 30, September 30, and
December 31 and on the earlier to occur of the Termination Date and the Term
Conversion Date, commencing March 31, 1998. Each installment shall be, in an
amount equal to the Applicable Margin for Commitment Fees MULTIPLIED BY the
amount by which (a) the average daily Commitment exceeds (b) the average daily
Principal Debt, in each case during the period from and including the last
payment date to and excluding the payment date for such installment; PROVIDED
THAT, each such installment shall be calculated in accordance with
SECTION 5.1(f).
SECTION 6. SECURITY; GUARANTIES.
6.1 COLLATERAL. To secure full and complete payment and performance of
the Obligation and the Revolver/Acquisition Obligation, the Companies and each
Guarantor hereby jointly and severally grant and convey to, and create in
favor of Collateral Agent for the ratable benefit of Lenders and the Revolver/
Acquisition Lenders, first priority Liens in, to, and on the following items
and types of property (collectively, herein called the "COLLATERAL"), all as
more particularly described in the Loan Papers (PROVIDED THAT, no Agent or any
Lender hereby assumes or is made the transferee of any obligations of any
Company or any Guarantor regarding any of the Collateral):
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(a) All present and future accounts, contract Rights, general
intangibles, investment property, chattel paper, documents, instruments,
inventory, equipment, fixtures, other goods, minerals, money, and deposit
accounts, wherever located, now owned or hereafter acquired by any Company
or any Guarantor and any and all present and future Tax refunds of any kind
whatsoever to which any Company or any Guarantor is now or shall hereafter
become entitled.
(b) All present and future issued and outstanding shares of capital
stock or other equity or investment securities now owned or hereafter
acquired by any Company or any Guarantor, including, without limitation,
all capital stock of the Subsidiaries of any Company or any Guarantor,
together with all distributions thereon and any securities issued in
substitution or replacement thereof.
(c) All Rights, titles, and interests of any Company in and to all
promissory notes and other instruments payable to the Companies, now or
hereafter existing, including, without limitation, any Cellular Partnership
Promissory Notes or other inter-company notes, and all Rights in, to, and
under all other loan and collateral documents relating to such instruments.
(d) All present and future Rights, titles, interests, and Liens (but
none of the obligations) now owned or hereafter acquired by any Company or
any Guarantor in any partnership or joint venture, including, without
limitation, the Cellular Partnerships.
(e) All present and future Rights, titles, interests, and Liens (but
none of the obligations) now owned or hereafter acquired by any Company or
any Guarantor, as lessee or landlord, in and to each lease covering real
property or any interest therein, and equipment or other personal property
or any interest therein (each such lease herein called an "ASSIGNED
LEASE").
(f) Substantially all of the real estate now owned or hereafter
acquired by any Company or any Guarantor, TOGETHER WITH all improvements
thereon and fixtures attached thereto.
(g) The balance of every deposit account of any Company or any
Guarantor and any other claim of any Company or any Guarantor against any
depository, now or hereafter existing, whether liquidated or unliquidated,
including, without limitation, certificates of deposit, and other deposit
instruments.
(h) All present and future automobiles, trucks, truck tractors,
trailers, semi-trailers, other motor vehicles or rolling stock now owned or
hereafter acquired by any Company or any Guarantor (collectively, the
"VEHICLES").
(i) All present and future Rights, awards, and judgments to which any
Company or Guarantor is entitled under any Litigation (whether arising in
equity, contract, or tort) now existing or hereafter arising.
(j) All present and future Rights (including, without limitation, the
Right to sue for past, present, or future infringements), titles, and
interests of any Company or any Guarantor in and to all trademark
applications, trademarks, corporate names, company names, tradenames,
business names, fictitious business names, tradestyles, service marks,
logos, other source of business identifiers, copyrights, designs, Rights or
licenses to use any trademarks, and all
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registrations and recordings thereof (collectively, the "TRADEMARKS"), and
the goodwill of each business to which each Trademark relates.
(k) All present and future Rights (including, without limitation, the
Right to sue for past, present, and future infringements), titles, and
interests of any Company or any Guarantor in and to all patents, patent
applications, utility models, industrial models, designs, and any other
forms of industrial intellectual property, including all grants,
applications, reissues, continuations, and divisions with respect thereto
and any Rights to use, manufacture, or sell any patent.
(l) All Authorizations, licenses, and permits issued by the FCC or
any PUC to any Company or any Guarantor, to the extent permitted by
applicable Law.
(m) All proceeds of any sale or other disposition of any
Authorization, license, or permit issued by the FCC or any PUC to any
Company or any Guarantor, whether or not any such license or permit may
lawfully be included as Collateral and whether or not the grant of a
security interest in any such Authorization, license, or permit is
otherwise prohibited.
(n) All present and future increases, profits, combinations,
reclassifications, improvements, and products of, accessions, attachments,
and other additions to, tools, parts, and equipment used in connection
with, and substitutes and replacements for, all or part of the Collateral
heretofore described.
(o) All present and future accounts, contract Rights, general
intangibles, chattel paper, documents, instruments, cash and noncash
proceeds, and other Rights arising from or by virtue of, or from the
voluntary or involuntary sale or other disposition of, or collections with
respect to, or insurance proceeds payable with respect to, or proceeds
payable by virtue of warranty or other claims against the manufacturer of,
or claims against any other Person with respect to, all or any part of the
Collateral heretofore described in this clause or otherwise.
(p) All present and future security for the payment to any Company or
any Guarantor of any of the Collateral heretofore described and goods which
gave or will give rise to any of such Collateral or are evidenced,
identified, or represented therein or thereby.
6.2 GUARANTIES. As an inducement to Agents and Lenders to enter into this
Agreement, Borrower shall cause each other Company and each Cellular Partnership
Obligor to execute and deliver to Administrative Agent a Guaranty substantially
in the form and upon the terms of EXHIBIT C, providing for the guarantee of
payment and performance of the Obligation and the Revolver/Acquisition
Obligation.
6.3 FUTURE LIENS. Promptly after (a) the acquisition of any assets (real,
personal, tangible, or intangible) by any Company or any Guarantor, (b) the
removal, termination, or expiration of any prohibitions upon the granting of a
Lien in any asset (real, personal, tangible, or intangible) of any Company or
any Guarantor, or (c) upon the designation, formation, or acquisition of any new
Subsidiary (the assets and stock of such new Subsidiary and the assets described
in CLAUSES (a) and (b) hereof are referred to herein as the "ADDITIONAL
ASSETS"), Borrower shall (or shall cause such other Company or Guarantor to)
execute and deliver to Collateral Agent all further instruments and documents
(including, without limitation, Collateral Documents and all certificates and
instruments representing shares of stock or evidencing Debt and [any realty
appraisals] as Collateral Agent may require with respect to any such Additional
Assets), and shall take all further action that may be necessary or desirable,
or that Collateral Agent or Administrative Agent may reasonably request, to
grant, perfect, and protect Liens in favor of
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Collateral Agent for the benefit of Lenders and the Revolver/Acquisition
Lenders in such Additional Assets, as security for the Obligation and the
Revolver/Acquisition Obligation; IT BEING EXPRESSLY UNDERSTOOD that the
granting of such additional security for the Obligation is a material
inducement to the execution and delivery of this Agreement by each Lender.
Upon satisfying the terms and conditions hereof, such Additional Assets shall
be included in the "COLLATERAL" for all purposes under the Loan Papers, and
all references to the "COLLATERAL" in the Loan Papers shall include the
Additional Assets.
6.4 RELEASE OF COLLATERAL.
(a) UPON SALE OR DISPOSITION OF COLLATERAL. Upon any sale, transfer,
or disposition of Collateral which is expressly permitted pursuant to the
Loan Papers and the Revolver/Acquisition Loan Papers (or is otherwise
authorized by Lenders and the Revolver/Acquisition Lenders), and upon ten
(10) Business Days' prior written request by Borrower (which request must
be accompanied by true and correct copies of (a) all documents of transfer
or disposition, including any contract of sale, (b) a preliminary closing
statement and instructions to the title company, if any, and (c) all
requested release instruments), Collateral Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents as may be
necessary to evidence the release of Liens granted to Collateral Agent for
the benefit of Lenders and the Revolver/Acquisition Lenders pursuant hereto
in such Collateral; PROVIDED THAT, (i) no such release of Lien shall be
granted if any Default or Potential Default has occurred and is continuing,
including, without limitation, the failure to make certain mandatory
prepayments in accordance with SECTIONS 3.2(c) and (d) in conjunction with
the sale or transfer of such Collateral; (ii) Collateral Agent shall not be
required to execute any such document on terms which, in Collateral Agent's
opinion, would expose Collateral Agent to liability or create any
obligation or entail any consequence OTHER THAN the release of such Liens
without recourse or warranty; and (iii) such release shall not in any
manner discharge, affect, or impair the Obligation, the Revolver/
Acquisition Obligation, or Liens upon (or obligations of any Company or any
Guarantor in respect of) all interests retained by the Companies and the
Guarantors, including (without limitation) the proceeds of any sale, all
of which shall continue to constitute Collateral.
(b) CELLULAR PARTNERSHIP OBLIGOR COLLATERAL. With respect to Liens
on the assets of the Cellular Partnership Obligors, such Liens (as well as
any Liens on partnership interests therein pledged by Persons other than
any Company or any Guarantor) shall be released in the event all Debt to
the Companies has been paid in full and terminated; PROVIDED, FURTHER
HOWEVER, that from the date of such repayment until the Obligation has been
paid in full and the Commitment has been terminated, no Company may,
directly or through a Subsidiary, advance funds to any such Cellular
Partnership. In regard to repayment of such intercompany Debt, Collateral
Agent is hereby authorized by Lenders to execute and deliver such releases
of Cellular Partnership Obligors upon ten (10) Business Days prior written
request by Borrower supported by evidence that such intercompany Debt has
been terminated and repaid in full and accompanied by appropriate release
instruments, which must be in form and substance satisfactory to Collateral
Agent.
6.5 NEGATIVE PLEDGE. Notwithstanding the provisions of SECTION 6.1
hereof, until such time as Administrative Agent or Determining Lenders otherwise
require, the Companies and the Guarantors shall not be required to perfect Liens
on any assets described in SECTIONS 6.1(e), (f), (g), and (h) or to grant
specific assignments of easements, licenses, permits, certificates of
compliance, and certificates of approval issued by regulatory authorities,
franchises, or like grants of authority or service agreements. To the extent
Collateral Agent and Determining Lenders agree to delay the perfection or
attachment of any Lien granted
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pursuant to SECTION 6.1 hereof, for whatever reason, the Companies and the
Guarantors hereby covenant and agree not to directly create, incur, grant,
suffer, or permit to be created or incurred any Lien on any such assets,
OTHER THAN Permitted Liens. Furthermore, within thirty (30) days of the
request of Collateral Agent, Borrower shall (or shall cause each Company and
each Guarantor to) execute and deliver to Collateral Agent all instruments
and documents (including, without limitation, certificates and instruments
and documents representing shares of stock or evidencing Debt) and shall take
all further action that may be necessary or desirable, or that Collateral
Agent may reasonably request, to grant, perfect, and protect Liens in favor
of Collateral Agent for the benefit of Lenders, in such assets, as security
for the Obligation and the Revolver/Acquisition Obligation; IT BEING
EXPRESSLY UNDERSTOOD that the provisions of this negative pledge are a
material inducement to the execution and delivery of this Agreement by each
Lender.
6.6 CONTROL; LIMITATION OF RIGHTS. Notwithstanding anything herein or in
any other Loan Paper to the contrary, (a) the transactions contemplated hereby
(i) do not and will not constitute, create, or have the effect of constituting
or creating, directly or indirectly, actual or practical ownership of the
Companies or the Guarantors by Agents or Lenders, or control, affirmative or
negative, direct or indirect, by Agents or Lenders over the management or any
other aspect of the operation of the Companies or the Guarantors, which
ownership or control remains exclusively and at all times in the Companies or
the Guarantors, and (ii) do not and will not constitute the transfer,
assignment, or disposition in any manner, voluntary or involuntary, directly or
indirectly, of any Authorization at any time issued by the FCC or any PUC to the
Companies or the Guarantors, or the transfer of control of the Companies or the
Guarantors within the meaning of SECTION 310(d) of the Communications Act of
1934, as amended; and (b) neither Administrative Agent nor Collateral Agent
shall, without first obtaining the approval of the FCC or any applicable PUC,
take any action pursuant to this Agreement or any other Loan Paper that would
constitute or result in any assignment of any Authorization or any change of
control of the Companies or the Guarantors, if such assignment or change of
control would require, under then existing Law (including the written rules and
regulations promulgated by the FCC or any such PUC), the prior approval of the
FCC or any such PUC.
SECTION 7 CONDITIONS PRECEDENT.
7.1 CONDITIONS PRECEDENT TO CLOSING. This Agreement shall not become
effective, and Lenders shall not be obligated to advance any Borrowing, unless
Administrative Agent has received all of the agreements, documents, instruments,
and other items described on SCHEDULE 7.1 (OTHER THAN, each item, if any, listed
on SCHEDULE 7.1A, which items are hereby permitted to be delivered after the
Closing Date, but not later than the respective date for delivery of each such
item specified on SCHEDULE 7.1A).
7.2 CONDITIONS PRECEDENT TO A PERMITTED ACQUISITION. On or prior to the
consummation of any Acquisition (whether or not the purchase price for such
Acquisition is funded by Borrowings), Borrower shall have satisfied the
conditions and delivered, or caused to be delivered, to Administrative Agent,
all documents and certificates set forth on SCHEDULE 7.2 by no later than the
dates specified for satisfaction of such conditions on SCHEDULE 7.2; PROVIDED
THAT, with respect to the Acquisition of California 4 RSA, Borrower shall not be
required to deliver the Permitted Acquisition Compliance Certificate 30 days
prior to closing of such Acquisition, SO LONG AS Borrower shall deliver all
certificates and documents required under PART A of SCHEDULE 7.2 on or prior to
the Closing Date. Promptly upon receipt of each Permitted Acquisition
Compliance Certificate and each Permitted Acquisition Loan Closing Certificate,
Administrative Agent shall provide copies of such certificates to Lenders. All
documentation delivered and satisfaction of conditions pursuant to the
requirements of SECTION 7.2 must be satisfactory to Administrative Agent. To
the extent any Borrowing is being requested in connection with the
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consummation of the Acquisition, the conditions set forth in SECTIONS 7.2 and
7.3 hereof must be satisfied prior to the making of any such Borrowing.
7.3 CONDITIONS PRECEDENT TO EACH BORROWING. In addition to the conditions
stated in SECTION 7.1 and SECTION 7.2, Lenders will not be obligated to fund (as
opposed to continue or convert) any Borrowing, unless on the date of such
Borrowing (and after giving effect thereto): (a) Administrative Agent shall
have timely received therefor a Notice of Borrowing; (b) all of the
representations and warranties of any Company or any Guarantor set forth in the
Loan Papers are true and correct in all material respects (except to the extent
that (i) the representations and warranties speak to a specific date or (ii) the
facts on which such representations and warranties are based have been changed
by transactions contemplated or permitted by the Loan Papers); (c) no change in
the financial condition or business of any Company or any Guarantor which could
be a Material Adverse Event shall have occurred; (d) no Default or Potential
Default shall have occurred and be continuing; (e) the funding of such
Borrowings is permitted by Law; (f) in the event all or any part of the proceeds
of the Borrowing will be used to finance a Distribution to the extent permitted
by SECTION 9.21, Administrative Agent shall have received all such
certifications, financial information, and projections as Administrative Agent
may reasonably request; and (g) all matters related to such Borrowing must be
satisfactory to Required Lenders and their respective counsel in their
reasonable determination, and upon the reasonable request of Administrative
Agent, Borrower shall deliver to Administrative Agent evidence substantiating
any of the matters in the Loan Papers which are necessary to enable Borrower to
qualify for such Borrowing. Each Notice of Borrowing delivered to
Administrative Agent shall constitute the representation and warranty by
Borrower to Administrative Agent that the statements above are true and correct
in all respects. Each condition precedent in this Agreement is material to the
transactions contemplated in this Agreement, and time is of the essence in
respect of each thereof. Subject to the prior approval of Required Lenders,
Lenders may fund any Borrowing without all conditions being satisfied, but, to
the extent permitted by Law, the same shall not be deemed to be a waiver of the
requirement that each such condition precedent be satisfied as a prerequisite
for any subsequent funding or issuance, unless Required Lenders specifically
waive each such item in writing.
SECTION 8 REPRESENTATIONS AND WARRANTIES. Borrower, each other Company, and
each Guarantor represent and warrant to Administrative Agent and Lenders as
follows:
8.1 PURPOSE OF CREDIT FACILITY. Borrower will use (or will loan such
proceeds to its Companies to so use) all proceeds of Borrowings for one or more
of the following: (a) to finance the Acquisition of California RSA-4, Texas
RSA-16, Santa Cruz MSA, and other Permitted Acquisitions; (b) to finance Capital
Expenditures; (c) to finance certain investments permitted by the Loan Papers;
(d) to finance certain permitted Distributions; and (e) for general corporate
purposes. No Company or Guarantor is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying any "MARGIN STOCK" within the meaning of REGULATION U.
No part of the proceeds of any Borrowing will be used, directly or indirectly,
for a purpose which violates any Law, including, without limitation, the
provisions of REGULATIONS G, T, U, or X (as enacted by the Board of Governors of
the Federal Reserve System, as amended).
8.2 EXISTENCE, GOOD STANDING, AUTHORITY, AND AUTHORIZATIONS. Each Company
and Guarantor is duly organized, validly existing, and in good standing under
the Laws of its jurisdiction of organization (such jurisdictions being
identified on SCHEDULE 8.3, as supplemented and modified in writing from time to
time to reflect any changes to such Schedule as a result of transactions
permitted by the Loan Papers). Each Company is duly qualified to transact
business and is in good standing in each jurisdiction where the nature and
extent of its business and properties require the same. Each of Borrower, the
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Guarantors, and the Companies possesses all the Authorizations, franchises,
permits, licenses, certificates of compliance, and approvals and grants of
authority necessary, including, without limitation, any Authorization issued by
the FCC, all of which are described on SCHEDULE 8.2 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
Governmental 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 the Loan Papers by Borrower,
the Guarantors, and the Companies.
8.3 SUBSIDIARIES; CAPITAL STOCK. The Companies and Guarantors have no
Subsidiaries except as disclosed on SCHEDULE 8.3 (as supplemented and modified
in writing from time to time to reflect any changes to such Schedule as a result
of transactions permitted by the Loan Papers). All of the outstanding shares of
capital stock (or similar voting interests) of each Subsidiary are duly
authorized, validly issued, fully paid, and nonassessable and are owned of
record and beneficially as set forth on SCHEDULE 8.3 (as supplemented and
modified in writing from time to time to reflect any changes to such Schedule as
a result of transactions permitted by the Loan Papers), free and clear of any
Liens, restrictions, claims, or Rights of another Person, other than Permitted
Liens, and none of such shares owned by any Company or Guarantor is subject to
any restriction on transfer thereof except for restrictions imposed by
securities Laws and general corporate Laws. No Company or Guarantor has
outstanding any warrant, option, or other Right of any Person to acquire any of
its capital stock or similar equity interests. The number and percentage of
shares of partnership interests in each of the Cellular Partnerships, and the
ownership thereof, are accurately set forth on SCHEDULE 8.3 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 Collateral Agent, on
behalf of Lenders, as set forth on SCHEDULE 8.3 attached hereto.
