<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 2, 1999
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.
MCAFEE & TAFT A PROFESSIONAL CORPORATION
TENTH FLOOR, TWO LEADERSHIP SQUARE
211 NORTH ROBINSON
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: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement under the earlier effective registration statement for
the same offering. / /
------------------------
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, par value $1.00.............. 67,148 shares $1,000 $67,148,000 $18,668(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>
SUBJECT TO COMPLETION, DATED FEBRUARY 2, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PRELIMINARY PROSPECTUS
OFFER TO EXCHANGE
OUTSTANDING 12 1/4%
SENIOR EXCHANGEABLE PREFERRED STOCK
([ ] SHARES
OUTSTANDING)
FOR
12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
OF
DOBSON COMMUNICATIONS CORPORATION
TERMS OF EXCHANGE OFFER
- Expires 5:00 p.m., New York City time, , 1999, unless extended
- Not subject to any condition other than that the Exchange Offer not
violate applicable law or any applicable interpretation of the Staff of
the Securities and Exchange Commission
- All outstanding shares that are validly tendered and not validly withdrawn
will be exchanged
- Tenders of outstanding shares may be withdrawn any time prior to 5:00 p.m.
on the
business day prior to expiration of the Exchange Offer
- The exchange of shares will not be a taxable exchange for the U.S. federal
income tax purposes
- We will not receive any proceeds from the Exchange Offer
- The terms of the shares to be issued are substantially identical to the
outstanding shares, except for certain transfer restrictions and
registration rights relating to the outstanding notes
SEE "RISK FACTORS" BEGINNING ON PAGE 21 FOR A DISCUSSION OF CERTAIN MATTERS THAT
SHOULD BE CONSIDERED BY INVESTORS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES TO BE DISTRIBUTED IN THE
EXCHANGE OFFER, NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary.................................................................................................... 1
Risk Factors............................................................................................... 21
The Exchange Offer......................................................................................... 32
Selected Consolidated Financial and Other Data............................................................. 42
Pro Forma Condensed Consolidated Financial Data............................................................ 48
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 55
Business................................................................................................... 73
Management................................................................................................. 97
Principal Shareholders..................................................................................... 106
Description of the Preferred Stock......................................................................... 107
Description of the Exchange Debentures..................................................................... 133
Description of Certain Indebtedness........................................................................ 160
Description of Capital Stock............................................................................... 168
Federal Income Tax Considerations to U.S. Holders.......................................................... 176
Plan of Distribution....................................................................................... 186
Legal Matters.............................................................................................. 187
Experts.................................................................................................... 187
Certain Terms.............................................................................................. 188
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 us.
------------------------
The exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of our outstanding shares of 12 1/4% Senior Exchangeable
Preferred Stock 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.
------------------------
WHERE YOU CAN FIND MORE INFORMATION
This Prospectus constitutes a part of the registration statement (the
"Registration Statement") filed by us with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"). As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto. Therefore, we
make in this Prospectus reference to the Registration Statement and
ii
<PAGE>
to the exhibits and schedules thereto. For further information about us and
about the securities we hereby offer, you should consult the Registration
Statement and the exhibits and schedules thereto. You should be aware that
statements contained in this Prospectus concerning the provisions of any
documents filed as an exhibit to the Registration Statement or otherwise filed
with the Commission are not necessarily complete, and in each instance reference
is made to the copy of such document so filed. Each such statement is qualified
in its entirety by such reference.
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). As a result, we file periodic
reports, proxy statements and other information with the Commission. You may
read and copy reports, proxy statements and other information we file at the
public reference facilities maintained by the Commission at the Public Reference
Room, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Please
call the Commission at 1-800-SEC-0330 for further information on the public
reference facilities. Copies of documents we file can also be obtained at
prescribed rates by writing to the Commission, Public Reference Section, 450
Fifth Street, N.W., Washington, D.C. 20549. You may also access this information
electronically through the Commission's web page on the Internet at
http://www.sec.gov. This web site contains reports, proxy and information
statements and other information regarding registrants such as ourselves that
have filed electronically with the Commission. You may also access information
regarding us through our web page on the Internet at http://www.dobson.net.
The certificate of designation governing the outstanding shares of 12 1/4%
Senior Exchangeable Preferred Stock provides that we will furnish to the holders
of the 12 1/4% Senior Exchangeable Preferred Stock copies of the periodic
reports required to be filed with the Commission under the Exchange Act. Even if
we are not subject to the periodic reporting and informational requirements of
the Exchange Act, we will make such filings to the extent that such filings are
accepted by the Commission. We will make these filings regardless of whether we
have a class of securities registered under the Exchange Act. Furthermore, we
will provide the holders of the 12 1/4% Senior Exchangeable Preferred Stock
within 15 days after such filings with annual reports containing the information
required to be contained in Form 10-K, and quarterly reports containing the
information required to be contained in Form 10-Q promulgated by the Exchange
Act. From time to time, we will also provide such other information as is
required to be contained in Form 8-K promulgated by the Exchange Act. If the
filing of such information is not accepted by the Commission or is prohibited by
the Exchange Act, we will then provide promptly upon written request, at our
cost, copies of such reports to prospective purchasers of the 12 1/4% Senior
Exchangeable Preferred Stock.
iii
<PAGE>
SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER 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", THE "COMPANY", "OUR COMPANY" AND "WE" AS USED IN THIS
PROSPECTUS REFER TO DOBSON COMMUNICATIONS CORPORATION AND ITS PREDECESSORS AND
SUBSIDIARIES AS A COMBINED ENTITY, EXCEPT WHERE IT IS MORE CLEAR THAT SUCH TERMS
MEANS ONLY THE PARENT COMPANY. ALL REFERENCES TO "SYGNET" ARE TO SYGNET
WIRELESS, INC. AND ITS WHOLLY OWNED SUBSIDIARY, SYGNET COMMUNICATIONS, INC.
REFERENCE TO A FISCAL YEAR END RELATE TO A YEAR ENDING ON DECEMBER 31. YOU
SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH IN "RISK FACTORS" IN
EVALUATING THE COMPANY, ITS BUSINESS AND AN INVESTMENT IN THE PREFERRED STOCK.
CERTAIN CAPITALIZED TERMS USED IN THIS PROSPECTUS ARE DEFINED IN "CERTAIN
TERMS."
THE EXCHANGE OFFER
We completed on December 23, 1998 the private offering of $50.0 million of
12 1/4% Senior Exchangeable Preferred Stock. We entered into a registration
rights agreement with the initial purchaser in the private offering in which we
agreed, among other things, to deliver to you this Prospectus and to complete
the Exchange Offer within 180 days of the issuance of the 12 1/4% Senior
Exchangeable Preferred Stock. You are entitled to exchange in the Exchange Offer
your outstanding shares of 12 1/4% Senior Exchangeable Preferred Stock for
registered shares of 12 1/4% Senior Preferred Stock with substantially identical
terms. If the Exchange Offer is not completed by June 21, 1999, then the
dividend rate on the 12 1/4% Senior Exchangeable Preferred Stock will be
increased to 12 3/4% per year. You should read the discussion under the heading
"Summary Description of the Preferred Stock" and "Description of the Preferred
Stock" for further information regarding the registered 12 1/4% Senior
Exchangeable Preferred Stock.
We believe that the shares of 12 1/4% Senior Exchangeable Preferred Stock
issued in the Exchange Offer may be resold by you without compliance with the
registration and prospectus delivery provisions of the Securities Act, subject
to certain conditions. You should read the discussion under the headings
"Summary of the Terms of Exchange Offer" and "The Exchange Offer" for further
information regarding the Exchange Offer and resale of the shares of 12 1/4%
Senior Exchangeable Preferred Stock.
THE COMPANY
Our company is a leading provider of rural and suburban cellular telephone
services. Since we began providing our cellular service in 1990 in Oklahoma and
the Texas Panhandle, we have rapidly expanded our cellular operations with an
acquisition strategy targeting rural and suburban areas which have a significant
number of potential customers with substantial needs for cellular
communications. At September 30, 1998, our cellular systems covered a population
of 2.8 million in Arizona, California, Kansas, Maryland, Missouri, Oklahoma,
Pennsylvania and Texas. On December 23, 1998, our subsidiary acquired Sygnet
Wireless, Inc. and its subsidiary for $337.5 million in cash. Sygnet and its
subsidiary own and operate cellular telephone systems covering a population of
2.4 million in northeastern Ohio, western Pennsylvania and western New York. For
the nine months ended September 30, 1998, after giving pro forma effect to our
April 1, 1998 acquisition of California 4 RSA and to the Sygnet acquisition as
if each acquisition had occurred on January 1, 1997, we would have had revenue
of $176.5 million, an operating loss of $13.7 million and Adjusted EBITDA of
$75.9 million.
We believe that our mix of rural and suburban cellular systems generally
provides strong growth opportunities due to lower penetration rates, higher
subscriber growth rates and a higher proportion of roaming revenue compared to
cellular systems located in larger MSAs. We focus on systems that are adjacent
to major metropolitan areas and include a high concentration of expressway
corridors that tend to have a significant amount of roaming activity. We believe
these areas are not as fully developed as large MSAs, which were licensed
earlier by the FCC, and have the potential for increased cellular usage and
superior financial performance. We have entered into roaming agreements with
operators of cellular
1
<PAGE>
systems in neighboring MSAs and other MSAs that allow customers to roam at
competitive prices that, in certain instances, are comparable to our home area
rates.
We are organized to establish and maintain a strong and visible local
presence while achieving economies of scale and synergies through regional and
centralized functions. We have developed organizational, marketing and
operational programs designed to increase the number and retention of
subscribers, promote superior customer service, control subscriber acquisition
costs and enhance operating cash flow. We intend to apply these programs to the
properties we acquire. In addition to our acquisition of Sygnet, we recently
closed into escrow our acquisitions of the FCC licenses for, and certain assets
related to, Texas 10 RSA for $55.0 million in cash and Ohio 2 RSA for $39.3
million in cash. Recently, we entered into an agreement for the purchase of the
FCC licenses for, and certain assets related to, Maryland 1 RSA for $9.1 million
in cash, subject to adjustment.
The following table sets forth certain data with respect to our existing
cellular systems and the systems which have been or will be acquired in our
acquisitions of Sygnet, Texas 10 RSA, Ohio 2 RSA and Maryland 1 RSA
(collectively, the "Recent and Pending Acquisitions"):
<TABLE>
<CAPTION>
TOTAL TOTAL MARKET DATE
PROPERTIES POPS OWNERSHIP NET POPS SUBSCRIBERS(1) PENETRATION(2) ACQUIRED/EXPECTED
- ------------------------------------ ---------- ------------- ---------- ------------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CENTRAL REGION(3)
Oklahoma 5 and 7................... 148,500 64.4% 95,634 17,266 11.6% 1989
Texas Panhandle................... 88,500 61.0 53,985 14,328 16.2 1989
Northwest Oklahoma................ 105,100 100.0 105,100 6,938 6.6 1991
Kansas/Missouri................... 246,500 100.0 246,500 7,881 3.2 1996
Texas 16.......................... 334,000 100.0 334,000 5,761 1.7 1998
---------- ---------- -------------
Total........................... 922,600 835,219 52,174
---------- ---------- -------------
EASTERN REGION(4)
East Maryland...................... 453,700 100.0 453,700 33,942 7.5 1997
West Maryland..................... 441,000 100.0 441,000 28,248 6.4 1997
---------- ---------- -------------
Total........................... 894,700 894,700 62,190
---------- ---------- -------------
WESTERN REGION
Arizona 5.......................... 202,100 75.0 151,575 10,081 5.0 1997
California 7...................... 149,300 100.0 149,300 3,280 2.2 1998
California 4...................... 377,300 100.0 377,300 17,888 4.7 1998
Santa Cruz........................ 245,600 86.9 213,426 17,407 7.1 1998
---------- ---------- -------------
Total........................... 974,300 891,601 48,656
---------- ---------- -------------
Total--All Regions.................. 2,791,600 2,621,520 163,020
---------- ---------- -------------
RECENT AND PENDING ACQUISITIONS
Ohio 2(5)......................... 262,100 100.0 262,100 14,000(6) 5.3(6) September 1998
Texas 10(5)....................... 317,900 100.0 317,900 3,000(6) 0.9(6) December 1998
Sygnet(7)......................... 2,374,000 100.0 2,374,000 166,886(6) 7.0(6) December 1998
Maryland 1........................ 29,800 100.0 29,800 400(6) 1.3(6) March 1999
---------- ---------- -------------
Total--Acquisitions................. 2,983,800 2,983,800 184,286
---------- ---------- -------------
Total--All Properties............... 5,775,400 5,605,320 347,306
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
- ------------------------------
(1) As of September 30, 1998.
(2) Determined by dividing total subscribers by the total Pops covered by the
applicable FCC cellular license or authorizations held by us or our
subsidiaries.
(3) The Central Region consists of Oklahoma 5 RSA and Oklahoma 7 RSA, Texas 2
RSA, Enid, Oklahoma MSA, Oklahoma 2 RSA, Texas 16 RSA, Kansas 5 RSA,
Missouri 1 RSA, Missouri 4 RSA and Missouri 5 RSA. Our FCC licenses for
Oklahoma 5 RSA and Oklahoma 7 RSA do not include Kingfisher and Blaine
Counties, approximately one-half of Dewey County (total Pops
2
<PAGE>
estimated by us to be 3,000 for the area in Dewey County not covered by our
FCC license), Harmon and Greer Counties. We also own a 5% interest in a
partnership which owns the cellular system in Oklahoma 3 RSA which has total
Pops of 205,600. Information regarding Oklahoma 3 RSA is excluded because we
do not manage the system. Our license for Missouri 5 RSA covers only the
Linn County portion of the RSA.
(4) East Maryland consists of Maryland 2 RSA. West Maryland includes Cumberland,
Maryland MSA, Hagerstown, Maryland MSA, Maryland 3 RSA and Pennsylvania 10
West RSA. The FCC license for the Pennsylvania 10 West RSA covers only
Bedford County. Information for this RSA relates only to the area covered by
our FCC licenses. Upon the closing of the Maryland 1 Acquisition, Maryland 1
will become part of our West Maryland market area.
(5) We completed the acquisitions of the FCC licenses for Ohio 2 RSA on
September 2, 1998 and Texas 10 RSA on December 2, 1998. We are negotiating
with AirTouch in Ohio 2 RSA and with AT&T Wireless in Texas 10 RSA for the
purchase of subscribers and the lease of certain equipment necessary to
operate systems in each area. The purchase price for each of Ohio 2 RSA and
Texas 10 RSA is being held in escrow pending resolution of claims made
against the titles to the FCC licenses of our respective sellers. See "Risk
Factors--Recent Acquisitions."
(6) Based upon information provided by the sellers of the subscribers.
(7) Consists of the Youngstown, Ohio MSA, Sharon, Pennsylvania MSA, Ohio 11 RSA,
Erie, Pennsylvania MSA, New York 3 RSA, Pennsylvania 1 RSA, Pennsylvania 2
RSA, Pennsylvania 6 RSA and Pennsylvania 7 RSA. Sygnet had previously
operated Pennsylvania 2 RSA under an interim operating authority which was
terminated on June 3, 1997 when the FCC awarded a permanent license to
Pinellas Communications. On June 8, 1998, Sygnet entered into an agreement
to purchase Pennsylvania 2 RSA for $6.0 million in cash (the "Pennsylvania 2
Acquisition"). Since then, Sygnet has been operating Pennsylvania 2 RSA
under a management and lease agreement with the present owner of
Pennsylvania 2, which will continue in effect until the FCC's grant of the
license to the present owner is no longer subject to reconsideration or
judicial review.
BUSINESS STRATEGY
Our business strategy is to focus on the development and acquisition of
rural and suburban cellular systems. The principal elements of our strategy
include:
- integrating the operations of systems we acquire with our existing
cellular operations to achieve economies of scale.
- continuing to maintain and expand strategic relationships with operators
of cellular systems in major MSAs near our systems, including roaming
agreements which allow our subscribers to use the system in the
neighboring MSA at favorable rates.
- to distinguish ourself as the local market's leading cellular services
provider, stressing our service quality, local sales offices and
commitment to the community.
- attracting subscribers who are likely to generate high monthly revenue and
low churn rates.
- maintaining high levels of customer satisfaction through a variety of
techniques, including maintaining 24-hour customer service.
- increasing capacity and upgrading our systems to attract additional
subscribers, enhancing the use of its systems by existing subscribers,
increasing roaming activity and further enhancing the overall efficiency
of the network.
- continually evaluating opportunities to acquire additional rural and
suburban cellular systems.
OPERATIONS EXPECTED TO BE DISCONTINUED
Our wholly owned subsidiary, Logix Communications Enterprises, Inc.
("Logix,"), provides integrated local, long distance, data and other
telecommunications services to small and medium-sized business customers
throughout the Southwest United States. Logix operates long-haul fiber optic
facilities in Oklahoma, Texas and Colorado and incumbent local exchange services
in Oklahoma. Logix recently began offering switch-based integrated carrier
provider services in Oklahoma City, Tulsa and Amarillo. In
3
<PAGE>
addition, since our acquisition of American Telco, Inc. and its affiliate,
American Telco Network Services, Inc. on June 15, 1998, Logix has offered these
services in Houston, Austin, Dallas, Fort Worth and San Antonio.
We have designated Logix an unrestricted subsidiary with respect to the
12 1/4% Senior Exchangeable Preferred Stock. As an unrestricted subsidiary,
Logix is not subject to certain covenant restrictions which apply to the rest of
our operations. We intend to distribute the stock of Logix to certain of our
shareholders, subject to receipt of a favorable tax ruling from the Internal
Revenue Service. Holders of our 12 1/4% Senior Exchangeable Preferred Stock will
not participate in our distribution of Logix stock. Logix is accounted for as a
discontinued operation in our consolidated financial statements.
SYGNET ACQUISITION AND FINANCING PLAN
On December 23, 1998, our subsidiary, Dobson/Sygnet Communications Company,
acquired Sygnet and Sygnet became a subsidiary of Dobson/Sygnet Communications
Company. We paid $337.5 million in cash for all of the outstanding stock of
Sygnet. In order to finance the Sygnet acquisition, we consummated the following
transactions:
- we issued and sold $50.0 million of 12 1/4% Senior Exchangeable Preferred
Stock;
- we received gross proceeds of $115.0 million from the issuance of
preferred stock ranking junior to the 12 1/4% Senior Exchangeable
Preferred Stock (the "Equity Investments");
- we made an equity contribution to our subsidiary, Dobson/Sygnet
Communications Company, of $145.0 million;
- our subsidiary, Dobson/Sygnet Operating Company, obtained $430.0 million
of financing pursuant to senior secured credit facilities (the "New Credit
Facilities") from NationsBank, N.A., consisting of a $50.0 million
reducing revolving credit facility and $380.0 million of term loans;
- our subsidiary, Dobson/Sygnet Communications Company sold $200.0 million
aggregate principal amount of 12 1/4% Senior Notes due 2008 (the
"Dobson/Sygnet Notes"), of which $67.7 million was used to purchase a
portfolio of U.S. government securities (the "Pledged Securities") that
are pledged as security for the first six scheduled interest payments on
the Dobson/Sygnet Notes;
- Dobson/Sygnet Communications Company repaid a $25.0 million loan from us
used to make the deposit for the Sygnet Acquisition;
- all indebtedness outstanding under Sygnet's existing bank facility (the
"Sygnet Bank Facility") was repaid;
- Sygnet repurchased (the "Sygnet Note Repurchase") all of its outstanding
11 1/2% Senior Notes due 2006 (the "Sygnet Notes") pursuant to Sygnet's
offer to purchase the Sygnet Notes;
- we repurchased certain shares of our outstanding common and preferred
stock with a portion of the net proceeds of the Equity Investments and
borrowings under one of our existing bank facilities; and
- our subsidiary, Dobson Tower Company, purchased substantially all of the
cellular towers owned by Sygnet for $25.0 million in cash using funds
provided to Dobson Tower Company under a separate bank facility and from
the sale of preferred stock of Dobson Tower Company to our affiliate, and
leased the cellular towers back to Sygnet under operating leases (the
"Tower Sale Leaseback").
4
<PAGE>
The following table illustrates the sources and uses of funds for the Sygnet
acquisition (in millions):
<TABLE>
<CAPTION>
SOURCES OF FUNDS USES OF FUNDS
- -------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C>
Preferred Stock.............................. $ 50.0 Amount paid in the Sygnet
Equity Investments........................... 115.0 acquisition.................................. $ 337.5
Dobson/Sygnet Notes.......................... 200.0 Repayment of the Sygnet Bank Facility........ 198.8
New Credit Facilities........................ 407.0 Sygnet Note Repurchase....................... 136.1
Tower Sale Leaseback......................... 25.0 Purchase of Pledged Securities............... 67.7
Borrowings under existing credit Purchase of Class C Preferred Stock.......... 1.9
facilities................................. 15.0
Repurchase of Class A Common Stock........... 31.1
Fees and expenses............................ 38.9
--------- ---------
Total Sources of Funds................. $ 812.0 Total Uses of Funds.......................... $ 812.0
--------- ---------
--------- ---------
</TABLE>
5
<PAGE>
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to 67,148 outstanding
shares of our 12 1/4% Senior Exchangeable Preferred Stock including 64,646
shares initially issued on December 23, 1998 and additional shares of our
12 1/4% Senior Exchangeable Preferred Stock issued in the payment of dividends
thereon (the "Old Shares"), for an equal number of shares of our 12 1/4% Senior
Exchangeable Preferred Stock ("New Shares" and together with Old Shares the
"Preferred Stock"). The form and terms of the New Shares are identical in all
material respects to the form and terms of the outstanding Old Shares except
that the New Shares have been registered under the Securities Act of 1933, and
therefore are not entitled to the benefits of the registration rights granted
under the Registration Rights Agreement, executed as part of the offering of the
outstanding Old Shares, dated December 23, 1998 between the Company and
NationsBanc Montgomery Securities LLC, the Initial Purchaser in the private
offering.
<TABLE>
<S> <C>
Registration Rights Agreement..... You are entitled to exchange your Old Shares for
registered New Shares with substantially identical
terms. The Exchange Offer is intended to satisfy these
rights. After the Exchange Offer is complete, you will
no longer be entitled to any exchange or registration
rights with respect to your Shares.
The Exchange Offer................ We are offering to exchange one New Share for each Old
Share. All outstanding Old Shares that are validly
tendered and not validly withdrawn will be exchanged. In
order to be accepted, an outstanding Old Share must be
properly tendered and accepted. After consummation of
the Exchange Offer, holders of Old Shares which are not
exchanged will continue to be subject to the existing
restrictions upon the transfer of Old Shares and we will
have no further obligation to such holders to provide
for the registration of the Old Shares under the
Securities Act.
Resale of New Shares.............. Based on interpretations by the staff of the Commission
set forth in no-action letters issued to third parties,
including "Exxon Holdings Corporation" (available May
13, 1998) and "Morgan Stanley & Co. Incorporated"
(available June 5, 1991), we believe that the New Shares
issued in the Exchange Offer may be offered for resale,
resold and otherwise transferred by you without
compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that:
- the New Shares issued in the Exchange Offer are
being acquired in the ordinary course of business;
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the New Shares issued to you
in the Exchange Offer;
- you are not a broker-dealer who purchased such
outstanding Shares directly from us for resale
pursuant to Rule 144A or any other available
exemption under the Securities Act of 1933; and
- you are not an "affiliate" of the Company.
If our belief is inaccurate and you transfer any New
Shares issued to you in the Exchange Offer without
delivering a prospectus meeting the requirement of the
Securities Act or without an exemption from registration
of your New Shares from such requirements, you may incur
liability under the Securities Act. We do not assume or
indemnify you against such liability.
</TABLE>
6
<PAGE>
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Each broker-dealer that is issued New Shares in the
Exchange Offer for its own account in exchange for Old
Shares which were acquired by such broker-dealer as a
result of market-making or other trading activities,
must acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act, in
connection with any resale of the New Shares issued in
the Exchange Offer. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus,
such broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities
Act. A broker-dealer may use this Prospectus for an
offer to resell, resale or other retransfer of the New
Shares issued to it in the Exchange Offer. We have
agreed that for a period of 180 days after the date of
this Prospectus, we will make this Prospectus and any
amendment or supplement to this Prospectus available to
any such broker-dealer for use in connection with any
such resales. We believe that no registered holder of
the outstanding Old Shares is an affiliate (as such term
is defined in Rule 405 of the Securities Act) of the
Company.
The Exchange Offer is not being made to, nor will we
accept surrenders for exchange from, holders of
outstanding 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, , 1999, unless we decide to extend
the expiration date.
Accrued Dividends on the New
Shares and the Outstanding Old
Shares.......................... Dividends on the New Shares will accrue from January 15,
1999. Holders of outstanding Old Shares whose Old Shares
are accepted for exchange will be deemed to have waived
the right to receive any payment of dividends on such
outstanding Old Shares accrued from January 15, 1999 to
the date of the issuance of the New Shares.
Consequently, holders who exchange their outstanding Old
Shares for New Shares will receive the same dividend
payment on April 15, 1999 (the first dividend payment
date with respect to the outstanding Old Shares and the
New Shares to be issued in the Exchange Offer) that they
would have received had they not accepted the Exchange
Offer.
Termination of the Exchange
Offer........................... We may terminate the Exchange Offer if we determine that
our ability to proceed with the Exchange Offer could be
materially impaired due to any legal or governmental
action, new law, statute, rule or regulation or any
interpretation of the staff of the Commission of any
existing law, statute, rule or regulation. We do not
expect any of the foregoing conditions to occur,
although there can be no assurance that such conditions
will not occur. Holders of outstanding notes will have
certain rights against our Company under the
registration rights agreement executed as part of the
offering of the outstanding notes should we fail to
consummate the Exchange Offer.
</TABLE>
7
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<S> <C>
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 number of Old
Shares being tendered.
Procedures for Tendering
Old Shares...................... If you are a holder of Old Shares and you wish to tender
your Old Shares for exchange pursuant to the Exchange
Offer, you must transmit to United States Trust Company
of New York, as exchange agent, on or prior to the
Expiration Date:
either
- a properly completed and duly executed Letter of
Transmittal, which accompanies this Prospectus, or
a facsimile of the Letter of Transmittal,
including all other documents required by the
Letter of Transmittal, to the Exchange Agent at
the address set forth on the cover page of the
Letter of Transmittal; or
- a computer-generated message transmitted by means
of DTC's Automated Tender Offer Program system and
received by the Exchange Agent and forming a part
of a confirmation of book entry transfer in which
you acknowledge and agree to be bound by the terms
of the Letter of Transmittal;
and, either
- a timely confirmation of book-entry transfer of
your outstanding Old Shares into the exchange
Agent's account at The Depository Trust Company
("DTC") pursuant to the procedure for book-entry
transfers described in this Prospectus under the
heading "The Exchange Offer--Terms of the Exchange
Offer-- Procedures for Tendering Old Shares" must
be received by the Exchange Agent on or prior to
the Expiration Date; or
- the documents necessary for compliance with the
guaranteed delivery procedures described below.
By executing the Letter of Transmittal, each holder will
represent to us that, among other things, (i) the New
Shares to be issued in 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 nor any
such other person has an arrangement or understanding
with any person to participate in the distribution of
such New Shares and (iii) neither the holder nor any
such other person is our "affiliate," as defined in Rule
405 under the Securities Act of 1933.
Special Procedures for Beneficial
Owners.......................... If you are the beneficial owner of Old Shares and your
name does not appear on a security position listing of
DTC as the holder of such Old Shares or if you are a
beneficial owner of registered Old Shares that are
registered in the name of a broker, dealer, commercial
bank, trust company or other
</TABLE>
8
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<S> <C>
nominee and you wish to tender such Old Shares or
registered Old Shares in the Exchange Offer, you should
contact such person in whose name your Old Shares or
registered Old Shares are registered promptly and
instruct such person to tender on your behalf. If such
beneficial holder wished to tender on his own behalf
such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering its
outstanding Old Shares either make appropriate
arrangements to register ownership of the outstanding
Old Shares in such holder's name or obtain a properly
completed bond power from the registered holder. The
transfer of record ownership may take considerable time.
Guaranteed Delivery Procedures.... If you wish to tender your Old Shares and time will not
permit your required documents to reach the Exchange
Agent by the Expiration Date, or the procedure for
book-entry transfer cannot be completed on time or
certificates for registered notes cannot be delivered on
time, you may tender your Old Shares pursuant to the
procedures described in this Prospectus under the
heading "The Exchange Offer--Terms of the Exchange
Offer-- Guaranteed Delivery Procedures."
Withdrawal Rights................. You may withdraw the tender of your Old Shares at any
time prior to 5:00 p.m., New York City time, on
, 1999, the business day prior to the
Expiration Date, unless your notes were previously
accepted for exchange.
Acceptance of Outstanding Old
Shares and Delivery of New
Shares.......................... Subject to certain conditions (as summarized above in
"Termination of the Exchange Offer" and described more
fully under "The Exchange Offer--Conditions of the
Exchange Offer"), we will accept for exchange any and
all outstanding Old Shares notes which are properly
tendered in the Exchange Offer 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
promptly following the Expiration Date.
Certain U.S. Federal Income Tax
Consequences.................... The exchange of the Old Shares will generally not be a
taxable exchange for United States federal income tax
purposes. We believe you will not recognize any taxable
gain or loss or any income as a result of such exchange.
Use of Proceeds................... We will not receive any proceeds from the issuance of
New Shares pursuant to the Exchange Offer. We will pay
all expenses incident to the Exchange Offer.
Exchange Agent.................... United States Trust Company of New York is serving as
exchange agent in connection with the Exchange Offer.
The Exchange Agent can be reached at Corporate Trust
Administration, 114 West 47th Street, New York, NY
10036-1532. For more information with respect to the
Exchange Offer, the telephone number for the Exchange
Agent is (212) 852-1000 and the facsimile number for the
Exchange Agent is (212) 852-1625.
</TABLE>
9
<PAGE>
SUMMARY DESCRIPTION OF THE NEW SHARES
<TABLE>
<S> <C>
Securities Offered................ Shares of the Company's 12 1/4% Senior Exchangeable
Preferred Stock.
Dividends......................... Dividends on the Preferred Stock are payable in cash or,
on or before January 15, 2003, at our option, in
additional shares of Preferred Stock, on each January
15, April 15, July 15 and October 15, beginning January
15, 1999. For federal income tax purposes, we do not
expect these distributions with respect to the Preferred
Stock to qualify as dividends. Instead, we expect these
distributions to be treated as a return of capital until
we have earnings and profits as determined under
applicable federal income tax principles. See "Federal
Income Tax Considerations to U.S. Holders--Purchase,
Ownership and Disposition of the Preferred
Stock--Distributions on the Preferred Stock."
Liquidation Preference............ $1,000 per share, plus accrued dividends.
Voting............................ Holders of the Preferred Stock will have no voting
rights except as provided by law and as provided in the
certificate of designation for the Preferred Stock (the
"Certificate of Designation"). If we fail to pay
dividends for any four quarters, whether or not
consecutive, or upon certain other events (including our
failure to comply with covenants and to pay the
mandatory redemption price when due), then the number of
directors that make up our Board of Directors will be
increased to permit the holders of the majority of the
then outstanding shares of Preferred Stock, voting
separately as a class, to elect two directors.
Mandatory Redemption.............. We must redeem the Preferred Stock on January 15, 2008
(subject to the legal availability of funds) at a
redemption price equal to the liquidation preference,
plus accrued dividends to the redemption date.
Optional Redemption............... We may redeem any of the Preferred Stock beginning
January 15, 2003 at the redemption prices set forth in
this Prospectus.
Public Equity Offering Optional
Redemption...................... Before January 15, 2001, we may redeem up to 35% of the
aggregate liquidation preference amount of the Preferred
Stock at a redemption price equal to 112.250% of its
liquidation preference amount, plus unpaid dividends,
with net proceeds from a public offering of our common
stock if at least 65% of the aggregate liquidation
preference amount of Preferred Stock originally issued
remains outstanding.
Ranking........................... The Preferred Stock ranks:
- equally with our Senior Preferred Stock;
- senior to all classes of our common stock, our
Class A Preferred Stock, Class D Preferred Stock,
Class E Preferred Stock, Class F Preferred Stock,
Class G Preferred Stock, and Class H Preferred
Stock (each as defined herein), and to all of our
other capital stock;
</TABLE>
10
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<S> <C>
- equally with any of our capital stock the terms of
which expressly provide that it will rank equally
with the Preferred Stock; and
- junior to all of our capital stock the terms of
which expressly provide that such stock will rank
senior to the Preferred Stock. As of the date of
this Prospectus, all outstanding of our capital
stock, other than outstanding Senior Preferred
Stock, would rank junior to the Preferred Stock.
At September 30, 1998, the Company had $185.5
million liquidation preference of Senior Preferred
Stock outstanding.
Optional Exchange Feature......... We may exchange the Preferred Stock in whole but not in
part into Exchange Debentures, if the conditions
described in the Certificate of Designation are
satisfied.
Certain Covenants................. The Certificate of Designation contains certain
covenants that restrict our ability and the ability of
certain of our subsidiaries to:
- incur additional indebtedness and issue certain
capital stock,
- create liens,
- pay dividends on or make distributions in respect
of capital stock,
- redeem or repurchase our capital stock,
- make investments or certain other restricted
payments,
- sell assets,
- create restrictions on the ability of our
restricted subsidiaries to make certain payments,
- issue or sell stock of restricted subsidiaries,
- enter into transactions with our stockholders or
affiliates,
- incur senior subordinated indebtedness, or
- effect a consolidation or merger.
However, these limitations are subject to a number of
important qualifications and exceptions.
We have designated our subsidiaries, Logix,
Dobson/Sygnet Communications Company and Sygnet as
unrestricted subsidiaries. As a result, Logix,
Dobson/Sygnet Communications Company and Sygnet are not
subject to the covenants contained in the Certificate of
Designation.
Change of Control................. Upon certain change of control events, we must make an
offer to purchase the Preferred Stock at a purchase
price equal to 101% of the liquidation preference of the
Preferred Stock, plus unpaid dividends. See "Description
of the Preferred Stock."
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 dividends on, the
Preferred Stock
</TABLE>
11
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<S> <C>
outstanding on the Exchange Date (as defined under
"Description of the Preferred Stock").
Maturity.......................... January 15, 2008.
Interest Payment Dates............ January 15 and July 15 of each year, beginning with the
first of such dates to occur after the Exchange Date.
Before January 15, 2003, we may pay interest on the
Exchange Debentures by issuing additional Exchange
Debentures.
Optional Redemption............... We may redeem any of the Exchange Debentures beginning
January 15, 2003 at an initial redemption price of
106.125% of the principal amount of the Exchange
Debentures, declining thereafter to par after January
15, 2006, in each case plus accrued interest to the
redemption date.
Before January 15, 2001, we may redeem Exchange
Debentures having a principal amount of up to 35% of the
principal amount of the Exchange Debentures, at a
redemption price equal to 112.250% of the principal
amount of the Exchange Debentures, plus accrued
interest, with the proceeds of one or more sales of its
common stock. We may make such redemption only if such
redemption occurs within 180 days after completion of
such sale and after any such redemption at least 65% of
the aggregate principal amount of Exchange Debentures
originally issued remains outstanding.
Any optional redemption of Exchange Debentures must be
pro rata with the optional redemption of the Senior
Exchange Debentures that may be issued with respect to
the Senior Preferred Stock.
Ranking........................... The Exchange Debentures will be senior subordinated
indebtedness, ranking junior to all of our existing and
future Senior Indebtedness (as defined under
"Description of the Exchange Debentures") and senior to
all of our subordinated indebtedness. The Exchange
Debentures will rank equally with any Senior Exchange
Debentures that may be issued. At September 30, 1998,
assuming the Sygnet acquisition and its related
financing had been completed at that time, we would have
had $1,054.9 million of consolidated indebtedness
outstanding, and our subsidiaries would have had $894.9
million of indebtedness outstanding, all of which would
have been effectively senior to the Exchange Debentures.
Certain Covenants................. The indenture under which the Exchange Debentures would
be issued will contain certain covenants that restrict
our ability and the ability of certain of our
subsidiaries to:
- incur additional indebtedness,
- create liens,
- pay dividends on or make distributions in respect
of capital stock,
- redeem or repurchase our capital stock,
- make investments or certain other restricted
payments,
- sell assets,
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12
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<S> <C>
- create restrictions on the ability of our
restricted subsidiaries to make certain payments,
- issue or sell stock of restricted subsidiaries,
- enter into transactions with stockholders or
affiliates,
- incur senior subordinated indebtedness or
- effect a consolidation or merger.
However, these limitations would be subject to a number
of important qualifications and exceptions.
We have designated our subsidiaries, Logix,
Dobson/Sygnet Communications Company and Sygnet as
unrestricted subsidiaries. As a result, Logix,
Dobson/Sygnet Communications Company and Sygnet are not
subject to the covenants contained in the Exchange
Debenture indenture.
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 certain change of control events, we must make an
offer to purchase the Exchange Debentures at a purchase
price equal to 101% of the principal amount of the
Exchange Debentures, plus accrued interest. See
"Description of Exchange Debentures."
</TABLE>
RISK FACTORS
See "Risk Factors" for a discussion of factors you should carefully consider
before deciding to invest in the New Shares.
USE OF PROCEEDS
We will not receive any proceeds from the issuance of our New Shares
pursuant to this Prospectus.
13
<PAGE>
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
The following summary unaudited pro forma consolidated financial data were
derived from the pro forma condensed consolidated financial statements included
elsewhere in this Prospectus. The pro forma statement of operations data for the
year ended December 31, 1997 give effect to the consummation of the West
Maryland Acquisition and the Arizona 5 Acquisition and related financing and the
1998 Transactions (as such terms are defined under "Certain Terms"), including
the Sygnet acquisition and its related financing, as if they occurred on January
1, 1997. The pro forma statement of operations data for the nine months ended
September 30, 1998 give effect to the 1998 Transactions, including the Sygnet
acquisition and its related financing, as if they occurred on January 1, 1997.
The pro forma balance sheet data give effect to the Sygnet acquisition and its
related financing as if they occurred on September 30, 1998. The summary
unaudited pro forma consolidated financial data are based on currently available
information and certain assumptions that management believes are reasonable. The
pro forma financial information does not purport to represent what our results
of operations would have been if the Sygnet acquisition, the Sygnet Financing
and the other Transactions had been completed on the dates indicated, nor does
it purport to indicate the future financial position or results of our future
operations. The pro forma consolidated financial data should be read in
conjunction with "Use of Proceeds," "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 related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
<S> <C> <C>
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Operating revenue:
Service revenue....................................................... $ 105,475 $ 99,044
Roaming revenue....................................................... 66,463 73,005
Equipment sales....................................................... 6,566 2,994
Other revenue......................................................... 2,528 1,422
----------------- ----------
Total operating revenue............................................... 181,032 176,465
----------------- ----------
Operating costs and expenses:
Cost of services...................................................... 33,688 31,814
Cost of equipment..................................................... 14,863 13,390
Marketing and selling................................................. 24,804 26,094
General and administrative............................................ 31,129 29,264
Depreciation and amortization......................................... 106,933 89,617
----------------- ----------
Total operating expenses.............................................. 211,417 190,179
----------------- ----------
Operating loss.......................................................... (30,385) (13,714)
Interest expense........................................................ (88,092) (72,549)
Other income (expense), net............................................. 2,933 3,061
----------------- ----------
Loss before minority interests and taxes................................ (115,544) (83,202)
Minority interests in income of subsidiaries (1)........................ (1,531) (1,963)
Income tax benefit...................................................... 44,490 32,362
----------------- ----------
Loss from continuing operations before extraordinary items.............. (72,585) (52,803)
Extraordinary items (2)................................................. (1,350) (2,055)
Net loss from continuing operations..................................... (73,925) (54,858)
Dividends on preferred stock............................................ (54,924) (44,105)
----------------- ----------
Loss from continuing operations applicable to common stockholders....... $(128,859) $ (98,963)
----------------- ----------
----------------- ----------
OTHER FINANCIAL DATA:
Adjusted EBITDA (3)(4).................................................. $ 76,548 $ 75,903
Ratio of earnings to combined fixed charges and preferred stock
dividends (5)......................................................... -- --
Capital expenditures, excluding cost of acquisitions.................... 50,436 35,492
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE.)
14
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<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 SEPTEMBER 30, 1998
----------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
OTHER DATA:
Cellular subscribers (at period end).................................... 221,507 329,906
Cellular penetration (at period end) (6)................................ 4.3% 6.4%
Cellular churn (7)...................................................... 1.6% 1.6%
Average monthly revenue per cellular subscriber (8)..................... $ 39 $ 36
Marketing and selling costs per gross additional cellular subscriber
(9)................................................................... 307 350
Cellular cell sites (at period end)..................................... 298 391
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
--------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Net fixed assets....................................................................... $ 127,662
Total assets........................................................................... 1,654,974
Total debt............................................................................. 1,054,911
Mandatorily redeemable preferred stock................................................. 375,513
Stockholders' equity (deficit)......................................................... (128,162)
</TABLE>
- ------------------------------
(1) Reflects minority interests in partnerships in which we own the majority
interests.
(2) Extraordinary items reflect gain or (loss) related to early extinguishment
of debt.
(3) Adjusted EBITDA represents earnings before interest expense, income taxes,
depreciation, amortization, extraordinary items and changes in accounting
principles. Adjusted EBITDA is provided because it is a measure commonly
used in the telecommunications industry to determine a company's ability to
incur or service debt. Adjusted 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 Adjusted 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.
(4) Includes Adjusted EBITDA attributable to minority interests in subsidiaries
in which the Company owns a majority interest. The portion of Adjusted
EBITDA attributable to minority interests was $2.9 million for the year
ended December 31, 1997 and $3.7 million for the nine months ended September
30, 1998.
(5) On a pro forma basis, earnings would have been insufficient to cover
combined fixed charges and preferred stock dividends by $172.0 million for
the year ended December 31, 1997 and by $129.3 million for the nine months
ended September 30, 1998. "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.
(6) Determined by dividing our total ending cellular subscribers for the period
by the estimated total Pops covered by applicable FCC cellular licenses or
authorizations held by us.
(7) Churn means the number of cellular subscriber cancellations per period as a
percentage of the weighted average total cellular subscribers during such
period. Churn is stated as the average monthly churn rate for the period.
(8) Excludes roaming revenue and equipment revenue.
(9) Determined by dividing cellular marketing and selling costs by the gross
cellular subscribers added during each period. Cellular marketing and
selling costs represent selling expenses and losses incurred on equipment
sales.
15
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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables set forth certain historical financial data for Sygnet
and us. The summary historical financial data for us as of and for each of the
three years ended December 31, 1997 were derived from our audited consolidated
financial statements. The summary historical financial data for the Company as
of and for the nine months ended September 30, 1997 and 1998 were derived from
our unaudited consolidated financial statements which, in the opinion of
management, have been prepared on the same basis as our audited consolidated
financial statements and include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of our results of
operations and financial position for such periods and as of such dates. The
summary historical financial data for Sygnet as of and for each of the three
years ended December 31, 1997 were derived from Sygnet's audited consolidated
financial statements. The summary historical financial data for Sygnet as of and
for the nine months ended September 30, 1997 and 1998 were derived from Sygnet's
unaudited consolidated financial statements which, based on information
available to us from Sygnet, in the opinion of our management, have been
prepared on the same basis as Sygnet's audited consolidated financial statements
and include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of Sygnet's results of operations and
financial position for such periods and as of such dates. Operating results for
the nine months ended September 30, 1998 are not necessarily indicative of
results that may be expected for the full year. The historical consolidated data
should be read in conjunction with "Use of Proceeds," "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 of Sygnet and us, and the related notes
thereto, included elsewhere in this Prospectus.
16
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
1995 1996(1) 1997(2) 1997(3) 1998(4)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
STATEMENT OF OPERATIONS DATA:
Operating revenue:
Service revenue................................................ $ 13,949 $ 17,593 $ 38,410 $ 26,487 $ 47,769
Roaming revenue................................................ 4,370 7,852 26,262 17,782 45,916
Equipment sales revenue........................................ 671 662 1,455 741 2,503
Other revenue.................................................. 693 832 587 703 158
--------- --------- --------- --------- ---------
Total operating revenue........................................ 19,683 26,939 66,714 45,713 96,346
--------- --------- --------- --------- ---------
Operating expenses:
Cost of service................................................ 4,654 6,119 16,431 10,932 22,603
Cost of equipment.............................................. 2,013 2,571 4,046 2,834 5,166
Marketing and selling.......................................... 3,103 4,462 10,669 6,913 14,856
General and administrative..................................... 3,035 3,902 11,555 8,137 16,219
Depreciation and amortization.................................. 2,529 5,241 16,798 11,943 29,714
--------- --------- --------- --------- ---------
Total operating expenses....................................... 15,334 22,295 59,499 40,759 88,558
--------- --------- --------- --------- ---------
Operating income................................................. 4,349 4,644 7,215 4,954 7,788
Interest expense................................................. (1,854) (4,284) (27,640) (17,646) (25,039)
Other income (expense), net...................................... (210) (1,503) 2,777 1,854 3,304
Minority interests in income of subsidiaries (5)................. (1,334) (675) (1,693) (1,315) (1,963)
Income tax (provision) benefit................................... (347) 593 3,625 499 4,864
--------- --------- --------- --------- ---------
Income (loss) from continuing operations before
extraordinary items............................................ 604 (1,225) (15,716) (11,654) (11,046)
--------- --------- --------- --------- ---------
Income (loss) from discontinued operations....................... 500 331 332 1,652 (17,185)
Extraordinary items (6).......................................... -- (527) (1,350) (2,186) (2,644)
--------- --------- --------- --------- ---------
Net income (loss)................................................ 1,104 (1,421) (16,734) (12,188) (30,875)
Dividends on preferred stock..................................... (591) (849) (2,603) (727) (16,749)
--------- --------- --------- --------- ---------
Net income (loss) applicable to common stockholders.............. $ 513 $ (2,270) $ (19,337) $ (12,915) $ (47,624)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OTHER FINANCIAL DATA:
Adjusted EBITDA (7)(8)........................................... $ 6,878 $ 9,885 $ 24,013 $ 16,897 $ 37,502
Ratio of earnings to combined fixed charges and
preferred stock dividends (9).................................. 1.35x -- -- -- --
Capital expenditures, excluding cost of acquisitions............. $ 3,925 $ 17,438 $ 23,216 $ 13,781 $ 41,528
OTHER DATA:
Cellular subscribers (at period end)............................. 26,614 33,955 100,093 85,185 163,020
Cellular penetration (at period end) (10)........................ 8.0% 5.8% 6.1% 5.8% 5.8%
Cellular churn (11).............................................. 1.5% 1.8% 1.9% 2.2% 1.9%
Average monthly revenue per cellular subscriber (12)............. $ 50 $ 48 $ 41 $ 41 $ 40
Marketing and selling costs per gross additional
cellular subscriber (13)....................................... $ 451 $ 540 $ 398 $ 407 $ 399
Cellular cell sites (at period end).............................. 46 67 135 117 210
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
---------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Net fixed assets.......................................................................... $ 76,360
Total assets.............................................................................. 701,041
Total debt................................................................................ 448,056
Mandatorily redeemable preferred stock.................................................... 197,136
Stockholders' deficit..................................................................... (84,296)
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE.)
17
<PAGE>
(1) Includes the operations of our Kansas/Missouri properties from March 19,
1996, the date we acquired them.
(2) Includes the operations of West Maryland, East Maryland and Arizona 5 from
the dates they were acquired by the Company. West Maryland was acquired on
February 28, 1997, East Maryland on March 3, 1997 and Arizona 5 on October
1, 1997.
(3) Includes the operations of West Maryland and East Maryland from the dates
we acquired them.
(4) Includes the operations of Texas 16, California 4, Santa Cruz and
California 7 from the dates we acquired them. Texas 16 was acquired on
January 26, 1998; California 4 on April 1, 1998, Santa Cruz on June 16,
1998; and California 7 on July 29, 1998.
(5) Reflects minority interests in partnerships in which we own the majority
interests.
(6) Extraordinary items reflect gain or (loss) related to early extinguishment
of debt.
(7) Adjusted EBITDA represents earnings before interest expense, income taxes,
depreciation, amortization, extraordinary items and changes in accounting
principles. Adjusted EBITDA is provided because it is a measure commonly
used in the telecommunications industry to determine a company's ability to
incur or service debt. Adjusted 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 Adjusted EBITDA does not
include our commitments for capital expenditures or payments of debts and
should not be deemed to represent funds available to us.
(8) Includes Adjusted EBITDA attributable to minority interests in subsidiaries
in which we own a majority interest. The portion of Adjusted EBITDA
attributable to minority interests was $2.0 million, $2.3 million, $2.9
million, $2.0 million and $3.7 million for the years ended December 31,
1995, 1996 and 1997 and for the nine months ended September 30, 1997 and
1998, respectively.
(9) Earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $2.3 million for the year ended December 31, 1996, by
$21.6 million for the year ended December 31, 1997, by $11.2 million for
the nine months ended September 30, 1997 and by $49.8 million for the nine
months ended September 30, 1998. "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 our total ending cellular subscribers for the
period by the estimated total Pops covered by applicable FCC cellular
licenses.
(11) Churn means the number of cellular subscriber cancellations per period as
a percentage of the weighted average total cellular subscribers during
such period. Churn is stated as the average monthly churn rate for the
period.
(12) Excludes roaming and equipment revenue.
(13) Determined by dividing cellular marketing and selling costs by the gross
cellular subscribers added during each period. Cellular marketing and
selling costs represent selling expenses and losses incurred on equipment
sales.
18
<PAGE>
SYGNET WIRELESS, INC.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------- ------------------------
1995(1) 1996(2) 1997 1997 1998
--------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Subscriber revenue............................................. $ 17,191 $ 31,085 $ 52,639 $ 38,531 $ 46,738
Roaming revenue................................................ 4,176 9,687 26,993 19,868 24,753
Equipment sales................................................ 1,529 2,417 4,323 3,051 4,253
Other revenue.................................................. 1,681 1,607 1,679 1,308 1,190
--------- ----------- ----------- ----------- -----------
Total revenue.................................................. 24,577 44,796 85,634 62,758 76,934
--------- ----------- ----------- ----------- -----------
Costs and expenses:
Cost of services............................................... 3,366 5,509 10,048 7,175 9,005
Cost of equipment sales........................................ 4,164 5,816 9,663 6,806 7,790
General and administrative..................................... 5,564 9,852 16,976 11,667 14,665
Selling and marketing.......................................... 3,082 6,080 10,841 7,466 9,057
Depreciation and amortization.................................. 3,487 10,038 28,719 21,143 21,343
--------- ----------- ----------- ----------- -----------
Total costs and expenses....................................... 19,663 37,295 76,247 54,257 61,860
--------- ----------- ----------- ----------- -----------
Operating income................................................. 4,914 7,501 9,387 8,501 15,074
Interest expense................................................. (2,660) (11,174) (29,902) (22,558) (21,613)
Other income (expense), net...................................... (304) (195) (101) 6 (340)
--------- ----------- ----------- ----------- -----------
Income (loss) before extraordinary item.......................... 1,950 (3,868) (20,616) (14,051) (6,879)
Extraordinary loss on extinguishment of debt..................... -- (1,420) -- -- --
--------- ----------- ----------- ----------- -----------
Net income (loss)................................................ $ 1,950 $ (5,288) $ (20,616) $ (14,051) $ (6,879)
--------- ----------- ----------- ----------- -----------
--------- ----------- ----------- ----------- -----------
OTHER FINANCIAL DATA:
Adjusted EBITDA (3)............................................ $ 8,401 $ 17,539 $ 38,106 $ 29,644 $ 36,417
Ratio of earnings to combined fixed charges and preferred stock
dividends (4)................................................ 1.67x -- -- -- --
Capital expenditures, excluding cost of acquisitions........... $ 9,056 $ 10,050 $ 25,576 $ 16,979 $ 11,469
OTHER DATA:
Cellular subscribers (at period end)........................... 44,665 106,574 142,934 130,146 166,886
Cellular penetration (at period end) (5)....................... 4.4% 4.5% 6.0% 5.5% 7.0%
Cellular churn (6)............................................. 1.4% 1.3% 1.3% 1.3% 1.5%
Average monthly revenue per cellular subscriber (7)............ $ 46 $ 42 $ 36 $ 36 $ 34
Marketing and selling costs per gross additional cellular
subscriber (8)............................................... $ 370 $ 321 $ 291 $ 306 $ 287
Cellular cell sites (at period end)............................ 41 114 163 152 181
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
---------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Property and equipment, net............................................................... $ 52,138
Total assets.............................................................................. 333,296
Total debt................................................................................ 302,644
Stockholders' equity...................................................................... 12,339
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE.)
19
<PAGE>
(1) Includes the operations of system acquired in the Erie Acquisition (as
defined herein) from September 29, 1995, the date of acquisition.
(2) Includes the operations of systems acquired in the Horizon Acquisition (as
defined herein) from October 9, 1996, the date of acquisition.
(3) Adjusted EBITDA represents earnings before interest expense, income taxes,
depreciation, amortization expense, extraordinary items and changes in
accounting principles. Adjusted EBITDA is provided because it is a measure
commonly used in the telecommunications industry to determine a company's
ability to incur or service debt. Adjusted EBITDA is not derived according
to generally accepted accounting principles and should not be considered as
an alternative to net income, as a measure of performance, or to cash flows,
as a measure of liquidity. The calculation of Adjusted EBITDA does not
include Sygnet's commitments for capital expenditures or payments of debts
and should not be deemed to represent funds available to the Company.
(4) Earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $4.6 million for the year ended December 31, 1996, by
$22.7 million for the year ended December 31, 1997, by $16.2 million for the
nine months ended September 30, 1997 and by $6.6 million for the nine months
ended September 30, 1998. "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.
(5) Determined by dividing Sygnet's total ending cellular subscribers for the
period by the estimated total Pops covered by applicable FCC cellular
licenses or authorizations held by Sygnet.
(6) Churn means the number of cellular subscriber cancellations per period as a
percentage of the weighted average total cellular subscribers during such
period. Churn is stated as the average monthly churn rate for the period.
(7) Excludes roaming and equipment revenue.
(8) Determined by dividing cellular marketing and selling costs by the gross
cellular subscribers added during each period. Cellular marketing and
selling costs represent selling expenses and losses incurred on equipment
sales and equipment rentals.
20
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS, AS WELL AS THE OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS, IN EVALUATING US AND OUR BUSINESS.
SIGNIFICANT INDEBTEDNESS
We are highly leveraged. At September 30, 1998, assuming that our
acquisition of Sygnet and the related financing were completed at that time, we
would have had approximately $1,054.9 million of consolidated indebtedness, all
of which would rank senior to the Preferred Stock, $375.5 million aggregate
liquidation preference of mandatorily redeemable preferred stock, a deficit in
consolidated stockholders' equity of $128.2 million and $206.6 million of
availability (subsequent to which $55.0 million was borrowed to fund the
December 2, 1998 Texas 10 Acquisition) under the New Credit Facilities and the
Existing Credit Facilities. The Certificate of Designation also allows us to
incur additional indebtedness in the future. At December 31, 1997, assuming that
the West Maryland Acquisition, the Arizona 5 Acquisition and its related
financing, and the 1998 Transactions, including our acquisition of Sygnet and
the Sygnet Financing were completed at that time, our Adjusted EBITDA minus
interest expense, preferred stock dividends and capital expenditures (excluding
acquisition costs) would have been $(116.9) million, and our earnings would have
been insufficient to cover our fixed charges and preferred stock dividends by
$172.0 million. For the nine months ended September 30, 1998, under the same
assumptions, our Adjusted EBITDA minus interest expense, preferred stock
dividends and capital expenditures (excluding acquisition costs) would have been
$(76.2) million, and our earnings would have been insufficient to cover our
fixed charges and preferred stock dividends by $129.3 million. See "Description
of the Preferred Stock," "Description of the Exchange Debentures," "Description
of Certain Indebtedness" and "Description of Capital Stock."
In addition, we have designated our subsidiaries, Logix, Dobson/Sygnet
Communications Company ("Dobson/Sygnet") and Sygnet as unrestricted subsidiaries
and they will not be subject to the covenants contained in the Certificate of
Designation. There will be no limit under the Certificate of Designation on the
amount of debt that Logix, Dobson/Sygnet and Sygnet will be able to incur, or on
their ability to create liens.
Our level of indebtedness could have important consequences, including:
- the debt service requirements could make it more difficult for us to make
cash dividend payments on the Preferred Stock or cash interest payments on
the Exchange Debentures, if issued;
- our ability to borrow additional money for working capital, capital
expenditures, debt service or dividend payment requirements or other
purposes will be limited;
- a substantial portion of our future cash flow from operations, if any,
will be required to pay principal and interest payments on its
indebtedness and will not be available for our business;
- our flexibility in planning for, or reacting to changes in, our business
and our ability to take advantage of future business opportunities may be
restricted;
- we may be more highly leveraged than certain of our competitors, which may
place us at a competitive disadvantage; and
- our high degree of leverage could make us more vulnerable in the event of
a downturn in our business.
SUBSTANTIAL CAPITAL REQUIREMENTS
We have required, and will likely continue to require, substantial capital
to further develop and expand our cellular systems. We have budgeted $30.2
million for capital expenditures in 1998, of which we have expended $23.7
million as of September 30, 1998. We have budgeted $50.2 million for capital
expenditures in 1999, approximately $40.0 million of which is for the purchase
of cell site and switching equipment. These amounts include expenditures related
to the systems that we will acquire in the Recent
21
<PAGE>
and Pending Acquisitions other than acquisition costs. We have not budgeted any
amounts to be expended in 1999 with respect to the buildout of our PCS systems.
See "--PCS Risks." We may require additional financing for future acquisitions
and for buildout requirements related to our PCS licenses.
Sources of additional capital for us may include public and private equity
and debt financings, including vendor financing. The extent of additional
financing that we will require will depend on the success of our operations. We
may not be able to obtain any additional financing on terms acceptable to us and
within the limitations contained in the Certificate of Designation, the
certificate of designation for the Senior Preferred Stock, the indenture
relating to our 11 3/4% Senior Notes due 2007 (the "Senior Notes Indenture"),
the certificates of designation for each of our other series of preferred stock,
the terms of the Existing Credit Facilities and New Credit Facilities, our other
indebtedness or any future financing arrangements. See "Description of the
Preferred Stock," "Description of the Exchange Debentures," "Description of
Certain Indebtedness" and "Description of Capital Stock."
ABILITY TO MEET REQUIRED DEBT SERVICE AND DIVIDEND OBLIGATIONS
We have experienced and will experience a substantial increase in total
indebtedness and in debt service and dividend requirements as a result of the
Transactions, and we and our subsidiaries are, and will continue to be, subject
to significant financial restrictions and limitations. In order for us to be
able to meet debt service and dividend requirements, including obligations under
the Senior Notes, the Senior Preferred Stock, the Preferred Stock, the
Dobson/Sygnet Notes and the Credit Facilities, we must successfully implement
our strategy. Our business strategy is to focus on increasing market
penetration, integrating the operations of acquired systems and further
developing our cellular systems. We cannot assure you that we will successfully
implement our strategy or that we will be able to generate sufficient cash flow
from operating activities to meet debt service and dividend obligations, as well
as other cash requirements, including for working capital and capital
expenditures. Furthermore, if we are unable to satisfy any of the covenants
under the Credit Facilities, including financial covenants, we will be unable to
borrow under these facilities during that time. Our inability to access such
financing could result in the delay or abandonment of some or all of our plans,
which could limit our ability to meet debt service and dividend obligations and
could have a material adverse effect on our business. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." The instruments governing certain
of our indebtedness, including the Credit Facilities, contain provisions making
it an event of default if we or certain of our subsidiaries fail to pay or
perform certain obligations under other indebtedness, including the Logix Notes.
See "--Covenant Restrictions." Our ability to borrow under the Credit Facilities
will be limited by the requirement that, on a quarterly basis beginning June 30,
2000, the amount available under the Existing Credit Facilities will reduce
until the facilities terminate in June 2006, and beginning December 2000, the
amount available under the New Credit Facilities will reduce until the facility
terminates in December 2007. The reduction in availability may require that we
make significant principal payments thereunder. See "Description of the
Preferred Stock," "Description of the Exchange Debentures" and "Description of
Certain Indebtedness."
NEED TO REFINANCE OUR INDEBTEDNESS
We will need to refinance our indebtedness under the Credit Facilities, the
Senior Notes and the Dobson/Sygnet Notes at their respective maturities. We will
also need to refinance our mandatory redemption obligations under our preferred
stock. Our ability and that of our subsidiaries to do so will depend on, among
other things, our financial condition at the time, the restrictions in the
instruments governing the indebtedness and other factors, including market
conditions, beyond our control. The Existing Credit Facilities and the New
Credit Facilities mature in 2006 and 2007, respectively, and require substantial
mandatory prepayments prior to such dates. Our outstanding Senior Notes ($160.0
million principal amount) mature April 15, 2007; and the Dobson/Sygnet Notes
($200.0 million principal amount) mature December 15, 2008. We are required to
redeem the Senior Preferred Stock and the Preferred Stock on January 15, 2008 at
a redemption price of 100% of their liquidation preference plus unpaid
dividends. See "--Ability of the Company to Pay Cash Interest or Cash Dividends
on the Preferred Stock."
22
<PAGE>
We are required to redeem outstanding shares of our Class D Preferred Stock and
Class E Preferred Stock at a redemption price of 100% of their liquidation
preference (an aggregate of $85.0 million) plus accrued and unpaid dividends
upon vote of the holders of a majority of the outstanding shares of each class,
after December 31, 2013 or upon our completion of an initial public offering of
our common stock. We are required to redeem outstanding shares of our Class F
Preferred Stock at a redemption price of 130% of the liquidation preference plus
unpaid dividends at December 31, 2013. We are required to redeem outstanding
shares of our Class G Preferred Stock and Class H Preferred Stock at a
redemption price of 100% of their liquidation preference (an aggregate of $25.0
million) plus unpaid dividends, upon the vote of the holders of a majority of
the outstanding shares of each class, after December 31, 2013 or upon our
completion of an initial public offering of our common stock. See "Description
of the Preferred Stock," "Description of the Exchange Debentures," "Description
of Certain Indebtedness" and "Description of Capital Stock." If any of this
indebtedness or preferred stock cannot be refinanced, it may cause a default
thereunder and under other of our obligations and those of our subsidiaries. In
addition, in the event the implementation of our strategy to develop and expand
our systems is delayed or we do not generate sufficient cash flow to meet our
debt service requirements or obligations with respect to our preferred stock, we
may need to seek additional financing. We cannot assure you that we could obtain
any such financing or refinancing on terms that are acceptable to us, if at all.
If we cannot obtain such financing or refinancing, we could be forced to dispose
of assets in order to make up for any shortfall. At September 30, 1998,
approximately 69.3% of our total assets consisted of intangible assets,
principally licenses granted by the FCC (80.3% on a pro forma basis, after
giving effect to the Sygnet Acquisition and Sygnet Financing). The value of our
intangible assets will depend upon a variety of factors, including the success
of our 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, we cannot assure you that our assets could be sold
quickly enough, or for sufficient amounts, to enable us to meet our obligations,
including our obligations with respect to the Senior Preferred Stock and
Preferred Stock.
SUBORDINATE RANKING OF PREFERRED STOCK AND EXCHANGE DEBENTURES
The Preferred Stock ranks junior to all of our present and future
indebtedness and other liabilities, equally with the Senior Preferred Stock, and
senior to all classes of our common stock and all Other Preferred Stock. In the
event of our bankruptcy, liquidation or reorganization, our assets will be
available to pay obligations on the Preferred Stock only after all of our
outstanding indebtedness and other liabilities have been paid in full, and there
may not be sufficient assets remaining to pay amounts payable on the Senior
Preferred Stock and the Preferred Stock. The Preferred Stock also effectively
ranks junior to all liabilities, including indebtedness, of our subsidiaries. At
September 30, 1998, assuming that the Sygnet acquisition and Sygnet Financing
were completed at that time, we would have had approximately $1,151.7 million of
consolidated indebtedness and other liabilities, excluding deferred credits for
income taxes, outstanding ranking senior to the Preferred Stock and our
subsidiaries would have had $976.7 million of liabilities, excluding deferred
credits for income taxes. See "--Leverage," "--Ability to Meet Required Debt
Service and Dividend Obligations" and "Description of the Preferred
Stock--Ranking."
If the Preferred Stock is exchanged for Exchange Debentures, the Exchange
Debentures will rank junior to all of our Senior Indebtedness (as such term is
defined under "Description of the Exchange Debentures"), including indebtedness
under the Senior Notes and the Existing Credit Facilities. The Exchange
Debentures will also rank effectively junior to all liablities, including
indebtedness, of our subsidiaries. In the event of our bankruptcy, liquidation
or reorganization, we will be able to pay obligations on the Exchange Debentures
only after all of our outstanding Senior Indebtedness has been paid in full, and
there may not be sufficient assets remaining to pay amounts payable on the
Exchange Debentures.
The Preferred Stock permits us to issue as dividends additional preferred
stock which ranks equally with the Preferred Stock. The Exchange Debentures
permit us to issue as interest additional exchange debentures which rank equally
with the Exchange Debentures. The Preferred Stock and the Exchange Debenture
also permit us and our subsidiaries to incur additional indebtedness and issue
additional
23
<PAGE>
preferred stock, subject to certain limitations. Such additional indebtedness
may rank senior to, equally with or junior to the Exchange Debentures, while
additional indebtedness of the subsidiaries will effectively rank senior to the
Exchange Debentures. Such additional preferred stock may rank senior (subject to
a majority vote of the Preferred Stock), equally or junior to the Preferred
Stock.
DEPENDENCE ON CASH FLOWS FROM SUBSIDIARIES
We are a holding company with no direct operations and no significant assets
other than the stock of our subsidiaries. We depend on the cash flows of our
subsidiaries to meet our obligations, including our obligations to pay interest
and principal on the Senior Notes, and dividends on the Senior Preferred Stock
and Preferred Stock. The ability of our subsidiaries to distribute funds to us
will be restricted by the terms of existing and future indebtedness including
the Credit Facilities. See "Description of Certain Indebtedness--The Credit
Facilities."
Our subsidiaries are separate legal entities that have no obligation to pay
any amounts due with respect to the Preferred Stock and, if issued, the Exchange
Debentures or to make any funds available to us. As a result, if any of our
subsidiaries liquidate their assets, our right to any of the proceeds (and the
consequent right of the holders of the 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, including the Dobson/Sygnet Notes and the Credit Facilities). We
will not be subordinated to such creditors if we are a creditor of such
subsidiary, in which case our claims would still be effectively subordinated to
any security interest in the assets of such subsidiary senior to that held by
us.
FUTURE ABILITY TO PAY CASH DIVIDENDS ON THE PREFERRED STOCK
Dividends on the Preferred Stock must be paid in cash commencing January 15,
2003. Under the Senior Note Indenture, we may pay cash dividends and make other
distributions on or in respect of our capital stock, including the Senior
Preferred Stock and Preferred Stock, only if certain financial tests are met. In
addition, the Credit Facilities limit the amount of cash available for
dividends, loans and cash distributions to us from our subsidiaries. Currently,
the restrictions contained in the Senior Note Indenture and the Credit
Facilities would prohibit us from paying cash dividends and would also prohibit
the issuance of the Exchange Debentures in exchange for Preferred Stock. We
cannot assure you that our existing or future financing arrangements will permit
us to pay cash dividends on the Preferred Stock beginning January 15, 2003. In
the event that any of our financing agreements limit our ability to pay cash
dividends on the Preferred Stock when required, we will need to obtain waivers
of the limitation or refinance amounts outstanding under such agreements to make
such dividend payments. We cannot assure you that we would be able to obtain
waivers or refinance amounts outstanding under such agreements. Our failure to
pay cash dividends on the Preferred Stock could result in a Voting Rights
Triggering Event (as defined under "Description of the Preferred Stock").
RESTRICTIONS IN GOVERNING INSTRUMENTS ON OUR OPERATIONS
The instruments governing our indebtedness and that of our subsidiaries, the
Certificate of Designation and the certificates of designation with respect to
the Senior Preferred Stock and the Other Preferred Stock impose significant
operating and financial restrictions on us and our subsidiaries. Such
restrictions significantly restrict, among other things, our ability and that of
our 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 Credit Facilities
require the maintenance of certain financial ratios. These restrictions could
also limit our ability and that of our subsidiaries to obtain future financings,
make needed capital expenditures, withstand a future downturn in our business or
the economy in general, or otherwise conduct necessary corporate activities. Our
failure or that of our subsidiaries to comply with these restrictions could lead
to a default under the terms of such indebtedness even though we are able to
meet debt service and dividend obligations. In the event of a default, the
holders of such indebtedness
24
<PAGE>
could elect to declare all such indebtedness to be due and payable and the
holders of Preferred Stock could obtain representation on our board of
directors. We cannot assure you that we and our subsidiaries would be able to
make such payments or borrow sufficient funds from alternative sources to make
any such payment. Even if we could obtain additional financing, we cannot assure
you that we could obtain financing on terms that are acceptable to us. In
addition, indebtedness under each of the Existing Credit Facilities is secured
by liens on assets. The pledge of our assets to existing lenders could impair
our ability to obtain favorable financing. See "Description of Certain
Indebtedness" and "Description of Capital Stock."
POSSIBLE INABILITY TO REPURCHASE OF PREFERRED STOCK OR EXCHANGE DEBENTURES UPON
A CHANGE OF CONTROL
We must offer to purchase the Preferred Stock or Exchange Debentures upon
the occurrence of a Change of Control at a purchase price equal to 101% of their
liquidation preference plus accrued dividends or principal amount plus accrued
interest, as the case may be. See "Description of the Preferred Stock--Change of
Control" and "Description of the Exchange Debentures--Change of Control."
The Credit Facilities, the Senior Note indenture and the certificate of
designation for the Senior Preferred Stock will prohibit us from prepaying the
Preferred Stock or the Exchange Debentures, including required prepayments
following a Change of Control. Prior to commencing an offer to purchase, we
would be required to (1) repay in full all indebtedness and purchase all of our
preferred stock and that of our subsidiaries that would prohibit the repurchase
of the Preferred Stock or the Exchange Debentures, as the
case may be, including indebtedness under the Credit Facilities, the Senior Note
Indenture and the certificate of designation for the Senior Preferred Stock, or
(2) obtain any consents required to permit the repurchase. If we are unable to
repay all of such indebtedness or are unable to obtain the necessary consents,
then we will be unable to offer to purchase the Preferred Stock or the Exchange
Debentures, resulting in a Voting Rights Triggering Event under the Preferred
Stock or an event of default under the Indenture. We cannot assure you that we
will have enough funds available at the time of any Change of Control offer to
make any debt payment (including repurchases of Preferred Stock or the Exchange
Debentures) as described above.
The events that constitute a Change of Control under the Certificate of
Designation or the Indenture, as the case may be, may also be events of default
under the Credit Facilities, the Senior Note Indenture and the certificate of
designation for the Senior Preferred Stock or our other indebtedness and that of
our subsidiaries. Such events may permit the lenders under such debt to declare
the debt due and payable and, if the debt is not paid, to require that we or our
subsidiaries sell assets that secure such debt in order to repay the lenders.
Similarly, a default under the Senior Preferred Stock could entitle the holders
thereof to obtain representation on our board of directors. In any such case,
our ability to raise cash to repurchase the Preferred Stock or the Exchange
Debentures, as the case may be, would be limited and would reduce the practical
benefit of the offer to purchase provisions to the holders of the Preferred
Stock or the Exchange Debentures. See "Description of Certain Indebtedness."
ACQUISITIONS; ABILITY TO INTEGRATE AND MANAGE GROWTH
We are subject to risks that acquired systems (including those acquired in
the Sygnet Acquisition) will not perform as expected and that the returns from
such systems will not support the indebtedness incurred or equity issued to
acquire, or the capital expenditures needed to develop, the systems. In
addition, expansion of our operations may place a significant strain on our
management, financial and other resources. Our ability to manage future growth
will depend upon our ability to monitor operations, control costs, maintain
effective quality controls and significantly expand our 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 efficiently at a pace consistent with the
growth of our business could have a material adverse effect on our business,
financial condition and results of operations. In addition, the integration of
acquired systems with existing operations will require
25
<PAGE>
us to incur considerable expenses in advance of anticipated revenues and may
cause substantial fluctuations in our 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 our existing systems. In addition,
telecommunications providers generally experience higher customer and employee
turnover rates during and after an acquisition. We cannot assure you that we
will be able to successfully integrate the systems acquired or any other
businesses we may acquire.
NEED TO BUILDOUT PCS LICENSED AREAS
In April 1997, we obtained PCS licenses for nine markets as part of the FCC
"F" Block auction. Our right to hold and use each license depends on the
buildout of the PCS system to cover at least 25% of the Pops covered by the
license by April 2002. See "Business--Cellular Operations." We have estimated
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 in part on the PCS technology we select, the extent our buildout, costs
at the time of buildout and the extent we, at our expense, must relocate
existing incumbent microwave licensees or compensate other PCS licensees for
their relocation costs. We will need additional financing for the buildout of
its PCS system. We cannot assure you that we will be able to obtain such
financing or, if such financing is available, that it can be obtained on terms
acceptable to us and within the limitations contained in the Senior Note
Indenture, the Credit Facilities, the Certificate of Designation and the
certificates of designation for the Senior Preferred Stock and the Other
Preferred Stock. If our subsidiary which holds the PCS licenses fails to satisfy
its installment financing obligations to the FCC, the PCS licenses may be
canceled, we would forfeit our investment in such PCS licenses, and the FCC
could sue the subsidiary for collection of any unpaid sums due to the FCC plus
forfeiture penalties. As of September 30, 1998, we had paid $1.0 million for
such PCS licenses and owed the FCC an additional $4.1 million. We cannot assure
you that our PCS system will be profitable. The extent of potential demand for
PCS in our markets cannot be estimated with any degree of certainty. We have no
experience operating PCS systems. Sygnet holds no PCS licenses.
When the FCC first licensed cellular systems in the United States, it
specified the technical standards of systems operations to insure nationwide
compatibility between all cellular carriers. In contrast, the FCC has not
mandated the technology standard for PCS operations, leaving each licensee free
to select among several competing technologies, some of which are not compatible
with each other. We cannot assure you that the technical standards selected by
us 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 affected. To the extent most
competitors in the PCS industry select a competing technology that is not
compatible to the system selected by us, our PCS business may be adversely
affected. We have not yet finalized our plans with respect to the buildout of
our PCS licensed systems, nor have we selected the digital technology to be used
in such systems.
COMPETITION
The telecommunications industry is highly competitive. Many of our existing
and potential competitors have substantially greater financial, personnel,
technical, marketing and other resources than do we as well as other competitive
advantages. Currently the FCC authorizes only two cellular licensees to operate
in each license area and we compete in each of our markets 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. We also compete, although to a lesser
extent, with resellers, paging companies and landline telephone service
providers.
As a result of recent regulatory and legislative initiatives, our cellular
operations may face increased competition from entities which use other
communications technologies or other radio frequency spectrum
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such as broadband PCS licensees and enhanced specialized mobile radio licensees.
The FCC has authorized as many as six broadband PCS licensees to provide
services in each of our markets, although not all of these licensees have begun
servicing those markets. Our operations may also face competition from other
technologies developed in the future including, but not limited to, satellite
systems and services provided over spectrum allocated to the Wireless
Communications Services and General Wireless Communications Services. While
mobile services are not currently feasible on Wireless Communications Services
spectrum, and General Wireless Communications Services spectrum has not been
licensed, mobile operations are not prohibited on such spectrum and may emerge
at a future date. We believe the likelihood of near-term competition from such
services is reduced because the areas in which we operate are less densely
populated. We cannot assure you, however, that one or more of the technologies
currently used by us in our business will not become inferior or obsolete at
some time in the future. See "Business-- Competition."
We may not be able to continue to compete successfully and new technologies
and products that are more commercially accepted than ours may be developed.
Some competitors may market other services such as long distance services, cable
television access or landline local exchange services with their wireless
offerings. There has been a cellular 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. We expect that this trend
will continue. See "Business--Competition" for more detailed information on our
competitive environment.
INCREASING FREQUENCY OF TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant changes
in technology, including advancements protected by intellectual property laws.
Significant changes can be seen in the increasing pace of digital upgrades in
existing analog wireless systems, evolving industry standards, the availability
of new radio frequency spectrum allocations for wireless services, ongoing
improvements in the capacity and quality of digital technology, shorter
development cycles for new products and enhancements, developments in emerging
wireless transmission technologies and changes in end-user requirements and
preferences. International standards bodies and national regulators will
consider technology standards for new third-generation wireless technologies in
coming years, and we cannot assure you that its current technologies will be
compatible with such technologies. In addition, we may be required to select in
advance one technology over another. However, at the time we must make our
investment, it will be impossible to accurately predict which technology may
prove to be the most economic, efficient or capable of attracting customer
usage. 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 our business cannot be predicted, and we
cannot assure you that technological developments will not have a material
adverse effect on us.
DEPENDENCE ON KEY PERSONNEL
Our businesses are managed by a small number of management and operating
personnel. The loss of certain of these individuals could have a material
adverse effect on us. We believe that our ability to manage our planned growth
successfully will depend in large part on our continued ability to attract and
retain highly skilled and qualified personnel. See "--Risks Associated with
Acquisitions; Ability to Manage Growth" and "Management."
RELIANCE ON USE OF THIRD-PARTY SERVICE MARKS
We use the registered service marks CELLULAR ONE-Registered Trademark- and
AIRTOUCH-TM- CELLULAR-Registered Trademark- to promote the services we offer in
certain of our license areas. Our use of the CELLULAR ONE-Registered Trademark-
service mark is governed by five-year contracts with Cellular One Group, the
owner of the service mark. These contracts begin to expire in 2001 and we have
the option to renew these contracts for two additional five-year terms. Our
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
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Marks." Under these agreements, we must meet specified operating and service
quality standards for its systems. If these agreements are not renewed upon
expiration or if we fail to meet the applicable operating or service quality
standards, our 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 our control, the names CELLULAR ONE-Registered Trademark-
or AIRTOUCH-TM- CELLULAR were to suffer diminished marketing appeal, our ability
both to attract new subscribers and retain existing subscribers could be
materially impaired in the applicable markets.
POTENTIAL FOR ADVERSE REGULATORY CHANGE AND THE NEED FOR REGULATORY APPROVALS
The licensing, construction, operation, acquisition and sale of wireless
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
wireless activities and wireless carriers or the loss of any license or licensed
area could have a material adverse effect on our operations. In addition, all
cellular and PCS licenses in the United States are subject to renewal upon
expiration of their initial ten-year term. Our cellular licenses will expire at
varying dates beginning in October 2000. We believe 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. We cannot assure you, however, that our licenses will be
renewed. See "Business--Regulation."
EQUIPMENT FAILURE AND NATURAL DISASTER
We carry business interruption, casualty and property insurance in amounts
we believe 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 our central switching offices, our microwave links or
certain of our cell sites could have a material adverse effect on our
operations.
RELIANCE ON ONE BILLING VENDOR
We rely primarily on one vendor to produce all of our customer billings. If
this billing vendor for any reason were to encounter significant problems
affecting its ability to perform its billing functions for us, our ability to
generate billings to our customers would be materially impaired, until a new
arrangement could be established.
NEED TO INTEGRATE OTHER RECENT ACQUISITIONS
We recently closed our acquisition of the FCC license for each of Ohio 2 RSA
and Texas 10 RSA. The purchase price of each of these acquisitions is being held
in escrow pending resolution of claims made against the seller's title to the
FCC licenses. We cannot assure you that these claims will be resolved in favor
of the respective sellers. If the claims are ultimately resolved in a manner
adverse to either seller, we could lose our license for the affected RSA,
although we would receive back our purchase price held in escrow. However, if
this occurred, we would need to either dispose of any improvements we had made,
redeploy them in another system to be operated by us or abandon the assets. We
could incur costs and expenses in connection with such disposal, redeployment or
abandonment. In addition, we would lose the benefit of owning such properties
and the future cash flows therefrom. Depending upon how much we had invested in
the affected RSA, how much of that investment could be sold or salvaged and the
potential future benefit therefrom, a loss of either of these licenses could
have an adverse effect on our operations and the loss of revenues from either
such system could have an adverse effect on our financial condition.
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 our business. On August 1, 1996, the FCC released a
report and
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order, which became effective in August 1996 as to mobile and portable devices
and in October 1997 for cellular transmitters, that updates the guidelines and
methods it uses for evaluating RF emissions from radio equipment, including
cellular and PCS telephones and transmitting facilities. We do not believe these
guidelines will have a material impact on its operations. While the FCC's rules
impose more restrictive standards on RF emissions from lower power devices such
as portable cellular telephones, we believe, based on manufacturers'
certifications, that all cellular telephones currently provided by us to our
customers, as well as our transmitting facilities, comply with the FCC's
standards. See "Business-- Regulation."
CONFLICTS OF INTEREST
Everett R. Dobson, our Chairman of the Board, President and Chief Executive
Officer, and his affiliates beneficially own approximately 80% of the combined
voting power of all classes of our outstanding voting stock on a fully diluted
basis. Certain decisions concerning the operations or financial structure of the
Company may present conflicts of interest between the holders of our voting
stock and the holders of the Preferred Stock and, if issued, the Exchange
Debentures. In addition, holders of voting 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 Preferred Stock and, if
issued, the Exchange Debentures.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES FOR HOLDERS OF PREFERRED STOCK AND
EXCHANGE DEBENTURES
Because we may pay dividends on the Preferred Stock by distributing
additional shares of Preferred Stock, compliance with U.S. federal withholding
tax rules would be difficult with respect to investors who are not U.S. persons.
Accordingly, we consider the Preferred Stock to be an inappropriate investment
for any person who or which is not a U.S. person.
Distributions of cash or, to the extent of their fair market value,
distributions of additional shares of Preferred Stock will generally be treated
as dividends, taxable as ordinary income to the extent of our current and
accumulated earnings and profits, as determined under U.S. federal income tax
principles. However, we presently do 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 we have earnings and
profits, distributions of cash or additional shares of Preferred Stock on the
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 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 Preferred Stock. In the case of distributions of
additional 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 Preferred Stock. A holder would recognize gain to the
extent that any distributions were to exceed our current or accumulated earnings
and profits and the adjusted tax basis of the holder in the Preferred Stock.
As we expect the redemption price of the Preferred Stock to exceed its issue
price by more than a de minimis amount, the difference ("redemption premium")
generally will be taxable as a constructive distribution of additional Preferred
Stock to a holder over a certain period under a constant interest rate method
similar to that described below for accruing original issue discount ("OID") on
the Exchange Debentures. However, to the extent we lack current or accumulated
earnings and profits for a taxable year to which a constructive distribution
relates, a holder should not recognize taxable income or gain as a result of the
constructive distribution. Moreover, there should be no net effect on the
holder's adjusted tax basis of the Preferred Stock as a result of the
constructive distribution if we have no current or accumulated earnings and
profits. To the extent we have current or accumulated earnings and profits for a
taxable year to which a constructive distribution relates, the distribution will
be taxable currently to the holder as a dividend even though the holder does not
receive any actual distribution and will produce a
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corresponding increase in the adjusted tax basis of the Preferred Stock as to
which the distribution is deemed to have been made. See "Federal Income Tax
Considerations to U.S. Holders--Redemption Premium."
Additional shares of Preferred Stock distributed on the Preferred Stock will
also have redemption premium if the redemption price of such Preferred Stock
exceeds the fair market value of the additional shares of Preferred Stock when
distributed by more than a de minimis amount. Such redemption premium may differ
from that attributable to the shares of Preferred Stock. Therefore, any such
additional shares of the Preferred Stock distributed may not be fungible with
the shares of the Preferred Stock previously issued.
Further, if holders of Preferred Stock receive additional shares of
Preferred Stock as a distribution on the Preferred Stock, such holders would, to
the extent we have earnings and profits for U.S. federal income tax purposes, be
required to include currently in gross income for U.S. federal income tax
purposes the fair market value of such additional shares distributed, even
though such holders have not received any cash with respect to such
distribution.
Upon a redemption of 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 Preferred Stock redeemed, except to the extent all or
a portion of the Exchange Debentures received is treated as a dividend payment.
Because we have the 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 OID for U.S.
federal income tax purposes, unless under special rules for interest holidays
the amount of OID is treated as de minimis. If the Exchange Debenture has OID in
excess of the de minimis amount, 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. The Exchange Debentures may also 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 to U.S. Holders."
POTENTIAL FAILURE OF COMPUTER SYSTEMS TO RECOGNIZE YEAR 2000
The "Year 2000 Issue" is the result of the inability of some computer
programs to distinguish the year 1900 from the year 2000. Most computer programs
and operating systems were written using two digits to define the applicable
year rather than four digits. This means that any equipment containing computer
programs with time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. In some instances this could result in
system failures, disruption in operations and possible inaccuracies of data.
In April 1998, we established a multi-disciplined team to perform a Year
2000 impact analysis for us. The team consists of representatives from each of
the lines of business, as well as representatives from key corporate
departments, and is headed by a full-time Year 2000 compliance manager. The team
created a Year 2000 assessment methodology which brought a structured approach
to the assessment and management reporting process, as well as disaster recovery
approach.
To date, we have completed an inventory of its automated systems and
services and an impact analysis that identified significant risk areas by line
of business, specific compliance requirements and costs and estimated completion
dates for affected systems. By the end of 1999, all of our automated systems and
services and those of Sygnet will be Year 2000 compliant.
We do not have large scale legacy applications used by many
telecommunications providers. From an information systems standpoint, we have
historically relied on outsourcing relationships for most of its business and
operational support applications. Those applications that have not been
outsourced to service
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providers have been deployed using packaged software from outside vendors. We
have also focused on evaluating software systems of pending acquisitions. As a
result, the remediation phase is not focused on a large scale in-house effort,
but on identification of third party systems and services that are not currently
Year 2000 compliant and oversight of third party compliance efforts.
The results of the impact analysis revealed that for our information
systems, services and telecommunications infrastructure, Year 2000 compliant
versions will be included as a part of existing maintenance and/or service
agreements at no additional cost to us and should be in place and tested by the
second quarter of 1999. We estimate total costs of approximately $0.8 million to
upgrade or replace those systems that are not Year 2000 compliant and will not
be upgraded through existing maintenance or service agreements. In addition, our
contingency plan for the Year 2000 is encompassed by a disaster recovery plan
for the business which will be in place by the end of the second quarter of
1999.
We will continue to analyze systems and services that utilize date-embedded
codes that may experience operational problems when the Year 2000 is reached. We
will continue communicating with third party vendors of systems software and
equipment, suppliers of telecommunications capacity and equipment, roaming
partners, customers and others with which it does business to coordinate Year
2000 compliance. To further mitigate risks, we will conduct our own Year 2000
tests on mission critical systems as Year 2000 compliant versions are released
by vendors.
LACK OF PUBLIC MARKET FOR THE PREFERRED STOCK; RESTRICTIONS ON TRANSFERABILITY
There has not been an established trading market for the Preferred Stock.
The Initial Purchaser has informed us that it does not currently intend to make
a market in the Preferred Stock. Accordingly, we cannot assure you as to the
development or liquidity of any market for the Preferred Stock. If a market for
the Preferred Stock were to develop, the Preferred Stock could trade for less
than the initial offering price, depending upon many factors, including
prevailing interest rates, our operating results and the markets for similar
securities, and such market may cease to continue at any time.
Your Old Shares were not registered under the Securities Act or any state
securities laws and may not be offered or sold, except pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act and applicable state securities laws, or pursuant to an effective
registration statement. We have registered the New Shares under the Securities
Act and are obligated to use our best efforts to complete an exchange offer for
the Old Shares or register resales of the Old Shares under the Securities Act,
but we cannot assure you that a trading market for the Preferred Stock will be
liquid or will develop at all.
CONSEQUENCES OF FAILURE TO EXCHANGE
Untendered outstanding New Shares that are not exchanged for New Shares
pursuant to the Exchange Offer will remain restricted securities. Outstanding
Old Shares will continue to be subject to the following restrictions on
transfer: (i) outstanding Old Shares may be resold only if registered pursuant
to the Securities Act, if an exemption from registration is available
thereunder, or if neither such registration nor such exemption is required by
law, (ii) outstanding Old Shares shall bear a legend restricting transfer in the
absence of registration or an exemption therefrom and (iii) a holder of
outstanding Old Shares who desires to sell or otherwise dispose of all or any
part of its outstanding Old Shares under an exemption from registration under
the Securities Act, if requested by us, must deliver to us an opinion of
independent counsel experienced in Securities Act matters, reasonably
satisfactory in form and substance to us, that such exemption is available.
FORWARD-LOOKING STATEMENTS
The description of our plans set forth herein, including our strategies,
planned capital expenditures, acquisitions and related financing, 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
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and uncertainties. Important factors that could cause actual capital
expenditures, acquisitions activity, or our performance to differ materially
from its plans include, without limitation:
- our ability to satisfy the financial covenants of our existing and future
debt instruments and to raise additional capital;
- our ability to integrate acquired systems with our existing operations and
to successfully market our services and products to existing and new
customers;
- our ability to install equipment and expand and upgrade our systems in a
timely manner and to manage our rapid growth successfully;
- our ability to compete effectively against competitors with greater
financial, technical, marketing and other resources and respond
effectively to changes in end-user requirements and preferences;
- the inability of third party vendors to provide products and services
which are Year 2000 compliant;
- the development of other technologies and products that may gain more
commercial acceptance than ours; and
- adverse regulatory changes.
We cannot assure you that anticipated future results will be achieved. Actual
events or results may differ materially as a result of risks to which we are or
may be subject. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof. We do not
intend to update or revise these forward-looking statements to reflect events or
circumstances after the date hereof including, without limitation, changes in
our business strategy or planned capital expenditures, or to reflect the
occurrence of unanticipated events.
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
An aggregate of 64,646 Old Shares were initially sold by Dobson on December
23, 1998 to NationsBanc Montgomery Securities LLC (the "Initial Purchaser") in
reliance on Section 4(2) of the Securities Act. The Initial Purchaser offered
and sold the Old Shares only to "qualified institutional buyers" (as defined in
Rule 144A) in compliance with Rule 144A. Subsequently and through January 15,
1999, 506 additional Old Shares have been issued as the payment of dividends on
the outstanding Preferred Stock.
In connection with the sale of the Old Shares, the Company and the Initial
Purchaser entered into a Registration Rights Agreement dated as of December 2,
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
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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 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
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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.
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 January 26, 1999, 65,152 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 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 , 1999, 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.
34
<PAGE>
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 Old Shares (rounded to the
nearest whole share) will be paid in New Shares on the first dividend 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
35
<PAGE>
("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 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
36
<PAGE>
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 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.
37
<PAGE>
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 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>
38
<PAGE>
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 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.
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
39
<PAGE>
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, 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.
40
<PAGE>
THE COMPANY
As a result of the Sygnet Acquisition, the Company's organization is as
follows:
[LOGO]
The Company's principal executive offices are located at Suite 200, 13439
North Broadway Extension, Oklahoma City, Oklahoma 73114, telephone (405)
391-8500.
41
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth certain historical consolidated financial
data of Dobson Communications Corporation as of and for each of the five years
ended December 31, 1997 and as of and for the nine months ended September 30,
1997 and 1998. 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 consolidated
financial statements which have been audited by Arthur Andersen LLP. The
consolidated financial data as of and for the nine months ended September 30,
1997 and 1998 have been derived from the unaudited financial statements of the
Company which, in the opinion of management have been prepared on the same basis
as the Company's audited consolidated financial statements and include all
adjustments (which consist only of normal recurring adjustments) necessary for a
fair presentation of the information set forth therein. Operating results for
the nine months ended September 30, 1998 are not necessarily indicative of the
results that may be expected for the full year. Acquisitions made by the Company
during 1996, 1997 and 1998 materially affect the comparability of data from one
period to another. The data should be read in conjunction with "Use of
Proceeds," "Pro Forma Condensed Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's financial statements and the related notes thereto included
elsewhere in this Prospectus.
42
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
------------------------------------------------------- -----------
1993 1994 1995 1996(1) 1997(2) 1997(3)
--------- --------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER SUBSCRIBER DATA)
STATEMENT OF OPERATIONS DATA:
Revenue:
Service revenue.................................... $ 7,308 $ 10,922 $ 13,949 $ 17,593 $ 38,410 $ 26,487
Roaming revenue.................................... 1,109 3,231 4,370 7,852 26,262 17,782
Equipment sales.................................... 2,672 1,016 671 662 1,455 741
Other revenue...................................... 158 206 693 832 587 703
--------- --------- --------- ----------- --------- -----------
Total revenue...................................... 11,247 15,375 19,683 26,939 66,714 45,713
--------- --------- --------- ----------- --------- -----------
Operating expenses:
Cost of service.................................... 2,409 2,991 4,654 6,119 16,431 10,932
Cost of equipment.................................. 1,283 1,502 2,013 2,571 4,046 2,834
Marketing and selling.............................. 2,552 3,098 3,103 4,462 10,669 6,913
General and administrative......................... 2,852 3,193 3,035 3,902 11,555 8,137
Depreciation and amortization...................... 1,637 1,885 2,529 5,241 16,798 11,943
--------- --------- --------- ----------- --------- -----------
Total operating expenses........................... 10,733 12,669 15,334 22,295 59,499 40,759
--------- --------- --------- ----------- --------- -----------
Operating income..................................... 514 2,706 4,349 4,644 7,215 4,954
Interest expense..................................... (1,013) (1,195) (1,854) (4,284) (27,640) (17,646)
Other income (expense), net.......................... 198 106 (210) (1,503) 2,777 1,854
Minority interests in income of subsidiaries (5)..... (502) (1,105) (1,334) (675) (1,693) (1,315)
Income tax (provision) benefit....................... 310 (168) (347) 593 3,625 499
--------- --------- --------- ----------- --------- -----------
(Loss) income from continuing operations before
extraordinary items and cumulative effect of change
in accounting principle............................ (493) 344 604 (1,225) (15,716) (11,654)
Income (loss) from discontinued operations, net of
income taxes....................................... 1,266 (110) 500 331 332 1,652
Extraordinary items, net of income taxes (6)......... -- 228 -- (527) (1,350) (2,186)
Cumulative effect of change in accounting principle,
net of income taxes................................ (232) -- -- -- -- --
--------- --------- --------- ----------- --------- -----------
Net income (loss).................................... $ 541 $ 462 $ 1,104 $ (1,421) $ (16,734) $ (12,188)
Dividends on preferred stock......................... -- (83) (591) (849) (2,603) (727)
--------- --------- --------- ----------- --------- -----------
Net income (loss) applicable to common
stockholders....................................... $ 541 $ 379 $ 513 $ (2,270) $ (19,337) $ (12,915)
--------- --------- --------- ----------- --------- -----------
--------- --------- --------- ----------- --------- -----------
Net income (loss) applicable to common stockholders
per common share:
Before discontinued operations, extraordinary
expense and cumulative effect of change in
accounting principle............................. $ (1.05) $ .55 $ .02 $ (4.38) $ (38.72) $ (26.17)
Discontinued operations............................ 2.68 (.23) 1.06 .70 .70 3.49
Extraordinary income (expense)..................... -- .48 -- (1.12) (2.85) (4.62)
Cumulative effect of change in accounting
principle........................................ (.49) -- -- -- -- --
--------- --------- --------- ----------- --------- -----------
Net income (loss) applicable to common stockholders
per common share................................... $ 1.14 $ .80 $ 1.08 $ (4.80) $ (40.87) $ (27.30)
--------- --------- --------- ----------- --------- -----------
--------- --------- --------- ----------- --------- -----------
Cash dividends declared per common share............. $ -- $ .11 $ 1.40 $ 1.18 $ 16.13 $ 16.13
Weighted average common shares outstanding........... 473,152 473,152 473,152 473,152 473,152 473,152
--------- --------- --------- ----------- --------- -----------
--------- --------- --------- ----------- --------- -----------
OTHER FINANCIAL DATA:
Adjusted EBITDA (7)(8)............................... $ 2,151 $ 4,591 $ 6,878 $ 9,885 $ 24,013 $ 16,897
Ratio of earnings to combined fixed charges and
preferred
stock dividends (9)................................ 1.46x 1.25x 1.35x -- -- --
Capital expenditures, excluding cost of
acquisitions....................................... $ 7,353 $ 5,267 $ 3,925 $ 17,438 $ 23,216 $ 13,781
OTHER DATA:
Cellular subscribers (at period end)................. 15,283 21,481 26,614 33,955 100,093 85,185
Cellular penetration (at period end) (10)............ 4.6% 6.5% 8.0% 5.8% 6.1% 5.8%
Cellular churn (11).................................. 0.5% 0.9% 1.5% 1.8% 1.9% 2.2%
Average monthly revenue per cellular subscriber
(12)............................................... $ 53 $ 50 $ 50 $ 48 $ 41 $ 41
Marketing and selling costs per gross additional
cellular subscriber (13)........................... $ 392 $ 429 $ 451 $ 540 $ 398 $ 407
Cellular cell sites (at period end).................. 26 36 46 67 135 117
<CAPTION>
1998(4)
-----------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Service revenue.................................... $ 47,769
Roaming revenue.................................... 45,916
Equipment sales.................................... 2,503
Other revenue...................................... 158
-----------
Total revenue...................................... 96,346
-----------
Operating expenses:
Cost of service.................................... 22,603
Cost of equipment.................................. 5,166
Marketing and selling.............................. 14,856
General and administrative......................... 16,219
Depreciation and amortization...................... 29,714
-----------
Total operating expenses........................... 88,558
-----------
Operating income..................................... 7,788
Interest expense..................................... (25,039)
Other income (expense), net.......................... 3,304
Minority interests in income of subsidiaries (5)..... (1,963)
Income tax (provision) benefit....................... 4,864
-----------
(Loss) income from continuing operations before
extraordinary items and cumulative effect of change
in accounting principle............................ (11,046)
Income (loss) from discontinued operations, net of
income taxes....................................... (17,185)
Extraordinary items, net of income taxes (6)......... (2,644)
Cumulative effect of change in accounting principle,
net of income taxes................................ --
-----------
Net income (loss).................................... $ (30,875)
Dividends on preferred stock......................... (16,749)
-----------
Net income (loss) applicable to common
stockholders....................................... $ (47,624)
-----------
-----------
Net income (loss) applicable to common stockholders
per common share:
Before discontinued operations, extraordinary
expense and cumulative effect of change in
accounting principle............................. $ (50.74)
Discontinued operations............................ (36.32)
Extraordinary income (expense)..................... (5.59)
Cumulative effect of change in accounting
principle........................................ --
-----------
Net income (loss) applicable to common stockholders
per common share................................... $ (100.65)
-----------
-----------
Cash dividends declared per common share............. --
Weighted average common shares outstanding........... 473,152
-----------
-----------
OTHER FINANCIAL DATA:
Adjusted EBITDA (7)(8)............................... $ 37,502
Ratio of earnings to combined fixed charges and
preferred
stock dividends (9)................................ --
Capital expenditures, excluding cost of
acquisitions....................................... $ 41,528
OTHER DATA:
Cellular subscribers (at period end)................. 163,020
Cellular penetration (at period end) (10)............ 5.8%
Cellular churn (11).................................. 1.9%
Average monthly revenue per cellular subscriber
(12)............................................... $ 40
Marketing and selling costs per gross additional
cellular subscriber (13)........................... $ 399
Cellular cell sites (at period end).................. 210
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE.)
43
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 1,046 $ 607 $ 732 $ 981 $ 2,752 $ 5,041
Restricted cash................................. -- -- -- -- 17,561 18,508
Net fixed assets................................ 10,252 11,590 11,414 26,794 52,374 76,360
Total assets.................................... 29,592 33,111 37,711 95,376 359,645 701,041
Total debt...................................... 15,773 20,661 24,319 75,750 335,570 448,056
Mandatorily redeemable preferred stock.......... -- -- 5,913 10,000 11,623 197,136
Stockholders' equity (deficit).................. 5,536 28 (6,971) (9,802) (36,673) (84,296)
</TABLE>
- ------------------------------
(1) Includes the operations of Kansas/Missouri properties from March 19, 1996,
the date they were acquired by the Company.
(2) Includes the operations of West Maryland, East Maryland and Arizona 5 from
the dates they were acquired by the Company. West Maryland was acquired on
February 28, 1997, East Maryland on March 3, 1997 and Arizona 5 on October
1, 1997.
(3) Includes the operations of West Maryland and East Maryland from the dates
they were acquired by the Company. West Maryland was acquired on February
28, 1997 and East Maryland on March 3, 1997.
(4) Includes the operations of Texas 16, California 4 and Santa Cruz from the
dates they were acquired by the Company. Texas 16 was acquired on January
26, 1998, California 4 on April 1, 1998 and Santa Cruz on June 16, 1998.
(5) Reflects minority interests in partnerships in which the Company owns the
majority interests.
(6) Extraordinary items reflect gain or (loss) related to early extinguishment
of debt.
(7) Adjusted EBITDA represents earnings before interest expense, income taxes,
depreciation, amortization, extraordinary items and changes in accounting
principles. Adjusted EBITDA is provided because it is a measure commonly
used in the telecommunications industry to determine a company's ability to
incur or service debt. Adjusted 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 Adjusted 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 Adjusted EBITDA attributable to minority interests in subsidiaries
in which the Company owns a majority interest. The portion of Adjusted
EBITDA attributable to minority interests was $.9 million, $1.5 million,
$2.0 million, $2.3 million, $2.9 million, $2.0 million and $3.7 million for
the years ended December 31, 1993, 1994, 1995, 1996 and 1997 and for the
nine months ended September 30, 1997 and 1998, respectively.
(9) Earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $2.3 million for the year ended December 31, 1996, by
$21.6 million for the year ended December 31, 1997, by $11.2 million for
the nine months ended September 30, 1997 and by $49.8 million for the nine
months ended September 30, 1998. "Earnings" is defined as earnings from
continuing operations 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.
(11) Churn means the number of cellular subscriber cancellations per period as
a percentage of the weighted average total cellular subscribers during
such period. Churn is stated as the average monthly churn rate for the
period.
(12) Excludes roaming and equipment revenue.
(13) Determined by dividing cellular marketing and selling costs by the gross
cellular subscribers added during each period. Cellular marketing and
selling costs represent selling expenses and losses incurred on equipment
sales.
44
<PAGE>
The following table sets forth certain historical consolidated financial
data for Sygnet with respect to each of the five years in the period ended
December 31, 1997 and for the nine months ended September 30, 1997 and 1998. The
selected historical consolidated financial data as of and for each of the years
in the period 1993 to 1997 have been derived from Sygnet's audited consolidated
financial statements. The selected historical consolidated financial data as of
and for the nine months ended September 30, 1997 and 1998 have been derived from
Sygnet's unaudited consolidated financial statements. In the opinion of
management, the unaudited consolidated financial statements have been prepared
on the same basis as Sygnet's audited consolidated financial statements and
include all adjustments, which consist only of normal recurring adjustments,
necessary for a fair presentation of the information set forth therein.
Operating results for the nine months ended September 30, 1998 are not
necessarily indicative of results that may be expected for the full year. The
information as set forth below should be read in conjunction with "Use of
Proceeds," "Pro Forma Consolidated Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and the related notes thereto included elsewhere in this
Prospectus.
45
<PAGE>
SYGNET WIRELESS, INC.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------- --------------------
1993 1994 1995(1) 1996(2) 1997 1997 1998
--------- --------- ----------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Subscriber revenue.............................. $ 8,878 $ 11,312 $ 17,191 $ 31,085 $ 52,639 $ 38,531 $ 46,738
Roamer revenue.................................. 3,107 4,145 4,176 9,687 26,993 19,868 24,753
Equipment sales................................. 1,098 1,172 1,529 2,417 4,323 3,051 4,253
Other revenue................................... 1,391 1,420 1,681 1,607 1,679 1,308 1,190
--------- --------- ----------- --------- --------- --------- ---------
Total revenue................................... 14,474 18,048 24,577 44,796 85,634 62,758 76,934
--------- --------- ----------- --------- --------- --------- ---------
Costs and expenses:
Cost of services................................ 2,515 3,452 3,366 5,509 10,048 7,175 9,005
Cost of equipment sales......................... 930 1,624 4,164 5,816 9,663 6,806 7,790
General and administrative...................... 4,412 4,467 5,564 9,852 16,976 11,667 14,665
Selling and marketing........................... 2,166 2,555 3,082 6,080 10,841 7,466 9,057
Depreciation and amortization................... 1,951 2,639 3,487 10,038 28,719 21,143 21,343
--------- --------- ----------- --------- --------- --------- ---------
Total costs and expenses........................ 11,974 14,737 19,663 37,295 76,247 54,257 61,860
--------- --------- ----------- --------- --------- --------- ---------
Operating income.................................. 2,500 3,311 4,914 7,501 9,387 8,501 15,074
Interest expense.................................. (702) (988) (2,660) (11,174) (29,902) (22,558) (21,613)
Other income (expense), net....................... (275) (601) (304) (195) (101) 6 (340)
--------- --------- ----------- --------- --------- --------- ---------
Income (loss) before extraordinary item........... 1,523 1,722 1,950 (3,868) (20,616) (14,051) (6,879)
Extraordinary loss on extinguishment of debt...... -- -- -- (1,420) -- -- --
--------- --------- ----------- --------- --------- --------- ---------
Net income (loss)................................. $ 1,523 $ 1,722 $ 1,950 $ (5,288) $ (20,616) $ (14,051) $ (6,879)
--------- --------- ----------- --------- --------- --------- ---------
--------- --------- ----------- --------- --------- --------- ---------
Dividends on preferred stock...................... -- -- -- (718) (2,122) (2,122) --
--------- --------- ----------- --------- --------- --------- ---------
Net income (loss) applicable to common
stockholders.................................... $ 1,523 $ 1,722 $ 1,950 $ (6,006) $ (22,738) $ (16,173) $ (6,879)
--------- --------- ----------- --------- --------- --------- ---------
--------- --------- ----------- --------- --------- --------- ---------
Net income (loss) per share applicable to common
stockholders: (3)
Before extraordinary item......................... $ (.74) $ (2.93) $ (2.21) $ (.75)
Extraordinary item................................ (.23) -- -- --
--------- --------- --------- ---------
Net Income (loss)................................. (.97) $ (2.93) $ (2.21) $ (.75)
--------- --------- --------- ---------
--------- --------- --------- ---------
OTHER FINANCIAL DATA:
Adjusted EBITDA (4)............................... $ 4,451 $ 5,950 $ 8,401 $ 17,539 $ 38,106 $ 29,644 $ 36,417
Ratio of earnings to combined fixed charges and
preferred stock dividends (5)................... 3.11x 2.60x 1.67x -- -- -- --
Capital expenditures, excluding cost of
acquisitions.................................... $ 3,630 $ 5,793 $ 9,056 $ 10,050 $ 25,576 $ 16,979 $ 11,469
OTHER DATA:
Cellular subscribers (at period end).............. 18,037 24,124 44,665 106,574 142,934 130,146 166,886
Cellular penetration (at period end) (6).......... 2.5% 3.3% 4.4% 4.5% 6.0% 5.5% 7.0%
Cellular churn (7)................................ 1.3% 1.5% 1.4% 1.3% 1.3% 1.3% 1.5%
Average monthly revenue per cellular subscriber
(8)............................................. $ 50 $ 45 $ 46 $ 42 $ 36 $ 36 $ 34
Marketing and selling costs per gross additional
cellular subscriber (9)......................... $ 391 $ 393 $ 370 $ 321 $ 291 $ 306 $ 287
Cellular cell sites (at period end)............... 18 24 41 114 163 152 181
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE.)
46
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Property and equipment, net..................... $ 11,127 $ 14,084 $ 21,049 $ 43,959 $ 53,007 $ 52,138
Total assets.................................... 20,553 27,418 79,618 344,178 340,986 333,296
Long-term debt.................................. 10,928 18,264 69,500 312,250 305,500 302,644
Preferred stock................................. -- -- -- 19,718 -- --
Stockholders' equity (deficit).................. 5,329 4,769 4,286 (1,982) 19,218 12,339
</TABLE>
- ------------------------------
(1) Includes the operations of the system acquired in the Erie Acquisition (as
defined herein) from September 30, 1995, the date of acquisition.
(2) Includes the operations of the systems acquired in the Horizon Acquisition
(as defined herein) from October 9, 1996, the date of acquisition.
(3) Net income (loss) per share applicable to common stockholders for the three
years ended December 31, 1995 is not provided because there is no meaningful
data for those periods.
(4) Adjusted EBITDA is provided because it is a measure commonly used in the
telecommunications industry to determine a company's ability to incur or
service debt. Adjusted EBITDA is not derived according to generally accepted
accounting principles and should not be considered as an alternative to net
income, as a measure of performance, or to cash flows, as a measure of
liquidity. The calculation of Adjusted 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.
(5) Earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $4.6 million for the year ended December 31, 1996, by
$22.7 million for the year ended December 31, 1997, by $16.2 million for the
nine months ended September 30, 1997 and by $6.6 million for the nine months
ended September 30, 1998. "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.
(6) Determined by dividing Sygnet's total ending cellular subscribers for the
period by the estimated total Pops covered by applicable FCC cellular
licenses or authorizations held by Sygnet.
(7) Churn means the number of cellular subscriber cancellations per period as a
percentage of the weighted average total cellular subscribers during such
period. Churn is stated as the average monthly churn rate for the period.
(8) Excludes roaming and equipment revenue.
(9) 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 and equipment rentals.
47
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The accompanying unaudited pro forma condensed consolidated statements of
operations of the Company for the nine months ended September 30, 1998 give
effect to the 1998 Transactions (including the Sygnet Acquisition and the Sygnet
Financing) as if they occurred on January 1, 1997. The accompanying unaudited
pro forma condensed consolidated statement of operations of the Company for the
year ended December 31, 1997 gives effect to the Transactions (including the
Sygnet Acquisition and the Sygnet Financing) as if they occurred on January 1,
1997. The accompanying unaudited pro forma condensed consolidated balance sheet
as of September 30, 1998 has been prepared to give effect to the Sygnet
Acquisition and the Sygnet Financing as if they occurred as of that date. The
1997 Acquisitions, the 1998 Acquisition and the Sygnet Acquisition 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 for the assets and liabilities acquired in the Sygnet
Acquisition, based on estimates of fair values using available information
provided by the management of Sygnet.
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
Sygnet Acquisition, the Sygnet Financing and the other 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--Markets and Systems" and the historical
financial statements and notes thereto included elsewhere in this Prospectus.
48
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
-------------------------------------------
DOBSON
COMMUNICATIONS
CORPORATION CALIFORNIA 4(1) SYGNET
--------------- --------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND
PER SUBSCRIBER DATA)
<S> <C> <C> <C>
OPERATING REVENUE:
Service revenue.............................................................. $ 47,769 $ 2,399 $ 46,738
Roaming revenue.............................................................. 45,916 2,336 24,753
Equipment sales.............................................................. 2,503 274 4,253
Other........................................................................ 158 74 1,190
--------------- ------ ---------
Total operating revenue...................................................... 96,346 5,083 76,934
--------------- ------ ---------
OPERATING EXPENSES:
Cost of services............................................................. 22,603 1,451 9,005
Cost of equipment............................................................ 5,167 433 7,790
Marketing and selling........................................................ 14,856 235 9,057
General and administrative................................................... 16,219 978 14,665
Depreciation and amortization................................................ 29,714 593 21,343
--------------- ------ ---------
Total operating expenses..................................................... 88,559 3,690 61,860
--------------- ------ ---------
Operating income (loss)........................................................ 7,787 1,393 15,074
Interest expense............................................................. (25,039) (240) (21,613)
Other income (expense), net.................................................. 3,304 98 (340)
--------------- ------ ---------
(Loss) income before minority interests and income taxes....................... (13,948) 1,251 (6,879)
Minority interests in income of subsidiaries................................... (1,963) -- --
--------------- ------ ---------
(Loss) income before income taxes.............................................. (15,911) 1,251 (6,879)
Income tax benefit............................................................. 4,864 -- --
--------------- ------ ---------
(Loss) income from continuing operations....................................... (11,047) 1,251 (6,879)
--------------- ------ ---------
Dividends on preferred stock................................................... (16,749)
---------------
Net loss from continuing operations applicable to common stockholders.......... (27,796)
---------------
Weighted average shares outstanding............................................ 473,152
---------------
Net loss from continuing operations applicable to common stockholders per
share........................................................................ (58.75)
---------------
<CAPTION>
PRO FORMA
ADJUSTMENTS TOTALS
----------- ---------
<S> <C> <C>
OPERATING REVENUE:
Service revenue.............................................................. $ 2,138(2) $ 99,044
Roaming revenue.............................................................. (4,036)(2) 68,969
Equipment sales.............................................................. -- 7,030
Other........................................................................ -- 1,422
----------- ---------
Total operating revenue...................................................... (1,898) 176,465
----------- ---------
OPERATING EXPENSES:
Cost of services............................................................. (1,246)(2) 31,813
Cost of equipment............................................................ -- 13,390
Marketing and selling........................................................ 1,946(2) 26,094
General and administrative................................................... (2,598)(2) 29,264
Depreciation and amortization................................................ 37,967(3) 89,617
----------- ---------
Total operating expenses..................................................... 36,070 190,179
----------- ---------
Operating income (loss)........................................................ (37,968) (13,714)
Interest expense............................................................. (25,657) (5) (72,549)
Other income (expense), net.................................................. -- 3,061
----------- ---------
(Loss) income before minority interests and income taxes....................... (63,625) (83,202)
Minority interests in income of subsidiaries................................... -- (1,963)
----------- ---------
(Loss) income before income taxes.............................................. (63,625) (85,165)
Income tax benefit............................................................. 27,498(6) 32,362
----------- ---------
(Loss) income from continuing operations....................................... (36,127) (52,803)
----------- ---------
Dividends on preferred stock................................................... (27,356) (8) (44,105)
----------- ---------
Net loss from continuing operations applicable to common stockholders.......... (96,908)
---------
Weighted average shares outstanding............................................ 492,174
---------
Net loss from continuing operations applicable to common stockholders per
share........................................................................ (196.90)
---------
</TABLE>
See accompanying notes to the unaudited pro forma consolidated condensed
financial statements.
49
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(1) To reflect the results of operations for California 4 for the three month
period in 1998 during which the property was not owned by the Company.
(2) To reclassify certain operating revenues and expenses to conform with the
Company's historical presentation.
(3) To reflect the additional depreciation and amortization resulting from the
allocation of purchase price to property and equipment, cellular license
acquisition costs and intangible assets. Property and equipment is being
depreciated over two to ten years, cellular license acquisition costs over
15 years and intangible assets over five to ten 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."
(4) To reflect (i) the $.7 million of interest expense relating to the $28.4
million of indebtedness incurred under the DCOC Facility in connection with
the California 4 Acquisition (assuming an interest rate of 9.0% per annum)
and (ii) the elimination of $.3 million of interest expense associated with
the indebtedness of California 4 which was not assumed by the Company.
(5) To reflect (i) the elimination of $21.6 million of interest expense
associated with the Sygnet Notes and Sygnet's existing bank facility which
will be repaid by the Company as part of the Sygnet Acquisition, (ii) $18.4
million of interest expense relating to the $200.0 million of the
Dobson/Sygnet Notes, (iii) $25.0 million of interest expense relating to the
borrowings under the New Credit Facilities (assuming a weighted average rate
of 8.38%), (iv) $.1 million of interest expense relating to the unused
principal amounts of the New Credit Facilities (assuming a commitment fee of
.5%), (v) $.6 million of amortization of deferred financing costs relating
to the estimated $8.2 million of debt issuance costs incurred in connection
with the offering of the Dobson/Sygnet Notes, (vi) $1.1 million of
amortization of deferred financing costs relating to the estimated $12.6
million of debt issuance costs incurred in connection with the New Credit
Facilities, (vii) $1.1 million of interest relating to the $17.5 million of
borrowings under the Dobson Tower Facility, (viii) the elimination of $.3
million of interest related to the $25.0 million borrowed under the DOC
Facility to pay the initial deposit for the Sygnet Acquisition and (ix) $1.1
million of interest expense related to the $16.2 million of borrowings under
existing credit facilities.
(6) To reflect an adjustment to income tax expense for the effects of the 1998
Transactions, assuming a 38% effective tax rate.
(7) To reflect dividends on the Senior Preferred Stock, including, the
amortization of the issuance costs with respect thereto.
(8) To reflect dividends on the Preferred Stock, including the amortization of
the issuance costs and discount with respect thereto and to reflect the
dividends on the Class D, Class F and Class G Preferred Stock, assuming
dividend rates of 15%, 16% and 16%, respectively, and does not reflect
dividends on the preferred stock to be issued by Dobson Tower or any
amortization of discount on the Class F Preferred Stock resulting from any
value that may be attributed to the warrants granted to the purchasers of
the Class F Preferred Stock.
50
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
DOBSON
COMMUNICATIONS WEST
CORPORATION MARYLAND(1) ARIZONA 5(1)
--------------- ------------- -------------
<S> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND
PER SUBSCRIBER DATA)
OPERATING REVENUE:
Service revenue.................................................................... $ 38,410 $ 1,464 $ 1,907
Roaming revenue.................................................................... 26,262 908 5,261
Equipment sales.................................................................... 1,455 54 383
Other.............................................................................. 587 -- 86
--------------- ------ ------
Total operating revenue............................................................ 66,714 2,426 7,637
--------------- ------ ------
OPERATING EXPENSES:
Cost of services................................................................... 16,431 492 1,304
Cost of equipment.................................................................. 4,045 -- --
Marketing and selling.............................................................. 10,669 357 627
General and administrative......................................................... 11,555 740 965
Depreciation and amortization...................................................... 16,798 405 904
--------------- ------ ------
Total operating expenses........................................................... 59,498 1,994 3,800
--------------- ------ ------
Operating income................................................................... 7,216 432 3,837
Interest expense................................................................... (27,640) -- --
Other income (expense), net........................................................ 2,777 126 150
--------------- ------ ------
(Loss) income before minority interests and income taxes........................... (17,647) 558 3,987
Minority interests in income of subsidiaries....................................... (1,693) -- --
--------------- ------ ------
(Loss) income before income taxes.................................................. (19,340) 558 3,987
Income tax (provision) benefit..................................................... 3,625 -- --
--------------- ------ ------
(Loss) income from continuing operations........................................... (15,715) 558 3,987
--------------- ------ ------
Dividends on preferred stock....................................................... (2,603)
---------------
Net loss from continuing operations applicable to common stockholders.............. (18,318)
---------------
Weighted average shares outstanding................................................ 473,152
---------------
Net loss from continuing operations applicable to common stockholders per share.... $ (38.71)
---------------
<CAPTION>
CALIFORNIA PRO FORMA
4 SYGNET ADJUSTMENTS
----------- --------- --------------
<S> <C>
OPERATING REVENUE:
Service revenue.................................................................... $ 8,540 $ 52,639 2,515(2)
Roaming revenue.................................................................... 10,654 26,993 (3,615)(2)
Equipment sales.................................................................... 351 4,323
Other.............................................................................. 176 1,679
----------- --------- --------------
Total operating revenue............................................................ 19,721 85,634 (1,100)
----------- --------- --------------
OPERATING EXPENSES:
Cost of services................................................................... 5,914 10,048 (501)(2)
Cost of equipment.................................................................. 1,155 9,663 --
Marketing and selling.............................................................. 1,105 10,841 1,205(2)
General and administrative......................................................... 2,698 16,976 (1,805)(2)
Depreciation and amortization...................................................... 2,011 28,719 58,096(3)
----------- --------- --------------
Total operating expenses........................................................... 12,883 76,247 56,995
----------- --------- --------------
Operating income................................................................... 6,838 9,387 (58,095)
Interest expense................................................................... (831) (29,902) (29,719)(4)(5)
Other income (expense), net........................................................ (19) (101) --
----------- --------- --------------
(Loss) income before minority interests and income taxes........................... 5,988 (20,616) (87,814)
Minority interests in income of subsidiaries....................................... -- -- 162(6)
----------- --------- --------------
(Loss) income before income taxes.................................................. 5,988 (20,616) (87,652)
Income tax (provision) benefit..................................................... -- -- 40,865(7)
----------- --------- --------------
(Loss) income from continuing operations........................................... 5,988 (20,616) (46,787)
----------- --------- --------------
Dividends on preferred stock....................................................... (52,321)(8)(9)
--------------
Net loss from continuing operations applicable to common stockholders..............
Weighted average shares outstanding................................................
Net loss from continuing operations applicable to common stockholders per share....
<CAPTION>
TOTALS
---------
OPERATING REVENUE:
Service revenue.................................................................... $ 105,475
Roaming revenue.................................................................... 66,463
Equipment sales.................................................................... 6,566
Other.............................................................................. 2,528
---------
Total operating revenue............................................................ 181,032
---------
OPERATING EXPENSES:
Cost of services................................................................... 33,688
Cost of equipment.................................................................. 14,863
Marketing and selling.............................................................. 24,804
General and administrative......................................................... 31,129
Depreciation and amortization...................................................... 106,933
---------
Total operating expenses........................................................... 211,417
---------
Operating income................................................................... (30,385)
Interest expense................................................................... (88,092)
Other income (expense), net........................................................ 2,933
---------
(Loss) income before minority interests and income taxes........................... (115,544)
Minority interests in income of subsidiaries....................................... (1,531)
---------
(Loss) income before income taxes.................................................. (117,075)
Income tax (provision) benefit..................................................... 44,490
---------
(Loss) income from continuing operations........................................... (72,585)
---------
Dividends on preferred stock....................................................... (54,924)
---------
Net loss from continuing operations applicable to common stockholders.............. (127,509)
---------
Weighted average shares outstanding................................................ 492,174
---------
Net loss from continuing operations applicable to common stockholders per share.... $ (259.07)
---------
</TABLE>
See accompanying notes to the unaudited pro forma consolidated condensed
financial statements.
51
<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 West Maryland properties for
the two month period and Arizona 5 RSA for the nine month period in 1997
during which the properties were not owned by the Company.
(2) To reclassify certain operating revenues and expenses to conform with the
Company's historical presentation.
(3) To reflect the additional depreciation and amortization resulting from the
allocation of purchase price to property and equipment, cellular license
acquisition costs and intangible assets. Property and equipment is being
depreciated over two to ten years, cellular license acquisition costs over
15 years and intangible assets over five to ten 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."
(4) To reflect (i) $4.4 million of interest expense relating to the Senior Notes
and indebtedness incurred under the then existing bank facility in
connection with the 1997 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 bank
facility, (iv) the elimination of $15.8 million of interest expense
(including $.4 million of amortization of deferred financing cost)
associated with the then existing bank facility which was repaid with a
portion of the proceeds from the sale of the Senior Preferred Stock and
borrowings under the DCOC Facility, (v) the elimination of $.8 million of
interest expense associated with the indebtedness of California 4 which was
not assumed by the Company, (vi) $2.6 million of interest expense relating
to the $28.4 million of incurred under the DCOC Facility in connection with
the California 4 Acquisition (assuming an interest rate of 9.0% per annum),
(vii) $5.8 million of interest expense relating to indebtedness 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 Existing Credit Facilities.
(5) To reflect (i) the elimination of $29.9 million of interest expense
associated with the Sygnet Notes and indebtedness under Sygnet's existing
bank facility which will be repaid by the Company as part of the Sygnet
Acquisition, (ii) $24.5 million of interest expense relating to the $200.0
million aggregate principal amount of the Dobson/Sygnet Notes, (iii) $33.4
million of interest expense relating to borrowings under the New Credit
Facilities (assuming a weighted average interest rate of 8.38%), (iv) $.2
million of interest expense relating to the unused principal amount of the
New Credit Facilities (assuming a commitment fee of .5%), (v) $.8 million of
amortization of deferred financing costs relating to the estimated $8.2
million of debt issuance costs incurred in connection with the offering of
the Dobson/Sygnet Notes, (vi) $1.5 million of amortization of deferred
financing costs relating to the estimated $12.6 million of debt issuance
costs incurred in connection with the New Credit Facilities, (vii) $1.4
million of interest related to the $17.5 million of borrowings under the
Dobson Tower Facility and (viii) $.8 million of interest expense related to
the $16.2 million of borrowings under existing credit facilities.
(6) To reflect the pro forma loss of the 25% equity interest in the Arizona 5
Partnership not owned by the Company.
52
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(7) To reflect an adjustment to income tax expense for the effects of the 1997
Acquisitions and the 1998 Transactions, assuming a 38% effective tax rate.
(8) To reflect dividends on the Senior Preferred Stock, including the
amortization of the issuance costs with respect thereto.
(9) To reflect dividends on the Preferred Stock, including the amortization of
the issuance costs and discount with respect thereto and to reflect the
dividends on the Class D, Class F and Class G Preferred Stock, assuming
dividend rates of 15%, 16% and 16%, respectively, and does not reflect
dividends on the preferred stock to be issued by Dobson Tower or any
amortization of discount on the Class F Preferred Stock resulting from any
value that may be attributed to the warrants granted to the purchasers of
the Class F Preferred Stock.
53
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
DOBSON SYGNET ADJUSTMENTS TOTALS
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
ASSETS
Current assets, net of restricted investments........... $ 42,313 $ 16,443 $ -- $ 58,756
Restricted investments.................................. 18,508 -- 67,661(1) 86,169
Property, plant and equipment........................... 76,360 52,138 (836)(2) 127,662
Receivables--affiliate.................................. 9,168 -- -- 9,168
Cellular license acquisition cost....................... 459,732 241,062 543,265(2) 1,244,059
Deposits................................................ 67,300 -- (25,000)(2) 42,300
Intangible assets....................................... 17,686 23,653 35,647 )(3 76,986
Other assets............................................ 9,974 -- -- 9,974
---------- ---------- ----------- ------------
Total assets........................................ $ 701,041 $ 333,296 $ 620,737 $ 1,655,074
---------- ---------- ----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities..................................... $ 49,925 $ 18,313 $ (2,510)(7) $ 65,728
Net liabilities from discontinued operations............ 629 -- -- 629
Long-term debt.......................................... 448,056 302,644 304,311(4) 1,054,911
Deferred credits........................................ 66,642 -- 189,264(2) 255,906
Minority interests...................................... 22,949 -- 7,500(5) 30,449
Preferred stock......................................... 197,136 -- 178,377(6) 375,513
Stockholders' equity/net assets......................... (84,296) 12,339 (56,205)(7) (128,162)
---------- ---------- ----------- ------------
Total liabilities and stockholders' equity.......... $ 701,041 $ 333,296 $ 620,737 $ 1,655,074
---------- ---------- ----------- ------------
</TABLE>
- ------------------------
(1) To reflect the estimated $67.7 in restricted cash to be held in a pledged
account to secure payment of the first six scheduled interest payments on
the Dobson/Sygnet Notes.
(2) To allocate the purchase price of the Sygnet Acquisition, including the
related deferred tax liability to the assets acquired. The purchase price
excludes the $6.0 million to be paid for the Pennsylvania 2 Acquisition.
(3) To reflect an estimated $22.8 million of offering costs incurred with the
Dobson/Sygnet Notes, the Preferred Stock and the New Credit Facilities.
(4) To reflect (i) the elimination of $302.6 million of indebtedness associated
with Sygnet that will be repaid by the Company as part of the Sygnet
Acquisition (included in this amount is $110.0 million of Sygnet Notes which
the Company estimates will be repurchased for $135.8 million using
borrowings under the New Credit Facilities), (ii) the incurrence of $398.3
million of indebtedness under the New Credit Facilities, (iii) the issuance
of $200.0 million aggregate principal amount of the Dobson/ Sygnet Notes,
(iv) the repayment of the $25.0 million borrowed to pay the deposit for the
Sygnet Acquisition, (v) the incurrence of $17.5 million of indebtedness
under the Tower Credit Facility and (vi) the incurrence of $16.2 million of
indebtedness under the Existing Credit Facilities.
(5) To reflect the $7.5 million preferred stock issued by Dobson Tower to an
affiliate of the Company.
(6) To reflect the issuance of the Preferred Stock in the Offering, an
additional $115.0 million of other preferred stock to be issued as part of
the Sygnet Financing and $25.0 million of Class G Preferred Stock and does
not reflect any amortization of discount on the Class F Preferred Stock
resulting from any value that may be attributed to the warrants granted to
the purchasers of the Class F Preferred Stock.
(7) To reflect the elimination of stockholders' equity of Sygnet, the conversion
of Class B Preferred Stock to Class A Common Stock and the stock
repurchases.
54
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading provider of rural cellular telephone services.
Since it commenced providing cellular services in 1990 in Oklahoma and the Texas
Panhandle, the Company has rapidly expanded its cellular operations with an
acquisition strategy targeting underdeveloped rural and suburban areas which
have a significant number of potential customers with substantial needs for
cellular communications. At September 30, 1998, the Company's cellular systems
covered 2.8 million Pops in Arizona, California, Kansas, Maryland, Missouri,
Oklahoma, Pennsylvania and Texas. On December 23, 1998 the Company acquired
Sygnet for $337.5 million in cash. The Company recently entered into an
agreement to acquire the FCC license for, and certain assets related to,
Maryland 1 RSA for $9.1 million in cash, subject to adjustment.
Sygnet owns and operates cellular telephone systems serving a large cluster
of properties with approximately 2.4 million Pops and 166,886 subscribers
located in northeastern Ohio, western Pennsylvania and western New York.
Sygnet's cellular systems are located in Youngstown, Ohio and Erie,
Pennsylvania, and in primarily rural and suburban areas between the Cleveland,
Akron-Canton, Pittsburgh, Buffalo and Rochester metropolitan areas.
The following discussion and analysis is of the historical financial
condition and results of operation of the Company and Sygnet and should be read
in conjunction with the Company's and Sygnet's consolidated financial statements
and the notes thereto appearing elsewhere in this Memorandum.
ACQUISITIONS
The Company continually evaluates opportunities to acquire additional
wireless systems. The following table sets forth the cellular markets and
systems acquired and to be acquired by the Company since 1995 (ownership in
parentheses if not 100% owned by the Company):
<TABLE>
<CAPTION>
PURCHASE PRICE
(DOLLARS IN
ACQUISITION MILLIONS) DATE
- ----------------------------------------------------- ------------------- ------------------
<S> <C> <C>
Sygnet............................................... $ 337.5 December 1998
Maryland 1........................................... 9.1 Pending
Texas 10 (1)......................................... 55.0 December 1998
Ohio 2 (2)........................................... 39.3 September 1998
California 7......................................... 21.0 July 1998
Santa Cruz (86.9%)................................... 31.2 June 1998
California 4......................................... 90.9 April 1998
Texas 16............................................. 56.6 January 1998
Arizona 5 (75%)...................................... 39.8 October 1997
East Maryland........................................ 75.8 March 1997
West Maryland........................................ 77.6 February 1997
Kansas/Missouri...................................... 30.0 March 1996
</TABLE>
- ------------------------------
(1) On December 2, 1998, the Company acquired the FCC cellular license for Texas
10 for $55.0 million in cash, subject to resolution of certain title matters
regarding the FCC license. In conjunction with its acquisition of Texas 10,
the Company is negotiating with AT&T Wireless for the purchase of
subscribers and to lease certain equipment necessary to operate Texas 10.
(2) On September 2, 1998, the Company acquired the FCC cellular license for Ohio
2 for $39.3 million in cash, subject to resolution of certain title matters
regarding the FCC license. In conjunction with its acquisition of Ohio 2,
the Company is negotiating with AirTouch for the purchase of subscribers and
to lease certain equipment necessary to operate Ohio 2.
55
<PAGE>
REVENUE
The cellular revenues of the Company and Sygnet 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 cellular telecommunications subscribers and the number of minutes of
usage per subscriber. There has also been a broad trend in the cellular
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. In addition, Sygnet has introduced new pricing plans which have
increased revenue and encouraged additional usage to a limited extent.
Roaming accounted for 39.4% and 47.7% of the Company's cellular revenue and
31.5% and 32.2% of Sygnet's revenues for the year ended December 31, 1997 and
the nine months ended September 30, 1998. On a pro forma basis after giving
effect to the Sygnet Acquisition, for the year ended December 31, 1997 and for
the nine months ended September 30, 1998 roaming would have accounted for 36.7%
and 39.1%, respectively, of the Company's revenue from its cellular operations.
While the industry trend is to reduce roaming rates, the Company believes that
its roaming rates and those of Sygnet are generally lower than rates offered by
others in or near the Company's or Sygnet's systems and that such lower roaming
rates mitigate against this trend; however, there can be no assurance that such
trend will not materially impact it in the future. The Company's roaming yield
(roamer service revenue, which includes airtime, toll charges and surcharges,
divided by roaming minutes of use) was $.70, $.75, $.70 and $.72 per minute
(excludes Arizona 5 for 1997, for which the roaming minutes of use were not
available) for the years ended December 31, 1995, 1996 and 1997 and for the nine
months ended September 30, 1998, respectively. Sygnet's roaming yield for the
same periods was $.57, $.55, $.58 and $.57, respectively.
Included in the Sygnet roaming revenue for the years ended December 31,
1995, 1996 and 1997 and for the nine months ended September 30, 1997 and
September 30, 1998, respectively, was $.1 million, $.9 million, $3.6 million,
$2.5 million and $4.0 million attributable to Sygnet customers roaming out of
their home areas but in other Sygnet markets.
The Company's overall cellular penetration rates decreased in 1996 and 1997
compared to 1995 due to the 1996 acquisition of Kansas/Missouri and the 1997
acquisitions of the Maryland properties, which operations, when acquired, had
lower overall penetration rates than the Company's existing properties. However,
penetration rates increased in the nine months ended September 30, 1998 compared
to the nine months ended September 30, 1997 as a result of acquisitions and
incremental penetration gain in existing markets. Sygnet's overall cellular
penetration rates increased in 1997 compared to 1996 and in the nine months
ended September 30, 1998 compared to the nine months ended September 30, 1997 as
a result of internal growth. The Company believes that as its cellular
penetration rates increase, the increase in new subscriber revenue will exceed
the loss of revenue attributable to the cellular churn rate.
In recent years, the Company and other cellular providers, 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 equipment sales, which
have resulted in increased marketing and selling costs per gross additional
subscriber. While the Company expects to continue these discounts and
promotions, the Company believes that the use of such promotions will result in
increased revenue from increases in the number of wireless subscribers.
56
<PAGE>
COSTS AND EXPENSES
The Company's and Sygnet's primary operating expense categories include cost
of service, cost of equipment, marketing and selling, general and administrative
and depreciation and amortization.
The Company's cost of service consists primarily of costs to operate and
maintain the Company's facilities utilized in providing service to customers and
amounts paid to third-party cellular providers for providing service to the
Company's subscribers.
Sygnet's cost of service consists primarily of costs associated with
billing, amounts paid for interconnection and call delivery and amounts paid to
third-party cellular providers for providing service to Sygnet's subscribers
when roaming, offset by the amount billed to Sygnet's subscribers.
The Company's and Sygnet's cost of equipment represents the cost associated
with telephone equipment and accessories sold to customers. In recent years, the
Company and Sygnet, as well as 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 and Sygnet
have incurred, and the Company expects to continue to incur, losses on equipment
sales, which have affected marketing and selling costs per gross additional
cellular subscriber. While the Company expects to continue these discounts and
promotions, the Company believes that the use of such promotions will lead to
increased revenue from increases in the number of cellular subscribers.
The Company's marketing and selling costs include advertising, compensation
paid to sales personnel and independent agents and all other costs to market and
sell cellular products and services and costs related to customer retention.
Commissions are paid to direct sales personnel for new business generated.
Independent sales agents receive commissions for generating new sales and
ongoing sales to existing customers.
Sygnet's marketing and selling costs primarily consist of advertising costs
and compensation paid to sales personnel and independent agents and retail store
operations' costs. Commissions are paid to direct sales personnel primarily for
the amount of new business generated. Independent sales agents receive
commissions for generating new sales and ongoing sales to existing customers.
The Company's general and administrative costs include all infrastructure
costs such as customer support, billing, collections, and corporate
administration.
Sygnet's general and administrative costs include all infrastructure costs
such as customer support, collections, corporate administration, costs to
maintain and operate cell sites and customer retention costs.
The size and scope of the Company's cellular operations increased
substantially as a result of acquisitions in 1996, 1997 and 1998, and will
increase further upon consummation of the Sygnet Acquisition. See "Pro Forma
Condensed Consolidated Financial Data." On a pro forma basis after giving effect
to the Sygnet Acquisition, the Texas 10 Acquisition and the Maryland 1
Acquisition, the Company would have had 347,306 subscribers at September 30,
1998. Although the Company's Adjusted EBITDA has increased as a result of
acquisitions made to date and will increase as a result of the Sygnet
Acquisition, the increased amortization and interest expense and dividends
associated with the Senior Notes, additional bank borrowings and Senior
Preferred Stock resulted in increased losses in 1997 and the first nine months
of 1998, which are expected to increase as a result of the Dobson/Sygnet Notes,
this Offering and the New Credit Facilities and continue until the Company
expands the acquired systems and increases its subscriber base. As a result of
the recent acquisitions, the comparability of the historical results of
operations have been affected for the periods discussed and such results may not
be indicative of future performance.
DISCONTINUED OPERATIONS
The Company, through its wholly-owned subsidiary, Logix, provides integrated
local, long distance, data and other telecommunications services to small and
medium-sized business customers throughout the
57
<PAGE>
Southwest United States. Logix operates long-haul fiber optic facilities in
Oklahoma, Texas and Colorado. Logix recently began offering switch-based
integrated communications provider services in Oklahoma City, Tulsa and
Amarillo. In addition, since the consummation of the American Telco Acquisition
on June 15, 1998, it has offered these services in Houston, Austin, Dallas, Fort
Worth and San Antonio. The Company intends to distribute the stock of Logix to
the Company's shareholders, subject to receipt of a favorable tax ruling.
Accordingly, Logix is accounted for as a discontinued operation in the Company's
consolidated financial statements.
RESULTS OF OPERATIONS--DOBSON
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1997
OPERATING REVENUE. For the nine months ended September 30, 1998, total
operating revenue increased $50.6 million, or 110.8%, to $96.3 million from
$45.7 million for the comparable period in 1997. Total service, roaming and
equipment revenue represented 49.6%, 47.7% and 2.6%, respectively, of total
operating revenue during the nine months ended September 30, 1998 and 57.9%,
38.9% and 1.6%, respectively, of total operating revenue during the nine months
ended September 30, 1997.
The following table sets forth the components of the Company's revenue for
the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1997 1998
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Operating revenue:
Service revenue...................................................... $ 26,487 $ 47,769
Roaming revenue...................................................... 17,782 45,916
Equipment sales...................................................... 741 2,503
Other revenue........................................................ 703 158
--------- ---------
Total............................................................ $ 45,713 $ 96,346
--------- ---------
--------- ---------
</TABLE>
Service revenue increased $21.3 million, or 80.3%, to $47.8 million in the
first nine months of 1998 from $26.5 million in the same period of 1997. Of the
increase, $16.4 million was attributable to the acquisitions. The remaining $4.9
million was primarily attributable to increased penetration and usage in the
Central and Eastern Regions. The Company's subscriber base increased 91.4% to
163,020 at September 30, 1998 from 85,185 at September 30, 1997. Approximately
54,417 subscribers were added since September 30, 1997 as a result of the
acquisitions of Arizona 5 and the 1998 Acquisitions. The Company's average
monthly service revenue per subscriber decreased 3.7% to $39.58 for the nine
months ended September 30, 1998 from $41.08 for the comparable period in 1997
due to the addition of new lower rate subscribers in the East Region and
competitive market pressures.
Roaming revenue increased $28.1 million, or 158.2%, to $45.9 million in the
first nine months of 1998 from $17.8 million for the comparable period of 1997.
Of the increase, $24.1 million was attributable to the 1997 and 1998
acquisitions. The remaining $4.0 million was primarily attributable to increased
roaming minutes in the Central and Eastern Regions due to expanded coverage
areas and increased usage in these markets.
Equipment sales of $2.5 million in the first nine months of 1998 represented
an increase of $1.8 million, or 238%, from $0.7 million in the same period of
1997, as the Company sold more equipment during the first nine months of 1998.
COST OF SERVICE. For the nine month period ended September 30, 1998, the
total cost of service increased $11.7 million, or 106.8%, to $22.6 million from
$10.9 million for the comparable period in 1997.
58
<PAGE>
Of the increase, $10.0 million was attributable to 1997 and 1998 Acquisitions.
The remaining $1.7 million was primarily attributable to increased subscribers
and minutes of use in the Central and Eastern Regions and expanded use of
rerating agreements with providers adjacent to the Company's markets. As a
percentage of service and roaming revenue, cost of wireless service decreased
slightly to 24.1% in the first nine months of 1998 from 24.7% in the comparable
period of 1997.
COST OF EQUIPMENT. For the nine month period ended September 30, 1998, cost
of equipment increased $2.4 million, or 82.3%, to $5.2 million during the first
nine months of 1998 from $2.8 million in the first nine months of 1997,
primarily from increases in the volume of equipment sold due to the growth in
subscribers.
MARKETING AND SELLING COSTS. Marketing and selling costs increased $8.0
million, or 114.9%, to $14.9 million in the first nine months of 1998 from $6.9
million in the comparable period of 1997. As a percentage of total operating
revenue, marketing and selling costs increased to 15.4% in the first nine months
of 1998 from 15.1% in the same period of 1997. The increase was primarily due to
the higher level of subscribers added period to period. Gross subscribers added
in the first nine months of 1998 was 48,882. The number of gross subscribers
added in the first nine months of 1997 was 22,273.
GENERAL AND ADMINISTRATIVE COSTS. For the nine month period ended September
30, 1998, general and administrative costs increased $8.1 million, or 99.3%, to
$16.2 million from $8.1 million for the same period in 1997. As a percentage of
total operating revenue, general and administrative costs decreased to 16.8% in
the first nine months of 1998 from 17.8% in the comparable period of 1997. The
increase was primarily due to increased billing costs as a result of the growth
in subscribers, the 1997 and 1998 Acquisitions and increased salary costs
resulting from additional personnel. The decrease as a percentage of total
operating revenue is a result of the Company's strategy to integrate new
operations in its existing management structure and a reduction in the Company's
uncollectible rate.
DEPRECIATION AND AMORTIZATION EXPENSE. For the nine month period ended
September 30, 1998, depreciation and amortization expense increased $17.8
million, or 148.8% to $29.7 million in the first nine months of 1998 from $11.9
million in the same period of 1997. Depreciation and amortization of assets
acquired in acquisitions accounted for $17.7 million of the increase in the
first nine months of 1998 compared to the same period of 1997.
INTEREST EXPENSE. For the first nine months of 1998, interest expense
increased $7.3 million, or 41.9%, to $25.0 million from $17.7 million in the
comparable period of 1997. The increase was primarily a result of increased
borrowings in the first nine months of 1998 to finance the Company's
acquisitions.
OTHER INCOME (EXPENSE), NET. For the nine months ended September 30, 1998,
other income increased $1.4 million, or 78.1%, to $3.3 million from $1.9 million
in the first nine months of 1997. Of the increase, $1.2 million was attributable
to increased interest income in 1998. In 1998, the Company had higher investment
balances related to proceeds from the Senior Preferred Stock and escrow deposits
relating to the Ohio 2 and Sygnet Acquisitions.
EXTRAORDINARY EXPENSE. In 1997 and 1998, the Company incurred an
extraordinary pretax loss of approximately $2.3 million and $3.3 million,
respectively, as a result of writing off previously capitalized financing costs
associated with revolving credit facilities that were refinanced in February
1997 and March 1998.
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 $39.8 million, or 147.6%, to $66.7 million from $26.9 million
in 1996. Total service, roaming and equipment revenue represented 57.6%, 39.4%
and 2.2% of total operating revenue, respectively, in 1997 and 65.3%, 29.1% and
2.5% of total operating revenue, respectively, in 1996.
59
<PAGE>
The following table sets forth the components of the Company's revenue for
the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------------
1996 1997
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Operating revenue:
Service revenue...................................................... $ 17,593 $ 38,410
Roaming revenue...................................................... 7,852 26,263
Equipment sales...................................................... 662 1,455
Other revenue........................................................ 832 586
--------- ---------
Total............................................................ $ 26,939 $ 66,714
--------- ---------
--------- ---------
</TABLE>
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 and Arizona
properties in 1997 and the inclusion of the operations of the Kansas/Missouri
properties for all of 1997. The remaining increase was primarily attributable to
increased penetration and usage in the Central Region. The Company's 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
East Maryland and West Maryland markets. The Company's average monthly 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 Eastern Region and competitive market pressures.
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, $15.6
million was attributable to the acquisition of the Maryland and Arizona
properties in 1997 and the inclusion of the operations of the Kansas/Missouri
markets for all of 1997. The remaining increase was primarily attributable to
increased roaming minutes in the Central Region due to expanded coverage areas
in these markets and an increase in minutes of use. Equipment sales of $1.5
million in 1997 represented an increase of $0.8 million, or 119.9%, from $0.7
million in 1996, as the Company sold more equipment in 1997.
COST OF SERVICE. For the year ended December 31, 1997, the total cost of
service increased $10.3 million, or 168.5%, to $16.4 million from $6.1 million
in 1996. Of the increase, $8.4 million was attributable to the acquisition of
the Maryland and Arizona properties in 1997 and the inclusion of the operations
of the Kansas/Missouri markets for all of 1997. The remaining increase was
primarily attributable to increased subscribers and minutes of use in the
Central Region and expanded use of rerating agreements with providers adjacent
to the Company's markets. As a percentage of service and roaming revenue, cost
of service increased to 25.4% in 1997 from 24.0% in 1996. This is primarily due
to the expanded use of rerating agreements noted above, as well as additional
facility lease costs in East Maryland.
COST OF EQUIPMENT. For the year ended December 31, 1997, the total cost of
equipment increased $1.4 million, or 57.3% to $4.0 million from $2.6 million in
1996, primarily from increases in the volume of equipment sold due to the growth
in subscribers.
MARKETING AND SELLING COSTS. Marketing and selling costs increased $6.2
million, or 139.1%, to $10.7 million in 1997 from $4.5 million in 1996. The
increase was primarily due to the higher level of subscribers added period to
period. Gross subscribers added in 1997 was 33,354 with subscribers added in the
Eastern Region and in Arizona 5 since their acquisitions making up 16,469 and
1,307, respectively, of the gross subscribers added. The number of gross
subscribers added in 1996 was 11,970. As a percentage of total operating
revenue, marketing and selling costs decreased to 16.0% in 1997 from 16.6% in
1996.
GENERAL AND ADMINISTRATIVE COSTS. For the year ended December 31, 1997,
general and administrative costs increased $7.7 million, or 196.2%, to $11.6
million from $3.9 million for the same period of 1996. The
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increase was primarily due to increased billing costs as a result of the growth
in wireless subscribers, the 1997 Acquisitions, the inclusion of the
Kansas/Missouri markets for all of 1997, and increased salary costs resulting
from additional personnel. As a percentage of total operating revenue, general
and administrative costs increased from 14.5% in 1996 to 17.3% in 1997. This
increase is a result of additional personnel necessary to support the Company's
expanded operations.
DEPRECIATION AND AMORTIZATION EXPENSE. For the year ended December 31,
1997, depreciation and amortization expense increased $11.6 million, or 220.5%,
to $16.8 million from $5.2 million in 1996. There was a $12.1 million increase
as a result of the amortization of assets acquired in the acquisition of the
Maryland and Arizona properties in 1997 and the Kansas/Missouri Acquisition in
1996 offset by a slight decrease related to assets in the Central Region.
INTEREST EXPENSE. For the year ended December 31, 1997, interest expense
increased $23.3 million to $27.6 million from $4.3 million in 1996. The increase
was primarily the result of increased borrowings to finance the acquisitions of
the Maryland and Arizona properties.
OTHER INCOME (EXPENSE), NET. For the year ended December 31, 1997, total
other income expense (net) (consisting of interest income, and other
income/expense) increased $4.3 million to $2.8 million from $(1.5) million in
1996. The increase was primarily 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.
EXTRAORDINARY EXPENSE. In 1997 and 1996, the Company incurred an
extraordinary pretax loss of approximately $2.2 million and $0.9 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 $7.2 million, or 36.9%, to $26.9 million from $19.7 million in
1995. Total service, roaming and equipment revenue represented 65.3%, 29.1% and
2.5% of total operating revenue, respectively, in 1996 and 70.9%, 22.2% and 3.4%
of total operating revenue, respectively, in 1995.
The following table sets forth the components of the Company's revenue for
the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
--------------------
1995 1996
--------- ---------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Operating revenue:
Service revenue...................................................... $ 13,949 $ 17,593
Roaming revenue...................................................... 4,369 7,852
Equipment sales...................................................... 672 662
Other revenue........................................................ 693 832
--------- ---------
Total............................................................ $ 19,683 $ 26,939
--------- ---------
--------- ---------
</TABLE>
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 Oklahoma and in the Texas
Panhandle and $1.1 million was attributable to the acquisition of the
Kansas/Missouri markets in March 1996. The Company's 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 Oklahoma and the Texas Panhandle. However, the Company's average
monthly service revenue per subscriber decreased 3.4% to $48.31 for the year
ended December 31, 1996 from
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$50.00 for the year ended December 31, 1995 due to competitive market pressures
and the addition of new lower usage subscribers.
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 markets 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 in Oklahoma and
the Texas Panhandle due to improved coverage areas and an increase in minutes of
use.
Equipment sales of $0.7 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.
COST OF SERVICE. For the year ended December 31, 1996, the total cost of
service increased $1.4 million, or 31.5%, to $6.1 million from $4.7 million in
1995. Of the increase, $1.0 million was attributable to the inclusion of the
Kansas and Missouri properties 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 of wireless service decreased as a percentage of service and roaming
revenue to 24.0% for the year ended December 31, 1996 from 25.4% for 1995.
COST OF EQUIPMENT. For the year ended December 31, 1996, the total cost of
equipment increased $0.6 million, or 27.8%, to 2.6 million from $2.0 million in
1995. The increase resulted primarily from increases in the volume of equipment
sales due to the growth of subscribers during 1996, partially offset by a
decrease in equipment costs.
MARKETING AND SELLING COSTS. Marketing and selling costs increased $1.4
million, or 43.8%, to $4.5 million in 1996 from $3.1 million in 1995. The
increase was primarily due to the higher level of wireless subscribers added
period to period. Gross subscribers added for the year ended December 31, 1996
was 11,970 with the Kansas/Missouri markets making up 1,511 of the gross
subscribers added. The gross number of subscribers added in 1995 was 9,653. As a
percentage of total operating revenue, marketing and selling costs increased to
16.6% in 1996 from 15.8% in 1995.
GENERAL AND ADMINISTRATIVE COSTS. For the year ended December 31, 1996,
general and administrative costs increased $0.9 million, or 28.5%, to $3.9
million from $3.0 million for 1995. The increase was primarily due to increased
billing costs as a result of the growth in subscribers, the inclusion of the
Kansas/ Missouri markets from March 1996 and increased salary costs resulting
from additional personnel in its wireless and fiber operations. General and
administrative costs decreased as a percentage of the Company's total revenues
to 14.5% in 1996 from 15.4% in 1995.
DEPRECIATION AND AMORTIZATION EXPENSE. For the year ended December 31,
1996, depreciation and amortization expense increased $2.7 million to $5.2
million from $2.5 million in 1995. Approximately $1.2 million of the increase
was the result of the amortization of the licenses acquired in the Kansas/
Missouri markets, with the remainder due primarily to the increase in equipment
in the Company's business.
INTEREST EXPENSE. For the year ended December 31, 1996, interest expense
increased $2.4 million to $4.3 million from $1.9 million in 1995. The increase
was primarily a result of increased borrowings to finance the Kansas/Missouri
acquisition.
OTHER INCOME (EXPENSE), NET. For the year ended December 31, 1996, other
income (expense), net decreased $1.3 million to $(1.5) million from $(0.2)
million in 1995 primarily as a result of a $1.7 million loss on the disposal of
two mobile telecommunications switching offices made in connection with system
upgrades in Oklahoma and the Texas Panhandle.
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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.
RESULTS OF OPERATIONS--SYGNET
Sygnet's operating results have been significantly affected as a result of
the Horizon Acquisition in October 1996 and the Erie Acquisition in September
1995. The systems acquired for $252.9 million in the Horizon Acquisition serve
contiguous markets representing approximately 1.4 million Pops in western
Pennsylvania and New York. The systems acquired in the Erie Acquisition for
$42.5 million represent approximately 282,300 Pops.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1997
REVENUE. For the nine months ended September 30, 1998, Sygnet's total
revenue increased 22.6% to $76.9 million, from $62.8 million in the first nine
months of 1997. The growth in revenue was the result of continued growth of the
subscriber base and increased roaming revenue generated by additional usage.
Subscriber revenue grew 21.3% to $46.7 million for the nine months ended
September 30, 1998 from $38.5 million in the comparable period in 1997 mainly as
a result of continued subscriber growth, despite a decline in average revenue
per subscriber. Sygnet's number of subscribers increased by 28.2% to 166,886 at
September 30, 1998 from 130,146 at September 30, 1997 due to internal growth. On
a per subscriber basis, average monthly subscriber revenue per subscriber
declined by 6.8% to $33.85 for the nine months ended September 30, 1998 from
$36.33 during the comparable period in 1997. This was due to competitive market
pressures, continuing promotional activity and the changing mix of subscribers
reflecting increasing levels of subscribers who purchase less expensive rate
plans that include packaged minutes of use.
Roamer revenue grew 24.6% to $24.8 million during the nine months ended
September 30, 1998 compared to $19.9 million in the comparable period in 1997.
This increase was mainly a result of increased roaming traffic throughout all of
Sygnet's systems which more than offset the decline in roaming revenue per
minute of use. Roaming minutes of use increased by 30.5% to 43.6 million for the
nine months ended September 30, 1998 from 33.4 million for the comparable period
in 1997. Roaming revenue per minute, including toll, for the nine months ended
September 30, 1998 decreased to $0.57 from $0.59 for the comparable period in
1997. This decrease was mainly a result of increased intrasystem roaming traffic
that is priced lower than other roaming traffic.
Equipment sales revenue increased 39.4% to $4.3 million for the nine months
ended September 30, 1998 from $3.1 million in the comparable period in 1997.
This increase was due mainly to an increased number of telephones and
accessories sold to new customers as well as from additional sales of equipment
to existing customers for retention purposes for which credits are given on the
sales price and reflected in general and administrative costs.
COST OF SERVICES. Cost of services increased 25.5% to $9.0 million for the
nine months ended September 30, 1998 from $7.2 million for the comparable period
in 1997. This increase was mainly a result of an increase in home subscriber net
roaming costs as well as increased billing and call delivery expenses associated
with the growth in the subscriber base. The increase in net roaming costs is
attributed mostly to increased levels of intrasystem roaming for which rates to
customers are lower than other roaming traffic which has stimulated usage.
Partially offsetting this increase are lower costs to Sygnet for long distance
charges and the elimination of costs associated with a terminated switching
agreement. As a percentage of total revenue, cost of services was 11.7% for the
nine months ended September 30, 1998 compared to 11.4% for the same period in
1997.
COST OF EQUIPMENT SALES. Cost of equipment sales increased 14.5% to $7.8
million for the nine months ended September 30, 1998 from $6.8 million in the
comparable 1997 period. This increase was due mainly
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to an increased number of telephones and accessories sold to existing
subscribers, as well as equipment subsidies and sales to new subscribers, offset
by a reduction in the average cost of telephones and accessories.
GENERAL AND ADMINISTRATIVE COSTS. General and administrative costs
increased 25.7% to $14.7 million for the nine months ended September 30, 1998
from $11.7 million for the comparable period in 1997. This increase was mainly a
result of the growth in the subscriber base which caused an increase in
compensation and increased customer retention costs due to competitive
pressures. As a percentage of total revenues, general and administrative expense
was 19.1% for the nine months ended September 30, 1998 compared to 18.6% for the
same period in 1997.
SELLING AND MARKETING COSTS. Selling and marketing costs increased 21.3% to
$9.1 million for the nine months ended September 30, 1998 from $7.5 million for
the comparable period in 1997. This increase is mainly due to an increase in new
subscribers added period to period which caused higher compensation and
commission expenses as well as an increase in advertising and promotional
expenses. Selling and marketing cost per gross new subscriber, including
equipment subsidies, decreased by 6.2% to $287 for the nine months ended
September 30, 1998 from $306 for the comparable period in 1997. This was
primarily a result of an improvement in the margin on telephone and accessory
subsidies and sales.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 1.0%
to $21.3 million for the nine months ended September 30, 1998 from $21.1 million
for the comparable period in 1997 due primarily to the depreciation on higher
levels of fixed assets resulting from capital expenditures for system growth.
This increase more than offset the decrease in depreciation due to certain cell
site equipment obtained in the Horizon Acquisition which become fully
depreciated in April 1998. For the nine months ended September 30, 1998, Sygnet
incurred $11.5 million in capital expenditures, primarily for cell site and
system enhancements.
INTEREST EXPENSE, NET. Interest expense decreased 4.2% to $21.6 million for
the nine months ended September 30, 1998 from $22.6 million for the comparable
period in 1997. This decrease was primarily a result of a lower level of
borrowing due to the repayment of certain indebtedness with the proceeds from
the sale of common stock.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUE. For 1997, Sygnet's total revenue increased 91.2% to $85.6 million
from $44.8 million for 1996. The growth in revenue was the result of the Horizon
Acquisition, which occurred on October 9, 1996, and continued growth of the
subscriber base.
Subscriber revenue grew by 69.3% to $52.6 million for 1997 from $31.1
million for 1996 mainly as a result of the Horizon Acquisition and continued
subscriber growth. Subscriber revenue, on a pro forma basis giving effect to the
Horizon Acquisition, would have grown by 22.7% due to growth in the subscriber
base, offset by a decline in average revenue per subscriber. Sygnet's
subscribers grew by 34.1% to 142,934 at December 31, 1997 from 106,574 at
December 31, 1996 due mainly to internal growth. On a pro forma basis giving
effect to the Horizon Acquisition, average monthly subscriber revenue per
subscriber would have declined by 7.3% to $35.91 during 1997 from $38.75 in
1996. This was due to the changing mix of subscribers reflecting increasing
levels of subscribers purchasing less expensive rate plans that include limited
free minutes of use, increased promotional activity and competitive market
pressures.
Roamer revenue increased 178.6% to $27.0 million during 1997 from $9.7
million for 1996. This increase was mainly a result of the Horizon Acquisition
as well as increased roaming traffic throughout all of Sygnet's systems. On a
pro forma basis giving effect to the Horizon Acquisition, roamer revenue would
have grown by 21.5% due to a greater volume of roaming traffic offset by a
reduction in roaming revenue per minute. Roaming revenue per minute for 1997
would have decreased to $0.58 from $0.59 for 1996 on a
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<PAGE>
pro forma basis giving effect to the Horizon Acquisition mainly as a result of
reductions in roaming rates with roaming partners.
Equipment sales increased 78.9% to $4.3 million for 1997 compared to $2.4
million for 1996. This increase was due mainly to the Horizon Acquisition, an
increased number of telephones and accessories distributed as new subscriber
acquisitions increased, as well as from additional sales of equipment to
existing customers. On a pro forma basis giving effect to the Horizon
Acquisition, equipment sales for 1997 would have increased 12.4% over 1996.
COST OF SERVICES. Cost of services increased 82.4% to $10.0 million during
1997 from $5.5 million for 1996 due mainly to the Horizon Acquisition. On a pro
forma basis giving effect to the Horizon Acquisition, cost of services for 1997
would have increased by 12.0% from 1996. This increase was mainly a result of an
increase in billing, call delivery and roaming costs associated with the growth
in the subscriber base, partially offset by lower rates for interconnection and
long distance charges. As a percentage of total revenues, on a pro forma basis
giving effect to the Horizon Acquisition, cost of services was 11.7% in 1997
compared to 12.7% in 1996.
COST OF EQUIPMENT SALES. Cost of equipment sales increased 66.2% to $9.7
million for 1997 from $5.8 million in 1996. This increase was due mainly to the
Horizon Acquisition and to an increased number of telephones and accessories
distributed as new subscriber acquisitions increased. Sales of equipment to
existing subscribers were also responsible for a portion of this increase. On a
pro forma basis giving effect to the Horizon Acquisition, cost of equipment
sales for 1997 would have increased 18.6% over 1996.
GENERAL AND ADMINISTRATIVE COSTS. General and administrative costs grew
72.3% to $17.0 million in 1997 from $9.9 million in 1996. This increase was due
primarily to the Horizon Acquisition and an increase in costs due to internal
growth. On a pro forma basis giving effect to the Horizon Acquisition, general
and administrative expenses for 1997 would have increased 19.8% over 1996. This
increase was mainly a result of an increase in compensation, customer retention,
occupancy and maintenance expenses associated with the growth in the subscriber
base as well as the additional cell sites added during 1997. As a percentage of
total revenues, on a pro forma basis giving effect to the Horizon Acquisition,
general and administrative expense would have been 19.8% in 1997 compared to
20.0% in 1996.
SELLING AND MARKETING COSTS. Selling and marketing costs grew 78.3% to
$10.8 million for 1997 from $6.1 million in 1996. This increase is due to the
Horizon Acquisition and a higher level of new subscribers added period to
period. On a pro forma basis giving effect to the Horizon Acquisition, selling
and marketing costs grew by 12.3% and selling and marketing cost per gross new
subscriber decreased to $291 in 1997 from $324 in 1996 reflecting a decrease in
cost of telephone and accessories in addition to improved operating
efficiencies.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$28.7 million for 1997 from $10.0 million in 1996 due to depreciation on higher
levels of fixed assets resulting from the Horizon Acquisition and purchases of
equipment to enhance systems in existing markets, and amortization of the
license acquired in the Horizon Acquisition. The amortization of the acquired
cellular licenses and subscriber lists contributed $10.3 million to this
increased amortization. For 1997, Sygnet spent $25.6 million in capital
expenditures, primarily for new cell sites, cell site conversions, and system
growth.
INTEREST EXPENSE, NET. Interest expense increased to $29.9 million in 1997
from $11.2 million in 1996. This increase was primarily a result of increased
borrowings associated with the Horizon Acquisition.
NET OPERATING LOSSES. At December 1997, Sygnet had a net operating loss
carryforward of $28.7 million. No benefit of the loss carryforward has been
recorded in 1997. If, in the future, this loss carryforward is utilized, the
related benefits will be recorded.
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YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
REVENUE. For 1996, Sygnet's total revenue increased 82.3% to $44.8 million
from $24.6 million for 1995. The growth in revenue was the result of the Horizon
and Erie Acquisitions and continued growth of the subscriber base.
Subscriber revenue grew 80.8% to $31.0 million for 1996 compared to $17.2
million for 1995 mainly as a result of the Horizon and Erie Acquisitions and
continued subscriber growth. Sygnet's subscribers increased to 106,574 at
December 31, 1996 from 44,665 at December 31, 1995 due mainly to the Horizon
Acquisition as well as internal growth. On a pro forma basis giving effect to
the Horizon Acquisition, the subscriber base increased by 36.8% to 106,574 at
December 31, 1996 from 77,891 at December 31, 1995. On a per subscriber basis
giving effect to the Horizon Acquisition, average monthly subscriber revenue
would have declined to $38.75 during 1996 from $41.66 in 1995 due in part to the
changing mix of subscribers reflecting increasing levels of subscribers
purchasing less expensive rate plans that include limited free minutes of use as
well as competitive market pressures.
Roamer revenue increased 132.0% to $9.7 million during 1996 compared to $4.2
million in 1995. This increase was mainly a result of the Horizon and Erie
Acquisitions as well as increased roaming traffic throughout all of Sygnet's
systems. Roamer revenue per minute during 1996 decreased to $.55 from $.57 in
1995. This decrease was due mainly to reductions made to roaming rates received
from other cellular carriers in the first quarter of 1995 which were in effect
for the full year in 1996, mitigated by the effects of the Horizon Acquisition.
Equipment sales increased 58.0% to $2.4 million in 1996 compared to $1.5
million in 1995. This increase was due mainly to the Horizon and Erie
Acquisitions and an increased number of telephones and accessories distributed
as new subscriber acquisitions increased, as well as from additional sales of
equipment to existing customers. Other revenue declined 4.4% to $1.6 million in
1996 from $1.7 million in 1995 as equipment rental revenue continued to decrease
due to the continued phase out of rental programs.
COST OF SERVICES. Cost of services increased 63.7% to $5.5 million in 1996
from $3.4 million in 1995 due mainly to the Horizon and Erie Acquisitions. Cost
of services decreased to 12.3% of total revenues in 1996 from 13.7% in 1995, as
a result of operating efficiencies gained from the Horizon and Erie
Acquisitions.
COST OF EQUIPMENT SALES. Cost of equipment sales increased 39.7% to $5.8
million in 1996 from $4.2 million in 1995. This increase was due mainly to the
Horizon and Erie Acquisitions and to an increased number of telephones and
accessories distributed as new subscriber acquisitions increased. The increased
cost of equipment sold resulting from the increase in gross activations was
mitigated by the declining cost to acquire new telephones.
GENERAL AND ADMINISTRATIVE COSTS. General and administrative costs
increased 77.1% to $9.9 million in 1996 from $5.6 million in 1995. This increase
is due primarily to the Horizon and Erie Acquisitions and the effects of a third
quarter 1995 one time adjustment to the personal property tax accrual resulting
from a substantial decrease in tax rates.
SELLING AND MARKETING COSTS. Selling and marketing costs increased 97.3% to
$6.1 million in 1996 from $3.1 million in 1995. This increase is due to the
Horizon and Erie Acquisitions and a higher level of new subscribers added period
to period. Selling and marketing cost per gross new subscriber, including
equipment subsidies, decreased 10.1% to $310.0 in 1996 from $345.0 for 1995 as a
result of a decrease in cost of telephones and accessories in addition to
improved efficiencies.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
187.9% to $10.0 million in 1996 from $3.5 million in 1995 due to depreciation on
higher levels of fixed assets resulting from the Horizon and Erie Acquisitions
and purchases for system growth, and amortization of the licenses acquired in
the Horizon and Erie Acquisitions. The amortization of the acquired cellular
licenses and subscriber
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lists contributed $3.4 million to this increased amortization. For 1996, Sygnet
spent $10.0 million in capital expenditures, primarily for new cell sites, cell
site conversions, and system growth.
INTEREST EXPENSE, NET. Interest expense increased to $11.2 million in 1996
from $2.7 million in 1995. This increase was primarily a result of increased
borrowings associated with the Horizon and Erie Acquisitions.
EXTRAORDINARY LOSS. In October 1996, Sygnet incurred an extraordinary loss
of $1.4 million to write off unamortized financing costs associated with an
extinguished bank credit agreement.
IMPACT OF YEAR 2000 ISSUE
DOBSON
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.
In April 1998, the Company established a multi-disciplined team to perform a
Year 2000 impact analysis for the Company. The team consists of representatives
from each of the lines of business, as well as representatives from key
corporate departments, and is headed by a full-time Year 2000 compliance
manager. The team created a Year 2000 assessment methodology which brought a
structured approach to the assessment and management reporting process, as well
as disaster recovery approach.
To date, the Company has completed an inventory of its automated systems and
services and an impact analysis that identified significant risk areas by line
of business, specific compliance requirements and costs and estimated completion
dates for affected systems. All of the Company's automated systems and services
are or will be Year 2000 compliant by the end of the second quarter of 1999.
The Company does not have large scale legacy applications used by many
telecommunications providers. From an information systems standpoint, the
Company has historically relied on outsourcing relationships for most of its
business and operational support applications. Those applications that have not
been outsourced to service providers have been deployed using packaged software
from outside vendors. Management has also focused on evaluating software systems
of pending acquisitions. As a result, the remediation phase is not focused on a
large scale in-house effort, but on identification of third party systems and
services that are not currently Year 2000 compliant and oversight of third party
compliance efforts.
The results of the impact analysis revealed that for most of the Company's
information systems, services and telecommunications infrastructure, Year 2000
compliant versions will be included as a part of existing maintenance and/or
service agreements at no additional cost to the Company and should be in place
and tested by the second quarter of 1999. The Company estimates total costs of
approximately $.5 million to upgrade or replace those systems that are not Year
2000 compliant and will not be upgraded through existing maintenance or service
agreements. In addition, the Company's contingency plan for the Year 2000 is
encompassed by a disaster recovery plan for the business which will be in place
by the end of the second quarter of 1999.
The Company will continue to analyze systems and services that utilize
date-embedded codes that may experience operational problems when the Year 2000
is reached. The Company will continue communicating with third party vendors of
systems software and equipment, suppliers of telecommunications capacity and
equipment, roaming partners customers and others with which it does business to
coordinate Year
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2000 compliance. To further mitigate risks, the Company will conduct its own
Year 2000 tests on mission critical systems as Year 2000 compliant versions are
released by vendors.
SYGNET
Sygnet has substantially completed an inventory of all its systems and
equipment in each market to determine the impact of the Year 2000 Issue. Based
on this inventory, Sygnet has contacted its significant vendors to determine how
their products and services might be affected by the Year 2000 Issue. Generally,
Sygnet is relying upon representations made by the vendors as to their state of
readiness for the Year 2000 Issue. Based on internal evaluations and on
information provided by these vendors certain systems have been upgraded and
tested for Year 2000 compliance. Sygnet estimates that it is 60% complete with
this phase of the project.
Sygnet is placing special emphasis on areas that present a risk of
materially interrupting its revenue stream in the event of a Year 2000 problem.
Presently, it appears three main systems have the potential to materially
interrupt the revenue stream due to the Year 2000 Issue. They are the two
cellular switches, which could prevent calls from being made, and the billing
system, which could prevent Sygnet from billing and subsequently receiving
revenue from its customers. To address this risk, the Northern Telecom switch,
which serves Ohio and Pennsylvania, has recently undergone a software upgrade to
a Year 2000 compliant version. Sygnet has monitored testing of this software in
a Year 2000 situation with commonly known critical dates and has encountered no
problems. Accordingly, Sygnet has deemed this system to have a minimal risk of
failure regarding the Year 2000 Issue and will not develop contingency plans for
the Northern Telecom switch unless new information becomes available that
suggests a contingency plan is warranted. The Ericsson switch, which serves New
York, is expected to have its software upgraded to a Year 2000 compliant version
in the first quarter of 1999. It is expected that like Northern Telecom,
Ericsson will provide sufficient testing prior to installation. In connection
with the planned upgrade of the New York system, Sygnet plans to replace the
Ericsson switching equipment with Northern Telecom equipment that is believed to
be year 2000 compliant. In addition, the upgrade of the billing system software
to a Year 2000 compliant version is expected to be completed in the first
quarter of 1999. The vendor that provides this system has indicated that Year
2000 compliance testing will be completed by June of 1999. Sygnet has deemed
this system to have a moderate risk of not being able to handle the Year 2000
requirements and a contingency plan is being prepared that may include selecting
a new billing vendor in mid 1999.
The cost of testing and upgrading these systems can not be determined at
this time. Management's current estimate is that the cost of becoming year 2000
compliant is not expected to exceed $250,000. This estimate may change
significantly downward or upward as the process continues or if problems arise
with either a switch or billing system. Additionally, this estimate may change
substantially if other systems or vendors are unable to become Year 2000
compliant causing a material interruption of the revenue stream.
LIQUIDITY AND CAPITAL RESOURCES
SYGNET
Sygnet has historically relied on internally generated funds to fund debt
service and a substantial portion of its capital expenditures. Bank credit
facilities and equity issuances have been used for additional support of capital
expenditure programs and to fund acquisitions.
Sygnet's net cash provided by operating activities was $13.5 million for the
nine months ended September 30, 1998 compared to $7.1 million for the comparable
period in 1997. The increase was primarily the result of the increase in
operating income, offset somewhat by a decrease in net working capital. Net cash
provided by operating activities was $9.4 million for 1997 compared to $14.8
million for 1996 and $2.4 million in 1995. This decrease from 1996 to 1997 was
primarily due to interest paid of $30.0 million in 1997 compared to $4.7 million
in 1996, which was offset significantly by the increase in revenue
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due to growth in subscribers. The increase from 1995 to 1996 was primarily the
result of the increase in the number of subscribers and their related growth in
revenue.
Sygnet's net cash used in investing activities was $11.1 million for the
nine months ended September 30, 1998 compared to $17.6 million for the
comparable period in 1997. In 1998, this activity reflects decreased levels of
purchases of property and equipment primarily for system buildout in addition to
proceeds of $300,000 associated with the sale of an undeveloped patent to an
officer/shareholder of Sygnet. In 1997, this activity reflects final payments
made in connection with the Horizon Acquisition and the completion of the
buildout of the system acquired in the Horizon Acquisition. Net cash used in
investing activities, which totaled $25.8 million, $264.2 million and $49.1
million for the years ended December 31, 1997, 1996 and 1995, respectively,
principally related to the system buildout in 1997, the Horizon Acquisition in
1996 and the Erie Acquisition in 1995 and capital expenditures required to
support the growth of the business.
Sygnet's net cash used in financing activities was $2.9 million for the nine
months ended September 30, 1998 compared to $10.0 million provided by financing
activities for the comparable period in 1997 as the combination of reduced
capital expenditures and increased cash flow from operating activities reduced
the need for outside financing. In 1997, this activity included $43.6 million in
net proceeds from the sale of Sygnet's common stock which were used primarily to
redeem the remaining outstanding preferred stock and to reduce amounts
outstanding under the Sygnet Bank Facility and fund capital expenditures. Net
cash provided by financing activities was $15.0 million for 1997 compared to
$251.2 million for 1996 and $46.6 million in 1995. The 1996 amount includes
primarily funds received, net of financing cost, from the issuance of the Sygnet
Notes and preferred stock and borrowings under the Sygnet Bank Facility to fund
acquisitions. Dividends of $.3 million and $1.2 million were paid in 1996 and
1995, respectively.
DOBSON
The Company's cellular operations require substantial capital to acquire,
construct and expand wireless telephone systems and to fund operating
requirements. Dobson has financed its operations through bank debt and the sale
of debt and equity.
At December 31, 1996, the Company had working capital of $10.6 million (a
ratio of current assets to current liabilities of 2.9:1) and a cash balance $1.0
million. At December 31, 1997, the Company had working capital of $15.9 million
(a ratio of current assets to current liabilities of 1.7:1) and a cash balance
of $2.8 million, which compares to working capital of $10.9 million (a ratio of
current assets to current liabilities of 1.2:1) and an unrestricted cash balance
of $5.0 million at September 30, 1998.
The Company's net cash provided by operating activities totaled $20.7
million for the nine-month period ended September 30, 1997 compared to $10.4
million for the nine months ended September 30, 1998. The decrease of $10.3
million was primarily due to the Company's net loss for the 1998 period, of
which $17.2 million related to discontinued operations, offset by net changes in
current assets and liabilities, depreciation and amortization, and deferred
income taxes and investment tax credits.
The Company's net cash provided by operating activities totaled $8.6 million
for 1995 compared to $11.6 million for 1996 and $12.3 million for 1997. 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. 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.
Net cash used in investing activities totaled $189.1 million and $440.3
million for the nine months ended September 30, 1997 and 1998, respectively. In
1997, investing activities consisted primarily of acquisitions of systems in the
Eastern Region, as well as capital expenditures. The 1998 investing activities
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principally related to acquisitions, escrow deposits and capital expenditures.
Of the 1998 investing activities, discontinued operations accounted for
approximately $17.8 million of capital expenditures and $131.5 million of
acquisition expenditures.
Net cash used in investing activities, which totaled $11.1 million, $49.4
million and $221.1 million for the years ended December 31, 1995, 1996 and 1997,
respectively, principally related to deposits made in 1995 related to the
Maryland acquisitions and PCS license acquisitions, the Kansas/Missouri
acquisition in 1996 and the Maryland and Arizona acquisitions in 1997, as well
as capital expenditures in all periods. Acquisitions accounted for $30.0 million
and $190.7 million in 1996 and 1997, respectively, and capital expenditures were
$3.9 million, $17.4 million and $23.2 million in 1995, 1996 and 1997,
respectively.
Net cash provided by financing activities was $168.5 million for the nine
months ended September 30, 1997 compared to $498.1 million for the nine months
ended September 30, 1998. Financing activities for the nine months ended
September 30, 1998 consisted primarily of $284.0 million of proceeds from
long-term debt and $175.0 million of proceeds from the issuance of Senior
Preferred Stock, offset by the repayment of $171.5 million of bank debt and
approximately $12.7 million of deferred financing costs in connection with the
issuance of Senior Preferred Stock and the March 1998 credit facilities
discussed below. In 1998, financing activities of the discontinued operations
provided proceeds of $350.0 million from the issuance of 12 1/4% Senior Notes.
Approximately $11.2 million of deferred financing costs were incurred in
connection with such Senior Notes offering.
Net cash provided by financing activities was $1.8 million for 1995 compared
to $38.3 million for 1996 and $210.2 million for 1997, respectively. 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 bank borrowings. Proceeds from
long-term debt exceeded repayment thereof by $2.7 million, $39.8 million and
$254.7 million in 1995, 1996, and 1997, respectively.
In April 1997, the Company entered into an interest rate hedge agreement
terminating on April 24, 2002 to hedge the Company's interest expense on $160.0
million of indebtedness under its revolving credit facilities. Subsequent to
September 30, 1998, the counterparty exercised its rights under the swap
agreement, fixing the interest rate at 6.13% plus a factor based on the
Company's leverage. The Company accounts for this as a hedge.
The minority partners in the Company's partnerships that own certain of its
wireless operations receive distributions equal to their share of the profit
multiplied by estimated income tax rates. Under the Company's bank credit
agreements, the Company's minority partners are not entitled to receive any cash
distributions in excess of amounts required to meet income tax obligations until
all indebtedness of their respective partnerships to the Company is paid or
extinguished.
The Company's capital expenditures (excluding cost of acquisitions and
discontinued operations) were $23.7 million for the nine months ended September
30, 1998 and the Company expects its capital expenditures (excluding cost of
acquisitions) to be approximately $30.2 million for all of 1998, exclusive of
acquisition costs, and $50.2 million for 1999. Of such capital expenditures for
1999, approximately $16.0 million is expected to relate to Sygnet and
approximately $4.0 million to Maryland 1. The Company has not budgeted any
amounts to be expended in 1998 or 1999 with respect to the systems which may be
acquired in other acquisitions or the Company's PCS system. The amount and
timing of capital expenditures may vary depending on the rate at which the
Company expands and develops its wireless systems and whether the Company
consummates additional acquisitions.
On December 23, 1998, a subsidiary of the Company acquired all of the
outstanding capital stock of Sygnet for $337.5 million in cash. The Sygnet
Acquisition was financed through borrowings under the Credit Facilities, the net
proceeds of offering of the Preferred Stock, the Equity Investments and the
Tower Sale Leaseback. In addition, the Company expects to borrow $9.1 million
under the DOC Facility to close
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the Maryland 1 Acquisition and $6.0 million under the New Credit Facilities to
close the Pennsylvania 2 Acquisition.
The Company has agreed to purchase approximately $65 million of cell site
and switching equipment between June 1997 and November 2001. Of this commitment,
approximately $34.6 million remained at September 30, 1998. Under another
equipment supply agreement, the Company agreed to purchase approximately $81.0
million of cell site and switching equipment by January 13, 2002. Of this
commitment, $67 million remained at September 30, 1998.
In April 1997, the Company was granted PCS licenses in nine markets in
Oklahoma, Kansas and Missouri. The Company financed $4.1 million of the $5.1
million 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 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 or 1999 with respect to the buildout of a PCS system.
In March 1998, the Company's subsidiary, Dobson Cellular Operations Company
("DCOC"), established a $200.0 million senior secured credit facility (the "DCOC
Facility"). Under the terms of the DCOC Facility, an additional $75.0 million
revolving credit facility may be established for acquisitions. This uncommitted
facility requires that the Company have borrowings outstanding of at least
two-thirds of the committed amount under the $200.0 million facility. DCOC's
obligations under the DCOC Facility are secured by all existing and future
assets of DCOC, and are guaranteed by DCOC' subsidiaries. In addition, the
Company's subsidiary, Dobson Operating Company ("DOC"), established a $250.0
million senior secured credit facility (the "DOC Facility") to replace a prior
bank facility. The DOC Facility is secured by all of DOC's stock and the stock
or partnership interests of its subsidiaries and all assets of DOC and its
restricted subsidiaries. The Company and DOC's subsidiaries, other than Logix
and the Arizona 5 Partnership, have guaranteed DOC's obligations under the DOC
Facility. The DCOC 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. The DOC Facility and DCOC Facility each amortize quarterly
beginning June 30, 2000 and terminate on June 30, 2006. At September 30, 1998,
the Company had credit available of $109.0 million under the DOC Facility and
$57.0 million under the DCOC Facility, subject to covenant limitations. See
"Description of Certain Indebtedness."
Sygnet is a party to a credit agreement with NationsBank for an aggregate
$430.0 million, consisting of a $50.0 million Revolving Credit Facility and
$380.0 million of Term Loan Facilities. The obligations under the New Credit
Facilities are secured by a pledge of the capital stock of Sygnet's operating
subsidiary as well as a lien on substantially all of the assets of Sygnet and
its operating subsidiary. The New Credit Facilities require Sygnet and the
Company to maintain certain financial ratios. The failure to maintain such
ratios would constitute an event of default, notwithstanding Sygnet's ability to
meet its debt service obligations. See "Description of Certain Indebtedness."
The ability of Sygnet to borrow under the New Credit Facilities will be limited
by the requirement that, on a quarterly basis beginning December 31, 2000, the
amount available under the New Credit Facilities will reduce until they
terminate.
As part of the Sygnet Financing, Sygnet sold to Dobson Tower, a wholly owned
subsidiary of the Company, substantially all of the towers it owns for $25.0
million. Dobson Tower then leased these towers back to Sygnet under an operating
lease, with annual lease payments of approximately $1.6 million. Dobson Tower
obtained the funds for such purchase from borrowings under a new credit facility
of
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$17.5 million and the sale of $7.5 million of preferred stock of Dobson Tower to
an affiliate of the Company.
On September 30, 1998, after giving pro forma effect to the Sygnet
Acquisition and Sygnet Financing, the Company and its subsidiaries would have
had approximately $1,054.9 million of indebtedness outstanding.
Although the Company cannot provide you any assurance, the Company believes
that, assuming successful implementation of the Company's strategy, including
the further development of its cellular systems and significant and sustained
growth in its cash flow, the net proceeds from the offering of the Old Shares,
together with the Equity Investments, borrowings under the New Credit
Facilities, the DOC Facility, the Tower Sale Leaseback, the DCOC Facility and
cash flow from operations, were sufficient to consummate the Sygnet Acquisition,
the Maryland 1 Acquisition and the Pennsylvania 2 Acquisition, to repay the
$25.0 million loan from Dobson to fund the earnest money deposit in connection
with the Sygnet Acquisition, to repay all outstanding indebtedness under the
Sygnet Bank Facility, to repurchase all of the Sygnet Notes in the Sygnet Note
Repurchase, to pay fees and expenses incurred in connection with the Sygnet
Acquisition and Sygnet Financing, and are expected to be sufficient to satisfy
the Company's currently expected capital expenditure, working capital and debt
service obligations. However, the Company will need to refinance the Credit
Facilities, the Senior Notes and the Dobson/Sygnet Notes at their maturities and
refinance its mandatory redemption obligations with respect to its preferred
stock, including the Preferred Stock and Senior Preferred Stock. 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.
See "Risk Factors--Refinancing Risk." The actual amount and timing of the
Company's future capital requirements may differ materially from the Company's
estimates as a result of, among other things, the demand for the Company's
services and regulatory, technological and competitive developments. Sources of
additional financing may include commercial bank borrowings, vendor financing
and the sale of equity or debt securities. The Company cannot assure you that
any such financing will be available on acceptable terms or at all.
EFFECT OF NEW ACCOUNTING STANDARDS
In July 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Derivatives and Hedging ("SFAS 133").
SFAS 133 establishes uniform hedge accounting criteria for all derivatives
requiring companies to formally document, designate and assess the effectiveness
of transactions that receive hedge accounting. Under SFAS 133, derivatives will
be recorded in the balance sheet as either an asset or liability measured at its
fair value, with changes in the fair value recognized in current earnings. SFAS
133 will be effective for fiscal years beginning after June 15, 1999. The
Company has not yet evaluated the impact of adopting SFAS 133 and has not
determined the timing or method of adoption of SFAS 133.
In April 1998, the Accounting Standards Executive Committee issued Statement
of Position ("SOP") 98-5, "Reporting on the Costs of Start-Up Activities,"
effective for fiscal years beginning after December 15, 1998, with earlier
application encouraged. The Company adopted SOP 98-5 as of January 1, 1998. SOP
98-5 requires costs of start-up activities and organization costs to be expensed
as incurred. Logix recognized a pretax loss of approximately $1.2 million in the
first quarter of 1998 as a result of adopting this SOP. This loss has been
reflected in income (loss) from discontinued operations in the accompanying
consolidated statement of operations for the nine months ended September 30,
1998.
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BUSINESS
The Company is a leading provider of rural and suburban cellular telephone
services. Since it began providing cellular service in 1990 in Oklahoma and the
Texas Panhandle, the Company has rapidly expanded its cellular operations with
an acquisition strategy targeting rural and suburban areas which have a
significant number of potential customers with substantial needs for cellular
communications. At September 30, 1998, the Company's cellular systems covered
2.8 million total Pops in Arizona, California, Kansas, Maryland, Missouri,
Oklahoma, Pennsylvania and Texas. On July 28, 1998, a subsidiary of the Company
entered into an agreement to acquire all of the outstanding capital stock of
Sygnet for $337.5 million in cash. Sygnet owns and operates cellular telephone
systems covering 2.4 million Pops in northeastern Ohio, western Pennsylvania and
western New York. For the nine months ended September 30, 1998, after giving
effect to the California 4 Acquisition and the Sygnet Acquisition as if each
acquisition had occurred on January 1, 1997, the Company would have had revenue
of $176.5 million, an operating loss of $13.7 million and Adjusted EBITDA of
$75.9 million.
The Company believes that its mix of rural and suburban cellular systems
generally provides strong growth opportunities due to lower penetration rates,
higher subscriber growth rates and a higher proportion of roaming revenue
compared to cellular systems located in larger MSAs. The Company focuses on
systems that are adjacent to major metropolitan areas and include a high
concentration of expressway corridors that tend to have a significant amount of
roaming activity. Management believes these areas are not as fully developed as
large MSAs, which were licensed earlier by the FCC, and have the potential for
increased cellular usage and superior financial performance. The Company has
entered into roaming agreements with operators of cellular systems in
neighboring MSAs and other MSAs that allow customers to roam at competitive
prices that, in certain instances, are comparable to the Company's home area
rates.
The Company was organized to establish and maintain a strong and visible
local presence while achieving economies of scale and synergies through regional
and centralized functions. The Company's local management teams have day-to-day
operating authority, with the flexibility to respond to individual market
requirements and to foster a strong sense of customer service and community
spirit. In addition, the Company believes that its marketing and customer
service functions are more effective when tailored to the local market
population. The regional presence of Dobson's call centers enhances its
knowledge of local markets, which improves the Company's ability to provide
customer service, credit and collection and order activation. However, the
Company retains centralized control of marketing, customer service, pricing,
system design, engineering, purchasing, financial and administrative functions
to maximize operating leverage and continuity over its cellular systems.
The Company has developed organizational, marketing and operational programs
designed to increase the number and retention of subscribers, promote superior
customer service, control subscriber acquisition costs and enhance operating
cash flow. The Company intends to apply these programs to the properties it
acquires. In addition to the Sygnet Acquisition, the Company recently closed
into escrow its acquisitions of the FCC licenses for, and certain assets related
to, Texas 10 RSA for $55.0 million in cash, and Ohio 2 RSA for $39.3 million in
cash. Recently, the Company entered into an agreement for the purchase of the
FCC licenses for, and certain assets related to, Maryland 1 RSA for $9.1 million
in cash, subject to adjustment.
STRATEGY
The Company's business strategy is to focus on the development and
acquisition of rural and suburban cellular systems. The principal elements of
the Company's strategy include:
INTEGRATE ACQUIRED OPERATIONS. The Company intends to integrate the
operations of systems it acquires, including Sygnet, with the Company's existing
cellular operations to achieve economies of scale.
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Management believes that these increased efficiencies will come from the
centralized control of pricing, customer service and marketing, system design,
engineering, purchasing, financial and administrative functions and from the
consolidation of billing functions. The Company expects to consolidate Sygnet's
three call service centers and one of the Company's call centers. Following
completion of the Maryland 1 Acquisition, the Company's subscribers and total
Pops will approximately double to 347,306 and 5.8 million, respectively. The
Company intends to use its increased leverage in negotiating prices and services
from third party service providers and equipment vendors.
EXPAND STRATEGIC RELATIONSHIPS. The Company intends to continue to maintain
and expand strategic relationships with operators of cellular systems in major
MSAs near the Company's systems. These relationships include roaming agreements
which allow the Company's subscribers to use the system in the neighboring MSA
at favorable rates. Under these agreements, similar benefits are available to
the MSA operator's subscribers roaming in the Company's areas. In addition, the
Company will deploy digital technology in its system area which is the same as
that selected by the Company's roaming partner in the neighboring MSA. The
Company also markets its cellular products and services under the predominant
brand name in the neighboring MSA. Such brand names include CELLULAR
ONE-Registered Trademark-, AIRTOUCH-SM- CELLULAR and AT&T Wireless
Services-Registered Trademark-. These strategic relationships and agreements
enable the Company to increase its roaming revenue, offer its subscribers larger
home rate areas and leverage the recognized brand names of its roaming partners
and their extensive marketing efforts. See "Risk Factors-- Reliance on Use of
Third Party Service Marks."
AGGRESSIVE LOCAL MARKETING AND PROMOTION OF CELLULAR SERVICES. The
Company's marketing objective is to continue to distinguish itself as the local
market's leading cellular services provider, stressing its service quality,
local sales offices and commitment to the community. The Company's sales efforts
are conducted primarily through its retail outlets and its direct sales force
and, to a lesser extent, through independent agents.
TARGETED SALES EFFORTS. The Company seeks to attract subscribers who are
likely to generate high monthly revenue and low churn rates. Local management
conducts 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.
SUPERIOR CUSTOMER SERVICE. The Company intends to maintain a high level of
customer satisfaction through a variety of techniques, including maintaining
24-hour customer service. The Company supports local customer service through
the Company's direct sales force and its retail stores, and through regional
customer service centers.
CONTINUED SYSTEM DEVELOPMENT. The Company believes that increasing capacity
and upgrading its systems will attract additional subscribers, enhance the use
of its systems by existing subscribers, increase roaming activity and further
enhance the overall efficiency of the network. The Company intends to continue
to upgrade 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. From January 1, 1997 through
September 30, 1998, the Company installed digital technology in its Eastern and
Central Regions, with the exception of the Kansas/Missouri RSAs, and expects to
complete the installation of digital technology in its Western Region in 1999.
Sygnet's digital systems covered approximately 84% of the total Pops in its
market areas at September 30, 1998. The remaining Sygnet systems are expected to
be upgraded to digital during 1999. Substantially all of the Company's and
Sygnet's systems are or will be serviced by digital technology by the end of
1999.
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DISCIPLINED EXPANSION THROUGH ACQUISITIONS. The Company continually
evaluates opportunities to acquire additional rural and suburban cellular
systems. In evaluating acquisitions, the Company targets RSAs and small MSAs
that have some or all of the following characteristics in addition to others:
- are adjacent to major metropolitan areas;
- have positive population growth trends;
- include a high concentration of expressway corridors that have a
significant amount of roaming activity; and
- have the potential to develop strategic relationships with operators of
neighboring wireless systems and the ability to offer service under a
leading brand name.
The Company is presently evaluating, and is in discussions with, a number of
potential acquisition candidates. Sygnet is party to an agreement to purchase
the FCC license for, and certain assets related to, Pennsylvania 2 RSA for $6.0
million. Because the seller's title to the license remains subject to
administrative and judicial review, the closing of such acquisition has been
delayed. Pending such closing, Sygnet is managing the operation of the cellular
system in the market under the supervision and control of the seller. The
Company has no agreements with respect to any acquisitions other the Maryland 1
Acquisition and the Pennsylvania 2 Acquisition.
DISCONTINUED OPERATIONS
The Company, through its wholly owned subsidiary, Logix, provides integrated
local, long distance, data and other telecommunications services to small and
medium-sized business customers throughout the Southwest United States. Logix
operates long-haul fiber optic facilities in Oklahoma, Texas and Colorado. Logix
recently began offering switch-based integrated communications provider services
in Oklahoma City, Tulsa and Amarillo. In addition, since the consummation of the
American Telco Acquisition on June 15, 1998, it has offered these services in
Houston, Austin, Dallas, Fort Worth and San Antonio. For the year ended December
31, 1997 and the nine months ended September 30, 1998, Logix had revenues of
$20.2 million and $40.2 million, respectively, operating income (loss) of $3.2
million and $(10.6) million, respectively, and Adjusted EBITDA of $8.2 million
and $(2.9) million, respectively. At September 30, 1998, Logix had total assets
of $402.8 million, total debt of $377.9 million and shareholder's deficit of $.6
million.
Logix has been designated an Unrestricted Subsidiary with respect to the
Preferred Stock and will not be subject to certain covenant restrictions which
apply to the rest of the Company's operations. The Company intends to distribute
the stock of Logix to certain of the Company's shareholders, subject to receipt
of a favorable tax ruling from the Internal Revenue Service. Logix is accounted
for as a discontinued operation in the Company's consolidated financial
statements.
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MARKETS AND SYSTEMS
The following table sets forth certain data with respect to the Company's
existing cellular systems and its Recent and Pending Acquisitions:
<TABLE>
<CAPTION>
TOTAL TOTAL MARKET YEAR
PROPERTIES POPS OWNERSHIP NET POPS SUBSCRIBERS(1) PENETRATION(2) ACQUIRED/EXPECTED
- ------------------------------------ ---------- ------------- ---------- ------------- --------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
CENTRAL REGION(3)
Oklahoma 5 and 7................... 148,500 64.4% 95,634 17,266 11.6% 1989
Texas Panhandle................... 88,500 61.0 53,985 14,328 16.2 1989
Northwest Oklahoma................ 105,100 100.0 105,100 6,938 6.6 1991
Kansas/Missouri................... 246,500 100.0 246,500 7,881 3.2 1996
Texas 16.......................... 334,000 100.0 334,000 5,761 1.7 1998
---------- ---------- -------------
Total........................... 922,600 835,219 52,174
---------- ---------- -------------
EASTERN REGION(4)
East Maryland...................... 453,700 100.0 453,700 33,942 7.5 1997
West Maryland..................... 441,000 100.0 441,000 28,248 6.4 1997
---------- ---------- -------------
Total........................... 894,700 894,700 62,190
---------- ---------- -------------
WESTERN REGION
Arizona 5.......................... 202,100 75.0 151,575 10,081 5.0 1997
California 7...................... 149,300 100.0 149,300 3,280 2.2 1998
California 4...................... 377,300 100.0 377,300 17,888 4.7 1998
Santa Cruz........................ 245,600 86.9 213,426 17,407 7.1 1998
---------- ---------- -------------
Total........................... 974,300 891,601 48,656
---------- ---------- -------------
Total--All Regions................ 2,791,600 2,621,520 163,020
---------- ---------- -------------
RECENT AND PENDING ACQUISITIONS
Ohio 2(5).......................... 262,100 100.0 262,100 14,000(6) 5.3(6) September 1998
Texas 10 (5)...................... 317,900 100.0 317,900 3,000(6) 0.9(6) December 1998
Sygnet(7)......................... 2,374,000 100.0 2,374,000 166,886(6) 7.0(6) December 1998
Maryland 1........................ 29,800 100.0 29,800 400(6) 1.3(6) March 1999
---------- ---------- -------------
Total--Acquisitions................. 2,983,800 2,983,800 184,286
---------- ---------- -------------
Total--All Properties............... 5,775,400 5,605,320 347,306
---------- ---------- -------------
---------- ---------- -------------
</TABLE>
- ------------------------
(1) As of September 30, 1998.
(2) Determined by dividing total subscribers by the total Pops covered by the
applicable FCC cellular license or authorizations held or to be acquired by
the Company.
(3) The Central Region consists of Oklahoma 5 RSA and Oklahoma 7 RSA, Texas 2
RSA, Enid, Oklahoma MSA, Oklahoma 2 RSA, Texas 16 RSA, Kansas 5 RSA,
Missouri 1 RSA, Missouri 4 RSA and Missouri 5 RSA. The Company's FCC
licenses for Oklahoma 5 RSA and Oklahoma 7 RSA do not include Kingfisher and
Blaine Counties, approximately one-half of Dewey County (total Pops
estimated by the Company to be 3,000 for the area in Dewey County not
covered by the Company's FCC license), Harmon and Greer Counties. The
Company also owns a 5% interest in a partnership which owns the cellular
system in Oklahoma 3 RSA which has total Pops of 205,600. Information
regarding Oklahoma 3 RSA is excluded because the Company does not manage the
system. The Company's license for Missouri 5 RSA covers only the Linn County
portion of the RSA.
(4) East Maryland consists of Maryland 2 RSA. West Maryland includes Cumberland,
Maryland MSA, Hagerstown, Maryland MSA, Maryland 3 RSA and Pennsylvania 10
West RSA. The FCC license for the Pennsylvania 10 West RSA covers only
Bedford County. Information for this RSA relates only to the area covered by
the Company's FCC licenses. Upon the closing of the Maryland 1 Acquisition,
Maryland 1 will become part of the West Maryland market area.
(5) The Company completed the acquisition of the FCC licenses for Ohio 2 RSA on
September 2, 1998 and the Texas 10 RSA on December 2, 1998. The Company is
negotiating with AirTouch in Ohio 2 RSA and with AT&T Wireless in Texas 10
RSA for the purchase of subscribers and the lease of certain equipment
necessary to operate systems in each area. The purchase price for each of
Ohio 2 RSA and Texas 10 RSA is held in escrow pending resolution of claims
made against the titles to the FCC licenses of the respective sellers to the
Company. See "Risk Factors--Recent Acquisitions."
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(6) Based upon information provided by the sellers of the subscribers.
(7) Consists of the Youngstown, Ohio MSA, Sharon, Pennsylvania MSA, Ohio 11 RSA,
Erie, Pennsylvania MSA, New York 3 RSA, Pennsylvania 1 RSA, Pennsylvania 2
RSA, Pennsylvania 6 RSA and Pennsylvania 7 RSA. Sygnet had previously
operated Pennsylvania 2 RSA under an interim operating authority which was
terminated on June 3, 1997 when the FCC awarded a permanent license to
Pinellas Communications. On June 8, 1998, Sygnet entered into an agreement
to purchase Pennsylvania 2 RSA for $6.0 million in cash. Since then, Sygnet
has been operating Pennsylvania 2 under a management and lease agreement
with the present owner of Pennsylvania 2, which will continue in effect
until the FCC's grant of the license to the present owner is no longer
subject to reconsideration or judicial review.
CENTRAL REGION
The Company's licensed systems and related assets in the Central Region
include properties in western Oklahoma (Oklahoma 5 RSA and Oklahoma 7 RSA), the
Texas Panhandle (Texas 2 RSA), Northwest Oklahoma (Enid, OK MSA and Oklahoma 2
RSA), Kansas/Missouri (Kansas 5, Missouri 1, Missouri 4 and Missouri 5 RSAs) and
Texas 16 RSA.
OKLAHOMA AND TEXAS PANHANDLE
GENERAL. The Company initiated cellular operations in western Oklahoma and
the Texas Panhandle area in 1990 as a start-up operation, activated its first
cell site in March 1991, and acquired additional properties in the area and in
Northwest Oklahoma in 1991. The Company's systems in Oklahoma 5 and 7, Northwest
Oklahoma, Central Texas and the Texas Panhandle include 0.3 million total Pops,
and 38,532 subscribers representing a 11.3% market penetration as of September
30, 1998.
DEMOGRAPHICS. The Oklahoma and the Texas Panhandle properties cover a
contiguous area of approximately 27,000 square miles and extend west from
Oklahoma City along I-40 to Amarillo, Texas. The Northwest Oklahoma properties
are located north and northwest of Oklahoma City. The principal industries in
Oklahoma and the Texas Panhandle are agriculture and oil and gas.
MARKETING AND ROAMING. The Company operates under the brand name CELLULAR
ONE-Registered Trademark- in Northwest Oklahoma and Dobson Cellular-TM- in
Oklahoma 5 and 7 and in and the Texas Panhandle. The Company currently has 10
retail stores, six kiosks locations and approximately 50 agents in the area. The
Company has roaming agreements with SWBM, AT&T Wireless and several other
companies which include their respective market areas in Oklahoma City, Amarillo
and adjacent RSAs.
SYSTEMS. There are 46 cell sites covering substantially all of the total
Pops in Oklahoma 5 and 7, Northwest Oklahoma and the Texas Panhandle. The
Company has completed upgrading its system in this area to analog/TDMA IS-136
digital service.
KANSAS/MISSOURI
GENERAL. In March 1996, the Company purchased the FCC license, and related
assets for, the Kansas 5 RSA, Missouri 1 RSA, Missouri 4 RSA and a portion of
the Missouri 5 RSA. The Kansas/Missouri properties are located in northeastern
Kansas and northwestern Missouri near Kansas City, and cellular services have
been provided in this area since 1992. The Company's Kansas/Missouri systems
include 246,500 total Pops and, at September 30, 1998, the Company had 7,881
subscribers, representing a 3.2% market penetration.
DEMOGRAPHICS. The Kansas and Missouri properties cover a contiguous area of
approximately 10,500 square miles. Leavenworth, Kansas, the largest city in the
Kansas and Missouri properties, serves primarily as a bedroom community to
Kansas City.
MARKETING AND ROAMING. The Company operates under the CELLULAR
ONE-Registered Trademark- service mark in its Kansas and Missouri properties.
Since March 1996, the Company has increased the number of retail locations from
one to four, and currently has 16 sales agents in this area. The Company has a
roaming agreement with CMT, a partnership between AirTouch and AT&T Wireless,
which includes the Kansas
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City and St. Joseph MSAs and adjacent RSAs. The Company also has roaming
agreements with Western Wireless and U.S. Cellular, each of which has systems
adjacent to the Kansas and Missouri properties.
SYSTEMS. The Kansas and Missouri properties include 28 cell sites which
cover approximately 75% of the population. The Company currently expects to
convert its system to analog/CDMA digital technology, which is the digital
technology for the Kansas City and St. Joseph MSAs chosen by CMT. However, a
final selection of the digital technology to be employed, and the timing of its
installation, is pending the choice of digital technology by the holder of the
Kansas City MSA.
TEXAS 16
GENERAL. On January 26, 1998, the Company purchased the FCC cellular
license for, and certain assets relating to, the Texas 16 RSA which is located
in south-central Texas in an area bordered by Austin, Houston and San Antonio.
Texas 16 has 334,000 total Pops and, as of September 30, 1998, there were over
5,761 subscribers (representing a 1.7% market penetration).
DEMOGRAPHICS. Texas 16 covers an area of approximately 10,900 square miles
in central Texas in which the principal industries are agriculture, oil and gas,
steel and plastics. The service area includes approximately 100 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 Austin.
MARKETING AND ROAMING. The Company has entered into roaming agreements with
Houston Cellular, a partnership between AT&T Wireless and BellSouth Mobility,
for the Houston market, and with AT&T Wireless for the San Antonio and Austin
markets. The Company operates under the brand name CELLULAR
ONE-Registered Trademark- in Texas 16. The Company has six existing retail
outlets in Texas 16 and intends to open one additional outlet.
SYSTEMS. Texas 16 has one Lucent switch and 27 cell sites which cover
substantially all of the Pops in the market area. The Company has recently
completed upgrading its system in Texas 16, and currently provides analog/TDMA
IS-136 service.
EASTERN REGION
The Company's licensed systems and related assets in the Eastern Region
include its properties in eastern Maryland (Maryland 2 RSA) and western Maryland
and southeastern Pennsylvania (Cumberland MSA, Hagerstown MSA and Pennsylvania
10 West RSA) near the Washington-Baltimore area and along the eastern shore of
Maryland.
GENERAL. On March 3, 1997, the Company purchased the FCC cellular license
for, and certain assets relating to, East Maryland for $75.8 million. The prior
owner of the East Maryland license had no employees, distribution facilities or
cell sites, and the property was serviced by Washington Baltimore Cellular
Limited Partnership ("WBCLP"), an affiliate of SWBM, under an interim operating
authority. In October 1997, the Company assumed control of customer service,
billing and activations in East Maryland and in May 1998, the Company assumed
all operations in East Maryland. The Company intends to add additional cell
sites and voice channels in East Maryland as its local subscriber base and
roaming traffic increase. On February 28, 1997, the Company also purchased the
FCC cellular licenses for, and certain assets relating to West Maryland for
$77.6 million. Cellular service has been provided in West Maryland since 1991.
The Company's systems in its Eastern Region include 894,700 total Pops, and at
September 30, 1998, the Company had 62,190 subscribers, representing a 7.0%
market penetration.
DEMOGRAPHICS. The Eastern Region covers approximately 6,200 square miles.
East Maryland encompasses suburban areas south and east of Washington, D.C. as
well as the eastern shore of Maryland. Many residents in Maryland commute to
Annapolis, Baltimore and Washington, D.C. and there is a heavy traffic pattern
in East Maryland during the summer months as tourists travel to and from several
popular vacation spots along the eastern shore, especially Ocean City. Maryland
properties are within 50 miles of
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Washington, D.C. and Baltimore. The areas has numerous high-technology
businesses and is considered a high-commuter market due to its proximity to
nearby metropolitan areas.
MARKETING AND ROAMING. In its Eastern Region, the Company operates under
the brand name CELLULAR ONE-Registered Trademark-, which is the dominant brand
name within the Washington/Baltimore area. The Company presently has nine retail
stores, five kiosks and 42 agents in its Eastern Region, and intends to open
additional retail locations.
The Company has a roaming agreement with AT&T Wireless which covers the
Company's entire Eastern Region. The Company also has roaming agreements with
SWBM, which operates under the CELLULAR ONE-Registered Trademark- brand name in
the Washington, D.C. area, that allows each party to include in its home
coverage footprint the other party's system, and with Vanguard, which operates a
system adjacent to certain of the Company's properties on the north and east of
the Eastern Region.
SYSTEMS. The Company has 44 cell sites in its Eastern Region which cover
substantially all the population in the market area. The Company has converted
its Eastern Region systems to analog/IS-136 TDMA digital technology. In West
Maryland, the Company currently has 19 cell sites covering substantially all of
the population in the market area. In East Maryland the Company has 25 cell
sites which cover substantially all of the population in the market area.
WESTERN REGION
The Company's licensed systems and related assets in the Western Region
includes its properties in southern California (California 7 RSA) and Arizona
(Arizona 5 RSA) ("Arizona/Southern California") and California 4 RSA and Santa
Cruz MSA in Northern California.
ARIZONA/SOUTHERN CALIFORNIA
GENERAL. On October 1, 1997, the Company acquired a 75% interest in the
Arizona 5 Partnership, which owns the FCC license for, and certain assets
relating to, Arizona 5 RSA for $39.8 million. The Company is the operating
manager of the Arizona 5 Partnership. On July 29, 1998, the Company acquired the
FCC license for, and certain assets relating to, California 7 RSA for $21.0
million. The Company's systems in Arizona/Southern California include 351,400
Pops and, at September 30, 1998, the Company had 13,361 subscribers representing
3.8% market penetration.
DEMOGRAPHICS. The Arizona/Southern California properties cover an area of
approximately 10,100 square miles in southern Arizona between Phoenix and
Tucson, and an area of approximately 4,200 square miles between San Diego and
the Arizona state line bordering Mexico. The principal industries in Arizona 5
are mining and smelting. Arizona 5 experiences significant tourist traffic to
the local Indian dwellings and commuter traffic to Phoenix and Tucson.
California 7 has experiences high roaming traffic as I-8, connecting San Diego
to Phoenix and Tucson, runs through California 7.
MARKETING AND ROAMING. In Arizona 5 and California 7, the Company has
roaming agreements with AirTouch. The Company is licensed to use the
AIRTOUCH-TM- CELLULAR service mark to identify and promote its cellular
telephone service in Arizona 5 and California 7. The roaming agreements provide
for Airtouch and the Company to include each other's service area in its home
coverage footprint, allowing each party to offer a wider service area.
AirTouch's service area includes Phoenix and Tucson. Airtouch's service area
includes San Diego. At present, the Company has one retail location and 14
agents in Arizona and 4 retail locations and 9 agents in California 7. The
Company intends to open additional retail locations, increase the number of
agents, and increase the use and marketing of the AIRTOUCH-TM- CELLULAR name in
the coverage area.
SYSTEMS. Arizona 5 has 18 cell sites which cover approximately 90% of the
population in the market area. The system is currently switched out of the
Phoenix office of US WEST. The Company intends to continue this arrangement with
US WEST until it installs its own switch. The core cell sites in Arizona 5
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are analog/CDMA digital, which is the digital technology used by AirTouch in the
Phoenix and Tucson MSAs. California 7 has seven cell sites and a central
switching office, covering approximately 90% of the population. The Company
intends to replace all of the equipment in these two markets in the first
quarter of 1999 and install additional cell sites over the next several years
utilizing analog/CDMA digital technology.
NORTHERN CALIFORNIA
GENERAL. On April 1, 1998, the Company acquired the corporation that owned
the FCC license for, and certain assets related to, 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 377,300 total Pops and, as of
September 30, 1998, there were approximately 17,888 subscribers (representing a
4.7% market penetration).
On June 16, 1998, the Company purchased 86.4% of the outstanding stock of
the corporation that owns the FCC cellular license for, and the assets relating
to, the Santa Cruz MSA, for $31.0 million. Subsequent to September 30, 1998, the
Company acquired an additional 0.5% interest in the corporation for $.2 million.
The Santa Cruz 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 245,600 total Pops (213,426 Net Pops) and, as of September 30,
1998, there were 17,407 subscribers (representing a 7.1% market penetration).
DEMOGRAPHICS. The Northern California properties cover an area of
approximately 5,900 square miles in northern and north-central California. The
principal industries in these areas are manufacturing and agriculture. In
addition, the areas experience significant tourist traffic as one of the
entrances to Yosemite National Park is located in the eastern segment California
4. The service area includes approximately 37 miles of Route 99 between
Sacramento and Los Angeles, 60 miles of I-25 between San Francisco and Los
Angeles, 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 has entered into roaming agreements with
AT&T Wireless in California 4 which will permit the Company to include AT&T
Wireless' service area in its home rate area, allow the Company to offer a wider
service area. The AT&T Wireless service area includes San Francisco, Fresno and
Modesto. The Company has a roaming agreement with AT&T Wireless and Bay Area
Cellular, a partnership between AT&T Wireless and AirTouch, for Santa Cruz, and
is negotiating a new roaming agreement. The Company uses the brand name CELLULAR
ONE-Registered Trademark- to market its services in Northern California and
currently operates 13 retail locations in the area.
SYSTEMS. California 4 has one switch and 25 cell sites which cover
substantially all of the population in the market area, and Santa Cruz has 15
cell sites which cover substantially all of the population in the market area.
The Company intends to replace the systems' and existing equipment and install
additional cell sites utilizing analog/TDMA IS-136 digital technology in 1999.
RECENT AND PENDING ACQUISITIONS
OHIO 2
GENERAL. On September 2, 1998, the Company purchased the FCC license for,
and related assets of, Ohio 2 RSA for $39.3 million, subject to resolution of
certain matters regarding the seller's title to the FCC licenses. Ohio 2 is
located in north-central Ohio bordered by Lake Erie on the north and Cleveland
on the east, and includes total Pops of 262,100. The Company is negotiating with
AirTouch for an agreement to purchase approximately 14,000 subscribers in Ohio 2
and to lease certain equipment necessary to operate the property. The Company
expects to convert the Ohio 2 subscriber base to the Company's system and assume
all operations of Ohio 2 in the first quarter of 1999. Along with the Sygnet
properties, Ohio 2 will be included in the Company's Northern Region.
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DEMOGRAPHICS. Ohio 2 covers an area of approximately 1,700 square miles in
north central Ohio in which the principal industries are manufacturing and
agriculture. The Ohio 2 market includes 54 miles of I-80, linking Sandusky to
Toledo, Akron and Cleveland, 56 miles of US-224 and 35 miles of State Highway 4.
MARKETING AND ROAMING. The Company will market its products and services in
Ohio 2 under the name Airtouch Cellular. Ohio 2 currently has two retail outlets
and two sales agents. The Company plans to open three additional retail outlets
in 1999. The Company is in negotiations with AirTouch for a roaming agreement
that will provide for the Company and Airtouch to include each other's service
area in its coverage footprint.
TEXAS 10
GENERAL. On December 2, 1998, the Company purchased the FCC licenses for,
and certain assets related to, Texas 10 RSA for $55.0 million, subject to
resolution of certain matters regarding the seller's title to the FCC licenses.
Texas 10 is located in north-central Texas, in an area bordered by Dallas,
Austin, Tyler and Longview MSAs, with approximately 317,900 total Pops. The
Company is negotiating with AT&T Wireless for an agreement to purchase
approximately 3,000 subscribers in Texas 10 and to lease certain equipment
necessary to operate the property. The Company expects to convert Texas 10
subscribers to the Company's system and assume all operations in the first
quarter of 1999. Texas 10 will be included in the Company's Central Region.
DEMOGRAPHICS. Texas 10 covers an area of approximately 9,000 square miles
in central Texas in which the principal industries are agriculture, oil and gas
and manufacturing. The service area includes 90 miles of I-45 connecting Dallas
and Houston, 30 miles of I-20 connecting Dallas and Shreveport and 130 miles of
US-79.
MARKETING AND ROAMING. The Company expects to market its products and
services in Texas 10 under the CELLULAR ONE brand name. Additionally, the
Company intends to enter into roaming agreements with Houston Cellular and AT&T
Wireless similar to the existing agreements at Texas 16. There are currently no
retail outlets in Texas 10; however, the Company plans to open five retail
outlets in 1999.
SYGNET
GENERAL. Sygnet owns and operates a single large cluster covering nine
contiguous 100%-owned markets (six RSAs and three MSAs) in northeastern Ohio,
western Pennsylvania and western New York. Sygnet's rural and suburban markets
are located between several major cities (Cleveland, Buffalo, and Pittsburgh).
Sygnet's markets have approximately 2.4 million total Pops and, as of September
30, 1998, there were 166,886 cellular subscribers representing a 7.0% market
penetration. Along with Ohio 2, the Sygnet properties will be operated by the
Company as its Northern Region.
DEMOGRAPHICS. The Sygnet properties cover an area in which the principal
industries are manufacturing, healthcare, high-technology and tourism. The
Sygnet properties include major transportation corridors connecting the
Cleveland, Akron-Canton, Pittsburgh, Buffalo and Rochester metropolitan areas.
The Youngstown market contains a portion of the Ohio Turnpike, a key traffic
corridor between Pittsburgh and Cleveland and straddles I-80, a major
transportation link between the Midwest and New York City; the Erie market
includes portions of I-79 and I-90; the Pennsylvania market includes the
Pennsylvania Turnpike, I-79 and I-80 and other key commuting routes to
Pittsburgh; and the New York market includes the New York Thruway between
Buffalo and Rochester, as well as many recreational areas.
MARKETING AND ROAMING. Roaming revenue is a substantial source of revenue
for Sygnet as a number of its cellular systems are located along major travel
and commuting corridors. Sygnet has roaming agreements with AT&T Wireless,
AirTouch and SBC and is a member of NACN, the world's largest telephone network
system, linking non-wireline cellular operations throughout the United States
and Canada. Most of Sygnet's cellular products and services are marketed under
the CELLULAR ONE-Registered Trademark-
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brand name. In its Youngstown market, Sygnet's cellular products and services
are marketed under the name "Wilcom Cellular" which has a strong local identity.
At September 30, 1998, Sygnet had 51 retail stores and outlets and agreements
with over 60 independent sales agents.
SYSTEMS. At September 30, 1998, the Sygnet network consisted of a Nortel
and an Ericsson cellular switch, 181 cell sites, 4 high power enhancers, 1 low
power enhancer and a large microwave network with 151 links. The Sygnet system
supports AMPS and TDMA services. Sygnet has upgraded its Ohio and Pennsylvania
systems to TDMA IS-136 digital technology for its systems which includes 130 of
its 181 cell sites. Sygnet owns 124 of its 134 cellular towers. In connection
with the Sygnet Acquisition, Sygnet sold substantially all of its own towers to
Dobson Tower in the Tower Sale Leaseback.
MARYLAND 1
GENERAL. On November 24, 1998, the Company entered into an agreement to
purchase the FCC licenses for, and certain assets related to, Maryland 1 RSA for
$9.1 million, subject to adjustment. Maryland 1 is located in western Maryland
and will be operated by the Company as a part of its West Maryland market.
Maryland 1 has approximately 29,800 total Pops with an estimated subscriber base
of 400, representing a 1.3% market penetration. The acquisition of Maryland 1 is
expected to close late in the first quarter of 1999.
DEMOGRAPHICS. Maryland 1 is adjacent to the Company's West Maryland market.
It includes 32 miles of I-68 which connects Morgantown, West Virginia and
Cumberland, Maryland.
SYSTEMS. Maryland 1 currently has six cell sites. The Company plans to add
five additional cell sites in 1999.
MARKETING AND ROAMING. Maryland 1 will be operated as part of the Company's
West Maryland market area. Maryland 1 has two retail locations and the Company
plans to add one additional outlet in 1999. Maryland 1 will be operated under
the Company's existing roaming agreements applicable to the West Maryland area.
CELLULAR OPERATIONS
PRODUCTS AND SERVICES
The Company provides a variety of cellular services and products designed to
address a range of consumer, business and personal needs. In addition to mobile
voice and data transmission, the Company offers ancillary services such as call
forwarding, call waiting, three-party conference calling, voice message storage
and retrieval and no-answer transfer. The nature of the services offered by the
Company varies depending upon the market area. The Company also sells cellular
equipment at discount prices and uses free phone promotions 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 include single year
and, to a lesser extent, 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.
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CUSTOMER SERVICE
Customer service is an essential element of the marketing and operating
philosophies of the Company. 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 regional
customer service centers located in Oklahoma City, OK and Frederick, MD on a
toll-free access number (with no airtime charge). Upon consummation of the
Sygnet Acquisition, the Company intends to provide customer service for Sygnet's
markets through its Frederick, MD service center. The Company recently opened a
regional customer service center in California 4. 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 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 markets depends, to a large
extent, upon the service mark used in neighboring MSAs. The Company markets its
cellular products and services under the name Dobson Cellular-TM- in portions of
Oklahoma 5 and 7 and the Texas Panhandle. In its Northwest Oklahoma, Kansas and
Missouri, and Eastern Region markets, the Company markets its cellular service
under the name CELLULAR ONE-Registered Trademark-, one of the most recognized
brand names in the cellular industry. The national advertising campaign
conducted by the Cellular One Group enhances the Company's advertising exposure
at a fraction of the cost of what could be achieved by the Company alone. The
Company uses the service mark AIRTOUCH-TM- CELLULAR in its southern California
and Arizona properties and expects to use a national brand name in central Texas
and the name CELLULAR ONE-Registered Trademark- in northern California. In its
Northern Region, the Company expects to continue Sygnet's use of the CELLULAR
ONE-Registered Trademark- brand name in all of Sygnet's areas other than the
Youngstown and Sharon MSAs in which the name Wilcom Cellular will continue to be
utilized. In Ohio 2, the Company intends to use the service mark AIRTOUCH-TM-
CELLULAR. 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. See "--Service Marks."
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
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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 currently has 167 and Sygnet has over
60 direct sales agents.
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 58 retail outlets and Sygnet operated 51 retail outlets
as of September 30, 1998. The Company's retail stores range in size from 420
square feet to 6,400 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 markets and in the markets to be acquired:
<TABLE>
<CAPTION>
CELLULAR MARKETS PRINCIPAL CELLULAR ROAMING PARTNERS
- ---------------------------------------------- ----------------------------------------------
<S> <C>
CENTRAL REGION:
Oklahoma 5 and 7............................ SWBM; AT&T Wireless
Texas Panhandle............................. SWBM; AT&T Wireless
Northwest Oklahoma.......................... SWBM; AT&T Wireless
Central Texas:
Texas 10.................................. AT&T Wireless
Texas 16.................................. AT&T Wireless; Houston Cellular
Kansas/Missouri............................. CMT; Western Wireless; U.S. Cellular
EASTERN REGION:
East Maryland............................... SWBM; AT&T Wireless; Vanguard
West Maryland............................... SWBM
WESTERN REGION:
Arizona/California:
Arizona 5................................. AirTouch
California 7.............................. AirTouch
California 4................................ AT&T Wireless
Santa Cruz.................................. AT&T Wireless; Bay Area Cellular
NORTHERN REGION:
Youngstown.................................. AT&T Wireless; AirTouch
Erie........................................ AT&T Wireless; AirTouch
New York.................................... AT&T Wireless; AirTouch
Pennsylvania................................ AT&T Wireless; AirTouch
Ohio 2...................................... AirTouch
</TABLE>
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The Company and Sygnet have agreements with NACN, which is the largest
wireless telephone network system in the world linking cellular operators
throughout the United States and Canada. NACN connects key areas across North
America so that customers can use their cellular phones to place and receive
calls in these areas as easily as they do in their home areas. Through NACN,
customers receive calls automatically without the use of complicated roaming
codes as they roam in more than 5,000 cities and towns in the United States and
Canada. In addition, special services such as call forwarding and call waiting
automatically follow subscribers as they travel.
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 total Pops. The Company has an agreement with AT&T
Wireless (PCS) under which the Company is a preferred roaming partner. See "Risk
Factors--PCS Risks," and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
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 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 aggregate net cost to
the Company under this agreement is estimated to be $81.0 million. The Company
is also party to another equipment supply agreement, with Nortel, to purchase
approximately $65.0 million of cell site and switching equipment over the period
June 1997 to November 2001.
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
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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 "--Strategy."
DIGITAL TECHNOLOGY. Digital signal transmission is accomplished through the
use of frequency management technologies, or "protocols." These protocols
"manage" the radio channel either by dividing it into distinct time slots (TDMA)
or by assigning specific coding instructions to each packet of digitized data
that comprises a signal (CDMA). While the FCC has mandated that licensed
cellular systems in the 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 a system using CDMA, only if it is a dual-mode handset that
permits the subscriber to use the digital 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. The Company has completed the conversion of many of its
systems to digital technology and expects to convert the remainder of its
systems (except for Kansas/ Missouri) by the end of 1999.
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.
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The following table reflects the digital technology currently used or
expected to be selected by the Company in each of its cellular markets.
<TABLE>
<CAPTION>
STATUS/EXPECTED
COMPLETION
CELLULAR MARKET DIGITAL TECHNOLOGY DATE
- ----------------------------------------------------------------------- ------------------------ --------------
<S> <C> <C>
CENTRAL REGION:
Oklahoma 5 and 7..................................................... analog/TDMA IS-136 Completed
Texas Panhandle...................................................... analog/TDMA IS-136 Completed
Northwest Oklahoma................................................... analog/TDMA IS-136 Completed
Central Texas:
Texas 10........................................................... analog/TDMA IS-136 3/31/99
Texas 16........................................................... analog/TDMA IS-136 Completed
Kansas/Missouri...................................................... N/A Pending(1)
EASTERN REGION:
East Maryland........................................................ analog/TDMA IS-136 Completed
West Maryland........................................................ analog/TDMA IS-136 Completed
WESTERN REGION:
Arizona/California:
Arizona 5.......................................................... analog/CDMA Completed
California 7....................................................... analog/CDMA 12/31/98
California 4......................................................... analog/TDMA IS-136 3/31/99
Santa Cruz........................................................... analog/TDMA IS-136 3/31/99
NORTHERN REGION:
Youngstown........................................................... analog/TDMA IS-136 Completed
Erie................................................................. analog/TDMA IS-136 Completed
New York............................................................. analog/TDMA IS-136 3/31/99
Pennsylvania......................................................... analog/TDMA IS-136 Completed
Ohio 2............................................................... analog/TDMA IS-136 3/31/99
</TABLE>
- ------------------------
(1) The Company has not yet selected the digital technology to deploy in the
Kansas/Missouri market.
INFORMATION SYSTEMS. Billing functions for the Company's cellular
operations are primarily 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.
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.
SERVICE MARKS
The Company owns the service mark Dobson Cellular-TM- 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.
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The following table sets forth the brand names used, or intended to be used,
by the Company for products and services in each of its cellular markets:
<TABLE>
<CAPTION>
CELLULAR MARKET SERVICE MARK
- ------------------------------------------------------------ --------------------------------
<S> <C>
CENTRAL REGION:
Oklahoma 5 and 7.......................................... Dobson Cellular-TM-
Texas Panhandle........................................... Dobson Cellular-TM-
Northwest Oklahoma........................................ CELLULAR
ONE-Registered Trademark-
Central Texas............................................. CELLULAR
ONE-Registered Trademark-
Kansas and Missouri....................................... CELLULAR
ONE-Registered Trademark-
EASTERN REGION:
East Maryland............................................. CELLULAR
ONE-Registered Trademark-
West Maryland............................................. CELLULAR
ONE-Registered Trademark-
WESTERN REGION:
Arizona/California........................................ AIRTOUCH-TM- CELLULAR
California 4.............................................. CELLULAR
ONE-Registered Trademark-
Santa Cruz................................................ CELLULAR
ONE-Registered Trademark-
NORTHERN REGION:
Youngstown................................................ Wilcom Cellular
Erie...................................................... CELLULAR
ONE-Registered Trademark-
New York.................................................. CELLULAR
ONE-Registered Trademark-
Pennsylvania.............................................. CELLULAR
ONE-Registered Trademark-
Ohio 2.................................................... AIRTOUCH-TM- CELLULAR
</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 that begin expiring in 2000 and may be
renewed at the Company's option, subject to the satisfaction of certain
operating standards, for two additional five-year terms.
AIRTOUCH-TM- CELLULAR is a registered service mark licensed by AirTouch. In
connection with the Arizona 5 Acquisition, the Company entered into a licensing
agreement which permits the Company to use the AIRTOUCH-TM- CELLULAR service
mark to identify and promote its cellular telephone service in Arizona 5. The
Company's right to use the service mark in the territory is non-exclusive and
non-transferrable. The licensing agreement for the AIRTOUCH-TM- CELLULAR mark
requires the Company to provide high-quality cellular telephone services to its
customers and to otherwise maintain reasonable standards set by AirTouch. The
licensing agreement is for an initial term of 20 years with automatic extensions
for additional five-year periods.
The Company intends to market its services using CELLULAR
ONE-Registered Trademark- in the Sygnet properties, except in the Youngstown
market where it will continue to market its services under the name "Wilcom
Cellular." The Company intends to market its services using the name
AIRTOUCH-TM- CELLULAR in Ohio 2 and CELLULAR ONE-Registered Trademark- in Texas
10. However, the Company has not yet entered into any license agreements with
respect to Ohio 2 and Texas 10, and the Company cannot assure you that it will
be able to do so.
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COMPETITION
The Company competes with various companies in each of its markets. The
following table lists the Company's principal competitors in each of its
cellular markets:
<TABLE>
<CAPTION>
CELLULAR MARKET PRINCIPAL COMPETITORS
- --------------------------------- -----------------------------------------------------------
<S> <C>
CENTRAL REGION:
Oklahoma 5 and 7............... AT&T Wireless; Western Wireless
Texas Panhandle................ Western Wireless
Northern Oklahoma.............. Enid Cellular
Central Texas.................. GTE
Kansas and Missouri............ SWBM; Kansas Cellular; ALLTEL; Chariton Cellular
EASTERN REGION:
East Maryland.................. BAM; Sprint
West Maryland.................. BAM; US Cellular; Sprint
WESTERN REGION:
Arizona/California............. BAM
California 4................... GTE
Santa Cruz..................... GTE
NORTHERN REGION:
Youngstown..................... ALLTEL
Erie........................... GTE Mobilenet
New York....................... Frontier
Pennsylvania................... ALLTEL; BAM
Ohio 2......................... ALLTEL
</TABLE>
The 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
long distance, landline local exchange and internet access service, with their
cellular 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.
Cellular carriers also face to a lesser extent competition from PCS, ESMR
and mobile satellite service ("MSS") providers, as well as from resellers of
these services and cellular service. In the future, cellular operators may also
compete more directly with traditional landline telephone service providers.
Continuing technological advances in telecommunications make it impossible to
predict the extent of future competition. However, due to the depth and breadth
of these competitive services offered by operators
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using these other technologies, such competition could be significant and is
expected to become more intense.
The FCC requires that all cellular system operators provide service to
resellers on a nondiscriminatory basis. A reseller provides cellular service to
customers but does not hold an FCC license or own cellular facilities. Instead,
the reseller buys blocks of cellular telephone numbers from a licensed carrier
and resells service through its own distribution network to the public.
Therefore, a reseller may be both a customer of a cellular licensee's services
and a competitor of that licensee. Several well-known telecommunications
companies resell cellular service as a complement to their long distance, local
telephone, paging, cable television or internet offerings.
The most likely source of direct competition to cellular providers in the
near term from a new technology is broadband PCS. Broadband PCS services consist
of wireless two-way telecommunications services for voice, data and other
transmissions employing digital micro-cellular technology. PCS operates in the
1850 to 1990 MHz band. 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 predecessors and affiliates already operate large
cellular telephone systems and thus bring significant wireless experience.
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 providers 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 MSS and is
currently providing such services. The FCC has also licensed four entities to
provide MSS as low earth-orbit satellite-based systems. One such licensee,
controlled by Motorola, operates a low earth-orbit satellite-based system called
"Iridium" and recently initiated such service in some markets. None of the other
licensees have yet launched MSS service. 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 MSS
services. Mobile satellite systems could augment or replace communications
within land-based cellular systems. While the Company may experience increased
competition from low earth-orbit satellite-based 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 industry 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.
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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 and are currently the subject of
administrative rulemakings and judicial proceedings that are significant to the
Company. 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 and designated as wireline and non-wireline. 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. However, no entity may own, directly or indirectly,
more than a 5% interest in both systems in any one MSA or RSA, unless such
ownership will not pose a substantial threat to competition, and no entity may,
directly or indirectly, own a controlling interest in, or otherwise have the
ability to control, both such systems. The FCC may prohibit or impose conditions
on transfers of licenses. In addition, under FCC rules, no person may have an
attributable interest (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 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, other entities 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 and the FCC has granted several
"unserved area" applications filed by parties other than the original MSA or RSA
licensee. Sygnet's five year buildout period has expired in all its markets. The
Company's buildout has been substantially completed in all of its markets.
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 annual regulatory fees and
assessments to support the FCC's regulation of its cellular operations, as well
as fees necessary to support centralized administration of telephone numbering,
telecommunications relay service ("TRS") for the hearing-impaired and
application filing fees.
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
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rights thereunder, including the Sygnet Acquisition. All applications for FCC
approval filed in connection with the Sygnet Acquisition have been granted by
the FCC and became final on December 8, 1998. 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 customer's resale of their services or
unreasonably discriminate against resellers of their services. All resale
obligations for cellular, broadband PCS and ESMR operators will terminate on
November 24, 2002. The FCC has also adopted requirements for cellular and other
providers of two-way voice services to implement basic and enhanced 911
services. These services provide emergency service providers with the ability to
better identify and locate callers using wireless services, including callers
using special devices for the hearing impaired. The Company's obligations to
implement these services is scheduled to occur in several stages ending in
October 2001. Cellular and PCS carriers are also required to provide law
enforcement agencies with capacity to support lawful wiretaps by March 12, 2001
and technical assistance for wiretaps by June 30, 2000. 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,
broadband PCS, paging and ESMR licensees to offer fixed services on a co-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 local 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 offer number portability and roaming to ported numbers by
March 31, 2000. These requirements may result in added capital expenditures for
the Company to make necessary system changes, although the Company currently has
no plans for any such expenditures.
Initial cellular and PCS licenses are generally granted for terms of ten
years, beginning on the date of the grant of the initial operating authority,
and are renewable upon application to the FCC. The initial term for three of the
Company's existing licenses expired in October 1998. Each license was renewed
for a new ten year term expiring in 2008. The balance of the Company's existing
licenses begin to expire in October 2000. Three of Sygnet's licenses have
already been renewed for a new ten year term, and the initial terms on the
balance of its licenses will expire over the next three years. Licenses may be
revoked and license renewal applications denied for cause after appropriate
notice and hearing. Near the conclusion of the license term, licensees must file
applications for renewal of licenses to obtain authority to operate for up to an
additional 10-year term. The FCC will award a renewal expectancy to a cellular
licensee that meets certain standards of past performance. If the existing
licensee receives a renewal expectancy, it is very likely that the existing
licensee's cellular license will be renewed without becoming subject to
competing applications. To receive a renewal expectancy, a licensee must show
that it has provided "substantial" service during its past license term, and has
substantially complied with applicable FCC rules and policies and the
Communications Act. "Substantial" service is defined as service which is sound,
favorable and substantially above a level of mediocre service that might only
minimally warrant renewal. If the existing licensee does not receive a renewal
expectancy, competing applications for the license will be accepted by the FCC.
The parties will be subject to a comparative hearing and the license may be
awarded to another entity.
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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 authorizing the FCC to
license 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 previously-licensed PCS
licensees for expenses they have incurred in relocating incumbent licensees that
the Company might have otherwise been required to relocate. 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 negotiation period is three years, with an additional two-year
mandatory negotiation period. After the voluntary and mandatory negotiation
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periods expire, the microwave user continues to hold primary status until April
4, 2005, but may be involuntarily relocated, albeit at the PCS licensee's
expense. 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. If greater than
25 percent of the Company's equity is owned of record or voted by aliens or
their representatives, a foreign government or its representative, or any
corporation organized under the laws of a foreign country and the FCC determines
that the public interest would be so served, it may revoke the Company's
cellular licenses or require an ownership restructuring. However, the FCC will
generally permit additional indirect ownership in excess of the statutory 25
percent benchmark where that interest is to be held by an entity or entities
from member countries of the World Trade Organization ("WTO"). For investors
from non-WTO countries, however, the FCC will determine whether the home country
of the foreign investor extends reciprocal treatment called "equivalent
competitive opportunities" to U.S. entities. If such opportunities do not exist,
it is unlikely that the FCC will permit investment beyond the 25 percent
benchmark. These restrictions could adversely affect the Company's ability to
attract additional equity financing.
Interconnection charges paid to local exchange carriers are a major
component of the cost structure of the Company and Sygnet. Changes in the
interconnection charge rate structure imposed by the FCC or mandated by the
Telecommunications Act may have a material impact on the Company.
The Telecommunications 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 Telecommunications Act requires state public utilities commissions
and/or the FCC to implement policies that mandate reciprocal compensation
between local exchange carriers, a category that will, for these purposes,
include cellular carriers, for interconnection services at rates more closely
related to cost. On August 1, 1996, the FCC adopted rules implementing the
interconnection policies imposed by the Telecommunications Act. Various aspects
of the order not directly related to interconnection between wireless carriers
and local exchange carriers are currently being reviewed by the U.S. Supreme
Court and the FCC's orders are currently subject to a federal appellate court
stay. If the FCC's rules are upheld on appeal, such action could result in
further reductions of the Company's interconnection expenses.
The Telecommunications Act requires, and the FCC has adopted, 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. These rules could
result in increased costs for the Company's cellular operations. The
Telecommunications 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.
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The Telecommunications Act specifically exempts all cellular carriers from
the obligation to provide equal access to interstate long distance carriers.
However, the Telecommunications Act gives the FCC the authority to impose rules
to require unblocked access through carrier identification codes or 800/888
numbers, so that cellular subscribers are not denied access to the long distance
carrier of their choosing, if the FCC determines that the public interest so
requires. The Company currently provides "dial around" equal access to all of
its customers.
The Telecommunications Act also imposes restrictions on a telecommunications
carrier's use of customer proprietary network information. FCC rules
implementing these restrictions could impose new costly obligations on the
Company and impose burdens on its current marketing activities.
The overall impact of the Telecommunications 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, use of customer proprietary network information 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.
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
Telecommunications 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
Telecommunications 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. Notwithstanding these new requirements, wireless carriers have had
various degrees of success in challenging offensive zoning requirements and it
is still unclear whether the costs of expanding cellular systems by adding cell
sites will increase and whether significant delays will be experienced due to
local zoning regulations.
The Company cannot assure you 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.
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FUTURE REGULATION. From time to time, legislation that could affect the
Company, either beneficially or adversely, is proposed by federal or state
legislators. The Company cannot assure you 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.
EMPLOYEES AND AGENTS
As of September 30, 1998, the Company had approximately 470 employees. In
addition, as of such date, the Company had agreements with 167 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, at a
monthly rental of approximately $19,000. See "Management--Certain Transactions."
As of September 30, 1998, the Company's cellular operations leased 30 and owned
three sales and administrative offices, at aggregate annual rentals of
approximately $.7 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 the Pending 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 owned and leased
210 cell sites as of September 30, 1998.
Sygnet owns office buildings in Youngstown and Warren, Ohio and land for a
proposed office site in Boardman, Ohio. As of September 30, 1998, Sygnet's
cellular operations leased 55 and owned two retail sales and administrative
offices. Sygnet anticipates that it will review these leases from time to time
and may, in the future, lease or acquire new facilities as needed. Sygnet does
not anticipate that it will encounter any material difficulties in meeting its
future needs for any leased space. Sygnet owned four cell sites and 124 towers
and leased 177 cell sites and ten towers as of September 30, 1998. Substantially
all of Sygnet's owned towers will be included in the Tower Sale Leaseback.
LEGAL PROCEEDINGS
Neither the Company nor Sygnet is currently involved in any pending legal
proceedings that individually or in the aggregate are material to the Company.
Each of the Company and Sygnet is a party to routine filings and customary
regulatory proceedings with the FCC and the state public utility commissions
relating to its operations.
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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 seven directors, four designated by the Dobson Partnership, one
designated by Childs, and two selected jointly by the Dobson Partnership and
Childs. See "Principal Shareholders." Two additional directors may be designated
by Senior Preferred Stock holders, two by Preferred Stock holders and one by the
holders of Class F Preferred Stock in the event certain voting rights triggering
events occur. See "Description of Capital Stock--Senior Preferred Stock,"
"--Other Preferred Stock" and "Description of the Preferred Stock."