8.4 AUTHORIZATION AND CONTRAVENTION. The execution and delivery by each
Company and Guarantor of each Loan Paper to which it is a party and the
performance by such Company and Guarantor of its obligations thereunder (a) are
within the corporate power of such Company or Guarantor, (b) will have been duly
authorized by all necessary corporate or partnership action on the part of such
Company or Guarantor when such Loan Paper is executed and delivered, (c) require
no action by or in respect of, or filing with, any Governmental Authority, which
action or filing has not been taken or made on or prior to the Closing Date (or
if later, the date of execution and delivery of such Loan Paper), (d) will not
violate any provision of the charter, bylaws, or partnership agreement of such
Company or Guarantor, (e) will not violate any provision of Law applicable to
it, other than such violations which individually or collectively could not be a
Material Adverse Event, (f) will not violate any material written or oral
agreements, contracts, commitments, or understandings to which it is a party,
other than such violations which could not be a Material Adverse Event, or
(g) will not result in the creation or imposition of any Lien on any asset of
any Company or Guarantor. The Companies and Guarantors have (or will have upon
consummation thereof) all necessary consents and approvals of any Person or
Governmental Authority required to be obtained in order to effect any asset
transfer, change of control, merger, or consolidations permitted by the Loan
Papers.
8.5 BINDING EFFECT. Upon execution and delivery by all parties thereto,
each Loan Paper will constitute a legal, valid, and binding obligation of each
Company and each Guarantor party thereto,
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enforceable against each such Company or Guarantor in accordance with its
terms, except as enforceability may be limited by applicable Debtor Relief
Laws and general principles of equity.
8.6 FINANCIAL STATEMENTS. The Current Financials were prepared in
accordance with GAAP and present fairly, in all material respects, the
consolidated financial condition, results of operations, and cash flows of the
Companies as of and for the portion of the fiscal year ending on the date or
dates thereof (subject only to normal year-end audit adjustments). There were
no material liabilities, direct or indirect, fixed or contingent, of the
Companies as of the date or dates of the Current Financials which are required
under GAAP to be reflected therein or in the notes thereto, and are not so
reflected. Except for transactions directly related to, or specifically
contemplated by, the Loan Papers, there have been no changes in the consolidated
financial condition of the Companies from that shown in the Current Financials
after such date which could be a Material Adverse Event, nor has Borrower or any
Company incurred any liability (including, without limitation, any liability
under any Environmental Law), direct or indirect, fixed or contingent, after
such date which could be a Material Adverse Event.
8.7 LITIGATION, CLAIMS, INVESTIGATIONS. No Company or Guarantor is
subject to, or aware of the threat of, any Litigation which is reasonably likely
to be determined adversely to any Company or any Guarantor, and, if so adversely
determined, could (individually or collectively with other Litigation) be a
Material Adverse Event. There are no outstanding orders or judgments for the
payment of money in excess of $1,000,000 (individually or collectively) or any
warrant of attachment, sequestration, or similar proceeding against the assets
of any Company or Guarantor having a value (individually or collectively) of
$1,000,000 or more which is not either (a) stayed on appeal or (b) being
diligently contested in good faith by appropriate proceedings and adequate
reserves have been set aside on the books of such Company in accordance with
GAAP. There are no formal complaints, suits, claims, investigations, or
proceedings initiated at or by any Governmental Authority pending or threatened
by or against any Company or Guarantor which could be a Material Adverse Event,
nor any judgments, decrees, or orders of any Governmental Authority outstanding
against any Company or any Guarantor that could be a Material Adverse Event.
8.8 TAXES. All Tax returns of each Company and Guarantor required to be
filed have been filed (or extensions have been granted) prior to delinquency,
except for any such returns for which the failure to so file could not be a
Material Adverse Event, and all Taxes imposed upon each Company or Guarantor
which are due and payable have been paid prior to delinquency, OTHER THAN Taxes
for which the criteria for Permitted Liens (as specified in SECTION 9.13(b)(v))
have been satisfied or for which nonpayment thereof could not constitute a
Material Adverse Event.
8.9 ENVIRONMENTAL MATTERS. No Company or Guarantor (a) knows of any
environmental condition or circumstance, such as the presence or Release of any
Hazardous Substance, on any property presently or previously owned by any
Company or any Guarantor that could be a Material Adverse Event, (b) knows of
any violation by any Company or any Guarantor of any Environmental Law, except
for such violations that could not be a Material Adverse Event, or (c) knows
that any Company or any Guarantor is under any obligation to remedy any
violation of any Environmental Law, except for such obligations that could not
be a Material Adverse Event; PROVIDED, HOWEVER, that each Company and each
Guarantor (x) to the best of its knowledge, has in full force and effect all
environmental permits, licenses, and approvals required to conduct its
operations and is operating in substantial compliance thereunder, and (y) has
taken prudent steps to determine that its properties and operations are not in
violation of any Environmental Law.
8.10 EMPLOYEE BENEFIT PLANS. (a) No Employee Plan has incurred an
accumulated funding deficiency, as defined in SECTION 302 of ERISA and
SECTION 412 of the Code, (b) neither Borrower nor any
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ERISA Affiliate has incurred material liability which is currently due and
remains unpaid under TITLE IV of ERISA to the PBGC or to an Employee Plan in
connection with any such Employee Plan, (c) neither Borrower nor any ERISA
Affiliate has withdrawn in whole or in part from participation in a
Multiemployer Plan, (d) Borrower has not engaged in any "PROHIBITED
TRANSACTION" (as defined in SECTION 406 of ERISA or SECTION 4975 of the Code)
which would be a Material Adverse Event, and (e) no Reportable Event has
occurred which is likely to result in the termination of an Employee Plan.
The present value of all benefit liabilities within the meaning of TITLE IV
of ERISA under each Employee Plan (based on those actuarial assumptions used
to fund such Employee Plan) did not, as of the last annual valuation date for
the 1997 plan year of such Plan, exceed the value of the assets of such
Employee Plan, and the total present values of all benefit liabilities within
the meaning of TITLE IV of ERISA of all Employee Plans (based on the
actuarial assumptions used to fund each such Plan) did not, as of the
respective annual valuation dates for the 1997 plan year of each such Plan,
exceed the value of the assets of all such plans.
8.11 PROPERTIES; LIENS. Each Company and each Guarantor has good and
marketable title to all its property reflected on the Current Financials, EXCEPT
(a) for (i) property that is obsolete, (ii) property that has been disposed of
in the ordinary course of business, or (iii) property with title defects or
failures in title which would not be a Material Adverse Event, or (b) as
otherwise permitted by the Loan Papers. Except for Permitted Liens, there is no
Lien on any property of any Company or any Guarantor, and the execution,
delivery, performance, or observance of the Loan Papers will not require or
result in the creation of any Lien on such property.
8.12 GOVERNMENT REGULATIONS. No Company or Guarantor is subject to
regulation under the INVESTMENT COMPANY ACT OF 1940, as amended, the PUBLIC
UTILITY HOLDING COMPANY ACT OF 1935, as amended, or any other Law (other than
REGULATIONS G, T, U, and X of the Board of Governors of the Federal Reserve
System and the requirements of any PUC or public service commission) which
regulates the incurrence of Debt.
8.13 TRANSACTIONS WITH AFFILIATES. No Company or Guarantor is a party to a
material transaction with any of its Affiliates (excluding transactions between
or among Companies), other than transactions in the ordinary course of business
and upon fair and reasonable terms not materially less favorable than such
Company could obtain or could become entitled to in an arm's-length transaction
with a Person that was not its Affiliate.
8.14 DEBT. No Company or Guarantor is an obligor on any Debt other than
Permitted Debt.
8.15 MATERIAL AGREEMENTS; MANAGEMENT AGREEMENTS. SCHEDULE 8.15 hereto sets
forth a list of all contracts material to the respective business of the
Companies and the Guarantors (including with respect to the Systems), and there
exists no material default under any of such contracts. There are no failures
of any material written or oral agreements, contracts, commitments, or
understandings to which any Company or Guarantor is a party to be in full force
and effect which could be a Material Adverse Event, and no default or potential
default exists on the part of any Company or any Guarantor thereunder which
could be a Material Adverse Event. None of Borrower, the Guarantors, or the
Companies is a party to any management or consulting agreement for the provision
of services to it, except as described in SCHEDULE 8.15 hereto.
8.16 INSURANCE. Each Company and each Guarantor maintains, with
financially sound, responsible, and reputable insurance companies or
associations, insurance concerning its properties and businesses against such
casualties and contingencies and of such types and in such amounts (and with
co-insurance and deductibles) as is customary in the case of same or similar
businesses.
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8.17 LABOR MATTERS. There are no actual or threatened strikes, labor
disputes, slow downs, walkouts, or other concerted interruptions of operations
by the employees of any Company or any Guarantor that could be a Material
Adverse Event. Hours worked by and payment made to employees of the Companies
and the Guarantors have not been in violation of the FAIR LABOR STANDARDS ACT or
any other applicable Law dealing with such matters, other than any such
violations, individually or collectively, which could not constitute a Material
Adverse Event. All payments due from any Company or any Guarantor on account of
employee health and welfare insurance have been paid or accrued as a liability
on its books, other than any such nonpayments which could not, individually or
collectively, constitute a Material Adverse Event.
8.18 SOLVENCY. At the time of each Borrowing hereunder and on the date of
each Permitted Acquisition, each Company and each Guarantor is (and after giving
effect to the transactions contemplated by the Loan Papers, any Permitted
Acquisition, and any incurrence of additional Debt, will be) Solvent.
8.19 INTELLECTUAL PROPERTY. Each Company and each Guarantor owns or has
sufficient and legally enforceable rights to use all material licenses, patents,
patent applications, copyrights, service marks, trademarks, trademark
applications, and trade names necessary to continue to conduct its businesses as
heretofore conducted by it, now conducted by it, and now proposed to be
conducted by it. Each Company and each Guarantor is conducting its business
without infringement or claim of infringement of any license, patent, copyright,
service mark, trademark, trade name, trade secret, or other intellectual
property right of others, other than any such infringements or claims which, if
successfully asserted against or determined adversely to any Company or any
Guarantor, could not, individually or collectively, constitute a Material
Adverse Event.
8.20 COMPLIANCE WITH LAWS. No Company or Guarantor is in violation of any
Laws (including, without limitation, the Communications Act, Environmental Laws,
and those Laws administered by the FCC and any PUC), other than such violations
which could not, individually or collectively, be a Material Adverse Event. No
Company or Guarantor has received notice alleging any noncompliance with any
Laws, except for such noncompliance which no longer exists, or which could not
constitute a Material Adverse Event.
8.21 PERMITTED ACQUISITIONS.
(a) VALIDITY. With respect to any Permitted Acquisitions, each of
Borrower, the Companies, and the Guarantors has the power and authority
under the Laws of its state of incorporation and under its articles of
incorporation and bylaws or Partnership Agreement, as applicable, to enter
into and perform the related Acquisition agreement to which it is a party
and all other agreements, documents, and actions required thereunder; and
all actions (corporate or otherwise) necessary or appropriate by Borrower,
the Companies, or the Guarantors (as the case may be) for the execution and
performance of said Acquisition agreements, and all other documents,
agreements, and actions required thereunder, have been taken, and, upon
their execution, such Acquisition agreements will constitute the valid and
binding obligation of Borrower, the Companies, and the Guarantors, as the
case may be, enforceable in accordance with their respective terms.
(b) NO VIOLATIONS. With respect to any Permitted Acquisition, the
making and performance of the related Acquisition agreements, and all other
agreements, documents, and actions required thereunder, will not violate
any provision of any Law, including, without limitation, all state
corporate Laws and judicial precedents of the states of incorporation or
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formation of Borrower, the Companies, and the Guarantors, and will not
violate any provisions of the articles of incorporation and bylaws or
Partnership Agreements of Borrower, the Companies, or the Guarantors, or
constitute a default under any agreement by which Borrower, the Companies,
or the Guarantors or their respective property may be bound.
8.22 REGULATION U. "MARGIN STOCK" (as defined in REGULATION U) constitutes
less than 25% of those assets of the Companies or the Guarantors which are
subject to any limitation on sale, pledge, or other restrictions hereunder.
8.23 TRADENAME. No Company or Guarantor has used or transacted business
under any other corporate or trade name in the five-year period preceding the
date hereof.
8.24 FULL DISCLOSURE. There is no material fact or condition relating to
the Loan Papers or the financial condition, business, or property of any Company
or any Guarantor which could be a Material Adverse Event and which has not been
related, in writing, to Administrative Agent. All information heretofore
furnished by any Company or any Guarantor to any Lender or Administrative Agent
in connection with the Loan Papers was, and all such information hereafter
furnished by any Company or any Guarantor to any Lender or Administrative Agent
will be, true and accurate in all material respects or based on reasonable
estimates on the date as of which such information is stated or certified.
SECTION 9 COVENANTS. Borrower and each Guarantor covenant and agree (and agree
to cause their ERISA Affiliates with respect to SECTION 9.10) to perform,
observe, and comply with each of the following covenants, from the Closing Date
and SO LONG THEREAFTER AS Lenders are committed to fund Borrowings under this
Agreement and thereafter until the payment in full of the Principal Debt and
payment in full of all other interest, fees, and other amounts of the Obligation
then due and owing, UNLESS Borrower receives a prior written consent to the
contrary by Administrative Agent as authorized by Required Lenders:
9.1 USE OF PROCEEDS. Borrower shall use the proceeds of Borrowings only
for the purposes represented herein.
9.2 BOOKS AND RECORDS. The Companies and Guarantors shall maintain books,
records, and accounts necessary to prepare financial statements in accordance
with GAAP.
9.3 ITEMS TO BE FURNISHED. Borrower shall cause the following to be
furnished to Administrative Agent for delivery to Lenders:
(a) Promptly after preparation, and no later than 120 days after the
last day of each fiscal year of each of Borrower and Communications,
Financial Statements showing the consolidated and consolidating financial
condition and results of operations calculated for each of (x) the
Companies and (y) Communications and its Restricted Subsidiaries as of, and
for the year ended on, such day, accompanied by:
(i) the unqualified opinion of a firm of nationally-recognized
independent certified public accountants, based on an audit using
generally accepted auditing standards, that such Financial Statements
(calculated with respect to the Companies or Communications and its
Restricted Subsidiaries, as the case may be) were prepared in
accordance with GAAP and present fairly the consolidated financial
condition and results
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of operations of the Companies or Communications and its Restricted
Subsidiaries, as the case may be;
(ii) any management letter prepared by such accounting firm;
(iii) with respect to the Financial Statements of the
Companies, a certificate from such accounting firm to Administrative
Agent indicating that during its audit it obtained no knowledge of any
Default or Potential Default or, if it obtained such knowledge, the
nature and period of existence thereof;
(iv) a letter from such accounting firm addressed to Borrower,
with a copy to Administrative Agent, acknowledging that (A) Borrower
plans to provide Administrative Agent with such audited Financial
Statements and accompanying audit report, (B) Administrative Agent has
informed Borrower that Administrative Agent and Lenders intend to rely
on such firm's audit report accompanying such Financial Statements,
and (C) Borrower intends for Administrative Agent and Lenders to so
rely; and
(v) with respect to the Financial Statements of the Companies, a
Compliance Certificate.
(b) Promptly after preparation, and no later than 60 days after the
last day of each fiscal quarter of Borrower, Financial Statements showing
the consolidated financial condition and results of operations calculated
for the Companies for such fiscal quarter and for the period from the
beginning of the then-current fiscal year to, such last day, accompanied by
a Compliance Certificate with respect to such Financial Statements.
(c) Within 60 days after the end of each fiscal quarter of Borrower,
a management report, showing for each System results of operations and
subscriber counts, discussing the financial results and comparing actual
performance results to the Budget for such period, and outlining principal
factors affecting performances of each market, and detailing the
outstanding principal amount of intercompany loans and advances from
Borrower to any Cellular Partnership Obligor, if any, all in form and
substance satisfactory to Administrative Agent.
(d) On or prior to March 31 of each fiscal year of Borrower, the
financial Budget for such fiscal year, accompanied by a certificate
executed by a Responsible Officer, certifying that such Budget was prepared
by Borrower based on assumptions which, in light of the historical
performance of the Companies and their prospects for the future, are
realistic and achievable.
(e) Promptly upon receipt thereof, copies of all auditor's annual
management letters delivered to Borrower.
(f) Notice, promptly after Borrower knows or has reason to know of
(i) the existence and status of any Litigation which could be a Material
Adverse Event, or of any order or judgment for the payment of money which
(individually or collectively) is in excess of $1,000,000, or any warrant
of attachment, sequestration, or similar proceeding against the assets of
any Company or Guarantor having a value (individually or collectively) of
$1,000,000, (ii) any material change in any material fact or circumstance
represented or warranted in any Loan Paper, (iii) a Default or Potential
Default specifying the nature thereof and what action Borrower or any other
Company or Guarantor has taken, is taking, or proposes to take with respect
thereto, (iv) the receipt by any Company or Guarantor of any notice from
any Governmental Authority of the expiration without
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renewal, termination, material modification or suspension of, or
institution of any proceedings to terminate, materially modify, or
suspend, any Authorization granted by the FCC or any applicable PUC, or
any other Authorization which any Company or Guarantor is required to
hold in order to operate its business in compliance with all applicable
Laws, other than such expirations, terminations, suspensions, or
modifications which individually or in the aggregate would not
constitute a Material Adverse Event, (v) any federal, state, or local
statute, regulation, or ordinance or judicial or administrative order
limiting or controlling the operations of any Company or any Guarantor
which has been issued or adopted hereafter and which is of material
adverse importance or effect in relation to the operation of any Company
or Guarantor, (vi) the receipt by any Company or any Guarantor of notice
of any violation or alleged violation of any Environmental Law, which
violation or alleged violation could individually or collectively with
other such violations or allegations, constitute a Material Adverse
Event, or (vii) (A) the occurrence of a Reportable Event that, alone or
TOGETHER WITH any other Reportable Event, could reasonably be expected
to result in liability of Borrower or any Company or Guarantor to the
PBGC in an aggregate amount exceeding $1,000,000; (B) any expressed
statement in writing on the part of the PBGC of its intention to
terminate any Employee Plan or Plans; (C) Borrower's or an ERISA
Affiliate's becoming obligated to file with the PBGC a notice of failure
to make a required installment or other payment with respect to an
Employee Plan; or (D) the receipt by Borrower or an ERISA Affiliate from
the sponsor of a Multiemployer Plan of either a notice concerning the
imposition of withdrawal liability in an aggregate amount exceeding
$1,000,000 or of the impending termination or reorganization of such
Multiemployer Plan.
(g) Promptly after any of the information or disclosures provided on
any of the Schedules delivered pursuant to this Agreement or any Annexes to
any of the Collateral Documents becomes outdated or incorrect in any
material respect, such revised or updated Schedule(s) or Annexes as may be
necessary or appropriate to update or correct such information or
disclosures; PROVIDED THAT, no deletions may be made to any Annexes
describing Collateral in any of the Collateral Documents unless approved by
Required Lenders.
(h) Promptly after preparation, true, correct, and complete copies of
all material reports or filings filed by or on behalf of any Company with
any Governmental Authority (including the FCC and the Securities and
Exchange Commission).