The Company's Board of Directors presently consists of six directors, with
one vacancy to be filled by an independent director designee of the Dobson
Partnership. Upon consummation of the Sygnet Acquisition, Albert H. Pharis, Jr.,
President and Chief Executive Officer of Sygnet, and Dana L. Schmaltz, an
executive officer of Childs, became directors of the Company, and Thadeus J.
Mocarski resigned as a director of the Company. Directors and executive officers
of the Company are elected to serve until they resign or are removed, or are
otherwise disqualified to serve, or until their successors are elected and
qualified. Directors of the Company are elected for one-year terms at the annual
meeting of stockholders which is held in April of each year. Officers of the
Company are appointed at the Board's first meeting after each annual meeting of
stockholders.
The directors and executive officers of the Company are set forth below.
Certain of the officers and directors hold or have held positions in several of
the Company's subsidiaries. The ages of the persons set forth below are as of
December 31, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
Everett R. Dobson (1)...................... 38 Chairman of the Board, President and Chief
Executive Officer
G. Edward Evans............................ 37 President and Chief Operating Officer of
cellular subsidiaries
Bruce R. Knooihuizen....................... 42 Vice President and Chief Financial Officer
R. Thomas Morgan........................... 42 Vice President and Chief Information
Officer
Richard D. Sewell, Jr. .................... 41 Treasurer
Stephen T. Dobson (1)...................... 35 Secretary and Director
Russell L. Dobson (1)...................... 63 Director
Justin L. Jaschke.......................... 39 Director
Albert H. Pharis, Jr....................... 48 Director
Dana L. Schmaltz........................... 31 Director
</TABLE>
- ------------------------
(1) Everett R. Dobson and Stephen T. Dobson are sons of Russell L. Dobson.
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 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
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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.
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.
RICHARD D. SEWELL, JR. joined the Company as Treasurer in September 1998.
Prior to joining the Company, Mr. Sewell was employed by Dal-Tile International
Inc., a ceramic tile manufacturer and distributor, as Vice President-Finance
from 1997 to 1998, as Vice President-Treasury from 1995 to 1997 and as Vice
President-Financial Reporting from 1990 to 1995. From 1979 to 1989, Mr. Sewell
was employed by Ernst & Young, a public accounting firm, concluding as a
principal in their Entrepreneurial Service Group. Mr. Sewell received a B.S. in
accounting from the University of Missouri-Kansas City.
STEPHEN T. DOBSON has been a director of the Company since 1990. He served
as Treasurer of the Company from 1990 until September 1998, and he has served as
Secretary of the Company since 1990. He has also served as General Manager and
Secretary of the Company's ILEC operations ("Telco") since 1994 and 1990,
respectively. He became President of Logix in January 1997. Mr. Dobson is a
member of the Western Rural Cellular Association ("WRTA"), National Telephone
Cooperative Association and 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, Mr. Jaschke served as Chief
Operating Officer for Nextel Communications, Inc. following its merger with
OneComm Corporation ("OneComm") in July 1995. Mr. Jaschke served as OneComm's
President and a member of its Board of Directors from 1993 until the merger with
Nextel Communications, Inc. From May 1990 to April 1993, Mr.
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Jaschke served as President and CEO of Bay Area Cellular Telephone Company. Mr.
Jaschke currently serves as Chairman of the Board of Directors of Metricom,
Inc., a wireless data communications provider. 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.
ALBERT H. PHARIS, JR. has served as President, Chief Executive Officer and
Director of Sygnet since Sygnet's inception in 1985. He has been active as a
board member of CTIA since 1985 and as a member of the CTIA Executive Committee
since 1989. He has also been Chairman of CTIA's Small Operators Caucus.
DANA L. SCHMALTZ became a director of the Company in accordance with the
terms of the Stockholders' Agreement dated December 23, 1998 between the Company
and J.W. Childs Associates, L.P. Mr. Schmaltz is a Vice President of J.W. Childs
Associates, L.P. and has been at J.W. Childs Associates, L.P. since February
1997. From 1995 to 1997, Mr. Schmaltz was an associate at DLJ Merchant Banking,
Inc. Mr. Schmaltz graduated from the Harvard Graduate School of Business
Administration in 1995.
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EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation during
1998, 1997 and 1996 earned by the Company's chief executive officer and its
other three most highly compensated executive officers as of December 31, 1998
("the Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
COMPENSATION OPTION AWARDS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) ($)(2) (# OF SHARES) ($)(3)
- ---------------------------------- --------- ---------- ------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Everett R. Dobson ................ 1998 $ 380,400 $ -- $ 39,700(4) -- $ 6,400
Chairman of the Board and 1997 300,000 250,000 54,800(4) -- 9,500
Chief Executive Officer 1996 300,000 142,400 77,100(4) -- 6,000
Stephen T. Dobson ................ 1998 155,200 -- 32,600(5) -- 4,700
Secretary, Treasurer 1997 100,000 75,000 13,800(5) -- 6,500
and Director 1996 97,000 75,000 20,600(5) -- 3,900
G. Edward Evans .................. 1998 152,500 35,100(6) -- 1,000 4,300
President and Chief 1997 113,600 80,000(7) -- 6,033 --
Operating Officer 1996 -- -- -- -- --
Bruce R. Knooihuizen ............. 1998 165,000 -- -- 1,000 4,100
Vice President and 1997 152,500 82,500 -- -- 1,400
Chief Financial Officer 1996 65,900 37,500 57,600(8) 7,541 --
</TABLE>
- ------------------------
(1) Bonus amounts for Everett R. Dobson, Stephen T. Dobson, G. Edward Evans and
Bruce R. Knooihuizen with respect to services performed in 1998 have not yet
been determined. For 1997, represents the bonus paid in 1998 with respect to
services performed in 1997. 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.
(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 $26,000, $36,600 and $62,900 for personal use of Company aircraft
and $12,300, $18,200 and $12,500 for a Company-provided vehicle in 1998,
1997and 1996, respectively.
(5) Includes $16,100, $10,400 and $7,400 for personal use of Company aircraft
and $16,300, $3,400 and $6,500 for a Company-provided vehicle in 1998, 1997
and 1996, respectively.
(6) Represents an advance on bonus to be awarded.
(7) Includes $20,000 received upon commencement of employment.
(8) Includes $5,600 for interim housing expenses, $24,300 for home mortgage
closing costs and $27,700 for tax reimbursements for such expenses and
costs.
The Named Executive Officers listed below were granted options to purchase
shares of the Company's Class B Common Stock in 1997. No stock options were
exercised by the Named Executive Officers in 1997.
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OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ANNUAL RATES
INDIVIDUAL GRANTS OF
-------------------------------- STOCK APPRECIATION FOR
NUMBER OF PERCENT OF TOTAL OPTION TERM(1)
OPTIONS OPTIONS GRANTED TO EXERCISE PRICE ----------------------
NAME GRANTED EMPLOYEES IN 1998 ($/SHARE) EXPIRATION DATE $5%($) 10%($)
- --------------------------------- ----------- ------------------- --------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bruce R. Knooihuizen............. 1,000 9.1% $ 300 01/29/98 $ 188,668 $ 478,123
G. Edward Evans.................. 1,000 9.1% $ 300 01/29/08 $ 188,668 $ 478,123
</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.
1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT 12/31/98(#) OPTIONS AT 12/31/98($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- --------------------------------------- ------------------------------- ---------------------------------------
<S> <C> <C>
Bruce R. Knooihuizen................... 3,016/5,525 $ 1,704,040/$2,921,625
G. Edward Evans........................ 1,206/5,827 $ 681,390/$3,092,255
</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.
Effective September 1, 1998, the Company entered into a consulting agreement
with Russell L. Dobson. Under the terms of the agreeement, Mr. Dobson has been
retained by Dobson Communications from September 1, 1998 through August 31,
2008. In exchange for Mr. Dobson's services, the Company will provide monthly
compensation of $15,000 and insurance benefits commensurate with the Company's
employee plan. Mr. Dobson's responsibilities will include representing the
Company at various functions, assisting with regulatory matters and assisting
executive officers of the Company in strategic planning and forecasting. In
addition, Mr. Dobson has agreed not to compete with the Company. During 1998,
Mr. Dobson was paid approximately $195,000 by the Company under the consulting
agreement.
Effective December 23, 1998 Albert H. Pharis, Jr. became a consultant to the
Company, to assist the Company on an as-needed basis, for term of five years.
Mr. Pharis will receive a fee of $40,000 for the first 90 days of such
consulting period and an annual fee of $60,000 thereafter. In addition, Mr.
Pharis received options to purchase 833 shares of the Company's Class B Common
Stock at an exercise price of $665 per
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share. Mr. Pharis's option vests ratably over a five-year period and fully vests
upon a change of control of the Company.
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 1998, the members of the Compensation Committee were Russell L. Dobson,
Justin L. Jaschke and Thadeus J. Mocarski, a former director. 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 Transactions."
STOCK OPTION PLAN
The Company's 1996 Stock Option Plan, as amended (the "Plan") was adopted 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"). As of December 31, 1998
options to purchase an aggregate of 29,767 shares of Class B Common Stock and
2,414 shares of Class C Common Stock had been granted under the Plan.
The maximum number of shares for which options may be granted under the Plan
is 30,166 shares of Class B Common Stock and 30,166 shares of Class C Common
Stock, 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 of
Class C 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 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
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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.
CERTAIN TRANSACTIONS
The Company has adopted a policy requiring that any material transaction
between the Company and persons or entities affiliated with officers, directors
or principal stockholders of the Company be on terms no less favorable to the
Company than reasonably could have been obtained in an arms' length transaction
with independent third parties. Any other matters involving potential conflicts
of interests are to be resolved on a case-by-case basis.
In the Reorganization in February 1997, the shareholders of DOC exchanged
their DOC stock for Dobson stock, and Dobson assumed outstanding DOC stock
options, substituting shares of Dobson's Class B Common Stock for the DOC stock
subject to options. 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). See "Description of the
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.
In January 1998, the Company issued the Fleet Investors 100,000 shares of Class
C Preferred Stock. In connection with the Sygnet Financing, the Fleet Investors
converted their Class B Preferred Stock into Class A Common Stock and disposed
of all their Class A Common Stock and Class C Preferred Stock. In addition, the
Shareholders' Agreement was replaced with a new shareholders' agreement and the
option granted to the Company by the Fleet Investors will terminated.
The Everett R. Dobson Irrevocable Family Trust, Steven T. Dobson Irrevocable
Family Trust and Robbin L. Dobson Irrevocable Family Trust (collectively, the
"Dobson Trusts") were co-borrowers with the Company and certain of its
subsidiaries under a prior bank facility, which was first entered into in 1994.
The Dobson Trusts are the limited partners of the Dobson 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 "Principal
Shareholders." 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 the Dobson 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
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bank borrowings 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 year ended December 31, 1997 and the
nine months ended September 30, 1998 the amounts billed for management fees and
expenses to NATELCO, LLC were $21,000 and $47,700, respectively. The amounts
owed by NATELCO, LLC to the Company for management fees at December 31, 1997 and
September 30, 1998 were $8,900 and $8,200, respectively.
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 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
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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.
Prior to November 1, 1998, the Company leased 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 was approximately $23,000, or $.93 per square foot. In October 1998,
WillRuss sold this building to an unrelated third party. As part of the sale
transaction, the Company entered into an agreement with the buyer to lease the
building for a one-year term at a monthly rent of approximately $19,000. 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."
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 stock 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 November 1997, Everett R. Dobson purchased an interest in the Company's
loan to Gila River Telecommunications Subsidiary, Inc., a wholly owned
subsidiary of the Gila River Indian Community. The Company repurchased this
interest in June 1998.
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 Logix for $105,000. In addition,
in June, 1998, Logix purchased certain long distance customers and related
assets for approximately $4.7 million. In connection with the purchase of these
assets of Zenex, a note payable in the amount of $284,765, including accrued
interest, from Zenex to Everett R. Dobson was paid in full.
In connection with the Sygnet Financing, the Company purchased for $1.9
million all of its outstanding shares (100,000 shares) of Class C Preferred
Stock held by the Fleet Investors and also purchased 43,348 shares of its Class
A Common Stock from Fleet Investors for $31.1 million. Thadeus J. Mocarski, a
principal of the Fleet Investors, was a director of the Company and resigned as
a director upon consummation of the Sygnet Acquisition. As part of the Sygnet
Financing, the Dobson Partnership acquired 37,630 shares of Class G Preferred
Stock from the Company in exchange for 37,630 shares of Class A Common Stock.
See "Description of Capital Stock--Other Preferred Stock" for a description of
the Class D Purchase Agreement and Investors Agreement entered into by the
Company in connection with the Sygnet Financing.
In the Tower Sale Leaseback, Dobson Tower Company purchased cellular towers
from Sygnet for $25.0 million and lease the towers back to Sygnet. Everett R.
Dobson, a director, executive officer and principal shareholder of the Company,
owns preferred stock issued by Dobson Tower Company. All of Dobson Tower
Company's common stock is owned by the Company.
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PRINCIPAL SHAREHOLDERS
The following table provides information concerning beneficial ownership of
the Company's voting securities at December 31, 1998, by (a) each person known
by the Company to beneficially own more than 5% of such stock, (b) each
director, nominee and Named Executive Officer, and (c) all directors, nominees
and executive officers as a group:
<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS D PREFERRED CLASS G PREFERRED STOCK
STOCK
---------------------- ---------------------- ------------------------ PERCENT OF
NAME AND ADDRESS OF BENEFICIAL NUMBER OF PERCENT OF NUMBER OF PERCENT OF NUMBER OF PERCENT OF TOTAL VOTING
OWNER SHARES CLASS SHARES CLASS SHARES CLASS POWER(1)
- ------------------------------- --------- ----------- --------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Everett R. Dobson (2) ......... 471,388 95.8% 3,534 4.7% 37,853 100.0% 84.8%
13439 N. Broadway Ext.
Oklahoma City, OK 73114
Russell L. Dobson ............. 3,154 * -- -- -- -- *
13439 N. Broadway Ext.
Oklahoma City, OK 73114
J.W. Childs
Associates, L.P. (3)......... 17,412 3.5% 71,560 95.3% -- -- 14.7%
One Federal St.
Boston, MA 02110
All directors, nominees and
executive officers as a group
(11 persons)................. 491,954 100.0% 75,094 100.0% 37,853 100.0% 100.0%
</TABLE>
- ------------------------
* Less than 1%.
(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 D Preferred Stock
(presently equivalent to one vote per share) is aggregated.
(2) All such shares are held by the Dobson 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) All such shares are beneficially owned by Dana L. Schmaltz, who became a
director following the closing of the Sygnet Financing.
Except as set forth above, no director, nominee or executive officer of the
Company owns or has the right to acquire within 60 days, or upon completion of
the Sygnet Financing will own or have the right to acquire within 60 days
thereafter, any of the Company's voting securities.
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DESCRIPTION OF THE PREFERRED STOCK
The summary contained herein of certain provisions of the 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 will be made
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. The Company has
authorized 2,500,000 shares of preferred stock, par value $1.00, including
184,000 shares of Preferred Stock, with a liquidation preference of $1,000 per
share. Such shares include the 64,646 shares of Preferred Stock issued in Old
Shares and additional shares of Preferred Stock which may be used to pay
dividends on the Preferred Stock if the Company elects to pay dividends in
additional Preferred Stock. The Company filed a Certificate of Designation with
respect thereto with the Secretary of State of Oklahoma as required by Oklahoma
law. The Preferred Stock will be exchangeable, at the option of the Company,
into the Exchange Debentures, at any time. See "--Exchange." The outstanding
Preferred Stock is fully paid and nonassessable and the holders thereof have no
subscription or preemptive rights related thereto. United States Trust Company
of New York will be the transfer agent and registrar for the Preferred Stock
(the "Transfer Agent" and "Registrar").
RANKING
The 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, Class A
Preferred Stock, the Class D Preferred Stock, the Class E Preferred Stock, the
Class F Preferred Stock, the Class G Preferred Stock, the Class H Preferred
Stock and to each other class of capital stock or series of preferred stock
established after the date of this Memorandum by the Board of Directors, the
terms of which do not expressly provide that it ranks senior to or on a parity
with the 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) on a parity with the Senior Preferred Stock and, subject to
certain conditions, with any class of capital stock or series of preferred stock
issued by the Company established after the date of this Memorandum by the Board
of Directors, the terms of which expressly provide that such class or series
will rank on a parity with the 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 the date of this Memorandum by the Board
of Directors, the terms of which expressly provide that such class or series
will rank senior to the Preferred Stock as to dividend distributions and
distributions upon liquidation, winding-up and dissolution of the Company
(collectively referred to as "Senior Securities"). The Preferred Stock is
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 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 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 Preferred Stock then
outstanding or (2) indebtedness of the Company.
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<PAGE>
DIVIDENDS
Holders of Preferred Stock are entitled to receive, when, as and if declared
by the Board of Directors, out of funds legally available therefor, dividends on
the Preferred Stock at a rate per annum equal to 12.25% 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 Issue Date and will
be payable quarterly in arrears on January 15, April 15, July 15 and October 15
of each year, commencing January 15, 1999. On and before January 15, 2003, the
Company may pay dividends, at its option, in cash or in additional fully paid
and nonassessable Preferred Stock having an aggregate liquidation preference
equal to the amount of such dividends. Dividends paid in additional shares of
Preferred Stock will be calculated and paid to registered holders to the nearest
whole share. The Company may pay dividends in cash during the period on or
before January 15, 2003 on the Senior Preferred Stock only if it also pays
dividends in cash on the Preferred Stock during such period.
The Depository Trust Company ("DTC") will not permit the allocation of
fractional shares. Consequently, payments made to Cede & Co. (as nominee for
DTC) will include cash in lieu of fractional shares based on the liquidation
preference of the Preferred Stock. Registered holders other than Cede & Co., if
any, will continue to receive fractional shares of Preferred Stock calculated to
the fifth decimal place.
After January 15, 2003, dividends may be paid only in cash. However, the
Senior Note Indenture, the certificate of designation for the Senior Preferred
Stock and the 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 Preferred Stock) on such
dividend payment date, the amount of accrued and unpaid dividends will bear
interest at the dividend rate on the Preferred Stock, compounding quarterly,
until declared and paid in full.
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 Preferred Stock. If full dividends are not so paid, the
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 Preferred Stock.
OPTIONAL REDEMPTION
The 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 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>
108
<PAGE>
In addition, on or prior to January 15, 2001, the Company may redeem
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 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, PROVIDED that such redemption date
occurs within 180 days after consummation of such sale and at least 65%
aggregate liquidation preference of Preferred Stock originally issued remains
outstanding after each such redemption.
The Company will not exercise its optional redemption rights provided in the
certificate of designation with respect to the Senior Preferred Stock unless it
contemporaneously redeems the Preferred Stock pro rata.
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 Preferred Stock.
In the event of partial redemptions of 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 and the Credit Facilities restrict the Company's ability to
redeem the Preferred Stock and future agreements may contain similar provisions.
See "Description of Certain Indebtedness-- The Senior Notes," "--The DOC
Facility" and "--The DCOC 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 Preferred Stock is to be
redeemed in part, the notice of redemption that related to such Preferred Stock
shall state the portion of the liquidation preference to be redeemed. New shares
of 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 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 Preferred Stock called for redemption.
MANDATORY REDEMPTION
The Preferred Stock is 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 Preferred
Stock to repurchase all or any part of such holder's 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 or the DCOC Facility is outstanding upon the occurrence of a Change
of Control until such Indebtedness is repaid, redeemed or repurchased in full,
in
109
<PAGE>
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 Closing Date which would prohibit
a Change of Control Offer prior to making an offer to repurchase Preferred
Stock, and there can be no assurance that the Company would have sufficient
funds to pay the purchase price for all Preferred Stock that the Company would
be required to purchase. In the event that the Company were required to purchase
outstanding 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 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 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 D Preferred Stock, the Class E Preferred Stock, the
Class F Preferred Stock, the Class G Preferred Stock, the Class H Preferred
Stock and the Common Stock of the Company. However, in a bankruptcy proceeding
commenced by or against the Company under the U.S. Bankruptcy Code, the claim of
a holder of Preferred Stock may be limited to the sum of (i) the initial
offering price and (ii) that portion of the difference between the liquidation
preference and the initial offering price not held to be the equivalent of
"unmatured interest" for purposes of the U.S. Bankruptcy Code. If, upon any
voluntary or involuntary liquidation, dissolution or winding-up of the Company,
the amounts payable with respect to the Preferred Stock and all other Parity
Securities are not paid in full, the holders of the 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 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 does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the Preferred
Stock, although such liquidation preference will be substantially in excess of
the par value of such 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 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 Preferred Stock will exceed the par value and
there will be no remedies available to holders of the 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 Preferred Stock and its par value.
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<PAGE>
VOTING RIGHTS
The holders of Preferred Stock 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 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 Preferred Stock, (c) the
Company fails to make an offer to purchase (and complete such purchase of) all
of the outstanding shares of Preferred Stock following a 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 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 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
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 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 Preferred
Stock are entitled to elect. Whenever the right of the holders of 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
Preferred Stock to elect directors.
Any vacancy occurring in the office of a director elected by the holders of
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 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 Preferred Stock, or authorize the issuance of any additional
shares of Preferred Stock (other than to pay dividends in kind), without the
affirmative vote or consent of the holders of at least a majority of the
outstanding shares of 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 Preferred
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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 Preferred Stock and shall not be
deemed to affect adversely the rights, preferences, privileges or voting rights
of the holders of Preferred Stock.
Under Oklahoma law, the holders of 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 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.
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"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.
"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.
"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, including, without limitation,
all Common Stock and 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 $.001 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 D Preferred Stock" means the Class D 15% Convertible Preferred Stock,
par value $1.00 per share, of the Company.
"Class E Preferred Stock" means the Class E Preferred Stock, par value $1.00
per share, of the Company.
"Class F Preferred Stock" means the Class F 16% Preferred Stock, par value
$1.00 per share, of the Company.
"Class G Preferred Stock" means the Class G 16% Convertible Preferred Stock,
par value $1.00 per share, of the Company.
"Class H Preferred Stock" means the Class H Preferred Stock, par value $1.00
per share, of the Company.
"Closing Date" means January 22, 1998.
"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
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such Restricted Subsidiary not owned on the last day of such period by the
Company or any of its Restricted Subsidiaries divided by (2) the total number of
shares of outstanding Common Stock of such Restricted Subsidiary on the last day
of such period.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Subsidiaries during such
period; EXCLUDING, HOWEVER, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in connection
with the offering of the 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 Preferred
Stock and any Senior Securities or Parity Securities at the time of
determination, to (ii) the aggregate amount of Consolidated EBITDA for the then
most recent four fiscal quarters for which financial statements of the Company
have been filed with the Commission (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
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GAAP (excluding the effects of foreign currency exchange adjustments under
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 52).
"Credit Facilities" means the DOC Facility and the DCOC Facility.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"DCOC" means Dobson Cellular Operations Company.
"DCOC Facility" means the $120 million and $80 million credit facilities
created and established by the DCOC Facility Agreement.
"DCOC Facility Agreement" means the agreement among DCOC, NationsBank of
Texas, N.A., First Union National Bank and Toronto Dominion (Texas), Inc., dated
as of March 25, 1998, establishing the DCOC Facility, together with all other
agreements, instruments, and documents executed or delivered pursuant thereto or
in connection therewith, in each cash as such agreement, other agreements,
instruments or documents may be amended, supplemented, extended, renewed,
replaced or otherwise modified from time to time.
"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/Sygnet" means Dobson/Sygnet Communications Company.
"Dobson/Sygnet Indenture" means the Indenture dated as of December 23, 1998
between Dobson/ Sygnet and United States Trust Company of New York, relating to
the Dobson/Sygnet Notes, as such indenture may be amended, supplemented,
extended, renewed, replaced or otherwise modified from time to time.
"Dobson/Sygnet Notes" means the 12 1/4% Senior Notes due 2008 to be issued
by Dobson/Sygnet under the Dobson/Sygnet Indenture.
"DOC Facility" means that certain credit facility created and established by
the DOC Facility Agreement.
"DOC Facility Agreement" means the Third Amended and Restated Credit
Agreement among Dobson Operating Company, Corestates Bank, N.A., Toronto
Dominion (Texas), Inc. and NationsBank of Texas, N.A. dated as of March 25,
1998, together with all other agreements, instruments and documents executed or
delivered pursuant thereto or in connection therewith, in each case as such
agreements, instruments or documents may be amended, supplemented, extended,
renewed, replaced or otherwise modified from time to time.
"Existing Stockholders" means Everett R. Dobson.
"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
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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.
"FCC" means the Federal Communications Commission.
"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.
"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 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
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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.
"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.
"Issue Date" means the date on which the Preferred Stock was originally
issued.
"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).
"Logix" means Logix Communications Enterprises, Inc., formerly named Dobson
Wireline Company.
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"Logix Notes" means the 12 1/4% Senior Notes due 2008 issued by Logix under
the Logix Indenture.
"Logix Indenture" means the Indenture dated as of June 12, 1998 between
Logix and United States Trust Company of New York, relating to the Logix Notes,
as such indenture may be amended, supplemented, extended, renewed, replaced or
otherwise modified from time to time.
"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 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 DCOC 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 Cellular Operations Company,
NationsBank of Texas, N.A. and NationsBanc Montgomery Securities LLC.
"New DOC Facility Agreement" means the credit agreement established pursuant
to the New DOC Facility Commitment Letter, 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.
"New Shares" means shares of the Company's 12 1/4% Senior Exchangeable
Preferred Stock which have been registered under the Securities Act and which
are issued in exchange for surrendered Old Shares.
"Offer to Purchase" means an offer by the Company to purchase Preferred
Stock from the Holders commenced by mailing a notice to the Transfer Agent and
each Holder stating: (i) the covenant pursuant
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to which the offer is being made and that all 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 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 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 Preferred Stock purchased pursuant to the
Offer to Purchase will be required to surrender the Preferred Stock, together
with the form entitled "Option of the Holder to Elect Purchase" on the reverse
side of the 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 Preferred Stock delivered for purchase and
a statement that such Holder is withdrawing its election to have such Preferred
Stock purchased; and (vii) that Holders whose Preferred Stock is being purchased
only in part will be issued new shares of Preferred Stock equal in liquidation
preference to the unpurchased portion of the Preferred Stock surrendered;
PROVIDED that each share of Preferred Stock purchased and each new share of
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 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 Preferred Stock or portions
thereof so accepted; and (iii) deliver, or cause to be delivered, to the
Transfer Agent all Preferred Stock or portions thereof so accepted together with
an Officers' Certificate specifying the Preferred Stock or portions thereof
accepted for payment by the Company. The Paying Agent shall promptly mail to the
Holders of Preferred Stock so accepted payment in an amount equal to the
purchase price, and the Transfer Agent shall promptly countersign and mail to
such Holders new shares of Preferred Stock equal in liquidation preference to
any unpurchased portion of the Preferred Stock surrendered; PROVIDED that each
share of Preferred Stock purchased and each new share of 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 Preferred Stock pursuant to an Offer to
Purchase.
"Old Shares" means shares of the Company's 12 1/4% Senior Exchangeable
Preferred Stock originally issued on December 23, 1998 and all additional shares
of the Company's 12 1/4% Senior Exchangeable Preferred Stock issued in the
payment of dividends thereon.
"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,
the Preferred Stock and all other series and classes of such preferred stock or
preference stock.
"Preferred Stock" means the Old Shares and the New Shares.
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"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 DOC Facility Agreement and the DCOC
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.
"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 Exchange Debentures" means the Company's 12 1/4% Senior Subordinated
Debentures due 2008 which may be issued by the Company in exchange for Senior
Preferred Stock.
"Senior Notes" means the 11 3/4% Senior Notes due 2007 issued by the Company
under the Senior Note Indenture.
"Senior Preferred Stock" means the Company's 12 1/4% Senior Exchangeable
Preferred Stock Mandatorily Redeemable 2008 issued by the Company on January 22,
1998.
"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.
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"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) Logix, Dobson/Sygnet, Dobson Tower
Company 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.
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"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 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 and Preferred Stock, pro
rata, tendered in an Offer to Purchase (or similar offer to purchase made under
the certificate of designation relating to the Senior Preferred Stock) made as a
result of a Change in Control or (B) deposited to defease the Senior Notes;
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(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
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.
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
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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 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 and the Preferred Stock shall not have
been paid in full as provided in the certificate of designation with respect to
the Senior Preferred Stock and the Certificate of Designation, respectively.
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
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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 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 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 Logix; 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
for the Senior Preferred Stock, the Bank Facility Agreement, the
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Senior Note Indenture or any other agreements in effect on the Closing Date or
in the Certificate of Designation, 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 DOC Facility Agreement or the DCOC 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 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 DOC Facility Agreement or the DCOC
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 DOC Facility Agreement or the DCOC 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 DCOC
Facility Commitment Letter, respectively; 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 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 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
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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 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.
LIMITATIONS ON SENIOR PREFERRED STOCK
The Company will not (a) exchange any Senior Preferred Stock for Senior
Exchange Debentures unless it will have previously exchanged, or will
contemporaneously exchange, all of the Preferred Stock for Exchange Debentures
or (b) redeem any Senior Preferred Stock unless it will contemporaneously redeem
a pro rata portion of the Preferred Stock.
COMMISSION REPORTS AND REPORTS TO HOLDERS
Whether or not the Company is required to file reports with the Commission,
for so long as any 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 Section 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
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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 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 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.
EXCHANGE
Subject to the "Limitations on Senior Preferred Stock" covenant, 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 Preferred Stock, including any Preferred Stock issued as payment for
dividends, for Exchange Debentures, subject to the conditions set forth in the
next succeeding paragraph. Presently, the exchange of the Preferred Stock for
Exchange Debentures would be restricted by covenants in the Senior Note
Indenture, the DOC Facility Agreement and the DCOC Facility Agreement. There can
be no assurance that the conditions in such covenants for the exchange of
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 Certain Indebtedness--The Senior Notes," "--The
DOC Facility" and "--The DCOC 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 Preferred Stock, which
notice shall state (i) that the Company is exchanging the 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
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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 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
clauses (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 Preferred Stock will be entitled to receive a principal amount of
Exchange Debentures for 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 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 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
Preferred Stock will receive certificates representing the entire principal
amount of Exchange Debentures to which its 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, the DOC Facility Agreement, the
DCOC Facility Agreement 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 Preferred Stock, and all rights of the holders of 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.
PREFERRED STOCK EXCHANGE OFFER REGISTRATION
The Company has agreed with the Initial Purchaser, 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 an issue of preferred stock of
the Company (the "New Shares") with terms identical to the Old Shares (the
"Preferred Stock Exchange Offer"). Upon such registration statement being
declared effective, the Company shall offer the New
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Shares in return for surrender of the Old Shares. Such offer shall 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 such an 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 the expiration of the time period
referred to in Rule 144(k) under the Securities Act after the Issue Date. The
Company shall, in the event of such shelf registration, provide to each holder
of Preferred Stock copies of the prospectus, notify each holder of Preferred
Stock when a registration statement for the Preferred Stock has become effective
and take certain other actions as are required to permit resales of the
Preferred Stock. In the event that the Preferred Stock Exchange Offer is not
consummated and a shelf registration statement is not declared effective on or
prior to 180 days after the Issue Date, additional dividends will accrue, at an
annual rate of .5% of the liquidation preference thereof, on the Old Shares from
the date that is 180 days after the Issue Date, payable in additional shares of
Preferred Stock quarterly in arrears on each January 15, April 15, July 15 and
October 15, commencing July 15, 1999, until the Preferred Stock Exchange Offer
is consummated or such shelf registration statement is declared effective. The
Company anticipates that it will consummate the Preferred Stock Exchange Offer
and that a shelf registration statement will not be required. Holders of Old
Shares who do not participate in the Preferred Stock Exchange Offer may
thereafter hold a less liquid security. Holders of Old Shares will not be named
as selling securityholders in a Preferred Stock Exchange Offer registration
statement.
PREFERRED STOCK BOOK-ENTRY; DELIVERY AND FORM
Preferred Stock will be represented by a single, permanent global Preferred
Stock certificate, in definitive, fully registered form (the "Restricted Global
Preferred Stock Certificate") and will be deposited with a custodian for DTC and
registered in the name of a nominee of DTC. The Restricted Global Preferred
Stock Certificate (and any Preferred Stock issued in exchange therefor) will be
subject to certain restrictions on transfer set forth therein and will bear the
legend regarding such restrictions set forth under "Notice to Investors." The
Preferred Stock is not issuable in bearer form.
THE GLOBAL PREFERRED STOCK CERTIFICATE
Upon the issuance of the Restricted 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 Restricted
Global Preferred Stock Certificate, to the accounts of persons who have accounts
with such depositary. Such accounts initially will be designated by or on behalf
of the Placement Agents. Ownership of beneficial interests in a Restricted
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 Restricted 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). Qualified Institutional Buyers
may hold their interests in the Restricted Global Preferred Stock Certificate
directly through DTC if they are participants in such system, or indirectly
through organizations that are participants in such system.
So long as DTC, or its nominee, is the registered owner or holder of a
Restricted Global Preferred Stock Certificate, DTC or such nominee, as the case
may be, will be considered the sole owner or holder of the Preferred Stock
represented by such Restricted Global Preferred Stock Certificate for all
purposes under the Certificate of Designation and the Preferred Stock. No
beneficial owner of an interest in a Restricted 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 Restricted 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 Restricted
Global Preferred Stock
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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 Restricted Global Preferred Stock Certificate, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the amount of such Restricted 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 Restricted 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 Preferred Stock (including the presentation of Preferred Stock
for exchange as described below) only at the direction of one or more
participants to whose account the interests in the Restricted Global Preferred
Stock Certificate are credited and only in respect of such portion of the
aggregate liquidation preference of 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. 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 Restricted 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 Initial Purchaser will have any
responsibility for the performance by DTC or its respective participants or
indirect participants of its or their respective obligations under the rules and
procedures governing their operations.
CERTIFICATED PREFERRED STOCK
If DTC is at any time unwilling or unable to continue as a depositary for
the Restricted Global Preferred Stock Certificate and a successor depositary is
not appointed by the Company within 90 days, the Company will issue certificated
Preferred Stock in exchange for the Restricted Global Preferred Stock
Certificate, which will bear the legend referred to under the heading "Notice to
Investors."
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DESCRIPTION OF THE 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 Preferred Stock (including any Preferred Stock issued in
payment of dividends), plus accrued and unpaid dividends, on the date of
exchange of the 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 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
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 issue date of the Exchange
Debentures. The Company may pay dividends in cash during the period on or before
January 15, 2003 on the exchange debentures which may be issued upon exchange of
the Senior Preferred Stock only if it also pays interest in cash on the Exchange
Debentures during such period. 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
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amount of original issue discount is treated as DE MINIMIS. See "Federal Income
Tax Considerations to U.S. Holders."
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 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.
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.
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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 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 65% aggregate principal amount of
Exchange Debentures originally issued remains outstanding after each such
redemption.
The Company will agree it will not exercise its optional redemption rights
with respect to the Senior Exchange Debentures unless it contemporaneously
redeems the Exchange Debentures pro rata.
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 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
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.
"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, including, without limitation,
all Common Stock and 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 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.
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"Class A Common Stock" means the Class A Common Stock, par value $.001 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 D Preferred Stock" means the Class D 15% Convertible Preferred Stock,
par value $1.00 per share, of the Company.
"Class E Preferred Stock" means the Class E Preferred Stock, par value $1.00
per share, of the Company.
"Class F Preferred Stock" means the Class F 16% Preferred Stock, par value
$1.00 per share, of the Company.
"Class G Preferred Stock" means the Class G 16% Convertible Preferred Stock,
par value $1.00 per share, of the Company.
"Class H Preferred Stock" means the Class H Preferred Stock, par value $1.00
per share, of the Company.
"Closing Date" means January 22, 1998.
"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 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)
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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 then most recent four
fiscal quarters for which financial statements of the Company have been filed
with the Commission (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).
"Credit Facilities" means the DOC Bank Facility and the DCOC Facility.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"DCOC" means Dobson Cellular Operations Company.
"DCOC Facility" means the $120.0 million and $80.0 million credit facilities
created and established by the DCOC Facility Agreement.
"DCOC Facility Agreement" means the agreement among DCOC, NationsBank of
Texas, N.A., First Union National Bank and Toronto Dominion (Texas), Inc., each
dated as of March 25, 1998, establishing the DCOC Facility, together with all
other agreements, instruments, and documents executed or delivered pursuant
thereto or in connection therewith, in each cash as such agreement, other
agreements, instruments or documents may be amended, supplemented, extended,
renewed, replaced or otherwise modified from time to time.
"Dobson/Sygnet" means Dobson/Sygnet Communications Company.
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"Dobson/Sygnet Indenture" means the Indenture dated as of December 23, 1998
between Dobson/ Sygnet and United States Trust Company of New York, relating to
the Dobson/Sygnet Notes, as such indenture may be amended, supplemented,
extended, renewed, replaced or otherwise modified from time to time.
"Dobson/Sygnet Notes" means the 12 1/4% Senior Notes due 2008 to be issued
by Dobson/Sygnet under the Dobson/Sygnet Indenture.
"DOC Facility" means that certain credit facility created and established by
the DOC Facility Agreement.
"DOC Facility Agreement" means the Third Amended and Restated Credit
Agreement among Dobson Operating Company, Corestates Bank, N.A., Toronto
Dominion (Texas), Inc. and NationsBank of Texas, N.A. dated as of March 25,
1998, together with all other agreements, instruments and documents executed or
delivered pursuant thereto or in connection therewith, in each case as such
agreements, instruments or documents may be amended, supplemented, extended,
renewed, replaced or otherwise modified from time to time.
"Existing Stockholders" means Everett R. Dobson.
"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.
"FCC" means the Federal Communications Commission.
"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.
"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
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
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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.
"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
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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.
"Issue Date" means the date on which the Preferred Stock was originally
issued.
"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).
"Logix" means Logix Communications Enterprises, Inc., formerly named Dobson
Wireline Company.
"Logix Notes" means the 12 1/4% Senior Notes due 2008 issued by Logix under
the Logix Indenture.
"Logix Indenture" means the Indenture dated as of June 12, 1998 between
Logix and United States Trust Company of New York, relating to the Logix Notes,
as such indenture may be amended, supplemented, extended, renewed, replaced or
otherwise modified from time to time.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary of the Company as a reserve against any
liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of such
issuance or sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary of the Company)
and proceeds from the conversion of other property received when converted to
cash or cash equivalents, net of attorney's fees, accountants' fees,
underwriters' or placement agents' fees, discounts or
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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 DCOC 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 Cellular Operations Company,
NationsBank of Texas, N.A. and NationsBanc Montgomery Securities LLC.
"New DOC Facility Agreement" means the credit agreement established pursuant
to the New DOC Facility Commitment Letter, 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 Transfer Agent
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 Debentures 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 Exchange Debentures 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 Exchange Debentures purchased pursuant to the Offer to
Purchase will be required to surrender the Exchange Debentures, together with
the form entitled "Option of the Holder to Elect Purchase" on the reverse side
of the Exchange Debentures 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 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. 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
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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 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 Exchange Debentures" means the Company's 12 1/4% Senior Subordinated
Debentures due 2008 which may be issued by the Company in exchange for Senior
Preferred Stock.
"Senior Indebtedness" means (i) Indebtedness of the Company under the Senior
Notes, the Senior Note Indenture, the DOC Facility Agreement and the DCOC
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, 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.
"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.
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"Senior Preferred Stock" means the Company's 12 1/4% Senior Exchangeable
Preferred Stock Mandatorily Redeemable 2008 issued by the Company on January 22,
1998.
"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) Logix, Dobson/Sygnet, Dobson Tower
Company 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 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, the
Senior 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
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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, 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 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
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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 "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
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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 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
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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' 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 Logix; 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
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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.
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 DOC Facility Agreement or
the DCOC 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 DOC Facility Agreement or the DCOC Facility Agreement, respectively;
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 DOC
Facility Agreement or the DCOC 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 DCOC Facility Commitment Letter,
respectively; or (B) any Indebtedness of a Restricted Subsidiary, or any
agreement pursuant to
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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
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
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release or discharge of the Guarantee which resulted in the creation of such
Subsidiary Guarantee, except a discharge or release by or as a result of payment
under such Guarantee.
LIMITATION ON TRANSACTIONS WITH STOCKHOLDERS AND AFFILIATES
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of the Company or with any
Affiliate of the Company or any Restricted Subsidiary, except upon fair and
reasonable terms no less favorable to the Company or such Restricted Subsidiary
than could be obtained, at the time of such transaction or, if such transaction
is pursuant to a written agreement, at the time of the execution of the
agreement providing therefor, in a comparable arm's-length transaction with a
Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
solely between the Company and any of its Wholly Owned Restricted Subsidiaries
or solely between Wholly Owned Restricted Subsidiaries; (iii) the payment of
reasonable and customary regular fees to directors of the Company who are not
employees of the Company; (iv) any payments or other transactions pursuant to
any tax-sharing agreement between the Company and any other Person with which
the Company files a consolidated tax return or with which the Company is part of
a consolidated group for tax purposes; 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
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and assets of, or the business of, the Company and its Restricted Subsidiaries
existing on the date of such investment and (ii) apply (no later than the end of
the 12-month period referred to in clause (i)) such excess Net Cash Proceeds (to
the extent not applied pursuant to clause (i)) as provided in the following
paragraph of this "Limitation on Asset Sales" covenant. The amount of such
excess Net Cash Proceeds required to be applied (or to be committed to be
applied) during such twelve-month period as set forth in clause (i) of the
preceding sentence and not applied as so required by the end of such period
shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $5 million, the Company
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of 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.
LIMITATIONS ON SENIOR EXCHANGE DEBENTURES
The Company will not (a) pay interest in cash on the Senior Exchange
Debentures unless it will contemporaneously pay interest in cash on the Exchange
Debentures or (b) redeem any Senior Exchange Debentures unless it will
contemporaneously redeem a pro rata portion of the Exchange Debentures.
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
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"--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-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 DOC Facility Agreement
and the DCOC 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 DOC Facility Agreement or the
DCOC 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,
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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 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.
If a bankruptcy case is commenced by or against the Company under the U.S.
Bankruptcy Code after the issuance of the Exchange Debentures, the claim of a
holder with respect to the principal amount thereof may be limited to an amount
equal to the sum of (i) the initial price of the Exchange Debentures and (ii)
that portion of the original issue discount that is not deemed to constitute
"unmatured interest" for purposes of the U.S. Bankruptcy Code. Any original
issue discount that was not amortized as of any such bankruptcy filing would
constitute "unmatured interest."
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.
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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 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
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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
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
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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.
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.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW CREDIT FACILITIES
The New Credit Facilities provided by NationsBank, as Agent, include a $50.0
million senior secured, reducing revolving credit facility (the "Revolving
Credit Facility") and a series of three term loans aggregating $400.0 million
("Term Loan Facilities") to be used for permitted acquisitions, restricted
payments, the Sygnet Acquisition, to refinance Sygnet's existing indebtedness
and to fund, capital expenditures, permitted investments, working capital and
other corporate purposes.
The following summary of the material provisions of the New Credit
Facilities does not purport to be complete and is subject to, and is qualified
in its entirety by reference to, the definitive loan documentation. Capitalized
terms that are used but not defined in this section have the meanings that are
given such terms in the Commitment Letter.
The New Credit Facilities aggregate $430.0 million and include (a) a $50.0
million, 7 3/4 year reducing revolving credit facility, (b) a $125.0 million,
7 3/4 year term loan ("Term Loan A"), (c) a $155.0 million, 8 1/4 year term loan
("Term Loan B"), and (d) a $100.0 million, 9 year term loan ("Term Loan C").
Borrowings under the Revolving Credit Facility and Term Loans A and B bear
interest payable at least quarterly, at Sygnet's option, at (a) the "Applicable
Margin" plus the greater of (i) the Federal Funds Effective Rate plus 0.5% and
(ii) the prime rate (the "Base Rate"), or (b) the "Applicable Margin" plus
Reserve Adjusted LIBOR ("LIBOR") for interest periods of 1, 2, 3 or 6 months.
The "Applicable Margin" for the Revolving Credit Facility and Term Loan A
fluctuates based on Sygnet's leverage and is the Base Rate plus 0.75% to 2.00%
or LIBOR plus 1.75% to 3.00%. For Term Loan B, the "Applicable Margin"
fluctuates based on Sygnet's leverage and is the Base Rate plus 1.75% to 2.25%
or LIBOR plus 2.75% to 3.25%. Term Loan C bears interest at LIBOR plus 3.75% for
interest periods of 1, 2, 3 or 6 months.
Commencing with the quarter ending December 31, 2000, the borrowing
commitment under the Revolving Credit Facility and Term Loan A will reduce
quarterly under the following annual amortization schedule:
<TABLE>
<CAPTION>
YEAR ANNUAL AMORTIZATION
- ------------------------------------------------------------------------- -------------------
<S> <C>
2000..................................................................... 5.0%
2001..................................................................... 7.5%
2002..................................................................... 7.5%
2003..................................................................... 12.5%
2004..................................................................... 15.0%
2005..................................................................... 25.0%
2006..................................................................... 27.5%
</TABLE>
Commencing with the quarter ending December 31, 2000, Term Loan B will
reduce quarterly under the following annual amortization schedule:
<TABLE>
<CAPTION>
YEAR ANNUAL AMORTIZATION
- ------------------------------------------------------------------------- -------------------
<S> <C>
2000..................................................................... 2.5%
2001..................................................................... 2.5%
2002..................................................................... 2.5%
2003..................................................................... 7.5%
2004..................................................................... 15.0%
2005..................................................................... 25.0%
2006..................................................................... 27.5%
2007..................................................................... 17.5%
</TABLE>
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Term Loan C will amortize annually under the following schedule:
<TABLE>
<CAPTION>
YEAR ANNUAL AMORTIZATION
- ------------------------------------------------------------------------- -------------------
<S> <C>
1999-2006................................................................ 1.0%
2007..................................................................... 92.0%
</TABLE>
The commitments under the New Credit Facilities will be permanently reduced
by an amount equal to 100% of the net cash proceeds from sales of assets in
excess of $5.0 million, to the extent not reinvested within 12 months, by an
amount equal to 100% of the net cash proceeds received from certain equity or
debt issuances and by 75% or 50% of excess cash flow, depending on Sygnet's
leverage. In addition, to the extent amounts have been borrowed in respect of
the Tower Sale Leaseback, such amounts shall be repaid with the net proceeds
therefrom and the commitments under each of Term Loan A and Term Loan B will
decrease by $10.0 million.
Sygnet may, without premium or penalty, prepay advances bearing interest
based on the Base Rate at any time and may, without premium or penalty, prepay
advances bearing interest based on the LIBOR rate at the end of an applicable
interest period. Term Loan C may be redeemed in whole or in part at 102% of the
principal amount through December 31, 1999, 101% of the principal amount through
December 31, 2001 and thereafter at 100%.
The New Credit Facilities contain a number of covenants including, among
others, covenants limiting the ability of Sygnet and each of its subsidiaries to
incur debt, make loans, create liens, make guarantees and investments, change
their business, engage in transactions with affiliates, sell assets, enter into
restrictive agreements, engage in sale leaseback transactions or new business
and engage in mergers and acquisitions. The New Credit Facilities will contain
other usual and customary negative and affirmative covenants, including Year
2000 compliance.
The New Credit Facilities restrict Sygnet and Sygnet Communications from
declaring and paying distributions or making restrictive payments. However,
Sygnet will be permitted to pay dividends to pay (i) scheduled interest on the
Dobson/Sygnet Notes commencing after the first six interest payments on the
Dobson/Sygnet Notes and (ii) regularly scheduled payments on up to $120,000,000
in liquidation preference value of Dobson's preferred stock, commencing January
15, 2003, in each case unless if 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 Sygnet or Sygnet Communications or the Company or any of
its restricted subsidiaries or the loss of a material license or cellular
system), Sygnet Communications will not be prohibited from paying dividends to
Sygnet to pay scheduled interest on the Dobson/ Sygnet Notes for more than 180
days.
Sygnet will be required to maintain certain financial ratios, including,
among others, a ratio of total debt to cash flow, a ratio of operating cash flow
to pro forma debt service, a ratio of operating cash flow to cash interest
expense and a fixed charge coverage ratio. In addition, the Company and Sygnet
will be required to maintain a ratio of debt to operating cash flow.
Failure to satisfy any of the financial covenants will constitute an Event
of Default under the New Credit Facilities, permitting the lenders, after
notice, to terminate the commitment and/or accelerate payment of outstanding
indebtedness notwithstanding the ability of Sygnet to meet its debt service
obligations. The New Credit Facilities will include other customary events of
default including, without limitation, loss of franchise or any material
license; breach of representations, warranties and covenants; insolvency or
bankruptcy of Sygnet or any of its subsidiaries or of the Company or any of its
subsidiaries; cross default to other material indebtedness, leases, contracts of
Sygnet, its subsidiaries, or of the Company and its subsidiaries (excluding
Logix); any material adverse change; dissolution or termination of Sygnet or any
of its subsidiaries or of the Company; if the Company fails to maintain direct
voting and economic
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control of Sygnet and its subsidiaries; and if less than two-thirds of the
existing executive management team of the Company continue to hold executive
positions with the Company.
Sygnet's obligations under the New Credit Facilities will be guaranteed by
its subsidiaries. Borrowings under the New Credit Facilities will be secured by
a first perfected security interest in all assets of Sygnet and its present and
future subsidiaries including a pledge of all intercompany notes.
TOWER CREDIT FACILITY
Dobson Tower obtained a $17.5 million term loan (the "Tower Credit
Facility"), which is secured by all assets of Dobson Tower, mature on December
22, 1999 364 days after closing and bears interest at a fixed rate of 8.0% per
annum.
The credit agreement governing the Tower Credit Facility requires, among
other things, that Dobson Tower provide to the lender an executed contract with
a third party acceptable to the lenders providing for the sale of the towers by
June 23, 1999.
THE DOC FACILITY
The Company's DOC Facility is a $250.0 million senior secured revolving
credit facility with NationsBank and certain other lenders. 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 loan agreement.
The DOC Facility matures on June 30, 2006. Borrowings under the DOC Facility
bear interest, payable at least quarterly, at DOC's option, at an annual rate
equal to either (i) the greater of (x) the federal funds rate plus 1/2% and (y)
the prime rate of NationsBank, plus in each case a percentage per annum ranging
from 0% to 1(1)%, 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 $75.0 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). The DOC Facility contains other customary affirmative covenants.
The DOC Facility restricts DOC from declaring and paying dividends or
distributions, including dividends to pay cash dividends on the Senior Preferred
Stock and the Preferred Stock and to pay
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scheduled interest on the Senior Notes and, if issued, the Exchange Debentures
and the Senior Exchange Debentures. However, DOC is permitted to pay dividends
or distributions to the Company to pay cash dividends on the Senior Preferred
Stock (or interest on the Senior Exchange Debentures and 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 Senior 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 $25.0 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 is 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 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 (less
the amount escrowed for interest payments on the Senior Notes), all payments
required under
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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
Senior Exchange Debentures, the obligations under the Senior 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 covenants 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 management 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 DCOC FACILITY
The DCOC Facility is a $200.0 million senior secured revolving credit
facility with NationsBank and certain other lenders, under which such lenders
provided funds to DCOC to finance the Texas 16 and California 4 Acquisitions and
have agreed to provide additional funds to finance other acquisitions, capital
expenditures, permitted investments and restricted payments and for general
corporate purposes of DCOC and its subsidiaries. The following summary of the
material provisions of the DCOC Facility does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the DCOC Facility
loan agreement. Capitalized terms that are used but not defined in this section
have the meanings that are given such terms in the DCOC Facility loan agreement.
The DCOC Facility includes (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 DCOC's option, may be converted into a term loan
maturing no later than eight and one-half years from the closing date of the New
Credit Facilities or, with the consent of the lenders, may be renewed for an
additional 364-day period. In addition, the DCOC Facility loan agreement
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. The uncommitted acquisition revolver facility
may not be established unless two-thirds of the commitment amount under the
committed facilities is outstanding.
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The facilities comprising the DCOC Facility will mature on June 30, 2006.
Borrowings under the DCOC Facility bear interest, payable at least quarterly, at
DCOC'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 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 DCOC's Leverage
Ratio.
Commencing with the quarter ending June 30, 2000, the borrowing commitment
under the DCOC 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 DCOC and its
subsidiaries and the issuance of certain indebtedness by DCOC.
The DCOC Facility contains a number of covenants including, among others,
covenants limiting the ability of DCOC 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, DCOC's capital expenditures will be limited to 110%
of its capital expenditures budget for such period. The DCOC Facility contains
other covenants customary for similar credit facilities.
The DCOC Facility prohibits distributions or restricted payments, except
that, after giving pro forma effect to any such distribution or payment, when
DCOC's Leverage Ratio is less than 5.0 to 1, payments may be made with up to
100% of Free Cash Flow and when DCOC's 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 DCOC Facility restricts DCOC from declaring and paying dividends or
distributions, including dividends to pay cash dividends on the Senior Preferred
Stock and the Preferred Stock and to pay scheduled interest on the Senior Notes
and, if issued, the Senior Exchange Debentures and the Exchange Debentures.
However, after January 15, 2003 DCOC will be permitted to pay dividends or
distributions to the Company to pay cash dividends on the Senior Preferred Stock
and the Preferred Stock and scheduled interest on the Senior Exchange Debentures
and 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 DCOC or the
loss of a material license or cellular system), DCOC will not be prohibited from
paying dividends to the Company to pay dividends on the Senior Preferred Stock
and the Preferred Stock or scheduled interest on the Senior Exchange Debentures
and the Exchange Debentures, if issued, for more than 180 days.
DCOC is required to comply with certain financial tests and maintain certain
financial ratios, including, among others, a requirement that (i) DCOC's
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 DCOC's Operating Cash Flow to its Pro Forma Debt
Service shall exceed 1.25 to 1; (iii) the ratio of DCOC's Operating Cash Flow to
its Cash Interest Expense for the most recently ended four quarters exceed 1.75
to 1 until
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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 DCOC
includes the Operating Cash Flow of any "Cellular Operating Partnership"
(defined as any entity in which DCOC or one of its subsidiaries owns a
partnership interest or serves as the managing general partner) multiplied by
DCOC's ownership interest in the partnership, except if DCOC provides financing
to any of the Cellular Operating Partnerships that are not 100% owned by DCOC,
100% of the Operating Cash Flow of the partnership will be included in the
definition of DCOC's 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 DCOC is defined as the sum of all obligations of DCOC
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 DCOC, and any
amounts for which DCOC is contingently liable to provide as equity or debt
advances to other parties, but does not include intercompany subordinated debt
owed by DCOC 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 and
the Preferred Stock is exchanged for the Senior Exchange Debentures and the
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
DCOC's Total Debt for the succeeding twelve months. "Pro Forma Interest Expense"
is the result obtained by multiplying (x) the sum of (a) DCOC's 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) DCOC's Operating Cash Flow for the most recently ended four
quarters to (ii) the sum of all payments on DCOC's Total Debt required to be
paid, its cash interest expense, capital expenditures, and cash taxes, and
distributions and dividends paid by DCOC, 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. DCOC's
"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 DCOC 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 DCOC Facility 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 DCOC.
DCOC's obligations under the DCOC Facility will be guaranteed by all of
DCOC's subsidiaries. Borrowings under the New Credit Facilities are secured by
all assets of DCOC and its present and future subsidiaries, and by a pledge of
the stock of and partnership interests in DCOC's subsidiaries.
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THE SENIOR NOTES
GENERAL. The Company 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 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. Logix, DCOC and
Dobson/Sygnet, and their respective subsidiaries, are Unrestricted Subsidiaries
with respect to the Senior Notes.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
At December 31, 1998, the authorized capital stock of the Company consisted
of 1,500,000 shares of Common Stock, par value $.001 per share ("Common Stock"),
consisting of 1,438,000 shares of Class A Common Stock, 31,000 shares of Class B
Non-Voting Common Stock ("Class B Common Stock"), 31,000 shares of Class C
Common Stock; and 2,500,000 shares of preferred stock, par value of $1.00 per
share, including 550,000 shares of Senior Preferred Stock, 184,000 shares of
Preferred Stock, 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"), 100,000 shares
of Class C 8% Cumulative, Non-Voting, Non-Convertible Preferred Stock ("Class C
Preferred Stock"), 85,000 shares of Class D 15% Convertible Preferred Stock
("Class D Preferred Stock"), 405,000 shares of Class E 15% Preferred Stock
("Class E Preferred Stock"), 205,000 shares of Class F Preferred Stock ("Class F
Preferred Stock"), 62,000 shares of Class G Preferred Stock ("Class G Preferred
Stock") and 62,000 shares of Class H Preferred Stock ("Class H Preferred Stock"
and together with the Class A Preferred Stock, the Class B Preferred Stock, the
Class C Preferred Stock, the Class D Preferred Stock, the Class E Preferred
Stock, the Class F Preferred Stock and the Class G Preferred Stock, the "Other
Preferred Stock"). At September 30, 1998, the issued and outstanding capital
stock of the Company consisted of 179,943 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. As part of the Sygnet Financing, all outstanding shares of Class B
Preferred Stock were converted into shares of Class A Common Stock and all
outstanding shares of Class C Preferred Stock were purchased by the Company. The
Company has reserved 13,914 shares of Class A Common Stock for issuance upon
exercise of warrants granted to the purchasers of the Class F Preferred Stock.
See "--Warrants." The Company has reserved 30,166 shares of Class B Common Stock
and 30,166 shares of Class C 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 and, except as
otherwise provided by law, will vote together with holders of Class D Preferred
Stock. Holders of Class B Common Stock have no voting rights except when a class
vote is required by law. Holders of Class C 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 DOC Facility, the Credit Facilities, the Senior Note
Indenture, the certificates of designation for the Senior Preferred Stock and
the Other Preferred Stock, the Certificate of Designation and, if the Exchange
Debentures or Senior Exchange Debentures are issued, the Exchange Debenture
Indenture and the Senior Exchange Debenture Indenture, as the case may be
(together, the "Financing Agreements"). 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.
SENIOR PREFERRED STOCK
The Senior Preferred Stock and the Senior Exchange Debentures are
substantially similar to the terms of the Preferred Stock and the Exchange
Debentures, respectively.
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OTHER PREFERRED STOCK
The Other Preferred Stock will rank junior to the Senior Preferred Stock and
the Preferred Stock with respect to the payment of dividends and upon
liquidation. The Class D and Class E Preferred Stock will rank junior to the
Class F Preferred Stock, PARI PASSU with the Class A Preferred Stock and, except
with respect to liquidation, the Class G and Class H Preferred Stock, and senior
to the Class G and Class H Preferred Stock as to liquidation. The Class G and
Class H Preferred Stock will rank junior to the Class A Preferred Stock and
Class F Preferred Stock and, as to liquidation, the Class D Preferred Stock and
Class E Preferred Stock and PARI PASSU with the Class D Preferred Stock and
Class E Preferred Stock, except as to liquidation.
CLASS A PREFERRED STOCK
The Company's subsidiary, DOC, 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 terms of
the Financing Agreements 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.
CLASS B AND CLASS C PREFERRED STOCK
As part of the Sygnet Financing, all of the outstanding shares of Class B
Preferred Stock will be converted to Class A Common Stock and all of the
outstanding shares of Class C Preferred Stock will be redeemed by the Company.
CLASS D PREFERRED STOCK AND CLASS E PREFERRED STOCK
On December 23, 1998, Childs and the Dobson Partnership purchased 75,094
shares of Class D Preferred Stock from DCC for $85.0 million pursuant to an
investment and transaction agreement (the "Class D Purchase Agreement") and
entered into a stockholder and investor rights agreement (the "Investors
Agreement") with certain other shareholders of the Company, excluding the
holders of the Class F Preferred Stock (collectively, the "Shareholders"), DOC
and the Company. The Dobson Partnership purchased $4.0 million of Class D
Preferred Stock and Childs purchased substantially all of the remaining $81.0
million of Class D Preferred Stock. Each share of Class D Preferred Stock is
convertible into one share of Class A Common Stock and one share of Class E
Preferred Stock. The following summary of the Class D Preferred Stock, the Class
E Preferred Stock, the Class D Purchase Agreement and the Investors Agreement
does not purport to be complete and is qualified in its entirety by reference to
the applicable certificates of designation and such agreements.
CLASS D PURCHASE AGREEMENT. The Class D Purchase Agreement contains various
covenants which, among other things, give the holders of Class D Preferred Stock
certain preemptive rights with respect to the Company's issuance of equity
securities (including rights, options or warrants with respect to such
securities and other securities convertible into equity securities), restrict
the ability of the Company and its subsidiaries to pay dividends, purchase their
outstanding equity securities, make investments, acquire or dispose of material
amounts of assets, engage in sale and leaseback transactions, or merge,
consolidate or
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dispose of all or substantially all of their assets. In addition, holders of
Class D Preferred Stock will be entitled to participate in the spin-off of
Logix.
CLASS D PREFERRED STOCK CERTIFICATE OF DESIGNATION. The certificate of
designation for the Class D Preferred Stock (the "Class D 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 D Preferred Stock vote together on all matters submitted
to a vote of the shareholders. Each share of Class D Preferred Stock, which is
initially convertible into one share of Class A Common Stock and one share of
Class E Preferred Stock, is entitled to the number of votes that the shares of
Class A Common Stock issuable upon conversion of the Class D Preferred Stock
would have on the record date fixed for any meeting, or the effective date of
action taken by written consent, of shareholders.
Approval of the holders of a majority of the outstanding Class D Preferred
Stock 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 D Preferred Stock other than preferred stock issued to
finance acquisitions and capital projects, (ii) make any change in the Company's
Certificate of Incorporation which would adversely affect the powers,
preferences or rights, including voting rights, of the Class D 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 Company's Certificate of Incorporation or Bylaws to change the
authorized number of directors or (v) authorize redemption, repurchase or
payment of dividends on any junior or parity stock, except for scheduled or
mandatory redemptions thereof and repurchases of management stock pursuant to
contractual rights.
DIVIDENDS. Cumulative dividends on each share of Class D Preferred Stock
accrue daily at the annual rate of 15% on the sum of the $1,131.92 per share
liquidation value. In addition, a holder of Class D Preferred Stock will be
entitled to receive additional dividends thereon in the same amounts as such
holder would have received if such shares of Class D Preferred Stock had been
fully converted into Class A Common Stock. All accumulated and unpaid dividends
on the Class D Preferred Stock ("Class D Accrued Dividends") from the date of
issuance, compounded annually, are payable in cash on the liquidation,
dissolution or winding up of the Company, or any redemption of Class D Preferred
Stock or the exercise of any put or call rights in respect thereof. Upon
conversion of Class D Preferred Stock into shares of Class A Common Stock and
Class E Preferred Stock, holders of Class D Preferred Stock will receive Class D
Accrued Dividends in additional shares of Class E Preferred Stock.
The Financing Agreements limit and, if exchange debentures are issued for
the Senior Preferred Stock or the Preferred Stock, each exchange debenture
indenture will limit, and for the foreseeable future effectively prohibit, the
payment of cash dividends on the Class D Preferred Stock.
The Class D Preferred Stock Certificate of Designation prohibits the
declaration or payment of dividends on or redemption or purchase by the Company,
any subsidiary or other affiliate of any junior securities.
CONVERSION. At any time and from time to time, any holder of Class D
Preferred Stock may convert each share of Class D Preferred Stock held into one
share of Class A Common Stock, subject to adjustment to prevent dilution, and
one share of Class E Preferred Stock.
REDEMPTION. All of the Class D Preferred Stock must be redeemed for its
liquidation preference plus Class D Accrued Dividends, subject to the legal
availability of funds therefor, following the vote of the holders of a majority
of the outstanding shares of Class D Preferred Stock and Class E Preferred
Stock, voting together as a single class, at any time after December 23, 2010.
The obligation of the Company to redeem its Class D Preferred Stock is subject
to the terms of the Financing Agreements.
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CLASS E PREFERRED STOCK CERTIFICATE OF DESIGNATION. The certificate of
designation for the Class E Preferred Stock provides for the following rights,
preferences and powers:
VOTING RIGHTS. Except as otherwise required by law and as authorized to
vote with the holders of Class D Preferred Stock for redemption, the holders of
shares of Class E Preferred Stock have no voting rights.
DIVIDENDS. Cumulative dividends on each share of Class E Preferred Stock
accrue daily at the annual rate of 15% on the sum of the $1,131.92 per share
liquidation value. All accumulated and unpaid dividends on the Class E Preferred
Stock ("Class E Accrued Dividends") from the date of issuance, compounded
annually, are payable in cash only upon the liquidation, dissolution or winding
up of the Company or on redemption of or exercise of the put and call rights
with respect to the Class E Preferred Stock. The Financing Agreements limit,
and, if exchange debentures are issued for either the Senior Preferred Stock or
the Preferred Stock, each exchange debenture indenture will limit, and for the
foreseeable future effectively prohibit, the payment of cash dividends on the
Class E Preferred Stock.
CONVERSION. The Class E Preferred Stock is not convertible.
REDEMPTION. All of the Class D and Class E Preferred Stock must be redeemed
for its liquidation preference plus Class E Accrued Dividends, subject to legal
availability of funds therefor, following the vote of the holders of a majority
of the outstanding shares of Class D Preferred Stock and the Class E Preferred
Stock, voting together as a single class, at any time after December 23, 2010,
or, with respect to Class E Preferred Stock only, upon completion by the Company
of an initial public offering of its common stock resulting in gross proceeds of
at least $50.0 million. The obligation of the Company to redeem its Class D and
Class E Preferred Stock is subject to the terms of the Financing Agreements.
PUT AND CALL OPTIONS. Upon the earliest to occur of December 23, 2005, a
"Change of Control" (as defined below) or the consummation by the Company of an
initial public offering of its common stock, and if the holders of a majority of
Class E Preferred Stock vote to require the purchase of their stock, each holder
will have the right to require the Company to purchase its Class E Preferred
Stock for its per share liquidation preference plus Class E Accrued Dividends,
subject to the terms of the Financing Agreements. A "Change of Control" means
any transaction that results in the voting power of the Company's voting stock
controlled by Everett R. Dobson and his affiliates being less than 50.1% and the
sale of all or substantially all of the Company's capital stock, business or
assets, but shall not include the sale or redemption by the Dobson Partnership
of up to $25.0 million of the Company's capital stock or an initial public
offering by the Company of its common stock. To the extent the Company has cash
available, the Company must pay cash to purchase the Class E Preferred Stock. To
the extent the Company does not have available cash, the Company is obligated to
issue one or more junior subordinated promissory notes ranking senior to all
preferred stock existing on the Closing Date other than Class F Preferred Stock
and bearing interest at an initial annual rate of 17%, payable quarterly,
subject to the terms of the Financing Agreements. If any quarterly interest
payment is not made, the annual rate increases by 0.5%, up to a maximum annual
rate of 20%. Quarterly payments of interest and principal on the notes are
required to the extent the Company has available cash and subject to the
additional condition that the Company has a ratio of cash flow to interest
expense of at least 1 to 1 for such quarter, after giving effect to the payment
of interest and principal. To the extent unpaid, obligations under the notes
will mature upon the last to occur of (i) termination of the Credit Facilities,
(ii) termination of the Senior Note Indenture, (iii) the repurchase, payment or
defeasance of the Senior Notes and (iv) the redemption of all outstanding Senior
Preferred Stock and Preferred Stock or the elimination of the financial
covenants contained in the certificates of designation for the Senior Preferred
Stock and the Preferred Stock.
In connection with an initial public offering of its common stock, the
Company will have the option to purchase all or any outstanding shares of Class
E Preferred Stock for the liquidation preference thereof, plus Class E
Dividends, payable in cash. Nothwithstanding the foregoing, in the case of a
Change of
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Control in which (i) prior to an initial public offering, Everett R. Dobson and
his affiliates cease to control at least 50.1% of the Company's voting stock or
(ii) following an initial public offering, Everett R. Dobson and his affiliates
cease to control at least 35% of the Company's voting stock, the Company may not
pay the holders subordinated notes in lieu of cash.
INVESTORS AGREEMENT. Under the Investors Agreement, Childs and the Dobson
Partnership shall have certain demand rights for their shares of Class A Common
Stock issuable upon conversion of the Class D Preferred Stock or otherwise held
and all Shareholders shall have "piggy-back" registration rights for their Class
A Common Stock. The Investors Agreement provides that seven directors will
constitute the Company's Board, one designated by Childs, four designated by the
Dobson Partnership, and two selected jointly by Childs and the Dobson
Partnership. So long as Childs beneficially owns at least 35% of the Company
securities held by it upon completion of the Equity Investments, in addition to
the director it may designate, Childs may also designate an observer to attend
each meeting of the Board and each meeting of any committee of the Board.
Notwithstanding the foregoing, an additional two directors may be designated by
the holders of Senior Preferred Stock, an additional two directors may be
designated by the holders of the Preferred Stock and one additional director by
the holders of the Class F Preferred Stock in the event of the non-payment of
dividends for certain periods (a voting rights triggering event).
The Shareholders will have preemptive rights with respect to new common
stock or securities convertible into common stock issued by the Company
(excluding securities issued in a public offering, upon the exercise of employee
stock options, warrants or conversion rights, or in connection with
acquisitions, financing capital projects or the incurrence of indebtedness) and
rights to participate with the Shareholders in a sale of their shares. Childs
generally may not sell its shares except to its affiliates, another shareholder
of the Company or in a public sale. The transfer restrictions in the Investors
Agreement will terminate upon the earliest of an initial public offering by the
Company, a Change of Control or December 23, 2003.
The Shareholders are obligated to sell their shares of the Company's common
stock, Class D Preferred Stock and Class E Preferred Stock to any unaffiliated
party pursuant to an agreement which (i) treats equally, on an "as-if-converted"
basis, the common value of all holders of the Company's common stock, Class D
Preferred Stock and Class E Preferred Stock, (ii) is approved by the board of
directors of the Company as fair to all stockholders and (iii) is approved by
stockholders of the Company holding 50.1% of the Company's outstanding common
stock (calculated on an "as-if-converted" basis). Notwithstanding the foregoing,
the Shareholders will not be obligated to sell any shares of Class D Preferred
Stock or Class E Preferred Stock unless such holder receives cash consideration
at least equal to the liquidation preference of such Class D or Class E
Preferred Stock, and will not be obligated to sell any shares of the Company's
common stock unless all shares of Class D Preferred Stock and Class E Preferred
Stock then held by Childs are also sold in the transaction.
The Shareholders will have the right to participate pro rata in certain
sales of the Company's outstanding common stock, Class D Preferred Stock and
Class E Preferred Stock by any other stockholder, except in the case of (i) the
sale by the Dobson Partnership of the Company's capital stock for $25.0 million
or less, together with accrued but unpaid dividends thereon, (ii) the sale of
any capital stock issued by the Company in connection with the Sygnet Financing,
or (iii) transfers made after an initial public offering. The right to
participate in such sale is pro rata based upon a fraction, the numerator of
which is the value of such shareholder's Class A Common Stock and Class E
Preferred Stock (valued at its liquidation preference), and the denominator of
which is the value of all outstanding Class A Common Stock.
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CLASS F PREFERRED STOCK
As part of the Sygnet Financing, certain shareholders of Sygnet purchased
30,000 shares of the Company's Class F Preferred Stock. The following summary of
the Class F Preferred Stock does not purport to be complete and is qualified in
its entirety by reference to the certificate of designation.
CLASS F PREFERRED STOCK CERTIFICATE OF DESIGNATION. The certificate of
designation for the Class F Preferred Stock (the "Class F 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 F
Preferred Stock have no voting rights except to elect a director of the Company
if a voting rights triggering event occurs with respect to the Class F Preferred
Stock.
DIVIDENDS. Dividends on the Class F Preferred Stock are payable in cash or,
at the option of the Company, in additional shares of Class F Preferred Stock.
Cumulative dividends on each share of Class F Preferred Stock accrue at the
annual rate of 16% on the sum of the $1,000 per share liquidation value, and all
accumulated and unpaid dividends ("Class F Accrued Dividends") from the date of
issuance, compounded annually, are payable in cash out of funds legally
available therefor on January 15, April 15, July 15 and October 15, commencing
January 15, 1999.
The Financing Agreements limit, and if the exchange debentures are issued
for the Senior Preferred Stock and if Exchange Debentures are issued for the
Preferred Stock, the respective exchange debenture indentures will limit, and
for the foreseeable future effectively prohibit, the payment of cash dividends
on the Class F Preferred Stock.
The Class F Preferred Stock Certificate of Designation prohibits the
declaration or payment of dividends on redemption or purchase of any junior
securities (by the Company, any subsidiary or other affiliate).
CONVERSION. The Class F Preferred Stock is not convertible.
REDEMPTION. The Class F Preferred Stock must be redeemed on December 31,
2010, subject to the legal availability of funds therefor, at 130% of its
liquidation preference, plus Class F Accrued Dividends.
At any time and from time to time after January 1, 1999, the Class F
Preferred Stock may be redeemed, in whole or in part, at the option of the
Company, at a redemption price expressed as a percentage of the liquidation
preference of the Class F Preferred Stock as set forth below, plus Class F
Accrued Dividends, if such redemption occurs during the 12-month period
beginning January 1 of each of the following years:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -------------
<S> <C>
1999.............................................................................. 100%
2000.............................................................................. 100%
2001.............................................................................. 105%
2002.............................................................................. 115%
2003 and thereafter............................................................... 130%
</TABLE>
CLASS G PREFERRED STOCK AND CLASS H PREFERRED STOCK
As part of the Sygnet Financing, the Dobson Partnership acquired 37,853
shares of the Company's Class G Preferred Stock in exchange for shares of the
Company's Class A Common Stock. Each share of Class G Preferred Stock is
initially convertible into one share of Class H Preferred Stock and shares of
Class A Common Stock. The following summary of the Class G Preferred Stock and
Class H Preferred
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Stock does not purport to be complete and is qualified in its entirety by
reference to the applicable certificates of designation.
CLASS G PREFERRED STOCK CERTIFICATE OF DESIGNATION. The certificate of
designation for the Class G Preferred Stock (the "Class G 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 G
Preferred Stock have no voting rights.
DIVIDENDS. Dividends on the Class G Preferred Stock are payable in cash or,
at the option of the Company, in additional shares of Class G Preferred Stock.
Cumulative dividends on each share of Class G Preferred Stock accrue at the
annual rate of 16% on the sum of the $660.40 per share liquidation value, and
all accumulated and unpaid dividends ("Class G Accrued Dividends") from the date
of issuance, compounded annually, are payable out of funds legally available
therefor in cash on the liquidation, dissolution or winding up of the Company or
on redemption.
The Financing Agreements limit, and if exchange debentures are issued for
the Senior Preferred Stock and the Preferred Stock, the respective exchange
debenture indentures will limit, and for the foreseeable future effectively
prohibit, the payment of cash dividends on the Class G Preferred Stock.
The Class G Preferred Stock Certificate of Designation prohibits the
declaration or payment of dividends on or redemption or purchase of any junior
securities (by the Company, any subsidiary or other affiliate).
CONVERSION. Each share of Class G Preferred Stock may be converted at any
time, or from time to time, after the Closing Date until the third anniversary
of the Closing Date. On the third anniversary of the Closing Date, any
outstanding shares of Class G Preferred Stock will automatically be converted.
Each share of Class G Preferred Stock is convertible into one share of Class H
Preferred Stock and shares of Class A Common Stock which, if all shares of Class
G Preferred Stock were fully converted, would represent approximately 1.87% of
the Company's then outstanding common stock, on a fully diluted basis.
REDEMPTION. The Class G Preferred Stock must be redeemed for its
liquidation value, plus Class G Accrued Dividends, within 90 days following the
vote of its holders following an initial public offering by the Company of its
common stock resulting in gross proceeds of at least $50.0 million, subject to
the legal availability of funds therefor and the terms of the Financing
Agreements.
CLASS H PREFERRED STOCK CERTIFICATE OF DESIGNATION. The certificate of
designation for the Class H Preferred Stock (the "Class H 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 H
Preferred Stock have no voting rights.
DIVIDENDS. Cumulative dividends on each share of the Class H Preferred
Stock accrue daily at the annual rate of 16% on the sum of $660.45 per share
liquidation value. All accumulated and unpaid dividends on the Class H Preferred
Stock (the "Class H Accrued Dividends") from the date of issuance, compounded
annually, are payable only upon the liquidation, dissolution or winding up of
the Company or on redemption. Dividends on the Class H Preferred Stock will
cease to accrue, and will not be payable, with respect to any period commencing
on, and from and after, the third anniversary of the issuance of the Class G
Preferred Stock. The Financing Agreements limit, and for the foreseeable future
effectively prohibit, the payment of cash dividends on the Class H Preferred
Stock.
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The Class H Preferred Stock Certificate of Designation prohibits the
declaration or payment of dividends on or redemption or purchase of any junior
securities (by the Company, any subsidiary or other affiliate).
CONVERSION. The Class H Preferred Stock is not convertible.
REDEMPTION. The Class H Preferred Stock must be redeemed following the vote
of its holders at any time after December 31, 2010 or upon completion of an
initial public offering by the Company of its common stock resulting in gross
proceeds of at least $50.0 million, subject to the legal availability of funds
therefor and the terms of the Financing Agreements, at 130% of its liquidation
preference, plus Class H Accrued Dividends.
WARRANTS
The purchasers of the Class F Preferred Stock also received warrants to
purchase shares of the Company's Class A Common Stock. The warrants are
exercisable at any time and from time to time during a two year period
commencing one year after issuance into a number of shares of Class A Common
Stock which, if all warrants were exercised, would represent a maximum of 2.24%
of the Company's then outstanding common stock on a fully diluted basis. The
initial exercise price of the warrants is $1.00 per share of Class A Common
Stock.
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FEDERAL INCOME TAX CONSIDERATIONS TO U.S. HOLDERS
The following summary describes the anticipated material U.S. federal income
tax consequences of the purchase, ownership and disposition of the Preferred
Stock and Exchange Debentures by U.S. Holders (as defined below). Except where
noted, it deals only with Preferred Stock and Exchange Debentures held as
capital assets within the meaning of Section 1221 of the Code and does not
address all aspects of the U.S. federal income tax consequences that may be
relevant to a particular investor or holders subject to special tax rules, such
as dealers in securities or currencies, financial institutions, tax-exempt
organizations, life insurance companies, persons holding Preferred Stock or
Exchange Debentures as a part of a hedging or conversion transaction or a
straddle, or U.S. Holders whose "functional currency" is not the U.S. dollar.
Furthermore, the summary is based upon the provisions of the Code and Treasury
Regulations, including the OID Regulations, rulings and judicial decisions
thereunder as of the date hereof. 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.
Because the Company may pay dividends on the Preferred Stock by distributing
additional shares of Preferred Stock, compliance with U.S. federal withholding
tax rules would be difficult with respect to investors who are not U.S. Holders.
Accordingly, the Company will offer the Preferred Stock only to investors who
are U.S. Holders and the summary does not address the U.S. federal income tax
consequences to investors who are not U.S. Holders. THE COMPANY CONSIDERS THE
PREFERRED STOCK TO BE AN INAPPROPRIATE INVESTMENT FOR ANY PERSON WHO OR WHICH IS
NOT A U.S. HOLDER.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP
AND DISPOSITION OF THE PREFERRED STOCK AND EXCHANGE DEBENTURES.
CERTAIN DEFINITIONS
"AFR" means the applicable federal rate, as of the relevant time, determined
under Section 1274(d) of the Code and published monthly by the IRS.
"Code" means the U.S. Internal Revenue Code of 1986, as amended and in
effect as of the date hereof.
"IRS" means the U.S. Internal Revenue Service.
"OID" means original issue discount as defined and used in Part V of
Subchapter P of Chapter 1 of the Code (Sections 1271 through 1288) and the
Treasury Regulations thereunder.
"OID Debentures" means any Exchange Debentures issued with original issue
discount.
"OID Regulations" means any final, temporary and proposed Treasury
Regulations published or promulgated under the Code that address debt
obligations issued with OID.
"U.S. Holder" means a beneficial owner of the Preferred Stock or Exchange
Debentures, as applicable, that is a citizen or resident of the United States, a
corporation, limited liability company, partnership (unless Treasury Regulations
provide otherwise) or other entity created or organized in or under the laws of
the U.S. 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 U.S. is able to exercise primary supervision over
the administration of such trust and (ii) one or more U.S. persons have the
authority to control all substantial decisions of such trust.
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PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED STOCK
DISTRIBUTIONS ON THE PREFERRED STOCK
GENERAL. Distributions of cash or of additional shares of Preferred Stock
on the Preferred Stock will generally be treated as dividends to U.S. Holders,
taxable as ordinary income 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 a distribution will be either the amount of cash
distributed or, in the case of additional shares of Preferred Stock, the fair
market value of the Preferred Stock distributed on the date of the distribution.
Accordingly, with respect to a distribution of additional shares of Preferred
Stock that is treated as a dividend, the fair market value of the distributed
shares would be taxable currently as ordinary income to a U.S. Holder even
though the U.S. Holder has not received any cash with respect to such
distribution.
However, management of the Company has determined that the Company does not
presently have any current or accumulated earnings and profits and is unlikely
to have current or accumulated earnings and profits in the foreseeable future.
The actual amount of the Company's earnings and profits at any future time will
of course depend upon the actions and financial performance of the Company.
Therefore, assuming the Company will not have any current or accumulated
earnings and profits, a distribution on the Preferred Stock will be treated as a
nontaxable return of capital and will be applied against and reduce the adjusted
tax basis of the Preferred Stock in the hands of each U.S. 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 the U.S. Holder upon the sale or
other taxable disposition of the Preferred Stock. The amount of any such
distribution which exceeds the adjusted tax basis of the Preferred Stock in the
hands of the U.S. Holder will be treated as capital gain and will be either
long-term or short-term capital gain depending on the U.S. Holder's holding
period for the Preferred Stock. The initial tax basis of additional Preferred
Stock distributed to a U.S. Holder will equal the fair market value of such
additional Preferred Stock at the time of distribution. Accordingly, in the case
of distributions of additional Preferred Stock on the Preferred Stock, any basis
reduction or gain recognition will be offset from an overall standpoint by a
corresponding amount of tax basis in the additional Preferred Stock distributed
to the U.S. Holder.
REDEMPTION PREMIUM. The Preferred Stock provides for both a mandatory and
an optional right of redemption by the Company. As the redemption price of the
Preferred Stock is expected to exceed its issue price (by more than a de minimis
amount), the excess, referred to as the "redemption premium," may be taxable as
a constructive distribution of additional Preferred Stock to the U.S. Holder on
the Preferred Stock over a certain period under a constant interest rate method
similar to that applicable to recognizing OID on the Exchange Debentures. See
the discussion of "--Original Issue Discount" under "Ownership and Disposition
of the Exchange Debentures." To the extent the Company has current or
accumulated earnings and profits for a taxable year so that the constructive
distribution attributable to such year is treated as a dividend, the amount of
the constructive distribution will generally be taxable currently as ordinary
income even though the U.S. Holder does not receive any actual distribution and
will increase the U.S. Holder's adjusted tax basis in the Preferred Stock. See
the above discussion of "--Distributions on the Preferred Stock."
Determined with reference to the OID Regulations, the issue price of the
Preferred Stock is equal to the first price to the public (excluding bond
houses, brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents, or wholesalers) at which a substantial amount of
the Preferred Stock is sold for money, even if part of the issue is subsequently
sold at a different price. Similarly, the difference between redemption price
and issue price is considered de minimis if such amount is less than the product
of (i) one-quarter of one percent of the redemption price and (ii) the number of
complete years to maturity.
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To the extent the Company lacks current or accumulated earnings and profits
for a taxable year to which a constructive distribution relates, a holder should
not recognize taxable income or gain as a result of the constructive
distribution. Moreover, there should be no net effect on the holder's adjusted
tax basis of the Preferred Stock as a result of the constructive distribution if
the Company has no current or accumulated earnings and profits.
For purposes of determining the amount of the redemption premium, redemption
of the Preferred Stock will be deemed to occur at the mandatory redemption price
unless, based on all of the facts and circumstances, the optional redemption is
more likely than not to occur. Under a Regulatory "safe harbor" rule, the
Company's optional right to redeem the Preferred Stock will not be treated as
more likely than not to occur if (i) the Company and the U.S. Holder are not
related, (ii) there are no plans, arrangements or agreements that effectively
require or are intended to compel the Company to exercise the optional right to
redeem the Preferred Stock (disregarding, for this purpose, a separate mandatory
redemption) and (iii) exercise of the right to redeem will not reduce the yield
of the Preferred Stock. 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 U.S. Holders, but
that the mandatory redemption obligation of the Company will control the timing
and the amount of the income a U.S. Holder of Preferred Stock will be required
to include in gross income as redemption premium.
Moreover, the Preferred Stock provides for a mandatory redemption at a
redemption price equal to the liquidation value of the Preferred Stock, plus
accrued and unpaid dividends. If at the time of issuance of the Preferred Stock,
there were no intention for dividends to be paid currently, the IRS could treat
the payment of such dividends on redemption as disguised additional redemption
premium subject to the constant yield rules discussed above. However, the
Company intends to pay all dividends currently on the Preferred Stock, either in
cash or, on or prior to January 15, 2003, in additional shares of Preferred
Stock. 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 include any accrued and unpaid
dividends in the stated redemption price nor should any such accrued and unpaid
dividends be treated as a constructive distribution to the U.S. Holders prior to
actually being paid.
Finally, in the event that additional Preferred Stock is distributed on the
Preferred Stock issued in this Offering and such additional Preferred Stock has
a fair market value at the time of distribution that is less than its redemption
price, the additional Preferred Stock will have a redemption premium that may be
taxable as a constructive distribution of additional stock to a U.S. Holder
(treated as a dividend to the extent of the Company's current and accumulated
earnings and profits) under the constant yield method over a period of time
commencing with the issuance of such additional Preferred Stock and ending with
the date on which the mandatory redemption is to occur. Such redemption premium
on the additional shares of Preferred Stock may differ from that attributable to
the Preferred Stock issued in this Offering. Therefore, any such additional
shares of Preferred Stock distributed may not be fungible with the shares issued
in this Offering.
DIVIDENDS-RECEIVED DEDUCTION. Subject to certain exceptions and
restrictions, corporate U.S. Holders generally will be entitled to a
dividends-received deduction equal to 70 percent of the amount of any
distribution on the Preferred Stock (whether payable in cash or additional
Preferred Stock) that is treated as a dividend. Distributions on the Preferred
Stock will not be eligible for the dividends-received deduction unless and until
the Company has current or accumulated earnings and profits at the time of the
distribution (i.e., the distribution is treated as a dividend).
In the event a distribution on the Preferred Stock is treated as a dividend,
application of the dividends-received deduction to the distribution nonetheless
may be restricted or may result in other U.S. federal tax consequences to the
corporate U.S. Holder. First, the dividends-received deduction is reduced or
eliminated for a corporate U.S. Holder which has indebtedness "directly
attributable" to its investment in the Preferred Stock or fails to meet special
holding period requirements. Second, if a distribution equals
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or exceeds five percent of a corporate U.S. Holder's adjusted tax basis in the
Preferred Stock, the distribution may constitute an "extraordinary dividend,"
requiring the corporate U.S. Holder to reduce its adjusted tax basis in the
Preferred Stock by the amount excluded from income as a result of the dividends-
received deduction. Finally, 70 percent of the amount excluded from income as a
result of the dividends-received deduction will be included in the computation
of "adjusted current earnings," potentially affecting a corporate U.S. Holder's
liability for alternative minimum tax.
SALE OR OTHER DISPOSITION OF THE PREFERRED STOCK
GENERAL. A U.S. Holder will generally recognize capital gain or loss upon
the sale or other taxable disposition of 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 Preferred Stock. A U.S. Holder's adjusted
tax basis in the Preferred Stock will equal the amount paid for such stock plus
the fair market value of any distributions of additional Preferred Stock and any
amount included in gross income as a constructive distribution or 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 Preferred Stock.
See the above discussion of "--Redemption Premium" and "--Distributions on the
Preferred Stock."
The capital gain or loss will be either long-term or short-term capital gain
depending on the U.S. Holder's holding period for the Preferred Stock at the
time of the sale or other disposition of the Preferred Stock. In the case of a
noncorporate U.S. Holder (including an individual), any capital gain will be
taxable at a preferential rate if the U.S. Holder's holding period for the
Preferred Stock exceeds one year. The deductibility of capital losses is subject
to limitations. Prospective investors should consult their own tax advisors
regarding the taxation of capital gains and capital losses recognized upon a
sale or other disposition of the Preferred Stock.
REDEMPTION OR EXCHANGE OF PREFERRED STOCK FOR EXCHANGE DEBENTURES
GENERAL. A redemption of the Preferred Stock for cash or an exchange of the
Preferred Stock for the Exchange Debentures will be treated, depending on the
facts and circumstances, as (i) a distribution on the Preferred Stock, or (ii) a
taxable exchange of the Preferred Stock. At the outset, any cash paid or
Exchange Debentures issued that are attributable to declared dividends will be
treated in the same manner as a distribution on the Preferred Stock. See the
above discussion of "--Distributions on the Preferred Stock."
A redemption or exchange of the Preferred Stock will be treated as a taxable
exchange of the Preferred Stock if the redemption or exchange results in either
(i) a complete termination, or (ii) a "meaningful reduction" of the U.S.
Holder's stock interest in the Company. For these purposes, a U.S. Holder is
deemed to own any shares of Company stock that are owned, or deemed owned, by
certain related persons and entities, as well as any shares that the Holder, or
a related person or entity, has the right to acquire by exercise of option. If
the redemption or exchange of the Preferred Stock does not result in a complete
termination or meaningful reduction of the U.S. Holder's stock interest in the
Company, the transaction will be treated as a distribution on the Preferred
Stock. See the above discussion of "--Distributions on the Preferred Stock." The
amount of the distribution will be measured by the amount of cash or the "issue
price" of the Exchange Debentures received by the U.S. Holder in consideration
for the Preferred Stock. To the extent the distribution is treated as a
dividend, it will be taxable as ordinary income and may have dividends-received
deduction, extraordinary dividend and/or alternative minimum tax consequences to
a corporate U.S. Holder. See the above discussion in "--Distributions on the
Preferred Stock."
If the redemption or exchange of the Preferred Stock results in a complete
termination or meaningful reduction of the U.S. Holder's stock interest in the
Company, the U.S. Holder will generally recognize capital gain or loss equal to
the difference between the amount realized by the U.S. Holder and the U.S.
Holder's adjusted tax basis in the Preferred Stock surrendered in the
transaction. The capital gain or
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loss will be either long-term or short-term capital gain depending on the U.S.
Holder's holding period for the Preferred Stock at the time of the sale or other
disposition of the Preferred Stock.
In the case of a noncorporate U.S. Holder (including an individual), any
capital gain will be taxable at a preferential rate if the U.S. Holder's holding
period for the Preferred Stock exceeds one year. The deductibility of capital
losses is subject to limitations.
The amount realized by a U.S. Holder will be (i) the amount of cash received
in redemption of the Preferred Stock (other than cash received with respect to
declared dividends), and (ii) an amount equal to the "issue price" of the
Exchange Debentures issued in exchange for the Preferred Stock (other than
Exchange Debentures issued with respect to declared dividends). Determination of
the "issue price" of the Exchange Debentures issued in exchange for the
Preferred Stock will depend on (i) whether the Preferred Stock or the Exchange
Debentures are traded on an established securities market within the meaning of
the OID Regulations during the 60 day period ending 30 days after the exchange
date, or (ii) if they are not so traded, the yield on the Exchange Debentures,
as of the exchange date, equals or exceeds the AFR. See the discussion of
"--Original Issue Discount" under "--Ownership and Disposition of the Exchange
Debentures." It cannot be determined at the present time whether the 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 AFR.
OWNERSHIP AND DISPOSITION OF THE EXCHANGE DEBENTURES
Depending upon a U.S. Holder's particular circumstances, the tax
consequences of holding Exchange Debentures may be less advantageous than the
tax consequences of holding Preferred Stock because, for example, payments of
interest on the Exchange Debentures will not be eligible for the
dividends-received deduction that may be available to corporate U.S. Holders
(subject to the Company having earnings and profits) and because, as discussed
below, the Exchange Debentures may be issued with OID.
The tax consequences of holding the Exchange Debentures will generally turn
on whether the Exchange Debentures are issued with OID. Exchange Debentures
issued within five years after issuance of the Preferred Stock in this Offering
likely will be OID Debentures, i.e., Exchange Debentures treated as having been
issued with OID. Exchange Debentures issued more than five years after issuance
of the Preferred Stock will not be issued with OID unless, as discussed below,
their stated redemption price at maturity exceeds their issue price.
ORIGINAL ISSUE DISCOUNT
GENERAL. 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).
Determination of the "issue price" of the Exchange Debentures issued in
exchange for the Preferred Stock will depend on whether, as of the exchange date
(i) the Preferred Stock or the Exchange Debentures are traded on an established
securities market within the meaning of the OID Regulations, or (ii) if they are
not so traded, the yield on the Exchange Debentures equals or exceeds the AFR.
If either the Exchange Debentures or the Preferred Stock are traded on an
established securities market during the 60 day period ending 30 days after the
exchange date, the issue price of the Exchange Debentures will equal the fair
market value of the traded property. If neither the Preferred Stock nor the
Exchange Debentures
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are traded on an established securities market, the issue price of the Exchange
Debentures will be the stated principal amount of the Exchange debentures if the
yield on the Exchange Debentures is equal to or greater that the AFR in effect
at the time the Exchange Debentures are issued. If the yield on the Exchange
Debentures is less than the AFR, their issue price will be equal to the present
value as of the issue date of all payments to be made on the Exchange
Debentures, discounted at the AFR. It cannot be determined at the present time
whether the 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 AFR.
PAYMENT OF INTEREST BY ISSUANCE OF ADDITIONAL EXCHANGE DEBENTURES.
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. Accordingly, none of the stated interest will be treated as
qualified stated interest unless under special rules for interest holidays the
amount of OID is treated as de minimis. Any additional Exchange Debentures
issued in lieu of cash will not be treated as debt instruments separate from the
Exchange Debentures upon which they were issued, but instead will be aggregated
with such Exchange Debentures for OID purposes.
The OID Regulations provide that in the case of a debt instrument which
provides the issuer with an unconditional option or options exercisable during
the term of the debt instrument which, if exercised, require payments to be made
on the debt instrument under an alternate payment schedule, the yield and
maturity of such debt instrument for purposes of calculating OID will be
determined by assuming the issuer will exercise, or will 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 were not exercised. Accordingly,
for purposes of calculating OID, it will be assumed that the Company will not
exercise the option because exercise of the option will not minimize the yield.
If the option were 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, U.S. Holders of Exchange Debentures
would include OID in income in advance of the receipt of cash, regardless of
such U.S. 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
will not have the option to pay interest with additional Exchange Debentures. In
such event, any Exchange Debenture will be issued with OID only to the extent
its principal amount exceeds its issue price by more than a de minimis amount
because (i) all interest payments on any Exchange Debenture issued will be
qualified stated interest, and (ii) the stated redemption price at maturity of
any Exchange Debenture will be equal to its principal amount.
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REPORTING PAYMENTS OF INTEREST AND OID ON THE EXCHANGE DEBENTURES
NON-OID EXCHANGE DEBENTURES. U.S. Holders of Exchange Debentures that are
not issued with OID will generally report the stated interest under the Exchange
Debentures as ordinary income under their regular method of tax accounting.
OID DEBENTURES. U.S. Holders of OID Debentures must include OID in gross
income for U.S. federal income tax purposes on an annual basis under a constant
yield accrual method, regardless of their method of accounting. As a result,
U.S. Holders will include OID in income in advance of the receipt of cash
attributable to that income. However, U.S. Holders of OID Debentures generally
will not be required to include separately in income cash payments received on
the OID Debentures, even if denominated as interest, to the extent such payments
do not constitute qualified stated interest (as defined above). The Company will
report to U.S. Holders of OID Debentures, on a timely basis, the reportable
amount of OID and interest income based on its understanding of applicable law.
The amount of OID includible in income by the initial U.S. 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 U.S. 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 (the discount rate which, when used in computing the
present value of all principal and interest payments to be made under the OID
Debenture, produces an amount equal to the OID Debenture's issue price) over (b)
the amount 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 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 premium 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 OID Debentures,
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
will affect the yield to maturity 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.
ELECTION TO REPORT INTEREST AS OID. U.S. 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 accrual method. 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
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any amortizable bond premium or acquisition premium. The election must be made
for the taxable year in which the U.S. Holder acquired the Exchange Debenture,
and may not be revoked without the consent of the IRS. U.S. Holders should
consult with their own tax advisors about the election to report interest on the
Exchange Debentures as OID using the constant yield method.
MARKET DISCOUNT ON RESALE OF EXCHANGE DEBENTURES
If a U.S. 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 U.S. 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 U.S.
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 U.S. Holder elects to accrue on a constant yield method. A U.S.
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 day of the first taxable year to which the election applies and may not be
revoked without the consent of the IRS.
ACQUISITION PREMIUM
A U.S. 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 U.S. 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.
AMORTIZABLE BOND PREMIUM
If immediately after the time the Preferred Stock is exchanged for Exchange
Debentures or immediately after the time a subsequent U.S. Holder acquires
Exchange Debentures, the U.S. 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 "amortizable bond premium" and such U.S. Holder will not
be required to include any OID in income.
A U.S. Holder generally may elect to amortize bond premium over the
remaining term of the Exchange Debenture on a constant yield method (subject to
special rules concerning early call provisions). The amount amortized in any
year will be treated as a reduction of the U.S. Holder's interest income from
the Exchange Debenture. Bond premium on an Exchange Debenture held by a U.S.
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 U.S.
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.
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REDEMPTION, SALE OR DISPOSITION OF EXCHANGE DEBENTURES
Upon the redemption, sale, exchange or retirement of an Exchange Debenture,
a U.S. 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. The
adjusted tax basis of a U.S Holder who receives Exchange Debentures in exchange
for 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 U.S. Holder and reduced by any amortized premium and any cash
payments on the Exchange Debentures other than qualified stated interest.
Such gain or loss will be capital gain or loss and will be long-term capital
gain of loss if at the time or redemption, sale, exchange or retirement the
Exchange Debenture has been held for more than one year. The deduction of
capital losses is subject to certain limitations. Prospective investors should
consult their own tax advisors regarding the taxation consequences of capital
gains and losses recognized upon a disposition of the Exchange Debentures.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS
If the yield-to-maturity on OID Debentures equals or exceeds the sum of (i)
the AFR in effect for the month in which the OID Debentures are issued, and (ii)
five percent, 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 debt of the Company or certain related parties).
Moreover, if the yield-to-maturity on the OID Debenture exceeds the sum of
(i) the AFR, and (ii) six percent (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 Preferred Stock made to U.S. Holders other
than certain exempt recipients (such as corporations). A 31 percent backup
withholding tax will apply to such payments if the U.S. 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 the U.S. Holder's U.S. federal income tax liability
provided the required information is timely furnished to the IRS.
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THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER OF THE 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 PREFERRED STOCK AND 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 Preferred Stock is eligible for trading in the
PORTAL market. The Company has been advised by the Initial Purchaser that the
Initial Purchaser currently intends to make a market in the Preferred Stock;
however, the Initial Purchaser is not 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 Preferred Stock, 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,
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available to any such Broker-Dealer for use in connection with resales. Any
Broker-Dealer participating in 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
Arthur Andersen LLP, independent public accountants, have audited the
following financial statements included in this Prospectus and elsewhere in the
Registration Statement as indicated in their reports with respect thereto as of
the dates indicated:
- The consolidated balance sheets of Dobson Communications Corporation and
subsidiaries as of December 31, 1996 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1997.
- The balance sheets of Gila River Cellular General Partnership as of
December 31, 1995 and 1996, and the related statements of operations,
changes in partners' capital and cash flows for each of the three years in
the period ended December 31, 1996.
We have included the above financial statements in reliance upon Arthur
Andersen LLP's authority as experts in giving such reports.
Ernst & Young LLP, independent auditors, have audited the following
financial statements included in this Prospectus and elsewhere in the
Registration Statement as set forth in their reports also included herein. The
financial statements are included herein in reliance on their reports, given on
their authority as experts in accounting and auditing.
- The combined statements of assets and liabilities of The Cellular
Telephone Business of Selected Systems of Horizon Cellular Telephone
Company, L.P. as of December 31, 1995 and 1996, and the related combined
statements of operations and net assets and of cash flows for each of the
years ended December 31, 1994, 1995 and 1996.
- The consolidated balance sheets of Sygnet Wireless, Inc. as of December
31, 1996 and 1997, and the related consolidated statements of operations,
shareholders' equity (deficit), and cash flows for each of the three years
in the period ended December 31, 1997.
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Holliday, Lemons, Thomas & Cox, P.C. (now Holliday, Lemons & Cox, P.C.),
independent public accountants, has audited the following financial statements
appearing in this Prospectus and elsewhere in the Registration Statement, as
indicated in their report appearing herein with respect thereto:
- The balance sheets of Cellular 2000 (A Partnership) as of December 31,
1996 and 1997, and the related statements of income, changes in partners'
equity and cash flows for the years ended December 31, 1996 and 1997.
We have included the above financial statements in reliance of the report of
Holliday, Lemons, Thomas & Cox, P.C., given upon its authority as experts in
accounting and auditing.
CERTAIN TERMS
For cellular regulatory purposes, the Federal Communications Commission
("FCC") has designated regions of the United States as either a Metropolitan
Statistical Area ("MSA") or Rural Service Area ("RSA"). Interests in cellular
markets are commonly measured on the basis of the population of the MSA or RSA
served, with each person in the market area referred to as a "Pop." As used in
this Memorandum, unless otherwise indicated, the term "Pops" means the estimate
of the population of an MSA or RSA, as derived from the KAGAN CELLULAR TELEPHONE
ATLAS FOR 1998. 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 "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 "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"). Unless otherwise indicated, all references in this
Memorandum to Pops, Net Pops and the Company's systems give effect to the
consummation of the Acquisitions. In addition, the following terms shall have
the following respective meanings:
1997 ACQUISITIONS--The West Maryland Acquisition and the Arizona 5
Acquisition.
1998 ACQUISITION--The California 4 Acquisition.
1997 FINANCINGS--The issuance and sale of the Company's Senior Notes, and
the establishment of and fundings under the DOC Facility to finance the 1997
Acquisitions.
1998 FINANCINGS--The issuance and sale of the Senior Preferred Stock to
finance the 1998 Acquisition and repay a portion of the outstanding indebtedness
under the DOC Facility and the establishment of the DCOC Facility.
1997 TRANSACTIONS--The 1997 Acquisitions and the 1997 Financings.
1998 TRANSACTIONS--The 1998 Acquisition, the 1998 Financings, the Sygnet
Acquisition and the Sygnet Financing.
ACQUISITIONS--The 1997 Acquisitions, the 1998 Acquisition and the Sygnet
Acquisition.
AIRTOUCH--AirTouch Communications, Inc. and its affiliates.
ALLEGIANCE TELECOM--Allegiance Telecom, Inc.
ALLTEL--ALLTEL Corporation and its affiliates.
188
<PAGE>
ARIZONA 5 ACQUISITION; ARIZONA 5 PARTNERSHIP; ARIZONA 5--The Company's
acquisition of a 75% interest in the partnership (the "Arizona 5 Partnership")
which owns the FCC license for and certain assets related to the system for
Arizona 5 RSA ("Arizona 5"), completed on October 1, 1997.
AT&T--AT&T Corp.
AT&T WIRELESS--AT&T Wireless Services, Inc. and its affiliates.
ATTI--Associated Telecommunications and Technologies, Inc., an affiliate of
the Company.
BAM--Bell Atlantic Mobile.
BELL ATLANTIC--Bell Atlantic Corporation.
BELLSOUTH MOBILITY--BellSouth Mobility, Inc.
CALIFORNIA 4 ACQUISITION; CALIFORNIA 4 PARTNERSHIP; CALIFORNIA 4--The
Company's acquisition of the outstanding stock of two corporations that own all
interests in the partnership ("California 4 Partnership") that owns the FCC
license for and assets related to California 4 RSA ("California 4"), completed
on April 1, 1998.
CHILDS--J.W. Childs Associates, L.P., a Delaware limited partnership.
CMT--CMT Partners, a partnership between AT&T Wireless and AirTouch.
CREDIT FACILITIES--The Existing Credit Facilities and the New Credit
Facilities.
DCOC--Dobson Cellular Operating Company, a wholly-owned subsidiary of Dobson
Communications Corporation.
DCOC FACILITY--A senior secured revolving credit facility of DCOC
established pursuant to a credit agreement among DCOC, NationsBank, N.A. and
certain other lenders.
DOBSON PARTNERSHIP--Dobson CC Limited Partnership, an Oklahoma limited
partnership. Everett R. Dobson is the president and sole director and
shareholder of RLD, Inc., the general partner of the partnership, and members of
his family and trusts established for certain of his family members are limited
partners.
DOBSON SENIOR NOTES--The 11 3/4% Senior Notes due 2007 issued by Dobson
Communications Corporation.
DOBSON/SYGNET--Dobson/Sygnet Communications Company, a wholly owned
subsidiary of the Company.
DOBSON/SYGNET NOTES--The 12 1/4% Senior Notes due 2008 to be issued by
Dobson/Sygnet.
DOBSON/SYGNET OPERATING--Dobson/Sygnet Operating Company, a wholly owned
subsidiary of Dobson/ Sygnet.
DOBSON TOWER--Dobson Tower Company, a wholly owned subsidiary of Dobson
Communications Corporation.
DOC--Dobson Operating Company, a wholly owned subsidiary of Dobson
Communications Corporation.
DOC FACILITY--A senior secured bank credit facility of DOC established
pursuant to a credit agreement among DOC, NationsBank, N.A. and certain other
lenders.
EAST MARYLAND ACQUISITION; EAST MARYLAND--The Company's acquisition of the
FCC license for and assets related to Maryland 2 RSA ("East Maryland") completed
on March 3, 1997.
ENID CELLULAR--Enid MSA Partnership d/b/a Enid Cellular.
189
<PAGE>
EQUITY INVESTMENTS--Equity investments in the Company aggregating $145.0
million to be made by the Dobson Partnership, Childs and certain of Sygnet's
existing stockholders.
ERICSSON--Telefonaktiebolaget LM Ericsson and its affiliates.
ERIE ACQUISITION--Sygnet's 1995 acquisition of Erie Cellular Telephone
Company which owned the FCC license and the related system for the Erie,
Pennsylvania MSA.
EXISTING CREDIT FACILITIES--The DOC Facility and the DCOC Facility.
FLEET INVESTORS--Collectively, Fleet Venture Resources, Inc., Fleet Equity
Partners VI, L.P. and Kennedy Plaza Partners.
FINANCING AGREEMENTS--The Senior Note Indenture; the certificates of
designation governing Senior Preferred Stock and the Preferred Stock; and the
documents and instruments governing and evidencing the Credit Facilities.
GTE--GTE Corporation and its affiliates.
HORIZON ACQUISITION--Sygnet's 1996 acquisition of the FCC licenses and
related systems for Pennsylvania 1 RSA, Pennsylvania 2 RSA, Pennsylvania 6 RSA,
Pennsylvania 7 RSA and New York 3 RSA.
HOUSTON CELLULAR--A partnership between AT&T Wireless and BellSouth
Mobility.
MARYLAND 1 ACQUISITION; MARYLAND 1--The Company's acquisition of the FCC
license for, and certain assets related to, Maryland 1 RSA ("Maryland 1").
MOTOROLA--Motorola, Inc.
NEW CREDIT FACILITIES--A $430.0 million senior secured bank facility to
consist of a $50.0 million reducing revolving credit facility and $380.0 million
of term loan facilities to be provided to Dobson/Sygnet Operating by banks led
by NationsBank, N.A.
OCC--Oklahoma Corporation Commission.
OHIO 2 ACQUISITION; OHIO 2--The Company's acquisition on September 2, 1998
of the FCC license for, and certain assets related to, Ohio 2 RSA ("Ohio 2").
OKLAHOMA TELECOM ACT--Oklahoma Telecommunications Act of 1997.
OTHER PREFERRED STOCK--The Company's Class A Preferred Stock, Class D
Preferred Stock, Class E Preferred Stock, Class F Preferred Stock, Class G
Preferred Stock and Class H Preferred Stock.
PENNSYLVANIA 2 ACQUISITION; PENNSYLVANIA 2--Sygnet's acquisition of the FCC
license for, and certain assets related to, Pennsylvania 2 RSA ("Pennsylvania
2").
POPS--The population included in the area covered by an FCC cellular
license.
RECENT AND PENDING ACQUISITIONS--The Sygnet Acquisition, the Texas 10
Acquisition, the Maryland 1 Acquisition and the Ohio 2 Acquisition.
RESALE--Resale by a provider of telecommunications services (such as a local
exchange carrier) of such services to other providers or carriers on a wholesale
or a retail basis.
SBC--SBC Communications, Inc.
SENIOR EXCHANGE DEBENTURES--The 12 1/4% Senior Subordinated Debentures due
2008 which may be issued by the Company.
SENIOR NOTES--The Company's outstanding 11 3/4% Senior Notes due 2007 issued
by the Company on February 28, 1997.
190
<PAGE>
SENIOR NOTE INDENTURE--The indenture dated as of February 28, 1997 between
Dobson Communications Corporation and United States Trust Company of New York,
governing the Senior Notes.
SENIOR PREFERRED STOCK--The Company's outstanding 12 1/4% Senior
Exchangeable Preferred Stock Mandatorily Redeemable 2008 issued by the Company
on January 22, 1998.
SPRINT--Sprint Corporation and affiliated companies.
SWBM--Southwestern Bell Mobile Systems, Inc.
SWBT--Southwestern Bell Telephone Company.
SYGNET--Sygnet Wireless, Inc. and its wholly-owned subsidiary, Sygnet
Communications, Inc.
SYGNET ACQUISITION--The merger of Dobson/Sygnet Operating with and into
Sygnet Wireless, Inc.
SYGNET FINANCING--The sale of the Old Shares, the Equity Investments, the
issuance and sale of the Dobson/Sygnet Notes, the establishment of and funding
under the New Credit Facilities, the repayment of Sygnet's credit facility, and
the purchase of Sygnet Notes in the Sygnet Tender Offer.
SYGNET NOTES--Sygnet's 11 1/2% Senior Notes due 2006.
SYGNET TENDER OFFER--Sygnet's offer to purchase all outstanding Sygnet
Notes.
TELECOMMUNICATIONS ACT--The Telecommunications Act of 1996.
TEXAS 10 ACQUISITION; TEXAS 10--The Company's acquisition on December 2,
1998 of the FCC license for, and certain assets related to, the system for Texas
10 RSA ("Texas 10").
TRANSACTIONS--The 1997 Transactions and the 1998 Transactions.
U.S. CELLULAR--United States Cellular Corporation.
US WEST--US WEST, Inc. and its affiliated companies.
VANGUARD--Vanguard Cellular Systems, Inc.
VYVX--Vyvx, Inc.
WEST MARYLAND ACQUISITION; WEST MARYLAND PROPERTIES--The Company's
acquisition of the FCC licenses for and assets related to the Cumberland,
Maryland MSA, Hagerstown, Maryland MSA and Pennsylvania 10 West RSA (the "West
Maryland Properties") completed on February 28, 1997.
WESTERN WIRELESS--Western Wireless Corporation.
WORLDCOM--MCI WorldCom, Inc.
191
<PAGE>
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, 1996 and 1997................................................... F-3
Consolidated statements of operations for the years ended December 31, 1995, 1996
and 1997..................................................................................................... F-4
Consolidated statements of stockholders' equity for the years ended December 31, 1995, 1996 and 1997........... F-5
Consolidated statements of cash flows for the years ended December 31, 1995, 1996
and 1997..................................................................................................... F-6
Notes to consolidated financial statements..................................................................... F-8
Condensed consolidated balance sheets as of December 31, 1997 and September 30, 1998 (unaudited)............... F-26
Condensed consolidated statements of operations for the nine months ended September 30, 1997 and 1998
(unaudited).................................................................................................. F-28
Condensed consolidated statements of cash flows for the nine months ended September 30, 1997 and 1998
(unaudited).................................................................................................. F-29
Notes to condensed consolidated financial statements (unaudited)............................................... F-30
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF HORIZON CELLULAR TELEPHONE COMPANY, L.P.
Report of independent auditors................................................................................. F-37
Combined statements of assets and liabilities as of December 31, 1995 and 1996................................. F-38
Combined statements of operations and net assets for the years ended December 31, 1994, 1995 and 1996.......... F-39
Combined statements of cash flows for the years ended December 31, 1994, 1995 and 1996......................... F-40
Notes to combined financial statements......................................................................... F-41
GILA RIVER CELLULAR GENERAL PARTNERSHIP
Report of independent public accountants....................................................................... F-46
Balance sheets as of December 31, 1995 and 1996................................................................ F-47
Statements of operations for the years ended December 31, 1994, 1995 and 1996.................................. F-48
Statements of changes in partners' capital for the years ended December 31, 1994, 1995 and 1996................ F-45
Statements of cash flows for the years ended December 31, 1994, 1995 and 1996.................................. F-50
Notes to financial statements.................................................................................. F-51
Balance sheet as of September 30, 1997 (unaudited)............................................................. F-54
Statements of operations for the nine months ended September 30, 1996 and 1997 (unaudited)..................... F-55
Statements of changes in partners' capital for the year ended December 31, 1996 and the nine months ended
September 30, 1997 (unaudited)............................................................................... F-56
Statements of cash flows for the nine months ended September 30, 1996 and 1997 (unaudited)..................... F-57
Notes to financial statements (unaudited)...................................................................... F-58
CELLULAR 2000 (A PARTNERSHIP)
Report of independent auditors................................................................................. F-59
Balance sheets as of December 31, 1996 and 1997................................................................ F-60
Statements of income for the years ended December 31, 1996 and 1997............................................ F-61
Statements of changes in partners' equity for the years ended December 31, 1996 and 1997....................... F-62
Statements of cash flows for the years ended December 31, 1996 and 1997........................................ F-63
Notes to financial statements.................................................................................. F-64
Balance sheets as of December 31, 1997 and March 31, 1998 (unaudited).......................................... F-72
Statements of income for the three months ended March 31, 1997 and 1998 (unaudited)............................ F-73
Statements of cash flows for the three months ended March 31, 1997 and 1998 (unaudited)........................ F-75
Notes to financial statements (unaudited)...................................................................... F-76
SYGNET WIRELESS, INC.
Report of independent auditors................................................................................. F-83
Consolidated balance sheets as of December 31, 1996 and 1997................................................... F-84
Consolidated statements of operations for the years ended December 31, 1995, 1996 and 1997..................... F-85
Consolidated statements of shareholders' equity (deficit) for the years ended December 31, 1995, 1996 and
1997......................................................................................................... F-86
Consolidated statements of cash flows for the years ended December 31, 1995, 1996 and 1997..................... F-87
Notes to consolidated financial statements..................................................................... F-88
Consolidated balance sheets as of December 31, 1997 and September 30, 1998 (unaudited)......................... F-98
Consolidated statements of operations for the nine months ended September 30, 1997 and 1998 (unaudited)........ F-99
Consolidated statements of cash flows for the nine months ended September 30, 1997 and 1998 (unaudited)........ F-100
Notes to consolidated financial statements (unaudited)......................................................... F-101
</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, 1996 and 1997, 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, 1996 and 1997,
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 (except with
respect to the matters discussed
in Note 15, as to which the date
is September 30, 1998)
F-2
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................................ $ 980,571 $ 2,752,399
Accounts receivable--
Due from customers, net of allowance for doubtful accounts of $325,619 and $632,661
in 1996 and 1997, respectively.................................................... 4,529,768 14,003,688
Affiliates......................................................................... 1,704,033 633,146
Restricted cash and investments...................................................... -- 17,561,231
Inventory............................................................................ 895,204 1,229,420
Deposits............................................................................. 6,350,000 --
Income taxes receivable.............................................................. 1,133,063 845,000
Prepaid expenses and other........................................................... 45,461 1,539,683
Deferred income taxes................................................................ 390,553 214,000
----------- -----------
Total current assets............................................................. 16,028,653 38,778,567
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, net..................................................... 26,794,365 52,373,866
----------- -----------
OTHER ASSETS:
Receivables--Affiliates.............................................................. 721,718 529,107
Notes receivable--Affiliates......................................................... 15,278,071 5,852,282
Notes receivable..................................................................... 41,673 --
Restricted investments............................................................... -- 9,216,202
Cellular license acquisition costs, net of accumulated amortization of $3,286,104 and
$13,814,229 in 1996 and 1997, respectively......................................... 23,465,128 206,694,474
Deferred costs, net of accumulated amortization of $1,818,736 and $2,628,777 in 1996
and 1997, respectively............................................................. 3,438,559 9,884,308
Other intangibles, net of accumulated amortization of $851,107 in 1997............... -- 9,328,031
Investments in unconsolidated subsidiaries and other................................. 590,910 6,911,002
Deferred tax asset................................................................... 719,748 --
Net assets of discontinued operations................................................ 8,297,100 20,077,167
Total other assets............................................................... 52,552,907 268,492,573
----------- -----------
Total assets..................................................................... $95,375,925 $359,645,006
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable..................................................................... $ 3,051,571 $11,708,420
Accrued expenses..................................................................... 1,079,321 7,641,021
Deferred revenue and customer deposits............................................... 605,712 1,979,508
Accrued dividends payable............................................................ 732,391 1,595,238
----------- -----------
Total current liabilities........................................................ 5,468,995 22,924,187
----------- -----------
PAYABLES--AFFILIATES................................................................... 11,514,356 8,206,935
LONG-TERM DEBT, net of current portion................................................. 75,750,000 335,570,059
DEFERRED CREDITS....................................................................... -- 1,039,000
MINORITY INTERESTS..................................................................... 2,444,176 16,954,165
COMMITMENTS (Note 12)
CLASS B CONVERTIBLE PREFERRED STOCK.................................................... 10,000,000 10,000,000
CLASS C PREFERRED STOCK................................................................ -- 1,623,329
STOCKHOLDERS' EQUITY:
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 1996 and 1997................................................... 473,152 473,152
Paid-in capital...................................................................... 5,508,285 5,508,285
Retained deficit..................................................................... (15,783,039) (42,754,106)
----------- -----------
Total stockholders' equity....................................................... (9,801,602) (36,672,669)
----------- -----------
Total liabilities and stockholders' equity....................................... $95,375,925 $359,645,006
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
----------- ---------- -----------
<S> <C> <C> <C>
OPERATING REVENUE:
Service revenue......................................................... $13,948,966 $17,593,317 $38,410,263
Roaming revenue......................................................... 4,369,476 7,852,532 26,262,370
Equipment sales......................................................... 671,349 661,632 1,455,088
Other................................................................... 693,411 831,802 586,206
----------- ---------- -----------
Total operating revenue............................................... 19,683,202 26,939,283 66,713,927
----------- ---------- -----------
OPERATING EXPENSES:
Cost of service......................................................... 4,653,969 6,118,734 16,430,603
Cost of equipment....................................................... 2,012,871 2,571,531 4,045,500
Marketing and selling................................................... 3,102,766 4,462,227 10,669,485
General and administrative.............................................. 3,035,562 3,901,631 11,555,355
Depreciation and amortization........................................... 2,528,747 5,241,446 16,797,780
----------- ---------- -----------
Total operating expenses.............................................. 15,333,915 22,295,569 59,498,723
----------- ---------- -----------
OPERATING INCOME.......................................................... 4,349,287 4,643,714 7,215,204
INTEREST EXPENSE.......................................................... (1,853,426) (4,283,482) (27,639,739)
OTHER INCOME (EXPENSE), net............................................... (209,983) (1,502,776) 2,776,730
----------- ---------- -----------
INCOME (LOSS) BEFORE MINORITY INTERESTS IN INCOME OF SUBSIDIARIES, INCOME
TAXES AND EXTRAORDINARY ITEMS........................................... 2,285,878 (1,142,544) (17,647,805)
MINORITY INTERESTS IN INCOME OF SUBSIDIARIES.............................. (1,334,155) (675,098) (1,693,372)
----------- ---------- -----------
INCOME (LOSS) BEFORE INCOME TAXES, DISCONTINUED OPERATIONS AND
EXTRAORDINARY ITEMS..................................................... 951,723 (1,817,642) (19,341,177)
INCOME TAX (PROVISION) BENEFIT............................................ (347,086) 593,307 3,624,610
----------- ---------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS.................................. 604,637 (1,224,335) (15,716,567)
INCOME FROM DISCONTINUED OPERATIONS, net of income tax expense of $391,149
in 1995, $182,512 in 1996 and $470,170 in 1997.......................... 499,543 331,058 332,141
----------- ---------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS.................................. 1,104,180 (893,277) (15,384,426)
EXTRAORDINARY EXPENSE, net of income tax expense of $323,205 in 1996 and
$827,210 in 1997 (Note 4)............................................... -- (527,334) (1,349,659)
----------- ---------- -----------
NET INCOME (LOSS)......................................................... 1,104,180 (1,420,611) (16,734,085)
DIVIDENDS ON PREFERRED STOCK.............................................. (591,300) (849,137) (2,603,362)
----------- ---------- -----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS....................... $ 512,880 $(2,269,748) $(19,337,447)
----------- ---------- -----------
----------- ---------- -----------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCKHOLDERS PER COMMON SHARE
Basic earnings per share
Before discontinued operations and extraordinary expense.............. .02 (4.38) (38.72)
Discontinued operations............................................... 1.06 .70 .70
Extraordinary expense................................................. -- (1.12) (2.85)
----------- ---------- -----------
BASIC EARNINGS (LOSS)..................................................... $ 1.08 $ (4.80) $ (40.87)
----------- ---------- -----------
----------- ---------- -----------
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-4
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 1995, 1996 AND 1997
<TABLE>
<CAPTION>
CLASS A CLASS A CLASS B STOCK OWNED BY
PREFERRED STOCK COMMON STOCK COMMON STOCK SUBSIDIARY
-------------------- -------------------- ------------------------ -------------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
--------- --------- --------- --------- ----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1994.......... -- $ -- 300 $ 1,000 1,000 $ 1,000 1,000 $ (1,000) $5,980,437
Net income............... -- -- -- -- -- -- -- -- --
Cash dividends declared
on preferred stock..... -- -- -- -- -- -- -- -- --
Cash dividends declared
on common stock........ -- -- -- -- -- -- -- -- --
--------- --------- --------- --------- ----------- ----------- --------- --------- ---------
DECEMBER 31, 1995.......... -- -- 300 1,000 1,000 1,000 1,000 (1,000) 5,980,437
Net loss................. -- -- -- -- -- -- -- -- --
Recapitalization (Note
6)..................... -- -- 472,852 472,152 (1,000) (1,000) (1,000) 1,000 (472,152)
Cash dividends declared
on preferred stock..... -- -- -- -- -- -- -- -- --
Cash dividends declared
on common stock........ -- -- -- -- -- -- -- -- --
--------- --------- --------- --------- ----------- ----------- --------- --------- ---------
DECEMBER 31, 1996.......... -- -- 473,152 473,152 -- -- -- -- 5,508,285
Net loss................. -- -- -- -- -- -- -- -- --
Cash dividends declared
on preferred stock..... -- -- -- -- -- -- -- -- --
Cash dividends declared
on common stock........ -- -- -- -- -- -- -- -- --
Preferred stock
dividend............... -- -- -- -- -- -- -- -- --
Reorganization........... 100,000 100,000 -- -- -- -- 100,000 (100,000) --
--------- --------- --------- --------- ----------- ----------- --------- --------- ---------
DECEMBER 31, 1997.......... 100,000 $ 100,000 473,152 $ 473,152 -- $ -- 100,000 $(100,000) $5,508,285
--------- --------- --------- --------- ----------- ----------- --------- --------- ---------
--------- --------- --------- --------- ----------- ----------- --------- --------- ---------
<CAPTION>
TREASURY RETAINED
STOCK, AT EARNINGS
COST (DEFICIT)
----------- -----------
<S> <C> <C>
DECEMBER 31, 1994.......... $(11,913,000) $ (892,022)
Net income............... -- 1,104,180
Cash dividends declared
on preferred stock..... -- (591,300)
Cash dividends declared
on common stock........ -- (660,858)
----------- -----------
DECEMBER 31, 1995.......... (11,913,000) (1,040,000)
Net loss................. -- (1,420,611)
Recapitalization (Note
6)..................... 11,913,000 (11,913,000)
Cash dividends declared
on preferred stock..... -- (849,137)
Cash dividends declared
on common stock........ -- (560,291)
----------- -----------
DECEMBER 31, 1996.......... -- (15,783,039)
Net loss................. -- (16,734,085)
Cash dividends declared
on preferred stock..... -- (980,033)
Cash dividends declared
on common stock........ -- (7,633,620)
Preferred stock
dividend............... -- (1,623,329)
Reorganization........... -- --
----------- -----------
DECEMBER 31, 1997.......... $ -- $(42,754,106)
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)............................................. $ 1,104,180 $ (1,420,611) $ (16,734,085)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities--
Depreciation and amortization............................... 6,652,792 9,720,379 21,729,095
Amortization of bond premium and financing cost............. -- -- 1,663,818
Deferred income taxes and investment tax credits, net....... 277,882 (361,003) (4,072,494)
Other deferred credits...................................... (1,450) -- --
Loss on disposition of assets, net.......................... -- 1,799,570 205,694
Extraordinary loss on financing cost........................ -- 850,539 2,527,655
Minority interests in income of subsidiaries................ 1,334,155 675,098 1,693,372
Equity in losses (income) of unconsolidated partnerships.... 98,288 (21,576) (222,348)
Changes in current assets and liabilities--
Accounts receivable......................................... (1,814,510) (360,480) (7,017,005)
Inventory................................................... 88,862 (540,295) (267,292)
Income taxes receivable..................................... 274,207 (1,133,063) 288,063
Prepaid expenses and other.................................. 257,904 90,684 (2,070,762)
Accounts payable............................................ (132,794) 1,904,193 8,121,481
Accrued expenses............................................ 403,132 283,650 5,616,066
Deferred revenue............................................ 74,426 79,166 636,135
Customer deposits........................................... 16,291 21,030 178,402
-------------- -------------- ---------------
Net cash provided by operating activities............... 8,633,365 11,587,281 12,275,795
-------------- -------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................................... $ (3,924,961) $ (17,437,774) $ (23,215,535)
Purchase of cellular license and properties................... -- (30,000,000) (190,719,765)
Proceeds from sale of property, plant and equipment........... 23,500 377,178 332,331
Proceeds from sale of investment in unconsolidated
subsidiary.................................................. -- 967,000 --
Deposits...................................................... (5,000,000) (1,350,000) 1,583,706
(Increase) decrease in receivable--affiliate.................. (340,606) (468,054) 769,821
Increase in notes receivable, net............................. (1,164,290) (1,004,435) (2,585,517)
Deferred costs................................................ -- -- (1,101,322)
Investment in unconsolidated partnerships and other, net...... (663,122) (463,668) (6,164,084)
-------------- -------------- ---------------
Net cash used in investing activities................... (11,069,479) (49,379,753) (221,100,365)
-------------- -------------- ---------------
</TABLE>
F-6
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 1995, 1996 AND 1997
<TABLE>
<CAPTION>
1995 1996 1997
-------------- -------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable................................... $ 700,000 $ 100,000 $ --
Repayments of notes payable................................... -- (800,000) --
Proceeds from long-term debt.................................. 7,373,499 75,750,000 343,500,000
Repayments of long-term debt.................................. (4,723,198) (35,910,470) (88,841,512)
Dividend distributions--
Preferred stock............................................. (591,300) (176,748) (117,186)
Common stock................................................ (660,858) (549,564) (7,633,620)
Distributions to partners..................................... (877,122) (145,005) (458,378)
Issuance of 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........ 866,283 57,632 1,051,057
Deferred costs................................................ (297,087) (4,127,925) (9,725,288)
-------------- -------------- ---------------
Net cash provided by financing activities............... 1,790,217 38,284,920 210,222,017
-------------- -------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............ (645,897) 492,448 1,397,447
CASH AND CASH EQUIVALENTS, beginning of year
From continuing operations.................................... 607,135 732,443 980,571
From discontinued operations.................................. 1,155,535 384,330 628,650
-------------- -------------- ---------------
Total cash and cash equivalents at beginning of period...... 1,762,670 1,116,773 1,609,221
-------------- -------------- ---------------
CASH AND CASH EQUIVALENTS, end of year
From continuing operations.................................... 732,443 980,571 2,752,399
From discontinued operations.................................. 384,330 628,650 254,269
-------------- -------------- ---------------
Total cash and cash equivalents at end of period............ $ 1,116,773 $ 1,609,221 $ 3,006,668
-------------- -------------- ---------------
-------------- -------------- ---------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for--
Interest (net of amounts capitalized)....................... $ 3,415,088 $ 6,784,154 $ 22,679,047
Income taxes................................................ $ 303,031 $ 838,100 $ --
-------------- -------------- ---------------
-------------- -------------- ---------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<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 15 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
15 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 15, 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 ENTITIES
The Company is comprised of the cellular entities listed below, which
operate cellular telephone systems servicing areas in Oklahoma, Texas, Kansas,
Missouri, Maryland, Pennsylvania and Arizona. The
F-8
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION: (CONTINUED)
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 RSA5
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>
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.
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.
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.
F-9
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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 $413,486, $1,596,794 and $10,528,125 was recorded in 1995, 1996 and
1997, 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 $403,690, $401,871 and $1,074,845
was recorded in 1995, 1996 and 1997, respectively.
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.
F-10
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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 $858,000 and $1,209,000
as of December 31, 1996 and 1997, 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 1995 and 1996 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 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 54% and 56% of the
Company's cellular roaming revenue was earned from two cellular carriers during
the years ended December 31, 1995 and 1996, respectively.
F-11
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("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).
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are recorded at cost. Newly constructed
cellular 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, 1995, 1996 and 1997, 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.
Listed below are the major classes of property, plant and equipment and
their estimated useful lives, in years, as of December 31, 1996 and 1997:
<TABLE>
<CAPTION>
USEFUL LIFE 1996 1997
----------- ------------- -------------
<S> <C> <C> <C>
Wireless systems and equipment......................................... 2 - 10 $ 21,441,766 $ 42,279,323
Buildings and improvements............................................. 5 - 40 5,773,937 10,387,759
Vehicles, aircraft and other work equipment............................ 3 - 10 1,758,430 1,895,477
Furniture and office equipment......................................... 5 - 10 1,147,029 3,716,401
Plant under construction............................................... 2,100,359 4,456,878
Land................................................................... -- 217,892
------------- -------------
Property, plant and equipment........................................ 32,221,521 62,953,730
Accumulated depreciation............................................... 5,427,156 10,579,864
------------- -------------
Property, plant and equipment, net................................... $ 26,794,365 $ 52,373,866
------------- -------------
------------- -------------
</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.
F-12
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT:
The Company's long-term debt as of December 31, 1996 and 1997, consisted of
the following:
<TABLE>
<CAPTION>
1996 1997
------------- --------------
<S> <C> <C>
Revolving credit facility................................. $ 75,750,000 $ 171,513,855
Senior notes.............................................. -- 160,000,000
Other notes payable....................................... -- 4,056,204
------------- --------------
Total long-term debt.................................... $ 75,750,000 $ 335,570,059
------------- --------------
------------- --------------
</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 $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 28, 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.
F-13
<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........................................................ $ --
1999........................................................ 198,871
2000........................................................ 19,712,038
2001........................................................ 28,743,176
2002........................................................ 30,915,471
2003 and thereafter......................................... 256,000,503
--------------
$335,570,059
--------------
--------------
</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, thereby cancelling its
treasury stock and authorized the capital structure of the Company to consist of
1,000,000 shares of Class A voting common stock, $1 par value per share, 31,000
shares of Class B common stock, $1 par value per share, 59,130 shares of 10%
cumulative, compounded, convertible,
F-14
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. STOCKHOLDERS' DEFICIT: (CONTINUED)
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 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:
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
F-15
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. ACQUISITIONS: (CONTINUED)
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.
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 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>
1996 1997
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Operating revenue................................................................. $ 63,835,474 $ 79,413,533
Loss from continuing operations before extraordinary items........................ (19,462,046) (13,886,970)
Net loss applicable to common stockholders........................................ (20,507,459) (17,507,850)
Basic net loss applicable to common stockholders per common share................. (43.34) (37.00)
</TABLE>
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.
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
F-16
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. ACQUISITIONS: (CONTINUED)
States Government at an annual interest rate of 6.25% (see Note 4). This
represented a non-cash 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 were approximately
$105,000, $109,000 and $179,000 during the years ended December 31, 1995, 1996
and 1997, 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.
F-17
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. EMPLOYEE BENEFIT PLANS: (CONTINUED)
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 $100
----------- ------------
</TABLE>
The following schedule shows the Company's net loss and net loss per share
for each of the years ended December 31, had compensation expense been
determined consistent with SFAS No. 123. The pro forma information presented
below is based on several assumptions and should not be viewed as indicative of
the Company in future periods.
<TABLE>
<CAPTION>
($ IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) 1996 1997
- ------------------------------------------------------------------------ --------- ----------
<S> <C> <C>
Net loss applicable to common stockholders:
As reported........................................................... $ (2,270) $ (19,337)
Pro forma............................................................. $ (2,309) $ (19,540)
Basic net loss applicable to common stockholders per common share:
As reported........................................................... $ (4.80) $ (40.87)
Pro forma............................................................. $ (4.88) $ (41.30)
</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>
(AMOUNTS EXPRESSED IN PERCENTAGES) 1996 1997
- -------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Interest rate............................................................. 6.98% 6.60%
Dividend yield............................................................ -- --
Expected volatility....................................................... 39.88% 40.27%
</TABLE>
The weighted average fair value of options granted using the Black-Scholes
option pricing model was $64.84 for 1996 and $71.42 for 1997.
F-18
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. TAXES:
Provision (benefit) for income taxes for the years ended December 31, 1995,
1996 and 1997, were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ----------- -------------
<S> <C> <C> <C>
Federal income taxes--
Current................................................................. $ (84,000) $ (452,000) $ --
Deferred................................................................ 327,000 (83,000) (3,243,000)
State income taxes (current and deferred)................................. 104,000 (58,000) (382,000)
---------- ----------- -------------
Total income tax provision (benefit).................................. $ 347,000 $ (593,000) $ (3,625,000)
---------- ----------- -------------
---------- ----------- -------------
</TABLE>
The provisions for income taxes for the years ended December 31, 1995, 1996
and 1997, differ from amounts computed at the statutory rate as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ----------- -------------
<S> <C> <C> <C>
Income taxes at statutory rate (34%)...................................... $ 324,000 $ (618,000) $ (6,576,000)
State income taxes, net of Federal income tax effect...................... 38,000 (73,000) (774,000)
Purchase price adjustment................................................. -- -- 3,747,000
Other, net................................................................ (15,000) 98,000 (22,000)
---------- ----------- -------------
$ 347,000 $ (593,000) $ (3,625,000)
---------- ----------- -------------
---------- ----------- -------------
</TABLE>
The tax effects of the temporary differences which gave rise to deferred tax
assets and liabilities at December 31, 1996 and 1997, were as follows:
<TABLE>
<CAPTION>
1996 1997
------------ -------------
<S> <C> <C>
Current deferred income taxes:
Allowance for doubtful accounts receivable......................................... $ 92,000 $ 152,000
Accrued liabilities................................................................ -- 45,000
Deferred expenses.................................................................. 298,000 17,000
------------ -------------
Net current deferred income tax asset............................................ 390,000 214,000
------------ -------------
Non-current deferred income taxes:
Fixed assets....................................................................... (74,000) (1,566,000)
Intangible assets.................................................................. -- (9,859,000)
Tax credits and carryforwards...................................................... 794,000 10,386,000
------------ -------------
Net non-current deferred income tax asset (liability)............................ 720,000 (1,039,000)
------------ -------------
Total deferred income taxes...................................................... $ 1,110,000 $ (825,000)
------------ -------------
------------ -------------
</TABLE>
At December 31, 1997, the Company had NOL carryforwards of approximately
$23,600,000, which may be utilized to reduce future Federal income taxes
payable.
F-19
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. RELATED PARTY TRANSACTIONS:
At December 31, 1996 and 1997, the Company had notes and interest receivable
of $3,308,438 and $5,888,054, respectively, of which $3,266,765 and $5,852,282
was due from related parties, including $2,253,892 and $295,612 at December 31,
1996 and 1997, 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 12.
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>
1996 1997
------------ ------------
<S> <C> <C>
Interest.......................................................... $ 165,282 $ 5,991,857
Property tax...................................................... 151,419 55,660
Vacation, wages and other......................................... 762,620 1,593,504
------------ ------------
Total accrued expenses.......................................... $ 1,079,321 $ 7,641,021
------------ ------------
------------ ------------
</TABLE>
12. 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-20
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. 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............................................................ $1,848,613
1999............................................................ 1,733,051
2000............................................................ 1,567,725
2001............................................................ 1,396,336
2002............................................................ 1,112,958
2003 and thereafter............................................. 5,061,921
</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 $300,000, $425,000 and $1,106,000 for the years
ended December 31, 1995, 1996 and 1997, respectively.
13. 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.
14. 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>
1996 1997
---------------------------- ------------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Revolving credit facility......................... $ 75,750,000 $ 75,750,000 $ 171,513,855 $ 171,513,855
Senior notes...................................... -- -- 160,000,000 169,200,000
Mortgage notes payable............................ 29,744,726 24,855,656 28,639,359 26,969,543
Other notes payable............................... -- -- 4,056,204 4,200,695
Interest rate hedge............................... -- -- -- (2,644,414)
</TABLE>
F-21
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SUBSEQUENT EVENTS:
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. On September 30,
1998, the Company adopted a plan to spin off DWC, as discussed below.
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 $3.3 million as a result of writing off previously capitalized
financing costs associated with the revolving credit facility in March 1998.
Such amount is included in deferred costs in the accompanying consolidated
balance sheets at December 31, 1997.
F-22
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SUBSEQUENT EVENTS: (CONTINUED)
DISCONTINUED OPERATIONS
On September 30, 1998, the Company's Board of Directors authorized the
distribution of the wireline segment to the holders of the Company's common
stock on a tax-free basis, subject to the receipt of a private letter ruling
from the Internal Revenue Service ("IRS") under Internal Revenue Code 355(e).
The request was filed with the IRS on October 6, 1998, and a ruling is expected
in the second quarter of 1999. The wireline segment, which consists of Logix and
its subsidiaries, operates as an integrated communications provider under the
LOGIX-SM- brand name in Oklahoma and Texas, owns local telephone exchanges in
Oklahoma and operates regional fiber optic transmission networks in Oklahoma,
Texas and Colorado. Pursuant to Accounting Principles Board Opinion ("APB") No.
30, "Reporting the Results of Operations--Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual, and Infrequently Occurring
Events and Transactions," the consolidated financial statements have been
restated for all periods presented to reflect the wireline operations, assets
and liabilities as discontinued operations.
The assets and liabilities of such operations have been classified as "Net
assets of discontinued operations" on the consolidated balance sheets and
consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1997
------------ ------------
($ IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents........................................ $ 629 $ 254
Other current assets............................................. 3,299 2,758
Property, plant and equipment, net............................... 35,136 35,976
Other assets..................................................... 15,544 12,965
------------ ------------
Total assets................................................... 54,608 51,953
Current liabilities.............................................. 3,948 2,544
Long-term debt, net of current portion........................... 40,565 27,498
Other liabilities................................................ 1,798 1,834
------------ ------------
Total liabilities.............................................. 46,311 31,876
------------ ------------
Net assets (liabilities) of discontinued operations.............. $ 8,297 $ 20,077
------------ ------------
------------ ------------
</TABLE>
The net income from operations of the wireline segment was classified on the
consolidated statement of operations as "Income from discontinued operations."
Summarized results of discontinued operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1996 1997
--------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
Net revenues..................................................................... $ 16,265 $ 17,908 $ 20,177
Income from continuing operations before income taxes............................ 891 514 886
Income tax provision............................................................. (391) (183) (337)
Extraordinary item............................................................... -- -- (217)
Income from discontinued operations.............................................. 500 331 332
</TABLE>
F-23
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SUBSEQUENT EVENTS: (CONTINUED)
ACQUISITIONS
TEXAS 16
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.
CALIFORNIA 4
On April 1, 1998, the Company acquired all of the capital stock of the
corporations which owned the Cellular 2000 Partnership. The Cellular 2000
Partnership owns the FCC cellular license and system for, and certain assets
relating to, the California 4 RSA. The total purchase price paid by the Company
was $90.9 million. The property is located in central California adjacent to
Fresno, Modesto and Yosemite National Park.
SANTA CRUZ
On June 16, 1998, the Company acquired an 86.4% interest in the Santa Cruz
Cellular Telephone Partnership ("SCCTP") for $31.0 million. SCCTP owns the
cellular license and other assets for the Santa Cruz MSA. The Santa Cruz MSA is
located adjacent to the California 4 RSA purchased in April 1998.
CALIFORNIA 7
On July 29, 1998, the Company purchased the FCC cellular license and certain
assets of the California 7 RSA for $21.0 million. California 7 is located in the
Imperial Valley extending from east of San Diego to the Arizona state line.
SYGNET
On July 28, 1998 the Company entered into a definitive agreement to acquire
the stock of Sygnet Wireless, Inc. ("Sygnet") for $337.5 million. Sygnet owns
and operates cellular systems in Ohio, Pennsylvania and New York covering an
estimated population base of 2.4 million people. In connection with the
acquisition, the Company plans to redeem Sygnet's senior notes ($110 million at
September 30, 1998) and refinance Sygnet's credit facility ($192.6 million at
September 30, 1998) (collectively, the "Refinancings"). In connection with the
Sygnet acquisition, the Company will also be required to finance the acquisition
of Pennsylvania 2 RSA for $6.0 million.
In July 1998, the Company placed $25 million into escrow pending the close
of the Sygnet acquisition. The Company expects to finance the remaining
purchase, consisting of the remaining $312.5 million of stock, the Refinancings
and the Pennsylvania 2 RSA acquisition, through a combination of bank financing
discussed below and the issuance of senior notes and preferred stock.
OHIO 2
On August 20, 1998, the Company entered into a definitive agreement to
purchase the FCC license for the Ohio 2 RSA for $39.3 million, subject to
adjustment. In September 1998, the Company placed
F-24
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. SUBSEQUENT EVENTS: (CONTINUED)
$39.3 million into escrow pending closing of the acquisition. The Company
expects to enter into agreements with AirTouch to acquire the subscribers and to
lease certain equipment necessary to operate Ohio 2. The license covers the area
in north central Ohio near Sandusky. The acquisition is expected to close in the
fourth quarter of 1998.
TEXAS 10
On September 2, 1998, the Company entered into a definitive agreement to
acquire the FCC license for, and certain assets relating to, the Texas 10 RSA
for $55.0 million, subject to adjustment. Texas 10 is located in central Texas.
In September 1998, the Company placed $3 million into escrow pending closing of
the acquisition. The acquisition is expected to close in the fourth quarter of
1998.
F-25
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
-------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents...................................................... $ 2,752,399 $ 5,041,044
Restricted cash and investments................................................ 17,561,231 18,508,358
Accounts receivable, net....................................................... 14,003,688 32,054,707
Receivables--affiliates........................................................ 633,146 629,252
Other current assets........................................................... 3,828,103 4,588,260
-------------- --------------
Total current assets......................................................... 38,778,567 60,821,621
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT, net............................................... 52,373,866 76,360,458
-------------- --------------
OTHER ASSETS:
Receivables--affiliates........................................................ 6,381,389 9,167,408
Restricted investments......................................................... 9,216,202 --
Cellular license acquisition costs, net........................................ 206,694,474 459,731,396
Deferred costs, net............................................................ 9,884,308 17,686,313
Other intangibles, net......................................................... 9,328,031 8,562,035
Deposits....................................................................... 5,150,000 67,300,000
Investments in unconsolidated subsidiaries and other........................... 1,761,002 1,411,711
Net assets of discontinued operations.......................................... 20,077,167 --
-------------- --------------
Total other assets........................................................... 268,492,573 563,858,863
-------------- --------------
Total assets............................................................... $ 359,645,006 $ 701,040,942
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-26
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
-------------- --------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable............................................................... $ 11,708,420 $ 25,404,208
Accrued expenses............................................................... 7,641,021 14,008,734
Accrued dividends payable...................................................... 1,595,238 7,296,175
Deferred revenue and customer deposits......................................... 1,979,508 3,215,933
-------------- --------------
Total current liabilities.................................................... 22,924,187 49,925,050
NET LIABILITIES OF DISCONTINUED OPERATIONS....................................... -- 628,962
ACCOUNTS PAYABLE--AFFILIATE...................................................... 8,206,935 --
LONG-TERM DEBT................................................................... 335,570,059 448,056,204
DEFERRED CREDITS................................................................. 1,039,000 66,641,994
MINORITY INTERESTS............................................................... 16,954,165 22,948,727
SENIOR EXCHANGEABLE PREFERRED STOCK.............................................. -- 185,513,000
CLASS B CONVERTIBLE PREFERRED STOCK.............................................. 10,000,000 10,000,000
CLASS C PREFERRED STOCK.......................................................... 1,623,329 1,623,329
STOCKHOLDERS' DEFICIT:
Class A Preferred Stock........................................................ 100,000 100,000
Class A Common Stock, $1 par value, 1,000,000 shares authorized and 473,152
shares issued and outstanding................................................ 473,152 473,152
Paid-in capital................................................................ 5,508,285 5,508,285
Retained deficit............................................................... (42,754,106) (90,377,761)
-------------- --------------
Total stockholders' deficit.................................................... (36,672,669) (84,296,324)
-------------- --------------
Total liabilities and stockholders' deficit.................................... $ 359,645,006 $ 701,040,942
-------------- --------------
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-27
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1998
------------ ------------
<S> <C> <C>
OPERATING REVENUES:
Service revenue..................................................... $ 26,487,441 $ 47,769,305
Roaming revenue..................................................... 17,781,657 45,916,023
Equipment sales..................................................... 740,538 2,502,707
Other............................................................... 703,331 158,020
------------ ------------
Total operating revenues.......................................... 45,712,967 96,346,055
------------ ------------
OPERATING EXPENSES:
Cost of service..................................................... 10,931,862 22,603,067
Cost of equipment................................................... 2,834,416 5,166,528
Marketing and selling............................................... 6,913,298 14,855,588
General and administrative.......................................... 8,136,923 16,219,389
Depreciation and amortization....................................... 11,942,536 29,713,544
------------ ------------
Total operating expenses.......................................... 40,759,035 88,558,116
------------ ------------
OPERATING INCOME...................................................... 4,953,932 7,787,939
INTEREST EXPENSE...................................................... (17,646,377) (25,039,213)
OTHER INCOME (EXPENSE), net........................................... 1,854,707 3,303,914
------------ ------------
LOSS BEFORE MINORITY INTERESTS IN INCOME OF SUBSIDIARIES, INCOME TAXES
AND EXTRAORDINARY ITEMS............................................. (10,837,738) (13,947,360)
MINORITY INTERESTS IN INCOME OF SUBSIDIARIES.......................... (1,314,312) (1,963,308)
------------ ------------
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS...................... (12,152,050) (15,910,668)
INCOME TAX BENEFIT.................................................... 498,758 4,864,070
------------ ------------
LOSS FROM CONTINUING OPERATIONS....................................... (11,653,292) (11,046,598)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of income tax
(benefit) expense of $80,003 and $(7,267,566) for the nine months
ended September 30, 1997 and 1998, respectively..................... 1,651,759 (17,184,832)
------------ ------------
LOSS BEFORE EXTRAORDINARY ITEMS....................................... (10,001,533) (28,231,430)
EXTRAORDINARY EXPENSE, net of income tax benefit of $85,392 in 1997
and $671,000 in 1998................................................ (2,186,223) (2,643,439)
------------ ------------
NET LOSS.............................................................. (12,187,756) (30,874,869)
DIVIDENDS ON PREFERRED STOCK.......................................... (727,646) (16,748,786)
------------ ------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS............................ $(12,915,402) $(47,623,655)
------------ ------------
------------ ------------
BASIC NET LOSS APPLICABLE TO COMMON STOCKHOLDERS PER COMMON SHARE.....
Before discontinued operations and extraordinary expense............ $ (26.17) $ (58.74)
Discontinued operations............................................. 3.49 (36.32)
Extraordinary expense............................................... (4.62) (5.59)
------------ ------------
BASIC NET LOSS APPLICABLE TO COMMON STOCKHOLDERS PER COMMON SHARE..... $ (27.30) $ (100.65)
------------ ------------
------------ ------------
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING...................... 473,152 473,152
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-28
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1997 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................................... $(12,187,756) $(30,874,869)
Adjustments to reconcile net loss to net cash provided by operating activities--
Depreciation and amortization.................................................... 15,473,672 37,399,250
Amortization of bond premium and financing cost.................................. -- 1,624,390
Deferred income taxes and investment tax credits, net............................ 486,519 (14,253,819)
(Gain) Loss on disposition of assets............................................. 19,632 (10,387)
Extraordinary loss on financing costv 2,497,598 3,314,439
Cumulative effect of change in accounting principle.............................. -- 1,162,629
Minority interests in income of subsidiaries..................................... 1,071,342 1,963,308
Changes in current assets and liabilities--
Accounts receivable.............................................................. (2,056,381) (12,480,566)
Other current assets............................................................. (1,148,883) (49,023)
Accounts payable................................................................. 4,122,827 7,998,999
Accrued expenses................................................................. 12,429,907 13,169,966
Deferred revenue and customer deposits........................................... -- 1,479,843
------------ ------------
Net cash provided by operating activities...................................... 20,708,477 10,444,160
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................................................... (13,780,956) (41,528,017)
Acquisitions....................................................................... (154,784,566) (333,354,429)
Deferred costs..................................................................... (1,592,979) --
Increase in receivable--affiliate.................................................. (1,047,284) (1,297,403)
Deposits 3,190,732 (62,150,000)
Investments in unconsolidated subsidiaries and other............................... (21,124,176) (1,931,189)
Proceeds on sale of assets......................................................... -- 6,700
------------ ------------
Net cash used in investing activities.......................................... (189,139,229) (440,254,338)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt....................................................... 95,250,000 284,000,000
Repayments of long-term debt....................................................... (797,708) (172,296,542)
Cash dividends..................................................................... (8,361,266) --
Issuance of preferred stock........................................................ -- 175,000,000
Issuance of senior notes........................................................... 160,000,000 350,000,000
Purchase of restricted investments................................................. (66,258,444) (120,976,000)
Maturities of restricted investments............................................... -- 9,400,000
Interest on restricted investments................................................. (1,553,949) (3,135,934)
Redemption of RTFC subordinated capital certificates............................... 1,051,057 --
Deferred financing costs........................................................... (10,842,406) (23,868,695)
------------ ------------
Net cash provided by financing activities...................................... 168,487,284 498,122,829
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS............................................ 56,532 68,312,651
------------ ------------
CASH AND CASH EQUIVALENTS, beginning of period
From continuing operations......................................................... 980,571 2,752,399
From discontinued operations....................................................... 628,650 254,269
------------ ------------
Total cash and cash equivalents, beginning of period......................... 1,609,221 3,006,668
------------ ------------
CASH AND CASH EQUIVALENTS, end of period.............................................
From continuing operations......................................................... 1,084,117 5,041,044
From discontinued operations....................................................... 581,636 66,278,275
------------ ------------
Total cash and cash equivalents, end of period............................... $ 1,665,753 $ 71,319,319
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-29
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
The condensed consolidated balance sheets of Dobson Communications
Corporation ("DCC") and subsidiaries (collectively with DCC, the "Company") as
of December 31, 1997 and September 30, 1998, the condensed consolidated
statements of operations for the nine months ended September 30, 1998 and 1997
and the condensed consolidated statements of cash flows for the nine months
ended September 30, 1998 and 1997 are unaudited. In the opinion of management,
such financial statements include all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of financial position,
results of operations, and cash flows for the periods presented.
The condensed balance sheet data at December 31, 1997 was derived from
audited financial statements, but does not include all disclosures required by
generally accepted accounting principles. The financial statements presented
herein should be read in connection with the Company's December 31, 1997
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
1. ORGANIZATION
The Company, through its predecessors, was organized in 1936 as Dobson
Telephone Company and adopted its current organizational structure in 1998. The
Company is a provider of rural and suburban wireless telephone services.
1997 REORGANIZATION
DCC was incorporated as an Oklahoma corporation in February 1997. Under an
Agreement and Plan of Reorganization effective February 28, 1997 ("1997
Reorganization"), 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 1997 Reorganization, DCC became the parent company
of DOC and the stock of certain subsidiaries of DOC was distributed to DCC.
1998 REORGANIZATIONS
In conjunction with the January 1998 issuance of 175,000 shares of 12.25%
Senior Exchangeable Preferred Stock mandatorily redeemable in 2008 (see Note 5),
the Company formed three new subsidiaries: Dobson Cellular Operating Company
("DCOC"), DOC Cellular Subsidiary Company ("DOC Cellular Subsidiary") and Logix
Communications Enterprises, Inc. ("Logix"), formerly named Dobson Wireline
Company. DCOC was created as the holding company for subsidiaries formed to
effect certain wireless 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 wireless subsidiaries. Logix was created as the holding
company for the Company's incumbent local exchange carrier ("ILEC"), fiber and
integrated communications provider ("ICP") operations. Logix was designated an
unrestricted subsidiary under the Senior Note Indenture and the Certificate of
Designation establishing the Senior Exchangeable Preferred Stock.
F-30
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION (CONTINUED)
On September 30, 1998, the Company adopted a plan to spin off Logix as
discussed in Note 3 ("September 1998 Reorganization"). Collectively, the January
1998 Reorganization and the September 1998 Reorganization are known as the "1998
Reorganizations."
2. ACQUISITIONS
RECENT ACQUISITIONS
On December 2, 1998, the Company purchased the FCC license for, and certain
assets related to, Texas 10 RSA for $55.0 million, subject to resolution of
certain title matters regarding the FCC licenses. Texas 10 is located in
north-central Texas, in an area bordered by Dallas, Austin, Tyler and Longview,
MSAs.
On September 2, 1998, the Company purchased the FCC license for, and related
assets of, Ohio 2 RSA for $39.3 million, subject to resolution of certain title
matters regarding the FCC licenses. Ohio 2 is located in north-central Ohio
bordered by Lake Erie on the north and Cleveland on the east.
On July 29, 1998, the Company purchased the FCC cellular license and certain
assets of the California 7 RSA for $21 million. California 7 is located in the
Imperial Valley extending from east of San Diego to the Arizona state line.
On June 16, 1998, the Company acquired an 86.4% interest in the Santa Cruz
Cellular Telephone Partnership ("SCCTP") for $31 million. SCCTP owns the
cellular license and other assets for the Santa Cruz MSA. The Santa Cruz MSA is
located adjacent to the California 4 RSA purchased in April 1998. Subsequent to
September 30, 1998, the Company acquired an additional .5% interest in SCCTP for
$.2 million.
On April 1, 1998, the Company acquired all of the capital stock of the
corporations which owned the Cellular 2000 Partnership. The Cellular 2000
Partnership owns the FCC cellular license and system for, and certain assets
relating to, the California 4 RSA. The total purchase price paid by the Company
was $90.9 million. The property is located in central California adjacent to
Fresno, Modesto and Yosemite National Park.
On January 26, 1998, the Company purchased the FCC cellular license for, and
certain assets relating to, the Texas 16 RSA for $56.6 million. The property is
located in south-central Texas in an area bordered by Austin, Houston and San
Antonio.
On October 1, 1997, the Company purchased for $39.8 million a 75% interest
in the Gila River Cellular General Partnership (the "Arizona 5 Partnership"),
which owns the cellular license for the Arizona 5 RSA 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 $9.5 million in
connection with the acquisition. In addition, the Company loaned $6.1 million to
the current partner which acquired a 25% interest in the Arizona 5 Partnership.
On March 3, 1997, the Company purchased the FCC cellular license for, and
certain assets relating to the Maryland 2 RSA for $75.8 million. 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".
F-31
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. ACQUISITIONS (CONTINUED)
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 $77.6 million. The properties are located immediately outside
the Washington/Baltimore metropolitan area.
The acquisition transactions were accounted for as purchases and,
accordingly, their results of operations have been included in the accompanying
condensed consolidated statements of operations from the respective dates of
acquisition. The unaudited pro forma information set forth below includes the
1997 acquisitions and 1998 acquisitions accounted for as if the purchases
occurred at the beginning of the respective periods presented. The unaudited pro
forma information is presented for informational purposes only and is not
necessarily indicative of the results of operations that actually would have
been achieved had the acquisitions been consummated at that time:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1998
---------- ----------
($ IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C>
Operating revenue............................................................... $ 92,996 $ 109,832
Loss before discontinued operations and extraordinary expense................... (23,633) (15,515)
Net loss........................................................................ (45,624) (48,220)
Net loss applicable to common stockholders...................................... (62,430) (65,862)
Net loss applicable to common stockholders per common share..................... $ (131.94) $ (139.20)
</TABLE>
PENDING ACQUISITIONS
As of July 28, 1998, the Company entered into a definitive agreement to
acquire the stock of Sygnet Wireless, Inc. ("Sygnet Acquisition") for $337.5
million. Sygnet owns and operates cellular systems in Ohio, Pennsylvania and New
York covering an estimated population base of 2.4 million people. In July 1998,
the Company placed $25 million into escrow pending closing of the acquisition.
The Sygnet acquisition is expected to close in the fourth quarter of 1998.
On November 24, 1998, the Company entered into a definitive agreement to
purchase the FCC licenses for, and certain assets related to, Maryland 1 RSA for
$9.1 million, subject to adjustment. Maryland 1 is located in western Maryland.
3. DISCONTINUED OPERATIONS
On September 30, 1998, the Company's Board of Directors authorized the
distribution of the wireline segment to the holders of the Company's common
stock on a tax-free basis, subject to the receipt of a private letter ruling
from the Internal Revenue Service ("IRS") under Internal Revenue Code 355(e).
The request was filed with the IRS on October 6, 1998, and a ruling is expected
in the second quarter of 1999. The wireline segment, which consists of Logix and
its subsidiaries, operates as an ICP under the LOGIX-SM- brand name in Oklahoma
and Texas, owns local telephone exchanges in Oklahoma and operates regional
fiber optic transmission networks in Oklahoma, Texas and Colorado. Pursuant to
Accounting Principles Board Opinion ("APB") No. 30, "Reporting the Results of
Operations--Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual, and Infrequently Occurring Events and Transactions," the
consolidated financial statements have been restated for all periods presented
to reflect the wireline operations, assets and liabilities as discontinued
operations.
F-32
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. DISCONTINUED OPERATIONS (CONTINUED)
The assets and liabilities of such operations have been classified as "Net
assets (liabilities) of discontinued operations" on the condensed consolidated
balance sheets and consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
($ IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................................. $ 254 $ 66,278
Restricted investments--current........................................... -- 43,448
Other current assets...................................................... 2,758 14,090
Property, plant and equipment, net........................................ 35,976 54,097
Restricted investments--non-current....................................... -- 79,533
Goodwill.................................................................. -- 124,481
Other assets.............................................................. 12,965 20,896
------------ -------------
Total assets............................................................ 51,953 402,823
Current liabilities....................................................... 2,544 26,184
Long-term debt, net of current portion.................................... 27,498 376,544
Other liabilities......................................................... 1,834 724
------------ -------------
Total liabilities....................................................... 31,876 403,452
------------ -------------
Net assets (liabilities) of discontinued operations....................... $ 20,077 $ (629)
------------ -------------
------------ -------------
</TABLE>
The net income from operations of the wireline segment was classified on the
condensed consolidated statement of operations as "Income (loss) from
discontinued operations." Summarized results of discontinued operations are as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1998
--------- ----------
($ IN THOUSANDS)
<S> <C> <C>
Net revenues..................................................................... $ 15,221 $ 40,176
Income (loss) from continuing operations before income taxes..................... 1,949 (23,753)
Income tax benefit (provision)................................................... (80) 7,268
Extraordinary item............................................................... (217) --
Cumulative effect of change in accounting principle.............................. -- (700)
Income from discontinued operations.............................................. (1,652) (17,185)
</TABLE>
4. LONG-TERM DEBT
The Company's long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
-------------- --------------
<S> <C> <C>
Revolving credit facilities............................................ $ 171,513,855 $ 284,000,000
DCC Senior Notes....................................................... 160,000,000 160,000,000
Other notes payable.................................................... 4,056,204 4,056,204
-------------- --------------
Total long-term debt................................................. $ 335,570,059 $ 448,056,204
-------------- --------------
-------------- --------------
</TABLE>
F-33
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
REVOLVING CREDIT FACILITIES
On March 25, 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. As of September 30, 1998, $143 million was outstanding under the DCOC
Credit Facility. At the same time, the Company's subsidiary DOC established a
$250 million senior secured credit facility (the "DOC Bank Facility") to replace
its existing revolving credit facility established on February 28, 1997 and
discussed below. The DOC Bank Facility is 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. DCOC is designated an unrestricted
subsidiary with regard to the DOC Facility. The Company and DOC's wholly owned
subsidiaries other than Logix and the Arizona 5 Partnership have guaranteed
DOC's obligations under the DOC Bank Facility. As of September 30, 1998, $141
million was outstanding under the DOC Bank Facility. The DCOC Credit Facility
and the DOC Bank 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. Interest on borrowings under the new credit agreements accrue at
variable rates (weighted average rate of approximately 6.9% at September 30,
1998). Initial proceeds were used primarily to refinance existing indebtedness
and finance the 1998 acquisitions described above. The Company expects to use
the remaining availability to finance capital expenditures, consummate future
acquisitions and fund general corporate operations. The facilities will
terminate in 2006.
In connection with the closing of the DOC 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 the Company's condensed consolidated statement of operations, net of
tax, for the nine months ended September 30, 1998 as an extraordinary expense.
In April 1997, the Company entered into an interest rate hedge agreement
terminating on April 24, 2002 to hedge the Company's interest expense on $160
million of its indebtedness under the revolving credit facilities. Subsequent to
September 30, 1998, the counterparty exercised its rights under the swap
agreement, fixing the interest rate at 6.13% plus a factor based on the
Company's leverage. The Company accounts for this as a hedge.
On February 28, 1997, the Company's bank credit agreement was amended and
restated to provide the Company with a $200 million revolving credit agreement
facility maturing in 2005 ("1997 Credit Facility"). Interest on borrowings under
the credit agreement accrued at a variable rate. Initial proceeds were used to
refinance existing indebtedness, finance the Maryland/Pennsylvania Acquisition
described in Note 2 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 $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 condensed consolidated
statement of operations for the nine months ended September 30, 1997.
F-34
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
SENIOR NOTES
On February 28, 1997, the Company issued $160 million of 11.75% Senior Notes
maturing in 2007 ("DCC Senior Notes"). The net proceeds were used to finance the
Maryland/Pennsylvania Acquisition described above 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 cash and investments in the Company's condensed consolidated balance
sheets. The DCC 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
DCC Senior Notes at 111.750% with proceeds from sales of stock, provided that
after any such redemption at least $104 million remains outstanding.
SYGNET FINANCING
On July 20, 1998, in connection with the pending Sygnet Acquisition, the
Company received commitments for a new $450 million credit facility to be
secured by the assets acquired in the Sygnet Acquisition. The Company also
obtained commitments for bridge financing, which expired subsequent to September
20, 1998.
5. 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 quarterly
dividends from the date of issuance and a liquidation preference of $1,000 per
share with rights over the other classes of capital stock. In 1998, the Company
has issued cumulative quarterly dividends in the form of 10,513 additional
shares of preferred stock (having a liquidation preference of $10.5 milion)
which represented non-cash financing activity, and thus are not included in the
accompanying condensed consolidated statement of cash flows. On and before
January 15, 2003, the Company may pay dividends, at its option, in cash or in
additional shares having an aggregate liquidation preference equal to the amount
of such dividends. 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.
6. RESTRICTED CASH AND INVESTMENTS
Restricted cash and investments consist of securities pledged to secure
payment of interest on the DCC Senior Notes through April 1999.
7. TAXES
The income tax benefit amounts for the nine months ended September 30, 1997
and 1998 differ from amounts computed at the statutory rate due primarily to net
operating losses for which no benefit has been recognized.
8. EARNINGS PER COMMON SHARE
Basic loss per common share is computed by the weighted average number of
shares of common stock outstanding during the year. 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.
F-35
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. RECENT PRONOUNCEMENTS
In July 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Derivatives and Hedging ("SFAS 133").
SFAS 133 establishes uniform hedge accounting criteria for all derivatives
requiring companies to formally document, designate and assess the effectiveness
of transactions that receive hedge accounting. Under SFAS 133, derivatives will
be recorded in the balance sheet as either an asset or liability measured at its
fair value, with changes in the fair value recognized as a component of
comprehensive income or in current earnings. SFAS 133 will be effective for
fiscal years beginning after June 15, 1999. The Company has not yet evaluated
the impact of adopting SFAS 133 and has not determined the timing or method of
adoption of SFAS 133.
10. COMMITMENTS
Effective December 6, 1995 (amended December 20, 1995, June 24, 1997 and
September 30, 1998), the Company entered into an equipment supply agreement in
which the Company agreed to purchase approximately $65 million of cell site and
switching equipment between June 24, 1997 and November 23, 2001 to update the
cellular systems for newly acquired and existing MSAs and RSAs. Of this
commitment, approximately $34.6 million remained at September 30, 1998.
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 site and switching equipment between January 13, 1998 and
January 12, 2002 to update the cellular systems for newly acquired and existing
MSAs and RSAs. Of this commitment, $67 million remained at September 30, 1998.
F-36
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Horizon, G.P., Inc.
We have audited the accompanying combined statements of assets and
liabilities of The Cellular Telephone Business of Selected Systems of Horizon
Cellular Telephone Company, L.P. as of December 31, 1995 and 1996, and the
related combined statements of operations and net assets and of cash flows for
each of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of Horizon Cellular Telephone Company, L.P.'s
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets and liabilities of The Cellular Telephone
Business of Selected Systems of Horizon Cellular Telephone Company, L.P. at
December 31, 1995 and 1996, and the combined results of their operations and
their cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
January 27, 1997
F-37
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED STATEMENTS OF ASSETS AND LIABILITIES
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
Current assets:
Cash............................................................................. $ 355,069 $ 435,407
Accounts receivable, net of allowance for doubtful accounts of $82,160 and
$100,790....................................................................... 1,709,143 2,240,468
Inventory........................................................................ 130,730 219,079
Prepaid expenses................................................................. 77,731 29,991
------------- -------------
Total current assets............................................................... 2,272,673 2,924,945
Property and equipment:
Cellular system.................................................................. 8,669,758 10,810,808
Other............................................................................ 959,727 1,287,823
------------- -------------
9,629,485 12,098,631
Accumulated depreciation......................................................... (3,080,449) (4,491,663)
------------- -------------
6,549,036 7,606,968
Licenses, net of accumulated amortization of $3,099,061 and $4,020,825............. 32,763,313 31,841,549
Other assets, net of accumulated amortization of $18,483 and $22,838............... 94,275 99,200
------------- -------------
Total assets....................................................................... $ 41,679,297 $ 42,472,662
------------- -------------
------------- -------------
LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable................................................................. $ 354,798 $ 702,859
Accrued expenses................................................................. 669,390 968,815
Deferred revenue................................................................. 403,994 566,521
------------- -------------
Total current liabilities.......................................................... 1,428,182 2,238,195
Advances from affiliates........................................................... 14,862,381 13,399,571
Net assets......................................................................... 25,388,734 26,834,896
------------- -------------
Total liabilities and net assets................................................... $ 41,679,297 $ 42,472,662
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-38
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED STATEMENTS OF OPERATIONS AND NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Cellular service.................................................. $ 5,863,828 $ 7,801,918 $ 10,867,791
Roaming revenues.................................................. 2,765,685 3,496,366 4,264,112
Cellular equipment sales.......................................... 524,892 402,430 388,505
------------- ------------- -------------
Total revenues...................................................... 9,154,405 11,700,714 15,520,408
Operating expenses:
Cellular service.................................................. 2,918,043 3,569,152 4,532,595
Cellular equipment................................................ 1,100,160 1,182,309 1,133,171
General and administrative........................................ 1,528,970 1,471,078 1,869,299
LPAR compensation................................................. -- -- 275,000
Marketing and selling............................................. 1,272,265 1,944,731 2,478,918
Depreciation and amortization..................................... 1,959,106 2,170,963 2,331,184
------------- ------------- -------------
8,778,544 10,338,233 12,620,167
------------- ------------- -------------
Income from operations.............................................. 375,861 1,362,481 2,900,241
Interest expense.................................................... 1,358,153 1,568,883 1,454,079
------------- ------------- -------------
Net (loss) income................................................... (982,292) (206,402) 1,446,162
Net assets at beginning of year..................................... 21,926,001 25,314,904 25,388,734
Partners' contributions............................................. 4,371,195 280,232 --
------------- ------------- -------------
Net assets at end of year........................................... $ 25,314,904 $ 25,388,734 $ 26,834,896
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes.
F-39
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------------
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income.................................................... $ (982,292) $ (206,402) $ 1,446,162
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization...................................... 1,959,106 2,170,963 2,331,184
Provision for bad debts............................................ 433,490 3,075 169,582
LPAR compensation.................................................. -- -- 275,000
Accrued interest expense--affiliate................................ 1,358,153 1,568,883 1,454,079
Changes in operating assets and liabilities:
Accounts receivable.............................................. (1,194,015) (280,891) (700,907)
Inventory........................................................ (72,670) 42,003 (88,349)
Prepaid expenses................................................. (4,768) (61,027) 47,740
Accounts payable and accrued expenses............................ 691,454 (239,835) 372,486
Deferred revenue................................................. 95,128 205,588 162,527
------------- ------------- -------------
Net cash provided by operating activities............................ 2,283,586 3,202,357 5,469,504
INVESTING ACTIVITIES
Purchases of property and equipment.................................. (1,942,166) (1,418,979) (2,462,997)
License and system acquisitions...................................... (4,205,125) -- --
Other................................................................ 27,925 (12,161) (9,280)
------------- ------------- -------------
Net cash used in investing activities................................ (6,119,366) (1,431,140) (2,472,277)
FINANCING ACTIVITIES.................................................
Advances to affiliates, net of $166,069 and $280,232 noncash
contributions in 1994 and 1995, respectively........................ (139,739) (2,038,131) (2,916,889)
Partners' contributions.............................................. 4,205,125 -- --
------------- ------------- -------------
Net cash provided by (used in) financing activities.................. 4,065,386 (2,038,131) (2,916,889)
------------- ------------- -------------
Net increase (decrease) in cash...................................... 229,606 (266,914) 80,338
Cash at beginning of year............................................ 392,377 621,983 355,069
------------- ------------- -------------
Cash at end of year.................................................. $ 621,983 $ 355,069 $ 435,407
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes.
F-40
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS
The accompanying audited combined financial statements of The Cellular
Telephone Business of Selected Systems of Horizon Cellular Telephone Company,
L.P. (HCTC) reflect the combined assets and liabilities, combined results of
operations, and combined cash flows of the cellular telephone business of
Horizon Cellular Telephone Company of Frederick ("Frederick"), Horizon Cellular
Telephone Company of Bedford ("Bedford"), Horizon Cellular Telephone Company of
Hagerstown, L.P. ("Hagerstown"), and the Cumberland Cellular Partnership
("Cumberland") (collectively referred to as "the Selected Systems," "the
Systems," or "the Company") as of December 31, 1995 and 1996, and for each of
the three years in the period ended December 31, 1996. The accompanying
financial statements are presented on HCTC's historical cost basis and are
intended to reflect only the assets, liabilities, operations, and cash flows
relating to the cellular telephone business of the named legal entities, which
are majority-owned subsidiary partnerships of HCTC, and do not represent the
financial statements of the named legal entities. The combined financial
statements include only the operating results since the Systems were acquired by
HCTC.
The Company owns, designs, develops, and operates cellular communications
systems. With the exception of Cumberland, KCCGP, L.P. (KCCGP) is the managing
and sole general partner of the subsidiary partnerships that own directly the
aforesaid cellular telephone businesses at December 31, 1996. With respect to
Cumberland, KCCGP is the managing and sole general partner of Horizon Cellular
Telephone Company of Cumberland, L.P., a 90.55% general partner in Cumberland.
KCCGP performs certain administrative functions for the Systems and,
accordingly, certain expenses of KCCGP (see Note 5) have been allocated to the
Systems on a basis which, in the opinion of management, is reasonable. However,
such expenditures are not necessarily indicative of, and it is not practicable
for management to estimate, the nature and level of expenses which might have
been incurred had the Systems been operating as separate independent companies.
2. ACQUISITIONS
In April 1994, HCTC simultaneously closed on various purchase, sale and
exchange agreements which ultimately resulted in HCTC (i) acquiring a majority
interest (90.55%) in the non-wireline FCC Operating License of the Cumberland
MSA, (ii) acquiring the non-wireline FCC Operating License of the Hagerstown MSA
together with certain operating assets, in exchange for substantially all of the
assets of the eastern portion of Bedford, and (iii) making a net payment of $4.2
million in cash. Simultaneously, HCTC contributed the Operating License to
Cumberland and contributed the Operating License to Hagerstown in exchange for a
99.0% interest in Hagerstown and KCCGP obtained a 1.0% interest in Hagerstown.
Effective January 1, 1995, the operations of Frederick and Bedford were
merged into Hagerstown. As part of the market consolidation, the general partner
interests were reorganized. KCCGP acquired an additional .9% interest in
Frederick (resulting in a 1% general partner ownership), reducing HCTC's Limited
Partnership interest to 99%. The additional partner contribution was based on
the estimated fair market value of the Frederick System.
All of the Company's acquisitions were accounted for under the purchase
method of accounting; accordingly, assets acquired and liabilities assumed have
been recorded at their estimated fair market values at the dates of acquisition
and their results of operations are included in the accompanying combined
statements of operations since the date of acquisition. The accompanying
financial statements
F-41
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
2. ACQUISITIONS (CONTINUED)
exclude the results of operations of the eastern portion of Bedford. The excess
of purchase price over the fair market value of identifiable net tangible assets
acquired has been allocated to customer lists and licenses. Pro forma results of
operations for 1994, assuming the acquisitions of Hagerstown and Cumberland
occurred on January 1, 1994, would not differ materially from reported results.
3. ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INVENTORIES
Inventories are carried at the lower of cost (using the first-in, first-out
method) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated over their
estimated useful lives (three to twelve years) using the straight-line method.
Depreciation expense amounted to approximately $1,143,000 in 1994,
$1,237,000 in 1995, and $1,405,000 in 1996.
LICENSES
Licenses primarily represent the acquisition costs of the Operating
Licenses. Such costs are being amortized over a period of 40 years using the
straight-line method.
The Systems periodically review the carrying value of their licenses to
determine whether such amounts are recoverable based on undiscounted future cash
flows and whether a reduction to fair value is necessary. There have been no
such reductions through December 31, 1996.
ADVANCES FROM AFFILIATES
Advances from affiliates primarily represent cash advances from HCTC and
KCCGP which provided funds for investing and operating activities, and have no
specific repayment terms. Interest expense is charged monthly at a rate of
11 3/8% of the ending balances payable to HCTC.
REVENUE AND EXPENSE RECOGNITION
Cellular airtime revenue and access charges are recognized as service is
provided. Cellular airtime is billed in arrears and access charges are billed in
advance. Subscriber acquisition costs (mainly commissions and loss on equipment
sales) are expensed when incurred. Accounts receivable consist mainly of amounts
due from subscribers and other cellular companies whose subscribers use the
Systems' cellular service.
F-42
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
3. ACCOUNTING POLICIES (CONTINUED)
Approximately 40% of the 1996 roaming revenues were generated from
subscribers of a cellular company serving an adjacent market when such
subscribers place or receive calls on the Company's system.
ADVERTISING EXPENSES
Advertising expenses are charged to operations as incurred and amounted to
approximately $256,100 in 1994, $394,400 in 1995, and $512,000 in 1996.
ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
---------- ----------
<S> <C> <C>
Property, sales, and excise taxes..................................... $ 128,400 $ 112,800
Interconnection and other billing costs............................... 68,400 63,500
Salaries and bonuses.................................................. 118,900 139,100
LPAR compensation..................................................... -- 275,000
Other................................................................. 353,700 378,400
---------- ----------
$ 669,400 $ 968,800
---------- ----------
---------- ----------
</TABLE>
INCOME TAXES
The legal entities under which the Systems operate are partnerships
organized under the laws of Delaware. Accordingly, federal and state income
taxes are not paid at the partnership level but by the ultimate partners. The
tax basis of the Systems' assets amounted to approximately $28.8 million and $30
million at December 31, 1995 and 1996, respectively.
NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of," which
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The impact of adopting this Statement in 1996 was not material
to the financial statements.
SFAS No. 123, "Accounting for Stock-Based Compensation," is effective for
fiscal years beginning after December 15, 1995. SFAS 123 provides companies with
a choice to follow the provisions of SFAS 123 in determining stock-based
compensation expense or to continue with the provisions of APB 25, "Accounting
for Stock Issued to Employees." Although the Selected Systems expect to continue
to follow APB 25, Statement 123 would have no effect on the combined financial
statements for the periods indicated (see Note 6).
F-43
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
4. COMMITMENTS AND CONTINGENCIES
The Systems lease office space, office equipment, and cellular sites and
facilities under operating leases with initial terms ranging from 1 to 20 years.
Most cellular sites contain renewal options ranging up to 25 years.
Future minimum payments under noncancelable operating leases with initial
terms of one year or more consisted of the following amounts as of December 31,
1996:
<TABLE>
<CAPTION>
CELLULAR
SITES OTHER
---------- ------------
<S> <C> <C>
1997................................................................ $ 87,000 $ 353,000
1998................................................................ 89,000 289,000
1999................................................................ 65,000 244,000
2000................................................................ 61,000 197,000
2001................................................................ 41,000 --
Thereafter.......................................................... 281,000 --
---------- ------------
Total minimum lease payments........................................ $ 624,000 $ 1,083,000
---------- ------------
---------- ------------
</TABLE>
Rental expense amounted to approximately $251,100 in 1994, $336,500 in 1995,
and $389,800 in 1996.
5. RELATED PARTY TRANSACTIONS
KCCGP provides various administrative services to the Systems, including
accounting, engineering, and marketing and advertising services, in addition to
funding working capital requirements and capital expenditures as necessary.
These expenses are charged, first on the basis of direct usage when
identifiable, with the remainder allocated equally among its operating systems.
Allocated expenses amounted to $107,000 for the year ended December 31, 1994,
and $50,000 for each of the years ended December 31, 1995 and 1996.
6. BENEFIT PLANS
HCTC has granted certain officers of the Selected Systems limited
partnership appreciation rights in HCTC pursuant to a Limited Partnership Unit
Appreciation Rights Plan ("LPAR Plan"), as amended, that was adopted September
1, 1994 to be effective January 1, 1993. Upon the occurrence of certain events
as specified therein ("Termination Events"), participants are entitled to share
in the amounts, if any, of distributions to HCTC's partners after all capital
contributions made by HCTC's partners have been repaid, together with a fixed
return on such contributions. Such rights vest over a period of five years;
however, vesting is automatically accelerated upon the occurrence of a
Termination Event. LPAR Plan compensation expense of $275,000 has been
recognized and included in accrued expenses as of December 31, 1996, which is
the LPAR Plan amount attributable to participants who are employees of the
Selected Systems.
Effective July 1, 1994, KCCGP established an employee savings plan (the
"Plan") that qualifies as a deferred salary arrangement under Section 401(k) of
the Internal Revenue Code. Under the Plan, which covers employees of the
Selected Systems who have met certain eligibility requirements, participating
F-44
<PAGE>
THE CELLULAR TELEPHONE BUSINESS OF SELECTED SYSTEMS OF
HORIZON CELLULAR TELEPHONE COMPANY, L.P.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
6. BENEFIT PLANS (CONTINUED)
employees may defer up to 15% of their pretax earnings, up to the Internal
Revenue Service annual contribution limit ($9,500 for calendar year 1996). The
Company matches up to 50% of the employee's contributions, up to a maximum of 3%
of the employee's earnings. Employees who participate in the LPAR Plan are
excluded from matching contributions. Matching Plan contributions, which vest
equally over five years, amounted to approximately $7,600 in 1994, $10,100 in
1995, and $17,600 in 1996.
7. SUBSEQUENT EVENTS
On November 19, 1996, the Company entered into a definitive agreement to
sell the FCC Operating Licenses of the Selected Systems, together with certain
operating assets and liabilities, to Dobson Cellular of Maryland, Inc. for
approximately $75 million, subject to adjustment. The combined financial
statements do not reflect either the estimated gain, or any expenses incurred or
expected to be incurred related to the sale of the systems. The sale is expected
to close in February of 1997, and is subject to certain regulatory and other
approvals.
F-45
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Gila River Cellular General Partnership:
We have audited the accompanying balance sheets of Gila River Cellular
General Partnership (an Arizona general partnership) as of December 31, 1996 and
1995, and the related statements of operations, changes in partners' capital and
cash flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Gila River Cellular General
Partnership as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 10, 1997
F-46
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND 1996
ASSETS
<TABLE>
<CAPTION>
1995 1996
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Note 2)............................................... $ -- $ 1,569,595
Accounts receivable, net of allowance of $58,696, and $159,707 respectively...... 503,165 849,026
Inventories (Note 2)............................................................. 32,551 27,645
Prepaid expenses................................................................. 555 107
------------- -------------
Total current assets........................................................... 536,271 2,446,373
------------- -------------
Property and Equipment (Notes 2 and 5):
Cellular systems................................................................. 10,218,397 10,363,236
Furniture and equipment.......................................................... 5,354 5,354
Construction in progress......................................................... 178,687 466,707
------------- -------------
10,402,438 10,835,297
Less accumulated depreciation and amortization................................... (1,361,443) (2,605,661)
------------- -------------
9,040,995 8,229,636
------------- -------------
Total assets................................................................... $ 9,577,266 $ 10,676,009
------------- -------------
------------- -------------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable................................................................. $ 170,867 $ 614,134
Accrued liabilities.............................................................. 762,799 415,006
Advance billings and deposits (Note 2)........................................... 80,964 97,915
Due to general partner (Notes 2 and 4)........................................... 2,111,267 --
------------- -------------
Total current liabilities...................................................... 3,125,897 1,127,055
Long-term liabilities.............................................................. 8,002 8,002
Commitments (Note 3) -- --
Partners' capital.................................................................. 6,443,367 9,540,952
------------- -------------
Total liabilities and partners' capital........................................ $ 9,577,266 $ 10,676,009
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-47
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Revenues (Note 2)
Cellular service...................................................... $ 906,882 $ 1,286,901 $ 2,151,888
Cellular equipment.................................................... 258,582 226,193 275,346
Roaming and other..................................................... 2,437,233 4,230,127 5,583,073
------------ ------------ ------------
Total revenues...................................................... 3,602,697 5,743,221 8,010,307
------------ ------------ ------------
Operating Expenses (Notes 2 and 4):
Cost of cellular service.............................................. 373,159 531,380 993,086
Cost of cellular equipment............................................ 269,986 264,037 350,028
Selling............................................................... 419,683 708,545 1,080,862
General and administrative............................................ 596,117 911,065 1,208,123
Depreciation and amortization......................................... 320,727 926,995 1,244,204
------------ ------------ ------------
Total operating expenses............................................ 1,979,672 3,342,022 4,876,303
------------ ------------ ------------
Operating income........................................................ 1,623,025 2,401,199 3,134,004
Other (expense) income (Note 2)......................................... 24,251 (50,024) (36,419)
------------ ------------ ------------
Net income........................................................ $ 1,647,276 $ 2,351,175 $ 3,097,585
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-48
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
BEGINNING BALANCE TRANSFER OF BALANCE ADJUSTED BALANCE
OWNERSHIP DEC. 31, INTEREST DEC. 31, OWNERSHIP DEC. 31,
INTEREST 1993 NET INCOME (NOTE 1) 1994 INTEREST NET INCOME 1995
----------- --------- ----------- ----------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
General Partners:
Gila River
Telecommunications,
Inc.................. 40.00% $ 977,966 $ 658,910 $ 79,799 $1,716,675 41.9500% $ 986,318 $2,702,993
Tohono O'odham Utility
Authority............ 23.00% 562,331 378,874 (30,590) 910,615 22.2525% 523,195 1,433,810
Aztel, Inc............. 23.00% 562,331 378,874 (30,590) 910,615 22.2525% 523,195 1,433,810
U S WEST NewVector
Group, Inc........... 14.00% 342,288 230,618 (18,619) 554,287 13.5450% 318,467 872,754
----------- --------- ----------- ----------- --------- ----------- ----------- ---------
100.00% $2,444,916 $1,647,276 $ -- $4,092,192 100.0000% $2,351,175 $6,443,367
----------- --------- ----------- ----------- --------- ----------- ----------- ---------
----------- --------- ----------- ----------- --------- ----------- ----------- ---------
<CAPTION>
BALANCE
DEC. 31,
NET INCOME 1996
----------- ---------
<S> <C> <C>
General Partners:
Gila River
Telecommunications,
Inc.................. $1,299,437 $4,002,430
Tohono O'odham Utility
Authority............ 689,290 2,123,100
Aztel, Inc............. 689,290 2,123,100
U S WEST NewVector
Group, Inc........... 419,568 1,292,322
----------- ---------
$3,097,585 $9,540,952
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-49
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
<TABLE>
<CAPTION>
1994 1995 1996
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income......................................................... $ 1,647,276 $ 2,351,175 $ 3,097,585
------------- ------------- -------------
Adjustments to net income:
Depreciation and amortization...................................... 320,727 926,995 1,244,204
Changes in current assets and current liabilities:
Accounts receivable, net......................................... (139,488) (143,655) (345,861)
Inventories...................................................... (9,171) (3,259) 4,906
Accounts payable................................................. 62,289 10,260 35,995
Accrued liabilities.............................................. 99,636 663,163 (347,793)
Advance billings and deposits.................................... 22,220 33,632 16,951
Prepaid expenses................................................. (306) (249) 448
Other............................................................ (20,389) -- --
------------- ------------- -------------
Total adjustments................................................ 335,518 1,486,887 608,850
------------- ------------- -------------
Cash provided by operations...................................... 1,982,794 3,838,062 3,706,435
------------- ------------- -------------
INVESTING ACTIVITIES:
Purchase of property and equipment................................. (1,381,306) (7,090,057) (25,573)
Cash received on disposition of property and equipment............. -- 525,000 --
------------- ------------- -------------
Cash used for investing activities............................... (1,381,306) (6,565,057) (25,573)
------------- ------------- -------------
FINANCING ACTIVITIES:
(Payments to) advances from general partner........................ -- 2,111,267 (2,111,267)
------------- ------------- -------------
Cash (used for) provided by financing activities................. -- 2,111,267 (2,111,267)
------------- ------------- -------------
CASH AND CASH EQUIVALENTS:
Net increase (decrease).......................................... 601,488 (615,728) 1,569,595
Beginning balance................................................ 14,240 615,728 --
------------- ------------- -------------
Ending balance................................................... $ 615,728 $ -- $ 1,569,595
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-50
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
1. ORGANIZATION
Gila River Cellular General Partnership (an Arizona general partnership) was
formed on September 1, 1990, to fund, establish and provide cellular
telecommunication services to customers within the geographical area between the
cities of Phoenix and Tucson, Arizona known as the Gila Rural Service Area
("RSA") Number 5 (corridor). Gila River Telecommunications, Inc., Tohono O'odham
Utility Authority (a subsidiary organization of the Tohono O'odham Nation), and
Aztel, Inc. participate as general partners. U S WEST NewVector Group, Inc.
participates as the managing general partner.
Effective December 31, 1994, the partners of Gila River Cellular General
Partnership entered into a definitive agreement to amend the Partnership
Agreement to incorporate the geographical service area of Arizona RSA Number 5
(non-corridor) served by a separate partnership of Gila River
Telecommunications, Inc., Tohono O'odham Utility Authority and Aztel, Inc. As a
result of this transaction, the ownership interest of the general partners of
Gila River Cellular General Partnership has been revised as reflected in the
accompanying financial statements.
In late 1996, Dobson Communications Corporation ("Dobson") and the general
partners signed a letter of intent wherein Dobson agreed to purchase the
interests of the general partners. Upon completion of the transaction, which is
expected to occur in the first half of 1997, Dobson and the Gila River Indian
Community will have a 100% interest in Arizona RSA Number 5. At Dobson's option,
during the sales transition and post-transition periods, Dobson may purchase
services from the managing general partner similar to those discussed in Note 4.
2. SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include amounts which are readily convertible into
cash and which are not subject to significant risk from fluctuations in interest
rates.
INVENTORIES
Inventories are stated at the lower of cost or market on a first-in,
first-out (FIFO) basis. Inventories consist of cellular mobile telephone
equipment that is purchased by the Partnership primarily for sale to customers.
PROPERTY, EQUIPMENT AND DEPRECIATION
The Partnership's investment in property and equipment is stated at cost
less accumulated depreciation. Interest incurred during construction is
capitalized and amortized over the life of the underlying asset. Interest of
$9,216, $163,427 and $2,404 was capitalized during the years ended December 31,
1996, 1995 and 1994, respectively. The cost of these assets includes purchased
materials, contracted services, internal labor and applicable overhead.
F-51
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Depreciation is calculated on a straight-line basis over the following
estimated economic life of the assets:
<TABLE>
<S> <C>
3 to 20
Cellular systems.............................. years
Furniture and equipment....................... 3 to 5 years
</TABLE>
INCOME TAXES
Under provisions of the Internal Revenue Code, the partners include their
respective share of Partnership income or loss in their individual tax returns.
Accordingly, no provision for income taxes has been made in the accompanying
financial statements.
MANAGING GENERAL PARTNER FINANCING
The managing general partner advances funds to the Partnership as necessary
to finance operations and network construction. Interest is charged to the
Partnership on these advances at a rate equivalent with U S WEST NewVector
Group, Inc.'s borrowing rate which averaged 8.1% for the year ended December 31,
1996 and 7.5% for the years ended December 31, 1995 and 1994. Interest expense
incurred and paid, net of amounts capitalized for the years ended December 31,
1996, 1995 and 1994 was $50,098, $50,024 and $0, respectively.
REVENUES
The Partnership earns cellular service revenue by providing access to the
cellular network (access revenue) and for use of the network (airtime revenue).
Access revenue is billed one month in advance. Airtime and access revenues are
recognized when the service is provided.
ADVERTISING COSTS
Costs incurred for advertising are expensed as incurred.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATION
Certain reclassifications have been made to the prior year's financial
statements in order to present them on a basis consistent with that of the
current year.
F-52
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1995 AND 1994
3. COMMITMENTS:
OPERATING LEASES
Future minimum rental payments required under operating leases for real
estate that have initial or remaining noncancelable lease terms ending after
December 31, 1996, are as follows:
<TABLE>
<S> <C>
1997.............................................. $ 91,086
1998.............................................. 80,038
1999.............................................. 67,769
2000.............................................. 19,090
2001.............................................. 180
---------
Total............................................. $ 258,163
---------
---------
</TABLE>
Leases for real estate provide for renewal at various intervals with
provision for increased rents at each renewal.Rental expense for the years ended
December 31, 1996, 1995 and 1994 was $91,663, $103,604 and $51,809,
respectively.
4. RELATED PARTY TRANSACTIONS
In accordance with the Partnership Agreement, the managing general partner
provides many services to the Partnership as well as to other cellular
partnerships. These include legal, financial, engineering, operations, marketing
and accounting services. Costs for performing these services are charged to the
Partnership primarily on the basis of the managing general partner's time and
effort incurred on behalf of the Partnership for each activity.The Partnership
incurred costs from the managing general partner for the years ended December
31, 1996, 1995, and 1994 of $986,301, $848,279 and $529,924, respectively.
The Partnership purchases telecommunication services from an affiliate of
the managing general partner. Purchases for the years ended December 31, 1996,
1995 and 1994 were $289,404, $175,641 and $80,840, respectively.
The managing general partner provides switching services to the Partnership.
The Partnership was charged $196,202, $97,220 and $58,266 for the years ended
December 31, 1996, 1995 and 1994, respectively.
The Partnership utilizes digital transmission facilities from a U S WEST
NewVector Group, Inc. managed partnership. The Partnership was charged $4,380
for these services during the year ended December 31, 1996 and $0 for the two
years ended December 31, 1995 and 1994.
5. UPGRADE OF CELLULAR SYSTEM
During 1993, the Partnership decided to replace substantially all of its
cellular network equipment consisting primarily of cell site electronics. The
Partnership recorded a reserve of $460,000 in connection with this transaction
in order to reduce the cellular equipment to its net realizable value. During
the fourth quarter of 1995, assets with a book value of $1,132,394 and
accumulated depreciation of $200,153 were replaced in connection with the
upgrade. As part of this transaction, the Partnership's displaced cellular
equipment was transferred to the managing general partner at its fair market
value of $525,000.
F-53
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
(UNAUDITED)
Current assets:
Cash and cash equivalents........................................................................ $ 1,773,244
Accounts receivable, net of allowance of $164,039................................................ 949,650
Prepaid expenses................................................................................. 768
-------------
Total current assets....................................................................... 2,723,662
-------------
Property and Equipment
Cellular systems................................................................................. 10,482,892
Furniture and equipment.......................................................................... 7,420
Construction in progress......................................................................... 285,880
-------------
10,776,192
Less accumulated depreciation.................................................................... (3,374,726)
-------------
7,401,466
-------------
Total Assets............................................................................... $ 10,125,128
-------------
-------------
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable................................................................................. $ 239,846
Accrued liabilities.............................................................................. 725,517
Advance billings and deposits.................................................................... 100,214
-------------
Total current liabilities.................................................................. 1,065,577
Long-term liabilities............................................................................ 8,002
Commitments
Partners' capital................................................................................ 9,051,549
-------------
Total liabilities and partners' capital...................................................... $ 10,125,128
-------------
-------------
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-54
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------------
1996 1997
------------ ------------
<S> <C> <C>
(UNAUDITED)
Revenues
Cellular service.................................................................... $ 1,550,972 $ 1,906,980
Cellular equipment.................................................................. 197,669 382,956
Roaming and other................................................................... 4,082,018 5,347,644
------------ ------------
Total revenues.................................................................... 5,830,659 7,637,580
------------ ------------
Operating Expenses
Cost of cellular service............................................................ 649,269 902,609
Cost of cellular equipment.......................................................... 246,925 401,466
Selling............................................................................. 778,398 627,374
General and administrative.......................................................... 971,937 965,002
Depreciation and amortization....................................................... 791,961 903,908
------------ ------------
Total operating expenses.......................................................... 3,438,490 3,800,359
------------ ------------
Operating income...................................................................... 2,392,169 3,837,221
Other income (expense)................................................................ (50,098) 149,583
------------ ------------
Net income.................................................................... $ 2,342,071 $ 3,986,804
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-55
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
DISTRIBUTION BALANCE
OWNERSHIP BALANCE DEC. BALANCE DEC. TO GENERAL SEPT. 30,
INTEREST 31, 1995 NET INCOME 31, 1996 NET INCOME PARTNERS 1997
------------ ------------ ------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
General Partners:
Gila River Telecommunications,
Inc......................... 41.9500% 2,702,993 1,299,437 4,002,430 1,672,464 (1,877,769) 3,797,125
Tohono O'odham Utility
Authority................... 22.2525% 1,433,810 689,290 2,123,100 887,164 (996,068) 2,014,196
Aztel, Inc.................... 22.2525% 1,433,810 689,290 2,123,100 887,164 (996,068) 2,014,196
U S WEST NewVector Group,
Inc......................... 13.5450% 872,754 419,568 1,292,322 540,012 (606,302) 1,226,032
------------ ------------ ------------ ------------ ------------ ------------- ------------
100.0000% $ 6,443,367 $ 3,097,585 $ 9,540,952 $ 3,986,804 $ (4,476,207) $ 9,051,549
------------ ------------ ------------ ------------ ------------ ------------- ------------
------------ ------------ ------------ ------------ ------------ ------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-56
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1996
------------- 1997
-------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income........................................................................ $ 2,342,071 $ 3,986,804
------------- -------------
Adjustments to net income:
Depreciation...................................................................... 791,961 903,908
Changes in current assets and current liabilities:
Accounts receivable, net........................................................ (147,386) (100,624)
Inventories..................................................................... 17,406 27,645
Accounts payable................................................................ 25,773 (374,288)
Accrued liabilities............................................................. (299,017) 705,919
Advance billings and deposits................................................... 18,244 2,299
Prepaid expenses................................................................ (235) (661)
------------- -------------
Total adjustments............................................................... $ 406,746 $ 1,164,198
------------- -------------
Cash provided by operating activities........................................... 2,748,817 5,151,002
------------- -------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment......................................... (274,363) (927,322)
------------- -------------
Cash used for investing activities.............................................. (274,363) (927,322)
------------- -------------
FINANCING ACTIVITIES:
Cash distributions to general partners............................................ (2,155,613) (4,476,207)
Cash received from managing partner............................................... -- 456,176
------------- -------------
Cash used for financing activities.............................................. (2,155,613) (4,020,031)
------------- -------------
CASH AND CASH EQUIVALENTS:
Net increase...................................................................... 318,841 203,649
Beginning balance................................................................. -- 1,569,595
------------- -------------
Ending balance.................................................................... $ 318,841 $ 1,773,244
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-57
<PAGE>
GILA RIVER CELLULAR GENERAL PARTNERSHIP
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
BASIS OF PRESENTATION
The unaudited condensed financial statements include all normal adjustments
which, in the opinion of management, are necessary to present fairly the
condensed financial position at September 30, 1997, and the results of
operations and cash flows for the nine months ended September 30, 1997 and 1996.
These unaudited condensed financial statements should be read in conjunction
with the December 31, 1996 financial statements and related notes.
RECENT TRANSACTION
Effective October 1, 1997, the Gila River Cellular General Partnership (the
"Partnership") completed the transaction wherein Dobson Communications
Corporation ("DCC") agreed to purchase the interests of the general partners. As
a result of this transaction, Dobson and the Gila River Indian Community own a
100% interest in Arizona 5 RSA. See Note 1 and Note 4 of the December 31, 1996
financial statements for more information related to this transaction.
F-58
<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, 1996 and 1997 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, 1996 and 1997 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-59
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
BALANCE SHEET
DECEMBER 31, 1996 AND 1997
ASSETS
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents......................................................... $ 1,142,409 $ 1,079,070
Accounts receivable............................................................... 1,495,970 1,231,461
Accounts receivable--related parties.............................................. 1,201,698 1,396,810
Inventory......................................................................... 147,551 160,677
Prepaid and other current assets.................................................. 283,112 370,334
------------- -------------
Total current assets.......................................................... 4,270,740 4,238,352
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Buildings and towers.............................................................. 5,729,609 7,234,628
Cellular and switching equipment.................................................. 10,899,265 15,059,156
Autos and trucks.................................................................. 108,233 126,140
Office equipment and furniture.................................................... 405,133 413,672
Leasehold improvements............................................................ 110,976 333,675
Construction in progress.......................................................... 241,827 2,730,032
------------- -------------
Total property, plant and equipment........................................... 17,495,043 25,897,303
Less accumulated depreciation..................................................... 4,695,405 6,563,647
------------- -------------
Net property, plant and equipment................................................. 12,799,638 19,333,656
------------- -------------
OTHER ASSETS:
Start up costs 56,827
Loan costs........................................................................ 246,801 268,084
Licensing costs................................................................... 26,015 54,169
------------- -------------
Total other assets............................................................ 329,643 322,253
------------- -------------
TOTAL ASSETS.................................................................. $ 17,400,021 $ 23,894,261
------------- -------------
------------- -------------
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft.................................................................... $ -- $ 536,924
Notes payable..................................................................... 1,200,000 --
Notes payable--related party...................................................... -- 1,253,381
Accounts payable.................................................................. 714,601 723,491
Accounts payable--related parties................................................. 325,552 305,437
Obligation for equipment.......................................................... -- 1,621,169
Accrued management termination fee................................................ 1,500,000 --
Accrued expenses.................................................................. 62,332 143,022
Unearned revenue.................................................................. 246,738 297,792
Federal and state taxes payable................................................... 324,520 819,903
Customer deposits................................................................. 22,000 17,600
------------- -------------
Total current liabilities..................................................... 4,395,743 5,718,719
------------- -------------
LONG-TERM LIABILITIES:
Notes payable, less current portion............................................... 8,900,000 12,800,000
Obligation for equipment.......................................................... 1,497,616 --
------------- -------------
Total long term liabilities................................................... 10,397,616 12,800,000
------------- -------------
Total liabilities............................................................. 14,793,359 18,518,719
PARTNERS' EQUITY.................................................................... 2,606,662 5,375,542
------------- -------------
TOTAL LIABILITIES AND PARTNERS' EQUITY........................................ $ 17,400,021 $ 23,894,261
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
REVENUES:
Cellular service................................................................. $ 8,580,109 $ 8,539,822
Cellular roaming................................................................. 10,856,424 10,654,382
Equipment sales.................................................................. 224,504 351,256
Other income..................................................................... 66,089 175,437
------------- -------------
Total revenues................................................................... 19,727,126 19,720,897
------------- -------------
COSTS AND EXPENSES:
Cost of services................................................................. 6,103,477 5,914,442
Cost of equipment sales.......................................................... 728,357 1,154,816
Marketing and selling expenses................................................... 1,314,631 1,104,764
General and administrative expenses.............................................. 1,966,416 2,237,552
Legal and professional fees...................................................... 440,181 460,320
Depreciation..................................................................... 1,501,755 1,883,951
Amortization..................................................................... 188,892 127,390
------------- -------------
Total costs and expenses......................................................... 12,243,709 12,883,235
------------- -------------
Net income from operations......................................................... 7,483,417 6,837,662
------------- -------------
OTHER INCOME (EXPENSE):
Interest income.................................................................. 31,260 16,440
Interest expense................................................................. (822,573) (830,901)
Loss on disposition of fixed assets.............................................. -- (44,199)
Miscellaneous income............................................................. 2,265 9,444
Management termination fee....................................................... (3,000,000) --
------------- -------------
Total other income (expense)..................................................... (3,789,048) (849,216)
------------- -------------
Net income......................................................................... $ 3,694,369 $ 5,988,446
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-61
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Partners' equity, beginning of period................................................. $ 3,682,068 $ 2,606,662
Net income............................................................................ 3,694,369 5,988,446
Distributions......................................................................... 4,769,775 3,219,566
------------ ------------
Partners' equity, end of period....................................................... $ 2,606,662 $ 5,375,542
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-62
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................................. $ 3,694,369 $ 5,988,446
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization..................................................... 1,690,647 2,011,341
Loss on disposition of fixed assets............................................... -- 44,199
(Increase) decrease in assets:
Accounts receivable............................................................. (526,635) 69,397
Inventory....................................................................... 26,786 (13,126)
Prepaid and other current assets................................................ (178,022) (87,222)
Loan costs...................................................................... -- (80,000)
Licensing costs................................................................. -- (40,000)
Increase (decrease) in liabilities:
Accounts payable................................................................ 67,338 (11,225)
Accrued management termination fee.............................................. 500,000 (1,500,000)
Accrued liabilities............................................................. (14,072) 80,690
Unearned revenue................................................................ 51,630 51,054
Federal and state taxes payable................................................. 19,139 495,383
Customer deposits............................................................... (6,300) (4,400)
------------- -------------
Net cash provided by operating activities......................................... 5,324,880 7,004,537
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets................................................ -- 1,976
Capital expenditures for property, plant and equipment............................ (2,214,973) (7,087,210)
------------- -------------
Net cash used for investing activities............................................ (2,214,973) (7,085,234)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable....................................................... (1,150,000) (300,000)
Proceeds from notes payable....................................................... 2,000,000 3,000,000
Distributions..................................................................... (4,769,775) (3,219,566)
------------- -------------
Net cash provided (used) by financing activities.................................. (3,919,775) (519,566)
------------- -------------
Net increase (decrease) in cash and cash equivalents.............................. (809,868) (600,263)
Cash and cash equivalents at beginning of period.................................... 1,952,277 1,142,409
------------- -------------
Cash and cash equivalents at end of period.......................................... $ 1,142,409 $ 542,146
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-63
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
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-64
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
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, 1996 and 1997 was $625,105 and $681,933, 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, 1996 and 1997 was $114,387 and $173,103,
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-65
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
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
$122,808 in 1996 and $183,690 in 1997. 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, 1996 and 1997 for the statement of
cash flows consist of:
<TABLE>
<CAPTION>
1996 1997
------------ -------------
<S> <C> <C>
Cash and money market funds...................................... $ 1,142,409 $ 1,079,070
Cash overdrafts.................................................. -- (536,924)
------------ -------------
Total............................................................ $ 1,142,409 $ 542,146
------------ -------------
------------ -------------
</TABLE>
At December 31, 1997, the balance sheet presentation of cash and cash
equivalents omits the cash overdrafts.
F-66
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
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, 1996 and 1997, interest paid amounted to
$826,780 and $830,901, respectively, net of capitalized interest.
NOTE 3--NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<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.......................................................... $ 10,100,000 $ 14,053,381
Less current maturities........................................ 1,200,000 1,253,381
------------- -------------
Total long term portion of notes payable....................... $ 8,900,000 $ 12,800,000
------------- -------------
------------- -------------
</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-67
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
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-68
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
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 1996 1997
- --------------------------------------------------------------- ---------------------- ---------- ------------
<S> <C> <C> <C>
AT&T Wireless Services......................................... Accounts receivable $ 887,000 $ 1,057,000
of California, Inc. (including systems owned Accounts payable 268,000 243,000
or controlled by AWS) Notes payable -- 1,253,000
Bay Area Cellular Telephone.................................... Accounts receivable 315,000 281,000
Company Accounts payable 58,000 51,000
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, 1996 and 1997 consist of the following:
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Accounts receivable--roamer....................................... $ 314,304 $ 114,270
Accounts receivable--subscriber................................... 1,233,315 1,216,190
Accounts receivable--other........................................ 168,351 27,001
Less allowance for doubtful accounts.............................. (220,000) (126,000)
------------ ------------
Total........................................................... $ 1,495,970 $ 1,231,461
------------ ------------
------------ ------------
</TABLE>
F-69
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
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, 1996 and 1997 were $10,800 and $20,545, 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-70
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1997
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-71
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
BALANCE SHEET
DECEMBER 31, 1997 AND MARCH 31, 1998
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------- -------------
(AUDITED) (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents........................................................ $ 1,079,070 $ 130,801
Accounts receivable.............................................................. 1,231,461 1,443,923
Accounts receivable--related parties............................................. 1,396,810 1,115,548
Inventory........................................................................ 160,677 112,859
Prepaid and other current assets................................................. 370,334 221,161
------------- -------------
Total current assets............................................................. 4,238,352 3,024,292
------------- -------------
PROPERTY, PLANT AND EQUIPMENT:
Buildings and towers............................................................. 7,234,628 7,247,880
Cellular and switching equipment................................................. 15,059,156 16,719,661
Autos and trucks................................................................. 126,140 126,140
Office equipment and furniture................................................... 413,672 415,852
Leasehold improvements........................................................... 333,675 333,675
Construction in progress......................................................... 2,730,032 1,360,988
------------- -------------
Total property, plant and equipment.............................................. 25,897,303 26,204,196
Less accumulated depreciation.................................................... 6,563,647 7,137,194
------------- -------------
Net property, plant and equipment................................................ 19,333,656 19,067,002
------------- -------------
OTHER ASSETS:
Loan costs....................................................................... 268,084 252,281
Licensing costs.................................................................. 54,169 50,652
------------- -------------
Total other assets............................................................... 322,253 302,933
------------- -------------
TOTAL ASSETS....................................................................... $ 23,894,261 $ 22,394,227
------------- -------------
------------- -------------
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft................................................................... $ 536,924 $
Notes payable--related party..................................................... 1,253,381 203,793
Accounts payable................................................................. 723,491 640,282
Accounts payable--related parties................................................ 305,437 264,034
Obligation for equipment......................................................... 1,621,169 1,621,169
Accrued expenses................................................................. 143,022 171,362
Unearned revenue................................................................. 297,792 310,083
Federal and state taxes payable.................................................. 819,903 735,034
Customer deposits................................................................ 17,600 21,300
------------- -------------
Total current liabilities........................................................ 5,718,719 3,967,057
------------- -------------
LONG-TERM LIABILITIES:
Notes payable, less current portion.............................................. 12,800,000 12,800,000
------------- -------------
Total long term liabilities...................................................... 12,800,000 12,800,000
------------- -------------
Total liabilities................................................................ 18,518,719 16,767,057
PARTNERS' EQUITY................................................................... 5,375,542 5,627,170
------------- -------------
TOTAL LIABILITIES AND PARTNERS' EQUITY............................................. $ 23,894,261 $ 22,394,227
------------- -------------
------------- -------------
</TABLE>
See accompanying notes and accountants' report.
F-72
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1998
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES:
Cellular service.................................................................... $ 1,959,180 $ 2,398,814
Cellular roaming.................................................................... 2,061,429 2,336,412
Equipment sales..................................................................... 67,339 273,614
Other income........................................................................ 47,934 74,541
------------ ------------
Total revenues...................................................................... 4,135,882 5,083,381
------------ ------------
COSTS AND EXPENSES:
Cost of services.................................................................... 1,361,129 1,451,133
Cost of equipment sales............................................................. 215,516 433,286
Marketing and selling expenses...................................................... 284,870 235,264
General and administrative expenses................................................. 512,199 773,488
Legal and professional fees......................................................... 161,089 204,062
Depreciation........................................................................ 403,913 573,547
Amortization........................................................................ 47,831 19,321
------------ ------------
Total costs and expenses............................................................ 2,986,547 3,690,101
------------ ------------
Net income from operations............................................................ 1,149,335 1,393,280
------------ ------------
OTHER INCOME (EXPENSE):
Interest income..................................................................... 6,238 7,031
Interest expense.................................................................... (176,495) (240,041)
Loss on disposition of fixed assets................................................. (43,723)
Miscellaneous income................................................................ 40 91,358
------------ ------------
Total other income (expense)........................................................ (213,940) (141,652)
------------ ------------
Net income............................................................................ $ 935,395 $ 1,251,628
------------ ------------
------------ ------------
</TABLE>
See accompanying notes and accountants' report.
F-73
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1998
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Partners' equity, beginning of period................................................. $ 2,606,661 $ 5,375,542
Net income............................................................................ 935,395 1,251,628
Distributions......................................................................... 500,000 1,000,000
------------ ------------
Partners' equity, end of period....................................................... $ 3,042,056 $ 5,627,170
------------ ------------
------------ ------------
</TABLE>
See accompanying notes and accountants' report.
F-74
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1998
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................................. $ 935,395 $ 1,251,628
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization................................................... 451,744 592,868
Loss on disposition of fixed assets............................................. 43,723
(Increase) decrease in assets:
Accounts receivable........................................................... 447,986 68,800
Inventory..................................................................... 11,323 47,818
Prepaid and other current assets.............................................. 94,940 149,173
Licensing costs............................................................... (40,000)
Increase (decrease) in liabilities:
Accounts payable.............................................................. 113,353 (124,612)
Accrued expenses.............................................................. (3,510) 28,340
Unearned revenue.............................................................. 100,335 12,291
Federal and state taxes payable............................................... 34,259 (84,869)
Customer deposits............................................................. (1,967) 3,700
------------- -------------
Net cash provided by operating activities..................................... 2,187,581 1,945,137
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets................................................ 1,900
Capital expenditures for property, plant and equipment............................ (2,558,154) (306,894)
------------- -------------
Net cash used for investing activities............................................ (2,556,254) (306,894)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of notes payable....................................................... (300,000) (1,049,588)
Distributions..................................................................... (500,000) (1,000,000)
------------- -------------
Net cash provided (used) by financing activities.................................. (800,000) (2,049,588)
------------- -------------
Net increase (decrease) in cash and cash equivalents.............................. (1,168,673) (411,345)
Cash and cash equivalents at beginning of period.................................... 1,142,409 542,146
------------- -------------
Cash and cash equivalents at end of period.......................................... $ (26,264) $ 130,801
------------- -------------
------------- -------------
</TABLE>
See accompanying notes and accountants' report.
F-75
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, MARCH 31, 1997 AND 1998
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-76
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, MARCH 31, 1997 AND 1998
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 March 31, 1998 was $681,933 and $681,933,
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 March 31, 1998 was $173,103 and $188,907,
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 March 31, 1998 was
$15,213 and $18,730, respectively.
F-77
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, MARCH 31, 1997 AND 1998
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
$42,535 and $85,778 for the three months ended March 31, 1997 and 1998,
respectively. 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 March 31, 1998, approximately 48% 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
March 31, 1998. 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 March 31,
1998.
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 March 31, 1997 and 1998 for the statement of
cash flows consist of:
<TABLE>
<CAPTION>
1997 1998
----------- ----------
<S> <C> <C>
Cash and money market funds.......................................... $ 151,576 $ 130,801
Cash overdrafts...................................................... (177,840)
----------- ----------
Total................................................................ $ (26,264) $ 130,801
----------- ----------
----------- ----------
</TABLE>
For the three months ended March 31, 1997 and 1998, interest paid amounted
to $176,495 and $144,204, respectively, net of capitalized interest.
F-78
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, MARCH 31, 1997 AND 1998
NOTE 3--NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------- -------------
<S> <C> <C>
Commercial promissory note due April 1, 1998. Collateralized by
subordinated security interest in property and assets
purchased under contract with AWS and outcollect revenues.... $ 1,253,381 $ 203,793
8.16797% Variable rate term loan due December 31, 2003.
Collateralized by all property and assets of the
partnership.................................................. 12,800,000 12,800,000
------------- -------------
Total.......................................................... $ 14,053,381 $ 13,003,793
Less current maturities........................................ 1,253,381 203,793
------------- -------------
Total long term portion of notes payable....................... $ 12,800,000 $ 12,800,000
------------- -------------
------------- -------------
</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 1998.
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
F-79
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, MARCH 31, 1997 AND 1998
NOTE 3--NOTES PAYABLE (CONTINUED)
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 $1,000,000 were made during the period ended December
31, 1997 and March 31, 1998, respectively.
At March 31, 1998, these borrowings bear interest at 2.25% above the LIBOR
rate established for the period. Total interest incurred during the three month
period ended March 31, 1997 and 1998 was $204,367 and $168,442, respectively. Of
this, $30,316 and $24,238 were capitalized in 1997 and 1998, respectively, as
construction costs.
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>
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.
Cellular 2000 Telephone Co. owns the controlling interest in the Partnership.
<TABLE>
<CAPTION>
AMOUNT OF TRANSACTION
---------------------------------
RELATED PARTY TYPE OF TRANSACTION DECEMBER 31, 1997 MARCH 31, 1998
- -------------------------------------- -------------------------------------- ----------------- --------------
<S> <C> <C> <C>
AT&T Wireless Services of California, Accounts receivable $ 1,057,000 $ 876,372
Inc. (including systems owned or Accounts payable 243,000 216,088
controlled by AWS) Notes payable 1,253,000 203,793
Bay Area Cellular Telephone Company Accounts receivable 281,000 239,176
Accounts payable 51,000 47,946
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
F-80
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, MARCH 31, 1997 AND 1998
NOTE 5--OBLIGATION FOR EQUIPMENT (CONTINUED)
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 subsequent sale of the
system as discussed in Note 9, management fulfilled the obligation for the
upgrade to the switch in April, 1998, therefore this obligation is classified as
a current liability at March 31, 1998 on the balance sheet.
NOTE 6--ACCOUNTS RECEIVABLE
Accounts receivable at December 31, 1997 and March 31, 1998 consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ------------
<S> <C> <C>
Accounts receivable--roamer...................................... $ 114,270 $ 186,440
Accounts receivable--subscriber.................................. 1,216,190 1,303,430
Accounts receivable--other....................................... 27,001 116,053
Less allowance for doubtful accounts............................. (126,000) (162,000)
------------ ------------
Total............................................................ $1,231,461 $1,443,923
------------ ------------
------------ ------------
</TABLE>
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 three months
ended March 31, 1997 and 1998 were $5,500 and $8,715, 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.
F-81
<PAGE>
CELLULAR 2000 (A PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, MARCH 31, 1997 AND 1998
NOTE 8--COMMITMENTS AND CONTINGENCIES (CONTINUED)
The statement of income includes rental expense for operating leases of
approximately $101,200 for the three months ended March 31, 1997 and $107,161
for the three months ended March 31, 1998. The partnership's future minimum
lease commitments under noncancelable operating leases are as follows:
<TABLE>
<CAPTION>
REAL ESTATE EQUIPMENT
PERIOD LEASES RENTALS
- -------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Nine months ended 12-31-98.......................................... $ 314,385 $ 2,855
Year ended 12-31-99................................................. 346,501 1,586
Year ended 12-31-00................................................. 326,523
Year ended 12-31-01................................................. 226,151
Year ended 12-31-02................................................. 133,050
Year ended 12-31-03................................................. 126,851
Thereafter.......................................................... 305,525
------------ -----------
Total............................................................... $ 1,652,135 $ 4,441
------------ -----------
------------ -----------
</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 in August, 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
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
closed 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 closed in April, 1998.
F-82
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Sygnet Wireless, Inc.
We have audited the accompanying consolidated balance sheets of Sygnet
Wireless, Inc. as of December 31, 1996 and 1997, and the related consolidated
statements of operations, shareholders' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1997. 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 consolidated financial position of Sygnet
Wireless, Inc. at December 31, 1996 and 1997 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Cleveland, Ohio
February 6, 1998
F-83
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 2,257,748 $ 860,086
Accounts receivable, less allowance for doubtful accounts of $809,800 at
December 31, 1997 and $1,168,800 at December 31, 1996........................ 8,857,028 10,711,627
Inventory...................................................................... 1,696,952 1,867,445
Prepaid expenses............................................................... 531,171 309,460
-------------- --------------
Total current assets......................................................... 13,342,899 13,748,618
Other assets:
Cellular licenses--net......................................................... 252,271,468 245,866,235
Customer lists--net............................................................ 24,535,885 19,382,087
Deferred financing costs--net.................................................. 10,068,956 8,982,430
-------------- --------------
Total other assets........................................................... 286,876,309 274,230,752
Property and equipment--net...................................................... 43,958,969 53,007,015
-------------- --------------
Total assets................................................................. $ 344,178,177 $ 340,986,385
-------------- --------------
-------------- --------------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................................................... $ 2,826,629 $ 3,264,206
Deferred revenue............................................................... 1,679,873 2,058,066
Accrued expenses and other liabilities......................................... 2,744,789 4,196,230
Interest payable............................................................... 6,940,623 6,749,755
-------------- --------------
Total current liabilities.................................................... 14,191,914 16,268,257
Long-term debt................................................................... 312,250,000 305,500,000
Redeemable Series A Senior Cumulative Nonvoting Preferred Stock, $.01 par,
aggregate redemption value of $20,690,411, 500,000 shares authorized, 200,000
shares issued and outstanding and warrants..................................... 19,718,028 --
Shareholders' equity (deficit):
Common shares, $.01 par, Class A, 1 vote per share; 60,000,000 shares
authorized; 4,010,653 shares issued and outstanding as of December 31, 1997;
2,653 shares issued and outstanding as of December 31, 1996.................. 27 40,107
Common shares, $.01 par, Class B, 10 votes per share; 10,000,000 shares
authorized; 5,159,977 shares issued and outstanding as of December 31, 1997;
6,167,977 shares issued and outstanding as of December 31, 1996.............. 61,679 51,599
Additional paid-in capital..................................................... 5,812,211 47,598,498
Retained deficit............................................................... (7,605,730) (28,222,124)
Note receivable from officer/shareholder....................................... (249,952) (249,952)
-------------- --------------
Total shareholders' equity (deficit)............................................. (1,981,765) 19,218,128
-------------- --------------
Total liabilities, redeemable preferred stock and shareholders' equity
(deficit)...................................................................... $ 344,178,177 $ 340,986,385
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-84
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
1995 1996 1997
------------- ------------- --------------
<S> <C> <C> <C>
REVENUE:
Subscriber revenue............................................... $ 17,191,291 $ 31,084,883 $ 52,638,712
Roamer revenue................................................... 4,175,809 9,687,284 26,992,584
Equipment sales.................................................. 1,529,284 2,416,769 4,323,052
Other revenue.................................................... 1,680,544 1,607,245 1,679,412
------------- ------------- --------------
Total revenue.................................................. 24,576,928 44,796,181 85,633,760
COSTS AND EXPENSES:
Cost of services................................................. 3,365,954 5,508,386 10,048,416
Cost of equipment sales.......................................... 4,163,890 5,816,144 9,663,251
General and administrative....................................... 5,563,887 9,852,004 16,975,592
Selling and marketing............................................ 3,082,492 6,080,308 10,841,059
Depreciation and amortization.................................... 3,486,554 10,038,439 28,718,937
------------- ------------- --------------
Total costs and expenses....................................... 19,662,777 37,295,281 76,247,255
------------- ------------- --------------
INCOME FROM OPERATIONS............................................. 4,914,151 7,500,900 9,386,505
OTHER:
Interest expense................................................. 2,660,248 11,173,688 29,901,678
Other expense, net............................................... 303,867 194,723 101,221
------------- ------------- --------------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM............................ 1,950,036 (3,867,511) (20,616,394)
Extraordinary loss on extinguishment of debt....................... -- (1,420,864) --
------------- ------------- --------------
NET (LOSS) INCOME.................................................. $ 1,950,036 $ (5,288,375) $ (20,616,394)
------------- ------------- --------------
------------- ------------- --------------
Earnings per share information (pro forma for 1996):
Loss before preferred stock dividend and accretion............... (5,288,375) $ (20,616,394)
Preferred stock dividend and accretion........................... $ (718,028) $ (2,121,423)
------------- --------------
Net loss applicable to common shareholders....................... $ (6,006,403) $ (22,737,817)
------------- --------------
------------- --------------
Net loss per share applicable to common shareholders
Before extraordinary item...................................... $ (.74) $ (2.93)
Extraordinary item............................................. (.23) --
------------- --------------
Net loss....................................................... $ (.97) $ (2.93)
------------- --------------
------------- --------------
Weighted average common shares outstanding......................... 6,170,630 7,773,370
------------- --------------
------------- --------------
</TABLE>
See accompanying notes.
F-85
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATERD STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
WILCOM CORPORATION SYGNET COMMUNICATIONS, INC.
COMMON STOCK COMMON STOCK
---------------------------------------------- ---------------------------------------------
TYPE A TYPE B TYPE A TYPE B
---------------------- ---------------------- -------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- --------- ----------- --------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1995..... 500 $ 12,500 2,500 $ 62,500 209,362 $ 209,362 1,046,801 $ 1,046,801
Net Income......................
Dividends declared..............
Type A common stock
repurchased...................
Type B common stock
repurchased...................
----- --------- ----------- --------- --------- --------- ---------- -----------
Balance as of December 31, 1995... 500 12,500 2,500 62,500 209,362 209,362 1,046,801 1,046,801
Net loss........................
Dividends declared..............
Corporate merger................ (500) (12,500) (2,500) (62,500) 4,360 4,360 21,800 21,800
Retirement of treasury stock.... (8,024) (40,173)
Sygnet Wireless
capitalization................ (205,698) (213,722) (1,028,428) (1,068,601)
Capital contribution of
S Corporation earnings........
Preferred stock dividend........
Accretion of preferred stock....
Exchange of common shares.......
----- --------- ----------- --------- --------- --------- ---------- -----------
Balance as of December 31, 1996... -- -- -- -- -- -- -- --
Net loss........................
Preferred Stock dividend........
Accretion of Preferred Stock....
Stock option compensation.......
Excess of redemption price over
carring value of Preferred
Stock.........................
Net Proceeds from issuance of
stock to Boston Venture.......
Exchange of Common Shares.......
----- --------- ----------- --------- --------- --------- ---------- -----------
Balance as of December 31,
1997.......................... -- $ -- -- $ -- -- $ -- -- $ --
----- --------- ----------- --------- --------- --------- ---------- -----------
----- --------- ----------- --------- --------- --------- ---------- -----------
<CAPTION>
SYGNET WIRELESS, INC.
------------------------------------------- NOTE
RECEIVABLE TREASURY
CLASS A CLASS B ADDITIONAL RETAINED FROM STOCK
-------------------- --------------------- PAID-IN EARNINGS OFFICER/ ---------
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) SHAREHOLDER SHARES
--------- --------- ---------- --------- ----------- ------------ ------------ ---------
<S> <C>
Balance as of January 1, 1995..... -- $ -- -- $ -- $ 4,170,368 $ (482,842) $ (249,952) --
Net Income...................... 1,950,036
Dividends declared.............. (713,519)
Type A common stock
repurchased................... 8,024
Type B common stock
repurchased................... 40,173
--------- --------- ---------- --------- ----------- ------------ ------------ ---------
Balance as of December 31, 1995... -- -- -- -- 4,170,368 753,675 (249,952) 48,197
Net loss........................ (5,288,375)
Dividends declared.............. (261,625)
Corporate merger................ 48,840
Retirement of treasury stock.... (1,718,991) (48,197)
Sygnet Wireless
capitalization................ 6,170,630 61,706 1,220,617
Capital contribution of
S Corporation earnings........ 2,809,405 (2,809,405)
Preferred stock dividend........ (690,411)
Accretion of preferred stock.... (27,617)
Exchange of common shares....... 2,653 27 (2,653) (27)
--------- --------- ---------- --------- ----------- ------------ ------------ ---------
Balance as of December 31, 1996... 2,653 27 6,167,977 61,679 5,812,211 (7,605,730) (249,952) --
Net loss........................ (20,616,394)
Preferred Stock dividend........ (1,149,040)
Accretion of Preferred Stock.... (46,849)
Stock option compensation....... 306,000
Excess of redemption price over
carring value of Preferred
Stock......................... (925,534)
Net Proceeds from issuance of
stock to Boston Venture....... 3,000,000 30,000 43,601,710
Exchange of Common Shares....... 1,008,000 10,080 (1,008,000) (10,080)
--------- --------- ---------- --------- ----------- ------------ ------------ ---------
Balance as of December 31,
1997.......................... 4,010,653 $ 40,107 5,159,977 $ 51,599 $47,598,498 $(28,222,124) $ (249,952) $ --
--------- --------- ---------- --------- ----------- ------------ ------------ ---------
--------- --------- ---------- --------- ----------- ------------ ------------ ---------
<CAPTION>
AMOUNT
-----------
Balance as of January 1, 1995..... $ --
Net Income......................
Dividends declared..............
Type A common stock
repurchased................... $ (312,936)
Type B common stock
repurchased................... $(1,406,055)
-----------
Balance as of December 31, 1995... $(1,718,991)
Net loss........................
Dividends declared..............
Corporate merger................
Retirement of treasury stock.... 1,718,991
Sygnet Wireless
capitalization................
Capital contribution of
S Corporation earnings........
Preferred stock dividend........
Accretion of preferred stock....
Exchange of common shares.......
-----------
Balance as of December 31, 1996... --
Net loss........................
Preferred Stock dividend........
Accretion of Preferred Stock....
Stock option compensation.......
Excess of redemption price over
carring value of Preferred
Stock.........................
Net Proceeds from issuance of
stock to Boston Venture.......
Exchange of Common Shares.......
-----------
Balance as of December 31,
1997.......................... $ --
-----------
-----------
</TABLE>
See accompanying notes
F-86
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------
1995 1996 1997
-------------- --------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income............................................... $ 1,950,036 $ (5,288,375) $ (20,616,394)
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation.................................................. 2,765,816 5,948,693 16,018,841
Amortization.................................................. 720,738 4,089,746 12,700,096
Compensation expense from issuance of stock options........... -- -- 306,000
Loss on disposal of equipment................................. 161,222 177,633 102,955
Extraordinary loss on extinguishment of debt.................. -- 1,420,864 --
Changes in operating assets and liabilities:
Accounts receivable......................................... (2,838,833) (184,315) (1,854,599)
Inventory................................................... (184,951) (287,900) (170,493)
Prepaid and deferred expenses............................... 7,951 28,649 232,548
Accounts payable and accrued expenses....................... (589,925) 2,424,406 2,866,653
Accrued interest payable.................................... 452,933 6,481,912 (190,868)
-------------- --------------- --------------
Net cash provided by operating activities....................... 2,444,987 14,811,313 9,394,739
INVESTING ACTIVITIES
Acquisitions of Horizon and Erie................................ (40,533,104) (254,150,136) (599,442)
Purchases of property and equipment............................. (9,056,098) (10,049,999) (25,575,837)
Proceeds from sale of equipment................................. 513,730 -- 405,995
-------------- --------------- --------------
Net cash used in investing activities........................... (49,075,472) (264,200,135) (25,769,284)
FINANCING ACTIVITIES
Dividends paid.................................................. (1,158,980) (261,625) --
Proceeds from long-term debt.................................... 51,986,188 320,750,000 30,500,000
Principal payments on long-term debt............................ (750,000) (78,000,000) (37,250,000)
Increase in financing costs..................................... (1,716,230) (10,290,097) (65,376)
Net proceeds from issuance of preferred stock................... -- 19,000,000 --
Redemption of preferred stock................................... -- -- (21,839,451)
Net proceeds from issuance of common stock...................... -- -- 43,631,710
Purchase of treasury stock...................................... (1,718,991) -- --
-------------- --------------- --------------
Net cash provided by financing activities....................... 46,641,987 251,198,278 14,976,883
(Decrease) increase in cash and cash equivalents................ 11,502 1,809,456 (1,397,662)
Cash and cash equivalents at beginning of year.................. 436,790 448,292 2,257,748
-------------- --------------- --------------
Cash and cash equivalents at end of year........................ $ 448,292 $ 2,257,748 $ 860,086
-------------- --------------- --------------
-------------- --------------- --------------
</TABLE>
See accompanying notes
F-87
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
These financial statements include the combined financial statements of
Sygnet Communications, Inc. ("Sygnet") and Wilcom Corporation ("Wilcom") through
August 31, 1996, the effective date of the merger described below, and the
consolidated accounts of Sygnet Wireless, Inc. and its wholly-owned subsidiary
Sygnet Communications, Inc. ("Sygnet") (hereinafter collectively referred to as
the "Company") thereafter. The Company owns and operates cellular telephone
systems serving one large cluster with an approximate population of 2.4 million
in Northeastern Ohio, Western Pennsylvania and Western New York.
On August 19, 1996, the shareholders of Sygnet and Wilcom effected a
corporate restructuring whereby Wilcom was merged into Sygnet and shareholders
of Wilcom received 8.72 shares of Sygnet common stock for each share of Wilcom
common stock held as of August 31, 1996, the effective date of the merger. This
merger was a business combination between entities under common control whereby
the assets and liabilities so transferred were accounted for at historical cost
in a manner similar to that in pooling-of-interest accounting. Also, in
conjunction with this merger, the shareholders of Sygnet amended the articles of
incorporation to change Sygnet's name to Sygnet Wireless, Inc.
Prior to the restructuring, Sygnet and Wilcom had been operating their
cellular business through three partnerships (Youngstown Cellular Telephone
Company ("YCTC")), Erie Cellular Telephone Company ("Erie"), and Wilcom
Cellular) and Sharon--Youngstown Cellular, Inc. ("Sharon"). As a result of the
restructuring and merger, Sharon was renamed Sygnet and is the wholly-owned
subsidiary and operating company of Sygnet Wireless, Inc. The existence of YCTC,
Erie, and Wilcom Cellular terminated on October 1, 1996 when all partnership
interests transferred to Sygnet.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement No. 130, REPORTING COMPREHENSIVE
INCOME, which is required to be adopted effective January 1, 1998. This
Statement establishes standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Reclassification of financial statements for earlier periods presented is
required. The impact of Statement No. 130 on the Company's financial statements
is not expected to be material.
In June 1997, the FASB also issued Statement No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which is required to be
adopted effective January 1, 1998. This Statement changes the way companies
report selected segment information in annual financial statements and also
requires those companies to report selected segment information in interim
financial reports to shareholders. The impact of Statement No. 131 on the
Company's financial statement disclosures is not expected to be material.
3. ACQUISITIONS
On October 9, 1996, the Company acquired certain cellular licenses,
property, equipment, customer lists, current assets and current liabilities of
Horizon Cellular Telephone Company of Chautauqua L.P., Horizon Cellular
Telephone Company of Crawford L.P., and Horizon Cellular Telephone Company of
Indiana L.P. (hereinafter collectively referred to as "Horizon") for cash of
$252.9 million. The acquired systems provide cellular service to an estimated
population of 1.4 million in contiguous markets in Western Pennsylvania and
Western New York.
F-88
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
3. ACQUISITIONS (CONTINUED)
On September 30, 1995, Sygnet, as a general partner, purchased 95.46% of
Erie for cash of $40.53 million. On November 30, 1995, Sharon purchased 4.54% of
Erie for $1.92 million, which was paid on February 12, 1996.
The above transactions were accounted for as purchases and, accordingly, the
results of operations of the companies acquired have been included in the
consolidated financial statements since the dates of acquisition.
Cash paid for acquisitions is summarized below:
<TABLE>
<CAPTION>
1995 1996
------------- --------------
<S> <C> <C>
Current assets acquired....................................... $ 923,234 $ 3,613,696
Property and equipment........................................ 1,349,195 18,986,400
Cellular licenses............................................. 40,289,743 207,223,616
Customer lists................................................ 25,700,000
Current liabilities assumed................................... (108,878) (774,134)
------------- --------------
Net assets and liabilities acquired........................... 42,453,294 254,749,578
Amounts payable in future periods............................. (1,920,190) (599,442)
------------- --------------
Cash paid..................................................... $ 40,533,104 $ 254,150,136
------------- --------------
------------- --------------
</TABLE>
The pro forma unaudited condensed combined results of operations for the
year ended December 31, 1996 as if the purchase occurred on January 1, 1996 are
as follows:
<TABLE>
<CAPTION>
1996
--------------
<S> <C>
Revenue....................................................................... $ 69,851,000
--------------
--------------
Loss before extraordinary item................................................ $ (15,283,000)
--------------
--------------
Net loss...................................................................... $ (16,704,000)
--------------
--------------
Pro forma net loss per share applicable to common shareholders................ $ (3.25)
--------------
--------------
</TABLE>
4. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the parent
company and its wholly-owned subsidiary. Intercompany balances and transactions
have been eliminated in the consolidated financial statements.
CASH EQUIVALENTS
The Company considers all liquid investments with a maturity of three months
or less when purchased to be cash equivalents.
F-89
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORY
Inventory consisting of merchandise purchased for resale is stated at the
lower of cost or market determined by the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated over their
estimated useful lives calculated under the straight-line or double-declining
balance methods.
INTANGIBLE ASSETS
The FCC issues licenses that enable cellular carriers to provide cellular
service in specific geographic areas. The FCC grants licenses for a term of up
to 10 years and generally grants renewals if the licensee has complied with its
obligations under the Communications Act of 1934. In 1993, the FCC adopted
specific standards to apply to cellular renewals, concluding it will award a
renewal to a cellular licensee that meets certain standards of past performance.
Historically, the FCC has granted license renewals routinely. The Company
believes that it has met, and will continue to meet all requirements necessary
to secure renewal of its cellular licenses.
The Company has acquired cellular licenses and customer lists through its
acquisition of interests in various cellular systems. The cost of licenses and
customer lists acquired was $231,003,426 in 1996. The Company uses a 40 year
useful life to amortize its licenses under the straight-line method. Purchased
cellular and paging customer lists are being amortized over 5 years under the
straight-line method. The components of intangible assets at December 31 are
summarized below:
<TABLE>
<CAPTION>
1996 1997
-------------- --------------
<S> <C> <C>
Cellular licenses............................................ $ 255,849,696 $ 255,849,696
Customer lists............................................... 25,819,792 25,819,792
-------------- --------------
281,669,488 281,669,488
Accumulated amortization..................................... (4,862,135) (16,421,166)
-------------- --------------
$ 276,807,353 $ 265,248,322
-------------- --------------
-------------- --------------
</TABLE>
Amortization expense was $523,768, $3,652,470 and $11,559,031 in 1995, 1996
and 1997, 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.
REVENUE RECOGNITION
The Company earns revenue primarily by providing cellular services to its
customers (Subscriber Revenue) and from the usage of its system by the customers
of other cellular carriers (Roamer Revenue). Access revenue for Subscriber
Revenue is billed one month in advance. Revenue is recognized as service is
rendered. Subscriber acquisition costs (primarily commissions and loss on
equipment sales) are expensed when incurred.
F-90
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED FINANCING COSTS
Deferred financing costs are being amortized over the terms of the bank
credit facility and senior notes. Accumulated amortization was $266,084 and
$1,409,754 at December 31, 1996 and 1997, respectively. Amortization expense was
$196,170, $437,276 and $1,141,065 in 1995, 1996 and 1997, respectively. Upon
entering into a new bank credit facility in October 1996, an extraordinary loss
of $1,420,864 was incurred to write-off unamortized financing costs under the
extinguished bank credit agreement as described in Note 6.
ADVERTISING COSTS
Advertising costs are recorded as expense when incurred. Advertising expense
was $933,498, $1,225,151 and $1,841,138 in 1995, 1996 and 1997, respectively.
NET LOSS PER COMMON SHARE
In 1997, the Company adopted FASB Statement No. 128, EARNINGS PER SHARE,
which replaced the computation of primary and fully diluted earnings per share
with basic and diluted earnings per share. No restatement of prior year earnings
per share amounts was necessary since the impact was not significant.
Net loss per share is computed using the weighted average number of shares
of common stock outstanding during the period. The pro forma net loss per share
for 1996 is based on the number of common shares outstanding, as if the
corporate restructuring described in Note 1 occurred at the beginning of the
year. The effect of stock options is not included in the computation of dilutive
earnings per share since it is anti-dilutive.
Losses applicable to common shareholders include adjustments for Preferred
Stock dividends and accretions and the excess of the redemption price paid over
the carrying value of the Preferred Stock. Earnings per share for 1995 is not
presented because such data prior to the restructuring described in Note 1 is
not meaningful.
STOCK COMPENSATION
The Company accounts for its stock-based employee compensation arrangements
based on the intrinsic value of the equity instruments granted, as set forth in
APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results may 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
62%, 48% and 43% of the Company's Roamer Revenue was earned from two cellular
carriers in 1995, 1996 and 1997, respectively.