(i) Promptly after the filing thereof, a true, correct, and complete
copy of each FORM 10-K, FORM 10-Q, and FORM 8-K filed by or on behalf of
Borrower or any Company or any Guarantor with the Securities and Exchange
Commission.
(j) Promptly upon request therefor by Administrative Agent or
Lenders, such information (not otherwise required to be furnished under the
Loan Papers) respecting the business affairs, assets, and liabilities of
the Companies or the Guarantors, and such opinions, certifications, and
documents, in addition to those mentioned in this Agreement, as reasonably
requested.
(k) With respect to the post-closing requirements set forth on
SCHEDULE 7.1A, deliver, or cause to be delivered, to Administrative Agent
(or Collateral Agent in the case of Collateral Documents), all agreements,
documents, instruments, or other items listed on SCHEDULE 7.1A on or prior
to the date specified for delivery thereof on SCHEDULE 7.1A.
9.4 INSPECTIONS. Upon reasonable notice, the Companies and the Guarantors
shall allow Administrative Agent or any Lender (or their respective
Representatives) to inspect any of their properties,
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to review reports, files, and other records and to make and take away copies
thereof, to conduct tests or investigations, and to discuss any of their
affairs, conditions, and finances with other creditors, directors, officers,
employees, other representatives, and independent accountants of the
Companies or Guarantors, from time to time, during reasonable business hours.
9.5 TAXES. Each Company and each Guarantor (a) shall promptly pay when
due any and all Taxes OTHER THAN Taxes the applicability, amount, or validity of
which is being contested in good faith by lawful proceedings diligently
conducted, and against which reserve or other provision required by GAAP has
been made, and in respect of which levy and execution of any lien securing same
have been and continue to be stayed, (b) shall not, directly or indirectly, use
any portion of the proceeds of any Borrowing to pay the wages of employees
unless a timely payment to or deposit with the appropriate Governmental
Authorities of all amounts of Tax required to be deducted and withheld with
respect to such wages is also made, and (c) notify Lenders immediately if the
Internal Revenue Service or any other taxing authority commences or notifies any
Company or any Guarantor of its intention to commence an audit or investigation
with respect to any taxes of any kind due or alleged to be due from any Company
or any Guarantor.
9.6 PAYMENT OF OBLIGATIONS. Borrower shall pay the Obligation in
accordance with the terms and provisions of the Loan Papers. Each Company and
each Guarantor (a) shall promptly pay (or renew and extend) all of its material
obligations as the same become due (unless such obligations [other than the
Obligation or the Revolver/Acquisition Obligation] are being contested in good
faith by appropriate proceedings), and (b) shall not make any voluntary
prepayment of principal of, or interest on, any other Debt (other than the
Obligation or the Revolver/Acquisition Obligation), whether subordinate to the
Obligation or not or (ii) use proceeds from the Facilities to make any voluntary
prepayment of principal of, or interest on, or sinking fund payment in respect
of any Debt of any Company or any Guarantor. Borrower shall not make any
payment on any Subordinated Debt when it violates the subordination provisions
thereof.
9.7 MAINTENANCE OF EXISTENCE, ASSETS, AND BUSINESS. Except as otherwise
permitted by SECTION 9.25, each Company and each Guarantor shall at all times:
(a) maintain its existence and good standing in the jurisdiction of its
organization and its authority to transact business in all other jurisdictions
where the failure to so maintain its authority to transact business could be a
Material Adverse Event; (b) maintain all licenses, permits, and franchises
necessary for its business where the failure to so maintain could be a Material
Adverse Event; (c) keep all of its assets which are useful in and necessary to
its business in good working order and condition (ordinary wear and tear
excepted) and make all necessary repairs thereto and replacements thereof; and
(d) do all things necessary to obtain, renew, extend, and continue in effect all
Authorizations issued by the FCC or any applicable PUC which may at any time and
from time to time be necessary for the Companies and Guarantors to operate their
businesses in compliance with applicable Law, where the failure to so renew,
extend, or continue in effect could be a Material Adverse Event.
9.8 INSURANCE. The Companies and Guarantors shall, at their sole cost and
expense, keep and maintain the Collateral owned by such Company or Guarantor
insured for its actual cash value against loss or damage by fire, theft,
explosion, flood, and all other hazards and risks ordinarily insured against by
other owners or users of such properties in similar businesses of comparable
size and notify Agent promptly of any occurrence causing a material loss or
decline in value of the Collateral and the estimated (or actual, if available)
amount of such loss or decline. All policies of insurance on the Collateral
shall be in a form, with such deductibles, and with insurers recognized as
adequate by prudent business Persons in the same businesses as the Companies or
Guarantors and acceptable to Administrative Agent, and all
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such policies shall be in such amount as may be satisfactory to
Administrative Agent. On the Closing Date and thereafter as each policy is
renewed and extended, the Companies and Guarantors shall deliver to
Collateral Agent a certificate of insurance for each policy of insurance and
evidence of payment of all premiums therefor. Such policies of insurance and
the certificates evidencing the same shall contain an endorsement, in form
and substance acceptable to Collateral Agent, showing loss payable to
Collateral Agent for the benefit of Lenders and the Revolver/Acquisition
Lenders. Such endorsement, or an independent instrument furnished to
Collateral Agent, shall provide that the insurance companies will give
Collateral Agent at least thirty (30) days prior written notice before any
such policy or policies of insurance shall be altered or canceled and that no
act or default of any Company, any Guarantor, or any other Person shall
affect the Right of Collateral Agent to recover under such policy or policies
of insurance in case of loss or damage. Upon the payment by the insurer of
the proceeds of any such policy of insurance and if no Default has occurred
and is continuing, the Company or Guarantor so insured may retain such
insurance if such proceeds are used to repair or replace the property the
damage or destruction of which gave rise to the payment of such insurance
proceeds; PROVIDED, HOWEVER, that any insurance proceeds not used for repair
or replacement in accordance herewith, UNLESS paid as reimbursement of
expenses incurred and business losses suffered in connection with the loss or
damage to the Collateral, shall be paid to or retained by Collateral Agent
for application as a mandatory prepayment on the Obligation and the
Revolver/Acquisition Obligation in accordance with the Intercreditor
Agreement.
9.9 PRESERVATION AND PROTECTION OF RIGHTS. Each Company and each
Guarantor shall perform such acts and duly authorize, execute, acknowledge,
deliver, file, and record any additional agreements, documents, instruments, and
certificates as Administrative Agent, Collateral Agent, or Required Lenders may
reasonably deem necessary or appropriate in order to preserve and protect the
Rights of Administrative Agent and Lenders under any Loan Paper.
9.10 EMPLOYEE BENEFIT PLANS. Borrower shall not, directly or indirectly,
engage in any "PROHIBITED TRANSACTION" (as defined in SECTION 406 of ERISA or
SECTION 4975 of the Code), and the Companies, the Guarantors, and their
respective ERISA Affiliates shall not, directly or indirectly, (a) incur any
"ACCUMULATED FUNDING DEFICIENCY" as such term is defined in SECTION 302 of ERISA
with respect to any Employee Plan, (b) permit any Employee Plan to be subject to
involuntary termination proceedings pursuant to TITLE IV of ERISA, or (c) fully
or partially withdraw from any Multiemployer Plan, if such prohibited
transaction, accumulated funding deficiency, termination proceeding, or
withdrawal would result in liability on the part of any Company or any Guarantor
(individually or collectively) in excess of $1,000,000.
9.11 ENVIRONMENTAL LAWS. Each Company and each Guarantor shall (a) conduct
its business so as to comply with all applicable Environmental Laws and shall
promptly take corrective action to remedy any non-compliance with any
Environmental Law, (b) promptly investigate and remediate any known Release or
threatened Release of any Hazardous Substance on any property owned by any
Company or any Guarantor or at any facility operated by any Company or any
Guarantor to the extent and degree necessary to comply with Law and to assure
that any Release or threatened Release does not result in a substantial
endangerment to human health or the environment, and (c) establish and maintain
a management system designed to ensure compliance with applicable Environmental
Laws and minimize financial and other risks to each Company or Guarantor arising
under applicable Environmental Laws or as a result of environmentally-related
injuries to Persons or property.
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9.12 DEBT AND GUARANTIES.
(a) No Company or Guarantor shall, directly or indirectly, create,
incur, or suffer to exist any direct, indirect, fixed, or contingent
liability for any Debt, OTHER THAN:
(i) The Obligation;
(ii) The Revolver/Acquisition Obligation;
(iii) Debt incurred by Borrower under any Financial Hedge;
(iv) Debt between Companies;
(v) Debt of Borrower to Communications SO LONG AS such Debt is
unsecured, unguaranteed, and subordinate in right of payment to the
Obligation upon terms satisfactory to Administrative Agent; PROVIDED
THAT, repayments of such Debt may be made at such times, in such
amounts, for the purposes, and subject to the conditions, as specified
in SECTION 9.21(d); and
(vi) Debt of any Cellular Partnership Obligor owed to Borrower,
SO LONG AS (A) such Debt is evidenced by Cellular Partnership
Promissory Notes whose form and terms, including amortization
schedules, are acceptable to Administrative Agent; (B) such Cellular
Partnership Promissory Notes and all partnership interests of the
Companies in such Cellular Partnership Obligor are pledged or assigned
by the appropriate Companies to Collateral Agent, for the benefit of
Lenders and the Revolver/Acquisition Lenders, pursuant to appropriate
Collateral Documents; (C) each Cellular Partnership Obligor has
executed a Guaranty and has granted Liens in and to all its assets in
favor of Collateral Agent (for the benefit of Lenders and the
Revolver/Acquisition Lenders) by execution and delivery to Collateral
Agent of all Collateral Documents required by Collateral Agent; and
(D) such Cellular Partnership Obligor has delivered all such searches,
opinions, financing statements, and other documents reasonably
requested by Administrative Agent or Collateral Agent;
(vii) Trade Debt incurred in the ordinary course of business
for value received; and
(viii) Debt arising under Capital Leases not to exceed
$5,000,000 in the aggregate on any date of determination.
(b) No Company or Guarantor shall guarantee or assume or agree to
become liable in any way, either directly or indirectly, for any Debt or
liability of others, except (i) endorsements of checks or drafts in the
ordinary course of business and (ii) the obligations of the Companies and
Guarantors under the Guaranty.
9.13 LIENS. No Company or Guarantor will, directly or indirectly,
(a) enter into or permit to exist any arrangement or agreement which directly or
indirectly prohibits any Company or Guarantor from creating or incurring any
Lien on any of its assets, other than the Loan Papers or the Revolver/
Acquisition Loan Papers, or (b) create, incur, or suffer or permit to be created
or incurred or to exist any Lien upon any of its assets, EXCEPT:
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(i) Pledges or deposits made to secure payment of worker's
compensation, or to participate in any fund in connection with worker's
compensation, unemployment insurance, pensions, or other social security
programs;
(ii) Good-faith pledges or deposits made to secure performance of
bids, tenders, insurance or other contracts (OTHER THAN for the repayment
of borrowed money), or leases, or to secure statutory obligations, surety
or appeal bonds, or indemnity, performance, or other similar bonds as all
such Liens arise in the ordinary course of business of the Companies and
Guarantors;
(iii) Encumbrances consisting of zoning restrictions, easements,
or other restrictions on the use of real property, none of which impair in
any material respect the use of such property by the Person in question in
the operation of its business, and none of which is violated by existing or
proposed structures or land use;
(iv) Liens of landlords or of mortgagees of landlords, arising solely
by operation of law, on fixtures and movable property located on premises
leased in the ordinary course of business;
(v) The following, SO LONG AS the validity or amount thereof is
being contested in good faith and by appropriate and lawful proceedings
diligently conducted, reserve or other appropriate provisions (if any)
required by GAAP shall have been made, levy and execution thereon have been
stayed and continue to be stayed, and they do not in the aggregate
materially detract from the value of the property of the Person in
question, or materially impair the use thereof in the operation of its
business: (i) claims and Liens for Taxes (other than Liens relating to
Environmental Laws or ERISA); (ii) claims and Liens upon, and defects of
title to, real or personal property, including any attachment of personal
or real property or other legal process prior to adjudication of a dispute
of the merits; and (iii) claims and Liens of mechanics, materialmen,
warehousemen, carriers, landlords, or other like Liens; and
(vi) Statutory Liens on the Participation Certificates held by
Borrower to secure Borrower's obligations to CoBank, ACB, hereunder, SO
LONG AS the proceeds of such Participation Certificates (as and when
secured) shall be shared by CoBank, ACB among Lenders.
9.14 TRANSACTIONS WITH AFFILIATES. No Company or Guarantor shall enter
into any material transaction with any of its Affiliates (excluding transactions
among or between Companies), OTHER THAN transactions in the ordinary course of
business and upon fair and reasonable terms not materially less favorable than
such Company or Guarantor could obtain or could become entitled to in an
arm's-length transaction with a Person that was not its Affiliate.
9.15 COMPLIANCE WITH LAWS AND DOCUMENTS. No Company or Guarantor shall
violate the provisions of any Laws applicable to it, including, without
limitation, all rules and regulations promulgated by the FCC or any applicable
PUC, or any material written or oral agreement, contract, commitment, or
understanding to which it is a party, if such violation alone, or when
aggregated with all other such violations, could be a Material Adverse Event; no
Company or Guarantor shall violate the provisions of its charter, bylaws, or
partnership agreement, or modify, repeal, replace, or amend any provision of its
charter, bylaws, or partnership agreement, if such action could adversely affect
the Rights of Lenders.
9.16 PERMITTED ACQUISITIONS, SUBSIDIARY GUARANTIES, AND COLLATERAL
DOCUMENTS. In connection with each Permitted Acquisition, Borrower shall
deliver, or cause to be delivered to,
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Administrative Agent each of the items described on SCHEDULE 7.2, on or
before the date specified on such Schedule for each such item. Borrower
shall cause each Subsidiary that becomes a Subsidiary of any Company after
the Closing Date (whether as a result of acquisition, merger, creation, or
otherwise), (a) to execute a Guaranty on the date such entity becomes a
Subsidiary of a Company and promptly deliver (but in no event later than 10
days following consummation of such creation, acquisition, or merger) such
Guaranty to Collateral Agent and (b) to execute and deliver to Collateral
Agent all required Collateral Documents creating Liens in favor of Collateral
Agent on all the assets of such Subsidiary.
9.17 ASSIGNMENT. No Company or Guarantor shall assign or transfer any of
its Rights, duties, or obligations under any of the Loan Papers.
9.18 FISCAL YEAR AND ACCOUNTING METHODS. No Company or Guarantor will
change its fiscal year for book accounting purposes or its method of accounting,
OTHER THAN (a) immaterial changes in methods or as required by GAAP, or (b) in
connection with a Permitted Acquisition, such changes to the newly-acquired
entity so as to conform its fiscal year and its method of accounting to those of
the Companies.
9.19 GOVERNMENT REGULATIONS. No Company or Guarantor will conduct its
business in such a way that it will become subject to regulation under the
INVESTMENT COMPANY ACT OF 1940, as amended, the PUBLIC UTILITY HOLDING COMPANY
ACT OF 1935, as amended, or any other Law (other than Regulations G, T, U, and X
of the Board of Governors of the Federal Reserve System and the requirements of
any PUC or public service commission) which regulates the incurrence of Debt.
9.20 LOANS, ADVANCES, AND INVESTMENTS. No Company or Guarantor shall make
any loan, advance, extension of credit, or capital contribution to, make any
investment in, or purchase or commit to purchase any stock or other securities
or evidences of Debt of, or interests in, any other Person, OTHER THAN
(a) readily marketable, direct, full faith and credit obligations of the United
States of America, or obligations guaranteed by the full faith and credit of the
United States of America, maturing within not more than one year from the date
of acquisition; (b) short term certificates of deposit and time deposits, which
mature within one year from the date of issuance and which are fully insured by
the Federal Deposit Insurance Corporation; (c) commercial paper maturing in
365 days or less from the date of issuance and rated either "P-1" by Moody's
Investors Service, Inc. ("MOODY'S"), or "A-1" by Standard and Poor's Rating
Group (a division of McGraw-Hill, Inc., "S&P"); (d) debt instruments of a
domestic issuer which mature in one year or less and which are rated "A" or
better by Moody's or S&P on the date of acquisition of such investment;
(e) demand deposit accounts which are maintained in the ordinary course of
business; (f) loans, advances, extensions of credit, capital contributions, and
other investments between Companies; (g) loans or advances to Cellular
Partnership Obligors, SO LONG AS such Debt incurrence by the Cellular
Partnership Obligor is permitted pursuant to SECTION 9.12(a)(vi) and each of the
conditions for such Debt incurrence as set forth in SECTION 9.12(a)(vi) have
been satisfied; (h) Permitted Acquisitions; (i) trade accounts receivable which
are for goods furnished or services rendered in the ordinary course of business
and are payable in accordance with customary trade terms; (i) other investments
or commitments to make investments in cellular, local exchange, and PCS Systems
("SPECIAL INVESTMENTS"), SO LONG AS each such Special Investment does not exceed
the following limitations, determined as of the date such Special Investment is
to be made (each, an "INVESTMENT DATE") and after giving effect to such Special
Investment, and SO LONG AS on or prior to the Investment Date for each such
Special Investment, Borrower provides to Administrative Agent a certificate and
related PRO FORMA calculations demonstrating and confirming compliance with the
following limitations:
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(i) If the Senior Leverage Ratio on such Investment Date is less than
6.00 to 1.0, (A) the aggregate amount of Special Investments made during
such calendar year shall not exceed $5,000,000 and (B) the aggregate amount
of Special Investments made from the Effective Date to and including the
Investment Date shall not exceed the LESSER of (x) $25,000,000 or (y) the
SUM of $15,000,000 plus 100% of the Net Cash Proceeds received by Borrower
from any Equity Issuance; or
(ii) If the Senior Leverage Ratio on such Investment Date is greater
than or equal to 6.00 to 1.0, (A) the aggregate amount of Special
Investments made during such calendar year shall not exceed the SUM of
$2,500,000 and (B) the aggregate amount of Special Investments made from
the Effective Date to and including the Investment Date shall not exceed
the LESSER of (x) $25,000,000 or (y) the SUM of $7,500,000 plus 50% of the
Net Cash Proceeds received by Borrower from any Equity Issuance; and
(j) at such time as CoBank, ACB is a Lender hereunder, the Participation
Certificates in CoBank, ACB required to be acquired and maintained by Borrower
pursuant to SECTION 9.32.