F-91
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS
Derivative financial instruments are used by the Company in the management
of interest rate exposure and are accounted for on an accrual basis. Income and
expense are recorded in the same category as that arising from the related
liability being hedged (i.e., adjustments to interest expense).
The Company uses variable interest rate credit facilities to finance
acquisitions and operations of the Company. The Company may reduce its exposure
to fluctuations in interest rates by creating offsetting positions through the
use of derivative financial instruments. The Company does not use derivative
financial instruments for trading or speculative purposes, nor is the Company a
party to leveraged derivatives. The notional amount of interest rate swaps is
the underlying principal amount used in determining the interest payments
exchanged over the life of the swap. The notional amount is not a measure of the
Company's exposure through its use of derivatives.
The Company may be exposed to credit loss in the event of nonperformance by
the counterparties to its interest rate swap agreements. The Company anticipates
the counterparties will be able to fully satisfy its obligations under the
agreements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1996 and 1997, the carrying value of cash equivalents,
accounts receivable, the interest rate swap and the long-term bank debt
approximated fair value. The fair value of the long-term unsecured senior notes,
calculated based on quoted market prices, was $112,750,000 and $118,800,000 at
December 31, 1996 and 1997, respectively.
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
USEFUL LIFE 1996 1997
------------- -------------- --------------
<S> <C> <C> <C>
Land, building and improvements............... 5-19 years $ 7,296,770 $ 10,575,573
Cellular system and equipment................. 2.5-19 years 41,498,865 57,010,440
Customer premise equipment.................... 3 years 1,690,906 665,935
Office furniture and equipment................ 3-10 years 4,341,459 9,257,464
Cell site construction in progress............ 1,076,817 1,522,275
-------------- --------------
55,904,817 79,031,687
Accumulated depreciation...................... (11,945,848) (26,024,672)
-------------- --------------
$ 43,958,969 $ 53,007,015
-------------- --------------
-------------- --------------
</TABLE>
At December 31, 1997, the Company had purchase commitments of approximately
$9.3 million for equipment.
F-92
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
6. LONG-TERM DEBT
On September 19, 1996, the Company issued $110,000,000 11 1/2% unsecured
Senior Notes due October 1, 2006 (the Notes). The Notes pay interest
semiannually on April 1 and October 1 of each year commencing April 1, 1997. The
Notes are redeemable at the option of the Company at redemption prices
(expressed as a percentage of principal amount) ranging from 105.75% in 2001 to
100.00% in 2005 and thereafter. Among other things, the Notes contain certain
covenants which limit additional indebtedness, payment of dividends, sale of
assets or stock, changes in control and transactions with related parties. The
proceeds from the Notes were used to repay amounts borrowed under a $75 million
bank credit agreement and to finance the acquisition of Horizon described in
Note 3.
On October 9, 1996, Sygnet entered into a new financing agreement (the Bank
Credit Facility) with a commercial bank group. The Bank Credit Facility is a
senior secured reducing revolver that provides Sygnet the ability to borrow up
to $300.0 million through June 30, 1999. Mandatory reductions in the revolver
occur quarterly thereafter through June 30, 2005, when the Bank Credit Facility
terminates. The Bank Credit Facility is secured by certain assets and the stock
of Sygnet. The Bank Credit Facility provides for various borrowing rate options
based on either a fixed spread over the London Interbank Offered Rate (LIBOR) or
the prime rate. Interest payments are made quarterly. As of December 31, 1997,
$195.5 million was outstanding under the Bank Credit Facility.
Among other things, the Bank Credit Facility contains financial covenants
which require the maintenance of debt service ratios and the hedging of interest
rate risk and limit distributions to shareholders and sales of assets. In
connection with these covenants, the Company has a three year interest rate swap
with a total underlying notional amount of $80 million. The swap agreements
converted the interest rate on $80 million notional amount of the credit
facility from a variable rate based upon a three month LIBOR (5.81% at December
31, 1997) to fixed rates ranging from 5.79% to 6.03%. Amounts paid or received
under these agreements are recognized as adjustments to interest expense.
There are no future minimum payments based upon the borrowing levels at
December 31, 1997 for the next five years.
Interest paid was $2,202,345, 4,691,776 and $30,076,031 in 1995, 1996 and
1997 respectively.
7. LEASES
The Company has entered into various operating leases for land and office
facilities. Leases for tower sites provide for periodic extensions of lease
periods with future lease payments indexed to the consumer price index.
F-93
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
7. LEASES (CONTINUED)
Minimum future rental payments under operating leases having remaining terms
in excess of one year as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................... $1,777,262
1999........................................... 1,445,209
2000........................................... 1,182,204
2001........................................... 817,668
2002........................................... 505,431
Thereafter..................................... 6,657,092
----------
Total.......................................... $12,384,866
----------
----------
</TABLE>
Rent expense was approximately $460,800, $906,042 and $2,077,644 in 1995,
1996 and 1997, respectively.
8. RETIREMENT PLAN
The Company sponsors a 401(k) retirement and profit sharing plan which
covers substantially all its employees. Eligible employees can contribute from
1% to 15% of their compensation. The Company, at its discretion, may match a
portion of the employee's contribution. The Company may also, at its discretion,
make additional profit sharing contributions to the plan. Total pension expense
was $114,000, $181,000 and $293,000 in 1995, 1996 and 1997, respectively.
9. REDEEMABLE PREFERRED STOCK AND WARRANTS
On April 3, 1997, 100,000 shares of Series A Senior Cumulative Nonvoting
Preferred Stock (Preferred Stock) were redeemed by the Company at a cost of
$10,000,000 which was funded by the Bank Credit Facility. On June 20, 1997, the
remaining 118,394.51 shares of Preferred Stock were redeemed by the Company at a
cost of $11,839,451. This redemption was funded by the Common Stock Sale
described in Note 10.
The Preferred Stock had a redemption value of $100 per share and was
recorded at fair value on the date of issuance less issuance costs. Dividends
were cumulative from the date of issuance, accrued quarterly in arrears and were
payable in shares of Preferred Stock. The dividend rates increased annually from
15% in 1997 to 21% in 2000 and thereafter. As of December 31, 1996, the Company
accrued stock dividends in the amount of $690,411 (which represented 6,904
shares). The Preferred Stock included the potential issuance of warrants to
purchase shares of the Company's Class A Common Stock. For financial reporting
purposes, the estimated fair value of the warrants was included with the
Preferred Stock in the accompanying balance sheet and the excess of the
redemption value of the Preferred Stock over the carrying value was accreted by
periodic charges to additional paid-in capital over the life of the issue. No
warrants were issued.
The Company has authorized 5 million shares of Nonvoting Preferred Stock,
par value $.01 per share, of which 500,000 are designated as Series A Senior
Cumulative Nonvoting Preferred Stock.
F-94
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
9. REDEEMABLE PREFERRED STOCK AND WARRANTS (CONTINUED)
The Company has also authorized 10 million shares of Voting Preferred Stock,
par value $.01 per share, none of which are issued as of December 31, 1997.
10. SHAREHOLDERS' EQUITY
On June 20, 1997, the Company issued and sold 3,000,000 shares of Class A
Common Stock, $.01 par value, to Boston Ventures Limited Partnership V (Boston
Ventures) at a price of $15 per share (Common Stock Sales). The proceeds of
$43.6 million, net of issuance fees of $1.4 million, were used to redeem the
remaining outstanding Preferred Stock as described in Note 9, and to reduce
amounts outstanding under the Bank Credit Facility. As a condition of the Common
Stock Sales, Boston Ventures appointed two representatives on the Company's
eleven member board of directors.
In August 1997, Boston Ventures purchased 1,000,000 shares of Class B Common
Stock from shareholders pursuant to a tender offer which upon purchase based on
the requirements of the corporate restructuring described in Note 1, became
Class A Common Stock.
On August 28, 1996, the Company approved a plan to recapitalize the Company
whereby the Sygnet common stock Type A (205,698 shares) and Type B (1,028,428
shares) were converted into 6,170,630 shares of Sygnet Wireless, Inc. Class B
common stock in a 5 for 1 split, effective on September 20, 1996. These shares
are entitled to ten votes per share.
On January 5, 1995, Sygnet repurchased 8,024 Type A shares for $39.00 per
share and 40,173 Type B shares for $35.00 per share from a shareholder for
approximately $1,719,000. These shares were accounted for at cost and held as
treasury stock until August 28, 1996 when they were retired.
Under the most restrictive of the covenants discussed in Note 6, the Company
could not declare any additional dividends on its common stock at December 31,
1997.
On December 29, 1994, the Company received a promissory note from an
officer/shareholder for $249,952 for the purchase of common shares from a
shareholder. The note requires annual payment of interest at 8.23% with
principal repayment commencing on December 31, 1998 through December 31, 2001.
11. INCOME TAXES
On August 31, 1996, Sygnet and Wilcom terminated their status as Subchapter
S Corporations. As a result of this termination, application of the provisions
of Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME
TAXES, requires deferred income taxes to be provided for differences in the
basis for tax purposes and for financial accounting purposes of recorded assets
and liabilities. As a result of the termination of their Subchapter S
Corporation status, Sygnet and Wilcom contributed their undistributed earnings
to additional paid-in capital. At December 31, 1997, the Company has net
operating loss carryforwards of $28.7 million that expire in 2011 and 2012. For
financial reporting purposes, a valuation allowance of $7,747,300 has been
recognized to offset the net deferred tax assets which primarily relate to the
net operating loss carryforward.
F-95
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
11. INCOME TAXES (CONTINUED)
Amounts for deferred tax assets and liabilities at December 31, 1996 and
1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.................................................. $ 787,200 $ --
Amortization.................................................. 1,271,800 3,593,000
------------- -------------
Total deferred tax liabilities.................................. 2,059,000 3,593,000
Deferred tax assets:
AMT credit carryforward....................................... 63,400 63,400
Allowance for doubtful accounts............................... 397,400 275,300
Depreciation.................................................. 958,400
Net operating loss carryforward............................... 2,550,000 9,756,800
Other......................................................... 201,700 390,400
------------- -------------
3,212,500 11,444,300
Valuation allowance............................................. (1,153,500) (7,851,300)
------------- -------------
Total deferred tax assets....................................... 2,059,000 3,593,000
------------- -------------
Net deferred tax assets......................................... $ -- $ --
------------- -------------
------------- -------------
</TABLE>
The components of the income tax provision (benefit) in the consolidated
statements of operations for the year ended December 31, 1996 and 1997 are as
follows:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Cumulative effect of conversion from S to C corporation
status........................................................ $ 745,000 $ --
Deferred income tax (benefit)................................... (1,898,500) (6,697,800)
Valuation allowance............................................. 1,153,500 6,697,800
------------- -------------
Total provision for income tax (benefit)........................ $ -- $ --
------------- -------------
------------- -------------
</TABLE>
12. STOCK OPTION PLAN
The Company has stock option plans that provide for the purchase of Class A
common stock by employees and directors of the Company. Under the stock option
plans the Company is authorized to issue 1,250,000 options for the purchase of
shares of Class A common stock (1,000,000 for employees and 250,000 for
non-employee directors). These options vest over a period ranging from grant
date to five years, are exercisable based upon the terms of the grants and
expire at the end of ten years. The Company applies APBO No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES and related Interpretations in accounting for the
plan, which requires that for certain options granted, the Company recognizes as
compensation expense the excess of the deemed fair value for accounting purposes
of the common stock over the exercise price of the options. For the majority of
options, no compensation cost has been recognized. Had compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, the Company's net loss and net loss per share would not have been
materially different from the amounts reported.
F-96
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
12. STOCK OPTION PLAN (CONTINUED)
For pro forma calculations the fair value of each option is estimated on the
date of grant using the Minimum Value option-pricing model with the following
weighted-average assumptions used for grants in both 1996 and 1997: risk-free
interest rates ranging from 5.9% to 6.9% and average expected lives ranging from
5.25 to 7.5 years for issued options.
A summary of the status of the company's stock option plan as of December
31, 1996 and 1997 and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
1996 1997
----------------------------- -----------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- ----------------- ---------- -----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year........... -- $ -- 533,200 $ 10.00
Granted.................................... 533,200 10.00 183,000 10.31
Exercised.................................. -- -- -- --
Canceled................................... -- -- --
---------- ------ ---------- ------
Outstanding at year end.................... 533,200 10.00 716,200 $ 10.08
---------- ------ ---------- ------
---------- ------ ---------- ------
Options exercisable at year end............ -- 651,200
Weighted-average fair value of options
granted during the year.................. $ -- $ 7.80
Weighted-average remaining contractual
life..................................... 9.68 8.87
</TABLE>
At December 31, 1997, there were 533,800 options available for future grant.
F-97
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
-------------- --------------
(NOTE) (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 860,086 $ 467,124
Accounts receivable, less allowance for doubtful accounts of $565,862 at
September 30, 1998 and $809,800 at December 31, 1997......................... 10,711,627 13,506,769
Inventory...................................................................... 1,867,445 1,539,169
Prepaid expenses............................................................... 309,460 929,915
-------------- --------------
Total current assets......................................................... 13,748,618 16,442,977
Other assets:
Cellular licenses--net......................................................... 245,866,235 241,062,311
Customer lists--net............................................................ 19,382,087 15,527,090
Deferred financing costs--net.................................................. 8,982,430 8,126,156
-------------- --------------
Total other assets........................................................... 274,230,752 264,715,557
Property, plant and equipment--net............................................... 53,007,015 52,137,706
-------------- --------------
Total assets................................................................. $ 340,986,385 $ 333,296,240
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................... $ 3,264,206 $ 1,807,017
Deferred revenue............................................................... 2,058,066 2,381,739
Accrued expenses and other liabilities......................................... 4,196,230 4,591,172
Interest payable............................................................... 6,749,755 9,533,632
-------------- --------------
Total current liabilities.................................................... 16,268,257 18,313,560
Long-term debt................................................................... 305,500,000 302,644,000
Shareholders' equity:
Common shares, $.01 par, Class A, 1 vote per share, 60,000,000 shares
authorized, 4,734,091 shares issued and outstanding as of September 30, 1998;
4,010,653 shares issued and outstanding as of December 31, 1997.............. 40,107 47,341
Common shares, $.01 par, Class B, 10 votes per share; 10,000,000 shares
authorized, 4,436,539 shares issued and outstanding as of September 30, 1998;
5,159,977 shares issued and outstanding as of December 31, 1997.............. 51,599 44,365
Additional paid-in capital....................................................... 47,598,498 47,598,498
Retained deficit................................................................. (28,222,124) (35,101,572)
Note receivable from officer/shareholder......................................... (249,952) (249,952)
-------------- --------------
Total shareholders' equity................................................... 19,218,128 12,338,680
-------------- --------------
Total liabilities and shareholders' equity................................... $ 340,986,385 $ 333,296,240
-------------- --------------
-------------- --------------
</TABLE>
NOTE: THE BALANCE SHEET AT DECEMBER 31, 1997 HAS BEEN DERIVED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AT THAT DATE BUT DOES NOT INCLUDE ALL OF THE
INFORMATION AND FOOTNOTES REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
FOR COMPLETE FINANCIAL STATEMENTS.
F-98
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1997 1998
-------------- --------------
<S> <C> <C>
Revenue:
Subscriber revenue.............................................................. $ 38,531,124 $ 46,738,516
Roamer revenue.................................................................. 19,868,262 24,752,828
Equipment sales................................................................. 3,050,594 4,252,652
Other revenue................................................................... 1,307,703 1,190,063
-------------- --------------
Total revenue..................................................................... 62,757,683 76,934,059
Costs and expenses:
Cost of services................................................................ 7,175,048 9,004,943
Cost of equipment sales......................................................... 6,806,047 7,789,947
General and administrative...................................................... 11,666,527 14,664,517
Selling and marketing........................................................... 7,465,863 9,056,770
Depreciation and amortization................................................... 21,142,930 21,343,437
-------------- --------------
Total costs and expenses.......................................................... 54,256,415 61,859,614
-------------- --------------
Income from operations............................................................ 8,501,268 15,074,445
Other:
Interest expense, net........................................................... 22,558,545 21,612,673
Other........................................................................... (6,174) 341,220
-------------- --------------
Net income (loss)................................................................. $ (14,051,103) $ (6,879,448)
-------------- --------------
-------------- --------------
Earnings per share information:
Net income (loss)............................................................... $ (14,051,103) $ (6,879,448)
Preferred stock dividend and accretion.......................................... (2,121,472) --
-------------- --------------
Net income (loss) applicable to common shareholders............................. $ (16,172,575) $ (6,879,448)
-------------- --------------
-------------- --------------
Net income (loss) per share applicable to common shareholders................... $ (2.21) $ (.75)
-------------- --------------
-------------- --------------
Common shares outstanding......................................................... 7,302,498 9,170,630
-------------- --------------
-------------- --------------
</TABLE>
F-99
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
30,
------------------------------
1997 1998
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.......................................................................... $ (14,051,103) $ (6,879,448)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation.................................................................... 11,614,565 11,828,239
Amortization.................................................................... 9,528,365 9,515,198
Loss (gain) on disposal of assets............................................... (14,358) 109,104
Changes in operating assets and liabilities:
Accounts receivable........................................................... (2,269,177) (2,795,142)
Inventory..................................................................... 413,076 328,276
Prepaid and deferred expenses................................................. 188,487 (620,455)
Accounts payable and accrued expenses......................................... 732,773 (738,574)
Accrued interest payable...................................................... 982,713 2,783,877
-------------- --------------
Net cash provided by operating activities......................................... 7,125,341 13,531,075
INVESTING ACTIVITIES
Business acquisition.............................................................. (599,442) --
Purchases of property and equipment............................................... (16,979,123) (11,468,537)
Proceeds from sale of assets...................................................... 20,995 400,500
-------------- --------------
Net cash used in investing activities............................................. (17,557,570) (11,068,037)
FINANCING ACTIVITIES
Proceeds from long-term debt...................................................... 23,500,000 16,894,000
Principal payments on long-term debt.............................................. (35,250,000) (19,750,000)
Increase in financing costs....................................................... (308,666) --
Redemption of preferred stock..................................................... (21,839,451) --
Net proceeds from sale of common stock............................................ 43,875,000 --
-------------- --------------
Net cash (used in) provided by financing activities............................... 9,976,883 (2,856,000)
Decrease in cash and cash equivalents............................................. (455,346) (392,962)
Cash and cash equivalents at beginning of period.................................. 2,257,748 860,086
-------------- --------------
Cash and cash equivalents at end of period........................................ $ 1,802,402 $ 467,124
-------------- --------------
-------------- --------------
</TABLE>
F-100
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
These financial statements include the consolidated accounts of Sygnet
Wireless, Inc. (the "Company") and its wholly-owned subsidiary Sygnet
Communications, Inc. ("Sygnet"). The Company owns and operates cellular
telephone systems serving one large cluster with an approximate population of
2.4 million in Northeastern Ohio, Western Pennsylvania and Western New York.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended September 30,
1998 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1998. For further information, refer to the consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K for the fiscal year ended December 31, 1997 (File No. 333-10161)
filed with the Securities and Exchange Commission.
2. AGREEMENT AND PLAN OF MERGER
On July 28, 1998, the Company entered into an Agreement and Plan of Merger
("Merger") with a subsidiary of Dobson Communications Corporation ("Dobson")
pursuant to which Dobson will acquire all outstanding shares of common stock of
the Company for an aggregate amount of $337.5 million, or approximately $34.51
per share. The agreement is pending regulatory approval and is expected to close
in the fourth quarter of 1998.
3. LONG-TERM DEBT
The Company has $110.0 million 11 1/2% unsecured Senior Notes due October 1,
2006 (the "Notes"). The Notes pay interest semiannually on April 1 and October 1
of each year. The Notes are redeemable at the option of the Company at
redemption prices (expressed as a percentage of principal amount) ranging from
105.75% in 2001 to 100.00% in 2005 and thereafter. Among other things, the Notes
contain certain covenants which limit additional indebtedness, payment of
dividends, sale of assets or stock, changes in control and transactions with
related parties.
Sygnet has a financing agreement (the "Bank Credit Facility") with a
commercial bank group. The Bank Credit Facility is a senior secured reducing
revolver that provides Sygnet the ability to borrow up to $300.0 million through
June 30, 1999. Mandatory reductions in the revolver occur quarterly thereafter
through June 30, 2005, when the Bank Credit Facility terminates. The Bank Credit
Facility is secured by certain assets and the stock of Sygnet. The Bank Credit
Facility provides for various borrowing rate options based on either a fixed
spread over the London Interbank Offered Rate (LIBOR) or the prime rate. As of
September 30, 1998, the amount outstanding under the Bank Credit Facility is
$192.6 million.
4. REDEEMABLE PREFERRED STOCK AND WARRANTS
On April 3, 1997, 100,000 shares of Series A Senior Cumulative Nonvoting
Preferred Stock ("Preferred Stock"), were redeemed by the Company at a cost of
$10.0 million which was funded by the Bank Credit Facility. On June 20, 1997,
the remaining 118,394.51 shares of Preferred Stock were redeemed by
F-101
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. REDEEMABLE PREFERRED STOCK AND WARRANTS (CONTINUED)
the Company at a cost of $11,839,451. This redemption was funded by the Common
Stock Sale described in Note 5.
The Preferred Stock had a redemption value of $100 per share and was
recorded at fair value on the date of issuance less issuance costs. Dividends
were cumulative from the date of issuance, accrued quarterly in arrears and were
payable in shares of Preferred Stock. The dividend rates increased annually from
15% in 1997 to 21% in 2000 and thereafter. The Preferred Stock included the
potential issuance of warrants to purchase shares of the Company's Class A
Common Stock. For financial reporting purposes, the estimated fair value of the
warrants was included with the Preferred Stock in the accompanying balance sheet
and the excess of the redemption value of the Preferred Stock over the carrying
value was accreted by periodic charges to additional paid-in capital over the
life of the issue. No warrants were issued.
The Company has authorized 5 million shares of Nonvoting Preferred Stock,
par value $.01 per share, of which 500,000 are designated as Series A Senior
Cumulative Nonvoting Preferred Stock.
5. SHAREHOLDERS EQUITY
On June 20, 1997, the Company issued and sold 3,000,000 shares of Class A
Common Stock, $.01 par value, to Boston Ventures Limited Partnership V ("Boston
Ventures") at a price of $15 per share ("Common Stock Sale"). The proceeds of
$43.9 million, net of issuance fees, were used to redeem the remaining
outstanding Preferred Stock as described in Note 4, and to reduce amounts
outstanding under the Bank Credit Facility. As a condition of the Common Stock
Sale, Boston Ventures has two representatives on the Company's eleven member
board of directors.
In August 1997, Boston Ventures purchased 1,000,000 shares of Class B Common
Stock from shareholders pursuant to a tender offer which, upon purchase, became
Class A Common Stock.
6. COMMITMENTS AND CONTINGENCIES
In accordance with the Merger (see Note 2), the Company may be liable to pay
severance benefits and incentive compensation for an approximate amount of $1.9
million to certain employees if the Merger occurs and certain other conditions
are met before December 31, 1998.
On June 8, 1998, the Company entered into an agreement with Pinellas
Communications to purchase the license to operate a cellular telephone system in
the Rural Service Area PA-2. The purchase price is $6.0 million and the
transaction is expected to close in the fourth quarter of 1998.
F-102
<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 VII 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
NUMBERS DESCRIPTION METHOD OF FILING
- --------- ------------------------------------------------------------------------ ------------------
<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]
2.3.1 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]
2.3.2 First Amendment to Purchase Agreement dated August 29, 1997. (2) [2.1.1]
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF 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. (2) [2.2]
2.5 Asset Purchase Agreement dated October 9, 1997 between Texas 16 Cellular
Telephone Company and Dobson Cellular of Texas, Inc. (3) [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. (4) [2.6.1]
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. (5) [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. (5) [2.7]
2.8 Agreement and Plan of Merger dated July 28, 1998 between Sygnet
Wireless, Inc. and Dobson/Sygnet Operating Company (formerly known as
Front Nine Operating Company) (without schedules). (6) [2.0]
2.9 Asset Purchase Agreement dated August 20, 1998, between Ohio Wireless
Communications, L.L.C. and Dobson Cellular of Sandusky. (7)
2.10 Asset Purchase Agreement dated as of September 2, 1998 between A-1
Cellular of Texas, L.P. and Dobson Cellular of Navarro, Inc. (7)
2.11 Asset Purchase Agreement dated November 24, 1998 between First Cellular
of Maryland, Inc. and Dobson Cellular of Maryland, Inc. (7)
2.12 Agreement to furnish unfiled schedules. (7)
3.1 Registrant's Amended and Restated Certificate of Incorporation. (6) [3.1]
3.2 Registrant's Amended and Restated Bylaws. (6) [3.2]
3.3 Certificate of Amendment to the Certificate of Designation of the
Registrant's Class A Preferred Stock. (6) [3.3]
3.4 Certificate of Designation for the Registrant's Class B Preferred Stock. (5) [3.1]
3.5 Certificate of Designation for the Registrant's Class C Preferred Stock. (5) [3.1]
3.6 Certificate of Amendment to the Certificate of Designation of the
Registrant's Class D Preferred Stock. (6) [3.4]
3.7 Certificate of Amendment to the Certificate of Designation of the
Registrant's Class E Preferred Stock. (6) [3.5]
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
- --------- ------------------------------------------------------------------------ ------------------
<C> <S> <C>
3.8 Certificate of Designation for the Registrant's Class F Preferred Stock. (6) [3.6]
3.9 Certificate of Designation for the Registrant's Class G Preferred Stock. (6) [3.7]
3.10 Certificate of Amendment to the Certificate of Designation of the
Registrant's Class H Preferred Stock. (6) [3.8]
3.11 Certificate of Designation for the Registrant's 12 1/4% Senior
Exchangeable Preferred Stock Mandatorily Redeemable 2008. (6) [3.9]
4.1 Third Amended and Restated Credit Agreement among the Agents and Lenders
named therein and Dobson Operating Company dated March 25, 1998. (4) [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. (4) [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. (4) [4.3]
4.4 Credit Agreement among the Agents and Lenders named therein and
Dobson/Sygnet Operating Company, dated as of December 23, 1998. (7)
4.5 $17.5 million Term Loan Agreement between Dobson Tower Company and
NationsBank, N.A. dated as of December 23, 1998. (7)
4.6 Telephone Loan Contract dated as of November 7, 1958 between Dobson
Telephone Company, Inc. and United States of America. (1) [4.2]
4.7 Telephone Loan Contract dated as of March 19, 1956 between McLoud
Telephone Company and United States of America. (1) [4.3]
4.8 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]
4.9 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]
4.10 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]
4.11 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]
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
- --------- ------------------------------------------------------------------------ ------------------
<C> <S> <C>
4.12 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. (4) [4.11]
4.13 Agreement to furnish unfiled debt instruments. (4) [4.12]
4.14 Indenture dated as of June 12, 1998 between Logix Communications
Enterprises, Inc. (f/k/a Dobson Wireline Company), as Issuer, and
United States Trust Company of New York, as Trustee. (8) [4.5]
4.15 Escrow and Security Agreement dated June 12, 1998 among Logix
Communications Enterprises, Inc. (f/k/a Dobson Wireline Company), as
Pledgor, and Morgan Stanley & Co. Incorporated, NationsBanc Montgomery
Securities LLC as Placement Agents, and United States Trust Company of
New York, as Trustee. (8) [4.6]
4.16 Registration Rights Agreement dated June 12, 1998 between Logix
Communications Enterprises, Inc. (f/k/a Dobson Wireline Company) and
Morgan Stanley & Co. Incorporated and NationsBanc Montgomery
Securities LLC. (8) [4.7]
4.17 Indenture dated December 23, 1998 between Dobson/Sygnet Communications
Company, as Issuer, and United States Trust Company of New York, as
Trustee. (6) [4.1]
4.18 Pledge Agreement dated December 23, 1998 between Dobson/ Sygnet
Communications Company, as Pledgor, and NationsBanc Montgomery
Securities LLC, Lehman Brothers Inc., First Union Capital Markets, a
division of Wheat First Securities, Inc. and TD Securities (USA) Inc.,
as Initial Purchasers, and United States Trust Company of New York, as
Trustee. (7)
4.19 Registration Rights Agreement dated December 23, 1998 between
Dobson/Sygnet Communications Company and NationsBanc Montgomery
Securities LLC, Lehman Brothers Inc., First Union Capital Markets, a
division of Wheat First Securities, Inc. and TD Securities (USA) Inc. (7)
4.20 Registration Rights Agreement dated December 23, 1998 between the
Registrant and NationsBanc Montgomery Securities LLC. (7)
4.21 Certificate of Designation relating to Senior Preferred Stock is
contained in Exhibit 3.9 and incorporated herein by reference. (6) [3.9]
4.22 Preferred Stock Certificate. (7)
5 Opinion of McAfee & Taft A Professional Corporation. (7)
10.1.1* Registrant's 1996 Stock Option Plan, as amended. (7)
10.1.2* 1998 Stock Option Plan of Logix Communications Enterprises, Inc. (f/k/a
Dobson Wireline Company). (7)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
- --------- ------------------------------------------------------------------------ ------------------
<C> <S> <C>
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 Stock Purchase Agreement dated September 30, 1997 among Dobson Operating
Company, Associated TTI Limited Partnership and Hinton CATV Company,
Inc. (5) [10.2.3]
10.2.3 Stock Purchase Agreement, dated as of March 26, 1998, between the
shareholders of American Telco Inc. and American Telco Network
Services, Inc. and Logix Communications Enterprises, Inc. (f/k/a
Dobson Wireline Company). (9) [2.1]
10.2.4 First Amendment to Stock Purchase Agreement among American Telco Inc.
and American Telco Network Services, Inc. and Logix Communications
Enterprises, Inc. (f/k/a Dobson Wireline Company). (9) [2.2]
10.2.5 Stock Purchase Agreement, dated December 23, 1998 among the Registrant,
the Fleet Investors and the other entities listed therein. (7)
10.2.6 Asset Purchase Agreement dated December 23, 1998 by and between Sygnet
Communications, Inc. and Dobson Tower Company. (7)
10.2.7 Master Site License Agreement dated December 23, 1998 by and between
Sygnet Communications, Inc. and Dobson Tower Company. (7)
10.3.1* Letter dated June 3, 1996 from Registrant to Bruce R. Knooihuizen
describing employment arrangement. (1) [10.3.2]
10.3.2* Letter dated October 15, 1996 from Fleet Equity Partners to Justin L.
Jaschke regarding director compensation. (1) [10.3.3]
10.3.3* Letter dated December 26, 1996 from Registrant to G. Edward Evans
describing employment arrangement. (1) [10.3.1]
10.3.4* Letter dated September 16, 1997 from Registrant to William J. Hoffman,
Jr. describing employment arrangement. (5) [10.3.4]
10.3.5* Letter dated October 28, 1997 from Registrant to R. Thomas Morgan
describing employment arrangement. (5) [10.3.5]
10.3.6 Letter dated August 25, 1998 from Registrant to Richard D. Sewell, Jr.
describing employment arrangement. (7)
10.3.7* Consulting Agreement dated December 21, 1998 between Registrant and
Albert H. Pharis, Jr. (7)
10.4.1 North American Cellular Network Services Agreement dated August 26, 1992
between North American Cellular Network, Inc. and Dobson Cellular
Systems, Inc. (1) [10.4.2]
10.4.2 Agreement for DS-3 service dated December 16, 1993 between Logix
Communications Corporation (f/k/a Dobson Fiber Company) and NTS
Communications, Inc. and Addendum thereto dated June 1, 1994. (1) [10.4.1]
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
- --------- ------------------------------------------------------------------------ ------------------
<C> <S> <C>
10.4.3 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. (1) [10.5.2]
10.4.4 General Purchase Agreement dated January 13, 1998 between Lucent
Technologies, Inc. and Dobson Cellular Systems, Inc. (5) [10.4.7]
10.4.5 Operating Agreement dated January 16, 1998 between AT&T Wireless
Services, Inc. and Dobson Cellular Systems, Inc. (7)
10.4.6 Fourth Amended General Purchase Agreement dated January 5, 1999 between (4) [10.4.8]
Northern Telecom Inc. and Registrant. (7)
10.5.1 Assignment Agreement dated January 23, 1997 between Texas 16 Cellular
Telephone Company, Inc. and Dobson Cellular of Texas, Inc. re Cellular
One License Agreement. (7)
10.5.2 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]
10.5.3 Trademark Sublicense Agreement dated February 28, 1997 between AirTouch
Communications, Inc. (f/k/a WMC Partners L.P.) and Dobson Cellular of
Arizona, Inc. (1) [10.4.3]
10.5.4 Affiliation Agreement dated February 28, 1997 among Registrant, Dobson
Cellular of Arizona, Inc. and AirTouch Communications, Inc. (f/k/a WMC
Partners, L.P.). (1) [10.4.4]
10.5.5 Letter Agreement dated September 30, 1997 between U.S. West, New Vector
Group, Inc. and Gila River Cellular General Partnership, by Dobson
Cellular of Arizona, Inc. regarding License Agreement for post closing
use of "U.S. West Cellular" brand and "AirTouch" brand. (7)
10.5.6 Trademark Sub-License Agreement dated October 1, 1997 between AirTouch
Communications, Inc. (f/k/a WMC Partners, L.P.) and Gila River
Cellular General Partnership. (7)
10.5.7 Agreement dated April 1, 1998 between Cellular 2000 Telephone Co. and
Dobson Cellular of California re Cellular One License Agreement. (7)
10.5.8 Agreement dated June 16, 1998 between Santa Cruz Cellular Telephone,
Dobson Cellular of California and the other parties listed therein re
Cellular One License Agreement. (7)
10.5.9 Affiliation Agreement, Trademark License Agreement, Intercarrier Roamer
Service Agreement, Amendment to Intercarrier Roamer Service Agreement
made as of July 31, 1998 by and among Dobson Cellular Communications
Corporation, Dobson Cellular of Imperial, Inc. and AirTouch Cellular. (7)
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
- --------- ------------------------------------------------------------------------ ------------------
<C> <S> <C>
10.5.10 Affiliation Agreement dated as of August 28, 1998 by and among Dobson
Communications Corporation, Dobson Cellular of Sandusky, Inc., New
Par, on behalf of itself and its subsidiaries and affiliates, d/b/a
AirTouch Cellular. (7)
10.6 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. (2) [10.7]
10.7 Second Amended and Restated Partnership Agreement of Gila River Cellular
General Partnership dated September 30, 1997. (2) [10.8]
10.8.1 Investment and Transaction Agreement, dated December 23, 1998, among the
Registrant, Dobson CC Limited Partnership and J. W. Childs Equity
Partners II, L.P. (without exhibits). (7)
10.8.2 Stockholder and Investor Rights Agreement, dated December 23, 1998 among
the Registrant and the shareholders listed therein (without exhibits). (7)
10.8.3 Investors Agreement, dated December 23, 1998, among the Registrant, and
certain shareholders of Sygnet Wireless, Inc. and their affiliates
listed therein. (7)
12 Ratio of earnings to combined fixed charges and preferred stock
dividends. (7)
21 Subsidiaries. (7)
23.1 Consent of McAfee & Taft A Professional Corporation will be contained in
Exhibit 5 hereto. (7) [5]
23.2 Consent of Arthur Andersen LLP (Oklahoma City--DCC). (7)
23.3 Consent of Ernst & Young LLP (Philadelphia--Horizon). (7)
23.4 Consent of Arthur Andersen LLP (Denver--Gila River). (7)
23.5 Consent of Holliday, Lemons, Thomas & Cox, P.C. (7)
23.6 Consent of Ernst & Young LLP (Cleveland--Sygnet). (7)
24 Power of Attorney. (7)
27 Financial Data Schedule. (7)
99.1 Letter of Transmittal. (7)
99.2 Notice of Guaranteed Delivery. (7)
99.3 Company letter. (7)
99.4 Client letter. (7)
99.5 Instruction to Beneficial Holders. (7)
99.6 Guidelines for Certification of Taxpayer Identification Number. (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.
II-7
<PAGE>
(2) 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.
(3) 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.
(4) 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.
(5) Filed as an Exhibit to the Company's Registration Statement on Form S-4
(Registration No. 333-50107), as the exhibit number indicated in brackets
and incorporated by reference herein.
(6) Filed as an exhibit to the Company's Current Report on Form 8-K filed on
January 7, 1999, as the exhibit number indicated in brackets and
incorporated by reference herein.
(7) Filed herewith.
(8) Filed as an exhibit to Logix Communications Enterprises, Inc.'s Registration
Statement on Form S-4 (Registration No. 333-58693), as the exhibit number
indicated in brackets and incorporated by reference herein.
(9) Filed as an exhibit to the Company's Current Report on Form 8-K on June 30,
1998, as the exhibit number indicated in brackets and incorporated by
reference herein.
(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
II-8
<PAGE>
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registration pursuant to the provisions described under Item 20, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnifications against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended 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 2nd day of February, 1999.
<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 2nd day of February, 1999.
NAME TITLE
- ------------------------------ ----------------------------------------
/s/ Everett R. Dobson Chairman of the Board, President and
- ------------------------------ Chief Executive Officer (Principal
Everett R. Dobson Executive Officer) and Director
/s/ Stephen T. Dobson Secretary and Director
- ------------------------------
Stephen T. Dobson
/s/ Bruce R. Knooihuizen Vice President and Chief Financial
- ------------------------------ Officer (Principal Financial Officer)
Bruce R. Knooihuizen
/s/ Trent LeForce Corporate Controller (Principal
- ------------------------------ Accounting Officer)
Trent LeForce
/s/ Russell L. Dobson Director
- ------------------------------
Russell L. Dobson
/s/ Justin L. Jaschke Director
- ------------------------------
Justin L. Jaschke
/s/ Albert H. Pharis, Jr. Director
- ------------------------------
Albert H. Pharis, Jr.
/s/ Dana L. Schmaltz Director
- ------------------------------
Dana L. Schmaltz
II-10
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
- --------- ------------------------------------------------------------------------ ------------------
<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]
2.3.1 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]
2.3.2 First Amendment to Purchase Agreement dated August 29, 1997. (2) [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. (2) [2.2]
2.5 Asset Purchase Agreement dated October 9, 1997 between Texas 16 Cellular
Telephone Company and Dobson Cellular of Texas, Inc. (3) [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. (4) [2.6.1]
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. (5) [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. (5) [2.7]
2.8 Agreement and Plan of Merger dated July 28, 1998 between Sygnet
Wireless, Inc. and Dobson/Sygnet Operating Company (formerly known as
Front Nine Operating Company) (without schedules). (6) [2.0]
2.9 Asset Purchase Agreement dated August 20, 1998, between Ohio Wireless
Communications, L.L.C. and Dobson Cellular of Sandusky. (7)
2.10 Asset Purchase Agreement dated as of September 2, 1998 between A-1
Cellular of Texas, L.P. and Dobson Cellular of Navarro, Inc. (7)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
- --------- ------------------------------------------------------------------------ ------------------
<C> <S> <C>
2.11 Asset Purchase Agreement dated November 24, 1998 between First Cellular
of Maryland, Inc. and Dobson Cellular of Maryland, Inc. (7)
2.12 Agreement to furnish unfiled schedules. (7)
3.1 Registrant's Amended and Restated Certificate of Incorporation. (6) [3.1]
3.2 Registrant's Amended and Restated Bylaws. (6) [3.2]
3.3 Certificate of Amendment to the Certificate of Designation of the
Registrant's Class A Preferred Stock. (6) [3.3]
3.4 Certificate of Designation for the Registrant's Class B Preferred Stock. (5) [3.1]
3.5 Certificate of Designation for the Registrant's Class C Preferred Stock. (5) [3.1]
3.6 Certificate of Amendment to the Certificate of Designation of the
Registrant's Class D Preferred Stock. (6) [3.4]
3.7 Certificate of Amendment to the Certificate of Designation of the
Registrant's Class E Preferred Stock. (6) [3.5]
3.8 Certificate of Designation for the Registrant's Class F Preferred Stock. (6) [3.6]
3.9 Certificate of Designation for the Registrant's Class G Preferred Stock. (6) [3.7]
3.10 Certificate of Amendment to the Certificate of Designation of the
Registrant's Class H Preferred Stock. (6) [3.8]
3.11 Certificate of Designation for the Registrant's 12 1/4% Senior
Exchangeable Preferred Stock Mandatorily Redeemable 2008. (6) [3.9]
4.1 Third Amended and Restated Credit Agreement among the Agents and Lenders
named therein and Dobson Operating Company dated March 25, 1998. (4) [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. (4) [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. (4) [4.3]
4.4 Credit Agreement among the Agents and Lenders named therein and
Dobson/Sygnet Operating Company, dated as of December 23, 1998. (7)
4.5 $17.5 million Term Loan Agreement between Dobson Tower Company and
NationsBank, N.A. dated as of December 23, 1998. (7)
4.6 Telephone Loan Contract dated as of November 7, 1958 between Dobson
Telephone Company, Inc. and United States of America. (1) [4.2]
4.7 Telephone Loan Contract dated as of March 19, 1956 between McLoud
Telephone Company and United States of America. (1) [4.3]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
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<C> <S> <C>
4.8 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]
4.9 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]
4.10 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]
4.11 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]
4.12 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. (4) [4.11]
4.13 Agreement to furnish unfiled debt instruments. (4) [4.12]
4.14 Indenture dated as of June 12, 1998 between Logix Communications
Enterprises, Inc. (f/k/a Dobson Wireline Company), as Issuer, and
United States Trust Company of New York, as Trustee. (8) [4.5]
4.15 Escrow and Security Agreement dated June 12, 1998 among Logix
Communications Enterprises, Inc. (f/k/a Dobson Wireline Company), as
Pledgor, and Morgan Stanley & Co. Incorporated, NationsBanc Montgomery
Securities LLC as Placement Agents, and United States Trust Company of
New York, as Trustee. (8) [4.6]
4.16 Registration Rights Agreement dated June 12, 1998 between Logix
Communications Enterprises, Inc. (f/k/a Dobson Wireline Company) and
Morgan Stanley & Co. Incorporated and NationsBanc Montgomery
Securities LLC. (8) [4.7]
4.17 Indenture dated December 23, 1998 between Dobson/Sygnet Communications
Company, as Issuer, and United States Trust Company of New York, as
Trustee. (6) [4.1]
4.18 Pledge Agreement dated December 23, 1998 between Dobson/ Sygnet
Communications Company, as Pledgor, and NationsBanc Montgomery
Securities LLC, Lehman Brothers Inc., First Union Capital Markets, a
division of Wheat First Securities, Inc. and TD Securities (USA) Inc.,
as Initial Purchasers, and United States Trust Company of New York, as
Trustee. (7)
4.19 Registration Rights Agreement dated December 23, 1998 between
Dobson/Sygnet Communications Company and NationsBanc Montgomery
Securities LLC, Lehman Brothers Inc., First Union Capital Markets, a
division of Wheat First Securities, Inc. and TD Securities (USA) Inc. (7)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
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<C> <S> <C>
4.20 Registration Rights Agreement dated December 23, 1998 between the
Registrant and NationsBanc Montgomery Securities LLC. (7)
4.21 Certificate of Designation relating to Senior Preferred Stock is
contained in Exhibit 3.9 and incorporated herein by reference. (6) [3.9]
4.22 Preferred Stock Certificate. (7)
5 Opinion of McAfee & Taft A Professional Corporation. (7)
10.1.1* Registrant's 1996 Stock Option Plan, as amended. (7)
10.1.2* 1998 Stock Option Plan of Logix Communications Enterprises, Inc. (f/k/a
Dobson Wireline Company). (7)
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 Stock Purchase Agreement dated September 30, 1997 among Dobson Operating
Company, Associated TTI Limited Partnership and Hinton CATV Company,
Inc. (5) [10.2.3]
10.2.3 Stock Purchase Agreement, dated as of March 26, 1998, between the
shareholders of American Telco Inc. and American Telco Network
Services, Inc. and Logix Communications Enterprises, Inc. (f/k/a
Dobson Wireline Company). (9) [2.1]
10.2.4 First Amendment to Stock Purchase Agreement among American Telco Inc.
and American Telco Network Services, Inc. and Logix Communications
Enterprises, Inc. (f/k/a Dobson Wireline Company). (9) [2.2]
10.2.5 Stock Purchase Agreement, dated December 23, 1998 among the Registrant,
the Fleet Investors and the other entities listed therein. (7)
10.2.6 Asset Purchase Agreement dated December 23, 1998 by and between Sygnet
Communications, Inc. and Dobson Tower Company. (7)
10.2.7 Master Site License Agreement dated December 23, 1998 by and between
Sygnet Communications, Inc. and Dobson Tower Company. (7)
10.3.1* Letter dated June 3, 1996 from Registrant to Bruce R. Knooihuizen
describing employment arrangement. (1) [10.3.2]
10.3.2* Letter dated October 15, 1996 from Fleet Equity Partners to Justin L.
Jaschke regarding director compensation. (1) [10.3.3]
10.3.3* Letter dated December 26, 1996 from Registrant to G. Edward Evans
describing employment arrangement. (1) [10.3.1]
10.3.4* Letter dated September 16, 1997 from Registrant to William J. Hoffman,
Jr. describing employment arrangement. (5) [10.3.4]
10.3.5* Letter dated October 28, 1997 from Registrant to R. Thomas Morgan
describing employment arrangement. (5) [10.3.5]
10.3.6 Letter dated August 25, 1998 from Registrant to Richard D. Sewell, Jr.
describing employment arrangement. (7)
10.3.7* Consulting Agreement dated December 21, 1998 between Registrant and
Albert H. Pharis, Jr. (7)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
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<C> <S> <C>
10.4.1 North American Cellular Network Services Agreement dated August 26, 1992
between North American Cellular Network, Inc. and Dobson Cellular
Systems, Inc. (1) [10.4.2]
10.4.2 Agreement for DS-3 service dated December 16, 1993 between Logix
Communications Corporation (f/k/a Dobson Fiber Company) and NTS
Communications, Inc. and Addendum thereto dated June 1, 1994. (1) [10.4.1]
10.4.3 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. (1) [10.5.2]
10.4.4 General Purchase Agreement dated January 13, 1998 between Lucent
Technologies, Inc. and Dobson Cellular Systems, Inc. (5) [10.4.7]
10.4.5 Operating Agreement dated January 16, 1998 between AT&T Wireless
Services, Inc. and Dobson Cellular Systems, Inc. (7)
10.4.6 Fourth Amended General Purchase Agreement dated January 5, 1999 between (4) [10.4.8]
Northern Telecom Inc. and Registrant. (7)
10.5.1 Assignment Agreement dated January 23, 1997 between Texas 16 Cellular
Telephone Company, Inc. and Dobson Cellular of Texas, Inc. re Cellular
One License Agreement. (7)
10.5.2 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]
10.5.3 Trademark Sublicense Agreement dated February 28, 1997 between AirTouch
Communications, Inc. (f/k/a WMC Partners L.P.) and Dobson Cellular of
Arizona, Inc. (1) [10.4.3]
10.5.4 Affiliation Agreement dated February 28, 1997 among Registrant, Dobson
Cellular of Arizona, Inc. and AirTouch Communications, Inc. (f/k/a WMC
Partners, L.P.). (1) [10.4.4]
10.5.5 Letter Agreement dated September 30, 1997 between U.S. West, New Vector
Group, Inc. and Gila River Cellular General Partnership, by Dobson
Cellular of Arizona, Inc. regarding License Agreement for post closing
use of "U.S. West Cellular" brand and "AirTouch" brand. (7)
10.5.6 Trademark Sub-License Agreement dated October 1, 1997 between AirTouch
Communications, Inc. (f/k/a WMC Partners, L.P.) and Gila River
Cellular General Partnership. (7)
10.5.7 Agreement dated April 1, 1998 between Cellular 2000 Telephone Co. and
Dobson Cellular of California re Cellular One License Agreement. (7)
10.5.8 Agreement dated June 16, 1998 between Santa Cruz Cellular Telephone,
Dobson Cellular of California and the other parties listed therein re
Cellular One License Agreement. (7)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
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<C> <S> <C>
10.5.9 Affiliation Agreement, Trademark License Agreement, Intercarrier Roamer
Service Agreement, Amendment to Intercarrier Roamer Service Agreement
made as of July 31, 1998 by and among Dobson Cellular Communications
Corporation, Dobson Cellular of Imperial, Inc. and AirTouch Cellular. (7)
10.5.10 Affiliation Agreement dated as of August 28, 1998 by and among Dobson
Communications Corporation, Dobson Cellular of Sandusky, Inc., New
Par, on behalf of itself and its subsidiaries and affiliates, d/b/a
AirTouch Cellular. (7)
10.6 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. (2) [10.7]
10.7 Second Amended and Restated Partnership Agreement of Gila River Cellular
General Partnership dated September 30, 1997. (2) [10.8]
10.8.1 Investment and Transaction Agreement, dated December 23, 1998, among the
Registrant, Dobson CC Limited Partnership and J. W. Childs Equity
Partners II, L.P. (without exhibits). (7)
10.8.2 Stockholder and Investor Rights Agreement, dated December 23, 1998 among
the Registrant and the shareholders listed therein (without exhibits). (7)
10.8.3 Investors Agreement, dated December 23, 1998, among the Registrant, and
certain shareholders of Sygnet Wireless, Inc. and their affiliates
listed therein. (7)
12 Ratio of earnings to combined fixed charges and preferred stock
dividends. (7)
21 Subsidiaries. (7)
23.1 Consent of McAfee & Taft A Professional Corporation will be contained in
Exhibit 5 hereto. (7) [5]
23.2 Consent of Arthur Andersen LLP (Oklahoma City--DCC). (7)
23.3 Consent of Ernst & Young LLP (Philadelphia--Horizon). (7)
23.4 Consent of Arthur Andersen LLP (Denver--Gila River). (7)
23.5 Consent of Holliday, Lemons, Thomas & Cox, P.C. (7)
23.6 Consent of Ernst & Young LLP (Cleveland--Sygnet). (7)
24 Power of Attorney. (7)
27 Financial Data Schedule. (7)
99.1 Letter of Transmittal. (7)
99.2 Notice of Guaranteed Delivery. (7)
99.3 Company letter. (7)
99.4 Client letter. (7)
99.5 Instruction to Beneficial Holders. (7)
99.6 Guidelines for Certification of Taxpayer Identification Number. (7)
</TABLE>
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* 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 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.
(3) 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.
(4) 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.
(5) Filed as an Exhibit to the Company's Registration Statement on Form S-4
(Registration No. 333-50107), as the exhibit number indicated in brackets
and incorporated by reference herein.
(6) Filed as an exhibit to the Company's Current Report on Form 8-K filed on
January 7, 1999, as the exhibit number indicated in brackets and
incorporated by reference herein.
(7) Filed herewith.
(8) Filed as an exhibit to Logix Communications Enterprises, Inc.'s Registration
Statement on Form S-4 (Registration No. 333-58693), as the exhibit number
indicated in brackets and incorporated by reference herein.
(9) Filed as an exhibit to the Company's Current Report on Form 8-K on June 30,
1998, as the exhibit number indicated in brackets and incorporated by
reference herein.
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 20th day of August, 1998
by and between OHIO WIRELESS COMMUNICATIONS, L.L.C., a Delaware limited
liability company ("Seller"), certain Interest Holders of Seller (the "Interest
Holders"), and DOBSON CELLULAR OF SANDUSKY, INC., an Oklahoma corporation
("Purchaser").
R E C I T A L S
WHEREAS, Seller is the owner of that certain license (the "FCC
Authorization") granted by the Federal Communications Commission (the "FCC") to
provide non-wireline cellular telecommunications service in RSA 2 (the "RSA")
#586 in Sandusky, Ohio (the "Cellular System");
WHEREAS, Seller owns all rights to develop, construct, own and operate the
Cellular System in the RSA (the "Business");
WHEREAS, the Interest Holders own all of the economic interests in Seller,
either as Members or as holders of only economic interests; and
WHEREAS, Purchaser desires to purchase from Seller, and Seller and the
Interest Holders desire to sell to Purchaser, substantially all of the assets of
Seller relating to the Business, including assets acquired by Seller after the
date hereof until the Primary Closing Date, all subject to the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein set forth and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE
Except as otherwise provided and subject to the terms and conditions set
forth in this Agreement, Seller agrees to sell, convey, assign, transfer and
deliver to Purchaser, and Purchaser agrees to purchase from Seller at the
Primary Closing, all of Seller's right, title and interest in and to the Assets
(as defined in Section 2.01 hereof), free and clear of all security interests,
liens, pledges, charges, rights of third parties and encumbrances of every kind
(collectively, "Liens") other than Permitted Liens. As used herein, the term
"Permitted Liens" means (i) any Lien for taxes and assessments not yet past due,
(ii) any Liens represented by easements, rights of way, restrictions,
installations or public utilities, title imperfections and restrictions,
reservations in land patents, zoning ordinances or other similar Liens which do
not and will not individually or in the aggregate, materially interfere with the
use by Seller or Purchaser of the property subject thereto or affected thereby,
(iii) as to leaseholds, interests of the lessors thereof and Liens affecting the
interests of such lessors and (iv) any Lien set forth on SCHEDULE 1 attached
hereto.
<PAGE>
ARTICLE II
DESCRIPTION OF ASSETS; EXCLUDED ASSETS
SECTION 2.01. ASSETS. The assets to be conveyed to Purchaser shall
include all real and personal tangible and intangible assets, properties and
business owned or used by Seller of whatever description, which relate in any
way to the ownership, use or operation of the Business, including all property
and rights acquired or obtained by Seller from the date hereof through the date
of the Primary Closing other than the assets excluded pursuant to Section 2.02
hereof (collectively, the "Assets"). Such Assets shall be free and clear of all
Liens other than Permitted Liens. Such Assets shall include, without
limitation:
(a) All licenses (including the FCC Authorization), leases,
agreements, permits, authorizations, consents and other contracts, revenue
sharing and like agreements, agreements for the reception or transmission of
signals by microwave, easements, appurtenances, rights-of-way and
construction permits; all right, title and interest, if any, in and to all
streets, roads and public places, open or proposed; all agreements between
Seller and suppliers, cellular telephone service companies and subscribers
(including subscriber deposits), and all other similar rights and agreements
(including so-called roaming agreements), which in any way may relate to or
concern the operation by Seller of the Business, all as more particularly
described on SCHEDULE 2.01(a) attached hereto;
(b) All files of correspondence, lists, records and reports
concerning (i) customers and prospective customers of the Business and (ii) all
dealings with Federal, state and local regulatory agencies with respect to the
Business, including, but not limited to, all reports filed by or on behalf of
Seller with the FCC;
(c) All towers, tower equipment, antennas, switching and cell site
equipment and buildings, construction in progress, microwave equipment, testing
equipment, motor vehicles, office equipment, furniture and fixtures, supplies,
inventory and other physical assets, if any, used in or relating to the
Business, and all modifications, additions, restorations or replacements of the
whole or any part thereof;
(d) All interests in real property used in or relating to the
Business;
(e) All right, title and interest to engineering records, files,
data, drawings, blueprints, schematics, maps, reports, lists and plans and
processes intended for use in connection with the Business;
(f) All right, title and interest to intangible personal property
used in or relating to the Business, including all rights, patents and
copyrights used by Seller, and all of the rights of Seller associated therewith
(including any and all applications, registrations, extensions and renewals
thereof), and such rights, patents and copyrights as are described on
SCHEDULE 2.01(f) attached hereto; and
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<PAGE>
(g) Any of the tangible and intangible property of Seller which is
acquired after the date hereof but prior to the Primary Closing and which will
be set forth on SCHEDULE 2.01(g), as such Schedule shall be amended and
supplemented from time to time through the Primary Closing.
SECTION 2.02. EXCLUDED ASSETS. (a) The letter agreement dated June 25,
1992 by and among the Partnership, CCI RSA, Inc. and NewPar (the "AirTouch
Agreement") and the properties and assets described in Section 2.02(b) of this
Agreement which relate to the Business shall be retained by Seller and shall not
be sold, assigned or transferred to Purchaser (the "Excluded Assets").
(b) Anything in this Agreement to the contrary notwithstanding,
the Assets sold to Purchaser pursuant to the terms of this Agreement shall not
include Seller's limited liability company records, books of account, cash, bank
deposits and cash equivalents of Seller at the time of the Primary Closing.
SECTION 2.03. PURCHASER'S ACKNOWLEDGMENT. Purchaser acknowledges that at
the time of the execution of this Agreement, Seller's only assets are the FCC
Authorization and its rights under the AirTouch Agreement, and that Seller shall
not be obligated to acquire any additional assets.
ARTICLE III
ASSUMPTION OF LIABILITIES
As of the Primary Closing, Purchaser shall assume and agree to perform and
discharge the following as they become due for all periods from and after the
date of the Primary Closing, to the extent not previously performed or
discharged: (i) all obligations of Seller which accrue and are to be performed
from and after the Primary Closing under those permits, authorizations,
licenses, leases, rights of way, easements and other agreements related to the
Business listed on SCHEDULES 2.01(a) and 2.01(g); and (ii) all other obligations
of Seller entered into during the period from the date hereof to the Primary
Closing by Seller and identified to and consented by Purchaser and specifically
assumed by Purchaser at the Primary Closing (all of such permits,
authorizations, licenses, leases, rights of way, easements and other agreements
referred to in items (i) and (ii) being referred to hereinafter as the "Assumed
Liabilities"). Purchaser shall not be liable for any liabilities, debts,
contracts, agreements, including without limitation any contracts or agreements
set forth in Section 2.02, or other obligations of Seller of any nature
whatsoever other than the Assumed Liabilities, and it is expressly understood
that Purchaser shall not assume, and shall not be liable for any of Seller's
expenses or obligations relating to or accruing by reason of the proceedings
relating to the FCC Authorization in FCC Docket 91-142 (the "Risk Sharing
Proceeding"), including any obligations relating to any settlement thereof (such
other liabilities, debts, contracts, agreements or other obligations of Seller
other than the Assumed Liabilities being referred to as the "Non-Assumed
Liabilities").
-3-
<PAGE>
ARTICLE IV
INSTRUMENTS OF TRANSFER AND ASSUMPTION
SECTION 4.01. TRANSFER DOCUMENTS. At the Primary Closing, Seller will
deliver to Purchaser (a) a Bill of Sale in substantially the form attached
hereto as EXHIBIT A (the "Bill of Sale"), (b) all such other good and sufficient
instruments of sale, transfer and conveyance, in such form and including such
matters as Purchaser shall reasonably request, as shall be effective to vest in
Purchaser all of Seller's right and title to, and interest in, the Assets; and
(c) all contracts and commitments, instruments, books and records (except as
otherwise provided in Section 2.02 hereof) and other data relating to the
Assets, business and operations of Seller.
SECTION 4.02. ASSUMPTION DOCUMENTS. At the Primary Closing, Purchaser and
Seller will execute and deliver an Assumption Agreement in substantially the
form attached hereto as EXHIBIT B (the "Assumption Agreement") in order to
effect the assumption of the Assumed Liabilities by Purchaser.
ARTICLE V
PURCHASE PRICE; ALLOCATION
SECTION 5.01. PURCHASE PRICE. The total purchase price for the Assets
shall be Thirty-Nine Million Three Hundred Thousand Dollars ($39,300,000).
SECTION 5.02. DEPOSIT. Purchaser has paid into escrow with PNC Bank,
National Association (the "Escrow Agent") $500,000, and on the date hereof will
deposit an additional amount so that the total amount in escrow is Three Million
Nine Hundred Thirty Thousand Dollars ($3,930,000) (the "Deposit"). The Deposit
is being held and invested and will be disbursed pursuant to the terms of the
Deposit Escrow Agreement, a copy of which is attached hereto as EXHIBIT C (the
"Deposit Escrow Agreement"). If the Primary Closing occurs, (i) the earnings on
the Deposit shall be paid to Purchaser in accordance with the Deposit Escrow
Agreement, and (ii) the Deposit shall be retained in the escrow account, such
amount to be administered in accordance with the Purchase Escrow Agreement (as
defined below). If Seller terminates this Agreement in accordance with the
provisions of Section 16.01(e) or (f) prior to the Primary Closing and at the
time of such termination Seller is not then in material breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, then Seller shall be entitled to the Deposit as liquidated damages
(the "Liquidated Damages Amount"), which Liquidated Damages Amount the parties
agree is a fair and reasonable measure of the damages that Seller would sustain
as a result of such termination. Notwithstanding anything else set forth in
this Section 5.02, Seller's sole and exclusive recourse in the event Seller
terminates this Agreement in accordance with the provisions of Section 16.01(e)
or (f) prior to the Primary Closing shall be to receive the Deposit. If for any
other reason the Primary Closing does not occur, then the Deposit and all
earnings thereon shall be paid to Purchaser. All payments by the Escrow Agent
shall be made in accordance with the procedures and other provisions set forth
in the Deposit Escrow Agreement.
-4-
<PAGE>
SECTION 5.03. PAYMENT OF PURCHASE PRICE. On the Primary Closing Date and
subject to the terms and conditions set forth in this Agreement, in reliance on
the representations, warranties, covenants and agreements of the parties
contained herein and in consideration of the sale of the Assets, Purchaser will
pay the Purchase Price LESS the Deposit into an account (the "Purchase Escrow
Account") maintained by the Escrow Agent, and such amount will be held, invested
and disbursed pursuant to the terms of the Purchase Escrow Agreement
substantially in the form of EXHIBIT D attached hereto (the "Purchase Escrow
Agreement"). On the Primary Closing Date, the Deposit will be transferred to
the Purchase Escrow Account, whereupon the Deposit Escrow Agreement shall
terminate. At Final Closing, an amount equal to the Purchase Price less the sum
of (i) amounts paid to Purchaser from the Purchase Escrow Account in respect of
indemnification pursuant to Section 14.01 hereof and (ii) amounts held in
respect of any pending but unpaid claims for indemnification pursuant to Section
14.01 hereof (such amounts in clause (ii) being referred to as the "Indemnity
Escrow Amount") shall be paid to Seller from the Purchase Escrow Account. The
Indemnity Escrow Amount shall be held and released in accordance with the terms
of the Purchase Escrow Agreement. In addition, an amount equal to the earnings,
if any, which have accrued on the amount in the Purchase Escrow Account from the
Final Order Date (provided Seller is not then in material breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement) shall be paid to Seller at the Final Closing. All remaining amounts
in the Purchase Escrow Account shall be released to Purchaser in accordance with
the terms of the Purchase Escrow Agreement. Notwithstanding the foregoing, at
Final Closing Seller and Purchaser may instruct the Escrow Agent to release a
specified amount as a settlement of FCC litigation to which Seller is a party,
in accordance with the terms of the Purchase Escrow Agreement. Except as
provided in Section 16.02(b), in the event this Agreement is terminated after
the Primary Closing for any reason under Article XVI of this Agreement, all
amounts in the Purchase Escrow Account shall be released to Purchaser in
accordance with the terms of the Purchase Escrow Agreement.
SECTION 5.04. ALLOCATION OF PURCHASE PRICE. No later than five (5) days
before the Primary Closing, Purchaser and Seller in good faith shall determine
an allocation of the Purchase Price in accordance with the respective fair
market values of the Assets being purchased. Purchaser and Seller each further
agree to file their income tax returns and their other tax returns reflecting
the allocation as determined in this Section 5.04. If no agreement on an
allocation of the Purchase Price is reached within thirty (30) days after the
Primary Closing, such allocation shall be determined by a nationally recognized
appraisal firm mutually agreeable to Seller and Purchaser and the costs of such
appraisal shall be borne equally by Seller and Purchaser.
ARTICLE VI
CLOSING
SECTION 6.01. PRIMARY CLOSING. Subject to the terms and conditions
hereof, the Primary Closing (the "Primary Closing") shall take place at the
offices of Edwards & Angell, One BankBoston Plaza, Providence, Rhode Island
02903 on August 26, 1998 (the "Primary Closing Date").
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SECTION 6.02. FINAL CLOSING. Subject to the terms and conditions hereof,
the Final Closing (the "Final Closing") shall take place at the offices of
Edwards & Angell, One BankBoston Plaza, Providence, Rhode Island 02903 on a date
designated by Purchaser that is within ten (10) business days after the later to
occur of each of the following (the date of the later occurrence being referred
to herein as the "Final Order Date"): (a) the date on which the FCC's approval
of the assignment of the FCC Authorization from Seller to Purchaser has become a
Final Order; and (b) the date on which the FCC's order in the Risk Sharing
Proceeding granting the FCC Authorization to Seller has become a Final Order
(the "Final Closing Date"). For the purposes of this Agreement, the term "Final
Order" shall mean action by the FCC as to which (i) no request for stay by the
FCC of the action is pending, no such stay is in effect, and, if any deadline
for filing any such request is designated by statute or regulation, such
deadline has passed; (ii) no petition for rehearing or reconsideration of the
action is pending before the FCC and the time for filing any such petition has
passed; (iii) the FCC does not have the action under reconsideration on its own
motion and the time for such reconsideration has passed; and (iv) no appeal to a
court, or request for stay by a court, of the FCC's action is pending or in
effect, and, if any deadline for filing any such appeal or request is designated
by statute or rule, it has passed.
ARTICLE VII
SELLER'S REPRESENTATIONS
Seller hereby represents, warrants, covenants and agrees that:
SECTION 7.01. ORGANIZATION; QUALIFICATION; INTEREST HOLDERS. Seller is a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and is duly qualified to do business in
the State of Ohio. A true and complete copy of Seller's Certificate of
Formation and Limited Liability Company Operating Agreement, each as amended to
date, is attached as SCHEDULE 7.01(a) hereto. Seller has all power and
authority to own and operate its properties and to carry on its business as now
being conducted or proposed to be conducted by Seller and to carry out the
transactions contemplated by this Agreement. Seller has the power and authority
to execute and deliver and, subject to obtaining the FCC's approval to assign
the FCC Authorization to Purchaser, perform its obligations under this Agreement
and to undertake the transactions contemplated hereby. A true and accurate list
of the name and addresses of the Interest Holders of Seller is set forth on
SCHEDULE 7.01(b) attached hereto (the "Interest Holders").
SECTION 7.02. CONSENTS, AUTHORIZATION, EXECUTION AND DELIVERY OF
AGREEMENT. All necessary consents and approvals have been obtained by Seller
for the execution and delivery of this Agreement. The execution, delivery and
performance of this Agreement by Seller and the transfer of the Assets to
Purchaser have been duly and validly authorized and approved by all necessary
limited liability company action of Seller's Interest Holders. This Agreement
is a valid and binding obligation of Seller and the Interest Holders,
enforceable against them in accordance with its terms.
SECTION 7.03. TITLE TO ASSETS; LIABILITIES, CONDITION OF ASSETS. Except
as set forth on SCHEDULE 7.03 attached hereto, Seller has full power, right and
authority to sell and convey the
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Assets to Purchaser. Seller has, and at the Primary Closing will transfer
and convey to Purchaser, good and marketable title to the Assets, free and
clear of all Liens other than Permitted Liens. All Liens on the Assets in
effect on the date hereof are listed on SCHEDULE 7.03 hereto and all such
Liens, other than Permitted Liens, will be discharged at the Primary Closing.
Seller does not have any liabilities which would be required to be disclosed
on a balance sheet prepared in accordance with GAAP. The Assets, together
with the assets owned or used by AirTouch Communications, Inc. in connection
with its provision of cellular services in the RSA, constitute all of the
assets used or useful by Seller in connection with the operation of the
Business. No Interest Holder owns, leases or has any rights in any property,
license or other assets related to the Business.
SECTION 7.04. REAL PROPERTY - OWNED. Seller does not own any real
property or interests in real property in fee simple.
SECTION 7.05. REAL AND PERSONAL PROPERTY - LEASED. Seller does not lease
any real or personal property.
SECTION 7.06. EXISTING CONTRACTS. Set forth on SCHEDULE 7.06 attached
hereto are all agreements, contracts commitments, options, Liens, licenses,
mortgages and other security interests, promises and understandings (written or
oral) to which Seller is a party or by which any of the Assets and/or the
operation of the Business are bound (the "Existing Contracts"). No Interest
Holder or any person or entity (other than Seller) controlled or affiliated with
any Interest Holder has any contractual relationship relating to the ownership
of the Assets or operation of the Business, except as set forth on
SCHEDULE 7.06. Seller has heretofore delivered to Purchaser true and correct
copies of the Existing Contracts. Seller has no knowledge of any breach or
anticipated breach by the other parties to any Existing Contracts. The Existing
Contracts are in full force and effect and Seller is in compliance with the
terms of such Existing Contracts. Except for the Existing Contracts, Seller has
not entered into any other agreements relating to the ownership of the Assets
and the operation of the Business, including, but not limited to, rights-of-way,
rights of entry, licenses, easements, leases (real property or equipment), or
guaranty agreements. Seller is not aware of any claims by third parties that
Seller is required to enter into such other agreements to enable it to continue
owning the Assets and operating the Business as it is presently being operated.
SECTION 7.07. GOVERNMENTAL LICENSES. Seller holds all necessary licenses
including without limitation the FCC Authorization, consents, permits, approvals
and authorizations of public or governmental bodies including, without
limitation, the FCC and the state, counties and municipalities served by the
Business, which are required in connection with the ownership of the Assets and
which are required for the provision of cellular services in the RSA in
connection with applicable FCC regulations (collectively referred to as the
"Authorizations"). All Authorizations are in full force and effect. Seller has
complied with the terms of the Authorizations and there are no pending
modifications, amendments or revocations of the Authorizations which would
adversely affect the ownership of the Assets or the operation of the Business.
All fees of Seller due and payable to governmental authorities pursuant to the
Authorizations have been paid and no event has occurred which, with or without
the giving of
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notice or lapse of time or both, would constitute grounds for revocation or
modification of the Authorizations. All reports required of Seller to be
filed in connection with the Authorizations have been timely filed and are
accurate and complete. Seller has not engaged in any course of conduct that
could reasonably be expected to impair the ability of Seller to be the holder
of the Authorizations or is aware of any reason why the Authorizations might
not be renewed in the ordinary course, why any of the Authorizations might be
revoked, or why any pending applications or notifications might not be
approved. True and correct copies of the Authorizations, and all amendments
thereto to the date hereof, have been delivered by Seller to Purchaser and
are identified on SCHEDULE 7.07 attached hereto. The ownership of the Assets
and the operation of the Business by Seller is not subject to regulation or
supervision by any applicable state public utilities commission or other
similar state governmental instrumentality (a "PUC").
SECTION 7.08. COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 7.08
attached hereto, Seller is currently complying with, and it and its predecessor,
Alpha Cellular, a general partnership (the "Partnership"), have so complied
with, and Seller is not in default under or in violation of, and neither the
Business nor any of the Assets nor the operation or maintenance thereof,
contravenes in any respect any statute, law (including environmental or
employment laws), ordinance, decree, order, rule or regulation of any
governmental body applicable to the Assets or the Business, including, without
limitation, rules and regulations of the FCC.
SECTION 7.09. NO VIOLATION OF EXISTING AGREEMENTS. The execution,
delivery and performance of this Agreement by Seller and the Interest Holders
will not violate any provisions of law and will not, with or without the giving
of notice or the passage of time, or both, conflict with or result in any breach
of any of the terms or conditions of, or constitute a default under any Existing
Contracts. The execution, delivery and performance of this Agreement by Seller
and the Interest Holders will not result in the creation of any Lien upon the
Assets or the Business.
SECTION 7.10. LITIGATION AND LEGAL PROCEEDINGS. Except as set forth on
SCHEDULE 7.10 attached hereto, there is no outstanding judgment against Seller,
the Partnership or any Interest Holder and there is no litigation, proceeding or
investigation pending, or, to the knowledge of Seller and the Interest Holders,
threatened, against Seller, the Partnership, any Interest Holder or the Business
or the Assets or which questions the validity of any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement. Except as
set forth on SCHEDULE 7.10, there are no proceedings pending to which Seller or
any Interest Holder is a party or, to the knowledge of Seller and the Interest
Holders, threatened, nor any demands by any governmental agency, utility or
other party, to terminate, modify or adversely change the terms and conditions
of Seller's rights with respect to the Authorizations or Existing Contracts
whereby such termination or modification would result in an adverse effect on
the Business or the Assets.
SECTION 7.11. ENVIRONMENTAL COMPLIANCE. Seller has no real property,
whether owned or leased, and has no facilities or equipment, its only assets
being the FCC Authorization and certain rights under the AirTouch Agreement.
SECTION 7.12. LABOR MATTERS. Seller has no employees.
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SECTION 7.13. EMPLOYEE BENEFITS. Seller has no Employee Benefit Plans in
which one or more Interest Holders participate or are eligible to participate as
of the date hereof, and is not a party to any employment contract. The term
"Employee Benefit Plans" means all employee benefit plans as that term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"). No Interest Holder or employee of Seller participates or
is eligible to participate in a "defined benefit pension plan" as defined in
Section 3(35) of ERISA, maintained or made available by Seller. Neither Seller
nor any Controlled Group Member maintains or contributes to, or ever maintained
or contributed to, a plan under which any employee of Seller participates or is
eligible to participate subject to Section 412 of the Internal Revenue Code of
1986, as amended (the "Code"). The term "Controlled Group Member" means any
trade or business (whether or not incorporated) which is, or was at any relevant
time, aggregated with Seller pursuant to Section 414(b), (c), (m) or (o) of the
Code. Neither Seller nor any ERISA Affiliate has participated in or made
contributions to any "multiemployer plan" as defined in Section 4001(a)(3) of
ERISA. The term "ERISA Affiliate" means each trade or business (whether or not
incorporated) which is, or was at any relevant time, treated as a single
employer with Seller pursuant to Section 4001(b)(1) of ERISA.
SECTION 7.14. TAX MATTERS. Except as disclosed on SCHEDULE 7.14 attached
hereto, Seller, the Partnership and each of its Interest Holders have timely
filed all federal, state, county and local tax returns required to be filed as
of the date hereof and will file all such returns required to be filed from the
date hereof to the Primary Closing, and have paid and will pay all taxes due and
owing for all such periods. There are no suits, actions, claims,
investigations, inquiries or proceedings pending or, to the knowledge of Seller
and the Interest Holders, threatened against Seller, the Partnership or any
Interest Holder in respect of any taxes, interest, assessments, governmental
charges or penalties, with the exception of the Risk Sharing Proceeding, in
which Seller is a party.
SECTION 7.15. SUBSCRIBERS. As of the date hereof, the Business does not
have any subscribers.
SECTION 7.16. INSURANCE. Attached hereto as SCHEDULE 7.16 is an accurate
and complete list in all material respects of all insurance policies, bonds and
letters of credit which relate in any way to the ownership, use or operation of
the Assets and the Business.
SECTION 7.17. BROKERS. Except as set forth on SCHEDULE 7.17 attached
hereto, Seller and the Interest Holders have not engaged any agent, broker or
other person acting pursuant to the express or implied authority of Seller which
is or may be entitled to a commission or broker or finder's fee in connection
with the transactions contemplated by this Agreement or otherwise with respect
to the sale of the Assets or the Business.
SECTION 7.18. HART-SCOTT-RODINO. Seller does not meet the "size of person
test" for an acquired person under the Hart-Scott-Rodino Antitrust Improvements
Act, since Seller's ultimate parent entity and all entities that its ultimate
parent entity controls do not meet the financial thresholds set forth in 16
C.F.R. Part 801.
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SECTION 7.19. DISCLOSURE OF MATERIAL INFORMATION. No representation or
warranty by Seller or the Interest Holders hereunder or in the exhibits hereto,
the Bill of Sale, the Assumption Agreement, or in any closing certificate
delivered to Purchaser pursuant to Article X or XII hereof, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained therein not misleading.
ARTICLE VIII
PURCHASER'S REPRESENTATIONS
Purchaser hereby represents, warrants, covenants and agrees that:
SECTION 8.01. ORGANIZATION; QUALIFICATION. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Oklahoma. Purchaser has all power and authority to (i) own and operate
its properties, (ii) carry on its business as it is now being conducted, and
(iii) carry out the transactions contemplated by this Agreement and to own and
operate the Assets and the Business, subject to obtaining all necessary consents
required for the transfer by Seller of the Assets.
SECTION 8.02. CONSENTS; AUTHORIZATION; EXECUTION AND DELIVERY OF
AGREEMENT. The execution and delivery of this Agreement by Purchaser has been
duly and validly authorized and approved by all necessary corporate action.
Purchaser has full power and authority to execute and deliver and perform its
obligations under this Agreement. This Agreement is a valid and binding
obligation of Purchaser, enforceable against it in accordance with its terms.
SECTION 8.03. LITIGATION AND LEGAL PROCEEDINGS. There is no outstanding
judgment against Purchaser and there is no litigation, proceeding or
investigation pending, or, to Purchaser's knowledge, threatened, against
Purchaser or its assets which individually or in the aggregate would, if
adversely determined, result in a material adverse change in the business
condition (financial or otherwise), properties, prospects or assets of Purchaser
or which questions the validity of any action taken or to be taken pursuant to
or in connection with the provisions of this Agreement or the consummation of
the transactions contemplated hereby by Purchaser.
SECTION 8.04. BROKERS. With the exception of First Union Capital Markets,
to which Purchaser shall pay a brokerage fee, Purchaser has not engaged any
agent, broker or other person acting pursuant to the express or implied
authority of Purchaser which is or may be entitled to a commission or broker or
finder's fee in connection with the transactions contemplated by this Agreement
or otherwise with respect to the sale of the Assets or the Business.
SECTION 8.05. GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Purchaser of this Agreement require no action by or in respect
of, or filing with, any governmental body, agency or official other than the
filings with and approval of the FCC necessary to consummate the transactions
contemplated hereby.
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SECTION 8.06. NON-CONTRAVENTION. Purchaser is not a party to or bound
by any contract prohibiting the consummation of the transactions contemplated
hereby nor any contract or contracts that either separately or in the
aggregate materially and adversely affect Purchaser's ability to consummate
the transactions contemplated by this Agreement.
SECTION 8.07. ACCURACY OF STATEMENTS. No representation or warranty by
Purchaser hereunder or in the exhibits hereto, the Bill of Sale, the
Assumption Agreement, or in any closing certificate delivered to Seller
pursuant to Article XI hereof, contains or will contain any untrue statement
of a material fact, or omits or will omit to state any material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which such statements were made, not misleading.
SECTION 8.08. FINANCING; QUALIFICATIONS. Purchaser has, or will have
prior to the Primary Closing, sufficient cash, available lines of credit or
other sources of immediately available funds to enable it to purchase the
Assets. Purchaser has no knowledge of any fact that would, under existing
law, disqualify Purchaser as an assignee of the FCC Authorization.
SECTION 8.09. ENVIRONMENTAL COMPLIANCE. Purchaser currently has no
real property, whether owned or leased, and has no facilities or equipment
located in the RSA.
ARTICLE IX
SELLER'S AND PURCHASER'S AFFIRMATIVE COVENANTS
SECTION 9.01 ACCESS. Seller shall give Purchaser and its counsel,
accountants and other representatives access during normal business hours to
inspect all of the properties, books and records of Seller as they pertain to
the Assets and the Business, wherever located, and furnish Purchaser with
such available and existing documentation concerning the Assets and the
Business as Purchaser may reasonably request.
SECTION 9.02. CONDUCT OF BUSINESS. From the date hereof until the
Primary Closing Seller shall:
(a) Use its best efforts to preserve intact the Assets and the
Business, including, but not limited to, complying in all material respects
with applicable Federal, state and local laws, rules and regulations and
pertinent provisions of all Existing Contracts and Authorizations;
(b) Not sell, transfer, convey or otherwise dispose of the Assets
without the prior written consent of Purchaser or pledge or otherwise
encumber any of the Assets without the prior written consent of Purchaser;
(c) Not make any distribution of any Assets to any of its Interest
Holders or any affiliate of any of its Interest Holders;
(d) Not hire any employees;
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(e) Maintain its books and records in accordance with prior practice;
(f) Provide to the Purchaser, concurrently with filing thereof,
copies of all reports to and other filings with the FCC and any other
governmental agency;
(g) Not permit the FCC Authorization to expire or to be
surrendered or voluntarily modified in a matter adverse to the Business, or
take any action which would reasonably be expected to cause the FCC or any
other governmental authority to institute proceedings for the suspension,
revocation or limitation of rights under the FCC Authorization; or fail to
prosecute with due diligence any pending applications to any governmental
authority;
(h) Notify Purchaser in writing promptly after learning of the
institution or threat of any material action against Seller in any court, or
any action against Seller before the FCC or any other governmental agency,
and notify Purchaser in writing promptly upon receipt of any administrative
or court order relating to the Assets or the Business; and
(i) pay or cause to be paid or provide for all taxes of or
relating to Seller, the Assets and the employees required to be paid to city,
county, state, Federal and other governmental units up to the Primary Closing
Date.
SECTION 9.03. GOVERNMENTAL APPROVALS. (a) Purchaser will fully
cooperate with Seller and do all things that are commercially reasonable to
assist Seller to obtain all consents and approvals necessary for the transfer
or assignment to Purchaser of the Authorizations (including without
limitation, the FCC Authorization), including the furnishing of financial and
other information specifically with respect to Purchaser reasonably required
by the person whose consent or approval is being sought. Seller shall
provide adequate prior written notice to Purchaser of any meeting with
governmental authorities the purpose of which is to seek a consent or
approval to the transactions contemplated hereby, and Purchaser shall use all
reasonable efforts to furnish a representative to attend meetings with
appropriate government authorities for the purpose of obtaining such consents
or approvals. Seller hereby agrees to file the necessary Form 490 with the
FCC transferring or assigning control of the FCC Authorization to Purchaser
and diligently pursue the processing of the assignment of the FCC
Authorization to Purchaser and to file for all other necessary regulatory
approvals for the consummation of the transactions contemplated by this
Agreement within five business days of the date of execution of this
Agreement to the extent any such filings have not been made prior to the date
of execution of this Agreement.
(b) Purchaser and Seller shall share equally all fees relating to
filings made pursuant to this Section 9.03.
SECTION 9.04. THIRD PARTY CONSENTS; CLOSING CONDITIONS. (a) Each of
Purchaser and Seller covenants and agrees that each of them will reasonably
cooperate with each other, and Purchaser will do all things reasonably
necessary to assist Seller to obtain all consents and approvals necessary for
the transfer or assignment to Purchaser of the Assets, including the
furnishing of financial and other information specifically with respect to
Purchaser or Seller, as
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the case may be, reasonably required by the person whose consent or approval
is being sought. Notwithstanding the foregoing, to the extent that any of
the Assets to be sold, assigned, transferred or conveyed to Purchaser, or any
claim, right or benefit arising thereunder or resulting therefrom
(individually, an "Interest" and collectively, the "Interests"), is not
capable of being sold, assigned, transferred or conveyed without the
approval, consent or waiver of the issuer thereof or the other party thereto,
or any third person (including a government or governmental unit), and such
approval, consent or waiver has not been obtained, or if such sale,
assignment, transfer or conveyance or attempted assignment, transfer or
conveyance would constitute a breach thereof, and such approval, consent or
waiver has not been obtained, this Agreement shall not constitute a sale,
assignment, transfer or conveyance thereof, or an attempted assignment,
transfer or conveyance thereof; provided Seller shall use its best efforts to
provide Purchaser the benefits of any such Interest as provided in Section
19.01(b). Each of Purchaser and Seller shall use all reasonable efforts to
consummate the transactions contemplated hereby.
(b) Purchaser and Seller hereby covenant and agree to use all
reasonable efforts to satisfy, or assist the other party in satisfying,
the closing conditions applicable to Purchaser in Article XI hereof and
Seller in Article X hereof prior to the Primary Closing Date.
SECTION 9.05. NO SHOPPING. Seller and the Interest Holders and any of
their respective affiliates, advisors or representatives shall not, during
the term of this Agreement, directly or indirectly, solicit, encourage or
initiate any contact with, negotiate with, or provide any information to,
endorse or enter into any agreement with respect to, or take any other action
to facilitate any person or group, other than Purchaser and its
representatives, concerning any inquiries or the making of any proposals
concerning any merger, sale of all or substantially all of the assets,
acquisition of Seller's membership or other economic interests, or any
similar transaction involving Seller.
SECTION 9.06. SUPPLEMENTAL DISCLOSURE. Seller shall promptly from time
to time prior to the Primary Closing Date and Final Closing Date supplement
in writing the Schedules hereto with respect to any matter hereafter arising
that, if existing or known as of the date of this Agreement, would have been
required to be set forth or described in the Schedules hereto; provided,
however, that no such supplemental disclosure shall be deemed to cure any
breach of any representation or warranty of Seller made in this Agreement
unless Purchaser waives any such breach in writing to Seller.
SECTION 9.07. LITIGATION MATTERS. Seller and Purchaser agree that any
and all costs of litigation and other proceedings pertaining to the Risk
Sharing Proceeding shall be the responsibility of Seller, and that Seller
shall control the defense of the Risk Sharing Proceeding, subject to
Purchaser's right to assist in the defense. Seller agrees that it will not
settle the Risk Sharing Proceeding without the prior written consent of
Purchaser, such consent not to be unreasonably withheld, provided that
Purchaser's consent to Seller's payment of money to persuade adverse parties
to withdraw from the Risk Sharing Proceeding shall not be required.
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SECTION 9.08. SUBSEQUENT AUCTION OF FCC AUTHORIZATION. Despite
termination of this Agreement pursuant to Section 16.01(d), Purchaser hereby
agrees that if the FCC Authorization is subsequently awarded by the FCC in a
competitive bidding mechanism in which Purchaser meets the eligibility
criteria, Purchaser agrees to use its commercially reasonable efforts to
qualify to bid on the FCC Authorization, and if Purchaser is granted the FCC
Authorization after such competitive bidding process for a price which is
less than the Purchase Price, Purchaser shall pay to Seller the amount which
is 50% of the difference. If Seller meets the eligibility criteria but
Purchaser does not, Seller may bid on the FCC Authorization after disclosing
to the FCC that it intends to assign the FCC Authorization to Purchaser and
securing FCC consent, if necessary, to that course of action; and if Seller
is granted the FCC Authorization in such competitive bidding process, Seller
shall promptly take such steps as are reasonably necessary to allow Seller to
assign such FCC Authorization to Purchaser, including the filing and
prosecution of applications to obtain any required FCC consents to such
assignment. In such event, the purchase price for the FCC Authorization
payable to Sellers shall be the lesser of (i) the Purchase Price and (ii) the
sum of (a) the price at which Seller was awarded the FCC Authorization plus
(b) one half of the difference between such price and the Purchase Price.
SECTION 9.09. MANAGEMENT AGREEMENT. In the event that the FCC's
consent to the transfer of the FCC Authorization from Seller to Purchaser has
been stayed or otherwise suspended prior to the Primary Closing ("FCC Stay"),
Purchaser and Seller shall then commence negotiations on a mutually
acceptable form of Management Agreement to govern the operation of the
Business until the FCC's consent is restored. If Purchaser and Seller are
unable to agree on mutually acceptable terms of the Management Agreement
within 15 business days of the FCC Stay, then either party shall have the
right to terminate this Agreement on five (5) days written notice to the
other party.
ARTICLE X
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO
CONSUMMATE PRIMARY CLOSING
The obligations of Purchaser under this Agreement with respect to the
purchase and sale of the Assets shall be subject to the fulfillment on or
prior to the Primary Closing of each of the following conditions:
SECTION 10.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE
OF THIS AGREEMENT. All of the representations and warranties by Seller
contained in this Agreement shall be true and correct at and as of the
Primary Closing in all material respects. Seller shall have complied with
and performed in all material respects all of the agreements and covenants
required by this Agreement to be performed or complied with by it on or prior
to the Primary Closing. Purchaser shall have been furnished with a
certificate or certificates of the General Manager of Seller, dated as of the
Primary Closing, certifying to the fulfillment of the foregoing conditions.
SECTION 10.02. INTEREST HOLDER APPROVAL. Seller shall deliver to
Purchaser a copy of the approval signed by all of the Interest Holders of
Seller which authorizes the execution, delivery
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and performance of this Agreement by Seller and all instruments and documents
to be delivered in connection herewith and the transactions contemplated
hereby, duly certified by the General Manager of Seller.
SECTION 10.03. [Intentionally Omitted.]
SECTION 10.04. THIRD PARTY CONSENTS; FCC GRANT. Seller shall have
delivered to Purchaser such instruments, consents and approvals of third
parties (the form and substance of which shall be reasonably satisfactory to
Purchaser) as are necessary to transfer to Purchaser without modification
thereof, as of the Primary Closing, the Assets and the Authorizations. Prior
to the Primary Closing, the FCC shall have granted its consent to the
transfer and assignment of the FCC Authorization to Purchaser without any
conditions which Purchaser determines, in its sole discretion, to be
materially adverse to its ability to operate a cellular system in the RSA,
provided that a consent conditioned on the outcome of the Risk Sharing
Proceeding would not be deemed a materially adverse condition. Anything
herein to the contrary notwithstanding, Purchaser shall have the right (in
its sole discretion) but no obligation to waive the requirement set forth in
the preceding sentence.
SECTION 10.05. DUE DILIGENCE. Purchaser and its agents and
representative shall have conducted a satisfactory legal, regulatory and
business due diligence review of the Assets, the results of which shall be
satisfactory to Purchaser. This condition shall be conclusively satisfied
unless Purchaser notifies Seller, in writing, of deficiencies within sixty
(60) days of the date of this Agreement. If Seller is notified of any
deficiencies within such 60-day period, Seller shall have thirty (30) days in
which to notify Purchaser in writing of Seller's decision to: (1) cure the
deficiencies, in which event Seller shall have an additional 60 days to cure
identified deficiencies to Purchaser's reasonable satisfaction, or (2)
terminate this Agreement (which termination shall be deemed a termination
pursuant to 16.01(a)).
SECTION 10.06. NO MATERIAL ADVERSE CHANGE. There shall not have been
any material adverse change with respect to the Authorizations.
SECTION 10.07. OPINION OF COUNSEL TO SELLER. Purchaser shall have been
furnished with an opinion of Donald P. La Rocque, Esq., counsel to Seller,
dated as of the Primary Closing and addressed to Purchaser and to any
financial institution designated by Purchaser in substantially the form of
EXHIBIT E hereto.
SECTION 10.08. OPINION OF FCC COUNSEL TO SELLER. Purchaser shall have
been furnished with an opinion of Koteen & Naftalin, L.L.P., FCC counsel for
Seller, dated as of the Primary Closing and addressed to Purchaser and to any
financial institution designated by Purchaser in substantially the form of
EXHIBIT F-1 attached hereto.
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ARTICLE XI
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO
PRIMARY CLOSING
The obligations of Seller under this Agreement with respect to the
purchase and sale of the Assets shall be subject to the fulfillment on or
prior to the Primary Closing of each of the following conditions:
SECTION 11.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE
OF THIS AGREEMENT. All of the representations and warranties by Purchaser
contained in this Agreement shall be true and correct in all material
respects at and as of the Primary Closing. Purchaser shall have complied
with and performed in all material respects all of the agreements and
covenants required by this Agreement to be performed and complied with by it
on or prior to the Primary Closing. Seller shall have been furnished with a
certificate of an officer of Purchaser, dated as of the Primary Closing,
certifying to the fulfillment of the foregoing conditions.
SECTION 11.02. DIRECTORS' RESOLUTIONS. Purchaser shall deliver to
Seller copies of the resolutions of its Board of Directors authorizing the
execution, delivery and performance of this Agreement and all instruments and
documents to be delivered in connection herewith and the transactions
contemplated hereby, duly certified by an authorized officer of Purchaser.
SECTION 11.03. INCUMBENCY CERTIFICATE. Seller shall have received a
certificate of a secretary of Purchaser, certifying as to the genuineness of
the signatures of representatives of Purchaser authorized to take certain
actions or execute any certificate, document, instrument or agreement to be
delivered pursuant to this Agreement, which incumbency certificate shall
include the true signatures of such representatives.
SECTION 11.04. OPINION OF COUNSEL TO PURCHASER. Seller shall have been
furnished with an opinion of Edwards & Angell, counsel to Purchaser, dated as
of the Primary Closing and addressed to Seller in substantially the form of
EXHIBIT G hereto.
ARTICLE XII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION AT FINAL CLOSING
The obligations of Purchaser under this Agreement due after the Primary
Closing with respect to the purchase and sale of the Assets shall be subject to
the fulfillment on or prior to the Final Closing of each of the following
conditions:
SECTION 12.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE
OF THIS AGREEMENT. All of the representations and warranties by Seller and
the Interest Holders contained in this Agreement shall be true and correct in
all material respects at and as of the Final Closing. Seller shall have
complied with and performed in all material respects all of the agreements
and covenants required by this Agreement to be performed and complied with by
it on or prior to the Final Closing. Purchaser shall have been furnished
with a certificate of the
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General Manager of Seller, dated as of the Final Closing, certifying to the
fulfillment of the foregoing conditions.
SECTION 12.02. FCC FINAL ORDER. Each of (i) the FCC order granting
approval for the assignment of the FCC Authorization from Seller to Purchaser
and (ii) the FCC order granting the FCC Authorization to Seller in the Risk
Sharing Proceeding shall have become a Final Order, in each instance without
any conditions which the Purchaser shall have determined, in its sole
discretion, to be materially adverse to its ability to operate a cellular
system in the RSA.
SECTION 12.03. OPINION OF FCC COUNSEL TO SELLER. Purchaser shall have
been furnished an opinion of Koteen & Naftalin, L.L.P., FCC counsel for
Seller, dated as of the Final Closing and addressed to Purchaser and any
financial institution designated by Purchaser in substantially the form of
EXHIBIT F-2 attached hereto.
ARTICLE XIII
CASUALTY LOSSES
In the event that there shall have been suffered between the date hereof
and the Primary Closing any casualty loss relating to the Assets or the
Business, then at the Primary Closing all claims to insurance proceeds or
other rights of Seller against third parties arising from such casualty loss
(the "Claims") shall (to the extent assignable) be separately assigned by
Seller to Purchaser. To the extent any Claim is not assignable, such claim
may be pursued by Purchaser, for its own account and benefit, in the name of
Seller.
ARTICLE XIV
INDEMNIFICATION
SECTION 14.01. INDEMNIFICATION BY SELLER. Notwithstanding the Primary
Closing or Final Closing, and regardless of any investigation made at any
time by or on behalf of Purchaser or any information Purchaser may have, but
subject to the terms of this Article XIV, Seller and its Interest Holders, on
a joint and several basis (the "Indemnifying Seller Parties"), agree to
indemnify and to hold Purchaser, its shareholders, officers, directors, and
employees (the "Indemnified Purchaser Parties") harmless from and against and
in respect of any losses (including lost revenues), damages, costs, expenses
(including costs of investigations and reasonable attorney fees), suits,
demands, judgments and diminutions in value suffered or incurred (each a
"Loss" and collectively "Losses") by Purchaser arising from or related to:
(i) Any and all Non-Assumed Liabilities, whether or not known
or asserted at or prior to the Primary Closing, relating to or arising
from the ownership, operation, control or sale of the Assets or the
Business by Seller or the Partnership, or any other state of facts
which existed at or prior to the Primary Closing;
(ii) Any liability, debt, obligation, tax, claim or demand relating
to the FCC Authorization or any application therefor while held by Seller
or the Partnership,
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including without limitation, any fines or forfeitures imposed or
threatened to be imposed by the FCC, regardless of when such fines are
imposed or threatened;
(iii) Any misrepresentation, breach of warranty, or nonfulfillment of
any agreement or covenant on the part of Seller under this Agreement, the
Schedules or Exhibits hereto, the Bill of Sale, the Assumption Agreement,
the Deposit Escrow Agreement, the Purchase Escrow Agreement or in any
closing certificate delivered by Seller to Purchaser pursuant to Article X
or XII hereof; and
(iv) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by any Indemnified Purchaser Party in connection
with any action, suit, proceeding, demand, assessment or judgment incident
to any of the matters such Indemnified Purchaser Party is indemnified
against by the Indemnifying Seller Parties in this Agreement.
SECTION 14.02. INDEMNIFICATION BY PURCHASER. Notwithstanding the
Primary Closing or Final Closing, and regardless of any investigation made at
any time by or on behalf of Seller or any information Seller or its Interest
Holders may have, but subject to the terms of this Article XIV, Purchaser
agrees to indemnify and to hold Seller and its Interest Holders harmless from
and against and in respect of any Losses incurred by Seller and its Interest
Holders arising from or related to:
(i) All liabilities and obligations of Purchaser, and all claims
and demands made in respect thereof relating to or arising from,
Purchaser's ownership, operation or control of the Assets or the Business
after the Primary Closing, including on account of the Assumed Liabilities;
(ii) Any liability, debt, obligation, tax, claim or demand relating
to the FCC Authorization while held by Purchaser, including without
limitation, any fines or forfeitures imposed or threatened to be imposed by
the FCC, regardless of when such fines are imposed or threatened;
(iii) Any misrepresentation, breach of warranty, or nonfulfillment of
any agreement or covenant on the part of Purchaser under this Agreement,
the Schedules or Exhibits hereto, the Assumption Agreement, the Deposit
Escrow Agreement, the Purchase Escrow Agreement or in any closing
certificate delivered by Purchaser to Seller pursuant to Article XI
hereof; and
(iv) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Seller and its Interest Holders in connection
with any action, suit, proceeding, demand, assessment or judgment incident
to any of the matters Seller and its Interest Holders are indemnified
against by Purchaser in this Agreement.
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SECTION 14.03. NOTICE OF CLAIMS; DEFENSE OF THIRD PARTY. (a) A party
claiming indemnification under this Article XIV (the "Asserting Party") must
promptly notify (in writing and in reasonable detail) the party from which
indemnification is sought (the "Defending Party") of the nature and basis of
such claim for indemnification.
(b) If such claim relates to a claim, suit, litigation or other action
by a third party against the Asserting Party or any fixed or contingent
liability to a third party (a "Third Party Claim"), the Defending Party may
elect to assume and control the defense of the Third Party Claim at its own
expense with counsel selected by the Defending Party from and after such time
as the Defending Party unconditionally agrees in writing to accept, as
against the Asserting Party, all liabilities on account of such Third Party
Claim.
(c) Assumption of such liability, as against the Asserting Party, shall
not be deemed an admission of liability as against any such third party.
Notwithstanding the foregoing, the Defending Party may not assume or control
the defense if the named parties to the Third Party Claim (including any
impleaded parties) include both the Defending Party and the Asserting Party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them, in which case
the Asserting Party shall have the right to defend the Third Party Claim and
to employ counsel reasonably approved by the Defending Party, and to the
extent the matter is determined to be subject to indemnification hereunder,
the Defending Party shall reimburse the Asserting Party for the reasonable
costs of its counsel.
(d) If the Defending Party assumes liability for the Third Party Claim
as against the Asserting Party and assumes the defense and control of the
Third Party Claim pursuant to this Section 14.03, the Defending Party shall
not be liable for any fees and expenses of counsel for the Asserting Party
incurred thereafter in connection with the Third Party Claim (except in the
case of actual or potential differing interests, as provided in the preceding
sentence), but shall not agree to any settlement of such Third Party Claim
which does not include an unconditional release of the Asserting Party by the
third party claimant on account thereof, provided that such requirement shall
be deemed waived to the extent that the Asserting Party does not undertake to
provide and promptly execute and, concurrently with the delivery of any such
release, deliver a corresponding release of the third party claimant with
respect to such Third Party Claim.
(e) If the Defending Party does not assume liability for and the
defense of the Third Party Claim pursuant to this Section 14.03, the
Asserting Party shall have the right (i) to control the defense thereof and
(ii), if the Asserting Party shall have notified the Defending Party of the
Asserting Party's intention to negotiate a settlement of the Third Party
Claim (at the Defending Party's expense to the extent the matter is
determined to be subject to indemnification hereunder), which notice shall
include the material terms of any proposed settlement in reasonable detail,
to settle the Third Party Claim (at the Defending Party's expense to the
extent the matter is determined to be subject to indemnification hereunder)
on terms not materially inconsistent with those set forth in such notice,
unless the Defending Party shall have notified the Asserting Party in writing
of the Defending Party's election to assume liability for and the defense of
the Third Party Claim pursuant to this Section 14.03 within ten days after
receipt of such notice, and the
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Defending Party promptly thereafter shall have taken appropriate action to
implement such defense.
(f) The Asserting Party shall not be entitled to settle any such Third
Party Claim pursuant to the preceding sentence unless such settlement
includes an unconditional release of the Defending Party by the third party
claimant on account thereof, PROVIDED that such requirement shall be deemed
waived to the extent that the Defending Party does not undertake to provide
and promptly execute and, concurrently with delivery of any such release,
deliver a corresponding release of the third party claimant with respect to
such Third Party Claim.
(g) The Asserting Party and the Defending Party shall use all
reasonable efforts to cooperate fully with respect to the defense and
settlement of any Third Party Claim covered by this Article XIV.
SECTION 14.04. PURCHASE ESCROW AGREEMENT. The obligation of
Indemnifying Seller Parties to indemnify Indemnified Purchaser Parties for
Losses pursuant to this Article XIV shall be secured by, but not limited to,
the funds held pursuant to the Purchase Escrow Agreement.
SECTION 14.05. LIMITATIONS. The Defending Party's obligations to
indemnify the Asserting Party pursuant to this Article XIV shall be subject
to the following limitations:
(a) No indemnification shall be required to be made by the
Defending Party until the aggregate amount of the Asserting Party's Losses
exceeds $100,000 (the "Deductible"), and then indemnification shall only be
required to be made by the Defending Party to the extent of such Losses that
exceed the Deductible; PROVIDED, HOWEVER, the Deductible shall not be
applicable to (i) the Indemnifying Seller Parties' obligation to indemnify
the Indemnified Purchaser Parties for Non-Assumed Liabilities, (ii)
Purchaser's obligation to indemnify Seller and its Interest Holders for
Assumed Liabilities, (iii) a breach by Seller of its representations set
forth in Section 7.02, the first and second sentences of Section 7.03 and
Section 7.14, or (iv) Losses resulting from fraud.
(b) All representations and warranties contained in this
Agreement shall survive the Primary Closing until the second anniversary
thereof; provided, however, that notwithstanding the foregoing, (x) the
representations and warranties contained in Section 7.02, the first and
second sentences of Section 7.03, Section 7.14 and Section 8.02 shall survive
the Primary Closing for an unlimited duration, and (y) the representations
and warranties contained in Section 7.07 shall in any event survive until the
Final Closing (the applicable period of survival being referred to as the
"Survival Period"). To the extent a claim is made in respect of a
representation or warranty within the applicable Survival Period, such
representation or warranty shall survive after the Survival Period for
purposes of such claim until such claim is finally determined or settled.
Each party shall be precluded from asserting claims against the other party
after the applicable Survival Period.
(c) The liability of the Indemnifying Seller Parties under
Section 14.01 shall be limited in the aggregate to the amount of the Purchase
Price, and the liability of each Interest
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Holder under Section 14.01 shall be limited to that portion of the Purchase
Price which is represented by the percentage of economic interests in the
Seller held by such Interest Holder (either as Member or as holder of only
economic interests).
ARTICLE XV
CONFIDENTIALITY AND PRESS RELEASES
SECTION 15.01. CONFIDENTIALITY. Each party shall hold in strict
confidence all documents and information concerning the other and its
business and properties and, if the transaction contemplated hereby should
not be consummated, such confidence shall be maintained, and all such
documents and information (in written form) shall immediately thereafter be
returned to the party originally furnishing the same.
SECTION 15.02. PRESS RELEASES. No press release or public disclosure,
either written or oral, of the existence or terms of this Agreement shall be
made by either Purchaser or Seller without the consent of the other subject
to the provisions of Section 15.03, and Purchaser and Seller shall each
furnish to the other advance copies of any release which it proposes to make
public concerning this Agreement or the transactions contemplated hereby and
the date upon which Purchaser or Seller, as the case may be, proposes to make
such press release.
SECTION 15.03. DISCLOSURES REQUIRED BY LAW. This Article XV shall not,
however, be construed to prohibit any party from making any disclosures to
any governmental authority that it is required to make by law or from filing
this Agreement with, or disclosing the terms of this Agreement to, any
institutional lender to such party, or prohibit Seller, Purchaser or any of
their affiliates from disclosing to its investors, Interest Holders,
accountants, auditors, attorneys, financing sources, investment bankers,
parent company and broker/dealers such terms of this transaction and such of
Seller's business and financial information as are reasonably necessary to be
disclosed to them in connection with the Company's financing activities and
other proper business purposes.
ARTICLE XVI
TERMINATION
SECTION 16.01. TERMINATION PRIOR TO FINAL CLOSING. This Agreement may
be terminated and the transactions contemplated herein may be abandoned, by
written notice promptly given to the other party hereto, at any time prior to
the Final Closing (excepted as noted):
(a) by mutual written consent of Seller and Purchaser;
(b) by either Purchaser or Seller, if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise permanently prohibiting the
sale of the Assets to Purchaser (which Seller and Purchaser shall have used
all reasonable efforts to have lifted or
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reversed) and such order, decree, ruling or other action shall have become
final and nonappealable;
(c) by Purchaser, but only prior to Primary Closing, if Seller
shall have materially breached any of its representations, warranties,
covenants or agreements set forth in this Agreement, and said breach is not
cured within 10 business days after written notice of the breach is
received by Seller;
(d) by Purchaser, in the event that the FCC's order granting its
consent to the assignment of the FCC Authorization to Purchaser is
reversed, on reconsideration by the FCC or after judicial review, or in the
event that Seller's rights in the FCC Authorization are revoked, denied or
conditioned on such grounds that the value of the FCC Authorization is
materially impaired, on reconsideration by the FCC or after judicial
review, and in either event, Purchaser's right to operate the Cellular
System pursuant to the FCC Authorization without materially adverse
conditions is terminated;
(e) by Seller, if any of the events set forth in Section 16.01(d)
hereof have occurred solely due to Purchaser's material acts or material
omissions to act;
(f) by Seller, but only prior to Primary Closing, if Purchaser
shall have materially breached any of its representations, warranties,
covenants or agreements set forth in this Agreement, and said breach is not
cured within 10 business days after written notice of the breach is
received by Purchaser;
(g) by either Purchaser or Seller, effective on October 1, 2000,
and on the first day of any calendar quarter thereafter, if (i) such party
has provided ninety (90) days' written notice to the other party of such
termination, (ii) the Primary Closing has not taken place at the time of
termination, and (iii) the party seeking to terminate this Agreement is not
then in material breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement; or
(h) by Purchaser or Seller in accordance with the terms of
Section 9.09 hereof.
SECTION 16.02. PROCEDURE ON TERMINATION BY SELLER PURSUANT TO SECTION
16.01(e) OR (f).
(a) If Seller terminates this Agreement in accordance with the
provisions of Section 16.01(e) or (f) prior to the Primary Closing and at the
time of such termination Seller is not then in material breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, then Seller shall be entitled to receive the Deposit as the
Liquidated Damages Amount, which the parties agree is a fair and reasonable
measure of the damages that Seller would sustain as a result of such
termination. Notwithstanding anything else set forth in this Agreement,
Seller's sole and exclusive recourse in the event Seller terminates this
Agreement in
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accordance with the provisions of Section 16.01(e) or (f) prior to the
Primary Closing shall be to receive the Deposit.
(b) If Seller terminates this Agreement in accordance with the
provisions of Section 16.01(e) after the Primary Closing and at the time of
such termination Seller is not then in material breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement, then Seller shall be entitled to receive as liquidated damages an
amount equal to the Purchase Price, PLUS an amount equal to the earnings that
have accrued on the amount in the Purchase Escrow Account from the Final
Order Date, LESS amounts paid to Purchaser under claims for indemnification
pursuant to Section 14.01 hereof, which amount the parties agree is a fair
and reasonable measure of the damages that Seller would sustain as a result
of such termination. Notwithstanding anything else set forth in this
Agreement, Seller's sole and exclusive recourse in the event Seller
terminates this Agreement in accordance with the provisions of Section
16.01(e) after the Primary Closing shall be to receive the amount set forth
in the preceding sentence.
ARTICLE XVII
BROKERS' FEES
Each party represents and warrants to the other that it shall be solely
responsible for the payment of any fee or commission due to any broker or
finder it has engaged with respect to this transaction and the other party
hereto shall be indemnified for any liability with respect thereto pursuant
to Article XIV hereof.
ARTICLE XVIII
CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
PURCHASER, SELLER AND THE INTEREST HOLDERS HEREBY CONSENT TO THE
JURISDICTION OF THE FEDERAL AND STATE COURTS OF THE STATE OF OHIO, AS WELL AS
TO THE JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN FROM THE
AFORESAID COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
PURCHASER, SELLER AND THE INTEREST HOLDERS ALSO WAIVE TRIAL BY JURY IN ANY
ACTION BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT.
ARTICLE XIX
MISCELLANEOUS
SECTION 19.01. ADDITIONAL INSTRUMENTS OF TRANSFER. (a) From time to
time after the Closing, each party shall, if requested by another party,
make, execute and deliver such additional assignments, bills of sale, deeds
and other instruments, as may be reasonably necessary or proper to carry out
the specific provisions of this Agreement, including transfer to Purchaser
all of Seller's right, title and interest in and to the Assets. Such efforts
and assistance shall be without cost to any party.
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(b) Anything in this Agreement to the contrary notwithstanding, Seller
is not obligated to sell, assign, transfer or convey to Purchaser any of
their rights and obligations in and to any Interest without first obtaining
all necessary approvals, consents or waivers. To the extent any of the
approvals, consents or waivers described in Section 10.04 have not been
obtained by Seller as of the Primary Closing and Purchaser elects to proceed
with the Primary Closing, Seller shall, for a period equal to the longer of
six months after the Primary Closing, the Final Closing Date, or the
remaining term of such Interest, use all reasonable efforts to (i) obtain the
consent of any such third party; (ii) cooperate with Purchaser in any
reasonable and lawful arrangements designed to provide the benefits
(including, without limitation, the payment to Purchaser of any monies
received by Seller in connection therewith) of such Interest to Purchaser so
long as Purchaser performs all obligations with respect to the Interest (and
the payment of all expenses in connection therewith); and (iii) enforce, at
the request of Purchaser and at the expense and for the account of Purchaser,
any rights of Seller arising from such Interest against such issuer thereof
or the other party or parties thereto (including the right to elect to
terminate any such Interest in accordance with the terms thereof upon the
request of Purchaser); PROVIDED, HOWEVER, that neither Purchaser nor Seller
shall be obligated to pay any consideration or other sums therefor (except
for filing fees and other ordinary administrative charges and except as set
forth above) to the third party from whom such approval, consent or waiver is
requested.
SECTION 19.02. NOTICES. All notices and other communications required
or permitted to be given hereunder shall be in writing and shall be deemed to
have been duly given if delivered, sent by telecopier, recognized overnight
delivery service or mailed, registered or certified mail, return receipt
requested, postage prepaid, to the following addresses:
(i) If to Purchaser:
c/o Dobson Communications Corporation
13439 N. Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
Attention: Everett Dobson
Facsimile No.: (405) 391-8515
with a copy to:
Edwards & Angell, LLP
One BankBoston Plaza
Providence, Rhode Island 02903
Attention: David K. Duffell, Esq.
Facsimile No.: (401) 276-6602
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(ii) If to Seller:
Ohio Wireless Communications, L.L.C.
2615 Central Avenue
Columbus, IN 47201
Attention: Robert Chapman
Facsimile No.: (812) 372-1975
with copies to:
Donald P. La Rocque, Esq.
11770 Bernardo Plaza Court
Suite 350
San Diego, CA 92128
Facsimile: (619) 592-7142
Koteen & Naftalin, L.L.P.
1150 Connecticut Avenue, N.W.
Suite 1000
Washington, D.C. 20036
Attention: Alan Naftalin, Esq.
Facsimile No.: (202) 467-5915
Notices delivered personally shall be effective upon delivery. Notices
transmitted by telecopy shall be effective when received, provided that the
burden of proving notice when notice is transmitted by telecopy shall be the
responsibility of the party seeking such notice . Notices delivered by
overnight mail shall be effective when received. Notices delivered by
registered or certified mail shall be effective on the date set forth on the
receipt of registered or certified mail, or 72 hours after mailing, whichever
is earlier.
SECTION 19.03. EXPENSES. Each party shall bear its own expenses and
costs, including the fees of any corporate or FCC attorney retained by it,
incurred in connection with the preparation of this Agreement and the
consummation of the transactions contemplated hereby.
SECTION 19.04. TRANSFER TAXES. Seller shall pay any use, sales or
transfer taxes imposed in connection with the sale and delivery of the Assets
and rights acquired by Purchaser under this Agreement.
SECTION 19.05. COLLECTION PROCEDURES. From and after the Primary
Closing, Purchaser shall have the right and authority, at its expense, to
collect for its account all items to which it is entitled as provided in this
Agreement and to endorse with the name of Seller any checks or drafts
received on account of any such items.
SECTION 19.06. SPECIFIC PERFORMANCE. The parties recognize and
acknowledge that in the event Seller shall fail to perform its obligations
under the terms of this Agreement, money
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damages alone will not be adequate to compensate Purchaser. The parties,
therefore, agree and acknowledge that in the event Seller fails to perform
its obligations under this Agreement, Purchaser shall be entitled, in
addition to any action for monetary damages, and other rights and remedies on
account of such failure, to specific performance of the terms of this
Agreement and of the covenants and obligations hereunder.
SECTION 19.07. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio (without
application of principles of conflicts of law).
SECTION 19.08. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (by merger or other operation of law or otherwise) without the
prior written consent of the other party, which consent will not be
unreasonably withheld, except that Purchaser shall have the right (i) prior
to the Primary Closing, to assign its rights and obligations under this
Agreement to (A) another entity controlled by Dobson Communications
Corporation, or (B) any other entity which is qualified under FCC regulations
to hold the FCC Authorization and has the financial resources available to
consummate the transactions contemplated hereby, subject to Seller's
approval, such approval not to be unreasonably withheld, and (ii) after the
Primary Closing, to assign its rights and obligations under this Agreement to
any third party. Any such assignment shall become effective upon the
assignee's execution of documents reasonably acceptable to Seller pursuant to
which the assignee assumes all of the obligations and liabilities of
Purchaser under this Agreement.
SECTION 19.09. SUCCESSORS AND ASSIGNS. All agreements made and entered
into in connection with this transaction shall be binding upon and inure to
the benefit of the parties hereto, their successors and assigns.
SECTION 19.10. AMENDMENTS; WAIVERS. No alteration, modification or
change of this Agreement shall be valid except by an agreement in writing
executed by the parties hereto. No failure or delay by any party hereto in
exercising any right, power or privilege hereunder (and no course of dealing
between or among any of the parties) shall operate as a waiver of any such
right, power or privilege. No waiver of any default on any one occasion
shall constitute a waiver of any subsequent or other default. No single or
partial exercise of any such right, power or privilege shall preclude the
further or full exercise thereof.
SECTION 19.11. ENTIRE AGREEMENT. This Agreement merges all previous
negotiations and agreements between the parties hereto, either verbal or
written, including that certain letter agreement dated April 3, 1998, and
constitutes the entire agreement and understanding between the parties with
respect to the subject matter of this Agreement.
SECTION 19.12. THIRD PARTIES. Except as set forth in Article XIV
hereof, nothing herein, expressed or implied, is intended to or shall confer
on any person other than the parties hereto any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
- 26 -
<PAGE>
SECTION 19.13. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by
law, but only as long as the continued validity, legality and enforceability
of such provision or application does not materially (a) alter the terms of
this Agreement, (b) diminish the benefits of this Agreement or (c) increase
the burdens of this Agreement, for any person.
SECTION 19.14. SECTION HEADINGS. The section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 19.15. INTERPRETATION. As both parties have participated in
the drafting of this Agreement, any ambiguity shall not be construed against
either party as the drafter.
SECTION 19.16. FURTHER ASSURANCES. Seller agrees to provide to
Purchaser from time to time any information that Seller possesses with
respect to the operation of the Business and Assets prior to the Closing
which Purchaser requests in the future in connection with Purchaser's
financing efforts now or in the future or in connection with any FCC or other
regulatory filing.
SECTION 19.17. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be an original, but
all of which together shall constitute one agreement.
SECTION 19.18. INTEREST HOLDERS' AGENT. Each Interest Holder hereby
authorizes and appoints Robert Chapman (the "Interest Holders' Agent") as
its, his or her exclusive agent and attorney-in-fact to act on behalf of each
of them with respect to all matters which are subject of this Agreement and
the Exhibits hereto, including, without limitation, (a) receiving or giving
all notices, instructions, other communications, consents or agreements that
may be necessary, required or given hereunder and (b) asserting, settling,
compromising, or defending, or determining not to assert, settle, compromise
or defend, (i) any claims which any Interest Holder may assert, or have the
right to assert, against Purchaser, or (ii) any claims which Purchaser may
assert, or have the right to assert, against any Interest Holder. The
Interest Holders' Agent hereby accepts such authorization and appointment,
provided that Interest Holders' Agent shall have no duty or liability
whatsoever to Purchaser in his capacity as Interest Holders' Agent. In
addition, the Interest Holders agree that the Interest Holders' Agent shall
have no personal liability to the Interest Holders for any action taken
hereunder or for any omission to act where such action or omission is not the
result of gross negligence or willful misconduct on the part of the Interest
Holders' Agent. Upon the receipt of written evidence satisfactory to
Purchaser to the effect that the Interest Holders' Agent has been substituted
as agent of the Interest Holders by reason of his death, disability or
resignation, Purchaser shall be entitled to rely on such substituted agent to
the same extent as it was theretofore entitled to rely upon the Interest
Holders' Agent with respect to the matters covered by this SECTION 19.18. No
Interest Holder shall act with respect to any of the matters which are the
subject of this Agreement and the Exhibits hereto except through the Interest
Holders' Agent. The Interest Holders acknowledge and agree that Purchaser
may deal
- 27 -
<PAGE>
exclusively with the Interest Holders' Agent in respect of such matters, that
the enforceability of this SECTION 19.18 is material to Purchaser, and that
Purchaser has relied upon the enforceability of this SECTION 19.18 in
entering into this Agreement.
SECTION 19.19. REQUISITE PERCENTAGE. Seller covenants to use its
reasonable best efforts to obtain every Interest Holder's signature to this
Agreement. Purchaser and Seller agree, however, that this Agreement shall
become effective once there have been obtained the signatures of Interest
Holders holding at least 95% of the economic interests in Seller.
[THE REST OF THIS PAGE IS LEFT BLANK INTENTIONALLY.]
- 28 -
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized representative as of the day and year
first above written.
SELLER:
OHIO WIRELESS COMMUNICATIONS, L.L.C.
By: /s/ Robert Chapman Date: 8/3/98
------------------------------------------- ------------------------
Robert Chapman
General Manager
INTEREST HOLDER:
By: /s/ Robert Chapman Date: 8/3/98
------------------------------------------- ------------------------
Name: Robert Chapman
Title:
By: /s/ KENNETH E. AULL
-------------------------------------------
Name: Kenneth E. Aull
Title: Partner
By: /s/ KENNETH E. AULL
-------------------------------------------
Name: Kenneth E. Aull
Title: Co-trustee of the Kenneth E. Aull
Charitable Remainder Trust dated 7/10/98
By: /s/ ALLISON D. AULL
-------------------------------------------
Name: Allison D. Aull
Title: Co-trustee of the Kenneth E. Aull
Charitable Remainder Trust dated 7/10/98
By: /s/ JOHN WHITE BLAINE
-------------------------------------------
Name: John White Blaine
Title: Trustee, Prairie Schooner Trust
By: /s/ CLYDE BRIDGEMAN
-------------------------------------------
Name: Clyde Bridgeman
Title:
By: /s/ GROVER BRIDGEMAN
-------------------------------------------
Name: Grover Bridgeman
Title:
By: /s/ WALTER J. BUTTS
-------------------------------------------
Name: Walter J. Butts
Title:
By: /s/ JAMES D. COX
-------------------------------------------
Name: James D. Cox
Title:
By: /s/ JULES P. DION
-------------------------------------------
Name: Jules P. Dion
Title:
By: /s/ JOHN P. HERRON
-------------------------------------------
Name: John P. Herron
Title: Partner
By: /s/ ORVAL O. OLIVER
-------------------------------------------
Name: Orval O. Oliver
Title: Partner
By: /s/ DEBORAH R. PARKER
-------------------------------------------
Name: Deborah R. Parker
Title:
By: /s/ GRANT PARKER
-------------------------------------------
Name: Grant Parker
Title: Trustee for Doris Parker Trust
By: /s/ LOUISE ROBINSON
-------------------------------------------
Name: Louise Robinson
Title: Partner
By: /s/ EVELYN L. ROBINSON
-------------------------------------------
Name: Evelyn L. Robinson
Title: Trustee of Evelyn L. Robinson Charitable
Remainder Trust dated July 10, 1998
By: /s/ MAUDE STRANG
-------------------------------------------
Name: Maude Strang
Title: By Margaret Kridel under Power of Attorney
By: /s/ MILDRED P. WILLIAMS
-------------------------------------------
Name: Mildred P. Williams
Title: Partner
By: /s/ MILDRED P. WILLIAMS
-------------------------------------------
Name: Mildred P. Williams
Title: Trustee of the Mildred P. Williams
Charitable Remainder Trust dated 7/10/98
By: /s/ JOEL BROWN
-------------------------------------------
Name: Joel Brown
Title:
By: /s/ DAISY L. KOZAK
-------------------------------------------
Name: Daisy L. Kozak
Title: Partner
By: /s/ JANICE R. MEHL
-------------------------------------------
Name: Janice R. Mehl
Title: Partner
By: /s/ MARGARET E. QUINN
-------------------------------------------
Name: Margaret E. Quinn
Title:
By: /s/ WOODROW T. THAMBILL
-------------------------------------------
Name: Woodrow T. Thambill
Title: Partner
By: /s/ DEREK M. WILLIAMS
-------------------------------------------
Name: Derek M. WIlliams
Title: Partner
PURCHASER:
DOBSON CELLULAR OF SANDUSKY, INC.
By: /s/ Everett R. Dobson Date: 7/30/98
------------------------------------------- ------------------------
Name: Everett R. Dobson
Title: CEO
- 29 -
<PAGE>
ASSET PURCHASE AGREEMENT
by and between
A-1 CELLULAR OF TEXAS, L.P.
("SELLER")
and
DOBSON CELLULAR OF NAVARRO, INC.
("PURCHASER")
DATED AS OF SEPTEMBER 2, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - PURCHASE AND SALE. . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - DESCRIPTION OF ASSETS; EXCLUDED ASSETS. . . . . . . . . . . . . 2
SECTION 2.01. ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.02. EXCLUDED ASSETS . . . . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.03. PURCHASER'S ACKNOWLEDGMENT. . . . . . . . . . . . . . . . . . 3
ARTICLE III - ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . . . . . 3
ARTICLE IV - INSTRUMENTS OF TRANSFER AND ASSUMPTION. . . . . . . . . . . . . 4
SECTION 4.01. TRANSFER DOCUMENTS. . . . . . . . . . . . . . . . . . . . . . 4
SECTION 4.02. ASSUMPTION DOCUMENTS. . . . . . . . . . . . . . . . . . . . . 4
ARTICLE V - PURCHASE PRICE; ALLOCATION . . . . . . . . . . . . . . . . . . . 4
SECTION 5.01. PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 5.02. DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 5.03. PAYMENT OF PURCHASE PRICE . . . . . . . . . . . . . . . . . . 5
SECTION 5.04. ALLOCATION OF PURCHASE PRICE. . . . . . . . . . . . . . . . . 5
ARTICLE VI - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 6.01. PRIMARY CLOSING . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 6.02. FINAL CLOSING . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE VII - SELLER'S REPRESENTATIONS . . . . . . . . . . . . . . . . . . . 6
SECTION 7.01. ORGANIZATION; QUALIFICATION; PARTNERS . . . . . . . . . . . . 6
SECTION 7.02. CONSENTS, AUTHORIZATION, EXECUTION AND DELIVERY
OF AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 7.03. TITLE TO ASSETS; LIABILITIES, CONDITION OF ASSETS . . . . . . 7
SECTION 7.04. REAL PROPERTY - OWNED . . . . . . . . . . . . . . . . . . . . 7
SECTION 7.05. REAL AND PERSONAL PROPERTY - LEASED . . . . . . . . . . . . . 7
SECTION 7.06. EXISTING CONTRACTS. . . . . . . . . . . . . . . . . . . . . . 8
SECTION 7.07. GOVERNMENTAL LICENSES . . . . . . . . . . . . . . . . . . . . 8
SECTION 7.08. COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . 9
SECTION 7.09. NO VIOLATION OF EXISTING AGREEMENTS . . . . . . . . . . . . . 9
SECTION 7.10. LITIGATION AND LEGAL PROCEEDINGS. . . . . . . . . . . . . . . 9
SECTION 7.11. ENVIRONMENTAL COMPLIANCE. . . . . . . . . . . . . . . . . . . 9
SECTION 7.12. LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 7.13. EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . .10
SECTION 7.14. TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 7.15. SUBSCRIBERS . . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 7.16. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 7.17. BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 7.18. HART-SCOTT-RODINO . . . . . . . . . . . . . . . . . . . . . .11
ARTICLE VIII - PURCHASER'S REPRESENTATIONS . . . . . . . . . . . . . . . . .11
SECTION 8.01. ORGANIZATION; QUALIFICATION . . . . . . . . . . . . . . . . .11
SECTION 8.02. CONSENTS; AUTHORIZATION; EXECUTION AND DELIVERY OF
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 8.03. LITIGATION AND LEGAL PROCEEDINGS. . . . . . . . . . . . . . .12
SECTION 8.04. BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . .12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE IX - SELLER'S AND PURCHASER'S AFFIRMATIVE COVENANTS. . . . . . . . .12
SECTION 9.01. MANAGEMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . .12
SECTION 9.02 ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 9.03. CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . .12
SECTION 9.04. GOVERNMENTAL APPROVALS. . . . . . . . . . . . . . . . . . . .13
SECTION 9.05. THIRD PARTY CONSENTS; CLOSING CONDITIONS. . . . . . . . . . .14
SECTION 9.06. ENVIRONMENTAL REVIEW. . . . . . . . . . . . . . . . . . . . .14
SECTION 9.07. NO SHOPPING . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 9.08. SUPPLEMENTAL DISCLOSURE . . . . . . . . . . . . . . . . . . .15
SECTION 9.09. LITIGATION MATTERS. . . . . . . . . . . . . . . . . . . . . .15
ARTICLE X - CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO PRIMARY
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 10.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES;
PERFORMANCE OF THIS AGREEMENT. . . . . . . . . . . . . . . .15
SECTION 10.02. CERTIFIED AUTHORIZATION. . . . . . . . . . . . . . . . . . .15
SECTION 10.03. [INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . .15
SECTION 10.04. THIRD PARTY CONSENT; FCC GRANT . . . . . . . . . . . . . . .15
SECTION 10.05. NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . .16
SECTION 10.06. OPINION OF COUNSEL TO SELLER . . . . . . . . . . . . . . . .16
SECTION 10.08. OPINIONS OF FCC COUNSEL TO SELLER . . . . . . . . . . . . .16
ARTICLE XI - CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO
PRIMARY CLOSING . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 11.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES;
PERFORMANCE OF THIS AGREEMENT. . . . . . . . . . . . . . . .16
SECTION 11.02. DIRECTORS' RESOLUTIONS . . . . . . . . . . . . . . . . . . .16
SECTION 11.03. INCUMBENCY CERTIFICATE . . . . . . . . . . . . . . . . . . .17
SECTION 11.04. HART-SCOTT ACT . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 11.05. OPINION OF COUNSEL TO PURCHASER. . . . . . . . . . . . . . .17
ARTICLE XII - CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION AT FINAL
CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 12.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES;
PERFORMANCE OF THIS AGREEMENT. . . . . . . . . . . . . . . .17
SECTION 12.02. FCC FINAL ORDER. . . . . . . . . . . . . . . . . . . . . . .17
SECTION 12.03. OPTION OF FCC COUNSEL TO SELLER. . . . . . . . . . . . . . .17
ARTICLE XIII - CASUALTY LOSSES . . . . . . . . . . . . . . . . . . . . . . .17
ARTICLE XIV - INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 14.01. INDEMNIFICATION BY SELLER. . . . . . . . . . . . . . . . . .18
SECTION 14.02. INDEMNIFICATION BY PURCHASER . . . . . . . . . . . . . . . .19
SECTION 14.03. NOTICE OF CLAIMS; DEFENSE OF THIRD PARTY . . . . . . . . . .19
SECTION 14.04. PURCHASE ESCROW AGREEMENT. . . . . . . . . . . . . . . . . .20
SECTION 14.05. LIMITATIONS. . . . . . . . . . . . . . . . . . . . . . . . .20
ARTICLE XV - CONFIDENTIALITY AND PRESS RELEASES. . . . . . . . . . . . . . .21
SECTION 15.01. CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . .21
SECTION 15.02. PRESS RELEASES . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 15.03. DISCLOSURES REQUIRED BY LAW. . . . . . . . . . . . . . . . .21
ARTICLE XVI - TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 16.01. TERMINATION PRIOR TO FINAL CLOSING . . . . . . . . . . . . .22
ARTICLE XVII - BROKERS' FEES . . . . . . . . . . . . . . . . . . . . . . . .23
ARTICLE XVIII - CONSENT OF JURISDICTION, WAIVER OF JURY TRIAL. . . . . . . .23
ARTICLE XIX - MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . .23
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 19.01. ADDITIONAL INSTRUMENTS OF TRANSFER . . . . . . . . . . . . .23
SECTION 19.02. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 19.03. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 19.04. TRANSFER TAXES . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 19.05. COLLECTION PROCEDURES. . . . . . . . . . . . . . . . . . . .25
SECTION 19.06. SPECIFIC PERFORMANCE . . . . . . . . . . . . . . . . . . . .25
SECTION 19.07. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 19.08. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 19.09. SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . .26
SECTION 19.10. AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . .26
SECTION 19.12. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . .26
SECTION 19.13. THIRD PARTIES. . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 19.14. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 19.15. SECTION HEADINGS . . . . . . . . . . . . . . . . . . . . . .26
SECTION 19.16. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 19.17. FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . .26
SECTION 19.18. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 19.19. LIMITED RECOURSE TO PARTNERS . . . . . . . . . . . . . . . .27
</TABLE>
iii
<PAGE>
DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION CITE
---- ------------
<S> <C>
Adjustment 5.05(b)
Asserting Party 14.03
Assets 2.01
Assumed Liabilities Article III
Assumption Agreement 4.02
Authorizations 7.07
AWS Recitals
Bill of Sale 4.01
Business Recitals
Cellular System Recitals
CERCLA 7.11(b)
Claims Article XIII
Code 7.13
Controlled Group Member 7.13
Defending Party 14.03
Defined Benefit Pension Plan 7.13
Deposit 5.02
Deposit Escrow Agreement 5.02
Employee Benefit Plans 7.13
Environmental Laws 7.11(c)
ERISA 7.13
ERISA Affiliate 7.13
Escrow Agent 5.02
Escrowed Amount 5.03
Excluded Assets 2.02(a)
Existing Contracts 7.06
FCC Recitals
FCC Authorization Recitals
Final Closing 6.02
Final Closing Date 6.02
Final Order 6.02
General Partner Recitals
Hart-Scott Act 9.06(b)
Hazardous Substance 7.11(b)
Indemnified Purchaser Parties 14.01(a)
Indemnity Escrow Amount 5.03
Independent Accountants 5.05(c)
Interest or Interests 9.07(a)
Inventory 5.05(a)
IOA Recitals
Liens Article I
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
Liquidated Damages Amount 5.02
Management Agreement 9.01
Manager Recitals
Multiemployer Plan 7.13
Non-Assumed Liabilities Article III
Partners Recitals
Partnership Recitals
Permitted Liens Article I
Primary Closing 6.01
Primary Closing Date 6.01
Purchase Escrow Account 5.03
Purchase Escrow Agreement 5.03
Purchase Price 5.01
Purchaser Introduction
RCLA 7.11(b)
RCRA 7.11(b)
RSA Recitals
Risk Sharing Proceeding Article III
Seller Introduction
Seller's Estimate 5.05(c)
Third Party Claim 14.03
</TABLE>
v
<PAGE>
SCHEDULES
<TABLE>
<S> <C>
1 Permitted Liens
2.01(a) Contracts and Licenses
2.01(f) Intangible Personal Property
2.01(g) Property Acquired Prior to Primary Closing
2.02 Excluded Assets
7.01(a) Organizational Documents
7.01(b) Partners' Names
7.03 Liens
7.05(a) Leased Real Property
7.05(b) Leased Personal Property
7.06 Existing Contracts
7.07 Governmental Licenses
7.08 Compliance with Laws
7.10 Litigation
7.14 Tax Matters
7.16 Insurance
7.17 Brokers
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
A. Bill of Sale
B. Assumption Agreement
C. Deposit Escrow Agreement
D. Purchase Escrow Agreement
vi
<PAGE>
E. Management Agreement
F. Opinion of Counsel for Seller
G-1 Opinion of FCC Counsel for Seller to be delivered at Primary
Closing
G-2 Opinion of FCC Counsel for Seller to be delivered at Final
Closing
H. Opinion of Counsel for Purchaser
</TABLE>
vii
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 2nd day of
September, 1998 by and between A-1 CELLULAR OF TEXAS, L.P., a Delaware
limited partnership ("Seller"), and DOBSON CELLULAR OF NAVARRO, INC., an
Oklahoma corporation ("Purchaser").
R E C I T A L S
WHEREAS, Seller is the owner of that certain license (the "FCC
Authorization") granted by the Federal Communications Commission (the "FCC")
to provide non-wireline cellular telecommunications service in RSA 10 (the
"RSA") #661, in Navarro, Texas (the "Cellular System");
WHEREAS, Seller owns all rights to develop, construct, own and
operate the Cellular System in the RSA (the "Business"), subject to AT&T
Wireless Services, Inc.'s ("AWS") right to operate the Business under an
Interim Operating Authority ("IOA") granted by the FCC;
WHEREAS, A-1 Cellular of Texas, LLC, a Delaware limited liability
company (the "General Partner"), owns a one percent general partnership
interest in Seller, and A-1 Cellular Communications, a New Jersey general
partnership (the "Partnership"), owns a 99 percent limited partnership
interest in Seller and all of the membership interests in the General Partner;
WHEREAS, the persons identified on Schedule 7.01(b) (the
"Partners") own all of the interests in the Partnership;
WHEREAS, Purchaser desires to purchase from Seller, and Seller
desires to sell to Purchaser, substantially all of the assets of Seller
relating to the Business, including assets acquired by Seller after the date
hereof until the Primary Closing Date, all subject to the terms and
conditions set forth herein; and
WHEREAS, prior to the consummation of all of the transactions
contemplated herein, the Business may be managed by DOC Cellular Subsidiary
Company, Inc., an Oklahoma corporation which is the parent corporation of
Purchaser ("Manager"), on behalf of Seller pursuant to the Management
Agreement (as defined herein).
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements herein set forth and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
Except as otherwise provided and subject to the terms and
conditions set forth in this Agreement, Seller agrees to sell, convey,
assign, transfer and deliver to Purchaser, and Purchaser
<PAGE>
agrees to purchase from Seller at the Primary Closing, all of Seller's right,
title and interest in and to the Assets (as defined in Section 2.01 hereof),
free and clear of all security interests, liens, pledges, charges, rights of
third parties and encumbrances of every kind (collectively, "Liens") other
than Permitted Liens. As used herein, the term "Permitted Liens" means (i)
any Lien for taxes and assessments not yet past due or otherwise being
contested in good faith and for which appropriate reserves have been
established and will be taken into account in any Adjustment, (ii) any Liens
represented by easements, rights of way, restrictions, installations or
public utilities, title imperfections and restrictions, reservations in land
patents, zoning ordinances or other similar Liens which do not and will not
individually or in the aggregate, materially interfere with the use by Seller
or Purchaser of the property subject thereto or affected thereby, (iii) as to
leaseholds, interests of the lessors thereof and Liens affecting the
interests of such lessors and (iv) any Lien set forth on SCHEDULE 1 attached
hereto.
ARTICLE II
DESCRIPTION OF ASSETS; EXCLUDED ASSETS
SECTION 2.01. ASSETS. The assets to be conveyed to Purchaser
shall include all real and personal tangible and intangible assets,
properties and business owned or used by Seller of whatever description,
which relate in any way to the ownership, use or operation of the Business,
including all property and rights acquired or obtained by Seller from the
date hereof through the date of the Primary Closing, other than the assets
excluded pursuant to Section 2.02 hereof (collectively, the "Assets"). Such
Assets shall be free and clear of all Liens other than Permitted Liens. Such
Assets shall include, without limitation (it being understood that Seller
makes no representation or warranty as to the existence as of the date of
this Agreement of any Assets of the kinds described in subsections (c)
through (f)):
(a) All licenses (including the FCC Authorization), leases,
agreements, permits, authorizations, consents and other contracts, revenue
sharing and like agreements, agreements for the reception or transmission of
signals by microwave, easements, appurtenances, rights-of-way and
construction permits; all right, title and interest, if any, in and to all
streets, roads and public places, open or proposed; all agreements between
Seller and suppliers, cellular telephone service companies and subscribers
(including subscriber deposits), and all other similar rights and agreements
(including so-called roaming agreements), which in any way may relate to or
concern the operation by Seller of the Business, all as more particularly
described on SCHEDULE 2.01(A) attached hereto;
(b) All files of correspondence, lists, records and reports
concerning (i) customers and prospective customers of the Business and (ii)
all dealings with Federal, state and local regulatory agencies with respect
to the Business, including, but not limited to, all reports filed by or on
behalf of Seller with the FCC;
(c) All towers, tower equipment, antennas, switching and cell
site equipment and buildings, construction in progress, microwave equipment,
testing equipment, motor vehicles, office equipment, furniture and fixtures,
supplies, inventory and other physical assets, if
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any, used in or relating to the Business, and all modifications, additions,
restorations or replacements of the whole or any part thereof;
(d) All interests in real property used in or relating to the
Business;
(e) All right, title and interest to engineering records, files,
data, drawings, blueprints, schematics, maps, reports, lists and plans and
processes intended for use in connection with the Business;
(f) All right, title and interest to intangible personal
property used in or relating to the Business, including all rights, patents
and copyrights used by Seller, and all of the rights of Seller associated
therewith (including any and all applications, registrations, extensions and
renewals thereof), and such rights, patents and copyrights as are described
on SCHEDULE 2.01(f) attached hereto; and
(g) Any of the tangible and intangible property of Seller
which is acquired after the date hereof but prior to the Primary Closing and
which will be set forth on SCHEDULE 2.01(g), as such Schedule shall be
amended and supplemented from time to time through the Primary Closing.
SECTION 2.02. EXCLUDED ASSETS. (a) The properties and assets
described in SCHEDULE 2.02 attached hereto and in Section 2.02(b) of this
Agreement shall be retained by Seller and shall not be sold, assigned or
transferred to Purchaser (the "Excluded Assets").
(b) Anything in this Agreement to the contrary
notwithstanding, the Assets sold to Purchaser pursuant to the terms of this
Agreement shall not include Seller's partnership records, books of account,
cash, bank deposits and cash equivalents of Seller at the time of the Primary
Closing.
SECTION 2.03. PURCHASER'S ACKNOWLEDGMENT. Purchaser acknowledges
that at the time of the execution of this Agreement, Seller's only assets are
its FCC authorizations described herein and any rights it may have or
hereafter acquire as provided in this Agreement in any agreements with AWS
concerning the acquisition of AWS assets related to the RSA.
ARTICLE III
ASSUMPTION OF LIABILITIES
As of the Primary Closing, Purchaser shall assume and agree to
perform and discharge the following as they become due for all periods from
and after the date of the Primary Closing, to the extent not previously
performed or discharged: (i) all obligations of Seller which accrue and are
to be performed from and after the Primary Closing (x) under those permits,
authorizations, licenses, leases, rights of way, easements and other
agreements related to the Business listed on SCHEDULES 2.01(a) and 2.01(g),
(y) under those permits, authorizations, licenses, leases, rights of way,
easements, subscriber and other agreements related to the Business which
Manager in the name of Seller entered into, and all other liabilities
incurred by
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Manager on Seller's behalf, in accordance with the terms and conditions of
the Management Agreement, and (z) under the AWS agreements referred to in
Section 2.03; and (ii) all other obligations of Seller entered into during
the period from the date hereof to the Primary Closing by Seller and
identified to and consented by Purchaser and specifically assumed by
Purchaser at the Primary Closing (all of such permits, authorizations,
licenses, leases, rights of way, easements and other agreements referred to
in items (i) and (ii) being referred to hereinafter as the "Assumed
Liabilities"). Purchaser shall not be liable for any liabilities, debts,
contracts, agreements, including without limitation any contracts or
agreements set forth on Schedule 2.02, or other obligations of Seller of any
nature whatsoever other than the Assumed Liabilities and it is expressly
understood that Purchaser shall not assume, and shall not be liable for any
of Seller's expenses or obligations relating to or accruing by reason of the
proceedings relating to the FCC Authorization in FCC CC Docket 91-142 (the
"Risk Sharing Proceeding"), including any obligations relating to any
settlement thereof (such other liabilities, debts, contracts, agreements or
other obligations of Seller other than the Assumed Liabilities being referred
to as the "Non-Assumed Liabilities").
ARTICLE IV
INSTRUMENTS OF TRANSFER AND ASSUMPTION
SECTION 4.01. TRANSFER DOCUMENTS. At the Primary Closing, Seller
will deliver to Purchaser (a) a Bill of Sale in substantially the form
attached hereto as EXHIBIT A (the "Bill of Sale"), (b) all such other good
and sufficient instruments of sale, transfer and conveyance, in such form and
including such matters as Purchaser shall reasonably request, as shall be
effective to vest in Purchaser all of Seller's right and title to, and
interest in, the Assets; and (c) all contracts and commitments, instruments,
books and records (except as otherwise provided in Section 2.02 hereof) and
other data relating to the Assets, business and operations of Seller.
SECTION 4.02. ASSUMPTION DOCUMENTS. At the Primary Closing,
Purchaser and Seller will execute and deliver an Assumption Agreement in
substantially the form attached hereto as EXHIBIT B (the "Assumption
Agreement") in order to effect the assumption of the Assumed Liabilities by
Purchaser.
ARTICLE V
PURCHASE PRICE; ALLOCATION
SECTION 5.01. PURCHASE PRICE. The total purchase price for the
Assets shall be Fifty-Five Million Dollars ($55,000,000) (the "Purchase
Price").
SECTION 5.02. DEPOSIT. Purchaser is depositing into escrow with
PNC Bank, National Association (the "Escrow Agent") Three Million Dollars
($3,000,000) (the "Deposit") on the date hereof. The Deposit is being held
and invested and will be disbursed pursuant to the terms of the Deposit
Escrow Agreement, a copy of which is attached hereto as EXHIBIT C (the
"Deposit Escrow Agreement"). If the Primary Closing occurs (i) the earnings
on the Deposit shall be paid to Purchaser in accordance with the Deposit
Escrow Agreement, and (ii) the Deposit shall be retained in the escrow
account, such amount to be administered in accordance with the Purchase
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Escrow Agreement (as defined below). If Seller terminates this Agreement in
accordance with the provisions of Section 16.01(e) prior to the Primary
Closing, and at the time of such termination neither Seller nor Manager is
then in breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement or the Management Agreement (if then
in effect) and the conditions set forth in Section 10.04 have been satisfied,
then Seller shall be entitled to the Deposit as liquidated damages (the
"Liquidated Damages Amount"), which Liquidated Damages Amount the parties
agree is a fair and reasonable measure of the damages that Seller would
sustain as a result of such termination. Notwithstanding anything else set
forth in this Section 5.02, Seller's sole and exclusive recourse in the event
Seller terminates this Agreement in accordance with the provisions of Section
16.01(e) prior to the Primary Closing, including as a result of Purchaser's
or Manager's breach of its representations or obligations under this
Agreement or the Management Agreement prior to the Primary Closing, shall be
to receive the Deposit. If for any other reason the Primary Closing does not
occur, then the Deposit and all earnings thereon shall be paid to Purchaser.
All payments by the Escrow Agent shall be made in accordance with the
procedures and other provisions set forth in the Deposit Escrow Agreement.
SECTION 5.03. PAYMENT OF PURCHASE PRICE. On the Primary Closing
Date and subject to the terms and conditions set forth in this Agreement, in
reliance on the representations, warranties, covenants and agreements of the
parties contained herein and in consideration of the sale of the Assets,
Purchaser will pay the Purchase Price LESS the Deposit into an account (the
"Purchase Escrow Account") maintained by the Escrow Agent, and such amount,
along with the Deposit, will be held, invested and disbursed pursuant to the
terms of the Purchase Escrow Agreement substantially in the form of EXHIBIT D
attached hereto (the "Purchase Escrow Agreement"), whereupon the Deposit
Escrow Agreement shall terminate. Seller shall be paid the earnings on
amounts held pursuant to the Purchase Escrow Agreement on a monthly basis.
At Final Closing, an amount equal to the funds in the Purchase Escrow Account
(the "Escrowed Amount") less the sum of (x) amounts held in respect of
pending but unpaid claims by Purchaser for indemnification pursuant to
Section 14.01 and (y) $2,500,000 (such sum being referred to collectively as
the "Indemnity Escrow Amount") will be paid to Seller from the Purchase
Escrow Account at the Final Closing and the Indemnity Escrow Amount shall be
held and released in accordance with the terms of the Purchase Escrow
Agreement. In the event this Agreement is terminated after the Primary
Closing for any reason under Article XVI of this Agreement, (i) the Escrowed
Amount shall be released to Purchaser in accordance with the terms of the
Purchase Escrow Agreement and (ii) Seller shall pay Purchaser the difference,
if any, between the Purchase Price and the Escrowed Amount.
SECTION 5.04. ALLOCATION OF PURCHASE PRICE. No later than five
(5) days before the Primary Closing, Purchaser and Seller in good faith shall
determine an allocation of the Purchase Price in accordance with the
respective fair market values of the Assets being purchased. Purchaser and
Seller each further agree to file their income tax returns and their other
tax returns reflecting the allocation as determined in this Section 5.04. If
no agreement on an allocation of the Purchase Price is reached within thirty
(30) days of the Primary Closing, such allocation shall be determined by a
nationally recognized appraisal firm mutually agreeable to Seller and
Purchaser and the costs of such appraisal shall be borne equally by Seller
and Purchaser.
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ARTICLE VI
CLOSING
SECTION 6.01. PRIMARY CLOSING. Subject to the terms and
conditions hereof, the Primary Closing (the "Primary Closing") shall take
place at the offices of Edwards & Angell, LLP, One BankBoston Plaza,
Providence, Rhode Island 02903 a date designated by Purchaser that is within
five (5) business days after the date on which the FCC has granted its
consent to the assignment of the FCC Authorization from Seller to Purchaser
and the other conditions precedent to the Primary Closing have been satisfied
(the "Primary Closing Date").
SECTION 6.02. FINAL CLOSING. Subject to the terms and conditions
hereof, the Final Closing (the "Final Closing") shall take place at the
offices of Edwards & Angell, LLP, One BankBoston Plaza, Providence, Rhode
Island 02903 on a date designated by Purchaser that is within ten (10)
business days after the later to occur of each of the following: (a) the
date on which the FCC's approval of the assignment of the FCC Authorization
from Seller to Purchaser has become a Final Order and (b) the date on which
the FCC order in the Risk Sharing Proceeding granting the FCC Authorization
to Seller has become a Final Order (the "Final Closing Date"). For the
purposes of this Agreement, the term "Final Order" shall mean action by the
FCC as to which (i) no request for stay by the FCC of the action is pending,
no such stay is in effect, and, if any deadline for filing any such request
is designated by statute or regulation, such deadline has passed; (ii) no
petition for rehearing or reconsideration of the action is pending before the
FCC, and the time for filing any such petition has passed; (iii) the FCC,
does not have the action under reconsideration on its own motion and the time
for such reconsideration has passed; and (iv) no appeal to a court, or
request for stay by a court, of the FCC's action is pending or in effect,
and, if any deadline for filing any such appeal or request is designated by
statute or rule, it has passed.
ARTICLE VII
SELLER'S REPRESENTATIONS
Seller hereby represents, warrants, covenants and agrees that:
SECTION 7.01. ORGANIZATION; QUALIFICATION; PARTNERS. Seller is a
limited partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware. The General Partner is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware. True and complete copies of the General
Partner's Certificate of Formation and Limited Liability Company Operating
Agreement and Seller's Partnership Agreement, each as amended to date, are
attached as SCHEDULE 7.01(a) hereto. Seller has all power and authority to
own and operate its properties and to carry on its business as now being
conducted or proposed to be conducted by Seller and to carry out the
transactions contemplated by this Agreement. Seller has the power and
authority to execute and deliver and, subject to obtaining the FCC's approval
to assign the FCC Authorization to Purchaser, perform its obligations under
this Agreement and to undertake the transactions contemplated hereby. The
General Partner and the Partnership are the owners of all the interests in
Seller, the Partnership is
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the owner of all the interests in the General Partner, and all such interests
are held by the General Partner and the Partnership free and clear of any and
all Liens. A true and accurate list of the names of the Partners of the
Partnership is set forth on SCHEDULE 7.01(b) attached hereto. Subject to the
provisions of Section 19.08, nothing in this Section 7.01 shall preclude (1)
the liquidation of Seller and the General Partner simultaneously with or
after the Primary Closing, (2) the conversion of the Partnership to a limited
liability company before or after the Primary Closing, or (3) the transfer by
any Partner (or any member of a successor limited liability company) of all
or part of his interest in the Partnership (or such successor) before or
after the Primary Closing.
SECTION 7.02. CONSENTS, AUTHORIZATION, EXECUTION AND DELIVERY OF
AGREEMENT. All necessary consents and approvals have been obtained by Seller
for the execution and delivery of this Agreement. The execution, delivery
and performance of this Agreement by Seller and the transfer of the Assets to
Purchaser have been duly and validly authorized and approved by all necessary
partnership action of Seller, limited liability company action of the General
Partner, and partnership action of the Partnership. This Agreement is a
valid and binding obligation of Seller, enforceable against it in accordance
with its terms.
SECTION 7.03. TITLE TO ASSETS; LIABILITIES, CONDITION OF ASSETS.
Except as set forth on SCHEDULE 7.03 attached hereto, Seller has full power,
right and authority to sell and convey the Assets to Purchaser. Seller has,
and at the Primary Closing will transfer and convey to Purchaser, good and
marketable title to the Assets, free and clear of all Liens other than
Permitted Liens. All Liens on the Assets in effect on the date hereof are
listed on SCHEDULE 7.03 hereto and all such Liens, other than Permitted
Liens, will be discharged at the Primary Closing. Seller does not have any
liabilities which would be required to be disclosed on a balance sheet
prepared in accordance with GAAP. The tangible property, if any, included
among the Assets as of the date hereof are in good working order and repair,
reasonable wear and tear excepted. The Assets, together with the assets
owned or used by AWS in connection with its provision of cellular services in
the RSA, constitute all of the assets used or useful by Seller in connection
with the operation of the Business. Neither the Partnership nor any Partner
owns, leases or has any rights in any property, license or other assets
related to the Business. The Assets, together with the assets owned or used
by AWS in connection with its provision of cellular services in the RSA, are
in all material respect technically sufficient and capable of providing
cellular telephone service in the RSA for which Seller is licensed in
accordance with applicable FCC regulations.
SECTION 7.04. REAL PROPERTY - OWNED. Seller does not own any real
property or interests in real property in fee simple.
SECTION 7.05. REAL AND PERSONAL PROPERTY - LEASED. Set forth on
SCHEDULE 7.05(a) (in the case of real property) and SCHEDULE 7.05(b) (in the
case of personal property), are true and accurate descriptions of all real
and personal property leased by Seller and used or useful in the ownership or
operation of the Assets and the Business setting forth (i) the name of the
lessor and (ii) a description of the property leased. Such leases are in
full force and effect, and will be free and clear of all liens and
encumbrances at the Primary Closing other than Permitted Liens.
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SECTION 7.06. EXISTING CONTRACTS. Set forth on SCHEDULE 7.06
attached hereto are all agreements, contracts commitments, options, Liens,
licenses, mortgages and other security interests, promises and understandings
(written or oral) to which Seller is a party or by which any of the Assets
and/or the operation of the Business are bound (the "Existing Contracts").
No Partner or any person or entity (other than Seller) controlled or
affiliated with any Partner has any contractual relationship relating to the
ownership of the Assets or operation of the Business. Seller has heretofore
delivered to Purchaser true and correct copies of the Existing Contracts.
Seller has no knowledge of any breach or anticipated breach by the other
parties to any Existing Contracts that would have a material adverse effect
on the Business, the Assets or Seller's ability to perform its obligations
under this Agreement (a "Material Adverse Effect"). The Existing Contracts
are in full force and effect and Seller is in compliance with the terms of
such Existing Contracts except for matters that would not have a Material
Adverse Effect. Except for the Existing Contracts, neither Seller nor the
Partnership has entered into any other agreements relating to the ownership
of the Assets or the operation of the Business, including, but not limited
to, rights-of-way, rights of entry, licenses, easements, leases (real
property or equipment), or guaranty agreements. Seller is not aware of any
claims by third parties that Seller is required to enter into such other
agreements to enable it to continue owning the Assets and operating the
Business as it is presently being operated.
SECTION 7.07. GOVERNMENTAL LICENSES. Seller holds all necessary
licenses including without limitation the FCC Authorization, consents,
permits, approvals and authorizations of public or governmental bodies
including, without limitation, the FCC and the state, counties and
municipalities served by the Business, which are required in connection with
the ownership of the Assets and which are required for the provision of
cellular services in the RSA in connection with applicable FCC regulations
(collectively referred to as the "Authorizations"). All Authorizations are
in full force and effect. Seller and the Partnership have complied in all
material respects with the terms of the Authorizations and there are no
pending modifications, amendments or revocations of the Authorizations which
would materially and adversely affect the ownership of the Assets or the
operation of the Business. All fees of Seller and the Partnership due and
payable to governmental authorities pursuant to the Authorizations have been
paid and subject to the outcome of the Risk Sharing Proceeding, no event has
occurred which, with or without the giving of notice or lapse of time or
both, would constitute grounds for revocation or modification of the
Authorizations. All reports required of Seller and the Partnership to be
filed in connection with the Authorizations have been timely filed and are
accurate and complete in all material respects. Neither Seller nor the
Partnership has engaged in any course of conduct that could reasonably be
expected to impair the ability of Seller to be the holder of the
Authorizations and is not aware of any reason why the Authorizations might
not be renewed in the ordinary course, why any of the Authorizations might be
revoked, or why any pending applications or notifications might not be
approved. True and correct copies of the Authorizations, and all amendments
thereto to the date hereof, have been delivered by Seller to Purchaser and
are identified on SCHEDULE 7.07 attached hereto. The ownership of the Assets
and the operation of the Business by Seller is not subject to regulation or
supervision by any applicable state public utilities commission or other
similar state governmental instrumentality.
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SECTION 7.08. COMPLIANCE WITH LAWS. Except as set forth on
SCHEDULE 7.08 attached hereto, Seller is currently complying in all material
respects with and it and the Partnership have so complied with, and is not in
default in any material respect under or in violation of, and neither the
Business nor any of the Assets nor the operation or maintenance thereof,
contravenes in any material respect any statute, law (including environmental
or employment laws), ordinance, decree, order, rule or regulation of any
governmental body applicable to the Assets or the Business, including,
without limitation, rules and regulations of the FCC.
SECTION 7.09. NO VIOLATION OF EXISTING AGREEMENTS. The execution,
delivery and performance of this Agreement by Seller will not violate any
provisions of law and will not, with or without the giving of notice or the
passage of time, or both, conflict with or result in any breach of any of the
terms or conditions of, or constitute a default under any Existing Contracts
in any respect that would have a Material Adverse Effect. The execution,
delivery and performance of this Agreement by Seller will not result in the
creation of any Lien upon the Assets or the Business.
SECTION 7.10. LITIGATION AND LEGAL PROCEEDINGS. Except as set
forth on SCHEDULE 7.10 attached hereto, there is no outstanding judgment
against Seller, the General Partner, the Partnership, or any Partner and
there is no litigation, proceeding or investigation pending, or, to Seller's
knowledge, threatened, against Seller, the General Partner, the Partnership,
any Partner or the Business or the Assets or which questions the validity of
any action taken or to be taken pursuant to or in connection with the
provisions of this Agreement. Except as set forth on SCHEDULE 7.10, there are
no proceedings pending to which Seller, the General Partner, the Partnership
or any Partner is a party or, to Seller's knowledge, threatened, nor any
demands by any governmental agency, utility or other party, to terminate,
modify or adversely change the terms and conditions of Seller's rights with
respect to the Authorizations or Existing Contracts whereby such termination
or modification would result in a Material Adverse Effect on the Business or
the Assets. The pendency of the Risk Sharing Proceeding (including any
related appeals or other further proceedings) will not constitute a breach of
any representation or warranty contained in this Agreement, whether or not
such representation or warranty is expressly qualified by reference to the
Risk Sharing Proceeding.
SECTION 7.11. ENVIRONMENTAL COMPLIANCE. (a)(i) Neither Seller nor
the Partnership has generated, used, transported, treated, stored, released
or disposed of, or has suffered or permitted anyone else to generate, use,
transport, treat, store, release or dispose of any Hazardous Substance (as
hereinafter defined) with respect to the Assets or the Business in violation
of any Environmental Laws (as hereinafter defined); (ii) there has not been
any generation, use, transportation, treatment, storage, release or disposal
of any Hazardous Substance in connection with the ownership of the Assets,
the conduct of the Business or the use of any property or facility which
relates to the ownership of the Assets, the Business, or any adjacent
properties or facilities, which has created or might reasonably be expected
to create any liability under any Environmental Laws or which would require
reporting to or notification of any governmental entity; (iii) no friable
asbestos or polychlorinated biphenyl, and no underground storage tank, is
contained in or located at any facility of Seller relating to the Business in
violation of any Environmental Laws; and (iv) any Hazardous Substance handled
or dealt with in any way with
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respect to the Assets or the Business by Seller or the Partnership, or during
Seller's or the Partnership's ownership of the Assets or the Business, has
been and is being handled or dealt with in compliance with any Environmental
Laws.
(b) For purposes of this Agreement, the term "Hazardous
Substance" shall mean any substance which, as of the date of this Agreement,
is listed as hazardous or toxic in the regulations implementing the
Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended ("CERCLA"), the Response Compensation and Liability Act ("RCLA"),
the Resource Conservation and Recovery Act of 1976, as amended ("RCRA"), or
listed as a hazardous substance under any applicable state environmental
laws, or any substance which has been determined at any time by regulation,
ruling or otherwise by any agency or court to be a hazardous or toxic
substance regulated under federal or state law.
(c) For purposes of this Agreement, the term "Environmental
Laws" shall mean CERCLA, RCRA, RCLA and any applicable statutes, regulations,
rules, ordinances, codes, licenses, permits, orders, approvals, plans,
authorizations, concessions, franchises and similar items of all governmental
authorities, including the FCC, and all applicable judicial, administrative
and regulatory decrees, judgments and orders, any of which relate to the
protection of human health or the environment from the effects of Hazardous
Substances, including but not limited to those pertaining to reporting,
licensing, permitting, investigating and remediating emissions, discharges,
releases or threatened releases of Hazardous Substances into the air, surface
water, groundwater or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances.
SECTION 7.12. LABOR MATTERS. Seller has no employees.
SECTION 7.13. EMPLOYEE BENEFITS. Seller has no Employee Benefit
Plans in which any one or more Partners participate or are eligible to
participate as of the date hereof and is not a party to any employment
contract. The term "Employee Benefit Plans" means all employee benefit plans
as that term is defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). No Partner or employee of Seller
participates or is eligible to participate in a "defined benefit pension
plan" as defined in Section 3(35) of ERISA, maintained or made available by
Seller. Neither Seller nor any Controlled Group Member maintains or
contributes to, or ever maintained or contributed to, a plan under which any
employee of Seller participates or is eligible to participate subject to
Section 412 of the Internal Revenue Code of 1986, as amended (the "Code").
The term "Controlled Group Member" means any trade or business (whether or
not incorporated) which is, or was at any relevant time, aggregated with
Seller pursuant to Section 414(b), (c), (m) or (o) of the Code. Neither
Seller nor any ERISA Affiliate has participated in or made contributions to
any "multiemployer plan" as defined in Section 4001(a)(3) of ERISA. The term
"ERISA Affiliate" means each trade or business (whether or not incorporated)
which is, or was at any relevant time, treated as a single employer with
Seller pursuant to Section 4001(b)(1) of ERISA.
SECTION 7.14. TAX MATTERS. Except as disclosed on SCHEDULE 7.14
attached hereto, Seller has timely filed all federal, state, county and local
tax returns required to be filed as of the date
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hereof and will file all such returns required to be filed from the date
hereof to the Primary Closing, and has paid and will pay all taxes due and
owing for all such periods. There are no suits, actions, claims,
investigations, inquiries or proceedings pending or, to Seller's knowledge,
threatened against Seller or the Partnership in respect of any taxes,
interest, assessments, governmental charges or penalties.
SECTION 7.15. SUBSCRIBERS. As of the date hereof, the Business
does not have any subscribers.
SECTION 7.16. INSURANCE. Attached hereto as SCHEDULE 7.16 is an
accurate and complete list in all material respects of all insurance
policies, bonds and letters of credit which relate in any way to the
ownership, use or operation of the Assets and the Business.
SECTION 7.17. BROKERS. Except as set forth on SCHEDULE 7.17
attached hereto, neither Seller, the General Partner nor the Partnership has
engaged any agent, broker or other person acting pursuant to the express or
implied authority of Seller which is or may be entitled to a commission or
broker or finder's fee in connection with the transactions contemplated by
this Agreement or otherwise with respect to the sale of the Assets or the
Business.
SECTION 7.18. HART-SCOTT-RODINO. Seller does not meet the "size
of person test" for an acquired person under the Hart-Scott-Rodino Antitrust
Improvements Act, since Seller's ultimate parent entity and all entities that
its ultimate parent entity controls do not meet the financial thresholds set
forth in 16 C.F.R. Part 801.
ARTICLE VIII
PURCHASER'S REPRESENTATIONS
Purchaser hereby represents, warrants, covenants and agrees that:
SECTION 8.01. ORGANIZATION; QUALIFICATION. Purchaser is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Oklahoma. Purchaser has all power and authority to (i)
own and operate its properties, (ii) carry on its business as it is now being
conducted, and (iii) carry out the transactions contemplated by this
Agreement and to own and operate the Assets and the Business, subject to
obtaining all necessary consents required for the transfer by Seller of the
Assets.
SECTION 8.02. CONSENTS; AUTHORIZATION; EXECUTION AND DELIVERY OF
AGREEMENT. All necessary consents and approvals have been obtained by
Purchaser for the execution and delivery of this Agreement. The execution
and delivery of this Agreement by Purchaser has been duly and validly
authorized and approved by all necessary corporate action. Purchaser has
full power and authority to execute and deliver and perform its obligations
under this Agreement. This Agreement is a valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms.
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SECTION 8.03. LITIGATION AND LEGAL PROCEEDINGS. There is no
outstanding judgment against Purchaser and there is no litigation, proceeding
or investigation pending, or, to Purchaser's knowledge, threatened, against
Purchaser or its assets which individually or in the aggregate would, if
adversely determined, result in a material adverse change in the business
condition (financial or otherwise), properties, prospects or assets of
Purchaser or which questions the validity of any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement or the
consummation of the transactions contemplated hereby by Purchaser.
SECTION 8.04. BROKERS. Purchaser has not engaged any agent,
broker or other person acting pursuant to the express or implied authority of
Purchaser which is or may be entitled to a commission or broker or finder's
fee in connection with the transactions contemplated by this Agreement or
otherwise with respect to the sale of the Assets or the Business.
ARTICLE IX
SELLER'S AND PURCHASER'S AFFIRMATIVE COVENANTS
SECTION 9.01. MANAGEMENT AGREEMENT. Simultaneously with the
execution of this Agreement, Manager and Seller shall enter into a Management
Agreement in the form attached hereto as EXHIBIT E (the "Management
Agreement") pursuant to which Manager shall provide management services to
Seller from October 1, 1998 to the Primary Closing Date in connection with
the operation of the Business.
SECTION 9.02 ACCESS. Seller shall give Purchaser and its counsel,
accountants and other representatives access during normal business hours to
inspect all of the properties, books and records of Seller as they pertain to
the Assets and the Business, wherever located, and furnish Purchaser with
such available and existing documentation concerning the Assets and the
Business as Purchaser may reasonably request. Seller shall also provide
Purchaser with access to, and shall (to the extent required) consent to
disclosure by AWS to Purchaser of, any information within Seller's custody of
control pertaining to AWS's operation of the Business under the IOA granted
by the FCC.
SECTION 9.03. CONDUCT OF BUSINESS. From the date hereof until the
Primary Closing Seller shall:
(a) Use its best efforts to preserve intact the Assets and
the Business, including, but not limited to, maintaining in effect casualty
and liability insurance coverage on the Assets and the Business customary in
the industry for similar cellular telephone businesses, complying in all
material respects with applicable Federal, state and local laws, rules and
regulations and pertinent provisions of all Existing Contracts and
Authorizations;
(b) Use all reasonable efforts to preserve the goodwill of
the customers, suppliers and others having business relations with it;
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(c) Not sell, transfer, convey or otherwise dispose of the
Assets without the prior written consent of Purchaser or pledge or otherwise
encumber any of the Assets without the prior written consent of Purchaser;
(d) Not make any distribution of any Assets to any of its
Partners or any affiliate of any of its Partners;
(e) Not hire any employees without Purchaser's prior written
consent;
(f) Maintain its books and records in accordance with prior
practice;
(g) Provide to the Purchaser, concurrently with filing
thereof, copies of all reports to and other filings with the FCC and any
other governmental agency;
(h) Not permit the FCC Authorization to expire or to be
surrendered or voluntarily modified in a manner materially adverse to the
Business, or take any action which would reasonably be expected to cause the
FCC Authorization or any other governmental authority to institute
proceedings for the suspension, revocation or limitation of rights under the
FCC Authorization; or fail to prosecute with due diligence any pending
applications to any governmental authority;
(i) Notify Purchaser in writing promptly after learning of
the institution or threat of any material action against Seller in any court,
or any action against Seller before the FCC or any other governmental agency,
and notify Purchaser in writing promptly upon receipt of any administrative
or court order relating to the Assets or the Business; and
(j) pay or cause to be paid or provide for all taxes of or
relating to Seller, the Assets and the employees required to be paid to city,
county, state, Federal and other governmental units up to the Primary Closing
Date.
Actions taken or omitted on Seller's behalf by Manager under
the Management Agreement will not constitute a breach of this covenant.
SECTION 9.04. GOVERNMENTAL APPROVALS. (a) Purchaser will fully
cooperate with Seller and do all things that are commercially reasonable to
assist Seller to obtain all consents and approvals necessary for the transfer
or assignment to Purchaser of the Authorizations (including without
limitation, the FCC Authorization), including the furnishing of financial and
other information specifically with respect to Purchaser reasonably required
by the person whose consent or approval is being sought. Seller shall
provide adequate prior written notice to Purchaser of any meeting with
governmental authorities the purpose of which is to seek a consent or
approval to the transactions contemplated hereby, and Purchaser shall use all
reasonable efforts to furnish a representative to attend meetings with
appropriate government authorities for the purpose of obtaining such consents
or approvals. Seller hereby agrees to file the necessary Form 490 with the
FCC transferring or assigning control of the FCC Authorization to Purchaser
and diligently pursue the processing of the assignment of the FCC
Authorization to
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Purchaser and to file for all other necessary regulatory approvals for the
consummation of the transactions contemplated by this Agreement within five
business days of the date of execution of this Agreement to the extent any
such filings have not been made prior to the date of execution of this
Agreement.
(b) Purchaser and Seller shall share equally all fees relating
to filings made pursuant to this Section 9.04.
SECTION 9.05. THIRD PARTY CONSENTS; CLOSING CONDITIONS. (a) Each
of Purchaser and Seller covenants and agrees that each of them will
reasonably cooperate with each other, and Purchaser will do all things
reasonably necessary to assist Seller to obtain all consents and approvals
necessary for the transfer or assignment to Purchaser of the Assets,
including the furnishing of financial and other information specifically with
respect to Purchaser or Seller, as the case may be, reasonably required by
the person whose consent or approval is being sought. Notwithstanding the
foregoing, to the extent that any of the Assets to be sold, assigned,
transferred or conveyed to Purchaser, or any claim, right or benefit arising
thereunder or resulting therefrom (individually, an "Interest" and
collectively, the "Interests"), is not capable of being sold, assigned,
transferred or conveyed without the approval, consent or waiver of the issuer
thereof or the other party thereto, or any third person (including a
government or governmental unit), and such approval, consent or waiver has
not been obtained, or if such sale, assignment, transfer or conveyance or
attempted assignment, transfer or conveyance would constitute a breach
thereof, and such approval, consent or waiver has not been obtained, this
Agreement shall not constitute a sale, assignment, transfer or conveyance
thereof, or an attempted assignment, transfer or conveyance thereof; provided
Seller shall use its best efforts to provide Purchaser the benefits of any
such Interest as provided in Section 19.01(b). Each of Purchaser and Seller
shall use all reasonable efforts to consummate the transactions contemplated
hereby.
(b) Purchaser and Seller hereby covenant and agree to use all
reasonable efforts to satisfy, or assist the other party in
satisfying, the closing conditions applicable to Purchaser in Article
XI hereof and Seller in Article X hereof prior to the Primary Closing
Date.
SECTION 9.06. ENVIRONMENTAL REVIEW. Purchaser may, at its own
expense, cause an environmental review to be performed by an independent
consulting firm of good reputation in the industry on the leased real
property listed on the Schedules hereto to determine compliance with the
Environmental Laws.
SECTION 9.07. NO SHOPPING. Seller and the Partners and any of
their respective affiliates, advisors or representatives shall not directly
or indirectly, solicit, encourage or initiate any contact with, negotiate
with, or provide any information to, endorse or enter into any agreement with
respect to, or take any other action to facilitate any person or group, other
than Purchaser and its representatives, concerning any inquiries or the
making of any proposals concerning any merger, sale of all or substantially
all of the assets, acquisition of Seller's partnership interests, or any
similar transaction involving Seller.
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SECTION 9.08. SUPPLEMENTAL DISCLOSURE. Seller shall promptly from
time to time prior to the Primary Closing Date and Final Closing Date
supplement in writing the Schedules hereto with respect to any matter
hereafter arising (other than matters arising as a result of Manager's
actions under the Management Agreement) that, if existing or known as of the
date of this Agreement, would have been required to be set forth or described
in the Schedules hereto; provided, however, that no such supplemental
disclosure shall be deemed to cure any breach of any representation or
warranty of Seller made in this Agreement unless Purchaser waives any such
breach in writing to Seller.
SECTION 9.09. LITIGATION MATTERS. Seller and Purchaser agree that
any and all costs of litigation and other proceedings pertaining to the FCC
Authorization, including but not limited to the Risk Sharing Proceeding shall
be the responsibility of Seller, and that Seller shall control the defense of
the Risk Sharing Proceeding, subject to Purchaser's right to assist in the
defense. Seller and Purchaser agree to cooperate in good faith in defending
the Risk Sharing Proceeding, but Seller shall have the right to settle the
Risk Sharing Proceeding without the prior written consent of Purchaser,
provided Seller bears the entire economic consequence of any such settlement.
ARTICLE X
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO
PRIMARY CLOSING
The obligation of Purchaser under this Agreement with respect to
the purchase and sale of the Assets shall be subject to the fulfillment on or
prior to the Primary Closing of each of the following conditions:
SECTION 10.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES;
PERFORMANCE OF THIS AGREEMENT. All of the representations and warranties by
Seller contained in this Agreement shall be true and correct at and as of the
Closing in all material respects, except as they may have been affected by
Manager's actions under the Management Agreement. Seller shall have complied
with and performed in all material respects all of the agreements and
covenants required by this Agreement to be performed or complied with by it
on or prior to the Primary Closing. Purchaser shall have been furnished with
a certificate or certificates of a duly authorized representative of Seller,
dated as of the Primary Closing, certifying to the fulfillment of the
foregoing conditions.
SECTION 10.02. CERTIFIED AUTHORIZATION. Seller shall deliver to
Purchaser a copy of the approval required in order to authorize Seller's
execution, delivery and performance of this Agreement and all instruments and
documents to be delivered in connection herewith and the transactions
contemplated hereby, duly certified by a duly authorized representative of
Seller.
SECTION 10.03. [Intentionally Omitted] ..
SECTION 10.04. THIRD PARTY CONSENT; FCC GRANT. Seller shall have
delivered to Purchaser such instruments, consents and approvals of third
parties (the form and substance of which shall be reasonably satisfactory to
Purchaser) as are necessary to transfer to Purchaser without
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modification thereof, as of the Primary Closing, the Assets and the
Authorizations. Prior to the Primary Closing, the FCC shall have granted its
consent to the transfer and assignment of the FCC Authorization to Purchaser
without any conditions which Purchaser determines, in its sole discretion, to
be materially adverse.
SECTION 10.05. NO MATERIAL ADVERSE CHANGE. There shall not have
been any material adverse change in the financial condition, assets,
business, properties or prospects of the Cellular System, whether owned or
operated by Seller or AWS, from April 3, 1998 to the Primary Closing, other
than as a result of actions or omissions by Manager under the Management
Agreement.
SECTION 10.06. OPINION OF COUNSEL TO SELLER. Purchaser shall have
been furnished with an opinion of Drinker Biddle & Reath LLP, counsel to
Seller, dated as of the Primary Closing and addressed to Purchaser and to any
financial institution designated by Purchaser in substantially the form of
EXHIBIT F hereto.
SECTION 10.07. OPINION OF FCC COUNSEL TO SELLER. Purchaser shall
have been furnished with an opinion of Drinker Biddle & Reath LLP, FCC
counsel for Seller, dated as of the Primary Closing and addressed to
Purchaser and to any financial institution designated by Purchaser in
substantially the form of EXHIBIT G-1 attached hereto. Purchaser shall also
have been furnished with reasonable written assurance from counsel to Seller
that the consent of the Texas Public Utilities Commission is not necessary to
consummate the transaction contemplated hereby.
ARTICLE XI
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO
PRIMARY CLOSING
The obligations of Seller under this Agreement with respect to the
purchase and sale of the Assets shall be subject to the fulfillment on or
prior to the Primary Closing of each of the following conditions:
SECTION 11.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES;
PERFORMANCE OF THIS AGREEMENT. All of the representations and warranties by
Purchaser contained in this Agreement shall be true and correct in all
material respects at and as of the Primary Closing. Purchaser shall have
complied with and performed in all material respects all of the agreements
and covenants required by this Agreement to be performed and complied with by
it on or prior to the Primary Closing. Seller shall have been furnished with
a certificate of an officer of Purchaser, dated as of the Primary Closing,
certifying to the fulfillment of the foregoing conditions.
SECTION 11.02. DIRECTORS' RESOLUTIONS. Purchaser shall deliver to
Seller copies of the resolutions of its Board of Directors authorizing the
execution, delivery and performance of this Agreement and all instruments and
documents to be delivered in connection herewith and the transactions
contemplated hereby, duly certified by an authorized officer of Purchaser.
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SECTION 11.03. INCUMBENCY CERTIFICATE. Seller shall have received
a certificate of the secretary or an assistant secretary of Purchaser,
certifying as to the genuineness of the signatures of representatives of
Purchaser authorized to take certain actions or execute any certificate,
document, instrument or agreement to be delivered pursuant to this Agreement,
which incumbency certificate shall include the true signatures of such
representatives.
SECTION 11.04. FCC CONSENT. The FCC shall have granted its
consent to the assignment of the FCC Authorization from Seller to Purchaser.
SECTION 11.05. OPINION OF COUNSEL TO PURCHASER. Seller shall have
been furnished with an opinion of Edwards & Angell, LLP, counsel to
Purchaser, dated as of the Primary Closing and addressed to Seller in
substantially the form of EXHIBIT H hereto.
ARTICLE XII
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION AT FINAL CLOSING
The obligations of Purchaser under this Agreement with respect to
the purchase and sale of the Assets shall be subject to the fulfillment on or
prior to the Final Closing of each of the following conditions:
SECTION 12.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES;
PERFORMANCE OF THIS AGREEMENT. All of the representations and warranties by
Seller contained in this Agreement shall be true and correct in all material
respects at and as of the Final Closing, except as they have been affected by
Purchaser's actions. Seller shall have complied with and performed in all
material respects all of the agreements and covenants required by this
Agreement to be performed and complied with by it on or prior to the Final
Closing. Purchaser shall have been furnished with a certificate of a duly
authorized representative of Seller, dated as of the Final Closing,
certifying to the fulfillment of the foregoing conditions.
SECTION 12.02. FCC FINAL ORDER. Each of (i) the FCC order
consenting to the assignment of the FCC Authorization from Seller to
Purchaser and (ii) the FCC order granting the FCC Authorization to Seller in
the Risk Sharing Proceeding shall have become a Final Order, in each instance
without any conditions which the Purchaser shall have determined, in its sole
discretion, to be materially adverse to its ability to operate a cellular
system in the RSA.
SECTION 12.03. OPTION OF FCC COUNSEL TO SELLER. Purchaser shall
have been furnished an opinion of Drinker Biddle & Reath LLP, FCC counsel for
Seller, dated as of the Final Closing and addressed to Purchaser and any
financial institution designated by Purchaser in substantially the form of
EXHIBIT G-2 attached hereto.
ARTICLE XIII
CASUALTY LOSSES
In the event that there shall have been suffered between the date
hereof and the Primary Closing any casualty loss relating to the Assets or
the Business which does not materially and
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adversely affect the Business, then at the Primary Closing all claims to
insurance proceeds or other rights of Seller against third parties arising
from such casualty loss (the "Claims") shall (to the extent assignable) be
separately assigned by Seller to Purchaser. To the extent any Claim is not
assignable, such claim may be pursued by Purchaser, for its own account and
benefit, in the name of Seller.
ARTICLE XIV
INDEMNIFICATION
SECTION 14.01. INDEMNIFICATION BY SELLER. (a) Notwithstanding the
Primary Closing or Final Closing, and regardless of any investigation made at
any time by or on behalf of Purchaser or any information Purchaser may have,
but subject to the terms of this Article XIV Seller agrees to indemnify and
to hold Purchaser, its shareholders, officers, directors, and employees (the
"Indemnified Purchaser Parties") harmless from and against and in respect of
any losses (including lost revenues), damages, costs, expenses (including
costs of investigations and reasonable attorney fees), suits, demands,
judgments and diminutions in value suffered or incurred (each a "Loss" and
collectively "Losses") by Purchaser arising from or related to:
(i) Any and all Non-Assumed Liabilities, whether or not known
or asserted at or prior to the Primary Closing, relating to or
arising from the ownership, operation, control or sale of the Assets
or the Business, or any other state of facts which existed at or prior
to the Primary Closing;
(ii) Any liability, debt, obligation, tax, claim or demand
relating to the FCC Authorization or any application therefor,
including without limitation, any fines or forfeitures imposed or
threatened to be imposed by the FCC, prior to the Final Closing;
(iii) Any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of Seller
under this Agreement, the Schedules or Exhibits hereto, the Management
Agreement including the Exhibits thereto, the Bill of Sale, the
Assumption Agreement, the Deposit Escrow Agreement, the Purchase
Escrow Agreement or in any closing certificate delivered by Seller to
Purchaser pursuant to Article XI hereof; and
(iv) All costs and expenses (including reasonable attorneys'
fees) incurred by any Indemnified Purchaser Party in connection with
any action, suit, proceeding, demand, assessment or judgment incident
to any of the matters such Indemnified Purchaser Party is indemnified
against by Seller in this Agreement.
(b) In addition and subject to the terms of this Article XIV,
Seller shall indemnify the Indemnified Purchaser Parties against and hold
them harmless from any and all Losses which they may incur by reason of the
failure (if any) of Seller to comply with the Bulk Transfers Article of the
Uniform Commercial Code of any state.
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SECTION 14.02. INDEMNIFICATION BY PURCHASER. Notwithstanding the
Primary Closing or Final Closing, and regardless of any investigation made at
any time by or on behalf of Seller or any information Seller may have, but
subject to the terms of this Article XIV, Purchaser agrees to indemnify and
to hold Seller, the General Partner, the Partnership and the Partners
harmless from and against and in respect of any Losses incurred by Seller and
its Partners arising from or related to:
(i) All liabilities and obligations of Purchaser, and all
claims and demands made in respect thereof relating to or arising
from, Purchaser's ownership, operation or control of the Assets or
the Business after the Primary Closing, including on account of the
Assumed Liabilities;
(ii) Any liability, debt, obligation, tax, claim or demand
relating to the FCC Authorization, including without limitation, any
fines or forfeitures imposed or threatened to be imposed by the FCC,
after the Final Closing;
(iii) Any misrepresentation, breach of warranty, or
nonfulfillment of any agreement or covenant on the part of Purchaser
or Manager under this Agreement, the Schedules or Exhibits hereto, the
Management Agreement including the Exhibits thereto, the Assumption
Agreement, the Deposit Escrow Agreement, the Purchase Escrow Agreement
or in any closing certificate delivered by Purchaser to Seller
pursuant to Article XII hereof; and
(iv) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Seller, the General Partner, the
Partnership and the Partners in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the
matters Seller, the General Partner, the Partnership and the Partners
are indemnified against by Purchaser in this Agreement.
SECTION 14.03. NOTICE OF CLAIMS; DEFENSE OF THIRD PARTY. A party
claiming indemnification under this Article XIV (the "Asserting Party") must
promptly notify (in writing and in reasonable detail) the party from which
indemnification is sought (the "Defending Party") of the nature and basis of
such claim for indemnification within the applicable Survival Period. If
such claim relates to a claim, suit, litigation or other action by a third
party against the Asserting Party or any fixed or contingent liability to a
third party (a "Third Party Claim"), the Defending Party may elect to assume
and control the defense of the Third Party Claim at its own expense with
counsel selected by the Defending Party. Notwithstanding the foregoing, the
Defending Party may not assume or control the defense if the named parties to
the Third Party Claim (including any impleaded parties) include both the
Defending Party and the Asserting Party and representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them, in which case the Asserting Party shall have the
right to defend the Third Party Claim and to employ counsel reasonably
approved by the Defending Party, and to the extent the matter is determined
to be subject to indemnification hereunder, the Defending Party shall
reimburse the Asserting Party for the reasonable costs of its counsel. If
the Defending Party assumes the defense and control of the Third Party Claim
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pursuant to this Section 14.03, the Defending Party shall not be liable for
any fees and expenses of counsel for the Asserting Party incurred thereafter
in connection with the Third Party Claim (except in the case of actual or
potential differing interests, as provided in the preceding sentence), but
shall not agree to any settlement of such Third Party Claim which does not
include an unconditional release of the Asserting Party by the third party
claimant on account thereof, PROVIDED that such requirement shall be deemed
waived to the extent that the Asserting Party does not undertake to provide
and promptly execute and, concurrently with the delivery of any such release,
deliver a corresponding release of the third party claimant with respect to
such Third Party Claim. If the Defending Party does not assume the defense
of the Third Party Claim pursuant to this Section 14.03, the Asserting Party
shall have the right (i) to control the defense thereof and (ii), if the
Asserting Party shall have notified the Defending Party of the Asserting
Party's intention to negotiate a settlement of the Third Party Claim (at the
Defending Party's expense to the extent the matter is determined to be
subject to indemnification hereunder), which notice shall include the
material terms of any proposed settlement in reasonable detail, to settle the
Third Party Claim (at the Defending Party's expense to the extent the matter
is determined to be subject to indemnification hereunder) on terms not
materially inconsistent with those set forth in such notice, unless the
Defending Party shall have notified the Asserting Party in writing of the
Defending Party's election to assume liability for and the defense of the
Third Party Claim pursuant to this Section 14.03 within ten days after
receipt of such notice, and the Defending Party promptly thereafter shall
have taken appropriate action to implement such defense. The Asserting Party
shall not be entitled to settle any such Third Party Claim pursuant to the
preceding sentence unless such settlement includes an unconditional release
of the Defending Party by the third party claimant on account thereof,
PROVIDED that such requirement shall be deemed waived to the extent that the
Defending Party does not undertake to provide and promptly execute and,
concurrently with delivery of any such release, deliver a corresponding
release of the third party claimant with respect to such Third Party Claim.
The Asserting Party and the Defending Party shall use all reasonable efforts
to cooperate fully with respect to the defense and settlement of any Third
Party Claim covered by this Article XIV.
SECTION 14.04. PURCHASE ESCROW AGREEMENT. The obligation of
Seller to indemnify Indemnified Purchaser Parties for Losses pursuant to this
Article XIV shall be secured by the funds held pursuant to the Purchase
Escrow Agreement.
SECTION 14.05. LIMITATIONS. The Defending Party's obligations to
indemnify the Asserting Party pursuant to this Article XIV shall be subject
to the following limitations:
(a) No indemnification shall be required to be made by the
Defending Party until the aggregate amount of the Asserting Party's Losses
exceeds $100,000 (the "Deductible"), and then indemnification shall only be
required to be made by the Defending Party to the extent of such Losses that
exceed the Deductible; PROVIDED, HOWEVER, the Deductible shall not be
applicable to (i) Seller's obligation to indemnify the Indemnified Purchaser
Parties for Non-Assumed Liabilities, (ii) Purchaser's obligation to indemnify
Seller, the General Partner, the Partnership and the Partners for Assumed
Liabilities, (iii) Seller's obligation to indemnify the Indemnified Purchaser
Parties pursuant to Section 14.01(b), (iv) a breach by Seller of its
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representations set forth in Section 7.02, the first and second sentences of
Section 7.03 and Section 7.14 or (v) Losses resulting from fraud.
(b) All representations and warranties contained in this
Agreement shall survive the Primary Closing until the second anniversary
thereof; provided, however, that notwithstanding the foregoing, (x) the
representations and warranties contained in Section 7.02, the first and
second sentences of Section 7.03 and Section 8.02 shall survive the Primary
Closing for an unlimited duration, (y) the representations and warranties
contained in Sections 7.09 (as it may relate to Environmental Laws), 7.11 and
7.14 shall survive the Primary Closing until the expiration of the applicable
statute of limitation, and (z) the representations and warranties contained
in Section 7.07 shall in any event survive until the Final Closing (the
applicable period of survival being referred to as the "Survival Period").
To the extent a claim is made in respect of a representation or warranty
within the applicable Survival Period, such representation or warranty shall
survive after the Survival Period for purposes of such claim until such claim
is finally determined or settled. Each party shall be precluded from
asserting claims against the other party after the applicable Survival Period.
(c) Seller's liability to the Indemnified Purchaser Parties
for indemnification pursuant to this Article XIV shall be limited to
$2,500,000 and shall be satisfied only from the funds held pursuant to the
Purchase Escrow Agreement.
ARTICLE XV
CONFIDENTIALITY AND PRESS RELEASES
SECTION 15.01. CONFIDENTIALITY. Each party shall hold in strict
confidence all documents and information concerning the other and its
business and properties and, if the transaction contemplated hereby should
not be consummated, such confidence shall be maintained, and all such
documents and information (in written form) shall immediately thereafter be
returned to the party originally furnishing the same.
SECTION 15.02. PRESS RELEASES. No press release or public
disclosure, either written or oral, of the existence or terms of this
Agreement shall be made by either Purchaser or Seller without the consent of
the other subject to the provisions of Section 15.03, and Purchaser and
Seller shall each furnish to the other advance copies of any release which it
proposes to make public concerning this Agreement or the transactions
contemplated hereby and the date upon which Purchaser or Seller, as the case
may be, proposes to make such press release.
SECTION 15.03. DISCLOSURES REQUIRED BY LAW. This Article XV shall
not, however, be construed to prohibit any party from making any disclosures
to any governmental authority that it is required to make by law or from
filing this Agreement with, or disclosing the terms of this Agreement to, any
institutional lender to such party, or prohibit Seller, Purchaser or any of
their affiliates from disclosing to its investors, partners, accountants,
auditors, attorneys, financing sources, investment bankers, parent company
and broker/dealers such terms of this transaction and such of Seller's
business and financial information as are reasonably necessary to be
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disclosed to them in connection with the Company's financing activities and
other proper business purposes.
ARTICLE XVI
TERMINATION
SECTION 16.01. TERMINATION PRIOR TO FINAL CLOSING. This Agreement
may be terminated and the transactions contemplated herein may be abandoned,
by written notice promptly given to the other party hereto, at any time prior
to the Final Closing (excepted as noted):
(a) by mutual written consent of Seller and Purchaser;
(b) by either Purchaser or Seller, if any court of competent
jurisdiction in the United States or other United States governmental
body shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise permanently
prohibiting the sale of the Assets to Purchaser (which Seller and
Purchaser shall have used all reasonable efforts to have lifted or
reversed) and such order, decree, ruling or other action shall have
become final and nonappealable;
(c) by Purchaser, but only prior to Primary Closing, if Seller
shall have materially breached any of its representations, warranties,
covenants or agreements set forth in this Agreement or the Management
Agreement (if then in effect), and said breach is not cured within 10
business days after written notice of the breach is received by
Seller;
(d) by Purchaser, in the event that the FCC's order granting its
consent to the assignment of the FCC Authorization to Purchaser is
reversed, on reconsideration by the FCC or after judicial review, or
in the event that Seller's rights in the FCC Authorization are
revoked, denied or conditioned on such grounds that the value of the
FCC Authorization is materially impaired, on reconsideration by the
FCC or after judicial review, and in either event, Purchaser's right
to operate the Cellular System pursuant to the FCC Authorization
without materially adverse conditions is terminated;
(e) by Seller, but only prior to Primary Closing, if Purchaser
or Manager shall have materially breached any of its representations,
warranties, covenants or agreements set forth in this Agreement or the
Management Agreement (if then in effect), and said breach is not cured
within 10 business days after written notice of the breach is received
by Purchaser or Manager, as appropriate; or
(f) by either Purchaser or Seller, effective on January 1, 2001,
and on the first day of any calendar quarter thereafter, if (i) such
party has provided ninety (90) days' written notice to the other party
of such termination, (ii) the
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Primary Closing has not taken place at the time of termination, and
(iii) the party seeking to terminate this Agreement is not then in
material breach of any of its (or Manager's) representations,
warranties, covenants or agreements set forth in this Agreement or
the Management Agreement (if then in effect).
ARTICLE XVII
BROKERS' FEES
Each party represents and warrants to the other that it shall be
solely responsible for the payment of any fee or commission due to any broker
or finder it has engaged with respect to this transaction and the other party
hereto shall be indemnified for any liability with respect thereto pursuant
to Article XIV hereof.
ARTICLE XVIII
CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
PURCHASER AND SELLER HEREBY CONSENT TO THE JURISDICTION OF THE
FEDERAL AND STATE COURTS OF THE STATE OF TEXAS, AS WELL AS TO THE
JURISDICTION OF ALL COURTS FROM WHICH AN APPEAL MAY BE TAKEN FROM THE
AFORESAID COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING
ARISING OUT OF ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
PURCHASER AND SELLER ALSO WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR
WITH RESPECT TO THIS AGREEMENT.
ARTICLE XIX
MISCELLANEOUS
SECTION 19.01. ADDITIONAL INSTRUMENTS OF TRANSFER. (a) From time
to time after the Closing, each party shall, if requested by another party,
make, execute and deliver such additional assignments, bills of sale, deeds
and other instruments, as may be reasonably necessary or proper to carry out
the specific provisions of this Agreement, including transfer to Purchaser
all of Seller's right, title and interest in and to the Assets. Such efforts
and assistance shall be without cost to any party.
(b) Anything in this Agreement to the contrary notwithstanding,
Seller is not obligated to sell, assign, transfer or convey to Purchaser any
of their rights and obligations in and to any Interest without first
obtaining all necessary approvals, consents or waivers. To the extent any of
the approvals, consents or waivers described in Section 10.04 have not been
obtained by Seller as of the Primary Closing and Purchaser elects to proceed
with the Primary Closing, Seller shall, for a period equal to the longer of
six months after the Primary Closing, the Final Closing Date, or the
remaining term of such Interest, use all reasonable efforts to (i) obtain the
consent of any such third party; (ii) cooperate with Purchaser in any
reasonable and lawful arrangements designed to provide the benefits
(including, without limitation, the payment to Purchaser of any monies
received by Seller in connection therewith) of such Interest to Purchaser so
long as Purchaser performs all obligations with respect to the Interest (and
the payment of all expenses in connection therewith); and (iii) enforce, at
the request of Purchaser and at the expense and for the
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account of Purchaser, any rights of Seller arising from such Interest against
such issuer thereof or the other party or parties thereto (including the
right to elect to terminate any such Interest in accordance with the terms
thereof upon the request of Purchaser); PROVIDED, HOWEVER, that neither
Purchaser nor Seller shall be obligated to pay any consideration or other
sums therefor (except for filing fees and other ordinary administrative
charges and except as set forth above) to the third party from whom such
approval, consent or waiver is requested.
SECTION 19.02. NOTICES. All notices and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered, sent by telecopier, recognized
overnight delivery service or mailed, registered or certified mail, return
receipt requested, postage prepaid, to the following addresses:
(i) If to Purchaser:
c/o Dobson Communications Corporation
13439 N. Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
Attention: Everett Dobson
Facsimile No.: (405) 391-8515
with a copy to:
Edwards & Angell, LLP
One BankBoston Plaza
Providence, Rhode Island 02903
Attention: David K. Duffell, Esq.
Facsimile No.: (401) 276-6602
(ii) If to Seller:
A-1 Cellular Communications
648 Knollwood Terrace
Westfield, New Jersey 07090
Attention: Frederick W. Ball
Facsimile No.: (212) 983-7499
with a copy to:
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107
Attention: Michael B. Jordan, Esq.
Facsimile No.: (215) 988-2757
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<PAGE>
Notices delivered personally shall be effective upon delivery.
Notices transmitted by telecopy shall be effective when received, provided
that the burden of proving notice when notice is transmitted by telecopy
shall be the responsibility of the party giving such notice. Notices
delivered by overnight mail shall be effective when received. Notices
delivered by registered or certified mail shall be effective on the date set
forth on the receipt of registered or certified mail, or 72 hours after
mailing, whichever is earlier.
SECTION 19.03. EXPENSES. Except as otherwise provided herein,
each party shall bear its own expenses and costs, including the fees of any
corporate or FCC attorney retained by it, incurred in connection with the
preparation of this Agreement and the consummation of the transactions
contemplated hereby.
SECTION 19.04. TRANSFER TAXES. Seller shall pay any use, sales or
transfer taxes imposed in connection with the sale and delivery of the Assets
and rights acquired by Purchaser under this Agreement.
SECTION 19.05. COLLECTION PROCEDURES. From and after the Primary
Closing, Purchaser shall have the right and authority, at its expense, to
collect for its account all items to which it is entitled as provided in this
Agreement and to endorse with the name of Seller any checks or drafts
received on account of any such items.
SECTION 19.06. SPECIFIC PERFORMANCE. The parties recognize and
acknowledge that in the event Seller shall fail to perform its obligations
under the terms of this Agreement, money damages alone will not be adequate
to compensate Purchaser. The parties, therefore, agree and acknowledge that
in the event Seller fails to perform its obligations under this Agreement,
Purchaser shall be entitled, in addition to any action for monetary damages,
in addition to any other rights and remedies on account of such failure, to
specific performance of the terms of this Agreement and of the covenants and
obligations hereunder.
SECTION 19.07. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas (without
application of principles of conflicts of law).
SECTION 19.08. ASSIGNMENT. Except as provided below, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (by merger or other operation of law or
otherwise) without the prior written consent of the other party, which
consent will not be unreasonably withheld, except that (a) Purchaser shall
have the right (i) at any time to assign its rights and obligations under
this Agreement to another entity controlled by Dobson Communications
Corporation, and (ii) after the Primary Closing, to assign its rights and
obligations under this Agreement to any third party; and (b) Seller shall
have the right, at or after the Primary Closing, to liquidate and in
connection therewith to assign its duties and obligations to the Partnership
or to a limited liability company that succeeds to the Partnership's assets
and liabilities. A party shall provide prompt written notice to the other
party of any such assignment.
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SECTION 19.09. SUCCESSORS AND ASSIGNS. All agreements made and
entered into in connection with this transaction shall be binding upon and
inure to the benefit of the parties hereto, their successors and assigns.
SECTION 19.10. AMENDMENTS; WAIVERS. No alteration, modification
or change of this Agreement shall be valid except by an agreement in writing
executed by the parties hereto. No failure or delay by any party hereto in
exercising any right, power or privilege hereunder (and no course of dealing
between or among any of the parties) shall operate as a waiver of any such
right, power or privilege. No waiver of any default on any one occasion
shall constitute a waiver of any subsequent or other default. No single or
partial exercise of any such right, power or privilege shall preclude the
further or full exercise thereof.
SECTION 19.12. ENTIRE AGREEMENT. This Agreement merges all
previous negotiations and agreements between the parties hereto, either
verbal or written, including that certain letter agreement dated April 3,
1998, and constitutes the entire agreement and understanding between the
parties with respect to the subject matter of this Agreement.
SECTION 19.13. THIRD PARTIES. Except as set forth in Article XIV
hereof, nothing herein, expressed or implied, is intended to or shall confer
on any person other than the parties hereto any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
SECTION 19.14. SEVERABILITY. If any provision of this Agreement
or the application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by
law, but only as long as the continued validity, legality and enforceability
of such provision or application does not materially (a) alter the terms of
this Agreement, (b) diminish the benefits of this Agreement or (c) increase
the burdens of this Agreement, for any person.
SECTION 19.15. SECTION HEADINGS. The section headings contained
in this Agreement are solely for the purpose of reference, are not part of
the agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 19.16. INTERPRETATION. As both parties have participated
in the drafting of this Agreement, any ambiguity shall not be construed
against either party as the drafter.
SECTION 19.17. FURTHER ASSURANCES. Seller agrees to provide to
Purchaser from time to time any information that Seller possesses with
respect to the operation of the Business and Assets prior to the Closing
which Purchaser requests in the future in connection with Purchaser's
financing efforts now or in the future or in connection with any FCC or other
regulatory filing.
SECTION 19.18. COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which when so executed shall be an
original, but all of which together shall constitute one agreement.
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<PAGE>
SECTION 19.19. LIMITED RECOURSE TO PARTNERS. Any liability of
Seller under this Agreement shall be satisfied solely out of the assets of
Seller and the General Partner, and neither the Partnership nor any Partner
shall have any liability under this Agreement.
[The rest of this page is left blank intentionally.]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized representative as of the day
and year first above written.
SELLER:
A-1 CELLULAR OF TEXAS, L.P.
By: A-1 CELLULAR OF TEXAS, LLC, General Partner
By: A-1 CELLULAR COMMUNICATIONS, Sole Member
By: /s/ Frederick W. Ball
---------------------------------------------
, a General Partner
PURCHASER:
DOBSON CELLULAR OF NAVARRO, INC.
By: /s/ Everett Dobson
---------------------------------------------
Name:
Title:
<PAGE>
ASSET PURCHASE AGREEMENT
between
FIRST CELLULAR OF MARYLAND, INC.
and
DOBSON CELLULAR OF MARYLAND, INC.
DATED AS OF NOVEMBER 24, 1998
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 24th day of November,
1998, by and between FIRST CELLULAR OF MARYLAND, INC., a Delaware corporation
("Seller"), and DOBSON CELLULAR OF MARYLAND, INC., an Oklahoma corporation
("Purchaser").
R E C I T A L S
WHEREAS, Seller owns all right, title and interest in those certain
licenses listed on SCHEDULE 2.01(a) as "FCC Cellular Authorizations" granted
by the Federal Communications Commission (the "FCC") to provide cellular
radio telephone service in each of (i) the FCC's rural service area ("RSA")
#1 in the State of Maryland, (ii) the portion of the Cumberland, Maryland
metropolitan statistical area ("MSA") covered under 269 (A-2), Call Sign
KNKR271 and (iii) any and all extensions into the areas adjacent to such RSA
and MSA listed on Schedule 2.01(a) (collectively, the "Cellular Areas") and
owns and operates non-wireline cellular telephone systems in the Cellular
Areas (individually a "Cellular System" and collectively the "Cellular
Systems");
WHEREAS, Seller owns all right, title and interest in those certain
licenses listed on SCHEDULE 2.01(a) as "FCC Paging Authorizations" granted by
the FCC to provide paging service from transmitters located in the Cellular
Areas and owns and operates a paging system covered by such FCC Paging
Authorizations (the "Paging System") (the Paging System and the Cellular
Systems shall sometimes be referred to collectively as the "Systems"); and
WHEREAS, Purchaser desires to purchase from Seller, and Seller desires
to sell to Purchaser, substantially all of the assets and rights of Seller
relating to the ownership and operation of the Systems (the "Business"), all
subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements herein set forth and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I
PURCHASE AND SALE
Subject to the terms and conditions set forth in this Agreement, Seller
agrees to sell, convey, assign, transfer and deliver to Purchaser, and
Purchaser agrees to purchase from Seller at the Closing, all of Seller's
right, title and interest in and to the Assets (as defined in Section 2.01
hereof), free and clear of all debts, liabilities, obligations, taxes, other
than Assumed Liabilities, and free and clear of all security interests,
liens, pledges, charges, rights of third parties and encumbrances of every
kind (collectively, "Liens") other than Permitted Liens. As used herein, the
term "Permitted Liens" means (i) any Lien for taxes and assessments not yet
past due or otherwise being contested in good faith and for which appropriate
reserves have been established
<PAGE>
and are taken into account in the Working Capital Adjustment, (ii) any Lien
arising out of deposits made to secure leases or other obligations of a like
nature arising in the ordinary course of business, (iii) any Lien provided
for in any contract or lease listed on the disclosure schedules hereto and
not related to any indebtedness for borrowed money, (iv) any Lien that does
not materially interfere with the use by Seller of the property subject
thereto or affected thereby (including any easements, rights of way,
restrictions, installations or public utilities, title imperfections and
restrictions, reservations in land patents, zoning ordinances or other
similar Liens), (v) as to leaseholds, interests of the lessors thereof and
Liens affecting the interests of such lessors and (vi) any Lien set forth on
SCHEDULE 1 attached hereto.
ARTICLE II
DESCRIPTION OF ASSETS; EXCLUDED ASSETS
SECTION 2.01. ASSETS. The assets to be conveyed to Purchaser shall
include all real and personal tangible and intangible assets, properties and
rights owned by Seller of whatever description which relate in any way to the
ownership, use or operation of the Business, except assets excluded pursuant
to Section 2.02 hereof, but including all property and rights acquired or
obtained by Seller from the date hereof through the date of Closing
(collectively, the "Assets"). Such Assets shall be free and clear of all
Liens other than Permitted Liens as of the Closing. Such Assets shall
include, without limitation:
(a) Seller's FCC authorizations to operate (i) non-wireline
cellular telecommunications systems in the Cellular Areas (the "Cellular
Authorizations") and microwave paths used in connection with such cellular
operations (the "Microwave Authorizations" and together with the Cellular
Authorizations, the "FCC Cellular Authorizations") and (ii) a paging system
from the transmitters covered by the FCC Paging Authorizations (the "FCC
Paging Authorizations", and together with the FCC Cellular Authorizations,
the "FCC Authorizations"); all leases, agreements, licenses, permits,
consents, revenue sharing agreements, agreements for the reception or
transmission of signals by microwave; all easements, appurtenances,
rights-of-way and construction permits, if any, related to the Business; all
right, title and interest, if any, in and to all streets, roads and public
places, open or proposed; all agreements between Seller and any suppliers,
cellular telephone service companies and subscribers, paging service
companies and subscribers, and all other similar rights and agreements
(including roaming and interconnection agreements), including all
applications therefor, which in any way may relate to or concern the
operation by Seller of the Business, all of which items (other than those not
required to be listed pursuant to Sections 7.06 and 7.07 of this Agreement)
are more particularly set forth on SCHEDULE 2.01(a) attached hereto.
(b) Originals or copies (at Seller's option) of all of Seller's
files of correspondence, lists, records and reports concerning (i) customers
and prospective customers of the Business and (ii) all dealings with Federal,
state and local regulatory agencies with respect to the Business, including,
but not limited to, all reports filed by or on behalf of Seller with the FCC.
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<PAGE>
(c) All of Seller's right, title and interest in and to towers,
tower equipment, antennas, switching and cell site equipment and buildings,
construction in progress, microwave equipment, machinery, transmitters,
paging equipment, testing equipment, inventory and spare parts used in or
relating to the Business, and all modifications, additions, restorations or
replacements of the whole or any part thereof, substantially all of which
tangible assets as of the date hereof are described on SCHEDULE 2.01(c)
attached hereto.
(d) All real property, leaseholds and other interests in real
property of Seller used in or relating to the Business, as described on
Schedule 2.01(d) attached hereto.
(e) All of Seller's right, title and interest to engineering
records, files, data, drawings, blueprints, schematics, maps, reports, lists
and plans and processes intended for use in connection with the Business
provided that Seller may retain a copy thereof.
(f) All of the following: inventions, trademarks, service marks,
trade dress, trade names, logos and registrations and applications for a
registration thereof together with all of the goodwill associated therewith,
copyrights and copyrightable works and registrations and applications for the
registration thereof, computer software, data, data bases, documentation
thereof, trade secrets and other confidential information, other intellectual
property rights and intangible embodiments thereof (in whatever form or
medium); together with all books, records, drawings and other indicia,
however evidenced; in each case including, without limitation, the items set
forth on SCHEDULE 2.01(f) attached hereto.
(g) All communications towers, buildings, fixtures and other
improvements including, without limitation, all electrical, mechanical,
plumbing and other building systems, security and surveillance systems and
wiring and cable installations located on the property leased by Seller.
(h) All prepayments and prepaid expenses.
(i) All claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind.
(j) The right to receive and retain mail and other
communications.
(k) All advertising, marketing and promotional materials and all
other related printing or written materials.
(l) All goodwill as a going concern.
(m) Any assets of the type-described above which are acquired
after the date hereof but prior to the Closing.
SECTION 2.02. EXCLUDED ASSETS. (a) The properties and assets described
in SCHEDULE 2.02 attached hereto and in Section 2.02(b) of this Agreement
which relate to the Business shall not be
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<PAGE>
included in the Assets, shall be retained by Seller and shall not be sold,
assigned or transferred to Purchaser (the "Excluded Assets").
(b) Anything in this Agreement to the contrary notwithstanding,
the Assets sold to the Purchaser pursuant to the terms of this Agreement
shall not include the Seller's corporate records, books of account, cash,
bank deposits and cash equivalents at the time of the Closing, insurance
policies and rights and claims thereunder, bonds, letters of credit, surety
instruments and other similar items, and all claims, rights and interests in
and to any refunds of taxes or fees of any nature, or other claims against
third parties (including collection claims involving delinquent subscribers
who are not active subscribers of the Systems as of the Closing Date and no
portion of whose account receivable is included in the Current Assets (as
defined in Section 5.05(a) as of the Closing Date).
ARTICLE III
ASSUMPTION OF LIABILITIES
At Closing, Purchaser shall assume and agree to perform and discharge
the following to the extent not previously performed or discharged as of the
Closing: (i) all obligations of Seller which accrue and are to be performed
from and after the Closing under those permits, authorizations, licenses,
leases, rights of way, easements and other agreements either set forth on
SCHEDULES 2.01(a) AND (d) attached hereto or those agreements of a
non-material nature which are not required by this Agreement to be disclosed
on SCHEDULES 2.01(a) AND (d) and (ii) all other obligations of Seller entered
into during the period from the date hereof to the Closing by Seller in the
ordinary course of its business in accordance with the provisions of Section
9.05 below and that were identified to and consented by Purchaser (all of
such permits, authorizations, licenses, leases, rights of way, easements and
other agreements referred to in items (i) and (ii) being referred to
hereinafter as the "Assumed Contracts"); and (iii) all "Current Liabilities"
(as defined in Section 5.05(a) hereof) but only if and to the extent that
Purchaser receives a credit against the Purchase Price at the Closing (such
items (i) through (iii) are collectively referred to herein as the "Assumed
Liabilities"). Purchaser shall not be liable for any liabilities, debts,
contracts, agreements, including without limitation any contracts or
agreements set forth on SCHEDULE 2.02, or other obligations of Seller of any
nature whatsoever other than the Assumed Liabilities (such other liabilities,
debts, contracts, agreements or obligations of Seller other than the Assumed
Liabilities being referred to as "the Non-Assumed Liabilities").
ARTICLE IV
INSTRUMENTS OF TRANSFER
AND ASSUMPTION
SECTION 4.01. TRANSFER DOCUMENTS. At the Closing, Seller will deliver
to Purchaser (a) one or more Bills of Sale in substantially the form attached
hereto as EXHIBIT A (a "Bill of Sale"), (b) all such other good and
sufficient instruments of sale, transfer and conveyance, including, without
limitation, assignments of leases, in such form and including such matters as
Purchaser shall reasonably request and as shall be reasonably acceptable to
Seller, as shall be effective to vest in Purchaser all of Seller's right and
title to, and interest in, the Assets; and (c) all contracts
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<PAGE>
and commitments, instruments, books and records (except as otherwise provided
in Section 2.02 hereof) and other data included in the Assets.
SECTION 4.02. ASSUMPTION DOCUMENTS. At the Closing, Purchaser and
Seller will execute and deliver (a) an Assumption Agreement in substantially
the form attached hereto as EXHIBIT B (the "Assumption Agreement") and (b)
all such other good and sufficient instruments of assumption in such form and
including such matters as Seller shall reasonably request and as shall be
reasonably acceptable to Purchaser in order to effect the assumption of the
Assumed Liabilities by Purchaser.
ARTICLE V
PURCHASE PRICE; ALLOCATION
SECTION 5.01. PURCHASE PRICE. The total purchase price for the Assets
shall be Nine Million One Hundred Thousand Dollars ($9,100,000) (the "Base
Price"), as adjusted in accordance with the provisions of Section 5.05 hereof
(as adjusted, the "Purchase Price").
SECTION 5.02. DEPOSIT. Simultaneously with the execution of this
Agreement, Purchaser is depositing as a good faith deposit Nine Hundred Ten
Thousand Dollars ($910,000) (the "Deposit") with PNC Bank, National
Association (the "Escrow Agent"), to be held, invested and disbursed pursuant
to the terms of the Deposit Escrow Agreement in the form of EXHIBIT C
attached hereto (the "Deposit Escrow Agreement"). If the Closing occurs,
then the Deposit and all earnings on the Deposit shall be paid to Purchaser
pursuant to the Deposit Escrow Agreement and the full amount of the Deposit
and the earnings thereon shall be credited against and deducted from the
Purchase Price to be paid at the Closing by Purchaser for the Assets. If
Seller terminates this Agreement in accordance with the provisions of Section
15.02(d) and, at the time of such termination Seller is not then in breach of
any of its representations, warranties, covenants or agreements set forth in
this Agreement to such an extent that Seller's breaches, in the aggregate,
have caused or would reasonably be expected to cause Purchaser to suffer a
Material Loss (as defined in Section 10.01) or otherwise result in a Material
Adverse Effect (as defined in Section 10.01) and the conditions set forth in
Sections 10.04 and 10.05 would have been satisfied had Closing occurred on
the date Seller terminates this Agreement, then Seller shall be entitled to
the Deposit as liquidated damages (the "Liquidated Damages Amount"), which
Liquidated Damages Amount the parties hereby agree is a fair and reasonable
measure of the damages that Seller would sustain as a result of such
termination. Notwithstanding anything else set forth in this Section 5.02,
Seller's sole and exclusive recourse against Purchaser or any of its
subsidiaries or affiliates for any breach by Purchaser of its representations
or obligations hereunder (including in the event Seller terminates this
Agreement in accordance with the provisions of Section 15.02(d)) shall be to
receive the Liquidated Damages Amount. In any other case if the Closing does
not occur, then, pursuant to the Deposit Escrow Agreement, the Deposit and
all earnings thereon shall be paid to Purchaser. All payments by the Deposit
Escrow Agent shall be made, in accordance with the procedures and other
provisions set forth in the Deposit Escrow Agreement.
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<PAGE>
SECTION 5.03. PAYMENT OF PURCHASE PRICE. The Purchase Price less an
amount equal to Four Hundred Twenty-Five Thousand Dollars ($425,000) (the
"Escrow Payment"), shall be payable by wire transfer of immediately available
funds to Seller at Closing. The Escrow Payment shall be paid by the
Purchaser at Closing to the Escrow Agent to be held, invested and disbursed
pursuant to the terms of the Closing Escrow Agreement substantially in the
form of EXHIBIT D attached hereto (the "Closing Escrow Agreement").
SECTION 5.04. ALLOCATION OF PURCHASE PRICE. Prior to the Closing,
Purchaser and Seller in good faith shall each use their respective
commercially reasonable efforts to agree on an allocation of the Purchase
Price and the Assumed Liabilities in accordance with the respective fair
market value of the Assets being purchased and as provided for under Section
1060 of the Code. Purchaser and Seller each further agree to file their
income tax returns and their other tax returns and IRS Form 8594 reflecting
the allocation as determined in this Section 5.04 unless otherwise required
by applicable legal requirements. If no agreement on an allocation of the
Purchase Price with respect to the Assets is reached within such thirty (30)
day period, such allocation of the Purchase Price to the Assets shall be
determined by a nationally recognized appraisal firm mutually agreeable to
Seller and Purchaser and the costs of such appraisal shall be borne equally
by Seller and Purchaser.
SECTION 5.05. PURCHASE PRICE ADJUSTMENT.
(a) As used in this Section 5.05, the following terms shall have
the meaning set forth below:
"CURRENT ASSETS" means the Systems' prepaid items which Purchaser will
receive the benefit of after the Closing such as prepaid rent, property
taxes, utility charges, fees and deposits paid, all determined as of 12:01
a.m. on the Closing Date in accordance with GAAP.
"CURRENT LIABILITIES" means the Systems' (i) subscriber deposits
received, (ii) deferred revenue, (iii) accrued employee vacation and sick pay
expense, (iv) salaries, bonuses, fringe benefits and other remuneration
payable to employees to be hired by Purchaser to the extent not paid (or
provided for by Seller on the Closing Date), (v) expenses for goods and
services received in the normal course of business including taxes, utility
charges, special assessments, commissions, fees and (vi) other trade payables
and accrued expenses incurred in the normal course of business, all
determined as of 12:01 a.m. on the Closing Date in accordance with GAAP.
"GAAP" means generally accepted accounting principles consistently
applied.
(b) The Base Price shall be increased (or decreased) by the
amount by which Current Assets exceeds (or is less than) Current Liabilities
as of the Closing Date (the "Working Capital Adjustment").
(c) Seller shall prepare and submit to Purchaser, not later than
thirty (30) days prior to the Closing Date, a written good faith estimate of
the amount of the Working Capital
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<PAGE>
Adjustment and Seller's estimate of the Purchase Price resulting from the
Working Capital Adjustment ("Seller's Estimate"). Seller's Estimate shall be
accompanied by detailed supporting documents, work papers, subscriber records
and other data supporting the Working Capital Adjustment and Seller's
Estimate. The Seller's Estimate shall be based upon the books and records of
the Systems. The Seller's Estimate shall be accompanied by a certificate
signed by the President or Chief Financial Officer of Seller certifying that
Seller's Estimate was calculated in good faith and in accordance with the
provisions of this Section 5.05. After the delivery of Seller's Estimate and
prior to the Closing, Purchaser and Seller shall attempt to resolve any
disputes between Seller and Purchaser with respect to Seller's proposed
Working Capital Adjustments. In connection therewith, Purchaser shall have
full access to all Seller's records related to Seller's proposed Working
Capital Adjustment. At least ten (10) days prior to Closing, Purchaser shall
advise Seller in writing as to any dispute Purchaser has with Seller's
Estimate and provide Seller with Purchaser's calculation of the Working
Capital Adjustment and the Purchase Price, accompanied by a certificate
signed by the President or Chief Financial Officer of Purchaser certifying
that Purchaser's calculation was made in good faith and shall be accompanied
by supporting documents and information, to the extent the same is available
to Purchaser ("Purchaser's Estimate"). In the event Purchaser's Estimate of
the Purchase Price is less than $15,000 less than Seller's Estimate, the
Closing shall proceed with the Purchase Price based upon Seller's Estimate.
In the event the Purchaser's Estimate of the Purchase Price is more than
$15,000 less than Seller's Estimate, then the mid-point between Seller's
Estimate and Purchaser's Estimate shall be used as the Purchase Price for
purposes of Closing.
Within 90 days after the Closing Date, Purchaser shall deliver to Seller
a certificate (the "Closing Certificate") signed by the President or Chief
Financial Officer of Purchaser providing a compilation of the Working Capital
Adjustment to be made pursuant to this Section 5.05 including any changes in
the Working Capital Adjustment used to determine the Purchase Price at
Closing, together with a copy of any supporting documents, work papers,
subscriber records and other data relating to such Closing Certificate and
such other supporting evidence as Seller may reasonably request either prior
to or after delivery thereof. If Seller shall conclude that the Closing
Certificate does not accurately reflect the Working Capital Adjustment to be
made to the Base Price in accordance with this Section 5.05, Seller shall,
within 30 days after their receipt of the Closing Certificate (such 30 day
period being referred to as the "Response Period"), deliver to Purchaser a
written statement of any discrepancies believed to exist. If Seller fails to
so notify Purchaser of any discrepancies, then the calculation of the
Purchase Price set forth in the Purchaser's Closing Certificate shall be
controlling for all purposes hereof and Purchaser or Seller, as the case may
be, shall on or before the fifth business day following the expiration of the
Response Period pay to the other the amount which it is obligated to pay in
accordance with the Closing Certificate. On or before the fifth business day
following the earlier to occur of the expiration of the Response Period and
the date Purchaser receives Seller's statement of discrepancies, Purchaser or
Seller, as the case may be, shall pay the other the amount, if any, as to
which there is no discrepancy. Purchaser and Seller shall use good faith
efforts to jointly resolve their discrepancies within 15 days of Purchaser's
receipt of Seller's written statement of discrepancies, which resolution, if
achieved, shall be binding upon the parties and not subject to further
dispute or review. In the event Purchaser and Seller are unable to resolve
their differences within such fifteen (15) day period, then either party may
request that the matter be
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resolved by Price Waterhouse (the "Independent Accountants"). In submitting
a dispute to the Independent Accountants, each of the parties shall furnish,
at its own expense, the Independent Accountants and the other party with such
documents and information as the Independent Accountants may reasonably
request. Each party may also furnish to the Independent Accountants such
other information and documents as it deems relevant with the appropriate
copies and notification being given to the other party. The Independent
Accountants may conduct a conference concerning the disagreements between
Seller and Purchaser at which conference each party shall have the right to
present additional documents, material and other evidence and to have present
its advisors, accountants and counsel. The Independent Accountants shall
promptly render a decision on the issues presented, and such decision shall
be final and binding on the parties. The fees and expenses of the
Independent Accountants shall be divided equally between Purchaser and
Seller. Within 5 days of receipt of the Independent Accountants' decision
with respect to such dispute, if Purchaser is determined to owe an amount to
Seller, Purchaser shall pay such amount thereof to Seller, and if Seller is
determined to owe an amount to Purchaser, Seller shall pay such amount
thereof to Purchaser. All amounts owed by Purchaser or Seller to the other
in accordance with this Section 5.05(c) shall be paid by wire transfer of
immediately available funds and shall not bear any interest. Any amount due
Purchaser from Seller under this Section 5.05 and not paid when due may also
be paid from the funds held pursuant to the Escrow Agreement.
ARTICLE VI
CLOSING
Subject to the terms and conditions hereof, the closing (the "Closing")
shall take place at the offices of Edwards & Angell, LLP, One BankBoston
Plaza, Providence, Rhode Island 02903, on the date (the "Closing Date") which
is the latest of (a) the tenth (10th) business day after the date that (i)
the FCC granted its consent to the assignment of the FCC Authorizations from
Seller to the Purchaser by a Final Order (as defined in Section 10.04) or
(ii) if applicable, Seller receives from Purchaser the Finality Waiver Notice
(as defined in Section 10.4); (b) the tenth (10th) business day after the
expiration or early termination of the waiting period under the Hart-Scott
Act; or (c) January 1, 1999. The Closing shall be effective as of 12:01 a.m.
on the Closing Date. At Closing, each party shall deliver or cause to be
delivered to the other party the instruments of transfer and assumption
referenced in Article IV of this Agreement and the other deliveries required
by Article X (for Seller) and Article XI (for Purchaser) of this Agreement,
and Purchaser shall deliver to Seller, by wire transfer of immediately
available funds to one or more bank accounts as specified by Seller in wire
transfer instructions to be delivered to Purchaser at least two business days
prior to the Closing Date, the Purchase Price as required pursuant to Section
5.03.
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ARTICLE VII
SELLER'S REPRESENTATIONS
Seller hereby represents and warrants that:
SECTION 7.01. ORGANIZATION, QUALIFICATION. (a) Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware; and has all necessary power and authority to own and
operate its properties and to carry on its Business as now being conducted or
proposed to be conducted and to carry out the transactions contemplated by
this Agreement. Seller has the full power and authority to execute and
deliver and, subject to obtaining the FCC's approval to assign the FCC
Authorizations and the other governmental and third-party consents referred
to in Section 10.04, perform its obligations under this Agreement and to
undertake the transactions contemplated hereby. Seller is duly qualified to
conduct business as a foreign corporation in all jurisdictions for which
failure to so qualify would have a Material Adverse Effect (as defined below).
SECTION 7.02. CONSENTS, AUTHORIZATION, EXECUTION AND DELIVERY OF
AGREEMENT. Prior to the Closing, all necessary consents and approvals shall
have been obtained by Seller for the execution and delivery of this
Agreement. The execution, delivery and performance of this Agreement by
Seller and the transfer of the Assets to Purchaser have been duly and validly
authorized and approved by all necessary corporate and stockholder action of
Seller. This Agreement is a valid and binding obligation of Seller,
enforceable against it in accordance with its terms.
SECTION 7.03. SUBSIDIARIES AND INTERESTS IN OTHER COMPANIES. Seller
has no subsidiaries, and does not own or control any shares or other
securities of, or have any other proprietary interest in, any corporation,
partnership, limited liability company, joint venture, business association
or other person.
SECTION 7.04. TITLE TO ASSETS; CONDITION OF ASSETS. Seller has, and
will convey to Purchaser at Closing, good and marketable title to the Assets,
free and clear of all Liens other than Permitted Liens. All Liens in effect
on the date hereof which are to be discharged at Closing are listed on
SCHEDULE 7.04 hereto. The tangible property included among the Assets is in
good working order and repair, reasonable wear and tear excepted. The Assets
constitute all of the assets which are necessary, used or useful in the
operation of the Business as it is currently being conducted by Seller other
than the Excluded Assets. Except as disclosed on SCHEDULE 7.25, no officer,
director, stockholder or employee of Seller or any other individual,
partnership, corporation, person or entity (a "Person") other than the Seller
owns, leases or has any rights in any property, license or other assets
related to the Business other than the Excluded Assets. Except for factors
typically affecting propagation and reception in the cellular telephone and
paging industries generally, the tangible property included in the Assets are
technically sufficient and capable of providing cellular telephone service in
the Cellular Areas and paging service within the reliable service contour
generated by the transmitters covered by the FCC Paging Authorizations in
accordance with applicable FCC regulations except as set forth on SCHEDULE
7.08. All of the buildings, towers, transmitters, antenna, fixtures and
improvements
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owned or leased by Seller, and all heating and air conditioning equipment,
plumbing, electrical and other mechanical facilities and the roof, walls and
other structural components of the real property which are part of, or
located in such buildings, towers, antenna or improvements and are owned or
leased by Seller comply with applicable zoning laws and the building, health,
fire and environmental protection codes of all applicable governmental
jurisdictions, have no structural defects and do not require any repair other
than routine maintenance and the repair of ordinary wear and tear.
SECTION 7.05. REAL PROPERTY - OWNED. Seller owns no real property and
the real property leased by Seller related to the Business has never been
owned by Seller.
SECTION 7.06. REAL AND PERSONAL PROPERTY - LEASED. Set forth on
SCHEDULE 2.01(d) (in the case of real property) and SCHEDULE 2.01(a) (in the
case of personal property), are true and accurate listings of all real and
personal property leases to which Seller is a party (other than personal
property leases with annual payments of less than $2,000 and which leases,
together with the other contracts and agreements not required to be disclosed
on SCHEDULES 2.01(a) AND (d), in the aggregate have annual payments of less
than $25,000 or which are terminable without penalty on one month or less
notice) setting forth (i) the name of the lessor and (ii) with respect to the
real property leases, the legal description of the property leased. Except
as set forth on SCHEDULE 2.01(d) (in the case of leased real property) and
SCHEDULE 2.01(a) (in the case of leased personal property), all of the leases
set forth on Schedule 2.01(d) (i) are in full force and effect and are valid,
binding and enforceable in accordance with their respective terms, (ii) all
accrued and currently payable rents and other payments required by such
leases have been paid, (iii) Seller and, to Seller's knowledge, each other
party thereto have complied with all respective covenants and provisions of
such leases, (iv) neither Seller nor, to Seller's knowledge, any other party
is in default in any respect under any such leases, (v) no party has asserted
any defense, set off, or counter claim thereunder, (vi) no waiver, indulgence
or postponement of any obligations thereunder has been granted by any party,
and (vii) the validity or enforceability of any such lease will be in no way
affected by the sale of the Assets to Purchaser provided all required
consents have been obtained from the other parties to such lease.
SECTION 7.07. EXISTING CONTRACTS. SCHEDULES 2.01(a) AND (d) hereto set
forth all contracts, commitments and agreements in effect on the date hereof
with Seller's subscribers (other than standard subscriber agreements for
cellular), all leases (other than personal property leases with annual payments
of less than $2,000 and which leases, together with the other contracts and
agreements not required to be disclosed on SCHEDULES 2.01(a) AND (d), in the
aggregate have annual payments of less than $25,000 or which are terminable
without penalty on one month or less notice) to which Seller is a party, and all
other contracts, commitments and agreements (other than agreements with annual
payments of less than $2,000 and which agreements, together with the other
leases and contracts not required to be disclosed on SCHEDULES 2.01(a) AND (d),
in the aggregate have annual payments of less than $25,000 or which are
terminable without penalty on one month or less notice) or commitments (written
or oral) to which Seller is a party which relate to the ownership of the Assets
or the operation of the Business (the "Existing Contracts") except for the
contracts, leases, commitments and agreements included among the Non-Assumed
Liabilities (the "Excluded Contracts"). Except as disclosed on SCHEDULE 7.25,
no
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officer, director or employee of Seller or any Person (other than Seller)
controlling, controlled by or affiliated with or family member of any such
officer, director or employee has any contractual relationship relating to the
ownership or operation of the Business. Seller has heretofore delivered to
Purchaser true and correct copies of the Existing Contracts. Except as
disclosed on SCHEDULES 2.01(a) AND (d), Seller has no knowledge of any breach or
anticipated breach by the other parties to any Existing Contracts. The Existing
Contracts are in full force and effect and Seller is in compliance with its
obligations under such Existing Contracts. Except for the Existing Contracts
and the Excluded Contracts, Seller has not entered into any other contract,
commitment or agreement (other than agreements with annual payments of less than
$2,000 and which agreements, together with the other leases and contracts not
required to be disclosed on SCHEDULES 2.01(a) AND (d), in the aggregate have
annual payments of less than $25,000 or which are terminable without penalty on
one month or less notice) relating to the ownership of the Assets or the
operation of the Business, including, but not limited to, rights-of-way, rights
of entry, licenses, easements, leases, or guaranty agreements. There are no
claims by third parties that Seller is required to enter into other agreements
to enable it to continue to own the Assets and operate of the Business as it is
presently being operated.
SECTION 7.08. GOVERNMENTAL LICENSES. Except as set forth on
SCHEDULE 7.08, Seller holds all licenses, consents, permits, approvals and
authorizations of public and governmental bodies including, without limitation,
the FCC Authorizations and the state, counties and municipalities served by the
Business, which are required in connection with the ownership of the Assets
(collectively referred to as the "Authorizations"). All Authorizations are in
full force and effect. Seller has complied with the terms of the Authorizations
which it holds and there are no pending modifications, amendments or revocations
of the Authorizations which would adversely affect the ownership of the Assets
or the operation of the Business. All fees due and payable from Seller to
governmental authorities pursuant to the Authorizations have been paid. All
reports required of Seller to be filed in connection with the Authorizations
have been timely filed and are accurate and complete. With respect to the RSA,
for all of the FCC Authorizations that are FCC Cellular Authorizations in which
the five-year fill-in period expired prior to the date of this Agreement, the
Seller timely filed appropriate applications or notifications with the FCC such
that none of the original authorized area became "unserved area" as defined in
47 C.F.R. Part 22, except where such unserved areas have subsequently been added
to the Seller's Cellular Geographic Service Area pursuant to Phase 2
applications and form 489 notifications or as identified on SCHEDULE 7.08. The
Seller does not conduct any microwave operations on frequencies that are subject
to relocation under the FCC's rules. True and correct copies of the
Authorizations, and all amendments thereto to the date hereof, have been
delivered by Seller to Purchaser and are identified on SCHEDULE 2.01(a) hereto.
The Seller has not engaged in any course of conduct that could reasonably be
expected to impair the ability of Purchaser or its subsidiaries to be the holder
of the FCC Authorizations or is aware of any reason why the FCC Authorizations
might not be renewed in the ordinary course, why any of the FCC Authorizations
might be revoked, or why any pending applications or notifications might not be
approved. The ownership of the Assets and the operation of the Business by
Seller are not subject to regulation or supervision by any applicable state
public utilities commission or other similar state governmental instrumentality.
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SECTION 7.09. COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 7.09,
Seller is currently complying with and has so complied with, and is not in
default under or in violation of, and neither the Business nor any of the Assets
nor the operation or maintenance thereof, contravenes any statute, law
(including environmental or employment laws), ordinance, decree, order, rule,
regulation of any governmental body applicable to the Assets or the Business,
including, without limitation, the rules and regulations of the FCC.
SECTION 7.10. NO VIOLATION OF EXISTING AGREEMENTS. Subject to the
consents for the Existing Contracts identified in SCHEDULE 7.10, the execution,
delivery and performance of this Agreement by Seller and Seller's transfer of
the Assets to Purchaser (i) will not violate any provisions of any law (ii) will
not, with or without the giving of notice or the passage of time, or both,
conflict with or result in any breach of any of the terms or conditions of, or
constitute a default under any Existing Contracts, and (iii) will not result in
the creation of any Lien upon the Assets or the Business other than Permitted
Liens.
SECTION 7.11. LITIGATION AND LEGAL PROCEEDINGS. Except as set forth on
SCHEDULE 7.11, there is no outstanding judgment against Seller or any director,
officer or stockholder of Seller affecting the Business or the Assets or which
question the validity of any action taken or to be taken by Seller pursuant to
or in connection with the provisions of this Agreement and there is no
litigation, proceeding or investigation pending, or, to Seller's knowledge,
threatened, against Seller or any director, officer or stockholder of Seller
affecting the Business or the Assets or which questions the validity of any
action taken or to be taken by Seller pursuant to or in connection with the
provisions of this Agreement. Except as set forth on SCHEDULE 7.11, there are
no proceedings pending to which Seller or any director, officer or stockholder
of Seller is a party or, to Seller's knowledge, threatened, nor has Seller
received written notice of any demands by any governmental agency, utility or
other party, to terminate, modify or adversely change the terms and conditions
of Seller's rights with respect to the Authorizations or Existing Contracts.
SECTION 7.12. ENVIRONMENTAL COMPLIANCE. (a) Except as set forth on
SCHEDULE 7.12 hereto, (i) Seller has not generated, used, transported, treated,
stored, released or disposed of, or knowingly permitted anyone else to generate,
use, transport, treat, store, release or dispose of any Hazardous Substance (as
hereinafter defined) with respect to the Assets or the Business in violation of
any Environmental Laws (as hereinafter defined); (ii) there has not been any
generation, use, transportation, treatment, storage, release or disposal of any
Hazardous Substance in connection with Seller's ownership or use of the Assets,
the conduct of the Business or, to the best of Seller's knowledge, on, in or
under any property or facility used, owned or leased by Seller or, to the best
of Seller's knowledge, any adjacent properties or facilities, which has created
or might reasonably be expected to create any liability under any Environmental
Laws or which would require reporting to or notification of any governmental
entity; (iii) to the best of Seller's knowledge no friable asbestos,
polychlorinated biphenyl, or underground storage tank is contained in or located
on or under any property or facility owned, used or leased by Seller; and (iv)
any Hazardous Substance handled or dealt with in any way with respect to the
Assets or the Business by Seller, or during Seller's ownership or use of the
Assets or the Business, has been and is being handled or dealt with in
compliance with all Environmental Laws.
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(b) For purposes of this Agreement, the term "Hazardous
Substance" shall mean any substance which, as of the date of this Agreement, is
listed as hazardous or toxic in the regulations implementing the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended
("CERCLA"), the Response Compensation and Liability Act ("RCLA"), the Resource
Conservation and Recovery Act of 1976, as amended ("RCRA"), or listed as a
hazardous substance under any applicable state environmental laws, or any
substance which has been determined by regulation, ruling or otherwise by any
agency or court to be a hazardous or toxic substance regulated under federal or
state law, and shall include petroleum and petroleum products.
(c) For purposes of this Agreement, the term "Environmental Laws"
shall mean CERCLA, RCRA, RCLA and any applicable statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, approvals, plans, authorizations,
concessions, franchises and similar items of all governmental authorities and
all applicable judicial, administrative and regulatory decrees, judgments and
orders, any of which relate to the protection of human health or the environment
from the effects of Hazardous Substances, including but not limited to those
pertaining to reporting, licensing, permitting, investigating and remediating
emissions, discharges, releases or threatened releases of Hazardous Substances
into the air, surface water, groundwater or land, or relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
(d) Nothwithstanding anything herein to the contrary, in the event
that Purchaser brings an action of any kind against Seller to enforce this
Section 7.12, and the court of competent jurisdiction (or other relevant fact
finder) does not grant relief to Purchaser, Purchaser shall pay one hundred and
ten percent (110%) of the Seller's legal fees and expenses associated with its
defense of such action.
SECTION 7.13. EMPLOYEES. Within thirty (30) days of the date hereof,
Seller will prepare and deliver SCHEDULE 7.13 which will set forth a true and
complete list of the names and current salaries of all employees of the Seller
involved in the operation of the Business. Such employees are employees at
will. Seller has withheld all amounts required by law or agreement to be
withheld by it from the wages, salaries and other payments to its employees and
is not liable for any arrears of wages or any taxes for failure to comply with
any of the foregoing. There are no collective bargaining agreements covering
any of the employees of Seller. The Seller has not breached or otherwise failed
to comply with any provision of any collective bargaining agreement or other
labor union contract applicable to any of its employees. No consent of any
union (or similar group or organization) is required in connection with the
consummation of the transactions contemplated hereby. There are no pending, or,
to Seller's knowledge, threatened or anticipated, and, there is no factual basis
for any (a) employment discrimination (including age, sex, racial or handicap
discrimination) charges or complaints against or involving Seller, before any
federal, state, or local board, department, commission or agency or (b) unfair
labor practice charges or complaints, disputes or grievances affecting Seller.
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SECTION 7.14. EMPLOYEE BENEFITS. Except as set forth on SCHEDULE 7.14
attached hereto, Seller has no pension plan, profit sharing plan, deferred
compensation plan, stock option or stock bonus plan, saving plan, or other
benefit plan, policy, practice, or procedure or contract concerning employee
benefits or fringe benefits of any kind (collectively, "Employee Benefit
Plans"), whether or not governed by the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"). Seller is not a party to any employment
contract. No officer, director or employee of Seller participates or is
eligible to participate in a "defined benefit pension plan" as defined in
Section 3(35) of ERISA, maintained or made available by Seller. Neither Seller
nor any Controlled Group Member maintains or contributes to, or ever maintained
or contributed to, a plan under which any employee of Seller participates or is
eligible to participate subject to Section 412 of the Internal Revenue Code of
1986, as amended (the "Code"). The term "Controlled Group Member" means any
trade or business (whether or not incorporated) which is, or was at any relevant
time, aggregated with the Seller pursuant to Section 414(b), (c), (m) or (o) of
the Code. Neither Seller nor any ERISA Affiliate has participated in or made
contributions to any "multiemployer plan" as defined in Section 4001(a)(3) of
ERISA. The term "ERISA Affiliate" means each trade or business (whether or not
incorporated) which is, or was at any relevant time, treated as a single
employer with Seller pursuant to Section 4001(b)(1) of ERISA. Seller has
furnished Purchaser with true, complete and accurate copies of all Employee
Benefit Plans and related trust agreements as in effect on the date hereof, all
summary plan descriptions, and the latest annual reports filed with the
Department of Labor or the Internal Revenue Service (the "IRS").
Each of the Employee Benefit Plans is in compliance in all material
respects with all applicable requirements of ERISA, the Code, and other
applicable law. Each of the Employee Benefit Plans has been administered in all
material respects in accordance with its terms and with applicable legal
requirements. All "employee pension plans" (within the meaning of Section 3(2)
of ERISA) have been determined by the IRS to be qualified under Section 401(a)
of the Code, and no action or proceeding has been instituted or threatened which
would affect the qualification of any pension plan of Seller. No unfunded
liabilities, based upon the Pension Benefit Guarantee Corporation (the "PBGC")
rates currently in effect for plan terminations, exist with respect to any
Employee Benefit Plan which is a "defined benefit plan" (within the meaning of
Section 3(35) of ERISA). There has not been any reportable event with respect
to any pension plan of Seller. Seller has not engaged in a "prohibited
transaction" or breach of fiduciary responsibility with respect to any Employee
Benefit Plan which could subject Purchaser or any affiliate of Purchaser to a
penalty tax or other liability under ERISA or the Code. Neither Seller nor any
Affiliate of Seller has ever incurred any liability under Title IV of ERISA to
the PBGC or to a multi-employer pension plan.
SECTION 7.15. TAX MATTERS. Except as set forth on SCHEDULE 7.15 attached
hereto: (a) Seller has timely filed all Tax (as defined below) returns and
statements which it is required to file; (b) all such returns are complete and
accurate in all material respects and disclose all Taxes required to be paid for
the periods covered thereby; (c) Seller has not waived any statute of
limitations in respect of Taxes or agreed to an extension of time with respect
to a Tax assessment or deficiency; (d) no assessment of any additional Taxes for
periods for which returns have been filed has been asserted and no basis exists
therefor; (e) to Seller's knowledge, there are no
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unresolved questions or claims raised by any Taxing authority concerning the
Tax liability of Seller; and (f) all Taxes which Seller is required by law to
withhold or to collect for payment have been duly withheld and collected, and
have been paid. Seller has paid all Taxes due prior to the date hereof and
will pay when due (or contest in good faith by appropriate proceedings) all
Taxes which may become due on or before the Closing Date. For purposes of
this Section 7.15, the term "Tax" or "Taxes" means all taxes, charges, fees,
levies, imposts and other assessments including all income, sales, use, goods
and services, value added, capital, capital gains, alternative net worth,
transfer, profits, withholding, payroll, employer health, excise, real
property and personal property taxes, and any other taxes, customs duties,
stamp duties, fees, assessments or similar charges in the nature of a tax,
together with any interest, fines and penalties imposed by any governmental
authority (including federal, state, provincial, municipal and foreign
governmental authorities), and whether disputed or not.
SECTION 7.16. FINANCIAL STATEMENTS.
(a) The Purchaser has heretofore been furnished with a true and
complete copy of the unaudited balance sheets of Seller as of October 31, 1996
and the related unaudited statements of income and retained earnings and cash
flows for the fiscal year then ended, such balance sheet and income statement
being attached hereto as SCHEDULE 7.16(a) (together with the balance sheet and
income statement to be delivered pursuant to Section 9.01(b) hereof, the
"Historical Financial Statements").
(b) Each of the Historical Financial Statements delivered under
Section 7.16 (a) and to be delivered under Section 9.01(b) hereof was (and will
be) prepared in accordance with GAAP applied on a basis consistent with prior
periods and past practices; subject to the following proviso, each of the
balance sheets included in such Historical Financial Statements fairly presents
(and will present) in all material respects the financial condition of Seller,
as at the close of business on the date thereof; and, subject to the following
proviso, each of the statements of income included in such Historical Financial
Statements fairly presents (and will present) in all material respects the
results of operations of Seller, for the fiscal period then ended.
(c) Except as set forth on SCHEDULE 7.16(c) attached hereto, since
October 31, 1996, Seller has not:
(i) sold, assigned or transferred any of its Assets (except
for the Excluded Assets and except pursuant to existing contracts or
commitments disclosed on any Schedule to this Agreement or inventory
in the ordinary course of business consistent with past practice or
for assets sold or disposed of and replaced by other assets of
comparable use and value); or canceled any material debts or material
claims;
(ii) waived any material rights, whether or not in the
ordinary course of business;
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(iii) entered into any other transaction, except in the
ordinary course of business, or entered into any transaction with any
officer, director or shareholder of Seller, or any affiliate or family
member of any such Person;
(iv) suffered any material damage, destruction or casualty
loss with respect to the Assets, whether or not covered by insurance;
(v) made any distribution of any of the Assets to any
officer, director or shareholder of Seller or any affiliate or family
member of such officer, director or shareholder;
(vi) except as disclosed in writing by Seller to Purchaser,
obligated itself or the Business to give free or reduced price service
to customers with respect to the Business other than promotions
offered in the ordinary course of business and set forth on SCHEDULE
5.05(a) or occasionally free and temporary price reductions, entered
into any agreement with any governmental or regulatory authority
granting the authorization to freeze fees charged to customers of the
Business; or
(vii) entered into any agreement or understanding to do any of
the foregoing.
SECTION 7.17. SUBSCRIBERS/AGENTS. SCHEDULE 7.17 attached hereto sets
forth (a) the number of subscribers receiving service from (i) the Cellular
Systems and (ii) the Paging System as of a date within 5 days prior to the date
hereof, (b) a list of all agents who sell (i) cellular telephone equipment
and/or service and (ii) paging equipment and/or service on behalf of Seller as
of the date hereof, together with such agent's address and the number of gross
activations produced by each agent, and (c) a list of all entities that have
signed agreements providing for the resale of cellular and/or paging services.
SECTION 7.18. INSURANCE. Seller has delivered previously to Purchaser all
policies of title, liability, fire, worker's compensation and other forms of
insurance (including bonds) which insure against risk and liabilities to the
extent and in a manner customary in the cellular industry and which are adequate
to provide coverage against risk of a material nature to which Seller would
normally be exposed in the operation of the business. All such insurance
policies and binders are in full force and effect. Seller has complied with
each of such insurance policies and binders and has not failed to give any
notice or present any claim thereunder in a due and timely manner. There are no
outstanding unpaid claims under any of such insurance policies or binders and
Seller has not received any notice of cancellation or non-renewal of any such
policy or binder. There is no inaccuracy in any application for such policies
or binders which would reasonably be expected to materially adversely affect
coverage thereunder. No insurance carrier has canceled or reduced any insurance
coverage for Seller or has given any notice or other indication of its intention
to cancel or reduce any such coverage. All premiums due and payable under any
such insurance policies or binders of Seller have been duly paid or accrued to
the extent take into account in the Working Capital Adjustment. Seller
maintains insurance policies
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for the Systems with the insurance carriers, in such amounts and for such
losses or casualties as are described on SCHEDULE 7.18.
SECTION 7.19. BROKERS. Seller has not engaged any agent, broker or other
person acting pursuant to the express or implied authority of Seller which is or
may be entitled to a commission or broker or finder's fee in connection with the
transactions contemplated by this Agreement or otherwise with respect to the
sale of the Assets or the Business.
SECTION 7.20. UNDISCLOSED LIABILITIES. Seller has no liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
which are not reflected or reserved against the Historical Balance Sheet except
for liabilities and obligations that have arisen in the ordinary and usual
course of business and consistent with past practice (none of which results
from, arises out of, relates to, is in the nature of, or caused by any breach of
contract, breach of warranty, tort, infringement or violation of law) and except
for liabilities and obligations directly related to the transactions
contemplated hereby.
SECTION 7.21. PRICING OF SERVICES. SCHEDULE 7.21 sets forth a description
of all rate plans currently offered to subscribers of each System.
SECTION 7.22. PROPRIETARY RIGHTS. Seller lawfully possesses, and (except
for rights with respect to intellectual property rights listed on SCHEDULE 2.02)
the Assets will include, all intellectual property rights that are necessary to
the conduct of the Business.
SECTION 7.23. ACCOUNTS RECEIVABLE AND BAD DEBTS. All notes and accounts
receivable of Seller shown on the Historical Balance Sheet or thereafter
acquired were or (to the extent not heretofore collected) are valid and genuine,
were acquired in the ordinary course of business and are subject to no asserted
counterclaims, defenses or setoffs (subject to reserves therefor as will be
taken into account in the determination of Current Assets at Closing in
accordance with Section 5.05).
SECTION 7.24. CERTAIN BUSINESS RELATIONSHIPS WITH SELLER. Except as set
forth in SCHEDULE 7.24 attached hereto, none of the officers, directors or
stockholders of the Seller and its affiliates or family members have been
involved in any business arrangement or relationship with Seller within the past
12 months.
ARTICLE VIII
PURCHASER'S REPRESENTATIONS
Purchaser hereby represents, warrants, covenants and agrees that:
SECTION 8.01. ORGANIZATION; QUALIFICATION. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Oklahoma. Purchaser has all power and authority to (i) own and operate
its properties, (ii) carry on its business as it is now being conducted, and
(iii) carry out the transactions contemplated by this Agreement and to own
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and operate the Assets and the Business, subject to obtaining all necessary
consents required for the transfer by Seller of the Assets.
SECTION 8.02. CONSENTS; AUTHORIZATION; EXECUTION AND DELIVERY OF
AGREEMENT. All necessary consents and approvals have been obtained by
Purchaser for the execution and delivery of this Agreement. The execution
and delivery of this Agreement by Purchaser has been duly and validly
authorized and approved by all necessary corporate action. Purchaser has
full power and authority to execute and deliver and perform its obligations
under this Agreement. This Agreement is a valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms.
SECTION 8.03. LITIGATION AND LEGAL PROCEEDINGS. There is no outstanding
judgment against Purchaser and there is no litigation, proceeding or
investigation pending, or, to Purchaser's knowledge, threatened, against
Purchaser or its assets which individually or in the aggregate would, if
adversely determined, result in a material adverse change in the business
condition (financial or otherwise), properties or assets of Purchaser or which
questions the validity of any action taken or to be taken pursuant to or in
connection with the provisions of this Agreement or the consummation of the
transactions contemplated hereby by the Purchaser or which could have an adverse
effect on Purchaser's ability to perform its obligations hereunder.
SECTION 8.04. BROKERS. Purchaser has not engaged any agent, broker or
other person acting pursuant to the express or implied authority of Purchaser
which is or may be entitled to a commission or broker or finder's fee in
connection with the transactions contemplated by this Agreement or otherwise
with respect to the sale of the Assets or the Business.
SECTION 8.05. FINANCIAL CAPACITY. Purchaser shall have at the Closing the
financial ability to perform its obligations hereunder.
ARTICLE IX
SELLER'S AND PURCHASER'S COVENANTS
SECTION 9.01. FINANCIAL STATEMENTS AND SYSTEM INFORMATION.
(a) INTERIM FINANCIAL STATEMENTS. Seller covenants and agrees that
during the period after the execution of this Agreement and prior to the
Closing, Seller shall use its best efforts to provide Purchaser, within 30 days
of the end of each calendar quarter, Seller's unaudited balance sheet and income
statement for such three month period ("Interim Financial Statements"). The
Interim Financial Statements will be true and correct in all material respects,
will be prepared using the same accounting methods and procedures as used in the
preparation of the Historical Financial Statements except for the absence of
footnotes, subject to normal recurring adjustments, and will present fairly the
financial position of Seller at the date indicated and the results of Seller's
operations for such period.
(b) OCTOBER 31, 1997 FINANCIALS. Seller covenants and agrees that
Seller shall provide to Purchaser within ninety (90) days of the date of this
Agreement Seller's unaudited
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balance sheets as of October 31, 1997 and the related unaudited statements of
income and retained earnings and cash flows for the fiscal year then ended.
(c) ROAMING REPORTS. Seller covenants and agrees that during the
period after the execution of this Agreement and prior to the Closing, Seller
shall provided to Purchaser, within 10 days of the end of each calendar month,
Seller's cellular roaming reports relevant to the Cellular Areas.
SECTION 9.02. GOVERNMENTAL APPROVALS. (a) Purchaser covenants and agrees
that it will cooperate with Seller, and do all things reasonably necessary to
assist Seller, to obtain all consents and approvals necessary for assignment to
Purchaser of the FCC Authorizations, including the furnishing of financial and
other information specifically with respect to Purchaser reasonably required by
the Person whose consent or approval is being sought. Each of Purchaser and
Seller shall use all reasonable efforts to provide adequate prior written notice
to the other party of any meeting with governmental authorities the purpose of
which is to seek a consent or approval to the transactions contemplated hereby,
and such other party shall use all reasonable efforts to furnish a
representative to attend meetings with appropriate government authorities for
the purpose of obtaining such consents or approvals. Each of Purchaser and
Seller hereby agrees to file the necessary Form(s) 490 and 702 with the FCC
transferring or assigning control of the FCC Authorizations for the Business to
Purchaser and diligently pursue the processing of the assignment of the FCC
Authorizations to Purchaser and to file for all other necessary regulatory
approvals for the consummation of the transactions contemplated by this
Agreement within ten (10) business days of the date of execution of this
Agreement to the extent any such filings have not been made prior to the date of
execution of this Agreement. Seller and Purchaser shall share equally all
filing fees in connection with any filings pursuant to this Section 9.02(a).
(b) Seller covenants and agrees that it will cooperate with
Purchaser, and do all things reasonably necessary to assist Purchaser to prepare
and file with the Federal Trade Commission and the Department of Justice and
other regulatory authorities as promptly as possible all requisite applications
and amendments thereto together with related information, data and exhibits
necessary to satisfy the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act ("Hart-Scott Act"). Seller and Purchaser shall share equally
all filing fees in connection with any filings pursuant to this Section 9.02(b).
SECTION 9.03. THIRD PARTY CONSENTS; CLOSING CONDITIONS. (a) Seller
covenants and agrees to use its commercially reasonable efforts to obtain all
consents and approvals necessary for the transfer or assignment to Purchaser of
the Assumed Contracts. In addition, with respect to each real property lease
identified on SCHEDULE 2.01(d), Seller agrees that the instrument whereby Seller
requests the consent, estoppel and waiver of the lessor thereunder to the
assignment of such lease to such Purchaser shall be substantially in the form of
the letter attached hereto as SCHEDULE 9.03 and that Seller shall use its
commercially reasonable efforts to obtain each such lessor's consent to such
assignment by having each such lessor countersign such letter in the space
provided. Purchaser covenants and agrees to cooperate with Seller and assist
Seller in obtaining such consents and approvals including the furnishing of
financial and other information, reasonably required by the Person whose consent
or approval is being sought.
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Notwithstanding the foregoing, to the extent that any Assumed Contracts
listed on SCHEDULE 2.01(a) to be sold, assigned, transferred or conveyed to
Purchaser, or any claim, right or benefit arising thereunder or resulting
therefrom (individually, an "Interest" and collectively, the "Interests"), is
not capable of being sold, assigned, transferred or conveyed without the
approval, consent or waiver of the issuer thereof or the other party thereto,
or any third Person (including a government or governmental unit), and such
approval, consent or waiver has not been obtained, or if such sale,
assignment, transfer or conveyance or attempted assignment, transfer or
conveyance would constitute a breach thereof, and such approval, consent or
waiver has not been obtained, this Agreement shall not constitute a sale,
assignment, transfer or conveyance thereof, or an attempted assignment,
transfer or conveyance thereof; provided Seller shall use its best efforts to
provide Purchaser the benefits of any such Interest as provided in Section
17.01(b).
(b) Purchaser and Seller hereby covenant and agree to use all
reasonable efforts to satisfy, or assist the other party in satisfying, the
closing conditions applicable to the Purchaser in Article X hereof and the
Seller in Article XI hereof prior to the Closing Date.
SECTION 9.04. ACCESS. (a) Purchaser shall have the right, itself or
through its representatives, during normal business hours, after reasonable
notice (which may be oral) and without undue disruption to Seller's normal
business activities, to inspect the Assets and properties of Seller and to
inspect and make abstracts and reproductions of all books and records of Seller
including, without limitation, applications and reports to the FCC, all
financial information relevant to the Business, employee records, and
engineering and environmental reports and Seller shall furnish Purchaser with
such information respecting the Assets and Business and financial records as
Purchaser may, from time to time, reasonably request.
(b) Seller acknowledges and agrees, subject to any restrictions
placed thereon by an owner or lessor of any real property involved, that
Purchaser may commission, at Purchaser's cost and expense, a so-called "Phase I"
environmental site assessment of the Assets (the "Phase I Assessment"). If the
Phase I Assessment indicates that a so-called "Phase II" assessment (the "Phase
II Assessment") or other additional testing or analysis of the Assets is
advisable, the Purchaser may elect to cause its agents to conduct such testing
and analysis. Seller will use its commercially reasonable efforts to comply
with any reasonable request for information made by Purchaser or its agents in
connection with any such investigation. Seller covenants that any response to
any such request for information will be complete and correct in all material
respects. Seller will afford Purchaser and its agents access to all operations
of the Seller at all reasonable times and in a reasonable manner in connection
with any such investigation subject to any required approval of Seller's
landlords, which approval Seller will use its commercially reasonable efforts to
obtain. Should Purchaser commission such an investigation, such investigation
will have no effect upon the representations and warranties made by Seller to
Purchaser under this Agreement except that if any Phase I Assessment or Phase II
Assessment uncovers an environmental condition which then comprises a breach of
Seller's representations or warranties herein, Seller shall not have breached
such representation or warranty if Seller cures such breach in accordance with
the provisions of this Agreement.
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(c) Seller shall allow Purchaser the opportunity to conduct an
engineering review of the Assets to confirm that the Assets comply with the
FCC Authorizations and the regulations of the FCC and are otherwise in good
condition and repair, reasonable wear and tear excepted.
(d) Purchaser shall have the right, prior to the Closing, for
itself and its representatives, during normal business hours, after
reasonable notice (which may be oral) to inspect, install or otherwise modify
equipment relating to the Systems for purposes of transitioning the Systems
from Seller to Purchaser.
SECTION 9.05. CONDUCT OF BUSINESS. From and after the date hereof
Seller shall:
(a) operate the Systems in accordance with the FCC
Authorizations, and comply in all material respect with all laws, rules and
regulations applicable to Seller, including the regulations of the FCC;
(b) except for inventory sold in the ordinary course of
business, refrain from making any sale, lease, transfer or other disposition
of any of the Assets other than in connection with replacements with assets
of like use and value, or with the prior written approval of Purchaser;
(c) refrain from modifying, amending or altering in any material
respect, or terminating any of the Assumed Contracts, and from waiving or
canceling any default or breach or modifying, altering or terminating any
right or asset relating to or included in the Assets without Purchaser's
prior written approval, which approval will not be unreasonably withheld;
(d) maintain insurance on the Assets comparable to that
maintained prior to the date hereof, and subject to Article XII, use the
proceeds of any claims for loss under such policies, together with such other
funds as may be required, to repair, replace, or restore to their former
condition any Assets which may be damaged by fire or other casualty, all as
soon as reasonably possible;
(e) maintain its books and records in accordance with prior
practice; maintain all of its property and assets in their present condition,
ordinary wear and tear excepted, provided, however, Seller shall promptly
repair the items of equipment set forth on SCHEDULE 9.05 so that they are in
good working order or replace such equipment with like equipment which is in
good working order; maintain supplies of inventory and spare parts consistent
with past practice; and otherwise operate its business in the ordinary course
in accordance with past practices;
(f) refrain from changing the Systems' agents' commission rate,
sales practices (including the quality of the credit of subscribers
contracting for cellular telephone and paging service) or marketing practices
without Purchaser's approval, which approval will not be unreasonably
withheld;
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(g) except for Seller's payment of stay bonuses and other
compensation contingent upon Closing, refrain from increasing the
compensation payable or to become payable to any employee or agent without
Purchaser's approval, which approval will not be unreasonably withheld;
(h) refrain from entering into any contract or renewal of any
existing contract for the employment of any employee or agent of Seller other
than "at-will" employees and agents;
(i) use its commercially reasonable efforts to (x) keep its
business organization intact, (y) retain the services of the key employees of
the Systems, and (z) maintain good relationships with its employees,
suppliers, advertisers, subscribers, agents and others having business
relations with it, in each case in accordance with past practices;
(j) refrain from changing its Charter or by-laws in any way
which would materially adversely affect its power or authority to enter into
and perform this Agreement, or which would otherwise materially adversely
affect its performance of this Agreement;
(k) continue to advertise, promote and market the Systems and
its services in a manner consistent with past practice, and in any event from
the date hereof through the Closing, (x) spend on advertising, marketing and
promotion, on an aggregate basis from the date hereof to the Closing, at
least the amounts set forth in SCHEDULE 9.05 and (y) implement the holiday
advertising and sales promotion described on SCHEDULE 9.05 and consult
regularly with Purchaser on the status and effectiveness of such promotion
and on any modifications to such promotion to increase the number of
subscribers to the Systems;
(l) refrain from subjecting any of the Assets to any new Lien
other than Permitted Liens;
(m) refrain from doing or omitting to do any act which will
cause a material breach of, or material default under, or termination of
(except in accordance with its terms), any Assumed Contract;
(n) provide to the Purchaser, concurrently with filing thereof,
copies of all reports to and other filings with the FCC;
(o) not permit any of the FCC Authorizations to expire or to be
surrendered or voluntarily modified in a matter adverse to the Business, or
take any action which would reasonably be expected to cause the FCC
Authorizations or any other governmental authority to institute proceedings
for the suspension, revocation or limitation of rights under any of the FCC
Authorizations; or fail to prosecute with due diligence any pending
applications to any governmental authority;
(p) notify Purchaser in writing promptly after learning of the
institution or threat of any material action against Seller in any court, or
any action against Seller before the
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FCC or any other governmental agency, and notify Purchaser in writing
promptly upon receipt of any administrative or court order relating to the
Assets or the Business;
(q) if Seller deems it to be prudent, promptly replace any
employee who leaves the employ of the Systems; notify Purchaser of the hiring
of any new employee, any material change in job function of an employee, and
the termination of any employee;
(r) pay or cause to be paid or provide for all Taxes of or
relating to Seller, the Assets and the employees required to be paid to city,
county, state, Federal and other governmental units up to the Closing Date;
(s) refrain from taking any action not in Seller's usual course
of business regarding the Systems or the Assets without Purchaser's prior
approval, which approval will not be unreasonably withheld; and
(t) cooperate with Purchaser in connection with (x) Purchaser's
efforts to identify the current employees of Seller that Purchaser would like
to hire following the Closing consistent with all applicable federal, state
and/or local employment laws, rules and regulations, and (y) the prompt and
efficient transition of billing services after Closing to Purchaser's billing
system.
SECTION 9.06. NO SHOPPING. Prior to the Closing or earlier termination
of this Agreement, neither Seller nor any of its affiliates, advisors or
representatives shall, directly or indirectly, solicit, encourage or initiate
any contact with, negotiate with, or provide any information to, endorse or
enter into any agreement with respect to, or take any other action to
facilitate any person or group, other than Purchaser and its representatives,
concerning any inquiries or the making of any proposals concerning any
merger, sale of all or substantially all of the Assets, acquisition of a
substantial equity interest in Seller or any similar transaction involving
Seller.
SECTION 9.07. EMPLOYEES. Nothing contained in this Agreement shall
confer upon any employee of Seller any right with respect to continued
employment by Seller or Purchaser. No provision of this Agreement shall
create any third-party rights in any such employee, or any beneficiary or
dependent thereof, with respect to the compensation, terms and conditions of
employment and benefits that may be provided to such employee by Purchaser or
under any benefit plan that Purchaser may maintain. At least two (2) days
prior to Closing, Purchaser will provide to Seller written notice of the
names of Seller's employees to whom Purchaser will offer employment after
Closing.
SECTION 9.08. SUPPLEMENTAL DISCLOSURE. Seller shall promptly from time
to time prior to the Closing Date supplement in writing the Schedules hereto
with respect to any matter hereafter arising that, if existing or known as of
the date of this Agreement, would have been required to be set forth or
described in the Schedules hereto; provided, however, that no such
supplemental disclosure shall be deemed to cure any breach of any
representation or warranty of Seller made in
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this Agreement unless Purchaser fails to object in writing to Seller to any
such supplemental disclosure within ten (10) business days after Purchaser's
receipt thereof.
SECTION 9.09. DISPUTED ROAMING RECEIVABLES. In the event that
Purchaser collects a Disputed Roaming Receivable after the Closing (which did
not constitute a Current Asset at Closing), Purchaser shall pay the amount so
collected to Seller, net of Purchaser's out-of-pocket costs, if any, to
collect same.
SECTION 9.10. LEASES. Notwithstanding anything herein to the contrary,
Purchaser acknowledges that the leases for the Keyser and Deep Creek cell
sites are not yet fully executed. Seller shall use its best efforts and
Purchaser shall cooperate with Seller to arrange for the full execution of
these two (2) leases on terms reasonably satisfactory to Purchaser.
ARTICLE X
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE
The obligation of Purchaser under this Agreement with respect to the
purchase and sale of the Assets shall be subject to the fulfillment on or
prior to the Closing of each of the following conditions, any of which may be
waived in writing by Purchaser:
SECTION 10.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE
OF THIS AGREEMENT. All of the representations and warranties made by Seller
in this Agreement shall be true and correct at and as of the Closing except
for such breaches and inaccuracies therein which, in the aggregate, have not
caused and would not reasonably be expected to cause Purchaser to suffer a
Loss (as defined in Section 13.01) in excess of $10,000 in the aggregate (a
"Material Loss") or otherwise result in a Material Adverse Effect. Seller
shall have complied with and performed all of the agreements and covenants
required by this Agreement to be performed or complied with by it on or prior
to the Closing except for such noncompliances which, in the aggregate, have
not caused and would not reasonably be expected to cause a Material Loss or
otherwise result in a Material Adverse Effect. Purchaser shall have been
furnished with a certificate or certificates of Seller's President, dated as
of the Closing, certifying to the fulfillment of the foregoing conditions.
As used in this Agreement, the term "Material Adverse Effect" means a
material adverse effect on the Assets or the Business taken as a whole, other
than due to changes affecting the cellular telephone and paging industries
generally.
SECTION 10.02. RESOLUTIONS. Seller shall deliver to Purchaser copies
of the resolutions of the board of directors and shareholders of Seller
authorizing the execution, delivery and performance of this Agreement and all
instruments and documents to be delivered in connection herewith and the
transactions contemplated hereby, duly certified by an officer of Seller.
SECTION 10.03. INCUMBENCY CERTIFICATE. Purchaser shall have received a
certificate or certificates of an officer of Seller, certifying as to the
genuineness of the signatures of officers of Seller authorized to take
certain actions or execute any certificate, document, instrument or agreement
to be delivered pursuant to this Agreement, which incumbency certificate
shall include the true signatures of such officers.
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SECTION 10.04. THIRD PARTY CONSENTS; FCC; HART-SCOTT ACT. Seller shall
have delivered to Purchaser such instruments, consents and approvals of third
parties (the form and substance of which shall be reasonably satisfactory to
Purchaser). Prior to Closing Date, the FCC's grant of its consent to the
assignment of the FCC Authorizations to Purchaser shall have become a Final
Order, each without any material conditions, excepting conditions applied on
an industry-wide basis, which the Purchaser reasonably deems to be adverse.
Anything herein to the contrary notwithstanding, but subject to the
provisions of Section 9.09, the Purchaser shall have the right (in its sole
discretion) to waive the requirement set forth in the preceding sentence as
to any one or more of the FCC Authorizations by delivery to Seller of a
written notice to such effect (the "Finality Waiver Notice"). In addition,
all applicable waiting periods under the Hart-Scott Act (if applicable to the
transactions contemplated by this Agreement) shall have expired or been
terminated and no objection shall have been made by the Federal Trade
Commission ("FTC") or the United States Department of Justice ("DOJ"). For
the purposes of this Agreement, the term "Final Order" shall mean action by
the FCC as to which (i) no request for stay by the FCC, as applicable, of the
action is pending, no such stay is in effect, and, if any deadline for filing
any such request is designated by statute or regulation, such deadline has
passed; (ii) no petition for rehearing or reconsideration of the action is
pending before the FCC, and the time for filing any such petition has passed;
(iii) the FCC, does not have the action under reconsideration on its own
motion and the time for such reconsideration has passed; and (iv) no appeal
to a court, or request for stay by a court, of the FCC's action, as
applicable, is pending or in effect, and, if any deadline for filing any such
appeal or request is designated by statute or rule, it has passed.
Notwithstanding the foregoing, provided that (1) Seller has used its
commercially reasonable efforts to obtain such third party consents and (2)
the absence of such consents would not materially affect Purchaser's rights
hereunder, Seller's failure ultimately to obtain such consents shall not
terminate Purchaser and Seller's obligation to consummate the transactions
contemplated hereby. For purposes of the preceding sentence, the failure to
obtain the consent of the FCC, FTC and DOJ, as described in this Section
10.04, shall be deemed to materially affect Purchaser's rights hereunder.
SECTION 10.05. NO MATERIAL ADVERSE CHANGE. Other than changes
affecting the cellular telephone industry generally, there shall not have
been any material adverse change in the financial condition, assets, business
or properties of the Systems or Assets, from March 31, 1998 to the Closing.
SECTION 10.06. OPINION OF COUNSEL TO SELLER. Purchaser shall have been
furnished with an opinion of Patton Boggs, L.L.P., counsel to Seller, dated
as of the Closing and addressed to Purchaser, and to any institution
designated by Purchaser which has provided financing in connection with the
transactions contemplated by this Agreement, in substantially the form of
EXHIBIT E hereto.
SECTION 10.07. OPINIONS OF FCC COUNSEL TO SELLER. Purchaser shall
have been furnished with opinions of Patton Boggs, L.L.P., FCC counsel for
Seller, dated as of the Closing and addressed to Purchaser, and to any
financial institution designated by Purchaser which has
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provided the financing in connection with the transactions contemplated by
this Agreement, in substantially the form of EXHIBIT F attached hereto.
SECTION 10.08. CLOSING ESCROW AGREEMENT. Seller shall have executed
and delivered the Closing Escrow Agreement to Purchaser.
SECTION 10.09. TITLE INSURANCE; ESTOPPEL. Seller shall have provided
to Purchaser, at Seller's expense, and in a form satisfactory to Purchaser
and its lenders, all of the title commitments, title policies (including
endorsements thereto) and surveys required by Purchaser's lenders with
respect to the leased real property identified on Schedule 2.01(d). In
addition, with respect to each real property lease identified on SCHEDULE
2.01(d), Seller agrees that the instrument whereby Seller requests the
consent, estoppel and waiver of the lessor thereunder to the assignment of
such lease to such Purchaser shall be substantially in the form of the letter
attached hereto as SCHEDULE 9.03 and that Seller shall use its commercially
reasonable efforts to obtain each such lessor's consent to such assignment by
having each such lessor countersign such letter in the space provided.
SECTION 10.10. DUE DILIGENCE. Purchaser and its agents and
representatives shall have conducted a satisfactory legal, regulatory and
business due diligence review of the Assets, including, without limitation,
the Systems' properties, cell sites, transmitters, subscriber base and
revenue potential, the results of which shall be satisfactory to Purchaser.
Without limiting the generality of the foregoing, Purchaser shall be
satisfied that the Assets constitute all assets, licenses and property
necessary for the operation of the Systems as contemplated to be conducted by
Purchaser.
ARTICLE XI
CONDITIONS PRECEDENT TO
SELLER'S OBLIGATION TO CLOSE
The obligations of Seller under this Agreement with respect to the sale
of the Assets shall be subject to the fulfillment on or prior to the Closing
of each of the following conditions, any of which may be waived in writing by
Seller:
SECTION 11.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE
OF THIS AGREEMENT. All of the representations and warranties by Purchaser
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing. Purchaser shall have complied with and
performed in all material respects all of the agreements and covenants
required by this Agreement to be performed and complied with by it on or
prior to the Closing. Seller shall have been furnished with a certificate of
an officer of Purchaser, dated as of the Closing, certifying to the
fulfillment of the foregoing conditions.
SECTION 11.02. DIRECTORS' RESOLUTIONS. Purchaser shall deliver to
Seller copies of the resolutions of its Board of Directors authorizing the
execution, delivery and performance of this Agreement and all instruments and
documents to be delivered in connection herewith and the transactions
contemplated hereby, duly certified by an authorized officer of Purchaser.
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SECTION 11.03. INCUMBENCY CERTIFICATE. Seller shall have received a
certificate of a secretary of Purchaser, certifying as to the genuineness of
the signatures of representatives of Purchaser authorized to take certain
actions or execute any certificate, document, instrument or agreement to be
delivered pursuant to this Agreement, which incumbency certificate shall
include the true signatures of such representatives.
SECTION 11.04. FCC; HART-SCOTT ACT. The FCC shall have granted its
consent to the assignment of the FCC Authorizations to Purchaser. In
addition, all applicable waiting periods under the Hart-Scott Act (if
applicable to the transactions contemplated by this Agreement) shall have
expired or been terminated and no objection shall have been made by the FTC
or DOJ.
SECTION 11.05. OPINION OF COUNSEL TO PURCHASER. Seller shall have been
furnished with an opinion of Edwards & Angell, LLP, counsel to Purchaser,
dated as of the Closing and addressed to Seller in substantially the form of
EXHIBIT G hereto.
SECTION 11.06. CLOSING ESCROW AGREEMENT. Purchaser and the Escrow
Agent each shall have executed and delivered the Purchase Escrow Agreement to
Seller.
SECTION 11.07. NO LITIGATION. On the Closing Date, (i) no litigation,
proceeding, investigation, or inquiry shall be pending that, if sustained,
would materially and adversely affect the value of the Assets, Seller's right
to retain or convey the Assets or to operate the Systems, or Purchaser's
right to acquire, retain and own the Assets or to operate the Systems, and
(ii) no judgment, decree, injunction, rule or order of any court of competent
jurisdiction or other legal authority shall be outstanding against Purchaser,
Seller or any affiliate purporting to enjoin or otherwise prevent the Closing
of the transactions contemplated hereunder.
ARTICLE XII
CASUALTY LOSSES
In the event that there shall have been suffered between the date hereof
and the Closing any casualty loss relating to the Assets that becomes known
to Seller, Seller will promptly notify Purchaser of such event. Seller
shall, to the extent practicable, repair, rebuild or replace the portion of
the Assets damaged, destroyed or lost prior to the Closing Date. To the
extent the repair, rebuild or replacement of the portion of the Assets
damaged, destroyed or lost prior to the Closing Date is not practicable, then
the Purchase Price shall be reduced by the amount, mutually acceptable to
Purchaser and Seller, which is estimated by the parties to equal the
out-of-pocket costs and expenses that Purchaser is reasonably likely to incur
to repair, rebuild or replace, in accordance with cellular telephone industry
practices, such damaged, destroyed or lost Assets after the Closing Date, and
Seller shall retain all insurance proceeds payable as a result of the
occurrence of the event resulting in such loss or damage. Notwithstanding
the foregoing, in the event that Purchaser installs or modifies equipment
pursuant to its rights under Section 9.04(d) hereof, Purchaser shall
indemnify and hold harmless Seller from and against any losses incurred by
Seller arising out of Purchaser's installation or modification of equipment
prior to the Closing Date.
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ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. INDEMNIFICATION BY SELLER. (a) After the Closing, and
regardless of any investigation made at any time by or on behalf of Purchaser
or any information Purchaser may have, but subject to the terms of this
Article XIII, Seller agrees to indemnify and to hold Purchaser, its
shareholders, officers, directors, and employees (the "Indemnified Purchaser
Parties") harmless from and against and in respect of any losses (including
lost revenues), damages, costs, expenses (including costs of investigations
and reasonable attorney fees), suits, demands, judgments and diminutions in
value suffered or incurred (each a "Loss" and collectively "Losses") by
Purchaser arising from or related to:
(i) Any Non-Assumed Liability, whether or not known or
asserted at or prior to Closing, relating to or arising from the
ownership, operation, control or sale of the Assets, the Systems or
the Business or any other state of facts which existed at or prior to
Closing, including fines or forfeitures imposed or threatened to be
imposed by the FCC for the operation, at or prior to Closing, of the
Systems or the Business;
(ii) Any misrepresentation or breach of warranty in, or
omission from, any representation or warranty of Seller in this
Agreement, the Schedules or Exhibits hereto, the Closing Escrow
Agreement, the Deposit Escrow Agreement, the Bill of Sale, the
Assumption Agreement or in any closing certificate delivered by Seller
to Purchaser pursuant to Article X hereof;
(iii) Any breach or non-fulfillment of any covenant or
agreement on the part of Seller under this Agreement to be performed
on or following the Closing Date; and
(iv) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Purchaser in connection with any action,
suit, proceeding, demand, assessment or judgment incident to any of
the matters Purchaser is indemnified against by Seller in this
Agreement.
(b) In addition and subject to the terms of this Article XIII,
Seller shall indemnify Purchaser against and hold it harmless from any and
all Losses which Purchaser may incur by reason of the failure (if any) of
Seller to comply with the Bulk Transfers Article of the Uniform Commercial
Code of any state.
SECTION 13.02. INDEMNIFICATION BY PURCHASER. After the Closing, and
regardless of any investigation made at any time by or on behalf of Seller or
any information Seller may have, but subject to the terms of this Article
XIII, Purchaser agrees to indemnify and to hold Seller, and its directors,
officers, stockholders, employees, representatives and agents harmless from
and against and in respect of any Losses incurred by Seller from:
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(i) All liabilities and obligations of Purchaser, and all
claims and demands made in respect thereof, relating to or arising
from Purchaser's ownership, operation or control of the Assets or the
Business after the Closing, including on account of the Assumed
Liabilities; and;
(ii) Any misrepresentation or breach of warranty in, or
omission from, any representation or warranty of Purchaser in this
Agreement, the Schedules or Exhibits hereto, including the Closing
Escrow Agreement, the Deposit Escrow Agreement, the Assumption
Agreement or in any closing certificate delivered by Purchaser to
Seller pursuant to Article XI hereof;
(iii) Any breach or non-fulfillment of any covenant or
agreement on the part of Purchaser under this Agreement to be
performed on or following the Closing Date; and
(iv) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Seller in connection with any action,
suit, proceeding, demand, assessment or judgment incident to any of
the matters Seller is indemnified against by Purchaser in this
Agreement.
SECTION 13.03. NOTICE OF CLAIMS; DEFENSE OF THIRD PARTY. A party
claiming indemnification under this Article XIII (the "Asserting Party") must
notify (in writing, in reasonable detail and within a reasonable period of
time after the Asserting Party becomes aware of such claim) the party from
which indemnification is sought (the "Defending Party") of the nature and
basis of such claim for indemnification. If such claim relates to a claim,
suit, litigation or other action by a third party against the Asserting Party
or any fixed or contingent liability to a third party (a "Third Party
Claim"), the Defending Party may elect to assume and control the defense of
the Third Party Claim at its own expense with counsel selected by the
Defending Party from and after such time as the Defending Party
unconditionally agrees in writing to accept, as against the Asserting Party,
all liabilities on account of such Third Party Claim. Assumption of such
liability, as against the Asserting Party, shall not be deemed an admission
of liability as against any such third party. Notwithstanding the foregoing,
the Defending Party may not assume or control the defense if the named
parties to the Third Party Claim (including any impleaded parties) include
both the Defending Party and the Asserting Party and representation of both
parties by the same counsel (in such counsel's reasonable determination)
would be inappropriate due to actual or potential differing interests between
them, in which case the Asserting Party shall have the right to defend the
Third Party Claim and to employ counsel reasonably approved by the Defending
Party, and to the extent the matter is determined to be subject to
indemnification hereunder, the Defending Party shall reimburse the Asserting
Party for the reasonable costs of its counsel. If the Defending Party
assumes liability for the Third Party Claim as against the Asserting Party
and assumes the defense and control of the Third Party Claim pursuant to this
Section 13.03, the Defending Party shall not be liable for any fees and
expenses of counsel for the Asserting Party incurred thereafter in connection
with the Third Party Claim (except in the case of actual or potential
differing interests, as provided in
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the preceding sentence), but shall not agree to any settlement of such Third
Party Claim which does not include an unconditional release of the Asserting
Party by the third party claimant on account thereof, PROVIDED that such
requirement shall be deemed waived to the extent that the Asserting Party
does not undertake to provide and promptly execute and, concurrently with the
delivery of any such release, deliver a corresponding release of the third
party claimant with respect to such Third Party Claim. If the Defending
Party does not assume liability for and the defense of the Third Party Claim
pursuant to this Section 13.03, the Asserting Party shall have the right (i)
to control the defense thereof and (ii), if the Asserting Party shall have
notified the Defending Party of the Asserting Party's intention to negotiate
a settlement of the Third Party Claim (at the Defending Party's expense to
the extent the matter is determined to be subject to indemnification
hereunder), which notice shall include the material terms of any proposed
settlement in reasonable detail, to settle the Third Party Claim (at the
Defending Party's expense to the extent the matter is determined to be
subject to indemnification hereunder) on terms not materially inconsistent
with those set forth in such notice, unless the Defending Party shall have
notified the Asserting Party in writing of the Defending Party's election to
assume liability for and the defense of the Third Party Claim pursuant to
this Section 13.03 within ten days after receipt of such notice, and the
Defending Party promptly thereafter shall have taken appropriate action to
implement such defense. The Asserting Party shall not be entitled to settle
any such Third Party Claim pursuant to the preceding sentence unless such
settlement includes an unconditional release of the Defending Party by the
Third party claimant on account thereof, PROVIDED that such requirement shall
be deemed waived to the extent that the Defending Party does not undertake to
provide and promptly execute and, concurrently with delivery of any such
release, deliver a corresponding release of the third party claimant with
respect to such Third Party Claim. The Asserting Party and the Defending
Party shall use all reasonable efforts to cooperate fully with respect to the
defense and settlement of any Third Party Claim covered by this Article XIII.
SECTION 13.04. LIMITATIONS. The Defending Party's obligations to
indemnify the Asserting Party pursuant to this Article XIII shall be subject
to the following limitations:
(a) No indemnification shall be required to be made by the
Defending Party until the aggregate amount of the Asserting Party's Losses
exceeds $10,000 (the "Deductible") and then indemnification shall only be
required to be made by the Defending Party to the extent of such Losses that
exceed the Deductible; provided, however, the Deductible shall not be
applicable to (i) Seller's obligation to indemnify Purchaser for Non-Assumed
Liabilities, (ii) Purchaser's obligation to indemnify Seller for Losses
arising from or related to the matters described in Section 13.02(i), (iii)
adjustments to the Purchase Price provided for in Section 5.05, (iv) a breach
by Seller of its representations set forth in Section 7.02, the first
sentence of Section 7.04, and Section 7.15 or (v) Losses resulting from fraud.
(b) All representations and warranties contained in this
Agreement shall survive the Closing until the second anniversary thereof;
provided, however, that notwithstanding the foregoing, (x) the
representations and warranties contained in Section 7.02, the first sentence
of Section 7.04, and Section 7.15 shall survive the Closing for an unlimited
duration and (y) the representations and warranties contained in Sections
7.12 and 7.09 (as they
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may relate to Environmental Laws) shall survive the Closing until the second
anniversary thereof (the applicable period of survival being referred to as
the "Survival Period"). To the extent a claim is made in respect of a
representation or warranty within the applicable Survival Period, such
representation or warranty shall survive after the Survival Period for
purposes of such claim until such claim is finally determined or settled.
Each party shall be precluded from asserting claims against the other party
after the applicable Survival Period.
(c) In addition, the liability of any indemnitor with respect to
any Losses shall be determined on a basis that is net of the amount actually
paid to the indemnified party in respect of any such Losses pursuant to a
policy of insurance maintained by such indemnified party.
ARTICLE XIV
CONFIDENTIALITY AND PRESS RELEASES
SECTION 14.01. CONFIDENTIALITY. Each party (in such capacity, a
"Recipient Party") shall hold in strict confidence all documents and
information concerning the other (in such capacity, a "Disclosing Party")
and its business and properties and, if the transaction contemplated hereby
should not be consummated, such confidence shall be maintained, and all such
documents and information (in written form) shall immediately thereafter be
returned to the Disclosing Party. In furtherance of the foregoing, without
the express prior written consent of the Disclosing Party, the Recipient
Party shall not, directly or indirectly, disclose, disseminate, publish,
reproduce, retain, use (for its benefit or for the benefit of others) or
otherwise make available in any manner whatsoever, any such documents or
information to anyone except as provided in Section 14.03. If the Recipient
Party breaches, or threatens to commit a breach of, any of the provisions of
this Article XIV, the Disclosing Party shall have the right (in addition to
any other rights and remedies available at law or in equity) to equitable
relief (including injunctions) against such breach or threatened breach, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable harm to the Disclosing Party and that money damages would
not be an adequate remedy.
SECTION 14.02. PRESS RELEASES. No press release or public disclosure,
either written or oral, of the existence or terms of this Agreement shall be
made by either Purchaser or Seller without the consent of the other subject
to the provisions of Section 14.03, and Purchaser and Seller shall each
furnish to the other advance copies of any release which it proposes to make
public concerning this Agreement or the transactions contemplated hereby and
the date upon which Purchaser or Seller, as the case may be, proposes to make
such press release.
SECTION 14.03. DISCLOSURES REQUIRED BY LAW. This Article XIV shall
not, however, be construed to prohibit any party from making any disclosures
to any governmental authority that it is required to make by law or from
filing this Agreement with, or disclosing the terms of this Agreement to, any
institutional lender to such party, or prohibit Seller, Purchaser or any of
their affiliates from disclosing to its investors, partners, accountants,
auditors, attorneys, parent company and broker/dealers such terms of this
transaction as are customarily disclosed to them in connection with the sale
or acquisition of a cellular telephone system; PROVIDED, HOWEVER, that
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any such party shall be informed of the confidential nature of such
information and shall agree to keep such information confidential; and
PROVIDED, HOWEVER, that each party shall provide to the other reasonable
advance copies of any public release except where the provision of such
advance notice is not permissible.
ARTICLE XV
TERMINATION
SECTION 15.01. BREACHES AND DEFAULTS; OPPORTUNITY TO CURE. Prior to
the exercise by a party of any termination rights afforded under this
Agreement, if either party (the "Non-Breaching Party") believes the other
(the "Breaching Party") to be in breach hereunder, the Non-Breaching Party
shall provide the Breaching Party with written notice specifying in
reasonable detail the nature of such breach, whereupon the Breaching Party
shall have 30 days from the receipt of such notice to cure such breach to the
reasonable satisfaction of the Non-Breaching Party; PROVIDED, HOWEVER, that
if such breach is curable but is not capable of being cured within such
period and if the Breaching Party shall have commenced action to cure such
breach within such period and is diligently attempting to cure such breach,
then the Breaching Party shall be afforded an additional sixty (60) days to
cure such breach, PROVIDED, HOWEVER, that the cure period for a breach shall
in no event extend beyond the Outside Date. If the breach is not cured
within such time period, then the Breaching Party shall be in default
hereunder and the Non-Breaching Party shall be entitled to terminate this
Agreement (as provided in Section 15.02). This right of termination shall be
in addition to, and not in lieu of, any legal or equitable remedies available
to the Non-Breaching Party.
SECTION 15.02. TERMINATION. This Agreement may be terminated and the
transactions contemplated herein may be abandoned, by written notice given to
the other party hereto, at any time prior to the Closing:
(a) by mutual written consent of Seller and Purchaser;
(b) by either Purchaser or Seller, if any court of competent
jurisdiction in the United States or other United States governmental body
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise permanently prohibiting the
sale of the Assets to Purchaser (which Seller and Purchaser shall have used
all reasonable efforts to have lifted or reversed) and such order, decree,
ruling or other action shall have become final and nonappealable;
(c) subject to Section 15.01, by Purchaser, if Seller shall have
breached any of its representations herein and such breaches, in the
aggregate, would reasonably be expected to have a Material Adverse Effect
or if Seller shall have materially breached any of its covenants;
(d) subject to Section 15.01, by Seller, if Purchaser shall have
materially breached any of its representations or covenants herein and such
breach
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or breaches, in the aggregate, would reasonably be expected to have a
Material Adverse Effect or if Seller shall have materially breached any of
its covenants; or
(e) by either Seller or Purchaser if the Closing shall not have
occurred on or before May 31, 1999 (the "Outside Date"), unless: (i) the
parties agree in writing to extend the Outside Date, or (ii) the failure to
have the Closing shall be due to the failure of the party seeking to
terminate this Agreement to perform in any material respect its obligations
under this Agreement required to be performed by it at or prior to the
Closing.
ARTICLE XVI
BROKERS' FEES
Each party represents and warrants to the other that it shall be solely
responsible for the payment of any fee or commission due to any broker or
finder it has engaged with respect to this transaction and the other party
hereto shall be indemnified for any liability with respect thereto pursuant
to Article XIII hereof.
ARTICLE XVII
MISCELLANEOUS
SECTION 17.01. ADDITIONAL INSTRUMENTS OF TRANSFER. (a) From time to
time after the Closing, each party shall, if requested by another party,
make, execute and deliver such additional assignments, bills of sale, deeds
and other instruments, as may be reasonably necessary or proper to carry out
the specific provisions of this Agreement, including transfer to Purchaser
all of Seller's right, title and interest in and to the Assets. Such efforts
and assistance shall be at the cost of the requesting party.
(b) Anything in this Agreement to the contrary notwithstanding,
Seller is not obligated to sell, assign, transfer or convey to Purchaser any
of its rights and obligations in and to any Interest without first obtaining
all necessary approvals, consents or waivers. To the extent any of the
approvals, consents or waivers listed on SCHEDULE 10.04 have not been
obtained by Seller as of the Closing and Purchaser elects to proceed with the
Closing, Seller shall, for the remaining term of such Interest, use its
commercially reasonable efforts to (i) cooperate with Purchaser to obtain the
consent of any such third party; (ii) cooperate with Purchaser in any
reasonable and lawful arrangements designed to provide the benefits
(including, without limitation, the payment to Purchaser of any monies
received by Seller in connection therewith) of such Interest to Purchaser so
long as Purchaser performs all obligations with respect to the Interest (and
the payment of all expenses in connection therewith); and (iii) enforce, at
the request of Purchaser and at the expense and for the account of Purchaser,
any rights of Seller arising from such Interest against such issuer thereof
or the other party or parties thereto (including the right to elect to
terminate any such Interest in accordance with the terms thereof upon the
request of Purchaser); provided, however, that neither of Purchaser nor
Seller shall be obligated to pay any consideration or other sums therefor
(except for filing fees and other ordinary administrative charges and except
as set forth above) to the third party, or to commence
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any proceedings against the third party, from whom such approval, consent or
waiver is requested.
SECTION 17.02. NOTICES. All notices and other communications required
or permitted to be given hereunder shall be in writing and shall be deemed to
have been duly given if delivered, sent by telecopier, recognized overnight
delivery service or registered or certified mail, return receipt requested,
postage prepaid, to the following addresses:
(i) If to Purchaser:
13439 N. Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
Attention: Everett Dobson
Facsimile No.: (405) 391-8515
with a required copy (which shall not constitute notice) to:
Edwards & Angell, LLP
One BankBoston Plaza
Providence, Rhode Island 02903
Attention: Joseph A. Kuzneski, Jr., Esq.
Facsimile No.: (401) 276-6602
(ii) If to Seller:
First Cellular of Maryland, Inc.
921 Breckenridge Lane
Winchester, Virginia 22601
Attention: Kimerly G. Henry
Facsimile No.: (540) 678-5549
with a required copy (which shall not constitute notice) to:
Patton Boggs, L.L.P.
2550 M Street, N.W.
Washington, DC 20037
Attention: J. Jeffrey Craven, Esq.
Facsimile No.: (202) 457-6315
Notices delivered personally shall be effective upon delivery against
receipt. Notices transmitted by telecopy shall be effective when received,
provided that the burden of proving notice when notice is transmitted by
telecopy shall be the responsibility of the party providing such notice .
Notices delivered by overnight mail shall be effective when received.
Notices
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delivered by registered or certified mail shall be effective on the date set
forth on the receipt of registered or certified mail, or 72 hours after
mailing, whichever is earlier.
SECTION 17.03. EXPENSES. Each party shall bear its own expenses and
costs, including the fees of any corporate or FCC attorney retained by it,
incurred in connection with the preparation of this Agreement and the
consummation of the transactions contemplated hereby; provided that Seller
and Purchaser shall bear equally FCC, Hart-Scott Act and other governmental
filing fees.
SECTION 17.04. TRANSFER TAXES. Seller and Purchaser shall bear equally
all use, sales and transfer taxes, if any, imposed in connection with the
sale and delivery of the Assets acquired by Purchaser under this Agreement.
Notwithstanding anything else to the contrary set forth in this Section
17.04, Purchaser shall in no event be responsible in any manner for the
payment of any Taxes on any income or gain which Seller may realize as a
result of the sale of the Assets or otherwise related to the transactions
contemplated by this Agreement.
SECTION 17.05. COLLECTION PROCEDURES. From and after the Closing,
Purchaser shall have the right and authority, at its expense, to collect for
its account all items to which it is entitled as provided in this Agreement
and to endorse with the name of the Seller any checks or drafts received on
account of any such items.
SECTION 17.06. SPECIFIC PERFORMANCE. The parties recognize and
acknowledge that in the event Seller shall fail to perform its obligations
under the terms of this Agreement, money damages alone will not be adequate
to compensate the Purchaser. The parties, therefore, agree and acknowledge
that in the event the Seller fails to perform its obligations under this
Agreement prior to Closing, the Purchaser shall be entitled, in addition to
any action for monetary damages, in addition to any other rights and remedies
on account of such failure, to specific performance of the terms of this
Agreement and of the covenants and obligations hereunder.
SECTION 17.07. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma (without
application of principles of conflicts of law).
SECTION 17.08. ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (by merger or other operation of law or otherwise) without the
prior written consent of the other party, which consent will not be
unreasonably withheld except that Purchaser shall have the right to assign
its rights under this Agreement after the Closing to any institutional lender.
SECTION 17.09. SUCCESSORS AND ASSIGNS. All agreements made and entered
into in connection with this transaction shall be binding upon and inure to
the benefit of the parties hereto, their successors and permitted assigns.
SECTION 17.10. AMENDMENTS; WAIVERS. No alteration, modification or
change of this Agreement shall be valid except by an agreement in writing
executed by the parties hereto. No failure or delay by any party hereto in
exercising any right, power or privilege hereunder (and no
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course of dealing between or among any of the parties) shall operate as a
waiver of any such right, power or privilege. No waiver of any default on
any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof.
SECTION 17.11. ENTIRE AGREEMENT. This Agreement merges all previous
negotiations and agreements between the parties hereto, either verbal or
written, and constitutes the entire agreement and understanding between the
parties with respect to the subject matter of this Agreement.
SECTION 17.12. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be an original, but
all of which together shall constitute one agreement. Facsimile signatures
shall be deemed original signatures.
SECTION 17.13. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by
law, but only as long as the continued validity, legality and enforceability
of such provision or application does not materially (a) alter the terms of
this Agreement, (b) diminish the benefits of this Agreement or (c) increase
the burdens of this Agreement, for any person.
SECTION 17.14. SECTION HEADINGS. The section headings contained in
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
SECTION 17.15. INTERPRETATION. As both parties have participated in
the drafting of this Agreement, any ambiguity shall not be construed against
either party as the drafter.
SECTION 17.16. FURTHER ASSURANCES. For a period of twelve (12) months
after Closing, Seller agrees to provide to Purchaser from time to time any
information that Seller possesses with respect to the operation of the
Business and Assets prior to the Closing which the Purchaser reasonably
requests in the future in connection with the Purchaser's financing efforts
now or in the future or in connection with any FCC or other regulatory filing.
SECTION 17.17. THIRD PARTIES. Nothing herein, expressed or implied, is
intended to or shall confer on any person other than the parties hereto any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
SECTION 17.18. WAIVER OF JURY THE PARTIES HERETO IRREVOCABLY WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM, COUNTERCLAIM, OR
CROSS CLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT.
[THE REST OF THIS PAGE IS LEFT BLANK INTENTIONALLY.]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed by its duly authorized representative as of the day and year
first above written.
SELLER:
FIRST CELLULAR OF MARYLAND, INC.
By: /s/ Kimerly G. Henry
----------------------------------------
Kimerly G. Henry
President
PURCHASER:
DOBSON CELLULAR OF MARYLAND, INC.
By: /s/ Everett Dobson
----------------------------------------
Everett Dobson
Chairman
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SCHEDULE 7.17
SUBSCRIBERS: AGENTS
1. Number of Cellular Subscribers: currently roughly 400.
2. Number of Paging Subscribers: approximately 350-400.
3. List of Cellular Agents:
- Allen's Radio Shack
- Lakeside Cellular
4. List of Paging Agents:
- Allen's Radio Shack
- Lakeside Cellular
5. List of Cellular Resellers: None
6. List of Paging Resellers: None
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
13439 NORTH BROADWAY EXTENSION
OKLAHOMA CITY, OKLAHOMA 73114
February 2, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Unfiled Schedules
Ladies and Gentlemen:
Dobson Communications Corporation (the "Company") is a party to certain plans of
acquisition, reorganization, arrangement, liquidation or succession filed
herewith. The Company has not filed, and may not file in the future the
schedules or similar attachments to all of these exhibits. Pursuant to Item
601(b)(2) of Regulation S-K, the Company hereby agrees to furnish the
Commission a copy of any such unfiled schedules or similar attachments upon
request.
Very truly yours,
/s/ Bruce R. Knooihuizen
------------------------------------------
Bruce R. Knooihuizen
Vice President and Chief Financial Officer
<PAGE>
CREDIT AGREEMENT
among
DOBSON/SYGNET OPERATING COMPANY,
BORROWER
NATIONSBANC MONTGOMERY SECURITIES LLC,
LEAD ARRANGER
NATIONSBANK, N.A.,
ADMINISTRATIVE AGENT
LEHMAN COMMERCIAL PAPER INC. AND PNC BANK, NATIONAL ASSOCIATION,
CO-SYNDICATION AGENTS
and
TORONTO DOMINION (TEXAS), INC. AND FIRST UNION NATIONAL BANK,
CO-DOCUMENTATION AGENTS
and
THE LENDERS NAMED HEREIN,
LENDERS
$430,000,000
SENIOR SECURED CREDIT FACILITIES
DATED AS OF DECEMBER 23, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 DEFINITIONS AND TERMS. . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Number and Gender of Words; Other References . . . . . . . . . . . . . 24
1.3 Accounting Principles. . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2 BORROWING PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.1 Revolver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
2.2 Swing Line Subfacility . . . . . . . . . . . . . . . . . . . . . . . . 25
2.3 Term Loan A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.4 Term Loan B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.5 Term Loan C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.6 Terminations or Reductions of Commitments. . . . . . . . . . . . . . . 26
2.7 Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2.8 Borrowing Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 3 TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
3.1 Loan Accounts, Notes, and Payments . . . . . . . . . . . . . . . . . . 32
3.2 Interest and Principal Payments. . . . . . . . . . . . . . . . . . . . 32
3.3 Interest Options . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.4 Quotation of Rates . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.5 Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.6 Interest Recapture . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.7 Interest Calculations. . . . . . . . . . . . . . . . . . . . . . . . . 36
3.8 Maximum Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.9 Interest Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.10 Conversions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.11 Order of Application . . . . . . . . . . . . . . . . . . . . . . . . . 38
3.12 Sharing of Payments, Etc . . . . . . . . . . . . . . . . . . . . . . . 39
3.13 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
3.14 Booking Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4 CHANGE IN CIRCUMSTANCES. . . . . . . . . . . . . . . . . . . . . . . . 39
4.1 Increased Cost and Reduced Return. . . . . . . . . . . . . . . . . . . 39
4.2 Limitation on Types of Loans . . . . . . . . . . . . . . . . . . . . . 40
4.3 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.4 Treatment of Affected Loans. . . . . . . . . . . . . . . . . . . . . . 41
4.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
4.6 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.1 Treatment of Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
5.2 Fees of Administrative Agent and Arranger. . . . . . . . . . . . . . . 43
5.3 Revolver Facility Commitment Fees. . . . . . . . . . . . . . . . . . . 44
SECTION 6. SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
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6.1 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.2 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.3 Future Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.4 Release of Collateral. . . . . . . . . . . . . . . . . . . . . . . . . 45
6.5 Negative Pledge. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.6 Control; Limitation of Rights. . . . . . . . . . . . . . . . . . . . . 45
SECTION 7 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . 46
7.1 Conditions Precedent to Closing. . . . . . . . . . . . . . . . . . . . 46
7.2 Conditions Precedent to a Permitted Acquisition. . . . . . . . . . . . 46
7.3 Conditions Precedent to Each Borrowing.. . . . . . . . . . . . . . . . 46
SECTION 8 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 47
8.1 Purpose of Credit Facilities . . . . . . . . . . . . . . . . . . . . . 47
8.2 Existence, Good Standing, Authority, and Authorizations. . . . . . . . 47
8.3 Subsidiaries; Capital Stock. . . . . . . . . . . . . . . . . . . . . . 47
8.4 Authorization and Contravention. . . . . . . . . . . . . . . . . . . . 48
8.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.6 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.7 Litigation, Claims, Investigations . . . . . . . . . . . . . . . . . . 48
8.8 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
8.9 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . 49
8.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 49
8.11 Properties; Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.12 Government Regulations . . . . . . . . . . . . . . . . . . . . . . . . 49
8.13 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . 49
8.14 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.15 Material Agreements; Management Agreements . . . . . . . . . . . . . . 50
8.16 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.17 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.18 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.19 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . 50
8.20 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . 50
8.21 The Sygnet Merger and Dobson Acquisition . . . . . . . . . . . . . . . 50
8.22 Permitted Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . 51
8.23 Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
8.24 Tradename. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.25 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.26 Sygnet Towers Sale . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.27 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.28 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9 COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.1 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.2 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
9.3 Items to be Furnished. . . . . . . . . . . . . . . . . . . . . . . . . 53
9.4 Inspections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.5 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
9.6 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . 55
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9.7 Maintenance of Existence, Assets, and Business . . . . . . . . . . . . 56
9.8 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
9.9 Preservation and Protection of Rights. . . . . . . . . . . . . . . . . 56
9.10 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 57
9.11 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.12 Debt and Guaranties. . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.13 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
9.14 Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . 58
9.15 Compliance with Laws and Documents . . . . . . . . . . . . . . . . . . 58
9.16 Permitted Acquisitions, Subsidiary Guaranties, and Collateral
Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.17 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
9.18 Fiscal Year and Accounting Methods . . . . . . . . . . . . . . . . . . 59
9.19 Government Regulations . . . . . . . . . . . . . . . . . . . . . . . . 59
9.20 Loans, Advances, and Investments . . . . . . . . . . . . . . . . . . . 59
9.21 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
9.22 Restrictions on Subsidiaries . . . . . . . . . . . . . . . . . . . . . 61
9.23 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.24 Sale-Leaseback Financings. . . . . . . . . . . . . . . . . . . . . . . 61
9.25 Mergers and Dissolutions; Sale of Capital Stock. . . . . . . . . . . . 61
9.26 New Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.27 Financial Hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.28 Affiliate Subordination Agreements . . . . . . . . . . . . . . . . . . 62
9.29 Amendments to Documents. . . . . . . . . . . . . . . . . . . . . . . . 62
9.30 Financial Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.31 Year 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 10 DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.1 Payment of Obligation. . . . . . . . . . . . . . . . . . . . . . . . . 63
10.2 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.3 Debtor Relief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.4 Judgments and Attachments. . . . . . . . . . . . . . . . . . . . . . . 64
10.5 Government Action. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.6 Misrepresentation. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.7 Change of Management . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.8 Change of Control. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.9 Authorizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.10 Default Under Other Debt and Agreements. . . . . . . . . . . . . . . . 65
10.11 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . 65
10.12 Validity and Enforceability of Loan Papers . . . . . . . . . . . . . . 66
10.13 Material Adverse Effect. . . . . . . . . . . . . . . . . . . . . . . . 66
10.14 Environmental Liability. . . . . . . . . . . . . . . . . . . . . . . . 66
10.15 Pledged Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.16 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.17 Payment of Certain Other Agreements. . . . . . . . . . . . . . . . . . 66
10.18 Default or Acceleration under Certain Other Agreements . . . . . . . . 66
10.19 Redemption of Certain Other Debt or Obligation . . . . . . . . . . . . 67
SECTION 11 RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.1 Remedies Upon Default. . . . . . . . . . . . . . . . . . . . . . . . . 67
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11.2 Company Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
11.3 Performance by Administrative Agent. . . . . . . . . . . . . . . . . . 67
11.4 Delegation of Duties and Rights. . . . . . . . . . . . . . . . . . . . 68
11.5 Not in Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.6 Course of Dealing. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.7 Cumulative Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.8 Application of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 68
11.9 Certain Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . 68
11.10 Limitation of Rights . . . . . . . . . . . . . . . . . . . . . . . . . 69
11.11 Expenditures by Lenders. . . . . . . . . . . . . . . . . . . . . . . . 69
11.12 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 12 AGREEMENT AMONG LENDERS. . . . . . . . . . . . . . . . . . . . . . . . 70
12.1 Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . 70
12.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.3 Proportionate Absorption of Losses . . . . . . . . . . . . . . . . . . 71
12.4 Delegation of Duties; Reliance . . . . . . . . . . . . . . . . . . . . 71
12.5 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . . . 72
12.6 Default; Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . 73
12.7 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . . . 73
12.8 Relationship of Lenders. . . . . . . . . . . . . . . . . . . . . . . . 73
12.9 Benefits of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 73
12.10 Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
12.11 Obligations Several. . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 13 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
13.1 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
13.2 Nonbusiness Days . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
13.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
13.4 Form and Number of Documents . . . . . . . . . . . . . . . . . . . . . 74
13.5 Exceptions to Covenants. . . . . . . . . . . . . . . . . . . . . . . . 74
13.6 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
13.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
13.8 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 75
13.9 Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
13.10 Jurisdiction; Venue; Service of Process; Jury Trial. . . . . . . . . . 75
13.11 Amendments, Consents, Conflicts, and Waivers . . . . . . . . . . . . . 76
13.12 Multiple Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 76
13.13 Successors and Assigns; Assignments and Participations . . . . . . . . 77
13.14 Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
</TABLE>
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SCHEDULES AND EXHIBITS
Schedule 2.1 - Lenders and Commitments
Schedule 7.1 - Conditions Precedent to Closing
Schedule 7.2 - Conditions Precedent to Permitted Acquisition
Schedule 8.2 - FCC and PUC Licenses
Schedule 8.3 - Subsidiary List
Schedule 8.15 - Material Agreements
Exhibit A-1 - Form of Revolver Note
Exhibit A-2 - Form of Swing Line Note
Exhibit A-3 - Form of Term Loan Facility A Note
Exhibit A-4 - Form of Term Loan Facility B Note
Exhibit A-5 - Form of Term Loan Facility C Note
Exhibit B-1 - Form of Notice of Borrowing
Exhibit B-2 - Form of Notice of Conversion
Exhibit C - Form of Guaranty
Exhibit D - Form of Pledge, Assignment, and Security Agreement
Exhibit E-1 - Form of Compliance Certificate
Exhibit E-2 - Form of Permitted Acquisition Compliance Certificate
Exhibit E-3 - Form of Permitted Acquisition Loan Closing Certificate
Exhibit F - Form of Assignment and Acceptance Agreement
Exhibit G-1 - Form of Opinion of Counsel of Borrower
Exhibit G-2 - Form of Opinion of Special Regulatory Counsel
Exhibit G-3 - Form of Opinion of Local Counsel
Exhibit H - Form of Affiliate Subordination Agreements
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is entered into as of December 23, 1998, among
DOBSON/SYGNET OPERATING COMPANY (including its successor by merger, Sygnet
Wireless, Inc.) (as more fully defined in SECTION 1, "BORROWER"), NATIONSBANC
MONTGOMERY SECURITIES LLC, as Arranger (hereinafter defined), Lenders
(hereinafter defined), LEHMAN COMMERCIAL PAPER INC. and PNC BANK, NATIONAL
ASSOCIATION, as Co-Syndication Agents (hereinafter defined), TORONTO
DOMINION (TEXAS), INC. and FIRST UNION NATIONAL BANK, as Co-Documentation
Agents (hereinafter defined), and NATIONSBANK, N.A., as Administrative Agent
(hereinafter defined), for itself and the other Lenders.
RECITALS
A. Dobson/Sygnet Operating Company (f/k/a Front Nine Operating
Company and SWI Acquisition Corp.), an Ohio corporation, will be acquired by
Dobson/Sygnet Communications Corporation ("PARENT"), a Wholly-owned
Subsidiary of Dobson Communications Corporation, in a stock acquisition from
Dobson Operating Company (the "DOBSON ACQUISITION").
B. Concurrently with the Dobson Acquisition, Dobson/Sygnet
Operating Company will merge with and into Sygnet Wireless, Inc. pursuant to
that certain Agreement and Plan of Merger dated as of July 28, 1998, between
Dobson/Sygnet and Sygnet Wireless, Inc. (the "SYGNET MERGER").
C. Borrower has requested that, in addition to other sources of
financing, Lenders extend credit to Borrower to enable, among other things,
the consummation of the Sygnet Merger.
D. Upon and subject to the terms and conditions of this
Agreement, Lenders are willing to extend credit to Borrower, providing for
four credit facilities totaling $430,000,000, in the form of a revolving loan
facility in the aggregate principal amount of $50,000,000 and three term loan
facilities in the aggregate principal amount of $125,000,000, $155,000,000,
and $100,000,000, respectively.
Accordingly, in consideration of the mutual covenants contained
herein, the parties hereto 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.
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
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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, 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
Co-Syndication Agents, and the Co-Documentation Agents.
AGREEMENT means this Credit Agreement (as the same may hereafter be
amended, modified, supplemented, or restated from time to time).
ANNUALIZED OPERATING CASH FLOW means (i) from the Closing Date
through December 30, 1998, the Operating Cash Flow of the Companies for the
period from July 1, 1998, through September 30, 1998, MULTIPLIED BY four;
(ii) for the fiscal quarter ending December 31, 1998, the Operating Cash Flow
of the Companies for the period from July 1, 1998, through December 31, 1998
MULTIPLIED BY two; and (iii) for the fiscal quarter ending March 31, 1999,
the Operating Cash Flow of the Companies for the period from July 1, 1998,
through March 31, 1999, MULTIPLIED BY 4/3.
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:
(a) on any date of determination with respect to each Base Rate
Borrowing or Eurodollar Rate Borrowing under the Revolver Facility and Term
Loan A, respectively, the percentage per annum set forth in the appropriate
column below that corresponds to the Leverage Ratio at such date of
determination, as calculated based on the quarterly Compliance Certificate of
Borrower most recently delivered pursuant to SECTION 9.3 hereof:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Applicable Margin
-------------------------------------------
Leverage Ratio Eurodollar Rate
Base Rate Borrowings Borrowings
- -----------------------------------------------------------------------
<S> <C> <C>
Less than 2.00:1.0 0.750% 1.750%
- -----------------------------------------------------------------------
Greater than or equal to
2.00:1.0, 1.000% 2.000%
but less than 3.00:1.0
- -----------------------------------------------------------------------
</TABLE>
2
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Applicable Margin
-------------------------------------------
Leverage Ratio Eurodollar Rate
Base Rate Borrowings Borrowings
- -----------------------------------------------------------------------
<S> <C> <C>
Greater than or equal to
3.00:1.0, 1.250% 2.250%
but less than 4.00:1.0
- -----------------------------------------------------------------------
Greater than or equal to
4.00:1.0, 1.500% 2.500%
but less than 5.00:1.0
- -----------------------------------------------------------------------
Greater than or equal to
5.00:1.0, 1.750% 2.750%
but less than 6.0:1.0
- -----------------------------------------------------------------------
Greater than or equal to
6.0:1.0 2.000% 3.000%
- -----------------------------------------------------------------------
</TABLE>
; PROVIDED THAT, if after December 31, 2001, the ratio (based on the
quarterly Compliance Certificate of Borrower most-recently delivered pursuant
to SECTION 9.3 hereof) of (i) Debt of the Companies LESS the outstanding
principal amount of the Senior Reserve Notes to (ii) the Operating Cash Flow
of the Companies is less than 3.00:1.00, the Applicable Margin for the
Revolver Facility and Term Loan A will be reduced by 0.50%; however, in no
event, shall the Applicable Margin for the Revolver Facility or Term Loan A
be less than 0.750% for Base Rate Borrowings and 1.750% for Eurodollar Rate
Borrowings;
(b) on any date of determination with respect to each Base Rate
Borrowing or Eurodollar Rate Borrowing under Term Loan B, the percentage per
annum set forth in the appropriate column below that corresponds to the
Leverage Ratio at such date of determination, as calculated based on the
quarterly Compliance Certificate of Borrower most recently delivered pursuant
to SECTION 9.3 hereof:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
Applicable Margin
-------------------------------------------
Leverage Ratio Eurodollar Rate
Base Rate Borrowings Borrowings
- -----------------------------------------------------------------------
<S> <C> <C>
Less than 4.00:1.0 1.750% 2.750%
- -----------------------------------------------------------------------
Greater than or equal to
4.00:1.0, 2.000% 3.000%
but less than 6.00:1.0
- -----------------------------------------------------------------------
Greater than or equal to
6.0:1.0 2.250% 3.250%
- -----------------------------------------------------------------------
</TABLE>
; PROVIDED THAT, if after December 31, 2001, the ratio (based on the
quarterly Compliance Certificate of Borrower most-recently delivered pursuant
to SECTION 9.3 hereof) of (i) Debt of the Companies LESS the outstanding
principal amount of the Senior Reserve Notes to (ii) the Operating Cash Flow
of the Companies is less than 3.00:1.00, the Applicable Margin for Term Loan
B will be reduced by 0.25%; however, in no event, shall the Applicable Margin
for Term Loan B be less than 1.750% for Base Rate Borrowings and 2.750% for
Eurodollar Rate Borrowings; and
(c) for Borrowings under Term Loan C, which shall be limited to
Eurodollar Rate Borrowings, a percentage per annum equal to 3.750%; PROVIDED
THAT, if Eurodollar Rate Borrowings are not available, Borrowings under Term
Loan C shall be Base Rate Borrowings with an Applicable Margin of 2.750%.
The provisions in items (a), (b), and (c) are further subject to, the
following:
3
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
(i) Until the second Business Day after the initial
Financial Statements and Compliance Certificate for the fiscal quarter
ending December 31, 1998, shall have been delivered hereunder, the
Applicable Margin for Base Rate Borrowings and Eurodollar Rate
Borrowings under the Revolver Facility, Term Loan A, and Term Loan B
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 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 9.3(a) and 9.3(b) or the most recent
Permitted Acquisition Compliance Certificate for a Permitted
Acquisition, as the case may be; and
(ii) 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
the Revolver Facility, Term Loan A, and Term Loan B shall be the maximum
Applicable Margin for the respective Facility specified in the Tables
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 Leverage Ratio at such date of
determination, as calculated based on the quarterly compliance certificates
of Borrower most recently delivered pursuant to SECTION 9.3 hereof.
<TABLE>
<CAPTION>
--------------------------------------------
Applicable Margin
Leverage Ratio for Commitment
Fees
--------------------------------------------
<S> <C>
Greater than or equal to 0.500%
4.00 to 1.0
--------------------------------------------
Less than 4.00 to 1.0 0.375%
--------------------------------------------
</TABLE>
(a) Until the second Business Day after the initial
Financial Statements and Compliance Certificate for the fiscal quarter
ending December 31, 1998, 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 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.
4
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
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, (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, and (c) with respect to any Dobson Tower Resale, an
amount equal to such percentage as Dobson Tower estimates in good faith to be
its effective rate of the taxable gain for federal and state income tax
purposes with respect to such Dobson Tower Resale.
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 for the
relevant Facility.
BORROWER means Dobson/Sygnet and its successor by merger, Sygnet
Wireless, Inc., an Ohio corporation, together with any successor or assign of
Borrower permitted by the Loan Papers.
BORROWING means any amount disbursed (a) by one or more Lenders to
Borrower under the Loan Papers (under the Revolving Facility, the Swing Line
Subfacility, Term Loan A, Term Loan B, or Term Loan C), 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 under, any Loan Paper.
BORROWING DATE is defined in SECTION 2.8(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 23
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.
5
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
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.
CASH EQUIVALENTS means:
(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; and
(e) Demand deposit accounts which are maintained in the
ordinary course of business.
CELLULAR PARTNERSHIP means, as the case may be, any entity in which
any Company, Communications, or a Subsidiary of Communications (other than
Logix and its Subsidiaries) owns a partnership interest.
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-DOCUMENTATION AGENTS means Toronto Dominion (Texas), Inc. and
First Union National Bank and their permitted successors or assigns as
"CO-DOCUMENTATION AGENTS" under this Agreement.
CO-SYNDICATION AGENTS means Lehman Commercial Paper Inc. and PNC
Bank, National Association, and their respective permitted successors or
assigns as "CO-SYNDICATION AGENTS" under this Agreement.
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.
6
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
COLLATERAL DOCUMENTS means all security agreements, pledge
agreements, assignments of partnership interests, and Guaranties at any time
delivered to Administrative 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 for a particular Facility, at any
date of determination, as the case may be, the amount stated beside each
Lender's name under the heading for that Facility 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 Parent.
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.
COMMUNICATIONS OPERATING CASH FLOW, as of any date of determination,
means the Operating Cash Flow of Communications and its Subsidiaries (other
than Logix and its Subsidiaries) on a consolidated basis for the four most
recently ended fiscal quarters, adjusted, as required, to take into account
any minority ownership in any Subsidiary or Cellular Partnership; PROVIDED,
HOWEVER, with respect to any Cellular Partnership of Communications or its
Subsidiaries (other than Logix and its Subsidiaries), which is indebted to
Communications or any Subsidiary of Communications (other than Logix and its
Subsidiaries) (the "CELLULAR PARTNERSHIP DEBT"), such adjustments for
minority interests shall be made only when either (i) such Cellular
Partnership Debt has been paid in full or (ii) Communications or any
Subsidiary of Communications (other than Logix and its Subsidiaries) does
not have a Lien upon and right to apply 100% of the Operating Cash Flow of
such Cellular Partnership to repayment of such Cellular Partnership Debt.
COMMUNICATIONS TOTAL DEBT means the aggregate Debt of Communications
and its Subsidiaries (other than Logix and its Subsidiaries); PROVIDED, THAT
the Debt of Communications and its Subsidiaries (other than Logix and its
Subsidiaries) (a) shall be reduced by amounts on deposit in the escrow
account funded with proceeds of the Communications Bond Debt, which escrow
account is to be used to pay any outstanding interest under the
Communications Bond Debt; and (b) shall be increased by the liquidation value
of any Preferred Stock on which cash dividends are being paid or are required
to be paid; and (c) shall be increased by the outstanding principal amount of
all issued and outstanding Debentures.
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.
7
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
CONSEQUENTIAL LOSS means any loss, cost, or expense (including loss
of anticipated profit) 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 DEBT means on, any date of determination, (i) all Debt
of Parent and its Subsidiaries (including, without limitation, Borrower and
its Subsidiaries) LESS (ii) the value of the Pledged Government Securities
(using valuation methods for such assets consistent with those used in the
Companies' Financial Statements); PLUS (iii) in the event any Junior
Preferred Stock has been issued by Communications and cash dividends are
required to the paid thereon, the liquidation value of the Junior Preferred
Stock then issued and outstanding; PLUS (iv) in the event any Junior
Debentures have been exchanged for any Junior Preferred Stock, the
outstanding principal amount of such Junior Debentures.
CURRENT FINANCIALS means, at the time of any determination thereof,
the more recently delivered to Lenders of either (a)(i) the Financial
Statements for the fiscal year ended December 31, 1997, and the nine-month
period ended September 30, 1998, calculated on a consolidated basis for
Dobson/Sygnet Operating Company; (ii) the consolidated Financial Statements
of Sygnet Wireless, Inc. and its Subsidiaries for the fiscal year ended
December 31, 1997, and the nine-month period ended September 30, 1998; and
(iii) the PRO FORMA combined Financial Statements of Dobson/Sygnet Operating
Company, Sygnet Wireless, Inc., and their respective Subsidiaries prepared as
of the Closing Date after giving effect to the Sygnet Merger; 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.
DEBENTURES means, collectively, the Junior Debentures and the Senior
Debentures.
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, (iii) obligations of such Person under non-compete agreements, and
(iv) 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 not more than ninety (90) days past due);
(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 Debt of 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.
8
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
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)(i) for the Revolver, Term Loan A, and Term Loan B, the
sum of the Base Rate PLUS the highest Applicable Margin for Base Rate
Borrowings for the relevant Facility PLUS 2% or (ii) for Term Loan C, the sum
of the Base Rate PLUS the highest Applicable Margin for Base Rate Borrowings
under Term Loan B PLUS 2% AND (b) the Maximum Rate.
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.
DOBSON ACQUISITION means the acquisition of the stock of
Dobson/Sygnet by Parent from Dobson Operating Company pursuant to the Dobson
Acquisition Agreement.
DOBSON ACQUISITION AGREEMENT means the Stock Purchase Agreement dated
December 23, 1998, by and between Dobson Operating Company, as seller, and
Parent, as buyer.
DOBSON ACQUISITION DOCUMENTS means the Dobson Acquisition Agreement
and all documents or instruments executed pursuant thereto or in connection
therewith, together with all amendments, modifications, supplements, or
restatements thereof in form and upon terms satisfactory to Administrative
Agent.
DOBSON/SYGNET means Dobson/Sygnet Operating Company (formerly known
as Front Nine Operating Company and SWI Acquisition Corp.), an Ohio
corporation, which company, on and as of the Closing Date, was acquired by
Parent and was merged with and into Sygnet Wireless, Inc. pursuant to the
Sygnet Merger.
DOBSON TOWER means Dobson Tower Company, an Oklahoma corporation.
DOBSON TOWER RESALE means the sale of the Sygnet Towers by Dobson
Tower to a non-Affiliate either (i) for a cash purchase price equal to or
greater than $30,000,000 or (ii) on terms and conditions satisfactory to
Administrative Agent.
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.
9
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
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.
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.
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 for the relevant Facility.
EXCESS CASH FLOW means, on any date of determination with respect to
the fiscal year then most recently ended, Operating Cash Flow of the
Companies, PLUS any net decrease in Working Capital, LESS
10
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
the SUM of, without duplication, (a) Capital Expenditures made by the
Companies during such fiscal year which were permitted to be made under the
terms of the Loan Papers, (b) required payments of principal on Permitted
Debt of the Companies made during such fiscal year (other than payments made
pursuant to SECTIONS 2.7(b), 2.7(c), and 2.7(d)), (c) the aggregate Taxes
actually paid in cash by the Companies during such fiscal year, (d)
Distributions made by the Companies during such fiscal year to the extent
permitted by the Loan Papers; (e) Interest Expense paid by the Companies
during such fiscal year or accrued during such fiscal year in compliance with
the Loan Papers, SO LONG AS such accrued interest is actually paid by the
Companies during such fiscal year or the first two (2) calendar months of the
following fiscal year in compliance with the Loan Papers; and (f) any net
increase in Working Capital.
EXCESS TOWER PROCEEDS means with respect to any Dobson Tower Resale,
the amount payable to Borrower from Dobson Tower in accordance with the
Sygnet Towers Sale Agreement, which amount shall be no less than the amount
received by Dobson Tower, on or after the date of consummation of such Dobson
Tower Resale, after (i) deduction of Assumed Taxes, (ii) payment of all usual
and customary brokerage commissions and all other reasonable fees and
expenses incurred by Dobson Tower related to such Dobson Tower Resale
(including, without limitation, reasonable attorneys' fees and closing costs
incurred by Dobson Tower in connection with such Dobson Tower Resale), (iii)
deduction of appropriate amounts to be provided by Dobson Tower as a reserve,
in accordance with GAAP, against any liabilities retained by Dobson Tower
after such Dobson Tower Resale, which liabilities are associated with the
Sygnet Towers, (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 Dobson Tower Resale; and (v)
deduction for the amount necessary to liquidate the outstanding amount of any
preferred stock of Dobson Tower which is required to be repaid as a result of
such Dobson Tower Resale.
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 Term
Loan Facilities; FACILITY means, any of the Revolver Facility, Term Loan A,
Term Loan B, or Term Loan C.
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.
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
FINANCIAL STATEMENTS means balance sheets, statements of operations,
statements of shareholders' equity, 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' equity shall be in comparative form to the prior fiscal
year-end figures.
FIXED CHARGE COVERAGE RATIO means, at any date of determination with
respect to the most recently ended Rolling Period, the ratio of: (a) the
Operating Cash Flow of the Companies to (b) the SUM of (i) all mandatory
prepayments and regularly-scheduled principal payments with respect to Debt
of the Companies required to be paid, (ii) the amount paid for Capital
Expenditures by the Companies, (iii) cash Interest Expense of the Companies,
(iv) cash Taxes of the Companies, to the extent allocable to such Companies
pursuant to the Tax Sharing Agreement, and (v) distributions and dividends
paid in cash by Borrower.
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.
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. With respect
to the calculation of Interest Expense for Borrower and the Companies,
Interest Expense shall include the aggregate amount of cash interest paid on
the Senior Reserve Notes to the extent Borrower makes loans, advances,
investments, or Distributions to Parent to service regularly-scheduled cash
interest payments on such Senior Reserve Notes. With respect to the
calculation of Interest Expense for Parent, Interest Expense shall expressly
exclude any interest paid on the Senior Reserve Notes from the proceeds of
the Pledged Government Securities securing such Senior Reserve Notes.
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
INTEREST PERIOD is determined in accordance with SECTION 3.9.
JUNIOR PREFERRED STOCK means shares of (i) the Junior Exchangeable
Preferred Stock issued by Communications, in form, upon terms, and in an
amount acceptable to Administrative Agent; (ii) any additional Junior
Preferred Stock (on substantially identical terms to the Junior Preferred
Stock described in ITEM (i) preceding) issued in lieu of dividends on the
Junior Preferred Stock described in ITEM (i); and (iii) additional Junior
Preferred Stock issued in connection with any permitted adjustment,
supplement, or restatement of the applicable Certificate of Designation for
such Junior Preferred Stock in form and upon terms acceptable to
Administrative Agent.
JUNIOR DEBENTURES means any junior exchangeable debentures issued in
exchange for all or any portion of the Junior Preferred Stock, in form and
upon terms acceptable to Administrative Agent.
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.
LEVERAGE RATIO means, either (a) at any date of determination on or
prior to March 31, 1999, thereof, the ratio of Debt of the Companies to
Annualized Operating Cash Flow or (b) on any date of determination occurring
after April 1, 1999, the ratio of Debt of the Companies to Operating Cash
Flow, all calculated for the Companies on a consolidated basis; PROVIDED
THAT, solely for purposes of determining the "APPLICABLE MARGIN" and the
"APPLICABLE MARGIN FOR COMMITMENT FEES" after December 31, 2001, the Debt
component of the Leverage Ratio shall, on any date of determination, be equal
to the Debt of the Parent and its Subsidiaries on a consolidated basis;
PROVIDED, FURTHER, THAT if any Company acquires the Pennsylvania 2 Rural
Service Area within the first fiscal quarter of 1999, then any calculation of
Leverage Ratio for the fiscal quarter ending March 31, 1999, shall exclude
(i) any Debt incurred or recognized (up to a maximum of $6,000,000) with
respect to such Acquisition and (ii) to the extent any Debt is excluded, the
Operating Cash Flow attributable to such Acquisition.
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, 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 on and after the Closing
Date, (c) any Financial Hedge between any Company 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.
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
LOGIX means Logix Communications Enterprises, Inc., a Wholly-owned
Subsidiary of Communications.
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 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, either singly or in
the aggregate, or (c) Default or Potential Default.
MATERIAL AGREEMENT means any contract material to the respective
business of the Companies (including with respect to the Systems), including
the Sygnet Towers Lease.
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, 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 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.
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
NOTES means, at the time of any determination thereof, all
outstanding and unpaid Revolver Notes, the Swing Line Note, and Term Notes.
NOTICE OF BORROWING is defined in SECTION 2.8(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 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.
OFFERING MEMORANDA (or individually, an OFFERING MEMORANDUM) means
(i) the Offering Memorandum issued January 5, 1998, by Communications
pursuant to which 175,000 shares of the Senior Preferred Stock were offered
for purchase; and (ii) the Offering Memorandum issued December 16, 1998,
pursuant to which 64,646 shares of the Senior Preferred Stock were offered
for purchase (as the same may hereafter be amended, modified, supplemented,
or restated from time to time with the prior written approval of
Administrative Agent).
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) net
income or deficit during such period, PLUS (b) to the extent already deducted
in computing such net income (i) income Tax expense, (ii) Interest Expense
during such period, and (iii) depreciation, amortization, and other
non-cash-expense items during such period, LESS (c) interest and dividend
income, LESS (d) other non-cash components of income, adjusted as required to
take into account any minority ownership interest; PROVIDED, HOWEVER, with
respect to any Cellular Partnership of Borrower or its Subsidiaries which is
indebted to any Company (the "CELLULAR PARTNERSHIP DEBT"), such adjustments
for minority interests shall be made only when either (i) such Cellular
Partnership Debt has been repaid in full or (ii) a Company does not have a
Lien upon and right to apply 100% of the Operating Cash Flow of such Cellular
Partnership to repayment of such Cellular Partnership Debt. In calculating
Operating Cash Flow for the Companies for the fiscal quarters ending
September 30, 1998, December 31, 1998, and March 31, 1999, such Operating
Cash Flow shall be increased (to the extent deducted from net income and not
already added back in calculating Operating Cash Flow) by pro forma
adjustments to expenses for the applicable quarter not to exceed $1,104,500
for the fiscal quarters ending September 30, 1998, and December 31, 1998, and
$380,500 for the fiscal quarter ending March 31, 1999. 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 for any
Person, as the case may be, such amount shall be calculated after giving
effect to Acquisitions and divestitures of Person (to the extent permitted by
the Loan Papers in the case of the Companies) 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.
PARENT means Dobson/Sygnet Communications Company (formerly known as
Dobson/Sygnet Holding Company, and Front Nine Holding Company), an Oklahoma
corporation.
PARTICIPANT is defined in SECTION 13.13(e).
15
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
PBGC means the Pension Benefit Guaranty Corporation, or any successor
thereof, established pursuant to ERISA.
PERMITTED ACQUISITION means:
(a) The Sygnet Merger, the Dobson Acquisition, and, if no
Default or Potential Default exists or arises as a result thereof, the
Acquisition of the Pennsylvania 2 Rural Service Area; PROVIDED, HOWEVER,
in the case of the Pennsylvania 2 Rural Service Area Acquisition, such
Acquisition shall not constitute a "PERMITTED ACQUISITION" hereunder
unless and until Borrower complies with CLAUSE (b)(iv) hereunder;
(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) the purchase price for such Acquisition must be
less than or equal to $15,000,000 and when aggregated with the
purchase price of each other Acquisition consummated in such
calendar year, may not exceed $15,000,000 in the aggregate;
(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) each Authorization issued by the FCC or any PUC
to be acquired by any Company shall be valid, binding,
enforceable, and subsisting without any defaults thereunder or
enforceable adverse limitations thereon and shall not be subject
to any proceedings or claims opposing the issuance, development,
or use thereof or contesting the validity thereof UNLESS such
Company has entered into an agreement with the seller of such
Authorization protecting such Company from such adverse
limitations, proceedings, or claims, which agreement shall be on
terms and conditions satisfactory to Agents.
(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
16
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
(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 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.
PLEDGED GOVERNMENT SECURITIES means the portfolio of United States
government securities that are purchased with proceeds of the Senior Reserve
Notes and which are pledged as security for the first six interest payments
on the Senior Reserve Notes.
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, collectively, the Senior Preferred Stock and
the Junior Preferred Stock.
PRIME RATE means the per annum rate of interest established from time
to time by NationsBank, N.A., as its prime rate, which rate may not be the
lowest rate of interest charged by NationsBank, N.A. to its customers.
PRINCIPAL DEBT means, at the time of any determination thereof, the
sum of the Revolver Principal Debt and the Term Principal Debt, or with
respect to a particular Facility, the aggregate unpaid principal balance of
all Borrowings under that 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 Debt for the twelve months
following the date of determination and with respect to the Revolver
Principal Debt, the difference between the outstanding Revolver Principal
Debt on any date of determination, and the amount to which the Revolver
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) including,
17
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
without limitation, the Senior Reserve Notes to the extent Borrower makes or
anticipates making loans, advances, investments, or Distributions to Parent
to service regularly-scheduled cash interest payments on such Senior Reserve
Notes:
{[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 in respect of a Facility, the percentage stated
opposite such Lender's name under the heading for that Facility 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 sharing any amount or fee payable to any Lender in respect of a Facility,
the proportion which the portion of the Principal Debt for the applicable
Facility owed to such Lender bears to the Principal Debt under the applicable
Facility owed to all Lenders at the time in question, and (c) 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
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).
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
18
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
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
funding the Term Facilities, those Lenders holding 50.1% or more of the sum
of the Total Commitment; (b) on any date of determination prior to the
Termination Date for the Revolver Facility, those Lenders holding 50.1% or
more of the sum of the Revolver Commitment and the Term Principal Debt; and
(c) on any date of determination on or after the Termination Date for the
Revolver Facility, those Lenders holding 50.1% of the Principal Debt,
PROVIDED THAT, in no event under CLAUSES (a), (b), and (c) shall Required
Lenders be less than two Lenders, unless there is only one Lender hereunder.
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.
REVOLVER COMMITMENT means an amount (subject to reduction or
cancellation as herein provided) equal to $50,000,000.
REVOLVER COMMITMENT USAGE means, at the time of any determination
thereof, the aggregate Revolver Principal Debt (whether under the Swing Line
Subfacility, or otherwise).
REVOLVER FACILITY means the credit facility as described in and
subject to the limitations set forth in SECTION 2.1 hereof and the Swing Line
Subfacility.
REVOLVER LENDERS means those Lenders set forth under the heading
"REVOLVER FACILITY" on the most-recently amended SCHEDULE 2.1 to the
Agreement.
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.
RIGHTS means rights, remedies, powers, privileges, and benefits.
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
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); PROVIDED THAT, notwithstanding the foregoing, for any
calculation made with respect to the Companies as of any date of
determination occurring during the period from the Closing Date to (but not
including) June 30, 1999, the applicable Rolling Period shall be the fiscal
quarter(s) indicated below which correspond(s) to any applicable date of
determination as set forth below:
<TABLE>
<CAPTION>
DETERMINATION DATES CORRESPONDING ROLLING PERIOD
<S> <C>
Closing Date to (but not including) Fiscal Quarter ending September 30,
December 31, 1998 1998
December 31, 1998 to (but not Fiscal Quarters ending September 30,
including) March 31, 1999 and December 31, 1998
March 31, 1999 to (but not Fiscal Quarters ending September 30,
including) June 30, l999 1998, December 31, 1998, and
March 31, 1999
</TABLE>
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 DEBENTURES means any senior exchangeable debentures issued in
exchange for all or any portion of the Senior Preferred Stock (all as more
particularly described in the related Offering Memoranda), which shall be in
form and upon terms acceptable to Administrative Agent.
SENIOR PREFERRED STOCK means (i) 175,000 shares of Senior
Exchangeable Preferred Stock issued by Communications which is mandatorily
redeemable in 2008 and which was offered pursuant to the Offering Memorandum
dated January 5, 1998; (ii) 64,646 shares of Senior Exchangeable Preferred
Stock issued by Communications which is mandatorily redeemable in 2008, and
which was offered pursuant to the Offering Memorandum dated December 16,
1998; (iii) any additional Senior Preferred Stock (in substantially identical
terms as the Senior Preferred Stock with respect to which such stock is being
issued) issued in lieu of dividends on the Senior Preferred Stock described
in ITEMS (i) and (ii); and (iv) additional Senior Preferred Stock issued in
connection with any permitted adjustment, supplement, or restatement of the
applicable Certificate of Designation for such Senior Preferred Stock in form
and upon terms acceptable to Administrative Agent.
SENIOR RESERVE NOTES means the 12 1/4% Senior Reserve Notes due 2008,
issued by Parent pursuant to an Indenture dated December 23, 1998, between
Parent and United States Trust Company of New York, as Trustee for the
purchasers of such Senior Reserve Notes and all documents executed pursuant
thereto or in connection therewith, including all amendments, modifications,
supplements or restatements thereof in form and upon terms acceptable to
Administrative Agent.
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 (f)) 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 $3,000,000.
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DOBSON/SYGNET OPERATING 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 Debts as they mature, and (c)
such Person does not have unreasonably small capital to conduct such Person's
businesses.
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.
SWING LINE BORROWING means any Borrowing under the Swing Line
Subfacility.
SWING LINE COMMITMENT means an amount (subject to reduction or
cancellation as herein provided) equal to $10,000,000.
SWING LINE MATURITY DATE means December 22, 1999, and successive one
year extensions thereof if agreed to in writing by NationsBank in its sole
discretion, BUT IN NO EVENT, a date later than the Termination Date of the
Revolver Facility.
SWING LINE NOTE means a promissory note in substantially the form of
EXHIBIT A-2, and all renewals and extensions of all or any part thereof.
SWING LINE PRINCIPAL DEBT means, on any date of determination, that
portion of the Principal Debt outstanding under the Swing Line Subfacility.
SWING LINE SUBFACILITY means the subfacility under the Revolver
Facility described in, and subject to the limitations of, SECTION 2.2.
SYGNET COMMUNICATIONS means Sygnet Communications, Inc., an Ohio
corporation, a Wholly-owned Subsidiary of Borrower after the consummation of
the Sygnet Merger.
SYGNET MERGER means the merger of Dobson/Sygnet with and into Sygnet
Wireless, Inc. on the Closing Date pursuant to the Sygnet Merger Agreement.
SYGNET MERGER AGREEMENT means the Agreement and Plan of Merger dated
as of July 28, 1998 between Dobson/Sygnet and Sygnet Wireless, Inc., together
with all amendments or modifications thereto in form and terms acceptable to
Administrative Agent.
SYGNET MERGER DOCUMENTS means the Sygnet Merger Agreement and all
documents or instruments executed pursuant thereto or in connection
therewith, together with all amendments, modifications, supplements, or
restatements thereof in form and upon terms satisfactory to Administrative
Agent.
SYGNET SENIOR NOTES means the $110,000,000 11.50% notes due 2006
issued by Sygnet Wireless, Inc., as the same may have been amended or
modified.
SYGNET TOWERS means all cellular transmission towers owned by Sygnet
Communications on the Closing Date.
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
SYGNET TOWERS LEASE means the Master Site License Agreement, and
collectively, the Site Licenses, dated December 23, 1998, between Sygnet
Communications and Dobson Tower, whereby Sygnet Communications leases the
Sygnet Towers from Dobson Tower, which agreements are in form and upon terms
acceptable to Administrative Agent.
SYGNET TOWERS SALE means the sale of the Sygnet Towers by Sygnet
Communications to Dobson Tower on terms and conditions satisfactory to
Administrative Agent.
SYGNET TOWERS SALE AGREEMENT means the Asset Purchase Agreement
between Sygnet Communications and Dobson Tower dated December 23, 1998, in
which Sygnet Communications agrees to sell substantially all of the Sygnet
Towers to Dobson Tower, which agreement is in form and upon terms acceptable
to Administrative Agent.
SYGNET TOWERS SALE DOCUMENTS means the Sygnet Towers Sale Agreement,
the Sygnet Towers Lease, and all other documents delivered pursuant thereto
or in connection with the consummation of the Sygnet Towers Sale or execution
and performance of the Sygnet Towers Lease.
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 LENDERS means, collectively, the Term Loan A Lenders, the Term
Loan B Lenders, and the Term Loan C Lenders.
TERM LOAN A means the credit facility as described in and subject to
the limitations set forth in SECTION 2.3 hereof.
TERM LOAN A COMMITMENT means an amount (subject to reduction or
cancellation as herein provided) equal to $125,000,000.
TERM LOAN A LENDERS means those Lenders set forth under the heading
"TERM LOAN A" on the most-recently amended SCHEDULE 2.1 to the Agreement.
TERM LOAN A NOTE means a promissory note in substantially the form of
EXHIBIT A-3, and all renewals and extensions of all or any part thereof.
TERM LOAN A PRINCIPAL DEBT means, on any date of determination, the
aggregate unpaid principal balance of all Borrowings under Term Loan A.
TERM LOAN B means the credit facility as described in and subject to
the limitations set forth in SECTION 2.4 hereof.
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
TERM LOAN B COMMITMENT means an amount (subject to reduction or
cancellation as herein provided) equal to $155,000,000.
TERM LOAN B LENDERS means those Lenders set forth under the heading
"TERM LOAN B" on the most-recently amended SCHEDULE 2.1 to the Agreement.
TERM LOAN B NOTE means a promissory note in substantially the form of
EXHIBIT A-4, and all renewals and extensions of all or any part thereof.
TERM LOAN B PRINCIPAL DEBT means, on any date of determination, the
aggregate unpaid principal balance of all Borrowings under Term Loan B.
TERM LOAN C means the credit facility as described in and subject to
the limitations set forth in SECTION 2.5 hereof.
TERM LOAN C COMMITMENT means an amount (subject to reduction or
cancellation as herein provided) equal to $100,000,000.
TERM LOAN C LENDERS means those Lenders set forth under the heading
"TERM LOAN C" on the most-recently amended SCHEDULE 2.1 to the Agreement.
TERM LOAN C NOTE means a promissory note in substantially the form of
EXHIBIT A-5, and all renewals and extensions of all or any part thereof.
TERM LOAN C PRINCIPAL DEBT means, on any date of determination, the
aggregate unpaid principal balance of all Borrowings under Term Loan C.
TERM LOAN FACILITIES means, collectively, Term Loan A, Term Loan B,
and Term Loan C, and TERM LOAN FACILITY means, any of Term Loan A, Term Loan
B, or Term Loan C.
TERM NOTES means collectively, the Term Loan A Notes, the Term Loan B
Notes, and the Term Loan C Notes.
TERM PRINCIPAL DEBT means, on any date of determination, the SUM of
the Term Loan A Principal Debt, the Term Loan B Principal Debt, and the Term
Loan C Principal Debt.
TERMINATION DATE means (a) for purposes of the Revolver Facility, the
EARLIER of (x) September 23, 2006, and (y) the effective date of any other
termination, cancellation, or acceleration of Lenders' commitments to lend
under, and in accordance with, this Agreement; (b) for purposes of the Term
Loan A, the EARLIER of (x) September 23, 2006, and (y) the effective date of
any other termination, cancellation, or acceleration of Term Loan A in
accordance with this Agreement; (c) for purposes of the Term Loan B, the
EARLIER of (x) March 23, 2007, and (y) the effective date of any other
termination, cancellation, or acceleration of Term Loan B in accordance with
this Agreement; and (d) for purposes of the Term Loan C, the EARLIER of (x)
December 23, 2007, and (y) the effective date of any other termination,
cancellation, or acceleration of Term Loan C in accordance with this
Agreement, HOWEVER in no event shall the Termination Date be less than (i) 12
months prior to the maturity of the Sygnet Senior Notes or the Communications
Bond Debt with respect to the Revolver Facility and Term Loan A; (ii) 9
months prior to the maturity of the Sygnet Senior Notes or the Communications
Bond Debt with respect to Term Loan
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
B; and (iii) 6 months prior to the maturity of the Sygnet Senior Notes or the
Communications Bond Debt with respect to Term Loan C.
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
Term Loan Facilities (as the same may have been reduced or canceled as
provided in the Loan Papers) then in effect.
TYPE means any type of Borrowing determined with respect to the
interest option applicable thereto.
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.
WORKING CAPITAL means the SUM of all current assets other than cash,
LESS the SUM of all current liabilities other than the current portion of
long term Debt, all as determined in accordance with GAAP.
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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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
SECTION 2 BORROWING PROVISIONS.
2.1 REVOLVER FACILITY. Subject to and in reliance upon the
terms, conditions, representations, and warranties in the Loan Papers, each
Revolver Lender severally and not jointly agrees to lend to Borrower such
Revolver Lender's Pro Rata Part of one or more Borrowings under the Revolver
Facility not to exceed such Revolver 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 for the Revolver
Facility; (b) each such Borrowing shall be in an amount not less than (A)
$5,000,000 or a greater integral multiple of $1,000,000 (if a Base Rate
Borrowing or Eurodollar Rate Borrowing) or (B) $250,000 or a greater integral
multiple thereof (if a Swing Line Borrowing); and (c) on any date of
determination, the Revolver Commitment Usage shall never exceed the Revolver
Commitment.
2.2 SWING LINE SUBFACILITY.
(a) For the convenience of the parties and as an integral
part of the transactions contemplated by the Loan Papers, NationsBank,
solely for its own account, may make any requested Borrowing of $250,000
or a greater integral multiple thereof, subject to those terms and
conditions applicable to Borrowings set forth in SECTION 7.3(b), (c),
(d), and (e), directly to Borrower as a Swing Line Borrowing without
requiring any other Lender to fund its Pro Rata Part thereof unless and
until SECTION 2.2(b) is applicable; PROVIDED THAT: (i) each such
Borrowing must occur on a Business Day prior to, and not on or after,
the Swing Line Maturity Date; (ii) the aggregate Swing Line Principal
Debt outstanding on any date of determination shall not exceed the Swing
Line Commitment; (iii) on any date of determination, the Revolver
Commitment Usage shall never exceed the Revolver Commitment; (iv) at the
time of such Swing Line Borrowing, no Default or Potential Default shall
have occurred and be continuing; (v) each Swing Line Borrowing shall
bear interest at a rate per annum equal to the LESSER OF (a) the Base
Rate plus the Applicable Margin for Base Rate Borrowings under the
Revolver Facility, AND (b) the Maximum Rate; PROVIDED THAT at any time
after Revolver Lenders are deemed to have purchased pursuant to
SECTION 2.2(b) a participation in any Swing Line Borrowing, such
Borrowing shall bear interest at the Default Rate; and (vi) no
additional Swing Line Borrowing shall be made at any time after any
Revolver Lender has refused, notwithstanding the requirements of
SECTION 2.2(b), to purchase a participation in any Swing Line Borrowing
as provided in such Section, and until such purchase shall occur or
until the Swing Line Borrowing has been repaid. Each Borrowing under
the Swing Line Subfacility shall be available and may be prepaid on same
day telephonic notice from Borrower to NationsBank, SO LONG AS such
notice is received by NationsBank prior to 12:00 noon (Dallas, Texas
time). Interest on Swing Line Borrowings shall be paid monthly in
arrears on the last Business Day of each month. Principal on each Swing
Line Borrowing shall be repaid on the last Business Day of the month
following such Swing Line Borrowing.
(b) If Borrower fails to repay any Swing Line Borrowing as
provided herein (and in any event upon the earlier to occur of a Default
or the Swing Line Maturity Date), Administrative Agent shall timely
notify each Revolver Lender of such failure and of the date and amount
not paid. No later than the close of business on the date such notice
is given (if such notice was given prior to 12:00 noon Dallas time on
any Business Day, or, if made at any other time, on the next Business
Day following the date of such notice), each Revolver Lender shall be
deemed to have irrevocably and unconditionally purchased and received
from NationsBank an undivided interest
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
and participation in such Swing Line Borrowing to the extent of such
Revolver Lender's Pro Rata Part (with respect to the Revolver Facility)
thereof, and each Revolver Lender shall make available to NationsBank
in immediately available funds such Revolver Lender's Pro Rata Part
(with respect to the Revolver Facility) of such unpaid amount. All
such amounts payable by any Revolver Lender shall include interest
thereon from the date on which such payment is payable by such Revolver
Lender to, but not including, the date such amount is paid by such
Revolver Lender to Administrative Agent, at the Federal Funds Rate. If
such Lender does not promptly pay such amount upon Administrative
Agent's demand therefor, and until such time as such Revolver Lender
makes the required payment, NationsBank shall be deemed to continue to
have outstanding a Swing Line Borrowing in the amount of such unpaid
obligation. Each payment by Borrower of all or any part of any Swing
Line Borrowing shall be paid to Administrative Agent for the ratable
benefit of NationsBank and those Revolver Lenders who have funded their
participations in such Swing Line Principal Debt under this SECTION
2.2(b); PROVIDED THAT, with respect to any such participation, all
interest accruing on the Swing Line Principal Debt to which such
participation relates prior to the date of funding such participation
shall be payable solely to NationsBank for its own account.
2.3 TERM LOAN A. Subject to and in reliance upon the terms,
conditions, representations, and warranties in the Loan Papers, each Term
Loan A Lender severally and not jointly agrees to lend to Borrower in a
single Borrowing on the Closing Date an amount up to such Lender's Committed
Sum under Term Loan A; PROVIDED THAT (a) the aggregate Borrowings under Term
Loan A from all Term Loan A Lenders shall never exceed the Term Loan A
Commitment, and (b) Term Loan A Borrowings may not be repaid and reborrowed.
2.4 TERM LOAN B. Subject to and in reliance upon the terms,
conditions, representations, and warranties in the Loan Papers, each Term
Loan B Lender severally and not jointly agrees to lend to Borrower in a
single Borrowing on the Closing Date an amount up to such Lender's Committed
Sum under Term Loan B; PROVIDED THAT (a) the aggregate Borrowings under Term
Loan B from all Term Loan B Lenders shall never exceed the Term Loan B
Commitment, and (b) Term Loan B Borrowings may not be repaid and reborrowed.
2.5 TERM LOAN C. Subject to and in reliance upon the terms,
conditions, representations, and warranties in the Loan Papers, each Term
Loan C Lender severally and not jointly agrees to lend to Borrower in a
single Borrowing on the Closing Date an amount up to such Lender's Committed
Sum under Term Loan C; PROVIDED THAT (a) the aggregate Borrowings under Term
Loan C from all Term Loan C Lenders shall never exceed the Term Loan C
Commitment, and (b) Term Loan C Borrowings may not be repaid and reborrowed.
2.6 TERMINATIONS OR REDUCTIONS OF COMMITMENTS.
(a) VOLUNTARY COMMITMENT REDUCTIONS. 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 ratably among the Revolver Lenders in accordance with
their respective Committed Sums under the Revolver Facility. Promptly
after receipt of such notice of termination or reduction,
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
Administrative Agent shall notify Revolver Lenders 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 Principal
Debt outstanding, this Agreement shall be terminated to the extent
specified in SECTION 13.14, 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 REVOLVING COMMITMENT REDUCTION. The Revolver
Commitment shall be automatically and permanently reduced on each date
on which reductions of the Revolver Commitment are required to be made
pursuant to SECTION 3.2(c).
(c) SWING LINE FACILITY COMMITMENT REDUCTION. The Swing
Line Facility shall be automatically and permanently reduced from time
to time on the date of each reduction in the Revolver Commitment by the
amount, if any, by which the Swing Line Commitment exceeds the Revolver
Commitment then in effect.
(d) TERM FACILITY COMMITMENT REDUCTION. As of the date of
any principal payment or prepayment of any Term Principal Debt, the Term
Loan A Commitment, the Term Loan B Commitment, and the Term Loan C
Commitment, as the case may be, shall be reduced by the amount of each
such principal payment or prepayment made with respect to such Facility,
and the Committed Sum of each Lender under the respective Facility shall
be ratably reduced by the amount of each such principal payment or
prepayment made with respect to such Facility.
2.7 PREPAYMENTS.
(a) OPTIONAL PREPAYMENTS.
(i) Except as set forth herein, after giving
Administrative Agent advance written notice of the intent to
prepay, Borrower may voluntarily prepay all or any part of the
Revolver Principal Debt, the Swing Line Principal Debt, the Term
Loan A Principal Debt, and the Term Loan B 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 the third Business Day preceding the date of prepayment
of any Borrowing, (ii) each such partial prepayment must be in a
minimum amount of at least $3,000,000 (other than prepayment of
Swing Line Borrowings which may be in integral multiples of
$250,000) or a greater integral multiple of $1,000,000 thereof;
(iii) any Eurodollar Rate Borrowing may only be prepaid at the
end of an applicable Interest Period; 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, together with
(unless such prepayment is made with respect to a Base Rate
Borrowing under the Revolver Facility or the Swing Line
Subfacility) accrued and unpaid interest to the date of such
payment on the aggregate principal amount prepaid. Unless a
Default or Potential Default has occurred and is continuing (or
would arise as a result thereof), any payment
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
or prepayment of the Revolver Principal Debt or Swing Line
Principal Debt may be reborrowed by Borrower, subject to the
terms and conditions hereof.
(ii) After giving Administrative Agent advance
written notice of the intent to prepay, Borrower may voluntarily
prepay all or any part of the Term Loan C Principal Debt from
time to time; PROVIDED THAT: (i) such notice must be received by
Administrative Agent by 12:00 noon Dallas, Texas time on the
third Business Day preceding the date of prepayment; (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;
(iii) any Borrowing under Term Loan C may only be prepaid at the
end of an applicable Interest Period; (iv) Borrower shall pay
any related Consequential Loss within ten (10) days after demand
therefor; and (v) with respect to Term Loan C prepayments made
prior to December 31, 2000, Borrower shall pay a redemption
premium on such date of repayment equal to (A) 2% of the
principal amount of the Term Loan C Principal Debt being prepaid
for prepayments made from the Closing Date to December 31, 1999;
and (B) 1% of the principal amount of the Term Loan C Principal
Debt being prepaid for prepayments being made on or after
January 1, 1999 through December 31, 2000. Each notice of
prepayment shall specify the prepayment date, and the amount to
be prepaid and shall constitute a binding obligation of Borrower
to make a prepayment on the date stated therein, together with
the applicable redemption premium and all accrued and unpaid
interest to the date of such prepayment on the aggregate
principal amount prepaid.
(b) MANDATORY PREPAYMENTS FROM NET CASH PROCEEDS. Until
such time as the Principal Debt has been repaid in full, the Revolver
Commitment and the Principal Debt 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 Revolver Commitment and the Principal Debt shall be
permanently reduced or prepaid, as the case may be, by an amount
equal to 100% of the Net Cash Proceeds realized by 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 Revolver Commitment and
the Principal Debt shall be permanently reduced or prepaid, as
the case may be, in the order and manner specified herein, by an
amount equal to 100% of the Net Cash Proceeds in excess of
$3,000,000 realized by any Company from such Significant Sale
(or if such disposition is a Significant Sale as a result of
aggregation with other asset dispositions in the same fiscal
year, 100% of the aggregate Net Cash Proceeds received from all
such asset dispositions in the calendar year in excess of
$3,000,000), if such Net Cash Proceeds or any portion thereof
have not been reinvested in similar assets of the Companies
within eleven (11) months from the date of consummation of such
Significant Sale or other asset disposition, as the case may be;
(iii) Concurrently with any Equity Issuance by
Borrower, the Revolver Commitment and the Principal Debt shall
be permanently reduced or prepaid, as the case
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
may be, in the order and manner specified herein, by an amount
equal to 100% of the Net Cash Proceeds realized by Borrower from
such Equity Issuance;
Each commitment reduction or prepayment under this SECTION 2.7(b) shall
be applied ratably to the Revolver Commitment and the Term Principal
Debt (for purposes hereof, "RATABLY", for each Facility, on any date of
determination, shall mean the proportion that either the Revolver
Commitment or the Term Principal Debt under the applicable Term Loan
Facility, as the case may be, bears to the SUM of the Revolver
Commitment and the Term Principal Debt).
(c) MANDATORY PREPAYMENTS FROM EXCESS CASH FLOW. Borrower
shall, no later than the thirtieth (30th) day following the date on
which it delivers the Financial Statements required under SECTION 9.3(a)
for fiscal year 1999 and each fiscal year thereafter, (but in any event
within 120 days after the end of Borrower's fiscal year), prepay an
aggregate principal amount equal to either (i) 75% of Excess Cash Flow
for the fiscal year covered by such Financial Statements, if the
Leverage Ratio of the Companies is greater than 4.0:1.0 or (ii) 50% of
Excess Cash Flow for the fiscal year covered by such Financial
Statements, if the Leverage Ratio of the Companies is less than or equal
to 4.0:1.0. Each reduction or prepayment under this SECTION 2.7(c)
shall be applied ratably to the Revolver Commitment, the Term Loan A
Principal Debt, and the Term Loan B Principal Debt, or if no Term Loan A
Principal Debt or Term Loan B Principal Debt remains outstanding, then
to the Term Loan C Principal Debt (for purposes hereof, "RATABLY," for
each Facility, on any date of determination, shall mean the proportion
that the Revolver Commitment or the Term Principal Debt under the
applicable Term Loan Facility, as the case may be, bears to the SUM of
the Revolver Commitment and the aggregate Term Principal Debt under the
applicable Term Facilities being prepaid). Amounts prepaid pursuant to
this SECTION 2.7(c), shall not reduce the Revolver Commitment unless (i)
a Default or Potential Default then exists, or (ii) no Term Loan
Principal Debt is then outstanding.
(d) MANDATORY PREPAYMENTS FROM EXCESS TOWER PROCEEDS. Upon
consummation of the Dobson Tower Resale, Borrower shall, concurrently
with its receipt of any Excess Tower Proceeds, ratably prepay the Term
Loan A Principal Debt and the Term Loan B Principal Debt, in an amount
equal to 100% of the Excess Tower Proceeds. Each reduction or
prepayment under this SECTION 2.7(d) shall be applied ratably to the
Term Loan A Principal Debt and the Term Loan B Principal Debt (for
purposes of this CLAUSE (d), "RATABLY," on any date of determination,
shall mean the proportion that either the Term Loan A Principal Debt or
the Term Loan B Principal Debt bears to the SUM of the Term Loan A
Principal Debt and the Term Loan B Principal Debt).
(e) MANDATORY PREPAYMENTS FROM COMMITMENT REDUCTION. On any
Business Day that either (i) the Revolver Commitment Usage exceeds the
Revolver Commitment or (ii) the Swing Line Principal Debt exceeds the
Swing Line Commitment, Borrower shall prepay the Revolving Principal
Debt or the Swing Line Principal Debt, as the case may be, in an amount
equal to such excess.
(f) TERM LOAN OPT-OUTS.
(i) TERM LOAN B. To the extent there is any
Revolver Commitment or Term Loan A Principal Debt outstanding,
any Term Loan B Lender, at its option, may elect not to accept
such partial prepayment under this SECTION 2.7 (other than
SECTION 2.7(d)) (such Lender being a "DECLINING B LENDER"), in
which event the provisions of the next sentence shall apply. On
the prepayment date, an amount equal to that portion of the
prepayment
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
amount available to prepay Term Loan B Lenders (less any amounts
that would otherwise be payable to Declining B Lenders) shall
be applied ratably to prepay Term Loan B Principal Debt owed
to Term Loan B Lenders other than Declining B Lenders and any
amounts that would otherwise have been applied to prepay Term
Loan B Principal Debt owing to Declining B Lenders shall
instead be applied ratably to prepay the remaining Term Loan A
Principal Debt and reduce the Revolver Commitment as provided
in SECTIONS 2.7(b) through 2.7(f); PROVIDED FURTHER, that upon
prepayment in full of the Term Loan B Principal Debt owing to
Term Loan B Lenders other than Declining B Lenders the remainder
of any prepayment amount that is to be applied to Term Loan B
Principal Debt shall be applied ratably to prepay Term Loan B
Principal Debt owing to Declining B Lenders. Any Term Loan B
Lender may elect not to accept its ratable share of a partial
prepayment by giving written notice to the Administrative Agent
not later than 11:00 a.m. Dallas, Texas time on the Business
Day immediately preceding the scheduled prepayment date.
(ii) TERM LOAN C. To the extent there is any
Revolver Commitment, Term Loan A Principal Debt, or Term Loan B
Principal Debt outstanding, any Term Loan C Lender, at its
option, may elect not to accept such partial prepayment under
this SECTION 2.7 (other than SECTION 2.7(d)) (such Lender being
a "DECLINING C LENDER"), in which event the provisions of the
next sentence shall apply. On the prepayment date, an amount
equal to that portion of the prepayment amount available to
prepay Term Loan C Lenders (less any amounts that would
otherwise be payable to Declining C Lenders) shall be applied
ratably to prepay Term Loan C Principal Debt owed to Term Loan C
Lenders other than Declining C Lenders and any amounts that
would otherwise have been applied to prepay Term Loan C
Principal Debt owing to Declining C Lenders shall instead be
applied ratably to prepay the remaining Term Loan A Principal
Debt and Term Loan B Principal Debt, and reduce the Revolver
Commitment as provided in SECTIONS 2.7(b) through 2.7(f);
PROVIDED FURTHER, that upon prepayment in full of Term Loan C
Principal Debt owing to Term Loan C Lenders other than Declining
C Lenders the remainder of any prepayment amount that is to be
applied to Term Loan C Principal Debt shall be applied ratably
to prepay Term Loan C Principal Debt owing to Declining C
Lenders. Any Term Loan C Lender may elect not to accept its
ratable share of a partial prepayment by giving written notice
to the Administrative Agent not later than 11:00 a.m. Dallas,
Texas time on the Business Day immediately preceding the
scheduled prepayment date.
(g) MANDATORY PREPAYMENTS OF INTEREST/CONSEQUENTIAL LOSS.
All prepayments under this SECTION 2.7 shall be made, together with
accrued interest to the date of such prepayment on the principal amount
prepaid, together with any Consequential Loss arising as a result
thereof.
(h) APPLICATION OF REVOLVER COMMITMENT REDUCTION. All
Revolver Commitment reductions hereunder shall be applied ratably to
each Revolver Lender's Committed Sum under the Revolver Facility and
shall be applied to the regularly scheduled Revolver Commitment
reductions under SECTION 3.2(c) in inverse order of maturities; PROVIDED
THAT, (i) if there is no Default or Potential Default, no mandatory
commitment reduction under SECTION 2.7(b) (including any amount of
reduction from a prepayment under SECTION 2.7(b) that is applied to the
Revolver Commitment as a result of the opt-out provisions in
SECTION 2.7(f)) shall reduce the Revolver Commitment to an amount equal
to the lesser of $10,000,000 or the Revolver Commitment then outstanding
except in the event of the repayment in full of the Obligation; (ii) if
any Revolver Commitment reductions
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
are not made as a result of CLAUSE (i) preceding, then the amount of
such mandatory prepayment not applied as a Revolver Commitment reduction
shall be applied to the Term Loan A Principal Debt until paid in full,
then to the Term Loan B Principal Debt until paid in full, and then to
the Term Loan C Principal Debt until paid in full; and (iii) if required
pursuant to SECTION 2.7(e) Borrower shall also make a mandatory
prepayment of the Revolver Principal Debt, TOGETHER WITH (x) all
accrued and unpaid interest on the principal amount so prepaid and (y)
any Consequential Loss arising as a result thereof.
(i) APPLICATION OF MANDATORY PREPAYMENTS OF TERM PRINCIPAL
DEBT. All mandatory prepayments of the term Principal Debt under any
Term Facility shall be applied ratably to each Term Lender's Committed
Sum under such Term Facility and shall be applied to the
regularly-scheduled Term Principal Debt reductions for such Term
Facility as set forth in SECTION 3.2(d), (e), or (f) (as the case
may be) in inverse order of maturities.
2.8 BORROWING PROCEDURE. The following procedures apply to all
Borrowings (other than a Swing Line Borrowing):
(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, Term Loan A, Term Loan B, or Term
Loan C, (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.
(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
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
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 (other than Swing Line
Principal Debt) owed to each Revolver Lender shall be evidenced by the
Revolver Notes, one payable to each Revolver Lender in the maximum
stated principal amount of its Committed Sum under the Revolver Facility
as of the Closing Date. The Swing Line Principal Debt shall be
evidenced by a Swing Line Note payable to NationsBank in the stated
principal amount of the Swing Line Commitment.
(b) The Term Loan A Principal Debt owed to each Term Loan A
Lender shall be evidenced by a Term Loan A Note, payable to each Term
Loan A Lender in an amount equal to the principal amount advanced by
such Lender on the Closing Date under Term Loan A, not to exceed such
Term Loan A Lender's Committed Sum under Term Loan A.
(c) The Term Loan B Principal Debt owed to each Term Loan B
Lender shall be evidenced by a Term Loan B Note, payable to each Term
Loan B Lender in an amount equal to the principal amount advanced by
such Lender on the Closing Date under Term Loan B, not to exceed such
Term Loan B Lender's Committed Sum under Term Loan B.
(d) The Term Loan C Principal Debt owed to each Term Loan C
Lender shall be evidenced by a Term Loan C Note, payable to each Term
Loan C Lender in an amount equal to the principal amount advanced by
such Lender on the Closing Date under Term Loan C, not to exceed such
Term Loan C Lender's Committed Sum under Term Loan C.
(e) 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 for the applicable
32
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
Facility; 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 for the applicable Facility.
(b) The aggregate Principal Debt under each Facility on the
Termination Date applicable to such Facility shall be due and payable on
the Termination Date for that Facility.
(c) The Revolver Commitment in effect on the Closing Date,
shall be permanently reduced for the ratable account of the Revolver
Lenders by the percentages specified below on the corresponding
reduction dates set forth as follows (which amount shall be reduced as a
result of the application of commitment reductions and prepayments in
accordance with SECTIONS 2.7 and 3.11):
<TABLE>
<CAPTION>
Reduction Date Percentage Reduction
-------------- --------------------
<S> <C>
December 31, 2000 5.000%
March 31, 2001 1.875%
June 30, 2001 1.875%
September 30, 2001 1.875%
December 31, 2001 1.875%
March 31, 2002 1.875%
June 30, 2002 1.875%
September 30, 2002 1.875%
December 31, 2002 1.875%
March 31, 2003 3.125%
June 30, 2003 3.125%
September 30, 2003 3.125%
December 31, 2003 3.125%
March 31, 2004 3.750%
June 30, 2004 3.750%
September 30, 2004 3.750%
December 31, 2004 3.750%
March 31, 2005 6.250%
June 30, 2005 6.250%
September 30, 2005 6.250%
December 31, 2005 6.250%
March 31, 2006 9.166%
June 30, 2006 9.167%
September 30, 2006 9.167%
</TABLE>
(d) The Term Loan A Principal Debt shall be repaid for the
ratable account of the Term Loan A Lenders on the following dates in the
amounts indicated, determined as a percentage of the Term Loan A
Principal Debt outstanding on the Closing Date (which amount shall be
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
reduced as a result of the application of prepayments in accordance with
the order of priority set forth in SECTIONS 2.7 and 3.11):
<TABLE>
<CAPTION>
Percentage of Term Loan A
Payment Date Principal Debt
------------ --------------
<S> <C>
December 31, 2000 5.000%
March 31, 2001 1.875%
June 30, 2001 1.875%
September 30, 2001 1.875%
December 31, 2001 1.875%
March 31, 2002 1.875%
June 30, 2002 1.875%
September 30, 2002 1.875%
December 31, 2002 1.875%
March 31, 2003 3.125%
June 30, 2003 3.125%
September 30, 2003 3.125%
December 31, 2003 3.125%
March 31, 2004 3.750%
June 30, 2004 3.750%
September 30, 2004 3.750%
December 31, 2004 3.750%
March 31, 2005 6.250%
June 30, 2005 6.250%
September 30, 2005 6.250%
December 31, 2005 6.250%
March 31, 2006 9.166%
June 30, 2006 9.167%
September 30, 2006 9.167%
</TABLE>
(e) The Term Loan B Principal Debt shall be repaid for the
ratable account of the Term Loan B Lenders on the following dates in the
amounts indicated, determined as a percentage of the Term Loan B
Principal Debt outstanding on the Closing Date (which amount shall be
reduced as a result of the application of prepayments in accordance with
the order of priority set forth in SECTIONS 2.7 and 3.11):
<TABLE>
<CAPTION>
Percentage of Term Loan B
Payment Date Principal Debt
------------ --------------
<S> <C>
December 31, 2000 2.500%
March 31, 2001 .625%
June 30, 2001 .625%
September 30, 2001 .625%
December 31, 2001 .625%
March 31, 2002 .625%
June 30, 2002 .625%
</TABLE>
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
<TABLE>
<CAPTION>
Percentage of Term Loan B
Payment Date Principal Debt
------------ --------------
<S> <C>
September 30, 2002 .625%
December 31, 2002 .625%
March 31, 2003 1.875%
June 30, 2003 1.875%
September 30, 2003 1.875%
December 31, 2003 1.875%
March 31, 2004 3.750%
June 30, 2004 3.750%
September 30, 2004 3.750%
December 31, 2004 3.750%
March 31, 2005 6.250%
June 30, 2005 6.250%
September 30, 2005 6.250%
December 31, 2005 6.250%
March 31, 2006 6.875%
June 30, 2006 6.875%
September 30, 2006 6.875%
December 31, 2006 6.875%
March 31, 2007 17.500%
</TABLE>
(f) The Term Loan C Principal Debt shall be repaid for the
ratable account of the Term Loan C Lenders on the following dates in the
amounts indicated, determined as a percentage of the Term Loan C
Principal Debt advanced on the Closing Date (which amount shall be
reduced as a result of the application of prepayments in accordance with
the order of priority set forth in SECTIONS 2.7 and 3.11):
<TABLE>
<CAPTION>
Percentage of Term Loan C
Payment Date Principal Debt
------------ --------------
<S> <C>
December 31, 1999 1.000%
Each March 31, June 30, 0.250%
September 30,
and December 31,
commencing March 31,
2000, through and
including December 31,
2006
March 31, 2007 23.000%
June 30, 2007 23.000%
September 30, 2007 23.000%
December 23, 2007 23.000%
</TABLE>
35
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
(g) On any date of determination if the Revolver Commitment
Usage exceeds the Revolver Commitment or the Swing Line Principal Debt
exceeds the Swing Line Commitment then in effect, then Borrower shall
make a mandatory prepayment of the Principal Debt under the Revolver
Facility or the Swing Line Subfacility, respectively, 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 applied Pro Rata to each Revolver Lender's Committed Sum and shall be
applied to the regularly-scheduled Commitment reductions hereunder in
inverse order of maturity.
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 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
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
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 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 eight (8)
Interest Periods shall be in effect at one time.
3.10 CONVERSIONS. For Borrowings under the Revolver Facility,
Term Loan A, or Term Loan B, 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,
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
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. The right to convert from a Base
Rate Borrowing to a Eurodollar Rate Borrowing, or to continue as a Eurodollar
Rate Borrowing, shall not be available during the occurrence of a Default or
a Potential Default.
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 in the
following order: (i) to the ratable payment of all fees, expenses, and
indemnities for which Agents or Lenders have not been paid or reimbursed
in accordance with the Loan Papers (as used in this SECTION 3.11(b)(i),
a "RATABLE PAYMENT" for any Lender 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 or such Agent bears to the
total aggregate fees and indemnities owed to all Lenders and Agents on
such date of determination); (ii) to the ratable payment of accrued and
unpaid interest on the Revolver Principal Debt and the Term Principal
Debt (as used in this SECTION 3.11(b)(ii), "RATABLE PAYMENT" means, for
any Revolver Lender or Term Lender, on any date of determination, that
proportion which the accrued and unpaid interest on the Revolver
Principal Debt or the Term Principal Debt (as the case may be) owed to
such Revolver Lender or Term Lender bears to the total accrued and
unpaid interest under the Loan Papers owed to all Revolver Lenders and
all Term Lenders); (iii) to the ratable payment of the Revolver
Principal Debt and the Term Principal Debt (as used in this
SECTION 3.11(b)(iii), "RATABLE PAYMENT" means for any Revolver Lender or
any Term Lender, on any date of determination, that proportion which the
Revolver Principal Debt or the Term Principal Debt (as the case may be)
owed to such Revolver Lender or Term Lender bears to the sum of the
Principal Debt and the Term Principal Debt owed to all Revolver Lenders
and all Term Lenders; and (iv) to the payment of the remaining
Obligation in the order and manner Required Lenders deem appropriate.
Subject to the provisions of SECTION 12 and provided that Administrative Agent
shall not in any event be bound to inquire into or to determine the validity,
scope, or priority of any interest or entitlement of any
38
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
Revolver Lender or Term Lender and may suspend all payments or seek
appropriate relief (including, without limitation, instructions from Required
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 shall promptly distribute such amounts to each Lender in
accordance with the Agreement and the related 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 (except as provided herein
with respect to the Term Facility opt-outs in SECTION 2.7(f)), such Lender
shall purchase from the other Revolver Lenders and the Term 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 Revolver Lender or Term Lender
pursuant to this Section 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 Revolver Lender or Term
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
Revolver Lenders and Term Lenders in accordance with SECTION 3.12) the Rights
of offset and/or banker's Lien against each and every account and other
property, or any interest therein, which any Company 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.
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 Law or any change in any applicable Law 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
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
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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:
(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
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
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(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.
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:
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<PAGE>
(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
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
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
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 Obligation.
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, Lenders, and Arranger, as the case may be,
solely for their respective accounts, the fees described in that certain
separate letter agreement dated as of December 3, 1998, between Borrower,
Administrative Agent, and Arranger, and (b) each of the Agents, all the fees
specified in the letter dated December 9,
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<PAGE>
1998, addressed to Borrower from the Agents, which payments shall be made on
the dates specified, and in amounts calculated in accordance with, such
letter agreements.
5.3 REVOLVER FACILITY COMMITMENT FEES. Following the Closing
Date, Borrower shall pay to Administrative Agent, for the ratable account of
Revolver 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 for the Revolver Facility, commencing December 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). Solely
for the purposes of this SECTION 5.3, (i) determinations of the average daily
Revolver Commitment Usage shall exclude the Revolver Principal Debt of all
Swing Line Borrowings (provided that, solely for NationsBank in its capacity
as the Lender under the Swing Line Subfacility [and any successor Lender
thereunder, "SWING LINE LENDER"], Borrowings under the Swing Line Subfacility
will be included in determining the Revolver Commitment Usage for such Swing
Line Lender up to, but not in excess of, the amount which causes the Revolver
Commitment Usage of such Swing Line Lender to equal the Committed Sum in
respect of the Revolver Facility of such Lender); and (ii) "RATABLE" shall
mean, for any period of calculation, with respect to any Revolver Lender, that
proportion which (x) the average daily unused Revolver Committed Sum of such
Revolver Lender during such period bears to (y) the amount of the average daily
unused Revolver Commitment during such period.
SECTION 6. SECURITY; GUARANTIES.
6.1 COLLATERAL. To secure full and complete payment and
performance of the Obligation, the Companies hereby jointly and severally
grant and convey to, and create in favor of Administrative Agent for the
ratable benefit of the Lenders, first priority Liens in, to, and on all
assets of the Companies as more particularly described in the Collateral
Documents (the "COLLATERAL"); PROVIDED THAT, no Agent or any Lender hereby
assumes or is made the transferee of any obligations of any Company regarding
any of the Collateral.
6.2 GUARANTIES. As an inducement to Agents and Lenders to enter
into this Agreement, Borrower shall cause Sygnet Communications and each
other Subsidiary 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.
6.3 FUTURE LIENS. Promptly after (a) the acquisition of any
assets (real, personal, tangible, or intangible) by any Company, (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 (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 to) execute and
deliver to Administrative 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 Administrative Agent may require with respect to any such
Additional Assets), 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 the Lenders in such Additional Assets, as security for the Obligation; IT
BEING EXPRESSLY UNDERSTOOD that the granting of such additional security
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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. 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 Lenders, as the
case may be), 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, (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 2.7(b)(ii) in conjunction with the sale or transfer
of such Collateral; (ii) 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 (iii) such release shall not in any manner discharge,
affect, or impair the Obligation, or Liens upon (or obligations of any
Company in respect of) all interests retained by the Companies, including
(without limitation) the proceeds of any sale, all of which shall continue to
constitute Collateral.
6.5 NEGATIVE PLEDGE. Notwithstanding the provisions of SECTION
6.1 hereof, until such time as Administrative Agent or Required Lenders
otherwise require, the Companies shall not be required to: (i) perfect Liens
on certain assets constituting interests in assigned leases (other than the
Sygnet Towers Lease), vehicles, fixtures, or real estate, SO LONG AS the
aggregate value of such assets does not exceed $5,000,000, or (ii) 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
Administrative Agent and Required Lenders agree to delay the perfection or
attachment of any Lien granted pursuant to SECTION 6.1 hereof, for whatever
reason, the Companies 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 Administrative Agent, Borrower shall (or shall cause
each Company to) execute and deliver to Administrative 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 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.
6.6 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 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, which
ownership or control remains exclusively and at all times in the Companies,
and (ii) do not and will not constitute the transfer, assignment, or
disposition in any manner, voluntary or involuntary, directly or indirectly,
of any
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Authorization at any time issued by the FCC or any PUC to the Companies, or
the transfer of control of the Companies within the meaning of SECTION 310(d)
of the Communications Act; 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 any Authorization or any change of
control of the Companies, 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.
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.
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 SECTIONS 7.1 and 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 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 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
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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 and each other
Company represent and warrant to Administrative Agent and Lenders as follows:
8.1 PURPOSE OF CREDIT FACILITIES. 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 all or a portion of the Sygnet
Merger and the related costs and expenses; (b) to finance other Permitted
Acquisitions; (c) to refinance certain indebtedness of Sygnet Wireless, Inc.
existing as of the Closing Date, including the Sygnet Senior Notes; (d) to
finance Capital Expenditures; (e) to finance certain investments permitted by
the Loan Papers; (f) to finance certain permitted Distributions; (g) for
working capital of Borrower and its Subsidiaries; and (h) for general
corporate purposes. No Company 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 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 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 the
Companies possesses all 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 the
Companies or consummation of the Sygnet Merger, except as shall have been
obtained on or prior to the Closing Date.
8.3 SUBSIDIARIES; CAPITAL STOCK. The Companies 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 is subject to any restriction on transfer thereof except for
restrictions imposed by securities Laws and general corporate Laws. No
Company has outstanding any warrant, option, or other right of any Person to
acquire any of its capital stock or similar equity interests.
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8.4 AUTHORIZATION AND CONTRAVENTION. The execution and delivery
by each Company of each Loan Paper to which it is a party and the performance
by such Company of its obligations thereunder (a) are within the corporate
power of such Company, (b) will have been duly authorized by all necessary
corporate or partnership action on the part of such Company 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,
(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.
The Companies 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 the Sygnet Merger and any other any asset
transfer, change of control, merger, or consolidation 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 party thereto, enforceable against each such
Company 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 is subject
to, or aware of the threat of, any Litigation which is reasonably likely to
be determined adversely to any Company, 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 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 relating to the Sygnet Merger, the
transactions evidenced by the Loan Papers, or which could be a Material
Adverse Event, nor any judgments, decrees, or orders of any Governmental
Authority outstanding against any Company that could be a Material Adverse
Event.
8.8 TAXES. All Tax returns of each Company 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
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so file could not be a Material Adverse Event, and all Taxes imposed upon
each Company 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)(vi)) have been satisfied or for which nonpayment thereof
could not constitute a Material Adverse Event.
8.9 ENVIRONMENTAL MATTERS. No Company (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 that could be a Material Adverse Event, (b) knows of any violation by
any Company of any Environmental Law, except for such violations that could
not be a Material Adverse Event, or (c) knows that any Company 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 (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 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, when considered in the aggregate, 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, 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 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 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. Except as permitted in SECTION
9.14, no Company 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
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<PAGE>
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 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 Material Agreements, 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 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 thereunder which could be a Material
Adverse Event. No Company 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 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 that could be a Material Adverse
Event. Hours worked by and payment made to employees of the Companies 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 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 dates of the Sygnet Merger, the Sygnet Towers Sale, and each Permitted
Acquisition, each Company is (and after giving effect to the transactions
contemplated by the Loan Papers, the Sygnet Merger, any Permitted
Acquisition, and any incurrence of additional Debt, will be) Solvent.
8.19 INTELLECTUAL PROPERTY. Each Company 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 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, could not, individually or
collectively, constitute a Material Adverse Event.
8.20 COMPLIANCE WITH LAWS. No Company 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 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.
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<PAGE>
8.21 THE SYGNET MERGER AND DOBSON ACQUISITION. The Sygnet Merger
Agreement and the Dobson Acquisition Agreement have been executed and
delivered by all parties thereto and represents the valid and binding
agreement of the parties thereto, enforceable in all material respects in
accordance with its terms (EXCEPT as enforceability may be limited by
applicable Debtor Relief Laws and general principles of equity). On and as
of the Closing Date, the execution and delivery by Borrower (or its
predecessors in interest) of the Sygnet Merger Documents, the Dobson
Acquisition Documents, and the performance by Borrower and each Company (or
their respective predecessors in interest) of its obligations thereunder (a)
are within the corporate power of such Company (or its predecessors in
interest), (b) have been duly authorized by all necessary corporate action on
the part of such Company (or its predecessors in interest), (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,
(d) do not violate any provision of the charter or bylaws of such Company (or
its predecessors in interest), (e) do 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) do not violate any
Material Agreements to which it is (or its predecessors in interest are) a
party, other than such violations which could not be a Material Adverse
Event, (g) do not result in the creation or imposition of any Lien on any
asset of any Company or their predecessors in interest (other than Permitted
Liens), and (h) immediately prior to, and after giving pro forma effect
thereto, no Default or Potential Default exists or arises under the Loan
Papers. On and as of the Closing Date, the Companies (or their predecessors
in interest) have obtained all necessary consents and approvals of any Person
or Governmental Authority required to be obtained in order for such Company
to effectuate the Sygnet Merger and the Dobson Acquisition and the
transactions contemplated by the Sygnet Merger Agreement and the Dobson
Acquisition Agreement, EXCEPT to the extent any such failure could not be a
Material Adverse Event and would not reasonably be expected to materially
impair the value to the Companies of, or the benefits to be derived by the
Companies or their predecessors in interest from, the Sygnet Merger and the
Dobson Acquisition. On the Closing Date, all conditions precedent under the
Sygnet Merger Agreement and the Dobson Acquisition Agreement, to the parties'
obligations to consummate such Sygnet Merger and Acquisitions have been
satisfied in all material respects, and concurrently with the Closing Date,
the Sygnet Merger and the Dobson Acquisition shall have been consummated.
8.22 PERMITTED ACQUISITIONS.
(a) VALIDITY. With respect to any Permitted Acquisitions,
each Company party thereto 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 such
Companies (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 the Companies party thereto, 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 the Companies, and will not
violate any provisions of the articles of incorporation and bylaws or
Partnership Agreements of the Companies, or constitute a default under
any agreement by which any Company or its respective property may be
bound.
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8.23 REGULATION U. "MARGIN STOCK" (as defined in REGULATION U)
constitutes less than 25% of those assets of any Company which is subject to any
limitation on sale, pledge, or other restrictions hereunder.
8.24 TRADENAME. No Company has used or transacted business under any
other corporate or trade name in the five-year period preceding the date hereof.
8.25 YEAR 2000 COMPLIANCE. The Companies have (i) initiated a review
and assessment of all areas within their business and operations that could be
adversely affected by the "YEAR 2000 PROBLEM" (that is, the risk that computer
applications used by the Companies may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and time line for addressing the
Year 2000 Problem on a timely basis, and (iii) to date, implemented in all
material respects that plan in accordance with that timetable.
8.26 SYGNET TOWERS SALE. The Sygnet Towers Sale Agreement and
related Sygnet Towers Lease have been executed and delivered by all parties
thereto and represent the valid and binding agreements of the parties thereto,
enforceable in all material respects in accordance with their terms (EXCEPT as
enforceability may be limited by applicable Debtor Relief Laws and general
principles of equity). On and as of the Closing Date, the execution and
delivery by Sygnet Communications of the Sygnet Towers Sale Documents and the
performance by Sygnet Communications and each other Company of its obligations
thereunder (a) are within the corporate power of such Company, (b) have been
duly authorized by all necessary corporate action on the part of such Company,
(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, (d) do not violate any provision of the charter or bylaws of such
Company, (e) do 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) do not violate any Material Agreements to which it is a
party, other than such violations which could not be a Material Adverse Event,
(g) do not result in the creation or imposition of any Lien on any asset of any
Company (other than Permitted Liens), and (h) immediately prior to, and after
giving pro forma effect thereto, no Default or Potential Default exists or
arises under the Loan Papers. On and as of the Closing Date, the Companies have
obtained all necessary consents and approvals of any Person or Governmental
Authority required to be obtained in order for such Company to effectuate the
Sygnet Towers Sale and the transactions contemplated by the Sygnet Towers Sale
Agreement, EXCEPT to the extent any such failure could not be a Material Adverse
Event and would not reasonably be expected to materially impair the value to the
Companies of, or the benefits to be derived by the Companies from the Sygnet
Towers Sale. On the Closing Date, all conditions precedent under the Sygnet
Towers Sale Agreement to the parties' obligations to consummate the Sygnet
Towers Sale have been satisfied in all material respects, and concurrently with
the Closing Date, the Sygnet Towers Sale shall have been consummated.
8.27 NO DEFAULT. No Default or Potential Default exists or will
arise as a result of any Borrowing hereunder, or after giving effect to
consummation of the Sygnet Merger, the Sygnet Towers Sale, or the Sygnet Towers
Lease.
8.28 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, with respect to events prior to the Closing Date, Sygnet
Wireless, Inc., Dobson/Sygnet Operating Company, and their respective
Subsidiaries) 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 to any Lender or Administrative Agent in connection
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with the Loan Papers was, and all such information hereafter furnished by any
Company 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 other Company 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 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 Parent and
Communications, Financial Statements showing the consolidated and
consolidating financial condition and results of operations calculated
separately for each of (x) Parent and its Subsidiaries and
(y) Communications and its Subsidiaries (other than Logix and its
Subsidiaries), as of, and for the year ended on, such day, each
accompanied by:
(i) with respect to the consolidated Financial
Statements of Parent and its Subsidiaries and the consolidated
and consolidating Financial Statements of Communications and its
Subsidiaries, 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
Parent and its Subsidiaries or Communications and its
Subsidiaries (other than Logix and its Subsidiaries), as the
case may be) were prepared in accordance with GAAP and present
fairly the consolidated financial condition and results of
operations of Parent and its Subsidiaries or Communications and
its Subsidiaries (other than Logix and its Subsidiaries), as the
case may be;
(ii) any management letter prepared by such
accounting firm;
(iii) with respect to the Financial Statements of the
Parent and its Subsidiaries, 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
Parent or Communications (as the case may be), with a copy to
Administrative Agent, acknowledging that (A) Parent or
Communications, as the case may be, plans to provide
Administrative Agent with such
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audited Financial Statements and accompanying audit report,
(B) Administrative Agent has informed Parent 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) Parent or Communications, as the case may
be, intends for Administrative Agent and Lenders to so rely; and
(v) with respect to the consolidated and
consolidating Financial Statements of the Parent, a Compliance
Certificate.
(b) Promptly after preparation, and no later than 60 days
after the last day of each fiscal quarter of Parent and Borrower,
Financial Statements showing the consolidated financial condition and
results of operations calculated for the Parent and its Subsidiaries and
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, 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 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 has taken, is taking, or proposes
to take with respect thereto, (iv) the receipt by any Company 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 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 which has been issued or adopted hereafter
and which is of material adverse importance or effect in relation to the
operation of any Company, (vi) the receipt by any Company of notice of
any violation or alleged violation of any Environmental Law, which
violation or alleged violation could individually or collectively with
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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 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 Communications, Parent, or any Company 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, and such opinions, certifications, and
documents, in addition to those mentioned in this Agreement, as
reasonably requested.
9.4 INSPECTIONS. Upon reasonable notice, the Companies 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, from time to time, during reasonable business
hours.
9.5 TAXES. Each Company (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 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.
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
9.6 PAYMENT OF OBLIGATIONS. Borrower shall pay the Obligation in
accordance with the terms and provisions of the Loan Papers. Each Company
(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] 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), whether subordinate to the Obligation or not or
(ii) use proceeds from the Facilities to make any payment or prepayment of
principal of, or interest on, or sinking fund payment in respect of any other
Debt of any Company.
9.7 MAINTENANCE OF EXISTENCE, ASSETS, AND BUSINESS. Except as
otherwise permitted by SECTION 9.25, each Company 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 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 shall, at their sole cost and expense,
keep and maintain the Collateral owned by such Company 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
Administrative 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 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 shall deliver
to Administrative 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 Administrative Agent, showing loss payable to
Administrative Agent for the benefit of Lenders. Such endorsement, or an
independent instrument furnished to Administrative Agent, shall provide that the
insurance companies will give Administrative 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 or any other
Person shall affect the Right of Administrative 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 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 Administrative Agent for
application as a mandatory prepayment on the Obligation.
9.9 PRESERVATION AND PROTECTION OF RIGHTS. Each Company shall
perform such acts and duly authorize, execute, acknowledge, deliver, file, and
record any additional agreements, documents, instruments, and certificates as
Administrative Agent or Required Lenders may reasonably deem necessary
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
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, 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 (individually or collectively) in excess of $1,000,000.
9.11 ENVIRONMENTAL LAWS. Each Company 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 at any
facility operated by any Company 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
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 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) Debt incurred by Borrower under any Financial
Hedge;
(iii) Trade accounts payable which are for goods
furnished or services rendered in the ordinary course of
business and are payable in accordance with customary trade
terms that are not more than ninety (90) days past due;
(iv) Debt between Companies;
(v) Other Debt arising not to exceed $5,000,000 in
the aggregate on any date of determination; and
(vi) The Sygnet Senior Notes that were not tendered
to Sygnet Wireless, Inc. pursuant to the tender offer for such
notes in an aggregate principal amount not in excess of
$1,250,000.
(b) No Company shall guarantee or assume or agree to become
liable in any way, either directly or indirectly, for any Debt of
others, except (i) endorsements of checks or drafts in the ordinary
course of business, and (ii) the obligations of the Companies under the
Guaranties.
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
9.13 LIENS. No Company will, directly or indirectly, (a) enter into
or permit to exist any arrangement or agreement which directly or indirectly
prohibits any Company from creating or incurring any Lien on any of its assets,
other than the 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) Liens securing the Obligations;
(ii) 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;
(iii) 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;
(iv) 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;
(v) 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;
(vi) 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
(vii) Liens on the Pledged Government Securities, securing the
first six interest payments on the Senior Reserve Notes.
9.14 TRANSACTIONS WITH AFFILIATES. No Company shall enter into any
material transaction with any of its Affiliates (excluding transactions among or
between Companies), OTHER THAN (i) 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, or (ii) transactions
between the Companies and Communications or its Subsidiaries (other than Logix
and its Subsidiaries) on terms of the kind customarily employed to allocated
charges among members of a consolidated group of entities, in each such case,
that are fair and reasonable to the Companies, PROVIDED THAT, with respect to
such transactions permitted in CLAUSE (ii), the aggregate consideration for such
transactions does not exceed $3,000,000 in any calendar year.
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
9.15 COMPLIANCE WITH LAWS AND DOCUMENTS. No Company 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 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 Administrative Agent and (b) to execute and deliver to
Administrative Agent all required Collateral Documents creating Liens in favor
of Administrative Agent on all the assets of such Subsidiary.
9.17 ASSIGNMENT. No Company 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 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 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 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 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) Cash Equivalents;
(b) Loans, advances, extensions of credit, capital
contributions, and other investments between Companies;
(c) Permitted Acquisitions;
(d) 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;
(e) At any time when Distributions may be made pursuant to
SECTION 9.21(c), loans, advances, and investments to Parent in amounts
which (when aggregated with the Distributions
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
made pursuant to SECTION 9.21(c)) do not exceed the amount required to
pay regularly-scheduled cash interest payments on the Senior Reserve
Notes; and
(f) Loans, advances, and investments to Communications to be
used solely to pay regularly-scheduled cash dividends on the Preferred
Stock in an amount which (when aggregated with the Distributions made
pursuant to SECTION 9.21(d)) does not exceed the limitation on
Distributions set forth in SECTION 9.21(d); PROVIDED THAT, to the extent
Required Lenders have consented to the exchange of any Junior Preferred
Stock to Junior Debentures, any loans, advances, and investments to
Communications permitted with respect to Preferred Stock under this
SECTION 9.20(f) may be used (in lieu of making such dividends) for the
purpose of paying the regularly-scheduled interest payments on the
Junior Debentures.
9.21 DISTRIBUTIONS. No Company may directly or indirectly declare,
make, or pay any Distribution, other than:
(a) Distributions declared, made, or paid by Borrower wholly
in the form of its capital stock;
(b) Distributions by any Company to Borrower or any other
Company;
(c) Distributions made on or after June 15, 2002 (or such
earlier date as interest payments on the Senior Reserve Notes are not
fully funded by proceeds of the Pledged Government Securities) by
Borrower to Parent in an amount which (when aggregated with the loans,
advances, and investments made pursuant to SECTION 9.20(e)) does not
exceed the amount required to pay regularly-scheduled cash interest
payments on the Senior Reserve Notes; PROVIDED THAT, no Distributions
under this SECTION 9.21(c) nor any loans, advances, or investments under
SECTION 9.20(e) may be made if (i) a Default (other than a Default
resulting solely from the breach of a representation or warranty) then
exists or arises as a result thereof; or (ii) if the Obligation or any
part thereof has been accelerated; PROVIDED, HOWEVER, in the event that
any Default has occurred and is continuing, Borrower may, after June 15,
2002, declare and pay cash dividends to Parent pursuant to this SECTION
9.21(c), or make loans or advances to Parent pursuant to SECTION 9.20(e)
in an amount which (when aggregated with the amounts of all other loans,
advances, or dividends for such purposes from all other Subsidiaries of
Parent) shall not exceed (A) amounts then required to make any cash
interest payments on the Senior Reserve Notes, and (B) the next
regularly scheduled cash interest payment on the Senior Reserve Notes
if, but only if, (1) such Default (from the date of notice of the
existence of the earliest such Default if more than one exists) has
continued for 180 days and has not been cured or waived; (2) such
Default is not an Event of Default set forth in SECTIONS 10.1, 10.3, or
10.9 of this Agreement; and (3) Lenders have not demanded payment in
full of all obligations due and owing by Borrower under this Agreement
and the Loan Papers; and
(d) After April 14, 2003 (the "SUBJECT DATE"), SO LONG AS no
Default exists or arises as a result thereof, Distributions made by
Borrower directly (or indirectly through Parent) to Communications to be
used solely to pay regularly-scheduled cash dividends on any Preferred
Stock in an amount which (when aggregated with any loans, advances, or
investments made pursuant to SECTION 9.20(f)) does not exceed an
aggregate amount of regularly-scheduled cash dividends which are due and
payable on up to $120,000,000 of Preferred Stock (valued at liquidation
value as determined on the date of such payment); PROVIDED THAT, to the
extent Required
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<PAGE>
Lenders have consented to the exchange of any Junior Preferred Stock
to Junior Debentures, any Distributions to Communications permitted
with respect to Preferred Stock under this SECTION 9.21(d) may be used
(in lieu of making such dividends) for the purpose of paying
regularly-scheduled interest payments on the Junior Debentures.
Notwithstanding the foregoing, Distributions are permitted hereunder only to the
extent such 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 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 to a Company; (f) the
Sygnet Towers Sale, and (g) 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 (other than
the Sygnet Towers) (x) in any calendar year does not exceed $7,500,000 in the
aggregate, and (y) prior to the Termination Date of the applicable Facility 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 will enter into any
sale-leaseback arrangement (other than the Sygnet Towers Sale and the related
Sygnet Towers Lease) with any Person pursuant to which such Company 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
will, directly or indirectly, merge or consolidate with any other Person, other
than (a) as a result of the Sygnet Merger; (b) as a result of a Permitted
Acquisition, (c) 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, other than the Sygnet 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 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 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 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 as conducted on the Closing Date.
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<PAGE>
9.27 FINANCIAL HEDGES. Borrower 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 Debt of the Companies and Parent
outstanding on the Closing Date; PROVIDED, HOWEVER, that (a) the protected rate
shall be no greater than 2.0% 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 may 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 Administrative Agent on behalf of
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 with respect to intercreditor issues. If Borrower
enters into a Financial Hedge which meets or exceeds the minimum qualifications
in this SECTION 9.27 and does not result in a Default or Potential Default under
the Loan Papers, the consent of Administrative Agent to such terms shall not be
unreasonably withheld.
9.28 AFFILIATE SUBORDINATION AGREEMENTS. The Companies shall,
simultaneously with the creation of any and all future Debt of any Company 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 shall (a) amend or permit
any amendments to any Company's Articles of Incorporation or Bylaws, or any
Partnership Agreement of 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 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; (c) without the prior written consent of Required
Lenders, amend, modify, or waive any provision of the Sygnet Merger Documents,
the Sygnet Towers Sale Documents, or the Dobson Acquisition Documents.
9.30 FINANCIAL COVENANTS. As calculated on a consolidated basis for
the Companies (unless otherwise indicated):
(a) LEVERAGE RATIO. Borrower shall never permit the
Leverage Ratio of the Companies to be greater than the ratio shown in
the table below which corresponds to the applicable period of
determination:
<TABLE>
<CAPTION>
----------------------------------------------------------
PERIOD RATIO
----------------------------------------------------------
<S> <C>
From Closing Date to 6/30/99 7.60 to 1
----------------------------------------------------------
From 7/1/99 to 12/31/99 7.25 to 1
----------------------------------------------------------
From 1/1/00 to 6/30/00 6.75 to 1
----------------------------------------------------------
From 7/1/00 to 12/31/00 6.00 to 1
----------------------------------------------------------
From 1/1/01 to 12/31/01 5.50 to 1
----------------------------------------------------------
From 1/1/02 to 12/31/02 4.50 to 1
----------------------------------------------------------
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
----------------------------------------------------------
PERIOD RATIO
----------------------------------------------------------
From 1/1/03 and thereafter 3.50 to 1
----------------------------------------------------------
</TABLE>
(b) PRO FORMA DEBT SERVICE COVERAGE. Borrower shall never
permit the ratio of its Operating Cash Flow to its Pro Forma Debt
Service determined on a quarterly basis at the end of each fiscal
quarter to be less than or equal to 1.10 to 1.0.
(c) INTEREST COVERAGE. Borrower shall never permit the
ratio (determined, on March 31, 1999, for the fiscal quarter period
then-ending; on June 30, 1999, for the two-fiscal quarter period
then-ending; on September 30, 1999, for the three-fiscal quarter
period then-ending; and thereafter, on a quarterly basis for the
Rolling Period then-ending) of (i) its Operating Cash Flow to (ii) its
Interest Expense, to be less than (A) 1.25 to 1.0, from January 1,
1999 through December 31, 1999, (B) 1.50 to 1.0, from January 1, 2000
through December 31, 2000, and (C) 1.75 to 1.0 after December 31, 2000.
(d) FIXED CHARGE COVERAGE RATIO. Borrower shall never
permit its Fixed Charge Coverage Ratio, determined on a quarterly basis
on the last day of each fiscal quarter, to be less than or equal to 1.00
to 1.0.
(e) CONSOLIDATED LEVERAGE RATIO. On and after January 1,
2002, Borrower shall never permit the ratio of (a) Consolidated Debt to
(b) the Operating Cash Flow of Parent and its Subsidiaries to be greater
than the ratio shown in the table below which corresponds to the
applicable period of determination:
<TABLE>
<CAPTION>
----------------------------------------------------------
PERIOD RATIO
----------------------------------------------------------
<S> <C>
3/31/02 to 6/30/02 6.25 to 1
----------------------------------------------------------
7/1/02 to 12/31/02 5.75 to 1
----------------------------------------------------------
1/1/03 to 6/30/03 5.25 to 1
----------------------------------------------------------
7/1/03 to 12/31/03 4.75 to 1
----------------------------------------------------------
1/1/04 and thereafter 4.25 to 1
----------------------------------------------------------
</TABLE>
(f) COMMUNICATIONS LEVERAGE RATIO. Borrower shall never
permit the ratio of (a) Communications Total Debt to (b) Communications
Operating Cash Flow to be greater than (A) 9.50 to 1.0 from the Closing
Date through December 31, 1999, and (B) 8.50 to 1.00 thereafter.
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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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 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) 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,
9.29, 9.30 and 9.31]; 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, Parent, Communications, Sygnet
Wireless, or any other Company, or any Subsidiary of Communications (other than
Logix and its Subsidiaries) (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 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 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.
10.6 MISREPRESENTATION. Any representation or warranty made by any
Company 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. Less than two-thirds of the Executive
Management Team of Communications on the Closing Date continue to hold positions
on the Executive Management Team of Communications.
10.8 CHANGE OF CONTROL. If (i) Communications ceases to own 100% of
the voting control of Parent and its Subsidiaries, (ii) Parent ceases to own
100% of the voting control of Borrower and its
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Subsidiaries, or (iii) Borrower ceases to own 100% of its Subsidiaries as
determined on the Closing Date or if thereafter acquired, on the date of the
Acquisition.
10.9 AUTHORIZATIONS. (a) Any Authorization necessary for the
ownership or operations of any Company 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
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 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 as now conducted.
10.10 DEFAULT UNDER OTHER DEBT AND AGREEMENTS. (a) Communications,
Parent, any Company, or any other Subsidiary of Communications or Parent (other
than Logix and its Subsidiaries) fails to pay when due (after lapse of any
applicable grace periods) any Debt of such Company (other than the Obligation)
in excess (individually or collectively) of $1,000,000; (b) any default exists
under any material written or oral agreement, contract, commitment, or
understanding to which Communications, Parent, any Company, or their
Subsidiaries is a party; (c) the occurrence of an "EVENT OF DEFAULT" under the
Third Amended and Restated Credit Agreement dated of March 25, 1998, among
Dobson Operating Company, as Borrower, First Union National Bank (as successor
to CoreStates Bank, N.A.), as Administrative Agent, and certain Lenders party
thereto (as the same may be amended, modified, restated, or supplemented from
time to time); (d) the occurrence of an "EVENT OF DEFAULT" under the Revolving
Credit Agreement dated as of March 25, 1998, among Dobson Cellular Operations
Company, as Borrower, NationsBank, N.A. (as successor to NationsBank of Texas,
N.A.), as Administrative Agent, and certain Lenders party thereto (as the same
may be amended, modified, restated, or supplemented from time to time); (e) the
occurrence of an "EVENT OF DEFAULT" under the 364-Day Revolving Credit and Term
Loan Agreement dated as of March 25, 1998, among Dobson Cellular Operations
Company, as Borrower, NationsBank, N.A. (as successor to NationsBank of Texas,
N.A.), as Administrative Agent, and certain Lenders party thereto (as the same
may be amended, modified, restated, or supplemented from time to time); or (f)
the occurrence of a default under any Sygnet Towers Lease, which individually or
collectively could be a Material Adverse Event; PROVIDED THAT, with respect to
CLAUSES (c), (d), and (e), an "EVENT OF DEFAULT" under any such identified
credit facility shall not be a Default hereunder if such "EVENT OF DEFAULT" has
been waived by the requisite lenders under the applicable facility or is
otherwise consented to under the terms of such agreement.
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 9.3(f) 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
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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 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 party thereto or
any Company 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, 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 Administrative 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, Parent, Communications or any of its
Subsidiaries (other than Logix and its Subsidiaries), or any other Company 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 of the Senior Reserve Notes, the Preferred Stock, or the Debentures in a
manner or at a time during which such payment is not permitted under the terms
of the
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Loan Papers, or under any instrument or document evidencing or creating the
Senior Reserve Notes, any Preferred Stock, and any Debentures.
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 any agreement
creating or evidencing any Senior Reserve Notes, any Junior Preferred Stock, or
any Junior Debentures; (ii) the trustee with respect to, or any holder of, any
Senior Reserve Notes, any Junior Preferred Stock, or any Junior Debentures 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 Debt or
obligations under the Senior Reserve Notes, any Junior Preferred Stock, or any
Junior Debenture becomes due before its stated maturity by acceleration of the
maturity thereof.
10.19 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 Senior Reserve Notes, any Preferred
Stock, or any Debenture, and the trustee or the holders of any such Debt or
obligation shall initiate notice to request or require (or any Company shall
automatically be so required) to redeem or repurchase such Debt or obligation.
SECTION 11 RIGHTS AND REMEDIES.
11.1 REMEDIES UPON DEFAULT.
(a) If a Default exists under SECTIONS 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 shall, upon
the request of Required Lenders (subject to the terms of SECTION 12) 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 each Company in and to every account and other
property of each Company 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, each Company 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
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
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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 is not performed in accordance with the terms of the
Loan Papers, after the occurrence and during the continuance of a Default,
Administrative Agent may, at its option (but subject to the approval of Required
Lenders), perform or attempt to perform such covenant, duty, or agreement on
behalf of such Company. In such event, any amount expended by Administrative
Agent in such performance or attempted performance shall be payable by the
Companies, 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 until paid.
Notwithstanding the foregoing, it is expressly understood that Administrative
Agent does not assume, and shall never have, except by its express written
consent, any liability or responsibility for the performance of any covenant,
duty, or agreement of any Company.
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, (b)
preclude or interfere with compliance by any Company with any Law, or (c)
require any act or omission by any Company 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 with any Law or document, or that any Agent or any Lender does not
expect the Companies 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 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
and the Companies, 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
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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. Each Company 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 the Companies agree that Administrative Agent's and Lenders'
remedies at Law for failure of the Companies to comply with the provisions of
this Section would be inadequate and that such failure would not be adequately
compensable in damages, the Companies agree 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, 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 Administrative Agent and Arranger,
incident to any Loan Paper (including, but not limited to, the reasonable fees
and expenses of counsel to Administrative 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 and Administrative Agent incurred by Administrative Agent or any
Lender in connection with the enforcement of the obligations of any Company
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 COMPANY AGREE 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 PAPERS, 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,
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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. BORROWER AND EACH
COMPANY 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 PAPERS, 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, N.A. (and
NationsBank, 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
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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.
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.
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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 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, 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
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
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 upon
Administrative Agent or any other Agent in respect of, (i) the
creditworthiness of any Company 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. 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 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.
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.
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<PAGE>
12.8 RELATIONSHIP OF LENDERS. Nothing herein shall be construed as
creating a partnership or joint venture among Agents and Lenders.
12.9 BENEFITS OF AGREEMENT. Except for the representations and
covenants in SECTION 12.1(c) in favor of Borrower, none of the provisions of
this SECTION 12 shall inure to the benefit of any Company or any other Person
other than Lenders; consequently, no Company 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.
12.10 AGENTS. None of the Lenders identified in this Agreement as
"CO-SYNDICATION AGENTS" or "CO-DOCUMENTATION 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 as a "CO-SYNDICATION AGENTS" or
"CO-DOCUMENTATION AGENTS" shall have or be deemed to have any fiduciary
relationship with any Lender.
12.11 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 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 NOTICES. 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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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
to Administrative Agent shall also be sent to Haynes and Boone, LLP, 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 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 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 ONLY 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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<PAGE>
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 affected
thereby, 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 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)
change the percentage of the Total Commitment or Revolver Commitment, or
of the Principal Debt which shall be required for the Lenders or any of
them to take any action under this SECTION 13.11 or any other provision
of this Agreement or any Loan Paper; or (iv) except as otherwise
permitted by any Loan Paper, waives compliance with, amends, or releases
(in whole or in part) any material
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DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
Guaranty or releases (in whole or in part) any material 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" 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 shall be in an amount at least equal to
$5,000,000 in the aggregate for all Facilities being assigned;
PROVIDED THAT, no partial assignment for any Facility may be
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;
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<PAGE>
(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, PROVIDED HOWEVER, that with respect to
an assignment to an Affiliate of Lender, the processing fee
shall be $1,500.
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 Facilities 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 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,
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<PAGE>
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 without notice to, or the consent of
Borrower or Administrative Agent and, with the consent of Borrower and
Administrative Agent, after the Closing Date any Term Loan B Lender or
any Term Loan C Lender which is a fund may pledge all or any portion of
its Borrowings and its Notes to its trustee in support of its
obligations to its trustee. No such assignment shall release the
assigning Lender from its obligations hereunder.
(g) Any Lender may furnish any information concerning the
Companies 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 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, 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 any Company under any Loan Paper is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy, or reorganization of such Company or otherwise, the obligations of
each Company 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.
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[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
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<PAGE>
Signature Page to that certain Credit Agreement dated as of December 23,
1998, among Dobson/Sygnet Operating Company, as Borrower, NationsBank, N.A., as
Administrative Agent, and certain other Agents and Lenders named therein.
EXECUTED as of the 23rd day of December, 1998, but effective as of the
Closing Date.
Attest: DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger,
SYGNET WIRELESS, INC.)
By: /s/ TRENT LEFORCE By: /s/ G. EDWARD EVANS
---------------------------- ------------------------------
Name: Trent LeForce Name: G. Edward Evans
Title: Assistant Secretary Title: President
Mailing Address:
13439 North Broadway Extension
Oklahoma City, OK 73114
SYGNET COMMUNICATIONS, INC.
By: /s/ G. EDWARD EVANS
------------------------------
Name: G. Edward Evans
Title: President
Mailing Address:
13439 North Broadway Extension
Oklahoma City, OK 73114
NATIONSBANK, N.A., PNC BANK, NATIONAL ASSOCIATION,
AS ADMINISTRATIVE AGENT AND AS A AS A LENDER
LENDER
By: /s/ JULIE A. SCHELL By: /s/ THOMAS A. COATES
---------------------------- ------------------------------
Name: Julie A. Schell Name: Thomas A. Coates
Title: Vice President Title: Vice President
FIRST UNION NATIONAL BANK, TORONTO DOMINION (TEXAS), INC.
AS A LENDER AS A LENDER
By: /s/ STEVEN C. LILLY By: /s/ JIMMY SIMIEN
---------------------------- ------------------------------
Name: Steven C. Lilly Name: Jimmy Simien
Title: Vice President Title: Vice President
LEHMAN COMMERCIAL PAPER INC.,
AS A LENDER
By: /s/ WILLIAM J. GALLAGHER
----------------------------
Name: William J. Gallagher
Title: Authorized Signatory
81
DOBSON/SYGNET OPERATING CREDIT AGREEMENT
<PAGE>
EXHIBIT A-1
FORM OF REVOLVER NOTE
$_____________ ____________ __, ____
FOR VALUE RECEIVED, the undersigned, DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger, Sygnet Wireless, Inc.) ("BORROWER"), hereby
promises to pay to the order of ______________________ ("LENDER"), at the
offices of NATIONSBANK, N.A., as Administrative Agent for Lender and others as
hereinafter described, on the Termination Date, the LESSER of
(a) $_______________ and (b) the aggregate Revolver Principal Debt disbursed by
Lender to Borrower and outstanding and unpaid on the Termination Date (TOGETHER
WITH accrued and unpaid interest thereon).
This note has been executed and delivered under, and is subject to the
terms of, the Credit Agreement, dated as of December 23, 1998 (as amended,
modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"),
among Borrower, Administrative Agent, Lehman Commercial Paper Inc. and PNC Bank,
National Association, as Co-Syndication Agents, Toronto Dominion (Texas), Inc.
and First Union National Bank, as Co-Documentation Agents, and Lender and other
lenders party thereto, and is one of the "REVOLVER NOTES" referred to therein.
Unless defined herein, capitalized terms used herein that are defined in the
Credit Agreement have the meaning given to such terms in the Credit Agreement.
Reference is made to the Credit Agreement for provisions affecting this note
regarding applicable interest rates, principal and interest payment dates, final
maturity, voluntary and mandatory prepayments, acceleration of maturity,
exercise of Rights, payment of attorneys' fees, court costs, and other costs of
collection, certain waivers by Borrower and others now or hereafter obligated
for payment of any sums due hereunder and security for the payment hereof.
Without limiting the immediately preceding sentence, reference is made to
SECTION 3.8 of the Credit Agreement for usury savings provisions.
THE LAWS (OTHER THAN CONFLICT-OF-LAWS PROVISIONS THEREOF) OF THE STATE
OF TEXAS AND OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES
OF BORROWER AND LENDER AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND
INTERPRETATION HEREOF.
DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger, Sygnet Wireless, Inc.)
By:
Name:
Title:
82 EXHBIIT A-1
<PAGE>
EXHIBIT A-2
FORM OF SWING LINE NOTE
$10,000,000 ____________ __, ____
FOR VALUE RECEIVED, the undersigned, DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger, Sygnet Wireless, Inc.) ("BORROWER"), hereby
promises to pay to the order of NATIONSBANK, N.A. ("LENDER"), on the Swing Line
Maturity Date, the LESSER of (i) $10,000,000 and (ii) the aggregate principal
amount of Borrowings under the Swing Line Subfacility disbursed by Lender to
Borrower and outstanding and unpaid on the Swing Line Maturity Date (TOGETHER
WITH accrued and unpaid interest thereon).
This note has been executed and delivered under, and is subject to the
terms of, the Credit Agreement, dated as of December 23, 1998 (as amended,
modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"),
among Borrower, Administrative Agent, Lehman Commercial Paper Inc. and PNC Bank,
National Association, as Co-Syndication Agents, Toronto Dominion (Texas), Inc.
and First Union National Bank, as Co-Documentation Agents, and Lender and other
lenders party thereto, and is the "SWING LINE NOTE" referred to therein. Unless
defined herein, capitalized terms used herein that are defined in the Credit
Agreement have the meaning given to such terms in the Credit Agreement.
Reference is made to the Credit Agreement for provisions affecting this note
regarding applicable interest rates, principal and interest payment dates, final
maturity, voluntary and mandatory prepayments, acceleration of maturity,
exercise of Rights, payment of attorneys' fees, court costs and other costs of
collection, certain waivers by Borrower and others now or hereafter obligated
for payment of any sums due hereunder and security for the payment hereof.
Without limiting the immediately preceding sentence, reference is made to
SECTION 3.8 of the Credit Agreement for usury savings provisions.
THE LAWS (OTHER THAN CONFLICT-OF-LAWS PROVISIONS THEREOF) OF THE STATE
OF TEXAS AND OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES
OF BORROWER AND LENDER AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND
INTERPRETATION HEREOF.
DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger, Sygnet Wireless, Inc.)
By:
Name:
Title:
83 EXHBIIT A-2
<PAGE>
EXHIBIT A-3
FORM OF TERM LOAN A NOTE
$_________________ ____________ __, ____
FOR VALUE RECEIVED, the undersigned, DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger, Sygnet Wireless, Inc.) ("BORROWER"), hereby
promises to pay to the order of ______________________ ("LENDER"), at the
offices of NATIONSBANK, N.A., as Administrative Agent for Lender and others as
hereinafter described, on the Termination Date, the LESSER of
(a) $_______________ and (b) the aggregate Term Loan A Principal Debt disbursed
by Lender to Borrower and outstanding and unpaid on the Termination Date
(TOGETHER WITH accrued and unpaid interest thereon).
This note has been executed and delivered under, and is subject to the
terms of, the Credit Agreement, dated as of December 23, 1998 (as amended,
modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"),
among Borrower, Administrative Agent, Lehman Commercial Paper Inc. and PNC Bank,
National Association, as Co-Syndication Agents, Toronto Dominion (Texas), Inc.
and First Union National Bank, as Co-Documentation Agents, and Lender and other
lenders party thereto, and is one of the "TERM LOAN A NOTES" referred to
therein. Unless defined herein, capitalized terms used herein that are defined
in the Credit Agreement have the meaning given to such terms in the Credit
Agreement. Reference is made to the Credit Agreement for provisions affecting
this note regarding applicable interest rates, principal and interest payment
dates, final maturity, voluntary and mandatory prepayments, acceleration of
maturity, exercise of Rights, payment of attorneys' fees, court costs, and other
costs of collection, certain waivers by Borrower and others now or hereafter
obligated for payment of any sums due hereunder and security for the payment
hereof. Without limiting the immediately preceding sentence, reference is made
to SECTION 3.8 of the Credit Agreement for usury savings provisions.
THE LAWS (OTHER THAN CONFLICT-OF-LAWS PROVISIONS THEREOF) OF THE STATE
OF TEXAS AND OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES
OF BORROWER AND LENDER AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND
INTERPRETATION HEREOF.
DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger, Sygnet Wireless, Inc.)
By:
Name:
Title:
1 EXHBIIT A-3
<PAGE>
EXHIBIT A-4
FORM OF TERM LOAN B NOTE
$_________________ ____________ __, ____
FOR VALUE RECEIVED, the undersigned, DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger, Sygnet Wireless, Inc.) ("BORROWER"), hereby
promises to pay to the order of ______________________ ("LENDER"), at the
offices of NATIONSBANK, N.A., as Administrative Agent for Lender and others as
hereinafter described, on the Termination Date, the LESSER of
(a) $_______________ and (b) the aggregate Term Loan B Principal Debt disbursed
by Lender to Borrower and outstanding and unpaid on the Termination Date
(TOGETHER WITH accrued and unpaid interest thereon).
This note has been executed and delivered under, and is subject to the
terms of, the Credit Agreement, dated as of December 23, 1998 (as amended,
modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"),
among Borrower, Administrative Agent, Lehman Commercial Paper Inc. and PNC Bank,
National Association, as Co-Syndication Agents, Toronto Dominion (Texas), Inc.
and First Union National Bank, as Co-Documentation Agents, and Lender and other
lenders party thereto, and is one of the "TERM LOAN B NOTES" referred to
therein. Unless defined herein, capitalized terms used herein that are defined
in the Credit Agreement have the meaning given to such terms in the Credit
Agreement. Reference is made to the Credit Agreement for provisions affecting
this note regarding applicable interest rates, principal and interest payment
dates, final maturity, voluntary and mandatory prepayments, acceleration of
maturity, exercise of Rights, payment of attorneys' fees, court costs, and other
costs of collection, certain waivers by Borrower and others now or hereafter
obligated for payment of any sums due hereunder and security for the payment
hereof. Without limiting the immediately preceding sentence, reference is made
to SECTION 3.8 of the Credit Agreement for usury savings provisions.
THE LAWS (OTHER THAN CONFLICT-OF-LAWS PROVISIONS THEREOF) OF THE STATE
OF TEXAS AND OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES
OF BORROWER AND LENDER AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND
INTERPRETATION HEREOF.
DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger, Sygnet Wireless, Inc.)
By:
Name:
Title:
2 EXHBIIT A-4
<PAGE>
EXHIBIT A-5
FORM OF TERM LOAN C NOTE
$_________________ ____________ __, ____
FOR VALUE RECEIVED, the undersigned, DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger, Sygnet Wireless, Inc.) ("BORROWER"), hereby
promises to pay to the order of ______________________ ("LENDER"), at the
offices of NATIONSBANK, N.A., as Administrative Agent for Lender and others as
hereinafter described, on the Termination Date, the LESSER of
(a) $_______________ and (b) the aggregate Term Loan C Principal Debt disbursed
by Lender to Borrower and outstanding and unpaid on the Termination Date
(TOGETHER WITH accrued and unpaid interest thereon).
This note has been executed and delivered under, and is subject to the
terms of, the Credit Agreement, dated as of December 23, 1998 (as amended,
modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"),
among Borrower, Administrative Agent, Lehman Commercial Paper Inc. and PNC Bank,
National Association, as Co-Syndication Agents, Toronto Dominion (Texas), Inc.
and First Union National Bank, as Co-Documentation Agents, and Lender and other
lenders party thereto, and is one of the "TERM LOAN C NOTES" referred to
therein. Unless defined herein, capitalized terms used herein that are defined
in the Credit Agreement have the meaning given to such terms in the Credit
Agreement. Reference is made to the Credit Agreement for provisions affecting
this note regarding applicable interest rates, principal and interest payment
dates, final maturity, voluntary and mandatory prepayments, acceleration of
maturity, exercise of Rights, payment of attorneys' fees, court costs, and other
costs of collection, certain waivers by Borrower and others now or hereafter
obligated for payment of any sums due hereunder and security for the payment
hereof. Without limiting the immediately preceding sentence, reference is made
to SECTION 3.8 of the Credit Agreement for usury savings provisions.
THE LAWS (OTHER THAN CONFLICT-OF-LAWS PROVISIONS THEREOF) OF THE STATE
OF TEXAS AND OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES
OF BORROWER AND LENDER AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND
INTERPRETATION HEREOF.
DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger, Sygnet Wireless, Inc.)
By:
Name:
Title:
3 EXHBIIT A-5
<PAGE>
EXHIBIT B-1
FORM OF NOTICE OF BORROWING
(Dobson/Sygnet Operating Company)
(Dated: ______________ __, ____)
NationsBank, N.A.
as Administrative Agent for the
Lenders as defined in the Credit
Agreement referred to below
NationsBank Plaza, 13th Floor
901 Main Street
Dallas, TX 75202
Attn: Mickey McLean
Fax: (214) 508-2515
Reference is made to the Credit Agreement, dated as of December 23,
1998 (as amended, modified, supplemented, or restated from time to time, the
"CREDIT AGREEMENT"), among the undersigned, Administrative Agent, Lehman
Commercial Paper Inc. and PNC Bank, National Association, as Co-Syndication
Agents, Toronto Dominion (Texas), Inc. and First Union National Bank, as
Co-Documentation Agents, and Lenders party thereto. Capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to
such terms in the Credit Agreement. The undersigned hereby gives you notice
pursuant to the Credit Agreement that it requests a Borrowing under the
Credit Agreement, and in that connection sets forth below the terms on which
such Borrowing is requested to be made:
<TABLE>
<CAPTION>
-------------------------------------------
Term Term Term
Revolver Loan A Loan B Loan C
Facility Facility Facility Facility
-------------------------------------------
<S> <C> <C> <C> <C> <C>
(A) Specify if Borrowing is
under Revolver Facility,
Term Loan A Facility,
Term Loan B Facility, or
Term Loan C Facility. (A)
EXHIBIT B-1
<PAGE>
(B) Borrowing Date of
Borrowing (1) (B)
(C) Amount of Borrowing (2) (C)
(D) Type of Borrowing (3) (D)
(E) For a Eurodollar Rate
Borrowing, the Interest
Period and the last day
thereof (4) (E)
-------------------------------------------
</TABLE>
Borrower hereby certifies that the following statements are true and
correct on the date hereof, and will be true and correct on the Borrowing
Date specified herein after giving effect to such Borrowing:
(a) The requested Borrowing will not cause the Principal
Debt to exceed the Total Commitment; if the Borrowing is a Borrowing
under the Revolver Facility, the Borrowing will not cause the Revolver
Commitment Usage to exceed the Revolver Commitment; if the Borrowing is
a Borrowing under the Term Loan Facilities, such Borrowing will not (i)
cause the Term Principal Debt to exceed the sum of the aggregate
commitments for the Term Loan Facilities, or (ii) cause the Term
Principal Debt under the applicable Term Loan Facility to exceed the
aggregate commitments of Lenders for such Term Loan Facility;
(b) All of the representations and warranties of any Company
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 and, if
applicable, supplemental Schedules have been delivered with respect
thereto and, when necessary, approved by Required Lenders);
(c) $ of the requested Borrowings is to be
used for ; $ is to be used
for ; and $ is to be used for
;
(d) No material adverse change in the financial conditions,
operations, or businesses of Communications and its Restricted
Subsidiaries or the Companies or Guarantors has occurred since the date
of the quarterly and audited annual financial statements most recently
delivered by Borrower to Lenders pursuant to SECTIONS 7.1 and 9.3(a) and
(b) of the Credit Agreement;
(e) If all or part of the requested Borrowing will be used
to finance a Distribution, Borrower has complied with and delivered (or
shall comply with and delivery on or prior to the date of the requested
Borrowing) the items required by SECTION 7.3(f).
(f) No Default or Potential Default has occurred and is
continuing or will arise after giving effect to the requested Borrowing;
and
2 EXHIBIT B-1
<PAGE>
(f) If the requested Borrowing will be used to finance a
Permitted Acquisition, Borrower has complied with and delivered (or
shall comply with and deliver on or prior to the date of the requested
Borrowing) the items required by SECTION 7.2 and SCHEDULE 7.2.
Very truly yours,
DOBSON/SYGNET OPERATING COMPANY
(including its successor by
merger, Sygnet Wireless, Inc.)
By:
Name:
Title:
Rate:
-------------------
Confirmed by:
-------------------------
(1) For any Borrowing under the Revolver Facility, must be a Business Day
occurring prior to the Termination Date and be at least (a) three
Business Days following receipt by Administrative Agent of this Notice
of Borrowing for any Eurodollar Rate Borrowing, and (b) one Business Day
following receipt by Administrative Agent of this Notice of Borrowing
for any Base Rate Borrowing.
(2) Not less than $5,000,000 or an integral multiple of $1,000,000.
(3) Eurodollar Rate Borrowing or Base Rate Borrowing.
(4) 1, 2, 3, or 6 months, or other periods requested by Borrower to the
extent available from Lenders -- in no event may the Interest Period end
after the Termination Date.
3 EXHIBIT B-1
<PAGE>
EXHIBIT B-2
FORM OF NOTICE OF CONVERSION
(Dobson/Sygnet Operating Company)
(Dated: ______________ __, ____)
NationsBank, N.A.
as Administrative Agent for the
Lenders as defined in the Credit
Agreement referred to below
NationsBank Plaza, 13th Floor
901 Main Street
Dallas, TX 75202
Attn: Mickey McLean
Fax: (214) 508-2515
Reference is made to the Credit Agreement, dated as of December 23,
1998 (as amended, modified, supplemented, or restated from time to time, the
"CREDIT AGREEMENT"), among the undersigned, Administrative Agent, Lehman
Commercial Paper Inc. and PNC Bank, National Association, as Co-Syndication
Agents, Toronto Dominion (Texas), Inc. and First Union National Bank, as
Co-Documentation Agents, and Lenders party thereto. Capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to
such terms in the Credit Agreement. The undersigned hereby gives you notice
pursuant to SECTION 3.10 of the Credit Agreement that it elects to convert a
Borrowing under the Credit Agreement from one Type to another Type or elects
a new Interest Period for a Eurodollar Rate Borrowing, and in that connection
sets forth below the terms on which such election is requested to be made:
<TABLE>
<CAPTION>
---------------------------------------------
Term Term Term
Revolver Loan A Loan B Loan C
Facility Facility Facility Facility
---------------------------------------------
<S> <C> <C> <C> <C> <C>
(A) Specify if Borrowing is
under Revolver
Facility, Term Loan A
Facility, Term Loan B
Facility, or Term Loan
C Facility. (A)
(B) Date of conversion or
last day of applicable
Interest Period(1) (B)
(C) Principal amount of
existing Borrowing
being converted or
continued(2) (C)
(D) Net Type of Borrowing
selected (or Type of
Borrowing continued)(3) (D)
(E) For conversion to, or
continuation of, a
Eurodollar Rate
Borrowing, Interest
Period and the last day
thereof(4) (E)
---------------------------------------------
</TABLE>
EXHIBIT B-2
<PAGE>
On the date the rate is set, please confirm the interest rate below
and return by facsimile transmission to _________________________.
Very truly yours,
DOBSON/SYGNET OPERATING COMPANY
(including its successor by
merger, Sygnet Wireless, Inc.)
By:
Name:
Title:
Rate:
--------
Confirmed by:
-------------------------
(1) For any Borrowing under the Revolver Facility, must be a Business Day at
least (a) three Business Days following receipt by Administrative Agent
of this Notice of Conversion from a Base Rate Borrowing to a Eurodollar
Rate Borrowing or a continuation of a Eurodollar Rate Borrowing for an
additional Interest Period, and (b) one Business Day following receipt
by Administrative Agent of this Notice of Conversion for a conversion
from a Eurodollar Rate Borrowing to a Base Rate Borrowing.
(2) Not less than $5,000,000 or a greater integral multiple of $1,000,000
(if a Eurodollar Rate Borrowing).
(3) Eurodollar Rate Borrowing or Base Rate Borrowing.
(4) 1, 2, 3, or 6 months, or other periods requested by Borrower to the
extent available from Lenders -- in no event may the Interest Period end
after the Termination Date.
2 EXHIBIT B-2
<PAGE>
EXHIBIT C
FORM OF GUARANTY
THIS GUARANTY is executed as of December , 1998, by
___________________, a _________ corporation [partnership] ("GUARANTOR"), for
the benefit of NATIONSBANK, N.A., a national banking association (in its
capacity as Administrative Agent for Lenders).
WHEREAS, Dobson/Sygnet Operating Company, (including its successor by
merger, Sygnet Wireless, Inc.) ("BORROWER"), NationsBank, N.A., as
Administrative Agent (including its permitted successors and assigns in such
capacity, "ADMINISTRATIVE AGENT"), Lehman Commercial Paper Inc. and PNC Bank,
National Association, as Co-Syndication Agents (including their permitted
successors and assigns in such capacity, "SYNDICATION AGENT"), Toronto
Dominion (Texas), Inc. and First Union National Bank, as Co-Documentation
Agents (including their permitted successors and assigns in such capacity,
"DOCUMENTATION AGENT"), and Lenders now or hereafter party to the Credit
Agreement (including their respective permitted successors and assigns,
"LENDERS") have entered into a Credit Agreement, dated as of December 23,
1998 (as amended, modified, supplemented, or restated from time to time, the
"CREDIT AGREEMENT");
WHEREAS, provisions of the Credit Agreement permit Guarantor to
directly or indirectly receive proceeds of Borrowings made pursuant thereto;
and
WHEREAS, this Guaranty is integral to the transactions contemplated
by the Loan Papers and is a condition precedent to Lenders' obligations to
extend credit under the Loan Papers.
ACCORDINGLY, for adequate and sufficient consideration, the receipt
and adequacy of which are hereby acknowledged, Guarantor guarantees to
Administrative Agent and Lenders the prompt payment of the Guaranteed Debt
(defined below) as follows:
15. DEFINITIONS. Terms defined in the Credit Agreement have the
same meanings when used, unless otherwise defined, in this Guaranty. As used
in this Guaranty:
BORROWER means Borrower, Borrower as a debtor-in-possession, and any
receiver, trustee, liquidator, conservator, custodian, or similar party
appointed for Borrower or for all or substantially all of Borrower's assets
under any Debtor Relief Law.
CREDIT AGREEMENT is defined in the recitals to this Guaranty.
GUARANTEED DEBT means, collectively, (a) the Obligation and (b) all
present and future costs, attorneys' fees, and expenses reasonably incurred
by Administrative Agent or any Lender to enforce Borrower's, Guarantor's, or
any other obligor's payment of any of the Guaranteed Debt, including, without
limitation (to the extent lawful), all present and future amounts that would
become due but for the operation of Sections 502 or 506 or any other
provision of TITLE 11 of the UNITED STATES CODE and all present and future
accrued and unpaid interest (including, without limitation, all post-maturity
interest and any post-petition interest in any proceeding under Debtor Relief
Laws to which Borrower or Guarantor becomes subject).
GUARANTOR is defined in the preamble to this Guaranty.
EXHIBIT C
<PAGE>
LENDER means, individually, or LENDERS means, collectively, on any
date of determination, Administrative Agent, Syndication Agent, Documentation
Agent, and the Lenders.
SUBORDINATED DEBT means all present and future obligations of any
Company to Guarantor, whether those obligations are (a) direct, indirect,
fixed, contingent, liquidated, unliquidated, joint, several, or joint and
several, (b) due or to become due to Guarantor, (c) held by or are to be held
by Guarantor, (d) created directly or acquired by assignment or otherwise, or
(e) evidenced in writing.
16. GUARANTY. This is an absolute, irrevocable, and continuing
guaranty, and the circumstance that at any time or from time to time the
Guaranteed Debt may be paid in full does not affect the obligation of
Guarantor with respect to the Guaranteed Debt incurred after that. This
Guaranty remains in effect until the Guaranteed Debt is fully paid and
performed, all commitments to extend any credit under the Loan Papers have
terminated, and all Financial Hedges with any Lender have expired. Guarantor
may not rescind or revoke its obligations with respect to the Guaranteed
Debt. Notwithstanding any contrary provision, it is the intention of
Guarantor, Lenders, and Administrative Agent that the amount of the
Guaranteed Debt guaranteed by Guarantor by this Guaranty shall be in, but not
in excess of, the maximum amount permitted by fraudulent conveyance,
fraudulent transfer, or similar Laws applicable to Guarantor. Accordingly,
notwithstanding anything to the contrary contained in this Guaranty or any
other agreement or instrument executed in connection with the payment of any
of the Guaranteed Debt, the amount of the Guaranteed Debt guaranteed by
Guarantor by this Guaranty shall be limited to an aggregate amount equal to
the largest amount that would not render Guarantor's obligations hereunder
subject to avoidance under SECTION 548 of the UNITED STATES BANKRUPTCY CODE
or any comparable provision of any applicable state law.
17. CONSIDERATION. Guarantor represents and warrants that its
liability under this Guaranty may reasonably be expected to directly or
indirectly benefit it.
18. CUMULATIVE RIGHTS. If Guarantor becomes liable for any
indebtedness owing by Borrower to Administrative Agent or any Lender, OTHER
THAN under this Guaranty, that liability may not be in any manner impaired or
affected by this Guaranty. The Rights of Administrative Agent or Lenders
under this Guaranty are cumulative of any and all other Rights that
Administrative Agent or Lenders may ever have against Guarantor. The
exercise by Administrative Agent or Lenders of any Right under this Guaranty
or otherwise does not preclude the concurrent or subsequent exercise of any
other Right.
19. PAYMENT UPON DEMAND. If a Default exists, Guarantor shall,
on demand and without further notice of dishonor and without any notice
having been given to any Guarantor previous to that demand of either the
acceptance by Administrative Agent or Lenders of this Guaranty or the
creation or incurrence of any Guaranteed Debt, pay the amount of the
Guaranteed Debt then due and payable to Administrative Agent and Lenders. It
is not necessary for Administrative Agent or Lenders, in order to enforce
that payment by any Guarantor, first or contemporaneously to institute suit
or exhaust remedies against Borrower or others liable on any Guaranteed Debt
or to enforce Rights against any Collateral securing any Guaranteed Debt.
20. SUBORDINATION. The Subordinated Debt is expressly
subordinated to the full and final payment of the Guaranteed Debt. Guarantor
agrees not to accept any payment of any Subordinated Debt from any Company if
a Default exists. If Guarantor receives any payment of any Subordinated Debt
in violation of the foregoing, Guarantor shall hold that payment in trust for
Administrative Agent and Lenders and promptly turn it over to Administrative
Agent, in the form received (with any necessary endorsements), to be applied
to the Guaranteed Debt.
2 EXHIBIT C
<PAGE>
21. SUBROGATION AND CONTRIBUTION. Until payment in full of the
Guaranteed Debt, the termination of the Obligation of Lenders to extend
credit under the Loan Papers, and expiration of all Financial Hedges, (a)
Guarantor may not assert, enforce, or otherwise exercise any Right of
subrogation to any of the Rights or Liens of Administrative Agent or Lenders
or any other beneficiary against Borrower or any other obligor on the
Guaranteed Debt or any collateral or other security or any Right of recourse,
reimbursement, subrogation, contribution, indemnification, or similar Right
against Borrower or any other obligor on any Guaranteed Debt or any guarantor
of it, (b) Guarantor defers all of the foregoing Rights (whether they arise
in equity, under contract, by statute, under common law, or otherwise), and
(c) Guarantor defers the benefit of, and subordinates any Right to
participate in, any Collateral or other security given to Administrative
Agent or Lenders or any other beneficiary to secure payment of any Guaranteed
Debt.
22. NO RELEASE. Guarantor's obligations under this Guaranty may
not be released, diminished, or affected by the occurrence of any one or more
of the following events: (a) Any taking or accepting of any other security
or assurance for any Guaranteed Debt; (b) any release, surrender, exchange,
subordination, impairment, or loss of any Collateral securing any Guaranteed
Debt; (c) any full or partial release of the liability of any other obligor
on the Obligation, EXCEPT for any final release resulting from payment in
full of such Obligation; (d) the modification of, or waiver of compliance
with, any terms of any other Loan Paper; (e) the insolvency, bankruptcy, or
lack of corporate or partnership power of any other obligor at any time
liable for any Guaranteed Debt, whether now existing or occurring in the
future; (f) any renewal, extension, or rearrangement of any Guaranteed Debt
or any adjustment, indulgence, forbearance, or compromise that may be granted
or given by Administrative Agent or any Lender to any other obligor on the
Obligation; (g) any neglect, delay, omission, failure, or refusal of
Administrative Agent or any Lender to take or prosecute any action in
connection with the Guaranteed Debt or to foreclose, take, or prosecute any
action in connection with any Loan Paper; (h) any failure of Administrative
Agent or any Lender to notify Guarantor of any renewal, extension, or
assignment of any Guaranteed Debt, or the release of any security or of any
other action taken or refrained from being taken by Administrative Agent or
any Lender against Borrower or any new agreement between Administrative
Agent, any Lender, and Borrower; IT BEING UNDERSTOOD THAT neither
Administrative Agent nor any Lender is required to give Guarantor any notice
of any kind under any circumstances whatsoever with respect to or in
connection with any Guaranteed Debt, OTHER THAN any notice required to be
given to Guarantor by Law or elsewhere in this Guaranty; (i) the
unenforceability of any Guaranteed Debt against any other obligor or any
security securing same because it exceeds the amount permitted by Law, the
act of creating it is ULTRA VIRES, the officers creating it exceeded their
authority or violated their fiduciary duties in connection with it, or
otherwise; or (j) any payment of the Obligation to Administrative Agent or
any Lender is held to constitute a preference under any Debtor Relief Law or
for any other reason Administrative Agent or any Lender is required to refund
that payment or make payment to someone else (and in each such instance this
Guaranty will be reinstated in an amount equal to that payment).
23. WAIVERS. To the maximum extent lawful, Guarantor waives all
Rights by which it might be entitled to require suit on an accrued right of
action in respect of any Guaranteed Debt or require suit against Borrower or
others, whether arising under Section 34.02 of the TEXAS BUSINESS AND
COMMERCE CODE, as amended (regarding its Right to require Administrative
Agent or Lenders to sue Borrower on accrued right of action following its
written notice to Administrative Agent or Lenders), Section 17.001 of the
TEXAS CIVIL PRACTICE AND REMEDIES CODE, as amended (allowing suit against it
without suit against Borrower, but precluding entry of judgment against it
before entry of judgment against Borrower), RULE 31 of the TEXAS RULES OF
CIVIL PROCEDURE, as amended (requiring Administrative Agent or Lenders to
join Borrower in any suit against it unless judgment has been previously
entered against Borrower), or otherwise.
3 EXHIBIT C
<PAGE>
24. LOAN PAPERS. By execution hereof, Guarantor covenants and
agrees that certain representations, warranties, terms, covenants, and
conditions set forth in the Loan Papers are applicable to Guarantor and shall
be imposed upon Guarantor, and Guarantor reaffirms that each such
representation and warranty is true and correct and covenants and agrees to
promptly and properly perform, observe, and comply with each such term,
covenant, or condition. Moreover, Guarantor acknowledges and agrees that
this Guaranty is subject to the offset provisions of the Loan Papers in favor
of Administrative Agent and Lenders. In the event the Credit Agreement shall
cease to remain in effect for any reason whatsoever during any period when
any part of the Guaranteed Debt remains unpaid, the terms, covenants, and
agreements incorporated herein by reference shall nevertheless continue in
full force and effect as obligations of Guarantor under this Guaranty.
25. RELIANCE AND DUTY TO REMAIN INFORMED. Guarantor confirms
that it has executed and delivered this Guaranty after reviewing the terms
and conditions of the Loan Papers and such other information as it has deemed
appropriate in order to make its own credit analysis and decision to execute
and deliver this Guaranty. Guarantor confirms that it has made its own
independent investigation with respect to Borrower's creditworthiness and is
not executing and delivering this Guaranty in reliance on any representation
or warranty by Administrative Agent or any Lender as to that
creditworthiness. Guarantor expressly assumes all responsibilities to remain
informed of the financial condition of Borrower and any circumstances
affecting Borrower's ability to perform under the Loan Papers to which it is
a party or any collateral securing any Guaranteed Debt.
26. NO REDUCTION. The Guaranteed Debt may not be reduced,
discharged, or released because or by reason of any existing or future
offset, claim, or defense (EXCEPT for the defense of complete and final
payment of the Guaranteed Debt) of Borrower or any other obligor against
Administrative Agent or any Lender or against payment of the Guaranteed Debt,
whether that offset, claim, or defense arises in connection with the
Guaranteed Debt or otherwise. Those claims and defenses include, without
limitation, failure of consideration, breach of warranty, fraud, bankruptcy,
incapacity/infancy, statute of limitations, lender liability, accord and
satisfaction, usury, forged signatures, mistake, impossibility, frustration
of purpose, and unconscionability.
27. COMMUNICATIONS ACT. Notwithstanding any other provision of
this Guaranty, any action taken or proposed to be taken by Administrative
Agent or any Lender under this Guaranty which would affect the operational,
voting, or other control of Borrower or Guarantor, shall be pursuant to
SECTION 310(d) of the COMMUNICATIONS ACT OF 1934 (as amended), 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.
28. INSOLVENCY OF GUARANTOR. Should Guarantor become insolvent,
or fail to pay Guarantor's debts generally as they become due, or voluntarily
seek, consent to, or acquiesce in, the benefit or benefits of any Debtor
Relief Law (OTHER THAN as a creditor or claimant), or become a party to (or
be 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
hereunder, then, in any such event, the Guaranteed Debt shall be, as among
Guarantor, Administrative Agent and Lenders, a fully matured, due, and
payable obligation of Guarantor to Administrative Agent and Lenders (without
regard to whether Borrower is then in default under the Loan Papers or
whether the Obligation, or any part thereof, is then due and owing by
Borrower to any Lender), payable in full by Guarantor to Lenders upon demand,
and the amount thereof so payable shall be the estimated amount owing in
respect of the contingent claim created hereunder.
4 EXHIBIT C
<PAGE>
29. LOAN PAPER. This Guaranty is a Loan Paper and is subject to
the applicable provisions of SECTIONS 1 and 13 of the Credit Agreement,
including, without limitation, the provisions relating to GOVERNING LAW,
JURISDICTION, VENUE, SERVICE OF PROCESS, AND WAIVER OF JURY TRIAL, all of
which are incorporated into this Guaranty by reference the same as if set
forth in this Guaranty verbatim.
30. NOTICES. For purposes of SECTIONS 13.3 of the Credit
Agreement, Guarantor's address and telecopy number are as set forth next to
Guarantor's signature on the signature page hereof.
31. AMENDMENTS, ETC. No amendment, waiver, or discharge to or
under this Guaranty is valid unless it is in writing and is signed by the
party against whom it is sought to be enforced and is otherwise in conformity
with the requirements of SECTION 13.11 of the Credit Agreement.
32. ADMINISTRATIVE AGENT AND LENDERS. Administrative Agent is
Administrative Agent for each Lender under the Credit Agreement. All Rights
granted to Administrative Agent under or in connection with this Guaranty are
for each Lender's ratable benefit. Administrative Agent may, without the
joinder of any Lender, exercise any Rights in Administrative Agent's or
Lenders' favor under or in connection with this Guaranty. Administrative
Agent's and each Lender's Rights and obligations VIS-A-VIS each other may be
subject to one or more separate agreements between those parties. However,
Guarantor is not required to inquire about any such agreement or is subject
to any terms of it unless Guarantor specifically joins it. Therefore,
neither Guarantor nor its successors or assigns is entitled to any benefits
or provisions of any such separate agreement or is entitled to rely upon or
raise as a defense any party's failure or refusal to comply with the
provisions of it.
33. PARTIES. This Guaranty benefits Administrative Agent,
Lenders, and their respective successors and assigns and binds Guarantor and
its successors and assigns. Upon appointment of any successor Administrative
Agent under the Credit Agreement, all of the Rights of Administrative Agent
under this Guaranty automatically vests in that new Administrative Agent as
successor Administrative Agent on behalf of Lenders without any further act,
deed, conveyance, or other formality OTHER THAN that appointment. The Rights
of Administrative Agent and Lenders under this Guaranty may be transferred
with any assignment of the Guaranteed Debt. The Credit Agreement contains
provisions governing assignments of the Guaranteed Debt and of Rights and
obligations under this Guaranty.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
5 EXHIBIT C
<PAGE>
EXECUTED as of the date first stated in this Guaranty.
GUARANTOR:
Address:
By:
Name:
Telephone: Title:
Facsimile:
GUARANTY
SIGNATURE PAGE
<PAGE>
EXHIBIT D
[THIS PLEDGE, ASSIGNMENT, AND SECURITY AGREEMENT IS INTENDED TO
QUALIFY AS A MORTGAGE OF PROPERTY UNDER THE TERMS AND PROVISIONS
OF OHIO REVISED CODE, XVII, CHAPTER 1701, SECTION 1701.66
AND AS A SECURITY AGREEMENT UNDER THE TERMS AND PROVISIONS
OF OHIO REVISED CODE SECTION 1309.21]
[TO BE USED IN OHIO JURISDICTION ONLY]
FORM OF PLEDGE, ASSIGNMENT, AND SECURITY AGREEMENT
THIS PLEDGE, ASSIGNMENT, AND SECURITY AGREEMENT (the "SECURITY
AGREEMENT") is executed as of December ___, 1998, by , a
[corporation/partnership] (whether doing business
in its own name or in one or more of the tradenames listed on ANNEX A hereto,
"DEBTOR"), whose address is , and
NATIONSBANK, N.A., a national banking association, (in its capacity as
"ADMINISTRATIVE AGENT" for Lenders (hereafter defined)), as "SECURED PARTY,"
whose address is 901 Main Street, Suite 3100, Dallas, Texas 75202.
WHEREAS, Dobson/Sygnet Operating Company, (including its successor by
merger, Sygnet Wireless, Inc.) ("BORROWER"), NationsBank, N.A., as
Administrative Agent (including its permitted successors and assigns in such
capacity, "ADMINISTRATIVE AGENT"), Lehman Commercial Paper Inc. and PNC Bank,
National Association, as Co-Syndication Agents (including their permitted
successors and assigns in such capacity, "SYNDICATION AGENT"), Toronto
Dominion (Texas), Inc. and First Union National Bank, as Co-Documentation
Agents (including their permitted successors and assigns in such capacity,
"DOCUMENTATION AGENT"), and Lenders now or hereafter party to the Credit
Agreement have entered into a Credit Agreement, dated as of December 23, 1998
(as amended, modified, supplemented, or restated from time to time, the
"CREDIT AGREEMENT");
WHEREAS, this Security Agreement is integral to the transactions
contemplated by the Loan Papers, and the execution and delivery thereof is a
condition precedent to Lenders' obligations to extend credit under the Loan
Papers.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy
of which are hereby acknowledged, Debtor and Secured Party hereby agree as
follows:
14. REFERENCE TO CREDIT AGREEMENT. The terms, conditions, and
provisions of the Credit Agreement are incorporated herein by reference, the
same as if set forth herein verbatim, which terms, conditions, and provisions
shall continue to be in full force and effect hereunder so long as Lenders
are obligated to lend under the Credit Agreement and thereafter until the
Obligation is paid and performed in full.
- -------------------------------------------------------------------------------
THIS DOCUMENT Haynes and Boone, LLP
PREPARED BY AND WHEN 901 Main Street, Suite 3100
FILED, RETURN TO: Dallas, Texas 75202
Attention: Sue P. Murphy
15. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the
context hereof
EXHIBIT D
<PAGE>
otherwise requires, each term defined in either of the Credit Agreement or in
the UCC is used in this Security Agreement with the same meaning; PROVIDED
THAT, if the definition given to such term in the Credit Agreement conflicts
with the definition given to such term in the UCC, the Credit Agreement
definition shall control to the extent legally allowable; and (c) if any
definition given to such term in CHAPTER 9 of the UCC conflicts with the
definition given to such term in any other chapter of the UCC, the CHAPTER 9
definition shall prevail. As used herein, the following terms have the
meanings indicated:
COLLATERAL has the meaning set forth in PARAGRAPH 4 hereof.
FCC LICENSES means all Authorizations, licenses, and permits
issued by the FCC to Debtor.
LENDER means, individually, or LENDERS means, collectively, on
any date of determination, Administrative Agent, Syndication Agent,
Documentation Agent, and Lenders and their permitted successors and
assigns.
OBLIGATION means, collectively, (a) the "OBLIGATION" as defined
in the Credit Agreement, and (b) all indebtedness, liabilities, and
obligations of Debtor arising under this Security Agreement; it being
the intention and contemplation of Debtor and Secured Party that future
advances will be made by Secured Party or one or more Lenders to Debtor
for a variety of purposes, that Debtor may guarantee (or otherwise
become directly or contingently obligated with respect to) the
obligations of others to Secured Party or to one or more Lenders, that
from time to time overdrafts of Debtor's accounts with Secured Party or
with other Lenders may occur, and that Secured Party or one or more
Lenders may from time to time acquire from others obligations of Debtor
to such others, and that payment and repayment of all of the foregoing
are intended to and shall be part of the Obligation secured hereby. The
Obligation shall include, without limitation, future, AS WELL AS
existing, advances, indebtedness, liabilities, and obligations owed by
Debtor to Secured Party or to any Lender arising under the Loan Papers
or otherwise.
OBLIGOR means any Person obligated with respect to any of the
Collateral, whether as an account debtor, obligor on an instrument,
issuer of securities, or otherwise.
PARTNERSHIP means any partnership issuing a Partnership
Interest.
PLEDGED SECURITIES means, collectively, the Pledged Shares, the
Partnership Interests (whether or not a security), and any other
Collateral constituting securities.
SECURITY INTEREST means the security interest granted and the
pledge and assignment made under PARAGRAPH 3 hereof.
UCC means the Uniform Commercial Code as enacted in the State of
Texas or other applicable jurisdiction, as amended at the time in
question.
16. SECURITY INTEREST. In order to secure the full and complete
payment and performance of the Obligation when due, Debtor hereby grants to
Secured Party a Security Interest in all of Debtor's Rights, titles, and
interests in and to the Collateral and pledges, collaterally transfers, and
assigns the Collateral to Secured Party, all upon and subject to the terms
and conditions of this Security Agreement. Such Security Interest is granted
and pledge and assignment are made as security only and shall not subject
Secured Party to, or transfer or in any way affect or modify, any obligation
of Debtor with respect to any of the Collateral or any transaction involving
or giving rise thereto. The grant contained herein is intended to
2 EXHIBIT D
<PAGE>
confer upon Secured Party all Rights that a secured creditor may obtain and
that may be granted in the FCC Licenses under applicable Law as from time to
time in effect. If the Law is subsequently changed or clarified, or if the
FCC's interpretation of existing Law is changed, to permit or further permit
the granting of such security interests in FCC Licenses, then Debtor's FCC
Licenses, whether now held or hereinafter acquired, shall automatically
become subject to the Secured Party's Security Interest to the maximum extent
permitted by the Law as then in effect. In the meantime, the value of the
Systems' and Debtor's cellular telephone communication businesses as a going
concern depends upon the holder of Debtor's FCC Licenses also being the owner
of the assets used or useful in the operation of the Systems and, if
ownership of those assets is separated from the FCC Licenses, the FCC might,
under currently applicable Law, cancel the FCC Licenses. Accordingly, Debtor
and Secured Party, in recognition of the unique nature of the FCC Licenses
and the fact that the separation of the FCC Licenses from Debtor's operating
assets may prevent Lenders from adequately realizing the value of their
Security Interests, have provided in PARAGRAPH 9(b) hereof for the
appointment of a receiver upon a Default or Potential Default and for the
assignment of the FCC Licenses in the event of the foreclosure hereunder,
with the specific intention in each case that the physical assets used in
connection with the Systems not be separated from the FCC Licenses. If the
grant, pledge, or collateral transfer or assignment of any specific item of
the Collateral is expressly prohibited by any contract, then the Security
Interest created hereby nonetheless remains effective to the extent allowed
by UCC Section 9.318 or other applicable Law, but is otherwise limited by
that prohibition.
17. COLLATERAL. As used herein, the term "COLLATERAL" means the
following items and types of property now owned or in the future acquired by
Debtor:
(a) All present and future accounts, contract Rights,
general intangibles, chattel paper, documents, instruments, inventory,
investment property, equipment, fixtures, other goods, minerals, money,
and deposit accounts, wherever located, now owned or hereafter acquired
by such Debtor, and any and all present and future Tax refunds of any
kind whatsoever to which any Debtor 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 such Debtor, including, without limitation, all
capital stock of the Subsidiaries of such Debtor as more particularly
listed on ANNEX B hereto, TOGETHER WITH all distributions thereon, all
cash and noncash proceeds thereof, and any securities issued in
substitution or replacement thereof (collectively, the "PLEDGED
SHARES").
(c) All Rights, titles, and interests of such Debtor in and
to all promissory notes and other instruments payable to such Debtor,
now or hereafter existing, including, without limitation, the inter-
company notes or notes from Cellular Partnership as listed on ANNEX B
(collectively, the "COLLATERAL NOTES"), all Rights titles, interests,
and Liens Debtor may have, be or become entitled to under all present
and future security agreements, pledge agreements, deeds of trust,
mortgages, guarantees, or other documents assuring or securing payment
of the Collateral Notes (the "COLLATERAL NOTE SECURITY") 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
such Debtor in any partnership or joint venture, including, without
limitation, any Cellular Partnership and the partnerships listed on
ANNEX B hereof (collectively, the "PARTNERSHIP INTERESTS").
(e) All present and future Rights, titles, interests, and
Liens (but none of the obligations) now owned or hereafter acquired by
such Debtor, as lessee or landlord, in and to each lease covering
3 EXHIBIT D
<PAGE>
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 such Debtor, TOGETHER WITH all improvements
thereon and fixtures attached thereto.
(g) The balance of every deposit account of such Debtor and
any other claim of such Debtor against any depository, now or hereafter
existing, whether liquidated or unliquidated, including, without
limitation, certificates of deposit, other deposit instruments, and the
[ESCROW DEPOSIT UNDER THE SYGNET PURCHASE AGREEMENT] (collectively, the
"DEPOSIT ACCOUNTS").
(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 such Debtor (collectively,
the "VEHICLES").
(i) All present and future Rights, awards, and judgments to
which such Debtor 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 such Debtor 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, including, without limitation, such Debtor's
trademarks listed on ANNEX B hereto (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 such Debtor 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, including, without limitation, the patents listed on
ANNEX B hereto (collectively, the "PATENTS").
(l) All Authorizations, licenses, and permits issued by the
FCC or any PUC, to the extent that the grant of a security interest in
any such license or permit does not result in the forfeiture of, or
default under, any such license or permit, and the right of Debtor to
apply to the FCC for approval of transfers of licenses issued by the
FCC.
(m) All proceeds of any sale or other disposition of any
Authorization, license, or permit issued by the FCC or any PUC, 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.
4 EXHIBIT D
<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.
[The description of the Collateral contained in this PARAGRAPH 4 shall not be
deemed to permit any action prohibited by this Security Agreement or by the
terms incorporated in this Security Agreement. Furthermore, notwithstanding any
contrary provision, Debtor agrees that, if, but for the application of this
paragraph, granting a Security Interest in the Collateral would constitute a
fraudulent conveyance under 11 U.S.C. Section 548 or a fraudulent conveyance or
transfer under any state fraudulent conveyance, fraudulent transfer, or similar
Law in effect from time to time (each a "FRAUDULENT CONVEYANCE"), then the
Security Interest remains enforceable to the maximum extent possible without
causing such Security Interest to be a fraudulent conveyance, and this Security
Agreement is automatically amended to carry out the intent of this paragraph.]
[BRACKETED LANGUAGE TO BE INCLUDE ALL SECURITY AGREEMENTS OTHER THAN THE
SECURITY AGREEMENT FOR BORROWER.]
18. REPRESENTATIONS AND WARRANTIES. Debtor represents and
warrants to Secured Party that:
(a) CREDIT AGREEMENT. Certain representations and
warranties in the Credit Agreement are applicable to it or its assets or
operations, and each such representation and warranty is true and
correct.
(b) BINDING OBLIGATION. This Security Agreement creates a
legal, valid, and binding Lien in and to the Collateral in favor of
Secured Party and enforceable against Debtor. For Collateral in which
the Security Interest may be perfected by the filing of Financing
Statements, once those Financing Statements have been properly filed in
the jurisdictions described on ANNEX A hereto, the Security Interest in
that Collateral will be fully perfected. Once perfected and, in the
case of investment property or instruments, upon possession or "CONTROL"
(within the meaning of SECTIONS 8-106 and 9-115 of the UCC) by Secured
Party, the Security Interest will constitute a first-priority Lien on
the Collateral, subject only to Permitted Liens. The creation of the
Security Interest does not require the consent of any Person that has
not been obtained.
(c) LOCATION. Debtor's place of business and chief
executive office is where Debtor is entitled to receive notices
hereunder; the present and foreseeable location of Debtor's books and
records concerning any of the Collateral that is accounts is as set
forth on ANNEX A hereto, and the location of all other Collateral,
including, without limitation, Debtor's inventory and equipment, is as
set forth on ANNEX A hereto (but the failure of such description to be
accurate or complete shall not impair the Security Interest in such
Collateral); and, EXCEPT as noted on ANNEX A hereto, all such books,
records, and Collateral are in Debtor's possession.
(d) FIXTURES. The Collateral that is or may be fixtures is
located on or affixed to the real property described on ANNEX A hereto
(but the failure of such description to be accurate or complete shall
not impair the Security Interest in such Collateral).
5 EXHIBIT D
<PAGE>
(e) SECURITIES. All Collateral that is Pledged Securities
is duly authorized, validly issued, fully paid, and non-assessable, and
the transfer thereof is not subject to any restrictions, other than
restrictions imposed by applicable securities and corporate Laws. The
Pledged Shares issued by the Subsidiaries to Debtor constitute 100% of
the issued and outstanding common stock or other equity interests of
such Subsidiaries. Debtor has good title to the securities, free and
clear of all Liens and encumbrances thereon (EXCEPT for the Security
Interest created hereby), and has delivered to Secured Party all stock
certificates, promissory notes, bonds, debentures, or other instruments
or documents representing or evidencing the securities, TOGETHER WITH
corresponding assignment or transfer powers duly executed in blank by
Debtor, and such powers have been duly and validly executed and are
binding and enforceable against Debtor in accordance with their terms;
and the pledge of the securities in accordance with the terms hereof
creates a valid and perfected first priority security interest in the
securities securing payment of the Obligation.
(f) PARTNERSHIPS AND PARTNERSHIP INTERESTS. Each
Partnership issuing a Partnership Interest, including, without
limitation, any Cellular Partnership, is duly organized, currently
existing, and in good standing under all applicable Laws; there have
been no amendments, modifications, or supplements to any agreement or
certificate creating any Partnership or any material contract relating
to the Partnerships, of which Secured Party has not been advised in
writing; no default or potential default has occurred under the terms of
any material contract relating to any Partnership; and no approval or
consent of the partners of any Partnership is required as a condition to
the validity and enforceability of the Security Interest created hereby
or the consummation of the transactions contemplated hereby which has
not been duly obtained by Debtor. Debtor has good title to the
Partnership Interests free and clear of all Liens and encumbrances
(EXCEPT for the Security Interest granted hereby). The Partnership
Interests are validly issued, fully paid, and nonassessable and are not
subject to statutory, contractual, or other restrictions governing their
transfer, ownership, or control, EXCEPT as set forth in the partnership
agreements of the Cellular Partnerships or applicable securities Laws.
(g) GOVERNMENTAL AUTHORITY. No authorization, approval, or
other action by, and no notice to or filing with, any Governmental
Authority is required either (i) for the pledge by Debtor of the Pledged
Securities pursuant to this Security Agreement or for the execution,
delivery, or performance of this Security Agreement by Debtor, or
(ii) for the exercise by Secured Party of the voting or other Rights
provided for in this Security Agreement or the remedies in respect of
the Collateral pursuant to this Security Agreement (EXCEPT as may be
required in connection with the disposition of the Pledged Securities by
Laws affecting the offering and sale of securities generally and in
connection with the transfer of control of FCC Licenses).
(h) ACCOUNTS. All Collateral that is accounts, contract
Rights, chattel paper, instruments, or general intangibles is free from
any claim for credit, deduction, or allowance of an Obligor and free
from any defense, dispute, setoff, or counterclaim, and there is no
extension or indulgence with respect thereto.
(i) INSTRUMENTS, CHATTEL PAPER, COLLATERAL NOTES, AND
COLLATERAL NOTE SECURITY. All instruments and chattel paper,
including, without limitation, the Collateral Notes, have been delivered
to Secured Party, TOGETHER WITH corresponding endorsements duly executed
by Debtor in favor of Secured Party, and such endorsements have been
duly and validly executed and are binding and enforceable against Debtor
in accordance with their terms. Each Collateral Note and the documents
evidencing the Collateral Note Security are in full force and effect;
there have been no renewals or extensions of, or amendments,
modifications, or supplements to, any thereof about which the Secured
6 EXHIBIT D
<PAGE>
Party has not been advised in writing; and no default or potential
default has occurred and is continuing under any such Collateral Note or
documents evidencing the Collateral Note Security, EXCEPT as disclosed
on ANNEX C hereto.
(j) ASSIGNED LEASES. All Collateral that is an Assigned
Lease is in full force and effect; Debtor is in possession of the
property covered by each such Assigned Lease; and no default or
potential default exists under any such Assigned Lease.
(k) MAINTENANCE OF COLLATERAL. All tangible Collateral is
in good repair and condition, ordinary wear and tear excepted, and none
thereof is a fixture EXCEPT as specifically referred to herein in
PARAGRAPH 5(d) hereof.
(l) LIENS. Debtor owns all presently existing Collateral,
and will acquire all hereafter-acquired Collateral, free and clear of
all Liens, EXCEPT Permitted Liens.
(m) DEPOSIT ACCOUNTS. With respect to the Deposit Accounts,
(i) Debtor maintains each such Deposit Account with the banks listed on
ANNEX D hereto, (ii) Debtor shall use its best efforts to, within thirty
(30) days of the Closing Date, cause each such bank to acknowledge to
Secured Party that such Deposit Accounts are subject to the Security
Interest and Liens herein created, (iii) Debtor has the legal right to
pledge and assign to Secured Party the funds deposited and to be
deposited in the Deposit Accounts; and (iv) the Deposit Accounts listed
on ANNEX D represent all material bank accounts of Debtor, including
without limitation, all material operating accounts of Debtor, and all
certificates of deposit or other deposit instruments of Debtor.
The foregoing representations and warranties will be true and correct in all
respects with respect to any additional Collateral or additional specific
descriptions of certain Collateral delivered to Secured Party in the future
by Debtor.
The failure of any of these representations or warranties to be
accurate and complete does not impair the Security Interest in any Collateral.
19. COVENANTS. So long as Lenders are committed to extend credit
to Debtor under the Credit Agreement and until the Obligation is paid and
performed in full, Debtor covenants and agrees with Secured Party that Debtor
will:
(a) CREDIT AGREEMENT. (i) Comply with, perform, and be
bound by all covenants and agreements in the Credit Agreement that are
applicable to it, its assets, or its operations, each of which is hereby
ratified and confirmed (INCLUDING, WITHOUT LIMITATION, THE
INDEMNIFICATION AND RELATED PROVISIONS IN SECTIONS 11.12 OF THE CREDIT
AGREEMENT); AND (ii) CONSENT TO AND APPROVE THE VENUE, SERVICE OF
PROCESS, AND WAIVER OF JURY TRIAL PROVISIONS OF SECTIONS 13.10 OF THE
CREDIT AGREEMENT.
(b) RECORD OF COLLATERAL. Maintain, at the place where
Debtor is entitled to receive notices under the Loan Papers, a current
record of where all Collateral is located, permit representatives of
Secured Party at any time during normal business hours to inspect and
make abstracts from such records, and furnish to Secured Party, at such
intervals as Secured Party may request, such documents, lists,
descriptions, certificates, and other information as may be necessary
7 EXHIBIT D
<PAGE>
or proper to keep Secured Party informed with respect to the identity,
location, status, condition, and value of the Collateral.
(c) PERFORM OBLIGATIONS. Fully perform all of Debtor's
duties under and in connection with each transaction to which the
Collateral, or any part thereof, relates, so that the amounts thereof
shall actually become payable in their entirety to Secured Party.
(d) NOTICES. (i) Promptly notify Secured Party of (A) any
change in any fact or circumstances represented or warranted by Debtor
with respect to any of the Collateral or Obligation, and (B) any claim,
action, or proceeding affecting title to all or any of the Collateral or
the Security Interest and, at the request of Secured Party, appear in
and defend, at Debtor's expense, any such action or proceeding; and
(ii) give Secured Party thirty (30) days written notice before any
proposed (A) relocation of its principal place of business or chief
executive office, (B) change of its name, identity, or corporate
structure, (C) relocation of the place where its books and records
concerning its accounts are kept, and (D) relocation of any Collateral
(OTHER THAN delivery of inventory in the ordinary course of business to
third party contractors for processing and sales of inventory in the
ordinary course of business or as permitted by the Credit Agreement) to
a location not described on the attached ANNEX A. Prior to making any
of the changes contemplated in CLAUSE (ii) preceding, Debtor shall
execute and deliver all such additional documents and perform all
additional acts as Secured Party, in its sole discretion, may request in
order to continue or maintain the existence and priority of the Security
Interests in all of the Collateral.
(e) COLLATERAL IN TRUST. Hold in trust (and not commingle
with other assets of Debtor) for Secured Party all Collateral that is
chattel paper, instruments, Collateral Notes, Pledged Securities, or
documents at any time received by Debtor, and promptly deliver same to
Secured Party, unless Secured Party at its option (which may be
evidenced only by a writing signed by Secured Party stating that Secured
Party elects to permit Debtor to so retain) permits Debtor to retain the
same, but any chattel paper, instruments, Collateral Notes, or documents
so retained shall be marked to state that they are assigned to Secured
Party; each such instrument shall be endorsed to the order of Secured
Party (but the failure of same to be so marked or endorsed shall not
impair the Security Interest thereon).
(f) FURTHER ASSURANCES. At Debtor's expense and Secured
Party's request, before or after a Default or Potential Default,
(i) file or cause to be filed such applications and take such other
actions as Secured Party may request to obtain the consent or approval
of any Governmental Authority to Secured Party's Rights hereunder,
including, without limitation, the Right to sell all the Collateral upon
a Default or Potential Default without additional consent or approval
from such Governmental Authority (and, because Debtor agrees that
Secured Party's remedies at Law for failure of Debtor to comply with
this provision would be inadequate and that such failure would not be
adequately compensable in damages, Debtor agrees that its covenants in
this provision may be specifically enforced); (ii) from time to time
promptly execute and deliver to Secured Party all such other
assignments, certificates, supplemental documents, and financing
statements, and do all other acts or things as Secured Party may
reasonably request in order to more fully create, evidence, perfect,
continue, and preserve the priority of the Security Interest; and
(iii) pay all filing fees in connection with any financing,
continuation, or termination statement or other instrument with respect
to the Security Interests, including, without limitation, any filing fee
required in connection with any procedure hereafter developed for the
recordation or registration of Liens or security interests in FCC
Licenses.
8 EXHIBIT D
<PAGE>
(g) FIXTURES. For any Collateral that is a fixture or an
accession which has been attached to real estate or other goods prior to
the perfection of the Security Interest, furnish Secured Party, upon
demand, a disclaimer of interest in each such fixture or accession and a
consent in writing to the Security Interest of Secured Party therein,
signed by all Persons having any interest in such fixture or accession
by virtue of any interest in the real estate or other goods to which
such fixture or accession has been attached.
(h) ESTOPPEL AND OTHER AGREEMENTS AND MATTERS. Either
(unless waived by Secured Party in its sole judgment without requiring
approval of any other Lender) (i) use commercially reasonable efforts to
cause the landlord or lessor for each location where any of its
inventory or equipment is maintained to execute and deliver to Secured
Party an estoppel and subordination agreement in such form as may be
reasonably acceptable to Secured Party and its counsel, OR (ii) deliver
to Secured Party a legal opinion or other evidence (in each case that is
reasonably satisfactory to Secured Party and it counsel) that neither
the applicable lease nor the Laws of the jurisdiction in which that
location is situated provide for contractual, common law, or statutory
landlord's Liens that is senior to or PARI PASSU with the Security
Interest.
(i) CERTIFICATES OF TITLE. Upon the request of Secured
Party, if certificates of title are issued or outstanding with respect
to any of the Vehicles or other Collateral, cause the Security Interest
to be properly noted thereon.
(j) IMPAIRMENT OF COLLATERAL. Not use any of the
Collateral, or permit the same to be used, for any unlawful purpose, in
any manner that is reasonably likely to adversely impair the value or
usefulness of the Collateral, or in any manner inconsistent with the
provisions or requirements of any policy of insurance thereon nor affix
or install any accessories, equipment, or device on the Collateral or on
any component thereof if such addition will impair the original intended
function or use of the Collateral or such component.
(k) MODIFICATIONS TO AGREEMENTS. Not modify or substitute,
or permit the modification or substitution of, any Collateral Note or
any document evidencing the Collateral Note Security or contract to
which any of the Collateral which is accounts relates, nor extend or
grant indulgences regarding any account which is Collateral, other than
such modifications or indulgences as are reasonable and customary in the
industry in which Debtor is engaged.
(l) SECURITIES. Not sell, exchange, or otherwise dispose
of, or grant any option, warrant, or other Right with respect to, any of
the Pledged Shares; cause each Subsidiary not to issue any stock or
other securities in addition to or in substitution for the Pledged
Shares issued by the Subsidiaries, EXCEPT to Debtor; pledge hereunder,
immediately upon Debtor's acquisition (directly or indirectly) thereof,
any and all additional shares of stock or other securities of the
Subsidiaries or any other issuer of Securities issued to Debtor; and
take any action necessary, required, or requested by Secured Party to
allow Secured Party to fully enforce its Security Interest in the
Pledged Shares, including, without limitation, the filing of any claims
with any court, liquidator, trustee, custodian, receiver, or other like
person or party.
(m) PARTNERSHIPS AND PARTNERSHIP INTERESTS. (i) Promptly
perform, observe, and otherwise comply with each and every covenant,
agreement, requirement, and condition set forth in the contracts and
agreements creating or relating to any Partnership; (ii) do or cause to
be done all things necessary or appropriate to keep the Partnerships in
full force and effect and the Rights of Debtor and Secured Party
thereunder unimpaired; (iii) not consent to any Partnership selling,
leasing, or
9 EXHIBIT D
<PAGE>
disposing of substantially all of its assets in a single transaction
or a series of transactions; (iv) notify Secured Party of the occurrence
of any default under any contract or agreement creating or relating to
the Partnerships; and not consent to the amendment, modification,
surrender, impairment, forfeiture, cancellation, dissolution, or
termination of any Partnership, or material agreement relating
thereto; (v) not transfer, sell, or assign any of the Partnership
Interests or any part thereof; (vi) cause each Partnership to refrain
from granting any partnership interests in addition to or in
substitution for the Partnership Interests granted by the Partnerships,
EXCEPT to Debtor; (vii) pledge hereunder, immediately upon Debtor's
acquisition (directly or indirectly) thereof, any and all additional
Partnership Interests of any Partnership granted to Debtor; and
(viii) take any action necessary, required, or requested by Secured
Party to allow Secured Party to fully enforce its Security Interest in
the Partnership Interests, including, without limitation, the filing of
any claims with any court, liquidator, trustee, custodian, receiver, or
other like person or party.
(n) DEPOSITORY BANK. With respect to Deposit Accounts,
(i) maintain the Deposit Accounts at the banks (a "DEPOSITORY BANK")
described on ANNEX D or such additional depository banks as have
complied with ITEM (iv) hereof; (ii) within thirty (30) days of the
Closing Date, deliver to each depository bank a letter in the form of
ANNEX E hereto with respect to Secured Party's rights in such Deposit
Account and use its best efforts to obtain the execution of such letter
by each depository bank; (iii) deliver to Secured Party all certificates
or instruments, if any, now or hereafter representing or evidencing the
Deposit Accounts, accompanied by duly executed instruments of transfer
or assignment in blank, all in form and substance satisfactory to
Secured Party; and (iv) notify Secured Party prior to establishing any
additional Deposit Accounts and, at the request of Secured Party, obtain
from such depository bank an executed letter substantially in the form
of ANNEX E and deliver the same to Secured Party.
20. DEFAULT; REMEDIES. If a Default or a Potential Default
exists, Secured Party may, at its election (but subject to the terms and
conditions of the Credit Agreement), exercise any and all Rights available to
a secured party under the UCC, in addition to any and all other Rights
afforded by the Loan Papers, at Law, in equity, or otherwise, including,
without limitation, (a) requiring Debtor to assemble all or part of the
Collateral and make it available to Secured Party at a place to be designated
by Secured Party which is reasonably convenient to Debtor and Secured Party,
(b) surrendering any policies of insurance on all or part of the Collateral
and receiving and applying the unearned premiums as a credit on the
Obligation, (c) applying by appropriate judicial proceedings for appointment
of a receiver for all or part of the Collateral (and Debtor hereby consents
to any such appointment), and (d) applying to the Obligation any cash held by
Secured Party under this Security Agreement, including, without limitation,
any cash in the Cash Collateral Account (defined in SECTION 8(g)).
Notwithstanding the foregoing, Secured Party will not exercise any remedies
against the assets of Debtor unless it has given at least ten days written
notification to Debtor and to the FCC, to the extent such notice is required
under 47 C.F.R. 22.937(f).
(a) NOTICE. Reasonable notification of the time and place
of any public sale of the Collateral, or reasonable notification of the
time after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to Debtor and to any other
Person entitled to notice under the UCC; PROVIDED THAT, if any of the
Collateral threatens to decline speedily in value or is of the type
customarily sold on a recognized market, Secured Party may sell or
otherwise dispose of the Collateral without notification, advertisement,
or other notice of any kind. It is agreed that notice sent or given not
less than ten Business Days prior to the taking of the action to which
the notice relates is reasonable notification and notice for the
purposes of this subparagraph.
(b) SALES OF PLEDGED SECURITIES.
10 EXHIBIT D
<PAGE>
(i) Debtor agrees that, because of the Securities
Act of 1933, as amended, or the rules and regulations
promulgated thereunder (collectively, the "SECURITIES ACT"), or
any other Laws or regulations, and for other reasons, there may
be legal or practical restrictions or limitations affecting
Secured Party in any attempts to dispose of certain portions of
the Pledged Securities and for the enforcement of its Rights.
For these reasons, Secured Party is hereby authorized by Debtor,
but not obligated, upon the occurrence and during the
continuation of a Default or Potential Default, to sell all or
any part of the Pledged Securities at private sale, subject to
investment letter or in any other manner which will not require
the Pledged Securities, or any part thereof, to be registered in
accordance with the Securities Act or any other Laws or
regulations, at a reasonable price at such private sale or other
distribution in the manner mentioned above. Debtor understands
that Secured Party may in its discretion approach a limited
number of potential purchasers and that a sale under such
circumstances may yield a lower price for the Pledged
Securities, or any part thereof, than would otherwise be
obtainable if such Collateral were either afforded to a larger
number or potential purchasers, registered under the Securities
Act, or sold in the open market. Debtor agrees that any such
private sale made under this PARAGRAPH 7(b) shall be deemed to
have been made in a commercially reasonable manner, and that
Secured Party has no obligation to delay the sale of any Pledged
Securities to permit the issuer thereof to register it for
public sale under any applicable federal or state securities
Laws.
(ii) Secured Party is authorized, in connection with
any such sale, (A) to restrict the prospective bidders on or
purchasers of any of the Pledged Securities to a limited number
of sophisticated investors who will represent and agree that
they are purchasing for their own account for investment and not
with a view to the distribution or sale of any of such Pledged
Securities, and (B) to impose such other limitations or
conditions in connection with any such sale as Secured Party
reasonably deems necessary in order to comply with applicable
Law. Debtor covenants and agrees that it will execute and
deliver such documents and take such other action as Secured
Party reasonably deems necessary in order that any such sale may
be made in compliance with applicable Law. Upon any such sale
Secured Party shall have the right to deliver, assign, and
transfer to the purchaser thereof the Pledged Securities so
sold. Each purchaser at any such sale shall hold the Pledged
Securities so sold absolutely free from any claim or Right of
Debtor of whatsoever kind, including any equity or right of
redemption of Debtor. Debtor, to the extent permitted by
applicable Law, hereby specifically waives all rights of
redemption, stay, or appraisal which it has or may have under
any Law now existing or hereafter enacted.
(iii) Debtor agrees that five days' written notice
from Secured Party to Debtor of Secured Party's intention to
make any such public or private sale or sale at a broker's board
or on a securities exchange shall constitute "REASONABLE
NOTIFICATION" within the meaning of SECTION 9-504(c) of the UCC.
Such notice shall (A) in case of a public sale, state the time
and place fixed for such sale, (B) in case of sale at a broker's
board or on a securities exchange, state the board or exchange
at which such a sale is to be made and the day on which the
Pledged Securities, or the portion thereof so being sold, will
first be offered to sale at such board or exchange, and (C) in
the case of a private sale, state the day after which such sale
may be consummated. Any such public sale shall be held at such
time or times within ordinary business hours and at such place
or places as Secured Party may fix in the notice of such sale.
At any such sale, the Pledged Securities may be sold in one lot
as an entirety or in separate parcels, as Secured Party may
reasonably determine. Secured
11 EXHIBIT D
<PAGE>
Party shall not be obligated to make any such sale pursuant to
any such notice. Secured Party may, without notice or
publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may be made at
any time or place to which the same may be so adjourned.
(iv) In case of any sale of all or any part of the
Pledged Securities on credit or for future delivery, the Pledged
Securities so sold may be retained by Secured Party until the
selling price is paid by the purchaser thereof, but Secured
Party shall not incur any liability in case of the failure of
such purchaser to take up and pay for the Pledged Securities so
sold and in case of any such failure, such Pledged Securities
may again be sold upon like notice. Secured Party, instead of
exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the
Security Interests and sell the Pledged Securities, or any
portion thereof, under a judgment or decree of a court or courts
of competent jurisdiction.
(v) Without limiting the foregoing, or imposing upon
Secured Party any obligations or duties not required by
applicable Law, Debtor acknowledges and agrees that, in
foreclosing upon any of the Pledged Securities, or exercising
any other Rights or remedies provided Secured Party hereunder or
under applicable Law, Secured Party may, but shall not be
required to, (A) qualify or restrict prospective purchasers of
the Pledged Securities by requiring evidence of sophistication
or creditworthiness, and requiring the execution and delivery of
confidentiality agreements or other documents and agreements as
a condition to such prospective purchasers' receipt of
information regarding the Pledged Securities or participation in
any public or private foreclosure sale process, (B) provide to
prospective purchasers business and financial information
regarding the Companies available in the files of Secured Party
at the time of commencing the foreclosure process, without the
requirement that Secured Party obtain, or seek to obtain, any
updated business or financial information or verify, or certify
to prospective purchasers, the accuracy of any such business or
financial information, or (C) offer for sale and sell the
Pledged Securities with, or without, first employing an
appraiser, investment banker, or broker with respect to the
evaluation of the Pledged Securities, the solicitation of
purchasers for Pledged Securities, or the manner of sale of
Pledged Securities.
(c) APPLICATION OF PROCEEDS. Secured Party shall apply the
proceeds of any sale or other disposition of the Collateral under this
PARAGRAPH 7 in the following order: FIRST, to the payment of all
expenses incurred in retaking, holding, and preparing any of the
Collateral for sale(s) or other disposition, in arranging for such
sale(s) or other disposition, and in actually selling or disposing of
the same (all of which are part of the Obligation); SECOND, toward
repayment of amounts expended by Secured Party under PARAGRAPH 8; THIRD,
toward payment of the balance of the Obligation in the order and manner
specified in the Credit Agreement. Any surplus remaining shall be
delivered to Debtor or as a court of competent jurisdiction may direct.
If the proceeds are insufficient to pay the Obligation in full, Debtor
shall remain liable for any deficiency.
21. OTHER RIGHTS OF SECURED PARTY.
(a) PERFORMANCE. If Debtor fails to keep the Collateral in
good repair, working order, and condition, as required in this Security
Agreement, or fails to pay when due all Taxes on any of the Collateral
in the manner required by the Loan Papers, or fails to preserve the
priority of the Security Interest in any of the Collateral, or fails to
keep the Collateral insured as required by this
12 EXHIBIT D
<PAGE>
Security Agreement, or otherwise fails to perform any of its obligations
under the Loan Papers with respect to the Collateral, then Secured Party
may, at its option, but without being required to do so, make such
repairs, pay such Taxes, prosecute or defend any suits in relation to
the Collateral, or insure and keep insured the Collateral in any amount
deemed appropriate by Secured Party, or take all other action which
Debtor is required, but has failed or refused, to take under the Loan
Papers. Any sum which may be expended or paid by Secured Party under
this subparagraph (including, without limitation, court costs and
attorneys' fees) shall bear interest from the dates of expenditure or
payment at the Default Rate until paid and, TOGETHER WITH such interest,
shall be payable by Debtor to Secured Party upon demand and shall be
part of the Obligation.