9.21 DISTRIBUTIONS AND RESTRICTED PAYMENTS. No Company or Guarantor may
directly or indirectly declare, make, or pay any Restricted Payment, other than:
(a) Distributions declared, made, or paid by Borrower wholly in the
form of its capital stock;
(b) Distributions by any Company or Guarantor to Borrower or any
other Company;
(c) If in any fiscal year Borrower generates Free Cash Flow, then
Borrower may make Restricted Payments during the following fiscal year, SO
LONG AS no Default or Potential Default exists and SO LONG AS the aggregate
amount of all such Restricted Payments under this CLAUSE (c) in any fiscal
year does not exceed the following limitations corresponding to the Senior
Leverage Ratio determined as of the date such Restricted Payment is to be
made (the "PAYMENT DATE"), after giving pro forma effect to the Restricted
Payment, and SO LONG AS on or prior to the Payment Date for any such
Restricted Payment, Borrower provides Administrative Agent with a
certificate and related PRO FORMA calculations demonstrating and confirming
compliance with the following limitations (and, to the extent requested by
Administrative Agent, evidence that no approval of any Governmental
Authority is required (which has not been obtained) in connection with such
Special Investment or the financing thereof):
(i) If the Senior Leverage Ratio is less than 5.00 to 1.0, then
the aggregate amount of permitted Restricted Payments under this
CLAUSE (c) may not exceed 100% of the Free Cash Flow (as calculated
for the immediately preceding fiscal year); or
(ii) If the Senior Leverage Ratio is greater than or equal to
5.00 to 1.0, then the aggregate amount of permitted Restricted
Payments under this CLAUSE (c) may not exceed 50% of the Free Cash
Flow (as calculated for the immediately preceding fiscal year); and
(d) SO LONG AS no Triggering Event has occurred or is created thereby
(as determined on a pro forma basis), Distributions made after January 15,
2003, by Borrower to Communications in amounts sufficient (when aggregated
with the amounts of all other loans, advances, or dividends
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for such purposes from all other Subsidiaries of Communications) to pay
regularly-scheduled cash distributions or cash interest payments on the
Preferred Stock and Exchange Debentures, if any; PROVIDED, HOWEVER, in
the event that any Triggering Event has occurred and is continuing,
Borrower may declare and pay such dividends to Communications, or make
loans or advances to Communications, subject to the following terms,
conditions, and limitations: (i) the amount of any such dividends,
loans, or advances (when aggregated with the amounts of all other loans,
advances, or dividends for such purposes from all other Subsidiaries of
Communications) shall not exceed (A) amounts then required to make any
payment of cash dividends on the Preferred Stock or cash interest on the
Exchange Debentures, if issued, which payments are past due, by reason
of such Triggering Event, and (B) the next regularly scheduled payment
of the cash dividends on the Preferred Stock or cash interest on the
Exchange Debenture; (ii) such Triggering Event (from the date of notice
of the existence of the earliest such Triggering Event if more than one
exists) has continued for 180 days and has not been cured or waived;
(iii) such Triggering Event is not a Default set forth in SECTION 10.1,
10.3, or 10.9 hereof; and (iv) Lenders have not demanded payment in full
of all obligations due and owing by Borrower under this Agreement and
the Loan Papers; PROVIDED FURTHER, that so long as any Debt is owed from
Borrower to Communications, any Restricted Payment permitted under this
SECTION 9.21(d) shall be made as a repayment of such Debt.
Notwithstanding the foregoing, Restricted Payments and Distributions are
permitted hereunder only to the extent such Restricted Payment or Distribution
is made in accordance with applicable Law and constitutes a valid, non-voidable
transaction.
9.22 RESTRICTIONS ON SUBSIDIARIES. No Subsidiary of Borrower nor any
Guarantor shall enter into or permit to exist any material arrangement or
agreement (other than the Loan Papers) which directly or indirectly prohibits
any such Subsidiary from (a) declaring, making, or paying, directly or
indirectly, any Distribution to Borrower or any other Company, (b) paying any
Debt owed to Borrower or any other Company, (c) making loans, advances, or
investments to Borrower or any other Company, or (d) transferring any of its
property or assets to Borrower or any other Company.
9.23 SALE OF ASSETS. No Company or Guarantor shall sell, assign, transfer,
or otherwise dispose of any of its assets, OTHER THAN (a) sales of inventory in
the ordinary course of business, (b) the sale, discount, or transfer of
delinquent accounts receivable in the ordinary course of business for purposes
of collection, (c) occasional sales of immaterial assets for consideration not
less than the fair market value thereof, (d) dispositions of obsolete assets,
(e) sale, leases, or other disposition among Companies or from a Guarantor to a
Company; and (f) if no Default or Potential Default then exists or arises as a
result thereof, sales of other assets in the ordinary course of business;
PROVIDED THAT, the fair market value of all assets sold (x) in any calendar year
does not exceed $7,500,000 in the aggregate, and (y) prior to the Termination
Date does not exceed, in the aggregate, more than 49% of the fair market value
of the Companies' assets as determined on the Closing Date.
9.24 SALE-LEASEBACK FINANCINGS. No Company or Guarantor will enter into
any sale-leaseback arrangement with any Person pursuant to which such Company or
Guarantor shall lease any asset (whether now owned or hereafter acquired) if
such asset has been or is to be sold or transferred by any Company to any other
Person.
9.25 MERGERS AND DISSOLUTIONS; SALE OF CAPITAL STOCK. No Company or
Guarantor will, directly or indirectly, merge or consolidate with any other
Person, other than (a) as a result of a Permitted Acquisition, (b) mergers or
consolidations involving Borrower if Borrower is the surviving entity,
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(c) mergers among Wholly-owned Companies; PROVIDED THAT, in any merger involving
Borrower (including a Permitted Acquisition effected as a merger), Borrower must
be the surviving entity, and, in any merger involving any other Company
(including a Permitted Acquisition effected as a merger), a Company must be the
surviving entity. No Company or Guarantor shall liquidate, wind up, or dissolve
(or suffer any liquidation or dissolution), other than liquidations, wind ups,
or dissolutions incident to mergers permitted under this SECTION 9.25. No
Company or Guarantor may sell, assign, lease, transfer, or otherwise dispose of
the capital stock (or other ownership interests) of any other Company, EXCEPT
for sales, leases, transfers, or other such distributions to another Company.
9.26 NEW BUSINESS. No Company or Guarantor will, directly or indirectly,
permit or suffer to exist any material change in the type of businesses in which
it is engaged from the businesses of the Companies and Guarantors as conducted
on the Closing Date.
9.27 FINANCIAL HEDGES. The Companies shall, within 60 days from the date
hereof, enter into Financial Hedges in a form and upon terms acceptable to
Administrative Agent, issued by one or more Lenders or an institution acceptable
to Administrative Agent with a duration of a period of at least two years, with
respect to at least fifty percent (50%) of the Total Debt of the Companies
outstanding on the Closing Date; PROVIDED, HOWEVER, that (a) the protected rate
shall be no greater than 2.5% above the all-in rate on the Closing Date hereof;
(b) to the extent any Lender issues a Financial Hedge in compliance with the
requirements of this SECTION 9.27, such Lender shall be granted a Lien in the
Collateral to the extent of such Lender's credit exposure under such Financial
Hedge which is PARI PASSU with that of Collateral Agent on behalf of Lenders and
the Revolver/Acquisition Lenders; (c) each such Lender issuing a Financial Hedge
shall calculate its credit exposure in a reasonable and customary manner; and
(d) all documentation for such Financial Hedge shall conform to ISDA standards
and must be acceptable to Administrative Agent and Collateral Agent with respect
to intercreditor issues.
9.28 AFFILIATE SUBORDINATION AGREEMENTS. The Companies and Guarantors
shall, simultaneously with the creation of any and all future Debt of any
Company or any Guarantor to any one or more Affiliates, cause the appropriate
Affiliate or Affiliates to execute and deliver to Administrative Agent an
agreement, substantially in the form of EXHIBIT H, subordinating the payment of
such Debt to the payment of the Obligation.
9.29 AMENDMENTS TO DOCUMENTS. No Company or Guarantor shall (a) amend or
permit any amendments to any Company's Articles of Incorporation or Bylaws, or
any Partnership Agreement of any Cellular Partnership Obligor or any Company
that is a Cellular Partnership as in effect on the date of this Agreement, if
such action could adversely affect the Rights of Lenders; or (b) amend any
existing credit arrangement or enter into any new credit arrangement (to the
extent permitted by the Loan Papers), if such amended or new credit arrangements
contain any provisions which are materially more restrictive (as reasonably
determined by Administrative Agent) than the provisions of the Loan Papers.
9.30 FINANCIAL COVENANTS. As calculated on a consolidated basis for the
Companies:
(a) SENIOR LEVERAGE RATIO. Borrower shall never permit the Senior
Leverage Ratio of the Companies, determined on a quarterly basis at the end
of each fiscal quarter of the Companies, to be greater than the ratio shown
in the table below which corresponds to both the applicable period of
determination and the Companies Operating Cash Flow for the most-recently
ended Rolling Period:
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<TABLE>
- -------------------------------------------------------------------------------
SENIOR LEVERAGE RATIO FOR THE APPLICABLE PERIOD
OPERATING CASH --------------------------------------------------------------
FLOW FOR CLOSING TO 10-1-98 TO 7-1-99 TO 1-1-00 TO 1-1-01 AND
ROLLING PERIOD 9-30-98 6-30-99 12-31-99 12-31-00 THEREAFTER
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Equal to or 7.5:1.0 7.0:10 6.5:10 5.5:10 4.5:10
less than
$20,000,000
- -------------------------------------------------------------------------------
Greater than 8.0:10 7.5:1.0 7.0:1.0 5.5:1.0 5.0:1.0
$20,000,000
but less than
or equal to
$25,000,000
- -------------------------------------------------------------------------------
Greater than 8.5:1.0 8.0:1.0 7.5:1.0 6.5:1.0 5.5:1.0
$25,000,000
- -------------------------------------------------------------------------------
</TABLE>
PROVIDED THAT, the ratios corresponding to Operating Cash Flow in excess of
$20,000,000 or in excess of $25,000,000 (as the case may be) shall only be
applicable after Borrower has delivered to Administrative Agent, in form
and substance satisfactory to Administrative Agent, a certificate
(i) demonstrating pro forma compliance with the covenants of this Agreement
and (ii) providing projections to the Termination Date demonstrating
Borrower's ability to remain in compliance with the Loan Papers and to
amortize the Facilities, as scheduled.
(b) PRO FORMA DEBT SERVICE COVERAGE. Borrower shall never permit the
ratio of the Operating Cash Flow of the Companies to the Pro Forma Debt
Service of the Companies determined on a quarterly basis at the end of each
fiscal quarter of the Companies to be less than or equal to 1.25 to 1.0.
(c) INTEREST COVERAGE. Borrower shall never permit the ratio of
(i) the Operating Cash Flow of the Companies for any fiscal quarter to
(ii) the cash Interest Expense of the Companies determined on a quarterly
basis at the end of each fiscal quarter of the Companies for the Rolling
Period then-ended, to be less than or equal to (A) 1.75 to 1.0, from the
Closing Date through December 31, 1998, and (B) 2.00 to 1.0, after December
31, 1998.
(d) FIXED CHARGE COVERAGE RATIO. On and after January 1, 1999,
Borrower shall never permit the Companies' Fixed Charge Coverage Ratio,
determined on a quarterly basis on the last day of each fiscal quarter of
the Companies, to be less than or equal to 1.00 to 1.0.
(e) CAPITAL EXPENDITURES. Borrower shall not permit Capital
Expenditures from January 1, 1998 through December 31, 1998 to exceed 110%
of the amount budgeted for capital expenditures in the Budget for 1998.
9.31 YEAR 2000. All of the material computer software, computer firmware,
computer hardware (whether general or special purpose), and other similar or
related items of automated, computerized, and/or software systems that are used
or relied on by the Companies in the conduct of their respective businesses will
not malfunction, will not cease to function, will not generate incorrect data,
and will not produce incorrect results when processing, providing, and/or
receiving (a) date-related data into and between the twentieth and twenty-first
centuries and (b) date-related data in connection with any valid date in the
twentieth and twenty-first centuries.
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9.32 COBANK PARTICIPATION. At all times during which CoBank, ACB
("COBANK") is a Lender hereunder, Borrower shall acquire and maintain
participation certificates in CoBank (the "PARTICIPATION CERTIFICATES") in such
amounts and at such times as CoBank may from time to time require in accordance
with its Bylaws and Capital Plan (as each may be amended from time to time);
PROVIDED, HOWEVER, that the maximum amount of Participation Certificates that
Borrower may be required to purchase may not exceed the maximum amount permitted
by CoBank's Bylaws on the date hereof. The rights and obligations of the
parties with respect to the Participation Certificates and any other patronage
or other distributions shall be governed by CoBank's Bylaws.
SECTION 10 DEFAULT. The term "DEFAULT" means the occurrence of any one or
more of the following events:
10.1 PAYMENT OF OBLIGATION. The failure or refusal of any Company or
Guarantor to pay (a) the Obligation when the same becomes due (whether by its
terms, by acceleration, or as otherwise provided in the Loan Papers); and
(b) the indemnifications and reimbursement obligations provided for in the Loan
Papers after demand therefor.
10.2 COVENANTS. The failure or refusal of Borrower (and, if applicable,
any other Company or Guarantor) to punctually and properly perform, observe, and
comply with:
(a) Any covenant, agreement, or condition contained in SECTIONS 9.1,
9.3, 9.6, 9.12, 9.13, 9.14, 9.16, 9.17, 9.20 through 9.25, and 9.30; and
(b) Any other covenant, agreement, or condition contained in any Loan
Paper (OTHER THAN the covenants to pay the Obligation set forth in
SECTION 10.1 and the covenants in SECTION 10.2(a)), and such failure or
refusal continues for 20 days.
10.3 DEBTOR RELIEF. Borrower, Communications, any other Company, or
Guarantor or any Subsidiary of Communications (a) shall not be Solvent,
(b) fails to pay its Debts generally as they become due, (c) voluntarily seeks,
consents to, or acquiesces in the benefit of any Debtor Relief Law, OTHER THAN
as a creditor or claimant, or (d) becomes a party to or is made the subject of
any proceeding provided for by any Debtor Relief Law, OTHER THAN as a creditor
or claimant, that could suspend or otherwise adversely affect the Rights of
Administrative Agent or any Lender granted in the Loan Papers (UNLESS, in the
event such proceeding is involuntary, the petition instituting same is dismissed
within 30 days after its filing).
10.4 JUDGMENTS AND ATTACHMENTS. Any Company or Guarantor fails, within
60 days after entry, to pay, bond, or otherwise discharge any judgment or order
for the payment of money in excess of $1,000,000 (individually or collectively)
or any warrant of attachment, sequestration, or similar proceeding against any
Company's assets having a value (individually or collectively) of $1,000,000
which is not stayed on appeal.
10.5 GOVERNMENT ACTION. (a) A final non-appealable order is issued by any
Governmental Authority, including, but not limited to, the FCC or the United
States Justice Department, seeking to cause any Company or Guarantor to divest a
significant portion of its assets pursuant to any antitrust, restraint of trade,
unfair competition, industry regulation, or similar Laws, or (b) any
Governmental Authority shall condemn, seize, or otherwise appropriate, or take
custody or control of all or any substantial portion of the assets of any
Company or Guarantor.
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10.6 MISREPRESENTATION. Any representation or warranty made by any Company
or Guarantor contained in any Loan Paper shall at any time prove to have been
incorrect in any material respect when made.
10.7 CHANGE OF MANAGEMENT. More than one of the three members of the
Executive Management Team of Communications on the Closing Date cease to hold
positions on the Executive Management Team of Communications.
10.8 CHANGE OF CONTROL. If Communications ceases to own 100% of the voting
control (directly or indirectly) of Borrower and the other Companies.
10.9 AUTHORIZATIONS. (a) Any Authorization necessary for the ownership or
operations of any Company or Guarantor shall expire, and on or prior to such
expiration, the same shall not have been renewed or replaced by another
Authorization authorizing substantially the same operations by such Company; or
(b) any Authorization necessary for the ownership or operations of any Company
or Guarantor shall be canceled, revoked, terminated, rescinded, annulled,
suspended, or modified in a materially adverse respect, or shall no longer be in
full force and effect, or the grant or the effectiveness thereof shall have been
stayed, vacated, reversed, or set aside, (c) Borrower or any other Company or
Guarantor is required by any Governmental Authority to halt construction or
operations under any Authorization and such action shall continue uncorrected
for thirty (30) days after the applicable entity has received notice thereof; or
(d) if any Governmental Authority 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 other Company or Guarantor as now conducted.
10.10 DEFAULT UNDER OTHER DEBT AND AGREEMENTS. (a) The occurrence of a
"DEFAULT" under the Revolver/Acquisition Agreement; (b) any Company or Guarantor
fails to pay when due (after lapse of any applicable grace periods) any Debt of
such Company or Guarantor (other than the Obligation or the Revolver/Acquisition
Obligation) in excess (individually or collectively) of $1,000,000; (c) any
default exists under any material written or oral agreement, contract,
commitment, or understanding to which a Company or Guarantor is a party; or (d)
the occurrence of an "EVENT OF DEFAULT" under the Third Amended and Restated
Credit Agreement dated of even date herewith, among Dobson Operating Company, as
Borrower, CoreStates Bank, N.A., as Administrative Agent, NationsBank of Texas,
N.A., as Syndication Agent, Toronto Dominion (Texas), Inc., as Documentation
Agent, and certain Lenders party thereto (as the same may be amended, modified,
restated, or supplemented from time to time).
10.11 EMPLOYEE BENEFIT PLANS. (a) A "REPORTABLE EVENT" or "REPORTABLE
EVENTS," or a failure to make a required installment or other payment (within
the meaning of SECTION 412(n)(1) of the Code), shall have occurred with respect
to any Employee Plan or Plans that is expected to result in liability of
Borrower to the PBGC or to a Plan in an aggregate amount exceeding $1,000,000
and, within 30 days after the reporting of any such Reportable Event to
Administrative Agent or after the receipt by Administrative Agent of a statement
required pursuant to SECTION 8.3(d) hereof, Administrative Agent shall have
notified Borrower in writing that (i) Required Lenders have made a reasonable
determination that, on the basis of such Reportable Event or Reportable Events
or the failure to make a required payment, there are grounds under TITLE IV of
ERISA for the termination of such Employee Plan or Plans by the PBGC, or the
appointment by the appropriate United States district court of a trustee to
administer such Employee Plan or Plans or the imposition of a lien pursuant to
SECTION 412(n) of the Code in favor of an Employee Plan and (ii) as a result
thereof a Default exists hereunder; or (b) Borrower or any ERISA Affiliate has
provided to any affected party a 60-day notice of intent to terminate an
Employee Plan pursuant to a distress termination in accordance with
SECTION 4041(c) of ERISA if the liability expected to be incurred as a result
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of such termination will exceed $1,000,000; or (c) a trustee shall be
appointed by a United States district court to administer any such Employee
Plan; or (d) the PBGC shall institute proceedings (including giving notice of
intent thereof) to terminate any such Employee Plan; or (e)(i) Borrower or
any ERISA Affiliate shall have been notified by the sponsor of a
Multiemployer Plan that it has incurred withdrawal liability (within the
meaning of SECTION 4201 of ERISA) to such Multiemployer Plan, (ii) Borrower
or such ERISA Affiliate does not have reasonable grounds for contesting such
withdrawal liability or is not contesting such withdrawal liability in a
timely and appropriate manner and (iii) the amount of such withdrawal
liability specified in such notice, when aggregated with all other amounts
required to be paid to Multiemployer Plans in connection with withdrawal
liabilities (determined as of the date or dates of such notification),
exceeds $1,000,000; or (f) Borrower or any ERISA Affiliate shall have been
notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan
is in reorganization or is being terminated, within the meaning of TITLE IV
of ERISA, if solely as a result of such reorganization or termination the
aggregate annual contributions of Borrower and its ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or have been or are being
terminated have been or will be increased over the amounts required to be
contributed to such Multiemployer Plans for their most recently completed
plan years by an amount exceeding $1,000,000.
10.12 VALIDITY AND ENFORCEABILITY OF LOAN PAPERS. Any Loan Paper
shall, at any time after its execution and delivery and for any reason, cease to
be in full force and effect in any material respect or be declared to be null
and void (other than in accordance with the terms hereof or thereof) or the
validity or enforceability thereof be contested by any Company or Guarantor
party thereto or any Company or Guarantor shall deny in writing that it has any
or any further liability or obligations under any Loan Paper to which it is a
party.
10.13 MATERIAL ADVERSE EFFECT. If any event or condition shall exist
which could reasonably be expected to be a Material Adverse Event with respect
to the business, operations, properties, or financial positions of the Borrower,
Communications, any Guarantor, or any of their respective Subsidiaries.
10.14 ENVIRONMENTAL LIABILITY. If any event or condition shall occur
or exist with respect to any activity or substance regulated under the
Environmental Law and as a result of such event or condition, any Company shall
have incurred or in the opinion of the banks be reasonably likely to incur a
liability in excess of $3,000,000 liability during any consecutive twelve (12)
month period.
10.15 PLEDGED STOCK. If the Collateral Agent ceases to hold (for the
benefit of Lenders) 100% of the issued and outstanding shares of common stock of
the Companies as Collateral.
10.16 DISSOLUTION. Borrower, Communications, or any other Company or
Guarantor shall dissolve, liquidate, or otherwise terminate their existence.
10.17 PAYMENT OF CERTAIN OTHER AGREEMENTS. The payment directly or
indirectly (including, without limitation, any payment in respect of any sinking
fund, defeasance, redemption, or payment of any dividend or distribution) by any
Company or Guarantor of any amount of the Communications Bond Debt, any
Subordinated Debt, any Exchange Debenture, or the Preferred Stock in a manner or
at a time during which such payment is not permitted under the terms of the Loan
Papers, the Exchange Debenture Indenture, the Certificate of Designation for the
Preferred Stock, or under any instrument or document evidencing or creating the
Communications Bond Debt or Subordinated Debt, including, without limitation,
any subordination provisions set forth therein.
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10.18 DEFAULT OR ACCELERATION UNDER CERTAIN OTHER AGREEMENTS. (i) The
occurrence of any "DEFAULT" or "EVENT OF DEFAULT" or other breach which remains
uncured on any date of determination under or with respect to the Communications
Bond Debt, the Exchange Debentures, the Preferred Stock, or any agreement
creating or evidencing any Subordinated Debt; (ii) the trustee with respect to,
or any holder of, the Communications Bond Debt, the Exchange Debentures, the
Preferred Stock, or any Subordinated Debt shall effectively declare all or any
portion of that Debt or obligation thereunder due and payable prior to the
stated maturity thereof; or (iii) the Subordinated Debt, the Communications Bond
Debt, or Indebtedness or obligations under the Exchange Debentures or the
Preferred Stock becomes due before its stated maturity by acceleration of the
maturity thereof.
10.19 REDEMPTION OF CERTAIN OTHER DEBT OR OBLIGATIONS. If an event
shall occur, including, without limitation, a "CHANGE IN CONTROL" as defined in
any documents evidencing or creating the Communications Bond Debt, the Exchange
Debentures, the Preferred Stock, or any agreement evidencing or creating the
Subordinated Debt, and (i) the trustee or the holders of any such Debt or
obligation shall initiate notice to request or require (or any Company or
Guarantor shall automatically be so required) to redeem or repurchase such Debt
or obligation, or (ii) any Company or Guarantor shall initiate notice to holders
of the Subordinated Debt or the holders of any Communications Bond Debt,
Preferred Stock, or Exchange Debentures, in connection with a redemption of any
Debt or obligation arising under such agreements or instruments.
SECTION 11 RIGHTS AND REMEDIES.
11.1 REMEDIES UPON DEFAULT.
(a) If a Default exists under SECTION 10.3(c) or 10.3(d), the
commitment to extend credit hereunder shall automatically terminate and the
entire unpaid balance of the Obligation shall automatically become due and
payable without any action or notice of any kind whatsoever.
(b) If any Default exists, Administrative Agent may (and, subject to
the terms of SECTION 12, shall upon the request of Required Lenders) or
Required Lenders may, do any one or more of the following: (i) if the
maturity of the Obligation has not already been accelerated under
SECTION 11.1(a), declare the entire unpaid balance of the Obligation, or
any part thereof, immediately due and payable, whereupon it shall be due
and payable; (ii) terminate the commitments of Lenders to extend credit
hereunder; (iii) reduce any claim to judgment; (iv) to the extent permitted
by Law, exercise (or request each Lender to, and each Lender shall be
entitled to, exercise) the Rights of offset or banker's Lien against the
interest of Borrower in and to every account and other property of Borrower
which are in the possession of Administrative Agent or any Lender to the
extent of the full amount of the Obligation (to the extent permitted by
Law, Borrower being deemed directly obligated to each Lender in the full
amount of the Obligation for such purposes); and (v) exercise any and all
other legal or equitable Rights afforded by the Loan Papers, the Laws of
the State of Texas, or any other applicable jurisdiction as Administrative
Agent shall deem appropriate, or otherwise, including, but not limited to,
the Right to bring suit or other proceedings before any Governmental
Authority either for specific performance of any covenant or condition
contained in any of the Loan Papers or in aid of the exercise of any Right
granted to Administrative Agent or any Lender in any of the Loan Papers.
11.2 COMPANY WAIVERS. To the extent permitted by Law, the Companies and
Guarantors hereby waive presentment and demand for payment, protest, notice of
intention to accelerate, notice of acceleration, and notice of protest and
nonpayment, and agree that their respective liability with respect
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to the Obligation (or any part thereof) shall not be affected by any renewal
or extension in the time of payment of the Obligation (or any part thereof),
by any indulgence, or by any release or change in any security for the
payment of the Obligation (or any part thereof).
11.3 PERFORMANCE BY ADMINISTRATIVE AGENT. If any covenant, duty, or
agreement of any Company or Guarantor is not performed in accordance with the
terms of the Loan Papers, after the occurrence and during the continuance of a
Default, Administrative Agent or Collateral Agent may, at their option (but
subject to the approval of Required Lenders), perform or attempt to perform such
covenant, duty, or agreement on behalf of such Company or Guarantor. In such
event, any amount expended by Administrative Agent or Collateral Agent in such
performance or attempted performance shall be payable by the Companies and
Guarantors, jointly and severally, to Administrative Agent on demand, shall
become part of the Obligation, and shall bear interest at the Default Rate from
the date of such expenditure by Administrative Agent or Collateral Agent until
paid. Notwithstanding the foregoing, it is expressly understood that
Administrative Agent and Collateral Agent do not assume, and shall never have,
except by their express written consent, any liability or responsibility for the
performance of any covenant, duty, or agreement of any Company or any Guarantor.
11.4 DELEGATION OF DUTIES AND RIGHTS. Lenders may perform any of their
duties or exercise any of their Rights under the Loan Papers by or through their
respective Representatives.
11.5 NOT IN CONTROL. Nothing in any Loan Paper shall, or shall be deemed
to (a) give any Agent or any Lender the Right to exercise control over the
assets (including real property), affairs, or management of any Company or any
Guarantor, (b) preclude or interfere with compliance by any Company or any
Guarantor with any Law, or (c) require any act or omission by any Company or any
Guarantor that may be harmful to Persons or property. Any "MATERIAL ADVERSE
EVENT" or other materiality qualifier in any representation, warranty, covenant,
or other provision of any Loan Paper is included for credit documentation
purposes only and shall not, and shall not be deemed to, mean that any Agent or
any Lender acquiesces in any non-compliance by any Company or Guarantor with
any Law or document, or that any Agent or any Lender does not expect the
Companies or Guarantors to promptly, diligently, and continuously carry out all
appropriate removal, remediation, and termination activities required or
appropriate in accordance with all Environmental Laws. The Agents and the
Lenders have no fiduciary relationship with or fiduciary duty to Borrower or any
Company or Guarantor arising out of or in connection with the Loan Papers, and
the relationship between the Agents and the Lenders, on the one hand, and
Borrower, the Companies, and Guarantors, on the other hand, in connection with
the Loan Papers is solely that of debtor and creditor. The power of the Agents,
and Lenders under the Loan Papers is limited to the Rights provided in the Loan
Papers, which Rights exist solely to assure payment and performance of the
Obligation and may be exercised in a manner calculated by the Agents, and
Lenders in their respective good faith business judgment.
11.6 COURSE OF DEALING. The acceptance by Administrative Agent or Lenders
at any time and from time to time of partial payment on the Obligation shall not
be deemed to be a waiver of any Default then existing. No waiver by
Administrative Agent, Required Lenders, or Lenders of any Default shall be
deemed to be a waiver of any other then-existing or subsequent Default. No
delay or omission by Administrative Agent, Required Lenders, or Lenders in
exercising any Right under the Loan Papers shall impair such Right or be
construed as a waiver thereof or any acquiescence therein, nor shall any single
or partial exercise of any such Right preclude other or further exercise
thereof, or the exercise of any other Right under the Loan Papers or otherwise.
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11.7 CUMULATIVE RIGHTS. All Rights available to Administrative Agent and
Lenders under the Loan Papers are cumulative of and in addition to all other
Rights granted to Administrative Agent and Lenders at law or in equity, whether
or not the Obligation is due and payable and whether or not Administrative Agent
or Lenders have instituted any suit for collection, foreclosure, or other action
in connection with the Loan Papers.
11.8 APPLICATION OF PROCEEDS. Any and all proceeds ever received by
Administrative Agent or Lenders from the exercise of any Rights pertaining to
the Obligation shall be applied to the Obligation in the order and manner set
forth in SECTION 3.11.
11.9 CERTAIN PROCEEDINGS. Borrower will promptly execute and deliver, or
cause the execution and delivery of, all applications, certificates,
instruments, registration statements, and all other documents and papers
Administrative Agent or Lenders may reasonably request in connection with the
obtaining of any consent, approval, registration, qualification, permit,
license, or Authorization of any Governmental Authority or other Person
necessary or appropriate for the effective exercise of any Rights under the Loan
Papers. Because Borrower agrees that Administrative Agent's and Lenders'
remedies at Law for failure of Borrower to comply with the provisions of this
Section would be inadequate and that such failure would not be adequately
compensable in damages, Borrower agrees that the covenants of this Section may
be specifically enforced.
11.10 LIMITATION OF RIGHTS. Notwithstanding any other provision of
this Agreement or any other Loan Paper, any action taken or proposed to be taken
by Administrative Agent, any Agent, or any Lender under any Loan Paper which
would affect the operational, voting, or other control of any Company or
Guarantor, shall be pursuant to SECTION 310(d) of the COMMUNICATIONS ACT OF 1934
(as amended), any applicable state Law, and the applicable rules and regulations
thereunder and, if and to the extent required thereby, subject to the prior
consent of the FCC or any applicable PUC.
11.11 EXPENDITURES BY LENDERS. Borrower shall promptly pay within
fifteen (15) Business Days after request therefor (a) all reasonable costs,
fees, and expenses paid or incurred by Collateral Agent, Administrative Agent,
and Arranger, incident to any Loan Paper (including, but not limited to, the
reasonable fees and expenses of counsel to Administrative Agent, Collateral
Agent, and Arranger and the allocated cost of internal counsel in connection
with the negotiation, preparation, delivery, execution, coordination and
administration of the Loan Papers and any related amendment, waiver, or consent)
and (b) all reasonable costs and expenses of Lenders, Collateral Agent, and
Administrative Agent incurred by Administrative Agent, Collateral Agent, or any
Lender in connection with the enforcement of the obligations of any Company or
Guarantor arising under the Loan Papers (including, without limitation, costs
and expenses incurred in connection with any workout or bankruptcy) or the
exercise of any Rights arising under the Loan Papers (including, but not limited
to, reasonable attorneys' fees including allocated cost of internal counsel,
court costs and other costs of collection), all of which shall be a part of the
Obligation and shall bear interest at the Default Rate from the date due until
the date repaid.
11.12 INDEMNIFICATION. BORROWER AND EACH GUARANTOR AGREES TO INDEMNIFY
AND HOLD HARMLESS EACH AGENT, ARRANGER, AND EACH LENDER AND EACH OF THEIR
RESPECTIVE AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES,
AGENTS, ATTORNEYS AND ADVISORS (EACH, AN "INDEMNIFIED PARTY") FROM AND AGAINST
ANY AND ALL CLAIMS, DAMAGES, LOSSES, LIABILITIES, COSTS, AND EXPENSES
(INCLUDING, WITHOUT LIMITATION, REASONABLE ATTORNEYS' FEES) THAT MAY BE INCURRED
BY OR ASSERTED OR AWARDED AGAINST ANY INDEMNIFIED PARTY, IN EACH CASE ARISING
OUT OF OR IN CONNECTION WITH OR BY REASON OF (INCLUDING, WITHOUT LIMITATION, IN
CONNECTION WITH ANY INVESTIGATION, LITIGATION, OR PROCEEDING OR PREPARATION OF
DEFENSE IN CONNECTION
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THEREWITH) THE LOAN DOCUMENTS, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR
THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE BORROWINGS (INCLUDING ANY
OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF THE INDEMNIFIED PARTY),
EXCEPT TO THE EXTENT SUCH CLAIM, DAMAGE, LOSS, LIABILITY, COST, OR EXPENSE IS
FOUND IN A FINAL, NON-APPEALABLE JUDGMENT BY A COURT OF COMPETENT
JURISDICTION TO HAVE RESULTED FROM SUCH INDEMNIFIED PARTY'S GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT. IN THE CASE OF AN INVESTIGATION, LITIGATION OR OTHER
PROCEEDING TO WHICH THE INDEMNITY IN THIS SECTION 11.12 APPLIES, SUCH
INDEMNITY SHALL BE EFFECTIVE WHETHER OR NOT SUCH INVESTIGATION, LITIGATION OR
PROCEEDING IS BROUGHT BY THE BORROWER, ITS DIRECTORS, SHAREHOLDERS OR
CREDITORS OR AN INDEMNIFIED PARTY OR ANY OTHER PERSON OR ANY INDEMNIFIED
PARTY IS OTHERWISE A PARTY THERETO AND WHETHER OR NOT THE TRANSACTIONS
CONTEMPLATED HEREBY ARE CONSUMMATED. THE BORROWER AND EACH GUARANTOR AGREE
NOT TO ASSERT ANY CLAIM AGAINST ANY INDEMNIFIED PARTY ON ANY THEORY OF
LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING
OUT OF OR OTHERWISE RELATING TO THE LOAN DOCUMENTS, ANY OF THE TRANSACTIONS
CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE
BORROWINGS. WITHOUT PREJUDICE TO THE SURVIVAL OF ANY OTHER AGREEMENT OF THE
BORROWER HEREUNDER, THE AGREEMENTS AND OBLIGATIONS OF THE BORROWER CONTAINED
IN THIS SECTION 11.12 SHALL SURVIVE THE PAYMENT IN FULL OF THE BORROWINGS AND
ALL OTHER AMOUNTS PAYABLE UNDER THIS AGREEMENT.
SECTION 12 AGREEMENT AMONG LENDERS.
12.1 ADMINISTRATIVE AGENT.
(a) Each Lender hereby appoints NationsBank of Texas, N.A. (and
NationsBank of Texas, N.A. hereby accepts such appointment) as its nominee
and agent, in its name and on its behalf: (i) to act as nominee for and on
behalf of such Lender in and under all Loan Papers; (ii) to arrange the
means whereby the funds of Lenders are to be made available to Borrower
under the Loan Papers; (iii) to take such action as may be requested by any
Lender under the Loan Papers (when such Lender is entitled to make such
request under the Loan Papers and after such requesting Lender has obtained
the concurrence of such other Lenders as may be required under the Loan
Papers); (iv) to receive all documents and items to be furnished to Lenders
under the Loan Papers; (v) to timely distribute, and Administrative Agent
agrees to so distribute, to each Lender all material information, requests,
documents, and items received from Borrower under the Loan Papers; (vi) to
promptly distribute to each Lender its ratable part of each payment or
prepayment (whether voluntary, as proceeds of collateral upon or after
foreclosure, as proceeds of insurance thereon, or otherwise) in accordance
with the terms of the Loan Papers; (vii) to deliver to the appropriate
Persons requests, demands, approvals, and consents received from Lenders;
and (viii) to execute, on behalf of Lenders, such releases or other
documents or instruments as are permitted by the Loan Papers or as directed
by Lenders from time to time; PROVIDED, HOWEVER, Administrative Agent shall
not be required to take any action which exposes Administrative Agent to
personal liability or which is contrary to the Loan Papers or applicable
Law.
(b) Administrative Agent may resign at any time as Administrative
Agent under the Loan Papers by giving written notice thereof to Lenders and
may be removed as Administrative Agent under the Loan Papers at any time
with cause by Required Lenders. Should the initial or any successor
Administrative Agent ever cease to be a party hereto or should the initial
or any successor Administrative Agent ever resign or be removed as
Administrative Agent, then Required Lenders shall elect the successor
Administrative Agent from among the Lenders (other than the
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resigning Administrative Agent). If no successor Administrative Agent
shall have been so appointed by Required Lenders, within 30 days after
the retiring Administrative Agent's giving of notice of resignation or
Required Lenders' removal of the retiring Administrative Agent, then the
retiring Administrative Agent may, on behalf of Lenders, appoint a
successor Administrative Agent, which shall be a commercial bank having
a combined capital and surplus of at least $1,000,000,000. Upon the
acceptance of any appointment as Administrative Agent under the Loan
Papers by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with
all the Rights of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and obligations
of Administrative Agent under the Loan Papers, and each Lender shall
execute such documents as any Lender may reasonably request to reflect
such change in and under the Loan Papers. After any retiring
Administrative Agent's resignation or removal as Administrative Agent
under the Loan Papers, the provisions of this SECTION 12 shall inure to
its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under the Loan Papers.
(c) Administrative Agent, in its capacity as a Lender, shall have the
same Rights under the Loan Papers as any other Lender and may exercise the
same as though it were not acting as Administrative Agent; the term
"LENDER" shall, unless the context otherwise indicates, include
Administrative Agent; and any resignation, or removal of by Administrative
Agent hereunder shall not impair or otherwise affect any Rights which it
has or may have in its capacity as an individual Lender. Each Lender and
Borrower agree that Administrative Agent is not a fiduciary for Lenders or
for Borrower but simply is acting in the capacity described herein to
alleviate administrative burdens for both Borrower and Lenders, that
Administrative Agent has no duties or responsibilities to Lenders or
Borrower except those expressly set forth herein, and that Administrative
Agent in its capacity as a Lender has all Rights of any other Lender.
(d) Administrative Agent and its Affiliates may now or hereafter be
engaged in one or more loan, letter of credit, leasing, or other financing
transactions with Borrower, act as trustee or depositary for Borrower, or
otherwise be engaged in other transactions with Borrower (collectively, the
"OTHER ACTIVITIES") not the subject of the Loan Papers. Without limiting
the Rights of Lenders specifically set forth in the Loan Papers,
Administrative Agent and its Affiliates shall not be responsible to account
to Lenders for such other activities, and no Lender shall have any interest
in any other activities, any present or future guaranties by or for the
account of Borrower which are not contemplated or included in the Loan
Papers, any present or future offset exercised by Administrative Agent and
its Affiliates in respect of such other activities, any present or future
property taken as security for any such other activities, or any property
now or hereafter in the possession or control of Administrative Agent or
its Affiliates which may be or become security for the obligations of
Borrower arising under the Loan Papers by reason of the general description
of indebtedness secured or of property contained in any other agreements,
documents or instruments related to any such other activities; PROVIDED
THAT, if any payments in respect of such guaranties or such property or the
proceeds thereof shall be applied to reduction of the obligations of
Borrower arising under the Loan Papers, then each Lender shall be entitled
to share in such application ratably. Each Lender acknowledges that, and
consents to, NationsBank of Texas, N.A. also serving as the Administrative
Agent under the Revolver/Acquisition Facility and as Collateral Agent under
the Intercreditor Agreement.