(b) COLLECTION. If a Default or Potential Default exists
and upon notice from Secured Party, each Obligor with respect to any
payments on any of the Collateral (including, without limitation,
dividends and other distributions with respect to securities, payments
on Collateral Notes, insurance proceeds payable by reason of loss or
damage to any of the Collateral, or Deposit Accounts) is hereby
authorized and directed by Debtor to make payment directly to Secured
Party, regardless of whether Debtor was previously making collections
thereon. Subject to PARAGRAPH 8(e) hereof, until such notice is given,
Debtor is authorized to retain and expend all payments made on
Collateral. If a Default or Potential Default exists, Secured Party
shall have the Right in its own name or in the name of Debtor to
compromise or extend time of payment with respect to all or any portion
of the Collateral for such amounts and upon such terms as Secured Party
may determine; to demand, collect, receive, receipt for, sue for,
compound, and give acquittances for any and all amounts due or to become
due with respect to Collateral; to take control of cash and other
proceeds of any Collateral; to endorse the name of Debtor on any notes,
acceptances, checks, drafts, money orders, or other evidences of payment
on Collateral that may come into the possession of Secured Party; to
sign the name of Debtor on any invoice or bill of lading relating to any
Collateral, on any drafts against Obligors or other Persons making
payment with respect to Collateral, on assignments and verifications of
accounts or other Collateral and on notices to Obligors making payment
with respect to Collateral; to send requests for verification of
obligations to any Obligor; and to do all other acts and things
necessary to carry out the intent of this Security Agreement. If a
Default or Potential Default exists and any Obligor fails or refuses to
make payment on any Collateral when due, Secured Party is authorized, in
its sole discretion, either in its own name or in the name of Debtor, to
take such action as Secured Party shall deem appropriate for the
collection of any amounts owed with respect to Collateral or upon which
a delinquency exists. Regardless of any other provision hereof,
however, Secured Party shall never be liable for its failure to collect,
or for its failure to exercise diligence in the collection of, any
amounts owed with respect to Collateral, nor shall it be under any duty
whatsoever to anyone EXCEPT Debtor to account for funds that it shall
actually receive hereunder. Without limiting the generality of the
foregoing, Secured Party shall have no responsibility for ascertaining
any maturities, calls, conversions, exchanges, offers, tenders, or
similar matters relating to any Collateral, or for informing Debtor with
respect to any of such matters (irrespective of whether Secured Party
actually has, or may be deemed to have, knowledge thereof). The receipt
of Secured Party to any Obligor shall be a full and complete release,
discharge, and acquittance to such Obligor, to the extent of any amount
so paid to Secured Party.
(c) RECORD OWNERSHIP OF SECURITIES. If a Default or
Potential Default exists, Secured Party at any time may have any
Collateral that is Pledged Securities and that is in the possession of
Secured Party, or its nominee or nominees, registered in its name, or in
the name of its nominee or nominees, as pledgee; and, as to any Pledged
Securities so registered, Debtor shall execute and deliver (or cause to
be executed and delivered) to Secured Party all such proxies, powers of
attorney, dividend coupons or orders, and other documents as Secured
Party may reasonably request for the purpose of enabling Secured Party
to exercise the voting Rights and powers which it is entitled to
13 EXHIBIT D
<PAGE>
exercise under this Security Agreement or to receive the dividends and
other payments in respect of such Collateral that is Pledged Securities
which it is authorized to receive and retain under this Security
Agreement.
(d) VOTING OF SECURITIES. As long as neither a Default nor
Potential Default exists, Debtor is entitled to exercise all voting
Rights pertaining to any Collateral that is Pledged Securities. If a
Default or Potential Default exists and if Secured Party elects to
exercise such Right, the Right to vote any Collateral that is Pledged
Securities shall be vested exclusively in Secured Party. To this end,
Debtor hereby irrevocably constitutes and appoints Secured Party the
proxy and attorney-in-fact of Debtor, with full power of substitution,
to vote, and to act with respect to, any and all Collateral that is
Pledged Securities standing in the name of Debtor or with respect to
which Debtor is entitled to vote and act, subject to the understanding
that such proxy may not be exercised unless a Default exists. The proxy
herein granted is coupled with an interest, is irrevocable, and shall
continue until the Obligation has been paid and performed in full.
(e) CERTAIN PROCEEDS. Notwithstanding any contrary
provision herein, any and all stock dividends or distributions in
property made on or in respect of any Pledged Securities, and any
proceeds of any Pledged Securities, whether such dividends,
distributions, or proceeds result from a subdivision, combination, or
reclassification of the outstanding capital stock of any issuer thereof
or as a result of any merger, consolidation, acquisition, or other
exchange of assets to which any issuer may be a party, or otherwise,
shall be part of the Collateral hereunder, shall, if received by Debtor,
be held in trust for the benefit of Secured Party, and shall forthwith
be delivered to Secured Party (accompanied by proper instruments of
assignment and/or stock and/or bond powers executed by Debtor in
accordance with Secured Party's instructions) to be held subject to the
terms of this Security Agreement. Any cash proceeds of Collateral which
come into the possession of Secured Party (including, without
limitation, insurance proceeds) may, at Secured Party's option, be
applied in whole or in part to the Obligation (to the extent then due),
be released in whole or in part to or on the written instructions of
Debtor for any general or specific purpose, or be retained in whole or
in part by Secured Party as additional Collateral. Any cash Collateral
in the possession of Secured Party may be invested by Secured Party in
certificates of deposit issued by Secured Party (if Secured Party issues
such certificates) or by any state or national bank having combined
capital and surplus greater than $100,000,000 with a rating from Moody's
and S&P of P-1 and A-1+, respectively, or in securities issued or
guaranteed by the United States of America or any agency thereof.
Secured Party shall never be obligated to make any such investment and
shall never have any liability to Debtor for any loss which may result
therefrom. All interest and other amounts earned from any investment of
Collateral may be dealt with by Secured Party in the same manner as
other cash Collateral. The provisions of this subparagraph are
applicable whether or not a Default or Potential Default exists.
(f) USE AND OPERATION OF COLLATERAL. Should any Collateral
come into the possession of Secured Party, Secured Party may use or
operate such Collateral for the purpose of preserving it or its value
pursuant to the order of a court of appropriate jurisdiction or in
accordance with any other Rights held by Secured Party in respect of
such Collateral. Debtor covenants to promptly reimburse and pay to
Secured Party, at Secured Party's request, the amount of all reasonable
expenses (including, without limitation, the cost of any insurance and
payment of Taxes or other charges) incurred by Secured Party in
connection with its custody and preservation of Collateral, and all such
expenses, costs, Taxes, and other charges shall bear interest at the
Default Rate until repaid and, TOGETHER WITH such interest, shall be
payable by Debtor to Secured Party upon demand and shall become part of
the Obligation. However, the risk of accidental loss or damage to, or
diminution in
14 EXHIBIT D
<PAGE>
value of, Collateral is on Debtor, and Secured Party shall have no
liability whatever for failure to obtain or maintain insurance, nor to
determine whether any insurance ever in force is adequate as to amount
or as to the risks insured. With respect to Collateral that is in the
possession of Secured Party, Secured Party shall have no duty to fix
or preserve Rights against prior parties to such Collateral and shall
never be liable for any failure to use diligence to collect any amount
payable in respect of such Collateral, but shall be liable only to
account to Debtor for what it may actually collect or receive thereon.
The provisions of this subparagraph are applicable whether or not a
Default exists.
(g) CASH COLLATERAL ACCOUNT. If a Default exists, Secured
Party shall have, and Debtor hereby grants to Secured Party, the Right
and authority to transfer all funds on deposit in the Deposit Accounts
to a CASH COLLATERAL ACCOUNT (herein so called) maintained with a
depository institution acceptable to Secured Party and subject to the
exclusive direction, domain, and control of Secured Party, and no
disbursements or withdrawals shall be permitted to be made by Debtor
from such Cash Collateral Account. Such Cash Collateral Account shall
be subject to the Security Interest and Liens in favor of Secured Party
herein created, and Debtor hereby grants a security interest to Secured
Party on behalf of Lenders in and to, such Cash Collateral Account and
all checks, drafts, and other items ever received by Debtor for deposit
therein. Furthermore, if a Default exists, Secured Party shall have the
Right, at any time in its discretion without notice to Debtor, (i) to
transfer to or to register in the name of Secured Party or any Lender or
nominee any certificates of deposit or deposit instruments constituting
Deposit Accounts and shall have the Right to exchange such certificates
or instruments representing Deposit Accounts for certificates or
instruments of smaller or larger denominations and (ii) to take and
apply against the Obligation any and all funds then or thereafter on
deposit in the Cash Collateral Account or otherwise constituting Deposit
Accounts.
(h) POWER OF ATTORNEY. Debtor hereby irrevocably constitutes
and appoints Secured Party as Debtor's attorney-in-fact, with full
irrevocable power and authority in the place and stead of Debtor and in
the name of Debtor, Secured Party, Lenders, or otherwise, from time to
time in Secured Party's discretion, for the sole purpose of carrying out
the terms of this Security Agreement and, to the extent permitted by
applicable Law, to take any action and to execute any document and
instrument which Secured Party may deem necessary or advisable to
accomplish the following when a Default exists:
(i) to transfer any and all funds on deposit in the
Deposit Accounts to the Cash Collateral Account as set forth in
herein;
(ii) to receive, endorse, and collect any drafts or
other instruments or documents in connection with CLAUSE (b)
above and this CLAUSE (g);
(iii) to use the Patents and Trademarks or to grant or
issue any exclusive or non-exclusive license under the Patents
and Trademarks to anyone else, and to perform any act necessary
for the Secured Party to assign, pledge, convey, or otherwise
transfer title in or dispose of the Patents and Trademarks to
any other Person; and
(iv) to execute on behalf of Debtor any continuation
statement with respect to the Security Interests created hereby,
and to do any and all acts and things to protect and preserve
the Collateral, including, without limitation, the protection
and prosecution of all Rights included in the Collateral.
(i) PURCHASE MONEY COLLATERAL. To the extent that Secured
Party or any Lender has advanced or will advance funds to or for the
account of Debtor to enable Debtor to purchase or
15 EXHIBIT D
<PAGE>
otherwise acquire Rights in Collateral, Secured Party or such Lender,
at its option, may pay such funds (i) directly to the Person from whom
Debtor will make such purchase or acquire such Rights, or (ii) to
Debtor, in which case Debtor covenants to promptly pay the same to such
Person, and forthwith furnish to Secured Party evidence satisfactory to
Secured Party that such payment has been made from the funds so
provided.
(j) SUBROGATION. If any of the Obligation is given in
renewal or extension or applied toward the payment of indebtedness
secured by any Lien, Secured Party shall be, and is hereby, subrogated
to all of the Rights, titles, interests, and Liens securing the
indebtedness so renewed, extended, or paid.
(k) INDEMNIFICATION. Debtor hereby assumes all liability
for the Collateral, for the Security Interest, and for any use,
possession, maintenance, and management of, all or any of the
Collateral, including, without limitation, any Taxes arising as a result
of, or in connection with, the transactions contemplated herein, and
agrees to assume liability for, and to indemnify and hold Secured Party
and each Lender harmless from and against, any and all claims, causes of
action, or liability, for injuries to or deaths of Persons and damage to
property, howsoever arising from or incident to such use, possession,
maintenance, and management, whether such Persons be agents or employees
of Debtor or of third parties, or such damage be to property of Debtor
or of others. Debtor agrees to indemnify, save, and hold Secured Party
and each Lender harmless from and against, and covenants to defend
Secured Party and each Lender against, any and all losses, damages,
claims, costs, penalties, liabilities, and expenses (collectively,
"CLAIMS"), including, without limitation, court costs and attorneys'
fees, AND ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF SECURED
PARTY OR ANY LENDER, OR ANY OF THEIR RESPECTIVE OFFICERS, EMPLOYEES,
AGENTS, ADVISORS, EMPLOYEES, OR REPRESENTATIVES, howsoever arising or
incurred because of, incident to, or with respect to Collateral or any
use, possession, maintenance, or management thereof; PROVIDED, HOWEVER,
that the indemnity set forth in this PARAGRAPH 8(K) will not apply to
Claims caused by the gross negligence or willful misconduct of Secured
Party or any Lender.
22. ACKNOWLEDGMENT OF REGULATORY CONSIDERATIONS
(a) NO PROHIBITED TRANSFERS. It is hereby acknowledged that
assignment or transfer of control of the FCC Licenses without the prior
approval of the FCC may constitute a prohibited transfer in violation of
FCC rules and regulations. Secured Party agrees that exercise of its
Rights hereunder, including transfer of FCC Licenses upon the occurrence
of a Default or Potential Default, shall be effected only after the
obtaining of any necessary approvals for such exercise.
(b) ACTIONS BY DEBTOR. If counsel to Secured Party
reasonably determines that the consent of the FCC is required in
connection with any of the actions which may be taken by Secured Party
on behalf of Lenders in the exercise of their Rights hereunder or under
the Loan Papers, then Debtor, at its sole cost and expense, agrees to
use its best efforts to secure such consent and to cooperate with
Secured Party and Lenders in any action commenced by Secured Party to
secure such consent and in such case Debtor shall retain control of its
respective FCC Licenses until the FCC shall have granted its consent to
the transfer of the FCC Licenses and related permits. Upon the
occurrence and during the continuation of a Default or Potential
Default, Debtor shall promptly execute or cause the execution of all
applications, certificates, instruments, and other documents and papers
that the Secured Party may be required to file in order to obtain any
necessary governmental consent, approval, or authorization, and if
Debtor fails or refuses to execute such documents, then, on the order of
any court of competent jurisdiction, the Clerk of the Court with
jurisdiction may
16 EXHIBIT D
<PAGE>
execute such documents on behalf of Debtor. In addition, Debtor shall
execute such applications and other documents and will take such other
action as may be required in order for Secured Party to obtain from the
FCC consent to operate the System, through a receiver or otherwise,
during the time the Secured Party seeks to obtain a purchaser for the
System and to submit any sale of the Systems to the FCC for approval.
Debtor recognizes that FCC Licenses, franchises, and other similar
agreements or authorizations are unique assets which (or the control of
which) may have to be transferred in order for Lenders adequately to
realize the value of their Security Interests. Debtor further
recognizes that a violation of this covenant would result in
irreparable harm to Lenders for which monetary damages are not readily
ascertainable and which might not fully compensate such Lenders.
Therefore, in addition to any other remedy which may be available to
Lenders, at Law or in equity, Secured Party on behalf of Lenders shall
have the remedy of specific performance of the provisions of this
subsection.
(c) FCC APPROVAL. Notwithstanding anything to the contrary
contained in this Security Agreement, Secured Party will not take any
action pursuant to this Security Agreement or any of the documents
executed pursuant hereto which would constitute an assignment of an FCC
License or any transfer of control of an FCC License if such assignment
of license or transfer of control would require under then-existing Law
(including the written rules and regulations promulgated by the FCC or
such other regulatory authority with jurisdiction) the prior approval of
the FCC or such other regulatory authority with jurisdiction, without
first obtaining such approval. Debtor agrees to take, or cause to be
taken, any action which Secured Party may reasonably request in order to
obtain and enjoy the full Rights and benefits granted to Secured Party
by this Security Agreement and any other instruments or agreements
executed pursuant hereto, including, without limitation, at Debtor's
cost and expense, the exercise of its best efforts to cooperate in
obtaining FCC approval of any action or transaction contemplated by this
Security Agreement or any other instrument or agreement executed
pursuant hereto which is then required by Law.
(d) SUBSEQUENT ACTIONS BY DEBTOR. Debtor agrees that if,
for any reason, the FCC or any such other regulatory authority with
jurisdiction does not approve within a reasonable period of time the
initial application for approval of the transfer of the FCC Licenses,
then PARAGRAPHS 9(b) and (c) above hereof shall be applicable to any
subsequent application for transfer of the FCC Licenses pursuant to
action taken by Secured Party in the exercise of its Rights hereunder or
under the Loan Papers. With respect to each subsequent proposed
purchaser(s), Debtor agrees to execute all such applications and other
documents and take all such other action as may be reasonably requested
by Secured Party at any time and from time to time in order to obtain
the approval by the FCC or any other regulatory authorities. Exercise
by Secured Party of the Right to such cooperation shall not be exhausted
by the initial or any subsequent exercise thereof.
23. MISCELLANEOUS.
(a) CONTINUING SECURITY INTEREST. This Security Agreement
creates a continuing security interest in the Collateral and shall (i)
remain in full force and effect until the termination of the obligations
of Lenders to advance Borrowings under the Credit Agreement, the payment
in full of the Obligation, and the expiration of all Financial Hedges;
(ii) be binding upon Debtor, its successors, and assigns; and (iii)
inure to the benefit of and be enforceable by the Secured Party,
Lenders, and their respective successors, transferees, and assigns.
Without limiting the generality of the foregoing CLAUSE (iii), the
Secured Party and Lenders may assign or otherwise transfer any of their
respective Rights under this agreement to any other Person in accordance
with the terms and provisions of SECTION 13.13 of the Credit Agreement,
and to the extent of such assignment or transfer such Person shall
thereupon become vested with all the Rights and benefits in respect
thereof granted herein or
17 EXHIBIT D
<PAGE>
otherwise to the Secured Party or Lenders, as the case may be. Upon
payment in full of the Obligation, the termination of the commitment
of Lenders to extend credit, and the expiration of all Financial
Hedges, Debtor shall be entitled to the return, upon its request and
at its expense, of such of the Collateral as shall not have been sold
or otherwise applied pursuant to the terms hereof.
(b) REFERENCE TO MISCELLANEOUS PROVISIONS. This Security
Agreement is one of the "LOAN PAPERS" referred to in the Credit
Agreement, and all provisions relating to Loan Papers set forth in
SECTIONS 13 of the Credit Agreement, other than the provisions set forth
in SECTIONS 13.7, are incorporated herein by reference, the same as if
set forth herein verbatim.
(c) TERM. Upon full and final payment and performance of
the Obligation, this agreement shall thereafter terminate upon receipt
by Secured Party of Debtor's written notice of such termination;
PROVIDED THAT no Obligor, if any, on any of the Collateral shall ever be
obligated to make inquiry as to the termination of this agreement, but
shall be fully protected in making payment directly to Secured Party
until actual notice of such total payment of the Obligation is received
by such Obligor.
(d) ACTIONS NOT RELEASES. The Security Interest and
Debtor's obligations and Secured Party's Rights hereunder shall not be
released, diminished, impaired, or adversely affected by the occurrence
of any one or more of the following events: (i) the taking or accepting
of any other security or assurance for any or all of the Obligation;
(ii) any release, surrender, exchange, subordination, or loss of any
security or assurance at any time existing in connection with any or all
of the Obligation; (iii) the modification of, amendment to, or waiver of
compliance with any terms of any of the other Loan Papers without the
notification or consent of Debtor, EXCEPT as required therein (the Right
to such notification or consent being herein specifically waived by
Debtor); (iv) the insolvency, bankruptcy, or lack of corporate or trust
power of any party at any time liable for the payment of any or all of
the Obligation, whether now existing or hereafter occurring; (v) any
renewal, extension, or rearrangement of the payment of any or all of the
Obligation, either with or without notice to or consent of Debtor, or
any adjustment, indulgence, forbearance, or compromise that may be
granted or given by Secured Party or any Lender to Debtor; (vi) any
neglect, delay, omission, failure, or refusal of Secured Party or any
Lender to take or prosecute any action in connection with any other
agreement, document, guaranty, or instrument evidencing, securing, or
assuring the payment of all or any of the Obligation; (vii) any failure
of Secured Party or any Lender to notify Debtor of any renewal,
extension, or assignment of the Obligation or any part thereof, or the
release of any security, or of any other action taken or refrained from
being taken by Secured Party or any Lender against Debtor or any new
agreement between or among Secured Party or one or more Lenders and
Debtor, IT BEING UNDERSTOOD THAT neither Secured Party nor any Lender
shall be required to give Debtor any notice of any kind under any
circumstances whatsoever with respect to or in connection with the
Obligation, including, without limitation, notice of acceptance of this
Security Agreement or any Collateral ever delivered to or for the
account of Secured Party hereunder; (viii) the illegality, invalidity,
or unenforceability of all or any part of the Obligation against any
party obligated with respect thereto by reason of the fact that the
Obligation, or the interest paid or payable with respect thereto,
exceeds the amount permitted by Law, the act of creating the Obligation,
or any part thereof, is ULTRA VIRES, or the officers, partners, or
trustees creating same acted in excess of their authority, or for any
other reason; or (ix) if any payment by any party obligated with respect
thereto is held to constitute a preference under applicable Laws or for
any other reason Secured Party or any Lender is required to refund such
payment or pay the amount thereof to someone else.
18 EXHIBIT D
<PAGE>
(e) WAIVERS. EXCEPT to the extent expressly otherwise
provided herein or in other Loan Papers and to the fullest extent
permitted by applicable Law, Debtor waives (i) any Right to require
Secured Party or any Lender to proceed against any other Person, to
exhaust its Rights in Collateral, or to pursue any other Right which
Secured Party or any Lender may have; (ii) with respect to the
Obligation, presentment and demand for payment, protest, notice of
protest and nonpayment, and notice of the intention to accelerate; and
(iii) all Rights of marshaling in respect of any and all of the
Collateral.
(f) FINANCING STATEMENT. Secured Party shall be entitled at
any time to file this agreement or a carbon, photographic, or other
reproduction of this agreement, as a financing statement, but the
failure of Secured Party to do so shall not impair the validity or
enforceability of this agreement.
(g) AMENDMENTS. This instrument may be amended only by an
instrument in writing executed jointly by Debtor and Secured Party, and
supplemented only by documents delivered or to be delivered in
accordance with the express terms hereof.
(h) MULTIPLE COUNTERPARTS. This Security Agreement has been
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 Security
Agreement, it shall not be necessary to produce or account for more than
one such counterpart.
(i) PARTIES BOUND; ASSIGNMENT. This Security Agreement
shall be binding on Debtor and Debtor's heirs, legal representatives,
successors, and assigns and shall inure to the benefit of Secured Party
and Secured Party's successors and assigns.
(i) Secured Party is the agent for each Lender under
the Credit Agreement, the Security Interest and all Rights
granted to Secured Party hereunder or in connection herewith are
for the ratable benefit of each Lender, and Secured Party may,
without the joinder of any Lender, exercise any and all Rights
in favor of Secured Party or Lenders hereunder, including,
without limitation, conducting any foreclosure sales hereunder,
and executing full or partial releases hereof, amendments or
modifications hereto, or consents or waivers hereunder. The
Rights of each Lender VIS-A-VIS Secured Party and each other
Lender may be subject to one or more separate agreements between
or among such parties, but Debtor need not inquire about any
such agreement or be subject to any terms thereof unless Debtor
specifically joins therein; and consequently, neither Debtor nor
Debtor's heirs, personal representatives, successors, and
assigns shall be entitled to any benefits or provisions of any
such separate agreements or be entitled to rely upon or raise as
a defense, in any manner whatsoever, the failure or refusal of
any party thereto to comply with the provisions thereof.
(ii) Debtor may not, without the prior written
consent of Secured Party, assign any Rights, duties, or
obligations hereunder.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AS TO
ITS VALIDITY, INTERPRETATION, AND EFFECT IN ACCORDANCE WITH THE LAWS OF
THE STATE OF TEXAS, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW
AND EXCEPT IF THE VALIDITY OR PERFECTION OF THE SECURITY INTERESTS
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
19 EXHIBIT D
<PAGE>
STATE OF TEXAS. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL TERMS USED
HEREIN WHICH ARE DEFINED IN THE UNIFORM COMMERCIAL CODE AS ENACTED IN
THE STATE OF TEXAS SHALL HAVE THE MEANINGS THEREIN STATED.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
20 EXHIBIT D
<PAGE>
EXECUTED as of the date first stated in this Pledge, Assignment, and
Security Agreement.
, ATTEST: (Seal)
as Debtor
By:
Name: Secretary/Assistant Secretary
Title: of Debtor
Printed Name
WITNESSED:
Name:
Name:
[ACKNOWLEDGMENT]
[TO BE USED IN SYGNET COMMUNICATIONS, INC. PLEDGE AGREEMENT ONLY]
PLEDGE, ASSIGNMENT, AND SECURITY AGREEMENT
SIGNATURE PAGE
<PAGE>
EXECUTED as of the date first stated in this Pledge, Assignment, and
Security Agreement.
NATIONSBANK, N.A., WITNESSED:
as Secured Party
By:
Name: Name:
Title:
Name:
ACKNOWLEDGMENT
[TO BE USED IN SYGNET COMMUNICATIONS, INC. PLEDGE AGREEMENT ONLY]
STATE OF TEXAS )
)
COUNTY OF DALLAS )
This instrument was acknowledged before me on ,
1998, by , of
NATIONSBANK, N.A., a national banking association, on behalf of said banking
association, as Secured Party and as Administrative Agent for the Lenders party
to the Credit Agreement, dated as of December 23, 1998 (as amended, modified,
supplemented, or restated from time to time) among Borrower, Administrative
Agent, Lehman Commercial Paper Inc. and PNC Bank, National Association, as
Co-Syndication Agents, Toronto Dominion (Texas), Inc. and First Union National
Bank, as Co-Documentation Agents, and lenders party thereto.
---------------------------------------
(SEAL) Printed Name:
--------------------------
My Commission Expires:
-----------------
PLEDGE, ASSIGNMENT, AND SECURITY AGREEMENT
SIGNATURE PAGE
<PAGE>
ANNEX A TO SECURITY AGREEMENT
(TO BE PROVIDED BY BORROWER)
A. DEBTOR'S TRADENAMES
B. LOCATION OF BOOKS AND RECORDS
C. LOCATION OF COLLATERAL
D. LOCATION OF REAL PROPERTY
E. JURISDICTION(S) FOR FILING FINANCING STATEMENTS
23 EXHIBIT D
<PAGE>
ANNEX B TO SECURITY AGREEMENT
(TO BE PROVIDED BY BORROWER)
A. PLEDGED SHARES
B. INTER-COMPANY AND CELLULAR PARTNERSHIP PROMISSORY NOTES
C. PARTNERSHIP INTERESTS
D. TRADEMARKS
E. PATENTS
24 EXHIBIT D
<PAGE>
ANNEX C TO SECURITY AGREEMENT
DEFAULTS OR POTENTIAL DEFAULTS UNDER ANY COLLATERAL NOTE OR DOCUMENTS
EVIDENCING THE COLLATERAL NOTE SECURITY
(TO BE PROVIDED BY BORROWER)
25 EXHIBIT D
<PAGE>
ANNEX D TO SECURITY AGREEMENT
MATERIAL DEPOSIT ACCOUNTS
(TO BE PROVIDED BY BORROWER)
NAME OF BANK ADDRESS ACCOUNT NUMBER
------------ ------- --------------
26 EXHIBIT D
<PAGE>
ANNEX E TO SECURITY AGREEMENT
FORM OF LETTER FROM DEPOSITORY BANKS
TO: NationsBank, N.A., in its capacity as Administrative Agent for Certain
Lenders and as Secured Party under that certain Pledge, Assignment, and
Security Agreement dated as of December , 1998
901 Main Street, 64th Floor
Dallas, Texas 75202
Attn: Debra S. Wood
RE: DEPOSIT ACCOUNTS (THE "ACCOUNTS") MAINTAINED WITH _________ (THE
"DEPOSIT BANK"), INCLUDING WITHOUT LIMITATION THE DEPOSIT
ACCOUNTS LISTED ON ADDENDUM 1
This will confirm that (the "COMPANY") and the
undersigned Deposit Bank have agreed as follows with respect to the Accounts:
1. The Company and the Deposit Bank acknowledge and confirm that
all funds now or at any time hereafter deposited to the Accounts and all of
the Company's rights regarding such Accounts constitute part of the
"COLLATERAL" granted to Administrative Agent by the Company to secure the
Company's obligations under the Credit Agreement and/or related Loan Papers
and that Administrative Agent holds a security interest and collateral
assignment therein.
2. The Deposit Bank (excluding any Deposit Bank which is a
Lender under the Credit Agreement) will not exercise, and hereby releases,
any banker's lien upon, and any right of setoff against, the Accounts or any
funds at any time deposited to the Accounts EXCEPT with respect to the
Deposit Bank's normal fees and charges for operating the Accounts.
3. The Deposit Bank will take the following actions upon written
demand by Administrative Agent:
A. The Deposit Bank will (and in the event of such demand
the Company hereby irrevocably authorizes and instructs the Deposit Bank
to) cease honoring all drafts, demands, withdrawal requests, or
remittance instructions by the Company, whether made before or after the
demand.
B. The Deposit Bank will hold solely for account of
Administrative Agent all funds which may be on deposit in the Accounts
at the time of the demand and all funds thereafter deposited to the
Accounts, and, upon instructions from Administrative Agent, the Deposit
Bank will remit all such funds (subject to PARAGRAPH 2 above) to
Administrative Agent in such manner as Administrative Agent may from
time to time instruct the Deposit Bank in writing.
After such a demand is made, Administrative Agent shall have sole
control over the Accounts and the sole right to exercise and enforce all
rights and remedies with respect thereto. The demand shall be effective when
it is received by the Deposit Bank in writing at the address and to the
attention of the person set forth below (or at such other address or to the
attention of such other person as the Deposit Bank may specify by written
notice received by Administrative Agent and the Company) and when the Deposit
Bank has had a reasonable time, based on the same standards as those
applicable to payment and stop payment instructions generally, to act thereon.
27 EXHIBIT D
<PAGE>
4. Upon request of Administrative Agent, Deposit Bank will send
to Administrative Agent, at its above address, a copy of each periodic
statement for the Account, as and when the statement is sent to the Company.
5. This letter agreement is binding upon the Deposit Bank and
the Company and their successors and assigns and is enforceable by
Administrative Agent and its successors and assigns. It supersedes all prior
agreements relating to the Deposit Bank, and it may not be modified or
terminated EXCEPT upon Administrative Agent's written consent. The Deposit
Bank and the Company waive notice of acceptance hereof and of any action
taken or omitted in reliance hereon.
DATED AS OF: , 19 .
[COMPANY]
By:
Name:
Title:
[DEPOSIT BANK]
By:
Name:
Title:
[Address]
Attention:
Telex:
Telecopier:
NATIONSBANK, N.A.,
as Administrative Agent
By:
Name:
Title:
28 EXHIBIT D
<PAGE>
ADDENDUM 1
DEPOSIT ACCOUNTS
29 EXHIBIT D
<PAGE>
ANNEX F TO SECURITY AGREEMENT
PLEDGE INSTRUCTION
PARTNERSHIP:
INTEREST OWNER:
BY THIS PLEDGE INSTRUCTION, dated as of ___________ , 1998,
("INTEREST OWNER"), hereby instructs
(the "PARTNERSHIP") to register a pledge in favor of NationsBank, N.A.
("PLEDGEE"), in its capacity as Administrative Agent for certain Lenders and as
Secured Party under that certain Pledge, Assignment, and Security Agreement
dated as of December , 1998 (the "SECURITY AGREEMENT), against, and a security
interest in favor of Pledgee in, all of the Interest Owner's Rights in
connection with any partnership interest in the Partnership now and hereafter
owned by the Interest Owner ("PARTNERSHIP INTEREST").
A. PLEDGE INSTRUCTIONS. The Partnership is hereby
instructed by the Interest Owner to register all of the Interest Owner's
Right, title, and interest in and to all of the Interest Owner's Partnership
Interest as subject to a pledge and security interest in favor of Pledgee
who, upon such registration of pledge, shall become the registered pledgee of
the Partnership Interest with all Rights incident thereto.
B. INITIAL TRANSACTION STATEMENT. The Partnership is
further instructed by the Interest Owner to promptly inform Pledgee of the
registration of the pledge by sending the initial transaction statement, in
the form attached hereto as ANNEX A, to Pledgee at its office located at
, with a copy to Interest Owner.
C. PARTNERSHIP DISTRIBUTIONS, ACCOUNTS, AND
CORRESPONDENCE. The Partnership is further instructed by the Interest Owner
to promptly (i) cause the Partnership to pay and remit to the Pledgee all
proceeds, distributions, and other amounts payable to the Interest Owner upon
demand or otherwise, including, without limitation, upon the termination,
liquidation, and dissolution of the Partnership, (ii) cause the Partnership
to hold all funds in deposit accounts for the benefit of Pledgee, and (iii)
cause the Partnership to provide to the Pledgee all future correspondence,
accountings of distributions, and tax returns of the Partnership.
D. WARRANTIES OF THE INTEREST OWNER. The Interest Owner
hereby warrants that (i) the Interest Owner is an appropriate person to
originate this instruction; (ii) the Interest Owner is entitled to effect the
instruction here given; and (iii) the Interest Owner's taxpayer
identification number is .
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
EXECUTED as of the date first stated in this Pledge Instruction.
---------------------------------------
By:
Name:
Title:
30 EXHIBIT D
<PAGE>
CONSENT OF THE GENERAL PARTNER
The undersigned, , in its
capacity as general partner of the Partnership (in such capacity, the
"GENERAL PARTNER") hereby acknowledges and consents to, and agrees to cause
to be registered on the books and records of the Partnership, the Pledge of
Partnership Interests, and further agrees that upon receipt of written notice
from the Pledgee, the General Partner shall (i) cause the Partnership to pay
and remit to the Pledgee all distributions and other amounts payable to the
Interest Owner upon demand or otherwise, including, without limitation, upon
the termination, liquidation, and dissolution of the Partnership, (ii) cause
the Partnership to hold all funds in deposit accounts for the benefit of
Pledgee, and (iii) cause the Partnership to provide to the Pledgee all future
correspondence, accountings of distributions, and tax returns of the
Partnership.
,
as General Partner
By:
Name:
Title:
PLEDGE INSTRUCTION
SIGNATURE PAGE
<PAGE>
EXHIBIT A TO PLEDGE INSTRUCTION
FORM OF INITIAL TRANSACTION STATEMENT
THIS STATEMENT IS MERELY A RECORD OF THE RIGHTS OF THE ADDRESSEE
AS OF THE TIME OF ISSUANCE. DELIVERY OF THIS STATEMENT, OF
ITSELF, CONFERS NO RIGHTS ON THE RECIPIENT. THIS STATEMENT IS
NEITHER A NEGOTIABLE INSTRUMENT NOR A SECURITY.
NAME OF PLEDGOR:
ADDRESS OF PLEDGOR:
Tax ID or Social Security Number:
NationsBank, N.A.
[ADDRESS]
[Tax ID Number: ]
On December , 1998, the undersigned, ,
in its capacity as managing general partner of (in
such capacity, the "MANAGING GENERAL PARTNER") caused the pledge of ( %)
of the outstanding partnership interests in ("PARTNERSHIP
INTEREST") by (the "PLEDGOR"), in favor of NationsBank,
N.A. (the "PLEDGEE") to be registered on the books and records of the
Partnership. EXCEPT for the pledge in favor of the Pledgee, to the knowledge
of the undersigned (including, without limitation, any information which may
appear on the undersigned's books and records) there are no liens,
restrictions, or adverse claims to which the Partnership Interest is, or may
be, subject as of the date hereof.
By:
Name:
Title:
PLEDGE INSTRUCTION
SIGNATURE PAGE
<PAGE>
EXHIBIT E-1
FORM OF COMPLIANCE CERTIFICATE
FOR ENDED ,
DATE: ,
ADMINISTRATIVE AGENT: NationsBank, N.A.
BORROWER: DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger,
SYGNET WIRELESS, INC.)
This certificate is delivered under the Credit Agreement, dated as of
December 23, 1998 (as amended, modified, supplemented, or restated from time to
time, the "CREDIT AGREEMENT"), among Borrower, Administrative Agent, Lehman
Commercial Paper Inc. and PNC Bank, National Association, as Co-Syndication
Agents, Toronto Dominion (Texas), Inc. and First Union National Bank, as
Co-Documentation Agents, and Lenders party thereto. Capitalized terms used
herein and not otherwise defined herein shall have the meaning given to such
terms in the Credit Agreement.
I certify to Lenders that:
(a) I am a Responsible Officer of the Companies in the position(s)
set forth under my signature below;
(b) the Financial Statements of the Companies attached to this
certificate were prepared in accordance with GAAP, and present fairly in all
material respects the consolidated financial condition and results of operations
of those companies as of, and for the (three, six, or nine months, or fiscal
year) ended on, , (the "SUBJECT PERIOD")
[(subject only to normal year-end audit adjustments)];
(c) a review of the activities of the Companies during the Subject
Period has been made under my supervision with a view to determining whether,
during the Subject Period, the Companies have kept, observed, performed, and
fulfilled all of their respective obligations under the Loan Papers, and during
the Subject Period, to my knowledge (i) the Companies kept, observed, performed,
and fulfilled each and every covenant and condition of the Loan Papers (EXCEPT
for the deviations, if any, set forth on ANNEX A to this certificate) in all
material respects, and (ii) no Default (nor any Potential Default) has occurred
which has not been cured or waived (EXCEPT the Defaults or Potential Defaults,
if any, described on ANNEX A to this Certificate);
(d) to my knowledge, the status of compliance by the Companies with
SECTIONS 9.12, 9.20, 9.21, 9.23, and 9.30(a), (b), (c), (d), (e), and (f) of the
Credit Agreement at the end of the Subject Period is as set forth on ANNEX B to
this certificate; and
EXHIBIT E-1
<PAGE>
(e) except for the deviations described on ANNEX A, all Net Cash
Proceeds from the disposition of assets required to be reinvested in property or
assets of the Companies during the Subject Period have been reinvested, and no
mandatory prepayment is required to be paid by Borrower to Lenders pursuant to
SECTION 2.7(b)(ii) of the Credit Agreement.
By:
Name:
Title:
2 EXHIBIT E-1
<PAGE>
EXHIBIT E-2
FORM OF PERMITTED ACQUISITION COMPLIANCE CERTIFICATE
DATE: ,
ADMINISTRATIVE AGENT: NationsBank, N.A.
BORROWER: Dobson/Sygnet Operating Company,
(including its successor by merger,
Sygnet Wireless, Inc.)
- -------------------------------------------------------------------------------
This Permitted Acquisition Compliance Certificate (the "CERTIFICATE") is
delivered under the Credit Agreement, dated as of December 23, 1998 (as amended,
modified, supplemented, or restated from time to time, the "CREDIT AGREEMENT"),
among Borrower, Administrative Agent, Lehman Commercial Paper Inc. and PNC Bank,
National Association, as Co-Syndication Agents, Toronto Dominion (Texas), Inc.
and First Union National Bank, as Co-Documentation Agents, and Lenders party
thereto. Capitalized terms used herein and not otherwise defined herein shall
have the meanings given to such terms in the Credit Agreement.
1. NOTIFICATION OF PROPOSED ACQUISITION.
Borrower hereby notifies Administrative Agent that
[BORROWER OR ANY SUBSIDIARY OF BORROWER] intends
to acquire the [stock/assets] of
(the "SUBJECT ACQUISITION"), on , 19 (the "ACQUISITION
DATE"). In connection with the Subject Acquisition and in satisfaction of
certain conditions precedent to the qualification of the Subject Acquisition as
a "PERMITTED ACQUISITION" under the Loan Papers, the following is attached
hereto:
ANNEX A: which sets forth calculations demonstrating pro forma compliance
with the covenants in SECTIONS 9.12, 9.20, 9.21, 9.23, and 9.30
of the Credit Agreement, after giving effect to the Subject
Acquisition;
ANNEX B: which sets forth pro forma income and balance sheet projections
for the Companies, after giving effect to the Subject
Acquisition;
ANNEX C: which sets forth ten year cash flow projections for the Subject
Acquisition; and
ANNEX D: which is a true and correct copy of the Purchase Agreement.
2. CERTIFICATIONS.
On and as of the date of this Certificate, Borrower certifies to
Administrative Agent and Lenders that the following statements are true and
correct on the date hereof and will be true and correct on the closing date of
the Subject Acquisition:
(a) All of the representations and warranties in the Credit Agreement are
true and correct;
(b) No Default or Potential Default exists nor will occur as a result of,
and after giving effect to, the Subject Acquisition;
EXHIBIT E-2
<PAGE>
(c) The company(ies) being acquired is (are) engaged in, or the assets
being acquired are used in, the domestic cellular business;
(d) To the extent the Subject Acquisition is structured as a merger,
Borrower (or if such merger is with another Company, such Company) is
the survivor;
(e) To the extent that the Subject Acquisition is structured as a stock
acquisition, the acquiring Company will own not less than 75% of the
entity being acquired after giving effect to the Subject Acquisition;
and
(f) Attached hereto as ANNEX D is a true and correct copy of the Purchase
Agreement and all amendments, exhibits, and schedules thereto.
(g) The purchase price for the Subject Acquisition, when aggregated with
the purchase prices of all other Acquisitions consummated during the
calendar year, does not exceed $15,000,000.
3. ACKNOWLEDGMENTS AND CONFIRMATION.
Borrower acknowledges that this Certificate and the attached documents are
being delivered in partial satisfaction of the requirements for a "PERMITTED
ACQUISITION," and further confirms its understanding that the Subject
Acquisition will not be a "PERMITTED ACQUISITION" until satisfaction of each of
the criteria specified in the definition of "PERMITTED ACQUISITION" in SECTION
1.1 of the Credit Agreement, including, without limitation, satisfaction of the
conditions precedent set forth in SECTION 7.2 and on SCHEDULE 7.2.
4. FURTHER ASSURANCES.
Borrower shall timely deliver to Administrative Agent, upon reasonable
request by Administrative Agent, any documents, certificates, or information
relating to the Subject Acquisition (including, without limitation, all
information necessary to enable Administrative Agent to complete any due
diligence related to the Company(ies) or the assets being acquired), which
documents or certificates shall be in form and substance acceptable to
Administrative Agent.
DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger,
Sygnet Wireless, Inc.)
By:
Name:
Title:
2 EXHIBIT E-2
<PAGE>
EXHIBIT E-3
FORM OF PERMITTED ACQUISITION LOAN
CLOSING CERTIFICATE
(___________, 19__)
This certificate is delivered pursuant to SECTION 7.2 of the Credit
Agreement, dated as of December 23, 1998 (as amended, modified, supplemented, or
restated from time to time, the "CREDIT AGREEMENT"), among Borrower,
Administrative Agent, Lehman Commercial Paper Inc. and PNC Bank, National
Association, as Co-Syndication Agents, Toronto Dominion (Texas), Inc. and First
Union National Bank, as Co-Documentation Agents, and Lenders party thereto.
Capitalized terms used herein and not otherwise defined herein shall have the
meaning given to such terms in the Credit Agreement.
1. SUBJECT ACQUISITION. This certificate relates to the Acquisition by
[BORROWER OR ANY SUBSIDIARY OF BORROWER] of the
[stock/assets] of (the "SUBJECT
ACQUISITION"), on , 19 (the "ACQUISITION DATE").
2. CERTIFICATION REGARDING SUBJECT ACQUISITION. In connection with Subject
Acquisition, Borrower hereby represents and warrants the following:
- All of the representations and warranties in the Credit Agreement are
true and correct immediately prior to and after giving effect to the
Subject Acquisition (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 and, if
applicable, supplemental Schedules have been delivered with respect
thereto and, when necessary, approved by Required Lenders);
- Immediately prior to and after giving effect to the Subject
Acquisition, no Default or Potential Default exists;
- Not less than 30 days prior to the Acquisition Date, Borrower
delivered to Administrative Agent a Permitted Acquisition Compliance
Certificate with respect to the Subject Acquisition, TOGETHER WITH all
financial projections, reports, and certifications required thereby,
which certifications and representations continue to be true and
correct on the Acquisition Date and which projections continue to be
accurate and complete on and as of the Acquisition Date;
- The Subject Acquisition meets all of the requirements to qualify as a
"PERMITTED ACQUISITION" under the Credit Agreement, including, without
limitation, the following conditions: (i) the purchase price for the
Subject Acquisition (when aggregated with the purchase price of each
other Acquisition consummated in the same calendar year as the Subject
Acquisition) is less than or equal to $15,000,000; (ii) as of the
Acquisition Date, the Subject 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) each condition
precedent to a Permitted Acquisition set forth in SECTION 7.2 and
SCHEDULE 7.2 of the Credit Agreement has been satisfied; (iv) after
giving effect to the Subject Acquisition, the acquiring party is
Solvent and the Companies, on a consolidated basis, are Solvent; (v)
if the Subject Acquisition is structured as a merger, Borrower (or if
such merger is with any Company other than
EXHIBIT E-3
<PAGE>
Borrower, then such Company) is the surviving entity after giving
effect to such merger; and (vi) if the Subject Acquisition is
structured as a stock/equity acquisition, the acquiring Company owns
not less than a 75% interest in the entity being acquired
- All acquisition documents related to the Subject Acquisition (the
"ACQUISITION DOCUMENTS") have been duly and validly executed and
delivered by each of the parties thereto and constitute the legal,
valid, and binding obligations of the parties thereto, enforceable
against such parties in accordance with their respective terms (EXCEPT
as may be limited by applicable Debtor Relief Laws);
- All representations and warranties made by Borrower in the Permitted
Acquisition Compliance Certificate and related Notice of Borrowing (if
any) delivered with respect to the Subject Acquisition, and by any
Company or other Person in the Acquisition Documents, are true and
correct in all material respects on and as of the date made or deemed
made, as of the Acquisition Date, and as of the date(s) of funding of
the Borrowing (if any) and the delivery of this certificate; and the
Acquisition Documents set forth the entire agreement and understanding
of the parties thereto relating to the subject matter thereof, and
there are no other agreements, arrangements, or understandings,
written or oral, relating to the matters covered thereby; and
- The Subject Acquisition has been consummated contemporaneously with
the making of the related Borrowing (if any) and the delivery of this
certificate, and in compliance, in all material respects, with all
conditions and requirements contained in the Acquisition Documents; no
breach of any material term or condition contained in such Acquisition
Documents has occurred; after giving effect to the Subject
Acquisition, Borrower or its Subsidiary, as applicable, has acquired
and become the owner(s) of all of the property or assets to be
acquired thereby free and clear of any Liens, EXCEPT Permitted Liens;
in connection with the Subject Acquisition, no Company has assumed any
liabilities other than those reflected or reserved against in the
applicable pro forma financial statements delivered to Administrative
Agent, or contingent liabilities under the Acquisition Documents which
are not required to be reflected or reserved against in accordance
with GAAP.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
2 EXHIBIT E-3
<PAGE>
EXECUTED on the date first written on this Permitted Acquisition Loan
Closing Certificate.
DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger,
Sygnet Wireless, Inc.)
By:
Name:
Title:
3 EXHIBIT E-3
<PAGE>
EXHIBIT F
FORM OF ASSIGNMENT AND ACCEPTANCE AGREEMENT
Reference is made to the Credit Agreement dated as of December 23, 1998 (as
amended, modified, supplemented, or restated from time to time, the "CREDIT
AGREEMENT") among Dobson/Sygnet Operating Company, (including its successor by
merger, Sygnet Wireless, Inc.) ("BORROWER"), NationsBank, N.A., as
Administrative Agent for Lenders ("ADMINISTRATIVE AGENT"), Lehman Commercial
Paper Inc. and PNC Bank, National Association, as Co-Syndication Agents, Toronto
Dominion (Texas), Inc. and First Union National Bank, as Co-Documentation
Agents, and Lenders party thereto. Capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to such terms in the
Credit Agreement.
"ASSIGNOR" and "ASSIGNEE" referred to on SCHEDULE 1 agree as follows:
1. Assignor hereby sells and assigns to Assignee, without recourse and
without representation or warranty EXCEPT as expressly set forth herein, and
Assignee hereby purchases and assumes from Assignor, an interest in and to
Assignor's Rights and obligations under the Credit Agreement and the related
Loan Papers as of the date hereof equal to the percentage interest specified on
SCHEDULE 1. After giving effect to such sale and assignment, Assignor's and
Assignee's Committed Sums and the amount of the Borrowings under the Credit
Agreement owing to each of them will be as set forth on SCHEDULE 1.
2. Assignor (a) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (b) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties, or representations made in or in connection with the Loan Papers or
the execution, legality, validity, enforceability, genuineness, sufficiency, or
value of the Loan Papers or any other instrument or document furnished pursuant
thereto; (c) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of any party to any Loan Paper or the
performance or observance by any such party of any of its obligations under the
Loan Papers or any other instrument or document furnished pursuant thereto; and
(d) attaches the Notes held by Assignor and requests that Administrative Agent
exchange such Notes for new Notes. Such new Notes shall be prepared in
accordance with the provisions of SECTION 3.1(a) or SECTION 3.1(b) of the Credit
Agreement, as applicable, and will reflect the respective Committed Sums (for
each Facility, as appropriate) of Assignee and Assignor after giving effect to
this Assignment and Acceptance Agreement.
3. Assignee (a) confirms that it has received a copy of the Credit
Agreement, TOGETHER WITH copies of the current Financial Statements and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance
Agreement; (b) agrees that it will, independently and without reliance upon
Administrative Agent, Assignor, or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Credit Agreement;
(c) confirms that it is an Eligible Assignee; (d) appoints and authorizes
Administrative Agent to take such action as ADMINISTRATIVE AGENT on its behalf
and to exercise such powers and discretion under the Credit Agreement as are
delegated to Administrative Agent by the terms thereof, TOGETHER WITH such
powers and discretion as are reasonably incidental thereto; (e) agrees that it
will perform in accordance with their terms all of the obligations that by the
terms of the Credit Agreement are required to be performed by it as a Lender;
and (f) attaches any U.S. Internal Revenue Service or other forms required under
SECTION 4.6(d) of the Credit Agreement.
4. Following the execution of this Assignment and Acceptance Agreement by
Assignor, Assignee, and Borrower (to the extent required hereunder), it will be
delivered to Administrative Agent for
Exhibit F
<PAGE>
acceptance and recording by Administrative Agent. The effective date for
this Assignment and Acceptance Agreement (the "EFFECTIVE DATE") shall be the
date of acceptance hereof by Administrative Agent, unless otherwise specified
on SCHEDULE 1.
5. Upon such acceptance and recording by Administrative Agent, as of the
Effective Date, (a) Assignee shall be a party to the Credit Agreement and, to
the extent provided in this Assignment and Acceptance Agreement, have the Rights
and obligations of a Lender thereunder, and (b) Assignor shall, to the extent
provided in this Assignment and Acceptance Agreement, relinquish its Rights and
be released from its obligations under the Agreement.
6. Upon such acceptance and recording by Administrative Agent, from and
after the Effective Date, Administrative Agent shall make all payments under the
Credit Agreement, the Notes, and loan accounts in respect of the interest
assigned hereby (including, without limitation, all payments of principal,
interest, and commitment fees and other fees with respect thereto) to Assignee.
Assignor and Assignee shall make all appropriate adjustments in payments under
the Credit Agreement and the other Loan Papers for periods prior to the
Effective Date directly between themselves.
7. Unless Assignee is a Lender or an Affiliate of a Lender or unless a
Default or Potential Default then exists, this Assignment and Acceptance
Agreement is conditioned upon the consent of Borrower and Administrative Agent
pursuant to the definition of "ELIGIBLE ASSIGNEE" in the Credit Agreement. The
execution and delivery of this Assignment and Acceptance Agreement by Borrower
and Administrative Agent is evidence of this consent.
8. As contemplated by SECTION 13.13(b)(v) of the Credit Agreement,
Assignor or Assignee (as determined between Assignor and Assignee) agrees to pay
to Administrative Agent for its account on the Effective Date in federal funds a
processing fee of $3,500.
9. THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
TEXAS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
10. This Assignment and Acceptance Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of SCHEDULE 1 to this Assignment and Acceptance Agreement
by telecopier shall be effective as delivery of a manually executed counterpart
of this Assignment and Acceptance Agreement.
IN WITNESS WHEREOF, Assignor and Assignee have caused SCHEDULE 1 to this
Assignment and Acceptance Agreement to be executed by their officers thereunto
duly authorized as of the date specified thereon.
2 EXHIBIT F
<PAGE>
3. EFFECTIVE DATE (if other than date of acceptance by
Administrative Agent): *___________ ___, ____
[NAME OF ASSIGNOR], as ASSIGNOR
By:
Name:
Title:
Date:
Address for Notice:
Attn:
Telephone:
Telecopier:
[NAME OF ASSIGNOR], as ASSIGNOR
By:
Name:
Title:
Date:
Address for Notice:
Attn:
Telephone:
Telecopier:
If SECTION 13.13(b) and CLAUSE (c) of the definition of "ELIGIBLE ASSIGNEE" of
the Credit Agreement so require, Borrower and Administrative Agent consent to
this Assignment and Acceptance Agreement.
DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger,
Sygnet Wireless, Inc.),
as BORROWER
By:
Name:
Title:
Date:
NATIONSBANK, N.A.,
as ADMINISTRATIVE AGENT
By:
Name:
Title:
Dated:
* This date should be no earlier than five Business Days after the delivery
of this Assignment and Acceptance Agreement to Administrative Agent.
5 EXHIBIT F
<PAGE>
ASSIGNMENT AND ACCEPTANCE AGREEMENT
SIGNATURE PAGE
<PAGE>
EXHIBIT G-1
FORM OF OPINION OF COUNSEL OF BORROWER
(DOBSON/SYGNET)
[Firm Letterhead]
December ___, 1998
NationsBank, N.A., as Administrative Agent
Lehman Commercial Paper Inc., as Co-Syndication Agent
PNC Bank, National Association, as Co-Syndication Agent
Toronto Dominion (Texas), Inc., as Co-Documentation Agent
First Union National Bank, as Co-Documentation Agent
Each Lender named in SCHEDULE 2.1 to the Credit Agreement referred to below
RE: CREDIT AGREEMENT FOR DOBSON/SYGNET OPERATING COMPANY
Ladies and Gentlemen:
We have acted as counsel to Dobson/Sygnet Operating Company (together with
its successor by merger Sygnet Wireless, Inc., "BORROWER"), and its Subsidiaries
(collectively with Borrower, the "COMPANIES") in connection with the Credit
Agreement, dated as of December 23, 1998 (as amended, modified, supplemented, or
restated from time to time, the "CREDIT AGREEMENT"), among Borrower,
NationsBank, N.A., as Administrative Agent, Lehman Commercial Paper Inc. and PNC
Bank, National Association, as Co-Syndication Agents, Toronto Dominion (Texas),
Inc. and First Union National Bank, as Co-Documentation Agents, and Lenders
named on SCHEDULE 2.1 to the Credit Agreement ("LENDERS"). In addition, we have
also acted as counsel to Dobson Operating Company ("DOC") and Dobson/Sygnet
Communications Company ("D/S COMPANY") in connection with D/S Company's
acquisition of Borrower's stock from DOC (the "DOBSON ACQUISITION").
This opinion is delivered pursuant to SECTION 7.1 of the Credit Agreement
and PARAGRAPH 11 of SCHEDULE 7.1 to the Credit Agreement. Except as otherwise
defined herein, each capitalized term used herein has the meaning given to such
term in the Credit Agreement.
In arriving at the opinions expressed below, we have examined such
corporate documents and records of the Companies and such certificates of public
officials and of officers of the Companies, other documents, and matters of law
as we deemed necessary or appropriate, including, without limitation, originals
or copies of (a) the Credit Agreement, (b) the Notes, (c) the Guaranty executed
by Sygnet Communications, Inc., (d) the Pledge, Assignment, and Security
Agreement executed by Borrower in favor of Lender, (e) the Pledge, Assignment,
and Security Agreement executed by Sygnet Communications, Inc. in favor of
Lender (collectively with (d) above, the "SECURITY AGREEMENTS"), (f) Financing
Statements showing Borrower, as Debtor, and Administrative Agent, as Secured
Party, to be filed in appropriate jurisdictions; (g) Financing Statements
(collectively with (e) above, the "FINANCING STATEMENTS") showing Sygnet
Communications, Inc., as Debtor, and Administrative Agent, as Secured Party, to
be filed in appropriate jurisdictions; and (h) other Collateral Documents (all
of the foregoing are collectively, the "TRANSACTION DOCUMENTS"); additionally,
we have examined [describe documents evidencing the Dobson Acquisition] (the
"DOBSON ACQUISITION DOCUMENTS") .
EXHIBIT G-1
<PAGE>
Based upon the foregoing, we are of the opinion that:
1. Each Company, DOC, and D/S Company (a) is a corporation validly
existing and in good standing under the Laws of its state of incorporation, (b)
is duly qualified to transact business as a foreign corporation in each
jurisdiction where the nature and extent of its business and properties require
the same, and (c) possesses all requisite corporate authority and power to
conduct its business and execute, deliver, and comply with the terms of each of
the Transaction Documents, the Dobson Acquisition Documents, and the Sygnet
Merger Documents to which such Company is a party, which have been duly
authorized and approved by all necessary corporate action and for which no
approval or consent of any Person or Governmental Authority is required which
has not been obtained.
2. Each Company has duly executed and delivered each Transaction Document
and each Sygnet Merger Document, to which such Company is a party.
3. Each Transaction Document and Sygnet Merger Document to which any
Company is party evidence the valid and legally binding obligations of such
Company, enforceable against such Company in accordance with their terms, EXCEPT
as the enforcement may be limited by Debtor Relief Laws and EXCEPT that the
remedies available with respect thereto may be subject to general principles of
equity (regardless of whether such remedies are sought in a proceeding in equity
or at law).
4. The execution, delivery, and performance of and compliance with the
terms of the Transaction Documents and the Sygnet Merger Documents will not
cause any Company to be in violation of its respective Articles or Certificates
of Incorporation or Bylaws.
5. The execution, delivery, and performance of and compliance with the
terms of the Transaction Documents and the Sygnet Merger Documents will not
cause any Company to be in violation of any Laws other than such violations
which will not, individually or collectively, be a Material Adverse Event.
6. The execution, delivery, and performance of and compliance with the
terms of the Transaction Documents and the Sygnet Merger Documents will not
cause any Company to be in default under any material, written, or oral
agreements, contracts, commitments, or understandings to which any Company is a
party.
7. Each Company is in compliance in all material respects with all
applicable Laws, federal, state, and local (including without limitation,
Environmental Laws and those statutes administered each state public utility
commission that, on the date of this opinion, exercises jurisdiction over the
Companies (collectively, the "LOCAL AUTHORITIES")), material to the conduct of
its business and operations. Except as have been obtained, no authorization,
consent, approval, waiver, licenses, or formal exemptions from, nor any filing,
declaration, or registration with, any Governmental Authority or
non-governmental entity, under the terms of the contracts or otherwise, is
required by reason of or in connection with the execution and performance of the
Transaction Documents and the Sygnet Merger Documents.
8. No Company is involved in, nor are we aware of the threat of, any
Litigation which is reasonably likely to be determined adversely to any Company.
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,
acquisition, or similar proceeding against any Company's assets having a value
(individually or collectively) of $1,000,000 or more.
2 EXHIBIT G-1
<PAGE>
9. The extent of the ownership of the capital stock of or equity interest
in, and jurisdiction of organization of, each Company is as set forth on ANNEX A
attached hereto, and, to the best of our knowledge, after reasonable
investigation, EXCEPT as set forth on such schedule, no Company (a) has any
other Subsidiaries or (b) has transacted business under any other corporate or
trade name in the five-year period preceding the date hereof.
10. No Company, and no Affiliate of any Company, is (a) subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Investment Company Act of 1940 (as any of the preceding acts have
been amended), or any other Law (other than regulations issued by the FCC and
REGULATION X of the Board of Governors of the Federal Reserve System) which
regulates the incurring by any Company of Debt, including, but not limited to,
Laws relating to common or contract carriers or the sale of electricity, gas,
steam, water, or other public utility services, or (b) EXCEPT as listed on
ANNEX B attached hereto, a "UTILITY" defined in the Laws of the jurisdictions in
which such Company or such Affiliate maintains assets or conducts business.
11. The proceeds of the Borrowings are not to be used directly or
indirectly for the purpose of purchasing or carrying, or for the purpose of
extending credit to others for the purpose of purchasing or carrying, any
"MARGIN STOCK" as that term is defined in REGULATION U of the Board of Governors
of the Federal Reserve System.
12. (a) No Employee Plan has incurred an accumulated funding deficiency
(as defined in the Code and ERISA), (b) no Company, and no ERISA Affiliate of
any Company, has incurred material liability which is currently due and remains
unpaid to the PBGC or to an Employee Plan in connection with any such Employee
Plan, (c) no Company, and no ERISA Affiliate of any Company, has withdrawn in
whole or in part from participation in a Multiemployer Plan, (d) no Company has
engaged in any prohibited transaction (as such term is defined in ERISA or the
Code) which would be a Material Adverse Event, and (e) to the best of our
knowledge, after reasonable investigation, no Reportable Event has occurred
which is likely to result in the termination of any Employee Plan.
13. The interest payable by Borrower pursuant to the Notes and Credit
Agreement is not in violation of the usury Laws of the State of Texas or the
United States of America.
14. The conditions precedent to the initial Borrowing have been waived in
writing or satisfied in accordance with the Loan Papers.
15. Borrower is the beneficial and record owner of all shares of Sygnet
Communications, Inc., free and clear of any Liens or transfer restrictions.
16. The Financing Statements are in sufficient form for recordation. When
the Financing Statements have been filed and recorded in the jurisdictions
listed on ANNEX A hereto, the Transaction Documents shall create and perfect
valid and continuing security interests in favor of Administrative Agent, for
the benefit of Lenders in the Collateral, to the extent that the filing of
financing statements is effective to perfect security interests in the
Collateral, subject to the qualifications set forth in the Security Agreements
with respect to licenses issued by the FCC. No further action, including any
filing or recording of any document, is necessary in order to establish,
perfect, and maintain Lenders' security interests in the assets and the stock
created by the Security Agreements, EXCEPT for the periodic filing of
continuation statements with respect to financing statements filed under the
Uniform Commercial Code of the applicable jurisdiction.
3 EXHIBIT G-1
<PAGE>
17. The Dobson Acquisition Documents have been duly executed and delivered
by DOC and D/S Company, and constitute the valid and legally binding obligations
of DOC and D/S Company, enforceable in accordance with their terms, EXCEPT as
the enforcement may be limited by Debtor Relief Laws and EXCEPT that the
remedies available with respect thereto may be subject to general principles of
equity (regardless of whether such remedies are sought in a proceeding in equity
or at law). The Dobson Acquisition has been consummated in accordance with the
Dobson Acquisition Documents and applicable Law.
This opinion is addressed to you solely for your use in connection with the
transactions contemplated by the Transaction Documents, and no person other than
Administrative Agent, Syndication Agent, Documentation Agent, each Lender, each
assignee that hereafter becomes a Lender as permitted by the Credit Agreement,
and the law firm of Haynes and Boone, LLP, is entitled to rely hereon without
our prior written consent. This opinion is given as of the date hereof, and we
have no obligation to revise or update this opinion subsequent to the date
hereof or to advise you or any other person of any matter subsequent to the date
hereof which would cause us to modify this opinion in whole or in part.
Very truly yours,
4 EXHIBIT G-1
<PAGE>
EXHIBIT G-2
FORM OF OPINION OF SPECIAL REGULATORY COUNSEL
(DOBSON/SYGNET)
[Firm Letterhead]
December ___, 1998
NationsBank, N.A., as Administrative Agent
Lehman Commercial Paper Inc., as Co-Syndication Agent
PNC Bank, National Association, as Co-Syndication Agent
Toronto Dominion (Texas), Inc., as Co-Documentation Agent
First Union National Bank, as Co-Documentation Agent
Each Lender named in SCHEDULE 2.1 to the Credit Agreement referred to below
RE: CREDIT AGREEMENT FOR DOBSON/SYGNET OPERATING COMPANY
Ladies and Gentlemen:
We have acted as special communications regulatory counsel to
Dobson/Sygnet Operating Company (together with is its successor by merger,
Sygnet Wireless, Inc., "BORROWER"), and its Subsidiaries (collectively with
Borrower, the "COMPANIES") in connection with the Credit Agreement, dated as
of December 23, 1998 (as amended, modified, supplemented, or restated from
time to time, the "CREDIT AGREEMENT"), among Borrower, NationsBank, N.A., as
Administrative Agent, Lehman Commercial Paper Inc. and PNC Bank, National
Association, as Co-Syndication Agents, Toronto Dominion (Texas), Inc. and
First Union National Bank, as Co-Documentation Agents, and Lenders named on
SCHEDULE 2.1 to the Credit Agreement ("LENDERS").
This opinion is delivered pursuant to SECTION 7.1 of the Credit
Agreement and PARAGRAPH 12 of SCHEDULE 7.1 to the Credit Agreement. Except
as otherwise defined herein, each capitalized term used herein has the
meaning given to such term in the Credit Agreement.
We have examined the articles of incorporation, bylaws, and partnership
agreements, as applicable, of the Companies, the Loan Papers, the
certificates of public convenience and necessity and similar authorizations
issued to the Companies by the Federal Communications Commission ("FCC") and
each state public utility commission ("PUC") that, on the date of this
opinion, exercises jurisdiction over the Companies (each such PUC, an
"APPLICABLE PUC"). See SCHEDULE I for the list of Applicable PUCs as of the
date of this opinion. Our opinion is limited to the provisions of the
Communications Act of 1934, as amended, 47 U.S.C. Section 151 ET SEQ. (the
"COMMUNICATIONS ACT"), and all laws administered by, and all rules,
regulations, and published policies of, the FCC and Applicable PUCs, and we
express no opinion and assume no responsibility as to the applicability of
any other laws.
Based upon the foregoing, we are of the opinion that:
1. The consummation of the Sygnet Merger and the execution and
delivery of the Credit Agreement and the Loan Papers by Borrower and the
performance by the Companies of the Obligation will not violate any law,
rule, regulation, or policy of the FCC or any Applicable PUC.
EXHIBIT G-2
<PAGE>
2. The execution and delivery of a Guaranty by the Subsidiaries party
thereto and the performance by such Subsidiaries of their respective
obligations thereunder will not violate any law, rule, regulation, or policy
of the FCC or any Applicable PUC.
3. Each Company holds all licenses required by the FCC and all other
certificates or licenses required by any Applicable PUC for the construction
and operation, in accordance with the Communications Act and the PUC Laws, of
each of the cellular systems owned or leased by the Companies (collectively,
the "CELLULAR SYSTEMS"). All of the certificates and licenses are duly and
validly held by the applicable Company, and all such certificates and
licenses are in full force and effect without conditions, other than such
conditions that are generally applicable to such licenses and other
certificates.
4. The Companies' execution and delivery, and performance and
compliance with the terms and provisions of the Credit Agreement and the
other Loan Papers and the Sygnet Merger Documents: (a) will not result in a
violation of the Communications Act or any PUC Laws: (b) will not cause any
cancellation, termination, revocation, forfeiture, or material impairment of
any FCC or PUC authorization, certificate, or license; and (c) will not
require further notice to or the approval of the FCC or any Applicable PUC
[, EXCEPT in the states where applications for authority are currently pending]
.
5. The ownership and operation by the Companies of their Systems and
other business operations are in compliance in all material respects with the
Communications Act (including, without limitation, all FCC filing, reporting,
prior approval, and similar requirements).
6. No approval, authorization, consent, adjudication, or order of the
FCC or any Applicable PUC which has not been obtained by the Companies as of
this date is required to be obtained by the Companies in connection with the
consummation of the Sygnet Merger, the execution and delivery of the Loan
Papers, the borrowing under the Credit Agreement, the payment or performance
of the Obligations by the Companies or the creations of the Liens in favor of
Lenders under the Loan Papers.
7. To the best of our knowledge: (a) there is no outstanding decree or
order that has been issued by the FCC or any Applicable PUC against any
Company and no pending or threatened litigation, proceedings, notice of
violation, order to show cause, complaint, inquiry, or investigation before
the FCC or any Applicable PUC (i) relating to any Company or relating to its
Cellular Systems or business operations that might result in the
cancellation, termination, revocation, forfeiture, or material impairment of
any FCC or PUC authorizations, certificates, or licenses, or have any
material adverse effect upon, or cause material disruption to, any Company or
the ownership or operation of such Cellular Systems or business operations or
(ii) seeking to prohibit, restrict, or delay consummation of the transactions
contemplated by the Loan Papers, the Sygnet Merger Documents, or fulfillments
of any conditions under the Loan Papers of the Sygnet Merger Documents; and
(b) no action has been taken by the FCC or any Applicable PUC which might
now, or after notice or lapse of time, or both, result in the cancellation,
termination, revocation, forfeiture, or material impairment of any FCC or PUC
authorizations, certificates, or licenses, or have any material adverse
effect upon, or material disruption to, any Company or the ownership or
operation of their Cellular Systems or business operations.
This opinion letter is provided to Administrative Agent, Syndication
Agent, Documentation Agent, each Lender, and Haynes and Boone, LLP, and their
respective participants, assignees, or other transferees, by us in our
capacity as special communications regulatory counsel to the Companies.
Very truly yours,
2 EXHIBIT G-2
<PAGE>
EXHIBIT G-3
FORM OF OPINION OF OHIO COUNSEL
(DOBSON/SYGNET)
[Firm Letterhead]
December ___, 1998
NationsBank, N.A., as Administrative Agent
Lehman Commercial Paper Inc., as Co-Syndication Agent
PNC Bank, National Association, as Co-Syndication Agent
Toronto Dominion (Texas), Inc., as Co-Documentation Agent
First Union National Bank, as Co-Documentation Agent
Each Lender named in SCHEDULE 2.1 to the Credit Agreement referred to below
RE: CREDIT AGREEMENT FOR DOBSON/SYGNET OPERATING COMPANY
Ladies and Gentlemen:
We have acted as special [ ] counsel to
Dobson/Sygnet Operating Company (together with its successor by merger,
Sygnet Wireless, Inc., "BORROWER"), and its Subsidiaries (collectively with
Borrower, the "COMPANIES") in connection with the Credit Agreement, dated as
of December 23, 1998 (as amended, modified, supplemented, or restated from
time to time, the "CREDIT AGREEMENT"), between Borrower, NationsBank, N.A.,
as Administrative Agent, Lehman Commercial Paper Inc. and PNC Bank, National
Association, as Co-Syndication Agents, Toronto Dominion (Texas), Inc. and
First Union National Bank, as Co-Documentation Agents, and Lenders named on
SCHEDULE 2.1 to the Credit Agreement ("LENDERS").
This opinion is delivered pursuant to SECTION 7.1 of the Credit
Agreement and PARAGRAPH 13 of SCHEDULE 7.1 to the Credit Agreement. Except
as otherwise defined herein, each capitalized term used herein has the
meaning given to such term in the Credit Agreement.
As to matters of law in the State of Ohio (the "SUBJECT JURISDICTION"),
we have acted as your special counsel in connection with the preparation of
the Credit Agreement and related Loan Papers. In that connection, we have
examined such certificates of public officials and of officers of Borrower,
other documents, and matters of law as we deemed necessary or appropriate,
including, without limitation, originals or copies of the Loan Papers and the
opinions hereinafter stated, and counterparts of the following documents
(collectively, the "TRANSACTION DOCUMENTS"):
(a) Credit Agreement;
(b) Guaranty executed by Sygnet Communications, Inc.;
(c) Pledge, Assignment, and Security Agreement naming Borrower, as
Debtor, and Administrative Agent, as Secured Party;
EXHIBIT G-3
<PAGE>
(d) Pledge, Assignment, and Security Agreement (collectively with
(c) above, the "SECURITY AGREEMENTS") naming Sygnet Communications, Inc.,
as Debtor, and Administrative Agent, as Secured Party;
(e) Financing Statements showing Borrower, as Debtor, and
Administrative Agent, as Secured Party, to be filed in appropriate
jurisdictions in the State of Ohio;
(f) Financing Statements (collectively with (e) above, the
"FINANCING STATEMENTS") showing Sygnet Communications, Inc., as Debtor, and
Administrative Agent, as Secured Party, to be filed in appropriate
jurisdictions in the State of Ohio;
(g) The Sygnet Merger Documents.
Based on the foregoing, subject to the comments and exceptions
hereinafter stated, and limited in all respects to the laws of the Subject
Jurisdiction and the United States of America, it is our opinion that:
1. Each Company (a) is a corporation validly existing and in good
standing under the Laws of its state of incorporation, (b) is duly qualified
to transact business as a foreign corporation in each jurisdiction where the
nature and extent of its business and properties require the same, and (c)
possesses all requisite corporate authority and power to conduct its business
and execute, deliver, and comply with the terms of the Transaction Documents
and the Sygnet Merger Documents to which such Company is a party, which have
been duly authorized and approved by all necessary corporate action and for
which no approval or consent of any Person or Governmental Authority is
required which has not been obtained.
2. The Loan Papers and the Sygnet Merger Documents to which any
Company is a party evidence the valid and legally binding obligations of such
Company, enforceable in accordance with their respective terms, EXCEPT as the
enforcement may be limited by Debtor Relief Laws and EXCEPT that the remedies
available with respect thereto may be subject to general principles of equity
(regardless of whether such remedies are sought in a proceeding in equity or
at law).
3. Each Company has duly executed and delivered each Loan Paper and each
Sygnet Merger Document, to which such Company is a party.
4. The execution, delivery, and performance of and compliance with the
terms of the Loan Papers and the Sygnet Merger Documents will not cause any
Company to be in violation of its respective Articles or Certificates of
Incorporation or Bylaws.
5. To the best of our knowledge, after reasonable investigation, no
Company is, nor will the execution, delivery, the performance of, and
compliance with the terms of the Loan Papers and the Sygnet Merger Documents
(and the Sygnet merger contemplated thereby) cause any Company to be, in
violation of any Laws other than such violations which will not, individually
or collectively, be a Material Adverse Event.
6. The Security Agreements and Financing Statements are in proper
recordable form, and constitute valid and binding obligations of the Companies
executing the same enforceable in accordance with their terms, EXCEPT as the
enforcement thereof may be limited by applicable bankruptcy, rearrangement,
receivership, reorganization, or similar Debtor Relief Laws from time to time in
effect and affecting the rights of creditors generally, and EXCEPT that the
remedies available with respect thereto may be subject to general principles of
equity (regardless of whether such remedies are sought in a proceeding in equity
or at law). The Financing Statements are legally sufficient under the laws of
the Subject Jurisdiction to perfect any security
2 EXHIBIT G-3
<PAGE>
interests in favor of Administrative Agent, for the benefit of Lenders,
which may have attached to the Collateral therein described.
7. Under the laws of the Subject Jurisdiction, no mortgage,
documentary, stamp, or similar taxes, other than nominal recording fees, will
be payable in connection with the execution, delivery, or recording of the
Transaction Documents or any of the transactions contemplated thereby.
8. The Financing Statements should be filed with the Secretary of
State of and with at
the addresses set forth on SCHEDULE 1 hereto. When so filed and recorded,
the Transaction Documents shall create and perfect a valid and continuing
security interest in the Collateral described in the Transaction Documents,
to the extent that the filing of a financing statement in the Subject
Jurisdiction is effective to perfect the security interests granted in the
Collateral in favor of Administrative Agent, for the benefit of Lenders. No
further or subsequent filing, recording, or registration of the Transaction
Documents or any other instrument will be necessary in order to create,
perfect, or maintain the liens and security interests created an perfected by
the Transaction Documents, EXCEPT that within six months next prior to the
expiration of five years from the filing of the Financing Statements (and
each five years thereafter), Continuation Statements must be filed with the
Secretary of State of , all pursuant to the Uniform
Commercial Code as enacted in the Subject Jurisdiction.
9. You are not required, as a result of the transactions contemplated
in the Transaction Documents to qualify to do business in the Subject
Jurisdiction in order to receive the benefits of, or to exercise rights under
or in connection with, the Transaction Documents.
10. EXCEPT for the filing of the Financing Statements, no other
declarations or filings with, and no consents, waivers, approvals,
authorizations, or other actions by, any governmental or regulatory body of
the Subject Jurisdiction, including, without limitation, any environmental
protection agency or regulatory authority, are necessary in connection with
the execution and delivery by any Company of, and the performance of such
Company's obligations under or in connection with, the Transaction Documents,
or in connection with the granting of the security interests in the
Collateral and the exercise of Rights under the Transaction Documents.
11. The Sygnet Merger has been consummated in accordance with the
Sygnet Merger Documents and applicable Ohio Law. The Certificate of Merger
has been filed with the Secretary of State of Ohio and is in full force and
effect. The execution, delivery, and performance of the Sygnet Merger
Documents by the Companies party thereto were duly authorized and approved by
the respective shareholders of such Companies, and no other consents or
approvals of any Person or Governmental Authority and no other corporate
proceedings on the part of any such Company is necessary to authorize the
Sygnet Merger and the consummation of the transactions contemplated thereby,
other than such consent, approvals, or proceedings which have been previously
obtained or conducted, as the case may be. The Sygnet Merger Documents were
duly executed and delivered by the Companies party thereto and constitute the
legal, valid, and binding obligation of each such Company, enforceable in
accordance with its terms.
This opinion letter is provided to Lender, each assignee and participant
under the Credit Agreement, and Haynes and Boone, LLP.
Respectfully submitted,
3 EXHIBIT G-3
<PAGE>
EXHIBIT H
FORM OF AFFILIATE SUBORDINATION AGREEMENT
THIS AFFILIATE SUBORDINATION AGREEMENT is entered into among NationsBank,
N.A., in its capacity as Administrative Agent for Lenders (defined below), and
________________, a __________________ corporation ("SUBORDINATED CREDITOR"),
and Dobson/Sygnet Operating Company (including its successor by merger, Sygnet
Wireless, Inc.) ("BORROWER").
WHEREAS, Borrower, NationsBank, N.A., as Administrative Agent, Lehman
Commercial Paper Inc. and PNC Bank, National Association, as Co-Syndication
Agents, Toronto Dominion (Texas), Inc. and First Union National Bank, as
Co-Documentation Agents, and certain Lenders have entered into a Credit
Agreement, dated as of December 23, 1998 (as amended, modified, supplemented, or
restated from time to time, the "CREDIT AGREEMENT");
WHEREAS, this Agreement is integral to the transactions contemplated by the
Loan Papers, and the execution and delivery thereof is a condition precedent to
Lenders' obligations to extend credit under the Loan Papers;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Administrative Agent, Subordinated Creditor, and
Borrower agree as follows:
1. Unless otherwise defined herein, or the context hereof otherwise
requires, each term defined in either of the Credit Agreements is used in this
Agreement with the same meaning. As used herein, the following terms have the
meanings indicated:
SENIOR DEBT means, whether now or hereafter arising, the Obligation,
including, without limitation, interest thereon after the commencement of
any proceedings under any Debtor Relief Law.
SUBORDINATED DEBT means the principal of and interest on all Debt of
Borrower or any other Company, whether direct, indirect, fixed, contingent,
liquidated, unliquidated, joint, several, or joint and several, now or
hereafter existing, due, or to become due to Subordinated Creditor, or held
or to be held by Subordinated Creditor, whether created directly or
acquired by assignment or otherwise, and whether evidenced by written
instrument or not.
2. The payment of any and all Subordinated Debt is hereby expressly
subordinated to all Senior Debt to the extent and in the manner set forth in
this Agreement.
3. Subordinated Creditor shall not accelerate, demand, sue for, commence
any collection or enforcement action or proceeding, take, receive, accept, or
retain any payment or distribution of any character, whether in cash,
securities, or other property, in respect of the principal of, premium on, or
interest on, the Subordinated Debt, or any Collateral therefor, until all Senior
Debt shall have been paid in full with interest, including, without limitation,
interest during any bankruptcy or similar proceeding involving Borrower from the
date of the filing thereof to the date of distribution (notwithstanding any
statute, including without limitation the Federal Bankruptcy Code, any rule of
Law, or bankruptcy procedures to the contrary).
EXHIBIT H
<PAGE>
4. In the event of the institution of and in connection with any
proceeding against Borrower pursuant to any Debtor Relief Law, and unless or
until the Senior Debt is paid in full:
(a) All Senior Debt shall first be paid in full before any payment or
distribution of any character, whether in cash, securities, or other
property, shall be made in respect of any Subordinated Debt;
(b) Any payment or distribution of any character, whether in cash,
securities, or other property, which would otherwise (but for the terms
hereof) be payable or deliverable in respect of any Subordinated Debt,
shall be paid or delivered directly to Administrative Agent, for the
benefit of Lenders, until all Senior Debt shall have been paid in full, and
Subordinated Creditor irrevocably authorizes, empowers, and directs all
receivers, trustees, liquidators, conservators, and others having authority
to effect all such payments and deliveries;
(c) Administrative Agent, on behalf of Lenders, may, as
attorney-in-fact for Subordinated Creditor, take such action on behalf of
Subordinated Creditor, and Subordinated Creditor hereby appoint
Administrative Agent, on behalf of Lenders, as its attorney-in-fact, to
demand, sue for, collect, and receive any and all such moneys, dividends,
or other assets and give acquittance therefor and to file any claim, proof
of claim, or other instrument of similar character and to take such other
proceedings in the name of Subordinated Creditor as Administrative Agent
may deem necessary or advisable for the enforcement of the Agreement; and
(d) Each Subordinated Creditor shall execute and deliver to
Administrative Agent, for the benefit of Lenders, all such further
instruments confirming the authorization referred to in the foregoing
CLAUSES (B) and (C) and all such proofs of claim, assignments of claim, and
other instruments and shall take all such other actions as may be requested
by Administrative Agent in order to enable Administrative Agent to enforce
all Rights of Lenders and Administrative Agent hereunder and all claims of
Administrative Agent or any Lender upon or in respect of the Subordinated
Debt, and failing execution of such instruments or taking of such actions
by Subordinated Creditor, Administrative Agent, for the benefit of Lenders,
is hereby authorized and empowered to execute and perform the same on
behalf of such Subordinated Creditor.
5. In the event any payment or distribution of any character, whether in
cash, securities, or other property, is received by Subordinated Creditor in
contravention of the terms of this Agreement, and before all Senior Debt shall
have been paid in full, such payment or distribution shall be held by such
Subordinated Creditor, as trustee of an express trust, in trust for the benefit
of, and shall be paid over or delivered and transferred to Administrative Agent
for application to all Senior Debt remaining unpaid until such Senior Debt shall
have been paid in full. Each Subordinated Creditor hereby assigns to
Administrative Agent, for the benefit of Lenders, all its rights to any such
payments or distributions, which Administrative Agent may exercise in
Administrative Agent's name or in the name of such Subordinated Creditor, and
agrees to execute such instruments as may be required by Administrative Agent to
enable Administrative Agent, for the benefit of Lenders, to enforce such claims.
Any payments or distributions received in excess of the amount sufficient to pay
all Senior Debt in full shall be returned by Administrative Agent to such
Subordinated Creditor.
EXHIBIT H
<PAGE>
6. Administrative Agent or Lenders may, at any time and from time to
time, without the consent of or notice to Subordinated Creditor, without
incurring responsibility to Subordinated Creditor, and without impairing or
releasing any of Administrative Agent's Rights, or any of the obligations of
Subordinated Creditor hereunder, (a) change the amount, manner, place, or terms
of payment, or change or extend the time of payment of or renew or alter all or
any part of the Senior Debt or amend, modify, supplement, or restate, any of the
Loan Papers in any manner whatsoever; (b) sell, exchange, release, or otherwise
deal with all or any part of any property by whomsoever at any time pledged or
mortgaged to secure, or howsoever securing, all or any part of the Senior Debt;
(c) hold all or any Property as additional Collateral under the Loan Papers to
secure all or any part of the Senior Debt; (d) release anyone liable in any
manner for the payment or collection of all or any part of the Senior Debt;
(e) exercise or refrain from exercising any Rights against Borrower and others
(including the undersigned); and (f) apply any sums, by whomsoever paid or
however realized, to the Senior Debt.
7. Notwithstanding anything to the contrary contained in any other
instrument or document delivered in connection with the Subordinated Debt or
otherwise, including, without limitation, any prior perfection of a security
interest or Lien, any security interests and Liens now or hereafter held by
Subordinated Creditor in any Collateral for the Subordinated Debt shall be
junior and subordinate to any security interests and Liens now or hereafter held
by Administrative Agent, for the benefit of Lenders, in the same Collateral. So
long as the Senior Debt shall remain unpaid, Administrative Agent may at all
times in its sole discretion exercise any and all powers and Rights which it now
has or may hereafter acquire with respect to any of the Collateral securing the
Senior Debt, all without the necessity of obtaining any consent or approval of
Subordinated Creditor.
8. Each Subordinated Creditor represents and warrants that it is duly
organized, validly existing, and in good standing under the laws of its state of
organization and has the power and authority under the laws of such state and
under its articles of incorporation and by-laws or other organizational
documents to enter into this Agreement; all actions necessary or appropriate for
its execution and performance of this Agreement have been taken and upon its
execution, this Agreement will constitute its valid and binding obligation
enforceable in accordance with its terms; and the making and performance of this
Agreement will not violate any law or its articles of incorporation or by-laws
or other organizational documents, or result in any violation of or constitute a
default under any agreement by which it or any of its property is bound.
9. This Agreement is a continuing agreement of subordination and Lenders
may continue to make loans to or otherwise accept the obligations of Borrower in
reliance hereon, without notice to Subordinated Creditor.
10. While this Agreement remains in effect, each Subordinated Creditor
covenants and agrees that it will not modify or amend or permit modification or
amendment of the terms and conditions of the Subordinated Debt, without
obtaining the prior written consent of Administrative Agent.
11. No waiver of Administrative Agent's Rights hereunder shall be
effective unless in a writing signed by Administrative Agent, and each waiver
shall extend only to the specific instance involved and shall not impair or
affect Administrative Agent's Rights in any other respect at any other time.
Each Subordinated Creditor hereby waives all notices with respect
EXHIBIT H
<PAGE>
to the subject matter hereof, including, but not limited to, notice of
acceptance of this Agreement, of the making of loans or advances to the Borrower
or any extensions, renewals, or modifications thereof, releases of collateral
security or guarantors or other indulgences of any character, or of the
occurrence or declaration of any default or the taking of any collection or
enforcement action. THIS AGREEMENT SHALL BE CONSTRUED ACCORDING TO THE LAWS OF
THE STATE OF TEXAS.
12. This Agreement inures to the benefit of Administrative Agent, Lenders,
and their respective successors and assigns, and the Rights under this Agreement
may be assigned in whole or in part in connection with any partial or complete
assignment or transfer of the Senior Debt. Administrative Agent is
Administrative Agent for each Lender, and Administrative Agent may, without the
joinder of any Lender, exercise any and all Rights in favor of Lenders
hereunder. The Rights of each Lender VIS-A-VIS Administrative Agent and each
other Lender may be subject to one or more separate agreements between or among
such parties, but Subordinated Creditor need not inquire about any such
agreement or be subject to any terms thereof unless Subordinated Creditor
specifically joins therein; and, consequently, neither Subordinated Creditor nor
its heirs, personal representatives, successors, or assigns are entitled to any
benefits or provisions of any such separate agreements or are entitled to rely
upon or raise as a defense, in any manner whatsoever, the failure or refusal of
any party thereto to comply with the provisions thereof. This Agreement binds
Subordinated Creditor and its successors and assigns, and Subordinated Creditor
will advise each future holder of all or any part of the Subordinated Debt that
the Subordinated Debt is subordinated to the Senior Debt in the manner and to
the extent set forth in this Agreement.
13. This Agreement may be executed in a number of identical counterparts,
each of which is deemed an original for all purposes and all of which
constitute, collectively, one agreement; but, in making proof of this Agreement,
it is not necessary to produce or account for more than one counterpart.
14. Subject to the provisions of this Agreement and the Rights of
Administrative Agent hereunder, as between Borrower and Subordinated Creditor,
nothing herein contained shall impair the obligation of Borrower, which is
absolute and unconditional to pay the Subordinated Debt as and when the same
shall become due and payable in accordance with the terms thereof, or prevent
Subordinated Creditor upon default with respect to the Subordinated Debt, from
exercising all rights, powers, and remedies otherwise provided therein or by
applicable Law.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
EXHIBIT H
<PAGE>
EXECUTED on the date first stated in this Affiliate Subordination Agreement.
[SUBORDINATED CREDITOR]
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
NATIONSBANK, N.A.,
as Administrative Agent
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
BORROWER (a) acknowledges and confirms that it has received an executed copy of
this Affiliate Subordination Agreement and approves of and consents to it in all
respects; and (b) agrees to be bound by and to observe all of the terms and
conditions of this Affiliate Subordination Agreement.
DOBSON/SYGNET OPERATING COMPANY
(including its successor by merger, Sygnet
Wireless, Inc.)
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
AFFILIATE SUBORDINATION AGREEMENT
SIGNATURE PAGE
EXHIBIT H
<PAGE>
SCHEDULE 2.1
LENDERS AND APPLICABLE LENDING OFFICES
(Dobson/Sygnet Operating Company)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
LENDER AND APPLICABLE LENDING OFFICE FACILITIES
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
<S> <C>
First Union National Bank Revolver Facility
Attn: Tony Parisi Term Loan A
F.C. 1-8-11-28 Term Loan B
1339 Chestnut Street Term Loan C
Philadelphia, PA 19107
215-786-8216
215-786-7721 (fax)
- -------------------------------------------------------------------------------------
Lehman Commercial Paper Inc. Revolver Facility
Attn: Kevin Lockhart Term Loan A
3 World Financial Center Term Loan B
New York, NY 10285 Term Loan C
212-526-7144
212-526-4911 (fax)
- -------------------------------------------------------------------------------------
NationsBank, N.A. Revolver Facility
Communications Finance Division Term Loan A
Attn: Thomas E. Carter Term Loan B
901 Main Street, 64th Floor Term Loan C
Dallas, Texas 75202
214-508-2576
214-508-9390 (fax)
- -------------------------------------------------------------------------------------
PNC Bank, National Association Revolver Facility
Attn: Tom Coates Term Loan A
1600 Market Street Term Loan B
21st Floor Term Loan C
Philadelphia, PA 19103
215-585-6466
215-585-6680 (fax)
- -------------------------------------------------------------------------------------
Toronto Dominion (Texas), Inc. Revolver Facility
Attn: Nancy Sheridan Term Loan A
31 West 52nd Street Term Loan B
New York, NY 10019 Term Loan C
212-827-7582
212-262-1928 (fax)
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
SCHEDULE 2.1
<PAGE>
COMMITMENTS
REVOLVER FACILITY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
NAME AND ADDRESS OF REVOLVER REVOLVER REVOLVER
LENDERS COMMITTED SUMS COMMITMENT PERCENTAGE
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
First Union National Bank $8,720,930.23 17.441860460000001%
Attn: Tony Parisi
F.C. 1-8-11-28
1339 Chestnut Street
Philadelphia, PA 19107
215-786-8216
215-786-7721 (fax)
- ---------------------------------------------------------------------------------------------
Lehman Commercial Paper Inc. $11,627,906.98 23.255813960000001%
Attn: Kevin Lockhart
3 World Financial Center
New York, NY 10285
212-526-7144
212-526-4911 (fax)
- ---------------------------------------------------------------------------------------------
NationsBank, N.A. $12,209,302.33 24.418604660000000%
Communications Finance Division
Attn: Thomas E. Carter
901 Main Street, 64th Floor
Dallas, Texas 75202
214-508-2576
214-508-9390 (fax)
- ---------------------------------------------------------------------------------------------
PNC Bank, National Association $8,720,930.23 17.441860460000001%
Attn: Tom Coates
1600 Market Street
21st Floor
Philadelphia, PA 19103
215-585-6466
215-585-6680 (fax)
- ---------------------------------------------------------------------------------------------
Toronto Dominion (Texas), Inc. $8,720,930.23 17.441860460000001%
Attn: Nancy Sheridan
31 West 52nd Street
New York, NY 10019
212-827-7582
212-262-1928 (fax)
- ---------------------------------------------------------------------------------------------
Totals $50,000,000.00 100.00%
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
3 SCHEDULE 2.1
<PAGE>
TERM LOAN A FACILITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
NAME AND ADDRESS TERM LOAN A TERM LOAN A
OF COMMITTED SUMS COMMITMENT PERCENTAGE
TERM LOAN A LENDERS
- ----------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
First Union National Bank $21,802,325.58 17.441860463999998%
Attn: Tony Parisi
F.C. 1-8-11-28
1339 Chestnut Street
Philadelphia, PA 19107
215-786-8216
215-786-7721 (fax)
- ---------------------------------------------------------------------------------------------
Lehman Commercial Paper Inc. $29,069,767.44 23.255813952000000%
Attn: Kevin Lockhart
3 World Financial Center
New York, NY 10285
212-526-7144
212-526-4911 (fax)
- ---------------------------------------------------------------------------------------------
NationsBank, N.A. $30,523,255.82 24.418604655999999%
Communications Finance Division
Attn: Thomas E. Carter
901 Main Street, 64th Floor
Dallas, Texas 75202
214-508-2576
214-508-9390 (fax)
- ---------------------------------------------------------------------------------------------
PNC Bank, National Association $21,802,325.58 17.441860463999998%
Attn: Tom Coates
1600 Market Street
21st Floor
Philadelphia, PA 19103
215-585-6466
215-585-6680 (fax)
- ---------------------------------------------------------------------------------------------
Toronto Dominion (Texas), Inc. $21,802,325.58 17.441860463999998%
Attn: Nancy Sheridan
31 West 52nd Street
New York, NY 10019
212-827-7582
212-262-1928 (fax)
- ---------------------------------------------------------------------------------------------
Totals $125,000,000.00 100.00%
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
4 SCHEDULE 2.1
<PAGE>
TERM LOAN B FACILITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
NAME AND ADDRESS TERM LOAN B TERM LOAN B
OF COMMITTED SUMS COMMITMENT PERCENTAGE
TERM LOAN B LENDERS
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
First Union National Bank $27,034,883.72 17.441860464516129%
Attn: Tony Parisi
F.C. 1-8-11-28
1339 Chestnut Street
Philadelphia, PA 19107
215-786-8216
215-786-7721 (fax)
- ----------------------------------------------------------------------------------------------
Lehman Commercial Paper Inc. $36,046,511.63 23.255813954838711%
Attn: Kevin Lockhart
3 World Financial Center
New York, NY 10285
212-526-7144
212-526-4911 (fax)
- ----------------------------------------------------------------------------------------------
NationsBank, N.A. $37,848,837.21 24.418604651612906%
Communications Finance Division
Attn: Thomas E. Carter
901 Main Street, 64th Floor
Dallas, Texas 75202
214-508-2576
214-508-9390 (fax)
- ----------------------------------------------------------------------------------------------
PNC Bank, National Association $27,034,883.72 17.441860464516129%
Attn: Tom Coates
1600 Market Street
21st Floor
Philadelphia, PA 19103
215-585-6466
215-585-6680 (fax)
- ----------------------------------------------------------------------------------------------
Toronto Dominion (Texas), Inc. $27,034,883.72 17.441860464516129%
Attn: Nancy Sheridan
31 West 52nd Street
New York, NY 10019
212-827-7582
212-262-1928 (fax)
- ----------------------------------------------------------------------------------------------
Totals $155,000,000.00 100.00%
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
5 SCHEDULE 2.1
<PAGE>
TERM LOAN C FACILITY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
NAME AND ADDRESS TERM LOAN C TERM LOAN C
OF COMMITTED SUMS COMMITMENT PERCENTAGE
TERM LOAN C LENDERS
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
First Union National Bank $17,441,860.47 17.441860469999998%
Attn: Tony Parisi
F.C. 1-8-11-28
1339 Chestnut Street
Philadelphia, PA 19107
215-786-8216
215-786-7721 (fax)
- ----------------------------------------------------------------------------------------------
Lehman Commercial Paper Inc. $23,255,813.95 23.255813949999997%
Attn: Kevin Lockhart
3 World Financial Center
New York, NY 10285
212-526-7144
212-526-4911 (fax)
- ----------------------------------------------------------------------------------------------
NationsBank, N.A. $24,418,604.64 24.418604639999998%
Communications Finance Division
Attn: Thomas E. Carter
901 Main Street, 64th Floor
Dallas, Texas 75202
214-508-2576
214-508-9390 (fax)
- ----------------------------------------------------------------------------------------------
PNC Bank, National Association $17,441,860.47 17.441860469999998%
Attn: Tom Coates
1600 Market Street
21st Floor
Philadelphia, PA 19103
215-585-6466
215-585-6680 (fax)
- ----------------------------------------------------------------------------------------------
Toronto Dominion (Texas), Inc. $17,441,860.47 17.441860469999998%
Attn: Nancy Sheridan
31 West 52nd Street
New York, NY 10019
212-827-7582
212-262-1928 (fax)
- ----------------------------------------------------------------------------------------------
Totals $100,000,000.00 100.00%
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
6 SCHEDULE 2.1
<PAGE>
SCHEDULE 7.1
CONDITIONS PRECEDENT TO CLOSING
(Dobson/Sygnet Operating Company)
The Agreement and related Loan Papers shall not become effective
unless Administrative Agent has received all of the following (unless
otherwise indicated, all documents shall be dated as of December 23, 1998,
and all terms used with their initial letters capitalized are used herein
with their meanings as defined in the Agreement):
2. THE AGREEMENT. The Agreement (together with all Schedules and Exhibits
thereto) executed by Borrower, each Lender, and Administrative Agent.
3. NOTES. For each Lender, the Notes for such Lender in the forms of
EXHIBITS A-1, A-2, A-3, A-4 or A-5, as applicable, payable to the order
of each applicable Lender, as contemplated in SECTION 3.1.
4. GUARANTY. A Guaranty, in the form of EXHIBIT C, executed by each Person
which first becomes a Subsidiary of Borrower upon consummation of the
Sygnet Merger (each such Person, a "NEW SUBSIDIARY").
5. ARTICLES OF INCORPORATION. A copy of the Articles of Incorporation or
Certificate of Incorporation, and all amendments thereto, of Borrower
and each New Subsidiary (other than any Company that is a partnership),
each accompanied by a certificate that such copy is correct and
complete, one dated a Current Date (as used herein, the term "CURRENT
DATE" means any date not more than 30 days prior to the Closing Date),
issued by the appropriate Governmental Authority of the jurisdiction of
incorporation of each such Company, and one dated the Closing Date,
executed by the President or Vice President and the Secretary or
Assistant Secretary of each such Company.
6. BYLAWS. A copy of the Bylaws, and all amendments thereto, of Borrower
and each New Subsidiary (other than any Company that is a partnership),
accompanied by a certificate that such copy is correct and complete,
dated the Closing Date, and executed by the President or Vice President
and the Secretary or Assistant Secretary of each such Company.
7. PARTNERSHIP AGREEMENTS. Copies of the currently-effective Partnership
Agreement for each New Subsidiary that is a partnership, and all
amendments thereto, accompanied by a certificate of the General Partner
or other appropriate managing partner dated as of the Closing Date that
such copies are correct and complete; a certified copy of the
Partnership Agreement for each New Subsidiary that is a partnership,
each dated a Current Date, issued by the appropriate Governmental
Authority of the jurisdiction in which such partnership is organized.
8. GOOD STANDING AND AUTHORITY. Certificates of the appropriate
Governmental Authorities of such jurisdictions as Administrative Agent
may designate, each dated a Current Date, to the effect that Borrower
and each New Subsidiary is in good standing with respect to the payment
of franchise and similar Taxes (to the extent such information is
available) and is duly qualified to transact business in such
jurisdiction.
9. INCUMBENCY. Certificates of incumbency dated as of the Closing Date
with respect to all officers or partners of each Company who will be
authorized to execute or attest to any of the Loan Papers on behalf of
such Company, executed by the President or a Vice President, and the
Secretary or an
SCHEDULE 7.1
<PAGE>
Assistant Secretary, of each such Company (or General Partner or other
appropriate managing partner for any Company that is a partnership).
10. RESOLUTIONS. Copies of resolutions duly adopted by the Board of
Directors of each Company that will be executing any Loan Paper as of
the Closing Date, approving this Agreement and the other Loan Papers and
authorizing the transactions contemplated in such Loan Papers,
ACCOMPANIED BY a certificate of the Secretary or an Assistant Secretary
of each such Company, dated as of the Closing Date, certifying that such
copy is a true and correct copy of resolutions duly adopted at a meeting
of (which may be held by conference telephone or similar communications
equipment by means of which all Persons participating in a meeting can
hear each other if permitted by applicable Law and, if required by such
Law, by its Bylaws), or by the unanimous written consent of (if
permitted by applicable Law and, if required by such Law, by its
Bylaws), the Board of Directors of each such Company, and that such
resolutions constitute all the resolutions adopted with respect to such
transactions, have not been amended, modified, or revoked in any
respect, and are in full force and effect as of the Closing Date.
11. PARTNERSHIP AUTHORIZATION. For each Company that will be executing any
Loan Paper as of the Closing Date that is a partnership, evidence of
authorization by the applicable partners, in each case authorizing the
execution and full performance of the Loan Papers, and all other
documents and actions required pursuant thereto, accompanied by a
certificate from the general partner or other appropriate managing
partner, dated as of the Closing Date, certifying that such copy is a
true and correct copy of the authorizations adopted by the partnership
and that such authorizations constitute all authorizations adopted with
respect to such transactions, have not been amended, modified, or
revoked in any respect, and are in full force and effect as of the
Closing Date.
12. OPINION OF COUNSEL TO THE COMPANIES. The opinion of counsel to the
Companies, addressed to Administrative Agent and Lenders, substantially
in the form of EXHIBIT G-1.
13. OPINION OF SPECIAL REGULATORY COUNSEL TO THE COMPANIES. The opinion of
special regulatory counsel to the Companies, addressed to Administrative
Agent and Lenders, substantially in the form of EXHIBIT G-2.
14. LOCAL COUNSEL OPINION. Such other written opinions of local counsel,
addressed to Administrative Agent and Lenders, as Administrative Agent
may request, substantially in the form of EXHIBIT G-3.
15. RELIANCE LETTERS. Letters from counsel to parties to the Sygnet Merger
Documents permitting Administrative Agent and Lenders to rely on
opinions delivered pursuant thereto, the same as if Administrative Agent
and Lenders were addressees.
16. PLEDGE, ASSIGNMENT, AND SECURITY AGREEMENTS. A Pledge, Assignment, and
Security Agreement, substantially in the form and upon the terms of
EXHIBIT D, executed by Borrower and each New Subsidiary, as debtor, and
delivered to Administrative Agent, as secured party on behalf of
Lenders, granting and creating Liens in favor of Lenders in and to all
of the Collateral, TOGETHER WITH (a) one or more Financing Statements,
executed and delivered by Borrower and each New Subsidiary, as debtor,
in favor of Administrative Agent, as secured party on behalf of Lenders,
covering all such Collateral, and (b) delivery to Administrative Agent
of all Pledged Shares and Collateral Notes (as such terms are defined in
the Pledge, Assignment, and Security Agreement), together with executed
blank stock powers for each Pledged Share certificate delivered and
executed allonge endorsements for each Collateral Note delivered, all in
form acceptable to Administrative Agent.
2 SCHEDULE 7.1
<PAGE>
17. LIEN SEARCHES. Lien searches in the name of Borrower, each New
Subsidiary, and any other name(s) as Administrative Agent may deem
appropriate in each state where Borrower and each New Subsidiary
maintains an office or has real property, showing no financing
statements or other Lien instruments of record except for Permitted
Liens or Liens being released concurrently with the Sygnet Merger or
Dobson Acquisition.
18. LIEN RELEASES. Payoff letters in form and substance reasonably
acceptable to Administrative Agent relating to the payoff of all Debt of
Borrower and any New Subsidiary (other than Permitted Debt) or duly
executed releases or assignments of Liens and financing statements in
recordable form as may be necessary to reflect that the Liens created by
the Collateral Documents are first priority Liens (except for Permitted
Liens).
19. CONSENTS, FILINGS, ETC. Evidence satisfactory to Administrative Agent
and its counsel that the Companies have received all approvals,
authorizations, consents, and waivers of any Governmental Authority or
other Person necessary or appropriate for the execution, delivery, and
performance by Borrower or any New Subsidiary of the Loan Papers and all
documents relating to the Dobson Acquisition, Sygnet Merger, Sygnet
Tower Sale, and Sygnet Tower Lease, to which it is a party, including,
without limitation, (a) all such approvals, authorizations, consents,
and waivers disclosed in the Loan Papers or the documents relating to
the Dobson Acquisition, Sygnet Merger, Sygnet Tower Sale, or Sygnet
Tower Lease (including those required in connection with the assignment
of material contracts), (b) any such approvals, authorizations,
consents, or waivers reasonably required by Administrative Agent in
connection with the granting of a security interest to Administrative
Agent in each material contract acquired or assumed by any Company, and
(c) all filings, consents, or approvals with or of Governmental
Authorities necessary to enter into the Loan Papers or consummate the
Dobson Acquisition, Sygnet Merger, Sygnet Tower Sale, Sygnet Tower
Lease, or any other transactions contemplated by the Loan Papers, as
applicable, including, without limitation, all filings (if any) required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
lapse of all waiting periods with respect thereto.
20. INSURANCE. Evidence that the Collateral is insured (including flood
insurance) in such amounts, against such risks, with such deductibles,
and with such insurers as may be satisfactory to Administrative Agent
with loss payable to Administrative Agent, on behalf of Lenders, as
their interests may appear, together with certificates evidencing such
insurance (containing a standard mortgagee clause) with appropriate
endorsements to satisfy SECTION 9.8 of the Agreement.
21. UNRESTRICTED SUBSIDIARY DESIGNATION. Evidence that Communications
(a) has designated Parent, Borrower and each New Subsidiary as
"UNRESTRICTED SUBSIDIARIES" in compliance with the requirements of: (i)
the Communications Bond Debt, (ii) the Certificate of Designation for
the Senior Preferred Stock, (iii) the Credit Agreement dated as of
March 25, 1998, among Dobson Operating Company (as "BORROWER"),
Communications (as "GUARANTOR"), and First Union National Bank (as
successor by merger to CoreStates Bank, N.A., as "ADMINISTRATIVE
AGENT"), (iv) the Revolving Credit Agreement dated as of March 25, 1998,
among Dobson Cellular Operations Company (as "BORROWER"), and
NationsBank, N.A. (as successor by merger to NationsBank of Texas, N.A.,
as "ADMINISTRATIVE AGENT"), and (v) the 364-Day Revolving Credit and
Term Loan Agreement dated as of March 25, 1998, among Dobson Cellular
Operations Company (as "BORROWER"), and NationsBank, N.A. (as successor
by merger to NationsBank of Texas, N.A., as "ADMINISTRATIVE AGENT"), and
(b) has provided all required notices, certifications, and resolutions
to the Trustee under the Communications Bond Debt or other parties, as
required by the Communications Bond Debt.
3 SCHEDULE 7.1
<PAGE>
22. NOTICE OF BORROWING. A duly completed Notice of Borrowing for the
initial Borrowing, delivered to Administrative Agent, together with
calculations demonstrating compliance with SECTION 9.30 on the Closing
Date after giving effect to any Borrowings made on such date.
23. CURRENT FINANCIALS AND COMPLIANCE CERTIFICATE. True and correct copies
of the Current Financials of the Companies, together with 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 all related
transactions, Sygnet Merger, Dobson Acquisition, Sygnet Tower Sale, and
Sygnet Tower Lease.
24. BUDGET. A Budget showing the projected income and expenses of the
Companies for fiscal year 1999.
25. PAYMENT OF FEES AND CLOSING FEES. Payment of all fees payable on or
prior to the Closing Date to Administrative Agent, Arranger, or any
Lender as provided for in SECTION 5 of the Agreement, together with
reimbursements to Administrative Agent and Arranger for all fees and
expenses incurred in connection with the negotiation, preparation, and
closing of the transactions evidenced by the Loan Papers (including,
without limitation, attorneys' fees and expenses).
26. SYGNET TOWER SALE. Evidence that the Sygnet Tower Sale has been
consummated and delivery to Administrative Agent of true and correct
copies of the Sygnet Tower Sale Agreement and the Sygnet Tower Lease,
certified as true and correct as of the Closing Date by a Responsible
Officer of Borrower.
27. APPOINTMENT OF AGENT. Evidence satisfactory to Administrative Agent
that Borrower has appointed an agent for service of process pursuant to
SECTION 13.10.
28. TAX SHARING AGREEMENT. An acknowledgment executed by Parent and the
Companies that they are subject to the Tax Sharing Agreement.
29. COMPLIANCE WITH OTHER DEBT DOCUMENTS. An opinion from securities
counsel to the Companies addressed to Administrative Agent and Lenders,
stating that the Debt incurred under the Agreement and related Loan
Papers, the capital contributions made by Communications and Parent, the
Sygnet Merger, the Dobson Acquisition, the Sygnet Tower Sale, and the
Sygnet Tower Lease are in compliance with the terms of the
Communications Bond Debt, the Indenture for the Senior Reserve Notes,
and the Certificates of Designation for the Senior Preferred Stock.
30. DOBSON ACQUISITION AND SYGNET MERGER. (i) A fully-executed copy of the
Agreement and Plan of Merger by and among Sygnet Wireless and Borrower,
dated as of July 28, 1998, together with all material amendments,
schedules and exhibits thereto, certified as true, correct, and complete
by a Responsible Officer of Borrower; (ii) evidence satisfactory to
Administrative Agent and its counsel that the Sygnet Merger has been
consummated in accordance with the terms of the agreement described in
clause (i) preceding, and that all material conditions stated therein
have been satisfied without waiver; (iii) evidence of filing of the
Certificate of Merger of Sygnet Wireless and Borrower; and (iv) evidence
satisfactory to Administrative Agent that the Dobson Acquisition has
been consummated.
31. SOLVENCY OPINION. Evidence satisfactory to Administrative Agent in the
form of a solvency opinion that, as of the closing, after giving effect
to the Dobson Acquisition, the Sygnet Merger, the Sygnet Tower Sale, and
the Sygnet Tower Lease, Borrower is Solvent and the Companies, on a
consolidated basis, are Solvent.
4 SCHEDULE 7.1
<PAGE>
32. SYGNET SENIOR NOTES. To the extent any Sygnet Senior Notes are
outstanding as of the Closing Date, evidence satisfactory to
Administrative Agent that there has been no "DEFAULT" or "EVENT OF
DEFAULT" thereunder, and after giving pro form effect to the
transactions contemplated by the Agreement and the related Loan Papers,
there will be no default or event of default, under the Sygnet Senior
Notes.
33. EQUITY CONTRIBUTIONS. Evidence satisfactory to Administrative Agent
that capital contributions in an amount greater than or equal to
$145,000,000 have been made from Communications to Parent and from
Parent to Borrower.
34. SENIOR RESERVE NOTES. Evidence satisfactory to Administrative Agent
that Parent has received a minimum of $125,000,000 in net proceeds (less
the value of any Pledged Government Securities securing interest
payments on the Senior Reserve Notes) from the issuance of the Senior
Reserve Notes, and that Parent has contributed such proceeds as a
capital contribution to Borrower.
35. DEPOSIT ESCROW AGREEMENT. Evidence satisfactory to Administrative Agent
that the Escrow Agreement (as defined in the Sygnet Merger Agreement)
contains terms evidencing Lenders' Rights in the Deposit (as defined in
the Sygnet Merger Agreement).
36. OTHER DOCUMENTS. Such other agreements, documents, instruments,
opinions, certificates, and evidences as Administrative Agent may
reasonably request.
5 SCHEDULE 7.1
<PAGE>
SCHEDULE 7.2
CONDITIONS PRECEDENT TO PERMITTED ACQUISITION
(Dobson/Sygnet Operating Company)
Borrower shall deliver, or cause to be delivered, to Administrative
Agent all of the following items, on or before than the dates indicated below
(all terms used with their initial letters capitalized are used herein with
their meanings as defined in the Credit Agreement):
A. 5 DAYS PRIOR TO THE EXECUTION BY ANY COMPANY OF ANY PURCHASE AGREEMENT
FOR ANY PROPOSED PERMITTED ACQUISITION:
A copy of the proposed purchase agreement and all related schedules and
exhibits thereto for the Subject Acquisition.
B. THIRTY DAYS PRIOR TO THE CONSUMMATION DATE OF ANY PROPOSED PERMITTED
ACQUISITION:
PERMITTED ACQUISITION COMPLIANCE CERTIFICATE. A Permitted
Acquisition Compliance Certificate, substantially in the form of EXHIBIT E-2
to the Credit Agreement, executed and delivered by Borrower, together with
the following attached thereto:
ANNEX A: which sets forth calculations demonstrating pro forma
compliance with the financial covenants in SECTION 9.30
and additional covenants in SECTIONS 9.20 and 9.21 of
the Credit Agreement, after giving effect to the Subject
Acquisition;
ANNEX B: which sets forth pro forma income and balance sheet
projections for the Companies, after giving effect to
the Subject Acquisition;
ANNEX C: which sets forth ten-year cash flow projections for the
Subject Acquisition; and
ANNEX D: which is a true and correct copy of the Purchase
Agreement and all amendments, exhibits, and schedules
thereto.
B. ON OR PRIOR TO THE CONSUMMATION DATE OF ANY PERMITTED ACQUISITION:
1. PERMITTED ACQUISITION LOAN CLOSING CERTIFICATE. A Permitted Acquisition
Loan Closing Certificate, substantially in the form of EXHIBIT E-3 to
the Credit Agreement, executed and delivered by Borrower on the
consummation date of the Subject Acquisition.
2. SCHEDULES. If the information on any Schedule to any Loan Paper changes
or is incomplete as a result of the Subject Acquisition, revised or
supplemental Schedules to such Loan Papers which are required to make
the disclosures in such Schedules accurate after giving effect to the
Subject Acquisition.
3. GUARANTIES. A Guaranty, substantially in the form of EXHIBIT C to the
Credit Agreement, executed by each Person which first becomes a
Subsidiary of Borrower upon consummation of the Subject Acquisition
(each such Person, a "NEW SUBSIDIARY").
1 SCHEDULE 7.2
<PAGE>
4. SECURITY DOCUMENTS. A Pledge, Assignment, and Security Agreement
substantially in the form of EXHIBIT D to the Credit Agreement, together
with all corresponding financing statements, assignments, or other
related instruments or documents, executed by each New Subsidiary.
5. ARTICLES OF INCORPORATION. Copies of the Articles or Certificate of
Incorporation, and all amendments thereto, of each New Subsidiary (or,
in the case of any New Subsidiary that is a limited partnership, of the
corporate general partner of such New Subsidiary, if any), and, in the
case of any New Subsidiary that is a limited partnership, copies of its
Limited Partnership Agreement and all amendments thereto, accompanied by
certificates that such copies are correct and complete, one dated a date
not more than 60 days prior to the date of the Subject Acquisition,
issued by the appropriate Governmental Authority of the jurisdiction of
incorporation of such New Subsidiary (OTHER THAN any such New Subsidiary
that is a limited partnership) or any corporate general partner thereof,
and one dated as of the date of consummation of the Subject Acquisition,
executed by the President, a Vice President, the Secretary or an
Assistant Secretary of each such New Subsidiary, or of its general
partner, as applicable.
6. BYLAWS. Copies of the Bylaws, and all amendments thereto, of each New
Subsidiary (or, in the case of any New Subsidiary that is a limited
partnership, of the corporate general partner of such New Subsidiary, if
any), accompanied by a certificate that such copy is correct and
complete, executed by the President, a Vice President, the Secretary or
an Assistant Secretary of each such New Subsidiary, or of its general
partner, as applicable.
7. RESOLUTIONS. Copies of resolutions duly adopted by the Board of
Directors of each New Subsidiary or, in the case of any New Subsidiary
that is a limited partnership, by the Board of Directors of the general
partner of such New Subsidiary, and that will be executing any Loan
Paper as of the date of the Subject Acquisition, approving such Loan
Papers to which it is a party and authorizing the transactions
contemplated in the Loan Papers, accompanied by a certificate of the
Secretary or an Assistant Secretary of each such New Subsidiary or of
its general partner, as applicable, that such copy is a true and correct
copy of resolutions duly adopted at a meeting of (which may be held by
conference telephone or similar communications equipment by means of
which all New Subsidiary participating in a meeting can hear each other
if permitted by applicable Law and, if required by such Law, by the
Bylaws of such New Subsidiary or of its general partner, as applicable),
or by the unanimous written consent of (if permitted by applicable Law
and, if required by such Law, by the Bylaws of such New Subsidiary or of
its general partner, as applicable), the Board of Directors of such New
Subsidiary or of its general partner, as applicable, and that such
resolutions constitute all the resolutions adopted with respect to such
transactions, have not been amended, modified, or revoked in any respect
(EXCEPT as any such resolution may be modified by any such other
resolution), and are in full force and effect as of the date of
consummation of the Subject Acquisition.
8. INCUMBENCY. Certificates of incumbency of all officers of each New
Subsidiary (or, in the case of any New Subsidiary that is a limited
partnership, of the general partner of such New Subsidiary) who will be
authorized to execute a Guaranty or any other Loan Paper on behalf of
any such New Subsidiary, executed by the President, a Vice President,
the Secretary or an Assistant Secretary of each such New Subsidiary, or
of its general partner, as applicable.
9. EXISTENCE AND GOOD STANDING. Copies of any certificates of existence
and good standing and any filing officer certificates (or commercial
reports similar thereto) obtained by or delivered to Borrower in
connection with the Subject Acquisition.
2 SCHEDULE 7.2
<PAGE>
10. LIEN SEARCHES. Lien searches in the name of each New Subsidiary being
acquired (in the case of a merger) or in the name of each New Subsidiary
transferring any assets being acquired (in the case of an asset
acquisition) pursuant to the Subject Acquisition in each state where
such New Subsidiary maintains an office or has real property, showing no
financing statements or other Lien instruments of record except for
Permitted Liens or Liens being released concurrently with the Subject
Acquisition.
11. LIEN RELEASES. Payoff letters in form and substance reasonably
acceptable to Administrative Agent or duly executed releases or
assignments of Liens and financing statements in recordable form as may
be necessary to reflect that the Liens created by the Loan Papers
affecting the assets acquired in connection with the Subject Acquisition
are first priority Liens (except for Permitted Liens).
12. CONSENTS, FILINGS, ETC. All approvals, authorizations, consents, and
waivers of any Governmental Authority or other Person necessary or
appropriate for the execution, delivery, and performance by any New
Subsidiary of all documents relating to the Subject Acquisition or the
Loan Papers to which it is a party, including, without limitation, (a)
all such approvals, authorizations, consents, and waivers disclosed in
the documents relating to the Subject Acquisition (including those
required in connection with the assignment of material contracts), (b)
any such approvals, authorizations, consents, or waivers reasonably
required by Administrative Agent in connection with the granting of a
security interest to Administrative Agent in each material contract
acquired or assumed by any Company in connection with the Subject
Acquisition, and (c) all filings, consents, or approvals with or of
Governmental Authorities necessary to consummate the Subject
Acquisition, as applicable, including, without limitation, all filings
(if any) required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and the lapse of all waiting periods with respect thereto.
13. INSURANCE. With respect to each New Subsidiary or additional assets
acquired, certificates of insurance for each policy of insurance
maintained by such New Subsidiary or covering such additional assets and
evidence that such policies are in full force and effect, which
insurance coverage and related certificates of insurance shall satisfy
the requirements of SECTION 9.8 of the Credit Agreement.
14. NOTICE OF BORROWING. To the extent Borrower uses Borrowings to fund the
Subject Acquisition, a Notice of Borrowing, substantially in the form of
EXHIBIT B-1 to the Credit Agreement, executed by Borrower.
15. LEGAL OPINIONS. To the extent requested by Administrative Agent,
favorable opinions of (i) counsel for the Companies, in form and
substance satisfactory to Administrative Agent, with respect to the
Subject Acquisition and the Loan Papers to be executed and/or delivered
in connection therewith, and (ii) such other counsel as may be
acceptable to Administrative Agent, regarding the form and
enforceability of the Collateral Documents in the states where any
property acquired in connection with the Subject Acquisition is located.
16. ACQUISITION DOCUMENTS. A certified copy of the executed purchase
agreement (together with all schedules and exhibits thereto) and copies
of all other documents relating to the Subject Acquisition.
17. OTHER DOCUMENTS. Such other agreements, documents, instruments,
opinions, certificates, and evidences as Administrative Agent may
reasonably request. Administrative Agent shall, upon request of
Borrower, confirm to Borrower that it has received all such items so
requested and that all matters required to be satisfactory to the
Administrative Agent are satisfactory.
3 SCHEDULE 7.2
<PAGE>
SCHEDULE 8.2
FCC AND PUC LICENSES
(Dobson/Sygnet Operating Company and Subsidiaries)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
CALL SIGN USE STATION LOCATION CALL SIGN USE STATION LOCATION
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
WNGC333 SMR Youngstown, OH WPJD307 Microwave Corning, NY
- -----------------------------------------------------------------------------
KNRT240 SMR Youngstown, OH WMS263 Microwave S. Dansville, NY
- -----------------------------------------------------------------------------
KLF512 Paging Various WPJD305 Microwave Savona, NY
- -----------------------------------------------------------------------------
KEK302 Paging Youngstown, OH WMJ738 Microwave Attica, NY
- -----------------------------------------------------------------------------
KNKA318 Cellular Youngstown, OH WPNG888 Microwave Sheldon, NY
- -----------------------------------------------------------------------------
KNKA555 Cellular Sharon, PA WMJ415 Microwave Freeport, PA
- -----------------------------------------------------------------------------
KNKN660 Cellular Columbiana, OH WPNH775 Microwave Worthington, PA
- -----------------------------------------------------------------------------
KNKA743 Cellular Erie, PA WPNH774 Microwave Boyers, PA
- -----------------------------------------------------------------------------
WLT235 TFA Various WMR486 Microwave Cranberry, PA
- -----------------------------------------------------------------------------
WPNH426 Microwave Damascus, OH WMR259 Microwave Clarion, PA
- -----------------------------------------------------------------------------
WMM409 Microwave Salem, OH (Old) WHD223 Microwave Clearfield, PA
- -----------------------------------------------------------------------------
WMR482 Microwave Edinboro, PA WPNH427 Microwave Meadville, PA
- -----------------------------------------------------------------------------
WPNH428 Microwave Summit, PA WHD221 Microwave Punxsutawney, PA
- -----------------------------------------------------------------------------
WLN230 Microwave Austintown, OH WHD222 Microwave Reynoldsville, PA
- -----------------------------------------------------------------------------
WLW476 Microwave Greenford, OH WPNA580 Microwave Warren, PA
- -----------------------------------------------------------------------------
WLL292 Microwave North Lima, OH WHD220 Microwave Indiana, PA
- -----------------------------------------------------------------------------
WML722 Microwave Poland, OH WMJ410 Microwave New Castle, PA
- -----------------------------------------------------------------------------
WLN229 Microwave Youngstown, OH WMJ412 Microwave Butler, PA
- -----------------------------------------------------------------------------
WPNH430 Microwave Youngstown, OH WMJ673 Microwave Westfield, NY
(downtown)
- -----------------------------------------------------------------------------
WLN778 Microwave Charleston, PA WMM463 Microwave Ellicottville, NY
- -----------------------------------------------------------------------------
WLL936 Microwave Mercer, PA WMM465 Microwave Olean, NY
- -----------------------------------------------------------------------------
WPNH429 Microwave Sharpsville, PA WMR257 Microwave Butler, PA
- -----------------------------------------------------------------------------
WLC636 Microwave Warren, OH WMJ411 Microwave Butler, PA
- -----------------------------------------------------------------------------
WLC637 Microwave Warren, OH WMJ414 Microwave Springdale, PA
- -----------------------------------------------------------------------------
WLA974 Microwave Warren, OH WMJ416 Microwave Kittanning, PA
- -----------------------------------------------------------------------------
WMW725 Microwave Warren, OH WMJ674 Microwave Buffalo, NY
- -----------------------------------------------------------------------------
WLA975 Microwave Berlin Center, OH WMK455 Microwave Falconner, NY
- -----------------------------------------------------------------------------
WLL890 Microwave Greenville, PA WMM464 Microwave Salamanca, NY
- -----------------------------------------------------------------------------
</TABLE>
SCHEDULE 8.2
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
CALL SIGN USE STATION LOCATION CALL SIGN USE STATION LOCATION
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------
WHF611 Microwave Lisbon, OH WMM909 Microwave Leroy, NY
- -----------------------------------------------------------------------------
WMK795 Microwave Briston, OH WMR258 Microwave Emlenton, PA
- -----------------------------------------------------------------------------
WMM408 Microwave Youngstown, OH WMR260 Microwave Oil City, PA
- -----------------------------------------------------------------------------
WMN588 Microwave Calcutta, OH WMR483 Microwave Meadville, PA
- -----------------------------------------------------------------------------
WMR484 Microwave Mercer, PA WMR485 Microwave Porterville, PA
- -----------------------------------------------------------------------------
KNKN865 Cellular Chautauqua, NY WMR487 Microwave Pittsburgh, PA
- -----------------------------------------------------------------------------
KNKN937 Cellular Crawford, PA WPNH770 Microwave Worthington, PA
- -----------------------------------------------------------------------------
*KNKP984 Cellular McKean, PA WMS264 Microwave Hornell, NY
- -----------------------------------------------------------------------------
KNKN625 Cellular Lawrence, PA WMS260 Microwave Colden, NY
- -----------------------------------------------------------------------------
KNKN562 Cellular Jefferson, PA WMS265 Microwave Avoca, NY
- -----------------------------------------------------------------------------
WMS262 Microwave Angelica, NY WMS261 Microwave Freedom, NY
- -----------------------------------------------------------------------------
WPNG887 Microwave Rushford, NY WPJD306 Microwave Wellsville, NY
- -----------------------------------------------------------------------------
WPNG886 Microwave West Valley, NY WMK453 Microwave Arkwright, NY
(Plato)
- -----------------------------------------------------------------------------
WPNG885 Microwave Cherry Creek, NY WMK454 Microwave Ellery Center, NY
- -----------------------------------------------------------------------------
WPNH777 Microwave Sherman, NY WMS259 Microwave Buffalo, NY
- -----------------------------------------------------------------------------
WMK452 Microwave New Oregon, NY WMJ737 Microwave Alexander, NY
- -----------------------------------------------------------------------------
</TABLE>
* Effective June 29, 1998, SCI discontinued its provision of cellular
service in the McKean, PA, RSA in accordance with the terms of its
Interim Operating Authority. SCI continues to provide cellular service
in the McKean, PA, RSA pursuant to a Management Agreement with the
permanent license holder, Pinellas Communications, pending its
acquisition of the permanent license from Pinellas. An application to
assign the permanent license to SCI was filed with the FCC on July 8,
1996.
Public Utilities Commission of Ohio Certificate of Public Convenience and
Necessity, Certificate No. 90-5321, dated December 12, 1994.
2 SCHEDULE 8.2
<PAGE>
PENDING MICROWAVE STATION APPLICATIONS
<TABLE>
<CAPTION>
Call Sign Location Purpose Date Filed
--------- -------- ------- ----------
<S> <C> <C> <C>
WMK 454 Ellery, NY Minor Modification 5/12/98
WPNH 777 Sherman, NY Minor Modification 5/12/98
WMS 262 Angelica, NY Minor Modification 6/22/98
WPNG 887 Rushford, NY Minor Modification 6/22/98
</TABLE>
PENDING APPLICATIONS
I. MICROWAVE STATIONS
<TABLE>
<CAPTION>
Call Sign Location Purpose Date Filed
--------- -------- ------- ----------
<S> <C> <C> <C>
WPNH777 Sherman, NY Minor Modification 10/21/98
(File No. 9708726)
New Saegertown, PA New Station 10/21/98
(File No. 9708727)
WPNH774 Boyers, PA Minor Modification 12/7/98
WLL936 Mercer, PA Minor Modification 12/7/98
WMR484 Mercer, PA Minor Modification 12/14/98
WMR485 Porterville, PA Minor Modification 12/14/98
WMR486 Cranberry, PA Minor Modification 12/14/98
</TABLE>
II. PAGING STATIONS
<TABLE>
<CAPTION>
Call Sign Location Purpose Date Filed
--------- -------- ------- ----------
<S> <C> <C> <C>
KLF512 Youngstown, NY Modification 9/2/98
</TABLE>
3 SCHEDULE 8.2
<PAGE>
SCHEDULE 8.3
CORPORATE STOCK AND PARTNERSHIP INTERESTS
(Dobson/Sygnet Operating Company)
CORPORATIONS
Sygnet Communications, Inc.
Jurisdiction of Incorporation: Ohio
FOREIGN QUALIFICATIONS: New York and Pennsylvania
CAPITAL STOCK: 100% owned by Dobson/Sygnet Operating Company (including
its successor by merger, Sygnet Wireless, Inc.)
SCHEDULE 8.3
<PAGE>
SCHEDULE 8.15
MATERIAL AGREEMENTS
(Dobson/Sygnet Operating Company and Subsidiaries)
(a)(i) The following are material contracts of the Company and SCI, currently
required to be filed pursuant to Item 601(b)(10) of Regulation S-K
promulgated by the Securities and Exchange Commission, and which have
been entered into since the Company Balance Sheet Date. (Please refer
to the Company Filings for a list of agreements filed as exhibits to
the Company Filings):
None.
(a)(ii) The following are employment, severance, termination, consulting and
retirement agreements not otherwise disclosed in this Agreement:
None.
(a)(iii) The following is a list of each loan agreement, indenture, letter of
credit, lease required to be capitalized under GAAP, mortgage, note
and other debt instrument evidencing, individually, indebtedness or an
annual obligation to pay in excess of $250,000:
Interest Rate Swap Agreements with Corestates Bank, N.A. and PNC Bank,
National Association.
Indenture dated as of September 26, 1996, between Sygnet Wireless,
Inc. and Fleet National Bank, as Trustee.
Unsecured Subordinated Revolving Credit Note dated as of October 9,
1996, executed and delivered by Sygnet Communications, Inc. in favor
of Sygnet Wireless, Inc.
Credit Agreement dated as of October 9, 1996, among the Company and
The Toronto-Dominion Bank and PNC Bank, National Association, as
amended by that certain Consent, Waiver and Amendment dated March 28,
1997, between Sygnet Communications, Inc. and PNC Bank, National
Association, as further amended by that certain Second Amendment to
Credit Agreement dated as of April 18, 1998.
(a)(iv) The following are agreements that require annual payments of more than
$250,000 (other than purchase orders and advertising sales contracts
entered into in the ordinary course of business):
Cellular One License Agreement effective December 1, 1996, between
Cellular One Group and Erie Cellular Telephone Company (upon a change
of control, requires notice, submission of financial information and
payment of a transfer fee).
Cellular One License Agreement, effective as of December 17, 1996,
between Cellular One Group and Sygnet Communications, Inc. (PA-1)
(upon a change of control, requires notice, submission of financial
information and payment of a transfer fee).
Cellular One License Agreement, effective as of November 7, 1996,
between Cellular One Group and Sygnet Communications, Inc. (PA-6)
(upon a change of control, requires notice, submission of financial
information and payment of a transfer fee).
SCHEDULE 8.15
<PAGE>
Cellular One License Agreement, effective as of January 30, 1997,
between Cellular One Group and Sygnet Communications, Inc. (PA-7)
(upon a change of control, requires notice, submission of financial
information and payment of a transfer fee).
Cellular One License Agreement, effective as of January 1, 1997,
between Cellular One Group and Sygnet Communications, Inc. (NY-3)
(upon a change of control, requires notice, submission of financial
information and payment of a transfer fee).
Northern Telecom, Inc. DMS-MTX Cellular Supply Agreement dated June 1,
1996 between Youngstown Cellular Telephone Company and Northern
Telecom, Inc. with Amendment No. 1 dated April 15, 1998 (need prior
written consent to transfer or assign).
Software License Agreement dated April 20, 1995, between International
Telecommunication Data Systems, Inc. ("ITDS") and Youngstown Cellular
Telephone Company and Wilson Cellular, with Addendum dated January 19,
1996, and Addendum dated September 20, 1997 (may not be assigned
without prior written consent of ITDS).
Interconnection Agreement for a Wireless System under Sections 251 and
252 of the Telecommunications Act of 1996 dated as of March 27, 1998,
by and between Ameritech Information Industry Services, a division of
Ameritech Services, Inc. on behalf of Ameritech Ohio and Sygnet
Communications (may assign to an entity acquiring all or substantially
all assets or equity by providing prior written notice).
Dealer Agreement dated April 15, 1996, between Clarion Cellular (d/b/a
Butler Car Audio) and Horizon Cellular Telephone Company of Lawrence.
Type 2 A-B Interconnection and Traffic Interchange Agreement for
F.C.C. Part 22 Cellular Carriers between The Bell Telephone Company of
Pennsylvania and Youngstown Cellular Telephone Company dated August
27, 1991, with Amendments dated June 1, 1996, January 24, 1997, August
19, 1996, and Rider dated October 18, 1996 (need prior written consent
to assign).
Intercarrier Services Agreement dated April 25, 1995, between
Youngstown Cellular Telephone Company and EDS Personal Communications
Corporation, with Amendments dated April 10, 1996, and August 1, 1997
(need prior written consent to assign).
Connection and Traffic Interchange Agreement dated December 19, 1985,
between Sprint (f/k/a United Telephone Company of Ohio) and Youngstown
Cellular Telephone Company of Ohio and Youngstown Cellular Telephone
Company (need prior consent to assign or in any way transfer).
Wholesale Service Agreement between Frontier Communications of the
West, Inc. and Sygnet Communications dated April 24, 1996, with
amendment dated July 11, 1997 (need prior written consent to
transfer).
Dealer Agreement signed January 3, 1994, between Horizon Cellular
Telephone Company of Lawrence and Cell Mart.
Standard Agency Agreement - Cellular Service dated February 19, 1996,
between Auto Club Cellular and Erie Cellular Telephone Company.
2 SCHEDULE 8.15
<PAGE>
TERM LOAN AGREEMENT
among
DOBSON TOWER COMPANY,
BORROWER
and
NATIONSBANK, N.A.,
LENDER
$17,500,000
DATED AS OF DECEMBER 23, 1998
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1 DEFINITIONS AND TERMS. . . . . . . . . . . . . . . . . . . . . .1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Number and Gender of Words; Other References . . . . . . . . . .7
1.3 Accounting Principles. . . . . . . . . . . . . . . . . . . . . .8
SECTION 2 LOAN.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 3 TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . .8
3.1 Loan Accounts, Notes, and Payments . . . . . . . . . . . . . . .8
3.2 Interest and Principal Payments. . . . . . . . . . . . . . . . .8
3.3 Default Rate . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.4 Interest Calculations. . . . . . . . . . . . . . . . . . . . . .9
3.5 Maximum Rate . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.6 Order of Application . . . . . . . . . . . . . . . . . . . . . .9
3.7 Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.8 Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . .9
3.9 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Treatment of Fees. . . . . . . . . . . . . . . . . . . . . . . 10
4.2 Upfront Fees . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5. SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Guaranties . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3 Future Liens . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.4 Release of Collateral. . . . . . . . . . . . . . . . . . . . . 11
5.5 Negative Pledge of Companies . . . . . . . . . . . . . . . . . 11
5.6 Negative Pledge of Guarantors. . . . . . . . . . . . . . . . . 11
5.7 Control; Limitation of Rights. . . . . . . . . . . . . . . . . 11
SECTION 6 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . 12
6.1 Conditions Precedent to Closing. . . . . . . . . . . . . . . . 12
SECTION 7 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . 12
7.1 Purpose of Term Loan . . . . . . . . . . . . . . . . . . . . . 12
7.2 Existence, Good Standing, Authority, and Authorizations. . . . 12
7.3 Subsidiaries; Capital Stock. . . . . . . . . . . . . . . . . . 13
7.4 Authorization and Contravention. . . . . . . . . . . . . . . . 13
7.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 Litigation, Claims, Investigations . . . . . . . . . . . . . . 13
7.7 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.8 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 14
7.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 14
7.10 Properties; Liens. . . . . . . . . . . . . . . . . . . . . . . 14
7.11 Government Regulations . . . . . . . . . . . . . . . . . . . . 14
7.12 Transactions with Affiliates . . . . . . . . . . . . . . . . . 14
7.13 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.14 Material Agreements; Management Agreements . . . . . . . . . . 14
7.15 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
i
<PAGE>
7.16 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . 15
7.17 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.18 Intellectual Property. . . . . . . . . . . . . . . . . . . . . 15
7.19 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 15
7.20 Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.21 Tradename. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.22 Year 2000 Compliance . . . . . . . . . . . . . . . . . . . . . 15
7.23 Towers Acquisition . . . . . . . . . . . . . . . . . . . . . . 16
7.24 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.25 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 8 COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.1 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 16
8.2 Items to be Furnished. . . . . . . . . . . . . . . . . . . . . 16
8.3 Inspections. . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.4 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.5 Payment of Obligations . . . . . . . . . . . . . . . . . . . . 18
8.6 Maintenance of Existence, Assets, and Business . . . . . . . . 18
8.7 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.8 Preservation and Protection of Rights. . . . . . . . . . . . . 19
8.9 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 19
8.10 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . 19
8.11 Debt and Guaranties. . . . . . . . . . . . . . . . . . . . . . 19
8.12 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
8.13 Transactions with Affiliates . . . . . . . . . . . . . . . . . 20
8.14 Compliance with Laws and Documents . . . . . . . . . . . . . . 20
8.15 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.16 Fiscal Year and Accounting Methods . . . . . . . . . . . . . . 21
8.17 Government Regulations . . . . . . . . . . . . . . . . . . . . 21
8.18 Loans, Advances, and Investments . . . . . . . . . . . . . . . 21
8.19 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . 21
8.20 Restrictions on Subsidiaries . . . . . . . . . . . . . . . . . 21
8.21 Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . 21
8.22 Towers Sale. . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.23 Sale-Leaseback Financings. . . . . . . . . . . . . . . . . . . 22
8.24 Mergers and Dissolutions; Sale of Capital Stock. . . . . . . . 22
8.25 New Business . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.26 Amendments to Documents. . . . . . . . . . . . . . . . . . . . 22
8.27 Year 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 9 DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.1 Payment of Obligation. . . . . . . . . . . . . . . . . . . . . 22
9.2 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.3 Debtor Relief. . . . . . . . . . . . . . . . . . . . . . . . . 23
9.4 Judgments and Attachments. . . . . . . . . . . . . . . . . . . 23
9.5 Government Action. . . . . . . . . . . . . . . . . . . . . . . 23
9.6 Misrepresentation. . . . . . . . . . . . . . . . . . . . . . . 23
9.7 Change of Management . . . . . . . . . . . . . . . . . . . . . 23
9.8 Change of Control. . . . . . . . . . . . . . . . . . . . . . . 23
9.9 Authorizations . . . . . . . . . . . . . . . . . . . . . . . . 23
9.10 Default Under Other Debt and Agreements. . . . . . . . . . . . 24
9.11 Validity and Enforceability of Loan Papers . . . . . . . . . . 24
9.12 Material Adverse Effect. . . . . . . . . . . . . . . . . . . . 24
9.13 Environmental Liability. . . . . . . . . . . . . . . . . . . . 24
ii
<PAGE>
9.14 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 10 RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . 25
10.1 Remedies Upon Default. . . . . . . . . . . . . . . . . . . . . 25
10.2 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
10.3 Performance by Lender. . . . . . . . . . . . . . . . . . . . . 25
10.4 Delegation of Duties and Rights. . . . . . . . . . . . . . . . 25
10.5 Not in Control . . . . . . . . . . . . . . . . . . . . . . . . 25
10.6 Course of Dealing. . . . . . . . . . . . . . . . . . . . . . . 26
10.7 Cumulative Rights. . . . . . . . . . . . . . . . . . . . . . . 26
10.8 Application of Proceeds. . . . . . . . . . . . . . . . . . . . 26
10.9 Certain Proceedings. . . . . . . . . . . . . . . . . . . . . . 26
10.10 Limitation of Rights . . . . . . . . . . . . . . . . . . . . . 26
10.11 Expenditures by Lender . . . . . . . . . . . . . . . . . . . . 26
10.12 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 11 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . 27
11.1 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.2 Nonbusiness Days . . . . . . . . . . . . . . . . . . . . . . . 27
11.3 Communications . . . . . . . . . . . . . . . . . . . . . . . . 28
11.4 Form and Number of Documents . . . . . . . . . . . . . . . . . 28
11.5 Exceptions to Covenants. . . . . . . . . . . . . . . . . . . . 28
11.6 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 28
11.8 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . 28
11.9 Entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.10 Jurisdiction; Venue; Service of Process; Jury Trial. . . . . . 29
11.11 Amendments, Consents, Conflicts, and Waivers . . . . . . . . . 29
11.12 Multiple Counterparts. . . . . . . . . . . . . . . . . . . . . 30
11.13 Successors and Assigns.. . . . . . . . . . . . . . . . . . . . 30
11.14 Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances. . . . . . . . . . . . . . . . . . . . . . . . . 30
iii
<PAGE>
SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
Schedule 6.1 - Conditions Precedent to Closing
Schedule 7.2 - FCC and PUC Licenses
Schedule 7.3 - Capital Stock and Partnership Interests
Interests
Schedule 7.14 - Material Agreements
Exhibit A - Form of Term Note
Exhibit B - Form of Guaranty
Exhibit C - Form of Pledge, Assignment, and Security
Agreement
Exhibit D-1 - Form of Opinion of Counsel of
Borrower
Exhibit D-2 - Form of Opinion of Special Regulatory
Counsel
</TABLE>
iv
<PAGE>
TERM LOAN AGREEMENT
THIS TERM LOAN AGREEMENT is entered into as of December 23, 1998, among
DOBSON TOWER COMPANY, an Oklahoma corporation ("BORROWER"), and NATIONSBANK,
N.A., as Lender ("LENDER").
RECITALS
A. Borrower is a newly-formed, Wholly-owned Subsidiary of Dobson
Communications Corporation and has requested that Lender extend credit to
Borrower in the form of this Term Loan Agreement, providing for a 364-day
term loan in the original principal amount of $17,500,000.
B. Upon and subject to the terms and conditions of this Agreement,
Lender is willing to make such loan to Borrower.
Accordingly, in consideration of the mutual covenants contained herein,
Borrower and Lender agree, as follows:
SECTION 1 DEFINITIONS AND TERMS.
1.1 DEFINITIONS. As used herein:
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).
AGREEMENT means this Term Loan Agreement (as the same may hereafter be
amended, modified, supplemented, or restated from time to time).
ASSUMED TAXES means, with respect to any asset 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
any asset 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 Tower.
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BASE RATE means a per annum rate of interest equal to 8.00%.
BORROWER is defined in the preamble to this Agreement.
BUSINESS DAY means 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.
CAPITAL LEASE means any capital lease or sublease which should be
capitalized on a balance sheet in accordance with GAAP.
CLOSING DATE means the date upon which this Agreement has been executed
by Borrower and Lender and all conditions precedent specified in SECTION 6.1
have been satisfied or waived.
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 5.1.
COLLATERAL DOCUMENTS means all security agreements, pledge agreements,
assignments of partnership interests, and Guaranties at any time delivered to
Lender 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 $17,500,000.
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.
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.
DCC LIMITED PARTNERSHIP, means Dobson CC Limited Partnership, a limited
partnership formed under the laws of the state of Oklahoma.
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)
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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; and (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.
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 9.
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 2% AND (b) the Maximum
Rate.
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.
DOLLARS and the symbol $ means lawful money of the United States of
America.
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
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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.
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.
EXECUTIVE MANAGEMENT TEAM means Everett Dobson, Bruce Knooihuizen, and
Edward Evans.
EXHIBIT means an exhibit to this Agreement unless otherwise specified.
FAMILY TRUSTS means collectively Everett R. Dobson Irrevocable Family
Trust, Stephen T. Dobson Irrevocable Family Trust, and Robbin L. Dobson
Irrevocable Family Trust.
FCC means the Federal Communications Commission and any successor
regulatory body.
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.
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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 DCC Limited Partnership, the Family Trusts, RLD, Inc,
Everett R. Dobson, and any other 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.
LAWS means all applicable statutes, laws, treaties, ordinances, tariff
requirements, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, or interpretations of any Governmental Authority.
LENDER is defined in the preamble of this Agreement.
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, and the Collateral
Documents, (b) all agreements, documents, or instruments in favor of Lender ever
delivered pursuant to this Agreement or otherwise delivered in connection with
all or any part of the Obligation, and (c) any and all future renewals,
extensions,
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restatements, reaffirmations, or amendments of, or supplements to, all or any
part of the foregoing.
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 Lender to enforce any such obligations or
any of their its 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.
MATERIAL AGREEMENT means any contract material to the respective
business of the Companies, including the Towers Lease.
MATURITY DATE means December 22, 1999.
MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, the maximum
non-usurious amount and the maximum non-usurious rate of interest which,
under applicable Law, 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.
NET CASH PROCEEDS means with respect to any asset sale, cash (freely
convertible into Dollars) received, on or after the date of consummation of
any asset sale, by any Company from such asset 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 asset sale
(including, without limitation, reasonable attorneys' fees and closing costs
incurred in connection with the asset sale), and, (iii) deduction of
appropriate amounts to be provided by any Company as a reserve, in accordance
with GAAP, against any liabilities retained by any Company after such asset
sale, which liabilities are associated with the assets being sold, including,
without limitation, liabilities related to environmental matters or against
any indemnification obligations associated with the asset sale.
NOTE means the promissory note substantially in the form of the
attached EXHIBIT A, and all renewals, extensions, modifications,
rearrangements thereof and any and all substitutions therefor.
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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 Lender, or any Affiliate of 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.
PERMITTED DEBT means Debt permitted under SECTION 8.11 as described in
such Section.
PERMITTED LIENS means Liens permitted under SECTION 8.12 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.
PRINCIPAL DEBT means, on any date of determination, the aggregate
unpaid principal balance of the Term Loan.
PRIVATE BANK LOANS means loans of up to $31,200,000 from NationsBank,
N.A. to DCC Limited Partnership, which loans are secured by a pledge of
certain shares of Communications stock owned by DCC Limited Partnership.
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.
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.
REPRESENTATIVES means representatives, officers, directors, employees,
attorneys, and agents.
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
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Papers, any other officer designated from time to time by the Board of
Directors of Borrower, which designated officer is acceptable to Lender.
RIGHTS means rights, remedies, powers, privileges, and benefits.
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.
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.
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.
SYGNET means Sygnet Communications, Inc., an Ohio corporation and a
Wholly-owned Subsidiary of Sygnet Wireless, Inc., the successor by merger
with Dobson/Sygnet Operating Company.
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 LOAN has the definition given is SECTION 2.
TOWERS means substantially all cellular transmission towers owned by
Sygnet acquired by Borrower pursuant to the Towers Acquisition.
TOWERS ACQUISITION means the acquisition of the Towers by Borrower from
Sygnet on terms and conditions satisfactory to Lender.
TOWERS ACQUISITION AGREEMENT means the agreement between Borrower and
Sygnet dated December 23, 1998, in which Borrower
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agrees to buy the Towers from Sygnet, which agreement is in form and upon
terms acceptable to Lender.
TOWERS ACQUISITION DOCUMENTS means the Towers Acquisition Agreement,
the Towers Lease, and all other documents delivered pursuant thereto or in
connection with the consummation of the Towers Acquisition or execution and
performance of the Towers Lease.
TOWERS LEASE means the Master Site License Agreement, and collectively,
the Site Licenses, dated December 23, 1998, between Borrower and Sygnet,
whereby Borrower leases the Towers to Sygnet, which agreement is in form and
upon terms acceptable to Lender.
TOWERS SALE means a sale of all or any of the Towers by Borrower to a
non-Affiliate on terms and conditions satisfactory to Lender.
TOWERS SALE AGREEMENT means any agreement between Borrower and a
non-Affiliate, in which Borrower agrees to sell to such non-Affiliate, one or
more Towers subject to the Towers Lease, which agreement must be in form and
upon terms acceptable to Lender.
TOWERS SALE DOCUMENTS means, with respect to any Towers Sale, the
related Towers Sale Agreement and all other documents delivered pursuant
thereto or in connection with the consummation of such Towers Sale.
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
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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, if any, 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.
SECTION 2 LOAN. Subject to the provisions in the Loan Papers, Lender
agrees to lend to Borrower in a single advance on the Closing Date, the sum
of $17,500,000 (the "TERM LOAN"). The Term Loan shall bear interest at a
rate equal to the Base Rate. Once repaid, Borrower may not reborrow any
portion of the Term Loan.
SECTION 3 TERMS OF PAYMENT.
3.1 LOAN ACCOUNTS, NOTES, AND PAYMENTS.
(a) The Principal Debt owed to Lender shall be evidenced by the
Note, payable to Lender in the maximum amount of the Commitment.
(b) Each payment or prepayment on the Obligation is due and must
be paid at Lender's principal office in Dallas in funds which are or will
be available for immediate use by Lender 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. Payments received
after such time shall be deemed received on the next Business Day.
3.2 INTEREST AND PRINCIPAL PAYMENTS.
(a) Interest on the Term Loan shall be due and payable as it
accrues on March 31, 1999, June 30, 1999, September 30, 1999, and the
Maturity Date.
(b) The Principal Debt is due and payable on the Maturity Date.
(c) Borrower shall make a mandatory prepayment of the Principal
Debt concurrently with the consummation of any asset sale, including,
without limitation, any Towers Sale, in an amount equal to 100% of the Net
Cash Proceeds realized by Borrower from such asset sale.
(d) After giving Lender 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
Lender by 12:00 noon Dallas, Texas time on the Business Day of a
prepayment; (ii) each such partial prepayment must be in a minimum amount
of at least $1,000,000 or a greater integral multiple of $100,000 thereof;
and (iii) all accrued interest on the Principal Debt being prepaid must
also be paid in full, to the date of such prepayment. Each notice of
prepayment shall specify the
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prepayment date and amount to be prepaid and shall constitute a binding
obligation of Borrower to make a prepayment on the date stated therein.
3.3 DEFAULT RATE. At the option of Lender 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.
3.4 INTEREST CALCULATIONS. 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 computed on the basis of a year of 365 or 366
days, as the case may be. All interest rate determinations and calculations
by Lender shall be conclusive and binding absent manifest error.
3.5 MAXIMUM RATE. Regardless of any provision contained in any Loan
Paper, Lender shall never 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 Lender ever does 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 Lender shall, to the maximum extent permitted under applicable
Law, (a) characterize any nonprincipal payment as an expense, fee, or premium
rather than as interest, (b) exclude voluntary prepayments and the effects
thereof, and (c) 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, Lender shall refund
such excess, and, in such event, Lender 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.
3.6 ORDER OF APPLICATION. Any payment (including proceeds from the
exercise of any Rights) shall be applied in the following order: (i) to all
fees and expenses for which Lender has not been paid or reimbursed in
accordance with the Loan Papers (and if such payment is less than all unpaid
or unreimbursed fees and expenses, then the payment shall be paid against
unpaid and unreimbursed fees and expenses in the order of incurrence or due
date); (ii) to accrued interest on the Principal Debt; (iii) to the remaining
Principal Debt in the order and manner as Lender deems appropriate; and (iv)
to the remaining Obligation in the order and manner as Lender deems
appropriate.
3.7 OFFSET. Upon the occurrence and during the continuance of a
Default, Lender shall be entitled to exercise the Rights of offset and/or
banker's Lien against each and every account and other property, or any
interest therein, which Borrower or any Guarantor may now or hereafter have
with, or which is now or hereafter in the possession of, Lender to the extent
of the full amount of the Obligation.
3.8 CAPITAL ADEQUACY. With respect to any the Term Loan, if any change
in present Law or any future Law regarding capital adequacy or compliance by
Lender with any request, directive, or requirement now existing or hereafter
imposed by any Governmental Authority regarding capital adequacy, or any change
in its written policies or in the risk category of this transaction, reduces the
rate of return on its capital as a consequence of its obligations under this
Agreement to a level below that which it otherwise could have achieved (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by it to be material (and it may, in determining the amount, use
reasonable assumptions and allocations of costs and expenses and use any
reasonable averaging or attribution method), then (UNLESS the effect is already
reflected in the rate of interest then applicable under this Agreement) Lender
shall
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notify Borrower and deliver to Borrower a certificate setting forth in
reasonable detail the calculation of the amount necessary to compensate it
(which certificate is conclusive and binding absent manifest error), and
Borrower shall promptly pay that amount to Lender upon demand. Lender shall
notify Borrower of any such determination as soon as practicable (but in any
event within 120 days) after Lender obtains actual knowledge of the event or
condition prompting Lender to make such determination, and Borrower shall not
be liable for any such amount or amounts that accrue between the date such
notification is required to be given and the date notice was actually given.
The provisions of and undertakings and indemnification set forth in this
SECTION 3.8 shall survive the satisfaction and payment of the Obligation and
termination of this Agreement.
3.9 TAXES.
(a) 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").
(b) Borrower agrees to indemnify Lender for the full amount of
Other Taxes paid by Lender and any liability (including penalties,
interest, and expenses) arising therefrom or with respect thereto.
(c) Within thirty (30) days after the date of any payment of Other
Taxes, Borrower shall furnish to Lender the original or a certified copy
of a receipt evidencing such payment.
(d) Without prejudice to the survival of any other agreement of
Borrower hereunder, the agreements and obligations of Borrower contained
in this SECTION 3.9 shall survive the termination of this Agreement and
the payment in full of the Obligation.
SECTION 4 FEES.
4.1 TREATMENT OF FEES. Except as otherwise provided by Law, the fees
described in this SECTION 4: (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, and (e)
shall, to the fullest extent permitted by Law, bear interest, if not paid
when due, at the Default Rate.
4.2 UPFRONT FEES. On or before the Closing Date, Borrower shall pay
to Lender an upfront fee of $218,750.00.
SECTION 5. SECURITY; GUARANTIES.
5.1 COLLATERAL. To secure full and complete payment and performance
of the Obligation, the Companies hereby jointly and severally grant and
convey to, and create in favor of Lender, first priority Liens in, to, and on
all assets of the Companies as more particularly described in the Collateral
Documents (the "COLLATERAL"); PROVIDED THAT, Lender does not hereby assume,
or is made the transferee of, any obligations of any Company regarding any of
the Collateral.
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5.2 GUARANTIES. As an inducement to Lender to enter into this
Agreement, Borrower shall cause each other Company and each Guarantor to
execute and deliver to Lender a Guaranty substantially in the form and upon
the terms of EXHIBIT B, providing for the guarantee of payment and
performance of the Obligation.
5.3 FUTURE LIENS. Promptly after (a) the acquisition of any assets
(real, personal, tangible, or intangible) by any Company, (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 (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 to) execute and deliver to
Lender 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 Lender may require
with respect to any such Additional Assets), and shall take all further
action that may be necessary or desirable, or that Lender may reasonably
request, to grant, perfect, and protect Liens in favor of Lender 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
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.
5.4 RELEASE OF COLLATERAL. Upon any sale, transfer, or disposition
of Collateral which is expressly permitted pursuant to the Loan Papers (or is
otherwise authorized by Lender), 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), Lender
shall execute such documents as may be necessary to evidence the release of
Liens granted to Lender 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)
Lender shall not be required to execute any such document on terms which, in
Lender's opinion, would expose Lender 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, or Liens upon (or obligations of
any Company 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.
5.5 NEGATIVE PLEDGE OF COMPANIES. To the extent Lender agrees to
delay the perfection or attachment of any Lien granted pursuant to SECTION
5.1 hereof, for whatever reason, the Companies 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 Lender, Borrower shall (or shall cause
each Company to) execute and deliver to Lender 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 Lender may reasonably
request, to grant, perfect, and protect Liens in favor of Lender, 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 Lender.
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5.6 Negative Pledge of Guarantors. By execution of a Guaranty, each
Guarantor hereby covenants and agrees not to directly create, incur, grant,
suffer, or permit to be created or incurred any Lien on the stock of
Communications owned by such Guarantor other than the Liens securing the
Private Bank Loans. The provisions of this negative pledge are a material
inducement to the execution and delivery of this Agreement by Lender.
5.7 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 Guarantors by Lender, or control,
affirmative or negative, direct or indirect, by Lender 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) Lender 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 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 6 CONDITIONS PRECEDENT.
6.1 CONDITIONS PRECEDENT TO CLOSING. This Agreement shall not become
effective, and Lender shall not be obligated to advance the Term Loan, unless
Lender has received all of the agreements, documents, instruments, and other
items described on SCHEDULE 6.1.
SECTION 7 REPRESENTATIONS AND WARRANTIES. Borrower, each other Company,
and each Guarantor (by the execution of a Guaranty and solely with respect to
representations concerning such Guarantor) represent and warrant to Lender as
follows:
7.1 Purpose of Term Loan. Borrower will use (or will loan such
proceeds to its Companies to so use) all proceeds of the Term Loan to
consummate the Towers Acquisition. 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 the Term Loan
will be used, directly or indirectly, for a purpose which violates any Law,
including, without limitation, the provisions of Regulations T, U, or X (as
enacted by the Board of Governors of the Federal Reserve System, as amended).
7.2 EXISTENCE, GOOD STANDING, AUTHORITY, AND AUTHORIZATIONS. Each
Company and Guarantor that is a legal entity is duly organized, validly
existing, and in good standing, under the Laws of its jurisdiction of
organization (such jurisdictions being identified on SCHEDULE 7.3, 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 and each Guarantor that is a legal entity 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
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authority, including, without limitation, any Authorization issued by the
FCC, all of which are described on SCHEDULE 7.2 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.
7.3 SUBSIDIARIES; CAPITAL STOCK. The Companies have no Subsidiaries
except as disclosed on SCHEDULE 7.3 (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 that is a
corporation are duly authorized, validly issued, fully paid, and
nonassessable and are owned of record and beneficially as set forth on
SCHEDULE 7.3 (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 is subject to any restriction on transfer thereof except
for restrictions imposed by securities Laws and general corporate Laws. No
Company has outstanding any warrant, option, or other Right of any Person to
acquire any of its capital stock or similar equity interests.
7.4 AUTHORIZATION AND CONTRAVENTION. The execution and delivery by
each Company and Guarantor that is a legal entity 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, partnership, or trust
power, as applicable, of such Company or Guarantor, (b) will have been duly
authorized by all necessary corporate, trust, partnership, or other action on
the part of such Company or Guarantor when such Loan Paper is executed and
delivered, and (c) will not violate any provision of the charter, bylaws,
trust agreement, or partnership agreement of such Company or Guarantor. 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) 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), (b) 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, (c) 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, and (d) will not result in the creation or
imposition of any Lien on any asset of any Company or Guarantor, other than
Permitted Liens. 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
acquisition or transfer permitted by the Loan Papers, including, without
limitation, the Towers Acquisition and any Towers Sale.
7.5 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.
7.6 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
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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
$250,000 (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 $250,000 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 or Guarantor 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 that could be a Material Adverse Event.
7.7 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 8.12(b)(vi)) have been satisfied or for which nonpayment
thereof could not constitute a Material Adverse Event.
7.8 ENVIRONMENTAL MATTERS. No Company (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 that
could be a Material Adverse Event, (b) knows of any violation by any Company
of any Environmental Law, except for such violations that could not be a
Material Adverse Event, or (c) knows that any Company 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 (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.
7.9 EMPLOYEE BENEFIT PLANS. No Company maintains any Employee Plan
or has any obligations under an Employee Plan.
7.10 PROPERTIES; LIENS. Each Company has good and marketable title to
all its property, 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,
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.
7.11 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 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.
7.12 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
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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.
7.13 DEBT. No Company is an obligor on any Debt other than Permitted
Debt.
7.14 MATERIAL AGREEMENTS; MANAGEMENT AGREEMENTS. SCHEDULE 7.14 hereto
sets forth a list of all contracts material to the business of the Companies,
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 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 thereunder which could be
a Material Adverse Event. None of Borrower or the Companies is a party to
any management or consulting agreement for the provision of services to it,
except as described in SCHEDULE 7.14 hereto.
7.15 INSURANCE. Each Company 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.
7.16 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 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 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.
7.17 SOLVENCY. As of the Closing Date, each Company and each
Guarantor is (and after giving effect to the Towers Acquisition, the other
transactions contemplated by the Loan Papers, and any incurrence of
additional Debt permitted under the Loan Papers, will be) Solvent.
7.18 INTELLECTUAL PROPERTY. Each Company 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 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, could not, individually or
collectively, constitute a Material Adverse Event.
7.19 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.
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7.20 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.
7.21 TRADENAME. No Company has used or transacted business under any
other corporate or trade name in the five-year period preceding the date
hereof.
7.22 YEAR 2000 COMPLIANCE. The Companies have (i) initiated a review
and assessment of all areas within their business and operations that could
be adversely affected by the "YEAR 2000 PROBLEM" (that is, the risk that
computer applications used by the Companies may be unable to recognize and
perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999), (ii) developed a plan and time line
for addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented in all material respects that plan in accordance with that
timetable.
7.23 TOWERS ACQUISITION. The Towers Acquisition Documents have been
executed and delivered by all parties thereto and represent the valid and
binding agreements of the parties thereto, enforceable in all material
respects in accordance with their terms (EXCEPT as enforceability may be
limited by applicable Debtor Relief Laws and general principles of equity).
On and as of the Closing Date, the execution and delivery by Borrower of the
Towers Acquisition Documents and the performance by Borrower and each Company
of its obligations thereunder (a) are within the corporate power of such
Company, (b) have been duly authorized by all necessary corporate action on
the part of such Company, (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, (d) do not violate any
provision of the charter or bylaws of such Company, (e) do 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) do
not violate any Material Agreements to which it is a party, other than such
violations which could not be a Material Adverse Event, (g) do not result in
the creation or imposition of any Lien on any asset of any Company (other
than Permitted Liens), and (h) immediately prior to, and after giving pro
forma effect thereto, no Default or Potential Default exists or arises under
the Loan Papers. On and as of the Closing Date, the Companies have obtained
all necessary consents and approvals of any Person or Governmental Authority
required to be obtained in order for such Company to effectuate the Towers
Acquisition and the transactions contemplated by the Towers Acquisition
Agreement, EXCEPT to the extent any such failure could not be a Material
Adverse Event and would not reasonably be expected to materially impair the
value to the Companies of, or the benefits to be derived by the Companies
from the Towers Acquisition. On the Closing Date, all conditions precedent
under the Towers Acquisition Agreement to the parties' obligations to
consummate the Towers Acquisition have been satisfied in all material
respects, and concurrently with the Closing Date, the Towers Acquisition
shall have been consummated.
7.24 NO DEFAULT. No Default or Potential Default exists or will arise
as a result of the Term Loan, or after giving effect to consummation of the
Towers Acquisition, or the Towers Lease.
7.25 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 Lender. All information heretofore
furnished by any Company or any Guarantor to Lender in connection with the
Loan Papers was, and all such information hereafter furnished by any Company
to Lender 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.
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SECTION 8 COVENANTS. Borrower and each Guarantor (by the execution of a
Guaranty and solely with respect to covenants affecting such Guarantor)
covenant and agree to perform, observe, and comply with each of the following
covenants, from the Closing Date and SO LONG 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 Lender:
8.1 USE OF PROCEEDS. Borrower shall use the proceeds of the Term
Loan only for the purposes represented herein.
8.2 ITEMS TO BE FURNISHED. Borrower (and each Guarantor with respect
to SECTIONS 8.2(a) and 8.2(b) only) shall cause the following to be furnished
to Lender:
(a) Within sixty (60) days of the end of each fiscal quarter
commencing with the fiscal quarter ending on March 31, 1999, unaudited
financial statements of the Companies consisting of an income statement,
cash flow statement, and balance sheet, each prepared in accordance with
GAAP.
(b) Notice, promptly after Borrower or any Guarantor 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
$250,000, or any warrant of attachment, sequestration, or similar
proceeding against the assets of any Company or Guarantor having a value
(individually or collectively) of $250,000, (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 the 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 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, or (vi) the receipt by any Company
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.
(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 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 Lender.
(d) 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).
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(e) Promptly upon request therefor by Lender, 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.
8.3 INSPECTIONS. Upon reasonable notice, the Companies and the
Guarantors shall allow Lender (or its 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.
8.4 TAXES. Each Company and each Guarantor (a) shall promptly pay
when due any and all Taxes owed by such Person, 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 the
Term Loan 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 Lender immediately if the Internal Revenue Service or any other taxing
authority commences or notifies any Company or 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 Guarantor.
8.5 PAYMENT OF OBLIGATIONS. Borrower shall pay the Obligation in
accordance with the terms and provisions of the Loan Papers. Each Company
(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]
are being contested in good faith by appropriate proceedings), and (b) shall
not (i) make any voluntary prepayment of principal of, or interest on, any
other Debt (other than the Obligation), whether subordinate to the Obligation
or not or (ii) use proceeds from the Term Loan to make any payment or
prepayment of principal of, or interest on, or sinking fund payment in
respect of any other Debt of any Company.
8.6 MAINTENANCE OF EXISTENCE, ASSETS, AND BUSINESS. Each Company and
each Guarantor shall at all times: (a) to the extent such Company or
Guarantor is a legal entity, 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.
8.7 INSURANCE. The Companies shall, at their sole cost and expense,
keep and maintain the Collateral owned by such Company 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 Lender
promptly of any occurrence causing
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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 and acceptable to Lender, and all such policies
shall be in such amount as may be satisfactory to Lender. On the Closing
Date and thereafter as each policy is renewed and extended, the Companies
shall deliver to Lender 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 Lender, showing loss payable
to Lender. Such endorsement, or an independent instrument furnished to
Lender, shall provide that the insurance companies will give Lender 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 or any other Person shall affect the Right of Lender 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 so insured may retain
such insurance proceeds if, within ninety (90) days of receipt of such
insurance proceeds, 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 Lender for
application as a mandatory prepayment on the Obligation.
8.8 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 Lender may reasonably deem necessary or appropriate in
order to preserve and protect the Rights of Lender under any Loan Paper.
8.9 EMPLOYEE BENEFIT PLANS. No Company shall, without prior written
notice to Lender, create or maintain any Employee Plan.
8.10 ENVIRONMENTAL LAWS. Each Company 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 at
any facility operated by any Company 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 arising under applicable Environmental Laws or as a result of
environmentally-related injuries to Persons or property.
8.11 DEBT AND GUARANTIES.
(a) No Company 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) Debt between Companies;
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(iii) Debt existing on the Closing Date disclosed to Lender in
writing and agreed to by Lender; and
(iv) Trade accounts payable which are for goods furnished or
services rendered in the ordinary course of business and are payable
in accordance with customary trade terms.
(b) No Company shall guarantee or assume or agree to become liable
in any way, either directly or indirectly, for any Debt 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
Guaranties.
8.12 LIENS. No Company will, directly or indirectly, (a) enter into
or permit to exist any arrangement or agreement which directly or indirectly
prohibits any Company from creating or incurring any Lien on any of its
assets, other than the 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) Liens in favor of Lender securing the Obligation;
(ii) 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;
(iii) 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;
(iv) 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;
(v) 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; and
(vi) 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.
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8.13 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.
8.14 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 that is a legal entity shall violate
the provisions of its charter, bylaws, partnership agreement, or trust
agreement, or modify, repeal, replace, or amend any provision of its charter,
bylaws, partnership agreement, or trust agreement, if such action could
adversely affect the Rights of Lender.
8.15 ASSIGNMENT. No Company or Guarantor shall assign or transfer any
of its Rights, duties, or obligations under any of the Loan Papers.
8.16 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 immaterial changes in methods or as required by GAAP.
8.17 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 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.
8.18 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) demand deposit accounts which are maintained in the ordinary course
of business; (b) loans, advances, extensions of credit, capital
contributions, and other investments between Companies; and (c) 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.
8.19 DISTRIBUTIONS. No Company may directly or indirectly declare,
make, or pay any Distribution, other than:
(a) Distributions declared, made, or paid by Borrower wholly in
the form of its capital stock; and
(b) Distributions by any Company or Guarantor to any other
Company.
Notwithstanding the foregoing, Distributions are permitted hereunder only to
the extent such Distribution is made in accordance with applicable Law and
constitutes a valid, non-voidable transaction.
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8.20 RESTRICTIONS ON SUBSIDIARIES. No Subsidiary of Borrower (nor any
Guarantor with respect to CLAUSES (b), (c), and (d)) 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
any Company, (b) paying any Debt owed to any other Company, (c) making loans,
advances, or investments to any other Company, or (d) transferring any of its
property or assets to any other Company.
8.21 SALE OF ASSETS. No Company shall sell, assign, transfer, or
otherwise dispose of any of its assets, OTHER THAN (i) Towers Sales, in form
and upon terms acceptable to Lender; and (ii) dispositions of obsolete
assets, SUBJECT TO satisfaction of the requirements of SECTION 3.2(c).
8.22 TOWERS SALE. Within six months after the Closing Date, Borrower
shall have entered into one or more Towers Sale Agreements pursuant to which
all or substantially all of the Towers are to be sold to a non-Affiliate and
shall deliver to Lender fully executed copies of all Towers Sale Agreements
and the related Towers Sale Documents, which must be in form and upon terms
acceptable to Lender.
8.23 SALE-LEASEBACK FINANCINGS. No Company will enter into any
sale-leaseback arrangement with any Person pursuant to which such Company
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.
8.24 MERGERS AND DISSOLUTIONS; SALE OF CAPITAL STOCK. No Company or
Guarantor that is a legal entity will, directly or indirectly, merge or
consolidate with any other Person. No Company or Guarantor that is a legal
entity shall liquidate, wind up, or dissolve (or suffer any liquidation or
dissolution). No Company or Guarantor that is a legal entity 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 or Guarantor.
8.25 NEW BUSINESS. No Company 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.
8.26 AMENDMENTS TO DOCUMENTS. No Company or Guarantor that is a legal
entity shall (a) amend or permit any amendments to any Company's Articles of
Incorporation or Bylaws, Trust Agreement, or any Partnership Agreement, as
applicable, if such action could adversely affect the Rights of Lender; (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 Lender) than the provisions of the
Loan Papers; or (c) without prior written consent of Lender, amend, modify,
or waive any provision of the Towers Acquisition Documents or the Towers
Lease, or, once executed and delivered to Lender pursuant to SECTION 8.22,
the Towers Sale Documents.
8.27 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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SECTION 9 DEFAULT. The term "DEFAULT" means the occurrence of any one or
more of the following events:
9.1 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.
9.2 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 8.1, 8.2, 8.5, 8.11, 8.12, 8.13, 8.15, 8.18, 8.19 through 8.24,
8.26, and 8.27;
(b) Any Debt or Lien covenant in any Guaranty; and
(c) Any other covenant, agreement, or condition contained in any
Loan Paper (OTHER THAN the covenants to pay the Obligation set forth in
SECTION 9.1 and the covenants in SECTION 9.2(a)), and such failure or
refusal continues for 20 days.
9.3 DEBTOR RELIEF. Borrower, Sygnet Wireless, Inc. and its
Subsidiaries, Communications, any other Company, any Guarantor, or any
Subsidiary of Communications (other than Logix Communications Enterprises,
Inc. and its Subsidiaries) (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
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).
9.4 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 $250,000 (individually or
collectively) or any warrant of attachment, sequestration, or similar
proceeding against any Company's assets having a value (individually or
collectively) of $250,000 which is not stayed on appeal.
9.5 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.
9.6 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.
9.7 CHANGE OF MANAGEMENT. Less than two-thirds of the Executive
Management Team of Communications on the Closing Date cease to hold positions
on the Executive Management Team of Communications.
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9.8 CHANGE OF CONTROL. If Communications ceases to own 100% of the
voting control (directly or indirectly) of Borrower and the other Companies
or if DCC Limited Partnership ceases to maintain voting control (directly or
indirectly) of Communications.
9.9 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) any 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 any Company or Guarantor as
now conducted.
9.10 DEFAULT UNDER OTHER DEBT AND AGREEMENTS. (a) 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) in excess
(individually or collectively) of $1,000,000; (b) any default exists under
any material written or oral agreement, contract, commitment, or
understanding to which a Company or Guarantor is a party; (c) 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); (d) the
occurrence of an "EVENT OF DEFAULT" under the Revolving Credit Agreement
dated as of March 25, 1998, among Dobson Cellular Operations Company, as
Borrower, NationsBank, N.A. (as successor to NationsBank of Texas, N.A.), as
Administrative Agent, and certain Lenders party thereto (as the same may be
amended, modified, restated, or supplemented from time to time); (e) the
occurrence of an "EVENT OF DEFAULT" under the 364-Day Revolving Credit and
Term Loan Agreement dated as of March 25, 1998, among Dobson Cellular
Operations Company, as Borrower, NationsBank, N.A. (as successor to
NationsBank of Texas, N.A.), as Administrative Agent, and certain Lenders
party thereto (as the same may be amended, modified, restated, or
supplemented from time to time); (f) the occurrence of an "EVENT OF DEFAULT"
under the Credit Agreement dated as of December 23, 1998, among Dobson/Sygnet
Operating Company, as Borrower, NationsBank, N.A., as Administrative Agent,
and certain Lenders party thereto (as the same may be amended, modified,
restated, or supplemented from time to time); or (g) the occurrence of an
"EVENT OF DEFAULT" under the Private Bank Loans; PROVIDED THAT, with respect
to CLAUSES (c), (d), (e), (f), and (g), an "EVENT OF DEFAULT" under any such
identified credit facility shall not be a Default hereunder if such "EVENT OF
DEFAULT" has been waived by the requisite lenders under the applicable
facility or is otherwise consented to under the terms of such agreement.
9.11 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.
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9.12 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 (other than Logix Communications Enterprises, Inc. and its
Subsidiaries).
9.13 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 $250,000 liability during any consecutive
twelve (12) month period.
9.14 DISSOLUTION. Borrower, Sygnet Wireless, Inc., Communications,
any other Company, any Guarantor that is a legal entity, or any Subsidiary of
Communications (other than Logix Communications Enterprises, Inc., and its
Subsidiaries) shall dissolve, liquidate, or otherwise terminate their
existence.
SECTION 10 RIGHTS AND REMEDIES.
10.1 REMEDIES UPON DEFAULT.
(a) If a Default exists under SECTION 9.3(c) or 9.3(d), 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, Lender may do any one or more of the
following: (i) if the maturity of the Obligation has not already been
accelerated under SECTION 10.1(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) reduce any claim to judgment;
(iii) to the extent permitted by Law, exercise the Rights of offset or
banker's Lien against the interest of Borrower or each Guarantor in and to
every account and other property of Borrower or any Guarantor which are in
the possession of Lender to the extent of the full amount of the
Obligation (to the extent permitted by Law, Borrower and each Guarantor
being deemed directly obligated to Lender in the full amount of the
Obligation for such purposes); and (iv) 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 Lender 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 Lender
in any of the Loan Papers.
10.2 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).
10.3 PERFORMANCE BY LENDER. 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,
Lender may, at its option, perform or attempt to perform such covenant, duty,
or agreement on behalf of such Company or Guarantor. In such event, any
amount expended by Lender in such performance or attempted performance shall
be payable by the Companies and
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Guarantors, jointly and severally, to Lender on demand, shall become part of
the Obligation, and shall bear interest at the Default Rate from the date of
such expenditure by Lender until paid. Notwithstanding the foregoing, it is
expressly understood that Lender does 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
Guarantor.
10.4 DELEGATION OF DUTIES AND RIGHTS. Lender may perform any of its
duties or exercise any of its Rights under the Loan Papers by or through its
Representatives.
10.5 NOT IN CONTROL. Nothing in any Loan Paper shall, or shall be
deemed to (a) give Lender the Right to exercise control over the assets
(including real property), affairs, or management of any Company or
Guarantor, (b) preclude or interfere with compliance by any Company or
Guarantor with any Law, or (c) require any act or omission by any Company or
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 Lender acquiesces in any non-compliance by any Company or Guarantor with
any Law or document, or that 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. Lender has no
fiduciary relationship with or fiduciary duty to any Company or Guarantor
arising out of or in connection with the Loan Papers, and the relationship
between Lender, on the one hand, and the Companies and Guarantors, on the
other hand, in connection with the Loan Papers is solely that of debtor and
creditor. The power of Lender 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 Lender in its good faith business judgment.
10.6 COURSE OF DEALING. The acceptance by Lender 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 Lender of any Default
shall be deemed to be a waiver of any other then-existing or subsequent
Default. No delay or omission by Lender 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.
10.7 CUMULATIVE RIGHTS. All Rights available to Lender under the Loan
Papers are cumulative of and in addition to all other Rights granted to
Lender at law or in equity, whether or not the Obligation is due and payable
and whether or not Lender has instituted any suit for collection,
foreclosure, or other action in connection with the Loan Papers.
10.8 APPLICATION OF PROCEEDS. Any and all proceeds ever received by
Lender 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 3.7.
10.9 CERTAIN PROCEEDINGS. Borrower and each Guarantor will promptly
execute and deliver, or cause the execution and delivery of, all
applications, certificates, instruments, registration statements, and all
other documents and papers Lender 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 and Guarantors agree that Lender's remedies at Law
for failure of Borrower or Guarantors 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.
10.10 LIMITATION OF RIGHTS. Notwithstanding any other provision of
this Agreement or any other Loan Paper, any action taken or proposed to be
taken by 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), if applicable,
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.
10.11 EXPENDITURES BY LENDER. Borrower shall promptly pay within
fifteen (15) Business Days after request therefor (a) all reasonable costs,
fees, and expenses paid or incurred by Lender, incident to any Loan Paper
(including, but not limited to, the reasonable fees and expenses of counsel
to Lender 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 Lender incurred by
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.
10.12 INDEMNIFICATION. BORROWER AND EACH GUARANTOR AGREE TO INDEMNIFY
AND HOLD HARMLESS LENDER AND ITS AFFILIATES AND ITS 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 PAPERS, ANY OF
THE TRANSACTIONS CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE
PROCEEDS OF THE TERM LOAN (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 10.12 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, EACH
OTHER COMPANY, 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 TERM LOAN. WITHOUT PREJUDICE TO THE
SURVIVAL OF ANY OTHER AGREEMENT OF THE BORROWER HEREUNDER, THE AGREEMENTS AND
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OBLIGATIONS OF THE BORROWER CONTAINED IN THIS SECTION 10.12 SHALL SURVIVE THE
PAYMENT IN FULL OF THE TERM LOAN AND ALL OTHER AMOUNTS PAYABLE UNDER THIS
AGREEMENT.
SECTION 11 MISCELLANEOUS.
11.1 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.
11.2 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.
11.3 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
each party to this Agreement is the address set forth by such parties'
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 Lender shall also be sent to
Haynes and Boone, LLP, 901 Main Street, Suite 3100, Dallas, Texas 75202,
Fax: 214/651-5940, Attn: Karen S. Nelson.
11.4 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 Lender and its counsel.
11.5 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.
11.6 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 Lender shall
survive termination of this Agreement and payment in full of the Obligation.
11.7 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.
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11.8 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. Lender 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.
11.9 ENTIRETY. THE RIGHTS AND OBLIGATIONS OF THE COMPANIES,
GUARANTORS, AND LENDER 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, AND/OR LENDER, REPRESENT THE FINAL
AGREEMENT BETWEEN THE COMPANIES, THE GUARANTORS, AND LENDER 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.
11.10 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 LENDER
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 11.10 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING, AND THESE WAIVERS SHALL APPLY TO ANY SUBSEQUENT
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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.
11.11 AMENDMENTS, CONSENTS, CONFLICTS, AND WAIVERS.
(a) Any provision of the Loan Papers may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by
Borrower and Lender.
(b) Any conflict or ambiguity between the terms and provisions of
this Agreement and terms and provisions in any other Loan Paper is
controlled by the terms and provisions of this Agreement to the extent
(and only to the extent) of such conflict.
(c) No course of dealing or any failure or delay by Lender, or any
of its Representatives with respect to exercising any Right of Lender
under this Agreement operates as a waiver thereof. A waiver must be in
writing and signed by Lender to be effective, and a waiver will be
effective only in the specific instance and for the specific purpose for
which it is given.
11.12 MULTIPLE COUNTERPARTS. Any Loan Paper 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 thereof, it shall not be necessary to produce or account
for more than one such counterpart. It is not necessary that Borrower and
Lender execute the same counterpart so long as identical counterparts are
executed by Borrower and Lender. This Agreement shall become effective when
counterparts hereof shall have been executed and delivered to Lender by
Borrower.
11.13 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon,
and inure to the benefit of the parties hereto and their respective
successors and assigns, EXCEPT THAT 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 Lender.
11.14 DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN CERTAIN
CIRCUMSTANCES. Borrower's obligations under the Loan Papers remain in full
force and effect until the Obligation is paid in full (except for provisions
under the Loan Papers which by their terms expressly survive payment of the
Obligation and termination of the Loan Papers). If at any time any payment
of the principal of or interest on any Note or any other amount payable by
Borrower, any Company, any Guarantor, or any other obligor on the Obligation
under any Loan Paper is rescinded or must be restored or returned upon the
insolvency, bankruptcy, or reorganization of Borrower, any Company, any
Guarantor, or otherwise, the obligations of Borrower and each Guarantor under
the Loan Papers with respect to that payment shall be reinstated as though
the payment had been due but not made at that time.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
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Signature Page to that certain Term Loan Agreement dated as of December
23, 1998, among Dobson Tower Company, as Borrower, and NationsBank, N.A., as
Lender.
EXECUTED as of the 22nd day of December, 1998, but effective as of the
Closing Date.
Attest: DOBSON TOWER COMPANY
By: /s/ Stephen T. Dobson By: /s/ Everett T. Dobson
---------------------------------- ------------------------------
Name: Stephen T. Dobson Name: Everett R. Dobson
--------------------------- -----------------------
Title: Secretary Title: CEO
-------------------------- ----------------------
Notice Address:
13439 N. Broadway Extn, Ste. 200
- -------------------------------------
Oklahoma City, Oklahoma 73114
- -------------------------------------
Telecopy Number: (405) 391-8765
---------------------
<PAGE>
Signature Page to that certain Term Loan Agreement dated as of December
23, 1998, among Dobson Tower Company, as Borrower, and NationsBank, N.A., as
Lender.
EXECUTED as of the 22nd day of December, 1998, but effective as of the
Closing Date.
NATIONSBANK, N.A.,
AS LENDER
By: /s/ Julie A. Schell
----------------------------------------
Name: Julie A. Schell
----------------------------------
Title: Vice President
----------------------------------
Notice Address:
901 Main Street, 64th floor
- -----------------------------
Dallas, Texas 75202
- -----------------------------
Attn: Julie Schell
Telecopy Number: 214-508-9390
---------------------
<PAGE>
EXHIBIT A
FORM OF TERM NOTE
$17,500,000.00 DECEMBER 23, 1998
FOR VALUE RECEIVED, the undersigned, DOBSON TOWER COMPANY, an Oklahoma
corporation ("BORROWER"), hereby promises to pay to the order of NATIONSBANK,
N.A., a national banking association (together with its permitted successors
or assigns, "LENDER"), on the Maturity Date, the LESSER of (a) SEVENTEEN
MILLION FIVE HUNDRED THOUSAND AND NO/100 ($17,500,000.00) and (b) the
aggregate Principal Debt outstanding and unpaid on the Maturity Date
(TOGETHER WITH accrued and unpaid interest thereon).
This note has been executed and delivered under, and is subject to the
terms of, the Term Loan Agreement, dated as of December , 1998 (as
amended, modified, supplemented, or restated from time to time, the "CREDIT
AGREEMENT"), between Borrower and Lender and is the " NOTE" referred to
therein. Unless defined herein, capitalized terms used herein that are
defined in the Credit Agreement have the meaning given to such terms in the
Credit Agreement. Reference is made to the Credit Agreement for provisions
affecting this note regarding applicable interest rates, principal and
interest payment dates, final maturity, voluntary and mandatory prepayments,
acceleration of maturity, exercise of Rights, payment of attorneys' fees,
court costs, and other costs of collection, certain waivers by Borrower and
others now or hereafter obligated for payment of any sums due hereunder and
security for the payment hereof. Without limiting the immediately preceding
sentence, reference is made to SECTION 3.5 of the Credit Agreement for usury
savings provisions.
THE LAWS (OTHER THAN CONFLICT-OF-LAWS PROVISIONS THEREOF) OF THE STATE
OF TEXAS AND OF THE UNITED STATES OF AMERICA SHALL GOVERN THE RIGHTS AND
DUTIES OF BORROWER AND LENDER AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT,
AND INTERPRETATION HEREOF.
DOBSON TOWER COMPANY
By:
----------------------------------------
Name:
----------------------------------
Title:
----------------------------------
<PAGE>
EXHIBIT B
FORM OF GUARANTY
THIS GUARANTY is executed as of December _____, 1998, by
___________________, a _________ corporation [limited partnership]
[family trust] ("GUARANTOR"), for the benefit of NATIONSBANK, N.A., a
national banking association (together with its permitted successors and
assigns, "LENDER).
WHEREAS, DOBSON TOWER COMPANY, an Oklahoma corporation ("BORROWER") and
Lender have entered into a Term Loan Agreement, dated as of December ,
1998 (as amended, modified, supplemented, or restated from time to time, the
"CREDIT AGREEMENT");
WHEREAS, Guarantor
[has a direct or indirect equity interest in Borrower]
[is a Subsidiary of Borrower] and has received direct or indirect benefit
from the Credit Agreement and the loan thereunder;
WHEREAS, provisions of the Credit Agreement require Guarantor to
execute and deliver to Lender this Guaranty as an inducement to Lender to
enter into the Credit Agreement and extend credit under the Loan Papers.
WHEREAS, this Guaranty is integral to the transactions contemplated by
the Loan Papers and is a condition precedent to Lenders' obligations to
extend credit under the Loan Papers.
ACCORDINGLY, for adequate and sufficient consideration, the receipt and
adequacy of which are hereby acknowledged, Guarantor guarantees to Lender the
prompt payment of the Guaranteed Debt (defined below) as follows:
I. DEFINITIONS. Terms defined in the Credit Agreement have the same
meanings when used, unless otherwise defined, in this Guaranty. As used in
this Guaranty:
BORROWER means Borrower, Borrower as a debtor-in-possession, and any
receiver, trustee, liquidator, conservator, custodian, or similar party
appointed for Borrower or for all or substantially all of Borrower's assets
under any Debtor Relief Law.
CREDIT AGREEMENT is defined in the recitals to this Guaranty.
GUARANTEED DEBT means, collectively, (a) the Obligation and (b) all
present and future costs, attorneys' fees, and expenses reasonably incurred
by Lender to enforce Borrower's, Guarantor's, or any other obligor's payment
of any of the Guaranteed Debt, including, without limitation (to the extent
lawful), all present and future amounts that would become due but for the
operation of Sections 502 or 506 or any other provision of TITLE 11 of the
UNITED STATES CODE and all present and future accrued and unpaid interest
(including, without limitation, all post-maturity interest and any
post-petition interest in any proceeding under Debtor Relief Laws to which
Borrower or Guarantor becomes subject).
GUARANTOR is defined in the preamble to this Guaranty.
LENDER is defined in the preamble to this Guaranty.
SUBORDINATED DEBT means all present and future obligations of any Company
to Guarantor, whether those obligations are (a) direct, indirect, fixed,
contingent, liquidated, unliquidated, joint, several, or joint
EXHIBIT B
<PAGE>
and several, (b) due or to become due to Guarantor, (c) held by or are to be
held by Guarantor, (d) created directly or acquired by assignment or
otherwise, or (e) evidenced in writing.
1. GUARANTY. This is an absolute, irrevocable, and continuing
guaranty, and the circumstance that at any time or from time to time the
Guaranteed Debt may be paid in full does not affect the obligation of
Guarantor with respect to the Guaranteed Debt incurred after that. This
Guaranty remains in effect until the Guaranteed Debt is fully paid and
performed and all commitments to extend any credit under the Loan Papers have
terminated. Guarantor may not rescind or revoke its obligations with respect
to the Guaranteed Debt. Notwithstanding any contrary provision, it is the
intention of Guarantor and Lender that the amount of the Guaranteed Debt
guaranteed by Guarantor by this Guaranty shall be in, but not in excess of,
the maximum amount permitted by fraudulent conveyance, fraudulent transfer,
or similar Laws applicable to Guarantor. Accordingly, notwithstanding
anything to the contrary contained in this Guaranty or any other agreement or
instrument executed in connection with the payment of any of the Guaranteed
Debt, the amount of the Guaranteed Debt guaranteed by Guarantor by this
Guaranty shall be limited to an aggregate amount equal to the largest amount
that would not render Guarantor's obligations hereunder subject to avoidance
under SECTION 548 of the UNITED STATES BANKRUPTCY CODE or any comparable
provision of any applicable state law.
2. CONSIDERATION. Guarantor represents and warrants that its
liability under this Guaranty may reasonably be expected to directly or
indirectly benefit it.
3. CUMULATIVE RIGHTS. If Guarantor becomes liable for any
indebtedness owing by Borrower to Lender, OTHER THAN under this Guaranty,
that liability may not be in any manner impaired or affected by this
Guaranty. The Rights of Lender under this Guaranty are cumulative of any and
all other Rights that Lender may ever have against Guarantor. The exercise
by Lender of any Right under this Guaranty or otherwise does not preclude the
concurrent or subsequent exercise of any other Right.
4. PAYMENT UPON DEMAND. If a Default exists, Guarantor shall, on
demand and without further notice of dishonor and without any notice having
been given to any Guarantor previous to that demand of either the acceptance
by Lender of this Guaranty or the creation or incurrence of any Guaranteed
Debt, pay the amount of the Guaranteed Debt then due and payable to Lender.
It is not necessary for Lender, in order to enforce that payment by any
Guarantor, first or contemporaneously to institute suit or exhaust remedies
against Borrower or others liable on any Guaranteed Debt or to enforce Rights
against any Collateral securing any Guaranteed Debt.
5. SUBORDINATION. The Subordinated Debt is expressly subordinated
to the full and final payment of the Guaranteed Debt. Guarantor agrees not
to accept any payment of any Subordinated Debt from any Company if a Default
exists. If Guarantor receives any payment of any Subordinated Debt in
violation of the foregoing, Guarantor shall hold that payment in trust for
Lender and promptly turn it over to Lender, in the form received (with any
necessary endorsements), to be applied to the Guaranteed Debt.
6. SUBROGATION AND CONTRIBUTION. Until payment in full of the
Guaranteed Debt and the termination of the Obligation under the Loan Papers
(a) Guarantor may not assert, enforce, or otherwise exercise any Right of
subrogation to any of the Rights or Liens of Lender or any other beneficiary
against Borrower or any other obligor on the Guaranteed Debt or any
Collateral or other security or any Right of recourse, reimbursement,
subrogation, contribution, indemnification, or similar Right against Borrower
or any other obligor on any Guaranteed Debt or any guarantor of it, (b)
Guarantor defers all of the foregoing Rights (whether they arise in equity,
under contract, by statute, under common law, or otherwise), and (c)
Guarantor defers the benefit of, and subordinates any Right to participate
in,
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any Collateral or other security given to Lender or any other beneficiary to
secure payment of any Guaranteed Debt.
7. NO RELEASE. Guarantor's obligations under this Guaranty may not
be released, diminished, or affected by the occurrence of any one or more of
the following events: (a) Any taking or accepting of any other security or
assurance for any Guaranteed Debt; (b) any release, surrender, exchange,
subordination, impairment, or loss of any Collateral securing any Guaranteed
Debt; (c) any full or partial release of the liability of any other obligor
on the Obligation, EXCEPT for any final release resulting from payment in
full of such Obligation; (d) the modification of, or waiver of compliance
with, any terms of any other Loan Paper; (e) the insolvency, bankruptcy, lack
of corporate, trust, or partnership power or capacity of any other obligor at
any time liable for any Guaranteed Debt, whether now existing or occurring in
the future; (f) any renewal, extension, or rearrangement of any Guaranteed
Debt or any adjustment, indulgence, forbearance, or compromise that may be
granted or given by Lender to any other obligor on the Obligation; (g) any
neglect, delay, omission, failure, or refusal of Lender to take or prosecute
any action in connection with the Guaranteed Debt or to foreclose, take, or
prosecute any action in connection with any Loan Paper; (h) any failure of
Lender to notify Guarantor of any renewal, extension, or assignment of any
Guaranteed Debt, or the release of any security or of any other action taken
or refrained from being taken by Lender against Borrower or any new agreement
between Lender and Borrower; IT BEING UNDERSTOOD THAT Lender is not required
to give Guarantor any notice of any kind under any circumstances whatsoever
with respect to or in connection with any Guaranteed Debt, OTHER THAN any
notice required to be given to Guarantor by Law or elsewhere in this
Guaranty; (i) the unenforceability of any Guaranteed Debt against any other
obligor or any security securing same because it exceeds the amount permitted
by Law, the act of creating it is ULTRA VIRES, the officers creating it
exceeded their authority or violated their fiduciary duties in connection
with it, or otherwise; or (j) any payment of the Obligation to Lender is held
to constitute a preference under any Debtor Relief Law or for any other
reason Lender is required to refund that payment or make payment to someone
else (and in each such instance this Guaranty will be reinstated in an amount
equal to that payment).
8. WAIVERS. To the maximum extent lawful, Guarantor waives all
Rights by which it might be entitled to require suit on an accrued right of
action in respect of any Guaranteed Debt or require suit against Borrower or
others, whether arising under Section 34.02 of the TEXAS BUSINESS AND
COMMERCE CODE, as amended (regarding its Right to require Lender to sue
Borrower on accrued right of action following its written notice to Lender),
Section 17.001 of the TEXAS CIVIL PRACTICE AND REMEDIES CODE, as amended
(allowing suit against it without suit against Borrower, but precluding entry
of judgment against it before entry of judgment against Borrower), RULE 31 of
the TEXAS RULES OF CIVIL PROCEDURE, as amended (requiring Lender to join
Borrower in any suit against it unless judgment has been previously entered
against Borrower), or otherwise.
9. LOAN PAPERS. By execution hereof, Guarantor covenants and agrees
that certain representations, warranties, terms, covenants, and conditions
set forth in the Loan Papers are applicable to Guarantor and shall be imposed
upon Guarantor, and Guarantor reaffirms that each such representation and
warranty is true and correct and covenants and agrees to promptly and
properly perform, observe, and comply with each such term, covenant, or
condition. Moreover, Guarantor acknowledges and agrees that this Guaranty is
subject to the offset provisions of the Loan Papers in favor of Lender. In
the event the Credit Agreement shall cease to remain in effect for any reason
whatsoever during any period when any part of the Guaranteed Debt remains
unpaid, the terms, covenants, and agreements incorporated herein by reference
shall nevertheless continue in full force and effect as obligations of
Guarantor under this Guaranty.
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10. ADDITIONAL COVENANTS. In addition to the covenants in the Credit
Agreement applicable to Guarantor, each Guarantor that is not a Company (so
long as such Companies are bound by the covenants in the Credit Agreement
relating to Debt and Liens) further covenants and agrees to perform, observe,
and comply with each of the following covenants from the Closing Date and SO
LONG THEREAFTER until the payment in full of the Guaranteed Debt, UNLESS
Guarantor receives a prior written consent to the contrary from Lender:
11.1 DEBT AND GUARANTIES. No Guarantor that is not a Company
shall:
a. Directly or indirectly, create, incur, or suffer to
exist any direct, indirect, fixed, or contingent liability for
any Debt, OTHER THAN:
i. Debt arising by virtue of this Guaranty;
ii. Debt existing on the Closing Date as set forth on
ANNEX A hereto; and
iii. Debt arising under or by virtue of the Private
Bank Loans.
b. Guarantee or assume or agree to become liable in any
way, either directly or indirectly, for any Debt of others,
except (i) this guaranty, (ii) endorsements of checks or
drafts in the ordinary course of business, and (iii) the
obligations of the Guarantor under any guaranties given in
connection with the Private Bank Loans.
11.2 LIENS. No Guarantor that is not a Company shall directly or
indirectly, (a) enter into or permit to exist any arrangement or
agreement which directly or indirectly prohibits such Guarantor from
creating or incurring any Lien on any of its assets, other than the
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 Guarantor;
iii Liens existing on the Closing Date as set forth on
ANNEX B hereto;
iv. 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;
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<PAGE>
v. 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; and
vi. 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: (a) claims
and Liens for Taxes (other than Liens relating to Environmental Laws
or ERISA); (b) 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 (c) claims and Liens of mechanics, materialmen,
warehousemen, carriers, landlords, or other like Liens.
11. RELIANCE AND DUTY TO REMAIN INFORMED. Guarantor confirms that it
has executed and delivered this Guaranty after reviewing the terms and
conditions of the Loan Papers and such other information as it has deemed
appropriate in order to make its own credit analysis and decision to execute
and deliver this Guaranty. Guarantor confirms that it has made its own
independent investigation with respect to Borrower's creditworthiness and is
not executing and delivering this Guaranty in reliance on any representation
or warranty by Lender as to that creditworthiness. Guarantor expressly
assumes all responsibilities to remain informed of the financial condition of
Borrower and any circumstances affecting Borrower's ability to perform under
the Loan Papers to which it is a party or any collateral securing any
Guaranteed Debt.
12. NO REDUCTION. The Guaranteed Debt may not be reduced,
discharged, or released because or by reason of any existing or future
offset, claim, or defense (EXCEPT for the defense of complete and final
payment of the Guaranteed Debt) of Borrower or any other obligor against
Lender or against payment of the Guaranteed Debt, whether that offset, claim,
or defense arises in connection with the Guaranteed Debt or otherwise. Those
claims and defenses include, without limitation, failure of consideration,
breach of warranty, fraud, bankruptcy, incapacity/infancy, statute of
limitations, lender liability, accord and satisfaction, usury, forged
signatures, mistake, impossibility, frustration of purpose, and
unconscionability.
13. COMMUNICATIONS ACT. Notwithstanding any other provision of this
Guaranty, any action taken or proposed to be taken by Lender under this
Guaranty which would affect the operational, voting, or other control of
Borrower or Guarantor, shall be pursuant to SECTION 310(d) of the
COMMUNICATIONS ACT OF 1934 (as amended), if applicable, 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.
14. INSOLVENCY OF GUARANTOR. Should Guarantor become insolvent, or
fail to pay Guarantor's debts generally as they become due, or voluntarily
seek, consent to, or acquiesce in, the benefit or benefits of any Debtor
Relief Law (OTHER THAN as a creditor or claimant), or become a party to (or
be 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 Lender granted hereunder, then, in any such
event, the Guaranteed Debt shall be, as among Guarantor and Lender, a fully
matured, due, and payable obligation of Guarantor to Lender (without regard
to whether Borrower is then in default under the Loan Papers or whether the
Obligation, or any part thereof, is then due and owing by Borrower to any
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Lender), payable in full by Guarantor to Lender upon demand, and the amount
thereof so payable shall be the estimated amount owing in respect of the
contingent claim created hereunder.
15. LOAN PAPER. This Guaranty is a Loan Paper and is subject to the
applicable provisions of SECTIONS 1 and 12 of the Credit Agreement,
including, without limitation, the provisions relating to GOVERNING LAW,
JURISDICTION, VENUE, SERVICE OF PROCESS, AND WAIVER OF JURY TRIAL, all of
which are incorporated into this Guaranty by reference the same as if set
forth in this Guaranty verbatim.
16. COMMUNICATIONS. For purposes of SECTION 12.3 of the Credit
Agreement, Guarantor's address and telecopy number are as set forth next to
Guarantor's signature on the signature page hereof.
17. AMENDMENTS, ETC. No amendment, waiver, or discharge to or under
this Guaranty is valid unless it is in writing and is signed by the party
against whom it is sought to be enforced and is otherwise in conformity with
the requirements of SECTION 12.11 of the Credit Agreement.
18. PARTIES. This Guaranty benefits Lender and its successors and
assigns and binds Guarantor and its successors and assigns. The Rights of
Lender under this Guaranty may be transferred with any assignment of the
Guaranteed Debt. The Credit Agreement contains provisions governing
assignments of the Guaranteed Debt and of Rights and obligations under this
Guaranty.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.]
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EXECUTED as of the date first stated in this Guaranty.
GUARANTOR:
Address:
---------------------
---------------------- By:
---------------------- -----------------------------------
Name:
-------------------------
Telephone: Title:
---------------------- -------------------
Facsimile:
----------------------
SIGNATURE PAGE TO GUARANTY
<PAGE>
EXHIBIT C
FORM OF PLEDGE, ASSIGNMENT, AND SECURITY AGREEMENT
THIS PLEDGE, ASSIGNMENT, AND SECURITY AGREEMENT (the "SECURITY
AGREEMENT") is executed as of December ___, 1998, by ______________________,
a __________ [corporation/partnership] (whether doing business in its own
name or in one or more of the tradenames listed on ANNEX A hereto, "DEBTOR"),
and NATIONSBANK, N.A., a national banking association (in its capacity as
Lender (hereafter defined)) as "SECURED PARTY".
WHEREAS, Dobson Tower Company, an Oklahoma corporation ("BORROWER"),
and NationsBank, N.A., as Lender (including its permitted successors or
assigns in such capacity, "LENDER") have entered into a Term Loan Agreement,
dated as of December ___, 1998 (as amended, modified, supplemented, or
restated from time to time, the "CREDIT AGREEMENT");
WHEREAS, this Security Agreement is integral to the transactions
contemplated by the Loan Papers, and the execution and delivery thereof is a
condition precedent to Secured Party's obligations to extend credit under the
Loan Papers.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Debtor and Secured Party hereby agree as
follows:
2. REFERENCE TO CREDIT AGREEMENT. The terms, conditions, and
provisions of the Credit Agreement are incorporated herein by reference, the
same as if set forth herein verbatim, which terms, conditions, and provisions
shall continue to be in full force and effect hereunder so long as Secured
Party is obligated to lend under the Credit Agreement and thereafter until
the Obligation is paid and performed in full.
3. CERTAIN DEFINITIONS. Unless otherwise defined herein, or the
context hereof otherwise requires, each term defined in the Credit Agreement
or in the UCC is used in this Security Agreement with the same meaning;
PROVIDED THAT, if the definition given to such term in the Credit Agreement
conflicts with the definition given to such term in the UCC, the Credit
Agreement definition shall control to the extent legally allowable; and (c)
if any definition given to such term in CHAPTER 9 of the UCC conflicts with
the definition given to such term in any other chapter of the UCC, the
CHAPTER 9 definition shall prevail. As used herein, the following terms have
the meanings indicated:
COLLATERAL has the meaning set forth in PARAGRAPH 4 hereof.
FCC LICENSES means all Authorizations, licenses, and permits issued
by the FCC to Debtor, if any.
OBLIGATION means, collectively, (a) the "OBLIGATION" as defined in
the Credit Agreement, and (b) all indebtedness, liabilities, and
obligations of Debtor arising under this Security Agreement; it being the
intention and contemplation of Debtor and Secured Party that a single
advance will be made by Secured Party to Borrower for the purposes set
forth in the Credit Agreement, that Debtor may guarantee (or otherwise
become directly or contingently obligated with respect to) the obligations
of others to Secured Party, that from time to time overdrafts of Debtor's
accounts with Secured Party may occur, and that Secured Party may from
time to time acquire from others obligations of Debtor to such others, and
that payment and repayment of all of the foregoing are intended to and
shall be part of the Obligation secured hereby. The Obligation
EXHIBIT C
<PAGE>
shall include, without limitation, future, AS WELL AS existing, advances,
indebtedness, liabilities, and obligations owed by Debtor to Secured Party
arising under the Loan Papers or otherwise.
OBLIGOR means any Person obligated with respect to any of the
Collateral, whether as an account debtor, obligor on an instrument, issuer
of securities, or otherwise.
PARTNERSHIP means any partnership issuing a Partnership Interest.
PLEDGED SECURITIES means, collectively, the Pledged Shares, the
Partnership Interests (whether or not a security), and any other Collateral
constituting securities.
SECURITY INTEREST means the security interest granted and the pledge
and assignment made under PARAGRAPH 3 hereof.
UCC means the Uniform Commercial Code as enacted in the State of
Texas or other applicable jurisdiction, as amended at the time in
question.
4. SECURITY INTEREST. In order to secure the full and complete
payment and performance of the Obligation when due, Debtor hereby grants to
Secured Party a Security Interest in all of Debtor's Rights, titles, and
interests in and to the Collateral and pledges, collaterally transfers, and
assigns the Collateral to Secured Party, all upon and subject to the terms
and conditions of this Security Agreement. Such Security Interest is granted
and pledge and assignment are made as security only and shall not subject
Secured Party to, or transfer or in any way affect or modify, any obligation
of Debtor with respect to any of the Collateral or any transaction involving
or giving rise thereto. The grant contained herein is intended to confer upon
Secured Party all Rights that a secured creditor may obtain and that may be
granted in the FCC Licenses under applicable Law as from time to time in
effect. If the Law is subsequently changed or clarified, or if the FCC's
interpretation of existing Law is changed, to permit or further permit the
granting of such security interests in FCC Licenses, then Debtor's FCC
Licenses, whether now held or hereinafter acquired, shall automatically
become subject to the Secured Party's Security Interest to the maximum extent
permitted by the Law as then in effect. If the grant, pledge, or collateral
transfer or assignment of any specific item of the Collateral is expressly
prohibited by any contract, then the Security Interest created hereby
nonetheless remains effective to the extent allowed by UCC SECTION 9.318 or
other applicable Law, but is otherwise limited by that prohibition.
5. COLLATERAL. As used herein, the term "COLLATERAL" means the
following items and types of property now owned or in the future acquired by
Debtor:
(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 Debtor and
any and all present and future Tax refunds of any kind whatsoever to which
Debtor 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 Debtor, including, without limitation, all capital
stock of the Subsidiaries of Debtor as more particularly listed on ANNEX B
hereto, TOGETHER WITH all distributions thereon, all cash and noncash
proceeds thereof, and any securities issued in substitution or replacement
thereof (collectively, the "PLEDGED SHARES").
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(c) All Rights, titles, and interests of Debtor in and to all
promissory notes and other instruments payable to Debtor, now or hereafter
existing, including, without limitation, any inter-company notes as listed
on ANNEX B (collectively, the "COLLATERAL NOTES"), all Rights, titles,
interests, and Liens Debtor may have, be or become entitled to under all
present and future security agreements, pledge agreements, deeds of trust,
mortgages, guarantees, or other documents assuring or securing payment of
the Collateral Notes (the "COLLATERAL NOTE SECURITY") 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 Debtor in
any partnership or joint venture, including, without limitation, the
partnerships listed on ANNEX B hereof (collectively, the "PARTNERSHIP
INTERESTS").
(e) All present and future Rights, titles, interests, and Liens
(but none of the obligations) now owned or hereafter acquired by Debtor,
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, including the Towers Lease (each such lease herein called an
"ASSIGNED LEASE").
(f) Substantially all of the real estate now owned or hereafter
acquired by Debtor, TOGETHER WITH all improvements thereon and fixtures
attached thereto.
(g) The balance of every deposit account of Debtor and any other
claim of Debtor against any depository, now or hereafter existing, whether
liquidated or unliquidated, including, without limitation, certificates of
deposit, and other deposit instruments (collectively, the "DEPOSIT
ACCOUNTS").
(h) All present and future automobiles, trucks, truck tractors,
trailers, semi-trailers, other motor vehicles or rolling stock, now owned
or hereafter acquired by Debtor (collectively, the "VEHICLES").
(i) All present and future Rights, awards, and judgments to which
Debtor 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 Debtor 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, including,
without limitation, Debtor's trademarks listed on ANNEX B hereto
(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 Debtor 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, including, without limitation, the
patents listed on ANNEX B hereto (collectively, the "PATENTS").
(l) All Authorizations, licenses, and permits issued by the FCC or
any PUC, to the extent that the grant of a security interest in any such
license or permit does not result in the
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forfeiture of, or default under, any such license or permit, and the right
of Debtor to apply to the FCC for approval of transfers of licenses issued
by the FCC.
(m) All proceeds of any sale or other disposition of any
Authorization, license, or permit issued by the FCC or any PUC to Debtor,
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 Debtor 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. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants
to Secured Party that:
(a) CREDIT AGREEMENT. Certain representations and warranties in
the Credit Agreement are applicable to it or its assets or operations, and
each such representation and warranty is true and correct.
(b) BINDING OBLIGATION. This Security Agreement creates a legal,
valid, and binding Lien in and to the Collateral in favor of Secured Party
and enforceable against Debtor. For Collateral in which the Security
Interest may be perfected by the filing of Financing Statements, once
those Financing Statements have been properly filed in the jurisdictions
described on ANNEX A hereto, the Security Interest in that Collateral will
be fully perfected. Once perfected and, in the case of investment
property or instruments, upon possession or "CONTROL" (within the meaning
of SECTIONS 8-106 and 9-115 of the UCC) by Secured Party, the Security
Interest will constitute a first-priority Lien on the Collateral, subject
only to Permitted Liens. The creation of the Security Interest does not
require the consent of any Person that has not been obtained.
(c) LOCATION. Debtor's place of business and chief executive
office is where Debtor is entitled to receive notices hereunder; the
present and foreseeable location of Debtor's books and records concerning
any of the Collateral that is accounts is as set forth on ANNEX A hereto,
and the location of all other Collateral, including, without limitation,
Debtor's inventory and equipment, is as set forth on ANNEX A hereto (but
the failure of such description to be accurate or complete shall not
impair the Security Interest in such Collateral); and, EXCEPT as noted on
ANNEX A hereto, all such books, records, and Collateral are in Debtor's
possession.
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(d) FIXTURES. The Collateral that is or may be fixtures is
located on or affixed to the real property described on ANNEX A hereto
(but the failure of such description to be accurate or complete shall not
impair the Security Interest in such Collateral).
(e) SECURITIES. To the extent any Collateral consists of Pledged
Shares, then all such Pledged Securities are duly authorized, validly
issued, fully paid, and non-assessable, and the transfer thereof is not
subject to any restrictions, other than restrictions imposed by applicable
securities and corporate Laws. The Pledged Shares issued by the
Subsidiaries to Debtor, if any, constitute 100% of the issued and
outstanding common stock or other equity interests of such Subsidiaries.
Debtor has good title to the securities, free and clear of all Liens and
encumbrances thereon (EXCEPT for the Security Interest created hereby),
and has delivered to Secured Party all stock certificates, promissory
notes, bonds, debentures, or other instruments or documents representing
or evidencing the securities, TOGETHER WITH corresponding assignment or
transfer powers duly executed in blank by Debtor, and such powers have
been duly and validly executed and are binding and enforceable against
Debtor in accordance with their terms; and the pledge of the securities in
accordance with the terms hereof creates a valid and perfected first
priority security interest in the securities securing payment of the
Obligation.
(f) PARTNERSHIPS AND PARTNERSHIP INTERESTS. To the extent any
Collateral consists of Partnership Interests, then each Partnership
issuing a Partnership Interest is duly organized, currently existing, and
in good standing under all applicable Laws; there have been no amendments,
modifications, or supplements to any agreement or certificate creating any
Partnership or any material contract relating to the Partnerships, of
which Secured Party has not been advised in writing; no default or
potential default has occurred under the terms of any material contract
relating to any Partnership; and no approval or consent of the partners of
any Partnership is required as a condition to the validity and
enforceability of the Security Interest created hereby or the consummation
of the transactions contemplated hereby which has not been duly obtained
by Debtor. Debtor has good title to the Partnership Interests, if any,
free and clear of all Liens and encumbrances (EXCEPT for the Security
Interest granted hereby). The Partnership Interests, if any, are validly
issued, fully paid, and nonassessable and are not subject to statutory,
contractual, or other restrictions governing their transfer, ownership, or
control, EXCEPT as set forth in the partnership agreements of the
Partnerships or applicable securities Laws.
(g) GOVERNMENTAL AUTHORITY. No authorization, approval, or other
action by, and no notice to or filing with, any Governmental Authority is
required either (i) for the pledge by Debtor of the Pledged Securities
pursuant to this Security Agreement or for the execution, delivery, or
performance of this Security Agreement by Debtor, or (ii) for the exercise
by Secured Party of the voting or other Rights provided for in this
Security Agreement or the remedies in respect of the Collateral pursuant
to this Security Agreement (EXCEPT as may be required in connection with
the disposition of the Pledged Securities by Laws affecting the offering
and sale of securities generally and in connection with the transfer of
control of FCC Licenses).
(h) ACCOUNTS. All Collateral that is accounts, contract Rights,
chattel paper, instruments, or general intangibles is free from any claim
for credit, deduction, or allowance of an Obligor and free from any
defense, dispute, setoff, or counterclaim, and there is no extension or
indulgence with respect thereto.
(i) INSTRUMENTS, CHATTEL PAPER, COLLATERAL NOTES, AND COLLATERAL
NOTE SECURITY. All instruments and chattel paper, including, without
limitation, the Collateral Notes, have been delivered to Secured Party,
TOGETHER WITH corresponding endorsements duly executed by Debtor in favor
of
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Secured Party, and such endorsements have been duly and validly executed
and are binding and enforceable against Debtor in accordance with their
terms. To the extent any Collateral consists of Collateral Notes, then
each Collateral Note and the documents evidencing the Collateral Note
Security are in full force and effect; there have been no renewals or
extensions of, or amendments, modifications, or supplements to, any
thereof about which the Secured Party has not been advised in writing; and
no default or potential default has occurred and is continuing under any
such Collateral Note or documents evidencing the Collateral Note Security,
EXCEPT as disclosed on ANNEX C hereto.
(j) ASSIGNED LEASES. All Collateral that is an Assigned Lease is
in full force and effect; Debtor is in possession of the property covered
by each such Assigned Lease; and no default or potential default exists
under any such Assigned Lease.
(k) MAINTENANCE OF COLLATERAL. All tangible Collateral is in good
repair and condition, ordinary wear and tear excepted, and none thereof is
a fixture EXCEPT as specifically referred to herein in PARAGRAPH 5(d)
hereof.
(l) LIENS. Debtor owns all presently existing Collateral, and
will acquire all hereafter-acquired Collateral, free and clear of all
Liens, EXCEPT Permitted Liens.
(m) DEPOSIT ACCOUNTS. With respect to the Deposit Accounts, (i)
Debtor maintains each such Deposit Account with the banks listed on
ANNEX D hereto, (ii) Debtor shall use its best efforts to, within thirty
(30) days of the Closing Date, cause each such bank to acknowledge to
Secured Party that such Deposit Accounts are subject to the Security
Interest and Liens herein created, (iii) Debtor has the legal right to
pledge and assign to Secured Party the funds deposited and to be deposited
in the Deposit Accounts; and (iv) the Deposit Accounts listed on ANNEX D
represent all material bank accounts of Debtor, including without
limitation, all material operating accounts of Debtor, and all
certificates of deposit or other deposit instruments of Debtor.
The foregoing representations and warranties will be true and correct in all
respects with respect to any additional Collateral or additional specific
descriptions of certain Collateral delivered to Secured Party in the future
by Debtor.
The failure of any of these representations or warranties to be
accurate and complete does not impair the Security Interest in any Collateral.
7. COVENANTS. So long as Secured Party is committed to extend
credit to Debtor under the Credit Agreements and until the Obligation is paid
and performed in full, Debtor covenants and agrees with Secured Party that
Debtor will:
(a) CREDIT AGREEMENT. (i) Comply with, perform, and be bound by
all covenants and agreements in the Credit Agreement that are applicable
to it, its assets, or its operations, each of which is hereby ratified and
confirmed (INCLUDING, WITHOUT LIMITATION, THE INDEMNIFICATION AND RELATED
PROVISIONS IN SECTION 10.12 OF THE CREDIT AGREEMENT); AND (ii) CONSENT TO
AND APPROVE THE VENUE, SERVICE OF PROCESS, AND WAIVER OF JURY TRIAL
PROVISIONS OF SECTION 11.10 OF THE CREDIT AGREEMENT.
(b) RECORD OF COLLATERAL. Maintain, at the place where Debtor is
entitled to receive notices under the Loan Papers, a current record of
where all Collateral is located, permit
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representatives of Secured Party at any time during normal business hours
to inspect and make abstracts from such records, and furnish to Secured
Party, at such intervals as Secured Party may request, such documents,
lists, descriptions, certificates, and other information as may be
necessary or proper to keep Secured Party informed with respect to the
identity, location, status, condition, and value of the Collateral.
(c) PERFORM OBLIGATIONS. Fully perform all of Debtor's duties
under and in connection with each transaction to which the Collateral, or
any part thereof, relates, so that the amounts thereof shall actually
become payable in their entirety to Secured Party.
(d) NOTICES. (i) Promptly notify Secured Party of (A) any change
in any fact or circumstances represented or warranted by Debtor with
respect to any of the Collateral or Obligation, and (B) any claim, action,
or proceeding affecting title to all or any of the Collateral or the
Security Interest and, at the request of Secured Party, appear in and
defend, at Debtor's expense, any such action or proceeding; and (ii) give
Secured Party thirty (30) days written notice before any proposed (A)
relocation of its principal place of business or chief executive office,
(B) change of its name, identity, or corporate structure, (C) relocation
of the place where its books and records concerning its accounts are kept,
and (D) relocation of any Collateral (OTHER THAN delivery of inventory in
the ordinary course of business to third party contractors for processing
and sales of inventory in the ordinary course of business or as permitted
by the Credit Agreement) to a location not described on the attached
ANNEX A. Prior to making any of the changes contemplated in CLAUSE (ii)
preceding, Debtor shall execute and deliver all such additional documents
and perform all additional acts as Secured Party, in its sole discretion,
may request in order to continue or maintain the existence and priority of
the Security Interests in all of the Collateral.
(e) COLLATERAL IN TRUST. Hold in trust (and not commingle with
other assets of Debtor) for Secured Party all Collateral that is chattel
paper, instruments, Collateral Notes, Pledged Securities, or documents at
any time received by Debtor, and promptly deliver same to Secured Party,
unless Secured Party at its option (which may be evidenced only by a
writing signed by Secured Party stating that Secured Party elects to
permit Debtor to so retain) permits Debtor to retain the same, but any
chattel paper, instruments, Collateral Notes, or documents so retained
shall be marked to state that they are assigned to Secured Party; each
such instrument shall be endorsed to the order of Secured Party (but the
failure of same to be so marked or endorsed shall not impair the Security
Interest thereon).
(f) FURTHER ASSURANCES. At Debtor's expense and Secured Party's
request, before or after a Default or Potential Default, (i) file or cause
to be filed such applications and take such other actions as Secured Party
may request to obtain the consent or approval of any Governmental
Authority to Secured Party's Rights hereunder, including, without
limitation, the Right to sell all the Collateral upon a Default or
Potential Default without additional consent or approval from such
Governmental Authority (and, because Debtor agrees that Secured Party's
remedies at Law for failure of Debtor to comply with this provision would
be inadequate and that such failure would not be adequately compensable in
damages, Debtor agrees that its covenants in this provision may be
specifically enforced); (ii) from time to time promptly execute and
deliver to Secured Party all such other assignments, certificates,
supplemental documents, and financing statements, and do all other acts or
things as Secured Party may reasonably request in order to more fully
create, evidence, perfect, continue, and preserve the priority of the
Security Interest; and (iii) pay all filing fees in connection
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with any financing, continuation, or termination statement or other
instrument with respect to the Security Interests, including, without
limitation, any filing fee required in connection with any procedure
hereafter developed for the recordation or registration of Liens or
security interests in FCC Licenses.
(g) FIXTURES. For any Collateral that is a fixture or an
accession which has been attached to real estate or other goods prior to
the perfection of the Security Interest, furnish Secured Party, upon
demand, a disclaimer of interest in each such fixture or accession and a
consent in writing to the Security Interest of Secured Party therein,
signed by all Persons having any interest in such fixture or accession by
virtue of any interest in the real estate or other goods to which such
fixture or accession has been attached.
(h) ESTOPPEL AND OTHER AGREEMENTS AND MATTERS. Either (unless
waived by Secured Party) (i) use commercially reasonable efforts to cause
the landlord or lessor for each location where any of its inventory or
equipment is maintained to execute and deliver to Secured Party an
estoppel and subordination agreement in such form as may be reasonably
acceptable to Secured Party and its counsel, OR (ii) deliver to Secured
Party a legal opinion or other evidence (in each case that is reasonably
satisfactory to Secured Party and it counsel) that neither the applicable
lease nor the Laws of the jurisdiction in which that location is situated
provide for contractual, common law, or statutory landlord's Liens that is
senior to or PARI PASSU with the Security Interest.
(i) CERTIFICATES OF TITLE. Upon the request of Secured Party, if
certificates of title are issued or outstanding with respect to any of the
Vehicles or other Collateral, cause the Security Interest to be properly
noted thereon.
(j) IMPAIRMENT OF COLLATERAL. Not use any of the Collateral, or
permit the same to be used, for any unlawful purpose, in any manner that
is reasonably likely to adversely impair the value or usefulness of the
Collateral, or in any manner inconsistent with the provisions or
requirements of any policy of insurance thereon nor affix or install any
accessories, equipment, or device on the Collateral or on any component
thereof if such addition will impair the original intended function or use
of the Collateral or such component.
(k) MODIFICATIONS TO AGREEMENTS. Not modify or substitute, or
permit the modification or substitution of, any Collateral Note or any
document evidencing the Collateral Note Security or contract to which any
of the Collateral which is accounts relates, nor extend or grant
indulgences regarding any account which is Collateral, other than such
modifications or indulgences as are reasonable and customary in the
industry in which Debtor is engaged.
(l) SECURITIES. Not sell, exchange, or otherwise dispose of, or
grant any option, warrant, or other Right with respect to, any of the
Pledged Shares; cause each Subsidiary not to issue any stock or other
securities in addition to or in substitution for the Pledged Shares issued
by the Subsidiaries, EXCEPT to Debtor; pledge hereunder, immediately upon
Debtor's acquisition (directly or indirectly) thereof, any and all
additional shares of stock or other securities of the Subsidiaries or any
other issuer of Securities issued to Debtor; and take any action
necessary, required, or requested by Secured Party to allow Secured Party
to fully enforce its Security Interest in the Pledged Shares, including,
without limitation, the filing of any claims with any court, liquidator,
trustee, custodian, receiver, or other like person or party.
(m) PARTNERSHIPS AND PARTNERSHIP INTERESTS. (i) Promptly perform,
observe, and otherwise comply with each and every covenant, agreement,
requirement, and condition set forth in the contracts and agreements
creating or relating to any Partnership; (ii) do or cause to be done all
things necessary or appropriate to keep the Partnerships in full force and
effect and the Rights of Debtor
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and Secured Party thereunder unimpaired; (iii) not consent to any
Partnership selling, leasing, or disposing of substantially all of its
assets in a single transaction or a series of transactions; (iv) notify
Secured Party of the occurrence of any default under any contract or
agreement creating or relating to the Partnerships; and not consent to
the amendment, modification, surrender, impairment, forfeiture,
cancellation, dissolution, or termination of any Partnership, or
material agreement relating thereto; (v) not transfer, sell, or assign
any of the Partnership Interests or any part thereof; (vi) cause each
Partnership to refrain from granting any partnership interests in
addition to or in substitution for the Partnership Interests granted by
the Partnerships, EXCEPT to Debtor; (vii) pledge hereunder, immediately
upon Debtor's acquisition (directly or indirectly) thereof, any and all
additional Partnership Interests of any Partnership granted to Debtor;
and (viii) take any action necessary, required, or requested by Secured
Party to allow Secured Party to fully enforce its Security Interest in
the Partnership Interests, including, without limitation, the filing of
any claims with any court, liquidator, trustee, custodian, receiver, or
other like person or party.
(n) DEPOSITORY BANK. With respect to Deposit Accounts,
(i) maintain the Deposit Accounts at the banks (a "DEPOSITORY BANK")
described on ANNEX D or such additional depository banks as have complied
with ITEM (IV) hereof; (ii) within thirty (30) days of the Closing Date,
deliver to each depository bank a letter in the form of ANNEX E hereto
with respect to Secured Party's rights in such Deposit Account and use its
best efforts to obtain the execution of such letter by each depository
bank; (iii) deliver to Secured Party all certificates or instruments, if
any, now or hereafter representing or evidencing the Deposit Accounts,
accompanied by duly executed instruments of transfer or assignment in
blank, all in form and substance satisfactory to Secured Party; and (iv)
notify Secured Party prior to establishing any additional Deposit Accounts
and, at the request of Secured Party, obtain from such depository bank an
executed letter substantially in the form of ANNEX E and deliver the same
to Secured Party.
8. DEFAULT; REMEDIES. If a Default or a Potential Default exists,
Secured Party may, at its election (but subject to the terms and conditions
of the Credit Agreement), exercise any and all Rights available to a secured
party under the UCC, in addition to any and all other Rights afforded by the
Loan Papers, at Law, in equity, or otherwise, including, without limitation,
(a) requiring Debtor to assemble all or part of the Collateral and make it
available to Secured Party at a place to be designated by Secured Party which
is reasonably convenient to Debtor and Secured Party, (b) surrendering any
policies of insurance on all or part of the Collateral and receiving and
applying the unearned premiums as a credit on the Obligation, (c) applying by
appropriate judicial proceedings for appointment of a receiver for all or
part of the Collateral (and Debtor hereby consents to any such appointment),
and (d) applying to the Obligation any cash held by Secured Party under this
Security Agreement, including, without limitation, any cash in the Cash
Collateral Account (defined in SECTION 8(g)). Notwithstanding the foregoing,
Secured Party will not exercise any remedies against the assets of Debtor
unless it has given at least ten days written notification to Debtor and to
the FCC, to the extent such notice is required under 47 C.F.R. 22.937(f).
(a) NOTICE. Reasonable notification of the time and place of any
public sale of the Collateral, or reasonable notification of the time
after which any private sale or other intended disposition of the
Collateral is to be made, shall be sent to Debtor and to any other Person
entitled to notice under the UCC; PROVIDED THAT, if any of the Collateral
threatens to decline speedily in value or is of the type customarily sold
on a recognized market, Secured Party may sell or otherwise dispose of the
Collateral without notification, advertisement, or other notice of any
kind. It is agreed that notice sent or given not less than ten Business
Days prior to the taking of the action to which the notice relates is
reasonable notification and notice for the purposes of this subparagraph.
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(b) SALES OF PLEDGED SECURITIES.
(i) Debtor agrees that, because of the Securities Act of
1933, as amended, or the rules and regulations promulgated
thereunder (collectively, the "SECURITIES ACT"), or any other Laws
or regulations, and for other reasons, there may be legal or
practical restrictions or limitations affecting Secured Party in any
attempts to dispose of certain portions of the Pledged Securities
and for the enforcement of its Rights. For these reasons, Secured
Party is hereby authorized by Debtor, but not obligated, upon the
occurrence and during the continuation of a Default or Potential
Default, to sell all or any part of the Pledged Securities at
private sale, subject to investment letter or in any other manner
which will not require the Pledged Securities, or any part thereof,
to be registered in accordance with the Securities Act or any other
Laws or regulations, at a reasonable price at such private sale or
other distribution in the manner mentioned above. Debtor understands
that Secured Party may in its discretion approach a limited number
of potential purchasers and that a sale under such circumstances may
yield a lower price for the Pledged Securities, or any part thereof,
than would otherwise be obtainable if such Collateral were either
afforded to a larger number or potential purchasers, registered
under the Securities Act, or sold in the open market. Debtor agrees
that any such private sale made under this PARAGRAPH 7(b) shall be
deemed to have been made in a commercially reasonable manner, and
that Secured Party has no obligation to delay the sale of any
Pledged Securities to permit the issuer thereof to register it for
public sale under any applicable federal or state securities Laws.
(ii) Secured Party is authorized, in connection with any such
sale, (A) to restrict the prospective bidders on or purchasers of
any of the Pledged Securities to a limited number of sophisticated
investors who will represent and agree that they are purchasing for
their own account for investment and not with a view to the
distribution or sale of any of such Pledged Securities, and (B) to
impose such other limitations or conditions in connection with any
such sale as Secured Party reasonably deems necessary in order to
comply with applicable Law. Debtor covenants and agrees that it
will execute and deliver such documents and take such other action
as Secured Party reasonably deems necessary in order that any such
sale may be made in compliance with applicable Law. Upon any such
sale Secured Party shall have the right to deliver, assign, and
transfer to the purchaser thereof the Pledged Securities so sold.
Each purchaser at any such sale shall hold the Pledged Securities so
sold absolutely free from any claim or Right of Debtor of whatsoever
kind, including any equity or right of redemption of Debtor.
Debtor, to the extent permitted by applicable Law, hereby
specifically waives all rights of redemption, stay, or appraisal
which it has or may have under any Law now existing or hereafter
enacted.
(iii) Debtor agrees that five days' written notice from
Secured Party to Debtor of Secured Party's intention to make any
such public or private sale or sale at a broker's board or on a
securities exchange shall constitute "REASONABLE NOTIFICATION"
within the meaning of SECTION 9-504(c) of the UCC. Such notice
shall (A) in case of a public sale, state the time and place fixed
for such sale, (B) in case of sale at a broker's board or on a
securities exchange, state the board or exchange at which such a
sale is to be made and the day on which the Pledged Securities, or
the portion thereof so being sold, will first be offered to sale at
such board or exchange, and (C) in the case of a private sale, state
the day after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary business
hours and at such place or places as Secured Party may fix in the
notice of such sale. At any such sale, the Pledged Securities may
be sold in one lot as an entirety or in separate parcels, as Secured
Party may reasonably determine. Secured
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Party shall not be obligated to make any such sale pursuant to any
such notice. Secured Party may, without notice or publication,
adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place
to which the same may be so adjourned.
(iv) In case of any sale of all or any part of the Pledged
Securities on credit or for future delivery, the Pledged Securities
so sold may be retained by Secured Party until the selling price is
paid by the purchaser thereof, but Secured Party shall not incur any
liability in case of the failure of such purchaser to take up and
pay for the Pledged Securities so sold and in case of any such
failure, such Pledged Securities may again be sold upon like notice.
Secured Party, instead of exercising the power of sale herein
conferred upon it, may proceed by a suit or suits at law or in
equity to foreclose the Security Interests and sell the Pledged
Securities, or any portion thereof, under a judgment or decree of a
court or courts of competent jurisdiction.
(v) Without limiting the foregoing, or imposing upon Secured
Party any obligations or duties not required by applicable Law,
Debtor acknowledges and agrees that, in foreclosing upon any of the
Pledged Securities, or exercising any other Rights or remedies
provided Secured Party hereunder or under applicable Law, Secured
Party may, but shall not be required to, (A) qualify or restrict
prospective purchasers of the Pledged Securities by requiring
evidence of sophistication or creditworthiness, and requiring the
execution and delivery of confidentiality agreements or other
documents and agreements as a condition to such prospective
purchasers' receipt of information regarding the Pledged Securities
or participation in any public or private foreclosure sale process,
(B) provide to prospective purchasers business and financial
information regarding the Companies available in the files of
Secured Party at the time of commencing the foreclosure process,
without the requirement that Secured Party obtain, or seek to
obtain, any updated business or financial information or verify, or
certify to prospective purchasers, the accuracy of any such business
or financial information, or (C) offer for sale and sell the Pledged
Securities with, or without, first employing an appraiser,
investment banker, or broker with respect to the evaluation of the
Pledged Securities, the solicitation of purchasers for Pledged
Securities, or the manner of sale of Pledged Securities.
(c) APPLICATION OF PROCEEDS. Secured Party shall apply the
proceeds of any sale or other disposition of the Collateral under this
PARAGRAPH 7 in the following order: FIRST, to the payment of all expenses
incurred in retaking, holding, and preparing any of the Collateral for
sale(s) or other disposition, in arranging for such sale(s) or other
disposition, and in actually selling or disposing of the same (all of
which are part of the Obligation); SECOND, toward repayment of amounts
expended by Secured Party under PARAGRAPH 8; THIRD, toward payment of the
balance of the Obligation in the order and manner specified in the Credit
Agreement. Any surplus remaining shall be delivered to Debtor or as a
court of competent jurisdiction may direct. If the proceeds are
insufficient to pay the Obligation in full, Debtor shall remain liable for
any deficiency.
9. OTHER RIGHTS OF SECURED PARTY.
(a) PERFORMANCE. If Debtor fails to keep the Collateral in good
repair, working order, and condition, as required in this Security
Agreement, or fails to pay when due all Taxes on any of the Collateral in
the manner required by the Loan Papers, or fails to preserve the priority
of the Security Interest in any of the Collateral, or fails to keep the
Collateral insured as required by this
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Security Agreement, or otherwise fails to perform any of its obligations
under the Loan Papers with respect to the Collateral, then Secured Party
may, at its option, but without being required to do so, make such
repairs, pay such Taxes, prosecute or defend any suits in relation to the
Collateral, or insure and keep insured the Collateral in any amount
deemed appropriate by Secured Party, or take all other action which
Debtor is required, but has failed or refused, to take under the Loan
Papers. Any sum which may be expended or paid by Secured Party under
this subparagraph (including, without limitation, court costs and
attorneys' fees) shall bear interest from the dates of expenditure or
payment at the Default Rate until paid and, TOGETHER WITH such interest,
shall be payable by Debtor to Secured Party upon demand and shall be part
of the Obligation.
(b) COLLECTION. If a Default or Potential Default exists and upon
notice from Secured Party, each Obligor with respect to any payments on
any of the Collateral (including, without limitation, dividends and other
distributions with respect to securities, payments on Collateral Notes,
insurance proceeds payable by reason of loss or damage to any of the
Collateral, or Deposit Accounts) is hereby authorized and directed by
Debtor to make payment directly to Secured Party, regardless of whether
Debtor was previously making collections thereon. Subject to
PARAGRAPH 8(e) hereof, until such notice is given, Debtor is authorized to
retain and expend all payments made on Collateral. If a Default or
Potential Default exists, Secured Party shall have the Right in its own
name or in the name of Debtor to compromise or extend time of payment with
respect to all or any portion of the Collateral for such amounts and upon
such terms as Secured Party may determine; to demand, collect, receive,
receipt for, sue for, compound, and give acquittances for any and all
amounts due or to become due with respect to Collateral; to take control
of cash and other proceeds of any Collateral; to endorse the name of
Debtor on any notes, acceptances, checks, drafts, money orders, or other
evidences of payment on Collateral that may come into the possession of
Secured Party; to sign the name of Debtor on any invoice or bill of lading
relating to any Collateral, on any drafts against Obligors or other
Persons making payment with respect to Collateral, on assignments and
verifications of accounts or other Collateral and on notices to Obligors
making payment with respect to Collateral; to send requests for
verification of obligations to any Obligor; and to do all other acts and
things necessary to carry out the intent of this Security Agreement. If a
Default or Potential Default exists and any Obligor fails or refuses to
make payment on any Collateral when due, Secured Party is authorized, in
its sole discretion, either in its own name or in the name of Debtor, to
take such action as Secured Party shall deem appropriate for the
collection of any amounts owed with respect to Collateral or upon which a
delinquency exists. Regardless of any other provision hereof, however,
Secured Party shall never be liable for its failure to collect, or for its
failure to exercise diligence in the collection of, any amounts owed with
respect to Collateral, nor shall it be under any duty whatsoever to anyone
EXCEPT Debtor to account for funds that it shall actually receive
hereunder. Without limiting the generality of the foregoing, Secured Party
shall have no responsibility for ascertaining any maturities, calls,
conversions, exchanges, offers, tenders, or similar matters relating to
any Collateral, or for informing Debtor with respect to any of such
matters (irrespective of whether Secured Party actually has, or may be
deemed to have, knowledge thereof). The receipt of Secured Party to any
Obligor shall be a full and complete release, discharge, and acquittance
to such Obligor, to the extent of any amount so paid to Secured Party.
(c) RECORD OWNERSHIP OF SECURITIES. If a Default or Potential
Default exists, Secured Party at any time may have any Collateral that is
Pledged Securities and that is in the possession of Secured Party, or its
nominee or nominees, registered in its name, or in the name of its nominee
or nominees, as pledgee; and, as to any Pledged Securities so registered,
Debtor shall execute and deliver (or cause to be executed and delivered)
to Secured Party all such proxies, powers of attorney, dividend coupons or
orders, and other documents as Secured Party may reasonably request for
the purpose of enabling Secured Party to exercise the voting Rights and
powers which it is entitled to
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exercise under this Security Agreement or to receive the dividends and
other payments in respect of such Collateral that is Pledged Securities
which it is authorized to receive and retain under this Security
Agreement.
(d) VOTING OF SECURITIES. As long as neither a Default nor
Potential Default exists, Debtor is entitled to exercise all voting Rights
pertaining to any Collateral that is Pledged Securities. If a Default or
Potential Default exists and if Secured Party elects to exercise such
Right, the Right to vote any Collateral that is Pledged Securities shall
be vested exclusively in Secured Party. To this end, Debtor hereby
irrevocably constitutes and appoints Secured Party the proxy and attorney-
in-fact of Debtor, with full power of substitution, to vote, and to act
with respect to, any and all Collateral that is Pledged Securities
standing in the name of Debtor or with respect to which Debtor is entitled
to vote and act, subject to the understanding that such proxy may not be
exercised unless a Default exists. The proxy herein granted is coupled
with an interest, is irrevocable, and shall continue until the Obligation
has been paid and performed in full.
(e) CERTAIN PROCEEDS. Notwithstanding any contrary provision
herein, any and all stock dividends or distributions in property made on
or in respect of any Pledged Securities, and any proceeds of any Pledged
Securities, whether such dividends, distributions, or proceeds result from
a subdivision, combination, or reclassification of the outstanding capital
stock of any issuer thereof or as a result of any merger, consolidation,
acquisition, or other exchange of assets to which any issuer may be a
party, or otherwise, shall be part of the Collateral hereunder, shall, if
received by Debtor, be held in trust for the benefit of Secured Party, and
shall forthwith be delivered to Secured Party (accompanied by proper
instruments of assignment and/or stock and/or bond powers executed by
Debtor in accordance with Secured Party's instructions) to be held subject
to the terms of this Security Agreement. Any cash proceeds of Collateral
which come into the possession of Secured Party (including, without
limitation, insurance proceeds) may, at Secured Party's option, be applied
in whole or in part to the Obligation (to the extent then due), be
released in whole or in part to or on the written instructions of Debtor
for any general or specific purpose, or be retained in whole or in part by
Secured Party as additional Collateral. Any cash Collateral in the
possession of Secured Party may be invested by Secured Party in
certificates of deposit issued by Secured Party (if Secured Party issues
such certificates) or by any state or national bank having combined
capital and surplus greater than $100,000,000 with a rating from Moody's
and S&P of P-1 and A-1+, respectively, or in securities issued or
guaranteed by the United States of America or any agency thereof. Secured
Party shall never be obligated to make any such investment and shall never
have any liability to Debtor for any loss which may result therefrom. All
interest and other amounts earned from any investment of Collateral may be
dealt with by Secured Party in the same manner as other cash Collateral.
The provisions of this subparagraph are applicable whether or not a
Default or Potential Default exists.