12.2 EXPENSES. Upon demand by Administrative Agent, each Lender shall pay
its Pro Rata Part of any reasonable expenses (including, without limitation,
court costs, reasonable attorneys' fees, and other costs of collection) incurred
by Administrative Agent in connection with any of the Loan Papers if and to
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the extent Administrative Agent does not receive reimbursement therefor from
other sources within 60 days after incurred; PROVIDED THAT, each Lender shall
be entitled to receive its Pro Rata Part of any reimbursement for such
expenses, or part thereof, which Administrative Agent subsequently receives
from such other sources.
12.3 PROPORTIONATE ABSORPTION OF LOSSES. Except as otherwise provided in
the Loan Papers, nothing in the Loan Papers shall be deemed to give any Lender
any advantage over any other Lender insofar as the Obligation arising under the
Loan Papers is concerned, or to relieve any Lender from absorbing its Pro Rata
Part of any losses sustained with respect to the Obligation (except to the
extent such losses result from unilateral actions or inactions of any Lender
that are not made in accordance with the terms and provisions of the Loan
Papers).
12.4 Delegation of Duties; Reliance. Administrative Agent may perform any
of its duties or exercise any of its Rights under the Loan Papers by or through
its Representatives. Administrative Agent and its Representatives shall (a) be
entitled to rely upon (and shall be protected in relying upon) any writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telecopy, telegram, telex or teletype message, statement, order, or other
documents or conversation believed by it or them to be genuine and correct and
to have been signed or made by the proper Person and, with respect to legal
matters, upon opinion of counsel selected by Administrative Agent, (b) be
entitled to deem and treat each Lender as the owner and holder of the Principal
Debt owed to such Lender for all purposes until, subject to SECTION 13.13,
written notice of the assignment or transfer thereof shall have been given to
and received by Administrative Agent (and any request, authorization, consent,
or approval of any Lender shall be conclusive and binding on each subsequent
holder, assignee, or transferee of the Principal Debt owed to such Lender or
portion thereof until such notice is given and received), (c) not be deemed to
have notice of the occurrence of a Default unless a responsible officer of
Administrative Agent, who handles matters associated with the Loan Papers and
transactions thereunder, has received written notice from a Lender or Borrower
and stating that such notice is a "NOTICE OF DEFAULT," and (d) be entitled to
consult with legal counsel (including counsel for Borrower), independent
accountants, and other experts selected by Administrative Agent and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts.
12.5 LIMITATION OF LIABILITY.
(a) None of the Agents, or any of their respective Representatives
shall be liable for any action taken or omitted to be taken by it or them
under the Loan Papers in good faith and reasonably believed by it or them
to be within the discretion or power conferred upon it or them by the Loan
Papers or be responsible for the consequences of any error of judgment,
except for fraud, gross negligence, or willful misconduct; and none of the
Agents, or any of their respective Representatives has a fiduciary
relationship with any Lender by virtue of the Loan Papers (PROVIDED THAT,
nothing herein shall negate the obligation of Administrative Agent or
Collateral Agent to account for funds received by it for the account of any
Lender).
(b) Unless indemnified to its satisfaction against loss, cost,
liability, and expense, neither Administrative Agent nor any other Agent
shall be compelled to do any act under the Loan Papers or to take any
action toward the execution or enforcement of the powers thereby created or
to prosecute or defend any suit in respect of the Loan Papers. If
Administrative Agent requests instructions from Lenders or Required
Lenders, as the case may be, with respect to any act or action (including,
but not limited to, any failure to act) in connection with any Loan Paper,
Administrative Agent shall be entitled (but shall not be required) to
refrain (without incurring any
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liability to any Person by so refraining) from such act or action unless
and until it has received such instructions. Except where action of
Required Lenders or all Lenders is required in the Loan Papers,
Administrative Agent may act hereunder in its own discretion without
requesting instructions. In no event, however, shall Administrative
Agent or any of its respective Representatives be required to take any
action which it or they determine could incur for it or them criminal or
onerous civil liability. Without limiting the generality of the
foregoing, no Lender shall have any right of action against
Administrative Agent as a result of Administrative Agent's acting or
refraining from acting hereunder in accordance with the instructions of
Required Lenders (or all Lenders, if required in the Loan Papers).
(c) Neither Administrative Agent nor any other Agent shall be
responsible in any manner to any Lender or any Participant for, and each
Lender represents and warrants that it has not relied upon Administrative
Agent or any other Agent in respect of, (i) the creditworthiness of any
Company or any Guarantor and the risks involved to such Lender, (ii) the
effectiveness, enforceability, genuineness, validity, or the due execution
of any Loan Paper, (iii) any representation, warranty, document,
certificate, report, or statement made therein or furnished thereunder or
in connection therewith, (iv) the existence, priority, or perfection of any
Lien hereafter granted or purported to be granted under any Loan Paper, or
(v) observation of or compliance with any of the terms, covenants, or
conditions of any Loan Paper on the part of any Company or Guarantor. Each
Lender agrees to indemnify Administrative Agent and its respective
Representatives and hold them harmless from and against (but limited to
such Lender's Pro Rata Part of) any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, reasonable
expenses, and reasonable disbursements of any kind or nature whatsoever
which may be imposed on, asserted against, or incurred by them in any way
relating to or arising out of the Loan Papers or any action taken or
omitted by them under the Loan Papers (INCLUDING ANY OF THE FOREGOING
ARISING FROM THE NEGLIGENCE OF ADMINISTRATIVE AGENT OR ITS
REPRESENTATIVES), to the extent Administrative Agent and its respective
Representatives are not reimbursed for such amounts by any Company
(PROVIDED THAT, Administrative Agent, and its respective Representatives
shall not have the right to be indemnified hereunder for its or their own
fraud, gross negligence, or willful misconduct).
12.6 DEFAULT; COLLATERAL. Upon the occurrence and continuance of a
Default, Lenders agree to promptly confer in order that Required Lenders or
Lenders, as the case may be, may agree upon a course of action for the
enforcement of the Rights of Lenders; and Administrative Agent shall be entitled
to refrain from taking any action (without incurring any liability to any Person
for so refraining) unless and until Administrative Agent shall have received
instructions from Required Lenders. All rights of action under this Agreement
and under the Notes and all rights to the Collateral, if any, hereunder may be
enforced by Administrative Agent or Collateral Agent (in accordance with the
Intercreditor Agreement) and any suit or proceeding instituted by Administrative
Agent or Collateral Agent in furtherance of such enforcement shall be brought in
their respective names as Administrative Agent or Collateral Agent (as the case
may be) without the necessity of joining as plaintiffs or defendants any other
Lender, and the recovery of any judgment shall be for the benefit of Lenders
subject to the expenses of Administrative Agent and/or Collateral Agent. In
actions with respect to any property of Borrower, Administrative Agent is acting
for the ratable benefit of each Lender. Any and all agreements to subordinate
(whether made heretofore or hereafter) other indebtedness or obligations of
Borrower to the Obligation shall be construed as being for the ratable benefit
of each Lender.
12.7 LIMITATION OF LIABILITY. To the extent permitted by Law, (a) neither
Administrative Agent nor any other Agent (acting in their respective agent
capacities) shall incur any liability to any other
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Lender, Agent, or Participant except for acts or omissions resulting from its
own fraud, gross negligence or wilful misconduct, and (b) neither
Administrative Agent nor any other Agent, Lender, or Participant shall incur
any liability to any other Person for any act or omission of any other
Lender, Agent, or Participant.
12.8 RELATIONSHIP OF LENDERS. Nothing herein shall be construed as
creating a partnership or joint venture among Agents and Lenders.
12.9 INTERCREDITOR AGREEMENT. Each Lender authorizes and directs
Administrative Agent to enter into the Intercreditor Agreement (substantially in
the form and upon the terms of EXHIBIT I) for the benefit of the Lenders,
pursuant to which, among other things, (a) NationsBank of Texas, N.A., is
appointed as Collateral Agent for the benefit of Lenders and the
Revolver/Acquisition Lenders, (b) the relative Rights of Lenders and the
Revolver/Acquisition Lenders with respect to the Collateral are described, and
(c) procedures with respect to maintenance and release of the Collateral are
proscribed.
12.10 BENEFITS OF AGREEMENT. Except for the representations and
covenants in SECTIONS 12.1(c) and 12.9 in favor of Borrower, none of the
provisions of this SECTION 12 shall inure to the benefit of any Company,
Guarantor, or any other Person other than Lenders; consequently, no Company,
Guarantor, or any other Person shall be entitled to rely upon, or to raise as a
defense, in any manner whatsoever, the failure of any Agent or any Lender to
comply with such provisions.
12.11 AGENTS. None of the Lenders identified in this Agreement as
"SYNDICATION AGENT," "DOCUMENTATION AGENT," "MANAGING AGENT," or "CO-AGENT"
shall have any rights, powers, obligations, liabilities, responsibilities, or
duties under this Agreement other than those applicable to all Lenders as such.
Without limiting the foregoing, none of the Lenders so identified as a
"SYNDICATION AGENT," "DOCUMENTATION AGENT," "MANAGING AGENT," or "CO-AGENT"
shall have or be deemed to have any fiduciary relationship with any Lender.
12.12 OBLIGATIONS SEVERAL. The obligations of Lenders hereunder are
several, and each Lender hereunder shall not be responsible for the obligations
of the other Lenders hereunder, nor will the failure of one Lender to perform
any of its obligations hereunder relieve the other Lenders from the performance
of their respective obligations hereunder
SECTION 13 MISCELLANEOUS.
13.1 HEADINGS. The headings, captions, and arrangements used in any of the
Loan Papers are, unless specified otherwise, for convenience only and shall not
be deemed to limit, amplify, or modify the terms of the Loan Papers, nor affect
the meaning thereof.
13.2 NONBUSINESS DAYS. In any case where any payment or action is due
under any Loan Paper on a day which is not a Business Day, such payment or
action may be delayed until the next-succeeding Business Day, but interest and
fees shall continue to accrue in respect of any payment to which it is
applicable until such payment is in fact made; PROVIDED THAT, if, in the case of
any such payment in respect of a Eurodollar Rate Borrowing, the next-succeeding
Business Day is in the next calendar month, then such payment shall be made on
the next-preceding Business Day.
13.3 COMMUNICATIONS. Unless specifically otherwise provided, whenever any
Loan Paper requires or permits any consent, approval, notice, request, or demand
from one party to another, such communication must be in writing (which may be
by telex or telecopy) to be effective and shall be deemed
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to have been given (a) if by telex, when transmitted to the telex number, if
any, for such party, and the appropriate answer back is received, (b) if by
telecopy, when transmitted to the telecopy number for such party (and all such
communications sent by telecopy shall be confirmed promptly thereafter by
personal delivery or mailing in accordance with the provisions of this
section; PROVIDED, THAT any requirement in this parenthetical shall not affect
the date on which such telecopy shall be deemed to have been delivered), (c)
if by mail, on the third Business Day after it is enclosed in an envelope,
properly addressed to such party, properly stamped, sealed, and deposited in
the appropriate official postal service, or (d) if by any other means, when
actually delivered to such party. Until changed by notice pursuant hereto,
the address (and telex and telecopy numbers, if any) for Administrative Agent
and each Lender, Administrative Agent, and other Agents is set forth on
SCHEDULE 2.1, and for Borrower and each Company is the address set forth by
Borrower's signature on the signature page of this Agreement and for each
Guarantor is the address set forth by such Guarantor's signature on the
signature page of its Guaranty. A copy of each communication to
Administrative Agent shall also be sent to Haynes and Boone, L.L.P., 901 Main
Street, Dallas, Texas 75202, Fax: 214/651-5940, Attn: Karen S. Nelson.
13.4 FORM AND NUMBER OF DOCUMENTS. Each agreement, document, instrument,
or other writing to be furnished under any provision of this Agreement must be
in form and substance and in such number of counterparts as may be reasonably
satisfactory to Administrative Agent and its counsel.
13.5 EXCEPTIONS TO COVENANTS. No Company or Guarantor shall take any
action or fail to take any action which is permitted as an exception to any of
the covenants contained in any Loan Paper if such action or omission would
result in the breach of any other covenant contained in any of the Loan Papers.
13.6 SURVIVAL. All covenants, agreements, undertakings, representations,
and warranties made in any of the Loan Papers shall survive all closings under
the Loan Papers and, except as otherwise indicated, shall not be affected by any
investigation made by any party. All rights of, and provisions relating to,
reimbursement and indemnification of Administrative Agent, any Agent, or any
Lender shall survive termination of this Agreement and payment in full of the
Obligation.
13.7 GOVERNING LAW. THE LAWS OF THE STATE OF TEXAS AND OF THE UNITED
STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES TO THE LOAN
PAPERS AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF THE
LOAN PAPERS.
13.8 INVALID PROVISIONS. If any provision in any Loan Paper is held to be
illegal, invalid, or unenforceable, such provision shall be fully severable; the
appropriate Loan Paper shall be construed and enforced as if such provision had
never comprised a part thereof; and the remaining provisions thereof shall
remain in full force and effect and shall not be affected by such provision or
by its severance therefrom. Administrative Agent, Lenders, and each Company and
Guarantor party to such Loan Paper agree to negotiate, in good faith, the terms
of a replacement provision as similar to the severed provision as may be
possible and be legal, valid, and enforceable.
13.9 ENTIRETY. THE RIGHTS AND OBLIGATIONS OF THE COMPANIES, GUARANTORS,
LENDERS, AND AGENTS SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS,
DOCUMENTS, AND INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN SUCH PARTIES
ARE SUPERSEDED BY AND MERGED INTO SUCH WRITINGS. THIS AGREEMENT (AS AMENDED IN
WRITING FROM TIME TO TIME) AND THE OTHER WRITTEN LOAN PAPERS EXECUTED BY ANY
COMPANY, ANY GUARANTOR, ANY LENDER, AND/OR ANY AGENT, (TOGETHER WITH ALL
COMMITMENT LETTERS AND FEE LETTERS AS THEY RELATE TO THE PAYMENT OF FEES AFTER
THE CLOSING DATE) REPRESENT THE FINAL AGREEMENT BETWEEN THE COMPANIES, THE
GUARANTORS, LENDERS, AND AGENTS, AND MAY NOT BE CONTRADICTED BY
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EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY SUCH
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN SUCH PARTIES.
13.10 JURISDICTION; VENUE; SERVICE OF PROCESS; JURY TRIAL. EACH PARTY
HERETO, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY
(A) IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND
FEDERAL COURTS LOCATED IN TEXAS, AND AGREES AND CONSENTS THAT SERVICE OF PROCESS
MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING ARISING OUT OF OR IN CONNECTION WITH
THE LOAN PAPERS AND THE OBLIGATION BY SERVICE OF PROCESS AS PROVIDED BY TEXAS
LAW, (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN PAPERS AND THE
OBLIGATION BROUGHT IN ANY SUCH COURT, (C) IRREVOCABLY WAIVES ANY CLAIMS THAT ANY
LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM,
(D) AGREES TO DESIGNATE AND MAINTAIN AN AGENT FOR SERVICE OF PROCESS IN TEXAS IN
CONNECTION WITH ANY SUCH LITIGATION AND TO DELIVER TO ADMINISTRATIVE AGENT
EVIDENCE THEREOF, IF REQUESTED, (E) IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE
MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE
PREPAID, AT ITS ADDRESS SET FORTH HEREIN, (F) IRREVOCABLY AGREES THAT ANY LEGAL
PROCEEDING AGAINST ANY PARTY HERETO ARISING OUT OF OR IN CONNECTION WITH THE
LOAN PAPERS OR THE OBLIGATION SHALL BE BROUGHT IN ONE OF THE AFOREMENTIONED
COURTS, AND (G) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ITS
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY LOAN PAPER OR THE TRANSACTIONS CONTEMPLATED THEREBY. The
scope of each of the foregoing waivers is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including, without limitation, contract claims, tort
claims, breach of duty claims, and all other common law and statutory claims.
The Companies, Guarantors, and each other party to this Agreement acknowledge
that this waiver is a material inducement to the agreement of each party hereto
to enter into a business relationship, that each has already relied on this
waiver in entering into this Agreement, and each will continue to rely on each
of such waivers in related future dealings. The Companies, Guarantors, and each
other party to this Agreement warrant and represent that they have reviewed
these waivers with their legal counsel, and that they knowingly and voluntarily
agree to each such waiver following consultation with legal counsel. THE
WAIVERS IN THIS SECTION 13.10 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THESE WAIVERS SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS, AND REPLACEMENTS TO OR OF THIS OR ANY OTHER
LOAN PAPER. In the event of Litigation, this Agreement may be filed as a
written consent to a trial by the court.
13.11 AMENDMENTS, CONSENTS, CONFLICTS, AND WAIVERS.
(a) Except as otherwise specifically provided, (i) this Agreement may
only be amended, modified or waived by an instrument in writing executed
jointly by Borrower and Required Lenders, and, in the case of any matter
affecting Administrative Agent (EXCEPT removal of Administrative Agent as
provided in SECTION 12) by Administrative Agent, and may only be
supplemented by documents delivered or to be delivered in accordance with
the express terms hereof, and (ii) the other Loan Papers may only be the
subject of an amendment, modification, or waiver if Borrower and Required
Lenders, and, in the case of any matter affecting Administrative Agent
(EXCEPT as set forth above), Administrative Agent, have approved same.
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<PAGE>
(b) Any amendment to or consent or waiver under this Agreement or any
Loan Paper which purports to accomplish any of the following must be by an
instrument in writing executed by Borrower and executed (or approved, as
the case may be) by each Lender, and, in the case of any matter affecting
Administrative Agent, by Administrative Agent: (i) extends the due date or
reduces the amount of any scheduled payment of the Obligation or any
scheduled Commitment reduction of the Obligation arising under Loan Papers
beyond the date specified in the Loan Papers; (ii) reduces the interest
rate or decreases the amount of interest, fees, or other sums payable to
Administrative Agent or Lenders hereunder (except such reductions as are
contemplated by this Agreement); (iii) changes the definition of
"APPLICABLE MARGIN" or "APPLICABLE MARGIN FOR COMMITMENT FEES" (other than
changes having the effect of increasing such Applicable Margin or
Applicable Margin for Commitment Fees)," "REQUIRED LENDERS," "COMMITMENT,"
"TERM LOAN MATURITY DATE," "PRO RATA," or "PRO RATA PART," or (iv) except
as otherwise permitted by any Loan Paper, waives compliance with, amends,
or releases (in whole or in part) any Guaranty or releases (in whole or in
part) any Collateral for the Obligation; or (v) changes this CLAUSE (b) or
any other matter specifically requiring the consent of all Lenders
hereunder. No amendment or waiver with respect to the definition of
"TERMINATION DATE" may be made without the consent of all Lenders, except
such extensions as are contemplated by SECTION 2.3. Without the consent of
such Lender, no Lender's "COMMITTED SUM" under the Facility may be
increased.
(c) Any conflict or ambiguity between the terms and provisions herein
and terms and provisions in any other Loan Paper shall be controlled by the
terms and provisions herein.
(d) No course of dealing nor any failure or delay by Administrative
Agent, any Lender, or any of their respective Representatives with respect
to exercising any Right of Administrative Agent or any Lender hereunder
shall operate as a waiver thereof. A waiver must be in writing and signed
by Administrative Agent and Required Lenders (or by all Lenders, if
required hereunder) to be effective, and such waiver will be effective only
in the specific instance and for the specific purpose for which it is
given.
13.12 MULTIPLE COUNTERPARTS. This Agreement may be executed in a
number of identical counterparts, each of which shall be deemed an original for
all purposes and all of which constitute, collectively, one agreement; but, in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart. It is not necessary that each Lender
execute the same counterpart so long as identical counterparts are executed by
Borrower, each Lender, and Administrative Agent. This Agreement shall become
effective when counterparts hereof shall have been executed and delivered to
Administrative Agent by each Lender, Administrative Agent, and Borrower, or,
when Administrative Agent shall have received telecopied, telexed, or other
evidence satisfactory to it that such party has executed and is delivering to
Administrative Agent a counterpart hereof.
13.13 SUCCESSORS AND ASSIGNS; ASSIGNMENTS AND PARTICIPATIONS.
(a) This Agreement shall be binding upon, and inure to the benefit of
the parties hereto and their respective successors and assigns, EXCEPT THAT
(i) Borrower may not, directly or indirectly, assign or transfer, or
attempt to assign or transfer, any of its Rights, duties or obligations
under any Loan Papers without the express written consent of all Lenders,
and (ii) EXCEPT as permitted under this Section, no Lender may transfer,
pledge, assign, sell any participation in, or otherwise encumber its
portion of the Obligation.
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(b) Each Lender may assign to one or more Eligible Assignees all or a
portion of its Rights and obligations under this Agreement and the other
Loan Papers (including, without limitation, all or a portion of its
Borrowings and its Notes); PROVIDED, HOWEVER, that:
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or an
assignment of all of a Lender's Rights and obligations under this
Agreement and the other Loan Papers, any such partial assignment (when
aggregated with the amount of any concurrent assignments by the
assigning Lender to the same assignee under the Revolver/Acquisition
Facility and/or under the Third Amended and Restated Credit Agreement
dated as of March 25, 1998, among Dobson Operating Company, CoreStates
Bank, N.A., as Administrative Agent, and the lenders now or hereafter
party thereto [as the same may hereafter be amended, modified,
restated, or supplemented]) shall be in an amount at least equal to
$5,000,000, but in no event less than $1,000,000;
(iii) each such assignment by a Lender shall be of a
constant, and not varying, percentage of all of its Rights and
obligations under this Agreement and the Notes;
(iv) the parties to such assignment shall execute and deliver to
the Administrative Agent for its acceptance an Assignment and
Acceptance Agreement in the form of EXHIBIT F hereto, together with
any Notes subject to such assignment and a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and Acceptance
Agreement, the assignee thereunder shall be a party hereto and, to the
extent of such assignment, have the obligations, Rights, and benefits of a
Lender under the Loan Papers and the assigning Lender shall, to the extent
of such assignment, relinquish its rights and be released from its
obligations under the Loan Papers. Upon the consummation of any assignment
pursuant to this Section, but only upon the request of the assignor or
assignee made through Administrative Agent, Borrower shall issue
appropriate Notes to the assignor and the assignee, reflecting such
Assignment and Acceptance. If the assignee is not incorporated under the
laws of the United States of America or a state thereof, it shall deliver
to Borrower and Administrative Agent certification as to exemption from
deduction or withholding of Taxes in accordance with SECTION 4.6.
(c) Administrative Agent shall maintain at its address referred to in
SECTION 13.3 a copy of each Assignment and Acceptance Agreement delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment, and principal amount of the
Borrowings owing to, each Lender from time to time (the "REGISTER"). The
entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and Borrower, Administrative Agent and the Lenders
may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of the Loan Papers. The Register shall be
available for inspection by Borrower or any Lender at any reasonable time
and from time to time upon reasonable prior notice. Upon the consummation
of any assignment in accordance with this SECTION 13.13, SCHEDULE 2.1 shall
automatically be deemed amended (to the extent required) by Administrative
Agent to reflect the name, address, and respective Committed Sums under the
Facility of the assignor and assignee.
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<PAGE>
(d) Upon its receipt of an Assignment and Acceptance Agreement
executed by the parties thereto, together with any Notes subject to such
assignment and payment of the processing fee, the Administrative Agent
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of EXHIBIT F hereto, (i) accept such Assignment and
Acceptance Agreement, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the parties thereto.
(e) Subject to the provisions of this Section and in accordance with
applicable Law, any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable Law, at any time sell to
one or more Persons (each a "PARTICIPANT") participating interests in its
portion of the Obligation. In the event of any such sale to a Participant,
(i) such Lender shall remain a "LENDER" under this Agreement and the
Participant shall not constitute a "LENDER" hereunder, (ii) such Lender's
obligations under this Agreement shall remain unchanged, (iii) such Lender
shall remain solely responsible for the performance thereof, (iv) such
Lender shall remain the holder of its share of the Principal Debt for all
purposes under this Agreement, (v) Borrower and Administrative Agent shall
continue to deal solely and directly with such Lender in connection with
such Lender's Rights and obligations under the Loan Papers, and (vi) such
Lender shall be solely responsible for any withholding taxes or any filing
or reporting requirements relating to such participation and shall hold
Borrower and Administrative Agent and their respective successors,
permitted assigns, officers, directors, employees, agents, and
representatives harmless against the same. Participants shall have no
Rights under the Loan Papers, other than certain voting Rights as provided
below. Subject to the following, each Lender shall be entitled to obtain
(on behalf of its Participants) the benefits of SECTION 4 with respect to
all participations in its part of the Obligation outstanding from time to
time SO LONG AS Borrower shall not be obligated to pay any amount in excess
of the amount that would be due to such Lender under SECTION 4 calculated
as though no participations have been made. No Lender shall sell any
participating interest under which the Participant shall have any Rights to
approve any amendment, modification, or waiver of any Loan Paper, except to
the extent such amendment, modification, or waiver extends the due date for
payment of any amount in respect of principal (OTHER THAN mandatory
prepayments), interest, or fees due under the Loan Papers, reduces the
interest rate or the amount of principal or fees applicable to the
Obligation (EXCEPT such reductions as are contemplated by this Agreement),
or releases any material Guaranty or all or any substantial portion of the
Collateral for the Obligation under the Loan Papers (EXCEPT such releases
as are contemplated by this Agreement); PROVIDED THAT, in those cases where
a Participant is entitled to the benefits of SECTION 4 or a Lender grants
Rights to its Participants to approve amendments to or waivers of the Loan
Papers respecting the matters previously described in this sentence, such
Lender must include a voting mechanism in the relevant participation
agreement or agreements, as the case may be, whereby a majority of such
Lender's portion of the Obligation (whether held by such Lender or
Participant) shall control the vote for all of such Lender's portion of the
Obligation. Except in the case of the sale of a participating interest to
another Lender, the relevant participation agreement shall not permit the
Participant to transfer, pledge, assign, sell participations in, or
otherwise encumber its portion of the Obligation, unless the consent of the
transferring Lender (which consent will not be unreasonably withheld) has
been obtained.
(f) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time assign and pledge all or any portion of its
Borrowings and its Notes to any Federal Reserve Bank as collateral security
pursuant to Regulation A and any Operating Circular issued by such Federal
Reserve Bank. No such assignment shall release the assigning Lender from
its obligations hereunder.
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<PAGE>
(g) Any Lender may furnish any information concerning the Companies
or the Guarantors in the possession of such Lender from time to time to
Eligible Assignees and Participants (including prospective Eligible
Assignees and Participants).
13.14 DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN
CIRCUMSTANCES. The obligations of each Company and each Guarantor under the
Loan Papers shall remain in full force and effect until termination of the
Commitment and payment in full of the Principal Debt and of all interest, fees,
and other amounts of the Obligation then due and owing, EXCEPT that SECTIONS 4,
11, and 13, and any other provisions under the Loan Papers expressly intended to
survive by the terms hereof or by the terms of the applicable Loan Papers, shall
survive such termination. If at any time any payment of the principal of or
interest on any Note or any other amount payable by Borrower under any Loan
Paper is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy, or reorganization of Borrower or otherwise, the
obligations of each Company and each Guarantor under the Loan Papers with
respect to such payment shall be reinstated as though such payment had been due
but not made at such time.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
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<PAGE>
Signature Page to that certain 364-Day Revolving Credit and Term Loan
Agreement dated as of March 25, 1998, among Dobson Cellular Operations Company,
as Borrower, NationsBank of Texas, N.A., as Administrative Agent, and certain
other Agents and Lenders named therein.
EXECUTED as of the 25th day of March, 1998, but effective as of the Closing
Date.
Attest: DOBSON CELLULAR OPERATIONS COMPANY
By: By:
------------------------------ ------------------------------
Name: Name:
------------------------- -------------------------
Title: Title:
------------------------ ------------------------
Mailing Address:
- ---------------------------------
- ---------------------------------
73
<PAGE>
Signature Page to that certain 364-Day Revolving Credit and Term Loan
Agreement dated as of March 25, 1998, among Dobson Cellular Operations Company,
as Borrower, NationsBank of Texas, N.A., as Administrative Agent, and certain
other Agents and Lenders named therein.
EXECUTED as of the 25th day of March, 1998, but effective as of the
Closing Date.
NATIONSBANK OF TEXAS, N.A.,
AS ADMINISTRATIVE AGENT AND AS A LENDER
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
Signature Page to that certain 364-Day Revolving Credit and Term Loan
Agreement dated as of March 25, 1998, among Dobson Cellular Operations Company,
as Borrower, NationsBank of Texas, N.A., as Administrative Agent, and certain
other Agents and Lenders named therein.
EXECUTED as of the 25th day of March, 1998, but effective as of the Closing
Date.
[Name of Lender]
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
Signature Page to that certain 364-Day Revolving Credit and Term Loan
Agreement dated as of March 25, 1998, among Dobson Cellular Operations Company,
as Borrower, NationsBank of Texas, N.A., as Administrative Agent, and certain
other Agents and Lenders named therein.
Each of the undersigned Guarantors hereby acknowledges that it has reviewed
this Credit Agreement and agrees that certain of the representations and
covenants contained in SECTION 8 apply to Guarantors:
DOBSON CELLULAR OF TEXAS, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
DOBSON CELLULAR OF CALIFORNIA, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE>
DPD ____ _______ shares
Dobson Communications Corporation
INCORPORATED UNDER THE LAWS OF THE STATE OF OKLAHOMA
CUSIP 256072 30 7
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF 12 1/4% SENIOR EXCHANGEABLE PREFERRED
STOCK OF THE PAR VALUE OF ONE DOLLAR ($1.00) EACH OF
DOBSON COMMUNICATIONS CORPORATION
transferable on the books of the Corporation only by the holder hereof in person
or by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be held subject to all the provisions of the Certificate of Incorporation
of the Corporation and any amendments thereto, including the Certificate of
Designation for the Preferred Stock, to all of which the holder of this
certificate by acceptance hereof assents. This certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated: January 22, 1998
Countersigned and Registered: [SEAL]
United States Trust Company of New York
Transfer Agent and Registrar
By
---------------------------------
Authorized Officer
---------------------------------
Everett R. Dobson
Chairman of the Board and President
---------------------------------
Stephen T. Dobson
Treasurer and Secretary
<PAGE>
The following abbreviations, when used in the inscription on the face of
the within Preferred Stock, shall be construed as though they were written out
in full according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT _____________, Custodian for ______________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of
survivorship and not as tenants under Uniform Gifts to Minors Act of ________________________
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list
____________________________________________________
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 Preferred Stock and all rights thereunder, hereby irrevocably
constituting and appointing
_______________________________________________________________________attorney
to transfer said Preferred Stock on the books of the Corporation with full power
of substitution in the premises.
In connection with any transfer of this Preferred Stock occurring prior to
the date which is the earlier of (i) the date of a registration statement with
respect to resales of the Preferred Stock 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 Preferred Stock is being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
/ / (b) this Preferred Stock 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 Preferred Stock and the
Certificate of Designation.
If none of the foregoing boxes is checked, the Transfer Agent shall not be
obligated to register this Preferred Stock 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 the Certificate of Designation 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
Preferred Stock 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, as amended, 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 Corporation 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.
Date:
---------------------- -------------------------------------------
NOTICE: To be executed by an executive
officer
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Preferred Stock purchased in its entirety by
the Corporation pursuant to paragraph (h) of the Certificate of Designation,
check the box: / /
If you want to elect to have only a portion of the shares of Preferred Stock
represented by this Certificate purchased by the Corporation pursuant to
paragraph (h) of the Certificate of Designation, state the number of shares to
be purchased: _____________
Date: Your Signature:
---------------------- ----------------------------
(Sign exactly as name appears
on the reverse side of this
certificate)
Signature Guarantee:
-----------------------------------------------------------
(Signature must be guaranteed by a financial institution
that is a member of the Securities Transfer Agent Medallion
Program ("STAMP"), the Stock Exchange Medallion Program
("SEMP"), the New York Stock Exchange, Inc. Medallion
Signature Program ("MSP") or such other signature guarantee
program as may be determined by the Registrar in addition
to, or in substitution for, STAMP, SEMP or MSP, all in
accordance with the Securities Exchange Act of 1934, as
amended.)
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports as they relate to Dobson Communications Corporation (and to all
references to our Firm) included in or made a part of this registration
statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
April 14, 1998
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report as it relates to Texas 16 Cellular Telephone Company (and to all
references to our Firm) included in or made a part of this registration
statement.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
April 14, 1998
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 16, 1998 (and to all references to our Firm) included in or
made a part of this registration statement on Form S-4.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
April 10, 1998
<PAGE>
[LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
inclusion of our report dated February 13, 1998 with respect to the financial
statements of Cellular 2000 (A Partnership) as of December 31, 1997 and 1996,
and for the years then ended included in or made a part of the Registration
Statement (Form S-4, No. 333- ) and the related Prospectus of Dobson
Communications Corporation to be filed on or about April 14, 1998 for the
registration of 185,575 shares of its 12 1/4% Senior Exchangeable Preferred
Stock due 2008.
/s/ Holliday, Lemons, Thomas & Cox, P.C.
Texarkana, Texas
April 13, 1998
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
DOBSON COMMUNICATIONS CORPORATION
We, the undersigned officers and directors of Dobson Communications
Corporation (hereinafter, the "Company"), hereby severally constitute Everett R.
Dobson, Stephen T. Dobson and Bruce R. Knooihuizen 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 shares of the Company's 12 1/4% Senior
Exchangeable Preferred Stock, 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 he 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 14th day of April, 1998.
NAME TITLE
- ------------------------------ ----------------------------------------
/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
Bruce R. Knooihuizen Officer (Principal Financial Officer)
/s/ TRENTON W. LEFORCE
- ------------------------------ Corporate Controller (Principal
Trenton W. LeForce Accounting 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
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
IN EXCHANGE FOR
12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
OF
DOBSON COMMUNICATIONS CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON JUNE __, 1998 (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 Only)
P.O. Box 844 Corporate Trust Operations 111 Broadway
Cooper Station Department Lower Level CONFIRM BY TELEPHONE:
New York, NY 10276-0844 770 Broadway-13th Floor New York, NY 10006 (800) 548-6565
Attention: Corporate New York, NY 10003 Attention: Corporate
Trust Services Trust Services
(registered or certified
mail recommended)
</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 May __,
1998 (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
new shares of 12 1/4% Senior Exchangeable Preferred Stock (the "New Shares")
of Dobson for outstanding shares of 12 1/4% Senior Exchangeable Preferred
Stock (the "Old Shares") of Dobson on a one-for-one basis (calculated to the
fifth decimal place). The terms of the New Shares are identical in all
material respects (including with respect to dividends, voting and upon
redemption) to the terms of the Old Shares for which they may be exchanged
pursuant to the Exchange Offer, except that the New Shares 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 January 16, 1998 (the "Registration Rights Agreement"),
and all Old Shares validly tendered will be accepted for exchange. Any Old
Shares not tendered will remain outstanding and continue to accrue dividends,
but will not retain any rights under the Registration Rights Agreement.
Holders electing to have
<PAGE>
Old Shares exchanged pursuant to the Exchange Offer will be required to
surrender such Old Shares, together with the Letter of Transmittal, to the
Exchange Agent at the address specified herein prior to the close of business
on the Expiration Date. Holders will be entitled to withdraw their election,
at any time prior to 5:00 p.m., New York City time on the Expiration Date, by
sending to the Exchange Agent at the address specified herein a facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Old Shares delivered for exchange and a statement that such Holder
is withdrawing this election to have such Old Shares 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 Shares to which this Letter of Transmittal relates.
If the space provided below is inadequate, the Certificate Numbers should be
listed on a separate signed schedule affixed hereto.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD SHARES TENDERED HEREWITH
- --------------------------------------------------------------------------------
Name(s) and Certificate Aggregate Amount
Address(es) of Number(s) Liquidation Preference Tendered*
Registered Holder(s) Represented by Shares
(Please fill in)
Total
- --------------------------------------------------------------------------------
* Unless otherwise indicated, the holder will be deemed to have tendered
all old Shares included. See Instruction 2.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This Letter of Transmittal is to be used if certificates for Old Shares 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 Shares are
registered or any other person who has obtained a properly completed bond power
from the registered holder.
-2-
<PAGE>
Holders whose Old Shares are not immediately available or who cannot
deliver their Old Shares and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date may tender their Old Shares
according to the guaranteed delivery procedure set forth in the Prospectus
under the captions "The Exchange Offer -- Terms of the Exchange Offer --
Procedures for Tendering Old Shares" and "The Exchange Offer -- Terms of the
Exchange Offer -- Guaranteed Delivery Procedures."
/ / CHECK HERE IF TENDERED OLD SHARES 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 Shares. Subject to, and effective upon, the acceptance for exchange of
the Old Shares 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 Shares. 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 Shares 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 Shares and to acquire New Shares
issuable upon the exchange of such tendered Old Shares, and that, when the
same are accepted for exchange, Dobson will acquire good and unencumbered
title to the tendered Old Shares, 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 Shares or to
transfer ownership of such Old Shares 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 Shares tendered hereby and, in such event, the Old
Shares not exchanged will be returned to the undersigned at the address shown
below the signature of the undersigned.
By tendering, each Holder of Old Shares represents to Dobson that (i) the
New Shares acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New Shares, whether or
not such person is such Holder, (ii) neither the Holder of Old Shares nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Shares, (iii) if the Holder is not a
broker-dealer or is a broker-dealer but will not receive New Shares for its own
account in exchange for Old Shares, neither the Holder nor any such other person
is engaged in or intends to participate in a distribution of the New Shares 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 bro-
ker-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 Shares for
its own account in exchange for Old Shares, it acknowledges that it will deliver
a prospectus meeting the requirements of the Securities Act in connection with
any resale of such New Shares. 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 Shares, 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
-4-
<PAGE>
and other legal representatives of the undersigned. Tendered Old Shares may
be withdrawn at any time prior to 5:00 p.m., New York City Time on the
Expiration Date.