(f) USE AND OPERATION OF COLLATERAL. Should any Collateral come
into the possession of Secured Party, Secured Party may use or operate
such Collateral for the purpose of preserving it or its value pursuant to
the order of a court of appropriate jurisdiction or in accordance with any
other Rights held by Secured Party in respect of such Collateral. Debtor
covenants to promptly reimburse and pay to Secured Party, at Secured
Party's request, the amount of all reasonable expenses (including, without
limitation, the cost of any insurance and payment of Taxes or other
charges) incurred by Secured Party in connection with its custody and
preservation of Collateral, and all such expenses, costs, Taxes, and other
charges shall bear interest at the Default Rate until repaid and, TOGETHER
WITH such interest, shall be payable by Debtor to Secured Party upon
demand and shall become part of the Obligation. However, the risk of
accidental loss or damage to, or diminution in value of, Collateral is on
Debtor, and Secured Party shall have no liability whatever for failure to
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obtain or maintain insurance, nor to determine whether any insurance ever
in force is adequate as to amount or as to the risks insured. With respect
to Collateral that is in the possession of Secured Party, Secured Party
shall have no duty to fix or preserve Rights against prior parties to such
Collateral and shall never be liable for any failure to use diligence to
collect any amount payable in respect of such Collateral, but shall be
liable only to account to Debtor for what it may actually collect or
receive thereon. The provisions of this subparagraph are applicable
whether or not a Default exists.
(g) CASH COLLATERAL ACCOUNT. If a Default exists, Secured Party
shall have, and Debtor hereby grants to Secured Party, the Right and
authority to transfer all funds on deposit in the Deposit Accounts to a
CASH COLLATERAL ACCOUNT (herein so called) maintained with a depository
institution acceptable to Secured Party and subject to the exclusive
direction, domain, and control of Secured Party, and no disbursements or
withdrawals shall be permitted to be made by Debtor from such Cash
Collateral Account. Such Cash Collateral Account shall be subject to the
Security Interest and Liens in favor of Secured Party herein created, and
Debtor hereby grants a security interest to Secured Party in and to, such
Cash Collateral Account and all checks, drafts, and other items ever
received by Debtor for deposit therein. Furthermore, if a Default exists,
Secured Party shall have the Right, at any time in its discretion without
notice to Debtor, (i) to transfer to or to register in the name of Secured
Party or nominee any certificates of deposit or deposit instruments
constituting Deposit Accounts and shall have the Right to exchange such
certificates or instruments representing Deposit Accounts for certificates
or instruments of smaller or larger denominations and (ii) to take and
apply against the Obligation any and all funds then or thereafter on
deposit in the Cash Collateral Account or otherwise constituting Deposit
Accounts.
(h) POWER OF ATTORNEY. Debtor hereby irrevocably constitutes and
appoints Secured Party as Debtor's attorney-in-fact, with full irrevocable
power and authority in the place and stead of Debtor and in the name of
Debtor, Secured Party or otherwise, from time to time in Secured Party's
discretion, for the sole purpose of carrying out the terms of this
Security Agreement and, to the extent permitted by applicable Law, to take
any action and to execute any document and instrument which Secured Party
may deem necessary or advisable to accomplish the following when a Default
exists:
(i) to transfer any and all funds on deposit in the Deposit
Accounts to the Cash Collateral Account as set forth in herein;
(ii) to receive, endorse, and collect any drafts or other
instruments or documents in connection with CLAUSE (b) above and
this CLAUSE (g);
(iii) to use the Patents and Trademarks or to grant or issue
any exclusive or non-exclusive license under the Patents and
Trademarks to anyone else, and to perform any act necessary for the
Secured Party to assign, pledge, convey, or otherwise transfer title
in or dispose of the Patents and Trademarks to any other Person; and
(iv) to execute on behalf of Debtor any continuation
statement with respect to the Security Interests created hereby, and
to do any and all acts and things to protect and preserve the
Collateral, including, without limitation, the protection and
prosecution of all Rights included in the Collateral.
(i) PURCHASE MONEY COLLATERAL. To the extent that Secured Party
has advanced or will advance funds to or for the account of Debtor to
enable Debtor to purchase or otherwise acquire Rights in Collateral,
Secured Party, at its option, may pay such funds (i) directly to the
Person from whom Debtor will make such purchase or acquire such Rights, or
(ii) to Debtor, in which case Debtor
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covenants to promptly pay the same to such Person, and forthwith furnish
to Secured Party evidence satisfactory to Secured Party that such
payment has been made from the funds so provided.
(j) SUBROGATION. If any of the Obligation is given in renewal or
extension or applied toward the payment of indebtedness secured by any
Lien, Secured Party shall be, and is hereby, subrogated to all of the
Rights, titles, interests, and Liens securing the indebtedness so renewed,
extended, or paid.
(k) INDEMNIFICATION. DEBTOR HEREBY ASSUMES ALL LIABILITY FOR THE
COLLATERAL, FOR THE SECURITY INTEREST, AND FOR ANY USE, POSSESSION,
MAINTENANCE, AND MANAGEMENT OF, ALL OR ANY OF THE COLLATERAL, INCLUDING,
WITHOUT LIMITATION, ANY TAXES ARISING AS A RESULT OF, OR IN CONNECTION
WITH, THE TRANSACTIONS CONTEMPLATED HEREIN, AND AGREES TO ASSUME LIABILITY
FOR, AND TO INDEMNIFY AND HOLD SECURED PARTY HARMLESS FROM AND AGAINST,
ANY AND ALL CLAIMS, CAUSES OF ACTION, OR LIABILITY, FOR INJURIES TO OR
DEATHS OF PERSONS AND DAMAGE TO PROPERTY, HOWSOEVER ARISING FROM OR
INCIDENT TO SUCH USE, POSSESSION, MAINTENANCE, AND MANAGEMENT, WHETHER
SUCH PERSONS BE AGENTS OR EMPLOYEES OF DEBTOR OR OF THIRD PARTIES, OR SUCH
DAMAGE BE TO PROPERTY OF DEBTOR OR OF OTHERS. DEBTOR AGREES TO INDEMNIFY,
SAVE, AND HOLD SECURED PARTY HARMLESS FROM AND AGAINST, AND COVENANTS TO
DEFEND SECURED PARTY AGAINST, ANY AND ALL LOSSES, DAMAGES, CLAIMS, COSTS,
PENALTIES, LIABILITIES, AND EXPENSES (COLLECTIVELY, "CLAIMS"), INCLUDING,
WITHOUT LIMITATION, COURT COSTS AND ATTORNEYS' FEES, AND ANY OF THE
FOREGOING ARISING FROM THE NEGLIGENCE OF SECURED PARTY, OR ANY OF THEIR
RESPECTIVE OFFICERS, EMPLOYEES, AGENTS, ADVISORS, EMPLOYEES, OR
REPRESENTATIVES, HOWSOEVER ARISING OR INCURRED BECAUSE OF, INCIDENT TO, OR
WITH RESPECT TO COLLATERAL OR ANY USE, POSSESSION, MAINTENANCE, OR
MANAGEMENT THEREOF; PROVIDED, HOWEVER, THAT THE INDEMNITY SET FORTH IN
THIS PARAGRAPH 8(K) WILL NOT APPLY TO CLAIMS CAUSED BY THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT OF SECURED PARTY.
10. ACKNOWLEDGMENT OF REGULATORY CONSIDERATIONS
To the extent any of the Collateral consists of FCC Licenses, the
following provisions shall apply:
(a) NO PROHIBITED TRANSFERS. It is hereby acknowledged that
assignment or transfer of control of the FCC Licenses without the prior
approval of the FCC may constitute a prohibited transfer in violation of
FCC rules and regulations. Secured Party agrees that exercise of its
Rights hereunder, including transfer of FCC Licenses upon the occurrence
of a Default or Potential Default, shall be effected only after the
obtaining of any necessary approvals for such exercise.
(b) ACTIONS BY DEBTOR. If counsel to Secured Party reasonably
determines that the consent of the FCC is required in connection with any
of the actions which may be taken by Secured Party in the exercise of
their Rights hereunder or under the Loan Papers, then Debtor, at its sole
cost and expense, agrees to use its best efforts to secure such consent
and to cooperate with Secured Party in any action commenced by Secured
Party to secure such consent and in such case Debtor shall retain control
of its respective FCC Licenses until the FCC shall have granted its
consent to the transfer of the FCC Licenses and related permits. Upon the
occurrence and during the continuation of a Default or Potential Default,
Debtor shall promptly execute or cause the execution of all applications,
certificates, instruments, and other documents and papers that the Secured
Party may be required to file in order to obtain any necessary
governmental consent, approval, or authorization, and if Debtor fails or
refuses to execute such documents, then, on the order of any court of
competent
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jurisdiction, the Clerk of the Court with jurisdiction may execute such
documents on behalf of Debtor. In addition, Debtor shall execute such
applications and other documents and will take such other action as may
be required in order for Secured Party to obtain from the FCC consent to
operate the Towers, through a receiver or otherwise, during the time the
Secured Party seeks to obtain a purchaser for the Towers and to submit
any sale of the Towers to the FCC for approval. Debtor recognizes that
FCC Licenses, franchises, and other similar agreements or authorizations
are unique assets which (or the control of which) may have to be
transferred in order for Secured Party adequately to realize the value
of their Security Interests. Debtor further recognizes that a violation
of this covenant would result in irreparable harm to Secured Party for
which monetary damages are not readily ascertainable and which might not
fully compensate Secured Party. Therefore, in addition to any other
remedy which may be available to Secured Party, at Law or in equity,
Secured Party shall have the remedy of specific performance of the
provisions of this subsection.
(c) FCC APPROVAL. Notwithstanding anything to the contrary
contained in this Security Agreement, Secured Party will not take any
action pursuant to this Security Agreement or any of the documents
executed pursuant hereto which would constitute an assignment of an FCC
License or any transfer of control of an FCC License if such assignment of
license or transfer of control would require under then-existing Law
(including the written rules and regulations promulgated by the FCC or
such other regulatory authority with jurisdiction) the prior approval of
the FCC or such other regulatory authority with jurisdiction, without
first obtaining such approval. Debtor agrees to take, or cause to be
taken, any action which Secured Party may reasonably request in order to
obtain and enjoy the full Rights and benefits granted to Secured Party by
this Security Agreement and any other instruments or agreements executed
pursuant hereto, including, without limitation, at Debtor's cost and
expense, the exercise of its best efforts to cooperate in obtaining FCC
approval of any action or transaction contemplated by this Security
Agreement or any other instrument or agreement executed pursuant hereto
which is then required by Law.
(d) SUBSEQUENT ACTIONS BY DEBTOR. Debtor agrees that if, for any
reason, the FCC or any such other regulatory authority with jurisdiction
does not approve within a reasonable period of time the initial
application for approval of the transfer of the FCC Licenses, then
PARAGRAPHS 9(B) and (C) above hereof shall be applicable to any subsequent
application for transfer of the FCC Licenses pursuant to action taken by
Secured Party in the exercise of its Rights hereunder or under the Loan
Papers. With respect to each subsequent proposed purchaser(s), Debtor
agrees to execute all such applications and other documents and take all
such other action as may be reasonably requested by Secured Party at any
time and from time to time in order to obtain the approval by the FCC or
any other regulatory authorities. Exercise by Secured Party of the Right
to such cooperation shall not be exhausted by the initial or any
subsequent exercise thereof.
11. MISCELLANEOUS.
(a) CONTINUING SECURITY INTEREST. This Security Agreement creates
a continuing security interest in the Collateral and shall (i) remain in
full force and effect until the termination of the obligations of Secured
Party to advance Borrowings under the Credit Agreement and the payment in
full of the Obligation; (ii) be binding upon Debtor, its successors, and
assigns; and (iii) inure to the benefit of and be enforceable by the
Secured Party, and its respective successors, transferees, and assigns.
Without limiting the generality of the foregoing CLAUSE (III), the Secured
Party may assign or otherwise transfer any of their respective Rights
under this agreement to any other Person, and to the extent of such
assignment or transfer such Person shall thereupon become vested with all
the Rights and benefits in respect thereof granted herein or otherwise to
the Secured Party. Upon payment in full of the Obligation and the
termination of the commitment of Secured Party to extend
16
<PAGE>
credit, Debtor shall be entitled to the return, upon its request and at
its expense, of such of the Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof.
(b) REFERENCE TO MISCELLANEOUS PROVISIONS. This Security
Agreement is one of the "LOAN PAPERS" referred to in the Credit Agreement,
and all provisions relating to Loan Papers set forth in SECTION 11 of the
Credit Agreement, other than the provisions set forth in SECTIONS 11.7,
are incorporated herein by reference, the same as if set forth herein
verbatim.
(c) TERM. Upon full and final payment and performance of the
Obligation, this agreement shall thereafter terminate upon receipt by
Secured Party of Debtor's written notice of such termination; PROVIDED
THAT no Obligor, if any, on any of the Collateral shall ever be obligated
to make inquiry as to the termination of this agreement, but shall be
fully protected in making payment directly to Secured Party until actual
notice of such total payment of the Obligation is received by such
Obligor.
(d) ACTIONS NOT RELEASES. The Security Interest and Debtor's
obligations and Secured Party's Rights hereunder shall not be released,
diminished, impaired, or adversely affected by the occurrence of any one
or more of the following events: (i) the taking or accepting of any other
security or assurance for any or all of the Obligation; (ii) any release,
surrender, exchange, subordination, or loss of any security or assurance
at any time existing in connection with any or all of the Obligation;
(iii) the modification of, amendment to, or waiver of compliance with any
terms of any of the other Loan Papers without the notification or consent
of Debtor, EXCEPT as required therein (the Right to such notification or
consent being herein specifically waived by Debtor); (iv) the insolvency,
bankruptcy, or lack of corporate or trust power of any party at any time
liable for the payment of any or all of the Obligation, whether now
existing or hereafter occurring; (v) any renewal, extension, or
rearrangement of the payment of any or all of the Obligation, either with
or without notice to or consent of Debtor, or any adjustment, indulgence,
forbearance, or compromise that may be granted or given by Secured Party
to Debtor; (vi) any neglect, delay, omission, failure, or refusal of
Secured Party to take or prosecute any action in connection with any other
agreement, document, guaranty, or instrument evidencing, securing, or
assuring the payment of all or any of the Obligation; (vii) any failure of
Secured Party to notify Debtor of any renewal, extension, or assignment of
the Obligation or any part thereof, or the release of any security, or of
any other action taken or refrained from being taken by Secured Party
against Debtor or any new agreement between Secured Party and Debtor, IT
BEING UNDERSTOOD THAT Secured Party shall not be required to give Debtor
any notice of any kind under any circumstances whatsoever with respect to
or in connection with the Obligation, including, without limitation,
notice of acceptance of this Security Agreement or any Collateral ever
delivered to or for the account of Secured Party hereunder; (viii) the
illegality, invalidity, or unenforceability of all or any part of the
Obligation against any party obligated with respect thereto by reason of
the fact that the Obligation, or the interest paid or payable with respect
thereto, exceeds the amount permitted by Law, the act of creating the
Obligation, or any part thereof, is ULTRA VIRES, or the officers,
partners, or trustees creating same acted in excess of their authority, or
for any other reason; or (ix) if any payment by any party obligated with
respect thereto is held to constitute a preference under applicable Laws
or for any other reason Secured Party is required to refund such payment
or pay the amount thereof to someone else.
(e) WAIVERS. EXCEPT to the extent expressly otherwise provided
herein or in other Loan Papers and to the fullest extent permitted by
applicable Law, Debtor waives (i) any Right to require Secured Party to
proceed against any other Person, to exhaust its Rights in Collateral, or
to pursue any other Right which Secured Party may have; (ii) with respect
to the Obligation, presentment and demand for payment, protest, notice of
protest and nonpayment, and notice of the intention to accelerate; and
(iii) all Rights of marshaling in respect of any and all of the
Collateral.
17
<PAGE>
(f) FINANCING STATEMENT. Secured Party shall be entitled at any
time to file this agreement or a carbon, photographic, or other
reproduction of this agreement, as a financing statement, but the failure
of Secured Party to do so shall not impair the validity or enforceability
of this agreement.
(g) AMENDMENTS. This instrument may be amended only by an
instrument in writing executed jointly by Debtor and Secured Party, and
supplemented only by documents delivered or to be delivered in accordance
with the express terms hereof.
(h) MULTIPLE COUNTERPARTS. This Security Agreement has been
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 Security
Agreement, it shall not be necessary to produce or account for more than
one such counterpart.
(i) PARTIES BOUND; ASSIGNMENT. This Security Agreement shall be
binding on Debtor and Debtor's heirs, legal representatives, successors,
and assigns and shall inure to the benefit of Secured Party and Secured
Party's successors and assigns, EXCEPT THAT, Debtor may not, without the
prior written consent of Secured Party, assign any Rights, duties, or
obligations hereunder.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AS TO ITS
VALIDITY, INTERPRETATION, AND EFFECT IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND
EXCEPT IF THE VALIDITY OR PERFECTION OF THE SECURITY INTERESTS HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.
UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL TERMS USED HEREIN WHICH ARE
DEFINED IN THE UNIFORM COMMERCIAL CODE AS ENACTED IN THE STATE OF TEXAS
SHALL HAVE THE MEANINGS THEREIN STATED.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE TO FOLLOW.
18
<PAGE>
EXECUTED as of the date first stated in this Pledge, Assignment, and
Security Agreement.
___________________________, ATTEST: (Seal)
as Debtor
By: ______________________________ ________________________________
Name: _______________________ Secretary/Assistant Secretary
Title: _______________________ of Debtor
_____________________________
Printed Name
WITNESSED:
_____________________________
Name: _______________________
_____________________________
Name: _______________________
NATIONSBANK, N.A., WITNESSED:
as Secured Party
By: ____________________________ _____________________________
Name: _____________________ Name: _______________________
Title: _____________________
_____________________________
Name: _______________________
SIGNATURE PAGE TO PLEDGE, ASSIGNMENT, AND SECURITY AGREEMENT
<PAGE>
EXHIBIT D-1
FORM OF OPINION OF COUNSEL OF BORROWER
(DOBSON TOWER)
[Firm Letterhead]
December __, 1998
NationsBank, N.A., as Lender
901 Main Street, 64th Floor
Dallas, Texas 75202
Attn: Debra S. Wood
RE: CREDIT AGREEMENT FOR DOBSON TOWER COMPANY
Ladies and Gentlemen:
We have acted as counsel to Dobson Tower Company ("BORROWER"), its
Subsidiaries (collectively with Borrower, the "COMPANIES"), Dobson CC Limited
Partnership (the "PARTNERSHIP), Everett R. Dobson Irrevocable Family Trust,
Stephen T. Dobson Irrevocable Family Trust, Robbin L. Dobson Irrevocable
Family Trust (collectively, the "FAMILY TRUSTS"), RLD, Inc., and Everett R.
Dobson (collectively with the Subsidiaries, the Partnership, the Family
Trusts, and RLD, Inc., the "GUARANTORS") ( in connection with the Term Loan
Agreement, dated as of December , 1998 (as amended, modified,
supplemented, or restated from time to time, the "CREDIT AGREEMENT"), between
Borrower and NationsBank, N.A., a national banking association ("LENDER"),
and the Guaranties executed by Guarantors and delivered in connection with
the Credit Agreement (each a "GUARANTY").
This opinion is delivered pursuant to SECTION 7.1 of the Credit
Agreement and PARAGRAPH [9] of SCHEDULE 7.1 to the Credit Agreement. Except
as otherwise defined herein, each capitalized term used herein has the
meaning given to such term in the Credit Agreement.
In arriving at the opinions expressed below, we have examined such
corporate, trust, and partnership documents and records of the Borrowers and
Guarantors and such certificates of public officials and of officers of the
Borrower and the Guarantors, other documents, and matters of law as we deemed
necessary or appropriate, including, without limitation, originals or copies
of (a) the Credit Agreement, (b) the Note, (c) the Guaranties executed by
each Guarantor, (d) the Pledge, Assignment, and Security Agreement executed
by Borrower in favor of Lender (the "SECURITY AGREEMENT"), (e) Financing
Statements showing Borrower, as Debtor, and Administrative Agent, as Secured
Party, to be filed in appropriate jurisdictions, and (f) other Collateral
Documents (all of the foregoing are collectively, the "TRANSACTION
DOCUMENTS"). In arriving at the opinions expressed below, we have also
reviewed the originals or copies of the Towers Acquisition Agreement by and
between Borrower and Sygnet Communications, Inc. and the Towers Lease by and
between Borrower and Sygnet Communications, Inc. (the "TOWERS ACQUISITION
DOCUMENTS").
Based upon the foregoing, we are of the opinion that:
1. Each Company and Guarantor that is a corporation (a) is a
corporation validly existing and in good standing under the Laws of its state
of incorporation, (b) is duly qualified to transact business as a foreign
corporation in each jurisdiction where the nature and extent of its business
and properties require the same, and (c) possesses all requisite corporate
authority and power to conduct its business and execute,
ANNEX A TO EXHIBIT C
<PAGE>
deliver, and comply with the terms of the Transaction Documents and Towers
Acquisition Documents to which such Company or Guarantor is a party, which
have been duly authorized and approved by all necessary corporate action and
for which no approval or consent of any Person or Governmental Authority is
required which has not been obtained.
2. Each Guarantor that is a partnership (a) is a partnership validly
existing and in good standing under the Laws of its state of formation, and
(b) possesses all requisite partnership authority and power to conduct its
business and execute, deliver, and comply with the terms of the Transaction
Documents to which such Guarantor is a party, which have been duly authorized
and approved by all necessary partnership action and for which no approval or
consent of any Person or Governmental Authority is required which has not
been obtained.
3. Each Guarantor that is a trust (a) is a trust validly existing
and in good standing under the Laws of its state of formation, and (b)
possesses all requisite trust authority and power to conduct its business and
execute, deliver, and comply with the terms of the Transaction Documents to
which such Guarantor is a party, which have been duly authorized and approved
by all necessary trust action and for which no approval or consent of any
Person or Governmental Authority is required which has not been obtained.
4. Each Company and Guarantor has duly executed and delivered each
Transaction Document or Towers Acquisition Document to which such Company or
Guarantor is party.
5. The Transaction Documents and Towers Acquisition Documents to
which any Company or Guarantor is party evidence the valid and legally
binding obligations of such Company or Guarantor, enforceable against such
Company or Guarantor in accordance with their terms, EXCEPT as the
enforcement may be limited by Debtor Relief Laws and EXCEPT that the remedies
available with respect thereto may be subject to general principles of equity
(regardless of whether such remedies are sought in a proceeding in equity or
at law).
6. The execution, delivery, and performance of and compliance with
the terms of the Transaction Documents and Towers Acquisition Documents will
not cause any Company or Guarantor to be in violation of its respective
Partnership Agreement, Trust Agreement, Articles or Certificates of
Incorporation, or Bylaws.
7. The execution, delivery, and performance of and compliance with
the terms of the Transaction Documents and Towers Acquisition Documents will
not cause any Company or Guarantor to be in violation of any Laws.
8. The execution, delivery, and performance of and compliance with
the terms of the Transaction Documents and Towers Acquisition Documents will
not cause any Company or Guarantor to be in default under any material,
written, or oral agreements, contracts, commitments, or understandings to
which any Company or Guarantor is a party.
9. Each Company and Guarantor is in compliance in all material
respects with all applicable Laws, federal, state, and local (including
without limitation, the Communications Act, Environmental Laws, and those
statutes administered by the public utility commission of the State of
Oklahoma that, on the date of this opinion, exercises jurisdiction over the
Companies or any Guarantor), material to the conduct of its business and
operations. Except as have been obtained, no authorization, consent,
approval, waiver, licenses, or formal exemptions from, nor any filing,
declaration, or registration with, any Governmental Authority or
non-governmental entity, under the terms of the contracts or otherwise, is
required by reason of or in
EXHIBIT D-1
<PAGE>
connection with the execution and performance of the Transaction Documents or
the Towers Acquisition Documents.
10. The execution and delivery of a Guaranty by the Guarantors party
thereto and the performance by such Guarantors of their respective
obligations thereunder will not violate any law, rule, regulation, or policy
of any Governmental Authority.
11. No Company or Guarantor is involved in, nor are we aware of the
threat of, any Litigation which is reasonably likely to be determined
adversely to any Company or Guarantor. 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, acquisition, or similar
proceeding against any Company's or Guarantor's assets having a value
(individually or collectively) of $1,000,000 or more.
12. To the best of our knowledge, after reasonable investigation,
EXCEPT as set forth on ANNEX A, no Company (a) has any other Subsidiaries or
(b) has transacted business under any other corporate or trade name in the
five-year period preceding the date hereof.
13. No Company, no Affiliate of any Company, and no Guarantor is (a)
subject to regulation under the Public Utility Holding Company Act of 1935,
the Federal Power Act, the Investment Company Act of 1940 (as any of the
preceding acts have been amended), or any other Law (other than regulations
issued by the FCC and REGULATION X of the Board of Governors of the Federal
Reserve System) which regulates the incurring by any Company of Debt,
including, but not limited to, Laws relating to common or contract carriers
or the sale of electricity, gas, steam, water, or other public utility
services, or (b) EXCEPT as listed on ANNEX B attached hereto, a "UTILITY"
defined in the Laws of the jurisdictions in which such Company or such
Affiliate maintains assets or conducts business.
[14. No Company is required to obtain a certificate of convenience,
certificate of necessity, or similar grant of authority from the Oklahoma
Corporation Commission or any other Governmental Authority with respect to a
Tower. No other permits, licenses, or certificates, are required to be obtained
by any Company under the Laws in effect in Oklahoma, Ohio, Pennsylvania, or New
York, including the Laws administered by Local Authorities, to operate any Tower
as presently operated by such Company.] [BRACKETED LANGUAGE TO BE RENDERED IF
NOT IN REGULATORY COUNSEL OPINION]
15. The proceeds of the Term Loan are not to be used directly or
indirectly for the purpose of purchasing or carrying, or for the purpose of
extending credit to others for the purpose of purchasing or carrying, any
"MARGIN STOCK" as that term is defined in REGULATION U of the Board of
Governors of the Federal Reserve System.
16. No Company maintains any Employee Plan or has any obligations
under an Employee Plan.
17. The interest payable by Borrower pursuant to the Note and Credit
Agreement is not in violation of the usury Laws of the State of Texas or the
United States of America.
18. The conditions precedent to the advance of the Term Loan have
been waived in writing or satisfied in accordance with the Loan Papers.
19. The Persons pledging to Lender any of the Pledged Shares (as defined
in the Security Agreement) are the beneficial and record owners thereof, free
and clear of any Liens or transfer restrictions [(other than restrictions on the
amount thereof which may be sold.)]
<PAGE>
20. The Financing Statements are in sufficient form for recordation.
When the Financing Statements have been filed and recorded in the
jurisdictions listed on ANNEX A hereto, the Transaction Documents shall
create and perfect valid and continuing security interests in favor of
Lender, to the extent that the filing of financing statements is effective to
perfect security interests in the Collateral, subject to the qualifications
set forth in the Security Agreement with respect to licenses issued by the
FCC. No further action, including any filing or recording of any document,
is necessary in order to establish, perfect, and maintain Lender's security
interests in the assets and the stock created by the Security Agreement,
EXCEPT for the periodic filing of continuation statements with respect to
financing statements filed under the Uniform Commercial Code of the
applicable jurisdiction.
This opinion is addressed to you solely for your use in connection with
the transactions contemplated by the Transaction Documents, and no person
other than Lender, each assignee that hereafter becomes a Lender as permitted
by the Credit Agreement, and the law firm of Haynes and Boone, LLP, is
entitled to rely hereon without our prior written consent. This opinion is
given as of the date hereof, and we have no obligation to revise or update
this opinion subsequent to the date hereof or to advise you or any other
person of any matter subsequent to the date hereof which would cause us to
modify this opinion in whole or in part.
Very truly yours,
_______________________________
<PAGE>
EXHIBIT D-2
FORM OF OPINION OF SPECIAL REGULATORY COUNSEL
(DOBSON TOWER)
[Firm Letterhead]
December ___, 1998
NationsBank, N.A., as Lender
901 Main Street, 64th Floor
Dallas, Texas 75202
Attn: Debra S. Wood
RE: CREDIT AGREEMENT FOR DOBSON TOWER COMPANY
Ladies and Gentlemen:
We have acted as special communications regulatory counsel to Dobson
Tower Company ("BORROWER") and its Subsidiaries (collectively with Borrower,
the "COMPANIES") in connection with the Credit Agreement, dated as of
December __, 1998 (as amended, modified, supplemented, or restated from time
to time, the "CREDIT AGREEMENT"), between Borrower and NationsBank, N.A., a
national banking association ("LENDER") and the related acquisition by
Borrower of all cellular transmission towers owned by Sygnet Communications,
Inc (the "TOWERS"), such acquisition transaction being herein referred to as
the "TOWERS ACQUISITION."
This opinion is delivered pursuant to SECTION 7.1 of the Credit Agreement
and PARAGRAPH [12] of SCHEDULE 7.1 to the Credit Agreement. Except as otherwise
defined herein, each capitalized term used herein has the meaning given to such
term in the Credit Agreement.
We have examined the articles of incorporation and bylaws of the
Companies, the Loan Papers, the certificates of public convenience and
necessity and similar authorizations issued to the Companies by the Federal
Communications Commission ("FCC") and each state public utility commission
("PUC") that, on the date of this opinion, exercises jurisdiction over the
Companies (each such PUC, an "APPLICABLE PUC"). See SCHEDULE I for the list
of Applicable PUCs as of the date of this opinion. Our opinion is limited to
the provisions of the Communications Act of 1934, as amended, 47 U.S.C.
Section 151 ET SEQ. (the "COMMUNICATIONS ACT"), and all laws administered by,
and all rules, regulations, and published policies of, the FCC and Applicable
PUCs, and we express no opinion and assume no responsibility as to the
applicability of any other laws.
Based upon the foregoing, we are of the opinion that:
1. The Towers Acquisition does not require any approval by the FCC
or any Applicable PUC
2. The execution and delivery of the Credit Agreement and the Loan
Papers by the Companies and the performance by the Companies of the
Obligation will not violate any law, rule, regulation, or policy of the FCC
or any Applicable PUC.
3. The Companies' execution and delivery, and performance and
compliance with, the terms and provisions of the Credit Agreement and the
other Loan Papers: (a) will not result in a violation of the
EXHIBIT D-2
<PAGE>
Communications Act or any PUC Laws: and (b) will not require further notice
to or the approval of the FCC or any Applicable PUC.
4. The ownership and operation by the Companies of the Towers are in
compliance in all material respects with the Communications Act (including,
without limitation, all FCC filing, reporting, prior approval, and similar
requirements).
5. No approval, authorization, consent, adjudication, or order of
the FCC or any Applicable PUC which has not been obtained by the Companies as
of this date is required to be obtained by the Companies in connection with
any assignment or transfer of control, transfer of assets, or merger or other
consolidation of operations by the Companies.
6. To the best of our knowledge: (a) there is no outstanding decree
or order that has been issued by the FCC or any Applicable PUC against any
Company and no pending or threatened litigation, proceedings, notice of
violation, order to show cause, complaint, inquiry, or investigation before
the FCC or any Applicable PUC relating to any Company or relating to the
Towers that might have any material adverse effect upon, or cause material
disruption to, any Company or the ownership or operation of the Towers; and
(b) no action has been taken by the FCC or any Applicable PUC which might
now, or after notice or lapse of time, or both, have any material adverse
effect upon, or material disruption to, any Company or the ownership or
operation of the Towers.
This opinion letter is provided to Lender and Haynes and Boone, LLP,
and their respective participants, assignees, or other transferees, by us in
our capacity as special communications regulatory counsel to the Companies.
Very truly yours,
_______________________________
<PAGE>
SCHEDULE 6.1
CONDITIONS PRECEDENT TO CLOSING
(Dobson Tower Company)
The Agreement and related Loan Papers shall not become effective
unless Lender has received all of the following (unless otherwise indicated,
all documents shall be dated as of December __, 1998, and all terms used with
their initial letters capitalized are used herein with their meanings as
defined in the Agreement):
1. THE AGREEMENT. The Agreement (together with all Schedules and Exhibits
thereto) executed by Borrower and Lender.
2. NOTE. The Note for Lender in the form of EXHIBITS A.
3. GUARANTY. A Guaranty, in the form of EXHIBIT C, executed by each
Guarantor.
4. ARTICLES OF INCORPORATION. A copy of the Articles of Incorporation or
Certificate of Incorporation, and all amendments thereto, of each Company
and each Guarantor that is a corporation, each accompanied by a
certificate that such copy is correct and complete, one dated a Current
Date (as used herein, the term "CURRENT DATE" means any date not more
than 30 days prior to the Closing Date), issued by the appropriate
Governmental Authority of the jurisdiction of incorporation of each such
Company, and one dated the Closing Date, executed by the President or
Vice President and the Secretary or Assistant Secretary of each such
Company.
5. BYLAWS. A copy of the Bylaws, and all amendments thereto, of each
Company and each Guarantor that is a corporation, accompanied by a
certificate that such copy is correct and complete, dated the Closing
Date, and executed by the President or Vice President and the Secretary
or Assistant Secretary of each such Company.
6. PARTNERSHIP AGREEMENTS. Copies of the currently-effective Partnership
Agreement for each Company and each Guarantor that is a partnership, and
all amendments thereto, accompanied by a certificate of the General
Partner or other appropriate managing partner dated as of the Closing
Date that such copies are correct and complete; a certified copy of the
Partnership Agreement for each Company and each Guarantor that is a
partnership, each dated a Current Date, issued by the appropriate
Governmental Authority of the jurisdiction in which such partnership is
organized.
7. TRUST AGREEMENTS. Copies of the currently-effective Trust Agreement for
each Company and each Guarantor that is a trust, and all amendments
thereto, accompanied by a certificate of the Trustee or other appropriate
Person dated as of the Closing Date that such copies are correct and
complete.
8. GOOD STANDING AND AUTHORITY. Certificates of the appropriate
Governmental Authorities of such jurisdictions as Lender may designate,
each dated a Current Date, to the effect that each Company and each
Guarantor that is a corporation or partnership is in good standing with
respect to the payment of franchise and similar Taxes (to the extent such
information is available) and is duly qualified to transact business in
such jurisdiction.
9. INCUMBENCY. Certificates of incumbency dated as of the Closing Date with
respect to all officers, trustees, or partners of each Company and each
Guarantor that is not an individual who will be authorized to execute or
attest to any of the Loan Papers on behalf of each Company and each
SCHEDULE 6.1
<PAGE>
Guarantor that is not an individual, executed by the President or a Vice
President, and the Secretary or an Assistant Secretary, of each such
Company (or General Partner or other appropriate managing partner for any
Guarantor that is a partnership or Trustee for any Guarantor that is a
trust).
10. RESOLUTIONS. Copies of resolutions duly adopted by the Board of
Directors of each Company and each Guarantor that is a corporation that
will be executing any Loan Paper as of the Closing Date, approving this
Agreement and the other Loan Papers and authorizing the transactions
contemplated in such Loan Papers, ACCOMPANIED BY a certificate of the
Secretary or an Assistant Secretary of each such Company or Guarantor,
dated as of the Closing Date, certifying that such copy is a true and
correct copy of resolutions duly adopted at a meeting of (which may be
held by conference telephone or similar communications equipment by means
of which all Persons participating in a meeting can hear each other if
permitted by applicable Law and, if required by such Law, by its Bylaws),
or by the unanimous written consent of (if permitted by applicable Law
and, if required by such Law, by its Bylaws), the Board of Directors of
each Company and each Guarantor that is a corporation, and that such
resolutions constitute all the resolutions adopted with respect to such
transactions, have not been amended, modified, or revoked in any respect,
and are in full force and effect as of the Closing Date.
11. PARTNERSHIP AUTHORIZATION. For each Company and each Guarantor that will
be executing any Loan Paper as of the Closing Date that is a partnership,
evidence of authorization by the applicable partners, in each case
authorizing the execution and full performance of the Loan Papers, and
all other documents and actions required pursuant thereto, accompanied by
a certificate from the general partner or other appropriate managing
partner, dated as of the Closing Date, certifying that such copy is a
true and correct copy of the authorizations adopted by the partnership
and that such authorizations constitute all authorizations adopted with
respect to such transactions, have not been amended, modified, or revoked
in any respect, and are in full force and effect as of the Closing Date.
12. TRUST AUTHORIZATION. For each Guarantor that will be executing any Loan
Paper as of the Closing Date that is a trust, evidence of authorization
by the necessary trustees authorizing the execution and full performance
of the Loan Papers, and all other documents and actions required pursuant
thereto, accompanied by a certificate from a trustee, dated as of the
Closing Date, certifying that such copy is a true and correct copy of the
authorizations adopted by the trust and that such authorizations
constitute all authorizations adopted with respect to such transactions,
have not been amended, modified, or revoked in any respect, and are in
full force and effect as of the Closing Date.
13. OPINION OF COUNSEL TO THE COMPANIES. The opinion of counsel to the
Borrower, addressed to Lender, substantially in the form of EXHIBIT D-1.
14. OPINION OF SPECIAL REGULATORY COUNSEL TO THE COMPANIES. The opinion of
special regulatory counsel to the Companies, addressed to Lender,
substantially in the form of EXHIBIT D-2.
15. [Reliance Letters. Letters from counsel to parties to the Towers
Acquisition Documents permitting Lenders to rely on opinions delivered
pursuant thereto (if any).]
16. PLEDGE, ASSIGNMENT, AND SECURITY AGREEMENTS. A Pledge, Assignment, and
Security Agreement, substantially in the form and upon the terms of
EXHIBIT C, executed by each Company, as debtor, and delivered to Lender
as secured party, granting and creating Liens in favor of Lender in and
to all of the Collateral, TOGETHER WITH (a) one or more Financing
Statements, executed and delivered by each Company, as debtor, in favor
of Lender as secured party, covering all such Collateral, and
(b) delivery to Lender of all Pledged Shares and Collateral Notes (as
such terms are defined in the Pledge, Assignment, and Security
Agreement), together with executed blank stock powers for each
4
<PAGE>
Pledged Share certificate delivered and executed allonge endorsements
for each Collateral Note delivered, all in form acceptable to Lender.
17. LIEN SEARCHES. Lien searches in the name of each Company, and any other
name(s) as Lender may deem appropriate in each state where each Company
maintains an office or has real property, showing no financing statements
or other Lien instruments of record except for Permitted Liens.
18. LIEN RELEASES. Payoff letters in form and substance reasonably
acceptable to Lender relating to the payoff of all Debt of each Company
(other than Permitted Debt) or duly executed releases or assignments of
Liens and financing statements in recordable form as may be necessary to
reflect that the Liens created by the Collateral Documents are first
priority Liens (except for Permitted Liens).
19. CONSENTS, FILINGS, ETC. Evidence satisfactory to Lender and its counsel
that the Companies have received all approvals, authorizations, consents,
and waivers of any Governmental Authority or other Person necessary or
appropriate for the execution, delivery, and performance by any Company
of the Loan Papers and all documents relating to the Towers Acquisition
and Towers Lease, to which it is a party, including, without limitation,
(a) all such approvals, authorizations, consents, and waivers disclosed
in the Loan Papers or the documents relating to the Towers Acquisition
and Towers Lease (including those required in connection with the
assignment of material contracts), (b) any such approvals,
authorizations, consents, or waivers reasonably required by Lender in
connection with the granting of a security interest to Lender in each
material contract acquired or assumed by any Company, and (c) all
filings, consents, or approvals with or of Governmental Authorities
necessary to enter into the Loan Papers or consummate the Towers
Acquisition and Towers Lease, or any other transactions contemplated by
the Loan Papers, as applicable, including, without limitation, all
filings (if any) required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the lapse of all waiting periods with
respect thereto.
20. INSURANCE. Evidence that the Collateral is insured (including flood
insurance) in such amounts, against such risks, with such deductibles,
and with such insurers as may be satisfactory to Lender with loss payable
to Lender, as its interests may appear, together with certificates
evidencing such insurance (containing a standard mortgagee clause) with
appropriate endorsements to satisfy SECTION.8.7 of the Agreement.
21. UNRESTRICTED SUBSIDIARY DESIGNATION. Evidence that Communications
(a) has designated, Borrower and each Subsidiary of Borrower as
"UNRESTRICTED SUBSIDIARIES" in compliance with the requirements of: (i)
the Communications Bond Debt, (ii) the Certificate of Designation for the
Senior Preferred Stock, (iii) the Credit Agreement dated as of March 25,
1998, among Dobson Operating Company (as "BORROWER"), Communications (as
"GUARANTOR"), and First Union National Bank (as successor by merger to
CoreStates Bank, N.A., as "ADMINISTRATIVE AGENT"), (iv) the Revolving
Credit Agreement dated as of March 25, 1998, among Dobson Cellular
Operations Company (as "BORROWER"), and NationsBank, N.A. (as successor
by merger to NationsBank of Texas, N.A., as "ADMINISTRATIVE AGENT"), and
(v) the 364-Day Revolving Credit and Term Loan Agreement dated as of
March 25, 1998, among Dobson Cellular Operations Company (as "BORROWER"),
and NationsBank, N.A. (as successor by merger to NationsBank of Texas,
N.A., as "ADMINISTRATIVE AGENT"), and (b) has provided all required
notices, certifications, and resolutions to the Trustee under the
Communications Bond Debt or other parties, as required by the
Communications Bond Debt.
22. PAYMENT OF FEES AND CLOSING FEES. Payment of all fees payable on or
prior to the Closing Date to Lender as provided for in SECTION 4 of the
Agreement, together with reimbursements to Lender for all fees and
expenses incurred in connection with the negotiation, preparation, and
closing of the
5
<PAGE>
transactions evidenced by the Loan Papers (including, without
limitation, attorneys' fees and expenses).
23. TAX SHARING AGREEMENT. An acknowledgment executed by the Companies that
they are subject to the Tax Sharing Agreement.
24. TOWERS ACQUISITION. (i) A fully-executed copy of the Towers Acquisition
Agreement by and between Dobson Sygnet and Borrower, dated as of
December __, 1998, together with all material amendments, schedules
and exhibits thereto, certified as true, correct, and complete by a
Responsible Officer of Borrower; (ii) evidence satisfactory to Lender
and its counsel that the Towers Acquisition has been consummated in
accordance with the terms of the agreement described in clause (i)
preceding, and that all material conditions stated therein have been
satisfied without waiver.
25. EQUITY CONTRIBUTIONS. Evidence satisfactory to Lender that capital
contributions in the form of preferred stock in form and upon terms
acceptable to Lender in an amount greater than or equal to $7,500,000.00
have been made from DCC Limited Partnership to Borrower.
26. FAIRNESS OPINION. Evidence satisfactory to Lender in the form of a
fairness opinion that the considertion to be paid for the Towers is fair
to Borrower from a financial point of view.
27. OTHER DOCUMENTS. Such other agreements, documents, instruments,
opinions, certificates, and evidences as Lender may reasonably request.
6
<PAGE>
SCHEDULE 7.2
FCC AND PUC LICENSES
(Dobson/Sygnet Operating Company)
None.
SCHEDULE 7.2
<PAGE>
SCHEDULE 7.3
CAPITAL STOCK AND PARTNERSHIP INTERESTS
(Dobson Tower Company)
None.
SCHEDULE 7.3
<PAGE>
SCHEDULE 7.14
MATERIAL AGREEMENTS
(Dobson Tower Company)
1. That certain Term Loan Agreement dated as of December 23, 1998, between
Dobson Tower Company and NationsBank, N.A.
2. That certain Asset Purchase Agreement by and between Sygnet
Communications, Inc. and Dobson Tower Company, together with all attendant
documents and assumed lease agreements associated therewith.
3. That certain Master Site License Agreement by and between Dobson Tower
Company and Sygnet Communications, Inc.
SCHEDULE 7.14
<PAGE>
===============================================================================
COLLATERAL PLEDGE AND SECURITY AGREEMENT
Dated as of December 23, 1998
Between
DOBSON/SYGNET COMMUNICATIONS COMPANY
and
UNITED STATES TRUST COMPANY OF NEW YORK
===============================================================================
<PAGE>
COLLATERAL PLEDGE AND SECURITY AGREEMENT
This COLLATERAL PLEDGE AND SECURITY AGREEMENT (this "PLEDGE
AGREEMENT") is made and entered into as of December 23, 1998 by DOBSON/SYGNET
COMMUNICATIONS COMPANY, an Oklahoma corporation (the "PLEDGOR"), having its
principal office at 13439 N. Broadway Extension, Suite 200, Oklahoma City,
Oklahoma 73114, in favor of UNITED STATES TRUST COMPANY OF NEW YORK, a bank and
trust company organized under the New York banking law, having an office at 114
W. 47th Street, New York, New York 10036, as trustee (the "TRUSTEE") for the
holders (the "HOLDERS") of the Notes (as defined herein) issued by the Pledgor
under the Indenture referred to below. Capitalized terms used herein and not
otherwise defined herein shall have the meanings given to such terms in the
Indenture.
W I T N E S S E T H
WHEREAS, the Pledgor and United States Trust Company of New York, as
Trustee, have entered into that certain indenture dated as of the date hereof
(as amended, restated, supplemented or otherwise modified from time to time, the
"INDENTURE"), pursuant to which the Pledgor is issuing on the date hereof
$200,000,000 in aggregate principal amount of 121/4% Senior Notes due 2008 (the
"NOTES"); and
WHEREAS, the Pledgor has agreed, pursuant to the Indenture, to
deposit on the date hereof (the "CLOSING DATE") $67,561,539 (the "FUNDS") with
the Trustee to be held by the Trustee for the benefit of the Holders of the
Notes; and
WHEREAS, the Pledgor has opened a non-interest bearing collateral
account (the "COLLATERAL ACCOUNT") with United States Trust Company of New York
at its office at 114 W. 47th Street, New York, New York 10036, Account No.
04140400 in the name of "DOBSON/SYGNET COLLATERAL" but under the sole dominion
and control of the Trustee and subject to the terms of this Pledge Agreement;
and
WHEREAS, to secure the obligations of the Pledgor under the
Indenture and the Notes to provide for payment in full of the first six
scheduled interest payments due on the Notes and (ii) secure repayment of the
principal, premium (if any) and interest on the Notes in the event that the
Notes become due and payable prior to such time as the first six scheduled
interest payments thereon shall have been paid in full (collectively, the
"OBLIGATIONS"), the Pledgor has agreed (a) to pledge to the Trustee for its
benefit and the ratable benefit of the Holders of the Notes, a security interest
in the Collateral (as defined herein) and (b) to execute and deliver this Pledge
Agreement in order to secure the payment and performance by the Pledgor of all
the Obligations; and
WHEREAS, it is a condition precedent to the initial purchase of the
Notes by the initial Holders thereof that the Pledgor shall have granted the
security interest and made the pledge
<PAGE>
contemplated by this Pledge Agreement; and
WHEREAS, unless otherwise defined herein or in the Indenture, terms
used in Articles 8 or 9 of the Uniform Commercial Code ("UCC") as in effect in
the State of New York are used herein as therein defined.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and in order to induce the Holders of the Notes to purchase the
Notes, the Pledgor hereby agrees with the Trustee, for the benefit of the
Trustee and for the ratable benefit of the Holders of the Notes, as follows:
SECTION 1. CERTAIN DEFINITIONS; APPOINTMENT OF THE TRUSTEE;
PLEDGE AND GRANT OF SECURITY INTEREST; DEPOSIT OF FUNDS
1.1 CERTAIN DEFINITIONS.
"CASH EQUIVALENTS" means, to the extent owned free and clear of all
liens other than liens created hereunder, Government Securities.
"GOVERNMENT BOOK-ENTRY SECURITY" means Government Securities
maintained in book-entry form through the United States Federal Reserve
Banks pursuant to (A) the United States Treasury Department regulations
codified at 31 C.F.R. Part 357, as modified by the amendments promulgated
at 61 Fed. Reg. 43, 626-43, 638 (Aug. 23, 1996), or (B) substantially
identical regulations promulgated by any other agency or instrumentality of
the United States whose securities qualify as "Government Securities"
hereunder.
"GOVERNMENT SECURITIES" means direct obligations of, obligations
fully guaranteed by, or participations in pools consisting of obligations
of or obligations guaranteed by, the United States of America for the
payment of which guarantee or obligations the full faith and credit of the
United States of America is pledged and which are not callable or
redeemable at the option of the issuer thereof.
1.2 APPOINTMENT OF THE TRUSTEE. The Pledgor hereby appoints
United States Trust Company of New York as Trustee in accordance with the terms
and conditions set forth herein and the Trustee hereby accepts such appointment.
1.3 PLEDGE AND GRANT OF SECURITY INTEREST. The Pledgor hereby
pledges to the Trustee for its benefit and for the ratable benefit of the
Holders of the Notes, and hereby grants to the Trustee for its benefit and for
the ratable benefit of the Holders of the Notes, a continuing first priority
security interest in and to all of the Pledgor's right, title and interest in,
to and under the
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<PAGE>
following (hereinafter collectively referred to as the "COLLATERAL"), whether
characterized as investment property, general intangibles or otherwise: (a)
the Collateral Account, all funds held therein and all certificates and
instruments, if any, from time to time representing or evidencing the
Collateral Account, and all Collateral Investments (as hereinafter defined)
and all certificates and instruments, if any, representing or evidencing the
Collateral Investments, and any and all security entitlements to the
Collateral Investments, and any and all related securities accounts in which
security entitlements to the Collateral Investments are carried, (b) all
notes, certificates of deposit, deposit accounts, checks and other
instruments from time to time hereafter delivered to or otherwise possessed
by the Trustee for or on behalf of the Pledgor in substitution for or in
addition to any or all the then existing Collateral, (c) all interest,
dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or
all of the then existing Collateral, and (d) all proceeds of any and all of
the foregoing Collateral (including, without limitation, proceeds that
constitute property of the types described in clauses (a) - (d) of this
Section 1) and, to the extent not otherwise included, all cash.
1.4 DEPOSIT OF FUNDS. On the Closing Date, the Pledgor shall
direct that the Funds be deposited into the Collateral Account.
SECTION 2. SECURITY FOR OBLIGATION. This Pledge Agreement and
the grant of a security interest in the Collateral hereunder secures the prompt
payment and performance when due (whether at stated maturity, by acceleration or
otherwise) of all the Obligations. Without limiting the generality of the
foregoing, this Pledge Agreement and the grant of a security interest in the
Collateral hereunder secures the payment of all amounts that constitute part of
the Obligations and would be owed by the Pledgor to the Trustee or the Holders
under the Notes or the Indenture but for the fact that they are unenforceable or
not allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Pledgor.
SECTION 3. DELIVERY OF COLLATERAL. (a) All certificates or
instruments representing or evidencing the Collateral, including, without
limitation, amounts invested as provided in Section 5, shall be delivered to (as
set forth in Section 6) and held by or on behalf of the Trustee pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance sufficient to establish and maintain in favor of the Trustee a valid
security interest in such Collateral, and shall be credited to the Collateral
Account. In addition, the Trustee shall have the right at any time to exchange
certificates or instruments representing or evidencing the Collateral for
certificates or instruments of smaller or larger denominations.
(b) Concurrently with the execution and delivery of this Pledge
Agreement, the Trustee is delivering to the Pledgor and NationsBanc
Montgomery Securities LLC a duly executed Notification and Control
Agreement ("CONTROL AGREEMENT"), substantially in the form of EXHIBIT A
hereto, confirming the Trustee's establishment and separate maintenance of
the Collateral Account, all in accordance with this Pledge Agreement.
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<PAGE>
SECTION 4. MAINTAINING THE COLLATERAL ACCOUNT. (a) So long as any
Obligation shall remain unpaid, the Trustee will maintain separately the
Collateral Account with United States Trust Company of New York, which account
shall at all times be under the sole dominion and control of the Trustee and
subject to the terms and conditions of this Pledge Agreement.
(b) It shall be a term and condition of the Collateral Account,
notwithstanding any term or condition to the contrary in any other
agreement relating to the Collateral Account, and except as otherwise
provided by the provisions of Section 7 and Section 14 hereof, that no
amount (including interest on Collateral Investments) shall be paid or
released to or for the account of, or withdrawn by or for the account of,
the Pledgor or any other Person from the Collateral Account.
The Collateral Account shall be subject to such applicable laws, and
such applicable regulations of the Board of Governors of the Federal Reserve
System and of any other appropriate banking or governmental authority, as may
now or hereafter be in effect.
SECTION 5. INVESTING OF AMOUNTS IN THE COLLATERAL ACCOUNT. If
directed by the Pledgor in writing, the Trustee will, subject to the provisions
of Section 7 and Section 14 hereof, from time to time (a) invest amounts on
deposit in the Collateral Account in such Cash Equivalents, each in the name of
or for the account of the Trustee, as the Pledgor may select and the Trustee may
approve and (b) invest interest paid on the Cash Equivalents referred to in
clause (a) above, and reinvest other proceeds of any such Cash Equivalents that
may mature or be sold, in each case in such Cash Equivalents, each in the name
of or for the account of the Trustee, as the Pledgor may select and the Trustee
may approve (the Cash Equivalents referred to in clauses (a) and (b) above being
collectively "COLLATERAL INVESTMENTS"). The amount on deposit in the Collateral
Account must include Government Securities sufficient, in the opinion of a
nationally recognized firm of independent public accountants selected by the
Pledgor, to provide for the payment in full of the first six scheduled interest
payments on all of the Notes then outstanding. Interest and proceeds that are
not invested or reinvested in Collateral Investments as provided above shall be
deposited and held in the Collateral Account. The Trustee shall in no event be
liable for any loss in the investment or reinvestment of amounts held in the
Collateral Account.
SECTION 6. DELIVERY OF COLLATERAL INVESTMENTS. (a) The Trustee
shall become the holder of the Collateral Investments (and any applicable
security entitlements thereto) through the following delivery procedures:
(i) in the case of Collateral Investments which are certificated securities in
registered form, delivery of the applicable certificate(s), specially endorsed
to the Trustee or registered in the name of the Trustee or accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Trustee, to the possession of (A) the Trustee,
(B) a securities intermediary or financial intermediary acting on behalf of the
Trustee, or (C) another person, other than a securities intermediary or
financial intermediary, which person acknowledges that it holds for the Trustee;
(ii) in the case of Collateral
-4-
<PAGE>
Investments which are uncertificated securities, registration of one of the
following as owner of such uncertificated securities: the Trustee or a person
designated by the Trustee, or person other than a securities intermediary or
financial intermediary, that becomes the registered owner of such
uncertificated securities and acknowledges that it holds the same for the
Trustee; and (iii) in the case of Collateral Investments in the form of
Government Book-Entry Securities, the making by a financial intermediary or
securities intermediary (other than a clearing corporation) to whose account
such Government Book-Entry Securities have been credited on the books of a
Federal Reserve Bank (or on the books of another such financial intermediary
or securities intermediary (other than a clearing corporation)), of book
entries indicating that such Government Book-Entry Securities have been
credited to an account of the Trustee, and the sending by such financial
intermediary or securities intermediary to the Trustee of confirmation of
such transfer to the Trustee's account.
(b) Upon delivery of any Collateral Investments to the Trustee
(or the Trustee's acquisition of a security entitlement thereto), the
Trustee shall make appropriate book entries indicating that such Collateral
Investment and/or such security entitlement has been credited to and is
held in the Collateral Account. Subject to the terms and conditions of
this Pledge Agreement, all Collateral Investments held by the Trustee
pursuant to this Pledge Agreement shall be held in the Collateral Account
under the exclusive dominion and control of the Trustee and for the benefit
of the Trustee and the ratable benefit of the Holders of the Notes and
segregated from all other funds or other property otherwise held by the
Trustee.
SECTION 7. DISBURSEMENTS. The Trustee shall hold the assets in
the Collateral Account and release the same, or a portion thereof, only as
follows:
(a) At least three Business Days prior to the due date of any of
the first six scheduled interest payments on the Notes, the Pledgor may,
pursuant to written instructions executed by the Pledgor (an "ISSUER
ORDER"), direct the Trustee to release from the Collateral Account, and if
necessary liquidate Collateral Investments in the Collateral Account and
pay to the Holders of the Notes funds sufficient to provide for payment in
full of such interest then due on the Notes. Upon receipt of an Issuer
Order, the Trustee will take any action necessary to provide for the
payment of the interest on the Notes in accordance with the payment
provisions of the Indenture to the Holders of the Notes from (and to the
extent of) funds available in the Collateral Account.
(b) If the Pledgor makes any interest payment or portion of an
interest payment for which the Collateral is security from a source of
funds other than the Collateral Account ("PLEDGOR FUNDS"), the Pledgor may,
after payment in full of such interest payment or portion thereof from
proceeds of the Collateral or such Pledgor Funds or both, direct the
Trustee to release to the Pledgor or to another party at the direction of
the Pledgor (a "PLEDGOR DESIGNEE") funds from the Collateral Account, and
if necessary liquidate
-5-
<PAGE>
Collateral Investments in the Collateral Account, in an amount less than
or equal to the amount of Pledgor Funds applied to such interest
payment. Upon receipt of an Issuer Order by the Trustee, the Trustee
shall pay over to the Pledgor or the Pledgor's Designee, as the case may
be, the requested amount from funds in the Collateral Account.
Concurrently with any release of funds to the Pledgor pursuant to this
Section 7(b), the Pledgor shall deliver to the Trustee a certificate
signed by an officer of the Pledgor stating that such release has been
duly authorized by the Pledgor and will not contravene any provision of
applicable law or the Certificate of Incorporation of the Pledgor or any
material agreement or other material instrument binding upon the Pledgor
or any of its subsidiaries or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Pledgor
or any of its subsidiaries or result in the creation or imposition of
any Lien on any assets of the Pledgor, except for the security interest
granted under this Pledge Agreement.
(c) Upon payment in full of the first six scheduled interest
payments on the Notes, the security interest in the Collateral evidenced by
this Pledge Agreement will automatically terminate and be of no further
force and effect and the Collateral shall promptly be paid over and
transferred to the Pledgor or a Pledgor Designee. In addition, upon the
release of any Collateral from the Collateral Account in accordance with
the terms of this Pledge Agreement, the security interest evidenced by this
Pledge Agreement in such released Collateral will automatically terminate
and be of no further force and effect.
(d) The Trustee shall not be required to liquidate any Collateral
Investment in order to make any payment hereunder unless instructed to do
so pursuant to an Issuer Order or pursuant to Section 14 hereof.
(e) Nothing contained in Section 1, Section 5, Section 6, this
Section 7 or any other provision of this Pledge Agreement shall (i) afford
the Pledgor any right to issue entitlement orders with respect to any
security entitlement to any of the Collateral Investments or any securities
account in which any such security entitlement may be carried, or otherwise
afford the Pledgor control of any such security entitlement or
(ii) otherwise give rise to any rights of the Pledgor with respect to any
of the Collateral Investments, any security entitlement thereto or any
securities account in which any such security entitlement may be carried,
other than the Pledgor's beneficial interest under this Pledge Agreement in
collateral pledged to and subject to the exclusive dominion and control
(consistent with this Pledge Agreement) of the Trustee in its capacity as
such (and not as a securities intermediary). The Pledgor acknowledges,
confirms and agrees that the Trustee holds a security entitlement to the
Collateral Investments solely as trustee for the Holders of the Notes and
not as a securities intermediary or financial intermediary.
(f) Nothing in this Section 7 shall affect the Trustee's rights
to apply the Collateral to the payments of amounts due on the Notes upon
acceleration thereof.
-6-
<PAGE>
(g) At least three Business Days prior to the due date of any of
the first six scheduled interest payments on the Notes, the Pledgor
covenants to give the Trustee (by Issuer Order) notice as to whether
payment of interest will be made pursuant to Section 7(a) or Section 7(b)
and as to the respective amounts of interest that will be paid pursuant to
Section 7(a) or Section 7(b). If no such notice is given, the Trustee will
act pursuant to Section 7(a) as if it had received an Issuer Order pursuant
thereto for the payment in full of the interest then due.
SECTION 8. REPRESENTATIONS AND WARRANTIES. The Pledgor hereby
represents and warrants that:
(a) The execution and delivery by the Pledgor of, and the
performance by the Pledgor of its obligations under, this Pledge Agreement
and the Control Agreement will not contravene any provision of applicable
law or the certificate of incorporation or by-laws of the Pledgor, or any
material agreement or other material instrument binding upon the Pledgor or
any of its subsidiaries or any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Pledgor or
any of its subsidiaries, or result in the creation or imposition of any
Lien on any assets of the Pledgor, except for the security interests
granted under this Pledge Agreement.
(b) No consent of any other person and no approval,
authorization, order of, or filing, declaration or qualification with, any
governmental body or agency is required (i) for the execution, delivery or
performance by the Pledgor of its obligations under either this Pledge
Agreement or the Control Agreement, (ii) for the grant by the Pledgor of
the security interest created hereby or (ii) for the pledge by the Pledgor
of the Collateral pursuant to either this Pledge Agreement or the Control
Agreement, except for any such consents, approvals, authorizations or
orders required to be obtained by the Trustee (or the Holders) for reasons
other than the consummation of this transaction, for the exercise by the
Trustee of the rights provided for in either this Pledge Agreement or the
Control Agreement or the remedies in respect of the Collateral pursuant to
either this Pledge Agreement or the Control Agreement.
(c) The Pledgor is the beneficial owner of the Collateral, free
and clear of any Lien or claims of any person or entity (except for the
security interests created by this Pledge Agreement). No financing
statement or instrument similar in effect covering all or any part of the
Pledgor's interest in the Collateral is on file in any public or recording
office, other than the financing statements filed pursuant to this Pledge
Agreement. The Pledgor has no trade names.
(d) This Pledge Agreement has been duly authorized, validly
executed and delivered by the Pledgor and constitutes a valid and binding
agreement of the Pledgor, enforceable against the Pledgor in accordance
with its terms, except as (i) the enforceability
-7-
<PAGE>
hereof may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally, (ii) the availability of equitable remedies
may be limited by equitable principles of general applicability, (iii) the
exculpation provisions and rights to indemnification hereunder may be
limited by U.S. federal and state securities laws and public policy
considerations and (iv) the waiver of rights and defenses contained in
Section 14(d), Section 17.11 and Section 17.15 hereof may be limited by
applicable law.
(e) Upon the transfer to the Trustee of the Funds and the
acquisition by the Trustee of a security entitlement thereto, in accordance
with Section 3 above, the pledge and grant of a security interest in the
Collateral pursuant to this Pledge Agreement for the benefit of the Trustee
and the Holders of the Notes will constitute a valid and perfected first
priority security interest in such Collateral, securing the payment of the
Obligations enforceable as such against all creditors of the Pledgor (and
any persons purporting to purchase any of the Collateral from the Pledgor).
(f) There are no legal or governmental proceedings pending or, to
the best of the Pledgor's knowledge, threatened to which the Pledgor or any
of its subsidiaries is a party or to which any of the properties of the
Pledgor or any such subsidiary is subject that would materially adversely
affect the power or ability of the Pledgor to perform its obligations under
this Pledge Agreement or to consummate the transactions contemplated
hereby.
(g) The pledge of the Collateral pursuant to this Pledge
Agreement is not prohibited by law or governmental regulation (including,
without limitation, Regulations T, U and X of the Board of Governors of the
Federal Reserve System) applicable to the Pledgor.
(h) No Event of Default (as defined herein) exists.
SECTION 9. FILING; FURTHER ASSURANCES. (a) Concurrently with
the execution and delivery of this Pledge Agreement, the Pledgor is
delivering to the Trustee acknowledgment copies or stamped receipt copies of
proper financing statements, duly filed on or before the Closing Date in
accordance with the Uniform Commercial Code as in effect in the State of New
York and the State of Oklahoma, covering the categories of Collateral
described in this Pledge Agreement.
(b) The Pledgor agrees that from time to time, at the expense of
the Pledgor, the Pledgor will, promptly upon request by the Trustee (which
request the Trustee may submit at the direction of the holders of a
majority in principal amount of the Notes then outstanding), execute and
deliver or cause to be executed and delivered, or use its reasonable best
efforts to procure, all assignments, instruments and other documents, all
in form and substance satisfactory to the Trustee, deliver any instruments
to the Trustee and take any other actions that may be necessary or, in the
opinion of the Trustee, desirable to perfect, continue the perfection of,
or protect the first priority of the Trustee's security
-8-
<PAGE>
interest in and to the Collateral, including the filing of all necessary
financing and continuation statements, to protect the Collateral against
the rights, claims, or interests of third persons (other than any such
rights, claims or interests created by or arising through the Trustee) or
to effect the purposes of this Pledge Agreement.
(c) The Pledgor hereby authorizes the Trustee to file any
financing or continuation statements in the United States with respect to
the Collateral without the signature of the Pledgor (to the extent
permitted by applicable law). A photocopy or other reproduction of this
Pledge Agreement or any financing statement covering the Collateral or any
part thereof shall be sufficient as a financing statement where permitted
by law.
(d) The Pledgor will promptly pay all costs incurred in
connection with this Pledge Agreement within 45 days of receipt of an
invoice therefor.
SECTION 10. COVENANTS. The Pledgor covenants and agrees with
the Trustee and the Holders of the Notes that from and after the date of this
Pledge Agreement until payment in full of all of the Obligations:
(a) that (i) it will not (and will not purport to) sell or
otherwise dispose of, or grant any option or warrant with respect to, any
of the Collateral or its beneficial interest therein, and (ii) it will not
create or permit to exist any Lien or other adverse interest in or with
respect to its beneficial interest in any of the Collateral (except for the
security interests granted under this Pledge Agreement); and
(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to restrict or inhibit
the Trustee's rights or remedies hereunder, including, without limitation,
the Trustee's right to sell or otherwise dispose of the Collateral or (ii)
fail to pay or discharge any tax, assessment or levy of any nature with
respect to its beneficial interest in the Collateral not later than five
days prior to the date of any proposed sale under any judgment, writ or
warrant of attachment with respect to such beneficial interest.
SECTION 11. POWER OF ATTORNEY. In addition to all of the
powers granted to the Trustee pursuant to the Indenture, the Pledgor hereby
appoints and constitutes the Trustee as the Pledgor's attorney-in-fact (with
full power of substitution), with full authority in the place and stead of
the Pledgor and in the name of the Pledgor or otherwise, from time to time in
the Trustee's discretion to take any action and to execute any instrument
that the Trustee may deem necessary or advisable to accomplish the purposes
of this Pledge Agreement, including, without limitation:
(a) to ask for, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due
under or in respect of any of the Collateral,
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(b) to receive, indorse and collect any drafts or other
instruments, documents and chattel paper, in connection with clause (a)
above,
(c) to file any claims or take any action or institute any
proceedings that the Trustee may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights of
the Trustee with respect to any of the Collateral,
(d) to pay or discharge taxes or Liens levied or placed upon the
Collateral, the legality or validity thereof and the amounts necessary to
discharge the same to be determined by the Trustee in its sole reasonable
discretion, and such payments made by the Trustee to become part of the
Obligations of the Pledgor to the Trustee, due and payable immediately upon
demand, and
(e) to convey any item of Collateral to any purchaser thereof and
give any notices or recordings of any Liens under Section 6 hereof;
PROVIDED, HOWEVER, that the Trustee shall have no obligation to perform any
of the foregoing actions. The Trustee's authority under this Section 11
shall include, without limitation, the authority to execute or endorse (a)
any checks or instruments representing proceeds of Collateral in the name of
the Pledgor, (b) any receipts for any certificate of ownership or any
document constituting Collateral or transferring title to any item of
Collateral, (c) any financing statements (to the extent permitted by
applicable law) or (d) any other documents deemed necessary or appropriate by
the Trustee to preserve, protect or perfect the security interest in the
Collateral and to file the same, prepare, file and sign the Pledgor's name on
any notice of Lien, and to take any other actions arising from or incident to
the powers granted to the Trustee in this Pledge Agreement. This power of
attorney is coupled with an interest and is irrevocable by the Pledgor.
SECTION 12. NO ASSUMPTION OF DUTIES; REASONABLE CARE. The
rights and powers conferred on the Trustee hereunder are solely to preserve
and protect the security interest of the Trustee and the Holders of the Notes
in and to the Collateral granted hereby and shall not be interpreted to, and
shall not impose any duties on the Trustee in connection therewith other than
those expressly provided herein or imposed under applicable law. Except as
provided by applicable law or by the Indenture, the Trustee shall be deemed
to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Trustee accords similar property held
by the Trustee for its own account, it being understood that the Trustee in
its capacity as such shall not have any responsibility for (a) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities or
other matters relative to any Collateral, whether or not the Trustee has or
is deemed to have knowledge of such matters, (b) taking any necessary steps
to preserve rights against any parties with respect to any Collateral or (c)
investing or reinvesting any of the Collateral or any loss on any investment.
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SECTION 13. INDEMNITY; TRUSTEE'S LIMITATION OF LIABILITY TO
PLEDGOR. (a) The Pledgor shall indemnify, reimburse, hold harmless and
defend the Trustee and its directors, officers, agents and employees, from
and against any and all claims, actions, obligations, liabilities and
expenses, including reasonable defense costs, reasonable investigative fees
and costs, and reasonable legal fees and damages arising from the Trustee's
performance or lack of performance as Trustee under this Pledge Agreement,
except to the extent that such claim, action, obligation, liability or
expense is directly attributable to the bad faith, gross negligence or wilful
misconduct of such indemnified person. This indemnity shall be a continuing
obligation of the Pledgor, its respective successors and assigns,
notwithstanding the termination of this Pledge Agreement.
(b) If at any time the Trustee is served with any judicial or
administrative order, judgment, decree, writ or other form of judicial or
administrative process which in any way affects Collateral (including, but
not limited to, orders of attachment or garnishment or other forms of
levies or injunctions or stays relating to the transfer of Collateral), the
Trustee is authorized to comply therewith in any manner as it or its legal
counsel of its own choosing deems appropriate and if the Trustee complies
with any such judicial or administrative order, judgment, decree, writ or
other form of judicial or administrative process, the Trustee shall not be
liable to the Pledgor even though such order, judgment, decree, writ or
process may be subsequently modified or vacated or otherwise determined to
have been without legal force or effect.
(c) The Trustee shall not incur any liability to the Pledgor for
not performing any act or fulfilling any duty, obligation or responsibility
hereunder by reason of any occurrence beyond the control of the Trustee
(including, but not limited to, any act or provision or any present or
future law or regulation or governmental authority, any act of God or war,
or the unavailability of the Federal Reserve Bank wire or telex or other
wire or communication facility).
(d) The Trustee shall not be responsible in any respect for the
form, execution, validity, value or genuineness of documents or securities
deposited hereunder, or for any description therein, or for the identity,
authority or rights of persons executing or delivering or purporting to
execute or deliver any such document, security or endorsement.
SECTION 14. REMEDIES UPON EVENT OF DEFAULT. If any Event of
Default under the Indenture or default hereunder (any such Event of Default
or default being referred to in this Pledge Agreement as an "EVENT OF
DEFAULT") shall have occurred and be continuing:
(a) The Trustee and the Holders of the Notes may exercise, in
addition to all other rights given by law or by this Pledge Agreement or
the Indenture, all of the rights and remedies with respect to the
Collateral of a secured party under the UCC in effect in the State of New
York at that time and also may (i) require the Pledgor to, and the Pledgor
hereby agrees that it will at its expense and upon request of the Trustee
forthwith, assemble
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all or part of the Collateral as directed by the Trustee and make it
available to the Trustee at a place to be designated by the Trustee that
is reasonably convenient to both parties and (ii) without notice except
as specified below, sell the Collateral or any part thereof in one or
more parcels at any broker's board or at public or private sale, in one
or more sales or lots, at any of the Trustee's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as
the Trustee may deem commercially reasonable. The Pledgor agrees that, to
the extent notice of sale shall be required by law, at least ten days'
notice to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Trustee shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Trustee may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. The purchaser
of any or all Collateral so sold shall thereafter hold the same absolutely,
free from any claim, encumbrance or right of any kind whatsoever created by
or through the Pledgor. Any sale of the Collateral conducted in conformity
with reasonable commercial practices of banks, insurance companies,
commercial finance companies, or other financial institutions disposing of
property similar to the Collateral shall be deemed to be commercially
reasonable. The Trustee or any Holder of Notes may, in its own name or in
the name of a designee or nominee, buy any of the Collateral at any public
sale and, if permitted by applicable law, at any private sale. All
expenses (including court costs and reasonable attorneys' fees, expenses
and disbursements) of, or incident to, the enforcement of any of the
provisions hereof shall be recoverable from the proceeds of the sale or
other disposition of the Collateral.
(b) All cash proceeds received by the Trustee in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Trustee, be held by the Trustee as
collateral for, and/or then or at any time thereafter applied (after
payment of any amounts payable to the Trustee pursuant to Section 15) in
whole or in part by the Trustee for the ratable benefit of the Holders of
the Notes against, all or any part of the Obligations in such order as the
Trustee shall elect or the Holders of at least 25% in aggregate principal
amount of the Notes then outstanding shall request. Any surplus of such
cash or cash proceeds held by the Trustee and remaining after payment in
full of all the Obligations shall be paid over to the Pledgor or to
whomsoever may be lawfully entitled to receive such surplus.
(c) The Pledgor further agrees to use its reasonable best efforts
to do or cause to be done all such other acts as may be necessary to make
such sale or sales of all or any portion of the Collateral pursuant to this
Section 14 valid and binding and in compliance with any and all other
applicable requirements of law. The Pledgor further agrees that a breach
of any of the covenants contained in this Section 14 will cause irreparable
injury to the Trustee and the Holders of the Notes, that the Trustee and
the Holders of the Notes have no adequate remedy at law in respect of such
breach and, as a consequence, that each and
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every covenant contained in this Section 14 shall be specifically
enforceable against the Pledgor, and the Pledgor hereby waives and agrees
not to assert any defenses against an action for specific performance of
such covenants except for a defense that no Event of Default has occurred.
SECTION 15. EXPENSES. The Pledgor will upon demand pay to the
Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the Trustee, that the Trustee may incur in
connection with (a) the review, negotiation and administration of this Pledge
Agreement, (b) the custody or preservation of, or the sale of, collection
from, or other realization upon, any of the Collateral, (c) the exercise or
enforcement of any of the rights of the Trustee and the Holders of the Notes
hereunder or (d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 16. SECURITY INTEREST ABSOLUTE. All rights of the
Trustee and the Holders of the Notes and security interests hereunder, and
all obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or
Notes or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to any departure from the Indenture;
(c) any taking, exchange, surrender, release or non-perfection of
any Liens on any other collateral for all or any of the Obligations;
(d) any manner of application of collateral, or proceeds thereof,
to all or any of the Obligations, or any manner of sale or other
disposition of any collateral for all or any of the Obligations or any
other assets of the Pledgor;
(e) any change, restructuring or termination of the corporate
structure or existence of the Pledgor; or
(f) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the Obligations or of this Pledge
Agreement.
SECTION 17. MISCELLANEOUS PROVISIONS.
Section 17.1. NOTICES. Any notice or communication given
hereunder and any deliveries made hereunder shall be sufficiently given if in
writing and delivered in person or mailed
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by first class mail, commercial courier service or telecopier communication,
addressed as follows:
IF TO THE PLEDGOR:
Dobson/Sygnet Communications Company
13439 N. Broadway Extension, Suite 200
Oklahoma City, Oklahoma 73114
Fax: (405) 391-8515
Attention: Bruce R. Knooihuizen
WITH A COPY TO:
McAfee & Taft
211 North Robinson
Suite 1000
Oklahoma City, Oklahoma 73102
Attention: Theodore M. Elam
IF TO THE TRUSTEE:
United States Trust Company of New York
114 W. 47th Street
New York, New York 10036
Fax: (212) 852-1626
Attention: Louis Young, Corporate Trust Administration
All such deliveries, notices and other communications shall be effective when
received.
Section 17.2. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Pledge Agreement may not be used to interpret another pledge, security
or debt agreement of the Pledgor or any subsidiary thereof. No such pledge,
security or debt agreement (other than the Indenture) may be used to
interpret this Pledge Agreement.
Section 17.3. SEVERABILITY. The provisions of this Pledge
Agreement are severable, and if any clause or provision shall be held
invalid, illegal or unenforceable in whole or in part in any jurisdiction,
then such invalidity or unenforceability shall affect in that jurisdiction
only such clause or provision, or part thereof, and shall not in any manner
affect such clause or provision in any other jurisdiction or any other clause
or provision of this Pledge Agreement in any jurisdiction.
Section 17.4. HEADINGS. The headings in this Pledge Agreement
have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the
terms or provisions hereof.
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Section 17.5. COUNTERPART ORIGINALS. This Pledge Agreement may
be signed in two or more counterparts, each of which shall be deemed an
original, but all of which shall together constitute one and the same
agreement.
Section 17.6. BENEFITS OF PLEDGE AGREEMENT. Nothing in this
Pledge Agreement, express or implied, shall give to any person, other than
the parties hereto and their successors hereunder, and the Holders of the
Notes, any benefit or any legal or equitable right, remedy or claim under
this Pledge Agreement.
Section 17.7. AMENDMENTS, WAIVERS AND CONSENTS. Any amendment
or waiver of any provision of this Pledge Agreement and any consent to any
departure by the Pledgor from any provision of this Pledge Agreement shall be
effective only if made or duly given in compliance with all of the terms and
provisions of the Indenture, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given. Neither the Trustee nor any Holder of Notes shall be deemed, by
any act, delay, indulgence, omission or otherwise, to have waived any right
or remedy hereunder or to have acquiesced in any Default or Event of Default
or in any breach of any of the terms and conditions hereof. Failure of the
Trustee or any Holder of Notes to exercise, or delay in exercising, any
right, power or privilege hereunder shall not preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. A
waiver by the Trustee or any Holder of Notes of any right or remedy hereunder
on any one occasion shall not be construed as a bar to any right or remedy
that the Trustee or such Holder of Notes would otherwise have on any future
occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
Section 17.8. INTERPRETATION OF AGREEMENT. As long as the
Trustee acts in good faith to the extent a term or provision of this Pledge
Agreement conflicts with the Indenture, the Indenture shall control with
respect to the subject matter of such term or provision. Notwithstanding the
foregoing and any other provision of this Pledge Agreement or the Indenture,
the Trustee shall have no fiduciary responsibility under this Pledge
Agreement.
Section 17.9. CONTINUING SECURITY INTEREST; TERMINATION. (a)
This Pledge Agreement shall create a continuing security interest in and to
the Collateral and shall, unless otherwise provided in this Pledge Agreement,
remain in full force and effect until the payment in full in cash of the
Obligations. This Pledge Agreement shall be binding upon the Pledgor, its
transferees, successors and assigns, and shall inure, together with the
rights and remedies of the Trustee hereunder, to the benefit of the Trustee,
the Holders of the Notes and their respective successors, transferees and
assigns.
(b) So long as no Event of Default shall have occurred and be
continuing, this Pledge Agreement (other than Pledgor's obligations under
Sections 13 and 15) shall terminate upon the payment in full in cash of the
Obligations. At such time, the Trustee shall, pursuant to an Issuer
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Order, reassign and redeliver to the Pledgor all of the Collateral hereunder
that has not been sold, disposed of, retained or applied by the Trustee in
accordance with the terms of this Pledge Agreement and the Indenture and take
all actions requested by the Pledgor that are necessary to release the
security interest created by this Pledge Agreement in and to the Collateral,
including the execution and delivery of all termination statements necessary
to terminate any financing or continuation statements filed with respect to
the Collateral. Such reassignment and redelivery shall be without warranty
by or recourse to the Trustee in its capacity as such and shall be at the
reasonable expense of the Pledgor.
Section 17.10. SURVIVAL OF REPRESENTATIONS AND COVENANTS. All
representations, warranties and covenants of the Pledgor contained herein
shall survive the execution and delivery of this Pledge Agreement, and shall
terminate only upon the termination of this Pledge Agreement. The
obligations of the Pledgor under Sections 13 and 15 hereof shall survive the
termination of this Agreement.
Section 17.11. WAIVERS. The Pledgor waives presentment and
demand for payment of any of the Obligations, protest and notice of dishonor
or default with respect to any of the Obligations, and all other notices to
which the Pledgor might otherwise be entitled, except as otherwise expressly
provided herein or in the Indenture.
Section 17.12. AUTHORITY OF THE TRUSTEE. (a) The Trustee shall
have and be entitled to exercise all powers hereunder that are specifically
granted to the Trustee by the terms hereof, together with such powers as are
reasonably incident thereto. The Trustee may perform any of its duties
hereunder or in connection with the Collateral by or through agents or
employees and shall be entitled to retain counsel and to act in reliance upon
the advice of counsel concerning all such matters. Except as otherwise
expressly provided in this Pledge Agreement or the Indenture, neither the
Trustee nor any director, officer, employee, attorney or agent of the Trustee
shall be liable to the Pledgor for any action taken or omitted to be taken by
the Trustee, in its capacity as Trustee, hereunder, except for its own bad
faith, gross negligence or willful misconduct, and the Trustee shall not be
responsible for the validity, effectiveness or sufficiency hereof or of any
document or security furnished pursuant hereto. The Trustee and its
directors, officers, employees, attorneys and agents shall be entitled to
rely on any communication, instrument or document believed by it or them to
be genuine and correct and to have been signed or sent by the proper person
or persons.
(b) The Pledgor acknowledges that the rights and
responsibilities of the Trustee under this Pledge Agreement with respect to
any action taken by the Trustee or the exercise or non-exercise by the
Trustee of any option, right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Pledge Agreement
shall, as between the Trustee and the Holders of the Notes, be governed by
the Indenture and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Trustee and the Pledgor,
the Trustee shall be conclusively presumed to be acting as agent for the
Holders of the Notes with full and valid authority so to act or refrain from
acting, and the Pledgor shall not be obligated or
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entitled to make any inquiry respecting such authority.
Section 17.13 FINAL EXPRESSION. This Pledge Agreement, together
with the Indenture and any other agreement executed in connection herewith,
is intended by the parties as a final expression of this Pledge Agreement and
is intended as a complete and exclusive statement of the terms and conditions
thereof.
Section 17.14. RIGHTS OF HOLDERS OF THE NOTES. No Holder of
Notes shall have any independent rights hereunder other than those rights
granted to individual Holders of the Notes pursuant to Section 6.07 of the
Indenture; PROVIDED that nothing in this subsection shall limit any rights
granted to the Trustee under the Notes or the Indenture.
Section 17.15. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL; WAIVER OF DAMAGES. (a) THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY
DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF
THE NOTES IN CONNECTION WITH THIS PLEDGE AGREEMENT, AND WHETHER ARISING IN
CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
(b) THE PLEDGOR HEREBY APPOINTS CT CORPORATION SYSTEM, 1633
BROADWAY, NEW YORK, NEW YORK 10019, AS ITS AGENT FOR SERVICE OF PROCESS IN
ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE AGREEMENT AND FOR
ACTIONS BROUGHT UNDER U.S. FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY
FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK AND AGREES TO SUBMIT
TO THE JURISDICTION OF ANY SUCH COURT.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY
AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE THE
RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
PLEDGOR OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN
GOOD FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR
THE COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH
COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE TRUSTEE. THE PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS,
SETOFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON
SUCH PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
TRUSTEE, EXCEPT FOR SUCH
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COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY SUCH
PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED. THE PLEDGOR WAIVES
ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN THE CITY OF
NEW YORK ONCE THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN THIS
PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(d) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES NOR
(EXCEPT AS OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT OR THE INDENTURE) THE
TRUSTEE IN ITS CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO THE PLEDGOR
(WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE
PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT
IS BINDING ON THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE CASE MAY BE, THAT
SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE TRUSTEE
OR SUCH HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD FAITH, GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR
WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY
HOLDER OF NOTES IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO
ENFORCE ANY JUDGMENT OR OTHER COURT ORDER PERTAINING TO THIS PLEDGE AGREEMENT
OR ANY RELATED AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE OR ANY
HOLDER OF NOTES, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING
ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT OR ANY
RELATED AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR ON THE ONE HAND AND THE
TRUSTEE AND/OR THE HOLDERS OF THE NOTES ON THE OTHER HAND.
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IN WITNESS WHEREOF, the Pledgor and the Trustee have each caused
this Pledge Agreement to be duly executed and delivered as of the date first
above written.
Pledgor:
DOBSON/SYGNET COMMUNICATIONS COMPANY
By: /s/ EVERETT R. DOBSON
--------------------------------------
Name: Everett R. Dobson
Title: Chief Executive Officer
Trustee:
UNITED STATES TRUST COMPANY OF NEW YORK
By: /s/ LOUIS P. YOUNG
--------------------------------------
Name: Louis P. Young
Title: Vice President
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EXHIBIT A
NOTIFICATION AND CONTROL AGREEMENT
THIS NOTIFICATION AND CONTROL AGREEMENT (the "AGREEMENT") dated
as of December 23, 1998 by and among Dobson/Sygnet Communications Company
(the "PLEDGOR") and the United States Trust Company of New York, a bank and
trust company organized under the new York banking law, in its capacity as
trustee (the "TRUSTEE") and in its capacity as a bank (the "BANK") at which
the Pledgor maintains the Collateral Account.
A. The Pledgor has granted to the Trustee a security interest
in the Collateral, pursuant to, and as more particularly described in, a
Collateral Pledge and Security Agreement dated as of December 23, 1998
between the Pledgor and the Trustee (as the same may hereafter be amended,
supplemented or otherwise modified from time to time, the "PLEDGE AGREEMENT";
terms defined in the Pledge Agreement and not otherwise defined herein are
used herein as therein defined).
B. Terms defined in Articles 8 or 9 of the Uniform Commercial
Code as in effect in the State of New York (the "UCC") are used in this
Agreement (including, without limitation, paragraph A above) as defined in
Articles 8 or 9, respectively, of the UCC.
C. Pursuant to the Pledge Agreement, the Trustee has required
the execution and delivery of this Agreement.
NOW, THEREFORE, for valuable consideration and intending to be
legally bound, the parties hereto agree and acknowledge as follows:
1. NOTICE OF SECURITY INTEREST. The Pledgor and Trustee are
entering into this Agreement to perfect, and confirm the first priority lien
of, the Trustee's security interest in the Collateral. The Bank agrees to
promptly make all necessary entries or notations in its books and records to
reflect the Trustee's security interest in the Collateral and to apply any
value distributed on account of any Collateral as provided in the Pledge
Agreement without further consent from the Pledgor. The Bank acknowledges
that the Trustee has control over the Collateral Account.
2. SEPARATE ACCOUNT; TRUSTEE REPRESENTATIONS AND WARRANTIES.
(a) The Trustee hereby instructs the Bank, and the Bank hereby confirms and
agrees that, unless the Trustee shall otherwise direct the Bank in writing,
the Collateral Account is to be maintained separately at all times.
(b) The Trustee hereby represents and warrants that it has
acquired its security interest in, and security entitlement to, the
Collateral for value and without notice of any adverse claim thereto.
Without limiting the generality of the foregoing, the Collateral is not, to
the Trustee's knowledge, subject to any Lien granted by the Trustee in favor
of any securities intermediary
<PAGE>
(including, without limitation, the Bank or the Federal Reserve Bank of New
York) and the Trustee has not knowingly or purposefully caused or permitted
the Collateral to become subject to any Lien created by or arising through
the Bank.
3. CONTROL. The Bank hereby agrees, upon written direction
from the Trustee and in accordance with the terms of the Pledge Agreement,
and without further consent from the Pledgor, (a) to comply with all
instructions, entitlement orders and directions of any kind originated by the
Trustee concerning the Collateral, to liquidate or otherwise dispose of the
Collateral as and to the extent directed by the Trustee and pay over to the
Trustee all proceeds and other value therefrom or otherwise distributed with
respect thereto without any set off or deduction, and (b) except as otherwise
directed by the Trustee, not to comply with the instructions or directions of
the Pledgor or any other person.
4. OTHER AGREEMENTS; TERMINATION; SUCCESSOR TRUSTEES. The
Bank shall simultaneously send to the Trustee and the Pledgor copies of all
notices given and statements rendered pursuant to the Collateral Account. So
long as the Pledge Agreement remains in effect, neither the Pledgor nor the
Bank shall terminate the Collateral Account without thirty (30) days' prior
written notice to the other party and the Trustee. In the event of any
conflict between the provisions of this Agreement and any other agreement
governing the Collateral Account, the provisions hereof shall control. In
the event the Trustee no longer serves as Trustee for the Collateral, the
Collateral Account shall be transferred to a successor trustee satisfactory
to the Trustee, provided that prior to such transfer, such successor trustee
executes an agreement that is in all material respects the same as this
Agreement or is otherwise in form and substance satisfactory to the Trustee.
5. INDEMNITY. The Pledgor shall indemnify and hold the
Trustee and the Bank harmless from any and all losses, claims, damages,
liabilities, expenses and fees, including reasonable counsel fees, resulting
from the execution of or performance under this Agreement and delivery by the
Trustee of all or any part of the Collateral to the Bank pursuant to this
Agreement, except claims, losses or liabilities resulting from the Trustee's
or the Bank's gross negligence, bad faith or willful misconduct as determined
by a final judgment of a court of competent jurisdiction. This
indemnification shall survive the termination of this Agreement.
6. PROTECTION OF BANK. Except as required by Paragraph 3
hereof, the Bank shall have no duty to determine that the amount and form of
assets constituting Collateral comply with any applicable requirements. The
Bank may rely and shall be protected in acting upon any notice, instruction,
or other communication which it reasonably believes to be genuine and
authorized.
7. TERMINATION/RELEASE OF COLLATERAL. This Agreement shall
terminate
-2-
<PAGE>
automatically upon receipt by the Bank of written notice executed by two
officers of the Trustee holding titles of Vice President or higher that (a)
all of the obligations secured by the Collateral have been satisfied, or (b)
all of the Collateral has been released, whichever is sooner, and the Bank
shall thereafter be relieved of all duties and obligations hereunder.
8. WAIVER AND SUBORDINATION OF RIGHTS. The Bank hereby
waives its right to set off any obligations of the Pledgor to the Bank
against any or all assets held by the Trustee as Collateral, and hereby
agrees that any and all liens, encumbrances, claims or security interests
which the Bank may have against the Collateral, either now or in the future
are and shall be subordinate and junior to the prior payment in full of all
obligations of the Pledgor now or hereafter existing under the Indenture,
Notes and all other documents related thereto whether for principal, interest
(including, without limitation, interest, as provided in the Notes, whether
or not such interest accrues after the filing of such petition for purposes
of the Bankruptcy Code or is an allowed claim in such proceeding),
indemnities, fees, premiums, expenses or otherwise. The Bank will not agree
with any third party that the Bank will comply with any instructions or
directions of any kind concerning the Collateral originated by such third
party without the prior written consent of the Trustee. Except for the
claims and interests of the Trustee and the Pledgor in the Collateral, the
Bank does not know of any claim to or security interest or other interest in
the Collateral.
9. EXPENSES. The Pledgor shall pay upon demand all fees,
costs and expenses (including reasonable fees and expenses of counsel) of
enforcing the Bank's rights and remedies upon any breach (by the Trustee or
the Pledgor) of any of the provisions of this Agreement.
10. NOTICES. All notices, demands, requests, consents,
approvals and other communications required or permitted hereunder must be in
writing and will be effective upon receipt if delivered personally, or if
sent by facsimile transmission with confirmation of delivery, or by
nationally recognized overnight courier service with confirmation of
delivery, to the Pledgor's and the Trustee's addresses as set forth in the
Pledge Agreement, and to the Bank's address as set forth below, or to such
other address as any party may give to the others in writing for such purpose.
11. CHANGES IN WRITING. No modification, amendment or waiver
of any provision of this Agreement nor consent to any departure by any party
therefrom will be effective unless made in writing signed by the parties
hereto, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.
12. ENTIRE AGREEMENT. This Agreement (including the documents
and instruments referred to herein) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and
oral, among the parties with respect to the subject matter hereof.
-3-
<PAGE>
13. COUNTERPARTS. This Agreement may be signed in any number
of counterpart copies and by the parties hereto on separate counterparts
(including by facsimile transmission), but all such copies shall constitute
one and the same instrument.
14. SUCCESSORS AND ASSIGNS. This Agreement will be binding
upon and inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
15. GOVERNING LAW AND JURISDICTION. This Agreement has been
delivered to and accepted by the Trustee and will be deemed to be made in the
State of New York. THIS AGREEMENT WILL BE INTERPRETED AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. Each of the parties hereby irrevocably submits for
itself and its property in any legal action or proceeding relating to this
Agreement, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction and venue of the courts of
the State of New York, the courts of the United States of America in New
York, and appellate courts from any thereof.
16. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR CLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) OF
ANY NATURE RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION
WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS.
EACH PARTY HERETO ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND
VOLUNTARY.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
PLEDGOR:
DOBSON/SYGNET COMMUNICATIONS COMPANY
By: /s/ Everett R. Dobson
----------------------------------------
Name: Everett R. Dobson
--------------------------------------
Title: Chief Executive Officer
-------------------------------------
TRUSTEE:
UNITED STATES TRUST COMPANY OF NEW YORK,
AS TRUSTEE
By: /s/ Louis P. Young
----------------------------------------
Name: Louis P. Young
--------------------------------------
Title: Vice President
-------------------------------------
-5-
<PAGE>
BANK'S ADDRESS FOR BANK:
NOTICES:
UNITED STATES TRUST COMPANY OF NEW YORK
114 W. 47th Street By: /s/ Louis P. Young
New York, New York 10036 ------------------------------------
Attention: Louis Young Name: Louis P. Young
Facsimile Number: (212) 852-1626 ----------------------------------
Title: Vice President
---------------------------------
-6-
<PAGE>
DOBSON/SYGNET COMMUNICATIONS COMPANY
$200,000,000
12 1/4% SENIOR NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
December 23, 1998
NationsBanc Montgomery Securities LLC
As representative of the several Initial
Purchasers listed on Schedule I hereto
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255-0001
Ladies and Gentlemen:
Dobson/Sygnet Communications Company, an Oklahoma corporation (the
"Company"), proposes to issue and sell (the "Initial Placement") to NationsBanc
Montgomery Securities, Inc., Lehman Brothers Inc., First Union Capital Markets,
a division of Wheat First Securities, Inc., a division of Wheat First
Securities, Inc. and TD Securities (USA) Inc. (the "Initial Purchasers" and,
individually, each an "Initial Purchaser") upon terms set forth in a purchase
agreement dated as of December 16, 1998 (the "Purchase Agreement") among the
Company, Dobson Communications Corporation, an Oklahoma corporation ("DCC"), and
the Initial Purchasers, its 12 1/4% Senior Notes due 2008 (the "Notes"). As an
inducement to you to enter into the Purchase Agreement and purchase the Notes
and in satisfaction of a condition to your obligations under the Purchase
Agreement, the Company agrees with you for the benefit of the holders from time
to time of the Notes (including the Initial Purchasers) (each of the foregoing a
"Holder" and together the "Holders"), as follows:
1. DEFINITIONS. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"AFFILIATE" of any specified person means any other person that,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this
definition, control of a person means the power,
<PAGE>
direct or indirect, to direct or cause the direction of the management and
policies of such person whether by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"CLOSING DATE" has the meaning set forth in the Purchase Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" has the meaning set forth in the preamble hereto.
"DCC" has the meaning set forth in the preamble hereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"EXCHANGE NOTES" means debt securities issued by the Company,
identical in all material respects to the Notes (except that (i) interest
thereon shall accrue from the last date on which interest was paid on the
Notes or, if no such interest has been paid, from December 23, 1998 and
(ii) the liquidated damages provisions and the transfer restrictions
pertaining to the Notes will be modified or eliminated, as appropriate, in
the Exchange Notes), to be issued under the Indenture.
"EXCHANGE OFFER" means the proposed offer to the Holders to issue
and deliver to such Holders, in exchange for the Notes, a like principal
amount of Exchange Notes.
"EXCHANGE OFFER REGISTRATION PERIOD" means the longer of (A) the
period until the consummation of the Exchange Offer and (B) two years after
effectiveness of the Exchange Offer Registration Statement, exclusive of
any period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement; PROVIDED,
HOWEVER, that in the event that all resales of Exchange Notes (including,
subject to the time periods set forth herein, any resales by Exchanging
Dealers) covered by such Exchange Offer Registration Statement have been
made, the Exchange Offer Registration Statement need not remain
continuously effective for the period set forth in clause (B) above.
"EXCHANGE OFFER REGISTRATION STATEMENT" means a Registration
Statement of the Company on an appropriate form under the Securities Act
with respect to the Exchange Offer, all amendments and supplements to such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"EXCHANGING DEALER" means any Holder (which may include the Initial
Purchasers) that is a broker-dealer, electing to exchange Notes acquired
for its own
<PAGE>
account as a result of market-making activities or other trading activities
for Exchange Notes.
"FINAL MEMORANDUM" has the meaning set forth in the Purchase
Agreement.
"HOLDER" has the meaning set forth in the preamble hereto.
"INDENTURE" means the indenture relating to the Notes and the
Exchange Notes, to be dated as of the Closing Date, between the Company and
United States Trust Company of New York, as the same may be amended,
supplemented, waived or otherwise modified from time to time in accordance
with the terms thereof.
"INITIAL PLACEMENT" has the meaning set forth in the preamble
hereto.
"INITIAL PURCHASERS" has the meaning set forth in the preamble
hereto.
"LOSSES" has the meaning set forth in Section 6(d) hereto.
"MAJORITY HOLDERS" means the Holders of a majority of the aggregate
principal amount of Notes registered under a Registration Statement.
"MANAGING UNDERWRITERS" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten
offering under a Shelf Registration Statement.
"NOTES" has the meaning set forth in the preamble hereto.
"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the
Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Notes or
the Exchange Notes covered by such Registration Statement, and all
amendments and supplements to the Prospectus, including post-effective
amendments.
"PURCHASE AGREEMENT" has the meaning set forth in the preamble
hereto.
"REGISTRATION STATEMENT" means any Exchange Offer Registration
Statement or Shelf Registration Statement pursuant to the provisions of
this Agreement, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto, and all material incorporated by
reference therein.
<PAGE>
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"SHELF REGISTRATION" means a registration effected pursuant to
Section 3 hereof.
"SHELF REGISTRATION PERIOD" has the meaning set forth in Section
3(b) hereof.
"SHELF REGISTRATION STATEMENT" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof,
which covers some or all of the Notes or Exchange Notes, as applicable, on
an appropriate form under Rule 415 under the Securities Act, or any similar
rule that may be adopted by the Commission, amendments and supplements to
such registration statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"TRUSTEE" means the trustee with respect to the Notes or Exchange
Notes, as applicable, under the Indenture.
"UNDERWRITER" means any underwriter of Notes in connection with an
offering thereof under a Shelf Registration Statement.
2. EXCHANGE OFFER; RESALES OF EXCHANGE NOTES BY EXCHANGING
DEALERS; PRIVATE EXCHANGE.
(a) The Company shall prepare and file with the Commission the
Exchange Offer Registration Statement with respect to the Exchange Offer. The
Company shall use its best efforts (i) to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act and remain effective
until the closing of the Exchange Offer and (ii) to consummate the Exchange
Offer on or prior to the 180th calendar day following the Closing Date.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Exchange Offer, it being the
objective of such Exchange Offer to enable each Holder electing to exchange
Notes for Exchange Notes (assuming that such Holder (x) is not an "affiliate" of
the Company within the meaning of the Securities Act, (y) is not a broker-dealer
that acquired the Notes in a transaction other than as a part of its
market-making or other trading activities and (z) if such Holder is not a
broker-dealer, acquires the Exchange Notes in the ordinary course of such
Holder's business, is not participating in the distribution of the Exchange
Notes and has no arrangements or understandings with any person to participate
in the distribution of the Exchange Notes) to resell such Exchange Notes from
and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of a
substantial proportion of the several states of the United States.
<PAGE>
(c) In connection with the Exchange Offer, the Company shall mail
to each Holder a copy of the Prospectus forming part of the Exchange Offer
Registration Statement, together with an appropriate letter of transmittal and
related documents, stating, in addition to such other disclosures as are
required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Notes validly tendered will be accepted for
exchange;
(ii) the dates of acceptance for exchange;
(iii) that any Note not tendered will remain outstanding and
continue to accrue interest, but will not retain any rights under this
Agreement;
(iv) that Holders electing to have a Note exchanged pursuant to
the Exchange Offer will be required to surrender such Note, together with
the enclosed letters of transmittal, to the institution and at the address
(located in the Borough of Manhattan, The City of New York) specified in
the notice prior to the close of business on the last day of acceptance for
exchange; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the last day of acceptance for
exchange, by sending to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the principal amount of Notes delivered for exchange and a
statement that such Holder is withdrawing his election to have such Notes
exchanged; and shall keep the Exchange Offer open for acceptance for not
less than 30 days and not more than 45 days (or longer if required by
applicable law) after the date notice thereof is mailed to the Holders;
utilize the services of a depositary for the Exchange Offer with an address
in the Borough of Manhattan, The City of New York; and comply in all
respects with all applicable laws relating to the Exchange Offer.
(d) As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange all Notes duly tendered and not validly
withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Trustee for cancellation all Notes so accepted
for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to
each Holder Exchange Notes equal in principal amount to the Notes of such
Holder so accepted for exchange.
<PAGE>
(e) The Initial Purchasers and the Company acknowledge that,
pursuant to interpretations by the staff of the Commission of Section 5 of the
Securities Act, and in the absence of an applicable exemption therefrom, each
Exchanging Dealer is required to deliver a Prospectus in connection with a sale
of any Exchange Notes received by such Exchanging Dealer pursuant to the
Exchange Offer in exchange for Notes acquired for its own account as a result of
market-making activities or other trading activities. Accordingly, the Company
shall:
(i) include the information set forth in Annex A hereto on the
cover of the Exchange Offer Registration Statement, in Annex B hereto in
the forepart of the Exchange Offer Registration Statement in a section
setting forth details of the Exchange Offer, in Annex C hereto in the
underwriting or plan of distribution section of the Prospectus forming a
part of the Exchange Offer Registration Statement, and in Annex D hereto in
the letter of transmittal delivered pursuant to the Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer Registration
Statement continuously effective under the Securities Act during the
Exchange Offer Registration Period for delivery of the prospectus included
therein by Exchanging Dealers in connection with sales of Exchange Notes
received pursuant to the Exchange Offer, as contemplated by Section 4(h)
below; PROVIDED, HOWEVER, that the Company shall not be required to
maintain the effectiveness of the Exchange Offer Registration Statement for
more than 30 days following the consummation of the Exchange Offer unless
the Company has been notified in writing on or prior to the 30th day
following the consummation of the Exchange Offer by one or more Exchanging
Dealers that such Holder has received Exchange Notes as to which it will be
required to deliver a prospectus upon resale.
(f) In the event that the Initial Purchasers determine that they
are not eligible to participate in the Exchange Offer with respect to the
exchange of Notes constituting any portion of an unsold allotment, upon the
effectiveness of the Shelf Registration Statement as contemplated by Section 3
hereof and at the request of the Initial Purchasers, the Company shall issue and
deliver to the Initial Purchasers, or to the party purchasing Notes registered
under the Shelf Registration Statement from the Initial Purchasers, in exchange
for such Notes, a like principal amount of Exchange Notes. The Company shall
use its best efforts to cause the CUSIP Service Bureau to issue the same CUSIP
number for such Exchange Notes as for Exchange Notes issued pursuant to the
Exchange Offer.
(g) The Company shall use its best efforts to complete the
Exchange Offer as provided above and shall comply with the applicable
requirements of the Securities Act, the Exchange Act and other applicable laws
and regulations in connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions, other than that (i) the Exchange Offer does
not violate applicable law or any applicable interpretation of the staff of the
Commission, (ii) no action or proceeding shall have been instituted or
threatened in any court or by any governmental agency which might materially
impair the ability of the Company to
<PAGE>
proceed with the Exchange Offer, and no material adverse development shall have
occurred in any existing action or proceeding with respect to the Company and
(iii) all governmental approvals shall have been obtained, which approvals the
Company deems necessary for the consummation of the Exchange Offer. The Company
shall inform the Initial Purchasers, upon their request, of the names and
addresses of the Holders to whom the Exchange Offer is made, and the Initial
Purchasers shall have the right, subject to applicable law, to contact such
Holders and otherwise facilitate the tender of Notes in the Exchange Offer.
3. SHELF REGISTRATION. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to effect
the Exchange Offer as contemplated by Section 2 hereof, or (ii) for any reason
other than those specified in clause (i) above, the Exchange Offer is not
consummated within 180 days of the Closing Date, or (iii) the Initial Purchasers
so request with respect to Notes held by them within 90 days following
consummation of the Exchange Offer, or (iv) any Holder (other than an Initial
Purchaser) is not eligible to participate in the Exchange Offer or has
participated in the Exchange Offer and has received Exchange Notes that are not
freely tradeable or (v) in the case where the Initial Purchasers participate in
the Exchange Offer or acquire Exchange Notes pursuant to Section 2(f) hereof,
the Initial Purchasers do not receive freely tradeable Exchange Notes in
exchange for Notes constituting any portion of an unsold allotment (it being
understood that, for purposes of this Section 3, (x) the requirement that the
Initial Purchasers deliver a Prospectus containing the information required by
Items 507 and/or 508 of Regulation S-K under the Securities Act in connection
with sales of Exchange Notes acquired in exchange for such Notes shall result in
such Exchange Notes being not "freely tradeable" and (y) the requirement that an
Exchanging Dealer deliver a Prospectus in connection with sales of Exchange
Notes acquired in the Exchange Offer in exchange for Notes acquired as a result
of market-making activities or other trading activities shall not result in such
Exchange Notes being not "freely tradeable"), the following provisions shall
apply:
(a) The Company shall, as promptly as practicable, file with the
Commission a Shelf Registration Statement relating to the offer and sale of
the Notes or the Exchange Notes, as applicable, by the Holders from time to
time in accordance with the methods of distribution elected by such Holders
and set forth in such Shelf Registration Statement and Rule 415 under the
Securities Act, PROVIDED that, with respect to Exchange Notes received by
the Initial Purchasers in exchange for Notes constituting any portion of an
unsold allotment, the Company may, if permitted by current interpretations
by the Commission's staff, file a post-effective amendment to the Exchange
Offer Registration Statement containing the information required by
Regulation S-K Items 507 and/or 508, as applicable, in satisfaction of its
obligations under this paragraph (a) with respect thereto, and any such
Exchange Offer Registration Statement, as so amended, shall be referred to
herein as, and governed by the provisions herein applicable to, a Shelf
Registration Statement.
(b) The Company shall use its best efforts to cause the Shelf
Registration
<PAGE>
Statement to be declared effective under the Securities Act as promptly as
possible after filing such Shelf Registration Statement pursuant to this
Section 3 and to keep such Shelf Registration Statement continuously
effective in order to permit the Prospectus contained therein to be usable
by Holders for a period of two years from the date the Shelf Registration
Statement is declared effective by the Commission or such shorter period
that will terminate when all the Notes or Exchange Notes, as applicable,
covered by the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement (in any such case, such period being called
the "Shelf Registration Period"). The Company shall be deemed not to have
used its best efforts to keep the Shelf Registration Statement effective
during the requisite period if it voluntarily takes any action that would
result in Holders of Notes covered thereby not being able to offer and sell
such Notes during that period, unless (i) such action is required by
applicable law, (ii) the Company complies with this Agreement or (iii) such
action is taken by the Company in good faith and for valid business reasons
(not including avoidance of the Company's obligations hereunder), including
the acquisition or divestiture of assets, so long as the Company promptly
thereafter complies with the requirements of Section 4(l) hereof, if
applicable.
4. REGISTRATION PROCEDURES. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall, within a reasonable time prior to the
filing of any Registration Statement, any Prospectus, any amendment to a
Registration Statement or amendment or supplement to a Prospectus or any
document which is to be incorporated by reference into a Registration
Statement or a Prospectus after initial filing of a Registration Statement,
provide copies of such document to the Initial Purchasers and their counsel
(and, in the case of a Shelf Registration Statement, the Holders and their
counsel, upon their request) and make such representatives of the Company
as shall be reasonably requested by the Initial Purchasers or their counsel
(and, in the case of a Shelf Registration Statement, the Majority Holders
or their counsel) available for discussion of such document, and shall not
at any time file or make any amendment to the Registration Statement, any
Prospectus or any amendment of or supplement to a Registration Statement or
a Prospectus or any document which is to be incorporated by reference into
a Registration Statement or a Prospectus, of which the Initial Purchasers
and their counsel (and, in the case of a Shelf Registration Statement, the
Holders and their counsel) shall not have previously been advised and
furnished a copy or to which the Initial Purchasers or their counsel (and,
in the case of a Shelf Registration Statement, the Holders or their
counsel) shall object, except for any amendment or supplement or document
(a copy of which has been previously furnished to the Initial Purchasers
and their counsel (and, in the case of a Shelf Registration Statement, the
Majority Holders and their counsel, upon their request)) which counsel to
the Company shall advise the Company, in the form of a written opinion, is
required in order to comply with
<PAGE>
applicable law; each of the Initial Purchasers agrees that, if it receives
timely notice and drafts under this clause (a), it will not take actions or
make objections pursuant to this clause (a) such that the Company is unable
to comply with its obligations under Section 2.
(b) The Company shall ensure that:
(i) any Registration Statement and any amendment thereto
and any Prospectus contained therein and any amendment or supplement
thereto complies in all material respects with the Securities Act
and the rules and regulations thereunder;
(ii) any Registration Statement and any amendment thereto
does not, when it becomes effective, contain an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; and
(iii) any Prospectus forming part of any Registration
Statement, including any amendment or supplement to such Prospectus,
does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
(c) (1) The Company shall advise the Initial Purchasers and, in
the case of a Shelf Registration Statement, the Holders of Notes covered
thereby, and, if requested by the Initial Purchasers or any such Holder,
confirm such advice in writing:
(i) when a Registration Statement and any amendment
thereto has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included
therein or for additional information.
(2) During the Shelf Registration Period or the Exchange Offer
Registration Period, as applicable, the Company shall advise the Initial
Purchasers and, in the case of a Shelf Registration Statement, the Holders
of Notes covered thereby, and, in the case of an Exchange Offer
Registration Statement, any Exchanging Dealer that has provided in writing
to the Company a telephone or facsimile number and address for notices,
and, if requested by the Initial Purchasers or any such Holder or
Exchanging Dealer, confirm such advice in writing:
(i) of the issuance by the Commission of any stop order
suspending
<PAGE>
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(ii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Notes included
therein for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(iii) of the happening of any event that requires the making
of any changes in the Registration Statement or the Prospectus so
that, as of such date, the Registration Statement or the Prospectus
does not include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein (in
the case of the Prospectus, in light of the circumstances under
which they were made) not misleading (which advice shall be
accompanied by an instruction to suspend the use of the Prospectus
until the requisite changes have been made).
(d) The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of Notes covered by
any Shelf Registration Statement that so requests, without charge, at least
one copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and schedules, and, if
the Holder so requests in writing, all exhibits thereto.
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Notes covered by any Shelf Registration
Statement, without charge, as many copies of the Prospectus (including each
preliminary Prospectus) included in such Shelf Registration Statement and
any amendment or supplement thereto as such Holder may reasonably request;
and the Company consents to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of Notes in connection
with the offering and sale of the Notes covered by the Prospectus or any
amendment or supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer that so
requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by reference
therein and, if the Exchanging Dealer so requests in writing, all exhibits
thereto.
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as many
copies of the
<PAGE>
Prospectus included in such Exchange Offer Registration Statement and any
amendment or supplement thereto as such Exchanging Dealer may reasonably
request for delivery by such Exchanging Dealer in connection with a sale of
Exchange Notes received by it pursuant to the Exchange Offer; and the
Company consents to the use of the Prospectus or any amendment or
supplement thereto by any such Exchanging Dealer, as provided in Section
2(e) above.
(i) Each Holder of Notes and each Exchange Dealer agrees by its
acquisition of such Notes or Exchange Notes to be sold by such Exchange
Dealer, as the case may be, that, upon actual receipt of any notice from
the Company of the happening of any event of the kind described in
paragraph (c)(2)(i), (c)(2)(ii), or (c)(2)(iii) of this Section 4, such
Holder will forthwith discontinue disposition of such Notes covered by such
Registration Statement or Prospectus or Exchange Notes to be sold by such
Holder or Exchange Dealer, as the case may be, until such Holder's or
Exchange Dealer's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4(l) hereof, or until it is advised in
writing by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto.
In the event that the Company shall give any such notice, the Exchange
Offer Registration Period shall be extended by the number of days during
such periods from and including the date of the giving of such notice to
and including the date when each seller of the Exchange Notes covered by
such Registration Statement or Exchange Notes to be sold by such Exchange
Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 4(l) hereof or
(y) the advice in writing.
(j) Prior to the Exchange Offer or any other offering of Notes
pursuant to any Registration Statement, the Company shall register or
qualify or cooperate with the Holders of Notes included therein and their
respective counsel in connection with the registration or qualification of
such Notes for offer and sale under the securities or blue sky laws of such
states as any such Holders reasonably request in writing and do any and all
other acts or things necessary or advisable to enable the offer and sale in
such states of the Notes covered by such Registration Statement; PROVIDED,
HOWEVER, that the Company will not be required to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is
not then so qualified, to file any general consent to service of process or
to take any action that would subject it to general service of process in
any such jurisdiction where it is not then so subject or to subject itself
to taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject.
(k) The Company shall cooperate with the Holders to facilitate
the timely preparation and delivery of certificates representing Notes to
be sold pursuant to any Registration Statement free of any restrictive
legends and in denominations of $1,000 or an integral multiple thereof and
registered in such names as Holders may request prior to
<PAGE>
sales of Notes pursuant to such Registration Statement.
(l) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 4, the Company shall promptly prepare and file
a post-effective amendment to any Registration Statement or an amendment or
supplement to the related Prospectus or any other required document so
that, as thereafter delivered to purchasers of the Notes included therein,
the Prospectus will not include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading
and, in the case of a Shelf Registration Statement, notify the Holders to
suspend use of the Prospectus as promptly as practicable after the
occurrence of such an event. Notwithstanding the foregoing, the Company
shall not be required to amend or supplement a Shelf Registration
Statement, any related Prospectus or any document incorporated therein by
reference, for a period not to exceed an aggregate of 30 days in any
calendar year, if the Company determines in its good faith judgment that
the disclosure of such event at such time would have a material adverse
effect on the business, operations, or prospects of the Company or the
disclosure otherwise related to a pending material business transaction
that has not yet been publicly disclosed.
(m) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the Notes
or Exchange Notes, as the case may be, registered under such Registration
Statement, and provide the Trustee with certificates for such Notes or
Exchange Notes, in a form eligible for deposit with The Depository Trust
Company.
(n) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable after the
effective date of the applicable Registration Statement an earnings
statement meeting the requirements of Rule 158 under the Securities Act.
(o) The Company shall cause the Indenture to be qualified under
the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), in
a timely manner.
(p) The Company may require each Holder of Notes to be sold
pursuant to any Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of such Notes as the
Company may from time to time reasonably require for inclusion in such
Registration Statement.
(q) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement, such information as the Managing Underwriters, if any, and
Majority Holders reasonably agree should be included therein, and shall
make all required filings of such Prospectus
<PAGE>
supplement or post-effective amendment promptly upon notification of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment.
(r) In the case of any Shelf Registration Statement, the Company
shall enter into such agreements (including underwriting agreements) and
take all other appropriate actions in order to expedite or to facilitate
the registration or the disposition of any Notes included therein, and in
connection therewith, if an underwriting agreement is entered into, cause
the same to contain indemnification provisions and procedures no less
favorable than those set forth in Section 6 (or such other provisions and
procedures acceptable to the Majority Holders and the Managing
Underwriters, if any) with respect to all parties to be indemnified
pursuant to Section 6.
(s) In the case of any Shelf Registration Statement, the Company
shall:
(i) make reasonably available for inspection by the
Holders of Notes to be registered thereunder, any underwriter
participating in any disposition pursuant to such Shelf Registration
Statement, and any attorney, accountant or other agent retained by
the Holders or any such underwriter all relevant financial and other
records, pertinent corporate documents and properties of the Company
and any of its subsidiaries;
(ii) cause the Company's officers, directors and employees
to supply all relevant information reasonably requested by the
Holders or any such underwriter, attorney, accountant or agent in
connection with any such Registration Statement as is customary for
similar due diligence examinations and make such representatives of
the Company as shall be reasonably requested by the Initial
Purchasers or Managing Underwriters, if any, available for
discussion of any such Registration Statement; PROVIDED, HOWEVER,
that any non-public information that is designated in writing by the
Company, in good faith, as confidential at the time of delivery of
such information shall be kept confidential by the Holders or any
such underwriter, attorney, accountant or agent, unless such
disclosure is made in connection with a court proceeding or required
by law, or such information becomes available to the public
generally or through a third party without an accompanying
obligation of confidentiality other than as a result of a disclosure
of such information by any such Holder, underwriter, attorney,
accountant or agent;
(iii) make such representations and warranties to the
Holders of Notes registered thereunder and the underwriters, if any,
in form, substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings as may be reasonably
requested by them;
(iv) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably
<PAGE>
satisfactory to the Managing Underwriters, if any) addressed to each
selling Holder and the underwriters, if any, covering such matters
as are customarily covered in opinions requested in similar
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters;
(v) obtain "cold comfort" letters and updates thereof from
the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed
to the underwriters, if any, and use reasonable efforts to have such
letter addressed to the selling Holders of Notes registered
thereunder (to the extent consistent with Statement on Auditing
Standards No. 72 of the American Institute of Certified Public
Accountants (AICPA) ("SAS 72")), in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with similar underwritten offerings, or if the provision
of such "cold comfort" letters is not permitted by SAS 72 or if
requested by the Initial Purchasers or their counsel in lieu of a
"cold comfort" letter, an agreed-upon procedures letter under
Statement on Auditing Standards No. 75 of the AICPA, covering
matters requested by the Initial Purchasers or their counsel; and
(vi) deliver such documents and certificates as may be
reasonably requested by the Majority Holders and the Managing
Underwriters, if any, and customarily delivered in similar
offerings, including those to evidence compliance with Section 4(l)
and with any conditions contained in the underwriting agreement or
other agreement entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v) and (vi)
of this Section 4(s) shall be performed at (A) the effectiveness of such
Shelf Registration Statement and each post-effective amendment thereto and
(B) each closing under any underwriting or similar agreement as and to the
extent required thereunder.
(t) The Company shall, in the case of a Shelf Registration, use
their best efforts to cause all Notes to be listed on any securities
exchange or any automated quotation system on which similar securities
issued by the Company are then listed if requested by the Majority Holders,
to the extent such Notes satisfy applicable listing requirements.
(u) The Company shall use its best efforts to cause the Exchange
Notes or Notes, as the case may be, to be rated by two nationally
recognized statistical rating organizations (as such term is defined in
Rule 436(g)(2) under the 1933 Act).
<PAGE>
5. REGISTRATION EXPENSES; REMEDIES. (a) The Company shall bear
all expenses incurred in connection with the performance of its obligations
under Sections 2, 3 and 4 hereof, including without limitation: (i) all
Commission, stock exchange or National Association of Securities Dealers, Inc.
registration and filing fees, (ii) all fees and expenses incurred in connection
with compliance with state securities or blue sky laws (including reasonable
fees and disbursements of counsel for any underwriters or Holders in connection
with blue sky qualification of any of the Exchange Notes or Notes), (iii) all
expenses of any persons in preparing or assisting in preparing, word processing,
printing and distributing any Registration Statement, any Prospectus, any
amendments or supplements thereto, any underwriting agreements, securities sales
agreements and other documents relating to the performance of and compliance
with this Agreement, (iv) all rating agency fees, if any, (v) all fees and
disbursements relating to the qualification of the Indenture under applicable
securities laws, (vi) the fees and disbursements of the Trustee and its counsel,
(vii) the fees and disbursements of counsel for the Company and, in the case of
a Shelf Registration Statement, the fees and disbursements of one counsel for
the Holders (which counsel shall be selected by the Majority Holders and which
counsel may also be counsel for the Initial Purchasers) and in the case of any
Exchange Offer Registration Statement, the fees and expenses of counsel to the
Initial Purchasers acting in connection therewith and (viii) the fees and
disbursements of the independent public accountants of the Company and Sygnet
Wireless, Inc., including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, but
excluding fees and expenses of counsel to the underwriters (other than fees and
expenses set forth in clause (ii) above) or the Holders and underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of Notes by a Holder.
(b) The Notes provide that if the Exchange Offer is not
consummated on or prior to the 180th calendar day following the Closing Date or
a Shelf Registration Statement is not declared effective when required, the
annual interest rate on the Notes will increase by 0.5% per annum until the
consummation of the Exchange Offer or the effectiveness of a Shelf Registration
Statement, as the case may be.
(c) Without limiting the remedies available to the Initial
Purchasers and the Holders, the Company acknowledges that any failure by the
Company to comply with its obligations under Sections 2 and 3 hereof may result
in material irreparable injury to the Initial Purchasers or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 2 and
3 hereof.
6. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with
any Registration Statement, the Company agrees to indemnify and hold harmless
each Holder of Notes covered thereby (including the Initial Purchasers and, with
respect to any Prospectus delivery as contemplated by Sections 2(e) and 4(h)
hereof, each Exchanging Dealer) the
<PAGE>
directors, officers, employees and agents of such Holder and each person who
controls such Holder within the meaning of either the Securities Act or the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Securities
Act, the Exchange Act or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in such
Registration Statement as originally filed or in any amendment thereof, or in
any preliminary Prospectus or Prospectus, or in any amendment thereof or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of the Prospectus, in
light of the circumstances under which they were made) not misleading, and
agrees to reimburse each such indemnified party, as incurred, for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage or liability (or action in respect
thereof); PROVIDED, HOWEVER, that the Company will not be liable in any case to
the extent that any such loss, claim, damage or liability arises out of or is
based upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with written
information furnished to the Company by or on behalf of any such indemnified
party specifically for inclusion therein; PROVIDED FURTHER, HOWEVER, that the
Company will not be liable in any case with respect to any untrue statement or
omission or alleged untrue statement or omission made in any preliminary
Prospectus or Prospectus, or in any amendment thereof or supplement thereto to
the extent that any such loss, claim, damage or liability (or action in respect
thereof) resulted from the fact that any indemnified party sold Notes or
Exchange Notes to a person to whom there was not sent or given, at or prior to
the written confirmation of such sale, a copy of the Prospectus as then amended
or supplemented, if the Company had previously complied with the provisions of
Section 4(c)(2) and 4(f) or 4(h) hereof and if the untrue statement contained in
or omission from such preliminary Prospectus or Prospectus was corrected in the
Prospectus as then amended or supplemented. This indemnity agreement will be in
addition to any liability that the Company may otherwise have.
The Company also agrees to indemnify or contribute to Losses of, as
provided in Section 6(d) hereof, any underwriters of Notes registered under a
Shelf Registration Statement, their employees, officers, directors and agents
and each person who controls such underwriters on the same basis as that of the
indemnification of the Initial Purchasers and the selling Holders provided in
this Section 6(a) and shall, if requested by any Holder, enter into an
underwriting agreement reflecting such agreement, as provided in Section 4(r)
hereof.
(b) Each Holder of Notes covered by a Registration Statement
(including the Initial Purchasers and, with respect to any Prospectus delivery
as contemplated by Sections 2(e) and 4(h) hereof, each Exchanging Dealer)
severally agrees to indemnify and hold harmless (i) the Company, (ii) each of
the directors of the Company, (iii) each of the officers of the Company who
signs such Registration Statement and (iv) each Person who controls the Company
within the meaning of either the Securities Act or the Exchange Act to the same
<PAGE>
extent as the foregoing indemnity from the Company to each such Holder, but only
with respect to written information furnished to the Company by or on behalf of
such Holder specifically for inclusion in the documents referred to in the
foregoing indemnity. This indemnity agreement will be in addition to any
liability that any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 6, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve the indemnifying party from liability under paragraph (a) or
(b) above unless and to the extent it did not otherwise learn of such action and
such failure results in the forfeiture by the indemnifying party of substantial
rights and defenses, and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) or (b) above. The
indemnifying party shall be entitled to appoint counsel (including local
counsel) of the indemnifying party's choice at the indemnifying party's expense
to represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be responsible
for the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); PROVIDED, HOWEVER, that such
counsel shall be reasonably satisfactory to the indemnified party.
Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel (and local counsel) if (i) the use of counsel chosen by the
indemnifying party to represent the indemnified party would present such counsel
with a conflict of interest, (ii) the actual or potential defendants in, or
targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
<PAGE>
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending the same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to reflect
the relative benefits received by such indemnifying party, on the one hand, and
such indemnified party, on the other hand, from the Initial Placement and the
Registration Statement that resulted in such Losses; PROVIDED, HOWEVER, that in
no case shall any Initial Purchaser or any subsequent Holder of any Note or
Exchange Note be responsible, in the aggregate, for any amount in excess of the
purchase discount or commission applicable to such Note, or in the case of an
Exchange Note, applicable to the Note that was exchangeable into such Exchange
Note, as set forth on the cover page of the Final Memorandum, nor shall any
underwriter be responsible for any amount in excess of the underwriting discount
or commission applicable to the Notes purchased by such underwriter under the
Registration Statement that resulted in such Losses. If the allocation provided
by the immediately preceding sentence is unavailable for any reason, the
indemnifying party and the indemnified party shall contribute in such proportion
as is appropriate to reflect not only such relative benefits but also the
relative fault of such indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
Benefits received by the Company shall be deemed to be equal to the total net
proceeds from the Initial Placement (before deducting expenses) as set forth on
the cover page of the Final Memorandum. Benefits received by the Initial
Purchasers shall be deemed to be equal to the total purchase discounts and
commissions as set forth on the cover page of the Final Memorandum, and benefits
received by any other Holders shall be deemed to be equal to the value of
receiving Notes or Exchange Notes, as applicable, registered under the
Securities Act. Benefits received by any underwriter shall be deemed to be
equal to the total underwriting discounts and commissions, as set forth on the
cover page of the Prospectus forming a part of the Registration Statement that
resulted in such Losses. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information provided
by the indemnifying party, on the one hand, or by the indemnified party, on the
other hand. The parties agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation that did not take account of the equitable considerations referred to
above. Notwithstanding the provisions of this paragraph (d), no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 6,
each person who controls a Holder within the meaning of either the Securities
Act or the Exchange Act and each director, officer, employee and agent of such
Holder shall have the same rights to contribution as such Holder, and each
person who controls the Company within the meaning of either the Securities Act
or the Exchange Act, each officer of the Company who shall have signed the
Registration Statement and each director of the
<PAGE>
Company shall have the same rights to contribution as the Company, subject in
each case to the applicable terms and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force
and effect, regardless of any investigation made by or on behalf of any Holder
or the Company or any of the officers, directors or controlling persons referred
to in Section 6 hereof, and will survive the sale by a Holder of Notes covered
by a Registration Statement.
7. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENT. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement that conflicts with the rights granted to the Holders herein
or otherwise conflicts with the provisions hereof.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then outstanding aggregate
principal amount of Notes (or, after the consummation of any Exchange Offer in
accordance with Section 2 hereof, of Exchange Notes); PROVIDED that, with
respect to any matter that directly or indirectly affects the rights of the
Initial Purchasers hereunder, the Company shall obtain the written consent of
the Initial Purchasers. Notwithstanding the foregoing (except the foregoing
proviso), a waiver or consent to departure from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders whose
Notes are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by the
Majority Holders, determined on the basis of Notes being sold rather than
registered under such Registration Statement.
(c) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
7(c), which address initially is, with respect to each Holder, the address
of such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to NationsBanc Montgomery Securities LLC;
(ii) if to the Initial Purchasers, at NationsBanc Montgomery
Securities LLC, 767 Fifth Avenue, Floor 12A, New York, New York 10153,
Attention: Paul Jetter; and
(iii) if to the Company, Dobson/Sygnet Operating Company, 13439 N.
Broadway Extension, Suite 200, Oklahoma City, Oklahoma 73114, Attention:
Bruce R.
<PAGE>
Knoohuizen, with a copy to McAfee & Taft A Professional Corporation, 211
North Robinson, Suite 1000, Oklahoma City, Oklahoma 73102, Attention:
Theodore M. Elam and W. Christopher Coleman.
All such notices and communications shall be deemed to have been
duly given when received. The Initial Purchasers, on the one hand, or the
Company, on the other, by notice to the other party or parties may designate
additional or different addresses for subsequent notices or communications.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Notes and/or Exchange Notes. The
Company hereby agrees to extend the benefits of this Agreement to any Holder of
Notes and/or Exchange Notes and any such Holder may specifically enforce the
provisions of this Agreement as if an original party hereto.
(e) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
(f) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) NOTES HELD BY THE COMPANY, ETC. Whenever the consent or
approval of Holders of a specified percentage of principal amount of Notes or
Exchange Notes is required hereunder, Notes or Exchange Notes, as applicable,
held by the Company or its Affiliates (other than subsequent Holders of Notes or
Exchange Notes if such subsequent Holders are deemed to be Affiliates solely by
reason of their holdings of such Notes or Exchange Notes) shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
DOBSON/SYGNET COMMUNICATIONS COMPANY
By: /s/ Everett R. Dobson
----------------------------
Name: Everett R. Dobson
Title: Chief Executive Officer
The foregoing Agreement is hereby
accepted as of the date first above written.
NATIONSBANC MONTGOMERY
SECURITIES LLC
As representative of the several Initial
Purchasers listed on Schedule I hereto
By:/s/ Paul D. Jetter
---------------------
Name: Paul D. Jetter
Title: Managing Director
<PAGE>
SCHEDULE I
INITIAL PURCHASERS
NationsBanc Montgomery Securities LLC
Lehman Brothers Inc.
First Union Securities, Inc.
a division of Wheat First Securities, Inc.
TD Securities (USA) Inc.
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Notes where such Notes
were acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Company has agreed that, starting on the
Expiration Date (as defined herein) and ending on the close of business one year
after the Expiration Date, it will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Notes, where such Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
<PAGE>
ANNEX C
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. 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 Exchange Notes received in
exchange for Notes where such Notes were acquired as a result of market-making
activities or other trading activities. The Company has agreed that, starting on
the Expiration Date and ending on the close of business one year after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until such date all dealers effecting transactions in the Exchange
Notes may be required to deliver a prospectus.
<PAGE>
ANNEX D
If the undersigned is a broker-dealer that will receive Exchange Notes for
its own account in exchange for Notes, it represents that the Notes to be
exchanged for the Exchange Notes were acquired by it as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
12 1/4% SENIOR EXCHANGEABLE PREFERRED STOCK
MANDATORILY REDEEMABLE 2008
REGISTRATION RIGHTS AGREEMENT
December 23, 1998
NationsBanc Montgomery Securities LLC
NationsBank Corporate Center
100 North Tryon Street
Charlotte, North Carolina 28255-0001
Ladies and Gentlemen:
Dobson Communications Corporation, an Oklahoma corporation (the
"Company"), proposes to issue and sell (the "Initial Placement") to NationsBanc
Montgomery Securities, Inc. (the "Initial Purchaser") upon terms set forth in a
purchase agreement dated as of December 16, 1998 (the "Purchase Agreement")
among the Company and the Initial Purchaser, its 121/4% Senior Exchangeable
Preferred Stock (the "Preferred Stock" and together with the PIK Shares (as
defined herein), the "Securities"), which will be mandatorily redeemable 2008,
as set forth in the Certificate of Designation relating to the Securities (the
"Certificate of Designation"). The Securities will be exchangeable, at the
option of the Company, in whole but not in part, into Senior Subordinated
Debentures due 2008 to be issued, if applicable, pursuant to an Indenture to be
dated as of the date of such exchange. As an inducement to you to enter into
the Purchase Agreement and purchase the Securities and in satisfaction of a
condition to your obligations under the Purchase Agreement, the Company agrees
with you for the benefit of the holders from time to time of the Securities
(including the Initial Purchaser) (each of the foregoing a "Holder" and together
the "Holders"), as follows:
1. DEFINITIONS. Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement. As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"AFFILIATE" of any specified person means any other person that,
directly or indirectly, is in control of, is controlled by, or is under
common control with, such specified person. For purposes of this
definition, control of a person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such
<PAGE>
person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"CERTIFICATE OF DESIGNATION" has the meaning set forth in the
preamble.
"CLOSING DATE" has the meaning set forth in the Purchase Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMPANY" has the meaning set forth in the preamble hereto.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"EXCHANGE OFFER" means the proposed offer to the Holders to issue
and deliver to such Holders, in exchange for the Securities, a like
aggregate liquidation value of Exchange Securities.
"EXCHANGE OFFER REGISTRATION PERIOD" means the longer of (A) the
period until the consummation of the Exchange Offer and (B) two years after
effectiveness of the Exchange Offer Registration Statement, exclusive of
any period during which any stop order shall be in effect suspending the
effectiveness of the Exchange Offer Registration Statement; PROVIDED,
HOWEVER, that in the event that all resales of Exchange Securities
(including, subject to the time periods set forth herein, any resales by
Exchanging Dealers) covered by such Exchange Offer Registration Statement
have been made, the Exchange Offer Registration Statement need not remain
continuously effective for the period set forth in clause (B) above.
"EXCHANGE OFFER REGISTRATION STATEMENT" means a Registration
Statement of the Company on an appropriate form under the Securities Act
with respect to the Exchange Offer, all amendments and supplements to such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"EXCHANGE SECURITIES" means securities issued by the Company,
identical in all material respects to the Securities (except that
(i) dividends thereon shall accrue from the last date on which dividends
were paid on the Securities or, if no such dividends have been paid, from
December 23, 1998 and (ii) the liquidated damages provisions and the
transfer restrictions pertaining to the Securities will be modified or
eliminated, as appropriate, in the Exchange Securities), to be issued under
the Certificate of Designation.
"EXCHANGING DEALER" means any Holder (which may include the Initial
<PAGE>
Purchaser) that is a broker-dealer, electing to exchange Securities
acquired for its own account as a result of market-making activities or
other trading activities for Exchange Notes.
"FINAL MEMORANDUM" has the meaning set forth in the Purchase
Agreement.
"HOLDER" has the meaning set forth in the preamble hereto.
"INITIAL PLACEMENT" has the meaning set forth in the preamble
hereto.
"INITIAL PURCHASER" has the meaning set forth in the preamble
hereto.
"LOSSES" has the meaning set forth in Section 6(d) hereto.
"MAJORITY HOLDERS" means the Holders of a majority of the aggregate
liquidation value of Securities registered under a Registration Statement.
"MANAGING UNDERWRITERS" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten
offering under a Shelf Registration Statement.
"PIK SHARES" means any additional Preferred Stock issued as payment
in kind dividends to any Holder of the Preferred Stock.
"PREFERRED STOCK" has the meaning set forth in the preamble hereto.
"PROSPECTUS" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the
Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Notes or
the Exchange Notes covered by such Registration Statement, and all
amendments and supplements to the Prospectus, including post-effective
amendments.
"PURCHASE AGREEMENT" has the meaning set forth in the preamble
hereto.
"REGISTRATION STATEMENT" means any Exchange Offer Registration
Statement or Shelf Registration Statement pursuant to the provisions of
this Agreement, amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto, and all material incorporated by
reference therein.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and
<PAGE>
regulations of the Commission promulgated thereunder.
"SHELF REGISTRATION" means a registration effected pursuant to
Section 3 hereof.
"SHELF REGISTRATION PERIOD" has the meaning set forth in Section
3(b) hereof.
"SHELF REGISTRATION STATEMENT" means a "shelf" registration
statement of the Company pursuant to the provisions of Section 3 hereof,
which covers some or all of the Securities or Exchange Securities, as
applicable, on an appropriate form under Rule 415 under the Securities Act,
or any similar rule that may be adopted by the Commission, amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"TRANSFER AGENT" means United States Trust Company of New York and
any successors thereto.
"UNDERWRITER" means any underwriter of Securities in connection with
an offering thereof under a Shelf Registration Statement.
2. EXCHANGE OFFER; RESALES OF EXCHANGE SECURITIES BY EXCHANGING
DEALERS; PRIVATE EXCHANGE.
(a) The Company shall prepare and file with the Commission the
Exchange Offer Registration Statement with respect to the Exchange Offer. The
Company shall use its best efforts (i) to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act and remain effective
until the closing of the Exchange Offer and (ii) to consummate the Exchange
Offer on or prior to the 180th calendar day following the Closing Date.
(b) Upon the effectiveness of the Exchange Offer Registration
Statement, the Company shall promptly commence the Exchange Offer, it being the
objective of such Exchange Offer to enable each Holder electing to exchange
Securities for Exchange Securities (assuming that such Holder (x) is not an
"affiliate" of the Company within the meaning of the Securities Act, (y) is not
a broker-dealer that acquired the Securities in a transaction other than as a
part of its market-making or other trading activities and (z) if such Holder is
not a broker-dealer, acquires the Exchange Securities in the ordinary course of
such Holder's business, is not participating in the distribution of the Exchange
Securities and has no arrangements or understandings with any person to
participate in the distribution of the Exchange Securities) to resell such
Exchange Securities from and after their receipt without any limitations or
restrictions under the Securities Act and without material restrictions under
the securities laws of a substantial proportion of the several states of the
United States.
(c) In connection with the Exchange Offer, the Company shall mail
to each
<PAGE>
Holder a copy of the Prospectus forming part of the Exchange Offer Registration
Statement, together with an appropriate letter of transmittal and related
documents, stating, in addition to such other disclosures as are required by
applicable law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Securities validly tendered will be accepted for
exchange;
(ii) the dates of acceptance for exchange;
(iii) that any Securities not tendered will remain outstanding and
continue to accrue dividends, but will not retain any rights under this
Agreement;
(iv) that Holders electing to have Securities exchanged pursuant
to the Exchange Offer will be required to surrender such Securities,
together with the enclosed letters of transmittal, to the institution and
at the address (located in the Borough of Manhattan, The City of New York)
specified in the notice prior to the close of business on the last day of
acceptance for exchange; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the last day of acceptance for
exchange, by sending to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice a
telegram, telex, facsimile transmission or letter setting forth the name of
such Holder, the aggregate liquidation value of Securities delivered for
exchange and a statement that such Holder is withdrawing his election to
have such Securities exchanged; and shall keep the Exchange Offer open for
acceptance for not less than 30 days and not more than 45 days (or longer
if required by applicable law) after the date notice thereof is mailed to
the Holders; utilize the services of a depositary for the Exchange Offer
with an address in the Borough of Manhattan, The City of New York; and
comply in all respects with all applicable laws relating to the Exchange
Offer.
(d) As soon as practicable after the close of the Exchange Offer,
the Company shall:
(i) accept for exchange all Securities duly tendered and not
validly withdrawn pursuant to the Exchange Offer;
(ii) deliver to the Transfer Agent for cancellation all Securities
so accepted for exchange; and
(iii) cause the Trustee promptly to authenticate and deliver to
each Holder Exchange Securities equal in liquidation value to the
Securities of such Holder so accepted for exchange.
<PAGE>
(e) The Initial Purchaser and the Company acknowledge that,
pursuant to interpretations by the staff of the Commission of Section 5 of the
Securities Act, and in the absence of an applicable exemption therefrom, each
Exchanging Dealer is required to deliver a Prospectus in connection with a sale
of any Exchange Securities received by such Exchanging Dealer pursuant to the
Exchange Offer in exchange for Securities acquired for its own account as a
result of market-making activities or other trading activities. Accordingly,
the Company shall:
(i) include the information set forth in Annex A hereto on the
cover of the Exchange Offer Registration Statement, in Annex B hereto in
the forepart of the Exchange Offer Registration Statement in a section
setting forth details of the Exchange Offer, in Annex C hereto in the
underwriting or plan of distribution section of the Prospectus forming a
part of the Exchange Offer Registration Statement, and in Annex D hereto in
the letter of transmittal delivered pursuant to the Exchange Offer; and
(ii) use its best efforts to keep the Exchange Offer Registration
Statement continuously effective under the Securities Act during the
Exchange Offer Registration Period for delivery of the prospectus included
therein by Exchanging Dealers in connection with sales of Exchange
Securities received pursuant to the Exchange Offer, as contemplated by
Section 4(h) below; PROVIDED, HOWEVER, that the Company shall not be
required to maintain the effectiveness of the Exchange Offer Registration
Statement for more than 30 days following the consummation of the Exchange
Offer unless the Company has been notified in writing on or prior to the
30th day following the consummation of the Exchange Offer by one or more
Exchanging Dealers that such Holder has received Exchange Securities as to
which it will be required to deliver a prospectus upon resale.
(f) In the event that the Initial Purchaser determines that it is
not eligible to participate in the Exchange Offer with respect to the exchange
of Securities constituting any portion of an unsold allotment, upon the
effectiveness of the Shelf Registration Statement as contemplated by Section 3
hereof and at the request of the Initial Purchaser, the Company shall issue and
deliver to the Initial Purchaser, or to the party purchasing Securities
registered under the Shelf Registration Statement from the Initial Purchaser, in
exchange for such Securities, a like liquidation value of Exchange Securities.
The Company shall use its best efforts to cause the CUSIP Service Bureau to
issue the same CUSIP number for such Exchange Securities as for Exchange
Securities issued pursuant to the Exchange Offer.
(g) The Company shall use its best efforts to complete the
Exchange Offer as provided above and shall comply with the applicable
requirements of the Securities Act, the Exchange Act and other applicable laws
and regulations in connection with the Exchange Offer. The Exchange Offer shall
not be subject to any conditions, other than that (i) the Exchange Offer does
not violate applicable law or any applicable interpretation of the staff of the
Commission, (ii) no action or proceeding shall have been instituted or
threatened in any court
<PAGE>
or by any governmental agency which might materially impair the ability of the
Company to proceed with the Exchange Offer, and no material adverse development
shall have occurred in any existing action or proceeding with respect to the
Company and (iii) all governmental approvals shall have been obtained, which
approvals the Company deems necessary for the consummation of the Exchange
Offer. The Company shall inform the Initial Purchaser, upon their request, of
the names and addresses of the Holders to whom the Exchange Offer is made, and
the Initial Purchaser shall have the right, subject to applicable law, to
contact such Holders and otherwise facilitate the tender of Securities in the
Exchange Offer.
3. SHELF REGISTRATION. If (i) because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines upon advice of its outside counsel that it is not permitted to effect
the Exchange Offer as contemplated by Section 2 hereof, or (ii) for any reason
other than those specified in clause (i) above, the Exchange Offer is not
consummated within 180 days of the Closing Date, or (iii) the Initial Purchaser
so requests with respect to Securities held by them within 90 days following
consummation of the Exchange Offer, or (iv) any Holder (other than the Initial
Purchaser) is not eligible to participate in the Exchange Offer or has
participated in the Exchange Offer and has received Exchange Securities that are
not freely tradeable or (v) in the case where the Initial Purchaser participates
in the Exchange Offer or acquires Exchange Securities pursuant to Section 2(f)
hereof, the Initial Purchaser does not receive freely tradeable Exchange
Securities in exchange for Securities constituting any portion of an unsold
allotment (it being understood that, for purposes of this Section 3, (x) the
requirement that the Initial Purchaser deliver a Prospectus containing the
information required by Items 507 and/or 508 of Regulation S-K under the
Securities Act in connection with sales of Exchange Securities acquired in
exchange for such Securities shall result in such Exchange Securities being not
"freely tradeable" and (y) the requirement that an Exchanging Dealer deliver a
Prospectus in connection with sales of Exchange Securities acquired in the
Exchange Offer in exchange for Securities acquired as a result of market-making
activities or other trading activities shall not result in such Exchange
Securities being not "freely tradeable"), the following provisions shall apply:
(a) The Company shall, as promptly as practicable, file with the
Commission a Shelf Registration Statement relating to the offer and sale of
the Securities or the Exchange Securities, as applicable, by the Holders
from time to time in accordance with the methods of distribution elected by
such Holders and set forth in such Shelf Registration Statement and Rule
415 under the Securities Act, PROVIDED that, with respect to Exchange
Securities received by the Initial Purchaser in exchange for Securities
constituting any portion of an unsold allotment, the Company may, if
permitted by current interpretations by the Commission's staff, file a
post-effective amendment to the Exchange Offer Registration Statement
containing the information required by Regulation S-K Items 507 and/or 508,
as applicable, in satisfaction of its obligations under this paragraph (a)
with respect thereto, and any such Exchange Offer Registration Statement,
as so amended, shall be referred to herein as, and governed by the
provisions herein applicable to, a Shelf Registration Statement.
<PAGE>
(b) The Company shall use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act as
promptly as possible after filing such Shelf Registration Statement
pursuant to this Section 3 and to keep such Shelf Registration Statement
continuously effective in order to permit the Prospectus contained therein
to be usable by Holders for a period of two years from the date the Shelf
Registration Statement is declared effective by the Commission or such
shorter period that will terminate when all the Securities or Exchange
Securities, as applicable, covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement (in any such case,
such period being called the "Shelf Registration Period"). The Company
shall be deemed not to have used its best efforts to keep the Shelf
Registration Statement effective during the requisite period if it
voluntarily takes any action that would result in Holders of Securities
covered thereby not being able to offer and sell such Securities during
that period, unless (i) such action is required by applicable law, (ii) the
Company complies with this Agreement or (iii) such action is taken by the
Company in good faith and for valid business reasons (not including
avoidance of the Company's obligations hereunder), including the
acquisition or divestiture of assets, so long as the Company promptly
thereafter complies with the requirements of Section 4(l) hereof, if
applicable.
4. REGISTRATION PROCEDURES. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall, within a reasonable time prior to the
filing of any Registration Statement, any Prospectus, any amendment to a
Registration Statement or amendment or supplement to a Prospectus or any
document which is to be incorporated by reference into a Registration
Statement or a Prospectus after initial filing of a Registration Statement,
provide copies of such document to the Initial Purchaser and its counsel
(and, in the case of a Shelf Registration Statement, the Holders and their
counsel, upon their request) and make such representatives of the Company
as shall be reasonably requested by the Initial Purchaser or its counsel
(and, in the case of a Shelf Registration Statement, the Majority Holders
or their counsel) available for discussion of such document, and shall not
at any time file or make any amendment to the Registration Statement, any
Prospectus or any amendment of or supplement to a Registration Statement or
a Prospectus or any document which is to be incorporated by reference into
a Registration Statement or a Prospectus, of which the Initial Purchaser
and its counsel (and, in the case of a Shelf Registration Statement, the
Holders and their counsel) shall not have previously been advised and
furnished a copy or to which the Initial Purchaser or its counsel (and, in
the case of a Shelf Registration Statement, the Holders or their counsel)
shall object, except for any amendment or supplement or document (a copy of
which has been previously furnished to the Initial Purchaser and its
counsel (and, in the case of a Shelf Registration Statement, the Majority
Holders and
<PAGE>
their counsel, upon their request)) which counsel to the Company shall
advise the Company, in the form of a written opinion, is required in order
to comply with applicable law; the Initial Purchaser agrees that, if it
receives timely notice and drafts under this clause (a), it will not take
actions or make objections pursuant to this clause (a) such that the
Company is unable to comply with its obligations under Section 2.
(b) The Company shall ensure that:
(i) any Registration Statement and any amendment thereto
and any Prospectus contained therein and any amendment or supplement
thereto complies in all material respects with the Securities Act
and the rules and regulations thereunder;
(ii) any Registration Statement and any amendment thereto
does not, when it becomes effective, contain an untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; and
(iii) any Prospectus forming part of any Registration
Statement, including any amendment or supplement to such Prospectus,
does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made,
not misleading.
(c) (1) The Company shall advise the Initial Purchaser and, in
the case of a Shelf Registration Statement, the Holders of Securities
covered thereby, and, if requested by the Initial Purchaser or any such
Holder, confirm such advice in writing:
(i) when a Registration Statement and any amendment
thereto has been filed with the Commission and when the Registration
Statement or any post-effective amendment thereto has become
effective; and
(ii) of any request by the Commission for amendments or
supplements to the Registration Statement or the Prospectus included
therein or for additional information.
(2) During the Shelf Registration Period or the Exchange Offer
Registration Period, as applicable, the Company shall advise the Initial
Purchaser and, in the case of a Shelf Registration Statement, the Holders
of Securities covered thereby, and, in the case of an Exchange Offer
Registration Statement, any Exchanging Dealer that has provided in writing
to the Company a telephone or facsimile number and address for notices,
and, if requested by the Initial Purchaser or any such Holder or Exchanging
Dealer, confirm such advice in writing:
<PAGE>
(i) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose;
(ii) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Securities
included therein for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
(iii) of the happening of any event that requires the making
of any changes in the Registration Statement or the Prospectus so
that, as of such date, the Registration Statement or the Prospectus
does not include an untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein (in
the case of the Prospectus, in light of the circumstances under
which they were made) not misleading (which advice shall be
accompanied by an instruction to suspend the use of the Prospectus
until the requisite changes have been made).
(d) The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(e) The Company shall furnish to each Holder of Securities
covered by any Shelf Registration Statement that so requests, without
charge, at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Holder so requests in writing, all exhibits thereto.
(f) The Company shall, during the Shelf Registration Period,
deliver to each Holder of Securities covered by any Shelf Registration
Statement, without charge, as many copies of the Prospectus (including each
preliminary Prospectus) included in such Shelf Registration Statement and
any amendment or supplement thereto as such Holder may reasonably request;
and the Company consents to the use of the Prospectus or any amendment or
supplement thereto by each of the selling Holders of Securities in
connection with the offering and sale of the Securities covered by the
Prospectus or any amendment or supplement thereto.
(g) The Company shall furnish to each Exchanging Dealer that so
requests, without charge, at least one copy of the Exchange Offer
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules, any documents incorporated by reference
therein and, if the Exchanging Dealer so requests in writing, all exhibits
thereto.
<PAGE>
(h) The Company shall, during the Exchange Offer Registration
Period, promptly deliver to each Exchanging Dealer, without charge, as many
copies of the Prospectus included in such Exchange Offer Registration
Statement and any amendment or supplement thereto as such Exchanging Dealer
may reasonably request for delivery by such Exchanging Dealer in connection
with a sale of Exchange Securities received by it pursuant to the Exchange
Offer; and the Company consents to the use of the Prospectus or any
amendment or supplement thereto by any such Exchanging Dealer, as provided
in Section 2(e) above.
(i) Each Holder of Securities and each Exchange Dealer agrees by
its acquisition of such Securities or Exchange Securities to be sold by
such Exchange Dealer, as the case may be, that, upon actual receipt of any
notice from the Company of the happening of any event of the kind described
in paragraph (c)(2)(i), (c)(2)(ii), or (c)(2)(iii) of this Section 4, such
Holder will forthwith discontinue disposition of such Securities covered by
such Registration Statement or Prospectus or Exchange Securities to be sold
by such Holder or Exchange Dealer, as the case may be, until such Holder's
or Exchange Dealer's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 4(l) hereof, or until it is advised in
writing by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto.
In the event that the Company shall give any such notice, the Exchange
Offer Registration Period shall be extended by the number of days during
such periods from and including the date of the giving of such notice to
and including the date when each seller of the Exchange Securities covered
by such Registration Statement or Exchange Securities to be sold by such
Exchange Dealer, as the case may be, shall have received (x) the copies of
the supplemented or amended Prospectus contemplated by Section 4(l) hereof
or (y) the advice in writing.
(j) Prior to the Exchange Offer or any other offering of
Securities pursuant to any Registration Statement, the Company shall
register or qualify or cooperate with the Holders of Securities included
therein and their respective counsel in connection with the registration or
qualification of such Securities for offer and sale under the securities or
blue sky laws of such states as any such Holders reasonably request in
writing and do any and all other acts or things necessary or advisable to
enable the offer and sale in such states of the Securities covered by such
Registration Statement; PROVIDED, HOWEVER, that the Company will not be
required to qualify as a foreign corporation or as a dealer in securities
in any jurisdiction in which it is not then so qualified, to file any
general consent to service of process or to take any action that would
subject it to general service of process in any such jurisdiction where it
is not then so subject or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject.
(k) The Company shall cooperate with the Holders to facilitate
the timely
<PAGE>
preparation and delivery of certificates representing Securities to be sold
pursuant to any Registration Statement free of any restrictive legends and
in denominations of $1,000 or an integral multiple thereof and registered
in such names as Holders may request prior to sales of Securities pursuant
to such Registration Statement.
(l) Upon the occurrence of any event contemplated by paragraph
(c)(2)(iii) of this Section 4, the Company shall promptly prepare and file
a post-effective amendment to any Registration Statement or an amendment or
supplement to the related Prospectus or any other required document so
that, as thereafter delivered to purchasers of the Securities included
therein, the Prospectus will not include an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading and, in the case of a Shelf Registration Statement, notify the
Holders to suspend use of the Prospectus as promptly as practicable after
the occurrence of such an event. Notwithstanding the foregoing, the
Company shall not be required to amend or supplement a Shelf Registration
Statement, any related Prospectus or any document incorporated therein by
reference, for a period not to exceed an aggregate of 30 days in any
calendar year, if the Company determines in its good faith judgment that
the disclosure of such event at such time would have a material adverse
effect on the business, operations, or prospects of the Company or the
disclosure otherwise related to a pending material business transaction
that has not yet been publicly disclosed.
(m) Not later than the effective date of any such Registration
Statement hereunder, the Company shall provide a CUSIP number for the
Securities or Exchange Securities, as the case may be, registered under
such Registration Statement, and provide the Trustee with certificates for
such Securities or Exchange Securities, in a form eligible for deposit with
The Depository Trust Company.
(n) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make generally
available to its security holders as soon as practicable after the
effective date of the applicable Registration Statement an earnings
statement meeting the requirements of Rule 158 under the Securities Act.
(o) The Company may require each Holder of Securities to be sold
pursuant to any Shelf Registration Statement to furnish to the Company such
information regarding the Holder and the distribution of such Securities as
the Company may from time to time reasonably require for inclusion in such
Registration Statement.
(p) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement, such information as the Managing Underwriters, if any, and
Majority Holders reasonably agree should be included therein, and shall
make all required filings of such Prospectus supplement or post-effective
amendment promptly upon notification of the matters to be
<PAGE>
incorporated in such Prospectus supplement or post-effective amendment.
(q) In the case of any Shelf Registration Statement, the Company
shall enter into such agreements (including underwriting agreements) and
take all other appropriate actions in order to expedite or to facilitate
the registration or the disposition of any Securities included therein, and
in connection therewith, if an underwriting agreement is entered into,
cause the same to contain indemnification provisions and procedures no less
favorable than those set forth in Section 6 (or such other provisions and
procedures acceptable to the Majority Holders and the Managing
Underwriters, if any) with respect to all parties to be indemnified
pursuant to Section 6.
(r) In the case of any Shelf Registration Statement, the Company
shall:
(i) make reasonably available for inspection by the
Holders of Securities to be registered thereunder, any underwriter
participating in any disposition pursuant to such Shelf Registration
Statement, and any attorney, accountant or other agent retained by
the Holders or any such underwriter all relevant financial and other
records, pertinent corporate documents and properties of the Company
and any of its subsidiaries;
(ii) cause the Company's officers, directors and employees
to supply all relevant information reasonably requested by the
Holders or any such underwriter, attorney, accountant or agent in
connection with any such Registration Statement as is customary for
similar due diligence examinations and make such representatives of
the Company as shall be reasonably requested by the Initial
Purchaser or Managing Underwriters, if any, available for discussion
of any such Registration Statement; PROVIDED, HOWEVER, that any
non-public information that is designated in writing by the Company,
in good faith, as confidential at the time of delivery of such
information shall be kept confidential by the Holders or any such
underwriter, attorney, accountant or agent, unless such disclosure
is made in connection with a court proceeding or required by law, or
such information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality other than as a result of a disclosure of such
information by any such Holder, underwriter, attorney, accountant or
agent;
(iii) make such representations and warranties to the
Holders of Securities registered thereunder and the underwriters, if
any, in form, substance and scope as are customarily made by issuers
to underwriters in similar underwritten offerings as may be
reasonably requested by them;
(iv) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably
<PAGE>
satisfactory to the Managing Underwriters, if any) addressed to each
selling Holder and the underwriters, if any, covering such matters
as are customarily covered in opinions requested in similar
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters;
(v) obtain "cold comfort" letters and updates thereof from
the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed
to the underwriters, if any, and use reasonable efforts to have such
letter addressed to the selling Holders of Securities registered
thereunder (to the extent consistent with Statement on Auditing
Standards No. 72 of the American Institute of Certified Public
Accountants (AICPA) ("SAS 72")), in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with similar underwritten offerings, or if the provision
of such "cold comfort" letters is not permitted by SAS 72 or if
requested by the Initial Purchaser or its counsel in lieu of a "cold
comfort" letter, an agreed-upon procedures letter under Statement on
Auditing Standards No. 75 of the AICPA, covering matters requested
by the Initial Purchaser or its counsel; and
(vi) deliver such documents and certificates as may be
reasonably requested by the Majority Holders and the Managing
Underwriters, if any, and customarily delivered in similar
offerings, including those to evidence compliance with Section 4(l)
and with any conditions contained in the underwriting agreement or
other agreement entered into by the Company.
The foregoing actions set forth in clauses (iii), (iv), (v) and (vi)
of this Section 4(r) shall be performed at (A) the effectiveness of such
Shelf Registration Statement and each post-effective amendment thereto and
(B) each closing under any underwriting or similar agreement as and to the
extent required thereunder.
(s) The Company shall, in the case of a Shelf Registration, use
their best efforts to cause all Securities to be listed on any securities
exchange or any automated quotation system on which similar securities
issued by the Company are then listed if requested by the Majority Holders,
to the extent such Securities satisfy applicable listing requirements.
5. REGISTRATION EXPENSES; REMEDIES. (a) The Company shall bear
all expenses incurred in connection with the performance of its obligations
under Sections 2, 3 and 4 hereof, including without limitation: (i) all
Commission, stock exchange or National Association of Securities Dealers, Inc.
registration and filing fees, (ii) all fees and expenses incurred in connection
with compliance with state securities or blue sky laws (including
<PAGE>
reasonable fees and disbursements of counsel for any underwriters or Holders in
connection with blue sky qualification of any of the Exchange Securities or
Securities), (iii) all expenses of any persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, any amendments or supplements thereto, any
underwriting agreements, securities sales agreements and other documents
relating to the performance of and compliance with this Agreement, (iv) all fees
relating to the filing of the Certificate of Designation with the Secretary of
State of Oklahoma, (v) the fees and disbursements of the Transfer Agent and its
counsel, (vi) the fees and disbursements of counsel for the Company and, in the
case of a Shelf Registration Statement, the fees and disbursements of one
counsel for the Holders (which counsel shall be selected by the Majority Holders
and which counsel may also be counsel for the Initial Purchaser) and in the case
of any Exchange Offer Registration Statement, the fees and expenses of counsel
to the Initial Purchaser acting in connection therewith and (vii) the fees and
disbursements of the independent public accountants of the Company and Sygnet
Wireless, Inc., including the expenses of any special audits or "cold comfort"
letters required by or incident to such performance and compliance, but
excluding fees and expenses of counsel to the underwriters (other than fees and
expenses set forth in clause (ii) above) or the Holders and underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of Securities by a Holder.
(b) The Securities provide that if the Exchange Offer is not
consummated on or prior to the 180th calendar day following the Closing Date or
a Shelf Registration Statement is not declared effective when required, the
annual dividend rate on the Securities will increase by 0.5% per annum until the
consummation of the Exchange Offer or the effectiveness of a Shelf Registration
Statement, as the case may be.
(c) Without limiting the remedies available to the Initial
Purchaser and the Holders, the Company acknowledges that any failure by the
Company to comply with its obligations under Sections 2 and 3 hereof may result
in material irreparable injury to the Initial Purchaser or the Holders for which
there is no adequate remedy at law, that it will not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Initial Purchaser or any Holder may obtain such relief as may be required to
specifically enforce the Company's obligations under Sections 2 and 3 hereof.
6. INDEMNIFICATION AND CONTRIBUTION. (a) In connection with
any Registration Statement, the Company agrees to indemnify and hold harmless
each Holder of Securities covered thereby (including the Initial Purchaser and,
with respect to any Prospectus delivery as contemplated by Sections 2(e) and
4(h) hereof, each Exchanging Dealer) the directors, officers, employees and
agents of such Holder and each person who controls such Holder within the
meaning of either the Securities Act or the Exchange Act, against any and all
losses, claims, damages or liabilities, joint or several, to which they or any
of them may become subject under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
<PAGE>
statement of a material fact contained in such Registration Statement as
originally filed or in any amendment thereof, or in any preliminary Prospectus
or Prospectus, or in any amendment thereof or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of the circumstances under
which they were made) not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage or liability (or action in respect thereof); PROVIDED, HOWEVER,
that the Company will not be liable in any case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue
statement or alleged untrue statement or omission or alleged omission made
therein in reliance upon and in conformity with written information furnished to
the Company by or on behalf of any such indemnified party specifically for
inclusion therein; PROVIDED FURTHER, HOWEVER, that the Company will not be
liable in any case with respect to any untrue statement or omission or alleged
untrue statement or omission made in any preliminary Prospectus or Prospectus,
or in any amendment thereof or supplement thereto to the extent that any such
loss, claim, damage or liability (or action in respect thereof) resulted from
the fact that any indemnified party sold Securities or Exchange Securities to a
person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Prospectus as then amended or
supplemented, if the Company had previously complied with the provisions of
Section 4(c)(2) and 4(f) or 4(h) hereof and if the untrue statement contained in
or omission from such preliminary Prospectus or Prospectus was corrected in the
Prospectus as then amended or supplemented. This indemnity agreement will be in
addition to any liability that the Company may otherwise have.
The Company also agrees to indemnify or contribute to Losses of, as
provided in Section 6(d) hereof, any underwriters of Securities registered under
a Shelf Registration Statement, their employees, officers, directors and agents
and each person who controls such underwriters on the same basis as that of the
indemnification of the Initial Purchaser and the selling Holders provided in
this Section 6(a) and shall, if requested by any Holder, enter into an
underwriting agreement reflecting such agreement, as provided in Section 4(q)
hereof.
(b) Each Holder of Securities covered by a Registration Statement
(including the Initial Purchaser and, with respect to any Prospectus delivery as
contemplated by Sections 2(e) and 4(h) hereof, each Exchanging Dealer) severally
agrees to indemnify and hold harmless (i) the Company, (ii) each of the
directors of the Company, (iii) each of the officers of the Company who signs
such Registration Statement and (iv) each Person who controls the Company within
the meaning of either the Securities Act or the Exchange Act to the same extent
as the foregoing indemnity from the Company to each such Holder, but only with
respect to written information furnished to the Company by or on behalf of such
Holder specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement will be in addition to any liability that
any such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 6 of
<PAGE>
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 6, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve the
indemnifying party from liability under paragraph (a) or (b) above unless and to
the extent it did not otherwise learn of such action and such failure results in
the forfeiture by the indemnifying party of substantial rights and defenses, and
(ii) will not, in any event, relieve the indemnifying party from any obligations
to any indemnified party other than the indemnification obligation provided in
paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint
counsel (including local counsel) of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
PROVIDED, HOWEVER, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties that are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. An indemnifying party will not, without the prior written
consent of the indemnified parties, settle or compromise or consent to the entry
of any judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or
(b) of this Section 6 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, then each applicable indemnifying party, in
lieu of indemnifying such indemnified party, shall have a joint and several
obligation to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with
<PAGE>
investigating or defending the same) (collectively "Losses") to which such
indemnified party may be subject in such proportion as is appropriate to
reflect the relative benefits received by such indemnifying party, on the one
hand, and such indemnified party, on the other hand, from the Initial
Placement and the Registration Statement that resulted in such Losses;
PROVIDED, HOWEVER, that in no case shall the Initial Purchaser or any
subsequent Holder of any Security or Exchange Security be responsible, in the
aggregate, for any amount in excess of the purchase discount or commission
applicable to such Security, or in the case of an Exchange Note, applicable
to the Security that was exchangeable into such Exchange Security, as set
forth on the cover page of the Final Memorandum, nor shall any underwriter be
responsible for any amount in excess of the underwriting discount or
commission applicable to the Securities purchased by such underwriter under
the Registration Statement that resulted in such Losses. If the allocation
provided by the immediately preceding sentence is unavailable for any reason,
the indemnifying party and the indemnified party shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of such indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the statements or
omissions that resulted in such Losses as well as any other relevant
equitable considerations. Benefits received by the Company shall be deemed
to be equal to the total net proceeds from the Initial Placement (before
deducting expenses) as set forth on the cover page of the Final Memorandum.
Benefits received by the Initial Purchaser shall be deemed to be equal to the
total purchase discounts and commissions as set forth on the cover page of
the Final Memorandum, and benefits received by any other Holders shall be
deemed to be equal to the value of receiving Securities or Exchange
Securities, as applicable, registered under the Securities Act. Benefits
received by any underwriter shall be deemed to be equal to the total
underwriting discounts and commissions, as set forth on the cover page of the
Prospectus forming a part of the Registration Statement that resulted in such
Losses. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
indemnifying party, on the one hand, or by the indemnified party, on the
other hand. The parties agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation that did not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of this
Section 6, each person who controls a Holder within the meaning of either the
Securities Act or the Exchange Act and each director, officer, employee and
agent of such Holder shall have the same rights to contribution as such
Holder, and each person who controls the Company within the meaning of either
the Securities Act or the Exchange Act, each officer of the Company who shall
have signed the Registration Statement and each director of the Company shall
have the same rights to contribution as the Company, subject in each case to
the applicable terms and conditions of this paragraph (d).
(e) The provisions of this Section 6 will remain in full force
and effect, regardless of any investigation made by or on behalf of any Holder
or the Company or any of
<PAGE>
the officers, directors or controlling persons referred to in Section 6
hereof, and will survive the sale by a Holder of Securities covered by a
Registration Statement.
7. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENT. The Company has not, as of the
date hereof, entered into, nor shall it, on or after the date hereof, enter
into, any agreement that conflicts with the rights granted to the Holders herein
or otherwise conflicts with the provisions hereof.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then outstanding aggregate
liquidation value of Securities (or, after the consummation of any Exchange
Offer in accordance with Section 2 hereof, of Exchange Securities); PROVIDED
that, with respect to any matter that directly or indirectly affects the rights
of the Initial Purchaser hereunder, the Company shall obtain the written consent
of the Initial Purchaser. Notwithstanding the foregoing (except the foregoing
proviso), a waiver or consent to departure from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders whose
Securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by the
Majority Holders, determined on the basis of Securities being sold rather than
registered under such Registration Statement.
(c) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail, telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current address given by such
Holder to the Company in accordance with the provisions of this Section
7(c), which address initially is, with respect to each Holder, the address
of such Holder maintained by the Transfer Agent, with a copy in like manner
to NationsBanc Montgomery Securities LLC;
(ii) if to the Initial Purchaser, at NationsBanc Montgomery
Securities LLC, 767 Fifth Avenue, Floor 12A, New York, New York 10153,
Attention: Paul Jetter; and
(iii) if to the Company, Dobson Communications Corporation, 13439
N. Broadway Extension, Suite 200, Oklahoma City, Oklahoma 73114, Attention:
Bruce R. Knoohuizen, with a copy to McAfee & Taft A Professional
Corporation, 211 North Robinson, Suite 1000, Oklahoma City, Oklahoma 73102,
Attention: Theodore M. Elam and W. Christopher Coleman.
All such notices and communications shall be deemed to have been
duly given
<PAGE>
when received. The Initial Purchaser, on the one hand, or the Company, on the
other, by notice to the other party or parties may designate additional or
different addresses for subsequent notices or communications.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Securities and/or Exchange
Securities. The Company hereby agrees to extend the benefits of this Agreement
to any Holder of Securities and/or Exchange Securities and any such Holder may
specifically enforce the provisions of this Agreement as if an original party
hereto.
(e) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
(f) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(h) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
(i) SECURITIES HELD BY THE COMPANY, ETC. Whenever the consent or
approval of Holders of a specified percentage of the aggregate liquidation value
of Securities or Exchange Securities is required hereunder, Securities or
Exchange Securities, as applicable, held by the Company or its Affiliates (other
than subsequent Holders of Securities or Exchange Securities if such subsequent
Holders are deemed to be Affiliates solely by reason of their holdings of such
Securities or Exchange Securities) shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage.
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
DOBSON COMMUNICATIONS
CORPORATION
By: /s/ Everett R. Dobson
Name: Everett R. Dobson
Title: Chief Executive Officer
The foregoing Agreement is hereby
accepted as of the date first above written.
NATIONSBANC MONTGOMERY
SECURITIES LLC
By: /s/ Paul D. Jetter
Name: Paul D. Jetter
Title: Managing Director
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. 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 Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, starting on the Expiration Date (as defined herein) and ending on the
close of business one year after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own account in
exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
Each broker-dealer that receives Exchange Securities for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Securities. 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 Exchange Securities received in
exchange for Securities where such Securities were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, starting on the Expiration Date and ending on the close of business one
year after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until such date all dealers effecting transactions in the
Exchange Securities may be required to deliver a prospectus.
<PAGE>
ANNEX D
If the undersigned is a broker-dealer that will receive Exchange Securities
for its own account in exchange for Securities, it represents that the
Securities to be exchanged for the Exchange Securities were acquired by it as a
result of market-making activities or other trading activities and acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Securities; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
<PAGE>
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER SUCH SECURITY, PRIOR TO THE DATE WHICH IS TWO YEARS AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE") ONLY (A) TO THE
COMPANY OR ANY SUBSIDIARY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON
IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND
THE TRANSFER AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSE (E) OR (F) PRIOR TO THE RESALE RESTRICTION TERMINATION DATE
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS
SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO., OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
CERTIFICATE OF DESIGNATION.
DPD AO-PIK-1 64,646 shares
Dobson Communications Corporation
INCORPORATED UNDER THE LAWS OF THE STATE OF OKLAHOMA
CUSIP 256069204
THIS CERTIFIES THAT CEDE & CO.
is the owner of Sixty-Four Thousand, Six Hundred Forty-Six and No/100's (64,646)
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.
<PAGE>
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated: December 23, 1998
Countersigned and Registered: [SEAL]
United States Trust Company of New York /s/ Everett R. Dobson
Transfer Agent and Registrar -----------------------
Everett R. Dobson
Chief Executive Officer
and President
By /s/ Louis P. Young
----------------------------
Authorized Officer
/s/ Bruce R. Knooihuizen
------------------------
Bruce R. Knooihuizen
Chief Financial Officer
and Vice President
-2-
<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>
<CAPTION>
<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
in common under Uniform Gifts to Minors Act of ___________________________
(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.
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<PAGE>
/ / (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
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<PAGE>
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.)
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<PAGE>
[LETTERHEAD]
FEBRUARY 2, 1999
Dobson Communications Corporation
13439 N. Broadway Extension, Suite 200
Oklahoma City, OK
Re: 12 1/4% Senior Exchangeable Preferred Stock
Ladies and Gentlemen:
We have acted as special counsel to Dobson Communications Corporation
("Dobson" or the "Company") in connection with the issuance and sale of up to
67,148 shares of the Company's 12 1/4% Senior Exchangeable Preferred Stock
(which, together with all accrued and paid dividends in kind are referred to
herein as the "Old Shares") and the registration under the Securities Act of
1933 of up to [64,646] shares of the Company's 12 1/4% Senior Exchangeable
Preferred Stock (the "New Shares"). The New Shares are to be offered in exchange
for all outstanding Old Shares (the "Exchange Offer") as more fully set forth in
the prospectus which forms are a part of the Company's Registration Statement on
Form S-4 (Registration No. 333- ); (the "Registration Statement").
In this connection we have examined the Company's Amended and Restated
Certificate of Incorporation (including the Certificate of Designation creating
the 12 1/4% Senior Exchangeable Preferred Stock) and Amended and Restated
Bylaws, minutes of certain meetings of the Company's Board of Directors and have
made such other investigations of fact and law as we deem necessary to render
the opinions set forth herein.
Based on the foregoing, we are of the opinion that the New Shares to be
exchanged for the Old Shares in the Exchange Offer, when issued in accordance
therewith, will be validly issued, fully paid and non-assessable.
We hereby consent to the reference to our firm in the Prospectus under the
caption "Legal Matters."
Very truly yours,
/S/ MCAFEE & TAFT
A Professional Corporation
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
1996 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Dobson Communications Corporation 1996 Stock
Option Plan (the "Plan") is to encourage key employees of Dobson
Communications Corporation (the "Company") and of any present or future
subsidiary of the Company (collectively, "Related Corporations"), by
providing opportunities to participate in the ownership of the Company and
its future growth through (a) the grant of options which qualify as
"incentive stock option" ("ISO") under Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code"); and (b) the grant of options
which do not qualify as ISOs ("Non-Qualified Options"). Both ISOs and
Non-Qualified Options are referred to hereafter individually as an "Option"
and collectively as "Options." As used herein, the term "subsidiary" means
"subsidiary corporation," as that term is defined in Section 424 of the
Code.
2. ADMINISTRATION OF THE PLAN
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered by
the Board of Directors of the Company (the "Board") or by a committee
appointed by the Board (the "Committee"). Hereinafter, all references
in this Plan to the "Committee" shall mean the Board if no Committee
has been appointed. Subject to ratification of the grant or
authorization of each Option by the Board (if so required by
applicable state law), and subject to the terms of the Plan, the
Committee shall have the authority to (i) determine to whom (from
among the class of employees eligible under paragraph 3 to receive
ISOs) ISOs shall be granted, and to whom (from among the class of
individuals and entities eligible under paragraph 3 to receive
Non-Qualified Options) Non-Qualified Options shall be granted; (ii)
determine the time or times at which Options shall be granted; (iii)
determine the purchase price of shares subject to each Option, which
prices shall not be less than the minimum price specified in paragraph
6; (iv) determine whether each Option granted shall be an ISO or a
Non-Qualified Option; (v) determine (subject to paragraph 7) the time
or times when each Option shall become exercisable and the duration of
the exercise period; (vi) determine whether restrictions such as
repurchase options are to be imposed on shares subject to Options and
the nature of such restrictions, if any, and (vii) interpret the Plan
and prescribe and rescind rules and regulations relating to it. If
the Committee determines to issue a Non-Qualified Option, it shall
take whatever actions it deems necessary, under Section 422 of the
Code and the regulations promulgated thereunder, to ensure that such
Option is not treated as an ISO. The interpretation and construction
by the
<PAGE>
Committee of any provisions of the Plan or of any Option granted
under it shall be final unless otherwise determined by the Board.
The Committee may from time to time adopt such rules and
regulations for carrying out the Plan as it may deem advisable. No
member of the Board or the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any
Option granted under it.
B. COMMITTEE ACTIONS. The Committee may select one of its members as its
chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and
acts of a majority of the members of the Committee at a meeting at
which a quorum is present, or acts reduced to or approved in writing
by all the members of the Committee, shall be the valid acts of the
Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution therefor,
fill vacancies however caused, or remove all members of the Committee
and thereafter directly administer the Plan.
3. ELIGIBLE EMPLOYEES. Options may be granted only to employees and Directors
of the Company or any Related Corporation. The Committee may take into
consideration a recipient's individual circumstances in determining whether
to grant an Option. The granting of any Option to any individual shall
neither entitle that individual to, nor disqualify him from, participating
in any other grant of Options.
4. STOCK. The stock subject to Options shall be authorized but unissued
shares of Common Stock of the Company, par value $1.00 per share (the
"Common Stock"). The aggregate number of shares which may be issued
pursuant to the Plan is 30,166 subject to adjustment as provided in
paragraph 13. If any Option granted under the Plan shall expire or
terminate for any reason without having been exercised in full or shall
cease for any reason to be exercisable in whole or in part, the unpurchased
shares subject to such Option shall again be available for grants of
Options under the Plan.
5. GRANTING OF OPTIONS. Options may be granted under the Plan at any time
after June 1, 1996, and prior to June 1, 2006. The date of grant of an
Option under the Plan will be the date specified by the Committee at the
time it grants the Option; provided, however, that such date shall not be
prior to the date on which the Committee acts to approve the grant.
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<PAGE>
6. MINIMUM OPTION PRICE: ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS. The exercise price per share
specified in the agreement relating to each Non-Qualified Option
granted under the Plan shall in no event be less than the minimum
legal consideration required therefore under the laws of Oklahoma or
the laws of any jurisdiction in which the Company or its successors in
interest may be organized.
B. PRICE FOR ISOS. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be
less than the fair market value per share of Common Stock on the date
of such grant. In the case of an ISO to be granted to an employee
owning stock possessing more than 10 percent (10%) of the total
combined voting power of all classes of stock of the Company or any
Related Corporation, the price per share specified in the agreement
relating to such ISO shall not be less than one hundred ten percent
(110%) of the fair market value per share of Common Stock on the date
of grant. For purposes of determining stock ownership under this
paragraph, the rules of Section 424(d) of the Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee may
be granted Options treated as ISOs only to the extent that, in the
aggregate under this Plan and all incentive stock option plans of the
Company and any Related Corporation, ISOs do not become exercisable
for the first time by such employee during any calendar year with
respect to stock having a fair market value (determined at the time
the ISOs were granted) in excess of $100,000. The Company intends to
designate any Options granted in excess of such limitation as
Non-Qualified Options.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the last business day
for which the prices or quotes discussed in this sentence are
available prior to the date such Option is granted and shall mean (i)
the average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or(ii) the last reported sale price (on
that date) of the Common Stock on the NASDAQ National Market, if the
Common Stock is not then traded on a national securities exchange; or
(iii) the closing bid price (or
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<PAGE>
average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common
Stock is not reported on the NASDAQ National Market. If the Common
Stock is not publicly traded at the time an Option is granted under
the Plan, "fair market value" shall mean the fair value of the
Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock
in private transactions negotiated at arm's length
7. OPTION DURATION. Subject to earlier termination as provided in paragraphs
9 and 10 or in the agreement relating to such Option, each Option shall
expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee
owning stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Related
Corporation, as determined under paragraph 6(B). Subject to earlier
termination as provided in paragraphs 9 and 10, the term of each ISO shall
be the term set forth in the original instrument granting such ISO, except
with respect to any part of such ISO that is converted into a Non-Qualified
Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through 12,
each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on the date of
grant or shall become exercisable thereafter in such installments as
the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes exercisable
it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at any
time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date that any installment of any Option becomes
exercisable; provided that the Committee shall not, without the
consent of an optionee, accelerate the permitted exercise date of any
installment of any Option granted to any employee as an ISO (and not
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<PAGE>
previously converted into a Non-Qualified Option pursuant to paragraph
16) if such acceleration would violate the annual vesting limitation
contained in Section 422(d) of the Code, as described in paragraph
6(c).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the agreement
relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his or
her ISOs shall become exercisable, and his or her ISOs shall terminate on
the earlier of (a) ninety (90) days after the date of termination of his or
her employment, or (b) their specified expiration dates, except to the
extent that such ISOs (or unexercised installments thereof) have been
converted into Non-Qualified Options pursuant to paragraph 16. For
purposes of this paragraph 9, employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service)
provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A bona fide leave of absence with the written
approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue
the employment of the optionee after the approved period of absence. ISOs
granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the
optionee continues to be an employee of the Company or any Related
Corporation. Nothing in the Plan shall be deemed to give any grantee of
any Option the right to be retained in employment by the Company or any
Related Corporation for any period of time.
10. DEATH; DISABILITY
A. DEATH. If an ISO optionee ceases to be employed by the Company and
all Related Corporations by reason of his or her death, any ISO owned
by such optionee may be exercised, to the extent otherwise exercisable
on the date of his death, by his estate, personal representative or
beneficiary who has acquired the ISO by will or by the laws of descent
and distribution, until the earlier of (i) the specified expiration
date of the ISO or (ii) twelve months from the date of the optionee's
death.
B. DISABILITY. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his or her disability, such
optionee shall have the right to
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<PAGE>
exercise any ISO held by him or her on the date of termination of
employment, for the number of shares for which he or she could have
exercised it on that date, until the earlier of the specified
expiration date of the ISO or twelve months from the date of the
termination of the optionee's employment. For the purposes of the
Plan, the term "disability" shall mean "permanent and total
disability" as defined in Section 22(e)(3) of the Code or any
successor statute.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
grantee except by will, by the laws of descent and distribution or, in the
case of Non-Qualified Options only, pursuant to a valid domestic relations
order. Except as set forth in the previous sentence, during the lifetime
of a grantee each Option shall be exercisable only by such grantee.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by instruments
(which need not be identical) in such forms as the Committee may from time
to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not
inconsistent with the Plan, including restrictions applicable to shares of
Common Stock issuable upon exercise of Options. The Committee may specify
that any Non-Qualified Option shall be subject to the restrictions set
forth herein with respect to ISOs, or to such other termination and
cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its
own members and/or one or more officers of the Company to execute and
deliver such instruments. The proper officers of the Company are
authorized and directed to take any and all action necessary or advisable
from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee
hereunder shall be adjusted as hereinafter provided, unless otherwise
specifically provided in the written agreement between the optionee and the
Company relating to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of common stock of
the Company shall be subdivided or combined into a greater or smaller
number or shares or if the Company shall issue any shares of its
common stock as a stock dividend on its outstanding Common Stock, the
number of shares of Common Stock deliverable upon the exercise of
Options shall be appropriately increased or decreased proportionately,
and appropriate adjustments
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<PAGE>
shall be made in the purchase price per share to reflect such
subdivision, combination or stock dividend.
B. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than in
connection with a transaction described in subparagraph C below)
pursuant to which securities of the Company or of another corporation
are issued with respect to the outstanding shares of Common Stock, an
optionee upon exercising an Option shall be entitled to receive for
the purchase price paid upon such exercise the securities he would
have received if he had exercised his Option prior to such
recapitalization or reorganization.
C. CHANGE IN CONTROL EVENTS. In the event any Change in Control Event
(as defined below) occurs, each Option then outstanding shall,
immediately prior to such Change in Control Event (except as set forth
in subparagraph E below), be nonforfeitable and exercisable in full.
A Change in Control Event shall mean any of the following:
1. Any transaction in which shares of voting securities of the
Company are sold or transferred by the Company or shareholders of
the Company as a result of which those persons and entities who
own voting securities of the Company prior to such transaction
own less than fifty percent (50%) of the outstanding voting
securities of the Company after such transaction;
2. The merger or consolidation of the Company with or into another
entity as a result of which less than fifty percent (50%) of the
outstanding voting securities of the surviving or resulting
entity are owned by those persons and entities who own voting
securities of the Company prior to such merger or consolidation;
or
3. The sale of all or substantially all of the Company's assets to
an entity of which less than fifty percent (50%) of the
outstanding voting securities of such entity are owned by those
persons and entities who own voting securities of the Company at
the time of such asset sale.
The existence of any Option shall not in any way prevent any Related Corporation
from engaging in any of the transactions described in this subparagraph C, nor
shall it confer any rights upon the holder of any such Option to participate in
any such transaction, except those expressly conferred by the Plan and the
agreement pursuant to which such Option shall have been granted. Nothing
contained in this Plan shall prevent the assumption of an
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<PAGE>
Option, or the substitution of a new option for an Option, by any
corporation, or the parent or subsidiary of any corporation, that becomes the
employer of an optionee by reason of a merger, consolidation or acquisition;
provided, however, that with respect to an ISO, the following additional
conditions are applicable:
1. the excess of the aggregate fair market value of the shares
subject to the Option immediately after the substitution or
assumption over the aggregate option price of such shares is not
more than the excess of the aggregate fair market value of the
shares subject to the Option immediately before such substitution
or assumption over the aggregate option price of such shares; and
2. the new option or the assumption of the old Option does not give
the optionee additional benefits that the optionee did not have
under the old Option.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs A, B, or C with respect to ISOs shall
be made only after the Committee, after consulting with counsel for
the Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424 of
the Code) or would cause any adverse tax consequences for the holders
of such ISOs. If the Committee determines that such adjustments made
with respect to ISOs would constitute a modification of such ISOs or
would cause adverse tax consequences to the holders, it may refrain
from making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution
or liquidation of the Company, each Option will terminate immediately
prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by
the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number
or price of shares subject to Options. No adjustments shall be made
for dividends paid in cash or in property other than securities of the
Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of
such fractional shares.
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<PAGE>
H. ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs A, B, or C above, the class and aggregate number of
shares set forth in paragraph 4 hereof that are subject to Options
which previously have been or subsequently may be granted under the
Plan shall also be appropriately adjusted to reflect the events
described in such subparagraphs. The Committee or the Successor Board
shall determine the specific adjustments to be made under this
paragraph 13 and, subject to paragraph 2, its determination shall be
conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part of installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and
specify the number of shares as to which such Option is being exercised,
accompanied by (i) an instrument of accession providing that the optionee
agrees to be bound by the terms, rights and obligations applicable to
"Shareholders" under that certain Shareholders' Agreement dated as of March
19, 1996, by and among the Company and its stockholders signatory thereto,
as amended from time to time, and (ii) full payment of the purchase price
therefor either (a) in United States dollars in cash or by check, (b) at
the discretion of the Committee, through delivery of shares of Common Stock
having a fair market value equal as of the date of the exercise to the cash
exercise price of the Option, (c) at the discretion of the Committee, by
delivery of the grantee'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 Code, (d) at the
discretion of the Committee and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient amount of the
proceeds from the sale of the Common Stock acquired upon exercise of the
Option and an authorization to the broker or selling agent to pay that
amount to the Company, which sale shall be at the participant's direction
at the time of exercise, or (e) at the discretion of the Committee, by any
combination of (a), (b), (c) and (d) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by means of
the methods set forth in clauses (b), (c), (d) or (e) of the preceding
sentence, such discretion shall be exercised in writing at the time of the
grant of the ISO in questions. The holder of an Option shall not have the
rights of a shareholder with respect to the shares covered by such Option
until the date of issuance of a stock certificate to such holder for such
shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be
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<PAGE>
made for dividends or similar rights for which the record date is before
the date such stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board as of June
1, 1996, subject, with respect to the validation of ISOs granted under the
Plan, to approval of the Plan by the stockholders of the Company at the
next meeting of Stockholders or, in lieu thereof, by written consent. If
the approval of stockholders is not obtained prior to June 1, 1997, any
grants of ISOs under the Plan made prior to that date will be rescinded.
The Plan shall expire at the end of the day on June 1, 2006 (except as to
Options outstanding on that date). Subject to the provisions of paragraph
5 above, Options may be granted under the Plan prior to the date of
stockholder approval of the Plan. The Board may terminate or amend the
Plan in any respect at any time, except that, without the approval of the
stockholders obtained within 12 months before or after the Board adopts a
resolution authorizing any of the following actions: (a) the total number
of shares that may be issued under the Plan may not be increased (except by
adjustment pursuant to paragraph 13); (b) the benefits accruing to
participants under the Plan may not be materially increased; (c) the
requirements as to eligibility for grants of ISOs may not be modified; (d)
the provisions of paragraph 3 regarding eligibility for grants of ISOs may
not be modified; (e) the provisions of paragraph 6(B) regarding the
exercise price at which shares may be offered pursuant to ISOs may not be
modified (except by adjustment pursuant to paragraph 13); (f) the
expiration date of the Plan may not be extended; and (g) the Board may not
take any action which would cause the Plan to fail to comply with Rule
16b-3. Except as otherwise provided in this paragraph 15, in no event may
action of the Board or stockholders alter or impair the rights of a
grantee, without such grantee's consent, under any Option previously
granted to such grantee.
16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS. The Committee, at the
written request or with the written consent of an optionee, may in its
discretion take such actions as may be necessary to convert such optionee's
ISOs (or any installments or portions of installments thereof) that have
not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
optionee is an employee of the Company or a Related Corporation at the time
of such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the
appropriate installments of such ISOs. At the time of such conversion, the
Committee (with the consent of the optionee) may impose such conditions on
the exercise of the resulting Non-Qualified Options as the Committee in its
discretion may
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<PAGE>
determine, provided that such conditions shall not be inconsistent with
this Plan. Nothing in the Plan shall be deemed to give an optionee the
right to have such optionee's ISOs converted into Non-Qualified Options,
and no such conversion shall occur until and unless the Committee takes
appropriate action.
17. CANCELLATION OF OPTIONS. The Board may, in its sole discretion, in cases
involving a serious breach of conduct by an employee or former employee, or
activity of a former employee in competition with the business of the
Company or a Related Corporation, cancel any Option, whether vested or not,
in whole or in part. Such cancellation shall be effective as of the date
specified by the Board. Without limitation, activities which shall
constitute a serious breach of conduct include: (i) the disclosure or
misuse of confidential information or trade secrets; (ii) activities in
violation of the policies of the Company or any Related Corporation,
including without limitation, the Company's insider trading policy; (iii)
the violation or breach of any material provision in any employment
contract or agreement among the employee and any Related Corporation; (iv)
engaging in conduct relating to the optionee's employment with the Company
or any Related Corporation for which either criminal or civil penalties may
be sought; and (v) engaging in activities which adversely affects or which
are contrary or harmful to the interest of the Company, any Related
Corporation or its business operations. The determination of whether an
employee or former employee has engaged in a serious breach of conduct or
activity in competition with the business of a Related Corporation shall be
determined by the Board in good faith and in its sole discretion.
18. APPLICATION OF FUNDS. The proceeds received by the Company from the sale
of shares pursuant to Options granted under the Plan shall be used for
general corporate purposes.
19. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in
writing immediately after he makes a Disqualifying Disposition (as
described in Sections 421, 422, and 424 of the Code and regulations
thereunder) of any stock acquired pursuant to the exercise of ISOs granted
under the Plan. A Disqualifying Disposition is generally any disposition
occurring on or before the later of (a) the date two years following the
date the ISO was granted or (b) the date one year following the date the
ISO was exercised.
20. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the making of a Disqualifying Disposition (as defined
in paragraph 19), the vesting or transfer of
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<PAGE>
restricted stock or securities acquired on the exercise of an Option
hereunder, or the making of a distribution or their payment with respect
to such stock or securities, the Company may withhold taxes in respect
of amounts that constitute compensation includible in gross income. The
Committee in its discretion may condition the exercise of an Option, the
vesting or transferability of restricted stock or securities acquired by
exercising an Option, on the grantee's making satisfactory arrangement
for such withholding. Such arrangement may include payment by the
grantee's delivery of previously held shares of Common Stock or the
withholding from the shares of Common Stock otherwise deliverable upon
exercise of an Option shares having an aggregate fair market value equal
to the amount of such withholding taxes.
21. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required
to send tax information statements to employees and former employees that
exercise Options under the Plan, and the Company may be required to file
tax information returns reporting the income received by grantees of
Options in connection with the Plan.
22. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Options shall be governed by the laws of Oklahoma,
or the laws of any jurisdiction in which the Company or its successors in
interest may be organized.
The undersigned hereby certify that they are all the Directors of Dobson
Communications Corporation entitled to vote on the foregoing matters and hereby
consent to the foregoing Plan.
/s/ Russell L. Dobson
--------------------------------------
Russell L. Dobson, Director
/s/ Everett R. Dobson
--------------------------------------
Everett R. Dobson, Director
/s/ Stephen T. Dobson
--------------------------------------
Stephen T. Dobson, Director
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<PAGE>
/s/ Justin L. Jaschke
--------------------------------------
Justin L. Jaschke, Director
/s/ Thadeus J. Mocarski
--------------------------------------
Thadeus J. Mocarski, Director
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<PAGE>
1998-1 AMENDMENT TO THE DOBSON COMMUNICATIONS CORPORATION
1996 STOCK OPTION PLAN
A. Section 4 of the Dobson Communications Corporation 1996 Stock
Option Plan (the "Plan") is hereby amended to read as follows:
"4. STOCK. The stock subject to Options and which may be issued
pursuant to the Plan shall be (i) 30,166 authorized but unissued
shares of Class B Non-Voting Common Stock of the Company, par value
$.001 per share (the 'Class B Stock'), and (ii) 30,166 authorized but
unissued shares of Class C Non-Voting Common Stock, par value $.001
per share (the 'Class C Stock') (the Class B Stock and the Class C
Stock are sometimes together referred to herein as the 'Common
Stock'). The number of such shares is subject to adjustment as
provided in paragraph 13. If any Option granted under the Plan shall
expire or terminate for any reason without having been exercised in
full or shall cease for any reason to be exercisable in whole or in
part, the unpurchased shares subject to such Option shall again be
available for grants of Options under the Plan."
B. Section 14 of the Dobson Communications Corporation 1996 Stock
Option Plan (the "Plan") is hereby amended to read as follows:
"14. MEANS OF EXERCISING OPTIONS. An Option (or any part of
installment thereof) shall be exercised by giving written notice
to the Company at its principal office address, or to such
transfer agent as the Company shall designate. Such notice shall
identify the Option being exercised and specify the number of
shares as to which such Option is being exercised, accompanied by
(i) an instrument of accession providing that the optionee agrees
to be bound by the terms, rights and obligations applicable to
'Shareholders' under that certain Shareholders' Agreement dated
as of March 19, 1996, by and among the Company and its
stockholders signatory thereto, as amended from time to time, and
(ii) full payment of the purchase price therefor either (a) in
United States dollars in cash or by check, (b) at the discretion
of the Committee, through delivery of shares of Common Stock
having a fair market value equal as of the date of the exercise
to the cash exercise price of the Option including
<PAGE>
withholding of shares of Common Stock otherwise deliverable upon
exercise of an Option, but only to the extent such exercise of an
Option would not result in an accounting compensation charge with
respect to the shares used to pay the exercise price unless
otherwise determined by the Committee, (c) at the discretion of the
Committee, by delivery of the grantee'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 Code, (d) at the discretion of the Committee and consistent
with applicable law, through the delivery of an assignment to the
Company of a sufficient amount of the proceeds from the sale of the
Common Stock acquired upon exercise of the Option and an
authorization to the broker or selling agent to pay that amount to
the Company, which sale shall be at the participant's direction at
the time of exercise, or (e) at the discretion of the Committee, by
any combination of (a), (b), (c) and (d) above. If the Committee
exercises its discretion to permit payment of the exercise price of
an ISO by means of the methods set forth in clauses (b), (c), (d) or
(e) of the preceding sentence, such discretion shall be exercised in
writing at the time of the grant of the ISO in questions. The
holder of an Option shall not have the rights of a shareholder with
respect to the shares covered by such Option until the date of
issuance of a stock certificate to such holder for such shares.
Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall
be made for dividends or similar rights for which the record date is
before the date such stock certificate is issued."
Except as otherwise provided in this 1998-1 Amendment to the Dobson
Communications Corporation 1996 Stock Option Plan ("Amendment"), the Plan is
hereby ratified and confirmed in all respects. This Amendment shall be
effective as of December 21, 1998.
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<PAGE>
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<PAGE>
DOBSON WIRELINE COMPANY
1998 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Dobson Wireline Company 1998 Stock Option Plan
(the "Plan") is to encourage key employees of Dobson Wireline Company (the
"Company") and of any present or future subsidiary of the Company
(collectively, "Related Corporations"), by providing opportunities to
participate in the ownership of the Company and its future growth through
(a) the grant of options which qualify as "incentive stock option" ("ISO")
under Section 422(b) of the Internal Revenue Code of 1986, as amended (the
"Code"); and (b) the grant of options which do not qualify as ISOs
("Non-Qualified Options"). Both ISOs and Non-Qualified Options are
referred to hereafter individually as an "Option" and collectively as
"Options." As used herein, the term "subsidiary" means "subsidiary
corporation," as that term is defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered by
the Board of Directors of the Company (the "Board") or by a committee
appointed by the Board (the "Committee"). Hereinafter, all references
in this Plan to the "Committee" shall mean the Board if no Committee
has been appointed. Subject to ratification of the grant or
authorization of each Option by the Board (if so required by
applicable state law), and subject to the terms of the Plan, the
Committee shall have the authority to (i) determine to whom (from
among the class of employees eligible under paragraph 3 to receive
ISOs) ISOs shall be granted, and to whom (from among the class of
individuals and entities eligible under paragraph 3 to receive
Non-Qualified Options) Non-Qualified Options shall be granted; (ii)
determine the time or times at which Options shall be granted; (iii)
determine the purchase price of shares subject to each Option, which
prices shall not be less than the minimum price specified in paragraph
6; (iv) determine whether each Option granted shall be an ISO or a
Non-Qualified Option; (v) determine (subject to paragraph 7) the time
or times when each Option shall become exercisable and the duration of
the exercise period; (vi) determine whether restrictions such as
repurchase options are to be imposed on shares subject to Options and
the nature of such restrictions, if any, and (vii) interpret the Plan
and prescribe and rescind rules and regulations relating to it. If
the Committee determines to issue a Non-Qualified Option, it shall
take whatever actions it deems necessary, under Section 422 of the
Code and the regulations promulgated thereunder, to ensure that such
Option is not treated as an ISO. The interpretation and construction
by the
<PAGE>
Committee of any provisions of the Plan or of any Option granted under
it shall be final unless otherwise determined by the Board. The
Committee may from time to time adopt such rules and regulations for
carrying out the Plan as it may deem advisable. No member of the
Board or the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any Option granted
under it.
B. COMMITTEE ACTIONS. The Committee may select one of its members as its
chairman, and shall hold meetings at such time and places as it may
determine. A majority of the Committee shall constitute a quorum and
acts of a majority of the members of the Committee at a meeting at
which a quorum is present, or acts reduced to or approved in writing
by all the members of the Committee, shall be the valid acts of the
Committee. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with
or without cause) and appoint new members in substitution therefor,
fill vacancies however caused, or remove all members of the Committee
and thereafter directly administer the Plan.
3. ELIGIBLE EMPLOYEES. Options may be granted only to employees and Directors
of the Company or any Related Corporation. The Committee may take into
consideration a recipient's individual circumstances in determining whether
to grant an Option. The granting of any Option to any individual shall
neither entitle that individual to, nor disqualify him from, participating
in any other grant of Options.
4. STOCK. The stock subject to Options shall be authorized but unissued
shares of Common Stock of the Company, par value $.01 per share (the
"Common Stock"). The aggregate number of shares which may be issued
pursuant to the Plan is 3,750,000 subject to adjustment as provided in
paragraph 13. If any Option granted under the Plan shall expire or
terminate for any reason without having been exercised in full or shall
cease for any reason to be exercisable in whole or in part, the unpurchased
shares subject to such Option shall again be available for grants of
Options under the Plan.
5. GRANTING OF OPTIONS. Options may be granted under the Plan at any time
after August 1, 1998, and prior to August 1, 2008. The date of grant of an
Option under the Plan will be the date specified by the Committee at the
time it grants the Option; provided, however, that such date shall not be
prior to the date on which the Committee acts to approve the grant.
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<PAGE>
6. MINIMUM OPTION PRICE: ISO LIMITATIONS.
A. PRICE FOR NON-QUALIFIED OPTIONS. The exercise price per share
specified in the agreement relating to each Non-Qualified Option
granted under the Plan shall in no event be less than the minimum
legal consideration required therefore under the laws of Oklahoma or
the laws of any jurisdiction in which the Company or its successors in
interest may be organized.
B. PRICE FOR ISOS. The exercise price per share specified in the
agreement relating to each ISO granted under the Plan shall not be
less than the fair market value per share of Common Stock on the date
of such grant. In the case of an ISO to be granted to an employee
owning stock possessing more than 10 percent (10%) of the total
combined voting power of all classes of stock of the Company or any
Related Corporation, the price per share specified in the agreement
relating to such ISO shall not be less than one hundred ten percent
(110%) of the fair market value per share of Common Stock on the date
of grant. For purposes of determining stock ownership under this
paragraph, the rules of Section 424(d) of the Code shall apply.
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee may
be granted Options treated as ISOs only to the extent that, in the
aggregate under this Plan and all incentive stock option plans of the
Company and any Related Corporation, ISOs do not become exercisable
for the first time by such employee during any calendar year with
respect to stock having a fair market value (determined at the time
the ISOs were granted) in excess of $100,000. The Company intends to
designate any Options granted in excess of such limitation as
Non-Qualified Options.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
granted under the Plan, the Company's Common Stock is publicly traded,
"fair market value" shall be determined as of the last business day
for which the prices or quotes discussed in this sentence are
available prior to the date such Option is granted and shall mean (i)
the average (on that date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a
national securities exchange; or(ii) the last reported sale price (on
that date) of the Common Stock on the NASDAQ National Market, if the
Common Stock is not then traded on a national securities exchange; or
(iii) the closing bid price (or
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<PAGE>
average of bid prices) last quoted (on that date) by an established
quotation service for over-the-counter securities, if the Common
Stock is not reported on the NASDAQ National Market. If the Common
Stock is not publicly traded at the time an Option is granted under
the Plan, "fair market value" shall mean the fair value of the
Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common
Stock in private transactions negotiated at arm's length
7. OPTION DURATION. Subject to earlier termination as provided in paragraphs
9 and 10 or in the agreement relating to such Option, each Option shall
expire on the date specified by the Committee, but not more than (i) ten
years from the date of grant in the case of Options generally and (ii) five
years from the date of grant in the case of ISOs granted to an employee
owning stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Related
Corporation, as determined under paragraph 6(B). Subject to earlier
termination as provided in paragraphs 9 and 10, the term of each ISO shall
be the term set forth in the original instrument granting such ISO, except
with respect to any part of such ISO that is converted into a Non-Qualified
Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through 12,
each Option granted under the Plan shall be exercisable as follows:
A. VESTING. The Option shall either be fully exercisable on the date of
grant or shall become exercisable thereafter in such installments as
the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes exercisable
it shall remain exercisable until expiration or termination of the
Option, unless otherwise specified by the Committee.
C. PARTIAL EXERCISE. Each Option or installment may be exercised at any
time or from time to time, in whole or in part, for up to the total
number of shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. The Committee shall have the right to
accelerate the date that any installment of any Option becomes
exercisable; provided that the Committee shall not, without the
consent of an optionee, accelerate the permitted exercise date of any
installment of any Option granted to any employee as an ISO (and not
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<PAGE>
previously converted into a Non-Qualified Option pursuant to paragraph
16) if such acceleration would violate the annual vesting limitation
contained in Section 422(d) of the Code, as described in paragraph
6(c).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the agreement
relating to such ISO, if an ISO optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or
disability as defined in paragraph 10, no further installments of his or
her ISOs shall become exercisable, and his or her ISOs shall terminate on
the earlier of (a) ninety (90) days after the date of termination of his or
her employment, or (b) their specified expiration dates, except to the
extent that such ISOs (or unexercised installments thereof) have been
converted into Non-Qualified Options pursuant to paragraph 16. For
purposes of this paragraph 9, employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service)
provided that the period of such leave does not exceed 90 days or, if
longer, any period during which such optionee's right to reemployment is
guaranteed by statute. A bona fide leave of absence with the written
approval of the Committee shall not be considered an interruption of
employment under this paragraph 9, provided that such written approval
contractually obligates the Company or any Related Corporation to continue
the employment of the optionee after the approved period of absence. ISOs
granted under the Plan shall not be affected by any change of employment
within or among the Company and Related Corporations, so long as the
optionee continues to be an employee of the Company or any Related
Corporation. Nothing in the Plan shall be deemed to give any grantee of
any Option the right to be retained in employment by the Company or any
Related Corporation for any period of time.
10. DEATH; DISABILITY
A. DEATH. If an ISO optionee ceases to be employed by the Company and
all Related Corporations by reason of his or her death, any ISO owned
by such optionee may be exercised, to the extent otherwise exercisable
on the date of his death, by his estate, personal representative or
beneficiary who has acquired the ISO by will or by the laws of descent
and distribution, until the earlier of (i) the specified expiration
date of the ISO or (ii) twelve months from the date of the optionee's
death.
B. DISABILITY. If an ISO optionee ceases to be employed by the Company
and all Related Corporations by reason of his
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<PAGE>
or her disability, such optionee shall have the right to exercise
any ISO held by him or her on the date of termination of
employment, for the number of shares for which he or she could have
exercised it on that date, until the earlier of the specified
expiration date of the ISO or twelve months from the date of the
termination of the optionee's employment. For the purposes of the
Plan, the term "disability" shall mean "permanent and total
disability" as defined in Section 22(e)(3) of the Code or any
successor statute.
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
grantee except by will, by the laws of descent and distribution or, in the
case of Non-Qualified Options only, pursuant to a valid domestic relations
order. Except as set forth in the previous sentence, during the lifetime
of a grantee each Option shall be exercisable only by such grantee.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by instruments
(which need not be identical) in such forms as the Committee may from time
to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not
inconsistent with the Plan, including restrictions applicable to shares of
Common Stock issuable upon exercise of Options. The Committee may specify
that any Non-Qualified Option shall be subject to the restrictions set
forth herein with respect to ISOs, or to such other termination and
cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its
own members and/or one or more officers of the Company to execute and
deliver such instruments. The proper officers of the Company are
authorized and directed to take any and all action necessary or advisable
from time to time to carry out the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to such optionee
hereunder shall be adjusted as hereinafter provided, unless otherwise
specifically provided in the written agreement between the optionee and the
Company relating to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of common stock of
the Company shall be subdivided or combined into a greater or smaller
number or shares or if the Company shall issue any shares of its
common stock as a stock dividend on its outstanding Common Stock, the
number of shares of Common Stock deliverable upon the exercise of
Options shall be appropriately increased or
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<PAGE>
decreased proportionately, and appropriate adjustments shall be
made in the purchase price per share to reflect such subdivision,
combination or stock dividend.
B. RECAPITALIZATION OR REORGANIZATION. In the event of a
recapitalization or reorganization of the Company (other than in
connection with a transaction described in subparagraph C below)
pursuant to which securities of the Company or of another corporation
are issued with respect to the outstanding shares of Common Stock, an
optionee upon exercising an Option shall be entitled to receive for
the purchase price paid upon such exercise the securities he would
have received if he had exercised his Option prior to such
recapitalization or reorganization.
C. CHANGE IN CONTROL EVENTS. In the event any Change in Control Event
(as defined below) occurs, each Option then outstanding shall,
immediately prior to such Change in Control Event (except as set forth
in subparagraph E below), be nonforfeitable and exercisable in full.
A Change in Control Event shall mean any of the following:
1. Any transaction in which shares of voting securities of the
Company are sold or transferred by the Company or shareholders of
the Company as a result of which those persons and entities who
own voting securities of the Company prior to such transaction
own less than fifty percent (50%) of the outstanding voting
securities of the Company after such transaction;
2. The merger or consolidation of the Company with or into another
entity as a result of which less than fifty percent (50%) of the
outstanding voting securities of the surviving or resulting
entity are owned by those persons and entities who own voting
securities of the Company prior to such merger or consolidation;
or
3. The sale of all or substantially all of the Company's assets to
an entity of which less than fifty percent (50%) of the
outstanding voting securities of such entity are owned by those
persons and entities who own voting securities of the Company at
the time of such asset sale.
The existence of any Option shall not in any way prevent any Related Corporation
from engaging in any of the transactions described in this subparagraph C, nor
shall it confer any rights upon the holder of any such Option to participate in
any such transaction, except those expressly conferred by the Plan and the
agreement pursuant to which such Option shall have been granted.
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<PAGE>
Nothing contained in this Plan shall prevent the assumption of an Option, or
the substitution of a new option for an Option, by any corporation, or the
parent or subsidiary of any corporation, that becomes the employer of an
optionee by reason of a merger, consolidation or acquisition; provided,
however, that with respect to an ISO, the following additional conditions are
applicable:
1. the excess of the aggregate fair market value of the shares
subject to the Option immediately after the substitution or
assumption over the aggregate option price of such shares is not
more than the excess of the aggregate fair market value of the
shares subject to the Option immediately before such substitution
or assumption over the aggregate option price of such shares; and
2. the new option or the assumption of the old Option does not give
the optionee additional benefits that the optionee did not have
under the old Option.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any adjustments
made pursuant to subparagraphs A, B, or C with respect to ISOs shall
be made only after the Committee, after consulting with counsel for
the Company, determines whether such adjustments would constitute a
"modification" of such ISOs (as that term is defined in Section 424 of
the Code) or would cause any adverse tax consequences for the holders
of such ISOs. If the Committee determines that such adjustments made
with respect to ISOs would constitute a modification of such ISOs or
would cause adverse tax consequences to the holders, it may refrain
from making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution
or liquidation of the Company, each Option will terminate immediately
prior to the consummation of such proposed action or at such other
time and subject to such other conditions as shall be determined by
the Committee.
F. ISSUANCES OF SECURITIES. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number
or price of shares subject to Options. No adjustments shall be made
for dividends paid in cash or in property other than securities of the
Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the
Plan and the optionee shall receive from the Company cash in lieu of
such fractional shares.
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<PAGE>
H. ADJUSTMENTS. Upon the happening of any of the events described in
subparagraphs A, B, or C above, the class and aggregate number of
shares set forth in paragraph 4 hereof that are subject to Options
which previously have been or subsequently may be granted under the
Plan shall also be appropriately adjusted to reflect the events
described in such subparagraphs. The Committee or the Successor Board
shall determine the specific adjustments to be made under this
paragraph 13 and, subject to paragraph 2, its determination shall be
conclusive.
14. MEANS OF EXERCISING OPTIONS. An Option (or any part of installment
thereof) shall be exercised by giving written notice to the Company at its
principal office address, or to such transfer agent as the Company shall
designate. Such notice shall identify the Option being exercised and
specify the number of shares as to which such Option is being exercised,
accompanied by full payment of the purchase price therefor either (a) in
United States dollars in cash or by check, (b) at the discretion of the
Committee, through delivery of shares of Common Stock having a fair market
value equal as of the date of the exercise to the cash exercise price of
the Option including withholding of shares of Common Stock otherwise
deliverable upon exercise of an Option, but only to the extent such
exercise of an Option would not result in an accounting compensation charge
with respect to the shares used to pay the exercise price unless otherwise
determined by the Committee, (c) at the discretion of the Committee, by
delivery of the grantee'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 Code, (d) at the
discretion of the Committee and consistent with applicable law, through the
delivery of an assignment to the Company of a sufficient amount of the
proceeds from the sale of the Common Stock acquired upon exercise of the
Option and an authorization to the broker or selling agent to pay that
amount to the Company, which sale shall be at the participant's direction
at the time of exercise, or (e) at the discretion of the Committee, by any
combination of (a), (b), (c) and (d) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by means of
the methods set forth in clauses (b), (c), (d) or (e) of the preceding
sentence, such discretion shall be exercised in writing at the time of the
grant of the ISO in questions. The holder of an Option shall not have the
rights of a shareholder with respect to the shares covered by such Option
until the date of issuance of a stock certificate to such holder for such
shares. Except as expressly provided above in paragraph 13 with respect to
changes in capitalization and stock dividends, no adjustment shall be
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<PAGE>
made for dividends or similar rights for which the record date is before
the date such stock certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board as of
August 1, 1998, subject, with respect to the validation of ISOs granted
under the Plan, to approval of the Plan by the stockholders of the Company
at the next meeting of Stockholders or, in lieu thereof, by written
consent. If the approval of stockholders is not obtained prior to August
1, 1999, any grants of ISOs under the Plan made prior to that date will be
rescinded. The Plan shall expire at the end of the day on August 1, 2008
(except as to Options outstanding on that date). Subject to the provisions
of paragraph 5 above, Options may be granted under the Plan prior to the
date of stockholder approval of the Plan. The Board may terminate or amend
the Plan in any respect at any time, except that, without the approval of
the stockholders obtained within 12 months before or after the Board adopts
a resolution authorizing any of the following actions: (a) the total number
of shares that may be issued under the Plan may not be increased (except by
adjustment pursuant to paragraph 13); (b) the benefits accruing to
participants under the Plan may not be materially increased; (c) the
requirements as to eligibility for grants of ISOs may not be modified; (d)
the provisions of paragraph 3 regarding eligibility for grants of ISOs may
not be modified; (e) the provisions of paragraph 6(B) regarding the
exercise price at which shares may be offered pursuant to ISOs may not be
modified (except by adjustment pursuant to paragraph 13); (f) the
expiration date of the Plan may not be extended; and (g) the Board may not
take any action which would cause the Plan to fail to comply with Rule
16b-3. Except as otherwise provided in this paragraph 15, in no event may
action of the Board or stockholders alter or impair the rights of a
grantee, without such grantee's consent, under any Option previously
granted to such grantee.
16. CANCELLATION OF OPTIONS. The Board may, in its sole discretion, in cases
involving a serious breach of conduct by an employee or former employee, or
activity of a former employee in competition with the business of the
Company or a Related Corporation, cancel any Option, whether vested or not,
in whole or in part. Such cancellation shall be effective as of the date
specified by the Board. Without limitation, activities which shall
constitute a serious breach of conduct include: (i) the disclosure or
misuse of confidential information or trade secrets; (ii) activities in
violation of the policies of the Company or any Related Corporation,
including without limitation, the Company's insider trading policy; (iii)
the violation or breach of any material provision in any employment
contract or agreement among the employee and any Related Corporation; (iv)
engaging in conduct relating to the
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<PAGE>
optionee's employment with the Company or any Related Corporation for
which either criminal or civil penalties may be sought; and (v) engaging
in activities which adversely affects or which are contrary or harmful
to the interest of the Company, any Related Corporation or its business
operations. The determination of whether an employee or former employee
has engaged in a serious breach of conduct or activity in competition
with the business of a Related Corporation shall be determined by the
Board in good faith and in its sole discretion.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the sale
of shares pursuant to Options granted under the Plan shall be used for
general corporate purposes.
18. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
granted under the Plan, each optionee agrees to notify the Company in
writing immediately after he makes a Disqualifying Disposition (as
described in Sections 421, 422, and 424 of the Code and regulations
thereunder) of any stock acquired pursuant to the exercise of ISOs granted
under the Plan. A Disqualifying Disposition is generally any disposition
occurring on or before the later of (a) the date two years following the
date the ISO was granted or (b) the date one year following the date the
ISO was exercised.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a
Non-Qualified Option, the making of a Disqualifying Disposition (as defined
in paragraph 19), the vesting or transfer of restricted stock or securities
acquired on the exercise of an Option hereunder, or the making of a
distribution or their payment with respect to such stock or securities, the
Company may withhold taxes in respect of amounts that constitute
compensation includible in gross income. The Committee in its discretion
may condition the exercise of an Option, the vesting or transferability of
restricted stock or securities acquired by exercising an Option, on the
grantee's making satisfactory arrangement for such withholding. Such
arrangement may include payment by the grantee's delivery of previously
held shares of Common Stock or the withholding from the shares of Common
Stock otherwise deliverable upon exercise of an Option shares having an
aggregate fair market value equal to the amount of such withholding taxes.
20. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of
any governmental authority required in connection with the authorization,
issuance or sale of such shares.
-11-
<PAGE>
Government regulations may impose reporting or other obligations on the
Company with respect to the Plan. For example, the Company may be required
to send tax information statements to employees and former employees that
exercise Options under the Plan, and the Company may be required to file
tax information returns reporting the income received by grantees of
Options in connection with the Plan.
21. GOVERNING LAW. The validity and construction of the Plan and the
instruments evidencing Options shall be governed by the laws of Oklahoma,
or the laws of any jurisdiction in which the Company or its successors in
interest may be organized.
The undersigned hereby certify that they are all the Directors of Dobson
Wireline Company entitled to vote on the foregoing matters and hereby consent to
the foregoing Plan.
/s/ RUSSELL L. DOBSON
------------------------------------
Russell L. Dobson, Director
/s/ EVERETT R. DOBSON
------------------------------------
Everett R. Dobson, Director
/s/ STEPHEN T. DOBSON
------------------------------------
Stephen T. Dobson, Director
/s/ JUSTIN L. JASCHKE
------------------------------------
Justin L. Jaschke, Director
/s/ THADEUS J. MOCARSKI
------------------------------------
Thadeus J. Mocarski, Director
-12-
<PAGE>
DOBSON WIRELINE COMPANY
INCENTIVE STOCK OPTION AGREEMENT
This Agreement is made as of August 1, 1998 (the "Date of Grant"), by
and between Dobson Wireline Company, an Oklahoma corporation (the
"Corporation"), and (the "Optionee").
W I T N E S S E T H:
WHEREAS, the Board of Directors of Dobson Wireline Company (the "Board")
adopted, with subsequent shareholder approval, the Dobson Wireline Company
1998 Stock Option Plan (the "Plan"); and
WHEREAS, the Plan provides for the granting of stock options by the
Board to key employees of the Corporation to purchase or to exercise certain
rights with respect to the Corporation's shares of Common Stock, with a par
value of $.01, in accordance with the terms and provisions of the Plan; and
WHEREAS, the Board considers the Optionee to be a person who is eligible
for a grant of stock options under the Plan, and has determined that it would
be in the best interest of the Corporation to grant the incentive stock
options documented herein.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, the parties hereby agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth in
this Agreement and the Plan, the Corporation hereby grants to the Optionee,
as a stock option, the right to purchase from the Corporation, during the
term of this Option, an aggregate of 1,042,500 shares ("Option Shares") of
the Corporation's Common Stock, with a par value $.01 per share (the "Common
Stock"), at an exercise price of $2.00 per share (the "Option"), said
exercise price being not less that 100% of the fair market value of the
Common Stock on the Date of Grant; PROVIDED, HOWEVER, that if the Optionee
owns, immediately prior to the grant of the Option, stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Corporation or a Related Corporation (as defined in the Plan)
("Ten-Percent Owner"), the exercise price shall at least 110% of the fair
market value of the Common Stock on the Date of Grant. This Option is
intended to be, and shall be treated as, an "incentive stock option" as
defined in Section 422(b) of the Internal Revenue Code of 1986.
2. VESTING OF OPTIONS. Subject to the provisions of paragraphs 9, 10, 11
and 12 of the Plan and the provisions of this Agreement, the Options granted
herein shall vest at the rate of
<PAGE>
twenty percent (20%) per annum on each annual anniversary of the Date of the
Grant.
3. TERM. This Option shall commence on Date of Grant and shall
terminate m accordance with the provisions of paragraph 5 below.
4. INSTALLMENT EXERCISE. Vested Options may be exercisable within the
Term of Option either in full or in two (2) installments, at the election of
the Optionee; PROVIDED HOWEVER, that as to each installment the amount due
for all shares exercised by the installment must be paid at the time of
exercise.
5. TERMINATION OF OPTION.
(a) The Option and all rights hereunder with respect thereto, to the
extent such rights shall not have been exercised by Optionee,
shall terminate and become null and void after the expiration
often (10) years from the Date of Grant (the "Option Term");
PROVIDED, HOWEVER, that the Option Term with respect to a
Ten-Percent Owner shall be five (5) years from the Date of Grant.
(b) Upon the occurrence of the Optionee's ceasing for any reason to
be employed by the Employer (such occurrence being "a termination
of the Optionee's employment"), the Option, may be exercised, to
the extent the Optionee is vested, outstanding and exercisable
upon the termination of employment, within ninety (90) days
following such termination of employment, except in a case where
the termination of the Optionee's employment is by reason of
retirement, disability or death.
(c) Upon termination of the Optionee's employment by reason of
retirement, disability or death, the Option shall be immediately
vested and may be exercised during the following periods, but
only to the extent that the Option was, if vested, exercisable on
any such date of retirement, disability or death: (i) the
one-year period following the date of such termination of the
Optionee's employment in the case of a disability (within the
meaning of Section 22(e)(3) of the Code); (ii) the one (1) year
period following the date of death, in the case of the Optionee's
death during Optionee's employment by the Employer; and (iii) the
ninety (90) day period following the date of such termination in
the case of retirement on or after attainment of age 65, or in
the case of disability other
-2-
<PAGE>
than as described in (i) above. In no event, however, shall any
such period extend beyond the Option Term set forth in paragraph
5(a) above.
(d) In the event of the death (or if appropriate, disability) of the
Optionee, the Option if otherwise eligible to be exercised, may
be exercised by the Optionee's legal representative(s).
(e) A transfer of the Optionee's employment between the Corporation
and any Related Corporation, or between any Related Corporations,
shall not be deemed to be a termination of the Optionee's
employment.
6. EXERCISE OF OPTIONS.
(a) The Option may be exercised only by written notice to the
Corporation in the form substantially similar to the form of
Exhibit "A," attached hereto; signed by the Optionee and
delivered in person or by certified or registered mail, return
receipt requested, to the President of the Corporation, or other
authorized representative of the Corporation, prior to the
termination of the Option as set forth in paragraph 5 above,
accompanied by full payment of the exercise price for the number
of shares of Common Stock being purchased upon such exercise,
unless in the sole discretion of the Compensation Committee, as
allowed by the Plan, an alterative payment method is agreed to by
the Company and Optionee.
(b) Either at the time the Option is exercised, in whole or in part,
or at any time thereafter as requested by the Corporation, the
Optionee shall make adequate provision for the federal and state
tax withholding obligations of the Corporation, if any, which
arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole
or part, of the Option, (ii) the transfer, in whole or in part,
of any shares of Common Stock acquired on exercise of the Option,
(iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction
with respect to any shares of Common Stock acquired on exercise
of the Option.
(c) On the exercise date specified in the Optionee's notice or as
soon thereafter as is practicable, the Corporation shall cause to
be delivered to the
-3-
<PAGE>
Optionee, a certificate or certificates for the Option Shares
then being purchased (out of theretofore unissued Common Stock
or required Common Stock, as the Corporation may elect) upon
full payment for such Option Shares. The obligation of the
Corporation to deliver Common Stock shall, however, be subject
to the condition that if at any time the Board shall determine
in its discretion that the listing, registration or
qualification of the Option or the Option Shares upon any
securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection
with, the Option or the issuance or purchase of Common Stock
thereunder, the Option may not be exercised in whole or in
part unless such listing, registration, qualification, consent
or approval shall have been effected or obtained free of any
conditions not acceptable to the Board.
(d) If the Optionee fails to pay for any of the Option Shares
specified in such notice or fails to accept delivery thereof, the
Optionee's right to purchase such Option shares may be terminated
by the Corporation. The date specified in the Optionee's notice
as of the date of exercise shall be deemed the date of exercise
of the Option, provided that payment in full for the Option
shares to be purchased upon such exercise shall have been
received by such date.
7. CANCELLATION OF OPTIONS. Except upon the occurrence of a Change in
Control Event, the Board may, in its sole discretion, in cases involving a
serious breach of conduct by an Optionee or activity of an Optionee in
competition with the business of the Corporation, cancel the Option, whether or
not vested, in whole or in part. Such cancellation shall be effective as of the
date specified by the Board. Without limitation, activities which shall
constitute a serious breach of conduct include: (i) the disclosure or misuse of
confidential information or trade secrets; (ii) activities in violation of the
Corporation's policies, including without limitation, the Corporation's insider
trading policy; (iii) the violation or breach of any material provision in any
employment contract or agreement among the Optionee and the Corporation; (iv)
engaging in conduct relating to the Optionee's employment with the Corporation
for which either criminal or civil penalties may be sought; and (v) engaging in
activities which adversely affect or which are contrary or harmful to the
interests of the Corporation or their respective business operations. The
determination of whether an Optionee has engaged in a serious breach of conduct
or activity in competition with the business of the Corporation shall
-4-
<PAGE>
be determined by the Board in good faith exercise of judgment, but in its
sole discretion.
8. NON-TRANSFERABILITY OF OPTION. The Option hereunder shall be
exercisable only by the Optionee (or any guardian or other legal
representative of the Optionee, if applicable) and the Option shall not be
transferable except in case of the death of the Optionee, by will or the laws
of descent and distribution. The Option shall not be subject to attachment,
execution or other similar process by any creditor of Optionee. In the event
of (a) any attempt by the Optionee to alienate, assign, pledge, hypothecate
or otherwise dispose of the Option, except as provided for herein, or (b) the
levy of any attachment, execution or similar process upon the rights or
interest hereby conferred, the Corporation may terminate the Option at any
time prior to exercise by Optionee, or Optionee's authorized representative,
by notice to the Optionee and it shall thereupon become null and void.
9. CHANGE OF CONTROL. In the event of any Change in Control Event, as
that term is defined in the Plan, each Option then outstanding shall,
immediately prior to such Change in Control Event, be fully vested,
nonforfeitable and exercisable in full at any time within thirty (30) days
after the Change in Control Event, except to the extent previously exercised,
forfeited or terminated. The Board may, in its sole discretion, arrange with
the surviving, continuing or successor corporation, as the case may be, (the
"Acquiring Corporation") to assume the Corporation's rights and obligations
under this Option Agreement or substitute a comparable option for the
Acquiring Corporation's stock for this Option. This Option shall terminate
and cease to be outstanding effective as of the date of the Change in Control
Event to the extent that the Option is neither (i) assumed or substituted for
by the Acquiring Corporation on or before the effective date of the Change in
Control Event nor (ii) exercised by the Optionee within thirty (30) days
after the Change in Control Event.
10. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. In the event of
certain corporate events such as stock splits, the Board has retained the
right, pursuant to the Plan, to increase or decrease the number of Option
Shares, change the kind of shares available under the Option and/or increase
or decrease the exercise price of the Option in order to preserve the
benefits or potential benefits intended to be made available under the Plan.
11. RIGHTS AS A SHAREHOLDER OR EMPLOYEE. The Optionee shall have no
rights of a shareholder with respect to any shares of Common Stock covered by
the Option until the date of the issuance of a certificate or certificates for
the shares for which the Option has been properly exercised. No adjustment
shall be made for dividends or distributions or other rights for which the
record date is prior to the date such certificate or certificates are
-5-
<PAGE>
issued, except as provided in paragraph 9 above. Nothing in the Option shall
confer upon the Optionee any rights to continue in the employment of the
Corporation or interfere in any way with any right of the Corporation with
respect to the Optionee's employment.
12. BINDING EFFECT. This Option Agreement shall inure to the benefit
of the successors and assigns of the Corporation and be binding upon the
Optionee and the Optionee's heirs, executors, administrators, successors and
assigns.
13. TERMINATION OR AMENDMENT OF THE PLAN. The Board may terminate or
amend the Plan and may amend this Option at any time, PROVIDED HOWEVER, that
no such termination or amendment may adversely affect vested Options, without
the consent of the Optionee, except as otherwise provided for in the Plan.
14. INTEGRATED AGREEMENT. This Option Agreement and the Plan
constitute the entire understanding and agreement of the Optionee and the
Corporation with respect to the subject matter contained herein and therein,
and there are no agreements, understandings, restrictions, representations,
or warranties among the Optionee and the Corporation other than those as set
forth or provided for herein and therein. To the extent contemplated herein
and therein, the provisions of the Option Agreement and the Plan shall
survive any exercise of the Option and shall remain in full force and effect.
15. APPLICABLE LAW. This Option Agreement shall be governed by the
laws of the State of Oklahoma.
16. SUBJECT TO PLAN. Except as may be specifically set forth herein,
the rights of the Optionee are subject to all of the terms and conditions of
the Plan, the provisions of which are hereby incorporated by reference
herein. The Optionee hereby acknowledges receipt of a copy of the Plan and
agrees to be bound by all terms and provisions thereof and further agrees to
accept as binding, conclusive and final all decisions or interpretations of
the Board upon any questions arising under this Option Agreement or the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the Date of Grant.
DOBSON WIRELINE COMPANY
By:
-------------------------------------
Printed Name:
------------------------
Title:
-------------------------------
OPTIONEE
-6-
<PAGE>
--------------------------------------
-7-
<PAGE>
EXHIBIT "A"
NOTICE OF
EXERCISE OF INCENTIVE STOCK OPTION
Dobson Wireline Company
13439 N. Broadway Extension, Suite 200
Oklahoma City, OK 73114
Gentlemen:
As of the date of this Notice, I hereby irrevocably exercise my option
to acquire ______ shares of Common Stock of Dobson Wireline Company for $2.00
per share in accordance with the terms and conditions of the Incentive Stock
Option Agreement dated as of August 1, 1998.
Tendered herewith is my payment of $________ therefor and I request that
a certificate for such shares be issued in the name of
_______________________ and delivered to _______________.
Sincerely,
- ---------------------------------
-8-
<PAGE>
-9-
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of
December 23, 1998, by and among DOBSON COMMUNICATIONS CORPORATION, an
Oklahoma corporation (the "Company"), DOBSON CC LIMITED PARTNERSHIP, an
Oklahoma limited partnership ("DCC, L.P."), DOBSON OPERATING COMPANY, an
Oklahoma corporation ("Dobson Operating"), J.W. CHILDS EQUITY PARTNERS II,
L.P., a Delaware limited partnership ("JWC"), Dana L. Schmaltz (the
"Representative"), as representative of, and attorney-in-fact for, certain
related persons or entities of JWC listed on Schedule A hereto (the "Group",
and together with JWC, the "JWC Group") (the JWC Group, together with the
Company, DCC, L.P. and Dobson Operating, the "Purchasers"), FLEET VENTURE
RESOURCES, INC., a Rhode Island corporation ("FVR"), FLEET EQUITY PARTNERS
VI, L.P., a Delaware limited partnership ("FEP"), and KENNEDY PLAZA PARTNERS,
a Rhode Island general partnership ("KPP" and, together with FVR and FEP,
"Fleet"); and, for purposes of Section 10.10 hereof only, Thadeus J. Mocarski.
W I T N E S S E T H T H A T:
WHEREAS, Fleet owns 100,000 shares of Class B Convertible Preferred
Stock of the Company, par value $1.00 per share ("Class B Preferred") and
100,000 shares of Class C Non-Voting Non-Convertible Preferred Stock of the
Company, par value $1.00 per share ("Class C Preferred" and, together with
all of the Common Stock (as defined below) owned by Fleet whether by
conversion of Fleet's Class B Preferred or as payment in connection with the
exercise of the DCC Option (as defined below), the "Fleet Stock"), all as
more particularly described on EXHIBIT A attached hereto;
WHEREAS, Fleet has granted to DCC, L.P. an option (the "DCC
Option") to purchase 40,000 shares of Class B Preferred pursuant to the
terms and conditions of that certain Option Agreement (the "Option
Agreement"), dated March 19, 1996, by and among DCC, L.P. and Fleet;
WHEREAS, DCC, L.P. desires to exercise the DCC Option and in
connection therewith DCC, L.P. will transfer to Fleet and Fleet has agreed to
accept, 18,169 shares of the Company's Class A Common Stock, par value $1.00
per share (the "Common Stock") having an aggregate value of $12,000,000, as
payment for the aggregate exercise price for 40,000 shares of the Common
Stock;
WHEREAS, Fleet desires to convert the 100,000 shares of the Class B
Preferred held by it into 100,000 shares of Common Stock, in accordance with the
terms of the Company's Amended and Restated Certificate of Designations,
Preferences and Relative and Other Special Rights and Qualifications,
Limitations and Restrictions of Class B Convertible Preferred Stock;
<PAGE>
WHEREAS, the Company desires to purchase and Fleet desires to sell
to the Company, 22,459 shares of the Common Stock held by Fleet and all of
the Class C Preferred held by Fleet upon the terms and conditions
hereinafter set forth;
WHEREAS, DCC, L.P. desires to purchase and Fleet desires to sell to
DCC, L.P., 17,412 shares of the Common Stock held by Fleet upon the terms and
conditions hereinafter set forth;
WHEREAS, Dobson Operating desires to purchase and Fleet desires to
sell to Dobson Operating 20,886 shares of the Common Stock held by Fleet upon
the terms and conditions hereinafter set forth; and
WHEREAS, the JWC Group desires to purchase and Fleet desires to
sell to the JWC Group 17,412 shares of the Common Stock held by Fleet upon
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as
follows:
SECTION 1. EXERCISE OF DCC OPTION; CONVERSION OF CLASS B PREFERRED.
1.1 CONVERSION OF CLASS B PREFERRED. Fleet hereby exercises its right
to convert 100,000 shares of Class B Preferred to 100,000 shares of Common
Stock and the Company hereby waives any notice or similar requirement in
connection therewith. Fleet acknowledges that no dividends are payable on or
with respect to such shares of Class B Preferred solely as a result of such
conversion.
1.2 EXERCISE OF DCC OPTION. DCC, L.P. hereby exercises the DCC Option
and subject to the satisfaction of the terms and conditions of this
Agreement, Fleet will sell, assign, convey, transfer and deliver to DCC,
L.P., at the Closing (as defined herein) 40,000 shares of Common Stock, free
and clear of any lien, pledge, claim, encumbrance, restriction, pre-emptive
or similar rights (imposed by statute or contract) or call of any kind
(herein collectively referred to as "Claims"), together with all accrued
dividends and other rights and interests relating thereto, in exchange for an
exercise price of $12,000,000 which payment shall be in the form of 18,169
shares of Common Stock. Payment of the exercise price shall be made to the
Fleet entities pro rata based on the number of shares being sold by each
Fleet entity pursuant to the DCC Option. DCC, L.P. agrees that the transfer
of such Common Stock shall be subject to payment by DCC, L.P. of any issuance
or transfer tax in respect thereof.
1.3 SATISFACTION OF CONDITIONS OF OPTION AGREEMENT. Upon the
satisfaction of the terms and conditions set forth herein (including, without
limitation, any notice or similar requirement) all conditions to the exercise
of the DCC Option shall be deemed to have been satisfied and Fleet's
obligations under the Option Agreement shall be satisfied in its entirety.
<PAGE>
1.4 DELIVERY OF STOCK. In connection with this Section 1, at the
Closing (a) Fleet shall deliver (i) to DCC, L.P. certificates representing
40,000 shares of Common Stock, together with stock powers duly endorsed for
transfer of such shares in favor of DCC, L.P. and (ii) to the Company
certificates representing 100,000 shares of Series B Preferred together with
stock powers duly endorsed for transfer of such shares in favor of the
Company; (b) DCC, L.P. shall deliver to Fleet certificates representing
18,169 shares of Common Stock, together with stock powers duly endorsed for
transfer of such shares in favor of FVR, FEP and KPP, as applicable; and (c)
the Company shall deliver to Fleet certificates representing 100,000 shares
of Common Stock.
SECTION 2. SALE AND PURCHASE OF THE FLEET STOCK.
2.1 SALE AND PURCHASE OF THE FLEET STOCK. Subject to the satisfaction
of the terms and conditions of this Agreement, Fleet will sell, assign,
convey, transfer and deliver to the Purchasers, and the Purchasers will
purchase from Fleet, at the Closing (as herein defined), the Fleet Stock
(after giving effect to the exercise of the DCC Option contemplated in
Section 1.2 hereof) free and clear of any Claims.
2.2 PURCHASE PRICE. The purchase price, which includes all accrued
dividends (the "Purchase Price") for the Fleet Stock shall be as follows:
<TABLE>
<CAPTION>
NUMBER AND TYPE OF SHARES PURCHASER PURCHASE PRICE
- ------------------------- --------- --------------
<S> <C> <C>
22,459 shares of Common The Company $16,130,000
Stock
17,412 shares of Common DCC, L.P. $11,500,000
Stock
20,886 shares of Common Dobson Operating $15,000,000
Stock
17,412 shares of Common The JWC Group $11,500,000
Stock
100,000 shares of Class C The Company $1,870,000
Preferred
</TABLE>
In consideration of the receipt of the Purchase Price, Fleet hereby
waives and
3
<PAGE>
disclaims any right to receive any additional dividends on and any and all
other rights and interests relating to the Fleet Stock.
Each of the Purchasers shall pay to Fleet on the Closing Date, by
wire transfer of immediately available funds, the Purchase Price set forth
opposite such Purchaser's name. Fleet shall provide the Purchasers payment
instructions prior to the Closing Date.
2.3 DELIVERY OF STOCK. At the Closing, Fleet shall deliver to each
Purchaser a certificate representing the number of shares of Fleet Stock
purchased by such Purchaser, together with stock powers duly endorsed for
transfer in favor of such Purchaser.
SECTION 3. THE CLOSING.
The closing of the transactions contemplated hereby (the "Closing")
shall take place on the date (the "Closing Date") and at the location of the
closing of the transactions contemplated by the Agreement and Plan of Merger,
dated as of July 28, 1998 (the "Merger Agreement") by and among Dobson/Sygnet
Operating Company, a wholly-owned subsidiary of the Company and
Sygnet-Wireless, Inc., but in no event later than January 31, 1999.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF FLEET.
Fleet hereby makes the following representations and warranties to the
Purchasers, each of which is true and correct on the date hereof and will be
true and correct on the Closing Date:
4.1 OWNERSHIP; AUTHORITY OF FLEET. On the Closing Date, the shares of
the Fleet Stock will be free and clear of any and all Claims. On the Closing
Date, Fleet will have good and marketable title free and clear of all claims
to the Fleet Stock and has the full legal right, title, power and authority
to sell, deliver, convey and assign the Fleet Stock to the Purchasers. Upon
delivery to the Purchasers of the Certificates for the Fleet Stock and
accompanying instruments of transfer against payment therefor, the Purchasers
will have acquired good, valid and exclusive title to the Fleet Stock, free
and clear of all Claims. The execution and performance of this Agreement by
Fleet, and the consummation by Fleet of the transactions contemplated hereby,
will not violate, result in a breach of, or constitute a default under any
agreement, instrument, judgment, order or decree to which Fleet is a party or
to which Fleet is subject. Except as described in this Agreement, there are
no existing contractual obligations or understandings to purchase, repurchase
or otherwise acquire any of the Fleet Stock or any interest therein. Except
for the Fleet Stock, neither FVR, FEP, KPP nor any of their respective
affiliates owns or has any right to acquire any debt or equity securities of
the Company.
4
<PAGE>
4.2 ORGANIZATION. (a) FVR is (i) duly organized, validly existing and
in good standing under the laws of the State of Rhode Island, (ii) has full
power and authority to own its property and assets and to carry on its
business as now being conducted and (iii) has full power to execute, deliver
and perform its obligations under the Closing Documents (as defined in
Section 6.1 hereof).
(b) FEP is (i) duly organized, validly existing and in good
standing under the laws of the State of Delaware, (ii) has full power and
authority to own its property and assets and to carry on its business as now
being conducted and (iii) has full power to execute, deliver and perform its
obligations under the Closing Documents.
(c) KPP is (i) duly organized, validly existing and in good
standing under the laws of the State of Rhode Island (ii) has full power and
authority to own its property and assets and to carry on its business as now
being conducted and (iii) has full power to execute, deliver and perform its
obligations under the Closing Documents.
4.3 AUTHORIZATION. (a) The execution and delivery of, and the
performance by FVR of its obligations under, the Closing Documents (i) are
within its corporate powers, (ii) have been duly authorized by all requisite
corporate action, (iii) do not and will not violate any provision of law, any
order of any court or other agency of government, or the corporate charter or
bylaws of FVR, and (iv) do not and will not violate any indenture, agreement
or other instrument to which it is a party, or by which it is bound, or be in
conflict with, result in a breach of, or constitute (with due notice or lapse
of time or both) a default under, or result in the creation or imposition of
any lien, charge or encumbrance of any nature whatsoever upon any of the
property or assets of FVR pursuant to, any such indenture, agreement or
instrument. FVR is not required to obtain any consent, approval or
authorization from, or to file any declaration or statement with, any
governmental instrumentality or other agency in connection with or as a
condition to the execution, delivery or performance of the Closing Documents.