Certificates for all New Shares delivered in exchange for tendered Old
Shares and any Old Shares 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: ____________________, 1998
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on certifi-
cate(s) for Old Shares 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: , 1998
--------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PAYOR'S NAME: DOBSON COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUBSTITUTE Name (If joint names, list first and circle the name
FORM W-9 of the person or entity whose number you enter
in Part I below.)
------------------------------------------------------
Address
Department of ------------------------------------------------------
the Treasury City, state and Zip Code
Internal Revenue
Service ------------------------------------------------------
Part I - PLEASE PROVIDE YOUR Social Security
Payor's Request for TAXPAYER IDENTIFICATION NUMBER number or Employer
Taxpayer Identification ("TIN") IN THE BOX AT RIGHT Identification
Number ("TIN") and AND CERTIFY BY SIGNING AND Number
Certification DATING BELOW
------------------------------------------------------
/ /
Part II - If exempt from backup withholding,
check the box to the right. Also provide
your TIN in Part I and sign and date this
form in Part III.
------------------------------------------------------
Part III - Under penalties of perjury, I certify that:
1. The number shown on this form is my correct
taxpayer identification number (or I am waiting
for a number to be issued to me), AND
2. I am not subject to backup withholding: (a) I am
exempt from backup withholding; or (b) I have not
been notified by the Internal Revenue Service that
I am subject to backup withholding as a result of
a failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer
subject to backup withholding.
CERTIFICATION INSTRUCTIONS. You must cross out item 2
above if you have been notified by the IRS that you
are currently subject to backup withholding because
of underreporting interest or dividends on your tax
return.
Signature Date
--------------------------- ---------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
-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 Shares, 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 SHARES, 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 Shares are not immediately available or who cannot
deliver their Old Shares and all other required documents to the Exchange
Agent on or prior to the Expiration Date may tender their Old Shares 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 Shares are registered, and the certificate number(s) of the Old Shares to
be tendered; and (iii) all tendered Old Shares 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 Shares for exchange.
2. PARTIAL TENDERS; WITHDRAWALS. If less than the entire number of
Old Shares evidenced by a submitted certificate is tendered, the tendering
Holder must fill in the number of shares tendered in the column entitled
"Amount Tendered." A newly issued certificate for the number of Old Shares
submitted but not tendered will be sent to such Holder as soon as practicable
after the Expiration Date. All Old Shares delivered to the Exchange Agent
will be deemed to have been tendered unless otherwise indicated. To withdraw
a tender of Old Shares 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 Shares to be withdrawn (the "Depositor"),
(ii) identify the Old Shares to be withdrawn (including the certificate
number or number of such Old Shares), (iii) contain a statement that such
holder is withdrawing its election to have such Old Shares exchanged, (iv) be
signed by the Holder in the same manner as the original signature on the
Letter of Transmittal by which such Old Shares were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the
-7-
<PAGE>
Old Shares register the transfer of such Old Shares in the name of the person
withdrawing the tender and (v) specify the name in which any such Old Shares
are to be registered, if different from that of the Depositor. If Old Shares
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 Shares so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no New Shares will be issued with respect
thereto unless the Old Shares so withdrawn are validly retendered. Any Old
Shares 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 Shares 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 Shares 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 Shares are registered in the name of the signer of the
Letter of Transmittal and the New Shares to be issued in exchange therefor
are to be issued (and any untendered Old Shares 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 Shares), the signature of such
signer need not be guaranteed. In any other case, the tendered Old Shares
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 Shares or Old Shares not exchanged are to be delivered to an
address other than that of the registered Holder appearing on the note
register for the Old Shares, 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 Shares 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 Shares 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 Shares.
-8-
<PAGE>
When this Letter of Transmittal is signed by the registered Holder or
Holders of Old Shares 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 Shares listed, such Old Shares 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 Shares.
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 Shares pursuant to the Exchange Offer. If,
however, certificates representing New Shares, or Old Shares 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 Shares tendered hereby, or if a transfer tax is imposed for any
reason other than the exchange of Old Shares 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 Shares 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 SHARES. Any Holder whose Old
Shares 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 and other 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 and telephone number set forth above and 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 Shares 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 Shares 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 irregularities in tenders or incur any
liability for failure to give any such
-9-
<PAGE>
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.
10. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder of any Old Shares which are accepted for exchange must provide Dobson
(as payor) with its correct taxpayer identification number ("TIN"), which, in
the case of a Holder who is an individual, is his or her social security
number. If Dobson is not provided with the correct TIN, the Holder may be
subject to a $50 penalty imposed by the Internal Revenue Service. (If
withholding results in an over-payment of taxes, a refund may be obtained.)
Certain Holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and
reporting requirements; however, these Holders still must submit the
Substitute Form W-9. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each tendering Holder must provide such
Holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such Holder is awaiting
a TIN), and that (i) the Holder has not been notified by the Internal Revenue
Service that such Holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the Holder that such Holder is no longer subject to
backup withholding. The Form must be signed, even if the Holder is exempt
from backup withholding. If the Old Notes are registered in more than one
name or are not in the name of the actual owner, consult the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for information on which TIN to report.
Dobson reserves the right in its sole discretion to take whatever steps
are necessary to comply with its obligation regarding backup withholding.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER
WITH CERTIFICATES FOR OLD SHARES 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>
Exhibit 99.2
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
IN EXCHANGE FOR
12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
OF
DOBSON COMMUNICATIONS CORPORATION
Registered holders of outstanding 12 1/4% Senior Exchangeable Preferred
Stock (the "Old Shares") of Dobson Communications Corporation ("Dobson") who
wish to tender their Old Shares in exchange for a like number of 12 1/4%
Senior Exchangeable Preferred Stock (the "New Shares") of Dobson and, in each
case, whose Old Shares are not immediately available or who cannot deliver
their Old Shares 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 111 Broadway Only)
Cooper Station Operations Lower Level
New York, NY 10276-0844 Department New York, NY 10006 CONFIRM BY TELEPHONE:
Attention: Corporate 770 Broadway-13th Floor Attention: Corporate (800) 548-6565
Trust Services New York, NY 10003 Trust Services
(registered or certified mail
recommended)
</TABLE>
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.
<PAGE>
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 Shares set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus.
The undersigned understands that tenders of Old Shares will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. The
undersigned understands that tenders of Old Shares pursuant to the Exchange
Offer may not be withdrawn after 5:00 p.m., New York City time on the
Expiration Date. Tenders of Old Shares may also be withdrawn if the Exchange
Offer is terminated without any such Old Shares 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 Owner(s) Name(s) of Registered Holder(s):
or Authorized Signatory:
---------------------------------------
- ----------------------------------- ---------------------------------------
- ----------------------------------- ---------------------------------------
Principal Amount of Old Shares Address:
Tendered: -------------------------------
- ----------------------------------- ---------------------------------------
Certificate No(s). of Old Shares (if Area Code and Telephone No.:
available):
- ----------------------------------- ---------------------------------------
- ----------------------------------- Date:
----------------------------------
-2-
<PAGE>
- -------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Shares exactly as its (their) name(s) appear on
certificates for Old Shares or on a security position listing the owners of
Old Shares, 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):
-----------------------------------------------------------------
Capacity:
-----------------------------------------------------------------
Address(es):
--------------------------------------------------------------
--------------------------------------------------------------------------
DO NOT SEND OLD SHARES WITH THIS FORM. OLD SHARES SHOULD BE SENT TO THE
EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER
OF TRANSMITTAL.
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an eligible guarantor institution which is a member of
one of the following 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), hereby (a) represents that each holder of
Old Shares on whose behalf this tender is being made "own(s)" the Old Shares
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 Shares 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 Shares 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 SHARES 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:
- ----------------------------------------- --------------------------
Area Code and Telephone No.: Title:
------------- -------------------------
Date:
- ----------------------------------------- --------------------------
- -------------------------------------------------------------------------------
-3-
<PAGE>
Exhibit 99.3
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
Give the Give the EMPLOYER
For this type of account: SOCIAL SECURITY For this type of account: IDENTIFICATION
number of-- number of--
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying number
of the personal representative
or trustee unless the legal
entity itself is not designated
in the account title.)(5)
2. Two or more individuals The actual owner of the account 10. Corporate account The corporation
(joint account) or, if combined funds, any one
of the individuals(1)
3. Husband and wife (joint The actual owner of the account 11. Religious, charitable, The organization
account) or, if joint funds, either or educational
person(1) organization account
4. Custodian account of a The minor(2) 12. Partnership account The partnership
minor (Uniform Gift to held in the name of the
Minors Act) business
5. Adult and minor (joint The adult or, if the minor is 13. Association, club or The organization
account) the only contributor, the other tax-exempt
minor(1) organization
6. Account in the name of The ward, minor, or incompetent 14. A broker or registered The broker or nominee
guardian or committee for a person(3) nominee
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1) 15. Account with the The public entity
savings trust account Department of
(grantor is also Agriculture in the name
trustee) of a public entity
(such as a State or
b. So-called trust The actual owner(1) local government,
account that is not a school district, or
legal or valid trust prison) that receives
under State law agricultural program
payments
8. Sole proprietorship account The owner(4)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension trust.
Note: If no name is circled when there is more than one name,
the number will be considered to be that of the first
name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for A Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan.
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- - An international organization or any agency or instrumentality thereof.
- - A dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- - Payments of patronage dividends where the amount renewed is not paid in
money.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Payments made to a nominee.
Exempt payees described above must still complete the Substitute Form W-9
enclosed herewith to avoid possible erroneous backup withholding. FILE THIS
FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE EXEMPT
ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE
INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments, other than interest, dividends and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6042, 6044, 6045, 6049, 6050A and 6050N.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes and to help verify the accuracy of the recipient's tax return. Payers
must be given the numbers whether or not recipients are required to file tax
returns. Payers must generally withhold 31% of taxable interest, dividend, and
certain other payments to a payee who does not furnish a taxpayer identification
number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure which is due to reasonable cause and not to
willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
-2-
<PAGE>
Exhibit 99.4
DOBSON COMMUNICATIONS CORPORATION
OFFER TO EXCHANGE
ITS
12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
IN EXCHANGE FOR
12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
TO: BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
Dobson Communications Corporation (the "Company") is offering to
exchange the "Exchange Offer"), upon and subject to the terms and conditions
set forth in the Prospectus, dated May __, 1998 (the "Prospectus"), and the
enclosed Letter of Transmittal (the "Letter of Transmittal"), its registered
12 1/4% Senior Exchangeable Preferred Stock (the "New Shares") for any and
all of its outstanding 12 1/4% Senior Exchangeable Preferred Stock (the "Old
Shares"). The Exchange Offer is being made in order to satisfy certain
obligations of the Company contained in the Registration Rights Agreement
dated as of January 16, 1998, between the Company and the other signatories
thereto.
We are requesting that you contact your clients for whom you hold Old
Shares regarding the Exchange Offer. For your information and for forwarding
to your clients for whom you hold Old Shares registered in your name or in
the name of your nominee, or who hold Old Shares registered in their own
names, we are enclosing the following documents:
1. Prospectus dated May __, 1998;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Shares are not immediately available or time
will not permit all required documents to reach the Exchange Agent prior to
the Expiration Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose
account you hold Old Shares registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to United States Trust Company Of New
York, the Exchange Agent for the Old Shares.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON JUNE __, 1998 (THE "EXPIRATION DATE"), UNLESS
EXTENDED BY THE COMPANY. THE OLD SHARES TENDERED PURSUANT TO THE EXCHANGE
OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE 5:00 P.M., NEW YORK CITY TIME, ON
THE EXPIRATION DATE.
<PAGE>
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Old Shares should be
delivered to the Exchange Agent, all in accordance with the instructions set
forth in the Letter of Transmittal and Prospectus.
If holders of Old Shares wish to tender, but it is impracticable for
them to forward their certificates for Old Shares prior to the expiration of
the Exchange Offer or to comply with the book-entry transfer procedures on a
timely basis, a tender may be effected by following the guaranteed delivery
procedures described in the Prospectus under "The Exchange Offer - Terms of
the Exchange Offer - Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to
the beneficial owners of Old Shares held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Shares pursuant to the Exchange Offer,
except as set forth in Instruction 4 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or
requests for additional copies of the enclosed materials, should be directed
to the Exchange Agent for the Old Shares, at its address and telephone number
set forth on the front of the Letter of Transmittal.
Very truly yours,
Dobson Communications Corporation
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
OTHER PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE
YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF
OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS
EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
-2-
<PAGE>
Exhibit 99.5
DOBSON COMMUNICATIONS CORPORATION
OFFER TO EXCHANGE
ITS
12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
IN EXCHANGE FOR
12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
To Our Clients:
Enclosed for your consideration are the Prospectus, dated May __, 1998
(the "Prospectus") and the related Letter of Transmittal (which together with
the Prospectus constitute the "Exchange Offer") in connection with the offer
by Dobson Communications Corporation, an Oklahoma corporation (the
"Company"), to exchange its 12 1/4% Senior Exchangeable Preferred Stock (the
"New Shares") for any and all of its outstanding 12 1/4% Senior Exchangeable
Preferred Stock (the "Old Shares"), upon the terms and subject to the
conditions set forth in the Exchange offer.
We are the Registered Holder of Old Shares held for your account. An
exchange of the Old Shares can be made only by us as the Registered Holder
and pursuant to your instructions. The Letter of Transmittal is furnished to
you for your information only and cannot be used by you to exchange the Old
Shares held by us for your account. The Exchange Offer provides a procedure
for holders to tender by means of guaranteed delivery.
We request information as to whether you wish us to exchange any or all
of the Old Shares held by us for your account upon the terms and subject to
the conditions of the Exchange Offer.
Your attention is directed to the following:
1. The New Shares will be exchanged for the Old Shares at the rate of
one for one (calculated to the fifth decimal place). The New Shares will
accrue dividends (as do the Old Shares) at a rate equal to 12 1/4% per
annum from their date of issuance. Holders of Old Shares that are accepted
for exchange will not receive accrued but unpaid dividends thereon on the
date of issuance of the New Shares. Such dividend will be paid with the
first dividend payment on the New Shares. Dividends on the Old Shares
accepted for exchange will cease to accrue on the day prior to the issuance
of the New Shares. The form and terms of the New Shares are the same in
all material respects as the form and terms of the Old Shares (which
they replace) except that the New Shares have been registered under
the Securities Act of 1933, as amended (the "Securities Act").
2. Based on the interpretation by the staff of the Securities and
Exchange Commission (the "SEC"), New Shares issued pursuant to the Exchange
Offer in exchange for Old Shares may be offered for resale, resold and
otherwise transferred by holders thereof (other than any such holder which
is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act or a "broker" or "dealer" registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) without compliance
with the registration and prospectus delivery provisions of the Securities
Act provided that such New Shares are acquired in the ordinary course of
such holders' business and such holders have no arrangement with any person
to participate in the distribution of such New Shares.
<PAGE>
3. The Exchange Offer is not conditioned on any minimum number of
Old Shares being tendered.
4. Notwithstanding any other term of the Exchange Offer, the
Company will not be required to accept for exchange, or exchange New
Shares for, any Old Shares not theretofore accepted for exchange, and may
terminate or amend the Exchange Offer as provided herein before the
acceptance of such Old Shares, if any of the conditions described in the
Prospectus under "The Exchange Offer - Conditions of the Exchange Offer"
exist.
5. Tendered Old Shares may be withdrawn at any time prior to 5:00
p.m., New York City time, on June __, 1998, if such Old Shares have not
previously been accepted for exchange pursuant to the Exchange Offer.
6. Any transfer taxes applicable to the exchange of the Old
Shares pursuant to the Exchange Offer will be paid by the Company, except
as otherwise provided in Instruction 4 of the Letter of Transmittal.
If you wish to have us tender any or all of your Old Shares, please so
instruct us by completing, detaching and returning to us the instruction form
attached hereto. An envelope to return your instructions is enclosed. If
you authorize a tender of your Old Shares, the entire principal amount of Old
Shares held for your account will be tendered unless otherwise specified on
the instruction form. Your instructions should be forwarded to us in ample
time to permit us to submit a tender on your behalf by the Expiration Date.
The Exchange Offer is not being made to, nor will tenders be accepted
from or on behalf of, holders of the Old Shares in any jurisdiction in which
the making of the Exchange Offer or acceptance thereof would not be in
compliance with the laws of such jurisdiction or would otherwise not be in
compliance with any provision of any applicable securities law.
-2-
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
OFFER TO EXCHANGE
ITS
12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
IN EXCHANGE FOR
12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus and the related Letter of Transmittal, in connection with the
Exchange Offer by the Company to exchange New Shares for Old Shares.
This will instruct you to tender the principal amount of Old Shares
indicated below held by you for the account of the undersigned, upon the
terms and subject to the conditions set forth in the Prospectus and the
related Letter of Transmittal.
The undersigned represents that (i) the New Shares acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of its business,
(ii) it is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the
distribution of such New Shares, and (iii) it is not an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company or, if it is an
affiliate, that it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
If the undersigned is a "broker" or "dealer" registered under the
Exchange Act that acquired Old Shares for its own account pursuant to its
market-making or other trading activities (other than Old Shares acquired
directly from the Company), the undersigned understands and acknowledges that
it may be deemed to be an "underwriter" within the meaning of the Securities
Act and, therefore, must deliver a prospectus relating to the New Shares
meeting the requirements of the Securities Act in connection with any resales
by it of New Shares acquired for its own account in the Exchange Offer.
Notwithstanding the foregoing, the undersigned does not thereby admit that it
is an "underwriter" within the meaning of the Securities Act.
You are hereby instructed to tender all Old Shares held for the account
of the undersigned unless otherwise indicated below:
/ / Do not tender any Old Shares
/ / Tender Old Shares in the number of _______________
SIGNATURE:
____________________________________________________
Name of Beneficial Owner (please print)
By__________________________________________________
Signature
____________________________________________________
Address
____________________________________________________
Zip Code
____________________________________________________
Area Code and Telephone Number
Dated: , 1997
<PAGE>
EXHIBIT 99.6
SCHEDULE II
DOBSON COMMUNICATIONS CORPORATION
SCHEDULE OF VALUATION ALLOWANCE ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT
OF YEAR EXPENSES DEDUCTIONS END OF YEAR
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Allowance for Doubtful
Accounts Receivable:
1997................................ 339,144 1,577,310 1,267,535 648,919
1996................................ 41,425 700,178 402,459 339,144
1995................................ 33,203 266,081 257,859 41,425
</TABLE>
Allowance for doubtful accounts are deducted from accounts receivable in the
balance sheet.
<PAGE>
EXHIBIT 99.7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Dobson Communications Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Dobson Communications Corporation
and subsidiaries included in the Form S-4 and have issued our report thereon
dated March 26, 1998. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed as exhibit
99.6 hereof, is the responsibility of the Company's management and is
presented for purposes of complying the Securities and Exchange Commission's
rules and is not part of the basic consolidated financial statements. This
schedule has been subjected to the auditing procedures applied in the audits
of the basic consolidated financial statements and, in our opinion, fairly
state in all material respects the financial data required to be set forth
therein in relation to the basic consolidated statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
March 26, 1998