The Closing Documents to which FVR is a party constitute the legal, valid
and binding obligations of FVR enforceable against FVR in accordance with
their respective terms except that such enforceability may be limited by
general principles of equity or laws affecting the enforcement of creditor's
rights generally.
(b) The execution and delivery of, and the performance by FEP of
its obligations under, the Closing Documents (i) are within its partnership
powers, (ii) have been duly authorized by all requisite partnership action,
(iii) do not and will not violate any provision of law, any order of any
court or other agency of government, or the certificate of partnership or
partnership agreement of FEP, and (iv) do not and will not violate any
indenture, agreement or other instrument to which it is a party, or by which
it is bound, or be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or result in the
5
<PAGE>
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of FEP pursuant to, any such
indenture, agreement or instrument. FEP is not required to obtain any
consent, approval or authorization from, or to file any declaration or
statement with, any governmental instrumentality or other agency in
connection with or as a condition to the execution, delivery or performance
of the Closing Documents. The Closing Documents to which FEP is a party
constitute the legal, valid and binding obligations of FEP enforceable
against FEP in accordance with their respective terms except that such
enforceability may be limited by general principles of equity or laws
affecting the enforcement of creditor's rights generally.
(c) The execution and delivery of, and the performance by KPP of
its obligations under the Closing Documents (i) are within its partnership
powers, (ii) have been duly authorized by all requisite partnership action,
(iii) do not and will not violate any provision of law, any order of any
court or other agency of government, or the certificate of partnership or
partnership agreement of KPP, and (iv) do not and will not violate any
indenture, agreement or other instrument to which it is a party, or by which
it is bound, or be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of KPP pursuant to, any such
indenture, agreement or instrument. KPP is not required to obtain any
consent, approval or authorization from, or to file any declaration or
statement with, any governmental instrumentality or other agency in
connection with or as a condition to the execution, delivery or performance
of the Closing Documents. The Closing Documents to which KPP is a party
constitute the legal, valid and binding obligations of KPP enforceable
against KPP in accordance with their respective terms except that such
enforceability may be limited by general principles of equity or laws
affecting the enforcement of creditor's rights generally.
4.4 BROKERS. Fleet has not used any finder or broker in connection
with this Agreement.
4.5 ACCESS TO INFORMATION. Fleet has had access to all information
requested by it from the Company and the Purchasers and their representatives
concerning the Company and Fleet's decision to sell the Fleet Stock. Fleet
acknowledges that the Company and the Purchasers have made no representations
or warranties concerning the Company or any of its subsidiaries except as
expressly set forth herein, including, without limitation, with respect to
any projections of the future financial performance of the Company.
SECTION 5. REPRESENTATION AND WARRANTIES OF THE PURCHASERS.
Each of Dobson Operating, DCC, L.P. and JWC (on behalf of itself and the
other
6
<PAGE>
members of the JWC Group) hereby make, as to themselves, the following
representations and warranties to Fleet, each of which is true and correct on
the date hereof and on the Closing Date.
5.1 ORGANIZATION. (a) Dobson Operating is (i) duly organized, validly
existing and in good standing under the laws of the State of Oklahoma, (ii)
has full power and authority to own its property and assets and to carry on
its business as now being conducted and (iii) has full power to execute,
deliver and perform its obligations under the Closing Documents.
(b) DCC, L.P. is (i) duly organized, validly existing and in good
standing under the laws of the State of Oklahoma, (ii) has full power and
authority to own its property and assets and to carry on its business as now
being conducted and (iii) has full power to execute, deliver and perform its
obligations under the Closing Documents.
(c) JWC is (i) duly organized, validly existing and in good
standing under the laws of the State of Delaware, (ii) has full power and
authority to own its property and assets and to carry on its business as now
being conducted and (iii) has full partnership power to execute, deliver and
perform its obligations under the Closing Documents.
5.2 AUTHORIZATION. (a) The execution and delivery of, and the
performance by Dobson Operating of its obligations under, the Closing
Documents (i) are within its corporate powers, (ii) have been duly authorized
by all requisite corporate action, (iii) do not and will not violate any
provision of law, any order of any court or other agency of government, or
the corporate charter or bylaws of Dobson Operating, and (iv) do not and will
not violate any indenture, agreement or other instrument to which it is a
party, or by which it is bound, or be in conflict with, result in a breach
of, or constitute (with due notice or lapse of time or both) a default under,
or result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of the property or assets of Dobson Operating
pursuant to, any such indenture, agreement or instrument. Dobson Operating
is not required to obtain any consent, approval or authorization from, or to
file any declaration or statement with, any governmental instrumentality or
other agency in connection with or as a condition to the execution, delivery
or performance of the Closing Documents. The Closing Documents to which
Dobson Operating is a party constitute the legal, valid and binding
obligations of Dobson Operating enforceable against Dobson Operating in
accordance with their respective terms except that such enforceability may be
limited by general principles of equity or laws affecting the enforcement of
creditor's rights generally.
(b) The execution and delivery of, and the performance by DCC,
L.P. of its obligations under, the Closing Documents (i) are within its
partnership powers, (ii) have been duly authorized by all requisite
partnership action, (iii) do not and will not violate any provision of law,
any order of any court or other agency of government, or the certificate of
partnership or
7
<PAGE>
partnership agreement of DCC, L.P., and (iv) do not and will not violate any
indenture, agreement or other instrument to which it is a party, or by which
it is bound, or be in conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under, or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the property or assets of DCC, L.P. pursuant to, any
such indenture, agreement or instrument. Except for required consents which
have been obtained, DCC, L.P. is not required to obtain any consent, approval
or authorization from, or to file any declaration or statement with, any
governmental instrumentality or other agency in connection with or as a
condition to the execution, delivery or performance of the Closing Documents.
The Closing Documents to which DCC, L.P. is a party constitute the legal,
valid and binding obligations of DCC, L.P. enforceable against DCC, L.P. in
accordance with their respective terms except that such enforceability may be
limited by general principles of equity or laws affecting the enforcement of
creditor's rights generally.
(c) The execution and delivery of, and the performance by JWC of
its obligations under the Closing Documents (i) are within its partnership
powers, (ii) have been duly authorized by all requisite partnership action,
(iii) do not and will not violate any provision of law, any order of any
court or other agency of government, or the certificate of partnership or
partnership agreement of JWC, and (iv) do not and will not violate any
material indenture, agreement or other instrument to which it is a party, or
by which it is bound, or result in a breach of, or constitute (with due
notice or lapse of time or both) a material default under, or result in the
creation or imposition of any material lien, charge or encumbrance of any
nature whatsoever upon any of the property or assets of JWC pursuant to, any
such indenture, agreement or instrument. Except for required consents which
have been obtained, JWC is not required to obtain any consent, approval or
authorization from, or to file any declaration or statement with, any
governmental instrumentality or other agency in connection with or as a
condition to the execution, delivery or performance of the Closing Documents.
The Closing Documents to which JWC is a party constitute the legal, valid
and binding obligations of JWC enforceable against JWC in accordance with
their respective terms except that such enforceability may be limited by
general principles of equity or laws affecting the enforcement of creditor's
rights generally.
5.3 BROKERS. None of the Purchasers has used any finder or broker in
connection with this Agreement.
5.4 INVESTMENT INTEREST. Each Purchaser hereby represents and warrants
to Fleet that it is acquiring the securities to be purchased by it pursuant
to this Agreement for investment and not with a view towards the sale or
distribution of the rights hereunder or thereunder.
SECTION 6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
8
<PAGE>
The Company hereby makes the following representations and warranties to
Fleet, each of which is true and correct on the date hereof and on the
Closing Date:
6.1 ORGANIZATION. The Company (a) is duly organized, validly existing
and in good standing under the laws of Oklahoma; (b) is duly qualified to
transact business in every jurisdiction where, because of the nature of its
business or property, such qualification is required, including, without
limitation, the State of Oklahoma; (c) has full power and authority to own
its property and assets and to carry on its business as now being conducted;
and (d) has full power to execute, deliver and perform its obligations under
this Agreement and all documents, agreements, certificates, and instruments
executed in connection herewith (collectively, together with this Agreement
and the Exhibits and Schedules hereto, the "Closing Documents").
6.2. AUTHORIZATION. The execution and delivery of, and the performance
by the Company of its obligations under the Closing Documents (a) are within
its corporate powers, (b) have been duly authorized by all requisite
corporate action, (c) do not and will not violate any provision of law, any
order of any court or other agency of government, or the corporate charter or
by-laws of the Company, and (d) do not and will not violate any indenture,
agreement or other instrument to which it is a party, or by which it is
bound, or be in conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under, or result in the creation
or imposition of any lien, charge or encumbrance of any nature whatsoever
upon any of the property or assets of the Company pursuant to, any such
indenture, agreement or instrument. Except for required consents which have
been obtained, the Company is not required to obtain any consent, approval or
authorization from, or to file any declaration or statement with, any
governmental instrumentality or other agency in connection with or as a
condition to the execution, delivery or performance of the Closing Documents.
6.3 NO OTHER TRANSACTIONS. Except in connection with the raising of
capital in order to consummate the transactions contemplated by the Merger
Agreement and to effect the stock purchase contemplated hereunder, neither
the Company nor, to its knowledge, any of its stockholders are currently
contemplating, and neither the Company nor, to its knowledge, any of its
stockholders have engaged in any discussions concerning, any transaction
involving an initial public offering of shares of the Company's capital
stock, the sale of outstanding shares of capital stock of the Company to
third parties or the sale of all or substantially all of the assets of the
Company.
6.4 SOLVENCY. Prior to, upon and immediately after the consummation of
the transactions contemplated hereby, the Company was, is, and will be
solvent and will have tangible and intangible assets having a fair value in
excess of the amount required to pay its probable liabilities on its existing
debts as they become absolute and matured, including for this
9
<PAGE>
purpose reasonable estimates of known unliquidated and disputed claims, and
has access to adequate capital for the conduct of its business and the
ability to pay its debts from time to time incurred in connection therewith
as such debts mature.
6.5 LITIGATION. There is no threatened or pending suit, claim, action
or proceeding against the Company or any of its subsidiaries which
individually or in the aggregate is reasonably likely to have a material
adverse effect upon the business, assets or condition, financial or
otherwise, of the Company; and there is no suit, claim, action or proceeding
now pending or threatened which seeks to prevent or delay the consummation of
the transactions contemplated by the Closing Documents.
6.6 NO BREACH. The consummation of the transactions contemplated by
the Closing Documents will not constitute or result in any default, breach or
violation of any statute, law, ordinance, decree, order, rule or regulation
of any governmental body, any provision of the Company's Articles of
Incorporation or By-laws, any promissory note, indenture or any evidence of
indebtedness or instrument or agreement providing security therefor, or any
lease, contract, commitment or other agreement to which it is a party or by
which it is bound, which individually or in the aggregate may result in a
material adverse effect on the business, assets or condition, financial or
otherwise, of the Company.
6.7 BROKERS. The Company has not used any finder or broker in
connection with this Agreement.
6.8 ENFORCEABLILTY. The execution and delivery by the Company of the
Closing Documents to which it is a party constitute the legal, valid and
binding obligations of the Company enforceable against the Company in
accordance with their respective terms except as such enforceability may be
limited by general principles of equity or laws affecting the enforcement of
creditors' rights generally.
SECTION 7. CONDITIONS PRECEDENT TO THE PURCHASERS' OBLIGATIONS.
All obligations of the Purchasers under this Agreement are subject
to the fulfillment (or waiver in whole or in part by each of the Purchasers
in writing) on or before the Closing Date, of each of the following
conditions:
7.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Fleet contained in this Agreement shall be true and correct
in all material respects on the date hereof and on the Closing Date as though
such representations and warranties were made on and as of the Closing Date.
10
<PAGE>
7.2 COMPLIANCE WITH AGREEMENT. Fleet shall have performed and complied
in all material respects with all of its obligations contemplated by this
Agreement.
7.3 GENERAL RELEASE. The Purchasers shall have received from Fleet and
Thadeus J. Mocarski a General Release in the form of Exhibit B attached
hereto.
SECTION 8. CONDITIONS PRECEDENT TO FLEET'S OBLIGATIONS.
All obligations of Fleet under this Agreement are subject to
fulfillment (or waiver in whole or in part by Fleet in writing) on or before
the Closing Date of the following conditions:
8.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Purchasers contained in this Agreement shall be true
and correct in all material respects on the date hereof and on the Closing
Date as though such representations and warranties were made on and as of the
Closing Date.
8.2 COMPLIANCE WITH AGREEMENT. The Purchasers shall have performed and
complied in all material respects with all of their obligations under this
Agreement.
8.3 GENERAL RELEASE. Fleet shall have received from the Company and
its stockholders a General Release in the form of EXHIBIT B attached hereto.
8.4 EXPENSES. The Company shall have paid any and all of Fleet's
reasonable out-of-pocket costs and expenses (including, without limitation,
reasonable legal fees and expenses) incurred as a result of the transactions
contemplated hereby and those contemplated by the Merger Agreement.
8.5 CLOSING DATE. The Closing shall occur no later than January 31,
1998.
SECTION 9. INDEMNIFICATION.
9.1 INDEMNIFICATION BY COMPANY. The Company shall indemnify Fleet and
its directors, officers and employees (collectively "Fleet Parties") and
Thadeus J. Mocarski, respectively, against and hold each of them harmless
from any and all liabilities, claims, suits, proceedings, demands, judgments,
damages, expenses and costs (including without limitation, reasonable counsel
fees and costs and expenses incurred in the investigation, defense or
settlement of any claims covered by this indemnity, on an as-incurred basis)
which Fleet or Mr. Mocarski may suffer or incur by reason of Fleet's
ownership of the Company's capital stock prior to the date hereof or by
reason of Mr. Mocarski's service as a director of the Company prior to
11
<PAGE>
the date hereof, including, without limitation, fraudulent conveyances made
by the Company to Fleet, any material breach by the Company of any of the
covenants, representations, warranties or agreements made by the Company in
this Agreement or liabilities arising in connection with the claims
instituted against the Company and certain other persons by Stephanie M.
Hardberger. The indemnification provided to Mr. Mocarski herein is in
addition to any other indemnification the Company may provide or has agreed
to provide to the members of the Board of Directors of the Company and shall
not limit in any way any other indemnification provided by the Company.
9.2 PROCEDURE. If any claim is made by Fleet or Mr. Mocarski, or if
any suit or proceeding is instituted against the Company, Fleet or Mr. Mocarski
which, if valid or prosecuted successfully would entitle Fleet or Mr. Mocarski
to be indemnified by the Company under Section 9.1 hereof (an "Indemnifiable
Claim"), Fleet or Mr. Mocarski shall notify the Company in writing of such
Indemnifiable Claim or potential Indemnifiable Claim. The Company may, at
its own cost and expense, assume the defense of such Indemnifiable Claim or
participate with Fleet and/or Mr. Mocarski, as the case may be, either
directly or through its counsel, in the resolution, by litigation or
otherwise, of any Indemnifiable Claim. Fleet and Mr. Mocarski agree to
reasonably cooperate with the Company in determining the validity of any
Indemnifiable Claim. Fleet and Mr. Mocarski agree that it and he will not
settle any Indemnifiable Claim without the written consent of the Company,
which shall not be unreasonably withheld.
9.3 INCREMENTAL INDEMNIFICATION. The indemnification provided to
Mr. Mocarski under Section 9.1 shall be in addition to any other
indemnification provided to members of the Board of Directors of the Company.
Mr. Mocarski shall be entitled to exercise any other rights to indemnification
as a director he may have and such other rights shall not be limited in any
way by the provisions of this Section 9.
9.4 NOTICES. Notices hereunder shall be effective if personally
delivered or deposited in the United States mail, postage prepaid, registered
or certified, return receipt requested or sent via nationally recognized
overnight delivery service, and addressed:
To the Company:
Dobson Communications Corporation
1349 N. Broadway Extension
Suite 200
Oklahoma City, OK 73116
Attn: Everett R. Dobson
12
<PAGE>
With a copy to:
Dobson Communications Corporation
1349 N. Broadway Extension
Suite 200
Oklahoma City, OK 73116
Attn: Ronald L. Ripley, Esq.
Senior Corporate Counsel
To Fleet:
Fleet Equity Partners
50 Kennedy Plaza, Suite 1200
Providence, RI 02903
Attn: Thadeus J. Mocarski
With a copy to:
Neil A. Torpey, Esq.
Paul, Hastings, Janofsky & Walker, LLP
399 Park Avenue
New York, NY 10022
To the JWC Group:
J.W. Childs Associates, L.P.
One Federal Street, 21st Floor
Boston, MA 02110
Attn: Dana L. Schmaltz
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, MA 02108
Attn: Louis A. Goodman, Esq.
Any party may change the address to which notices are to be addressed by
giving the other party notice in the manner herein set forth.
13
<PAGE>
SECTION 10. MISCELLANEOUS.
10.1 ASSIGNMENT. Neither this Agreement nor any right hereunder may be
assigned by any party without the prior written consent of the other parties.
10.2 FURTHER ACTS. From and after the Closing Date, upon reasonable
request, each party hereto will perform all such further acts and assurances
and execute, acknowledge and deliver documents as may be reasonably
appropriate to carry out the transactions contemplated hereby.
10.3 ENTIRE AGREEMENT; CONSTRUCTION. This Agreement, including the
Exhibits and the Schedules delivered pursuant hereto, constitute the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior promises, understandings and agreements with reference
to the subject matter hereof. This Agreement may not be changed, terminated
or discharged without a mutual written instrument signed by the parties
hereto. This Agreement shall be construed under the laws of the State of New
York , without giving effect to principles of conflicts of laws, and shall be
binding upon and inure to the benefit of the parties hereto, their respective
heirs, legal representatives and permitted assigns.
10.4 HEADINGS. The headings of the Sections and paragraphs of this
Agreement have been inserted for the convenience of reference only and shall
not affect the interpretation of any of the provisions of this Agreement.
10.5 TERMINATION. As of the Closing Date, the Securities Purchase
Agreement by and among Fleet and the Company dated as of March 19, 1996 (as
amended as of February 26, 1997) (the "SPA"); the Shareholders Agreement
among the Company and its shareholders, dated as of February 26, 1997; the
Option Agreement; the Option Agreement among Fleet and the Company dated as
of March 19, 1996; and each other agreement between or among Fleet, the
Company or any of the Company's affiliates related to any of the foregoing
shall be terminated and extinguished and no party thereto shall have any
further liability to the other party or parties thereto. Fleet and the
Company shall not, and the Company shall cause its affiliates not to, make
any claim under any of such agreements.
10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
10.7 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
14
<PAGE>
10.8 KEY MAN POLICY. Fleet hereby acknowledges and agrees that as of
the Closing Date it shall have no further right or interest in the key man
life insurance policy required to be obtained pursuant to Section 5.10 of the
SPA. Fleet agrees to take such steps as the Company reasonably requests (at
the Company's expense) to evidence its relinquishment of any interest in such
policy.
10.9 GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York, without giving effect to principles of conflicts of
law.
10.10 CONFIDENTIALITY. (a) Each of Fleet and Thadeus J. Mocarski
("Mocarski") acknowledge that, in the course of their association with the
Company and DCC, L.P., they have received and become knowledgeable regarding
confidential and proprietary information about the Company, its subsidiaries
and DCC, L.P., including but not limited to financial information and
analyses, business models, customer data, reports, plans, market information,
studies, strategies, documents and trade secrets which are not publicly
available ("Confidential Information"). "Confidential Information" shall not
include any information (i) which is or becomes publicly available, other
than as a result of disclosure in violation of this Section 10.10, (ii) was
available to or known by Fleet or Mocarski prior to its disclosure by the
Company or any of its subsidiaries or DCC, L.P., or (iii) becomes available
to Fleet or Mocarski from a person who is not obligated to the Company or one
of its subsidiaries or DCC, L.P. to keep such information confidential.
(b) For a period of one (1) year after the date of this Agreement,
Fleet and Mocarski each agree to keep all such Confidential Information
confidential and not to disclose (in whole or in part) such Confidential
Information to any person not affiliated with the Company, without the prior
written consent of the Company, which may be withheld for any reason. In
addition to all other rights and remedies to prevent any breach or threatened
breach of this non-disclosure obligation. This non-disclosure obligation of
Fleet and Mocarski shall survive the Closing Date and shall not be released
by the General Release given to them in connection with this Agreement.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
FLEET VENTURE RESOURCES, INC.
By: /s/ Thadeus J. Mocarski
---------------------------------
Thadeus J. Mocarski
Senior Vice President
FLEET EQUITY PARTNERS VI, L.P.
By: Fleet Growth Resources II, Inc.,
A General Partner
By: /s/ Thadeus J. Mocarski
---------------------------------
Thadeus J. Mocarski
Senior Vice President
KENNEDY PLAZA PARTNERS
By: /s/ Thadeus J. Mocarski
---------------------------------
General Partner
DOBSON COMMUNICATIONS CORPORATION
By: /s/ Everett R. Dobson
---------------------------------
Name: Everett R. Dobson
Title: President
<PAGE>
DOBSON CC LIMITED PARTNERSHIP
By: RLD, Inc., its General Partner
By: /s/ Everett R. Dobson
------------------------------------------------
Name: Everett R. Dobson
Title: President
DOBSON OPERATING COMPANY
By: /s/ Everett R. Dobson
------------------------------------------------
Name: Everett R. Dobson
Title: President
J.W. CHILDS EQUITY PARTNERS II, L.P.
By: J.W. Childs Advisors II, L.P., its general partner
By: J.W. Childs Associates, L.P., its general partner
By: J.W. Childs Associates, Inc., its general partner
By: /s/ Dana L. Schmaltz
------------------------------------------------
Name: Dana L. Schmaltz
Title: Vice President
By: /s/ Dana L. Schmaltz
------------------------------------------------
Dana L. Schmaltz, as agent, and attorney-in-fact
for certain coinvestors under Purchaser
Appointment of Agent and Power of Attorney and
not in his individual capacity
FOR PURPOSES OF SECTION 10.10 ONLY
/s/ Thadeus J. Mocarski
------------------------------
Thadeus J. Mocarski
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Dobson
JWC Stockholders
STOCKHOLDER
<C> <S>
1 J.W. Childs Equity Partners II, L.P.
2 JWC Equity Funding II, Inc.
3 Bock Family Trust
4 Childs, John W.
5 Childs, Richard S.
6 Childs, James E.
7 Anderson, Samual A.
8 Healy, Timothy J.
9 Hopkins, Glenn A.
10 Horn, Jerry D.
11 MacDonald, B. Lane
12 Rudy, Raymond B.
13 Schmaltz, Dana
14 Chechesse Creek Trust
15 Segal, Steven G.
16 SGS 1995 Family Limited Partnership
17 Steven G. Segal 1995 Irrevocable Trust
18 SGS-III Family Limited Partnership
19 Suttin, Adam L.
20 Suttin Irrevocable Family Trust, Adam L.
21 Suttin Family Trust II
22 Suttin IRA, Eugene N.
23 Yun, Edward D.
24 Yun Family Trust
25 Elman, Bob
26 Kozlowski, Ed
27 Murphy, Jim
28 Rebacliff, Baker & Dobbs, LLC
29 Schmidt, Benno C.
30 Soussou, Mario
31 Watts, Bill
32 OFS Investment Partners II
</TABLE>
18
<PAGE>
19
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
<TABLE>
<CAPTION>
<S> <C>
Exhibit A Stock owned by Fleet
Exhibit B Release
</TABLE>
20
<PAGE>
EXHIBIT A
STOCK OWNED BY FLEET
<TABLE>
<CAPTION>
SHAREHOLDER SHARES TO BE REDEEMED
- ----------- ---------------------
<S> <C>
Fleet Venture Resources, Inc. Stock Certificate Nos. B-1 for 27,778
111 Westminister Street shares and B-4 for 41,668 shares of
Providence, RI 02903 Class B Convertible Preferred Stock,
convertible into an aggregate of 69,446
shares of Class A Voting Stock
Stock Certificate Nos. CP-1 for 27,778
shares and CP-4 for 41,668 shares of
Class C Non-Voting, Non-Convertible
Preferred Stock
Fleet Equity Partners VI, L.P. Stock Certificate Nos. B-2 for 11,905
111 Westminister Street shares and B-5 for 17,857 shares of
Providence, RI 02903 Class B Convertible Stock, convertible
into an aggregate of 29,762 shares of
Class A Voting Common Stock
Stock Certificate Nos. CP-2 for 11,905
shares and CP-5 for 17,857 shares of
Class C Non-Voting, Non-Convertible
Preferred Stock
Kennedy Plaza Partners Stock Certificate Nos. B-3 for 317
c/o Fleet Equity Partners shares and B-6 for 475 shares of Class B
111 Westminister Street Convertible Preferred Stock, convertible
Providence, RI 02903 into an aggregate of 792 shares of
Class A Voting Common Stock
Stock Certificate Nos. CP-3 for 317
shares and CP-6 for 475 shares of
Class C Non-Voting, Non-Convertible
Preferred Stock
</TABLE>
20
<PAGE>
EXHIBIT B
GENERAL RELEASE
This General Release is entered into this 23rd day of December,
1998, by and between Dobson Communications Corporation, a Delaware corporation
(the "Company"), the shareholders of the Company who are signatories to this
General Release (the "Company Shareholders"; and together with the Company,
the "Company Parties"); and Fleet Venture Resources, Inc., a Rhode Island
corporation ("FEP"), Fleet Equity Partners VI, L.P., a Delaware limited
partnership ("FFG"), Kennedy Plaza Partners, a Rhode Island general
partnership ("KPP"), and Thadeus J. Mocarski, an individual ("Mocarski";
and together with FVR, FEP and KPP, the "Fleet Parties").
In consideration of the sum of $1.00 paid to the Company Parties by
the Fleet Parties and for other good and valuable consideration, the receipt
of which is hereby acknowledged, and in consideration of the mutual releases
set forth herein, the undersigned parties hereby agree as follows:
1. The Company Parties, and each of them, do hereby remise, release
and forever discharge the Fleet Parties, and their respective officers,
directors, employees, shareholders, partners, managers, agents, successors
and assigns from any and all manner of actions, causes of action, debts,
dues, claims and demands, both at law and in equity (collectively, "Claims"),
that the Company Parties or any of them ever had, now have, or in the future
may have for or by reason or means of any matter or thing from the beginning
of the world to the present, and further, but without restricting the
generality of the foregoing, any and all Claims, which directly or indirectly
are the subject matter of, arise out of, or are connected in any way with the
Fleet Parties' ownership of capital stock of Company, except as set forth in
Paragraph 3 below.
2. The Fleet Parties, and each of them, do hereby remise, release and
forever discharge the Company Parties, and their respective officers,
directors, employees, shareholders, partners, managers, agents, successors
and assigns from any and all Claims, that the Fleet Parties or any of them
ever had, now have, or in the future may have for or by reason or means of
any matter or thing from the beginning of the world to the present, and
further, but without restricting the generality of the foregoing, any and all
Claims, which arose while the Fleet Parties were owners of capital stock of
the Company or while Mocarski served on the Company's board of directors,
except as set forth in Paragraph 3 below.
3. Notwithstanding anything in this General Release to the contrary,
this General
21
<PAGE>
Release will not release any of the parties hereto from (i) Claims based upon
fraud committed by such party or such party's breach of its fiduciary duty to
the other party or (ii) any of their respective representations, warranties,
covenants, agreements and obligations pursuant to that certain Stock Purchase
Agreement of even date herewith by and among the Company and the Fleet
Parties; and (iii) will not release the Company Parties from any obligation
any of them may have to indemnify Mocarski in conjunction with his service on
the Company's board of directors.
4. This General Release shall be governed by the laws of the State of
New York, without giving effect to principles of conflicts of laws, and any
dispute thereunder shall be resolved in the courts located in that state, and
the undersigned consent to the exclusive jurisdiction of those courts for
such purpose.
5. This General Release may be executed in counterparts, each of which
shall be deemed an original and all of which when taken together shall
constitute one and the same agreement.
22
<PAGE>
IN WITNESS WHEREOF, the parties have executed this General Release
as of the date first above written.
DOBSON COMMUNICATIONS CORPORATION
By: /s/ Ronald L. Ripley
------------------------------------
Name: Ronald L. Ripley
Title: Vice President
FLEET VENTURE RESOURCES, INC.
By: /s/ Thadeus J. Mocarski
-----------------------------------
Thadeus J. Mocarski
Senior Vice President
FLEET EQUITY PARTNERS VI, L.P.
By: Fleet Growth Resources II, Inc.,
A General Partner
By: /s/ Thadeus J. Mocarski
-----------------------------------
Thadeus J. Mocarski
Senior Vice President
23
<PAGE>
KENNEDY PLAZA PARTNERS
By: /s/ Thadeus J. Mocarski
--------------------------------------
General Partner
/s/ Thadeus J. Mocarski
-------------------------------------------
Thadeus J. Mocarski
DOBSON CC LIMITED PARTNERSHIP
By: RLD, Inc., its General Partner
By: /s/ Ronald L. Ripley
-------------------------------------
Name: Ronald L. Ripley
Title: Attorney in Fact for RLD, Inc.
24
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 23rd day of December, 1998,
(the "Effective Date"), by and between SYGNET COMMUNICATIONS, INC., an Ohio
corporation, (hereinafter referred to as "Seller"), and DOBSON TOWER COMPANY,
an Oklahoma Corporation, (hereinafter referred to as "Buyer").
WHEREAS, Seller has agreed to grant, bargain, sell, assign, transfer and
deliver to Buyer all the cellular towers, cellular tower sites, equipment,
fixtures, cellular tower leases, ground leases, real estate owned, personal
property, and fixtures associated therewith (herein the "Assets"), identified
and summarized in the attached Exhibit "A"; and Buyer has agreed to purchase
all the Assets in accordance with the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and in consideration
of the mutual covenants herein contained, the parties hereto agree as follows:
1. SALE OF ASSETS. Seller hereby sells, grants, bargains, assigns,
transfers and delivers to Buyer all the Assets, both tangible and intangible,
wherever located, such Assets identified and summarized in the attached
Exhibit "A", and Buyer hereby purchases such Assets for the sum of $25
Million Dollars. Seller acknowledges receipt of the purchase price.
2. ASSIGNMENT. Seller shall take all necessary actions to consummate
the terms of this Agreement, including, but not limited to, execution of a
Bill of Sale, Assignment and Assumption Agreement, execution of other
instruments as necessary, including, but not limited to, assignments of
leases and conveyance of real property, and to take such action as Buyer may
reasonably deem necessary or appropriate to enable Buyer to exercise fully
its rights hereunder.
3. CLOSING DATE. Seller and Buyer agree that the closing with respect
to this Agreement shall take place simultaneous with the closing of that
certain Agreement and Plan of Merger dated as of July 28, 1998, among Sygnet
Wireless, Inc., and Dobson/Sygnet Operating Company, f/k/a Front Nine
Operating Company (the "Sygnet Merger).
4. EFFECTIVE TIME AND DATE. The terms and provisions of this
Agreement are effective as of the Effective Date set forth above, and
immediately prior to the effective time of the Sygnet Merger.
5. REPRESENTATIONS OF SELLER. Seller represents and warrants to Buyer
that (a) Seller has full power, authority and capacity to execute this
Agreement, perform the transactions
<PAGE>
required of it to consummate the transaction, and that to the extent consents
of third parties are required in order to consummate the transactions
contemplated by this Agreement, such consents have been obtained or will to
the best of Seller's ability be obtained; (b) Seller's execution, delivery
and performance of this Agreement, and the execution and delivery of the
documents delivered and transactions effected by it at the closing violate no
contract, agreement, order, judgment or the like that is binding on Seller or
the enforcement of which is threatened by any pending or anticipated
litigation, hearing or investigation; (c) the Assets identified in the
attached Exhibit "A" will be transferred to Buyer free and clear of all
liens, encumbrances, security interests and claims of third parties, other
than those liens, encumbrances, security interests or claims of third parties
which are specifically assumed by Buyer, if any. To the extent Seller cannot
obtain any required consent of a third party within sixty (60) days of the
Closing Date, the Buyer may, in its sole election, re-convey to Seller any of
the Assets subject to a lien, encumbrance, security interest or claim of
third parties for a credit equal to the fair market value of the returned
Asset, such value to be determined by Seller and Buyer.
6. REPRESENTATIONS OF BUYER. Buyer represents and warrants to Seller
that (a) Buyer has full power, authority and capacity to execute this
Agreement and perform the transactions required of it to consummate the
transaction; (b) Buyer's execution, delivery and performance of this
Agreement, and the execution and delivery of the documents delivered and
transactions effected by it at the closing violate no contract, agreement,
order, judgment or the like that is binding on Buyer or the enforcement of
which is threatened by any pending or anticipated litigation, hearing or
investigation.
7. ACKNOWLEDGMENT WITH RESPECT TO SUBSEQUENT SALES. Seller and Buyer
acknowledge and agree that should any of the Assets be re-sold by Buyer to a
non-affiliated third party after consummation of this Agreement, any Excess
Tower Proceeds received by Seller and Buyer in connection with such resale
shall be applied in accordance with the terms and provisions of that certain
Credit Agreement dated as of December 23, 1998, by and between Dobson/Sygnet
Operating Company, as Borrower, and NationsBank, N.A., as Administrative
Agent (the "Credit Agreement"). For purposes of this paragraph, "Excess
Tower Proceeds" shall have the meaning as defined in the Credit Agreement.
The terms of this paragraph shall survive the Closing.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of each party shall survive the Closing.
9. INDEMNIFICATION. Each of Seller and Buyer agrees to
2
<PAGE>
defend, indemnify and hold harmless the other from and against any breach of
the respective party's warranties and representations set forth above.
10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument.
11. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the substantive laws of the State of Oklahoma.
12. MODIFICATION. This Agreement may be amended only by a writing
signed by all the parties hereto.
13. BINDING EFFECT. This Agreement shall inure to the benefit of, and
shall be binding on, the parties hereto and their respective successors and
assigns.
14. INVALIDITY. If any one or more of the provisions of this Agreement
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect
the remaining provisions of this Agreement, and this document shall be
construed as if such invalid, illegal, or unenforceable provision had never
been contained herein.
15. ENTIRE CONTRACT. This Agreement constitutes the entire Agreement
among the parties hereto and supersedes any and all prior and contemporaneous
negotiations, agreements, and understandings among the parties hereto
pertaining to the subject matter hereof.
16. HEADINGS AND CONSTRUCTION. The headings contained in this
Agreement are inserted for convenience only, and shall not constitute a part
hereof.
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement
as of the Effective Date first above written.
"SELLER"
SYGNET COMMUNICATIONS, INC.
/s/ G. Edward Evans
--------------------------------
By: G. Edward Evans
-----------------------------
Title: President
-----------------------------
"BUYER"
DOBSON TOWER COMPANY
/s/ G. Edward Evans
--------------------------------
By: G. Edward Evans
-----------------------------
Title: President
-----------------------------
3
<PAGE>
EXHIBIT "A"
IDENTIFICATION AND SUMMARY OF ASSETS
TRANSFERRED BY SELLER TO BUYER
<TABLE>
<CAPTION>
Number SITE NAME HUB MKT COUNTY STATE ADDRESS LAND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Calcutta (St. Clair) COLUM Columbiana OH 16067 Maple St. Calcutta, OH 43920 R
2 Columbiana (Fairfield Twp) COLUM Columbiana OH State Rt.# 344 Columbianna, OH R
3 Damascus (Butler Twp) COLUM Columbiana OH 690 Valley Rd. Damascus, OH R
4 East Liverpool COLUM Columbiana OH 1000 Pope St. East Liverpool, OH 43920 R
5 East Palestine COLUM Columbiana OH 1415 Brookdale Ave. East Palestine, OH 44413 R
6 Hanoverton (Hanover Twp) COLUM Columbiana OH 30546 Speidel Rd. Hanoverton, OH 44423 R
7 Salem (Downtown) COLUM Columbiana OH 231 South Broadway Ave. Salem, OH 44460 R
8 Fairview ERIE Erie PA 4701 Franklin Ave. Fairview, PA 16415 R
9 Girard, PA ERIE Erie PA Mill Rd. Girard, PA 16417 R
10 Harborcreek ERIE Erie PA 4463 Iroquois Ave. Erie, PA 16511 R
11 Millcreek 1 ERIE Erie PA 2212 Fillmore Ave. Erie, PA 16506 R
12 Millcreek 2 ERIE Erie PA 5709 Wattsburg, Rd. Erie, PA 16509 R
13 Northeast ERIE Erie PA 8168 Dougan Rd. North East, PA 16428 R
14 Union City FH ERIE Erie PA RD #1 Old Wattsburg Rd. Union City, PA 16438 R
15 Waterford ERIE Erie PA 11730 Route 19 Waterford, PA 16509 R
16 West Springfield ERIE Erie PA 13825 Ridge Road and Rt.#20 W.Springfield, PA 16443 R
17 Addison NY3 Steuben NY Box 290 RD #3 Derby Hill Rd. Addison, NY R
18 Alexander NY3 Genesee NY 3242 Stannard Rd. Alexander, NY 14005 R
19 Arkwright NY3 Chautauqua NY RD #1 9565 Center Rd. Fredonia, NY 14063 R
20 Bath 2 NY3 Steuben NY Rumsey Rd. Bath, NY, Steuben County R
21 Bolivar NY3 Allegany NY Route 5A Salt Rising Rd. Bolivar, NY R
22 Caneadea (Houghton) NY3 Allegany NY Dutch Hill Rd. Caneadea, NY R
23 Carrolton FH NY3 Cattaraugus NY Allegany, NY R
24 Dunkirk (Perm) NY3 Chautauqua NY 1089 Central Ave. Dunkirk, NY R
25 Ellicottville 2 NY3 Cattaraugus NY 6152 Sugartown Rd., Ellicottville, NY R
26 Findley (French Creek) NY3 Chautauqua NY Gilmore Rd. Clymer, NY R
27 Hornell NY3 Steuben NY Bald Hill Rd. Hornellsville, NY 13843 R
28 Jasper NY3 Steuben NY 2499 Timmeran Rd. Greenwood, NY 14839 R
29 Keuka Lake #2 NY3 Steuben NY 9540 Grove Spring Rd. Hammondsport, NY 14840 R
30 LeRoy NY3 Genesee NY 8132 W. Bergen Rd. Leroy, NY 14482 R
31 Little Valley NY3 Cattaraugus NY Forth St.Little Valley, NY R
32 Olean 2 NY3 Cattaraugus NY Buffalo St. Ext., Olean, NY 14760 R
33 Pembroke NY3 Genesee NY 2064 Indian Falls Rd. Corfu, NY R
34 Poland, NY FH NY3 Chautauqua NY RD #1 Mee Rd. Poland, NY R
35 Portville NY3 Cattaraugus NY W. River Rd. Portville, NY R
36 Silver Creek NY3 Chautauqua NY 12592 Beebe Rd. Irving, NY R
37 Steamburg NY3 Cattaraugus NY Oldro Hill Rd., Coolspring, NY R
38 Warsaw NY3 Wyoming NY 3130 Merchant Rd. Warsaw, NY R
39 Westfield NY3 Chautauqua NY Douglas Rd. Westfield, NY R
40 Blooming Valley PA1 Crawford PA 28361 Highway 77, Cambridge Springs, PA 16403 R
41 Carlton PA1 Venango PA County Line Road Carlton, PA R
42 Dicksonburg PA1 Crawford PA Agnew Rd. Crawford County, PA R
43 Oil City 2 (Permanent) FH PA1 Venango PA 840 Orange Rd. Ext. Oil City, PA Cranberry Twp. R
44 Pittsfield PA1 Warren PA Abraham Hollow Pittsfield Twp. PA R
45 Pymatuning PA1 Crawford PA TW Route 307 Snake Rd.,Jamestown, PA 16134 R
46 Sheffield Twp. PA1 Warren PA Bull Hill Sheffield, PA R
47 Tidioute PA1 Warren PA Cambell Hill Rd., Tidioute, PA R
48 Warren, PA FH PA1 Trumbull PA East Fifth Ave. Ext. Warren, PA R
49 St. Mary's PA2 Elk PA Burkes True Value Route #255 St. Marys, PA R
50 Butler 3 PA6 Butler PA Heinz Rd. Butler, PA R
51 Cranberry 2 PA6 Butler PA 60 Progress Ave. Cranberry, PA 16066 R
52 East Brady PA6 Clarion PA Ferry St., East Brady (Bourgh), PA R
53 Elderton FH PA6 Armstrong PA West Saltwork Rd. Elderton, PA R
54 Ellwood City PA6 Lawrence PA Ellwood City, PA R
55 Emlenton H PA6 Clarion PA Hays Rd. Richland Twp. R
56 Freeport FH PA6 Armstrong PA 150 Striker Rd. Freeport, PA 16229 R
57 Muddy Creek PA6 Butler PA 2627 William Flynn Hwy. Slippery Rock, PA 16057 R
58 New Bethlehem PA6 Clarion PA 1/4 mile N. of the end of Conrail Rd. New Bethlehem, PA 16242 R
59 Prospect (Perm) PA6 Butler PA Monroe St. Prospect, PA R
60 Pulaski PA6 Lawrence PA Cotton School Rd. Volant, PA 16156 R
61 Slippery Rock PA6 Butler PA 284 Miller Rd. Slippery Rock, PA 16047 R
62 South Lawrence (L Beaver) PA6 Lawrence PA RD #1 Cosgrove Rd. New Galilee, PA 16141 R
63 Worth PA6 Lawrence PA 1810 Perry Hwy, Portersville, PA 16051 R
64 Worthington H PA6 Armstrong PA Rt. 422 East, approx. 3 miles west of Worthington, PA R
65 Brockway PA7 Jefferson PA Cemetery Hill Rd.(SR #1025) Brockway, PA R
66 Brookville PA7 Jefferson PA RR #4 W322 Brookville, PA R
67 Clarksburg PA7 Indiana PA RD#1 Box 625 Clarksburg, PA R
68 Curwensville (Lumber City) PA7 Clearfield PA Ann St. Ext. Curwensville, PA 16833 R
69 Dubois PA7 Clearfield PA RD #3 Box 254 Juniata St. Ext. DuBois, PA 15801 R
70 Indiana East H PA7 Indiana PA Black Hawk Rd. Chestnut Ridge Penn Run, PA R
71 Marion Center PA7 Indiana PA Keslar Rd.Twp Rt. 557,E. Mahoning Twp. Indianna County, PA R
72 Morrisdale PA7 Clearfield PA Oak Grove Rd. Morrisdale, PA 16821 R
73 Charleston MERCER Mercer PA W. Big Bend Rd. Mercer, PA 16137 R
74 Greenfield MERCER Mercer PA 25 Jellison Lane Mercer, PA 16137 R
75 Greenville H MERCER Mercer PA 107 Mc Cracken Rd. Greenville, PA 16125 R
76 Grove City MERCER Mercer PA 522 East Main St. Grove City, PA 16127 R
77 Hermitage 2 MERCER Mercer PA N. Buhl Farm Dr. R
78 New Vernon MERCER Mercer PA 513 Boyd-Steckler Rd. New Vernon, PA R
79 W.Middlesex (Shenango Twp) MERCER Mercer PA 100 Farkas Rd. West Middlesex, PA R
80 Alliance (Smith Twp) YGTN Mahoning OH Mahoning Ave. Alliance, OH R
81 Austintown 1 H YGTN Mahoning OH 5549 Dunlap Rd. Austintown, OH 44515 O
82 Austintown 2 YGTN Mahoning OH 1401 Raccoon Rd. Austintown, OH 44515 R
83 Berlin Center YGTN Mahoning OH 6370 Duck Creek Rd. Berlin Center, OH 44401 R
84 Boardman 1 YGTN Mahoning OH 1393 Boardman Canfield Rd. Boardman, OH 44512 R
85 Boardman 2 (McClurg) YGTN Mahoning OH 388 Mc Clurg Rd. Boardman, OH 44512 R
86 Boardman 3 YGTN Mahoning OH 7330 Market St. Boardman, OH 44512 R
87 Boardman 4 YGTN Mahoning OH 1209 Boardman Canfield Rd. Boardman, OH 44512 R
88 Bristol YGTN Trumbull OH 2560 Hyde Oakfield Rd. Bristolville, OH 44402 R
89 Brookfield YGTN Trumbull OH 6873 Warren Sharon Rd. Brookfield, OH 44403 R
90 Canfield 1 YGTN Mahoning OH 519 North Broad St. Canfield, OH 44406 R
91 Canfield 2 YGTN Mahoning OH 6155 State Route 446 Canfield, OH 44406 R
92 Coitsville YGTN Mahoning OH 65 Coitsville-Hubbard Rd. Youngstown, OH R
93 Cortland (Fowler Twp.) YGTN Trumbull OH 3263 Everett Hull Rd. Cortland, OH 44410 R
94 Girard, OH YGTN Trumbull OH 1 Petro Plaza Girard, OH 44420 R
95 Gustavus YGTN Trumbull OH 8088 State Route 193 Farmdale, OH 44417 R
96 Hartford YGTN Trumbull OH 2944 State Rt. 7 Youngstown-Conneaut Rd. Fowler, OH 44418 R
97 Howland YGTN Trumbull OH 9139 East Market St. Warren, OH R
98 Liberty Twp. YGTN Trumbull OH Goodwill Industries, 2747 Belmont Ave. Youngstown, OH 44505 R
99 Lordstown YGTN Trumbull OH 3293 Bailey Rd. Lordstown, OH R
100 McKinley (Niles) YGTN Trumbull OH 937 Youngstown-Warren Rd. Niles, OH 44446 R
101 New Springfield(Springfield Twp) YGTN Mahoning OH 3475 East South Range Rd. New Springfield, OH 44443 R
102 Newton Falls FH YGTN Trumbull OH 3384 Newton Falls-Bailey Rd. Warren, OH 44481 R
103 North Jackson (Jackson Twp.) YGTN Mahoning OH 1621 Duckcreek Rd. North Jackson, OH 44451 R
104 North Lima (A) YGTN Mahoning OH 10400 1/2 South Ave. Ext. North Lima, OH 44514 R
105 Vienna YGTN Trumbull OH 4308 Seminole Dr. Vienna, OH R
108 Warren 4 YGTN Trumbull OH 4664 Parkman Rd. Warren, OH R
Totals
Annual Totals
<CAPTION>
IN LEASE MO. REPLACE.
Number LESSOR SERVICE EXP. INCOME FEE COST
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1 Alfred C. Gloeckner 2/1/92 1/31/02 171 90,000
2 Novak Ohio Auto Sales & Salvage 8/30/96 8/30/21 300 90,000
3 Larry Shreve 7/26/95 7/25/20 200 65,000
4 City of East Liverpool 6/1/97 5/31/22 417 90,000
5 Catherine J. Grimm 2/1/96 1/31/21 275 90,000
6 Morrell Foor 11/15/96 11/15/21 425 65,000
7 City of Salem 6/20/95 6/19/45 160 77,000
8 Fairview Borough 9/1/94 8/31/99 259 500 90,000
9 Richard or Mary Margaret Gloskey 11/1/89 11/1/99 550 345 65,000
10 Gregory L. Savoia 4/9/97 4/8/22 400 90,000
11 William E. Walker 3/1/96 2/28/01 500 77,000
12 C & M Realty 6/6/96 6/30/21 450 90,000
13 Wesley H. & Teresa McGarvey 11/1/91 10/31/01 406 65,000
14 Lyle L. Bisbee 3/16/93 3/15/03 360 65,000
15 Peter A. Damiano 8/1/95 7/31/00 500 65,000
16 Edward Gehr dba/EJ's Motel 3/21/97 3/20/22 375 90,000
17 Daniel J. & Saloma S. Byler 12/1/94 12/1/99 250 65,000
18 Rosemary Bartz 7/1/91 7/30/01 288 90,000
19 Albert H. & Betty Ann Gaus 7/26/91 7/25/01 288 90,000
20 Robert D. Fullmer 6/15/98 6/14/23 400 90,000
21 Richard G. Smith 2/15/97 2/14/22 400 65,000
22 Earl C. & Dorothy E. Findlay 4/1/97 3/31/22 400 90,000
23 Robert Donald Benson, Jr. 4/1/98 3/31/23 150 90,000
24 Chautauqua County AG and Fair Association, Inc. 3/1/97 2/28/22 400 90,000
25 Calvin F. Mercer 12/1/96 11/30/21 400 90,000
26 Peak-n-Peak Recreation, Inc. 9/1/96 8/31/01 882 90,000
27 John D & Nancy L. Nisbet 6/15/94 6/30/99 325 90,000
28 Alfred N. & Belva M. Chace, Sr. 6/1/97 5/31/22 350 65,000
29 John & Patricia Mann, Sr. 12/8/94 12/7/99 250 90,000
30 Robert & Elizabeth Gath 6/1/92 6/1/02 287 90,000
31 Mario Fabbro & Gloria A. Fabbro 6/15/97 6/14/22 1,076 400 65,000
32 James G. & Barbara P. Maynard 1/1/98 12/31/22 400 65,000
33 Loren & Lois Falker 2/1/97 1/31/22 400 90,000
34 Mee Brothers Farms 9/1/91 8/31/01 259 90,000
35 Charles J. and Betty J. Safe 5/15/97 5/14/22 400 90,000
36 Laura L. Robinson 12/1/96 11/30/21 360 400 65,000
37 Walter E. Hornburg, Jr. 4/1/98 3/31/23 400 65,000
38 William E. Clark 3/6/96 3/6/01 351 65,000
39 Albert Riedesel C/O Phil Riedesel 10/1/91 9/31/01 259 65,000
40 Leigh E. Bowes & Janet R. Bowes 8/1/97 7/31/22 300 90,000
41 Lestor J. & Nancy A. Wright 3/17/95 3/17/00 350 65,000
42 Anna H. Henning C/O Joseph Hruska 9/1/94 9/30/99 200 65,000
43 Michael E. & Joyce B. Morgan 10/8/96 10/7/21 275 65,000
44 Harold W. Cornish 3/1/96 2/28/01 250 65,000
45 John M. & Sherry Kay Krygowski 5/1/98 4/30/23 300 90,000
46 JJRG 4/16/97 4/15/22 267 65,000
47 Jack D. Moore & Janet A. Moore 7/1/97 6/30/22 275 90,000
48 David E.& Sara K. Hunter 7/22/93 7/21/03 480 65,000
49 Burke Brothers, Inc. 5/15/97 5/14/22 350 90,000
50 Paul Schneider 2/2/98 2/2/18 500 90,000
51 GPX, Inc. 3/1/97 2/28/22 300 90,000
52 Michael & Frances Dobrancin 9/1/97 8/31/02 500 65,000
53 Anthony J & Lillian Canale 6/1/95 6/1/00 500 65,000
54 James L. Gardner, Sr. 9/29/97 9/29/27 1,000 90,000
55 Wayne E. & Kathleen J. Dittman, Sr. 12/15/93 12/31/98 300 65,000
56 Shirley Westendorf Cassel 7/18/91 7/31/01 345 65,000
57 Joseph M. & Joan M. Timko 10/24/97 10/24/22 425 90,000
58 Norma S. Reichard 2/1/97 1/31/07 350 65,000
59 Prospect Borough 12/1/97 11/30/02 667 90,000
60 Laird M. & Joyce M. Whiting 8/1/95 7/31/00 500 65,000
61 Howard C & Janet L. Taylor 4/1/94 4/30/99 300 65,000
62 Paul M. Dodds 4/1/93 4/30/03 360 65,000
63 Richard V. Fisher and Louise Fisher 3/1/98 2/28/23 350 90,000
64 Michael W. & Marjorie G. Johns 2/1/96 1/31/01 400 65,000
65 Deborah Fye 4/1/97 3/31/22 726 350 90,000
66 Betty L. Wright 5/23/93 5/23/03 282 65,000
67 David N., Michael T., Thomas J., Nicholas J., & James R. Okopal 10/23/97 10/23/22 500 90,000
68 Michael Husak, Donald Husak, & William Husak 4/23/97 4/23/22 425 65,000
69 Eleanor L. Fairman 1/25/96 1/31/01 400 90,000
70 Kenneth Mentch 11/3/90 11/30/00 345 65,000
71 Andy & Lillian Lazeration 5/1/97 4/30/07 500 65,000
72 Morris Township 12/1/95 12/31/00 300 65,000
73 Leona Locke 5/11/87 5/31/12 75 65,000
74 Timothy & Joan Jellison 3/1/97 2/28/22 350 90,000
75 John David Wible 8/1/87 7/31/12 174 100 90,000
76 John F. Collar 4/6/94 4/5/19 125 77,000
77 D & M Development 12/15/97 12/14/22 833 90,000
78 James & Renee Bates 7/1/97 6/30/00 150 65,000
79 Edward Farkas 10/1/96 9/30/21 300 90,000
80 Janice Harvis 10/1/96 9/30/21 500 518 90,000
81 Land Purchased Own Land Own Land 560 - 65,000
82 John Kozak 12/21/94 12/20/19 275 77,000
83 James R. Brown 5/1/85 4/30/00 150 65,000
84 Anthony Pannozzo (included in office lease article 24) 11/1/93 11/1/01 500 77,000
85 A & B Warehouse (Amendment to Lease) 1/16/98 2/28/01 199 500 77,000
86 Achilles Partnership 3/1/96 2/29/16 - 77,000
87 ASI Partnership 4/1/97 3/31/02 400 90,000
88 James W. & Gerladine I. Payne 6/1/90 6/1/15 180 150 65,000
89 James & Darlene Ghizzoni 8/1/95 7/31/20 250 77,000
90 City of Canfield 6/15/93 6/14/18 169 77,000
91 Russell A. Morrison & James S. Paris 10/1/96 9/30/21 415 90,000
92 John Zidian 12/1/96 11/30/21 350 90,000
93 Cortland Masonic Lodge #592 F&AM 9/1/96 8/31/21 250 90,000
94 Petro Stopping Centers, L.P. 10/1/96 9/30/21 450 77,000
95 F.H. & R.L. Miller 4/1/90 3/31/15 229 176 65,000
96 Leon C. & Veda C. Kepner 6/1/86 5/31/01 396 250 65,000
97 Michael & Alan Lahey 2/1/95 1/31/00 1,280 425 77,000
98 Youngstown Area Goodwill Industries, Inc. 7/1/93 6/30/18 169 77,000
99 Imperial Trailer Park, Inc. 9/15/97 9/30/12 199 525 90,000
100 Ohio Motorists Association 1/28/91 12/31/15 180 431 65,000
101 City of Springfield 12/15/94 12/14/44 158 77,000
102 William A. & Joy Noelle Sloan 5/9/90 5/9/15 606 50 65,000
103 William Matsouris 4/5/95 4/4/20 167 65,000
104 Poling & Bacon 9/1/88 8/31/13 50 90,000
105 Orval Bragg and Vicki L. Bragg 5/1/97 4/30/22 375 90,000
108 Russell Howard 8/12/96 8/12/16 300 90,000
Totals 7,474 36,454 8,246,000
Annual 89,688 437,448
<CAPTION>
ADDITIONAL
Number RENTERS NOTES SITE NAME Mkt. CELL NAD83 LAT NAD83 LON
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 1-2 additional renters 40DEG.40' 05.2" 80DEG.35' 23.3
2 2-4 additional renters 40DEG.53' 09.0" 80DEG.42' 23.3"
3 1-2 additional renters 40DEG.53' 28.0" 80DEG.57' 03.0"
4 2-4 additional renters E. Liver. Colum, OH 59 40DEG.37' 37.2" 80DEG.34' 11.3"
5 1-2 additional renters E. Palest. Colum, OH 56 40DEG.51' 06.9" 80DEG.33' 37.9"
6 2-4 additional renters Hanover. Colum, OH 58 40DEG.46' 43.4" 80DEG.55' 29.8"
7 1-2 additional renters Salem DT Colum, OH 53 40DEG.53' 58.0" 80DEG.51' 20.0"
8 2-4 additional renters Fairview Erie, PA 77 42DEG.01' 27.2" 80DEG.15' 21.2"
9 2-4 additional renters Girard PA Erie, PA 73 41DEG.57' 41.2" 80DEG.19' 14.2"
10 2-4 additional renters Harbor Crk Erie, PA 86 42DEG.09' 05.2" 80DEG.00' 16.2"
11 2-4 additional renters 42DEG.05' 33.0" 80DEG.08 15.0"
12 1-2 additional renters Millcrk 2 Erie, PA 82 42DEG.05' 51.7" 80DEG.00' 35.2"
13 2-4 additional renters 42DEG.09' 20.2" 79DEG.53' 07.2"
14 2-4 additional renters Union City Erie, PA 76 41DEG.55' 25.0" 79DEG.49' 37.0"
15 2-4 additional renters Waterfrd Erie, PA 79 41DEG.57' 37.2" 80DEG.00' 10.2"
16 2-4 additional renters 41DEG.56' 37.4" 80DEG.28' 27.6"
17 2-4+ additional renters Addison NY-3 318 42DEG.05' 54.4" 77DEG.17' 39.2"
18 2-4 additional renters Alexander NY-3 301 42DEG.55' 09.2" 78DEG.16' 02.1"
19 2-4 additional renters Arkwright NY-3 302 42DEG.24' 56.2" 79DEG.14' 18.2"
20 2-4 additional renters Bath 2 NY-3 42DEG.21' 24" 77DEG.19' 16"
21 sygnet only Bolivar NY-3 338 42DEG.04' 18.2" 78DEG.11' 11.0"
22 2-4 additional renters 42DEG.25' 22.2" 78DEG.06' 26.0"
23 2-4 additional renters Carrollton NY-3 350 42DEG.04' 22.2" 78DEG.33' 43.1
24 2-4 additional renters Dunkirk NY-3 334 42DEG.27' 44.2" 79DEG.20' 20.2"
25 2-4 additional renters 42DEG.16' 34.2" 78DEG.39' 31.1"
26 2-4 additional renters 42DEG.03' 19.8" 79DEG.44' 48.9"
27 2-4 additional renters Hornell NY-3 315 42DEG.21' 02.2" 77DEG.41' 25.0"
28 2-4 additional renters Jasper NY-3 347 42DEG.06' 45.3" 77DEG.34' 13"
29 sygnet only Keuka Lake NY-3 320 42DEG.27' 44.3" 77DEG.09' 05.3"
30 2-4 additional renters Le Roy NY-3 306 43DEG.01' 07.2" 78DEG.00' 35.0"
31 2-4 additional renters Little Val. NY-3 348 42DEG.13' 58.2" 78DEG.47' 46.1"
32 2-4 additional renters 42DEG.05' 55.23" 78DEG.27' 43.07"
33 2-4 additional renters Pembroke NY-3 337 43DEG.00 53.2" 78DEG.20' 30.1"
34 2-4 additional renters Poland NY NY-3 305 42DEG.09' 00.2" 79DEG.09' 29.2"
35 2-4 additional renters Portville NY-3 346 42DEG.02' 02.2" 78DEG.20' 57.1"
36 2-4 additional renters Silver Crk NY-3 336 42DEG.33' 15.3" 79DEG.06' 49.8"
37 2-4 additional renters Steamburg NY-3 352 42DEG.05' 52.2" 78DEG.55' 44.1"
38 2-4 additional renters Warsaw NY-3 329 42DEG.43' 57.8" 78DEG.06' 38.4"
39 2-4 additional renters Westfld NY-3 303 42DEG.16' 24.2" 79DEG.37' 23.2"
40 2-4 additional renters Blooming Val PA-1 165 41DEG.42' 30.2" 79DEG.58' 39.2"
41 1-2 additional renters Carlton PA-1 116 41DEG.29' 26.3 79DEG.59' 47.1"
42 1-2 additional renters Dicksonburg PA-1 113 41DEG.41' 10.2" 80DEG.21' 27.2"
43 2-4 additional renters 41DEG.24' 40.7" 79DEG.42' 55.3"
44 2-4 additional renters Pittsfield PA-1 323 41DEG.52' 19.5" 79DEG.23' 15.5"
45 2-4 additional renters Pymatuning PA-1 171 41DEG.29' 56.8" 80DEG.25' 43.4"
46 sygnet only Sheffield PA-1 151 41DEG.41' 58.2" 79DEG.02' 32.1"
47 sygnet only Tidioute PA-1 163 41DEG.41' 10.2" 79DEG.25' 08.2"
48 2-4 additional renters Warren PA-1 330 41DEG.51' 44.2" 79DEG.07' 50.2"
49 2-4 additional renters St. Mary's PA-2 152 41DEG.23' 37.2" 78DEG.33' 12.1"
50 2-4 additional renters But. 3 PA-6 170 40DEG.53' 21.0" 79DEG.58' 01.0"
51 sygnet only Cranbry 2 PA-6 158 40DEG.42' 31.2" 80DEG.06' 39.3"
52 sygnet only E. Brady PA-6 150 40DEG.59' 08.2" 79DEG.36' 08.2"
53 2-4 additional renters Elderton PA-6 135 40DEG.42' 02.2" 79DEG.22' 19.1"
54 2-4 additional renters Ellwood Cty PA-6 154 40DEG.52' 26.4" 80DEG.15' 27.3"
55 2-4 additional renters Emlenton PA-6 123 41DEG.10' 34" 79DEG.38' 23"
56 2-4 additional renters 40DEG.42' 48.2" 79DEG.40' 31.2"
57 2-4 additional renters Muddy Crk PA-6 164 40DEG.59' 19.2" 79DEG.58' 41.2"
58 2-4 additional renters New Bethlehe PA-6 125 41DEG.00' 51.6" 79DEG.20' 13.4"
59 2-4 additional renters Prospect PA-6 127 40DEG.54' 30.7" 80DEG.02' 29.7"
60 2-4 additional renters Pulaski PA-6 115 41DEG.05' 44.2" 80DEG.23' 06.2"
61 2-4 additional renters Slippery Roc PA-6 118 41DEG.03' 59" 80DEG.05' 46"
62 2-4 additional renters 40DEG.52' 34.6" 80DEG.22' 40.4"
63 2-4 additional renters Worth PA-6 172 40DEG.58' 09" 80DEG.09' 53"
64 2-4 additional renters Worthington PA-6 145 40DEG.50' 52.2" 79DEG.41' 14.2"
65 2-4 additional renters Brockway PA-7 130 41DEG.15' 26.2" 78DEG.47' 09.1"
66 2-4 additional renters Brookville PA-7 143 41DEG.10' 23.2" 79DEG.06' 52.1"
67 2-4 additional renters Clarksburg PA-7 160 40DEG.31' 26.6" 79DEG.23' 23.3"
68 2-4 additional renters Curwensville PA-7 148 40DEG.58' 17.2" 78DEG.31' 52.1"
69 2-4 additional renters Dubois PA-7 137 41DEG.08' 23.0" 78DEG.46' 05.0"
70 2-4 additional renters 40DEG.35' 59.2" 79DEG.03' 14.1"
71 sygnet only Marion Cente PA-7 149 40DEG.45' 21.2" 79DEG.03' 08.1"
72 2-4 additional renters Morrisdale PA-7 144 40DEG.57' 01" 78DEG.12' 31"
73 1-2 additional renters Charlstn Sharon, PA 102 41DEG.13' 41.2" 80DEG.20' 40.2"
74 2-4 additional renters Greenfld Sharon, PA 109 41DEG.11' 23.3" 80DEG.21' 02.0"
75 2-4 additional renters Greenville Sharon, PA 101 41DEG.22' 46.2" 80DEG.24' 39.2"
76 1-2 additional renters 41DEG.09' 03.2" 80DEG.04' 25.2"
77 2-4 additional renters Hermit. 2 Sharon, PA 173 41DEG.14' 11.2" 80DEG.28' 08.3"
78 sygnet only New Vern. Sharon, PA 104 41DEG.23' 07.2" 80DEG.07' 38.2"
79 2-4 additional renters 41DEG.09' 21.1" 80DEG.27' 36.0"
80 2-4 additional renters 40DEG.54' 10.2" 81DEG.05' 09.3"
81 2-4+ additional renters 3 acres @10k acre =$30k Aust. 1 Ygn, OH 4 41DEG.06' 42.2" 80DEG.46' 13.3"
82 1-2 additional renters Aust. 2 Ygn, OH 17 41DEG.05' 12.0" 80DEG.43' 54.0"
83 2-4+ additional renters Berlin Ygn, OH 3 41DEG.01' 32.2" 80DEG.54' 31.3"
84 1-2 additional renters Land lease included in combined lease Board. 1 Ygn, OH 15 41DEG.01' 27.2" 80DEG.42' 19.3"
85 Land lease included in combined lease Board. 2 Ygn, OH 6 40DEG.59' 45.0" 80DEG.38' 52.0"
86 1-2 additional renters Board. 3 Ygn, OH 24 41DEG.01' 24.9" 80DEG.39' 48.8"
87 2-4 additional renters Board. 4 Ygn, OH 28 41DEG.01' 19.2" 80DEG.37' 55.6"
88 2-4 additional renters Bristol Ygn, OH 9 41DEG.24' 35.2" 80DEG.53' 36.3"
89 2-4 additional renters Brookfld Ygn, OH 23 41DEG.14' 04.3" 80DEG.34' 15.7"
90 1-2 additional renters Canfld 1 Ygn, OH 14 41DEG.02' 24.2" 80DEG.45' 30.3"
91 2-4 additional renters Canfld 2 Ygn, OH 32 41DEG.00' 53.8" 80DEG.46' 04.2"
92 2-4 additional renters Coitsvil. Ygn, OH 31 41DEG.05' 32.3" 80DEG.33' 57.9"
93 2-4 additional renters 41DEG.20' 09.7" 80DEG.42' 05.3"
94 1-2 additional renters Girard OH Ygn, OH 25 41DEG.08' 30.9" 80DEG.42' 59.9"
95 2-4 additional renters Gustav. Ygn, OH 10 41DEG.26' 29.2" 80DEG.39' 52.3"
96 1 new renter Hartfrd Ygn, OH NA 41DEG.18' 05.2" 80DEG.33' 51.3"
97 1-2 additional renters Howlnd Ygn, OH 21 41DEG.14' 18.4" 80DEG.43' 30.4"
98 1-2 additional renters Liberty Ygn, OH 16 41DEG.08' 05.2" 80DEG.39' 45.3"
99 2-4 additional renters Lordstn Ygn, OH 33 41DEG.08' 44.2" 80DEG.53' 08.5"
100 2-4 additional renters McKin. Ygn, OH 11 41DEG.11' 56.2" 80DEG.43' 45.3"
101 1-2 additional renters 40DEG.56' 35.2" 80DEG.35' 10.3"
102 2-4 additional renters Newton Falls Ygn, OH 7 41DEG.11' 17.2" 80DEG.55' 17.3"
103 2-4 additional renters 41DEG.06' 51.2" 80DEG.53' 57.3"
104 2-4 additional renters 40DEG.58' 01.2" 80DEG.38' 08.3"
105 2-4 additional renters Vienna Ygn, OH 27 41DEG.14' 03.5" 80DEG.39' 53.5"
108 2-4 additional renters 41DEG.15' 55.5" 80DEG.52' 41.3"
Totals
Annual
<CAPTION>
CPI
Number GRD TWR STR TWR PHASE 1 POWER CPI INCREASE RESPONSIBILITY EXTENDED TERM
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 1207' 185' 199' Self Support N BAT 2/1/02 3 periods/5 years each
2 1090' 180' 190' Self Support N BAT 8/30/01 2 periods/25 years each
3 1280' 160' 175' Guyed N BAT 7/26/00 4 periods/25 years
4 1218' 180' 199' Self Support N BAT 6/1/99 3 periods/5 years each
5 1227' 180' 190' Self Support N BAT 2/1/01 4 periods/25 years each
6 1287' 300' 320' Guyed N GEN 11/15/01 2 periods/25 years each
7 1225' 160' 180' Monopole N BAT None None
8 800' 180' 190' Self Support N BAT 9/1/99 5 periods/5 years each
9 890' 280' 293' Guyed N BAT 11/1/99 15% 4 periods/5 years each
10 684' 180' 199' Self Support N BAT 4/9/02 1 period/25 years each
11 724' 120' 130' Monopole N BAT 3/1/01 7 periods/5 years each
12 1121' 180' 190' Self Support N BAT 6/6/01 1 period/25 years each
13 1258' 280' 295' Guyed N BAT 11/1/01 25% 4 periods/5 years each
14 1599' 280' 295' Guyed N BAT 3/16/03 20% at renewal 4 periods/5 years each
15 1373' 277' 295' Guyed N BAT 7/31/00 15% 5 periods/5 years each
16 721' 180' 199' Self Support N BAT 3/21/02 1 period/25 years each
17 1692' 290' 299' Guyed N BAT 12/1/99 20% Landlord 5 periods/ 5 years each
18 1087' 185' 199' Self Support N GEN 7/1/01 2 periods/5 years each
19 1725' 185' 199' Self Support N BAT 7/26/01 2 periods/5 years each
20 1578' 180' 199' Self Support N BAT 6/14/03 1 period/24 years each
21 2231' 110' 120' Guyed N BAT 2/15/02 1 period/25 years each
22 1790' 180' 199' Self Support N BAT 4/1/03 Landlord (CPI) 1 period/24 years
23 2300' 180' 199' Self Support N BAT 4/1/03 Landlord (CPI) 1 period/24 years
24 657' 180' 199' Self Support N BAT 3/1/02 1 period/25 years each
25 2052' 180' 195' Self Support N BAT 12/1/01 1 period/25 years each
26 1828' 180' 195' Self Support N BAT 1/1/99 Landlord/yearly 3 periods/5 years each
27 1875' 185' 199' Self Support N GEN 6/30/99 5 periods/5 years each
28 2359' 300' 320' Guyed N BAT 6/1/02 1 period/25 years each
29 1030' 110' 120' Self Support N BAT 12/8/99 Landlord (20%) 5 periods/5 years each
30 870' 185' 199' Self Support N BAT 6/1/02 2 periods/5 years each
31 2178' 300' 320' Guyed N BAT 6/15/02 1 period/25 years each
32 1979' 300' 320' Guyed N BAT 1/1/03 Sygnet/Every 5 Yrs. 1 period/24 years each
33 903' 180' 199' Self Support N BAT 2/1/02 1 period/25 years each
34 1641' 185' 199' Self Support N BAT 9/1/01 2 periods/5 years each
35 1812' 180' 199' Self Support N BAT 5/14/02 1 period/25 years each
36 664' 300' 320' Guyed N BAT 12/1/01 1 period/25 years each
37 2192' 300' 320' Guyed N BAT 4/1/03 Landlord/CPI 1 period/24 years each
38 1606' 280' 299' Guyed Y BAT 3/6/99 Yearly (5%) 5 periods/5 years each
39 1458' 185' 199' Guyed N BAT 10/1/01 2 periods/5 years each
40 1601' 180' 199' Self Support N BAT 8/1/02 1 period/25 years each
41 1527' 180 * ? Guyed N GEN 3/17/00 20% 5 periods/5 years each
42 1275' 180' ? Guyed N GEN 9/1/99 5 periods/5 years each
43 1394' 300' 320' Guyed N BAT 10/8/01 1 period/25 years each
44 1765' 400' 410' Guyed Y GEN 3/1/01 5 periods/5 years each
45 1241' 180' 199' Self Support N BAT 5/1/99 Yearly/(4%) 1 period/25 years each
46 1871' 190' 199' Guyed N BAT 4/16/02 1 period/25 years each
47 1652' 190' 199' Self Support N BAT 7/1/02 2 periods/25 years each
48 1750' 270' 299' Guyed N BAT 7/21/03 20% 4 periods/5 years each
49 1911' 190' 199' Self Support N BAT 5/15/02 1 period/25 years each
50 1268' 180' 199' Self Support N BAT 2/2/03 2 periods/20 years each
51 1124' 60' 70' Self Support N BAT 3/1/02 See specifications in lease None
52 1361' ? ? Guyed N BAT 9/1/02 Increase to $720/5 yr. 5 periods/5 years each
53 1492' 180' 190 * Guyed N GEN 6/1/00 5 periods/5 years each
54 1180' 180' 199' Self Support N BAT 9/29/27 6 periods/5 years each
55 1479' 390 * 399' Guyed N GEN 12/31/98 Landlord (20%) 5 periods/5 years each
56 1365' 280' 300' Guyed N BAT 8/1/01 15% 4 periods/5 years each
57 1442' 180' 199" Self Support N BAT 10/24/02 1 period/25 years each
58 1437' 301' 320' Guyed N BAT 2/1/02 3 periods/10 years each
59 1367' 180' 199' Self Support N BAT 12/1/02 Sygnet 5 periods/5 years
60 1138' 180' 190' Guyed N GEN 8/1/00 20% 5 periods/5 years each
61 1296' 162' 172' Guyed N GEN 4/30/99 Landlord/(20%) 5 periods/5 years each
62 1270' 180' 190' Guyed N GEN 4/30/03 Landlord/20% 4 periods/5 years each
63 1273' 180' 199' Self Support N BAT 3/1/03 5 Years/20% 1 period/25 years each
64 1424' 290' 300' Guyed Y BAT 2/1/01 15% 5 periods/5 years each
65 1755' 180' 199' Self Support N BAT 4/1/02 1 period/25 years each
66 1640' 140' 156 * Guyed Y BAT 5/24/03 Landlord 3 periods/5 years each
67 1279' 180' 199' Self Support N BAT 10/23/02 1 period/25 years each
68 1318' 300' 320' Guyed N BAT 4/23/02 2 periods/25 years each
69 1636' 280' 299' Self Support Y BAT 1/25/01 5 periods/5 years each
70 1860' 288' 302 * Guyed Y BAT 12/1/00 3 periods/5 years each
71 1542' 190' 199' Guyed N BAT 5/1/02 3 periods/5 years each
72 1594' 280' 300' Guyed Y BAT 12/1/00 5 periods/5 years each
73 1300' 186.5' 199.5' Guyed N GEN 6/1/12 4 periods/25 years each
74 1282' 180' 199' Self Support N BAT 3/1/02 1 period/25 years each
75 1240' 286' 299' Self Support N BAT 8/1/12 4 periods/25 years each
76 1330' 143' 156' Monopole N BAT 4/6/99 3 periods/25 years each
77 1151' 180' 199' Self Support N BAT 12/15/02 1 period/25 years each
78 1470' 180' 193' Guyed N BAT None None
79 1148' 180' 195' Self Support Y BAT 10/1/01 2 periods/25 years each
80 1118' 180' 190' Self Support N BAT 10/1/00 3 periods/5 years each
81 1140' 190' 199' Guyed Y GEN
82 1125' 140' 148' Monopole N BAT 12/21/99 1 period/25 years each
83 1165' 287' 299' Guyed N GEN 5/1/00 2 periods/5 years each
84 1010' 120' 128 * Monopole N BAT 11/1/01 Contact Rich 2 periods/3 years each
85 1180' 140' 150' Monopole N BAT 3/1/01 2 periods/5 years each
86 1110' 120' 130' Monopole N BAT None 3 periods/20 years each
87 1047' 180' 199' Self Support N BAT 4/1/02 4 periods/5 years each
88 840' 190' 199' Guyed N BAT 6/1/00 4 periods/25 years each
89 1155' 160' 170' Monopole N BAT 8/1/00 4 periods/25 years each
90 1160' 140' 152' Monopole N BAT 6/15/03 1 period/25 years each
91 1154' 180' 190' Self Support N BAT 10/1/00 3 periods/5 years each
92 1095' 180' 195' Self Support N BAT 12/1/01 2 periods/25 years each
93 1079' 180' 190' Self Support N BAT 9/1/01 3 periods/25 years each
94 985' 120' 130' Monopole N BAT 10/1/01 3 periods/5 years each
95 1080' 260' 274 * Guyed N BAT 4/1/00 4 periods/25 years each
96 1163' 180' 188' Guyed N BAT None 3 periods/5 years each
97 1070' 140' 150' Monopole N BAT 2/1/00 5 periods/5 years each
98 1085' 140' 160' Monopole N BAT 7/1/03 1 period/25 years each
99 990' 180' 199' Self Support N BAT 9/15/99 Annually/5% None
100 1055' 190' 199' Guyed N BAT 1/1/01 2 periods/25 years each
101 1230' 140' 148 * Monopole N BAT 5/9/00 4 periods/25 years each
102 915' 287' 299' Guyed N BAT 9/1/13 4 periods/25 years each
103 1060' 160' 175' Guyed N BAT 4/5/00 4 periods/25 years each
104 1190' 160' 175' Self Support N BAT 9/1/13 4 periods/25 years each
105 1142' 180' 187' Self Support N BAT 5/1/99 5 periods/5 years each
108 908' 180' 190' Self Support N BAT 8/12/01 2 periods/20 years each
Totals
Annual
<CAPTION>
Number NOTICE TO EXTEND OPTION TO PURCHASE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1 No more than 12 months prior to expiration SEND: 12/1/2001 First right of refusal
2 No more than 12 months prior SEND: 1/1/2021 N/A
3 60 Day notice SEND: 4/1/2019 N/A
4 No more than 12 months prior SEND: 1/1/2022 N/A
5 No more than 12 months SEND: 9/1/2020 N/A
6 No more than 12 months SEND: 5/1/2021 N/A
7 None N/A
8 Automatically renewed unless notified 10 days in advance N/A
9 Automatically renewed unless notified 10 days in advance N/A
10 No more than 12 months SEND: 3/1/2022 N/A
11 No more than 12 months SEND: 10/1/2000 N/A
12 No more than 12 months SEND: 1/1/2021 N/A
13 Automatically renewed unless notified 10 days SEND: 10/1/2001 N/A
14 Automatically renewed unless notified 10 days in advance N/A
15 Automatic renewal unless termination notice is sent 90 days prior N/A
16 No more than 12 months prior to the expiration SEND: 9/1/2021 N/A
17 Automatic renewal unless notified 10 days prior SEND: 09/1/1999 N/A
18 Automatic renewal unless notified 60 days prior SEND: 6/1/2001 Right of first refusal
19 Automatic renewal unless notified 60 days prior SEND: 7/1/2001 N/A
20 No more than 12 months prior SEND: 2/1/2023
21 No more than 12 months SEND: 9/1/2021 N/A
22 No more than 12 months prior SEND: 3/1/2023 N/A
23 No more than 12 months prior SEND: 3/1/2023 N/A
24 No more than 12 months no less than 6 months prior to expiration SEND: 8/1/2021 N/A
25 No more than 12 months prior to expiration SEND: 7/1/2021 Right of first refusal
26 Automatic renewal unless notified 60 days prior SEND: 8/1/1999 N/A
27 Automatic renewal unless notified 30 days prior SEND: 6/1/1999 N/A
28 No more than 12 months SEND: 11/1/2021 N/A
29 Automatically renewed unless notified 10 days prior SEND: 11/1/1999 N/A
30 Automatic renewal unless notified 60 days prior SEND: 5/1/2002 First right of refusal
31 No more than 12 months SEND: 12/1/2021 N/A
32 No more than 12 months prior SEND: 6/1/2021 N/A
33 No more than 12 months prior to expiration SEND: 10/1/2022 First right of refusal
34 Automatic renewal unless terminated 60 days prior SEND: 8/1/2001 First right of refusal
35 No more than 12 months prior to expiration SEND: 10/1/2021 N/A
36 No more than 12 months prior to expiration SEND: 5/1/2021 N/A
37 No more than 12 months prior to expiration SEND: 3/31/2022 N/A
38 Automatic renewal unless notified 30 days prior SEND: 12/1/2000 N/A
39 Automatic renewal unless notified 60 days prior SEND: 9/15/2001 N/A
40 No more than 12 months prior SEND: 1/1/2022 N/A
41 Automatically renewed unless notified 30 days prior SEND: 2/1/2000 N/A
42 Automatic renewal unless notified 30 days prior SEND: 6/1/1999 First right of refusal
43 No more than 12 months prior to expiration SEND: 7/1/2021 N/A
44 Automatically renewed unless notified 30 days prior SEND: 11/1/2000 N/A
45 No more than 12 months prior to expiration SEND: 5/1/2022 N/A
46 No more than 12 months prior prior SEND: 1/1/2022 N/A
47 No more than 12 months prior to expiration SEND: 1/1/2022 N/A
48 Automatically renewed unless notified 30 days in advance SEND: 7/1/2003 N/A
49 No more than 12 months prior to expiration SEND: 10/1/2021 N/A
50 No more than 12 months prior to expiration SEND: 8/1/2017 N/A
51 N/A
52 No more than 12 months no less than 60 days SEND: 1/1/2002 N/A
53 Automatically renewed unless notified 30 days prior SEND: 5/1/2000 N/A
54 No more than 12 months prior to expiration SEND: 3/1/2027 N/A
55 Automatically renewed unless notified 10 days prior SEND: 12/1/98 N/A
56 Automatic renewal unless notified 10 days prior SEND: 7/1/2001 Right of first refusal
57 No more than 12 months prior to expiration: SEND 4/1/2022 N/A
58 No more than 12 months SEND: 6/1/2006 N/A
59 No more than 12 months prior to expiration SEND: 5/1/2002 N/A
60 Automatic renewal unless notified 30 days prior SEND: 7/1/2000 N/A
61 Automatically renewed unless notified 10 days prior SEND: 4/1/99 N/A
62 Automatically renewed unless notified 10 days prior SEND: 4/1/2003 N/A
63 No more than 12 months prior to the expiration SEND: 8/1/2022 N/A
64 Automatic renewal unless notified 30 days prior SEND: 12/25/2000 N/A
65 No more than 12 months prior to expiration SEND: 10/1/2022 N/A
66 Automatically renewed unless notified 30 days prior SEND: 4/15/2003 N/A
67 No more than 12 months prior SEND 4/1/2022 N/A
68 No more than 12 months prior to expiration SEND: 3/1/2022 N/A
69 Automatic renewal unless notified 30 days prior SEND: 1/1/2001 First right of refusal
70 Automatically renewed unless notified 30 days prior to expiration N/A
71 No more than 12 months SEND: 10/1/2006 N/A
72 Automatically renewed unless notified 30 days prior to expiration N/A
73 No more than 12 months/No less than 2 months SEND: 2/15/2012 First right of refusal
74 No more than 12 months SEND: 10/1/2021 N/A
75 No more than 12 months/No less than 2 months SEND: 4/15/2012 N/A
76 No more than 12 months SEND: 12/15/2018 First right of refusal
77 No more than 12 months prior to expiration SEND: 8/15/2022 N/A
78 None N/A
79 No more than 12 months prior SEND: 5/1/2021 N/A
80 No more than 12 months prior SEND: 3/1/2021 N/A
81
82 No more than 12 months SEND: 9/1/2019 N/A
83 No more than 12 months/No less than 2 months SEND: 1/15/2000 N/A
84 No more than 3 months prior to existing term SEND: 8/1/2001 N/A
85 No more than 3 months SEND: 11/25/2000 N/A
86 No more than 12 months SEND: 8/30/2015 N/A
87 No more than 12 months prior SEND: 12/1/2001 N/A
88 No more than 12 months No less than 2 months SEND: 2/15/2015 First right of refusal
89 No more than 12 months SEND: 9/1/2019 N/A
90 No more than 12 months SEND: 2/1/2018 N/A
91 No more than 12 months prior to expiration SEND: 1/1/2021 N/A
92 No more than 12 months prior SEND: 5/1/2021 N/A
93 No more than 12 months SEND: 1/1/2021 N/A
94 Automatically renewed unless notified 30 days in advance N/A
95 No more than 12 months SEND: 1/1/2015 First right of refusal
96 No time frame given SEND: 4/1/2001 N/A
97 At least 12 months prior SEND: 12/31/1998 N/A
98 No more than 12 months SEND: 1/1/2018 N/A
99 None N/A
100 No more than 12 months/No less than 6 months SEND: 4/1/2015 N/A
101 No more than 12 months SEND: 1/1/2015 First right of refusal
102 No more than 12 months/No less than 2 months SEND: 4/15/2013 First right of refusal
103 No more than 12 months SEND: 1/15/2020 N/A
104 No more than 12 months/No less than 2 months SEND: 4/15/2013 First right of refusal
105 No more than 12 months SEND: 1/1/2022 N/A
108 No more than 12 months prior SEND: 3/1/2016 N/A
Totals
Annual
</TABLE>
<PAGE>
MASTER SITE LICENSE AGREEMENT
This Master Site License Agreement ("Agreement") is entered into as of
the 23rd day of December , 1998, by and between Dobson Tower Company, an
Oklahoma corporation (referred to herein as "Licensor") and Sygnet
Communications, Inc., an Ohio corporation (referred to herein as "Tenant").
R-1. Tenant is licensed by the Federal Communications Commission
("FCC") to construct and operate communications systems throughout the United
States.
R-2. Licensor owns, leases, operates and/or manages real estate,
buildings, towers, tanks and/or other improvements ("Improvements") on real
property (each a "Property") in the United States and wishes to License
portions of a number of the Properties to Tenant for the purpose of locating
and operating communications facilities' and services thereon.
R-3. Tenant desires to license from Licensor portions of such
Properties for such purpose.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. MASTER LICENSE.
(A) This Agreement sets forth the basic terms and conditions upon which
each such Property or portion thereof is licensed by Licensor to Tenant.
Upon the parties' agreement as to the particular terms of any such license,
the parties shall execute and attach hereto a completed site license ("Site
License") for each such site, in the form attached hereto as Exhibit A, which
is incorporated herein by this reference. The terms and conditions of any
Site License shall govern and control in the event of a discrepancy or
inconsistency with the terms and conditions of this Agreement. This
Agreement shall govern Licensor's existing Properties only, and shall not
apply to raw land or new construction of towers on such Properties.
(B) Upon execution hereof, Licensor agrees to provide Tenant with such
information regarding each Property which it operates as may be necessary for
Tenant to evaluate the usefulness of such Property for its purposes as may be
readily available to Licensor. Licensor agrees to use reasonable efforts to
cause each of its subsidiaries and managers at each such Property to
cooperate fully with Tenant and its agents for the purpose of determining
suitability of the Property and installing and constructing the Tenant's
facilities, including providing Tenant and such agents with access to such
Properties and the opportunity to conduct limited testing at any such
Property, subject to reasonable limitations imposed by Licensor and/or any of
such managers.
<PAGE>
2. DESCRIPTION OF PROPERTY AND LICENSED PREMISES. Licensor either
owns or leases the Property. If Licensor leases the Property, Licensor shall
provide Tenant with a copy of its lease (the "Prime Lease"), which will be
attached to each affected Site License as Exhibit 6. Upon reasonable request
of Tenant, Licensor shall exercise its best commercially reasonable efforts
to obtain the written consent of the prime landlord to the Site License and
any renewals or extensions thereof. The part of the Property to be licensed
by Licensor to Tenant shall include ground and/or rack space and such other
space for the mounting of antennas for the operation of certain
telecommunications equipment to be located within, atop, adjacent to or on
the Property, and such space across the Property that might be required for
providing Tenant access and necessary utilities. All floor space, rack
space, ground space, tower space and associated real property licensed by
Licensor to Tenant shall collectively be referred to hereinafter as "the
Premises," as more fully described in Exhibit 2 to the Site License. A more
complete description of the equipment to be placed on the Premises by Tenant,
including all transmit and/or receive frequencies, dimensions, and more
specific positions of such equipment as it will be installed on the Premises
shall be attached to each Site License at Exhibit 1. Tenant shall prepare and
present to Licensor an accurate and complete Exhibit 1 prior to execution of
the Site License for the subject Property. If, during the term of the Site
License, Tenant requests to add or remove equipment to or from the Premises,
which additional equipment is not listed on Exhibit 1, Licensor shall use all
reasonable efforts to accommodate Tenant's request, provided that the
Property has sufficient space and capacity to support the requested
additional equipment. In the event of such an agreed upon increase or
decrease in the equipment at the Premises, Licensor and Tenant shall mutually
agree to a reasonable rental adjustment as consideration for such additional
or reduced equipment.
To the extent any rights herein are subject to any existing Prime Lease
or license granted or existing in favor of Licensor from a third party
("third party license"), the rights herein are expressly made subject to such
third party license. In the event any such Prime Lease or other third party
license terminates or expires by its terms prior to the times for termination
or expiration or the Term herein, or the two additional optional renewal
terms herein, within ninety (90) days after execution of this Master Site
License Agreement, Licensor agrees to begin exercising its best commercially
reasonable efforts to obtain such renewals or extensions thereof, and options
for renewal or extensions thereof, as Licensor is reasonably able, and on as
nearly similar terms and rental sums as are now in existence, in order for
Licensor to be able to fulfill the terms of this Agreement, for the entire
duration envisioned herein. In the event Licensor is able to negotiate such
renewals or replacements thereof, but any of the material terms will be
different (including
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<PAGE>
but not limited to rental sums), Licensor shall present same to Tenant for
its review and approval, before Licensor executes same.
Licensor shall also be responsible, at its expense, for the cost of
obtaining any approvals which may be required by any local, state or federal
authority, in conjunction with the granting of any License created herein,
its ownership of the Property and Improvements, or the operation of the
License granted herein, except insofar as same is specifically required of
Tenant by law in order for Tenant to carry out its intended use on the
Premises.
3. TERM AND TERMINATION. Each Site License shall become effective
upon installation of Tenant's equipment at the subject Property or 120 days
following the date the Site License for such Property is fully executed,
whichever is sooner ("the Commencement Date"), and shall continue in effect
for a term of five (5) years. Tenant warrants that it shall employ
reasonable efforts to obtain all required local permits for construction and
operation of its facilities installed by or owned by Tenant, and shall inform
Licensor immediately of its receipt of those permits. Tenant shall provide
Licensor with prior notice of the date upon which Tenant shall commence the
installation of Tenant's equipment. It is expressly understood that all
rights granted to Licensee for each Property hereunder are irrevocable until
the Site License for such Property expires or sooner terminates in accordance
with the terms and conditions herein set forth.
If, at any time during the Term hereof, (including any renewal or
extension of the Term herein), Tenant shall lose its F.C.C. license needed
for it to use the Premises for the intended use under the License granted
herein (as distinguished from any transfer, sale or assignment of such F.C.C.
license), this lease shall immediately terminate upon the termination of
Tenant's F.C.C. license, and at that point, no further obligation shall be
owed by either party hereto to the other under this Agreement, except as to
obligations which had already accrued prior to the time of the loss of such
Tenant F.C.C. license.
(A) Following an uncured material breach by a party, the non-breaching
party may terminate the applicable Site License, provided, however, the
non-breaching party must first provide to the breaching party all reasonable
opportunity provided hereunder to cure any such breach, including providing
to the breaching party at least thirty (30) days prior written notice of the
non-breaching party's intent to terminate the Site License. Upon termination
or expiration of a Site License, Tenant shall immediately remove its
equipment from Licensor's Premises. Tenant's failure to remove its equipment
within thirty (30) days following the expiration or termination of the Site
License shall entitle Licensor to receive from Tenant storage fees in an
amount equal to one hundred dollars ($100) per day beyond such thirty (30)
day period. Licensor hereby
3
<PAGE>
waives any and all landlord liens or similar claims to Tenant's equipment,
which equipment may be removed by Tenant at any time, provided, however, such
removal shall not create any termination of the applicable Site License or
reduction in any amount due Licensor.
(B) Any of Tenant's equipment which is deemed stored by Licensor in
accord with the terms herein shall not be entitled to receive electrical
power during such period of storage and Licensor shall have the right to
discontinue power to all stored equipment. Such equipment may also be
removed from the Premises by Licensor and stored at Licensor's main
facilities, but at all times remain the property of Tenant.
(C) In the event that the Premises are damaged or destroyed such that
Tenant is unable to operate its equipment thereon, Licensor shall make an
election within ten (10) days following such event as to whether Licensor
shall make repairs or reconstruct the damaged portion of the Premises to
enable Tenant to operate upon the Premises in substantially the same manner
as Tenant enjoyed prior to the event of destruction. Such election shall
only be effective if Licensor is willing and able to make such repair or
reconstruction within ninety (90) days following the making of the election.
If Licensor elects not to repair or reconstruct the Premises within the
aforementioned ten (10) day period; or if Licensor is unable to make such
repairs or reconstruct the Premises during that ninety (90) day period, then
Tenant shall have the option to: 1) terminate the Site License, without
further liability to either party, or 2) require Licensor to immediately pay
over, or assign its right to payment of all insurance proceeds payable to
Licensor arising from the loss or damage to the Premises, and Tenant may use
such proceeds to make such repairs or reconstruction. If Licensor elects to
repair or reconstruct the Premises within the aforementioned ninety (90) day
period, or if Tenant elects to use the insurance proceeds to repair or
restore said damage, the Site License shall continue to bind the parties,
providing, however, Licensor shall not be entitled to receive rents during
the period commencing on the date of destruction and extending to the date of
completion of the repairs or reconstruction. In the event that Tenant
terminates the applicable Site License under this Paragraph 3(C), Licensor
shall return to Tenant all prepaid rents collected by Licensor which
represents that period commencing upon the date of destruction of the
Premises and continues to the date of termination. Licensor's failure to
make an election during the ten (10) day period following damage or
destruction of the Premises shall be deemed an election by Licensor not to
repair or reconstruct the Premises. Nothing contained herein shall be deemed
an election by Licensor not to repair or reconstruct the Premises. Nothing
contained herein shall be deemed a guarantee by Licensor to repair or
reconstruct the Premises following destruction.
4
<PAGE>
4. MAINTENANCE OF EQUIPMENT. Tenant shall, at its own expense,
maintain its equipment on or attached to the Premises in a safe condition and
in good repair, and in a manner reasonably suitable to Licensor so as not to
conflict with the use of the Property by Licensor or by any other tenant
lawfully using the Property, subject to Paragraph 19 below. All repair and
maintenance of Tenant's equipment shall be performed by qualified
technicians, authorized to enter the Premises as Tenant's agents, contractors
or employees.
To the extent any of the Improvements or the Premises are required to be
repaired or maintained under any laws or regulations of the F.C.C., or the
F.A.A. (including but not limited to tower signage, painting and lighting
requirements), such maintenance and repairs shall be promptly addressed by
Licensor at its sole expense, and in accordance with any such legal
requirements.
(A) Any and all machinery, equipment and trade fixtures, except the
electrical service, installed by Tenant, shall remain Tenant's
notwithstanding the fact that it may be affixed or attached to the realty or
the Premises, and shall, during the term of the Site License or any extension
or renewal thereof, and upon termination thereof, belong to and be removable
by Tenant. Tenant agrees that the Premises and associated realty shall not
be damaged by Tenant's occupancy and that Tenant shall, upon termination of
occupancy, make any repairs necessitated by Tenant's occupancy or removal of
Tenant's equipment, less ordinary wear and tear and loss by casualty or other
causes beyond Tenant's control.
(B) All transmitters operated by Tenant upon the Premises shall include
the use of, for example, a single stage isolator or a single bandpass cavity
or such other devices which may reasonably prevent or deter the creation of
harmful electrical interference. Licensor may determine, from time to time
and as is reasonable and necessary, other similar requirements for safe,
interference free operation of Tenant's equipment upon the Premises and
Tenant shall comply with all such requests.
5. ACCESS. Licensor agrees to give Tenant free and unrestricted
ingress and egress to the Premises during the term of the Site License and
any extension or renewals thereof for the purpose of installing, maintaining,
operating, replacing, upgrading and removing Tenant's equipment. Licensor's
promise does not extend to real property which is not under Licensor's
authority or control. Licensor's promise will not be interpreted as a
guarantee of Tenant's ability to enter or exit the Premises when weather
conditions, road conditions and other elements outside of Licensor's control
might affect Tenant's ability to enter the
5
<PAGE>
Premises.
6. MAINTENANCE AND OPERATION OF PREMISES. Licensor reserves to itself
and its successors, and assigns, the right to maintain the Property and to
operate telecommunications facilities thereon in such manner as will best
enable each to fulfill its own requirements, but in accord with the covenants
contained herein, including Licensor's promise to maintain the Property in
merchantable condition. In such event, Licensor shall not act, or permit
others to act, under such reserved rights in such a manner as to cause any
interruption of or interference with Tenant's operation of Tenant's
equipment, or the rights granted under this Agreement, or Tenant's service,
including but not limited to electrical interference and interference created
by intermodulation. Under no circumstances shall Licensor be liable for
consequential damages to any party, including but not limited to third
parties, arising out of interruption of Tenant's service, except as a result
of acts or omissions by Licensor, or those acting under authorization from
Licensor.
(A) Licensor shall be solely responsible at its expense for compliance
with ally local, state and federal laws, regulations and rules, involving
painting, signage and lighting requirements arising out of owning,
maintaining, or operating of the Improvements or the Property, in accord with
the existing laws, rules and regulations adopted, or which might be adopted,
including those by the Federal Aviation Administration or the Federal
Communications Commission; and shall indemnify Tenant for all fines levied
against Tenant for Licensor's failure to comply with such laws, rules and
regulations.
(B) Tenant promises to cooperate fully in Licensor's efforts to
maintain the peaceful occupation of the structure of which the Premises are a
portion, including, without limitation, Tenant's agreement to cooperate in
maintaining the cleanliness of the Premises; in constructing its equipment in
a safe, reasonably quiet, and non-disruptive manner; in assisting in
maintaining the security of the Premises by reasonably limiting the number of
persons with access to the Premises; and in directing its employees to treat
all other tenants with civility and courtesy.
(C) In the event that Licensor deems it reasonable and necessary,
Licensor may, at Licensor's expense, require that an intermodulation study be
performed by Tenant, to determine the effect of Tenant's use of the Premises
as it might effect existing users of the Property; provided that Licensor may
only require Tenant to do such study one (1) time during the term of a Site
License. Licensor may require that Tenant present to Licensor such study as a
condition to Tenant's occupation.
(D) Licensor hereby warrants that the Premises have been
6
<PAGE>
constructed and will be operated and maintained in accord with all laws,
rules, statutes, and regulations adopted or to be adopted by all applicable
and relevant fora or governmental bodies. Subject to the terms and
conditions contained herein, Licensor hereby agrees to indemnify and hold
Tenant harmless for all violations of any law, rule, statute, or regulation
for which Licensor is responsible, including the payment of all fines,
forfeitures, or similar penalties levied against Tenant for Licensor's
violation of its duties hereunder, provided, however, Licensor's obligation
to indemnify and hold Tenant harmless in accord with this Paragraph 6(D)
shall be limited by those expressed conditions and limitations contained
herein, including, without limitation, Tenant's compliance with all of its
duties created hereunder.
7. RENTAL OF PREMISES. Tenant shall pay Licensor monthly rent in the
amount set forth in the Site License for the subject Property (plus
applicable taxes), payable in advance commencing on the Commencement Date of
the License as provided for in Paragraph 3 and on the first day of each month
thereafter during the term of the Site License or any renewal period. All
rental payments will be made to Licensor, at the following address:
Dobson Tower Company
13439 N. Broadway Extension, Suite 200
Oklahoma City, OK 73114
Tenant agrees to pay a late fee for all rent payments not timely made (ten
(10) days past due) in an amount equal to five percent (5%) of the overdue
amount.
(A) If, following ten (10) days prior written notification to Tenant by
Licensor of Tenant's failure to make current its account, Tenant fails to
make timely rent payments such that the account is greater than sixty (60)
days past due, Tenant shall be deemed to have materially breached this
agreement. Notwithstanding all other remedies available at law or equity or
contained herein, Tenant's breach under this Paragraph 7(A) shall entitle
Licensor to demand and collect from Tenant a penalty amount in the amount set
forth in the Site License, in addition to all amounts due hereunder.
(B) Upon each anniversary date of the Commencement Date as defined by
Paragraph 3 herein, the annual charge for rental of the Premises shall be
automatically increased by an amount equal to four percent (4%) of the
previous annual rate. Such increases shall be automatic and will not require
Tenant's prior approval and by its execution of this agreement, Tenant agrees
to pay each such increase as a portion of its rent. Such increases shall
apply to the entire term of this agreement and any extension or renewal
period.
7
<PAGE>
(C) All rental payments made to Licensor shall be deemed the sole and
exclusive property of Licensor and shall not be subject to delay, offset,
refund or placement in escrow for any reason or purpose, except such refunds
as are expressed herein.
8. INDEMNIFICATION AND INSURANCE. Tenant shall indemnify Licensor
against any and all claims and demands for damages to property and injury or
death to persons, arising out of or caused by the installation, maintenance,
presence, use or removal of Tenant's equipment on the Premises, unless such
damage or injury shall be due to the willful acts or negligence of Licensor,
its employees, agents or invitees. Licensor shall indemnify Tenant against
any and all claims and demands for damages to property and injury or death to
persons, arising out of or caused by the acts or omissions of Licensor or
Licensor's employees, agents, or invitees, or the installation, maintenance,
presence, use or removal of third party's equipment on the Property, unless
such damage or injury shall be due to the negligence of Tenant, its
employees, agents or invitees. Licensor and Tenant shall each obtain and
maintain public liability insurance in an amount equal to Two Million Dollars
($2,000,000) during the term of the Site License and any renewal period,
respectively covering Licensor's and Tenant's use and ownership of rights in
the Premises. Tenant shall cause Licensor to be named as an additionally
insured person on its casualty and public liability policy(ies), and Licensor
shall cause Tenant, and any Tenant lender or lenders, to each be named as
additionally insured persons on Licensor's casualty and public liability
policy(ies). Tenant shall also carry worker's compensation insurance
covering all of Tenant's employees and automobile insurance covering all of
Tenant's vehicles in such amounts as are required by law. Certificates of
required insurance shall be periodically furnished to Licensor by Tenant, and
to Tenant by Licensor upon reasonable demand by the requesting party.
(A) Tenant and Licensor shall each be responsible for maintaining any
insurance covering their own equipment on the Property, in commercially
reasonable amounts sufficient to assure the ability to repair, reconstruct or
replace same if destroyed; the lives and health of their respective agents,
employees and invitees; damage or injury to other persons or other persons'
property caused by the acts or omissions of their own agents, employees, or
invitees; and any other business or liability insurance which each may deem
necessary to protect their own interests.
While not required to do so under this Agreement, in the event Tenant
obtains business interruption insurance, Licensor shall have no claim of
right, title or interest in or to any benefits paid under such coverage for
any reason.
(B) Licensor and Tenant each hereby waive any and all rights
8
<PAGE>
of recovery, claim, action, or causes of action, against the other, its
agents, officers or employees, for any loss or damage that may occur to the
Premises, or any improvements thereto, or any personal property of such party
therein, or to any person by reason of fire, the elements or any other cause
which could be insured against under the terms of standard property,
liability, fire and extended coverage insurance policies, regardless of cause
or origin, including negligence of other party hereto, its agents, officers
or employees and each party covenants that no insurer shall hold any right of
subrogation against such other party.
(C) Hold Harmless: Tenant hereby agrees to hold harmless the owner of
the real property and associated structures and all persons from whom
Licensor has taken authority for the purposes of Licensor's entrance into and
performance hereunder (if such person(s) are third parties), for any and all
injury or damages arising out of Tenant's occupation, use or employment for
commercial purposes of the Premises, including, without limitation, all
injury, loss or damages to Tenant and its agents, assigns, successors,
employees, invitees, and Tenant agrees that Licensor is the only other party
to this agreement and that no other party shall be deemed to have any
liability, duty or obligation to Tenant arising hereunder.
9. RENEWAL OPTIONS. Tenant shall have the option to renew and extend
the term of any Site License upon the same terms and conditions as set forth
herein for two (2) successive period(s) of five (5) years each (the "Renewal
Periods"). Tenant shall be deemed to have exercised its option to renew a
Site License and such Site License shall automatically renew on each fifth
year anniversary following commencement unless written notification of intent
to terminate the Site License is received by Licensor from Tenant on a date
which is at least ninety (90) days, but less than one hundred eighty (180)
days prior to the date of expiration. The word "term" as used in this
Agreement shall include the above-mentioned Renewal Period(s) as might be
exercised by Tenant.
10. DEFAULT. Neither party shall be deemed in default under a Site
License until the other party has given the defaulting party at least thirty
(30) days written notice of any default hereunder and the defaulting party
has failed to cure the same within thirty (30) days after receipt of such
notice; provided, however, that where such default cannot reasonably be cured
in such thirty (30) day period and if the defaulting party shall proceed
promptly to cure the same and prosecute such curing with due diligence, the
time for curing such default shall be extended for such period of time as may
be deemed necessary by the other party in its reasonable discretion to
complete such curing. Tenant's right to cure a default provided in this
Paragraph 10 shall not apply to the timely payment of rents.
9
<PAGE>
(A) Licensor will not, except in an emergency as shall be interpreted
in Licensor's sole discretion, cure any alleged default by Tenant until after
the expiration of thirty (30) days following Tenant's receipt of notice
provided for herein and then only if Tenant has failed, during such period,
to cure such default or perform such act.
(B) Licensor reserves the right to disconnect the electrical power to
Tenant's equipment if, following notification by another user of the
Property, or Tenant's agents or employees, or by notification by officials of
the Federal Government, it is determined that operation of Tenant's equipment
is causing injury or damage to other persons or users, subject to Paragraph
19 below, or is in violation of law. Such disconnection by Licensor shall
not be performed without informing Tenant prior to Licensor's taking such
action and without providing Tenant with an opportunity within seventy-two
(72) hours following such notification (which notification shall be by
telephone and followed immediately by written notice pursuant to the
Paragraph 13 herein below), to cure immediately such problems or answer such
allegations. If, following notification to Tenant by Licensor, Tenant does
not repair or disconnect Tenant's equipment within the aforementioned
seventy-two (72) hour period, to discontinue continuing injury and/or damage
to other persons or tenants, and Licensor reasonably deems such repair or
disconnection necessary to protect Licensor or other persons, Licensor may
disconnect the electrical power to Tenant's equipment, which act shall be
without liability to Licensor and Licensor shall not be liable for any
damages, loss of revenue, claims, or injuries caused by Licensor arising out
of disconnection of Tenant's equipment, except such injury or damages caused
by Licensor's negligence or willful actions, and only to the extent provided
for herein. Licensor warrants that the terms contained within this Paragraph
10(B) are substantially similar and reflected within all other licenses
entered into by Licensor for third parties' occupation and use of all or any
part of the Property and shall be included in substantially similar form
within future licenses entered into by Licensor for future tenants' use of
all or any part of the Property.
(C) Tenant shall be deemed to be in default if Tenant causes to be
placed upon its equipment or the Premises any unbonded mechanics' or
materialmen's lien or encumbrance, which placement delays, prevents or
impedes Licensor's or third parties' use of the Premises. Notwithstanding
the foregoing, Licensor acknowledges that Tenant has entered into a financing
arrangement, including promissory notes and financial and security
agreements, for the financing of Tenant's telecommunications facilities and
the operation thereof. Accordingly, Licensor hereby consents to Tenant's
installation and operation of Tenant's equipment, which is deemed collateral
under the aforementioned financing agreement(s), and Licensor agrees that (i)
it disclaims any interest in the
10
<PAGE>
collateral, as fixtures or otherwise; and (ii) it shall hold as exempt such
collateral from execution, foreclosure, sale, levy, attachment, or distress
for any rent due or to become due and that such collateral may be removed by
Tenant or pursuant to the terms of such financial arrangement(s) at any time
without recourse to legal proceedings. Licensor's consent provided under
this Paragraph 10(C) shall not be employed for the purpose of reducing any
obligation of Tenant's created hereunder for the timely payment of rents.
11. ASSIGNMENT OF LICENSE. Tenant shall not assign or sub-license this
Agreement or any Site License without the prior written consent of Licensor,
EXCEPT that no prior written consent shall be required from Licensor for any
such assignment or sub-license to (i) party who owns or acquires a
controlling ownership interest in Tenant (whether by purchase of fifty-one
percent (51%) or greater of the voting stock of Tenant, or substantially all
of the assets of Tenant, or otherwise); (ii) Tenant's parent corporation or
an affiliate of Tenant (For purposes of this paragraph, an affiliate is an
entity in which there is a common owner owning at least a ten percent (10 %)
ownership interest in both Tenant and the other affiliated entity, and shall
include but not be limited to parent and subsidiary entities to Tenant, as
well as partnerships in which Dobson Communications Corporation, or any of
its subsidiary entities, is a general partner.); or (iii) a successor to
Tenant's FCC license to operate Tenant's equipment. In the event of a
permitted assignment or sub-license which does not require Licensor's prior
consent, Tenant shall provide Licensor written notice of the assignment or
sub-license, and the name and address of the assignee or sub-licensee before
same shall be binding on Licensor. With regard to any assignment or
sub-license which does require prior consent from Licensor, Licensor
covenants and agrees that it will not unreasonably withhold, delay or
condition its consent to any such assignment or sub-license. Under no
circumstances shall a Site License be assigned by Tenant to any party which
does not agree to be bound by all terms and conditions contained herein.
Licensor may assign its rights under this Agreement only upon sale of
the underlying Property or Premises, and Licensor's Improvements, without
prior approval from Tenant, PROVIDED that before the assignment may be made
binding on Licensor or Tenant, Licensor's transferee shall furnish Tenant
with the written adoption of this Agreement, and assumption of Licensor's
obligations under this agreement. Otherwise, no such assignment of the
Licensor's rights under this Agreement shall be made without Tenant's prior
written approval, which shall not be unreasonably withheld.
(A) As a condition precedent to Tenant's and Licensor's right to assign or
sub-license this Agreement and/or any Site
11
<PAGE>
License to any third party, Tenant and Licensor each covenant that they will
notify the other in writing of their intent to make such assignment or
sub-license and, in the event that Licensor's or Tenant's consent is not
required or is deemed given hereunder, the transferring party shall provide
to the other all documents reasonably required by the non-transferring party
to assure that the assignee or sub-licensee agrees to be bound by all terms
and conditions contained herein which bind the transferring party.
(B) Notwithstanding anything in this agreement to the contrary,
Licensor hereby agrees to Tenant's assignment of this Agreement and any Site
License to any financing entity, or agent on behalf of any financing entity,
to whom Tenant (i) has obligations for borrowing money or in respect to
guarantee thereof; (ii) has obligations evidenced by bonds, debentures, notes
or similar instruments; or (iii) has obligations under or with respect to
letters of credit, bankers acceptances and similar facilities or in respect
of guarantees thereof. Further, Licensor agrees to execute such estoppel
affidavits and other documents relating to this Agreement and the Site
Licenses as may be reasonably requested by Tenant or Tenant's lender(s).
12. ATTORNEYS FEES. In the event that either party brings a law suit
to compel the performance of the other party hereunder, the substantially
prevailing party in such suit shall be entitled, in addition to all other
remedies at law or equity, to reimbursement for all reasonable attorney's
fees and costs paid to bring or defend such suit.
13. MANNER OF GIVING NOTICE. Any written notice to be given under this
Agreement or any Site License shall be mailed to each party at the address
shown below. All notice shall be sent by registered or certified mail,
postage prepaid, return receipt requested, or by a reputable express carrier
which provides overnight delivery service following receipt of a signature
from the receiver, and shall be deemed given when so mailed or sent.
Licensor: Dobson Tower Company
Attn: President
13439 N. Broadway Extension, Suite 200
Oklahoma City, OK 73114
Tenant: [As designated in each Site License]
Sygnet Communications, Inc.
Attn: President
13439 N. Broadway Extension, Suite 200
Oklahoma City, OK 73114
With copy to: Dobson Communications Corporation
Attn: Mr. Ronald L. Ripley
12
<PAGE>
Vice President and Senior General Counsel
13439 N. Broadway Extension, Suite 200
Oklahoma City, OK 73114
14. QUIET ENJOYMENT. Licensor covenants and agrees that upon Tenant's
paying the rent and other applicable charges and performing in accord with
the terms and conditions stated herein, Tenant may peacefully and quietly
enjoy the Premises, subject to the terms and conditions of this Agreement and
the Site License.
15. COMPLIANCE WITH STATUTES AND REGULATIONS. Antennas, wires and
appliances of Tenant shall be erected and maintained in accord with the
requirements and specifications of the safety codes of the State where the
Premises are located or any applicable jurisdiction or any amendments or
revisions thereof, and in compliance with any rules or orders now in effect,
or that hereafter may be issued by the Federal Communications Commission.
16. AUTOMATIC TERMINATION. Licensor may terminate this Agreement
immediately and the parties shall deem Tenant to be in default if any of the
following occurs: (i) Tenant is declared bankrupt or files for bankruptcy
protection; (ii) Tenant is adjudged insolvent, and such judgment is not
reversed within thirty (30) days of entry; (iii) a receiver is appointed to
manage Tenant and/or its assets, and such appointment is not overturned
within thirty (30) days; or, (iv) Tenant is found by a court of competent
jurisdiction to have engaged in felonious activity in the operation of
equipment at the Premises. Termination by Licensor for the causes listed
above shall not create a reduction, offset, or relief from liability of all
charges due and owing Licensor which have accrued up to the time when
termination is elected.
17. PASS THROUGHS. In addition to the annual rental payments to be
made by Tenant, Tenant agrees to pay its reasonable pro rata or
representative portion of any increase in taxes, excluding income taxes; any
road assessments levied for the provision of ingress and egress to the
Premises; or increase in per unit rate of necessary utilities which occur
following the commencement of the site License and which are billed to either
party for operation of the Premises. Charges for increased utility rates
will not be passed through to tenants which are billed separately by the
utility company for power and/or telephone service and Tenant agrees to
separate metering of its electrical power at Tenant's sole expense. Charges
to Tenant for such increases may be commenced immediately following
Licensor's receipt of a demand for higher costs from the applicable
government agency, supplier, utility company or road maintenance company,
without prior notification to or approval from tenant, however, Licensor
shall provide to Tenant all documentation necessary to demonstrate the source
and amount of any increase directly attributable to Tenant's equipment on the
Premises. Under no circumstances shall
13
<PAGE>
Licensor charge Tenant for such increases in a manner that might result in a
profit to Licensor. Tenant's failure to pay any such charges upon demand by
Licensor shall be deemed to be a failure to pay rents as required herein.
18. COMPLIANCE WITH LAW REGARDING AUTHORITY TO OPERATE. Except as
specifically provided herein, the parties shall be responsible for compliance
with all laws, statutes and regulations for which their authority to operate
radio equipment, or operate the Premises or Property as the case may be, is
dependent. No party shall indemnify the other or be made liable in any way
for any other party's failure to act in compliance with any rule or law,
including violations which result in criminal prosecution or punitive action
against a party, no matter what the source or cause of the violation of law
might be except as provided for in Paragraph 6(D) above. Accordingly, each
party shall be solely responsible for its actions and its defense of such
actions before any official agency or relevant court, with the sole
responsibility party(ies) being those named in such action.
19. INTERFERENCE. Tenant shall have full and complete responsibility
to correct, within seventy-two (72) hours, any electrical interference caused
to other communications equipment at the Property by operation of Tenant's
equipment, which cause is a result of a defect in Tenant's equipment. The
term "defect" shall include any operating of Tenant's equipment which is not
in accord with the technical parameters of any license issued by the Federal
Communications Commission for operation of Tenant's facilities; any operation
in variance with any equipment authorization granted by the Federal
Communications Commission for operation of Tenant's facilities; any operation
in variance with any equipment authorization granted by the Federal
Communications Commission for sale, marketing and use of Tenant's equipment;
any circumstance or condition which causes Tenant's equipment to operate in
variance with any Exhibit attached to the subject Site License hereto; and
any operation of tenant's equipment which does not conform with generally
accepted practices of telecommunications engineering, including, but not
limited to, applicable ANSI standards which exist or come to exist. Licensor
warrants that the terms contained within this Paragraph 19 are substantially
similar to and reflected within all other licenses entered into by Licensor
for third parties' occupation and use of all or part of the Property and
shall be included in substantially similar form within future licenses
entered into by Licensor for future tenants' use of all or part of the
Property.
(A) Licensor hereby agrees to cooperate reasonably with Tenant in
relieving any harmful electrical interference to Tenant's equipment caused by
the operation of other telecommunications facilities on the Premises,
including directing the interfering operator to discontinue the creation of
such harmful interference
14
<PAGE>
or exercising Licensor's right to disconnect the operation of offending
facilities until such time as the harmful interference can be resolved. In
the event that the parties' cooperation cannot relieve the receipt of harmful
electrical interference to Tenant's equipment within thirty (30) days
following Tenant's providing to Licensor notification of the existence of the
harmful interference, and said interference is not caused by any defect or
unreasonable condition in Tenant's equipment or operation, Tenant may
terminate this License and/or seek any other remedies available to Tenant at
law or in equity, including an injunction against the interfering party;
providing, however, such termination or remedies shall be without liability
to Licensor, except for acts or omissions of Licensor in violation of this
Agreement.
20. SUITABILITY. Tenant warrants that prior to the Commencement Date,
it will examine the Premises to its satisfaction and that if Tenant does not
send Licensor written notification to the contrary, Tenant's election not to
notify Licensor otherwise shall be deemed to be Tenant's acceptance of the
Premises as suitable for occupation by Tenant for the purposes described
herein. In the event that Tenant determines that the Premises are unsuitable
for Tenant's occupation and use, Tenant may terminate the Site License for
said Premises without further liability to either party. Tenant further
acknowledges that Licensor does not warrant, in any way, the quality, range,
or propagation characteristics of any radio signal to be transmitted by
operation of Tenant's equipment.
21. ENVIRONMENTAL LAWS. Tenant represents, warrants and agrees that it
will conduct its activities on the Premises in compliance with all applicable
Environmental Laws. Licensor represents, warrants and agrees that it has in
the past and will in the future, conduct its activities on the Property in
compliance with all applicable Environmental Laws and that the Property is
free of hazardous substances as of the date of this License.
Licensor shall be responsible for, and promptly cause to be performed,
any investigation and remediation as required by any environmental laws or
common law, of all spills or other release of hazardous substances, not
caused solely by Tenant, that have occurred or which may occur on the
Property.
Tenant agrees to defend, indemnify and hold Licensor harmless from and
against any and all claims, causes of action, demands, and liability
including, but not limited to, damages, costs, expenses, assessments,
penalties, fines, losses, judgments and attorney's fees that Licensor may
suffer due to the existence or discovery of any hazardous substance on the
Premises or the migration of any hazardous substance to other properties or
release into the environment, arising solely from Tenant's activities on the
Premises.
15
<PAGE>
Licensor agrees to defend, indemnify and hold Tenant harmless from and
against any and all claims, causes of action, demands and liability
including, but not limited to, damages, costs, expenses, assessments,
penalties, fines, losses, judgments and attorney's fees that Tenant may
suffer due to the existence or discovery of any hazardous substance, except
radio frequency emissions on the Property, or the migration of any hazardous
substance to other properties or released into the environment, that relate
to or arise from Licensor's activities during the term of this License (or
the activities of third parties acting under the authority of Licensor) and
from all conditions and activities on the Property prior to the commencement
of this License.
The indemnification in this Paragraph specifically includes costs
incurred in connection with any investigation of site conditions or any
cleanup, remedial, removal or restoration work required by any governmental
authority.
Notwithstanding the foregoing, Tenant agrees to cooperate with Licensor
and other users of the Property to resolve any violations of RF emission
standards created by the operation, collocation, and use of the Property by
Tenant and all other users, which standards are promulgated by the FCC,
including, if necessary, the provision of shielding devices or hardware or
other such remedies which are reasonably required to assure compliance with
all such regulations. Licensor agrees to cooperate with Tenant to assist in
assuring compliance with all FCC promulgated RF exposure limitations,
including providing to Tenant upon request, all relevant information which
Licensor has in its possession regarding the equipment employed by collocated
systems operating upon the Property.
Each party warrants that they shall provide immediate notification to
the other party of any investigation or lawsuit commenced by any agency,
governmental body, person, or forum regarding any alleged violation of any
environmental protection law. A party's failure to provide such notification
will not, however, be deemed a waiver of a party's obligation to provide
indemnification required hereunder.
This Paragraph 21 shall survive the expiration or earlier termination of
this Agreement or the Site License.
22. CONDEMNATION. In the event that the Premises or any portion
thereof are taken pursuant to a condemnation proceeding or by eminent domain,
such that Tenant can no longer operate its telecommunications equipment on
the premises, the Site License shall terminate without liability to either
party and Tenant shall not only be entitled to any portion of any award
arising out of such proceedings which are attributable to any of Tenant's
16
<PAGE>
property, improvements or property rights under this Agreement or any of the
Site Licenses.
23. ENTIRE AGREEMENT SEVERABILITY. This Agreement, together with each
Site License, entered into pursuant to the terms hereof constitutes the
entire agreement and understanding between the parties, and supersedes all
offers, negotiations and other agreements concerning the subject matter
contained herein. Neither this Agreement nor any Site License may be
modified or terminated except as provided herein or by other written
agreements between the parties. If any provision of this Agreement or any
Site License is held by a court of competent jurisdiction to be invalid, it
shall be considered deleted from this Agreement or the Site License, however,
the remainder of this Agreement or the Site License shall survive and be
deemed enforceable.
24. PARTIES BOUND BY AGREEMENT. Subject to the provisions hereof, this
Agreement and each Site License shall extend to and bind the parties and
their heirs, executors, administrators, successors and assigns.
25. GOVERNING LAW. Each Site License and this Agreement as applied to
that Site License shall be construed in accordance with the laws of the of
Ohio.
26. HEADINGS. The headings included herein are merely a matter of
convenience and shall not be employed for the purpose of interpretation of
the language contained herein.
27. WARRANTY OF SIGNATORIES. The persons signing below and the persons
signing each Site License executed hereunder warrant that they possess all
actual and apparent authority to bind legally the party which they claim to
represent, for all purposes related to performance in accord with the terms
contained herein. The signing persons agree that they possess all authority,
both actual and implied, to cause the party they represent to enter into and
perform under this agreement for all purposes.
28. COUNTERPARTS. This Agreement and any Site License may be executed
in counterpart originals and each shall be deemed fully binding on the
parties in all respects.
29. ABILITY TO PERFORM. Licensor warrants that: (i) that it owns the
tower or other Improvements at the Property, on which part of the Premises is
located; (ii) it has good title to or a valid leasehold interest in the
Property pursuant to a valid lease with the owner of the land (on which the
Property is located); (iii) it is a corporation in good standing, authorized
to do business within the state where the Premises are located; (iv) it has
authority to enter into this Agreement and each Site License pursuant to its
interest in the property; and (v) it knows of no reason why it
17
<PAGE>
cannot enter into this Agreement and each Site License and perform hereunder,
including reasons arising under any statute, law, rule, regulation,
contractual obligation, decision of any applicable government agency or
forum, articles of incorporation, by-law, or pending or threatened litigation.
30. RECORDING. Licensor acknowledges that a Memorandum of Agreement,
in the form annexed hereto as Exhibit C, will be recorded by Tenant in the
official records of the County where the Property is located, and Licensor
agrees to cooperate reasonably with Tenant's effort to record such Memorandum
of Agreement. In the event the Property is encumbered by a mortgage or deed
of trust, Licensor agrees to employ reasonable efforts to obtain and furnish
to Tenant a non-disturbance and attornment instrument for each such mortgage
or deed of trust.
WHEREFORE, the parties have executed this agreement on the day and year
first above written, intending to be legally bound to the terms and
conditions contained herein.
Licensor: Tenant:
Dobson Tower Company, Sygnet Communications, Inc.
an Oklahoma corporation an Ohio corporation
By: /s/ G. Edward Evans By: /s/ G. Edward Evans
-------------------------------- --------------------------------
Its: President Its: President
-------------------------------- --------------------------------
Date: 12-23-98 Date: 12-23-98
-------------------------------- --------------------------------
18
<PAGE>
License No._____________
Structure No.___________
EXHIBIT A
Site License
to the Master Site License Agreement between Sygnet Communications,
Inc., an Ohio corporation, together with its communications affiliates
collectively ("Tenant"), and Dobson Tower Company ("Licensor").
1. Site No./Name:
2. Name of Licensor:
3. Name of Tenant:
4. Site Address: (street address and legal description - attach)
5. Site Latitude and Longitude:
6. Commencement Date:
7. Monthly Rent: Penalty Amount:
8. Term: See paragraphs 3 and 9 of the Master Site License
Agreement
9. Site Licensor-Owned:_____________ or Licensor-Licensed:_____________
If Licensed, Term of Underlying License:
10. Special Access Requirements:
11. Existing Mortgages, etc.:
12. Licensor Contact for Access for Emergency:
13. Tenant Contact for Emergency:
19
<PAGE>
14. Tenant's Address for Notice Purposes:
LICENSOR:
By:
-------------------------------------
Title:
-------------------------------------
TENANT:
By:
-------------------------------------
Title:
-------------------------------------
Date:
--------------------------------
Attachments: Exhibit 1: Description of Tenant's Equipment
Exhibit 2: Description or Depiction of Premises (Field
Drawing of Equipment Shelter/Room/Cabinet
Location(s) and right-of-way to the Premises)
Exhibit 3: Engineering/Architectural Plans and Specifications
Exhibit 4: Existing Liens, Rights of Way and Easements
Exhibit 5: Current Wireless Communications Uses of Site
(including frequencies and radiated power
densities)
Exhibit 6: Prime License (if applicable)
20
<PAGE>
EXHIBIT 1
DESCRIPTION OF TENANT'S EQUIPMENT
The equipment Tenant shall place on the Premises is as follows:
INITIAL INSTALLATION:
One (1) Equipment shelter (10'x 12') to house Tenant's communications
equipment, constructed on a concrete pad.
Six (6) Panel antennas, approximately 1'x 4' in size.
Six (6) Coaxial runs, 7/8" in diameter.
Grounding equipment necessary to tie into Licensor's grounding ring, as
applicable.
Waveguide bridge, associated supports and connectors, utility lines and
transmission lines
Sectors:
-------------------------------------
Azimuths:
-------------------------------------
Frequencies:
-------------------------------------
Positions: (See Exhibit B)
FUTURE INSTALLATION
Three (3) Panel antennas, approximately 1'x 4' in size
Three (3) Coaxial runs, 7/8" in diameter.
Grounding equipment necessary to tie into Licensor's grounding ring, as
applicable.
Waveguide bridge; associated supports and connectors, utility lines and
transmission lines
Sectors:
-------------------------------------
Azimuths:
-------------------------------------
Frequencies:
-------------------------------------
Positions: (See Exhibit B)
<PAGE>
EXHIBIT B
DESCRIPTION OF PREMISES
The Premises are described and/or depicted as follows:
<PAGE>
EXHIBIT C
WHEN RECORDED SEND TO:
______________________________________
______________________________________
______________________________________
______________________________________
MEMORANDUM OF AGREEMENT
This Memorandum of License is entered into on this __________________
day of ___________________, 199 ____, by and between __________________________
___________________, a ___________________ corporation, with an office at
______________________________________, (hereinafter referred to as "Licensor")
and ______________________________________, a ___________________ corporation,
with an office at ______________________________________, (hereinafter referred
to as "Tenant").
1. Licensor and Tenant entered into a Site License ("Agreement') on
___________________, 199____, for the purpose of installing, operating
and maintaining a radio communications facility and other
improvements. All of the foregoing are set forth in the Agreement.
2. The term of the Agreement is for five (5) years, commencing on
___________________, 199____, ("Commencement Date") and terminating on
the fifth (5th) anniversary of the Commencement Date, with two (2)
successive five (5) year options to renew.
3. The Land which is the subject of the Agreement is described in Exhibit
A annexed hereto. The portion of the Land being licensed to Tenant
(the "Premises") is described in Exhibit B annexed hereto.
IN WITNESS WHEREOF, the parties have executed this Memorandum of
Agreement as of the day and year first written above.
LICENSOR: TENANT:
By:________________________________ By:_____________________________________
Title:_____________________________ Title:__________________________________
Date:______________________________ Date:___________________________________
<PAGE>
STATE OF___________________________
COUNTY OF__________________________
On ___________________, before me, _____________________________________, Notary
Public, personally appeared ______________________________________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument and acknowledged to me
that he executed the same in his authorized capacity, and that by his signature
on the instrument, the person, or the entity upon behalf of which the person
acted, executed the instrument.
WITNESS my hand and official seal.
______________________________________ [SEAL]
Notary Public
My commission expires:___________________
<PAGE>
[Dobson Letterhead]
August 25, 1998 AMENDED OFFER
Mr. Richard D. Sewell, Jr.
721 Torrey Pines Lane
Garland, TX 75044
Dear Richard:
It is with pleasure that we offer you a position as Treasurer with Dobson
Communications Corporation at a rate of $4,583.34 per pay period (minus
taxes) reporting to Bruce Knooihuizen. This letter does not constitute an
offer for permanent or a specific term of employment. In addition, you will
also be eligible for an annual bonus of up to 35% of your base salary,
dependent upon achieving various performance objectives and receive a $20,000
sign-on bonus with your first pay check. Also, upon employment with Dobson
Communications Corporation and subject to approval by the Board of Directors,
you will be awarded stock option grants equal to .2% of the Cellular
valuation. In the event of a change of control of Dobson Communications
Corporation, you will automatically be fully vested. Previously, I have
attached a copy of our current valuation and the potential worth of the
company's wireless business assuming we meet our business plan targets and we
receive reasonable valuations in five years. Obviously this could change
either upward or downward based on factors including acquisitions and
economic conditions. In addition, we will also provide you with three (3)
weeks vacation upon hire. After conversaiton with the interview team, I am
confident you will be a tremendous asset to the Account Department.
As required by the Immigration Reform and Control Act of 1986, your offer is
also contingent upon your proof of eligibility to work in the United States.
You must exhibit proper identification on your first day of employment.
Our benefit package presently includes: health, dental, and vision insurance
with company paid premiums for you and dependent coverage; employee group
life insurance of four (4) times your annual salary or eight (8) times your
annual salary in case of accidental death; monthly vacation accrual of 48
hours for first year of service; monthly sick leave accrual of 48 hours for
first year of service; short-term and long-term disability insurance;
Flexible Compensation Plan (125 Cafeteria Plan); Employee Assistance Program;
and 401k plan that matches up to 4% contribution after one year of service
and 1,000 hours.
To insure relocation from Texas is quick and easy, we will pay to pack and
ship your household goods and provide 90 days of temporary living
accommodations, which Dobson will arrange for in the Oklahoma City area.
Dobson will also pay reasonable closing costs and any storage fees during
your temporary living time frame. These relocation payments are provided
(gorssed-up for tax purposes) and contingent upon one full year of service
provided to Dobson Communications Corporation by employee. Please indicate
your concurrence to the above by signing below, then return the document to me.
In the event that there should be a change of control of Dobson
Communications Corporation which results in your termination without cause,
we will agree to pay you one year of serverance based on your base annual
salary. If the terms and conditions of this letter are satisfactory to you,
please sign and return the attached copy of this letter signifying your
acceptance and indicating the day you expect to begin employment.
<PAGE>
You will be notified under separate letter when your orientation will be
conducted. Please arrange to report 8:30 a.m. to Dobson Communications
Corporation, 13439 North Broadway Extension, sutie 200, Oklahoma City, on
that day. Dobson Communications Corporation is looking forward to becoming a
part of our growing team.
If you have any questions, please call me at (405) 391-8500.
Sincerely,
/s/ Gail Kudla
- --------------------------
Gail Kudla
VP, Human Resources
I accept employment with Dobson Communications Corporation as set forth above
and expect to start on 9-3-98.
/s/ Richard D. Sewell, Jr.
- --------------------------
Signature
<PAGE>
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") by and between DOBSON
COMMUNICATIONS CORPORATION, an Oklahoma corporation (the "Company"), and
Albert H. Pharis, Jr., an individual (the "Consultant"), dated as of the 21st
day of December, 1998 (the "Effective Date").
W I T N E S S E T H:
WHEREAS, Sygnet Wireless, Inc. and its subsidiary, Sygnet
Communications, Inc. (together, "Sygnet") are engaged in providing full
service mobile telecommunications including cellular telecommunications (the
"Business"); and
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of July
28, 1998, the Company, through an indirect subsidiary, has agreed to acquire
Sygnet (the "Sygnet Acquisition"); and
WHEREAS, Consultant is a director and is President and Chief Executive
Officer of Sygnet; and
WHEREAS, Consultant, in his capacity as President and Chief Executive
Officer of Sygnet, has been instrumental in developing the goodwill of the
Business by virtue of his intimate knowledge of all aspects of the Business
and his personal relationships with the employees and certain customers of
the Business; and
WHEREAS, the Company desires to preserve and protect the value of the
Business and goodwill to be acquired by the Company, and the value of any
goodwill developed following the Company's acquisition of Sygnet as a result
of Consultant's services rendered pursuant to this Agreement; and
WHEREAS, the Consultant has agreed to assist the Company in the
transition of ownership, and the operation, of the Business, to maintain the
confidentiality of certain information concerning the Business, and to
refrain from competing with the Company and Sygnet for a reasonable period of
time;
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties agree as follows:
1. ENGAGEMENT. The Company hereby engages the Consultant as a
consultant and advisor, and Consultant agrees to accept such engagement, on
the terms and conditions set forth herein. Consultant further agrees to
serve faithfully and to the best of his ability and to devote such of his
time, energy and
<PAGE>
skill to the service of the Company and Sygnet, all as set forth in this
Agreement; provided, however, nothing herein contained shall prevent
Consultant from engaging in other endeavors not in conflict with the business
of the Company or its subsidiaries or his duties and responsibilities under
this Agreement.
2. DUTIES. During the term of this Agreement, Consultant shall render
such services of an advisory or consultive nature and promote the name and
good will of the Company and Sygnet as the Company, through its Chief
Executive Officer, may reasonably request so that the Company may have the
benefit of Consultant's experience and knowledge of the business and affairs
of Sygnet and of his reputation and contacts in the Business. In this
regard, Consultant will (i) use his best efforts (which shall not require an
unusual or burdensome amount of time nor shall Consultant be required to
incur out-of-pocket costs or expenses without reimbursement) to assist the
Company in maintaining good business relations with the principal suppliers
to and customers of the Business, and (ii) not take any action that would
detract from or impair the business relationship of those parties.
Consultant agrees that he will be available for advice and counsel to the
officers and directors of the Company at all reasonable times by telephone,
letter, or in person. Consultant agrees that he will serve faithfully and to
the best of his ability, and devote such of his time, energy and skill to the
service of the Company, as the Company through its Chief Executive Officer
may reasonably request.
3. INDEPENDENT CONTRACTOR. During the term of this Agreement,
Consultant shall be retained by the Company as and Consultant shall hold
himself out as, an independent contractor, and not as an "associate" or
"employee" of the Company. Accordingly, the Company shall not withhold
amounts of applicable federal and state income, withholding and employment
taxes from the fees to be paid Consultant hereunder unless otherwise required
by applicable law and regulations. Consultant shall be solely responsible
for and shall pay all of such taxes.
4. TERM. The initial term of this Agreement shall be for a period of
five years commencing on the Effective Date and ending on the earlier to
occur of (i) the fifth anniversary of the Closing Date of the Sygnet
Acquisition or (ii) the last day of the month coinciding with the date on
which a termination event (death, Disability, Cause or Voluntary Termination)
shall have occurred as provided in paragraph 6 hereof. Such period is
hereafter referred to as the "Consulting Period".
5. COMPENSATION.
5.1. TRANSITIONAL PERIOD FEE. The parties have agreed that
for consultive services provided by Consultant under
-2-
<PAGE>
this Agreement for a transition period of 90 days next following the
consummation of the Sygnet Acquisition (the "Transition Period"), the
Consultant shall receive a fee of $40,000, payable in full, within ten days
next following the last day of the Transition Period.
5.2. CONSULTING FEE. Commencing on the first day next
following the expiration of the Transition Period and for the remainder of
the Consulting Period, and in consideration of the Consultant faithfully
performing consulting services under this Agreement, and in consideration of
the Consultant being reasonably available to render to the Company the
services provided in paragraph 2 hereof, the Consultant shall receive an
annual fee of Sixty Thousand Dollars ($60,000) (the "Consulting Fee"),
payable in monthly installments in advance of $5,000.00 each commencing on
the first day of the Consulting Period and continuing until the earlier of
the expiration of the Consulting Period or termination of this Agreement
pursuant to, and subject to the provisions of, Section 6.
5.3. EXPENSES. During the Consulting Period, the Consultant
shall be entitled to receive reimbursement for all reasonable business and
travel expenses incurred by the Consultant while performing consulting
services for and at the request of the Company, all under and in accordance
with the policies, practices and procedures of the Company with respect to
key management associates of the Company and recognized by the Internal
Revenue Code of 1986, as amended (the "Code"), and rules and regulations of
the Internal Revenue Service promulgated thereunder, as approved and
interpreted by the Chief Financial Officer of the Company.
5.4. HEALTH, DISABILITY AND LIFE BENEFITS. In addition to
the consulting fee and the reimbursement expenses provided for above,
commencing with the first day of the Transition Period and for the remainder
of the Consulting Period, Consultant shall be entitled to receive such
health, disability and life insurance coverage as is provided to employees
whose annual compensation is comparable to the consulting fee to be paid to
Consultant under the terms of this Agreement.
5.5. OFFICE AND SUPPORT STAFF. During the Consulting Period
and if determined to be reasonably necessary for the Consultant to perform
his duties hereunder by the Chief Financial Officer of the Company, the
Consultant shall be provided with a suitable office in Youngstown, Ohio, of a
size and with furnishings and other appointments and secretarial and other
assistants as are provided to key management associates of the Company.
6. TERMINATION.
-3-
<PAGE>
6.1. DEATH OR DISABILITY. Except as provided in paragraph
7.1 hereof, this Agreement shall terminate automatically upon the
Consultant's death or "Disability." For purposes of this Agreement
"Disability" means disability which, at least twelve weeks after its
commencement, is determined to be total and permanent by a physician selected
by the Company and acceptable to the Consultant or Consultant's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
6.2. CAUSE. The Company may terminate this Agreement for
"Cause." For purposes of this Agreement "Cause" means (i) an act or acts of
personal dishonesty taken by the Consultant and intended to result in
personal enrichment of the Consultant at the expense of the Company, (ii) the
continued failure of Consultant to perform his duties and obligations under
this Agreement, which failure is not remedied at a reasonable period of time
after receipt of written notice from the Company, or (iii) the conviction of
the Consultant of a felony. Further, for purposes of this paragraph 6.2:
(a) No act, or failure to act, on the Consultant's
part shall be deemed "willful" unless done, or omitted to be done, by the
Consultant not in good faith and without reasonable belief that the
Consultant's action or omission was in the best interest of the Company.
(b) The Consultant shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to the
Consultant a copy of a resolution duly adopted by the affirmative vote of a
majority of the entire membership of the Board of Directors of the Company
(excluding the Consultant) at a meeting of the Board called and held for such
purpose (after reasonable notice to the Consultant and an opportunity for the
Consultant, together with the Consultant's counsel, to be heard before the
Board), finding that in the good faith opinion of the Board the Consultant
was guilty of conduct set forth in clauses (i), (ii) or (iii) above and
specifying the particulars thereof in reasonable detail. The determination
of the Board shall be binding upon the Company and the Consultant.
6.3. VOLUNTARY TERMINATION. The Consultant may voluntarily
terminate this Agreement ("Voluntary Termination") at any time during the
Consulting Period. A Voluntary Termination is any termination of this
Agreement by the Consultant during the Consulting Period other than
termination due to death, Cause or Disability.
6.4. NOTICE OF TERMINATION. Any termination by the Company
for Cause or Disability or by the Consultant by reason of his death or
Voluntary Termination shall be communicated a
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Notice of Termination to the other party hereto in accordance with the terms
of this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Consultant's engagement under the provisions so indicated, (iii) if
applicable, a copy of the resolution of the Board required by paragraph 6.2
hereof, and (iv) specifies a date of termination, which date shall be the
last day of the month of such notice.
7. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
7.1. DEATH OR DISABILITY. If this Agreement is terminated
by reason of the Consultant's death or Disability, it shall terminate without
further obligations of the Consultant or his legal representative, as the
case may be, or the Company; provided, however, (i) in the event of the death
of the Consultant, the Company shall continue to pay the Consulting Fee
during the Consulting Period to the legal representative of Consultant or
Consultant's designee or (ii) in the event of the Disability of the
Consultant, the Company shall continue to pay the Consulting Fee during the
Consulting Period to the Consultant or his legal representative, as the case
may be, and (iii) in either event, any approved sums due under paragraphs 5.3
and 5.4 which have been accrued and have been expended by the Consultant and
which have not been reimbursed by the Company shall be paid to the Consultant
or his legal representative, as the case may be. In either of such events,
with the exception of the Consulting Fee the Company shall have no further
obligations to Consultant, Consultant's designee or his legal representative
under or pursuant to this Agreement.
7.2. CAUSE OR VOLUNTARY TERMINATION. If this Agreement is
terminated for Cause or by reason of a Voluntary Termination, the Company
shall have no further obligations to the Consultant from and after the
termination date and Consultant shall not be entitled to any severance
payment. If on the date of termination for cause, Consultant holds any
unexercised options to purchase capital stock of the Company, such options
shall be deemed surrendered and cancelled as of the date of termination,
without exercise.
7.3. INVOLUNTARY TERMINATION. If this Agreement is
terminated by the Company without cause and not by reason of the Consultant's
death or Disability, the Company shall be obligated to pay to Consultant an
amount equal to two monthly installments of the Consulting Fee described in
Section 5.2 hereof for the two calendar months next following the date of
such termination. In addition, in the event of an Involuntary Termination by
the Company, and if at the date of such termination
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the Consultant shall hold unexercised options to purchase capital stock of
the Company, the Consultant shall be entitled to exercise any and all options
to purchase stock which, in accordance with the terms of such options, could
be exercised within 12 months next following the date of termination. Any
additional unexercised options then held by Consultant shall be deemed
surrendered and canceled as of the date of termination, without exercise.
8. FULL SETTLEMENT. Except for termination of this Agreement by
the Company for Cause or as provided for in paragraph 10, the Company's
obligations to make the payments provided for in this Agreement and otherwise
to perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Consultant or others. In no event shall the
Consultant be obligated to seek employment or take any other action by way of
mitigation of the amounts payable to the Consultant under any of the
provisions of this Agreement.
9. INDEMNIFICATION. During the Consulting Period, the Company
shall indemnify the Consultant for his acts under this Agreement to the same
extent and manner it provides indemnification for its officers and directors.
10. CERTAIN REDUCTIONS OF PAYMENTS BY THE COMPANY. In the event
that any payment made by the Company to the Consultant pursuant to the terms
of this Agreement shall be determined by the Internal Revenue Service as
nondeductible for federal income tax purposes by the Company, such amount
shall be repaid by the Consultant to the Company within 45 days after
notification by the Company. In the event at the end of said period,
Consultant has not reimbursed the Company for such sum, the Company shall
have the right of offset as against the Consulting Fee with respect to any
payments then due and owing, together with interest at the applicable federal
rates provided for in Section 7872(f)(2) of the Code.
11. DISCLOSURE OF INFORMATION. Consultant agrees that during the
term of this Agreement and for a period of three (3) years next following the
termination hereof, Consultant will not, without the prior written consent of
the Board of Directors of the Company, directly or indirectly, in any
individual, corporate or representative capacity whatsoever, reveal, divulge,
disclose or communicate to any person, firm, association, corporation or
other entity in any manner whatsoever information of any kind, nature or
description concerning any matters affecting or relating to the Business
which are not already in the public domain, including without limitation:
(i) the names of any of the prior or present customers or accounts of the
Business, (ii) the prices for which Buyer obtains or has obtained, or at
which it sells, or has sold,
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products of the Business, (iii) the names of the personnel involved in the
Business, (iv) the Company's financial affairs as they relate to the
Business, (v) the Company's or Sygnet's methods and manner of operating the
Business or (vi) the Company's plans, trade secrets, or other data of any
kind, nature or description whatsoever relating to the Business. Without
regard to whether any or all of the foregoing matters would be deemed
confidential, material or important, the parties hereto stipulate that as
between them, the same are important, material and confidential and
materially affect Buyer's effective and successful conduct of the Business
and its goodwill.
12. COVENANT NOT TO COMPETE. Consultant agrees that during the
term of this Agreement and for a period of three (3) years next following the
termination hereof, without the prior written consent of the Board of
Directors of the Buyer, Consultant will not, directly or indirectly, (i)
through any corporation, partnership or other entity (a) with respect to
which Sygnet, the Company or any Affiliate of Sygnet or the Company is now or
may hereafter be a director, executive officer or general partner, (b) which
is now or may hereafter be otherwise owned or controlled by Sygnet, the
Company or any Affiliate, or (ii) as principal, agent, employee, employer,
consultant, director, stockholder or holder of any equity security, partner
or in any other individual or representative capacity whatsoever:
12.1. Call upon, solicit, divert, take away or attempt to
call upon, solicit, divert or take away any then existing customers,
suppliers, businesses, or accounts of the Business, or of Sygnet or the
Company in connection with any business competitive with the Business in any
State where Sygnet or the Company is presently conducting the Business
(collectively, the "Restricted States"), nor interfere or compete with the
Business, or any portion thereof or the Buyer in connection with such
customers, suppliers, businesses, and accounts in the Restricted States;
12.2. Knowingly hire, attempt to hire, contact or solicit
with respect to hiring any present employee or future employee or consultant
of the Business or any portion thereof, or of Sygnet or the Company;
provided, that the foregoing prohibition shall not extend to (a) a former
employee of Sygnet whose employment by Sygnet or the Company was not
continued following consummation of the Merger, or (b) a former employee of
Sygnet or the Company whose employment by Sygnet or the Company, as the case
may be, ceased more than twelve (12) months prior to contact by Consultant;
12.3. Knowingly engage in, or give any advice to, any person,
firm, partnership, association, corporation or other entity engaged in a
business competitive with the Business or any
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portion thereof in the Restricted States;
12.4. Lend credit, money or reputation for the purpose of
establishing or operating a business competitive with the Business or any
portion thereof in the Restricted States; or provided, however, that the
foregoing provisions of this Section 12 shall not apply to the Consultant's
investment in or employment by the communications tower business controlled
by Gregory T. Pauley, nor employment by or the ownership of less than a 5%
investment interest in a significantly active regional wireless provider who
may be in competition with Sygnet, such as Western Wireless or Nextel, or a
nationally active wireless provider who may be in competition with Sygnet,
such as AT&T Wireless.
These covenants are intended to restrict Consultant and his
Affiliates, agents and representatives from competing in any manner with the
Business, any portion thereof or Sygnet or the Company in the activities
which have heretofore been carried on by Sygnet or the Company in connection
with the Business or any portion thereof. The parties hereto agree that
prohibitions set forth in this Section 12 shall be liberally interpreted in
order to carry out the intents and purposes of this Agreement. As used in
this Agreement, the term "Affiliate" shall mean a person that directly, or
indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, the person specified; and, when used to
indicate a relationship with any person, shall include (i) a corporation or
organization of which such person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities, (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee
or in a similar capacity, and (iii) any relative or spouse of such person, or
any relative of such spouse, who has the same home as such person or who is a
director or officer of the person or any of its parents or subsidiaries.
13. ENFORCEMENT OF COVENANTS. Consultant acknowledges that a
violation or attempted violation on its part of any agreement in Sections 11
or 12 above will cause such damage to the Company and the Business which will
be irreparable, and accordingly, Consultant agrees that the Company shall be
entitled as a matter of right to an injunction from any court of competent
jurisdiction, restraining any further violation of such agreements by
Consultant and his Affiliates, their respective employees, agents or
representatives, either individually or collectively. Consultant further
agrees that the three (3) year period of restriction set forth in Sections 11
and 12 above shall be tolled during any period of violation thereof by
Consultant or any of his Affiliates. Any exercise by the Company of its
rights pursuant to this Section 13 shall be cumulative and in addition to any
other
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remedies to which the Company may be entitled.
14. BOARD OF DIRECTORS. Upon (a) execution of this Agreement by
Consultant, and (b) consummation of the Sygnet Acquisition, it is intended
that Consultant will be elected to the office of, and become a director of
the Company. Consultant agrees that so long as he is a member of the
Company's Board of Directors, Consultant will attend all meetings of the
Board of Directors and, on an annual basis, at least two (2) company strategy
sessions, wherever held, unless Consultant is unable to attend by reason of
illness, physical infirmity or family emergency. Upon Consultant becoming a
member of the Company's Board of Directors, the Company agrees that it will
grant to Consultant options, under the Company's 1996 Stock Option Plan, as
amended (the "Plan"), options to purchase an aggregate of 833 shares of the
Company's Class B Common Stock at an option exercise price per share equal to
the fair market value of the Company's Class B Common Stock as determined by
a majority of the members of the Company's Board of Directors, subject to the
terms of such Plan and the other provisions contained in this Agreement.
15. ASSIGNMENT, BINDING EFFECT AND SUCCESSORS.
15.1. ASSIGNMENT. This Agreement is personal to the
Consultant and without the prior written consent of the Company shall not be
assignable by the Consultant otherwise than by will or the laws of descent
and distribution.
15.2. BINDING EFFECT. This Agreement shall inure to the
benefit of and be binding upon the Company, the Consultant, their respective
heirs, successors, assigns or legal representatives, as the case may be.
16. MISCELLANEOUS.
16.1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Oklahoma, without
reference to principles of conflict of laws.
16.2. INDEPENDENT CONTRACTOR. Consultant is and at all times
shall be an independent contractor. Nothing herein shall be construed as
creating a partnership, joint venture, the relationship of employer and
employee or of principal and agent or any other relationship between the
Company and Consultant.
16.3. HEADINGS. The captions of this Agreement are not part
of the provisions hereof and shall have no force and effect.
16.4. AMENDMENT. This Agreement may not be amended or
modified otherwise than by a written agreement executed
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by the parties hereto or their respective heirs, successors, assigns or the
legal representatives, as the case may be.
16.5. NOTICES. All notices and other communications
hereunder shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
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IF TO THE CONSULTANT:
Mr. Albert H. Pharis, Jr.
7130 Raccoon Road
Canfield, Ohio 44406
IF TO THE COMPANY:
Dobson Communications Corporation
13439 N. Broadway Extension, Suite 200
Oklahoma City, Oklahoma 73114
Attention: Mr. Everett R. Dobson
President and Chief Executive Officer
Copy to:
McAfee & Taft A Professional Corporation
10th Floor, Two Leadership Square
Oklahoma City, Oklahoma 73102
Attention: Theodore M. Elam, Esq.
or such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices and communications shall be
effective when actually received by the addressee.
16.6. SEVERABILITY. The invalidity or enforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
16.7. NO WAIVER. The Consultant's failure to insist upon
strict compliance with any provision hereof shall not be deemed to be a
waiver of such provision or any other provision hereof.
16.8. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the Company and the Consultant with respect to the subject
matter hereof, and replaces in full the terms and conditions of all prior
negotiations, agreements and understanding between the parties hereto with
respect to the matters encompassed by this Agreement.
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IN WITNESS WHEREOF, the Consultant has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Albert H. Pharis,
----------------------------------------
Albert H. Pharis, Jr.
"CONSULTANT"
DOBSON COMMUNICATIONS CORPORATION,
an Oklahoma corporation
By /s/ Everett R. Dobson
-------------------------------------
Everett R. Dobson, President
"COMPANY"
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OPERATING AGREEMENT
THIS OPERATING AGREEMENT (the "Agreement") is dated as of the 16th day
of January, 1998 (the "Effective Date") by and between AT&T Wireless Services,
Inc., on behalf of itself and its Affiliates listed in Schedule 1 hereto
(individually and collectively, "AWS") and Dobson Cellular Systems, Inc., on
behalf of itself and its Affiliates listed in Schedule 2 hereto (individually
and collectively, "Dobson"). AWS and Dobson are sometimes referred to,
individually, as a "Party" and together as "Parties."
R E C I T A L
WHEREAS, each of AWS and Dobson desires to make arrangements to
facilitate the provision of voice and voice-related mobile wireless
radiotelephone service to its Customers through the wireless radiotelephone
facilities of the other Party in a manner providing a common look and feel and
the appearance of seamlessness between the Parties' facilities, in accordance
with the terms of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein set forth and intending to be legally bound hereby, the Parties do hereby
agree as follows:
ARTICLE I.
DEFINITIONS
As used in this Agreement, the terms below shall have the following
meanings:
ADDITIONAL FEATURES means the Features that are neither Core Features
nor Future Core Features but that are offered by a Party to its Customers in its
Home Service Area.
ADOPTED FEATURES means the Core Features and the Future Core Features.
AFFILIATE means, with respect to a Party, any facilities-based CMRS
operating company that (a) is controlled by or under common control with the
Party, (b) is an entity in which the Party has at least fifty percent (50%)
voting interest, (c) shares switching facilities with the Party, (d) is managed
by the Party, or (e) is providing Service utilizing CMRS spectrum it has
acquired from a Party.
APPROVED CIBERNET NEGATIVE FILE GUIDELINES means the negative file
guidelines appearing in the CIBER Record in effect from time to time.
AT&T WIRELESS means AT&T Wireless Services, Inc., individually.
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AUTHORIZED RECEIPT POINT or ARP means the location or address of the
Party designated by the Home Carrier as the delivery point for its CIBER records
and authorized agent for performing CIBER edits.
AUTHORIZED ROAMER means a Roamer using equipment and an assigned
telephone number with the NPA/NXX combinations listed in accordance with Article
VI below for whom the Serving Carrier has not received a negative notification
in accordance with the provisions of this Agreement.
AWS has the meaning set forth in the first paragraph of this Agreement.
AWS SYSTEM means the facilities owned and/or operated by AWS with which
it provides Service anywhere within the United States.
BTA means a geographic area designated by the FCC as a Basic Trading
Area in which a PCS System may be operated, as described more specifically in 47
CFR 24.202 of the FCC rules and regulations.
CELLULAR SYSTEM means a wireless communication system that is operated
pursuant to authority granted by the FCC under 47 CFR Part 22.
CIBER means Cellular Intercarrier Billing Exchange Record.
CIBER RECORD means the publication prepared by CIBERNET Corporation, a
wholly-owned subsidiary of the Cellular Telecommunications Industry Association,
as a service to the wireless communications industry. Unless specifically
provided otherwise in this Agreement, all words and phrases defined in the CIBER
Record shall have the meaning herein that they have therein.
CLEARINGHOUSE means that entity which provides for the exchange of CIBER
records and performs industry accepted CIBER edits, including edits to verify
Industry Negative File information.
CMRS means any Commercial Mobile Radio Service as authorized by the FCC.
CORE FEATURES means the Features that, as of the Effective Date, AWS and
Dobson have agreed to implement and maintain in order to create a common look
and feel and seamless subscriber service between the AWS System and the Dobson
System, as evidenced by their listing in Schedule E-1 to Exhibit E attached
hereto.
CUSTOMER means an end-user of Service with which a Party has entered
into an agreement to provide such Service, regardless of whether such Service is
to be provided through the facilities of such Party.
DEFAULT has the meaning set forth in Section 13.1.
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DOBSON has the meaning set forth in the first paragraph of this
Agreement.
DOBSON SERVICE AREA means the geographic area in which Dobson and those
of its Affiliates now or hereafter listed on Schedule 2 provide Service.
DOBSON SYSTEM means the facilities owned and/or operated by Dobson with
which it provides Service anywhere within the Dobson Service Area.
DOBSON TDMA SYSTEM means that portion of the Dobson System located in
the markets listed on Exhibit A.
EFFECTIVE DATE has the meaning set forth in the first paragraph of this
Agreement.
ESN means the Electronic Serial Number that is encoded in a wireless
telephone set by the manufacturer and which is broadcast by such telephone.
EQUIPMENT means phones, handsets, transmitters, terminals, control
equipment and switches and other hardware and software required or useful to use
Service, including phones and handsets Customers use in connection with Service.
FCC means the Federal Communications Commission and any successor agency
or authority.
FEATURES means voice and voice-related features and services available
from a Party through its mobile wireless telecommunication system.
FUTURE CORE FEATURES means the Features that are agreed upon in the
future by the Parties pursuant to Section 10.3.2 as necessary to maintain a
common look and feel, and seamless subscriber service, between the AWS System
and the Dobson System, and which the Parties agree will be supported by both of
their Systems, on the terms and conditions of this Agreement, in the same manner
as the Core Features. Once implemented, a Future Core Feature shall be deemed a
Core Feature for purposes of this Agreement.
GENERAL AVAILABILITY means the date upon which the technology and
products that comprise any Future Core Features are commercially available from
the vendors of such technology and product(s), and such Feature has successfully
completed and passed the first application in the System of the Party seeking to
implement such features and is ready for live commercial deployment.
HOME CARRIER means a Party who is providing Service to its registered
Customers in a geographic area where it holds a license or permit to construct
and operate a mobile wireless radiotelephone system and station.
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HOME SERVICE AREA means the geographic area in which a Home Carrier is
licensed to provide Service.
INDUSTRY NEGATIVE FILE means the negative file maintained by the
authorized Clearinghouses in accordance with approved CIBERNET Negative File
Guidelines.
MIN means the "Mobile Identification Number" which is assigned by a Home
Carrier to each of its registered Customers.
MSA means a geographic area designated by the FCC as a Metropolitan
Service Area in which a Cellular System may be operated, as described more
specifically in 47 CFR 22.909 of the FCC rules and regulations.
MTA means a geographic area designated by the FCC as a Major Trading
Area in which a PCS System may be operated, as described more specifically in 47
CFR 24.202 of the FCC rules and regulations.
NPA/NXX COMBINATIONS means the six-digit numerical combinations assigned
by regulatory authorities to identify the area code and telephone number prefix
for Service.
PCS SYSTEM means a wireless communication system that is operated
pursuant to authority granted by the FCC under 47 CFR Part 24.
PARTIES and PARTY have the meanings set forth in the first paragraph of
this Agreement.
ROAMER means a Customer of one Party who seeks Service from the other
Party within the geographic area served by the other Party, regardless of
whether Service also is offered in that area by the Party whose Customer is
seeking Service.
RSA means a geographic area designated by the FCC as a Rural Service
Area in which a Cellular System may be operated, as described more specifically
in 47 CFR 22.909 of the FCC rules and regulations.
SERVICE means telecommunications service for the transmission and
reception of voice and voice-related features provided by means of radio
frequencies that are or may be licensed, permitted or authorized now or in the
future by the FCC for use by a Cellular System or a PCS System, and in respect
of which service the user equipment is capable of and intended for usage during
routine movement, including halts at unspecified points, at more than one
location throughout a wide area public or private wireless network. Unless
otherwise specifically agreed by the Parties, Service shall include personal
base station services but, by way of example and without limitation, does not
include fixed wireless services, two-way messaging wireless services (NBPCS),
video broadcasting wireless services, television services (whether cable,
broadcast or direct broadcast satellite), broadcast radio services, interactive
informational or transactional content services such as on-line content network
services, Internet based services, satellite based communications services, and
air to ground communications services.
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SERVING CARRIER means a Party who provides Service for registered
Customers of another Party while such Customers are in the geographic area where
the Serving Carrier, directly or through subsidiaries, provides Service.
SYSTEM means the AWS System or the Dobson System, and SYSTEMS means the
AWS System and the Dobson System.
TDMA means the present and future North American Time Division Multiple
Access standard which is set by the Telecommunications Industry Association
(which at the Effective Date is IS-136), which is the essential radio frequency
technical method for digital wireless telephone operations upon which the
Service and equipment related thereto are designed to operate.
USER INTERFACE means the process, functional commands, and look and feel
by which a Customer operates and utilizes the Adopted Features, including the
sequence and detail of specific commands or service codes, the detailed
operation and response of Equipment to the sequence of keys pressed to effect
subscriber Equipment functions, and the response of subscriber Equipment to the
activation of these keys, or in response to signals or data from either the
Dobson System or the AWS System. Furthermore and for greater certainty, such
definition shall include without limitation, the manner in which information is
displayed on the screen of a phone used for Adopted Features, announcement tones
or messages occur, and service or feature codes that must be dialed. The origins
of the information presented to the user may be the user Equipment, or the AWS
System or the Dobson System, or both.
ARTICLE II.
PROVISION OF SERVICE
2.1 Each Party shall provide, to any Authorized Roamer who so
requests, in accordance with its own ordinary requirements, restrictions,
practices, and tariffs, if applicable, and with the terms and conditions of this
Agreement, any and all types of Service that such Party provides to its own
Customers within its Service Area. At a minimum, such Service shall include
voice communications capability, as well as any other types of Service required
by this Agreement, including without limitation Article X hereof.
2.2 Notwithstanding anything in this Agreement to the contrary, a
Serving Carrier may suspend or terminate Service to an Authorized Roamer in
accordance with the terms of its own ordinary requirements, restrictions,
practices, and tariffs, if any, but such suspension or termination shall not
affect the rights and obligations of the Parties for Service furnished hereunder
prior to such termination or suspension.
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2.3 In connection with its Service to Roamers, no Serving Carrier
shall use recorded announcements or other inducements for an Authorized Roamer
to discontinue the Service of its Home Carrier or, unless otherwise authorized
herein, Roamer's use of a Serving Carrier's system.
2.4 In the event that an operating entity becomes an Affiliate of a
Party after the date of this Agreement, such Party may, upon thirty (30) days
prior written notice to the other Party, add such operating entity to Schedule 1
or Schedule 2, as the case may be, at the expiration of which thirty-day period,
(a) the Customers of such entity shall be entitled to Service as Roamers from
the other Party on the terms and conditions of this Agreement and (b) such
operating entity shall provide Service to Customers of the other Party who are
Authorized Roamers, although the other Party is not obligated to request such
Service or to require its Customers to request such Service. Notwithstanding the
foregoing, the other Party, in its reasonable discretion, may specify, by
delivering written notice thereof prior to the expiration of the thirty day
period, that any Affiliate so added shall not be entitled to preference as a
Serving Carrier as otherwise provided in Section 2.5.
2.5
2.5.1 AWS, in its capacity as Home Carrier, shall cause
substantially all of its Customers, when roaming in the markets operated by
Dobson that are listed on Exhibit A, to normally seek Service as Roamers from
Dobson prior to seeking Service from any other carrier. Dobson, in its capacity
as Home Carrier, shall cause substantially all of its Customers, when roaming in
the markets operated by AWS that are listed on Exhibit B, to normally seek
Service as Roamers from AWS prior to seeking Service from any other carrier.
2.5.2 As a condition to the right of a Party under Section
2.5.1 to be the preferred provider of Service to Customers of the other Party,
the market being served by the Serving Carrier shall (i) have fully installed a
TDMA-based system, including all Core Features, (ii) be fully interoperable in
accordance with Sections 10.6, 10.7, and 10.8, and (iii) otherwise have met, and
be in compliance with, all terms and conditions of this Agreement.
2.5.3 Upon the addition to or deletion from Schedule 1 or 2 of
any operating entity pursuant to Section 2.4, Exhibits A and B shall
automatically be revised accordingly, except that either Party may, in its sole
discretion, specify that an addition by either Party to Schedule 1 or 2 shall
not be given effect for any or all purposes of this Section 2.5.
2.6 Dobson shall join and remain a member of the North American
Cellular Network throughout the term of this Agreement.
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ARTICLE III.
RELATED SERVICES
3.1 Upon request by Dobson, AWS and Dobson shall consider
implementing a common System Identification Number (SID) for markets operated by
the respective Parties in the same general vicinity or taking other steps to
suppress the roaming indicator on a Customer's handset from lighting to indicate
that the Customer is roaming in such markets, but each Party may, in its sole
discretion, decide whether to implement such measure.
3.2 So long as interexchange services are offered to Dobson and
those of its Affiliates listed in Schedule 2 by AT&T Corp. or one of its
Affiliates on terms that are reasonably competitive with those available
through other sources, Dobson and its Affiliates listed in Schedule 2 shall
not market, offer, provide, or resell interexchange services, except (i) such
services offered by AT&T Corp. or its Affiliate or (ii) services provided
exclusively within a single home service area designated as such by Dobson in
its marketing materials. All relevant factors shall be considered in
determining the competitiveness of interexchange services, including rates,
volume commitments, duration, and other terms. At anytime when Dobson
believes that it can obtain such interexchange services from another
source(s) at better terms than those being offered to Dobson by AT&T Corp. or
one of its Affiliates, Dobson may solicit competing offers. If such offer is
made which Dobson believes is better, and the relevant rates are at least 5%
less than those charged to Dobson by AT&T Corp. or one of it's Affiliates,
Dobson shall provide AWS with a written term sheet which specifies the
relevant rates, volume commitments, duration and other material terms of the
competing offer ("Offer Notice"). AT&T Corp. or one of its Affiliates shall
have thirty (30) days after receipt of the Offer Notice by AWS to offer to
Dobson the comparable interexchange service(s) upon the same or better terms
as specified in the Offer Notice. If AT&T Corp. or one of its Affiliates make
such an offer to Dobson, Dobson agrees to contract with AT&T Corp. or one of
its Affiliates for any of such services acquired by Dobson. If no such offer
is made by AT&T Corp. or one of its Affiliates within the required time
period, then Dobson may accept the competing offer. Any claim or dispute over
the interpretation or implementation of this paragraph shall be resolved
under the provisions of paragraph 13.2 of this Agreement.
3.3 AWS and Dobson agree that Dobson shall participate in AWS's
National Account Program ("NAP") on substantially the terms of AWS's standard
NAP agreement, a copy of which has been provided to Dobson. Promptly following
the execution of this Agreement, AWS and Dobson shall negotiate in good faith
the final terms of such agreement, with the goal of executing the agreement by
August 1, 1998.
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3.4 Each Party, within the geographic areas in which such Party
provides Service, will provide Service without any additional toll charge
throughout an area (a so-called "home calling area") that is of a size at least
reasonably comparable to the area within which toll-free calls placed through
facilities that are exclusively land-based are available.
ARTICLE IV.
CUSTOMER SERVICE
4.1 The Parties shall use commercially reasonable efforts to develop
and implement systems enabling each Party, as Serving Carrier, to route to a
Customer's Home Carrier any 611 customer service call received from a Customer
of the other Party while roaming on the Serving Carrier's System.
ARTICLE V.
CHARGES
Each Home Carrier, whose Customers (including the Customers of its
resellers) receive service from a Serving Carrier as Authorized Roamers under
this Agreement, shall pay to the Serving Carrier who provided such service 100%
of the Serving Carrier's charges for CMRS and one hundred percent (100%) of the
toll charges pursuant to Exhibit C. The amount of the charges for the use of
each Serving Carrier's Service are set forth in Exhibit C attached to this
Agreement.
ARTICLE VI.
EXCHANGE OF INFORMATION
6.1 The Parties shall furnish to each other, in the format of
Exhibit D to this Agreement, the valid NPA/NXX combinations used by their
respective Customers. These combinations shall be accepted by the other Party.
Each NPA/NXX combination is and shall be within the entire line range
(0000-9999), or a specified portion thereof. The minimum line range to be
exchanged by the Parties shall be 1,000 line numbers. Each Party shall be
responsible for all billings otherwise properly made under this Agreement to
any number listed by such Party within the range or ranges specified by it in
Exhibit D. Additions, deletions, or changes to NPA/NXX combinations and line
number range(s) for the Home Carrier's Customers may be made upon at least
fifteen (15) days prior written notice to the Serving Carrier. Such notice
shall be in the form attached as Exhibit D to this Agreement and shall include
the requested effective date for the addition, deletion or change.
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6.2 Each Party shall provide to the other Party a list of MINs (from
among those within the NPA/NXX combination(s) identified pursuant to Section 6.1
hereof) and ESNs (of the telephones to which the other Party is not authorized
to provide Service pursuant to this Agreement), which shall be entered into the
Industry Negative File. The approved CIBERNET Negative File Guidelines, as
amended from time to time, shall be the governing criteria for the Parties.
Thereafter, from time to time, as agreed by the Parties, each Party shall notify
each other Party of all additions to, and deletions from, these lists for the
Customers of that particular Party. Such notifications shall be made during
normal business hours of the Party being notified by facsimile or by telephone
with a written confirmation and shall be effective one (1) hour after receipt.
6.3 Each Party hereby agrees to indemnify the other Party, together
with its partners and any and all of their officers, directors, employees,
agents and/or affiliates, against, and hold them harmless from, any and all
claims, suits, demands, losses and expenses, including reasonable attorneys'
fees and disbursements, which may result in any way whatsoever from the
indemnified Party's denial of Roamer or local Service to any NPA/NXX and MIN
combination which has been listed by the indemnifying Party as not being
authorized to receive Service; provided that (i) the person seeking
indemnification (the "Indemnified Person") provides notice of such claim
promptly after its discovery to the Party from which indemnification is sought
(the "Indemnifying Person") and in any event the Indemnifying Person will be
released from any obligation hereunder to the extent it is prejudiced by any
delay in the delivery of such notice, (ii) the Indemnifying Person shall have
the right to assume the defense of such claim, (iii) the Indemnified Person
shall provide such reasonable assistance and cooperation in the defense of such
claim as is requested by the Indemnifying Person, and (iv) the Indemnified
Person shall not settle or compromise any such claim without the prior written
consent of the Indemnifying Person.
6.4 Each Party, due to system limitations, may purge or delete
numbers of its Customers from the lists as referred to in Section 6.2 hereof,
but in all such cases, such purging or deletion must be done in accordance with
the approved CIBERNET Negative File Guidelines. If purging or deletion of
numbers is done prior to the time periods established by such Guidelines, or
through procedures not otherwise set forth, in the approved CIBERNET Negative
File Guidelines, the Party implementing the purge or deletion will assume
financial liability for any charges incurred by those numbers. All purges or
deletions made pursuant to this Section 6.4 shall be given through the Parties
and shall be in the form mutually agreed upon by the Parties and effective as of
the time established by the approved CIBERNET Negative File Guidelines (unless
otherwise modified by mutual agreement of the Parties.)
6.5 Upon the implementation of wireless number portability in any
portion of either the AWS System or the Dobson System, the Parties shall
cooperate in establishing an alternative method for exchanging ESN, MIN, and
NPA/NXX information required to permit roaming by the other Party's Customers in
their respective systems.
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ARTICLE VII.
FRAUD
7.1 The Parties will cooperate and, as necessary, supplement this
Agreement in order to minimize fraudulent or other unauthorized use of their
systems. If any Party reasonably decides that, in its sole judgment, despite due
diligence and cooperation pursuant to the preceding sentence, fraudulent or
other unauthorized use has reached an unacceptable level of financial loss and
is not readily remediable, such Party may suspend the use of applicable NPA/NXX
combinations, in whole or in part, pursuant to the terms of this Agreement.
7.2 Each Party shall take reasonable actions to control fraudulent
Roamer usage, including without limitation using either (i) a positive
validation/verification ("PV") system provided by a mutually agreed upon
validation/verification service under which the ESN, MIN and/or NPA/NXX used in
a call in the Serving Carrier's system is compared against a list of Authorized
Roamers or (ii) SS-7 connections through a network of carriers. The Parties
shall work together in good faith to designate and implement a system as
specified in the preceding sentence and enhancements thereto or alternative
systems as they shall agree in the future. The Home Carrier shall have no
responsibility or liability for calls completed by a Serving Carrier without
obtaining positive validation/verification as required herein.
7.3 In addition to other procedures set forth in this Agreement, a
Home Carrier may notify a Serving Carrier by facsimile, with written
confirmation, that certain NPA/NXX combinations are not to receive Service. Any
calls completed using such NPA/NXX combinations made one full business day or
more after such notice has been given shall be the sole responsibility of the
Serving Carrier, and the Home Carrier shall not be charged any amount for such
calls.
7.4 Each Serving Carrier shall use commercially reasonable efforts
to provide each Home Carrier with real-time visibility of call detail records
delivered through a network compatible with AWS's network. Such information
shall be delivered within one hour of the applicable call. In the event that the
Serving Carrier provides such a real-time visibility system, the Serving Carrier
shall not be liable in any event for a temporary failure of the system unless
the Serving Carrier has been notified of such failure by the Home Carrier and
the Serving Carrier does not take commercially reasonable steps to remedy the
failure. If the Serving Carrier has been so notified and has failed to take such
commercially reasonable steps, the Serving Carrier shall be liable for all
unauthorized usage attributed to Home Carrier's subscribers during the period
from the time Serving Carrier was notified of the problem to the time that the
problem has been resolved to the reasonable satisfaction of the Home Carrier.
7.5 For purposes of notification under this Article VII, the
following addresses and facsimile numbers shall be used:
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If to AWS: AT&T Wireless Services, Inc.
5000 Carillon Point
Kirkland, WA 98033
Attn: Billing and ICS Operations
Tel. No. 425-827-4500
Fax No. 425-828-1390
If to Dobson: Dobson Communications Corp.
Dobson Communications Corp
13439 North Broadway Extension
Oklahoma City OK
Attn: Tina Durant
Tel. No. 405-391-8400
Fax No. 405-391-8417
Each Party may change the names, addresses and numbers set forth above
by providing notice to the other Party as provided in Article XVI below.
ARTICLE VIII.
BILLING
8.1 Each Home Carrier shall be responsible for billing to, and
collecting from, its own Customers all charges that are incurred by such
Customers as a result of service provided to them as Authorized Roamers by the
Serving Carrier. The Home Carrier shall also be responsible for billing its
Customers for, and remitting to, the Federal Government all federal excise tax
that may be due in connection with the service being billed by it to its
Customers. While the Serving Carrier will be responsible for the computation and
remittance of all state and local taxes, each Home Carrier shall be liable to
the Serving Carrier for all such state and local taxes remitted by the Serving
Carrier, for Authorized Roamers regardless of whether these amounts are paid to
the Home Carrier by its Customers.
8.2 Each Serving Carrier who provides Service to an Authorized
Roamer pursuant to this Agreement shall forward Roamer billing information,
within five business days of the call date, in accordance with the procedures
and standards set forth in the CIBER Record to the Home Carrier's Authorized
Receipt Point. CIBER Type 50 and CIBER Type 70 records shall not be accepted
without mutual signed agreement and if such mutual agreement is reached it will
be attached to this Agreement. Any future revisions of the CIBER Record or
additional record types must be mutually agreed upon before implementation. In
the event the parties use the CIBERNET Net Settlement Program, or alternative
settlement program such information must be in a format in compliance with the
CIBER Record requirements or agreed upon format.
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8.3 Where the Authorized Roamer billing information required to be
provided by the Serving Carrier in accordance with Section 8.2 above is not in
accordance with the CIBER Record, the Home Carrier may return a record to the
Serving Carrier as provided in the CIBER Record. Returning the defective record
will be in accordance with CIBER Record established procedures. The Serving
Carrier may correct the defective record and return it to the Home Carrier for
billing, provided that the time period from the date of the Service call at
issue to the receipt of the corrected record does not exceed sixty (60) days.
8.4 No credit for insufficient data or defective records shall be
permitted except as provided in Section 8.3 above, unless mutually agreed upon
by both Parties.
8.5 Each Home Carrier may at its discretion perform any necessary
edits at its Clearinghouse on incollect or outcollect call records to ensure
compliance with the terms of this Agreement.
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ARTICLE IX.
SETTLEMENT
9.1 Each Party will settle its accounts with the other Parties on
the basis of billing information received as described in this Article IX. In
the event both Parties use a net financial settlement procedure, the Parties
shall not submit a paper invoice but will make payments in accordance with such
net financial settlement procedures provided that the Parties may submit call
records for payment that relate to calls made more than sixty (60) days from the
date of the call if such call was the subject of a dispute or investigation
regarding fraudulent or unauthorized use.
9.2 If an incorrect roaming rate is charged by the Serving Carrier
to the Home Carrier, the Serving Carrier shall refund all amounts in excess of
the contract rate back to the Home Carrier within forty five days of
notification by the Home Carrier. Each carrier shall have ninety (90) days from
the end of the settlement period to invoice for amounts in excess of the
contract rate. The Home Carrier will send a collection letter within sixty (60)
days of the invoice date, within ninety (90) days of the invoice date, and
within one hundred (120) days of the invoice date. If the invoice remains unpaid
after one hundred twenty (120) days from the original invoice date, the Home
Carrier may withhold the amounts from the CIBERNET Net Settlement Program or
alternative settlement program.
9.3 In the event that either Party does not use a net financial
settlement procedure, the billing and payment for charges incurred under this
Agreement shall be as set forth below.
9.3.1 The parties shall determine amounts owed to each other
for Service provided to Roamers in one-month periods with such period beginning
on the sixteenth day of each calendar month and ending on the fifteenth day of
the following month in which Service is provided. The end of this Period shall
be referred to as "Close of Billing."
9.3.2 The Parties shall send each other an invoice for
Services used under this Agreement within fifteen (15) days after the Close of
Billing.
9.3.3 Each invoice shall contain the following information.
a. Billing period used by Serving Carrier
b. Batch sequence number
c. Serving and Home Carrier System Identification
Number
d. Air Service charges
e. Total toll charges (both intrastate and
interstate)
f. All other charges and credits
g. Total taxes
h. Total charges
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9.3.4 Payment on such invoices shall be made in the form of a
check or a wire transfer which must be received by the invoicing party within
thirty (30) days from the date of the invoice. Late payments shall be charged
with a late payment fee of one and one half percent (1.5%) of the outstanding
balance for each thirty-day period (or portion thereof) that such payments are
late.
9.3.5 Each Party may offset the amount owed to the other Party
under this Agreement and a single payment of the balance to the Party entitled
to receive such balance shall be made.
9.4 If the Serving Carrier provides pre-call validation of the Home
Carrier's Customers, the Home Carrier agrees to implement Negative File
Suppression at the Clearinghouse and the CIBERNET Negative File Guidelines and
procedures do not apply.
ARTICLE X.
INTEROPERABILITY
10.1 The Parties agree that their respective obligations under this
Agreement related to the interoperability of the AWS System and the Dobson TDMA
System shall be construed in accordance with the following general principles:
10.1.1 The Parties agree, confirm and acknowledge that one of
their primary objectives in entering into this Agreement is to promote the
establishment and operation throughout the United States of a mobile wireless
service that is TDMA-based and that will appear to their respective subscribers
as a single mobile wireless network with a common User Interface pertaining to
the Adopted Features, and that they intend to achieve such purpose and objective
as set forth in, and subject to the terms and conditions of, this Agreement.
Core Features and Future Core Features, once implemented, shall be made
available to all Customer's of a Party when roaming in the AWS System or the
Dobson TDMA System, subject to the terms of this Agreement. Each Party shall use
good faith efforts, when implementing any software or other System change or
upgrade, to confirm the continued availability of the Feature interoperability
provided for herein, and in the event of any interference with any Feature
interoperability shall work expeditiously to restore required functionality.
Without limiting the generality of the foregoing, in the event the
Authentication Fraud Protection Feature (or any subsequent or comparable fraud
protection Feature) is disabled or affected by any network change so as to
interfere with its interoperability, the Party responsible for such network
shall restore interoperability within 48 hours of notification from the affected
Party.
10.1.2 The Parties agree that each of their respective
obligations, duties, rights and entitlements pursuant to this Agreement shall be
interpreted, to the extent such interpretation is required to resolve any
dispute or uncertainty concerning this Agreement, in a manner that is reasonably
consistent with, and which reasonably supports, the purpose and objective of
this Agreement as set out in Section 10.1.1.
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10.1.3 The Parties agree that they each shall, in good faith,
work together, cooperate, and use the rights that they each have granted the
other under this Agreement for the purposes set out in Section 10.1.1 and on the
terms and conditions of this Agreement.
10.1.4 Any entity listed on Schedule 1 but in which AT&T
Wireless owns, directly or indirectly, less than a majority interest or which
AT&T Wireless otherwise does not control shall, at the option of AT&T Wireless,
not be subject to the requirements of this Article
10.2 The Parties agree to implement TDMA-based systems as follows:
10.2.1 The Parties each acknowledge and confirm that their
digital standard for, in the case of AWS, the AWS System and, in the case of
Dobson, the Dobson TDMA System, is currently (as of the Effective Date) TDMA. In
addition, Dobson shall maintain its commitment to TDMA as Dobson's digital
standard for the Dobson TDMA System on Exhibit A for so long as, and to the
extent that, AWS maintains its commitment to TDMA as AWS's digital standard. AWS
agrees that in the event it may exercise its discretion to no longer remain
committed to TDMA as its digital standard, it shall inform Dobson of that
decision by no later than six months prior to the implementation of any
non-compatible interface. Upon the implementation of any such non-compatible
interface, the following Sections of this Agreement shall immediately terminate:
Sections 10.1.1, 10.2.2, and 10.2.3.
10.2.2 Dobson shall deploy TDMA throughout the Dobson TDMA
System within twelve (12) months after the date of this Agreement. Dobson shall
use commercially reasonable efforts to promote the use of TDMA-based
communications devices among its Customers who roam on the AWS System.
10.2.3 Notwithstanding any other provision of this Section
10.2, the Parties acknowledge that certain outlying portions of their respective
service areas may receive only digital control channels and not digital voice
service.
10.3 Each of the Parties agrees that it shall operate and support its
TDMA-based System, to the extent installed, to ensure that the other Party's
Customers can use the Adopted Features when roaming on the Serving Carrier's
TDMA-based System in the same manner that such Customers use such Adopted
Features on the Home Carrier's TDMA-based System.
10.3.1 Each Party shall, at its own expense, implement the Core
Features in the AWS System, in the case of AWS, and in the Dobson TDMA System,
in the case of Dobson, within one (1) year after the Effective Date. Thereafter,
Core Features shall be implemented at the time any TDMA-based system is placed
into operation.
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10.3.2 The Future Core Features shall be those features that
are agreed upon by the Parties from time to time after the execution of this
Agreement. Each Party shall, at its own expense, implement such Future Core
Features within one (1) year after the General Availability of such Future Core
Features, provided that, and subject to such Party's determination, in its sole
and absolute discretion, that such implementation is both financially feasible
and economically viable, and consistent with such Party's objective of
maximizing its financial performance. In the event that a Party opts not to
adopt a Future Core Feature in accordance with this Section 10.3.1, it shall
promptly notify the other Party of that decision. Future Core Features shall be
implemented in accordance with this Section in the areas specified for each
respective Party in Section 10.3.1.
10.3.3 Each Party shall have the right, in its sole discretion
to adopt and implement (at such Party's own expense) Additional Features, but
the other Party shall have no obligation to support any Additional Features.
10.3.4 The Parties shall use commercially reasonable efforts to
comply with the network Standards with respect to the Core Features and Future
Core Features that are set out in Schedule E-2 to Exhibit E attached hereto. The
sole remedies available to a Party (the "Affected Party") for the failure by the
other Party to comply with this Section 10.3.4 shall be (a) to suspend, for so
long as such noncompliance continues in effect, the Affected Party's obligation
under Section 2.5 to treat the other Party as the preferred provider of roaming
services in the market(s) in which such noncompliance arises and (b) in the
event such noncompliance continues for ninety (90) days or more, to permanently
terminate such preferred provider status in such market(s). This limitation of
remedies shall not limit in any way the remedies available to a Party for
noncompliance by the other Party with any other provision of this Agreement,
whether or not such noncompliance is a result of the same circumstances that
result in noncompliance with this Section.
10.4 Neither Party shall provide the other Party's Customers with
Service inferior in quality to that provided to its own Customers. Each Party
shall provide Service to Customers of the other Party of a quality level, based
on criteria customarily used to evaluate the performance of wireless voice
systems, comparable to or exceeding industry norms. Any assessment of "quality"
shall be with reference to the System's performance as a whole within a specific
MSA, RSA, or BTA, as the case may be, and shall be over such a period of time as
reasonably necessary to yield an accurate depiction of System "quality" taking
into account all of the variables which may affect System performance.
10.5 In order to facilitate performance by each of the Parties of
their obligations under this Article X, the Parties agree to exchange and share
information with each other as follows, except that nothing contained herein
shall be construed to require a Party to exchange information that the Party
considers confidential or proprietary.
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10.5.1 Subject to Article XVII of this Agreement, the Parties
shall provide each other, on a reasonably prompt basis, with all information and
materials that either has a right to disclose that is necessary to meet the
interoperability standards set forth in this Article X, including without
limitation the following information:
System Engineering:
- Minimum Standards for Systems
Features:
- Capability description of present Core Features and other
Features
- User Interface (codes)
- Implementation procedures
- Roaming requirements
- Feature functionality design documents
Research and Development:
- operational test results
- operational defects and bugs
- remedial/back-up plans
- operational, functional and technical specifications
- all related documentation
- systems integration
10.5.2 Each Party agrees that it shall, in performing its
obligations to provide the other Party with information in accordance with
Section 10.5, act reasonably, and in good faith toward the other Party.
10.5.3 Nothing contained herein is intended or should be
construed to constitute the transfer or grant by one Party to the other of any
ownership, license, or other rights of or to any trade secret, know-how, or
other intellectual property by one Party to the other.
10.6 Each Party shall provide for automatic call delivery for
Customers of the other Party who are Roamers in such Party's system. To this
end, each Party shall continuously provide the hardware, software and
transmission facilities required for such call delivery either directly between
the systems of the Parties or indirectly through a separate network of wireless
communications carriers. The hardware, software and transmission facilities
provided by each Party hereunder shall at all times be operated and maintained
to provide the most efficient level of service that is technically feasible and
commercially reasonable to minimize transmission errors and Service
interruptions.
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10.7 If the Parties have implemented linking facilities as
contemplated in Section 10.8, the Serving Carrier shall automatically hand-off
to the Home Carrier, and as requested shall automatically accept hand-off from
the Home Carrier in order to provide Service as specified in Article II, calls
to or from a Customer of the Home Carrier in accordance with the hand-off
procedures established for such linking facilities. To this end, each Party
shall continuously provide the hardware, software and transmission facilities
required for such call hand-off either directly between the systems of such Home
and Serving Carrier or indirectly through a separate network of wireless
communications carriers. The hardware, software and transmission facilities
provided by each Party hereunder shall at all times be operated and maintained
to provide the most efficient level of service that is technically feasible and
commercially reasonable to minimize transmission errors and Service
interruption.
10.8 The Parties will work together to evaluate the economic
advantage of various switch linking options to interconnect and facilitate
networking of the Parties' respective Systems as required by this Agreement.
Should the Parties agree to install and maintain linking facilities, the cost of
the linking facilities shall be allocated pursuant to, the following provisions:
10.8.1 AWS and Dobson will each pay one-half of the equipment
costs for the establishment of microwave facilities to link the Parties'
respective Systems for the purposes of automatic call delivery and automatic
call hand-off. Each Party is solely responsible for the costs of preparing its
own facilities for the System link.
10.8.2 Equipment costs for the establishment of a landline link
(T-1) to link the Parties' respective Systems together for these purposes shall
be split between the Parties as follows:
(a) AWS and Dobson shall each pay one-half of the
cost for the installation, use, modification, or discontinuance of the linking
facilities. Each party is solely responsible for all costs to prepare its own
facilities for the link between the Systems.
(b) For ease of administration, AWS will order and
be the customer of record ("COR") for such facilities. Dobson will reimburse AWS
monthly for its share of the recurring costs of such facilities. The COR shall
be responsible for invoicing the other Party for its share of the costs, with
payment due within 30 days of receipt of the invoice.
10.8.3 The Parties agree that this Section 10.8 relates only to
those costs necessary to establish the referenced facilities. This section is
not applicable to the allocation of costs with respect to the provision of
service for each Parties Customers.
10.9 The Parties acknowledge that they do not currently have the
technical systems in place to allocate charges for cellular service provided by
a Carrier when a Customer's call is handed off from one System to another. The
Parties agree that the revenues and costs for a call belong to the Party whose
System operates the originating cell site (the "Bill and Keep System").
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ARTICLE XI.
REPRESENTATIONS AND WARRANTIES
11.1 AWS hereby represents and warrants to Dobson that:
11.1.1 AT&T Wireless is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware. AT&T
Wireless has all requisite power and authority to execute and deliver this
Agreement and to cause this Agreement to be the binding obligation, to the
extent provided herein, of those of its Affiliates listed on Schedule 1 or added
to Schedule 1 hereafter in accordance with Section 2.4.
11.1.2 This Agreement is the legal, valid, and binding
obligation of AT&T Wireless, enforceable against AT&T Wireless in accordance
with its terms, except that such enforceability may be subject to (a)
bankruptcy, insolvency, reorganization, moratorium, or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b) equitable
principles of law and the discretion of any court or arbitral body before which
any related proceeding may be brought.
11.1.3 The execution, delivery, and performance of this
Agreement by AT&T Wireless does not and will not conflict with or result in a
material default, suspension, or termination of any agreement, contract,
obligation, license, or authorization with or granted by any third party or
governmental body.
11.2 Dobson hereby represents and warrants to AWS that:
11.2.1 Dobson is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Oklahoma. Dobson
has all requisite power and authority to execute and deliver this Agreement and
to cause this Agreement to be the binding obligation, to the extent provided
herein, of those of its Affiliates listed on Schedule 2 or added to Schedule 2
hereafter in accordance with Section 2.4.
11.2.2 This Agreement is the legal, valid, and binding
obligation of Dobson, enforceable against Dobson in accordance with its terms,
except that such enforceability may be subject to (a) bankruptcy, insolvency,
reorganization, moratorium, or other similar laws now or hereafter in effect
relating to creditors' rights generally and (b) equitable principles of law and
the discretion of any court or arbitral body before which any related proceeding
may be brought.
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11.2.3 The execution, delivery, and performance of this
Agreement by Dobson does not and will not conflict with or result in a material
default, suspension, or termination of any agreement, contract, obligation,
license, or authorization with or granted by any third party or governmental
body.
ARTICLE XII.
TERM, TERMINATION AND SUSPENSION OF AGREEMENT
12.1 This Agreement shall have a term commencing on the Effective
Date and continuing for a period of five (5) years. Thereafter, this Agreement
shall continue in force on a month-to-month basis unless either party terminates
the Agreement by written notice to the other party given at least 90 days prior
to the date of termination. Otherwise, this Agreement may be terminated or
suspended only as provided in this Article XII.
12.2 This Agreement may be terminated or suspended by either Party
immediately upon written notice to the other of a Default (as defined in Section
13.1) by the other Party. In addition, either Party may suspend this Agreement
immediately upon written notice to the other Party pursuant to Section 13.1.1 of
the existence of a breach of this Agreement, whether or not such breach
constitutes a Default, which materially affects the Service being provided to
Customers of the non-breaching Party. While any suspension of this Agreement,
whether in part or in whole, is in effect the obligations of the Parties shall
be only those that survive termination and to work together to resolve as
expeditiously as possible any difficulty that resulted in a suspension. At such
time as the Party originally giving notice of suspension concludes that the
problem causing the suspension has been resolved, that Party shall give to the
other written notice to this effect. This Agreement shall resume in full effect
within five (5) business days after the Parties have mutually agreed that the
problem has been resolved.
12.3 The Parties shall cooperate to limit the extent and effect of
any suspension of this Agreement to what is reasonably required to address only
the cause of such suspension.
12.4 In the event that a Party transfers control of an Affiliate
listed in Schedule 1 or Schedule 2, as the case may be, the Party shall provide
at least four months' prior written notice to the other Party and upon such
transfer such Affiliate shall be deleted from the appropriate Schedule, but
doing so will not relieve a Party of its obligations under Section 14.1.
12.5 The termination or suspension of this Agreement shall not affect
the rights and liabilities of the Parties under this Agreement with respect to
all Authorized Roamer charges incurred prior to the effective date of such
termination or suspension.
20
<PAGE>
ARTICLE XIII.
DEFAULT
13.1 A Party will be in "Default" under this Agreement upon the
occurrence of any of the following events:
13.1.1 Material breach of any material term of this Agreement,
if such breach shall continue for fifty (30) days after receipt of written
notice thereof from the nonbreaching Party;
13.1.2 Voluntary liquidation or dissolution or the approval by
the management, board of directors, stockholders, or owners of a Party of any
plan or arrangement for the voluntary liquidation or dissolution of the Party;
13.1.3 A final order by the FCC revoking or denying renewal of
CMRS licenses or permits granted to such Party which, individually or in the
aggregate, are material to the business of such Party; or
13.1.4 Such Party (i) filing pursuant to a statute of the
United States or of any state, a petition for bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee for all or a
portion of such Party's property, (ii) has filed against it, pursuant to a
statute of the United States or of any state, a petition for bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or trustee
for all or a portion of such Party's property, provided that within sixty (60)
days after the filing of any such petition such Party fails to obtain a
discharge thereof, or (iii) making an assignment for the benefit of creditors or
petitioning for, or voluntarily entering into, an arrangement of similar nature,
and provided that such filing, petition, or appointment is still continuing.
13.2 All claims and disputes relating in any way to the performance,
interpretation, validity, or breach of this Agreement, including but not limited
to a claim based on or arising from an alleged tort, shall be resolved as
provided in this Section 13.2. It is the intent of the Parties that any
disagreements be resolved amicably to the greatest extent possible.
13.2.1 If a disagreement cannot be resolved by the
representatives of the Parties with day-to-day responsibility for this
Agreement, such matter shall be referred to an executive officer of each of the
Parties. The executive officers shall conduct face-to-face negotiations at a
neutral location or such other location as shall be mutually agreed upon. If
these representatives are unable to resolve the dispute within ten business days
after either Party requests the involvement of the executive officers, then
either Party may, but is not required to, refer the matter to mediation or
arbitration, as applicable in accordance with Sections 13.2.2 and 13.2.3.
13.2.2 In any case where the amount claimed or at issue is One
Million Dollars ($1,000,000) or more and the Parties are unsuccessful in
resolving the disagreement, the Parties
21
<PAGE>
agree to submit the disagreement to non-binding mediation upon written
notification by either Party. The Parties shall mutually select an independent
mediator experienced in telecommunications system disputes. The specific format
for the mediation shall be left to the discretion of the mediator. If mediation
does not result in resolution of the disagreement within thirty days of the
initial request for mediation, then either Party may, but is not required to,
refer the matter to arbitration.
13.2.3 Any disagreement not finally resolved in accordance with
the foregoing provisions of this Section 13.2 shall, upon written notice by
either Party to the other, be resolved by final and binding arbitration. Subject
to this Section 13.2.3, such arbitration shall be conducted through, and in
accordance with the rules of, JAMS/Endispute. A single neutral arbitrator shall
decide all disputes. Each Party shall bear its own expenses with respect to the
arbitration, except that the costs of arbitration proceeding itself, including
the fees and expenses of the arbitrator, shall be shared equally by the Parties.
The arbitration shall take place in a neutral location selected by the
arbitrator. The arbitrator may permit discovery to the full extent permitted by
the Federal Rules of Civil Procedure or to such lesser extent as the arbitrator
determines is reasonable. The arbitrator shall be bound by and strictly enforce
the terms of this Agreement. The arbitrator shall make a good faith effort to
apply applicable law, but an arbitration decision and award shall not be subject
to review because of errors of law. The arbitrator shall have the sole authority
to resolve issues of the arbitrability of any disagreement, including the
applicability or running of any applicable statute of limitation. The arbitrator
shall not have power to award damages in connection with any dispute in excess
of actual compensatory damages nor to award punitive damages nor any damages
that are excluded under this Agreement and each party irrevocably waives any
claim thereto. The award of any arbitration shall be final, conclusive and
binding on the Parties. Judgement on the award may be entered in any court
having jurisdiction over the Party against which the award was made. Nothing
contained in this Section 13.2.3 shall be deemed to prevent either party from
seeking any interim equitable relief; such as a preliminary injunction or
temporary restraining order, pending the results of the arbitration. The United
States Arbitration Act and federal arbitration law shall govern the
interpretation, enforcement, and proceedings pursuant to the arbitration clause
in this Agreement.
ARTICLE XIV.
SUCCESSORS AND ASSIGNS
14.1 Neither Party may, directly or indirectly, sell, assign,
transfer, or convey its interest in this Agreement or any of its rights or
obligations hereunder, including any assignment or transfer occurring by
operation of law, without the written consent of both Parties, except that (i)
either Party may assign or delegate this Agreement or any of its rights or
obligations hereunder to an Affiliate of such Party without the consent of the
other Party, but such assignment or delegation will not relieve the Party of any
of its obligations hereunder and (ii) a Party may assign its rights and
obligations hereunder to an assignee of its Service license or permit issued by
the EEC, provided that such assignee expressly assumes, by written instrument
22
<PAGE>
approved in writing by the other Party, all of the obligations of such Party
hereunder and thereby becomes a Party hereunder. In no event will an assignment
permitted under this Section 14.1 without the consent of the other Party
obligate a Serving Carrier to provide Service to Customers of the assignee or
any of its Affiliates other than Customers residing in the area in which the
assignor previously was licensed to provide Service.
14.2 No person other than a Party to this Agreement shall acquire any
rights hereunder as a third-party beneficiary or otherwise by virtue of this
Agreement.
ARTICLE XV.
NO PARTNERSHIP OR AGENCY RELATIONSHIP IS CREATED
Nothing contained in this Agreement shall constitute the Parties as
partners with one another or render any Party liable for any debts or
obligations of any other Party, nor shall any Party hereby be constituted the
agent of the other Party.
ARTICLE XVI.
NOTICES AND AUTHORIZED REPRESENTATIVES
Unless otherwise provided herein, any notice, request, instruction or
other document to be given hereunder by any Party to the other shall be in
writing and delivered by hand delivery, certified mail (postage prepaid, return
receipt requested), facsimile, or overnight air delivery service, as follows:
If to AWS, to: AT&T Wireless Services, Inc.
5000 Carillon Point
Kirkland, WA 98033
Attn: Intercarrier Services
with a copy to: AT&T Wireless Services, Inc.
5000 Carillon Point
Kirkland, WA 98033
Attn: Legal Department
If to Dobson, to: Dobson Cellular Systems, Inc.
13439 North Broadway Extension
Oklahoma City, OK 73114
Attn: Tina Durant
23
<PAGE>
or such other address as any Party may from time to time furnish to the other
Party by a notice given in accordance with the terms of this Section. All such
notices and communications shall be deemed to have been duly given at the time
delivered by hand, if personally delivered; three business days after being
deposited in the mail, if mailed; when receipt is confirmed, if by facsimile and
received by 3:00 p.m. local time on any business day and otherwise on the next
business day; and the next business day if sent by overnight air delivery
service.
ARTICLE XVII.
CONFIDENTIALITY
17.1 Each Party shall, and shall cause each of its Affiliates and
each of its and their employees, agents, and contractors, to keep confidential
and not use for any purpose except as contemplated by this Agreement, any and
all information and know-how provided to it by the other Party which is
identified in writing as confidential ("Confidential Information").
Identification of information as confidential shall, in the case of information
delivered in tangible form, appear on at least the face or first page of such
information and, in the case of information communicated verbally, be given
verbally contemporaneously with the delivery of the information and confirmed in
writing within five business days thereafter. Notwithstanding the foregoing, the
following information shall be treated as Confidential Information without any
further identification as such: (i) The terms, but not including the mere
existence, of this Agreement; and (ii) all information exchanged pursuant to
Article VI.
17.2 Notwithstanding Section 17.1, a Party shall have no obligation
to keep confidential any information that (a) was rightly in the receiving
Party's possession before receipt from the disclosing Party, (b) is or becomes a
matter of public knowledge without violation of this Agreement by the receiving
Party, (c) is rightfully received by the receiving Party from a third party
rightfully in possession of and, to the best of the receiving Party's knowledge,
with a right to make an unrestricted disclosure of such information, (d) is
disclosed by the disclosing Party to a third party without imposing a duty of
confidentiality on the third party, or (e) is independently developed by the
receiving Party without the use of any Confidential Information. In addition, a
Party may disclose any Confidential Information to the extent required by
applicable law or regulation or by order of a court or governmental agency;
provided, that prior to disclosure the Party shall use all reasonable efforts to
notify the other Party of such pending disclosure and shall provide any
reasonable assistance requested by the other Party to maintain the
confidentiality of the information.
17.3 The Parties agree that a Party will not have an adequate remedy
at law in the event of a disclosure or threatened disclosure of Confidential
Information in violation of this Article XVII. Accordingly, in such event, in
addition to any other remedies available at law or in equity, a Party shall be
entitled to specific enforcement of this Article XVII and to other injunctive
and equitable remedies against such breach without the posting of any bond.
24
<PAGE>
17.4 The obligations under this Article XVII shall survive the
termination of this Agreement for a period of three years.
ARTICLE XVIII.
MISCELLANEOUS
18.1 The Parties agree to comply with, conform to, and abide by all
applicable and valid laws, regulations, rules and orders of all governmental
agencies and authorities, and agree that this Agreement is subject to such laws,
regulations, rules and orders. All references in this Agreement to such laws,
regulations, rules and orders include any successor provision. If any amendment
to or replacement of the same materially alters the benefits, rights, and duties
of the Parties hereunder, the Parties agree to negotiate in good faith an
amendment to this Agreement to restore the respective positions of the Parties
to substantially the same point as existed prior to such amendment or
replacement.
18.2 The Parties agree to use their respective best, diligent, and
good faith efforts to fulfill all of their obligations under this Agreement. The
Parties recognize, however, that to effectuate all the purposes of this
Agreement, it may be necessary either to enter into future agreements or to
amend this Agreement, or both. In that event, the Parties agree to negotiate
with each other in good faith.
18.3 This Agreement constitutes the full and complete agreement of
the Parties with respect to the subject matter hereof. Any prior agreements
among the Parties with respect to this subject matter, including without
limitation the Intercarrier Services Agreements dated as of October 16, 1991 and
June 16, 1997, are hereby superseded. This Agreement may not be amended, except
by the written consent of the Parties. Waiver of any breach of any provision of
the Agreement must be in writing signed by the Party waiving such breach or
provision and such waiver shall not be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision. The failure of a Party to
insist upon strict performance of any provision of this Agreement or any
obligation under this Agreement shall not be a waiver of such Party's right to
demand strict compliance therewith in the future.
18.4 The headings in this Agreement are inserted for convenience and
identification only and are not intended to describe, interpret, define or limit
the scope, extent or intent of this Agreement or any provision thereof.
18.5 This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same Agreement.
18.6 This Agreement shall be construed in accordance with the
internal laws of the State of Delaware without reference to the choice of law
principles, except as subject to the United States Arbitration Act and the
Federal Communications Act.
25
<PAGE>
18.7 Except for claims by third parties which fall within the scope
of a Party's indemnification obligations, neither Party shall be liable to the
other Party for any special, indirect, consequential, or punitive damages.
18.8 The Parties agree that they will not use the name, service marks
or trademarks of the other party or any of its Affiliates in any advertising,
publicity releases or sales presentations, without such Party's written consent.
Neither Party is licensed hereunder to conduct business under any logo,
trademark, service or trade name (or any derivative thereof) of the other Party.
18.9 No Party shall make any public statement or issue any press
release concerning the terms of this Agreement except as necessary to comply
with requirements of any law, regulation, or the order or judgment of a court or
tribunal of competent jurisdiction. If any such public statement or release is
so required, and AWS and Dobson mutually agree to such statement or release, the
Party making such disclosure shall consult with the other Party prior to making
such statement or release and the Party shall use all reasonable efforts, act in
good faith, to agree upon a text for such statement or release which is
satisfactory to AWS and Dobson. Nothing contained herein is intended to limit
the ability of the Parties to make statements regarding the availability to such
Party's Customers of the Services to be provided hereunder by the other Party or
that such other Party is the provider of such Services.
18.10 Neither of the Parties will be liable for nonperformance or
defective performance of its obligations under this Agreement to the extent and
for such periods of time as such nonperformance or defective performance is due
to reasons outside such Party's control, including, without limitation, acts of
God, war, acts of any governmental authority, riots, revolutions, fire, floods,
explosions, sabotage, nuclear incidents, lightning, weather, earthquakes,
storms, sinkholes, epidemics, strikes, or delays of suppliers or subcontractors
for the same causes. Neither Party shall be required to settle any labor dispute
or other third party dispute in any manner which is deemed by that Party to be
less than totally advantageous, in that Party's sole discretion.
18.11 Except as specifically provided herein, this Agreement is a
non-exclusive arrangement between the Parties and nothing contained in this
Agreement is intended or should be construed to preclude or limit a Party from
obtaining from or providing to a third party Service of a type available or
required to be provided under this Agreement.
26
<PAGE>
EXECUTED as of the date first written above.
AT&T WIRELESS SERVICES, INC. DOBSON CELLULAR SYSTEMS, INC.
By: /s/ Don Adams By: /s/ G. Edward Evans
------------------------------- ---------------------------------
Name: Don Adams Name: G. Edward Evans
----------------------------- ------------------------------
Title: Vice President - Title: President
Carrier Relations ------------------------------
Date: 7/8/98 Date: 8/14/98
----------------------------- -------------------------------
27
<PAGE>
SCHEDULE 1
AT&T WIRELESS SERVICES, INC. AND ITS AFFILIATES
28
<PAGE>
Schedule 1: AT&T Wireless Services, Inc. and its Affiliates [LOGO]
<TABLE>
<CAPTION>
MKT # MARKET SID/BID OPERATING ENTITY/LICENSEE
----- ------ ------- -------------------------
AT&T WIRELESS MARKETS - 850 MHZ ANALOG/DIGITAL PROPERTIES
- ---------------------------------------------------------
<S> <C> <C> <C> <C>
ALASKA 187 Anchorage 251 Cellular Alaska Partnership
316 Alaska-2 RSA Wasillia 30921 AT&T Wireless Services of Alaska, Inc.
CALIF. 215 Chico 311 AT&T Wireless Services of California, Inc.
74 Fresno 153 AT&T Wireless Services of California, Inc.
142 Modesto 30357 AT&T Wireless Services of California, Inc.
73 Oxnard-Ventura 30065 AT&T Wireless Services of California, Inc.
254 Redding 513 Redding Cellular Partnership
35 Sacramento 129 AT&T Wireless Services of California, Inc.
107 Stockton 233 AT&T Wireless Services of California, Inc.
150 Visalia 30363 Visalia Cellular Telephone Company
274 Yuba City 30861 Yuba City Cellular Telephone Company
124 Santa Barbara 531 Santa Barbara Cellular Systems, Ltd.
338 California - 3 RSA 233 AT&T Wireless Services of California, Inc.
343 California - 8 RSA 30859 AT&T Wireless Services of California, Inc.
347 California - 12 RSA 153 AT&T Wireless Services of California, Inc.
CONNECTICUT 357 CT-1 (Litchfield) 1101 Litchfield Acquisitions Corporation
COLO. 117 Colorado Springs 30743 AT&T Wireless Services of Colorado, Inc.
19 Denver 45 AT&T Wireless Services of Colorado, Inc.
210 Fort Collins 30747 Fort Collins-Loveland Cellular Telephone Co.
243 Greeley 30751 Greeley Cellular Telephone Company
350 Colorado - 3 RSA
(Vail/Grand Junction) 30989 AT&T Wireless Services of Colorado, Inc.
FLORIDA 211 Bradenton 30853 Bradenton Cellular Partnership
146 Daytona Beach 325 AT&T Wireless Services of Florida, Inc.
51 Jacksonville 75 AT&T Wireless Services of Florida, Inc.
137 Melbourne 30851 Melbourne Cellular Telephone Company
12 Miami, Key West 37, 30277 AT&T Wireless Services of Florida, Inc.
245 Ocala 30063 Ocala Cellular Telephone Company, Inc.
60 Orlando 175 AT&T Wireless Services of Florida, Inc.
167 Sarasota 30849 Sarasota Cellular Telephone Company
22 Tampa 30283 AT&T Wireless Services of Florida, Inc.
363 FL-4 Citrus - Brooksville 30261 AT&T Wireless Services of Florida, Inc.
361 FL-2 Glades 37 Talcom, Inc.
208 Fort Pierce, Vero Beach,
Sebastian 37, 30281, 30309 AT&T Wireless Services of Florida, Inc.
114 Lakeland 37 AT&T Wireless Services of Florida, Inc.
72 West Palm Beach 37 AT&T Wireless Services of Florida, Inc.
370 FL-11 AT&T Wireless Services of Florida, Inc.
364 FL-5 Flagler (A2) Talcom, Inc.
HAWAII 386 Hawaii - 2 RSA (Maui) 1159 AT&T Wireless Services of Hawaii, Inc.
IDAHO 190 Boise 289 Boise City Cellular Partnership
391 Idaho - 4 RSA (Elmore) 30393 AT&T Wireless Services of Idaho, Inc.
Page 1
<PAGE>
Schedule 1: AT&T Wireless Services, Inc. and its Affiliates [LOGO]
<CAPTION>
MKT # MARKET SID/BID OPERATING ENTITY/LICENSEE
----- ------ ------- -------------------------
<S> <C> <C> <C> <C>
LOUISIANA 219 Monroe 463 Monroe Cellular, Inc.
100 Shreveport 229 First Cellular Group of Shreveport, Inc.
455 LA- 2 A2 Monroe Cellular, Inc.
456 LA- 3 A3 First Cellular Group of Shreveport, Inc.
MINN. 15 Minneapolis 23 AT&T Wireless Services of Minnesota, Inc.
288 Rochester, Austin 30233, 26321 Rochester CellTelCo
198 St. Cloud 30235 St. Cloud Cellular Telephone Company, Inc.
MISSOURI 163 Springfield 559 MC Cellular Corporation, Inc.
239 Joplin 30069 MC Cellular Corporation, Inc.
517 Missouri - 14 RSA (Monet) 30071 Auburn Television Group, Inc.
NEVADA 93 Las Vegas 211 AT&T Wireless Services of Nevada, Inc.
171 Reno 515 Reno Cellular Telephone Company
545 Nevada - 3 RSA (Carson City) 30855 AT&T Wireless Services of Nevada, Inc.
NEW JERSEY 550 Hunterdon (NJ-1) 1487 NJ Cellular, Inc.
NEW YORK 1 New York 25 Cellular Telephone Company
OKLA. 260 Lawton, OK 425 OK-5 Cellular, Inc.
45 Oklahoma City 169 Midwest Cellular Telephone Ltd Ptsp
57 Tulsa 111 AT&T Wireless Services of Tulsa, Inc.
598 OK-3 Grant 30919 OK-3 Cellular, Inc.
599 OK-4 Nowata AT&T Wireless Services, Inc.
600 OK-5 1585 OK-5 Cellular, Inc.
OHIO 199 Steubenville/Weirton 30317 McLang Cellular Inc.
199 Wintersville, St Clairsville 30501, 30889 McLang Cellular Inc.
OREGON 135 Eugene 61 AT&T Wireless Services of Oregon, Inc.
229 Medford 30867 Medford Cellular Telephone Company, Inc.
30 Portland 61 AT&T Wireless Services of Oregon, Inc.
148 Salem 30869 Salem Cellular Telephone Company
607 Oregon 2 - Madras 31011 Pueblo Cellular Communications, Inc.
607 Oregon 2 - The Dalles 30293 Pueblo Cellular Communications, Inc.
607 Hood River 1601 Pueblo Cellular Communications, Inc.
PENN. 143 Johnstown, Somerset 30051, 30971 McCaw Communications of Johnstown, Inc.
13 Pittsburgh 39 Pittsburgh Cellular Telephone Company
TEXAS 9 Dallas 33 Metroplex Telephone Company
75 Austin 107 Texas Cellular Telephone Company Ltd Partnership
662 TX-11 Cherokee 1711 Northeast Texas Cellular Telephone Company
287 Bryan/College Station 297 Texas Cellular Telephone Company Ltd Partnership
Page 2
<PAGE>
Schedule 1: AT&T Wireless Services, Inc. and its Affiliates [LOGO]
<CAPTION>
MKT # MARKET SID/BID OPERATING ENTITY/LICENSEE
----- ------ ------- -------------------------
<S> <C> <C> <C> <C>
657 TX- 6 Jack 30287 McCaw Communications of Gainesville, Tx, Inc.
160 Killeen-Temple 409 Texas Cellular Telephone Company Ltd Partner
206 Longview-Marshall 30473 Longview Cellular, Inc.
661 Tx - 10 Navarro 1709,30953,30969 AT&T Wireless Services, Inc.
668 Tx - 17 Newton 1723 Texas Cellular Telephone Company Ltd Partner
33 San Antonio 151 AT&T Wireless Services of San Antonio, Inc.
292 Sherman-Denison 30635 Texas Cellular Telephone Company Ltd Partner
240 Texarkana 30475 Texarkana Cellular Partnership
237 Tyler 579 Northeast Texas Cellular Telephone Company
194 Waco 587 Texas Cellular Telephone Company Ltd Partner
233 Wichita Falls, TX 595 Wichita Falls CellTelCo
666 Lampassas/Johnson City 30773, 30843
UTAH 159 Provo 30871 Provo Cellular Telephone Company
39 Salt Lake City 91 AT&T Wireless Services of Utah, Inc.
673 Utah - 1 RSA (Box Elder) 91 AT&T Wireless Services of Utah, Inc.
WASH. 270 Bellingham 30877 Bellingham Cellular Partnership
212 Bremerton 30873 Bremerton Cellular Telephone Company
242 Olympia 30875 Olympia Cellular Telephone Company, Inc.
20 Seattle 47 AT&T Wireless Services of Washington, Inc.
20 Kirkland 26345 AT&T Wireless Services of Washington, Inc.
109 Spokane 231 Spokane Cellular Telephone Company
82 Tacoma 47 AT&T Wireless Services of Washington, Inc.
191 Yakima 30227 Yakima Cellular Telephone Company
699 Skamania Pueblo Cellular Communications, Inc.
693 WA - 1 Calallam AT&T Wireless Services of Washington, Inc.
698 WA - 6 Longview WA 30243 AT&T Wireless Services of Washington, Inc.
698 WA - 6 Chehalis WA 30837 AT&T Wireless Services of Washington, Inc.
697 WA - 5 Ellensburg/Moses Lakes 30231 AT&T Wireless Services of Washington, Inc.
214 Tri Cities WA 30229 AT&T Wireless Services of Washington, Inc.
WEST VA. 178 Wheeling 30059 Wheeling Cellular Telephone Company
Page 3
<PAGE>
Schedule 1: AT&T Wireless Services, Inc. and its Affiliates [LOGO]
<CAPTION>
MKT # MARKET SID/BID OPERATING ENTITY/LICENSEE
----- ------ ------- -------------------------
<S> <C> <C> <C> <C>
ARKANSAS PCS Little Rock MTA 40 AT&T Wireless PCS, Inc.
ARIZONA PCS Phoenix 4169 AT&T Wireless PCS, Inc.
ILLINOIS PCS Chicago 4111 AT&T Wireless PCS, Inc.
NEBRASKA PCS Omaha 4165 AT&T Wireless PCS, Inc.
Virginia PCS Richmond 4177 AT&T Wireless PCS, Inc.
WA DC PCS Washington - Baltimore 4196 AT&T Wireless PCS, Inc.
PUERTO RICO PCS Puerto Rico 4175 AT&T Wireless PCS, Inc.
New Mexico PCS El Paso/Albuquerque 4128 AT&T Wireless PCS, Inc.
PENN. PCS Philadelphia 4167 AT&T Wireless PCS of Philadelphia, LLC
TENNESSEE PCS Memphis-Jackson MTA:28 AT&T Wireless PCS, Inc.
TENNESSEE PCS Knoxville 4141 AT&T Wireless PCS, Inc.
NORTH CAR. PCS Charlotte/Greensboro 4109 AT&T Wireless PCS, Inc.
NORTH CAR. PCS Greensboro 40117 AT&T Wireless PCS, Inc.
South CAR. PCS Rock Hill 40119 AT&T Wireless PCS, Inc.
OHIO PCS Cincinnati/Dayton 4113 AT&T Wireless PCS, Inc.
OHIO PCS Cleveland 4116 AT&T Wireless PCS of Cleveland, LLC
OHIO PCS Columbus 4117 AT&T Wireless PCS, Inc.
New York PCS Buffalo/Rochester 4108 AT&T WIRELESS PCS, INC.
MISSOURI PCS St. Louis 4189 AT&T Wireless PCS, Inc.
Kentucky PCS Louisville Lexington 4147 AT&T Wireless PCS, Inc.
Kentucky PCS Nashville 4158 AT&T Wireless PCS, Inc.
MASS. PCS Boston Providence 4105 AT&T Wireless PCS, Inc.
MICHIGAN PCS Detroit 4125 AT&T Wireless PCS, Inc.
GEORGIA PCS Atlanta 4101 AT&T Wireless PCS, Inc.
</TABLE>
Page 4
<PAGE>
SCHEDULE 2
DOBSON CELLULAR SYSTEMS, INC. AND ITS AFFILIATES
OK RSA# 5
OK RSA# 7
OK RSA# 2
ENID OK
TX RSA# 2
TX RSA# 16
CA RSA# 4
CA RSA# 7
Santa Cruz CA (1)
AZ RSA# 5
MD RSA# 2
MD RSA# 3
Hagerstown MD
Cumberland MD
PA RSA# 10 W
OH RSA# 2
MO RSA# 1
MO RSA# 4
MO RSA# 5A
MO RSA# 2
KS RSA# 5
(1) Subject to consummation of acquisition.
29
<PAGE>
EXHIBIT A
DOBSON MARKETS
Enid, OK
OK RSA#2
CA RSA#4
Santa Cruz, CA (1)
TX RSA#16
TX RSA#10 (1)
MD RSA#2 (2)
MD RSA#3 (2)
Cumberland, MD (2)
Hagerstown, MD (2)
PA RSA #10W
(1) Subject to consummation of the acquisition of the market by Dobson.
(2) Subject to any preexisting agreements of AWS and any approvals that may be
required thereunder. AWS is under no obligation to seek such approvals.
30
<PAGE>
EXHIBIT B
AWS MARKETS
31
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
SID MARKET
BID NAME STATE NOTE RSA
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
23 Minneapolis, MN MN
25 New York, NY NY
33 Dallas, TX TX
37 Miami, FL FL
39 Pittsburgh, PA PA
45 Denver, CO CO
47 Seattle, WA WA
61 Portland, OR OR
75 Jacksonville, FL FL
91 Salt Lake City, UT UT
107 Austin, TX TX
111 Tulsa, OK OK
129 Sacramento, CA CA
151 San Antonio, TX TX
153 Fresno, CA CA
169 Oklahoma City, OK OK
175 Orlando, FL FL
211 Las Vegas, NV NV
229 Shreveport, LA LA
231 Spokane, WA WA
233 Stockton, CA CA
251 Anchorage, AK AK
289 Boise, ID ID
297 Bryan College Station, TX TX
311 Chico, CA CA
325 Daytona Beach, FL FL
409 Temple/Killeen, TX TX
425 Lawton, OK OK
463 Monroe, LA LA
513 Redding, CA CA
515 Reno, NV NV
531 Santa Barbara, CA CA
559 Springfield, MO MO
579 Tyler, TX TX
587 Waco, TX TX
595 Wichita Falls TX
1019 Wasilla, AK AK
1101 Litchfield, CN CN
1159 Maui, HI HI
1487 Hundterdon County, NJ NJ
1585 Grove, OK OK
1601 Hood River, OR OR
1711 Lufkin,TX TX
1723 Huntsville, TX TX
1783 Centralia, WA WA now BID 30837
4101 Atlanta GA
4105 Boston-Providence MA/RI
4108 Buffalo-Rochester NY
4109 Charlotte-Greensboro NC
40117 Greensboro NC
40119 Rock Hill SC
4111 Chicago IL
4113 Cincinnati/Dayton OH
4116 Cleveland OH
4117 Columbus OH
4125 Detroit MI
4128 El Paso/Alberquerque NM
4141 Knoxville TN
4147 Louisville/Lexington KY
4158 Nashville KY
4165 Omaha NE
4167 Philadelphia PA
<PAGE>
- --------------------------------------------------------------------------------
SID MARKET
BID NAME STATE NOTE RSA
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
4169 Phoenix AZ
4175 Puerto Rico/US Virgin Islands
4177 Richmond VA
4189 St Louis MO
4196 Washington-Baltimore WA DC
4197 Wichita KS
26321 Austin MN
26345 Kirkland WA WA
30051 Johnstown, PA PA
30059 Wheeling, WV WV
30063 Ocala, FL FL
30065 Oxnard, CA CA
30069 Joplin MO
30071 Monet, MO MO
30111 Corvallis, OR OR OR-4
30227 Yakima, WA WA
30229 Tri-Cities, WA WA
30231 Ellensburg, WA WA
30233 Rochester, MN MN
30235 St Cloud, MN MN
30243 Longview, WA WA
30261 Brooksville, FL FL
30277 Key West, FL FL
30281 Vero Beach, FL FL
30283 Tampa, FL FL
30287 Gainsville, FL TX
30293 The Dalles, OR OR
30309 Sebastion, FL FL
30317 Weirton/Steubenville, WV/OH OH
30393 Elmore, ID ID
30473 Longview/Marshall TX TX
30475 Texarkana, TX/AR TX
30501 Wintersville, OH OH
30635 Sherman/Denison, TX TX
30743 Colorado Springs, CO CO
30747 Fort Collins, CO CO
30751 Greeley, CO CO
30773 Lampassas, TX TX
30837 Chehalis WA
30849 Sarasota, FL FL
30851 Melbourne, FL FL
30853 Bradenton, FL FL
30855 Carson City, NV NV
30857 Modesto, CA CA
30859 Tehama, CA CA
30861 Yuba City, CA CA
30863 Visalia, CA CA
30867 Medford, OR OR
30869 Salem, OR OR
30871 Provo, UT UT
30873 Bremerton, WA WA
30875 Olympia, WA WA
30877 Bellingham, WA WA
30889 St Clairsville, OH OH
30919 Stillwater, OK OK
30921 Wasilla, AK AK
30971 Somerset, PA PA
30989 Vail/Grand Junction, CO CO
31011 Madras, OR OR
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
AT&T MANAGED MARKETS
NOT INCLUDED IN SERVICE RATES.
<TABLE>
<CAPTION>
SORTED BY: SID/BID
EFFECTIVE: NOVEMBER 1, 1997
- --------------------------------------------------------------------------------
SID MARKET NOTES Rates
BID NAME Contact
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1089 Canon City, CO
1163 Coeur D'Alene, ID North American Cell
1321 Deep Creek, MD MD-1 LP
1703 Greenville, TX KO Communications
1973 San Saba, TX Concho Cellular
30237 Sierra, CA Data Cellular Systems
30239 El Dorado, CA Cellular Pacific
30249 Newburg, OR
30363 Park City, UT Omega Cellular
30409 Astoria, OR
30425 San Luis Obispo, CA C-1 San Luis Obispo
30573 Ruston, LA LA 1 Joint Venture
</TABLE>
<PAGE>
EXHIBIT C
SERVICE CHARGES
The rates between the Dobson markets listed below and all AWS markets listed on
Schedule 1 are as follows.
TX- RSA#16:
1998 Dobson shall charge AWS $0.50 per minute, AWS shall charge Dobson
$0.35 per minute.
1/16/1999 Dobson shall charge AWS $0.35 per minute, AWS shall charge Dobson
$0.35 per minute.
1/16/2000 and beyond - per the Rate Adjustment below.
All minutes billed in full minute increments, partial minutes rounded up to next
full minute.
RATE ADJUSTMENT
The following defined terms are used herein:
- - "Outcollect Revenues" means the amount paid by AWS to Dobson for Service
provided to AWS Customers as Roamers in any Market that is included in the
Dobson System.
- - "Base Period" means any twelve consecutive calendar months.
- - "Prior Period" means the twelve consecutive calendar months preceding any
Base Period. A Prior Period may include a period during which a Market was
operated by a predecessor in interest to Dobson.
- - "Market" means any individual area designated and operated by Dobson as a
home service area.
Effective one year after the Effective Date, the rate payable by AWS to Dobson
for roaming in any Market that has been operated by Dobson for at least twelve
months shall be adjusted in accordance with the following formula IF AND ONLY IF
such calculation shall result in a lower rate than that previously in effect:
The per minute rate shall be adjusted by multiplying the rate by (1) 1.2 and (2)
Outcollect Revenues during the Prior Period and dividing by (3) Outcollect
Revenues for the Base Period. The result shall be rounded to the nearest whole
cent for purposes of the new rate to be applied, but shall be rounded at the
sixth decimal place for purposes of calculating future rate adjustments.
Examples:
(1) Dobson acquires Market X from XYZ Wireless Co. on July 1, 1998. The roaming
rate in Market X is $.35 per minute. For the period from July 1, 1998 to
June 30, 1999, AWS pays Dobson $650,000 for roaming in Market X. For the
period from July 1, 1997 to June 30, 1998, AWS paid XYZ Wireless Co.
$500,000 for roaming in Market X. Effective July 1, 1999, the roaming rate
shall be adjusted to $.35 x (1.2 x $500,000)/$650,000 = $.32 (as rounded).
For future rate adjustments, the rate shall be .323077.
(2) Same assumptions as Ex. 1, but Outcollect Revenue in Base Period is
$575,000. The calculation then yields $.35 x (1.2 x $500,000)/$575,000 =
$.37. Since this exceeds the rate in effect, no adjustment is made and the
roaming rate continues to be $.35.
32
<PAGE>
CA RSA#4
1998 Dobson shall charge AWS CA markets $0.35 per peak minute, $0.20 per
off peak minute*. AWS CA markets shall charge $0.35 per peak minute, $0.20 per
off peak minute.*
*Peak = 6:00 AM to 7:59 PM Monday - Friday; off-peak = 8:00 PM - 5:59 AM Monday
- - Friday, all day Saturday and Sunday.
Dobson and AWS shall charge $0.50 per minute reciprocal for markets outside of
CA.
Effective 4/1/1999 the rates to be charged are per the Rate Adjustment shown
below.
All minutes billed in full minute increments, partial minutes rounded up to next
full minute.
RATE ADJUSTMENT
The following defined terms are used herein:
- - "Outcollect Revenues" means the amount paid by AWS to Dobson for Service
provided to AWS Customers as Roamers in any Market that is included in the
Dobson System.
- - "Base Period" means any twelve consecutive calendar months.
- - "Prior Period" means the twelve consecutive calendar months preceding any
Base Period. A Prior Period may include a period during which a Market was
operated by a predecessor in interest to Dobson.
- - "Market" means any individual area designated and operated by Dobson as a
home service area.
Effective one year after the Effective Date, the rate payable by AWS to Dobson
for roaming in any Market that has been operated by Dobson for at least twelve
months shall be adjusted in accordance with the following formula IF AND ONLY IF
such calculation shall result in a lower rate than that previously in effect:
The per minute rate shall be adjusted by multiplying the rate by (1) 1.2 and (2)
Outcollect Revenues during the Prior Period and dividing by (3) Outcollect
Revenues for the Base Period. The result shall be rounded to the nearest whole
cent for purposes of the new rate to be applied, but shall be rounded at the
sixth decimal place for purposes of calculating future rate adjustments.
Examples:
(1) Dobson acquires Market X from XYZ Wireless Co. on July 1, 1998. The
roaming rate in Market X is $.35 per minute. For the period from July 1,
1998 to June 30, 1999, AWS pays Dobson $650,000 for roaming in Market X.
For the period from July 1, 1997 to June 30, 1998, AWS paid XYZ Wireless
Co. $500,000 for roaming in Market X. Effective July 1, 1999, the roaming
rate shall be adjusted to $.35 x (1.2 x $500,000)/$650,000 = $.32 (as
rounded). For future rate adjustments, the rate shall be .323077.
(2) Same assumptions as Ex. 1, but Outcollect Revenue in Base Period is
$575,000. The calculation then yields $.35 x (1.2 x $500,000)/$575,000 =
$.37. Since this exceeds the rate in effect, no adjustment is made and the
roaming rate continues to be $.35.
33
<PAGE>
SANTA CRUZ CA:
1998 Dobson and AWS shall reciprocally charge $0.35 per minute.
Effective twelve (12) months after the closing date of the sale of this market
to Dobson, the rates to be charged are per the Rate Adjustment shown below.
All minutes billed in full minute increments, partial minutes rounded up to next
full minute.
RATE ADJUSTMENT
The following defined terms are used herein:
- - "Outcollect Revenues" means the amount paid by AWS to Dobson for Service
provided to AWS Customers as Roamers in any Market that is included in the
Dobson System.
- - "Base Period" means any twelve consecutive calendar months.
- - "Prior Period" means the twelve consecutive calendar months preceding any
Base Period. A Prior Period may include a period during which a Market was
operated by a predecessor in interest to Dobson.
- - "Market" means any individual area designated and operated by Dobson as a
home service area.
Effective one year after the Effective Date, the rate payable by AWS to Dobson
for roaming in any Market that has been operated by Dobson for at least twelve
months shall be adjusted in accordance with the following formula IF AND ONLY IF
such calculation shall result in a lower rate than that previously in effect:
The per minute rate shall be adjusted by multiplying the rate by (1) 1.2 and (2)
Outcollect Revenues during the Prior Period and dividing by (3) Outcollect
Revenues for the Base Period. The result shall be rounded to the nearest whole
cent for purposes of the new rate to be applied, but shall be rounded at the
sixth decimal place for purposes of calculating future rate adjustments.
Examples:
(1) Dobson acquires Market X from XYZ Wireless Co. on July 1, 1998. The
roaming rate in Market X is $.35 per minute. For the period from July 1,
1998 to June 30, 1999, AWS pays Dobson $650,000 for roaming in Market X.
For the period from July 1, 1997 to June 30, 1998, AWS paid XYZ Wireless
Co. $500,000 for roaming in Market X. Effective July 1, 1999, the roaming
rate shall be adjusted to $.35 x (1.2 x $500,000)/$650,000 = $.32 (as
rounded). For future rate adjustments, the rate shall be .323077.
(2) Same assumptions as Ex. 1, but Outcollect Revenue in Base Period is
$575,000. The calculation then yields $.35 x (1.2 x $500,000)/$575,000 =
$.37. Since this exceeds the rate in effect, no adjustment is made and the
roaming rate continues to be $.35.
34
<PAGE>
ENID OK AND OK RSA #2:
1998 Dobson and AWS shall reciprocally charge $0.35 per minute.
Effective twelve (12) months after the effective date of this Agreement, the
rates to be charged are per the Rate Adjustment shown below.
All minutes billed in full minute increments, partial minutes rounded up to next
full minute.
RATE ADJUSTMENT
The following defined terms are used herein:
- - "Outcollect Revenues" means the amount paid by AWS to Dobson for Service
provided to AWS Customers as Roamers in any Market that is included in the
Dobson System.
- - "Base Period" means any twelve consecutive calendar months.
- - "Prior Period" means the twelve consecutive calendar months preceding any
Base Period. A Prior Period may include a period during which a Market was
operated by a predecessor in interest to Dobson.
- - "Market" means any individual area designated and operated by Dobson as a
home service area.
Effective one year after the Effective Date, the rate payable by AWS to Dobson
for roaming in any Market that has been operated by Dobson for at least twelve
months shall be adjusted in accordance with the following formula IF AND ONLY IF
such calculation shall result in a lower rate than that previously in effect:
The per minute rate shall be adjusted by multiplying the rate by (1) 1.2 and (2)
Outcollect Revenues during the Prior Period and dividing by (3) Outcollect
Revenues for the Base Period. The result shall be rounded to the nearest whole
cent for purposes of the new rate to be applied, but shall be rounded at the
sixth decimal place for purposes of calculating future rate adjustments.
Examples:
(1) Dobson acquires Market X from XYZ Wireless Co. on July
1, 1998. The roaming rate in Market X is $.35 per minute. For the period
from July 1, 1998 to June 30, 1999, AWS pays Dobson $650,000 for roaming in
Market X. For the period from July 1, 1997 to June 30, 1998, AWS paid XYZ
Wireless Co. $500,000 for roaming in Market X. Effective July 1, 1999, the
roaming rate shall be adjusted to $.35 x (1.2 x $500,000)/$650,000 = $.32
(as rounded). For future rate adjustments, the rate shall be .323077.
(2) Same assumptions as Ex. 1, but Outcollect Revenue in Base
Period is $575,000. The calculation then yields $.35 x (1.2 x
$500,000)/$575,000 = $.37. Since this exceeds the rate in effect, no
adjustment is made and the roaming rate continues to be $.35.
35
<PAGE>
MD RSA#2,MD RSA#2, CUMBERLAND, HAGERSTOWN MD, PA RSA#10 W:
1998 Dobson and AWS shall reciprocally charge $0.35 per minute.
Effective twelve (12) months after the effective date of this Agreement, the
rates to be charged are per the Rate Adjustment shown below.
All minutes billed in full minute increments, partial minutes rounded up to next
full minute.
RATE ADJUSTMENT
The following defined terms are used herein:
- - "Outcollect Revenues" means the amount paid by AWS to Dobson for Service
provided to AWS Customers as Roamers in any Market that is included in the
Dobson System.
- - "Base Period" means any twelve consecutive calendar months.
- - "Prior Period" means the twelve consecutive calendar months preceding any
Base Period. A Prior Period may include a period during which a Market was
operated by a predecessor in interest to Dobson.
- - "Market" means any individual area designated and operated by Dobson as a
home service area.
Effective one year after the Effective Date, the rate payable by AWS to Dobson
for roaming in any Market that has been operated by Dobson for at least twelve
months shall be adjusted in accordance with the following formula IF AND ONLY IF
such calculation shall result in a lower rate than that previously in effect:
The per minute rate shall be adjusted by multiplying the rate by (1) 1.2 and (2)
Outcollect Revenues during the Prior Period and dividing by (3) Outcollect
Revenues for the Base Period. The result shall be rounded to the nearest whole
cent for purposes of the new rate to be applied, but shall be rounded at the
sixth decimal place for purposes of calculating future rate adjustments.
Examples:
(1) Dobson acquires Market X from XYZ Wireless Co. on July 1, 1998. The
roaming rate in Market X is $.35 per minute. For the period from July 1,
1998 to June 30, 1999, AWS pays Dobson $650,000 for roaming in Market X.
For the period from July 1, 1997 to June 30, 1998, AWS paid XYZ Wireless
Co. $500,000 for roaming in Market X. Effective July 1, 1999, the roaming
rate shall be adjusted to $.35 x (1.2 x $500,000)/$650,000 = $.32 (as
rounded). For future rate adjustments, the rate shall be .323077.
(2) Same assumptions as Ex. 1, but Outcollect Revenue in Base Period is
$575,000. The calculation then yields $.35 x (1.2 x $500,000)/$575,000 =
$.37. Since this exceeds the rate in effect, no adjustment is made and the
roaming rate continues to be $.35.
36
<PAGE>
MARKETS ADDED TO EXHIBIT A AFTER THE EFFECTIVE DATE OF THIS AGREEMENT
First twelve months Dobson and AWS shall determine rate(s) to be charged.
Second twelve (12) months and beyond - Effective twelve (12) months after the
addition of the market to this Agreement, the rates to be charged are per the
Rate Adjustment shown below or such other rates as the Parties shall mutually
agree on a market by market basis.
All minutes billed in full minute increments, partial minutes rounded up to next
full minute.
RATE ADJUSTMENT
The following defined terms are used herein:
- - "Outcollect Revenues" means the amount paid by AWS to Dobson for Service
provided to AWS Customers as Roamers in any Market that is included in the
Dobson System.
- - "Base Period" means any twelve consecutive calendar months.
- - "Prior Period" means the twelve consecutive calendar months preceding any
Base Period. A Prior Period may include a period during which a Market was
operated by a predecessor in interest to Dobson.
- - "Market" means any individual area designated and operated by Dobson as a
home service area.
Effective one year after the Effective Date, the rate payable by AWS to
Dobson for roaming in any Market that has been operated by Dobson for at
least twelve months shall be adjusted in accordance with the following
formula IF AND ONLY IF such calculation shall result in a lower rate than
that previously in effect: The per minute rate shall be adjusted by
multiplying the rate by (1) 1.2 and (2) Outcollect Revenues during the Prior
Period and dividing by (3) Outcollect Revenues for the Base Period. The
result shall be rounded to the nearest whole cent for purposes of the new
rate to be applied, but shall be rounded at the sixth decimal place for
purposes of calculating future rate adjustments.
Examples:
(1) Dobson acquires Market X from XYZ Wireless Co. on July 1, 1998. The
roaming rate in Market X is $.35 per minute. For the period from July 1,
1998 to June 30, 1999, AWS pays Dobson $650,000 for roaming in Market X.
For the period from July 1, 1997 to June 30, 1998, AWS paid XYZ Wireless
Co. $500,000 for roaming in Market X. Effective July 1, 1999, the roaming
rate shall be adjusted to $.35 x (1.2 x $500,000)/$650,000 = $.32 (as
rounded). For future rate adjustments, the rate shall be .323077.
(2) Same assumptions as Ex. 1, but Outcollect Revenue in Base Period is
$575,000. The calculation then yields $.35 x (1.2 x $500,000)/$575,000 =
$.37. Since this exceeds the rate in effect, no adjustment is made and the
roaming rate continues to be $.35.
37
<PAGE>
ALL OTHER DOBSON MARKETS LISTED ON SCHEDULE 2 BUT NOT SPECIFIED ABOVE:
As of the effective date of this Agreement, OK RSA#5, OK RSA#7, TX RSA#2, CA
RSA#7, AZ RSA#5, OH RSA#2, MO RSA#1, MO RSA#4, MO RSA#5A, MO RSA#2 and KS RSA#5,
and AWS will reciprocally charge $0.35 per minute.
Effective 4/16/1999 OK RSA#5, OK RSA#7, TX RSA#2, CA RSA#7, AZ RSA#5, OH RSA#2,
MO RSA#1, MO RSA#4, MO RSA#5A, MO RSA#2 and KS RSA#5, and AWS will reciprocally
charge $0.25 per minute.
Effective 4/16/2000 OK RSA#5, OK RSA#7, TX RSA#2, CA RSA#7, AZ RSA#5, OH RSA#2,
MO RSA#1, MO RSA#4, MO RSA#5A, MO RSA#2 and KS RSA#5, and AWS will reciprocally
charge $0.20 per minute.
All minutes billed in full minute increments, partial minutes rounded up to next
full minute.
AWS KANSAS CITY JOINT VENTURE MARKETS AND DOBSON
Rates between the Kansas City Joint Venture markets, designated on Schedule 1
and Dobson shall be as set forth in July 11, 1997 rate agreement letter, but the
terms of this Agreement otherwise shall apply with respect thereto.
38
<PAGE>
TOLL RATES:
Dobson and AWS agree that the toll rates charged between the parties shall be
reduced to the actual AWS average retail rates charged to AWS customers for
roaming, as calculated on a national basis, but not less than $0.15 per minute
for the years 1998-2000, $0.12 per minute for the year 2001 and $0.10 per minute
for the remaining term of the Agreement.
International toll rates shall be no more than AT&T tariff rates.
39
<PAGE>
EXHIBIT D
TECHNICAL DATA
METHODS AND PROCEDURES
The following information is furnished by __________ to __________ pursuant
to Section 6.1 of the Intercarrier Roamer Service Agreement between AT&T
Wireless Services, Inc. and ________________________, by __________________:
- -------------------------------------------------------------------------------
NPA/NXX LINE RANGE SID/BID CITY START DATE END DATE
- -------------------------------------------------------------------------------
By:____________________________
Title:_________________________
Issue Date:____________________
The effective date shall be
_______________________________
40
<PAGE>
EXHIBIT E
INTEROPERABILITY STANDARDS
41
<PAGE>
SCHEDULE E-1
CORE FEATURES
Below is a list and description of the Core Features that the Parties have
implemented in their Systems and agree to maintain in accordance with Section
10.3 of this Agreement. These definitions are functional descriptions of the
Core Features.
1. CALL DELIVERY
This capability permits a Customer to receive incoming calls to his or her
phone while in his or her home market or while roaming in the other Party's
Network (together, the "Mobile Wireless Network").
2. ROAMING - DO NOT DISTURB
This capability permits a Customer, who would normally receive all incoming
calls while visiting a Mobile Switching Center that is part of the Mobile
Wireless Network, to temporarily inhibit the delivery of such calls. Activating
this capability has no impact on the Customer's to originate calls or
on the Customer's ability to receive calls via the roamer access ports.
3. CALL FORWARDING
A. CALL FORWARDING IMMEDIATE
This capability permits a Customer to send all incoming calls destined for
the Customer's phone to another phone number specified by the Customer.
Activating this capability has no impact on the Customer's ability to originate
calls. When this capability is activated, calls are forwarded regardless of
whether the Customer is located within his or her local market or whether the
Customer is roaming outside of such local market.
B. CALL FORWARDING BUSY
This capability permits a Customer to send all incoming calls destined for
his or her phone to another phone number specified by the Customer when the
Customer is engaged in a call.
C. CALL FORWARDING NO ANSWER
This capability permits a Customer to send all incoming calls destined for
his or her phone to another phone number specified by the Customer when the
Customer does not answer or when the Customer's phone does not respond to a
page.
42
<PAGE>
D. CALL FORWARDING CONDITIONAL
This capability permits a Customer to send all incoming calls destined for
the Customer's phone to another phone number specified by the Customer when: (i)
the Customer does not answer his or her phone; (ii) the phone does not respond
to a page; or (iii) the Customer is engaged in a call.
4. CALL WAITING
This capability permits a Customer to receive incoming calls even though a
call may already be in progress.
5. VOICEMAIL
This capability forwards those Customer's incoming calls which are not
answered by the Customer, and for which no other explicit treatment has been
activated (for example, those described in item 3, above), to a voice storage
and retrieval system.
6. THREE WAY CALLING
This capability permits a Customer to add a third party to an active two
party call.
7. SLEEP MODE
This capability permits an IS 136 phone to operate in a power saving mode
when camping on an IS 136 system, thereby allowing the battery standby time to
increase.
8. VOICE COMPATIBILITY
This capability permits IS-136 phones to operate on a visited system.
9. CALL HANDOFF
This capability permits hand-off of a TDMA call at a handoff border of a
System to the TDMA or analog facilities of the adjoining service provider,
depending upon channel availability. Hand-offs will be required to occur
bi-directionally.
10. CALLING NUMBER IDENTIFICATION
This capability identifies for the Customer either the telephone number or
the stored name (in the wireless phone) of the person who is calling ("CNIP").
It also permits a Customer to inhibit the ability of a person to whom the
Customer is placing a call from identifying either the telephone number or the
name of such Customer who is placing the call ("CNER").
43
<PAGE>
11. MESSAGE WAITING INDICATOR
This capability is an enhancement to voice mail, and provides the
Customer with the current status of the number of unheard voice mail messages
waiting in his or her voice mail box.
12. SHORT MESSAGING SERVICE
This capability will permit a caller to deliver both numeric and
alphanumeric messages of up to eighty characters to an IS-136 phone. If the
Customer to whom the message has been delivered has his or her phone off or
is not in the IS-136 coverage area, then messages are stored for future
delivery.
13. ENHANCED REGISTRATION
This capability permits the wireless provider to keep track of IS-136
mobile unit activity or registration status. Registration status is used for
a number of different reasons: incoming call paging, IS-41 call delivery, SMS
message delivery. Traditionally the registration of the mobile was supervised
by Autonomous Registration, but Enhanced Registration provides a higher
resolution of visibility.
14. PRIVATE NUMBER PLAN
This capability permits a defined group of Customers to call defined
private network extensions by using an abbreviated unique dialing pattern
(four digit dialing).
15. OVER THE AIR ACTIVATION (OTA) AND OVER THE AIR PROGRAMMING (OTAP)
This capability will permit the service provider to provision mobiles
"over the air". This functionality will remove the need for the subscriber to
visit an agent and have the phone activated in the traditional manner. The
would-be subscriber would follow instructions on how to activate service and
within minutes be able to place calls.
16. */# DIALING CODE UNIFORMITY
This capability will permit Customer's to dial specified numbers
preceded by a "#" or "*" symbol to access specific services.
17. VOICE MAIL
The ability of a Customer to retrieve messages from the Customer's voice
mail box by dialing the Customer's wireless number.
44
<PAGE>
18. AUTHENTICATION FRAUD PROTECTION
This capability permits a caller to register, originate and terminate
calls utilizing the industry fraud protection CAVE algorithm.
45
<PAGE>
EXHIBIT 10.4.6
[LETTERHEAD]
December 6, 1995
Mr. Everett Dobson
President
Dobson Communications Company
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
Re: (Duplicate) signed original- DMS-MTX Cellular Supply Agreement
Dear Mr. Dobson:
Enclosed please find your signed original Cellular Supply Agreement.
Please note that changes in the Agreement were made subsequent to your
signature, as mutually agreed upon and acknowledged by the parties in Bill
Barnett's letter of 11/30/95 (see enclosed copy).
The referenced changes are as follows:
(1) The language set out in the 11/30/95 letter was incorporated in the
Agreement as new Section 24.1 (and all subsequent sections renumbered
for conformity).
(2) The words "Subject to Section 24.1 herein" were added to the beginning
of Section 17.5.
Also note, that the Effective Date and State of Incorporation for Dobson
Communications Corporation were inserted into the opening paragraph of the
Agreement.
Your patience and cooperation in bringing this negotiation to a mutually
successful conclusion have been appreciated.
Very truly yours,
/s/ Hal Naboshek
Hal Naboshek
Contracts Manager, Wireless Networks
(214) 684-5942
cc: Molly Ellis
Scott Linke
<PAGE>
[LOGO]
November 30, 1995
Dear Everett,
Below is the language to be inserted into the Purchase Agreement. Thank you
for the business and have a wonderful holiday season.
"THIS CONTRACT SHALL BECOME EFFECTIVE UPON EXECUTION BY BOTH PARTIES, HOWEVER
NORTEL AGREES THAT IF THE CELLULAR LICENSES PURCHASED FROM TDS BY CUSTOMER
ARE NOT TRANSFERRED TO CUSTOMER BY THE LAST DAY OF FEBRUARY 1996, CUSTOMER
SHALL HAVE THE RIGHT TO TERMINATE THIS CONTRACT AND SHALL COMPENSATE NORTEL
FOR IT'S REASONABLE EXPENSES INCURRED IN PERFORMANCE OF THIS CONTRACT."
Best regards,
/s/ Bill Barnett
W.F. Barnett
V.P. Sales
Nortel Wireless Networks
<PAGE>
OKLAHOMA / TEXAS
EQUIPMENT PURCHASE
<PAGE>
[LETTERHEAD]
December 20, 1995
Dobson Communications Corporation
13439 North Broadway Extension, Suite 200
Oklahoma City, OK 73114
Attention: Verland Brewster
Subject: Executed Amendment No. 1 to Supply Agreement
Enclosure: (1) One (1) signed original, effective December 20, 1995
Dear Mr. Brewster:
Northern Telecom Inc. ("NTI") hereby provides one fully executed copy of the
subject Amendment No. 1 (Enclosure (1)).
Should you have any questions concerning this agreement, please contact me at
(214) 684-1304 or facsimile (214) 301-2675.
Sincerely,
/s/ Koni B. Overturf
Koni B. Overturf
Manager, Contracts Administration
cc: Rick Barton
Scott Linke
Ken Ord
<PAGE>
AMENDMENT NO. 1
TO
SUPPLY AGREEMENT
BETWEEN
DOBSON COMMUNICATIONS CORPORATION
AND
NORTHERN TELECOM INC.
Made as of this 20th day of December 1995, by and between Dobson
Communications Corporation (hereinafter referred to as "Buyer"), an Oklahoma
corporation with offices at 13439 North Broadway Extension, Suite 200,
Oklahoma City, Oklahoma 73114 and Northern Telecom Inc. (hereinafter referred
to as "NTI" or "Seller"), a Delaware corporation with offices at 2435 N.
Central Expressway, Richardson, Texas 75080.
WHEREAS, Buyer and Seller entered into a Supply Agreement dated as of
December 6, 1995 (the "Agreement"); and
WHEREAS, Buyer and Seller now wish to amend the Agreement to allow for the
purchase by Buyer of Additional Equipment as such is identified in Exhibit A
hereto;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
Buyer and Seller agree as follows:
1. Buyer hereby agrees to purchase/license from Seller the Additional
Equipment, Software and Services set forth in Exhibit A hereto.
2. Execution of this Amendment No. 1 constitutes a firm, non-cancelable
Purchase Order for the Additional Equipment, Software and Services set forth
in Exhibit A hereto.
1
<PAGE>
3. Notwithstanding the provisions of Section 5.2.1 hereof, the parties
understand and agree that, (i) the applicable purchase price as set forth
in Exhibit A hereof ("Purchase Price") only satisfies the volume level
requirements of Section 5.2.2; (ii) does not qualify for AE Credits as
provided in Section 5.2.1 and; (iii) only those future Purchase Orders
issued for amounts in addition to the Purchase Price will qualify for AE
Credits.
4. For purposes of this Amendment, the contingency language set forth in
Section 24.1 of the Agreement shall not apply.
5. Except as specifically modified by this Amendment, the Agreement in all
other respects continues in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to be signed by
their duly authorized representatives effective as of the date first set
forth above.
DOBSON COMMUNICATIONS INC. NORTHERN TELECOM INC.,
By: /s/ Everett Dobson By: /s/ Matthew J. Desch
------------------------------- -------------------------------
Everett Dobson Matthew J. Desch
- ----------------------------------- -----------------------------------
Type or Print Name Type or Print Name
Title: President Title: Group VP & GM
---------------------------- ----------------------------
Date: 12/20/95 Date: 12/20/95
------------------------------ -----------------------------
2
<PAGE>
EXHIBIT A
1.0 ADDITIONAL EQUIPMENT
Delivery is currently scheduled for first quarter 1996.
1.1 SWITCH (SUPERNODE SE)
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C> <C>
HARDWARE:
SuperNode SE Dual ICP (480 ports) 1 $1,197,497 $1,197,497
MCTM-I w/1 ICP (240 ports) 3 $310,000 $930,000
ICP Packfill (240 ports) 1 $257,625 $257,625
DTC Packfill (480 ports) 1 $210,320 $210,320
Turbo Link Interface 1 $4,239 Included
MP Controller CP for Billing Xler (NT1X29BA) 2 $3,150 $6,300
X.25 layer 2 Intersystem Linx Cont. (NT6X916B) 1 $1,705 $1,705
CCS7 8MEG Link Interface Unit (LIU V.35) 7 $13,352 $93,464
SNSE MAP Furniture 1 Included Included
Helmsman/Compass Documentation 1 $4,700 $4,700
SuperNode SE Spares 1 $175,486 $175,486
Hardware Subtotal $2,877,097
SOFTWARE: (SEE SECTION 2.0 FOR PACKAGES INCLUDED)
BCS Software License Fee LOT $25,000 $25,000
Packages available prior to MTX-01 (BCS 36) LOT $345,500 $345,500
MTX-01 Software Additions LOT $34,000 $34,000
MTX-02 Software Additions LOT $47,400 $47,400
Software Subtotal $451,900
EF & I:
NORTEL Engineer, Install & Commission LOT $262,012 $262,012
RF Engineering New System Performance
Optimization, Hand-off Adjustments in LOT $120,000 Included
accordance with Annex 8 hereof
EF&I Subtotal $262,012
25% SWITCH AND SOFTWARE DISCOUNT ($832,249)
STRATEGIC DISCOUNT ($665,799)
SWITCH NET TOTAL PRICE $2,092,960
</TABLE>
A-1
<PAGE>
1.2 SWITCH (TDMA DIGITAL UPGRADE)
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C> <C>
TDMA DIGITAL SWITCH EQUIPMENT
MDSP Cabinet w/DSP Module, 2 DSPs & 2 Contrl 1 $60,426 $60,426
DSP Module (one shelf, 2 DSPs & 2 DSP Contrls) 2 $64,860 $129,720
DSP Cards (need 1 per 2 DRUs in digital mode) 12 $11,430 $137,160
DSP Controllers (need 1 per 4 DSPs) 0 $14,560 $0
MDSP Spares 1 $18,379 $18,379
TDMA CELL SITE EQUIPMENT
Dual Mode Radio Unit Monitor (DRUM) 35 $7,150 $250,250
Subtotal $595,935
EF&I:
Eng., Install & Commission with Initial System LOT $35,064 $35,064 $35,064
25% EQUIPMENT DISCOUNT ($148,984)
TDMA DIGITAL ADDITION NET PRICE $482,015
TDMA SPECIAL DISCOUNT ($482,015)
</TABLE>
A-2
<PAGE>
1.3 CELL SITES
1.3.1 OKLAHOMA B-SIDE MARKET
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1. BRIDGEPORT
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
2. BUTLER
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
3. CAMARGO
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
4. CHICKASHA
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
5. CLINTON
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
6. ELK CITY
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
7. ELK CITY 2
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
8. FT. COBB
24 Channel OMNI cell site (CC1024NU) 1 $152,544 $152,544
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $152,544
9. GRACEMONT
24 Channel OMNI cell site (CC1016NU) 1 $152,544 $152,544
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $152,544
</TABLE>
A-3
<PAGE>
1.3.1 Oklahoma B-Side Market - Continued
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C>
10. HOBART
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
11. ROLL
24 Channel OMNI cell site (CC1024NU) 1 $152,544 $152,544
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $152,544
12. RUSH SPRINGS
24 Channel OMNI cell site (CC1016NU) 1 $152,544 $152,544
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $152,544
13. SWEETWATER
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
14. TUTTLE
24 Channel OMNI cell site (CC1024NU) 1 $152,544 $152,544
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $152,544
SPARES:
Cell Site Spares (ICRM/DRU) LOT $54,974 $54,974 $54,974
Oklahoma B-Side Cell Site Subtotal $2,253,784
DUAL-MODE RADIO UNITS:
Dual Mode Radio Unit (DRU) CCH & LCR 28 $10,500 $294,000
Dual Mode Radio Unit (DRU) VOICE CHANNELS 265 $10,500 $2,782,500
Radio Units Subtotal $3,076,500
EF & I:
Eng., Install & Commission 16 CH. Cell Site 2 $11,058 $22,116
Eng., Install & Commission 24/32 CH. Cell Site 12 $16,362 $196,344
Subtotal $218,460
25% CELL SITE DISCOUNT ($563,446)
25% RADIO UNITS DISCOUNT ($769,125)
STRATEGIC DISCOUNT ($1,066,057)
OKLAHOMA B-SIDE CELL SITE AND RADIO UNITS NET TOTAL PRICE $3,150,116
</TABLE>
A-4
<PAGE>
1.3.2 Texas B-Side Market
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C>
1. BORGER
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
2. CANADIAN
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
3. CLARENDON
24 Channel OMNI cell site (CC1016NU) 1 $152,544 $152,544
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $152,544
4. CONWAY
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
5. DARROUZETT
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
6. FARNSWORTH
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
7. FLOWERS
24 Channel OMNI cell site (CC1024NU) 1 $152,544 $152,544
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $152,544
8. GRUVER
24 Channel OMNI cell site (CC1024NU) 1 $152,544 $152,544
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $152,544
9. LELA
24 Channel OMNI cell site (CC1024NU) 1 $152,544 $152,544
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $152,544
10. PAMPA
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
</TABLE>
A-5
<PAGE>
1.3.2 Texas B-Side Market - Continued
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C>
11. STINNET
24 Channel OMNI cell site (CC1024NU) 1 $152,544 $152,544
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $152,544
12. WELLINGTON
24 Channel OMNI cell site (CC1016NU) 1 $152,544 $152,544
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $152,544
SPARES:
Cell Site Spares (ICRM/DRU) LOT $54,974 $54,974 $54,974
Texas B-Side Cell Site Subtotal $1,946,502
DUAL-MODE RADIO UNITS:
Dual Mode Radio Unit (DRU) CCH & LCR 24 $10,500 $252,000
Dual Mode Radio Unit (DRU) VOICE CHANNELS 230 $10,500 $2,415,000
Radio Units Subtotal $2,667,000
EF&I:
Eng., Install & Commission 16 CH. Cell Site 1 $11,058 $11,058
Eng., Install & Commission 24/32 CH. Cell Site 11 $16,362 $179,982
EF&I Subtotal $191,040
25% CELL SITE DISCOUNT ($486,626)
25% RADIO UNITS DISCOUNT ($666,760)
STRATEGIC DISCOUNT ($922,700)
TEXAS B-SIDE CELL SITE AND RADIO UNITS NET TOTAL PRICE $2,728,466
</TABLE>
A-6
<PAGE>
1.3.3 Enid MSA Market
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- -------- -----
<S> <C> <C> <C> <C> <C>
1. ENID
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
2. ENID 2
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
3. GARBER
24 Channel OMNI cell site (CC1016NU) 1 $152,544 $152,544
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners 0 Included Included
Subtotal $152,544
SPARES:
Cell Site Spares (ICRM/DRU) 0 $54,974 0 0
Enid Cell Site Subtotal $496,836
DUAL-MODE RADIO UNITS:
Dual Mode Radio Unit (DRU) CCH & LCR 6 $10,500 $63,000
Dual Mode Radio Unit (DRU) VOICE CHANNELS. 45 $10,500 $472,500
Radio Unit Subtotal $535,500
EF&I
Eng., Install & Commission 16 CH. Cell Site 0 $11,058 0
Eng., Install & Commission 24/32 CH. Cell Site 3 $16,362 $49,086
EF&I Subtotal $49,086
25% CELL SITE DISCOUNT ($124,209)
25% RADIO UNIT DISCOUNT ($133,875)
STRATEGIC DISCOUNT ($206,467)
ENID CELL SITE AND RADIO UNIT NET TOTAL PRICE $616,871
</TABLE>
A-7
<PAGE>
1.3.4 Oklahoma A-Side Market
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- -------- -----
<S> <C> <C> <C> <C> <C>
1. ALVA
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
2. ARNETT
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
3. BUFFALO
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
4. FREEDOM
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
5. FAIRVIEW
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
6. WOODWARD
32 Channel OMNI cell site (CC1032NU) 1 $172,146 $172,146
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $172,146
SPARES:
Cell Site Spares (ICRM/DRU) LOT $54,974 $54,974 $54,974
Oklahoma A-Side Cell Site Subtotal $804,790
DUAL-MODE RADIO UNITS:
Dual Mode Radio Unit (DRU) CCH & LCR 12 $10,500 $126,000
Dual Mode Radio Unit (DRU) VOICE CHANNELS 77 $10,500 $808,500
Radio Unit Subtotal $934,500
EF&I
Eng., Install & Commission 16 CH. Cell Site 5 $11,058 $55,290
Eng., Install & Commission 24/32 CH. Cell Site 1 $16,362 $16,362
Subtotal $71,652
25% CELL SITE DISCOUNT ($201,198)
25% RADIO UNIT DISCOUNT ($233,625)
STRATEGIC DISCOUNT ($347,858)
OKLAHOMA A-SIDE CELL SITE AND RADIO UNIT NET TOTAL PRICE $1,028,262
</TABLE>
A-8
<PAGE>
1.4 TRAINING
Prices for training are exclusive of travel, lodging, food, and
incidental expenses, which shall be for Buyer's account. Course
content is subject to change at Seller's discretion.
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- -------- -----
<S> <C> <C> <C> <C> <C>
CLASSROOM COURSES:
DMS-MTX Maintenance #944 3 $4,275 $12,825
Cell Site Operations & Maintenance #963 3 $1,425 $4,275
Cell Translations & Appl. #980 3 $1,425 $4,275
Cell Site Data Base #982 3 $1,425 $4,275
DMS-MTX Networking (IS-41 Rev. B) #984 3 $1,425 $4,275
ON-SITE TRAINING:
Introduction to MTX MAP #925 6 $855 $5,130
Cellular Intermediate RF Engineering #1000 $9,000 $9,000
MTX-01 Cellular Hand-off #1001 $6,000 $6,000
System Performance & Opt. Audits #1002 $6,000 $6,000
On site training requires a minimum of 6 people; the maximum is 20.
TRAINING NET TOTAL PRICE $56,055
</TABLE>
A-9
<PAGE>
<TABLE>
<S> <C>
ADDITIONAL EQUIPMENT SUBTOTAL $ 9,672,730
ASTRONET TRADE-IN DISCOUNT* $(1,800,000)
*Buyer shall be responsible for de-installation
and packing of all Astronet trade-in equipment.
Seller will be responsible for shipment of all
de-installed equipment.
ADDITIONAL EQUIPMENT NET TOTAL $ 7,872,730**
PURCHASE PRICE
**IF AMENDMENT NO. 1 IS EXECUTED BY BUYER ON OR BEFORE
12/21/95 AS EVIDENCED BY THE SIGNATORY DATE OF
AMENDMENT NO. 1, THE FOLLOWING SHALL APPLY AND
REPLACE THE PURCHASE PRICE SET FORTH ABOVE:
Add: One ICP Packfill $ 257,625
CDPD Option (See Section 3.0, Exhibit A) $ 255,384
ADDITIONAL EQUIPMENT SUBTOTAL $ 8,385,739
Less: ICP Packfill and CDPD Option Credit $ (513,009)
95 Year End Contract Commitment Credit $ (400,000)
ADDITIONAL EQUIPMENT NET TOTAL PURCHASE PRICE $ 7,472,730
</TABLE>
A-10
<PAGE>
2.0 SOFTWARE
2.1 SOFTWARE. The items listed below as "included" are included in the Price
quoted for the Switch in Section 1.1 of this Exhibit A.
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION PEC PRICE PRICE TOTAL
- ---- ----------- --- ----- ---- -----
<S> <C> <C> <C> <C> <C>
1 Automatic Trunk Testing NTX051AA $5,000 Included
2 Network Management NTX050AB $20,000 Included
3 DS-1 64 Kb/s Clear Channel NTX142AA $5,000 Included
4 DS-1 Extended Superframe Format NTX143AA $2,000 Included
5 Focused Maintenance NTX272AA $10,000 Included
6 Enhanced Security w/o Password Encrypt NTX292BA $3,000 Included
7 Vertical Features KIT NTX325AA $40,000 Included
8 MTX Split Ticket Billing NTX332AA $5,000 Included
9 CDR Search On Disk NTX333AA $10,000 Included
10 Dynamic Power Control NTX336AA $5,000 Included
11 Malicious Call Trace NTX337AA $25,000 Included
12 Cellular Hotline NTX373AA $30,000 Included
13 Credit Card Calling NTX375AA $20,000 Included
14 IS-41+ Networking NTX376AB $25,000 Included
15 Network Messaging Enhancements NTX377AA $25,000 Included
16 Dedicated Access (FXS) NTX379AA $10,000 Included
17 OM Thresholding & Alarms NTX385AA $1,000 Included
18 OM Selective Output NTX445AB $5,000 Included
19 Switch Performance Monitoring System NTX738AC $20,000 Included
20 Switch Path Diagnostics NTX885Ab $10,000 Included
21 MPC Multi-link Mgmt NTX892AA $5,000 Included
22 MPC X.25 Interface NTXE65AA $18,000 Included
23 High Speed MPC NTXE98AA $3,000 Included
24 DMS Base Data Access Interface NTXG18AA $7,500 Included
25 Time of Day Routing NTXG51AA $10,000 Included
26 MTX Equal Access Enhance Office (BCS 35) NTXG53AB $15,000 Included
27 Expanded Spectrum NTXG56AA $25,000 Included
28 Follow Me Roaming NTXG57AA $25,000 Included
29 Centralized Operational A & M NTXG82AA $16,500 Included
30 Account Code Billing NTXG86AA $30,000 Included
31 Real Time Billing NTXG87AA $30,000 Included
32 STSR Sectorization NTXG88AA $25,000 Included
33 Maintenance Manager Morning Report NTXJ35AA $5,000 Included
34 Surveillance NTXL20AA $25,000 Included
35 Network Boundary Paging NTXL24AA $17,500 Included
36 Mobile Jamming Detection NTXL25AA $20,000 Included
37 Call Delivery Activatable NTXL28AA $30,000 Included
38 Mobile Tracking NTXL61AA $15,000 Included
39 Remote Call Forw Activate/De-Activate NTXL62AA $30,000 Included
40 IS41 Enhanced Roamer Validation NTXM17AA $50,000 Included
41 IS-41 Rev.B NTXM30AA $32,000 Included
42 Call Forwarding Enhancements NTXM31AA $10,000 Included
43 Visitor Location Register NTXM32AA $41,000 Included
44 Active Mobile Paging NTXM33AA $53,000 Included
45 Manufacturers ESN Fraud NTXM34AA $10,000 Included
46 Expanded Call Forwarding Feature Coder NTXM39AA $24,000 Included
47 MPC 1984 MPC X.25 NTXM85AA $1,875 Included
A-11
<PAGE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION PEC PRICE PRICE TOTAL
- ---- ----------- --- ----- ---- -----
<S> <C> <C> <C> <C> <C>
48 EDRAM Upload NTXS72AA $35,000 Included
49 XPM+ Based ICP NTXX89AA $11,000 Included
50 Multi-Net. Protocol (Billing File Xfer.) NTXX98AA $10,000 Included
51 Networking Software including: SB1204NU $345,500 $345,500
MTX to MTX handoff & call delivery,
IS-41 Rev A networking software for
SS7 & X.25 layer 2 (pt. to pt.)
Software Subtotal $345,500
</TABLE>
2.2 The following additional Software is priced on a per voice channel basis
except where indicated with a asterisk. The Total Software Price set out
below is included in the Subtotal for Software in Section 1.1 of this
Exhibit A.
<TABLE>
<CAPTION>
VOICE UNIT
ITEM DESCRIPTION PEC CHANNELS PRICE TOTAL
- ---- ----------- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C>
MTX 01 FEATURES:
1 Dual Mode Message Waiting Notification NTXX55AA 200 $31 $ 6,200
2 Audio Message Waiting Notification NTXX57AA 200 $31 $ 6,200
3 Translations per Sector NTXX58AA 200 $12 $ 2,400
4 Multiple TLDN pool NTXX59AA 200 $12 $ 2,400
5 Handoff by station class mark NTXX64AA 200 $18 $ 3,600
6 Single switch mult-LATA NTXX67AA 200 $12 $ 2,400
7 Multiple tumbling ESNs NTXX69AA 200 $ 6 $ 1,200
8 Single carrier duplex ICRM NTXX75AA 200 $18 $ 3,600
9 Optimal power handoff NTXX77AA 200 $ 6 $ 1,200
10 Cancel Call Waiting NTXX78AA 200 $12 $ 2,400
11 Roaming do not disturb NTXX92AA 200 $12 $ 2,400
MTX 01 Software Subtotal $34,000
MTX 02 FEATURES:
1 Zone Paging NTXX05AA 200 $18 $3,600
2 Microcell Software Support* NTXX06AA 1 N/C N/C
3 Mobile Status Link NTXX08AA 200 $92 $18,400
4 ICRM Drop and Insert NTXX10AA 200 $18 $3,600
5 Drop Call Reduction* NTXX62AA 1 $3,400 $3,400
6 CLID Presentation NTXX66AA 200 $92 $18,400
7 CLID Restriction NTXX93AA 1 Included Included
8 ISUP Base NTXX01AA 1 Included Included
9 MTX TR-317 NTXX09AA 1 Included Included
10 CDPD-MDIS Base* NTXX14AA 0 $77,000 $0
11 CDPD-MDBS priced per CDPD radio NTXX14AAR 0 $1,540 $0
MTX 01 Software Subtotal $47,400
</TABLE>
A-12
<PAGE>
2.3 Seller's unit price for an individual Software feature priced on a per
voice channel basis (as set out in 1.4.2 above) shall remain fixed until
Buyer has purchased such feature for two thousand (2,000) voice channels.
Seller shall not charge Buyer for any number of voice channels in excess
of a total of two thousand (2,000) for any one feature.
3.0 CELLULAR DIGITAL PACKET DATA (CDPD)- OPTION
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ----- ------------- ----- -------- ----------- ------
<S> <C> <C> <C> <C> <C>
HARDWARE:
Network Interface Unit (NIU) 1 $59,997 $ 59,997
Ethernet Interface Unit (EIU) 2 $14,788 $ 29,576
Link Interface Unit (XLIU) X.25/X.75 3 $41,000 $ 123,000
CDPD Spares Set LOT $67,327 $ 67,327
Hardware Subtotal $279,000
SOFTWARE:
CDPD-MDIS Base NTXX14AA 1 $ 77,000 $ 77,000
CDPD-MDBS priced per CDPD radio NTXX14AAR 35 $ 1,540 $ 53,900
EF&I:
Install & Commission LOT $ 8,904 $ 8,904 $ 8,904
CDPD Subtotal $317,004
25% HARDWARE AND SOFTWARE DISCOUNT ($102,700)
OPTIONAL STRATEGIC DISCOUNT* ($ 61,620)
NET TOTAL CDPD PRICE* $255,384
</TABLE>
* Net Total CDPD Price is valid for purchase under Amendment No. 1 only
provided, that Amendment No. 1 is executed on or before 12/21/95.
Each XLIU supports a maximum of 12 cell sites and a maximum of 250 TEIs.
Each cell site supports one CDPD radio.
A-13
<PAGE>
MISSOURI / KANSAS
EQUIPMENT PURCHASE
<PAGE>
DMS-MTX CELLULAR
SUPPLY AGREEMENT
BETWEEN
DOBSON COMMUNICATIONS CORPORATION
AND
NORTHERN TELECOM INC.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
SECTION PAGE
- -------- -----
<S> <C>
1. DEFINITIONS 1
2. SCOPE 4
3. PURCHASE ORDERS 5
4. PRICE 5
5. PAYMENT 6
6. DELIVERY, RISK OF LOSS, TITLE 8
7. WARRANTIES, REMEDIES AND LIMITATION OF WARRANTIES AND 9
REMEDIES AND DISCLAIMERS OF WARRANTIES AND LIABILITY
8. FORCE MAJEURE 12
9. PATENT OR COPYRIGHT INFRINGEMENTS 12
10. SOFTWARE LICENSE 13
11. SOFTWARE UPDATES 15
12. REMEDIES 15
13. BUYER'S RESPONSIBILITIES 16
14. TESTING, TURNOVER AND ACCEPTANCE 18
15. COVERAGE, INTERFERENCE AND THIRD-PARTY FACILITIES 18
16. REGULATORY COMPLIANCE 19
17. CHANGES 19
18. CONDITION OF INSTALLATION SITE(S) 21
19. RELEASE OF INFORMATION 21
20. CONFIDENTIALITY 21
21. INTERCONNECTION TO SWITCH 22
22. EQUIPMENT CHANGES 23
23. ANNEXES 23
24. GENERAL 23
ANNEXES
- --------
ANNEX 1 - EQUIPMENT AND SERVICES PRICING
ANNEX 2 - STATEMENT OF WORK/SAMPLE PROJECT SCHEDULE
ANNEX 3 - DMS-MTX ACCEPTANCE CRITERIA
ANNEX 4 - TURNOVER AND ACCEPTANCE NOTICES
ANNEX 5 - SELLER WARRANTY SERVICES
ANNEX 6 - SOFTWARE LICENSE
ANNEX 7 - DOCUMENTATION
</TABLE>
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DMS-MTX CELLULAR
SUPPLY AGREEMENT
AGREEMENT dated December 6, 1995, by and between Dobson Communications
Corporation (hereinafter referred to as "Buyer") a Oklahoma corporation, with
offices located at 13439 North Broadway Extension, Suite 200, Oklahoma City,
Oklahoma 73114 and Northern Telecom Inc., a Delaware corporation with offices
located at 2435 N. Central Expressway, Richardson, Texas 75080 (hereinafter
referred to as "NTI" or "Seller").
WITNESSETH:
In consideration of the mutual promises and covenants hereinafter set forth,
the parties hereby agree as follows:
1. DEFINITIONS
As used herein, the following capitalized terms have the following
meanings:
1.1 "CELL SITE" shall mean any Seller-engineered Hardware and Software
comprised of Seller radios and common equipment, but not Switch or
Switch-related equipment.
1.2 "COMMISSIONING" shall mean the on-site testing of Equipment installed
by Seller in accordance with Seller's Acceptance Criteria set forth in
Annex 3 hereof.
1.3 "DOCUMENTATION" shall mean System documentation, whether in written or
electronic form, delivered to Buyer in the medium set forth in Buyer's
Purchase Order, such media being more fully described in Annex 7,
"Documentation." All Documentation delivered to Buyer shall be subject
to any copyright and confidentiality restrictions.
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1.4 "EQUIPMENT" shall mean either singularly or collectively the
NTI-manufactured Hardware and Software products provided hereunder.
The terms of this Agreement applicable to "Equipment" shall also be
deemed to apply to OEM Equipment, unless otherwise expressly excluded
in this Agreement and subject to the limitations set forth in
Section 2.1.4 hereof.
1.5 "EXPANSION" shall mean Equipment (which may in certain circumstances
include a Cell Site) added to a System after Turnover that is beyond
the wired-for System capacity as provided in its original
configuration, and which Equipment requires Seller engineering and
Installation/Commissioning Services.
1.6 "HARDWARE" shall mean the NTI hardware components listed in Annex 1 as
may comprise a System, an Expansion, a Cell Site, or Merchandise.
1.7 "INITIAL PURCHASE" shall mean the Equipment, Installation, and
Services specifically identified in Annex 1, being initially purchased
by Buyer hereunder.
1.8 "INSTALLATION" shall mean the installation of Equipment by Seller.
1.9 "INSTALLATION SITE" shall mean the location (contiguous United States)
specified in Buyer's Purchase Order for Installation of a Switch
and/or Cell Sites.
1.10 "MERCHANDISE" shall mean miscellaneous components of Hardware, with
respect to which no engineering, Installation, or Commissioning are to
be provided by Seller.
1.11 "OEM EQUIPMENT" shall mean miscellaneous items of non-NTI equipment
made available for sale to Buyer by Seller under this Agreement, not
integrated into the Hardware during the manufacturing process.
1.12 "PROJECT SCHEDULE" shall mean those delivery, installation and/or
in-service dates, as applicable, proposed by Buyer and accepted by
Seller.
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1.13 "PURCHASE ORDER" shall mean any Purchase Order issued by Buyer
hereunder to Seller pursuant to Section 3 of this Agreement.
1.14 "SERVICES" shall mean those services performed by Seller under this
Agreement.
1.15 "SHIP DATE" shall mean the scheduled date agreed upon by Buyer and
Seller as the date on which the appropriate Equipment shall be shipped.
1.16 "SOFTWARE" shall mean the proprietary and/or third party software
computer programs (consisting of firmware and logic instructions in
machine-readable code residing in, or intended to be loaded in System
memories which provide basic logic, operating instructions and
user-related application instructions, but excluding customer data)
as well as associated documentation used to describe, maintain and use
the programs which are integral to any Hardware furnished to Buyer.
Any reference herein to Equipment or Software being "sold,"
"purchased" or the like is understood to be a reference in fact to the
program being licensed.
1.17 "SPECIFICATIONS" shall mean the specifications and performance
standards of the Hardware, Software and System as set forth in the
applicable sections of NORTHERN TELECOM PRACTICES ("NTPs"),
incorporated herein by reference. Seller shall have the right, at its
sole discretion to modify, change or amend the Specifications at any
time during the term of this Agreement.
1.18 "SWITCH" shall mean any one of the DMS-MTX family of switching
components.
1.19 "SYSTEM" shall mean the combination of a Switch and one or more Cell
Sites furnished hereunder requiring Seller engineering and
Installation/Commissioning Services.
1.20 "TERM" shall mean the period commencing on the date first set forth
above (hereinafter "Effective Date") and ending three (3) years
therefrom, unless terminated earlier in accordance with the terms and
conditions hereof, or unless extended by the mutual written consent of
the parties hereto.
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1.21 "TURNOVER" shall mean that time when Seller has completed Installation
and Commissioning of a Switch, Cell Site or Expansion and turns over
such equipment for Buyer's placing into service.
1.22 "WARRANTY PERIOD" shall mean:
1.22.1 With respect to the Hardware engineered, furnished and installed by
Seller, a period of twelve (12) consecutive months from the date of
Turnover.
1.22.2 With respect to Cell Sites not installed by Seller, thirteen (13)
consecutive months from the shipment date.
1.22.3 With respect to the Software, a period of twelve (12) consecutive
months from the date of Turnover.
1.22.4 With respect to Merchandise, a period of ninety (90) consecutive days
from the shipment date of that Merchandise.
2. SCOPE
2.1 During the Term, in accordance with an appropriate Purchase Order
issued by Buyer for Equipment and/or Services, Seller shall:
2.1.1 engineer, deliver, install (or have installed) and Commission the
Equipment for use in the continental United States;
2.1.2 grant to Buyer a nonexclusive license to use all Software associated
with, and integral to, Hardware purchased by Buyer hereunder, which
license shall continue beyond the Term, in accordance with Annex 6
attached hereto;
2.1.3 carry out the installation of Equipment at the applicable
Installation Site substantially in accordance with the Sample Project
Schedule set forth in Annex 2 and in accordance with the relevant
Purchase Orders;
2.1.4 furnish OEM Equipment to Buyer at prices to be quoted by Seller and
in accordance with such OEM vendor's then current terms, conditions
and specifications.
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3. PURCHASE ORDERS
3.1 Each Purchase Order for Equipment and/or Services issued during the
Term of this Agreement, or as it may be extended, shall be governed by
the terms and conditions of this Agreement, and shall incorporate
these terms and conditions by reference. Buyer hereby expressly agrees
that except for non-conflicting administrative terms as provided
below, any additional or preprinted terms or conditions on the
applicable Purchase Order, shall be null, void and of no effect. Each
such Purchase Order shall specify:
3.1.1 The description of the ordered Equipment and/or Services, including
any identification referenced in the price list herein attached as
Annex 1;
3.1.2 Requested place and date of delivery as previously agreed by Seller;
3.1.3 Applicable Price for the ordered Equipment and/or Services as set
forth in Annex 1 or as may be separately quoted by Seller from time to
time;
3.1.4 Price for Equipment engineering, installation and testing to be quoted
by Seller, together with a mutually agreed Installation and Turnover
schedule;
3.1.5 Installation Site(s) where applicable;
3.1.6 Other appropriate information as may be required by Seller necessary
to fill the Purchase Order such as Buyer's floor plan and frequency
plan; and
3.1.7 Location to which the applicable invoice shall be rendered for payment.
3.2 Any Purchase Order issued by Buyer and not rejected in writing within
ten (10) business days after receipt by Seller shall be deemed
accepted.
4. PRICE
4.1 The price ("Price") for any Equipment shall consist of (i) unit list
prices for Hardware and Merchandise, as set forth in Annex 1; (ii)
license fees to use the Software associated with such Hardware, as set
forth in Annex 1; and (iii) for OEM Equipment and Services, the Prices
as may be quoted by Seller from time to time.
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4.2 Unless otherwise specified, the Prices set forth in Annex 1 are
exclusive of Seller's charges for any Services associated therewith.
4.3 The Prices are exclusive of any taxes, which shall be the
responsibility of Buyer pursuant to Section 5.4 hereof.
5. PAYMENT
5.1 With respect to Purchase Orders for Equipment that include
Installation Services therefor, delivery of which Equipment is taken
by Buyer on or before December 31, 1995, Buyer shall pay to Seller the
appropriate Price in accordance with the following schedule:
5.1.1 20% of the Purchase Order Price payable upon execution of this
Agreement by the parties.
5.1.2 10% of the Purchase Order Price shall be invoiced by Seller upon
shipment of the Switch in the case of a System Installation or, in the
case of an Expansion or Cell Site installation, upon shipment of the
major components to the Installation Site. Such payment shall be paid
to Seller within thirty (30) days following the date of Seller's
invoice therefor.
5.1.3 50% of the Purchase Order Price shall be invoiced by Seller upon the
date of Turnover. Such payment shall be paid to Seller within thirty
(30) days following the date of Seller's invoice therefor.
5.1.4 20% of the Purchase Order Price shall be invoiced by Seller after
Acceptance of the Equipment as defined in Article 14 herein. Such
payment shall be paid to Seller within thirty (30) days following the
date of Seller's invoice therefor.
5.2 With respect to Purchase Orders for Equipment that include
Installation Services therefor, delivery of which Equipment is taken
by Buyer after December 31, 1995, Buyer shall pay to Seller the
appropriate Price in accordance with the following schedule:
5.2.1 20% of the Purchase Order Price payable upon Seller's acceptance of
Buyer's Purchase Order.
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5.2.2 50% of the Purchase Order Price shall be invoiced by Seller upon
shipment of the Switch in the case of a System Installation or, in the
case of an Expansion or Cell Site installation, upon shipment of the
major components to the Installation Site. Such payment shall be paid
to Seller within thirty (30) days following the date of Seller's
invoice therefor.
5.2.3 20% of the Purchase Order Price shall be invoiced by Seller upon the
date of Turnover. Such payment shall be paid to Seller within thirty
(30) days following the date of Seller's invoice therefor.
5.2.4 10% of the Purchase Order Price shall be invoiced by Seller after
Acceptance of the Equipment as defined in Article 14 herein. Such
payment shall be paid to Seller within thirty (30) days following the
date of Seller's invoice therefor.
5.3 Any additional monies that become due to Seller (including, without
limitation, Merchandise orders, Service orders, such items as are
described in Section 5.4, Equipment purchases wherein Installation is
not provided by Seller, and OEM Equipment not part of the original
System order) shall be invoiced one hundred percent (100%) upon
shipment, or upon completion of Services performed, and paid to Seller
by Buyer within thirty (30) days of Seller's invoicing Buyer therefor.
In the case of a phased Installation, or if portions of an
Installation are delayed due to no fault of Seller, Seller may invoice
on a per Installation Site basis upon completion of the applicable
milestone event.
5.4 All past due amounts (collectively, "Past Due Amounts") shall bear
interest at the rate of one and one-half percent (1 1/2%) per month
(or such lesser rate as may be the maximum permissible rate under
applicable law), beginning with the date on which the applicable Past
Due Amount was due and payable.
5.5 Except for any franchise tax or any tax assessed on Seller's net
income, Buyer shall pay to Seller the amount of any sales and/or use
tax, duty, excise tax, fee or similar charges which Seller may be
required to pay because of its performance of this Agreement. Personal
property taxes
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assessable on the Equipment shall be the responsibility of Buyer. To the
extent Seller is required by law to collect such taxes (state or local),
one hundred percent (100%) thereof shall be added to invoices as
separately stated charges and paid in full by Buyer, unless the Buyer is
exempt from such taxes and furnishes Seller with a certificate of
exemption prior to issuance of invoice in a form reasonably acceptable
to Seller. Buyer shall hold Seller harmless from any and all subsequent
assessments levied by a proper taxing authority for such taxes,
including any interest, penalties or late charges due to Buyer's failure
to perform hereunder.
5.6 Until the total Price for each Purchase Order is paid to Seller, Seller
shall retain and Buyer hereby grants to Seller a purchase money security
interest in the Equipment, as applicable, and Buyer shall cooperate with
Seller in perfecting such interest.
5.7 Prior to payment in full of the Price and all additional monies due to
Seller, without written permission of Seller, Buyer shall not sell or
lease Equipment purchased by it, or assign any license to use the
Software, or allow any liens or encumbrances to attach to any such
Equipment, or remove such Equipment or Software from the Installation
Site (if applicable).
5.8 Seller reserves the right to require reasonable assurances of payment by
Buyer, e.g., funded financing by a financial institution acceptable to
Seller or letter of credit from a reputable bank provided by Buyer to
Seller not later than thirty (30) days prior to the scheduled Ship Date.
Seller may, from time to time, evaluate Buyer's credit standing, and on
that basis, establish a credit limit to accommodate Buyer's issuance of
Purchase Orders as herein provided. Buyer shall provide any reasonable
assistance requested by Seller necessary for Seller to make such
evaluation.
6. DELIVERY, RISK OF LOSS, TITLE
6.1 Equipment shall be shipped F.O.B. the place of shipment with freight
charges prepaid and invoiced back to Buyer, except that in the case of a
Switch purchase or a Cell Site purchase that includes the E, F, and I
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option, Seller will be responsible for freight charges. Seller will
select the method and common carrier for shipment unless otherwise
specified by Buyer on the Purchase Order, in which case, Buyer will be
responsible for any additional premium freight charges.
6.2 Title and risk of loss or damage to any Equipment furnished by Seller
to Buyer in accordance with this Agreement shall pass to Buyer at the
point and on the date of shipment. Seller warrants to Buyer that such
title shall be good and clear title, free and clear of all liens and
encumbrances. THE FOREGOING NOTWITHSTANDING, TITLE TO SOFTWARE SHALL
NOT PASS TO BUYER AT ANY TIME.
6.3 Not later than thirty (30) days prior to the earliest Ship Date
relating to any of the items covered by the applicable Purchase Order
Buyer may notify Seller that Buyer (i) does not wish to receive
shipment of any Equipment on the date set forth in such Purchase
Order, or (ii) that Buyer's facilities are not prepared pursuant to
Annex 2 hereof in sufficient time for Seller to make delivery pursuant
to the date set forth in the applicable Purchase Order. In such case
Seller shall have the right to place such Equipment in storage and
Buyer shall be liable for all additional transportation, demurrage,
loading, storage, and associated costs thereby incurred by Seller. The
shipment of Equipment to a storage location as provided in this
Section 6.3 shall be deemed to constitute shipment of the Equipment
for purposes of invoicing, passage of title and risk of loss, and
commencement of the Warranty Period.
7. WARRANTIES, REMEDIES AND LIMITATION OF WARRANTIES AND REMEDIES AND
DISCLAIMERS OF WARRANTIES AND LIABILITY
7.1 HARDWARE AND SERVICES WARRANTY
7.1.1 Seller warrants that during the Warranty Period, the Hardware
furnished under this Agreement shall be free from defects in material
and workmanship, and shall conform to the applicable portions of the
Specifications, and that the Services furnished under this Agreement
shall be performed in a professional and workmanlike manner. Any and
all
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claims for breach of this warranty are conclusively deemed waived unless
made during the Warranty Period. Performance of Seller's obligations
hereunder shall not extend the Warranty Period, except that any Hardware
and/or Services repaired, replaced or corrected during the Warranty
Period shall continue to be warranted for the balance of the Warranty
Period.
7.1.2 Seller's sole obligation and Buyer's exclusive remedy under this
warranty are limited to the replacement or repair, at Seller's option,
of the defective component of the Hardware, or the correction of the
faulty Services. Such replacement Hardware may be new or reconditioned
to perform as new, at Seller's option. Buyer shall bear the risk of
loss and damage and all transportation costs for defective Hardware
shipped to Seller; and Seller shal bear the risk of loss and damage and
all transporation costs for replacement Hardware shipped to Buyer.
Title to defective or replacement Hardware shall pass to Seller or
Buyer, as appropriate, upon receipt thereof.
7.2 SOFTWARE WARRANTY
Seller warrants that, proived the Software is not altered by Buyer, and
provided the Software is used in conjunction with the DMS-MTX Hardware
purchased under this Agreement ane such Hardware has been maintained in
accordance with Seller's recommended maintenance procedures, the
Software shall function during the Warranty Period without defects which
materially affect Buyer's use of the Software in accordance with
Seller's Specifications for the Software. In the event the Software
fails to so perform and Buyer's use of the System is materially affected
by such failuer, Buyer's exclusive remedy under this warranty is to
require Seller to correct such failure and such remedy is conditioned
upon Seller's receiving written notice within the Warranty Period (or
oral notice promptly confirmed in writing) of such failure. The
correction of any Software failure shall not extend the Software
Warranty Period.
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7.3 RESPONSE SERVICES/TIME
7.3.1 During the Warranty Period, Seller's technical assistance service
("TAS") department shall provide reasonable assistance in the
investigation and resolution of service affection problems. If such
assitance is requested by Buyer, Buyer agrees to follow Seller's
standard policies and procedures related to such TAS services as set
forth in Annex 5, "Seller Warranty Services." The Hardware Warranty
Period shall include TAS only to the extent that any TAS services
provided under the Switch warranty also apply to Hardware operating in
conjuction with the applicable Switch. For routine warranty service
situations, Seller shall ship replacement or repaired Hardware (or
components thereof) within thirty (30) days of receipt of the defective
Hardware (or components thereof) from Buyer.
7.3.2 For emergency warranty service situations, Seller shall, during the
Warranty Period, use all reasonable efforts to ship replacement Hardware
(or components thereof) within twenty-four (24) hours of notification of
the warranty defect by Buyer. Buyer shall pay to Seller the surcharge
set forth in Annex 5, for such expedited shipment of placement Hardware.
Buyer shall ship the defective Hardware to Seller within thirty (30)
days of receipt of the replacement Hardware. In the event Seller fails
to receive such defective Hardware within such thirty (30) day period,
Seller shall invoice Buyer for the replacement Hardware at then-current
price in effect therefor. For the purpose of this Agreement, an
emergency shall be deemed to exist upon the occurence of a Priority E1
or E2 problem, as defined as Annex 5.
7.4 THE WARRANTIES AND REMEDIES SET FORTH ABOVE CONSTITUTE THE ONLY
WARRANTIES WITH RESPECT TO THE EQUIPMENT AND SERVICES PROIVDED, AND
BUYER'S EXCLUSIVE REMEDIES IN THE EVENT SUCH WARRANTIES ARE BREACHED.
THEY ARE IN LIEU OF ALL OTHER WARRANTIES WRITTEN AND ORAL, STATUTORY,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE WARRANTY OF
MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
SELLER SHALL NOT BE LIABLE FOR ANY INCIDENTAL, CONSEQUENTIAL, OR SPECIAL
DAMAGES OF ANY
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NATURE WHATSOEVER. BUYER ACKNOWLEDGES THAT THE SWITCH COMPONENT BEING
PROVIDED UNDER THIS AGREEMENT IS USED.
7.4.1 Seller's obligations udner this article 7 shall not apply to (i)
Equipment or components thereof such as fuses and bulbs that are
normally consumbed in operation, or have a normal life inherently
shorter than the Warranty; (ii) defects that are a result of improper
storage, installation, use, maintenance or repair by the Buyer
(including, without limitation, operation of the Equipment outside the
environmental parameters defined in the Specifications); (iii) improper
operation of Equipment with other hardware used by Buyer, including the
operation of Equipment with hardware not authorized by Seller for use
with the Equipment, or use of the Equipment with any improperly
operating equipment not supplied by Seller under this Agreement; (iv)
Equipment or components thereof that due to no fault of Seller have been
subjected to any other kind of misuse or detrimental exposure or have
been involved in an accident, fire explosion, Act of God, or any other
cause not attributable to Seller, or (v) Equipment or INstallation
Services altered, repaired, installed or relocated by any party other
than Seller or Seller's agents. For purposes of subsection (v),
"install" shall not mean the routine plug-in of the components done in
accordance with NTP guidelines.
7.5 OEM EQUIPMENT
7.5.1 OEM Equipment furnished under the initial Purchase Order in conjunction
with a Switch, (e.g., terminals and printers), shall be warranted in
accordance with the Hardware warranties set forth in Section 7.1 and
handled through Seller's Repair and Return department. With respect to
all other OEM items ordered by Buyer, Buyer shall receive the warranties
for such OEM Equipment directly from such OEM venders. Except for the
warranty of title extended in Section 6.2 hereof, the warranties
provided in this Section 7.5 are Buyer's sole and exclusive remedy
against Seller with respect to OEM Equipment provided under this
Agreement.
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8. FORCE MAJEURE
If the performance of this Agreement, or of any obligation hereunder
except for the obligations set forth in Article 5 is prevented,
restricted or interfered with by reason of fires, breakdown of plant,
labor disputes, embargoes, government ordinances or requirements, civil
or military authorities, acts of God or of the public enemy, acts or
omissions of carriers, inability to obtain necessary materials or
services from suppliers, or other causes beyond the reasonable control
of the party whose performance is affected, then the party affected,
upon giving prompt notice to the other party, as set forth in Section
24.2 shall be excused from such performance on a day-for-day basis to
the extent of such prevention, restriction, or interference (and the
other party shall likewise be excused from performance of its
obligations on a day-for-day basis to the extent such party's
obligations relate to the performance so prevented, restricted or
interfered with); provided that the party so affected shall use
reasonable efforts to avoid or remove such causes of non-performance and
both parties shall proceed to perform their obligations with dispatch
whenever such causes are removed or cease.
9. PATENT OR COPYRIGHT INFRINGEMENTS
9.1 Seller agrees to indemnify Buyer with respect to any suit, claim, or
proceeding brought against Buyer alleging that Buyer's use of the
Equipment constitutes an infringement of any United States patent or
copyright. Seller agrees to defend Buyer against any such claims and to
pay all litigation costs, reasonable attorney's fees, settlement
payments and any damages awarded in any final judgment arising from
such suit, claim or proceeding; provided, however, that Buyer shall
promptly advise Seller of any such suit, claim, or proceeding and shall
cooperate with Seller in the defense or settlement of such suit, claim
or proceeding and provided Seller shall have sole control thereof.
9.2 In the event that an injunction is obtained against Buyer's use of
Equipment arising from such patent or copyright suit, claim or
proceeding, in whole or in part, Seller shall, at its option, either:
(i) procure for Buyer the right to continue using the portion of a
System enjoined from use; or (ii)
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replace or modify the same so that Buyer's use is not subject to any
such injunction.
9.3 In the event that Seller cannot perform under Section 9.2, Buyer shall
have the right to return such Equipment or portion thereof to Seller
upon written notice to Seller and in the event of such return, neither
party shall have any further liabilities or obligations under this
Agreement, except that Seller shall refund the depreciated value of any
such Equipment or portion thereof as carried on the Buyer's books at the
time of such return.
9.4 Seller's indemnity obligations under Section 9.1 shall not apply to
infringement claims (i) arising from any portion of the Equipment that
is manufactured to Buyer's design, or (ii) arising from the use of the
Equipment in combination with any other apparatus or material not
supplied by Seller to the extent that the claims arise from such
combination usage.
9.5 The foregoing states the entire liability of Seller for patent or
copyright infringement by the Equipment. Seller shall have no liability
whatsoever for any patent or copyright infringement arising from Buyer's
use of the OEM Equipment, and Seller makes no warranty with respect
thereto.
10. SOFTWARE LICENSE
10.1 With respect to Equipment containing Software acquired under this
Agreement, Buyer is hereby granted a non-exclusive license to use the
Software in accordance with the terms set forth in Annex 6, "Software
License." Buyer is granted no title or ownership rights to the
Software, which rights shall remain in Seller or Seller's suppliers as
appropriate. An initial Software license fee paid by Buyer shall not
cover charges for future Software releases as contemplated in Section
11, and which fees are set forth in Annex 1.
10.2 From time to time Seller may, at its discretion, offer to license, at
variable fees, optional Software features to Buyer for use on Buyer's
System. Such variable fees shall be calculated on the basis of
measurable units of
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usage. The criteria for measurement may vary from feature to feature,
but will consist of units that may be quantified, such as, by way of
example and not limitation, radios (voice channels), effective traffic
channels, cell sites or subscribers (hereinafter "measurable units").
For purposes of this Article 10, "System" shall mean, in addition to the
definition set forth in Section 1.18 hereof, Buyer's DMS-MTX and all
interconnected cell sites.
10.2.1 A list of Seller's current variable license fee offerings is included in
Annex 1, as amended from time to time. Seller shall notify Buyer of any
price increases affecting such features not later than sixty (60) days
prior to the effective date. All such updates to Annex 1 shall be
provided to Buyer under separate cover and shall be deemed to be
incorporated herein by reference. The fees for all such features shall
be subject to a minimum charge as determined for each individual
Software feature; however, the total fees for each individual Software
feature based on the total number of such measurable units quantified
during the duration of the Software license will not aggregately exceed
the then-current fixed rate price for that particular feature. Buyer,
at its option, may license such Software features at the applicable
fixed-rate price.
10.2.2 In the event Buyer elects to license certain Software features on a
measurable unit basis as described hereinabove, Buyer hereby gives
Seller the right to audit Buyer's System either remotely or visually, or
some combination thereof, for purposes of determining such unit
quantities. Seller shall conduct an audit at the time the applicable
Software is loaded onto Buyer's DMS-MTX to determine the initial
quantity of measurable units. Thereafter, Seller shall have the right
to audit Buyer's System on an annual basis as set forth herein.
Following each annual audit, Buyer shall be invoiced for any additional
measurable units as compared with the preceding twelve-month period
total. No license fees shall be pro rated because of usage of any
additional measurable units during any portion of the preceding
twelve-month period. Payment shall be made to Seller by Buyer for all
license fees and associated taxes in accordance with Article 5 of this
Agreement. Seller's right to audit and invoice Buyer in accordance with
this Section 10.2 hereof for measurable units added following the
expiration of the Agreement shall survive the term of the Agreement.
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10.3 The obligations of Buyer under this Article 10 and Annex 6 shall
survive the termination of this Agreement, regardless of the cause of
termination.
11. SOFTWARE UPDATES
11.1 The license fees set forth in Annex 1 for additional Software releases
assume that Buyer's System is operating on Software at the same level
of maintainability as set forth in Section 11.3 hereof. Otherwise,
retrofitting features from a new release onto Buyer's System shall be
considered and quoted by Seller on a case-by-case basis. Additionally,
future Hardware purchases may require the support of a then-current
Software load.
11.2 Any such Software release may require the purchase of additional
Hardware by Buyer.
11.3 If Buyer elects to remain on a prior Software release, Seller's sole
obligation hereunder shall be to make available maintenance for the
Software for the previous two consecutive releases from the
then-current, Seller-numbered release (i.e., numbered Software load).
12. REMEDIES
12.1 Seller shall have the right to suspend its performance under this
Agreement by written notice to the Buyer and forthwith remove and take
possession of any portion of the Equipment that has been delivered if
the Buyer, prior to payment to Seller of the Price, shall become
insolvent or bankrupt, make a general assignment for the benefit of, or
enter into any arrangement with creditors, file a voluntary petition
under any bankruptcy, insolvency, or similar law, or have proceedings
under any such laws or proceedings seeking appointment of a receiver,
trustee or liquidator instituted against it which are not terminated
within thirty (30) days of such commencement.
12.2 In the event of any material breach of this Agreement by either party
which shall continue for thirty (30) or more days after written notice
of such breach (including a reasonably detailed statement of the nature
of such
16
<PAGE>
breach) shall have been given to the breaching party by the aggrieved
party, the aggrieved party shall be entitled at its option:
12.2.1 if the aggrieved party is the Buyer, to suspend its performance under
Article 5 of the Agreement for so long as the breach continues
uncorrected or;
12.2.2 if the aggrieved party is Seller, to suspend performance of all of
its obligations under the Agreement for so long as the breach
continues uncorrected or;
12.2.3 to avail itself of any and all remedies available at law or equity
whether or not it elects to suspend its performance under
Section 12.2.1 or 12.2.2 as applicable.
12.3 NOTWITHSTANDING THE PROVISIONS OF SECTION 12.2, OR ANY OTHER
PROVISION OF THIS AGREEMENT, SELLER SHALL NOT BE LIABLE FOR
INCIDENTAL, INDIRECT, CONSEQUENTIAL, OR SPECIAL DAMAGES OF ANY NATURE
WHATSOEVER FOR ANY ACTION ARISING UNDER THIS AGREEMENT.
12.4 Any action for breach of this Agreement or to enforce any right
hereunder shall be commenced within two (2) years after the cause of
action accrues or it shall be deemed waived and barred (except that
any action for nonpayment may be brought at any time permitted by
applicable law).
13. BUYER'S RESPONSIBILITIES
13.1 With respect to Equipment Installation, Buyer agrees that certain
duties shall be performed by the Buyer in a timely and proper fashion
as a condition precedent to Seller's obligations hereunder,
including, but not by way of limitation, those responsibilities
designated in Annex 2 (Statement of Work) as being the Buyer's, and
the following:
13.2 Buyer shall prepare the Installation Site(s) in accordance with
Seller's requirements for the Equipment as further set forth herein
and in Annex 2, no later than by the project dates as stated in
Purchase Order(s) accepted by Seller pursuant to the terms of this
Agreement.
17
<PAGE>
13.3 Buyer, at its expense, shall obtain all necessary local and federal
government permits applicable to a cellular telecommunications system
installation and operation (excluding any applicable permits required
in the normal course of Seller's doing business). Buyer understands
and agrees that all site engineering (including cell sites)
architectural work, civil work and supervision thereof, site
selection engineering, propagation engineering, environmental
approvals and rights-of-way are the responsibility of Buyer.
13.4 Buyer shall Insure that only qualified technicians shall perform any
maintenance and/or repair to the Equipment during the Warranty
Period, which maintenance and/or repair shall be confined to routine
tasks performed in accordance with Seller provided specifications.
14. TESTING, TURNOVER AND ACCEPTANCE
14.1 On completion of Installation of Equipment installed by Seller,
Seller shall provide Buyer five (5) days prior written notification
that such Equipment is ready for Commissioning. Following such
notification, Buyer agrees to have a representative present to
witness and acknowledge completion of such testing. Seller shall test
the Equipment in accordance with its standard testing procedures to
determine Equipment conformity with the standards and specifications
(hereinafter "Acceptance Criteria") of the applicable Seller
installation manuals as referenced in Annex 3, "DMS-MTX Acceptance
Criteria," as may be amended from time to time.
14.2 On the date that such Commissioning has been successfully completed,
Seller shall turn the Equipment over to Buyer ("Turnover"). On the
date of Turnover, Buyer shall complete and return to Seller the
"Turnover Notice" as described in Annex 4.
14.3 For purposes of this Agreement, the occurrence of any of the
following shall be deemed to constitute "Acceptance" of the Equipment:
14.3.1 Within fifteen (15) days following the date of Turnover, Buyer shall
either accept the Equipment in writing as provided in Annex 4,
"Acceptance
18
<PAGE>
Notice," or notify Seller in writing specifying in reasonable detail
those particulars in which the Equipment does not meet the Acceptance
Criteria. With respect to any such particulars, Seller shall promptly
proceed to take corrective action, and following correction, Buyer
shall accept the Equipment in writing.
14.3.2 The failure of Buyer to notify Seller within fifteen (15) days after
Turnover (or, in the case of correction, fifteen [15] days following
such correction) of any particulars in which the Equipment does not
meet the Acceptance Criteria, or the use by Buyer of the Equipment or
any portion thereof in revenue-producing service at any time, shall
be deemed to constitute Acceptance of such Equipment.
14.4 Acceptance of Equipment not installed by Seller shall be deemed to
occur upon receipt of and inspection by Buyer.
15. COVERAGE, INTERFERENCE AND THIRD-PARTY FACILITIES
15.1 Seller will not be responsible for radio propagation or coverage
distance due to Buyer's design. Seller shall not be responsible for
any failures or inadequacies of performance resulting from equipment
not supplied and installed by Seller or Seller's agents and
subcontractors pursuant to this Agreement. Seller shall not be
responsible for interference or disruption of service caused by
operation of other radio systems, lightning, motor ignition or other
similar interference.
15.2 In the event Buyer utilizes facilities or services supplied by others
such as common carrier circuits or towers, Seller shall have no
responsibility for the availability or adequacy of such services or
facilities.
16. REGULATORY COMPLIANCE
16.1 Seller shall use all reasonable efforts to install Equipment so that
it shall comply in all material respects with all Federal, State, and
local laws and regulations in force on the Effective Date of this
Agreement, which directly impose obligations upon the manufacturer,
Seller, or installer thereof.
19
<PAGE>
16.2 The prices set forth for the Equipment described herein are based on
Seller's design, manufacture, and delivery of the Equipment pursuant
to its design criteria and manufacturing processes and procedures in
effect on the Effective Date of this Agreement. If, as a result of
the imposition of requirements by any Federal, State or local
government during the Term of this Agreement there is a change in
such criteria, processes or procedure or any change in the Equipment,
the Prices will be adjusted equitably to reflect the added cost and
expense of such change.
17. CHANGES
17.1 Up to ninety (90) days prior to the scheduled Ship Date (or such
later time as is acceptable to Seller), Buyer may request Equipment
addition(s) or deletion(s) to any original Equipment configuration.
At any time prior to the start of Commissioning, Buyer may request
changes to the Project Schedule or Statement of Work. All such
Equipment reconfigurations or changes to the Statement of Work or
Project Schedule ("Changes") shall be subject to prior written
approval of Seller.
17.2 Except as provided in 17.3 below, all Changes shall be documented in
a written change order ("Change Order"), which shall be executed by
Buyer and returned to Seller prior to implementation of the requested
Changes. The Change Order shall detail any adjustments to the Price,
Statement of Work, or Project Schedule required by Seller for any
aspect of its performance under this Agreement.
17.3 Upon written request of Buyer for a Change to the Statement of Work
that entails additional services totaling $10,000, or less, and upon
written acceptance thereof by Seller, Seller will proceed in good
faith to implement such Change prior to receipt of an executed Change
Order. Within five (5) days following Buyer's written request, the
parties shall agree upon an appropriate price for such Changes, all
of which will be summarized in a subsequent Change Order and executed
by an authorized representative of Buyer within fifteen (15) days
following the date of the request for Change.
20
<PAGE>
17.4 Calculations for any System reconfigurations prior to the Ship Date
shall be based on Prices set forth in Annex 1, provided that (i) any
additions shall include any necessary engineering, installation and
testing charges and (ii) any deletions shall include applicable
discounts, and further provided that the net cumulative amount of
Changes shall not reduce the Price of a Purchase Order by more than
ten percent (10%).
17.5 Subject to Section 24.1 herein, Buyer understands and agrees that the
execution of this Agreement constitutes a firm, non-cancelable
Purchase Order for the Initial Purchase set forth in Section 1.0 of
Annex 1 and the training courses set out in Section 4.0 of Annex 1.
However, for Purchase Orders for Equipment other than the Initial
Purchase, upon written notification to Seller, Buyer may elect to
cancel such Purchase Orders prior to shipment of Equipment in
accordance with the following:
17.5.1 Without charge, Buyer may cancel any Purchase Order no later than
ninety (90) days prior to the earliest scheduled Ship Date; or
17.5.2 If Buyer cancels a Purchase Order less than ninety (90) days prior to
the earliest scheduled Ship Date, Buyer shall pay a cancellation
charge of ten percent (10%) of the Price to Seller; or
17.5.3 If Buyer cancels a Purchase Order less than sixty (60) days prior to
the earliest scheduled Ship Date, Buyer shall pay to Seller a
cancellation charge of fifteen percent (15%) of the Price; or
17.5.4 If Buyer cancels a Purchase Order less than thirty (30) days prior to
the earliest scheduled Ship Date, Buyer shall pay to Seller a
cancellation charge of twenty percent (20%) of the Price.
17.5.5 Buyer may not cancel a Purchase Order subsequent to the Ship Date.
The payment of such charges shall be Seller's sole remedy and Buyer's
sole obligation for such canceled Purchase Order(s).
21
<PAGE>
18. CONDITION OF INSTALLATION SITE(S)
Buyer warrants that the Installation Site is free from friable asbestos
or other hazardous contamination. In the event that such contamination
is found to be present at the Installation Site, Seller shall be
relieved of all of its obligations hereunder until such contamination
is removed. In the event that Buyer fails or refuses to remove such
contamination, Seller shall have the right to remove the Equipment or
portions thereof if already delivered and relocate the Equipment to an
alternate site provided by Buyer and charge Buyer for (i) any
additional delivery charges to the new Installation Site, (ii) all
materials expended at the site including cabling, permanently affixed
equipment, and those items which cannot reasonably be removed for use
elsewhere, (iii) specifically ordered items requested by Buyer, and
(iv) all labor and materials expended at the sites relating to the
relocation using Seller's then current rates.
19. RELEASE OF INFORMATION
19.1 Unless required by law, or as otherwise permitted under this Agreement,
Buyer and Seller agree that the terms and conditions of this Agreement
shall not be disclosed to any other party without the prior written
consent of the other; provided, however, that Seller may release
information to Northern Telecom Ltd., its research and development
affiliates, Bell Northern Research and BNR Inc. or any wholly-owned
subsidiaries ("Affiliate") on a need-to-know basis.
19.2 Neither Buyer nor Seller shall publish or use any advertising, sales
promotion, press releases or publicity matters relating to this
Agreement without the prior written approval of the other.
20. CONFIDENTIALITY
Buyer, Seller and Seller's Affiliates shall receive in confidence from
each other all technical information, business information,
documentation and expertise which is either (i) stamped or otherwise
marked as being confidential or proprietary whether in written or
electronic form, or (ii) if
22
<PAGE>
delivered in oral form, is summarized in a written memorandum and
listed as being confidential ("Confidential Information") and shall
not, except as previously authorized in writing by the other party,
publish, disclose or make use of such information (except as required
by law and after notice to the other party), unless and until the
Confidential Information shall have ceased to be proprietary as
evidenced by general public knowledge or shall have been legally
acquired by such party. This prohibition against disclosure,
publication or use of Confidential Information shall not restrict
either party from developing similar information in the exercise of its
own technical skill, so long as such other information is independently
developed by such party without making use of Confidential Information.
21. INTERCONNECTION TO SWITCH
21.1 Buyer understands that Equipment purchased hereunder does not
necessarily provide Buyer with a complete cellular telecommunications
System. In some cases, Buyer may intend to interconnect the Equipment
to an NTI DMS-MTX switch component, which switch component, and the
facilities for interconnection, may not be included in Buyer's Purchase
Order. In the event that Buyer interconnects such Equipment to an NTI
DMS-MTX switch not a part of a complete System purchase (hereinafter
"Host Switch"), it is understood and agreed that the making and
maintaining of all necessary arrangements (whether commercial, legal or
otherwise) with the supplier of such NTI DMS-MTX switch component,
including not only arrangements necessary to permit the timely
performance by Seller of its responsibilities under this Agreement,
(e.g., physical and remote dial-up access to the Host Switch for
installation and services purposes), but also any arrangements
necessary for the ongoing operation of the Equipment in conjunction
with the Host Switch, shall be solely the responsibility of Buyer, and
failure by Buyer to timely make or maintain, any necessary arrangements
shall not excuse Buyer from its obligations under this Agreement.
Seller shall have no responsibility whatsoever under this Agreement for
the proper performance of the Host Switch or for any failures of the
Equipment resulting from improper performance of the Host Switch.
23
<PAGE>
21.2 Buyer further acknowledges and agrees that the proper operation of the
Equipment and/or the availability of optional Software features, is
dependent upon having the appropriate Software Release Load operating
on the Host Switch.
22. EQUIPMENT CHANGES
With respect to any Purchase Order issued under this Agreement,
notwithstanding any other provisions contained in this Agreement,
Seller has the right, without prior approval from or notice to Buyer,
to make changes in the Equipment in whole or in part, or in the related
Specifications or other related documentation, or to substitute
products of later design at any time prior to delivery thereof,
provided that such changes do not adversely affect performance or
function. Seller is not obligated to make any such changes in items of
the Equipment previously delivered.
23. ANNEXES
The following Annexes shall form an integral part of this Agreement as
though written out in full in this Agreement:
Annex 1 - Equipment and Services Pricing
Annex 2 - Statement of Work/Sample Project Schedule
Annex 3 - DMS-MTX Acceptance Criteria
Annex 4 - Turnover and Acceptance Notices
Annex 5 - Seller Warranty Services
Annex 6 - Software License
Annex 7 - Documentation
Annex 8 - RF Engineering Services
24. GENERAL
24.1 This Agreement shall become effective upon execution by both parties;
however, Seller agrees that if the cellular licenses purchased from TDS
by Buyer are not transferred to Buyer by the last day of February,
1996, Buyer shall have the right to terminate this Agreement and shall
compensate
24
<PAGE>
Seller for Seller's reasonable expenses incurred in the performance
of this Agreement up to the date of termination.
24.2 Buyer may assign or transfer this Agreement or any rights hereunder to
any other party only with the prior written consent of Seller. No
assignment or sublicense of or under this Agreement, or of any rights
under this Agreement, by Buyer, shall relieve Buyer of primary
responsibility for performance of Buyer's obligations under this
Agreement. Seller reserves the right to refuse to honor any assignment
or sublicense which, in the opinion of its legal counsel, would
require it to violate any United States export restriction, other law,
or regulation. Seller reserves the right to subcontract any portion of
its obligation under this Agreement, but no such subcontract shall
relieve Seller of primary responsibility for performance of Seller's
obligations under this Agreement.
24.3 Notices and other communications shall be transmitted in writing by
Certified U.S. Mail, postage prepaid, return receipt requested,
addressed to the parties as follows:
Northern Telecom Inc. Dobson Communications Corp.
2435 N. Central Expressway 13439 North Broadway Extension
Richardson, Texas 75080 Oklahoma City, Oklahoma 73114
Attention: Director, Contracts Attention: Everett Dobson
cc: Program Manager President
Any notice given pursuant to this Section 24.2 shall be effective
five (5) days after the day it is mailed or upon receipt as evidenced
by the U.S. Postal Service return receipt card, whichever is earlier.
24.4 This Agreement may not be modified or amended or any rights of a
party to it waived except in a writing signed by duly authorized
representatives of the parties hereto.
24.5 Failure by either party at any time to require performance by the
other party or to claim a breach of any provision of this Agreement
shall not be construed as affecting any subsequent breach or the right
to require performance with respect thereto or to claim a breach with
respect thereto.
25
<PAGE>
24.6 Each party shall be liable for direct losses incurred by the other
party due to personal injury or damage to tangible property,
including the Hardware, which results from the negligence of that
party's employees or agents, provided, however, that nothing in this
Section shall affect or in any way increase Seller's obligation under
this Agreement with respect to the performance of the Hardware and/or
Software. Except for personal injury, the total liability of Seller
for all claims of any kind for any loss or damage, whether in
contract, warranty, tort (including negligence), strict liability or
otherwise, arising out of, connected with, or resulting from the
performance or non-performance of this Agreement shall in no case
exceed the total Price of the Purchase Order accepted under this
Agreement giving rise to the claim.
24.7 The rights and obligations of the parties and all interpretations and
performance of this Agreement shall be governed in all respects by
the laws of the State of Texas except for its rules with respect to
the conflict of laws.
24.8 Article headings are inserted for convenience only and shall not be
used in any way to construe the terms of this Agreement.
24.9 The invalidity in whole or in part, of any provision of this Agreement
shall not affect the validity of the remainder of such provision of
this Agreement.
24.9.1 This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original and all of which taken together
shall constitute one and the same instrument.
24.10 Each party hereto represents and warrants that (i) it has obtained
all necessary approvals, consents and authorizations of third parties
and governmental authorities to enter into this Agreement and to
perform and carry out its obligations hereunder; (ii) the persons
executing this agreement on its behalf have express authority to do
so, and, in so doing, to bind the party thereto; (iii) the execution,
delivery, and performance of this Agreement does not violate any
provision of any bylaw, charter, regulation, or any other governing
authority of the party; and (iv) the execution, delivery and
performance of this Agreement has been duly
26
<PAGE>
authorized by all necessary partnership or corporate action and this
Agreement is a valid and binding obligation of such party,
enforceable in accordance with its terms.
24.11 This Agreement constitutes the entire agreement between Seller and
the Buyer with respect to the subject matter hereof and supersedes
all previous negotiations, proposals, commitments, writings,
advertisements, publications and understandings of any nature
whatsoever. No agent, employee or representative of Seller has any
authority to bind Seller to any affirmation, representation, or
warranty concerning the System, except as stated in this Agreement
and unless such affirmation, representation, or warranty is
specifically included within this Agreement, it shall not be
enforceable by Buyer or any assignee or sublicensee of Buyer.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their representatives being thereunto duly authorized.
DOBSON COMMUNICATIONS NORTHERN TELECOM INC.
CORPORATION
By: /s/ Everett Dobson By: /s/ Matthew J. Desch
---------------------------- ---------------------------
Name: Everett Dobson Name: Matthew J. Desch
------------------------- -------------------------
(Type/Print) (Type/Print)
Title: President Title: Group VP & GM
------------------------ -------------------------
Date: 10-30-95 Date: 12/6/95
------------------------- --------------------------
27
<PAGE>
ANNEX 1
EQUIPMENT AND SERVICES
PRICING
During the Term, Buyer may purchase Equipment in addition to the Initial
Purchase ("Additional Equipment") at the lower of Seller's list Prices as of the
Effective Date (a portion of which are set forth in Section 2.0), or Seller's
then-current Prices at the time of issuance of Purchase Order. All Equipment
Prices shall be subject to any applicable discounts set forth in Sections 1.0
and 5.0 hereof (and their respective inclusive subsections).
Not all of Seller's Equipment set out in this Annex 1 will necessarily function
together as a System. Upon request, Seller will verify the operational
compatibility of any particular Equipment. Unless otherwise specifically
stated, Installation, Commissioning and engineering are not included in List
Prices.
The Prices set out in Sections 1.0 of this Annex 1 are based on Buyer trading in
its MTXM Switch after Turnover. Prior to Turnover and at its own expense,
Buyer shall de-install the MTXM Switch in accordance with the project schedule.
After Turnover, Seller shall remove at its own expense such MTXM Switch.
1.0 INITIAL PURCHASE
1.1 SWITCH (WITH USED MSCC CABINET)
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C>
HARDWARE:
SuperNode SE Dual ICP (480 ports) - with MSCC 1 $1,145,223 $1,145,223
Cabinet
MCTM-I w/1 DTC (480 ports) 1 $248,397 $248,397
MCGM w/7-9.6 bps HDLC Links 1 $59,113 $59,113
Turbo Link Interface 1 $4,239 Included
MP Controller CP for Billing Xfer (NT1X89BA) 2 $3,150 $6,300
X.25 layer 2 Intersystem Link Cont. (NT6X91BB) 1 $1,705 $1,705
CCS7 8MEG Link Interface Unit (LIU V.35) 2 $13,352 $26,704
SNSE MAP Furniture 1 Included Included
Helmsman/Compass Documentation 1 $4,700 $4,700
SuperNode SE Spares 1 $175,486 $175,486
ICP Packfill 1 $257,625 $257,625
Hardware Subtotal $1,925,253
</TABLE>
1-1
<PAGE>
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C>
SOFTWARE: (SEE SECTION 1.3 FOR PACKAGES INCLUDED)
BCS Software License Fee LOT $25,000 $25,000
Additional Packages LOT $426,900 $426,900
Software Subtotal $451,900
25% SWITCH AND SOFTWARE DISCOUNT ($594,288)
Used SNSE Cabinet Discount ($514,815)
Incremental ICP Packfill Discount ($200,379)
MTXM Trade-In Discount ($200,000)
EF & I:
NORTEL Engineer, Install & Commission LOT $177,658 $177,658
ICP Packfill Install & Commission LOT $7,160 $7,160
EF&I Subtotal $184,818
SWITCH NET TOTAL PRICE $1,052,489
1.2 CELL SITES (DUAL MODE)
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C>
1. NEW SITE 1
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
2. NEW SITE 2
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
3. NEW SITE 3
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
4. NEW SITE 4
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
</TABLE>
1-2
<PAGE>
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
- ---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C>
5. NEW SITE 5
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
6. NEW SITE 6
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
7. NEW SITE 7
16 Channel OMNI cell site (CC1016NU) 1 $115,534 $115,534
Integrated Cellular Remote Module (ICRM) 1 Included Included
Auto Tune Combiners LOT Included Included
Subtotal $115,534
SPARES:
Cell Site Spares (ICRM/DRU) LOT $54,974 $54,974 $54,974
Cell Site Subtotal $863,712
25% CELL SITE DISCOUNT ($215,928)
DUAL-MODE RADIO UNITS:
Dual Mode Radio Unit (DRU) CCH & LCR 14 $10,500 $147,000
Dual Mode Radio Unit (DRU) VOICE CHANNELS 98 $10,500 $1,029,000
Radio Units Subtotal $1,176,000
25% Radio Units DISCOUNT ($294,000)
EF&I:
Eng., Install & Commission 16 CH. Cell Site 7 $11,058 $77,406
EF&I Subtotal $77,406
VOLUME DISCOUNT ($509,928)
CELL SITE & RADIO UNITS TOTAL NET PRICE $1,097,262
----------
TOTAL INITIAL PURCHASE $2,149,751
Training (Annex 1, Section 4.0) $56,055
RF Engineering Services (Annex 1, Section 1.4) $111,700
----------
Initial Purchase Services Credit ($191,755)
TOTAL NET PRICE (INITIAL PURCHASE, RF ENG. SERV. & TRAINING) $2,125,751
</TABLE>
1-3
<PAGE>
1.3 SOFTWARE
13.1 SOFTWARE. The items listed below as "included" are included in the Price
quoted for the Switch in Section 1.1 of this Annex 1.
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION PEC PRICE PRICE TOTAL
- ---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C> <C>
1 Automatic Trunk Testing NTX051AA $5,000 Included
2 Network Management NTX080AB $20,000 Included
3 DS-1 64 Kb/s Clear Channel NTX142AA $5,000 Included
4 DS-1 Extended Superframe Format NTX143AA $2,000 Included
5 Focused Maintenance NTX272AA $10,000 Included
6 Enhanced Security w/o Password Encrypt NTX292BA $3,000 Included
7 Vertical Features KIT NTX325AA $40,000 Included
8 MTX Split Ticket Billing NTX332AA $5,000 Included
9 CDR Search On Disk NTX333AA $10,000 Included
10 Dynamic Power Control NTX336AA $5,000 Included
11 Malicious Call Trace NTX337AA $25,000 Included
12 Cellular Hotline NTX373AA $30,000 Included
13 Credit Card Calling NTX375AA $20,000 Included
14 IS-41+ Networking NTX378AB $25,000 Included
15 Network Messaging Enhancements NTX377AA $25,000 Included
16 Dedicated Access (FXS) NTX379AA $10,000 Included
17 OM Thresholding & Alarms NTX385AA $1,000 Included
18 OM Selective Output NTX445AB $5,000 Included
19 Switch Performance Monitoring System NTX738AC $20,000 Included
20 Switch Path Diagnostics NTX885Ab $10,000 Included
21 MPC Multi-link Mgmt NTX892AA $5,000 Included
22 MPC X.25 Interface NTXE85AA $18,000 Included
23 High Speed MPC NTXE98AA $3,000 Included
24 DMS Base Data Access Interface NTXG13AA $7,000 Included
25 Time of Day Routing NTXG51AA $10,000 Included
26 MTX Equal Access Enhance Office (BCS 35) NTXG53AB $15,000 Included
27 Expanded Spectrum NTXG58AA $25,000 Included
28 Follow Me Roaming NTXG57AA $25,000 Included
29 Centralized Operational A & M NTXG82AA $16,500 Included
30 Account Code Billing NTXG86AA $30,000 Included
31 Real Time Billing NTXG87AA $30,000 Included
32 STSR Sectorization NTXG88AA $25,000 Included
33 Maintenance Manager Morning Report NTXJ35AA $5,000 Included
34 Surveillance NTXL20AA $25,000 Included
35 Network Boundary Paging NTXL24AA $17,500 Included
36 Mobile Jamming Detection NTXL25AA $20,000 Included
37 Call Delivery Activatable NTXL28AA $30,000 Included
38 Mobile Tracking NTXL61AA $15,000 Included
</TABLE>
1-4
<PAGE>
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION PEC PRICE PRICE TOTAL
- ---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C> <C>
39 Remote Call Forw Activate/De-Activate NTXL62AA $30,000 Included
40 IS41 Enhanced Roamer Validation NTXM17AA $50,000 Included
41 IS-41 Rev.8 NTXM30AA $32,000 Included
42 Call Forwarding Enhancements NTXM31AA $10,000 Included
43 Visitor Location Register NTXM32AA $41,000 Included
44 Active Mobile Paging NTXM33AA $53,000 Included
45 Manufacturers ESN Fraud NTXM34AA $10,000 Included
46 Expanded Call Forwarding Feature Codes NTXM39AA $24,000 Included
47 MPC 1984 MPC X.25 NTXN85AA $1,875 Included
48 EDRAM Upload NTXS72AA $35,000 Included
49 XPM+ Based ICP NTXX89AA $11,000 Included
50 Multi-Net. Protocol (Billing File Xfer.) NTXX98AA $10,000 Included
51 Networking Software including: SB1204NU $345,500 $345,500
MTX to MTX handoff & call delivery-
IS-41 Rev A networking software for
SS7 & X.25 layer 2 (pt. to pt.)
Software Subtotal $345,500
</TABLE>
1.3.2 The following Software is priced on a per voice channel basis except
where indicated with an asterisk. The Total Software Additions Price
set out below is included in the Subtotal for Software in Section 1.1
of this Annex 1.
<TABLE>
<CAPTION>
VOICE UNIT
ITEM DESCRIPTION PEC CHANNELS PRICE TOTAL
- ---- ----------- --- -------- ----- -----
<S> <C> <C> <C> <C> <C>
MTX 01 FEATURES:
1 Dual Mode Message Waiting Notification NTXX55AA 200 $31 $6,200
2 Audio Message Waiting Notification NTXX57AA 200 $31 $6,200
3 Translations per Sector NTXX58AA 200 $12 $2,400
4 Multiple TLDN pool NTXX59AA 200 $12 $2,400
5 Handoff by station class mark NTXX64AA 200 $18 $3,600
6 Single switch multi-LATA NTXX67AA 200 $12 $2,400
7 Multiple tumbling ESNs NTXX69AA 200 $6 $1,200
8 Single carrier duplex ICRM NTXX75AA 200 $18 $3,600
9 Optimal power handoff NTXX77AA 200 $6 $1,200
10 Cancel Call Waiting NTXX78AA 200 $12 $2,400
11 Roaming do not disturb NTXX92AA 200 $12 $2,400
MTX 01 Software Subtotal $34,000
</TABLE>
1-5
<PAGE>
<TABLE>
<CAPTION>
VOICE UNIT
ITEM DESCRIPTION PEC CHANNELS PRICE TOTAL
- ---- ----------- --- -------- ----- -----
<S> <C> <C> <C> <C> <C>
MTX 02 FEATURES:
1 Zone Paging NTXXO5AA 200 $18 $3,600
2 Microcell Software Support* NTXX05AA 1 N/C N/C
3 Mobile Status Link NTXXO8AA 200 $92 $18,400
4 ICRM Drop and Insert NTXX10AA 200 $18 $3,600
5 Drop Call Reduction* NTXX62AA 1 $3,400 $3,400
6 CLID Presentation NTXX58AA 200 $92 $18,400
7 CLID Restriction NTXX93AA 1 Included Included
8 ISUP Base NTXX01AA 1 Included Included
9 MTIX TR-317 NTXXO9AA 1 Included Included
10 CDPD-MDIS Base* NTXX14AA 0 $77,000 $0
11 CDPD-MDBS priced per CDPD radio NTXX14AAR 0 $1,540 $0
MTX 02 Software Subtotal $47,400
</TABLE>
1.3.3 With respect to the purchase of Software features by Buyer other than
the purchase of such features as part of the Initial Purchase,
Seller's unit price for an individual Software feature priced on a per
voice channel basis (as set out in 1.3.2 above) shall remain fixed
until Buyer has purchased such feature for two thousand (2,000) voice
channels. Seller shall not charge Buyer for any number of voice
channels in excess of a total of two thousand (2,000) for any one
feature.
1.4 RF ENGINEERING SERVICES
Buyer shall purchase from Seller as part of the Initial Purchase the
RF Engineering Services listed below. Buyer shall purchase such
Services at the List Prices for twenty-eight (28) cell sites as set
out below. The Comprehensive System Performance Optimization Package
may not be unbundled.
<TABLE>
<CAPTION>
CELL SITE EXTENDED SYSTEM
SERVICE/PACKAGE PRICE PRICE PRICE T&L TOTAL
- --------------- ----- ----- ----- --- -----
<S> <C> <C> <C> <C> <C>
Frequency Plan Optimization
Service (Existing System) $375 $10,500 $4,250 $14,750
Comprehensive System
Performance Optimization
Service Package $2,850 $79,950 $11,500 $5,000 $96,950
------
TOTAL RF ENGINEERING SERVICES (28 CELL SITES) $111,700
</TABLE>
1-6
<PAGE>
1.4.1 Comprehensive System Performance Optimization Service Package
("CSPSO")
The CSPSO consists of the following Services:
(a) System Propagation Prediction and Plot
(b) System Propagation Prediction Analysis
(c) Comprehensive System Performance Optimization
(d) Dropped Call and Hand-off Performance Analysis
1.4.2 A Statement of Work defining the work requirements and
responsibilities of both Seller and Buyer which are necessary for
Seller to provide the Frequency Plan Optimization Service and CSPSO is
included in Annex 8 of this Agreement.
2.0 ADDITIONAL EQUIPMENT
<TABLE>
<CAPTION>
List
Description Price
----------- -----
<S> <C>
SWITCHING & SOFTWARE
MCTM-I w/1 DTC (480 ports) $248,397
DTC Packfill (480 ports) $210,320
MCTM-I w/1 ICP (240 ports) $310,000
ICP Packfill $257,625
CELL SITE RF
16 Channel OMNI cell site (CC1O16NU) $115,534
Integrated Cellular Remote Module (ICRM) INCLUDED
Auto Tune Combiners INCLUDED
24 Channel OMNI cell site (CC1024NU) $152,544
Integrated Cellular Remote Module (ICRM) INCLUDED
Auto Tune Combiners INCLUDED
32 Channel OMNI cell site (CC1032NU) $172,146
Integrated Cellular Remote Module (ICRM) INCLUDED
Auto Tune Combiners INCLUDED
8 CH NT800DR RF Expansion OMNI w/ ATC* $29,631
16 CH NT800DR RF Expansion OMNI w/ ATC* $49,233
RADIOS
Dual Mode Radio Unit (DRU) VOICE CHANNELS $10,500
</TABLE>
* The required cables and miscellaneous materials are not included. Upon
Buyer's request, Seller will provide a Price quote for such cables and
miscellaneous materials based on Seller's List Price as of the date of this
Agreement.
1-7
<PAGE>
3.0 ADDITIONAL SOFTWARE LICENSE FEE
Software Release License Fee for MTX
releases subsequent to release contained
in the Initial Purchase----------------------- $25,000 (per release)
Software License Fees shall be charged for each Switch and do not
include any additional Hardware that may be required. Such Fees shall
not include charges for optional Software or Software operating
outside the DMS-MTX core. The above quoted Software License Fee for
MTX releases subsequent to the release contained in the Initial
Purchase shall not be subject to discounts or credits of any kind.
Prices for optional Software features or Software operating outside
the DMS-MTX core shall be at Seller's then-current List Prices less
the applicable discount set out in Section 5 of this Annex 1 with the
exception described in Subsection 1.3.3 above for Software features
priced on a per voice channel basis.
4.0 TRAINING
Buyer shall purchase the Seller recommended training courses listed
below which have designated quantities greater than "0." Buyer shall
purchase such courses in the quantities and at the unit and extended
Prices set out below. If applicable, Buyer shall refer to Seller's
course catalog for prerequisite courses to determine the order in
which courses must be taken. Seller recommends that Buyer's personnel
be trained prior to Installation of Initial Purchase. Prices for
courses not purchased by Buyer are subject to change. Prices for
training are exclusive of travel, lodging, food, and incidental
expenses, which shall be for Buyer's account. Course content is
subject to change at Seller's discretion.
<TABLE>
<CAPTION>
UNIT EXTENDED
ITEM DESCRIPTION QTY PRICE PRICE TOTAL
---- ----------- --- ----- ----- -----
<S> <C> <C> <C> <C> <C>
CLASSROOM COURSES:
1 Introduction to MTX MAP #925 0 $855 $0
2 DMS-MTX Maintenance #944 3 $4,275 $12,625
3 Cell Site Operations & Maintenance #963 3 $1,425 $4,275
4 Cell Translations & Appl. #980 3 $1,425 $4,275
5 Cell Site Data Base #982 3 $1,425 $4,275
6 DMS-MTX Networking (IS-41 Rev. B) #984 3 $1,425 $4,275
7 Cellular Intermediate RF Engineering #1000 0 $856 $0
8 MTX-01 Cellular Hand-off #1001 0 $570 $0
9 System Performance Audits #1002 0 $570 $0
10 System Performance Optimizations #1003 0 $855 $0
ON-SITE TRAINING:
11 Introduction to MTX MAP #925 6 $855 $5,130
12 Cellular Intermediate RF Engineering #1000 $9,000 $9,000
13 MIX-01 Cellular Hand-off #1001 $6,000 $6,000
14 System Performance & Opt. Audits #1002 $6,000 $6,000
On site training requires a minimum of 6 people; the maximum is 20.
TOTAL $56,055
</TABLE>
1-8
<PAGE>
5.0 DISCOUNTS AND CREDITS
5.1 All discounts are included in the Prices set forth in Section 1.0 for
Initial Purchase and such Prices are not subject to any additional
discounts.
5.2 All Equipment other than the Equipment in the Initial Purchase shall
be discounted at thirty percent (30%) off Seller's List Prices for
such Equipment, except Dual Mode Radio units shall be discounted at
forty percent (40%) off such List Prices.
5.2.1 Subject to Subsection 5.2.2 below, Seller shall grant purchase credits
to Buyer in the categories of Additional Equipment listed below
resulting from Buyer's purchase of such Additional Equipment ("AE
Credits"). Such AE Credits shall be for an amount equal to the actual
dollar amounts resulting from the application of the formula set out
for each category of Additional Equipment.
<TABLE>
<CAPTION>
CATEGORY OF ADDITIONAL EQUIPMENT ADDITIONAL
-------------------------------- EQUIPMENT CREDIT
----------------
<S> <C>
Switch Equipment 4% of the Net Price of
Switch Equipment = AE
Credit dollar amount
Software 4% of the Net Price of
Software = AE Credit
dollar amount
Cell Site 15% of the Net Price of
Cell Site Equipment =
AE Credit dollar amount
Radio Units 5% of the Net Price of
Radio Units = AE Credit
dollar amount
</TABLE>
5.2.2 The credits described in Subsection 5.2.1 above may be earned only if
Buyer issues Purchase Orders to Seller for Additional Equipment on or
before September 1, 1997 in an aggregate amount of not less than $1.7M
(Net Price) AND if Buyer takes delivery of all such Additional
Equipment on or before December 31, 1997. Any such credits shall be
valid only until the expiration of the Term or any mutually agreed
extension thereof.
5.3 Services and OEM Equipment are not subject to discounts, except for
the Initial Purchase Services Credit set out in Section 1.2 of this
Annex 1.
1-9
<PAGE>
ANNEX 2
STATEMENT OF WORK/SAMPLE PROJECT SCHEDULE
1.0 This Statement of Work defines the work requirements and
responsibilities of both Seller and the Buyer which are necessary to
engineer, furnish, deliver, install and test the Equipment furnished
hereunder at the Installation Site(s) in accordance with the Project
Schedule contained herein. Seller's obligation to perform the Services
described hereunder assumes receipt and acceptance of a valid Purchase
Order for such Services and associated Equipment.
2.0 SELLER'S RESPONSIBILITIES
Seller, or its designated subcontractor, shall perform the following:
2.1 Engineer, furnish, deliver, install and test all Equipment in
accordance with the applicable Specifications and in accordance with
this Annex 2. Any changes to the Statement of Work will cause
adjustments to this Annex and may affect the Equipment pricing.
2.2 In conjunction with a Switch Installation, furnish a Customer Input
("CI") Questionnaire and Data Base Engineering Questionnaire to Buyer
on or before the date as specified in the Project Schedule.
2.3 In conjunction with a Switch Installation, perform a site visit on or
before the date as specified in the Project Schedule to Buyer's
facilities to review the information requested on the Questionnaires,
survey the Installation Sites(s) and generate floor plans to be used
to engineer and install the Equipment. Any services outside this
Statement of Work requested by Buyer as a result of the CI meeting
shall be quoted by Seller, upon request by Buyer, and if accepted by
Buyer, will be documented in a Change Order pursuant to Section 17 of
the Agreement.
2.4 During a Switch Installation, provide draft floor plans for the Switch
Installation Site to the Buyer on or before the date as specified in
the Project Schedule. Floor plan layouts will be finalized at the CI
meeting.
2.5 Ship the Equipment for which Seller has accepted a Purchase Order to
the Installation Site location(s) specified below on or before the
date as specified in the Purchase Order and/or Project Schedule ("D"
Date). Delivery will be delayed if the Installation Site(s) are not
made ready by the "D" Date.
2-1
<PAGE>
2.5.1 SWITCH LOCATION
Name:______________________________________
Street Address:____________________________
City:______________________________________
State/Country/Zip Code:____________________
2.5.2 CELL SITE(S)
Name:______________________________________
Street Address:____________________________
City:______________________________________
State/Country/Zip Code:____________________
2.6 Begin the Installation on or before the date as specified in the
Project Schedule ("H" Date), of the Equipment specified in Buyer's
Purchase Order according to the applicable sections of the Northern
Telecom Installation Manual and the engineering specifications and
drawings generated for the Equipment. The Installation work will be
done in a professional workmanlike manner.
2.7 Provide all tools, Installation and test equipment necessary for
performance of Seller's obligations listed in this Annex. Any use of
tools and/or test equipment by the Buyer must be approved by Seller
and may subject Buyer to additional charges.
2.8 Comply with the Buyer's security regulations for the Installation
Site(s).
2.9 Furnish the System Documentation as described in Annex 7 on or before
the date as specified in the Project Schedule.
2.10 Engineer, furnish, install and test the following materials required
to connect from Seller provided Equipment to the demarcation points
defined below:
2.10.1 RF Demarcation
The RF demarcation point is defined as the RF output connector port(s)
on the combiner(s) and the antenna input port(s) on the receive
multicoupler(s) in the cell site equipment frames. Seller will provide
all Equipment including voice frequency ("VF") and radio frequency
("RF") cables, wire, and associated materials for both Inter- and
Intra-frame connections. (RF jumpers (including connectors] to the
Buyer's antenna system main transmission line shall be provided by the
Buyer in accordance with Section 3.6 herein.)
2-2
<PAGE>
2.10.2 Telco Facilities Demarcation
The Telco Facility demarcation point is defined as the Main
Distribution Frame (MDF) and shall be provided by the Buyer. Terminal
blocks required for Equipment, VF, data, and alarm cables will be
provided and installed by Seller on the Buyer's MDF. Fifty feet of
each type cable (standard length) shall be provided by Seller per
Installation Site to connect the Equipment to the MDF. Seller will
cross connect the jumpers as directed by the Buyer. Appropriate
Information must be supplied by the Buyer in such cases. Additional
cable and associated materials, if required, will be provided at
Buyer's expense. Seller shall terminate MTX DS-1 cables to the
Buyer-provided DSX-1 panel. Buyer shall be responsible for bringing
all other DS-1 facilities to the DSX-1.
2.10.3 DC Power System Demarcation
The DC power system demarcation point is defined as the DC power board
fuse(s) and/or breaker(s). Wire for each power and return lead shall
be provided by Seller for each Installation Site (a maximum of 50 ft.
per frame) to connect to the Equipment. Additional wire and associated
materials, if required, will be provided at Buyer's expense. DC fuses
and/or breakers and any other part of the power board or DC power
system (including inverters) are not provided by Seller. The required
fuse and/or breaker quantities and sizes are available upon request.
2.10.4 Alarm System Demarcation
The Alarm System demarcation point is defined as the Seller furnished
alarm terminal block. Fifty feet of alarm cable shall be provided by
Seller per Installation Site to connect Equipment alarms to the
terminal block. Fifty feet of cable shall also be provided to connect
Seller's alarm display and control panel at the MTX. Additional cable
and associated materials, if required, will be provided at Buyer's
expense. Any alarm points that the Buyer may want to take to an
external alarm system will be done at the Buyer's expense.
2.11 Fifty feet of wire for each ground lead extending from Equipment to
the Main Ground Bar (MGB) shall be provided by Seller per Installation
Site.
2.12 During a Switch Installation, furnish, install and test one VDU, one
printer, one Norstar KSU equipped with two telephone sets and fifty
feet of associated cable with terminal blocks. Any additional items
will be provided and installed at Buyer's expense.
2.13 Complete the Installation and Testing on or before the date as
specified in the Project Schedule ("K" Date).
2-3
<PAGE>
2.14 Provide training to the Buyer as described in Annex 1 and in
accordance with Buyer's Purchase Order(s) as soon as course schedules
and Buyer's schedule allows.
2.15 Provide ongoing Technical Assistance Service (TAS) as described in
Annex 5.
NOTE: THE MATERIALS AND SERVICES DETAILED ABOVE REPRESENT SELLER'S TOTAL
RESPONSIBILITY FOR INSTALLATION ACTIVITIES. ANY ADDITIONAL MATERIALS
AND LABOR BEYOND THOSE DESCRIBED HEREIN SHALL BE QUOTED AND FURNISHED
BY SELLER, AT BUYER'S REQUEST, IN ACCORDANCE WITH ARTICLE 17 OF THE
SUPPLY AGREEMENT.
3.0 BUYER'S RESPONSIBILITIES
Buyer or its designated subcontractor, shall perform the following:
3.1 Provide overall program management and engineering functions related
to the Buyer's responsibilities listed in this Agreement. This
includes, but is not limited to, management of schedules for other
equipment suppliers, telco circuit orders and engineering relating to
Installation Site locating, frequency planning coordination and RF
propagation studies and coverage verification.
3.2 Provide all real estate property, environmental approvals, leases,
rents, and all permits and licenses, including but not limited to,
Certificates of Occupancy, FCC construction permits, zoning and FAA
permits.
3.3 Gather the information necessary to complete the Customer Information
and Data Base Questionnaires on or before the date as specified in the
Project Schedule.
3.4 Review, approve and return Seller's draft floor plan for each
Installation Site on or before the date as specified in the Project
Schedule.
3.5 Provide all required civil engineering and construction work
including, but not limited to, site preparation such as grading, tree
removal, roads, tower and building foundations, and fencing.
3.6 Provide and install towers, coax bridges, antennas, transmission line
and associated materials. This includes RF jumpers (with connectors)
between the main transmission line and the RF equipment bays. Antenna
system return loss measurements and other antenna system tests are the
Buyer's responsibility.
3.7 Provide adequate building facilities, utilities, space and
environmental conditions for Seller's Installation personnel and
Equipment as well as any other Buyer equipment on or before the date
as specified in the
2-4
<PAGE>
Project Schedule ("J" Date). The minimum building requirements are
given below. The Equipment environmental and space requirements are
given in Section 4.0 of this Annex.
3.7.1 Building facilities shall be provided with air-conditioning, heating,
ventilation, lighting and have adequate working space that is free of
debris and other clutter which might hinder the Installation. The
building must be dry and free from dust and in such condition as not
to be hazardous to Seller personnel or the Equipment and materials to
be installed. Seller shall gather and separate debris from usable
material, mark accordingly, and place in an area identified by Buyer
for Buyer's pick-up and disposition.
3.7.2 Provide any building renovations, computer floors and wall
penetrations. Provide openings (including elevator space where
required) to allow the Equipment to be placed into position.
3.7.3 Provide and install adequate fire fighting apparatus at each
Installation Site. Activation of a water fire extinguishing system may
void the warranty on the Equipment.
3.7.4 Provide and install all required commercial AC power and associated
fixtures including, but not limited to, AC panels, AC circuit
breakers, AC fuses, building wiring, convenience outlets, lighting and
AC grounds. All electrical facilities shall conform to the latest
issue of the National Electrical Code (NEC) and any local codes to
insure a safe work area.
3.7.5 Provide adequate security for the Equipment, installation materials
and tools at each Installation Site and/or storage facility (if
required).
3.7.6 Provide three telephone lines (two for modems and one telephone set),
and service (dial tone from a local exchange) at each switch
Installation Site and one telephone set at each cell site on or before
the "H" Date.
3.8 Engineer, furnish, deliver, install and test the following on or
before the "S" Date as specified in the Project Schedule in a
professional and workmanlike manner:
3.8.1 All overhead cable trays at each Installation Site.
3.8.2 An MDF for each Installation Site. The MDF can be a free standing rack
or a plywood panel board (4' x 8' x 5/8" typical) for wall mounting.
3.8.3 A single point grounding system, including an MGB and all subsequent
connections to the ground field shall be provided for the Equipment at
each Installation Site. The ground fields shall measure 5 ohms or
less.
3.8.4 A negative 48 VDC power system and a 500VA DC to AC inverter for each
DMS-MTX switch and a +24VDC power system for each cell site
2-5
<PAGE>
including all required fuses and/or circuit breakers for all Equipment
and any Buyer provided equipment. This includes any alarm cables,
terminal blocks and AC power wiring.
3.8.5 Dedicated DS-1 facilities to connect each DMS-MTX switch to the PSTN
and to each cell site. If direct digital DS-1 facilities are not
available, the Buyer may incur additional costs to interface the
Equipment. DS-1 facilities are to be provided (from the DSX-1 panel
provided by Buyer) to the Telco Facility demarcation point as defined
in paragraph 2.10.2 of this Annex at each Installation Site.
3.8.6 All channel banks and DSX-1 cross connect panels including: any
associated relay racks; fuse and alarm panels; power wiring; HF
cables; jumpers; alarm cables; VF jack fields; patch cords and
terminal blocks. Channel bank make and model numbers must be approved
by Seller prior to their use. Channel banks must be equipped with two
4-wire 56 kb/s dedicated data circuits and one dedicated 4-wire audio
circuit per cell site voice channel to each cell site. Any other
associated equipment such as ring generators and other channel units
are to be provided by the Buyer.
3.8.7 All alarm sensors and wiring, other than those which are included in
Equipment, and connect to Buyer provided alarm terminal blocks. This
includes, but is not limited to, open door, high/low temperature,
tower lights and smoke detector alarm sensors.
3.9 Provide Seller designated personnel free access to each Installation
Site as required to perform Seller's obligations under this Agreement.
Access is to be provided as follows:
3.9.1 Adequate roads and parking to each site for delivery vans and
two-wheel drive vehicles.
3.9.2 All required security passes and clearances.
3.9.3 24 hours/day, 7 days a week access to the Equipment. Seller shall
provide Buyer twenty-four hours' advance notice of the need for
access. Telephonic notification is permissible.
3.10 Provide or bear the cost for any special equipment required to deliver
Equipment to the Installation Site(s) such as 4-wheel drive vehicles,
bulldozers, cranes, helicopters, etc.
3.11 Provide and install all materials required to adequately support and
brace the Equipment in accordance with the seismic risk zone of each
Installation Site.
3.12 Buyer shall provide free telephone service (air time and long
distance) to Seller personnel during the Installation, testing, and
service period of the project. The purpose of such service will be to
support the Equipment Installation for testing purposes, business
communications, and safety needs of Seller personnel. The free service
shall include, but not be
2-6
<PAGE>
limited to, activation charges, air time, long distance, and roamer
charges. All traffic generated by Seller personnel will be limited to
business and Equipment testing purposes only. Any personal calls will
be the responsibility of Seller.
3.13 The Buyer and/or its representatives are encouraged to be present for
preliminary testing and Turnover. Sign-off sheets in Annex 4 shall
serve to provide a test record and establish the warranty start date.
4.0 DMS-MTW/Northern Telecom Cell Site Environmental Requirements (For
MTXD)
4.1 The Equipment is designed to operate in the controlled environment
described below. Operation outside the normal conditions will void the
warranty. The more stringent conditions will govern for co-located
switch and cell site configurations.
4.2 Ambient Temperature
4.2.1 System Normal Extreme
DMS-MTX/NT Cell Site 50 to 86 deg. F 41 to 120 deg. F
Conditions above or below the normal tolerance for more than 72
consecutive hours and 15 days maximum per year are considered extreme.
The rate of change shall not exceed 15 degrees F per hour.
Ambient Temperature is measured at a point 5 feet above floor level
and either mid-aisle or 15" in front of the equipment, whichever is
less.
4.2.2 Storage Ambient Temperature: -40 to 160 deg. F.
4.3 Relative Humidity (non-condensing)
<TABLE>
<CAPTION>
4.3.1 System Normal Extreme
<S> <C> <C>
DMS-MTX 20% to 55% 20% to 80%
NT Cell Site 20% to 55% 5% to 65%
</TABLE>
The DMS-MTX switch is allowed 80% relative humidity at an ambient
temperature that cannot exceed 70 degrees F. At an ambient
temperature of 120 degrees F, the maximum allowable relative humidity
is 30%.
Relative humidity is measured at a point 5 feet above floor level and
either mid-aisle or 15" in front of the equipment, whichever is less.
4.3.2 Storage Humidity: 10% to 90%; maximum water vapor pressure not to
exceed 25 mmHg.
2-7
<PAGE>
4.4 Air Cleanliness
The Equipment functions indefinitely in an ambient air having a
cleanliness standard no higher than class 100,000. Classes are defined
as the number of particles of 0.5 microns and larger, per cubic foot.
4.5 Space Requirements
The minimum distance between the ceiling and the finished floor is
9'-0" at all Installation Sites. Each DMS-MTXD cabinet is 28.4" x 28"
x 72" (WxDxH). All SuperNode cabinets are 42" x 24" x 72" (WxDxH). The
minimum front and rear aisle space is 36". Each cell site frame is 23"
x 18" x 84" (WxDxH). However, the footprint space required is 23" x
26" x 84", which space is in addition to the minimum aisle space
required: 36" in front; 24" in rear; 6" at the side.
4.6 Floor and Heat Dissipation Requirements
4.6.1 The Buyer's building facilities shall accommodate the following
Equipment parameters. (The number and type of cabinets and frames
depend upon the configuration requirements):
<TABLE>
<CAPTION>
Heat
4.6.2 DMS-MTX Cabinets Weight (lbs) Dissipation (BTU/Hr)
<S> <C> <C>
MCAM 643 2305
MCEX 650 2000
MCOR 725 4380
MNET 675 4380
MCTM-I 710 3546
LPP 1100 13831
ENET 1120 3740
MSCC 1600 13652
MDSP 663 1068
</TABLE>
<TABLE>
<CAPTION>
4.6.3 NT Cell Site Frames
<S> <C> <C>
Common Equipment 400 2600
8 Channel RF frame 600 5500
16 Channel RF frame 800 11000
</TABLE>
5.0 (SAMPLE) Project Schedule (In Weekly Intervals)
The sample project schedule listed below shall serve as an
informational guideline for the time periods involved in a typical
System installation. The project intervals assume one DMS-MTX and up
to 5 NT cell sites maximum. Add one week for each additional cell
site. Buyer and Seller shall agree upon specific Project Schedules
and/or delivery dates on a case-by-case basis prior to Seller's
acceptance of a Purchase Order.
2-8
<PAGE>
<TABLE>
<CAPTION>
Responsible
Week Milestone Event Party
---- --------------- -----------
<S> <C> <C>
1 Purchase Order Documents completed Seller/Buyer
and accepted by Seller
2 Send Customer Input/Data Base Seller
Questionnaire to Buyer
4 Customer Information Meeting with Seller/Buyer
Buyer (site survey may be performed)
6 Issue Draft Floor Plans to Buyer Seller
7 Approved Floor Plans returned to Seller Buyer
11 Installation Site Ready ("J" Date) Buyer
12 Ship MTX ("D" Date) Seller
13 Ship System Documentation Seller
13 Overhead Cable Tray/MDF Available ("S" Date) Buyer
13 DC Power/Ground System Available ("S" Date) Buyer
13 DS-1 Facilities/Channel Banks/DSX-1 Buyer
Cross connect Panels/Buyer's External
Alarm Points Available ("S" Date)
14 Start Installation ("H" Date) Seller
15 Frequency Plans provided Buyer
19 Installation Complete ("K" Date) (See Note) Seller
20 Pre-In-service check Seller
21 System In-service ("IS" or "Turnover" Date) Seller/Buyer
</TABLE>
NOTE: Seller's Price assumes continuous performance of on-site Installation
and Commissioning Services without delay or interruption of Services.
In the event of delays or disruption of Services, Buyer and Seller
shall agree upon a revised Project Schedule, provided, however, that
in the case of a schedule revision, there may not necessarily be a
day-for-day adjustment to the schedule.
2-9
<PAGE>
ANNEX 3*
DMS-MTX ACCEPTANCE CRITERIA
SITE: ____________________ DATE STARTED: ____________________
PROJECT: ____________________ COEO: ____________________
LOCATION: ____________________ DATE COMPLETED:____________________
____________________ SELLER REP: ____________________
BUYER REP: ____________________
<TABLE>
<CAPTION>
SELLER BUYER
SECTION NAME INITIALS INITIALS
<S> <C> <C> <C>
1225 EQUIPMENT GROUNDING VERIFICATION ________ ________
5160 POWER UP DMS SUPERNODE ________ ________
5172 POWER VERIFICATION ________ ________
5454 SLM COMMISSIONING ________ ________
5045 AUTOLOAD ROUTE VERIFICATION ________ ________
5620 OFFICE IMAGE CAPTURE-SUPERNODE ________ ________
5453 DMS-CORE COMMISSIONING ________ ________
5615 DMS-BUS COMMISSIONING ________ ________
5211 SYSTEM LOADING ENET ________ ________
5198 ENET COMMISSIONING ________ ________
5184 SPARE CIRCUIT PACK TEST DMS-SUPERNODE ________ ________
0310 CORE MAINTENANCE (PROC. 4,5,6,7 SECT. 4.7,4.8) ________ ________
0345 PERIPHERAL MODULE DIAGNOSTICS ________ ________
5350 TRUNK DIAGNOSTICS ________ ________
0831 INSTALLATION AND TEST OF DDU ________ ________
0177 MAGNETIC TAPE DRIVE TESTS ________ ________
5472 CABINET ALARM TESTING ________ ________
0190 CARRIER INTERFACE CARD FIELD EQUALIZATION ________ ________
5215 DRAM TESTING ________ ________
0461 TONES AND ANNOUNCEMENTS ________ ________
0691 ICP POWER VERIFICATION AND LOADING ________ ________
5025 ICP DIAGNOSTICS ________ ________
5180 ADDITION AND TESTS OF STRATUM 2 CLOCK ________ ________
5616 ADDITION AND TEST OF STRATUM 2.5 CLOCK ________ ________
5623 SYNCHRONIZATION FEATURE TEST ________ ________
0692 MTX TRUNK OPERATIONAL FEATURE TEST ________ ________
0693 AMA/CDR TEST ________ ________
0385 SPARE CIRCUIT PACK TEST ________ ________
5645 LIM LGADING AND DIAGNOSTICS ________ ________
</TABLE>
* All of the Test Criteria set forth in this Annex 3 may not be applicable to
the Equipment being ordered by Buyer under a Purchase Order. If a
referenced Section is not applicable, "NA" will be written in and Seller
and Buyer will initial off appropriately.
In certain instances it may be necessary for Seller to perform
additional Testing, depending on the Equipment being ordered under
Buyer's Purchase Order. When this occurs, the Section from Seller's
installation manual that the Equipment is to be Tested against will be
written in, and following successful completion of the Test, Seller and
Buyer will initial off appropriately.
3-1
<PAGE>
ANNEX 3*
DMS-MTX ACCEPTANCE CRITERIA
(CONTINUED)
SELLER BUYER
SECTION NAME INITIALS INITIALS
0446 OPERATIONAL MEASUREMENT TEST ________ ________
0690 CSC DATA LINK TEST ________ ________
**** 0.R.R. (OFFICE RELEASE RECORD) ________ ________
SELLER: __________________________ DATE:_____________________________
BUYER:____________________________ DATE:_____________________________
3-2
<PAGE>
ICP BASED CELL (ANALOG) ACCEPTANCE CRITERIA
SITE: ____________________ DATE STARTED: ____________________
PROJECT: ____________________ COEO: ____________________
LOCATION: ____________________ DATE COMPLETED:____________________
____________________ SELLER REP: ____________________
BUYER REP: ____________________
<TABLE>
<CAPTION>
SELLER BUYER
SECTION NAME INITIALS INITIALS
<S> <C> <C> <C>
1290 PROCEDURE TO INSTALL NT800 BASE ________ ________
1225 GROUND VERIFICATION ________ ________
1279 PROCEDURE TO VERIFY POWER ________ ________
1271 POWER AND GROUND VERIFICATION ________ ________
1269 TESTING THE MASTER OSCILLATOR ________ ________
1299 TRANSCEIVER DEBUG OPERATION ________ ________
1298 CELL SITE TRANSCEIVER TRANSMIT TEST ________ ________
1297 CELL SITE TRANSCEIVER RECEIVE TEST ________ ________
1296 TRANSCEIVER AUDIO ALIGNMENT ________ ________
1272 POWER AMPLIFIER MODULE TESTING ________ ________
1295 COMBINER TUNING AND TESTING ________ ________
1273 TESTING THE RCMI IN AN NT800 CELL SITE ________ ________
1294 TESTING CELL SITE ALARMS ________ ________
5224 ANTENNA AND TRANSMISSION LINE TEST ________ ________
**** O.R.R. (OFFICE RELEASE RECORD) ________ ________
1106 CELL SITE EXTENDED SPECTRUM FRAME TEST ________ ________
MOBILE ORIGINATION AND TERMINATION TEST ________ ________
(MOBILE TO MOBILE, MOBILE TO LAND,
LAND TO MOBILE, ALL RADIOS)
1291 CONNECT CUSTOMER FACILITIES TO CELL ________ ________
5026 MTX-CELL SITE INTEGRATION TEST ________ ________
1108 LOADING AND COMMISSIONING THE ICRM ________ ________
1107 ICRM INSTALLATION INTO THE CE1 FRAME ________ ________
</TABLE>
SELLER: __________________________ DATE:_____________________________
BUYER:____________________________ DATE:_____________________________
3-3
<PAGE>
ICP BASED CELL (DIGITAL) ACCEPTANCE CRITERIA
<TABLE>
<CAPTION>
SELLER BUYER
SECTION NAME INITIALS INITIALS
<S> <C> <C> <C>
1290 PROCEDURE TO INSTALL NT800 BASE ________ ________
1225 GROUND VERIFICATION ________ ________
1279 PROCEDURE TO VERIFY POWER ________ ________
1271 POWER AND GROUND VERIFICATION ________ ________
1269 TESTING THE MASTER OSCILLATOR ________ ________
1299 TRANSCEIVER DEBUG OPERATION ________ ________
5296 CELL SlTE DRU COMMISSIONING TESTS WITH ________ ________
IFR 1600
1272 POWER AMPLIFIER MODULE TESTlNG ________ ________
1295 COMBINER TUNING AND TESTING ________ ________
1108 LOADING AND COMMISSIONING THE ICRM ________ ________
1294 TESTING CELL SITE ALARMS ________ ________
5224 ANTENNA AND TRANSMISSION LINE TEST ________ ________
**** 0.R.R. (OFFICE RELEASE RECORD) ________ ________
1106 CELL SITE EXTENDED SPECTRUM FRAME TEST ________ ________
MOBILE ORIGINATION AND TERMINATION TEST ________ ________
(MOBILE TO MOBILE, MOBILE TO LAND, LAND
TO MOBILE, ALL RADIOS)
1291 CONNECT CUSTOMER FACILITIES TO CELL ________ ________
2176 DIGITAL CELLULAR OVERLAY ________ ________
1547 DRUM INSTALLATION INTO THE CE1 FRAME ________ ________
</TABLE>
SELLER: __________________________ DATE:_____________________________
BUYER:____________________________ DATE:_____________________________
3-4
<PAGE>
ICP BASED CELL (ANALOG/DIGITAL COMBINATION)
ACCEPTANCE CRITERIA
<TABLE>
<CAPTION>
SELLER BUYER
SECTION NAME INITIALS INITIALS
<S> <C> <C> <C>
1290 PROCEDURE TO INSTALL NT800 BASE ________ ________
1225 GROUND VERIFICATION ________ ________
1279 PROCEDURE TO VERIFY POWER ________ ________
1271 POWER AND GROUND VERIFICATION ________ ________
1269 TESTING THE MASTER OSCILLATOR ________ ________
1299 TRANSCEIVER DEBUG OPERATION ________ ________
5298 CELL SITE DRU COMMISSIONING TESTS WITH ________ ________
IFR 1600
1272 POWER AMPLIFIER MODULE TESTING ________ ________
1295 COMBINER TUNING AND TESTING ________ ________
5295 LOADING AND COMMISSIONING THE ICRM ________ ________
1294 TESTING CELL SITE ALARMS ________ ________
5224 ANTENNA AND TRANSMISSION LINE TEST ________ ________
**** O.R.R. (OFFICE RELEASE RECORD) ________ ________
1106 CELL SITE EXTENDED SPECTRUM FRAME TEST ________ ________
MOBILE ORIGINATION AND TERMINATION TEST
(MOBILE TO MOBILE, MOBILE TO LAND, LAND
TO MOBILE, ALL RADIOS)
1291 CONNECT CUSTOMER FACILITIES TO CELL ________ ________
2176 DIGITAL CELLULAR OVERLAY ________ ________
1547 DRUM INSTALLATION INTO THE CE1 FRAME ________ ________
1297 CELL SITE TRANSCEIVER RECEIVE TEST ________ ________
1298 CELL SITE TRANSCEIVER TRANSMIT TEST ________ ________
1296 TRANSCEIVER AUDIO ALIGNMENT ________ ________
1273 TESTING THE RCMI IN AN NT800 CELL SITE ________ ________
5026 MTX-CELL SITE INTEGRATION TEST ________ ________
</TABLE>
SELLER: __________________________ DATE:_____________________________
BUYER:____________________________ DATE:_____________________________
3-5
<PAGE>
Reference: Supply Agreement
dated __________________ between
Northern Telecom Inc. and
Dobson Communications Corporation
ANNEX 4
TURNOVER NOTICE
TO: Northern Telecom Inc.
2435 N. Central Expressway
Richardson, Texas 75080
Attention: Manager, Contract Administration
The undersigned hereby acknowledges that the Equipment located at __________ has
been installed and tested by Northern Telecom Inc., is available to be placed in
service and Commissioning has been completed as set forth in the referenced
Agreement.
The undersigned Buyer further acknowledges the commencement of the Warranty
Period as defined in the referenced Agreement as of the date written below.
Date: _______________________
Buyer: _______________________
By: _______________________
Title: _______________________
4-1
<PAGE>
Reference: Supply Agreement
dated ________________ between
Northern Telecom Inc. and
Dobson Communications Corporation
ACCEPTANCE NOTICE
TO: Northern Telecom Inc.
2435 N. Central Expressway
Richardson, Texas 75080
Attention: Manager, Contract Administration
Pursuant to the terms and conditions of the referenced Agreement, I, the
undersigned Buyer, hereby acknowledge that Northern Telecom Inc. has completed
all requirements for Acceptance of the Equipment located at ___________________,
as set forth in the Agreement and all Annexes, and hereby certify to the final
Acceptance of such Equipment.
Date: _____________________
Buyer: _____________________
By: _____________________
Title: _____________________
4-2
<PAGE>
ANNEX 5
SELLER WARRANTY SERVICES
1.0 TAS WARRANTY SERVICES
1.1 If Buyer experiences operational difficulties, Buyer may contact
Seller's Technical Assistance Service (TAS) Department. Special remote
terminals in the TAS center are used to communicate with Buyer's
System to diagnose fault conditions and recommend corrective action.
1.2 This function provides three (3) basic classifications of assistance
to a customer:
1.2.1 Emergency Technical Assistance Service
This service is available to customers who require immediate
assistance with operational problems (i.e., loss of call processing,
loss of billing). This service is available 24 hours/day, seven
days/week. Through verbal reports and remote diagnoses of the System,
TAS technicians recommend actions to restore the System to stable
operation as quickly as possible.
1.2.2 Routine Technical Assistance Service
This service is available to customers who require problem
isolation/resolution in a Non-Emergency situation. This service is
available during normal business hours (8-5 CST, M-F) and is primarily
used for analysis of routine technical problems using verbal reports
from site personnel and System-generated information.
1.2.3 Technical Information Service
This service is available during normal working hours to answer the
variety of questions about specific System functionality, procedures,
operational issues, new features, and other telephony oriented
questions.
5-1
<PAGE>
2.0 SERVICES NOT COVERED BY WARRANTY
2.1 Seller will provide technical assistance free of charge during the
initial warranty period, as defined in the terms and conditions of the
Supply Agreement. Some situations may arise during this no-charge
warranty period that will result in a service request being considered
as billable. Such situations include, but are not limited to the
following:
2.1.1 Requests resulting from problems with equipment not furnished by
Seller.
2.1.2 Requests where the problem solution was available via Seller
documentation such as NTPs, Advisory Bulletins, and BCS release
documents.
2.1.3 Requests that result from patches which alter the design intent of
standard Software in order to provide customer requested changes in
operations.
2.1.4 Requests for on-site assistance in lieu of remote testing.
2.1.5 Non-emergency requests outside normal business hours (8-5 CST, M-F,
Seller Holidays), unless scheduled with appropriate TAS manager in
advance.
2.1.6 Requests for assistance in performing System data changes or changes
to "write restricted" tables.
2.1.7 Requests for assistance in identifying faulty Hardware or Software for
which standard maintenance fault-locating procedures exists.
3.0 PRIORITY CLASSIFICATION
3.1 The TAS Center offers a single point of contact for customers who
require assistance to resolve problems which affect the technical
operation of their Northern Telecom DMS-MTX equipment.
TAS is available 24 hours/day, 7 days/week; therefore, the Service
Priority Classification System is designed to establish an
5-2
<PAGE>
interrelationship between the problems and the appropriate level of
reaction and resolution. The system is based upon a problem's direct
or potential effect upon subscriber service.
System problems are assigned one of five priority levels as defined in
NORTHERN TELECOM PRACTICES: "Northern Telecom Service Priority
Classification," or as such document may be revised from time to time.
The following situations are deemed by Seller to comprise an
emergency:
3.2 E1 Degradation and/or Outage.
3.2.1 Central Control (CC) or Computing Module (CM) inability to recover
from initialization on the active Central Processing Unit (CPU).
3.2.2 System call processing degraded for a reason such as:
- a trunk group out of service;
- 10% or more cellular channels out of service;
- CDR billing;
- inability to recover from initialization;
3.3 E2 Potential Degradation and/or Outage.
3.3.1 Standby Central Control (CC) out of service.
3.3.2 Any Central Message Control (CMC), Master Clock, Network Module (NM),
Input/Output Controller (IOC), Peripheral Processor out of service;
3.3.3 Affecting billing, 50% loss of DDU, MTD with no backup.
4.0 CUSTOMER SERVICE REPORT (CSR) PROCEDURES
4.1 Buyer Responsibility
It is recommended that the Buyer arrange to have all Engineering and
Technical Support personnel attend specified training courses in order
to properly utilize existing documentation and diagnostic resources
5-3
<PAGE>
required to ensure proper day to day operations of its Northern
Telecom equipment. Buyer is expected to understand and determine all
engineering parameters and to use all locally available resources to
troubleshoot and isolate system problems prior to calling Seller TAS
for assistance; however, in emergency situations such as System
outages, TAS should be notified immediately.
Whatever the nature of the service call, the more completely the
trouble is described, the more efficiently the problem can be analyzed
and rectified.
When a service call is placed with TAS, the following information must
be provided;
- Indicate if the call is an emergency or not;
- Company name and switch site location;
- Main telephone number;
- Contact name and telephone number;
- Hardware type;
- Detailed problem description.
After a service call is placed, Buyer site personnel must be available
to take direction from TAS to perform on-site activity required to
isolate and resolve the problem.
4.2 TAS Responsibility
a. Seller Normal Business Hours
Routine or Emergency Service calls are taken during normal
business hours (8-5 CST, M-F, except Seller holidays).
The TAS coordinator (Receptionist) will direct the service call
to the prime TAS representative assigned to the account. If the
prime TAS representative is unavailable, a message may be taken
or the call may be referred to a secondary TAS representative.
TAS is committed to a same day reply to all messages. Emergency
calls are responded to immediately by the first available TAS
representative.
5-4
<PAGE>
The TAS representative taking the service call will request the
required customer information, determine if the problem
description requires that a Customer Service Report (CSR) be
opened (general questions which do not require investigation may
not need to be formally documented by a CSR), determine the
appropriate priority classification, and respond according to the
response objective associated with that classification.
The TAS representative responsible for the CSR will prioritize
all assigned CSRs according to priority classification and will
resolve and close the CSR with the Buyer based on classification.
b. Outside Normal Business Hours
Emergency Service Only (E1, E2)
After-hours service calls are taken by an answering service. The
answering service will record the calling party name, company and
telephone number and will activate the emergency pager service
to page the designated TAS representative on-call. If there is no
response within five minutes, the answering service will begin
calling home phone numbers and pagers of TAS Managers and other
TAS representatives until contact is made. The responding Seller
representative will contact Buyer immediately and take
appropriate action to resolve the trouble. The service call will
be formally documented the next regular business day.
5.0 EMERGENCY SHIPPING SERVICE FOR REPLACEMENT HARDWARE
5.1 For requests received during Seller regular business hours 8:00 a.m. -
5:00 p.m. Monday-Friday (excluding holidays), the surcharge shall be
$50 per request.
5.2 For requests received outside regular business hours (as defined
above), the surcharge shall be $150 per request.
5-5
<PAGE>
ANNEX 6
SOFTWARE LICENSE
NORTHERN TELECOM INC. ("NTI") TELECOMMUNICATIONS PRODUCTS
1. Subject to the terms hereinafter set forth, Northern Telecom, Inc., ("NTI")
grants to Buyer a personal, non-exclusive license: (1) to use certain Licensed
Software, proprietary to NTI or its suppliers, contained as an integral part of
the Hardware; and (2) to Install and use each item of Licensed Software not an
integral part of the Hardware; and (3) to use the associated documentation.
Buyer is granted no title or ownership rights in or to the Licensed Software, in
whole or in part, which rights if any, as between the parties, shall remain with
NTI or its suppliers. The right to use Software or any individual feature
thereof may be restricted by a measure of usage of applications based upon the
number of devices, subscribers, or some similar measure. Expansion beyond a
specified usage level may require payment of an additional fee.
2. NTI considers the Licensed Software to contain "trade secrets" of NTI
and/or its suppliers. Such "trade secrets" include, without limitation thereto,
the specific design, structure and logic of individual Licensed Software
programs, their interactions with other portions of Licensed Software, both
internal and external, and the programming techniques employed therein. In
order to maintain the "trade secret" status of the information contained within
the Licensed Software, the Licensed Software is being delivered to Buyer in
object code form only.
3. NTI or its suppliers holding any intellectual property rights in the
Licensed Software, and/or any third party owning any intellectual property right
in software from which the Licensed Software was derived, are intended third
party beneficiaries of this License. All grants of rights to use intellectual
property intended to be accomplished by this License are explicitly stated and
no additional grants of such rights shall be inferred or created by implication.
4. Buyer warrants to NTI that Buyer is not purchasing the rights granted by
this License in anticipation of reselling those rights.
5. Buyer shall:
5.1 Hold the Licensed Software in confidence for the benefit of NTI and/or
suppliers; and
5.2 Keep a current record of the location of each copy of Licensed Software
made by it; and
5.3 Use each copy of the Licensed Software only on a single CPU at a time (for
this purpose, single CPU shall include systems with redundant processing units);
and
5.4 Affix to each copy of Licensed Software made by it, in the same form and
location, a reproduction of the copyright notices, trademarks and all other
proprietary legends and/or logos of NTI and/or its suppliers, appearing on
the original copy of such Licensed Software delivered to Buyer; and retain the
same without alteration on all original copies; and
5.5 Destroy the Licensed Software and all copies at such time as the Buyer
chooses to permanently cease using it.
6. Buyer shall not:
6.1 Use the Licensed Software (i) for any purpose other than Buyer's own
internal business purposes and (ii) other than as provided by this License; or
6.2 Allow anyone other than Buyer's employees and agents to have physical
access to the Licensed Software; or
6.3 Make copies of the Licensed Software except such limited number of object
code copies in machine readable form only, as may be reasonably necessary for
execution or archival purposes only; or
6.4 Make any modifications, enhancements, adaptations, or translations to or of
the Licensed Software, except for those resulting from those Buyer interactions
with the Licensed Software associated with normal use and explained in the
associated documentation; or
6.5 Attempt to reverse engineer, disassemble, reverse translate, decompile, or
in any other manner decode the Licensed Software, in order to derive the source
code form or for any other reason; or
6.6. Make full or partial copies of any documentation or other similar printed
or machine-readable matter provided with Licensed Software unless the same has
been supplied in a form by NTI intended for periodic reproduction of partial
copies or except limited partial/copies of documentation for Buyer's informal
use only; or
6.7 Export or re-export the Licensed Software and/or associated documentation
from the fifty states of the United States and the District of Columbia.
7. Buyer may assign collectively its rights under this License to any
subsequent owner of the Hardware, but not otherwise, except that no such
assignment or sublicense may be made to a direct competitor of NTI who
manufactures or sells wireless communications systems. No such assignment shall
be valid until Buyer shall delegate all of its obligations under the Agreement
to such party, and obtains from the assignee an unconditional written
assumption of all of such obligations, and NTI consents, in writing, to such
delegation and assumption. NTI shall not unreasonably withhold such consent.
Upon completion of such delegation and assumption Buyer shall transfer physical
possession of all Licensed Software (including all backup copies) to the
assignee. Except as provided, neither this License or any rights acquired by
Buyer through this License are assignable. Any attempted assignment of rights
and/or transfer of Licensed Software not specifically allowed shall be void and
conclusively presumed a material breach of this License.
8. If NTI claims a material breach of this License and files an action in a
court of competent jurisdiction seeking relief, and a judge issues a court
order, or a judgment rendered, that there is a material breach of this License,
then Buyer shall be required to return the Software to NTI or its distributor.
If Buyer fails to return such Software within five (5) working days after the
issuance of the court order or judgment, or in the case of disclosure of the
Software to anyone other than Buyer's employees or agents the initial issuance
of a court order or judgment, then NTI shall have the right, without further
notice, to temporarily terminate Buyer's right to continue to possess and use
the Software. If NTI elects to exercise that right, NTI may enter upon the
premises of Buyer during regular business hours and take possession of, remove,
and retain the Software until such time as the court may order otherwise. For
purposes of obtaining injunctive relief hereunder Buyer shall be deemed to have
agreed that remedies available at law are not adequate to protect the interests
of NTI and/or its suppliers, and to have consented to the equity jurisdiction of
the court.
9. IN NO EVENT WILL NTI AND/OR ANY OF ITS SUPPLIERS BE LIABLE TO OR THROUGH
BUYER FOR: (1) ANY INDIRECT, SPECIAL, INCIDENTAL AND/OR CONSEQUENTIAL DAMAGES
(INCLUDING, BUT NOT LIMITED TO, LOST PROFITS, LOST SAVINGS, OR INTERRUPTION OF
BUSINESS) SUFFERED BY BUYER FOR ANY REASON; (2) ANY DAMAGES SUFFERED BY BUYER AS
A RESULT OF BUYER'S FAILURE TO LIVE UP TO BUYER'S OBLIGATIONS UNDER THIS
AGREEMENT; (3) ANY CLAIM AGAINST BUYER BY ANY THIRD PARTY FOR DAMAGES OF ANY
KIND: ANY OR ALL OF WHICH ARISE FROM OR IN CONNECTION WITH THE DELIVERY, USE, OR
PERFORMANCE OF SOFTWARE GOVERNED BY THIS AGREEMENT, AND EVEN IF NTI AND/OR ANY
OF ITS SUPPLIERS HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSS, EXCEPT AS
GRANTED IN THE BODY OF THE AGREEMENT TO WHICH THIS LICENSE IS ATTACHED, THE
LICENSED SOFTWARE IF PROVIDED BY NTI "AS IS" AND WITHOUT WARRANTY OF ANY KIND OR
NATURE, WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING (WITHOUT LIMITATION) THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE.
THIS LIMITATION OF WARRANTIES WAS A MATERIAL FACTOR IN THE ESTABLISHMENT OF THE
LICENSE FEE CHARGED FOR EACH SPECIFIC ITEM OF SOFTWARE LICENSED.
Supply Version 2.0
Wireless - 1/95
6-1
<PAGE>
ANNEX 7
DOCUMENTATION
System Documentation is available through Seller's computer-based information
system ("HELMSMAN") as described below:
HELMSMAN CD-ROM: Includes one (1) compact disc and one (1) application
program; CD-ROM reader and interface card are optionally available
through Seller for use on Buyer-supplied DOS personal computer. Updates
are available at additional costs. (Documents not available on compact
disc will be provided in paper format.)
7-1
<PAGE>
ANNEX 8
RF ENGINEERING SERVICES
STATEMENT OF WORK
The purpose of this document is to describe the Scope of Work (SOW) for RF
Cellular Services to conduct a design analysis and system verification to
enhance the capacity and coverage of the existing network of cell sites located
in the Kansas RSA 5 and Missouri RSA's 1,2, 4, and 5 markets (designated herein
as KSM). Attachment 1 presents technical information provided by Buyer to Seller
upon which Seller shall rely in the performance of this SOW.
1.0 INITIAL DESIGN REQUIREMENTS
Seller will make maximum use of existing in-house information from prior design
work to the extent applicable to this statement of work.
1.1 BUYER NETWORK REQUIREMENTS DEFINITION
The following information shall be provided by the customer prior to initiation
of system design. Where that information is not available, reasonable
engineering assumptions may be made by Seller's engineering.
Traffic Requirements - A clear definition of the expected number of calls to be
placed during the peak hours of communications as a function of geographic
location of the mobile users. Capacity requirements for Dense Urban, Urban,
Suburban, and Rural shall be supplied as applicable. An estimate of the Call
Mean Hold Time shall also be supplied. If not supplied, the default value for
call duration of 1.76 minutes will be used in the design.
Grade of Service - Defined in terms of probability of call blocked percentage.
The default condition will be 2% blocked call probability.
Coverage - Defined in terms of probability of completing a call over percentage
of the covered area. The basic design value to be used will be -85 dBm minimum
expected signal level coverage which will accommodate most portable units.
Actual measured signal level will vary over the coverage area. For indoor
portable use, the design signal level coverage is defined as the presence of a
specified signal level to be measured at discrete locations throughout the
coverage area. The default condition is -75 dBm to be measured within a one (1)
meter radius at ten locations within the covered area at a height of one (1)
meter from the floor.
Growth - Defined in terms of traffic increase expressed in percent per year for
a specified span of time. The default value will be 15% per year.
8-1
<PAGE>
1.2 DATA COLLECTION - BUYER SUPPLIED
The following information shall be provided by Buyer to Seller for the covered
area prior to initiation of the preliminary design. If this data is not
supplied, a site visit may be required at additional cost.
Local street maps.
Local zoning restrictions (such as flood plains) that may affect location of
cell sites.
Since the contract requires the integration of the equipment into an existing
network, the customer shall provide the location of all existing affected cells
in the form of latitude and longitude accurate to one (1) arc-second, all
frequencies currently in operation in the existing network and all networks
bordering the KSM network and sharing the same frequency band, and all recent
coverage and C/I plots and drive test data. If Buyer has made adjustments in any
of the RF operating parameters of any cell sites since collection of the
provided data, then new drive test data of the affected cells must be supplied
or must be collected by Seller. No costs have been included in the basic price
for collection of this data by Seller's RF engineering. Such additional work by
Seller may be accomplished on a time and material basis.
Adjacent market frequency plan data shall be supplied by Buyer prior to start of
the frequency planning effort of Seller.
1.3 DATA COLLECTION - RF CELLULAR SERVICES
All applicable data collected by Seller in the past will be used if it is deemed
by Seller engineering to be reasonably current, accurate and representative of
the existing network. If Seller engineering deems it necessary, additional
information may be gathered by Seller from various sources in order to complete
the initial design. A fee may be included for collection of some of this
information where such information must be purchased from Seller approved
service providers. Such items will be billed to the project at actual cost.
Existing network data - This will include the collection of traffic, traffic
growth, and coverage of any existing cellular services. If available, published
subscriber forecasts are also collected. If Seller's engineering deems it
necessary, Buyer shall grant remote access to the OM data available on Buyer's
switch for analysis purposes. Seller will establish a folder on the Buyer's
switch for collection of the OM data. Access to the switch and the use of the
collected data in the folder shall remain undisturbed by Buyer for the duration
of the contract.
8-2
<PAGE>
2.0 RF ENGINEERING SERVICES
2.1 KICK OFF MEETING /REQUIREMENTS
Following contract award to Seller for equipment and services within the
customer's network, a kick-off meeting will be required between the Buyer and
Seller's RF Engineering. The meeting shall accomplish the following:
1. Review of customer input with respect to:
a) quality of service, coverage criteria, service area maps,
subscriber traffic profile, rollout plan, forecast, etc.
b) design specifications.
1. Review RF engineering process. Including organization charts, Buyer
primes and Seller's RF Engineering primes by discipline.
2. Review the final contract document and proposed RF Engineering process.
Review other prerequisites, activities, and deliverables for each step.
3. Review the Preliminary Design, Design Specifications, and RF Engineering
Statement of Work.
During the review process, any concerns are resolved and, if necessary,
additional site visits are conducted to collect detailed data.
2.2 SYSTEM BENCHMARKING
Operational Measurements will be set-up and monitored by a member of the
Seller's design team at least one week prior to initial drive testing. This will
allow the RF Engineering team to evaluate the existing system performance
metrics and establish a baseline prior to initiating any design efforts. The
specific OM groups (as applicable) to be monitored will be at the sole
discretion of Seller.
In order to properly benchmark the system, a team of Seller's engineers with the
assistance of Buyer's engineers will drive test coverage areas prior to the
installation of the switch. This survey will take note of special physical
elements that could affect the design such as unsuitable soil conditions, arenas
or other large public buildings where traffic could be concentrated, and density
of buildings and surrounding geographical situations for more precise
application of the clutter models. Seller's and Buyer's engineers will jointly
determine the drive route in these areas. Data will be collected to establish
the current operating performance condition of the network in the covered area
prior to commencement of design work. Data from this survey will be used to make
corrections to the standard models used in the design analysis work.
8-3
<PAGE>
2.3 INITIAL DESIGN
2.3.1 Propagation Prediction
Using this information preliminary cell cite designs are prepared. Seller uses
PlaNET as its design tool for RF propagation prediction. PlaNET is a software
package developed by Mobile Systems International (MSI) of England. PlaNET
provides the capability for single and multiple site RF prediction plots,
composite coverage plots, best server plots, interference prediction for both
co-channel and adjacent channel interference for an individual site or on a
whole system, and traffic calculations to fit demographics, land use, roadways
and traffic patterns.
The initial design results in the identification of recommended cell site
locations and search rings which are identified to the customer for site
acquisition activities. A total of 28 sites will be analyzed including 21
existing sites and 7 new sites. If additional site analyses are required as a
result of Buyer site acquisition activities, these efforts will be deemed
additional scope of work and Buyer will be charged according to the pricing
proposal.
The analysis process also results in prediction plots of the network, including:
- One composite and one individual cell coverage plot per cell of each
new and changed existing cells,
- Best server plots, for the area covered by the new cells,
- Database of key parameters such as cell site coordinates, ground
elevation for the new and changed existing cells,
- Tabulation of RF parameters for each new and changed existing cell
(antenna type/manufacturer model, orientation, tilt, height, peak
effective radiated power, etc.).
- One search ring for each new cell site for identification of
alternative cell site locations should the principle property not be
available.
If requested during the analysis phase, additional reviews of the area may be
conducted to identify areas of weak coverage, along with evaluation of
alternatives for coverage improvement such as additional macrocells or
microcells, cell enhancers, or other special techniques where feasible or
appropriate. Such work will be at additional cost to be negotiated with Buyer
prior to commencement of work.
2.3.2 Frequency Planning
The next step in the system analysis is the radio traffic design that involves
the analysis of traffic distribution within the service areas and the estimation
of voice channels required to support the desired system capacity. Based on the
traffic projection information provided by the Buyer, the grade of service
desired, and subscriber profile (Erlang loading), and other relevant information
gathered by the survey teams, the PlaNET tool is used to determine traffic
loading on a per-cell basis.
8-4
<PAGE>
In the PlaNET model, it is assumed that the instant of call establishment and
the duration of calls follow a Poison distribution, allowing the use of Erlang B
formula to relate the traffic in Erlangs to the number of channels required at
the grade of service (GOS). This forms the basis of the quantity of voice
channels at each facility and the requirement for capacity increase in circuits
to each cell site.
Starting with the inputs and results of System Propagation Prediction Analysis,
this study develops and validates an initial plan of channel assignments
including control and voice channels, DCCs, and SATs. An analytical review of
the cell coverage and channel traffic forecasts is completed to identify the
channel requirements. These requirements are then used to determine the number
of channels needed at each facility and the potential requirement for further
sectorization.
Buyer shall then arrange a meeting between Seller engineering and engineering
representatives of the adjacent markets for the purpose of coordinating
frequencies at the boundary cells. Buyer is responsible for providing to Seller
the agreed frequency plans for interfacing with the adjacent markets prior to
final frequency plan design (paragraph 2.4).
As part of the plan, a manual system-wide Co-channel Carrier-to-interference
ratio (C/I) review is completed to identify areas of co-channel interference and
areas of heavy traffic density where adjacent channels are assigned in
physically adjacent cells. Further changes in the plan are completed to
eliminate predicted problem interferences or adjacencies, or if unavoidable with
the given constraints, to minimize their impact by migrating them to areas of
low traffic density.
2.4 DETAILED RF DESIGN
2.4.1 Site Verification Data Collection - by Buyer
The qualification, selection, and acquisition of sites will be accomplished
solely by Buyer. The following information shall be provided by Buyer to Seller
prior to starting the final design (see 2.4.3) and Seller shall rely on this
information as accurate for design and implementation and construction purposes:
1. Verification of the suitability of the proposed antenna locations.
2. Determination of the actual line of sight parameters for each cell
location.
3. Determination of the actual blockage profiles for each of the cell
locations.
4. Physical inspection and determination of the suitability of the downtilt
prediction for the antennas.
5. Additional RF measurements as required by Seller to support the
propagation predictions.
6. Complete photographic records of each candidate cell site.
7. Identification of alternate sites. If additional site designs are
required as a result of customer site acquisition activities, this
effort will be deemed additional scope of work and Buyer will be
charged according to the pricing proposal.
8-5
<PAGE>
This data will then be forwarded to the design team at Seller for final RF
design of the network. Final design work will not start until completion of this
task by Buyer.
2.4.2 Buyer Site Acquisition
Following the site verification activities above, it is the Buyer's
responsibility to secure construction rights for the sites. In the event that
the primary site locations cannot be obtained, search rings have been provided
that will enable the customer to seek alternative site locations within
reasonable distances from the initial recommended locations. Once the final
locations have been determined, the customer shall provide the site coordinates
and other location data to Seller for final design of the network. If additional
site designs are required as a result of customer site acquisition activities,
this effort will be deemed additional scope of work and Buyer will be charged
according to the pricing proposal.
2.4.3 Preliminary Design Update - Final Design
A Final Design shall be generated based on the information generated in the
preceding efforts. This will be comprised of a study of the proposed service
areas and, using all available demographic and customer provided traffic pattern
data, will determine the final capacity requirements for each cell and will
formulate a final frequency plan for all channels. An initial study of datafill
and site configuration parameters will be undertaken to minimize all potential
interference and ensure that the design criteria are met.
The resulting frequency plan will be reviewed both manually and by automatic
analytical tools before finalization. Interactive review and discussion are
available with the Buyer prior to "lock down." At the conclusion of these
reviews, all frequency plan details are documented in a tabular format, along
with the given plan constraints and explanation of any special considerations or
techniques employed in finalization. Outputs of the frequency plan will be:
- Full tabulation of frequency plan including channel set definitions,
set and assignments of control channels, DCCs, voice channel sets, and
SATs to cells.
- Supporting tabulation of constraints governing initial plan including
channel requirements and underlying traffic forecast data.
- Explanation of special considerations or techniques employed in
mitigation of any specific problems.
As a result of this design effort, a detailed Final Design Report will be
prepared and presented to the customer for approval at the final design review.
Upon approval by the customer, the RF design will be released to Seller's
Systems Applications Engineering for final provisioning and implementation.
8-6
<PAGE>
3.0 POST INSTALLATION SUPPORT RF ENGINEERING
3.1 Acceptance Test Plan
During the construction phase of the program, RF engineering will prepare a
detailed Acceptance Test Plan (ATP) which will include proposed drive route(s),
RF parameters to be measured for Acceptance, and test methods to verify that the
installed cell sites meet the design objectives. The RF ATP will be submitted to
the Buyer for review and approval.
3.2 System Turn Up
3.2.1 Prior to Final Site Installation
Prior to turn up of the first site, the new switch load shall have been
installed and the existing cell site network returned to an operational state
with the frequency plan in effect as of the start of the switch load
installation. OM data shall have been collected by Seller to confirm operational
conformance of the RF portion of the cell sites to the condition of the network
prior to installation of the new load.
Upon installation of each site, Seller's installers shall have set the initial
RF parameters in accordance with the baseline datafill design criteria
established by Seller's engineering. System turn-up and will be conducted by
Seller for each new cell site within seven (7) days after the installation is
completed, verifying it operational from the RF perspective. Optimization of the
operating parameters of the network by Seller will be accomplished as described
in paragraph 3.2.2 following completion of installation of the last site.
It is understood by Seller that Buyer may elect to install the new cell sites
over a period of several months, and that Buyer may elect to turn up these sites
as they become operational. As a result, it may be necessary for Seller to
perform portions of the frequency retune plan as these new cell sites are made
operational. Frequency retunes of the entire network are not included in the SOW
during this portion of the installation process. Seller agrees to provide no
more than three (3) frequency retune portions until the final site installation
has been completed. If additional retune portions are necessary during the
process of installing the new cell sites, these will be performed by Seller on a
time and materials basis.
3.2.2 Following Completion of Last Site Installation
Final network optimization will undertaken following installation and turn up of
the last new cell site contemplated under this contract. As the optimization
effort progresses through ongoing performance analysis and drive testing,
appropriate parameter changes that can be readily implemented are identified and
specifically recommended to improve system call processing performance. Examples
of such changes include hand-off parameters, various system thresholds, and
frequency/SAT/DCC assignments.
8-7
<PAGE>
During the optimization process, Seller Engineering will adjust and fine tune
the pertinent switch parameters to achieve improved performance. The primary
focus is to improve the percentages of dropped calls and dropped hand-offs and
to reduce excessive hand-offs.
Any appropriate changes requiring physical construction are identified and
recommended, but are not included in this Statement of Work. Examples include
changes in cell physical details (antenna centerline height, location), antenna
replacement, or the addition of channels, frames, or new cells to improve
performance, and development of a revised frequency plan. Alternative system
configurations (including possible sectorization) are documented, explained and
recommended in cases of substantial interference.
Seller's RF Engineering group will perform a final drive test of the KSM market.
The drive routes will be limited to those already tested as part of paragraph
2.2 of this SOW. The data monitored and gathered will include hand-off points,
signal strength, C/I levels and path balance characteristics of the network.
This data will then be post-processed, plotted and analyzed to determine
specific performance anomalies. Initial Datafill changes are made at this point
based on the analysis of the drive test data. The data will be compared to that
compiled as part of the initial drive tests to indicate performance
improvements.
3.3.3 Cell Site Audits
For each new cell site in the network or cluster to be optimized, RF Engineering
will conduct a cell site audit. Site Audits consist of verifying the
installation and operation of the Seller radio equipment and wiring. It is
essential that the equipment is installed, configured, tested, and datafilled in
the correct manner. The audit will ensure that the equipment is working properly
and is not adversely affecting any existing equipment or service. The audits
include, but are not limited to the following:
1. Visually inspect physical plant (building, air conditioning, etc.).
Insure that filters are clean, HVAC is operational,
jumper/feedlines/connectors properly installed per Seller
specifications, general cleanliness of the facility.
2. Visually inspect the antenna structure for corrosion, loose fittings,
etc.
3. Inspect DC power and grounding to insure that Seller specifications are
met.
4. Sweep antennas for VSWR (Optional at additional cost).
5. Sweep receive multicoupler/duplexer for gain and VSWR (Optional at
additional cost).
6. Check firmware for latest revision.
8-8
<PAGE>
7. Analog radio TX tests (if applicable)
a. HSMO
b. TX power
c. PA power stepping
d. TX frequency
e. Manchester data
f. Modulation limiting
g. Residual modulation
h. SAT deviation and frequency
i. ST deviation and frequency
8. Combiner
a. tuning
b. loss
9. Duplexer loss
10. Analog radio RX tests (if applicable)
a. RX sensitivity (SINAD)
b. RSSI (response and offset)
c. RX audio level
d. Audio loopback
e. SAT detect
f. ST detect
g. 1 kHz Test Tone generator
h. Desensitization
11. Talk-In/Talk-Out balance
12. Test TX/RX Audio Levels (AVL)
13. Noise floor measurement (one channel from set)
14. Intermodulation test (all channels)
15. Call through tests (all channels)
16. Maintenance log review
Site audits are an integral part of the optimization process and will be
performed prior to any extensive performance related adjustments being made. The
process of site auditing is easily taught to customer technicians / engineers
and can be performed by them, if desired. A Site Audit Report will be provided
to the customer within 30 days after completion of the audit.
8-9
<PAGE>
ATTACHMENT 1
BUYER PROVIDED INFORMATION
<TABLE>
<CAPTION>
DOBSON CELLULAR
SITE NAME LONG LAT ANT. HT GRND HT AZIM. ERP TILT ANT. TYPE
ID# (feet) (feet) (deg) (Watts) (deg)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Atchinson 95 02 18 39 33 12 305 1060 270 100 0 740215
2 Troy 95 02 20 39 47 35 307 1046 Omni 80 0 BCR10-H
3 Baker 95 33 46 39 45 10 405 1180 090 100 0 740198RF5/8
4 Effingham 95 25 25 39 33 08 335 1128 Omni 97 0 740198RF5/8
5 Holton 95 48 37 39 23 45 405 1224 Omni 64 0 740198
6 Leavenworth 94 56 15 39 17 52 245 1080 245 30 0 PD1136
160 1080 045 50 4 BCR60015
150 1080 170 70 0 BCR80015
245 1080 280 70 0 RWA80015
7 Tonganoxie 95 04 42 39 05 25 305 960 090 50 0 740198RF5/8
8 Gentry 94 28 55 40 19 39 305 1066 Omni 165 0 BCR12-O
9 Maryville 94 53 01 40 22 00 355 1050 Omni 63 0 740198
10 Maryville DT 94 52 14 40 20 06 133 1138 Omni 40 0 740247
11 Mound City 95 11 41 40 04 14 405 1110 270 90 0 OGC9-825/RFM-3
12 Rock Port 95 31 53 40 24 27 405 1140 060 100 0 740190R2
13 Ridgeway 93 56 40 40 22 48 405 1050 Omni 67.6 0 740198
14 Braymer 93 48 14 39 40 12 305 901 0 100 0 740198RF5/8
15 Camron 94 15 17 39 44 46 305 1032 Omni 100 0 DB810
16 Carrolton95 93 31 13 39 24 55 305 835 Omni 100 0 740198
17 Chillicothe 93 35 14 39 48 51 355 774 Omni 73.2 0 740198
18 Jameson 94 01 17 39 57 47 405 927 Omni 70 0 740198
19 Maysville 94 19 45 39 53 40 366 951 Omni 133 0 SRL488
20 Plattsburg 95 94 29 07 39 33 33 305 1010 065 90 0 DB563
</TABLE>
8-10
<PAGE>
AMENDMENT NO. 3
TO
SUPPLY AGREEMENT
BETWEEN
DOBSON COMMUNICATIONS CORPORATION
AND
NORTHERN TELECOM INC.
Made effective as of the 30th day of September, 1998, by and between Dobson
Communications Corporation (hereinafter referred to as "Buyer"), an Oklahoma
corporation with offices at 13439 North Broadway Extension, Suite 200, Oklahoma
City, Oklahoma 73114 and Northern Telecom Inc. (hereinafter referred to as
"Seller"), a Delaware corporation, with offices at 2435 N. Central Expressway,
Richardson, Texas 75080.
WHEREAS, Buyer and Seller entered into a Supply Agreement dated as of December
6, 1995, as amended (the "Agreement"); and,
WHEREAS, Buyer and Seller now wish to amend the Agreement to include, among
other things, an additional commitment to purchase by Buyer and new discounts
applicable to fixture Equipment purchases, all as further described herein;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, Buyer
and Seller agree to amend the Agreement as follows:
1. Lengthen the Extended Term of the Agreement by adding the words "and five
(5) months" after the words "and ending four (4) years" in the definition
of Extended Term under Section 1 (DEFINITIONS).
2. Increase Buyer's commitment to purchase during the Extended Term by
amending Article 4 (PRICE), deleting the last sentence of Section 4.1 in
its entirety and replacing it with the following:
"Buyer understands that it has a firm obligation to purchase/license no
less than $65 million net Price (i.e., Price inclusive of applicable
discounts, but exclusive of sales tax) of Equipment and/or Software from
Seller during the Extended Term ('Commitment')."
1
<PAGE>
3. Amend Article 17 (CHANGES) by deleting the opening paragraph of Section
17.5 in its entirety and replacing it with the following:
"Subject to Section 24.1 herein, for purchases during the Initial Term,
Buyer understands and agrees that the execution of this Agreement
constitutes a firm, noncancelable Purchase Order for the Initial Purchase
set forth in Section 1.0 of Annex 1 and the training courses set forth in
Section 4.0 of Annex 1.
For purchases during the Extended Term, Buyer understands and agrees as
follows:
(a) that the execution of this Agreement constitutes a firm,
non-cancelable Purchase Order for the initial purchase of Equipment
and training for the Extended Term ('Extended Term initial Purchase'),
as set forth in Section 1.0 of Annex 1A hereof; and,
(b) that the execution of this Agreement constitutes a firm,
non-cancelable Purchase Order for the purchase of the Extended Term
Additional Equipment set forth in Section 2.0 of Annex 1A hereof
('Extended Term Additional Purchase'); provided, such non-cancelable
Purchase Order for the Extended Term Additional Equipment for the New
York-3 market, Pennsylvania-2 market and Sygnet 1999 Expansions set
forth in Sections 2.2, 2.3 and 2.4 shall be subject to Buyer's merging
with Sygnet Communications, Inc. during the Extended Term. Buyer shall
give Seller written notice of such merger at such time as it is
completed.
For Purchase Orders for Equipment other than the Initial Purchase, Extended
Term Initial Purchase and Extended Term Additional Purchase, upon written
notification to Seller, Buyer may elect to cancel such Purchase Orders
prior to shipment of Equipment in accordance with the following:"
4. Amend Annex 1A (EXTENDED TERM EQUIPMENT AND SERVICES PRICING) as follows:
(a) Add a new Section 2.0 (EXTENDED TERM ADDITIONAL PURCHASE), as set out
in Schedule A, attached hereto and incorporated herein; and,
(b) Change the numbering and language of Annex 1A sections as follows:
(i) Change Section 1.4 (P-3 TRADE-IN CREDITS) to a new Section 3.0;
(ii) Change Section 2.0 (SOFTWARE RELEASE LICENSE FEE) to a new
Section 4.0, conforming the numbering of all sections and
subsections therein, and add the words "and Extended Term
Additional Purchase" after the words "including the Extended Term
Initial Purchase" in the parenthetical clause in the first
sentence of a new Section 4.1; and,
2
<PAGE>
(iii) Change Section 3.0 (DISCOUNTS) to a new Section 5.0,
conforming the numbering of all sections therein.
5. Amend (newly numbered) Section 5.0 (DISCOUNTS) of Annex 1A as follows:
(a) Add the words "Subject to Subsection 5.2.1 below," to the beginning of
(new) Section 5.2; and,
(b) Add new Subsection 5.2.1 as follows:
"5.2.1 Following Buyer's purchase and Seller's delivery of the
Extended Term Additional Purchase set out in Section 2.0 of
Annex 1A, the following discounts and firm, fixed Prices
shall replace the discounts set out in Section 5.2 above:
(a) The following new discounts shall apply:
<TABLE>
<CAPTION>
Description Discount
----------- --------
<S> <C>
Switch Hardware 50%
Cell Site Hardware 50%
</TABLE>
(b) Buyer may purchase TRU-III/SCLPA(s) or TRU-II/SCLPA(s) for
the net Price per radio/amplifier unit (i.e., Price per
radio/amplifier unit inclusive of discounts, but exclusive
of sales tax) of $4,750."
The exclusions described in Section 5.2, sub-parts (i), (ii) and
(iii) above shall continue to apply."
6. Except as specifically modified by Amendments 1 through 3, the Agreement in
all other respects shall continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment No. 3 to be signed by
their duly authorized representatives effective as of the date first set forth
above.
DOBSON COMMUNICATIONS NORTHERN TELECOM INC.
CORPORATION
By /s/ G Edward Evans By: /s/ Nancy J. White
--------------------------- ---------------------------
Name: G Edward Evans Name: /s/ Nancy J. White
------------------------ -------------------------
(Type/Print) (Type/Print)
Title: President Title: V.P. and GM U.S. Region
----------------------- ------------------------
Date: 9/30/98 Date: 10/1/98
------------------------ -------------------------
3
<PAGE>
SCHEDULE A
TO AMENDMENT NO. 3 TO
THE 12/20/95 SUPPLY AGREEMENT BETWEEN
DOBSON COMMUNICATIONS CORPORATION
AND NORTHERN TELECOM INC.
ADDING NEW SECTION 2.0 TO ANNEX 1A
2.0 EXTENDED TERM ADDITIONAL PURCHASE
The existing equipment credits (totaling $1.475 million) set out in
Section 2.2 of this Annex 1 are granted to Buyer subject to Buyer's
trading in, on or before March 31, 1999, all Ericsson radio and cell
site hardware located at applicable sites in the New York-3 market
identified in such Section 2.2 ("Ericsson Hardware). Prior to Turnover,
Seller at its own expense shall de-install all Ericsson Hardware at such
New York sites in accordance with the applicable project schedule and
remove all such de-installed Ericsson Hardware. Buyer shall provide
Seller reasonable access during normal business hours to allow such
de-installation and removal. Title to such de-installed Ericsson
Hardware shall pass to Seller upon de-installation. Buyer hereby
represents that (i) the equipment is operational and in good condition,
(ii) that Buyer will have the right to convey title to such Ericsson
Hardware upon such de-installation by Seller, and (iii) that such title
shall be good and marketable and free and clear of liens or encumbrances
of any kind.
2.1 MARYLAND RSA-1 CELL SITE ADDITION
2.1.1 Switch Hardware
<TABLE>
<CAPTION>
DESCRIPTION LIST PRICE DISC NET PRICE
----------- ---------- ---- ---------
<S> <C> <C> <C> <C>
MCTMI Cabinet equipped with (1) ICP
MCTMI Cabinet $45,294
ICP Standard Packfill $160,500
ICP Digital Metro ES Option $150,500
DTC Packfill $0 $356,294 40% $213,776
--------
TDMA Hardware required to support (5) TDMA VCHs per Cell Site Sector
EDSP Cable Assembly $705
EDSP Shelf $20,000
Power Converter $6,206
EDSP Transcoder CP $140,000
EDSP Controller $5,040
EDSP Backplane $700 $172,651 40% $103,591
--------
</TABLE>
A-1
<PAGE>
2.1.1.1 Switch E, F, & I
<TABLE>
<CAPTION>
DESCRIPTION LIST PRICE DISC NET PRICE
----------- ---------- ---- ---------
<S> <C> <C> <C> <C>
Engineering Freight and Installation
Frame ENG $4,680
DSP Shelf Install $9,600
MCTMI Cabinet Installation $9,600
Switch Frame Freight $504 $24,384 0% $24,384
----
Switch Subtotal $341,751
<CAPTION>
2.1.2 Cell Site Equipment
DESCRIPTION QTY LIST PRICE EXT PRICE DISC NET PRICE
----------- --- ---------- --------- ---- ---------
<S> <C> <C> <C> <C> <C>
16CH OMNI/ICRM+/ATC Cell Site 10 $114,334 $1,143,340 45% $628,837
16CH Cell Site Power & Ground 10 $1,410 $14,100 45% $7,755
TRUIII/SCLPA Radios 10 $10,500 $105,000 50% $52,500
(DCCH PLUS 2 DVCH PER SECTOR)
TRUII/SCLPA Radios 20 $10,500 $210,000 50% $105,000
(ALCH, ALR PER SECTOR)
TRUIII/SCLPA Radios 10 $10,500 $105,000 50% $52,500
(TDMA VCH RADIO PER SECTOR)
TRUII/SCLPA Radios 120 $10,500 $1,260,000 50% $630,000
(ANALOG VCH RADIOS)
<CAPTION>
2.1.2.1 Cell sites E,F,& I
DESCRIPTION QTY LIST PRICE EXT PRICE DISC NET PRICE
----------- --- ---------- --------- ---- ---------
<S> <C> <C> <C> <C> <C>
Cell Site Engineering 10 $630 $6,300 0% $6,300
Cell Site Frame Freight 20 $504 $10,080 0% $10,080
16CH OMNI Cell Site Installation 10 $9,600 $96,000 0% $96,000
Cell Site Cutover Support 65 $120 $7,800 0% $7,800
CELL SITE SUBTOTAL $1,596,772
TOTAL MD-1 SWITCH AND CELL SITE ADDITION $1,938,523
NEW MARKET DISCOUNT ($1,111,375)
NET TOTAL MD-1 $827,148
</TABLE>
A-2
<PAGE>
2.2 NEW YORK-3 SUPERNODE SWITCH AND CELL SITES
2.2.1 Switch Hardware
<TABLE>
<CAPTION>
DESCRIPTION LIST PRICE DISC NET PRICE
----------- ---------- ---- ---------
<S> <C> <C> <C> <C>
Supernode Core with BRISC 60 Processor $1,745,750 40% $1,047,450
Link Peripheral Processor (LPP) Cabinet equipped with (8) LIU7s and CDPD
LPP Cabinet $376,974
LIU7 $116,656
NIU $71,126
XLIU $45,008
EIU $33,576 $643,340 40% $386,004
----------
Enhanced Network Frame equipped to support peripherals $484,180 40% $290,508
MCTMI Cabinets equipped with (4) DTCs and (8) ICPs
MCTMI Cabinet $271,764
ICP Standard Packfill $1,284,000
ICP Digital Metro ES Option $1,204,000
DTC Packfill $818,112 $3,577,876 40% $2,146,726
----------
MEDP Configured to support (5) TDMA VCH's per Cell Site Sector
MEDP Cabinet $35,368
EDSP Cable Assembly $5,640
EDSP Shelf $60,000
EDSP Power Converter $18,618
MEDP Cooling Unit $6,300
EDSP Transcoder & CP $1,120,000
EDSP Controller $17,640
EDSP Backplane $2,450 $1,266,016 40% $759,610
----------
MPDC Cabinet $18,837 40% $11,302
MCAM3 Cabinet with EDRAM and CTM $130,424 40% $78,254
MCGM Cabinet with (1) DIO and (1) MTD $105,134 40% $63,080
Wired Cabinets configured as Youngstown Backup
MCAM3 Cabinet $38,576
MCTM Frame (wired) empty $498,234
MEDP Frame $106,104 $642,914 40% $385,748
----------
MAP Equipment, Switch Spares with Cabinet
MAP Equipment $32,215
MCSS Cabinet $26,140
Supernode Spares $533,048
BRISC 60 $52,500
96Meg Memory $99,456 $743,359 40% $446,015
----------
2.2.1.1 Switch E, F, & I
DESCRIPTION LIST PRICE DISC NET PRICE
------------ ---------- ---- ---------
<S> <C> <C> <C> <C>
Engineering, Freight and Installation
Supernode ENG $41,400
Switch Power Engineering $2,160
Switch Cable Rack ENG $2,160
Switch MDF/DSX/Draw ENG $2,160
Switch Frame Freight $14,616
Supernode Install $36,000
A-3
<PAGE>
DESCRIPTION LIST PRICE DISC NET PRICE
----------- ---------- ---- ---------
<S> <C> <C> <C> <C>
ENET $9,600
LPP Install $9,600
MPDC Install $2,400
MCAM3 Install $12,000
MCGM Install $6,000
MCTMI Cabinet Installation $122,400
MAP Install $4,800
MCSS Install $1,200
MEDP Install $28,800
Database Support $5,800
Install Supervision $14,400
Post Cut Support $48,000
Software ONP $25,000 $388,496 0% $388,496
----------
Switch Sub-Total $6,003,194
NEW MARKET DISCOUNT ($5,614,698)
<CAPTION>
2.2.2 Software
DESCRIPTION EXT PRICE DISC NET PRICE
----------- --------- ---- ---------
<S> <C> <C> <C>
MTX Software Load based on $6 per SUB (25,000 SUBs) $150,000 0% $150,000
SOFTWARE SUBTOTAL $150,000
<CAPTION>
2.2.3 Cell Site Equipment
DESCRIPTION QTY LIST PRICE EXT PRICE DISC NET PRICE
----------- --- ---------- --------- ---- ---------
<S> <C> <C> <C> <C> <C>
16CH OMNI/ICRM+/ATC Cell Site 15 $114,334 $1,715,010 45% $943,256
16CH Cell site Power & Ground 15 $1,410 $21,150 45% $11,633
24CH OMNI/ICRM+/ATC Cell Site 35 $150,305 $5,260,675 45% $2,893,371
24CH Cell Site Power & Ground 35 $2,315 $81,025 45% $44,564
32CH OMNI/ICRM+/ATC Cell Site 5 $170,527 $852,635 45% $468,949
32CH Cell Site Power & Ground 5 $2,315 $11,575 45% $6,366
40CH OMNI/ICRM+/ATC Cell Site 2 $206,995 $413,990 45% $227,695
40CH Cell Site Power & Ground 2 $3,220 $6,440 45% $3,542
40CH BI-SECT/ICRM+/ATC Cell Site 1 $236,341 $236,341 45% $129,988
40CH Cell Site Power & Ground 1 $3,220 $3,220 45% $1,771
72CH SECT 120/ICRM+/ATC Cell Site 1 $405,300 $405,300 45% $222,915
72CH Cell Site Power & Ground 1 $5,030 $5,030 45% $2,767
TRUIII/SCLPA Radios 62 $10,500 $651,000 50% $325,500
(DCCH PLUS 2 DVCH PER SECTOR)
TRUII/SCLPA Radios 124 $10,500 $1,302,000 50% $651,000
(ACCH, ALR PER SECTOR)
TRUIII/SCLPA Radios 62 $10,500 $651,000 50% $325,500
(TDMA, VCH RADIO PER SECTOR)
TRUII/SCLPA Radios 936 $10,500 $9,828,000 50% $4,914,000
(ANALOG VCH RADIOS)
A-4
<PAGE>
<CAPTION>
2.2.3.1 Cell Sites E, F, & I
DESCRIPTION QTY LIST PRICE EXT PRICE DISC NET PRICE
----------- --- ---------- --------- ---- -----------
<S> <C> <C> <C> <C> <C>
Cell Site Engineering 59 $630 $37,170 0% $37,170
Cell Site Frame Freight 168 $504 $84,672 0% $84,672
16CH OMNI Cell Site Installation 15 $9,600 $144,000 0% $144,000
24/32CH OMNI Cell Site Installation 40 $14,400 $576,000 0% $576,000
40/48CH OMNI Cell Site Installation 2 $19,200 $38,400 0% $38,400
40CH BI-SECT Cell Site Installation 1 $24,000 $24,000 0% $24,000
72CH SECT Cell Site Installation 1 $38,400 $38,400 0% $38,400
Cell Site Cutover Support 1000 hours $120/hr. $20,000 0% $120,000
CELL SITE SUBTOTAL $12,235,457
SUBTOTAL $12,773,353
NEW MARKET DISCOUNT ($4,891,739)
EXISTING EQUIPMENT CREDIT ($1,475,000)
NET TOTAL NY-3 $6,407,214
2.3 PENNSYLVANIA RSA-2 CELL SITE ADDITION
2.3.1 Switch Hardware
<CAPTION>
DESCRIPTION LIST PRICE DISC NET PRICE
----------- ---------- ---- ---------
<S> <C> <C> <C> <C>
(1) Digital Metro ICP Packfill $311,000 40% $186,600
TDMA Hardware required to support (5) TDMA VCHs per Cell Site Sector
EDSP Cable Assembly $705
EDSP Shelf $20,000
Power Converter $6,206
EDSP Transcoder CP $140,000
EDSP Controller $2,520
EDSP Backplane $350 $169,781 40% $101,869
--------
<CAPTION>
2.3.1.1 Switch E, F, & I
DESCRIPTION LIST PRICE DISC NET PRICE
----------- ---------- ---- ---------
<S> <C> <C> <C>
Engineering Freight and Installation $24,384 0% $24,384
SWITCH SUBTOTAL $312,853
<CAPTION>
2.3.2 Cell Site Equipment
DESCRIPTION QTY LIST PRICE EXT PRICE DISC NET PRICE
----------- --- ---------- ---------- ---- ---------
<S> <C> <C> <C> <C> <C>
16CH OMNI/ICRM+/ATC Cell Site 10 $114,334 $1,143,340 45% $628,837
16CH Cell Site Power & Ground 10 $1,410 $14,100 45% $7,755
TRUIII/SCLPA Radios 10 $10,500 $105,000 50% $52,500
(DCCH PLUS 2 DVCH PER SECTOR)
TRUII/SCLPA Radios 20 $10,500 $210,000 50% $105,000
(ACCH, ALR PER SECTOR)
A-5
<PAGE>
<CAPTION>
DESCRIPTION QTY LIST PRICE EXT PRICE DISC NET PRICE
----------- --- ---------- ---------- ---- ---------
<S> <C> <C> <C> <C> <C>
TRUIII/SCLPA Radios 10 $10,500 $105,000 50% $52,500
(TDMA VCH RADIO PER SECTOR)
TRUII/SCLPA Radios 120 $10,500 $1,260,000 50% $630,000
2.3.2.1 Cell Sites E, F, & I
DESCRIPTION QTY LIST PRICE EXT PRICE DISC NET PRICE
----------- --- ---------- --------- ---- ---------
<S> <C> <C> <C> <C> <C>
Cell Site Engineering 10 $630 $6,300 0% $6,300
Cell Site Frame Freight 20 $504 $10,080 0% $10,080
16CH OMNI Cell Site Installation 10 $9,600 $96,000 0% $96,000
Cell Site Cutover Support 65 $120 $7,800 0% $7,800
CELL SITE SUBTOTAL $1,596,772
TOTAL PA-2 SWITCH AND CELL SITE ADDITION $1,909,525
NEW MARKET DISCOUNT ($1,111,375)
NET TOTAL PA-2 $798,250
<CAPTION>
2.4 SYGNET 1999 EXPANSIONS
DESCRIPTION LIST PRICE DISC NET PRICE
----------- ---------- ---- ---------
<S> <C> <C> <C>
ENET and XLIU LPP Expansion
SNSE Core $0
Crosspoint $36,000
DS-512 PB $56,000
XLIU $45,008 $137,008 40% $82,205
---------
(2) MCTMI Cabinets equipped with (3) digital Metro ES ICPs
MCTMI Cabinet $90,588
ICP Standard Packfill $481,500
ICP Digital Metro ES Option $451,500
DTC Packfill $0 $1,023,588 40% $614,153
---------
TDMA Hardware required to support (5) TDMA VCHs per Cell Site Sector
MEDP Cabinet $35,368
Cooling unit $6,300
EDSP Cable Assembly $2,115
EDSP Shelf $20,000
Power Converter $6,206
EDSP Transcoder CP $420,000
EDSP Controller $5,040
EDSP Backplane $700 $495,729 40% $297,437
---------
MCAM3 Cabinet $38,576 40% $23,146
A-6
<PAGE>
<CAPTION>
2.4.1.1 Switch E, F, & I
DESCRIPTION LIST PRICE DISC NET PRICE
----------- ---------- ---- ---------
<S> <C> <C> <C>
Engineering Freight and Installation $55,152 0% $55,152
SWITCH SUBTOTAL $1,072,093
<CAPTION>
2.4.2 Software
DESCRIPTION LIST PRICE DISC NET PRICE
----------- ---------- ---- ---------
<S> <C> <C> <C>
MTX Data Server 3.0 Software Fees $136,500 n/a $136,500
SOFTWARE SUBTOTAL $136,500
<CAPTION>
2.4.3 Cell Site Equipment
DESCRIPTION QTY LIST PRICE EXT PRICE DISC NET PRICE
----------- --- ---------- ---------- ---- ---------
<S> <C> <C> <C> <C> <C>
16CH OMNI/ICRM+/ATC Cell Site 15 $114,334 $1,715,010 45% $943,256
16CH Cell Site Power & Ground 15 $1,410 $21,150 45% $11,633
TRUIII/SCLPA Radios 15 $10,500 $157,500 50% $78,750
(DCCH PLUS 2 DVCH PER SECTOR)
TRUII/SCLPA Radios 30 $10,500 $315,000 50% $157,500
(ACCH, ALR PER SECTOR)
TRUIII/SCLPA Radios 15 $10,500 $157,500 50% $78,750
(TDMA VCH RADIO PER SECTOR)
TRUII/SCLPA Radios 180 $10,500 $1,890,000 50% $945,000
(ANALOG VCH RADIOS)
<CAPTION>
2.4.4 Cell Site E, F, & I
DESCRIPTION QTY LIST PRICE EXT PRICE DISC NET PRICE
----------- --- ---------- --------- ---- ---------
<S> <C> <C> <C> <C> <C>
Cell Site Engineering 15 $630 $9,450 0% $9,450
Cell Site Frame Freight 30 $504 $15,120 0% $15,120
16CH OMNI Cell Site Installation 15 $9,600 $144,000 0% $144,000
Cell Site Cutover Support 70 $120 $8,400 0% $8,400
CELL SITE SUBTOTAL $2,391,858
TOTAL SYGNET EXPANSION $3,600,451
EXECUTIVE DISCOUNT ($2,222,750)
NET TOTAL SYGNET $1,377,701
A-7
<PAGE>
2.5 REVISED OHIO-2 NEW SWITCH AND CELL SITES
<CAPTION>
2.5.1 Switch Hardware
DESCRIPTION LIST PRICE DISC NET PRICE
----------- ---------- ---- ---------
<S> <C> <C> <C> <C>
SNSE Core equipped with BRISC 60, ENET, (4) LIU7s
SNSE Core $913,197
BRISC 60 $116,958
96Meg Memory $596,736
LIU7 $58,328 $1,685,219 40% $1,011,131
----------
MCTMI Cabinets equipped with (1) DTC and (2) ICPs
MCTMI Cabinet $90,588
ICP Standard Packfill $321,000
ICP Digital Metro ES Option $301,000
DTC Packfill $204,528 $917,116 40% $550,270
----------
TDMA Equipment - MEDP Configured to support (5) TDMA VCHs per
Cell Site Sector
MEDP Cabinet $35,368
EDSP Cable Assembly $1,410
EDSP Transcoder CP $280,000
EDSP Controller $2,520
EDSP Backplane $350 $319,648 40% $191,789
----------
MCAM3 Cabinet with EDRAM and CTM $130,424 40% $78,254
MCGM Cabinet with (1) DIO and (1) MID $92,534 40% $55,520
MAP Equipment, Switch Spares with Cabinet $797,583 40% $478,550
<CAPTION>
2.5.1.1 Switch E, F,& I
DESCRIPTION LIST PRICE DISC NET PRICE
----------- ---------- ---- ---------
<S> <C> <C> <C>
Engineering, Freight and Installation $209,168 0% $209,168
SWITCH SUBTOTAL $2,574,682
NEW MARKET DISCOUNT ($2,365,514)
<CAPTION>
2.5.2 Cell Site Equipment
DESCRIPTION QTY LIST PRICE EXT PRICE DISC NET PRICE
----------- --- ---------- --------- ---- ---------
<S> <C> <C> <C> <C> <C>
16CH OMNI/ICRM+/ATC Cell Site 9 $114,334 $1,029,006 45% $565,953
16CH Cell Site Power & Ground 9 $1,410 $12,690 45% $6,980
24CH OMNI/ICRM+/ATC Cell Site 2 $150,305 $300,610 45% $165,336
24CH Cell Site Power & Ground 2 $2,315 $4,630 45% $2,547
64CH SECT 120/ICRM+/ATC Cell Site 2 $346,150 $692,300 45% $380,765
64CH Cell Site Power & Ground 2 $4,125 $8,250 45% $4,538
TRUIII/SCLPA Radios 17 $10,500 $178,500 50% $89,250
(DCCH PLUS 2 DVCH PER SECTOR)
TRUII/SCLPA Radios 34 $10,500 $357,000 50% $178,500
(ACCH, ALR PER SECTOR)
TRUIII/SCLPA Radios 17 $10,500 $178,500 50% $89,250
(TDMA VCH RADIO PER SECTOR)
TRUII/SCLPA Radios 180 $10,500 $1,890,000 50% $945,000
(ANALOG VCH RADIOS)
A-8
<PAGE>
<CAPTION>
2.5.2.1 Cell Sites E, F, & I
DESCRIPTION QTY LIST PRICE EXT PRICE DISC NET PRICE
----------- --- ---------- --------- ---- ---------
<S> <C> <C> <C> <C> <C>
Cell Site Engineering 13 $630 $8,190 0% $8,190
Cell Site Frame Freight 34 $504 $17,136 0% $17,136
16CH OMNI Cell Site Installation 9 $9,600 $86,400 0% $86,400
24CH OMNI Cell Site Installation 2 $14,400 $28,800 0% $28,800
64CH SECT Cell Site Installation 2 $31,200 $62,400 0% $62,400
CELL SITE SUBTOTAL $2,631,043
TOTAL OHIO-2 SWITCH AND CELL SITES $2,840,212
NEW MARKET DISCOUNT ($1,034,486)
NET TOTAL OHIO-2 $1,805,726
----------
</TABLE>
A-9
<PAGE>
AMENDMENT NO. 4
TO
SUPPLY AGREEMENT
BETWEEN
DOBSON COMMUNICATIONS CORPORATION
AND
NORTHERN TELECOM INC.
Made effective as of the 5th day of January 1999, by and between Dobson
Communications Corporation (hereinafter reference to as "Buyer"), an Oklahoma
corporation with offices at 13439 North Broadway Extension, Suite 200,
Oklahoma City, Oklahoma 73114 and Northern Telecom Inc. (hereinafter referred
to as "Seller"), a Delaware corporation, with offices at 2221 Lakeside
Boulevard, Richardson, Texas 75082-4399.
WHEREAS, Buyer and Seller entered into a Supply Agreement dated as of December
6, 1995, as amended (the "Agreement"); and,
WHEREAS, Buyer and Seller now wish to amend the Agreement, as amended, to,
among other things, allow for the purchase by Buyer of CDMA Equipment and to
allow for a firm commitment by Buyer to purchase certain CDMA Equipment as
further described herein;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
Buyer and Seller agree to amend the Agreement as follows:
1. Amend Article 1 (DEFINITIONS) as follows, adjusting the numbering
sequence in Article 1 accordingly:
(a) Add the words "including BTS Equipment, as applicable," after the
words "Seller radios and equipment" to the existing Section 1.2 ("Cell
Site" definition).
(b) Add new Section 1.2 as follows:
"1.2 "BASE STATION CONTROLLER ("BSC")' shall mean Seller engineered
CDMA Equipment providing radio channel management between the
Switch and the BTS. The BSC includes the Base Station Manager
("BSM"). For the purposes of this Agreement, the BSC shall be
considered Switch-related Equipment, unless otherwise noted."
1
<PAGE>
(c) Add new Section 1.3 as follows:
"1.3 'BASE TRANSCEIVER STATION ('BTS')' shall mean Seller engineered
CDMA Equipment, controlled by the BSC, providing the radio
link with mobile subscribers."
(d) Add new Section 1.5 as follows:
"1.5 'CODE DIVISION MULTIPLE ACCESS ('CDMA')' shall mean CDMA-based
telecommunication services provided by the System, operational
in the 800 MHz band."
(e) Replace the existing Section 1.7 ("Hardware") with the following:
"1.10 'HARDWARE' shall mean any of the 800 MHz AMPS/TDMA/CDMA or
1900 MHz TDMA Nortel manufactured hardware components, as
applicable, as may comprise a System, an Expansion, a Cell
Site, or Merchandise."
(f) Add new Section 1.15 as follows:
"1.15 'NBSS' shall mean network base station subsystem Equipment
comprised of at least one BSC and one or more BTSs."
(g) Replace the existing Section 1.17 ("Software") with the following:
"1.21 'SOFTWARE' shall mean any of the 800 MHz AMPS/TDMA/CDMA or 1900
MHz TDMA proprietary and/or third party software computer
programs provided hereunder, as applicable, (consisting of
firmware and logic instructions in machine-readable code
residing in, or intended to be loaded in System memories which
provide basic logic, operating instructions and user-related
application instructions, but excluding customer data) as well
as associated documentation used to describe, maintain and use
the programs which are integral to any Hardware furnished to
Buyer. Any reference herein to Equipment or Software being
"sold," "purchased" or the like is understood to be a
reference in fact to the program being licensed."
(h) Add new Section 1.22 as follows:
"1.22 'SOFTWARE RELEASE' shall mean (a), the base operating Software
for each of the Switch and NBSS Equipment, together with
certain standard incremental subscriber and/or carrier
software features included at Seller's sole discretion, such
base operating Software and standard subscriber and/or carrier
features together forming a universal load ("Universal Load"),
as well as (b), in addition to the
2
<PAGE>
Universal Load, certain features that may be activated at
Buyer's option ("Optional Features"), including by way of
example and not by limitation. Software features associated
with an Adjunct Platform, which may include Value-added
Software, as described in Annex 9 hereof."
(i) Add new Section 1.23 as follows:
"1.23 "Software Upgrade" shall mean an upgrade to Buyer's
then-existing Software Release that may download certain
Software fixes and/or enhancements as well as unlicensed
Optional Features from a more current Software Release onto
Buyer's Switch and/or NBSS Equipment.
(j) Add the words "including statements in the NTPs as to conformance
with specific Standards." to the end of the first sentence of the
existing Section 1.17 ("Specifications").
(k) Add new section 1.25 as follows:
"1.25 "Standards shall mean interim and/or final version(s) of
technical specifications derived by an ANSI accredited
standards organization, governing the operational and/or
interface standards for CDMA Equipment."
2. Amend the existing Section 5.3 (PAYMENT) as follows:
Add the words "Annual Software Fees described in Article 5 of Annex 1A,"
after the words "...such items as described in Section 5.4." in the first
sentence.
3. Amend Article 6 (DELIVERY, RISK OF LOSS, TITLE) by adding the following to
the end of Section 6.1:
"Buyer shall be responsible for the coordination of all BTS delivery
arrangements and freight and handling charges from Buyer's designated
delivery location to the Installation Site(s)."
4. Amend Sections 2.2, 2.3 and 2.4 of Annex 2 by replacing the three (3)
references to "Switch Installation" with the words "Switch or BSC
Installation."
5. Amend Section 2.4 of Annex 2 by replacing the words "Switch Installation
Site" with the words "Installation Site" in the first sentence.
3
<PAGE>
6. Amend Subsection 2.10.2 of Annex 2 as follows:
(a) Entitle the existing paragraph "Switch", and
(b) Add a new paragraph as follows:
"BTS
T1 connection in the BTS."
7. Amend Section 2.10.3 of Annex 2 as follows:
(a) Entitle the existing paragraph "Switch", and
(b) Add a new paragraph as follows:
"BTS
DC Breaker in the BTS."
8. Amend Subsection 2.10.4 of Annex 2 as follows:
(a) Entitle the existing paragraph "Switch", and
(b) Add a new paragraph as follows:
"BTS
Alarm connections in the BTS."
9. Amend Article 17 (CHANGES) by deleting the opening paragraph of Section
17.5 in its entirety and replacing it with the following:
"Subject to Section 24.1 herein, for purchases during the Initial Term.
Buyer understands and agrees that the execution of this Agreement
constitutes a firm, non-cancelable Purchase Order for the Initial Purchase
set forth in Section 1.0 of Annex 1 and the training courses set forth in
Section 4.0 of Annex 1.
For purchases during the Extended Term, Buyer understands and agrees as
follows:
(a) that the execution of this Agreement constitutes a firm, non-
cancelable Purchase Order for the initial purchase of Equipment
and training for the Extended Term ('Extended Term Initial Purchase'),
as set forth in Section 1.0 of Annex 1A hereof;
(b) that the execution of this Agreement constitutes a firm, non-
cancelable Purchase Order for the purchase of the Extended Term
Additional Equipment set forth in Section 2.0 of Annex 1A hereof
('Extended Term Additional
4
<PAGE>
Purchase,); provided, such non-cancelable Purchase Order for the
Extended Term Additional Equipment for the New York-3 market,
Pennsylvania-2 market and Sygnet 1999 Expansions set forth in Sections
2.2, 2.3 and 2.4 shall be subject to Buyer's merging with Sygnet
Communications, Inc. during the Extended Term. Buyer shall give Seller
written notice of such merger at such time as it is completed; and
(c) that the execution of this Agreement constitutes a firm, non-
cancelable Purchase Order for the purchase of the CDMA Equipment
and Services ("CDMA Equipment Purchase") set forth in Section 6.0 of
Annex 1A hereof and Buyer further agrees to accept delivery of such
Equipment and Services no later than June 1, 1999.
For Purchase Orders for Equipment other than the Initial Purchase, Extended
Term Initial Purchase, Extended Term Additional Purchase, and the CDMA
Equipment Purchase, upon written notification to Seller, Buyer may elect to
cancel such Purchase Orders prior to shipment of Equipment in accordance
with the following:"
10. Amend Annex 1A (Schedule A to Amendment No. 2, as amended in Amendment No.
3)(EXTENDED TERM EQUIPMENT AND SERVICES PRICING) as follows:
(a) Replace the existing language in the third introductory paragraph with
the following:
During the Extended Term, for 800 MHz AMPS/TDMA/CDMA and 1900 MHz TDMA
Equipment available to Seller's customers as of the Extended Effective
Date other than the Equipment included in the Extended Term Initial
Purchase ("Extended Term Additional Equipment"), Prices shall be at
Seller's then-current List Prices for DMS-MTX products less the
applicable discounts set out in Section 3.2 of this Annex.
(b) Add a new Section 6.0 (CDMA EQUIPMENT PURCHASE), as set forth in
Schedule A, attached hereto and incorporated herein; and,
(c) Delete the existing Section 4.0 (SOFTWARE RELEASE LICENSE FEE) in its
entirety and replace it with the following:
"4.0 SOFTWARE RELEASE LICENSE FEE
4.1 During the Extended Term, Buyer shall pay Seller the following
Software Release License fees for each Switch in service as of
the Extended Effective Date or purchased thereafter by Buyer
under this Agreement (including the Extended Term Initial
Purchase, the Extended Term Additional Purchase, and the CDMA
Equipment Purchase):
5
<PAGE>
(a) based on the audit described in Subsection 4.1.2
below, or the determination of the number of
AMPS/TDMA subscribers at Turnover as described in
Subsection 4.1.3 below, as applicable, a Software
license fee per Switch each calendar year during the
Extended Term equal to the product of $6.00 times
the number of AMPS/TDMA subscribers on such
applicable Switch at the time of such audit or
Turnover, as applicable ("AMPS/TDMA Software License
Fee");
(b) License fees for CDMA Software necessary to support
the Switch and NBSS Hardware set forth in Sections
6.1, 6.2, and 6.3 of Annex 1A, are included in the
CDMA Equipment Price. If Buyer wishes to (i) add
units of CDMA Software to support additional
capacity for Buyer's then-current Base Load beyond
the equipped for capacity as initially configured in
Sections 6.1, 6.2, and 6.3 of Annex 1A ("CDMA
Software Units"); (ii) license CDMA Software
Upgrades; or (iii) incrementally license CDMA
Optional Features that Seller may offer from time to
time. Buyer shall pay Seller the then-current List
Price (less any applicable discounts), as described
in Section 4.3 of this Annex 1A; and
(c) a Software application fee of $25,000 ("Software
Application Fee") per Switch per calendar year.
(cumulatively, the "Annual Software Fee"); provided,
subject to Subsection 4.1.1 below, in no event shall
such Annual Software Fee be less than $50,000 for
each applicable Switch during the Extended Term.
Subject to Subsection 4.1.3 below, Seller shall
invoice Buyer for the applicable Annual Software Fee
upon completion of the audit described in Subsection
4.1.2 below and Buyer shall pay 100% of the
applicable invoice within thirty (30) days of the
date of such invoice.
4.1.1 For the Switch in Buyer's Maryland 2 market only, no such
$50,000 minimum Annual Software Fee shall apply in the
event such audit indicates that no subscriber database is
datafilled on such Switch: provided, Buyer shall pay the
Software Application Fee ($25,000) for such Switch.
4.1.2 Except for the instances described in Subsection 4.1.3
hereinbelow, commencing in 1998, at the beginning of each
calendar year during the Term, but not later than January
31st of each such calendar year, Seller shall audit each
applicable Switch under this Agreement (i.e.,
6
<PAGE>
Buyer's Switches in its Cheyenne, Kansas, Maryland 2 and
Maryland 3 markets) and any new Switch purchased by Buyer
under this Agreement for any other market(s) ("New Market
Switch") to determine the number of AMPS/TDMA subscribers
per Switch for purposes of calculating the applicable
Annual Software Fee for the calendar year during which the
audit is conducted. Buyer hereby gives Seller the right at
its discretion to conduct such audit remotely or visually
on-site.
4.1.3 In the event Turnover of a New Market Switch occurs after
January 31st of any calendar year during the Term
(including 1997), upon Turnover of such New Market Switch,
Seller may invoice Buyer for the $25,000 Software
Application Fee and the applicable initial AMPS/TDMA
Software License Fee based on the number of AMPS/TDMA
subscribers on such New Market Switch as of the date of
Turnover of such Switch, such initial AMPS/TDMA Software
License Fee being prorated for the remainder of the
calendar year in which such New Market Switch is installed.
Buyer shall pay 100% of the applicable invoice within
thirty (30) days of the date of such invoice.
4.2 Buyer shall be provided with one (1) DMS-MTX standard,
commercially available Software release per Switch, as
offered by Seller to its customers for 800 MHz
AMPS/TDMA/CDMA Equipment application during the applicable
calendar year. Buyer may license additional AMPS/TDMA/CDMA
Software releases for each such Switch in a given Extended
Term calendar year (in addition to the AMPS/TDMA/CDMA
Software release included in the Annual Software Fee) by
paying Seller the $25,000 Software Application Fee. Upon
payment of the appropriate fees, all AMPS/TDMA/CDMA
Software releases licensed by Buyer hereunder shall include
all AMPS/TDMA/CDMA Software, whether base or optional
features, contained in the standard, commercially available
DMS-MTX Software ("DMS-MTX Core AMPS/TDMA/CDMA Software").
Such DMS-MTX AMPS/TDMA/CDMA Core Software shall not include
Software operating on an Adjunct Platform or Open A
interface.
In all cases the Annual Software Fee is exclusive of any
hardware/firmware required to operate the Software, but
includes TAS services as described in this Agreement.
4.3 Add-On 800 MHz CDMA Software Pricing
4.3.1 Upon payment of the appropriate fees, Buyer may license
CDMA Software Upgrades for the Switch and/or NBSS
Equipment. For each such Switch and NBSS Equipment, such
CDMA Software Upgrades
7
<PAGE>
shall be measured, calculated and charged based on the number
of then-current effective voice channels ("EVCs") on Buyer's
System as determined by the count on Buyer's Selector Bank
Subsystem ("SBS") at the time of implementation. (Each T1
span between the Switch and the BSC shall represent twenty
four [24] EVCs.) Such CDMA Software Upgrade license fees do
not include any additional CDMA Software Units, CDMA
Optional Features, Software operating on an Adjunct
Platform, Open A interface, any additional Hardware which
may be required, or the ONP fee as defined in Subsection
4.3.4 below. License fees are as follows:
Switch Software Upgrade License Fee Then-Current List Price x EVCs
NBSS Software Upgrade License Fee Then-Current List Price x EVCs
4.3.2 Additional CDMA Software Units
Upon payment of the appropriate fees, Buyer may add CDMA
Software Units to support required additional voice channel
(traffic) or other required capacity for Switches and/or NBSS
Equipment. All such CDMA Software Units shall be measured,
calculated and charged on the basis of the EVCs as registered
in the SBS on Buyer's System at the time of implementation,
as follows:
NBSS Software Units License Fee Then-Current List Price x EVCs
(on the basis of one EVC per
active voice port)
Switch Software Units License Fee Then-Current List Price x T1 spans
(one T1 span equals 24 EVCs)
The CDMA Software Units license fees do not include any CDMA
Software Upgrades. Optional Features, Software operating on
an Adjunct Platform, Open A interface, any additional
Hardware which may be required, or the ONP fee as defined in
Subsection 4.3.4 below.
4.3.3 CDMA Software Optional Features
CDMA Software Optional Features license fees may be
calculated on the basis of measurable units as described in
Section 10 of the Agreement, some of which features may be
licensed in increments. Upon payment of the applicable
license fees, Seller shall activate the applicable CDMA
Software, including relevant Optional Features in Buyer's
System.
8
<PAGE>
Switch Optional Features Then-Current List Price x
(Applicable Measurable Unit)
NBSS Optional Features Then-Current List Price x
(Applicable Measurable Unit)
4.3.4 NBSS Software Application Fee
The implementation of an NBSS Software Upgrade onto Buyer's
BSC(s) and/or BTS(s) shall be at Seller's then-current List
Price. No discount shall be applicable to such Service fee.
4.4 Upon payment of the appropriate fees, the term of the
Software license granted in Section 10 of the Agreement shall
run concurrent with the Term of the Agreement, provided the
license has not otherwise been terminated for breach by
Buyer. At Buyer's election, upon the expiration or
termination of the Agreement, provided that Buyer has paid
all Annual Software Fees and has not breached its obligations
under Section 10 or Annex 6. Buyer may obtain a perpetual
license to use the then-current Software Release at a fee to
be mutually agreed to by Buyer and Seller."
(d) Replace the existing Subsection 5.2.1, as amended, with the following:
"5.2.1 Following Buyer's purchase and Seller's delivery of the
Extended Term Additional Purchase set forth in Section 2.0 of
Annex 1A and the CDMA Equipment Purchase set forth in Section
6.0 of Annex 1A, the following discounts and firm, fixed
Prices shall replace the discounts set forth in Section 5.2
above:
(a) The following new discounts shall apply:
<TABLE>
<CAPTION>
Discount Off
Seller's Then-Current
Description List Price(s)
----------- -------------
<S> <C>
Switch Hardware 50%
Cell Site Hardware (exclusive of radios/amplifiers) 50%
BSC/BTS 40%
CDMA Software 40%
</TABLE>
(b) Buyer may purchase TRU-III/SCLPA(s) or TRU-II/SCLPA(s) for the
net Price per radio/amplifier unit (i.e., Price per
radio/amplifier unit inclusive of discounts, but exclusive of
sales tax) of $4,7500."
The exclusions described in Section 5-2, sub-parts (i), (ii) and (iii)
above shall continue to apply."
9
<PAGE>
11. Amend Annex 2 as follows:
(a) Add a new Section 2.15 as follows:
"2.15 For CDMA System purchases, provide on-site technical support
for the BSC/BTS Equipment consisting of two technicians, for
a period of six (6) consecutive weeks following commencement
of (i) the launch of the System into revenue producing
service, or (ii) a "friendly user" trial, whichever occurs
first. Such support shall not exceed fifty (50) hours per
week per technician, Monday through Friday, excluding
Seller's holidays. Any additional support shall be at
additional expense to Buyer."
(b) Renumber the existing Section "2.15" to "2.16"
(c) Add a new Section 2.17 as follows:
"2.17 Delivery and Installation Assumptions
Seller shall transport Switch and/or BSC Equipment by truck
or van to the Installation Site. Delivery requiring special
lifting devices or vehicles to facilitate delivery will be at
additional charge to Buyer.
Seller shall transport BTSs to Buyer's designated warehouse
by truck or van. Buyer shall be responsible for all costs
associated with the transportation of BTSs from Buyer's
designated delivery location to the Installation Site."
(d) Add a new Section 3.6 as follows:
"3.6 Provide and schedule all transportation activities
associated with delivery of BTS Equipment from Buyer's
warehouse or staging area to the Installation Site."
(e) Renumber the remaining sections of Annex 2 accordingly.
(f) Replace the existing Section 4.0 with the following:
"Switch/Cell Site Environmental Requirements (800 MHz AMPS/TDMA
only).
12. Except as specifically modified by Amendments 1 through 3 and this
Amendment No. 4, the Agreement in all other respects shall continue in
full force and effect.
10
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment No. 4 to be signed
by their duly authorized representatives effective as of the date first set
forth above.
DOBSON COMMUNICATIONS NORTHERN TELECOM INC.
CORPORATION
By: /s/ G. Edward Evans By: /s/ Nancy J. White
-------------------------------- -------------------------------
Name: G. Edward Evans Name: Nancy J. White
------------------------------ -----------------------------
(Type/Print) (Type/Print)
Title: President & COO Title: VP & GM, Wireless Networks
----------------------------- ----------------------------
Date: 12/22/98 Date: 1-5-99
------------------------------ -----------------------------
11
<PAGE>
SCHEDULE A
TO AMENDMENT NO. 4 TO
THE 12/20/95 SUPPLY AGREEMENT BETWEEN
DOBSON COMMUNICATIONS CORPORATION
AND NORTHERN TELECOM INC.
ADDING NEW ARTICLE 6 TO ANNEX 1A
6.0 800 MHz CDMA EQUIPMENT PURCHASE
6.1 SWITCH HARDWARE
<TABLE>
<CAPTION>
Description PEC QTY List Price Ext Price Disc NET Price
- ----------- --- --- ---------- --------- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
LPP Cabinet MA2080NU 1 $376,974 $376,974 50% $188,487
CDMA Interface Unit MA2086NU 2 $18,600 $37,200 50% $18,600
CDMA Application Unit MA2085NU 2 $17,500 $35,000 50% $17,500
DTC Packfill MA3000PF 1 $204,528 $204,528 50% $102,264
Switch Hardware E. F. & L.
- --------------------------
Switch Engineering SE4020NU 1 $4,680 $4,680 0% $4,680
Switch Frame Freight MF2000NU 1 $504 $504 0% $504
LPP Cabinet Installation MI2080NU 1 $9,600 $9,600 0% $9,600
Switch Hardware Sub-Total $341,635
</TABLE>
6.2 BASE STATION CONTROLLER (BSC) HARDWARE
<TABLE>
<CAPTION>
Description PEC QTY List Price Ext Price Disc NET Price
- ----------- --- --- ---------- --------- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
96 VCH TI BSC BSC96TIA 1 $340,000 $340,000 40% $204,000
BSC Software SWBSCA 95 $1,500 $142,500 40% $85,500
BSC Spares BSP0TIIA 1 $300,000 $300,000 40% $180,000
Base Station Controller (BSC) Hardware E. F. & L.
- -------------------------------------------------
CDMA Network Engineering NWDSGOI 1 $34,320 $34,320 0% $34,320
BSC E. F.& L. MT2700NU 1 $64,525 $64,525 0% $64,525
BSC Sub-Total $568,345
</TABLE>
6.3 800 MHz BASE TRANSCEIVER STATION (BTS) HARDWARE
<TABLE>
<CAPTION>
Description PEC QTY List Price Ext Price Disc NET Price
- ----------- --- --- ---------- --------- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
800MHz OMNI BTS BTS0811A 7 $110,000 $770,000 40% $462,000
800MHz Sector Kit SCSA801A 7 $42,000 $294,000 40% $176,400
Channel Card Kit NTGB62AA 7 $18,000 $126,000 40% $75,600
BTS Software SWBTSA 95 $1,000 $95,000 40% $57,000
BTS Spares Kit SSPA811A 1 $120,000 $120,000 40% $72,000
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
Description PEC QTY List Price Ext Price Disc NET Price
- ----------- --- --- ---------- --------- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Base Transceiver Station (BTS) Hardware E. F. & L.
- --------------------------------------------------
CDMA Post Cut Support CI0800NU 1 $49,500 $49,500 0% $49,500
800MHz BTS E. F. & L. CT0800NU 7 $16,309 $114,163 0% $114,163
BTS Sub-Total $1,006,663
CDMA System Sub-Total $1,916,643
EXECUTIVE EQUIPMENT DISCOUNT ($684,500)
-------------
FINAL CDMA EQUIPMENT PURCHASE $1,232,143
-------------
-------------
</TABLE>
A-2
<PAGE>
AGREEMENT
THIS AGREEMENT by and between TEXAS 16 CELLULAR TELEPHONE COMPANY, INC., a
Texas corporation ("Assignor"), and DOBSON CELLULAR OF TEXAS, INC., an Oklahoma
corporation ("Assignee"), is effective as of the 23 day of January 1997.
W I T N E S S E T H:
WHEREAS, Assignor and Cellular One Group ("Licensor") have entered into a
Cellular One License Agreement effective as of April 2, 1997 (the "License
Agreement"), whereby Licensor granted Assignor certain rights to use the
Cellular-R- mark and certain related marks in the TEXAS 16 - BURLESON, 667A
Rural Service Areas (the "Market") recognized and defined by the Federal
Communications Commission ("FCC");
WHEREAS, the FCC authorization for the Market, has been assigned from
Assignor to Assignee, and the FCC has consented to assignment; and
WHEREAS, both Licensee and Assignee desire to have Assignee continue as a
licensee under the License Agreement;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Assignor hereby transfers and assigns to Assignee its right, tide, and
interest in, to, and under the License Agreement. Assignee hereby assumes and
agrees to perform all liabilities, responsibilities, and obligations of Assignee
under the License Agreement that arise or accrue from the License Agreement
after the date hereof. Further, Assignee shall remain subject to any and all
limitations, qualifications and disabilities contained in the License Agreement
and/or resulting from the application of any of the provisions thereof
(including the existence of any default or any event or circumstance which but
for the lapse of time would constitute a default, or the existence of probation
status pursuant to Section XI.E. of the License Agreement), all of which
limitations, qualifications and disabilities shall continue unaffected by virtue
of this Agreement. Upon Assignee's execution hereof, Assignee shall pay to
Licensor, in accordance with Licensor's invoice, the customary fee then charged
by Licensor in connection with such assignment.
2. Assignee hereby agrees to continue to comply fully with the License
Agreement and all of the terms and provisions thereof. The information regarding
Assignee set forth on Exhibit A attached hereto is hereby substituted for the
comparable information regarding Assignor set forth in the License Agreement.
3. Nothing in this Agreement shall affect the obligations of Licensor and
Assignor, if any, under the License Agreements prior to the effective date of
this Agreement.
<PAGE>
4. Assignee hereby expressly acknowledge and agrees that the provisions
of Section III.C. of the License Agreement, which provide for an advisory
customer survey during the first year of a licensee's operation, are not
intended to afford Assignee an additional advisory survey as a result of this
assignment.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives, to be effective as of the
date first above written.
TEXAS 16 CELLULAR TELEPHONE COMPANY, INC.
By: /s/ Arnold C. Leong
----------------------------------
Name: Arnold C. Leong
--------------------------------
Title: President
-------------------------------
DOBSON CELLULAR OF TEXAS, INC.
By: /s/ G. Edward Evans
----------------------------------
Name: G. Edward Evans
--------------------------------
Title: President
-------------------------------
ACCEPTED AND AGREED TO:
CELLULAR ONE GROUP
By:
----------------------------------
RICHARD J. LYONS
PRESIDENT
-2-
<PAGE>
EXHIBIT A
Primary Contact in Ordinary
CODE OF BUSINESS:
NAME_______________________________
TITLE______________________________
COMPANY____________________________
ADDRESS____________________________
CITY/STATE/ZIP_____________________
PHONE______________________________
FAX________________________________
CONTACT FOR NOTICE PURPOSES:
NAME_______________________________
TITLE______________________________
COMPANY____________________________
ADDRESS____________________________
CITY/STATE/ZIP_____________________
PHONE______________________________
FAX________________________________
-3-
<PAGE>
CONTACT FOR BILLING PURPOSES.
NAME_______________________________
TITLE______________________________
COMPANY____________________________
ADDRESS____________________________
CITY/STATE/ZIP_____________________
PHONE_______________________________
FAX________________________
-4-
<PAGE>
September 30, 1997
Gila River Cellular General Partnership 13439 N. Broadway Extension, #100
Oklahoma City, Oklahoma 73114
RE: License Agreement for Post Closing use of "U S WEST Cellular" Brand
Ladies and Gentlemen:
In connection with Dobson Cellular of Arizona, Inc.'s ("Dobson")
purchase of the partnership interests in the Gila River Cellular General
Partnership ("Partnership") pursuant to a Purchase Agreement dated February
28, 1997 ("Agreement"), Dobson has requested that U S WEST New Vector Group,
Inc. ("New Vector") allow Dobson to use the "AirTouch" brand name for 30 days
after the closing. This letter agreement sets for the terms and conditions
under which Dobson will be allowed to use the Brand.
1) New Vector grants to Dobson a non-transferable, royalty-free,
non-exclusive, revocable personal License to use the "U S WEST Cellular"
names and logos (the "Marks") in connection with Cellular services until
November 1, 1997. Dobson is not granted a right to sublicense the Marks
to any other party. Dobson shall cease all use of the Marks in any manner
and shall destroy all materials containing the U S WEST Cellular brand on
or before 12:01 a.m., November 1, 1997.
2) Dobson shall maintain a standard of quality for the services offered under
the Marks commensurate with standards previously achieved and maintained by
New Vector; and shall, at a minimum, provide such services in compliance
with all laws and regulations. New Vector shall have the right, at all
reasonable times, and the opportunity to observe the actual rendering of
services under the Marks to determine that they are of proper quality.
Further, upon request, Dobson agrees to provide New Vector with
representative samples of advertising and other material being used by
Dobson under the Marks. If at any time the services shall in the sole
opinion of New Vector, fail to conform to the standard of quality set
forth herein, New Vector may so notify Dobson in writing, at which time
Dobson hall have ten (10) days to conform to New Vector's requested
standards. If Dobson fails to conform to such standards within the thirty
(30) day period, Dobson's rights to use the Marks shall immediately
terminate.
3) Dobson acknowledges that U S WEST, Inc. is the owner of the Marks. Dobson
shall not at any time do or suffer to be done any act or thing which will
in any way impair the rights of U S WEST, Inc. in and to the Marks or the
goodwill inherent in the Marks. It is understood that Dobson shall not
acquire and shall not claim any title to the Marks adverse to U S WEST,
Inc. by virtue of the license granted herein, or
<PAGE>
U S WEST Cellular License Agreement
September 30, 1997
Page 2
through Dobson's use of the Marks, it being expressly agreed that all use
of the Marks by Dobson shall inure to the benefit of U S WEST, Inc. or its
assignees. Dobson is estopped from challenging the validity of the Marks or
from setting up any claim adverse to New Vector or U S WEST, Inc.
4) Dobson shall comply with the conditions set forth in the U S WEST Corporate
Identity Guidelines, as may be amended from time to time, or as directed by
New Vector, with respect to the style, color, appearance and manner of use
of the Marks. Prior to producing, distributing or displaying any
advertising or other material containing the Marks, Dobson shall obtain
prior written approval from New Vector. Dobson is solely responsible for
ensuring that any uses of the Marks in any advertising or promotional
materials or otherwise is approved by New Vector. If New Vector shall be
deemed to have approved such use if no objection is given within five (5)
business days after written request by Dobson.
5) Any dispute between the parties arising from the conditions or obligations
created by this letter agreement shall be resolved in accordance with
Section 23 of the Purchase and Sale Agreement dated February 28, 1997
between Dobson and New Vector. In addition, any dispute arising from the
terms and conditions of this letter will be governed in accordance with
the laws of the State of Arizona.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
<PAGE>
U S WEST Cellular License Agreement
September 30, 1997
Page 3
US WEST NEWVECTOR GROUP,
INC., a Colorado corporation
/s/ Timothy A. Samples
----------------------------
The undersigned ______________________, being the ________________________
of Gila River Cellular General Partnership, and being fully authorized to
execute this letter agreement on behalf of Gila River Cellular General
Partnership, and having reviewed the terms of this letter, hereby accept such
terms in their entirety.
GILA RIVER CELLULAR GENERAL
PARTNERSHIP, by DOBSON CELLULAR OF
ARIZONA, INC., an Oklahoma corporation,
its Systems Manager
By: /s/ EVERETT DOBSON
--------------------------------
Title:
-----------------------------
<PAGE>
PARTIAL ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS PARTIAL ASSIGNMENT AND ASSUMPTION AGREEMENT ("Agreement") is
effective this 30th day of September, 1997 by and between U S WEST NewVector
Group, Inc., a Colorado corporation ("NVG"), and Gila River Cellular General
Partnership, and Arizona General Partnership ("Gila").
WHEREAS, Gila will become the license holder of the license to provide
cellular service for the area designated by the Federal Communications
Commission as Arizona RSA #5 ("RSA") on the closing of that certain Purchase
Agreement dated February 28, 1997 (the "Purchase Agreement"), as amended,
whereby Dobson Cellular of Arizona, Inc., an Oklahoma corporation ("Dobson")
has agreed to purchase the partnership interest in Gila;
WHEREAS, NVG has entered into those certain Agent Agreements
specifically listed on Exhibit "A" attached hereto ("Agent Agreements")
whereby the agents under the Agent Agreements have agreed to sell and service
cellular equipment in numerous markets served by NVG, including the RSA;
WHEREAS, Dobson will take over the operation of Gila as Systems Manager
in the RSA on September 30, 1997; and,
WHEREAS, NVG and Gila desire to enter into this Agreement to set forth
the terms and conditions on which NVG will partially assign, and Gila will
partially assume the obligations under the Agent Agreements.
NOW, THEREFORE, in consideration of the purchase and sale of the Assets
(as that term is defined in the Purchase Agreement), and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. ASSIGNMENT AND ASSUMPTION OF OPERATING CONTRACTS.
NVG does hereby assign, transfer and convey to Gila that portion of its
right, title and interest in and to the Agent Agreements solely to the extent
the Agent Agreements apply to the RSA. NVG will retain all right, title and
interest under the Agreements as they relate to all areas other than the RSA.
Gila does hereby agree to be bound by and to assume and discharge in
accordance with their terms all of the obligations and commitments of NVG
arising with respect to period of time commencing after the date hereof
under, with respect to and concerning the Agent Agreements solely to the
extent the Agent Agreements apply to the RSA. Notwithstanding any other
provision of this Agreement to the contrary, this Agreement shall not
constitute an agreement to assign any of the Agent Agreements, or any benefit
arising thereunder or resulting therefrom, if such an agreement to assign
without a consent required or necessary for such assignment would constitute
a breach thereof or in any way adversely affect the rights of NVG or Gila
thereunder.
<PAGE>
THIS AGREEMENT may be executed in one or more counterparts, each of
which shall be deemed an original, and when taken together shall be deemed
one and the same instrument, even though no single counterpart has been
executed by both of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Partial
Assignment and Assumption Agreement as of the date first written above,
notwithstanding the actual date of signature.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
-2-
<PAGE>
U S WEST NEWVECTOR GROUP, INC.
By: /s/ Timothy A. Samples
------------------------------------
Timothy A. Samples, Vice President
GILA RIVER CELLULAR GENERAL PARTNERSHIP
by DOBSON CELLULAR OF ARIZONA, INC., a
Systems Manager
By: /s/ EVERETT DOBSON
------------------------------------
Title:
---------------------------------
-3-
<PAGE>
EXHIBIT A
AGENT AGREEMENTS
1. Agent Agreement dated February 1, 1997 between U S WEST NewVector Group,
Inc. and Big Sky Unlimited, Inc., d/b/a Radia Shad/RSFR
2. Agent Agreement dated February 1, 1997 between U S WEST NewVector Group,
Inc. and Gila River Telecommunications, Incorporated, d/b/a Gila River
Cellular
3. Agent Agreement dated April 1, 1996 between U S WEST NewVector Group,
Inc. and Daniel Lee Saine d/b/a Payson Electronics/RSFR
4. Agent Agreement dated January 1, 1997 between U S WEST NewVector Group,
Inc. and Ric-Sha, Inc. d/b/a Valley Cellular
-4-
<PAGE>
TRADEMARK SUBLICENSE AGREEMENT
THIS AGREEMENT, dated as of October 1, 1997, is between WMC Partners,
L.P., a limited partnership organized and existing under the laws of the
State of Delaware ("WMC") and Gila River Cellular General Partnership, an
Arizona general partnership ("Sublicensee")
WITNESSETH:
WHEREAS, WMC is a licensee of the marks AIRTOUCH and AIRTOUCH DESIGN
which are owned by AirTouch Communications, Inc. ("AirTouch");
WHEREAS, WMC has the right, pursuant to its Trademark License Agreement
from AirTouch, to grant a sublicense to Sublicensee for the marks, AIRTOUCH
and AIRTOUCH DESIGN;
WHEREAS, WMC, Dobson Communications Corporation, an Oklahoma
corporation, and Dobson Cellular of Arizona, Inc., an Oklahoma corporation,
have entered into an Affiliation Agreement dated as of February 28, 1997 (the
"Affiliation Agreement") pursuant to which Operator's System will offer
Services (each as defined in the Affiliation Agreement or herein) exclusively
under the Licensed Marks;
WHEREAS, WMC believes that Sublicensee provides high quality goods and
services and further believes that Sublicensee will continue providing high
quality goods and services under the licensed marks; and
WHEREAS, WMC wishes to license to Sublicensee, and Sublicensee wishes to
obtain from WMC, the right to use certain trademarks subject to the
restrictions stated below;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, the parties hereto agree as follows:
I. DEFINITIONS
A. "LICENSED MARKS" means the trade name, "AirTouch Cellular", the
AIRTOUCH mark, and the AIRTOUCH DESIGN mark, as described in
attached Exhibit 1.
<PAGE>
TRADEMARK SUBLICENSE AGREEMENT
- -------------------------------------------------------------------------------
B. "PRODUCTS" means subscriber equipment offered for sale or lease
and any goods and other property ancillary thereto.
C. "SERVICES" means commercial mobile radio services provided by
Systems (as defined in the Affiliation Agreement), including,
without limitation, voice and data transport, and the services
ancillary thereto.
D. "TERRITORY" means the rural service area designated by the FCC as
Cellular Market No. Arizona 5 (Arizona RSA #5),
II. LICENSE GRANT
A. SCOPE. Effective as of the date hereof and subject to the terms
and conditions of this Agreement, WMC grants to Sublicensee a
royalty-free, nonexclusive, nontransferable, revocable sublicense
to use the Licensed Marks in connection with the Products and
Services and the sale and marketing of the Products and Services in
the Territory. WMC and AirTouch retain the right to concurrently
use or license others to use the Licensed Marks in the Territory in
connection with any goods and/or services. Sublicensee is expressly
prohibited from adopting a corporate or partnership name that
includes, or would be confusingly similar to, the Licensed Marks.
Sublicensee may, only if required by Arizona law, file a fictitious
business name statement using the words AirTouch Cellular, but
agrees to cancel and/or withdraw such filing when this Agreement
ends or is terminated.
B. QUALITY CONTROL. All uses of the Licensed Marks must appear
identical in substance to the Licensed Marks as they appear in
Exhibit 1 and the Manual as defined below. Sublicensee shall
employ the guidelines stated in the attached "Corporate Identity
Program" (the "Manual"), and any other reasonable standards that
AirTouch may adopt from time to time and of which Sublicensee has
been notified, when preparing any materials in which the Licensed
Marks are displayed. Prior to adopting any use of the Licensed
Marks, including without limitation, the use of the Licensed Marks
on documents, including packaging and labels of any kind,
Sublicensee shall deliver, at its own expense, one sample of each
manner in which the Licensed Marks are to be used to: Mary Hamaker,
Senior Counsel, AirTouch Communications, Inc., One California
Street, 21st Floor, San Francisco, CA 94111 ("AirTouch Quality
Control"). For purposes of this Agreement, a sample of a document
means the document itself, and a sample of a Product means either
the Product or a very clear photograph of the Product. AirTouch
2
<PAGE>
TRADEMARK SUBLICENSE AGREEMENT
- -------------------------------------------------------------------------------
Quality Control shall have ten working days from the date it
receives the samples to approve or disapprove of the sample,
unless otherwise mutually agreed. The method of delivery shall be
by overnight mail and the samples shall be deemed received the next
working day after Sublicensee sends them. In the event that
AirTouch Quality Control disapproves any sample, then Sublicensee
shall not employ that sample and shall immediately destroy all
other like samples, copies, and any other media bearing the
disapproved manner of use of the Licensed Marks.
C. RIGHT TO INSPECT. In addition to the foregoing, representatives of
WMC and AirTouch shall have the right, at all reasonable times, to
inspect the manner in which Sublicensee uses the Licensed Marks and
the quality of the Products on which the Licensed Marks are
affixed. Such inspection may, at the election of WMC or AirTouch,
be by personal visit to Sublicensee or by written request for
information or samples. If the inspection is by request for
samples, then the entity conducting the inspection shall reimburse
Sublicensee for the cost of shipping said samples. Sublicensee
agrees to cooperate with such inspections. In the event that WMC or
AirTouch determines that one or more manners in which Sublicense
uses the Licensed Marks are inconsistent with the Manual or other
standards adopted by AirTouch and of which Sublicense has notice,
or that the quality of any of the Products on which the Licensed
Marks are affixed is not consistent with maintaining the goodwill
inherent in the Licensed Marks, then WMC or AirTouch shall so
notify Sublicensee, and Sublicensee shall immediately cease use of
any such disapproved usage of the Licensed Marks and shall destroy
all copies, samples and other media that bear the disapproved
usage. Within thirty days of notice from WMC or AirTouch that a
particular usage has been disapproved, Sublicensee shall certify in
writing to the person providing the notice that Sublicense has
destroyed all media that bear said usage.
D. RECOGNITION OF OWNERSHIP. Sublicensee recognizes AirTouch's title
to the Licensed Marks, and shall not at any time do or suffer to be
done any act or thing which will in any way impair the rights of
AirTouch in and to the Licensed Marks or the goodwill inherent in
said Licensed Marks. It is understood that Sublicensee shall not
acquire and shall not claim any title to the Licensed Marks adverse
to AirTouch by Virtue of the license granted herein, or through
Sublicensee's use of said Licensed Marks, it being the intention of
the parties that all use of the Licensed Marks by Sublicensee shall
at all times inure to the benefit of AirTouch.
3
<PAGE>
TRADEMARK SUBLICENSE AGREEMENT
- -------------------------------------------------------------------------------
Sublicensee is estopped from challenging the validity of the
Licensed Marks or from setting up any claim adverse to AirTouch.
E. SALES OUTSIDE TERRITORY. Sublicensee agrees not to sell any
Products bearing the Licensed Marks with knowledge that such
products are to be resold outside the Territory. Such sales shall
constitute a breach of this Agreement if made with Sublicensee's
knowledge. If Sublicense learns of any such sales, it shall use
its best efforts to obtain possession of said Products and to
prevent such sales in the future, including refusing to sell
Products bearing the Licensed Marks to the persons or entities
responsible for the resale outside the Territory.
III. INFRINGEMENTS
A. INFRINGEMENT BY OTHERS. Sublicensee shall review regularly the
market for Products and Services in the Territory and shall inform
AirTouch or WMC promptly of any possible infringement of, or unfair
competition affecting, the Licensed Marks which comes to the
attention of Sublicensee. In the event affirmative action is taken
against any such possible infringement or act of unfair
competition, Sublicensee agrees to assist, in whatever reasonable
manner is requested, and at the expense of the requester. Recovery
of damages resulting from any such action shall be solely for the
account of AirTouch. Sublicensee shall have no right to initiate
any action to defend the Licensed Marks.
B. ACTIONS AGAINST SUBLICENSEE OR WMC. Should either party be involved
as a defendant in judicial action under the trademark laws or with
regard to an act of unfair competition in the Territory with regard
to the Licensed Marks, the parties agree to cooperate with each
other to the greatest possible extent in defending such an action.
IV. TERM AND TERMINATION
A. TERM. This Agreement will have an initial term of 20 years from the
date hereof. Thereafter, the term will automatically be extended
for additional five-year periods unless either party makes a valid
election not to renew this Agreement. An election not to renew will
be valid only if in writing and delivered to the other party at
least one year prior to the expiration of the then current term. In
the event of a termination under this Paragraph, Sublicensee shall
immediately cease implementation of any new or expanded uses of the
Licensed Marks and
4
<PAGE>
TRADEMARK SUBLICENSE AGREEMENT
- -------------------------------------------------------------------------------
shall discontinue existing uses of the Licensed Marks in accordance
with the procedure stated in Paragraph IV E below.
B. OPTIONAL TERMINATION. If Sublicense fails to use one or more of
the Licensed Marks in the Territory within any given term that this
Agreement is in effect, then WMC may, in its sole discretion,
terminate this Agreement as to the unused Licensed Mark or Marks.
In the event of a termination under this Paragraph, Sublicensee
shall immediately cease implementation of any new or expanded uses
of the Licensed Marks and shall discontinue existing uses of the
Licensed Marks in accordance with the procedure stated in Paragraph
IV E below.
C. TERMINATION FOR UNAUTHORIZED USE. If Sublicensee uses the Licensed
Marks for purposes other than the sale of Products and Services or
promoting the sale of Products and Services within the Territory or
if Sublicensee fails to use the Licensed Marks in accordance with
Section II above or any other requirements of this Agreement, then
WMC shall notify Sublicense of such failure by written notice sent
by overnight courier or facsimile, including a detailed statement
of the improper use. If Sublicensee fails to correct such improper
use within ten days after the date of such notice, then WMC or
AirTouch may seek an injunction to compel Sublicense to
discontinue the specific unauthorized use of the Licensed Marks
and/or terminate this Agreement by written notice sent by overnight
courier or facsimile to Sublicensee. In the event of such
termination, Sublicensee shall immediately cease implementation of
any new or expanded uses of the Licensed Marks and shall
discontinue existing uses of the Licensed Marks in accordance with
the procedure stated in Paragraph IV E below.
D. TERMINATION OF AFFILIATION AGREEMENT. If the Affiliation Agreement
terminates pursuant to Paragraph 9 thereof, then WMC may, in its
sole discretion, provide written notice of termination of this
Trademark Sublicense Agreement sent by overnight courier or
facsimile. The provisions of Paragraph IV E below shall govern
Sublicensee's transition away from the Licensed Marks.
5
<PAGE>
TRADEMARK SUBLICENSE AGREEMENT
- -------------------------------------------------------------------------------
E. PROCEDURE UPON TERMINATION; LICENSED MARKS REMOVAL PERIOD. Upon
termination of this Agreement pursuant to Paragraphs IV A through
D above, Sublicensee shall have three months in which to remove the
Licensed Marks from all advertisements, packaging, labels or other
documentation created by Sublicensee. Within six months after
termination of this Agreement pursuant to Paragraphs IV A through
D above, Sublicensee shall remove the Licensed Marks from all
Products and any other tangible items on which the Licensed Marks
have been affixed or used by Sublicensee. At the end of each such
period, WMC shall be allowed reasonable access to Sublicensee's
premises to observe and inspect to insure that Sublicensee is in
compliance with the above requirements and that the Licensed Marks
are no longer in use. Continued use of the Licensed Marks beyond
the above specified removal periods shall constitute infringement
of the Licensed Marks by Sublicensee and shall give rise to
AirTouch's remedy of specific performance in accordance with
Paragraph IV F. Sublicensee shall not adopt any trade name,
trademarks, or service marks that are confusingly similar to the
Licensed Marks in the event of termination of this Agreement.
Sublicensee may not, after termination of this Agreement, use the
Licensed Marks in any manner, including without limitation,
indicating that Sublicensee was formerly called "AirTouch" or
"AirTouch Cellular."
F. AIRTOUCH'S REMEDY OF SPECIFIC PERFORMANCE. Sublicensee
acknowledges that its failure to cease use of the Licensed Marks in
accordance with the provisions of this Agreement after termination
thereof will result in immediate and irreparable harm to AirTouch
for which there is no adequate remedy at law. AirTouch shall be
entitled to bring an action or proceeding for specific performance,
injunctive relief and/or other equitable relief to compel
Sublicensee to discontinue the infringement of the Licensed Marks,
to cease and desist all unauthorized use of the Licensed Marks, to
take all affirmative acts necessary to ensure discontinuance of use
of the Licensed Marks after termination of this Agreement, and to
obtain such relief as may be necessary and proper.
G. BREACH. If Sublicensee breaches any provision of this Agreement,
WMC may immediately give written notice of intention to terminate
within thirty days of the date of the writing, and, unless
Sublicensee notifies WMC in writing of a correction of such breach
within said period, this Agreement shall automatically terminate at
the expiration of the thirty day notice period. WMC may inspect
Sublicensee's premises
6
<PAGE>
TRADEMARK SUBLICENSE AGREEMENT
- -------------------------------------------------------------------------------
during the period sixty to ninety days after this Agreement has
terminated to ensure that Sublicensee is no longer using the
Licensed Marks. WMC and AirTouch retain all of its rights and
remedies to prevent Sublicensee from continuing to use the
Licensed Marks after termination of this Agreement due to breach.
H. NO DAMAGES. Notwithstanding any other provision in this or any
other agreement between the parties, should this Trademark
Sublicense Agreement be terminated for any reason, neither party
shall be able to claim from the other party any actual,
consequential or incidental damages.
I. CONTINUING OBLIGATIONS. Termination of this Agreement for any
reason shall not affect those obligations which, from the context
hereof, are intended to survive termination of this Agreement.
J. NO WAIVER. Any waiver by either party of a breach of any term or
condition of this Agreement shall not be considered as a waiver of
any subsequent breach of the same or any other term or condition
thereof.
K. ATTORNEYS' FEES. The prevailing party in any action arising under
this Agreement shall be entitled to collect its reasonable
attorneys' fees from the non-prevailing party. In the event that
any such action is resolved by a settlement agreement, then neither
party shall be deemed the "prevailing party" and each party shall
be responsible for its own attorneys' fees. In the event of
bankruptcy of one of the parties hereto, the attorneys' fees of the
nondebtor party, incurred in dealing with a bankruptcy, shall be
considered actual pecuniary loss under 11 USC section 365(b)(1).
V. MISCELLANEOUS
A. PARAGRAPH HEADINGS. The paragraph headings are for convenience only
and shall not be deemed to affect in any way the language of the
provisions to which they refer.
B. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without
reference to choice of law provisions. Selection of California law
as the governing law shall not be deemed to invoke any provision of
California law which would not otherwise be applicable to the
relationship contemplated hereunder. All actions arising under this
Agreement, including without
7
<PAGE>
TRADEMARK SUBLICENSE AGREEMENT
- -------------------------------------------------------------------------------
limitation, actions regarding the interpretation or breach of the
Agreement, shall be brought in the federal or state courts of
California.
C. NOTICES. All notices or other communications hereunder to WMC,
except as otherwise specified above, shall be sent to:
WMC Partners, L.P.
Legal Department
2999 Oak Road
Walnut Creek, CA 94596
Attn: Vice President - Legal
and if to Sublicensee, shall be sent to:
Dobson Communications Corporation
13439 N. Broadway Extension
Oklahoma City, OK 73114
Attention: Everett Dobson, President
with a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
Attention: David K. Duffell, Esq.
Any such notice or communication shall be in writing and shall be
deemed to have been received on the day of delivery if sent via
facsimile with confirmation of valid transmission, or after seven
calendar days from mailing if sent via certified mail, postage
prepaid or on the next business day if sent by overnight courier.
Either party may designate a new address to which notices or other
communications may be sent by giving notice to the other party.
D. SEVERABILITY. If any provision of this Agreement shall be held
illegal or invalid by any court, this Agreement shall be construed
and enforced as if such illegal or invalid provision had not been
contained herein, and this Agreement shall be deemed an agreement
of the parties to the full extent permitted by law. If any
provision shall be declared invalid or unenforceable because of its
breadth, scope or duration, such provision shall be severed from
the rest of this Agreement, and the remaining portions of the
Agreement shall remain valid and enforceable.
8
<PAGE>
TRADEMARK SUBLICENSE AGREEMENT
- -------------------------------------------------------------------------------
E. ASSIGNABILITY. Sublicensee may not assign or sublicense any of its
rights or delegate any of its duties under this Agreement. Any
attempted assignment, sublicense, or delegation by Sublicensee
shall be null and void.
F. COMPLETE AGREEMENT. This Agreement, together with the Affiliation
Agreement, embodies all of the terms and conditions of the
agreement between the parties with respect to the matters set forth
herein. There are no statements, terms, conditions,
representations, or warranties which have not been embodied herein.
G. MODIFICATIONS. This Agreement may not be modified or amended,
except in a writing signed on behalf of both parties by their duly
authorized representatives which refers specifically to this
Agreement.
H. FORCE MAJEURE. Neither party shall be in default under this
Agreement by reason of its delay in the performance of or failure
to perform any of its obligations herein if such delay or failure
is caused by strikes, acts of God or the public enemy, riots,
incendiaries, interference by civil or military authorities,
compliance with governmental laws, rules, and regulations, delays
in transit or delivery, or any fault beyond its control or without
its fault or negligence.
I. WAIVER. The failure of either party at any time to require
performance of any provision of this Agreement by the other party
shall not be deemed a waiver and shall not deprive that party of
its full right to require such performance in a particular instance
or at any other time. Any waiver must be in a writing executed by
a duly authorized representative of the waiving party.
J. DISPUTE RESOLUTION. Any dispute regarding this Agreement, including
without limitation, the interpretation, performance, or termination
of this Agreement, shall be handled pursuant to the dispute
resolution provisions stated in Paragraph 13(n) of the Affiliation
Agreement.
SIGNATURE ON FOLLOWING PAGE
9
<PAGE>
TRADEMARK SUBLICENSE AGREEMENT
- -------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized representatives as of the day
and year first set forth above.
WMC PARTNERS, L.P.
By
----------------------------
Print Name
--------------------
Title
-------------------------
GILA RIVER CELLULAR GENERAL PARTNERSHIP
By /s/ ILLEGIBLE
----------------------------
Print Name
--------------------
Title
-------------------------
10
<PAGE>
TRADEMARK SUBLICENSE AGREEMENT
- -------------------------------------------------------------------------------
EXHIBIT 1 -- LICENSED MARKS
1. The AIRTOUCH mark referred to in Paragraph I A above shall be used only
in the following manner:
AIRTOUCH-TM- or AirTouch-TM-
Sublicensee must use fonts from the Times or Univers families when this mark
is used on Products or in advertising for Products.
2. The AIRTOUCH DESIGN mark referred to in Paragraph IA above shall conform
to the Manual referred to in Paragraph II B above. Sublicensee shall always
place the letters "TM" as a superscript directly behind the letter "H" in the
AIRTOUCH DESIGN or such other designation as WMC or AirTouch may direct.
Sublicensee may not vary the typeface, spacing, or general structure or
configuration of the AIRTOUCH DESIGN mark. Sublicensee may employ different
sizes of the AIRTOUCH DESIGN mark so long as those different sizes conform
the Manual. Use of color in connection with the AIRTOUCH DESIGN must also
conform to the Manual.
3. The "AirTouch Cellular" trade name referred to in Paragraph I A above
shall be used on in the following manner:
AIRTOUCH CELLULAR or AirTouch Cellular
Sublicensee must use fonts from the Times or Univers families when this trade
name is used on Products or in advertising for Products.
11
<PAGE>
AGREEMENT
THIS AGREEMENT by and between CELLULAR 2000, a Michigan partnership
("Licensee"), CELLULAR 2000 TELEPHONE CO., a Michigan partnership
("Transferor") and DOBSON CELLULAR OF CALIFORNIA, INC., an Oklahoma
corporation ("Transferee") is effective as of the 1st day of April, 1998.
WITNESSETH
WHEREAS, Licensee and Cellular One Group ("Licensor") have entered into
a Cellular One License Agreement effective as of October 01, 1996 (the
"License Agreement") whereby Licensor granted Licensee certain rights to use
the Cellular One-Registered Trademark- mark and certain related marks in the
CALIFORNIA 04-MADERA Rural Service Area 339A1, (the "Market") recognized and
defined by the Federal Communications Commission ("FCC");
WHEREAS, control of Licensee, which holds the FCC authorization for the
Market, has been transferred from Transferor to Transferee, and the FCC has
consented to such change of control; and
WHEREAS, both Licensee and Transferee desire to have Licensee continue
as a licensee under the License Agreement;
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Licensee and Transferee hereby acknowledge that Licensee shall
continue to be entitled to the rights, and subject to the obligations, of a
licensee under the License Agreement, and further shall remain subject to any
and all limitations, qualifications and disabilities contained in the License
Agreement and/or resulting from the application of any of the provisions
thereof (including the default, or the existence of probation status pursuant
to Section XI.E of the Cellular One-Registered Trademark- License Agreement),
all of which limitations, qualifications and disabilities shall continue
unaffected by virtue of this change of control of Licensee. Upon Licensee's
execution hereof, Licensee shall pay to Licensor, in accordance with
Licensor's invoice, the customary fee then charged by Licensor in connection
with such changes of control.
2. Licensee hereby agrees to continue to comply fully with the License
Agreement and all of the terms and provisions thereof.
<PAGE>
3. Nothing in the Agreement shall affect the obligations of Transferor
under the License Agreement prior to the effective date of this Agreement.
4. Transferee hereby expressly acknowledges and agrees that the
provisions of Section III.C. of the Cellular One-Registered Trademark- License
Agreement, which provide for an advisory customer survey during the first
year of a licensee's operation, shall not be applicable to Transferee.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives, to be effective as of the
date first above written.
CELLULAR 2000 TELEPHONE CO.
It's General Partnership
By: /s/ Gene Valentino
-------------------------------------------
Name: Gene Valentino
-----------------------------------------
Title: President
----------------------------------------
Date of Signature: 3/17/98
---------------------------
ACCEPTED AND AGREED TO:
CELLULAR ONE GROUP
By: /s/ Richard J. Lyons
--------------------------------------------
Richard J. Lyons
President
-2-
<PAGE>
DOBSON CELLULAR OF CALIFORNIA, INC.
By: /s/ G. Edwards Evans
---------------------------------
Name: G. Edwards Evans
-------------------------------
Title: President
------------------------------
PRIMARY CONTACT IN ORDINARY
COURSE OF BUSINESS:
Name G. Edward Evans
--------------------------------------
Title President
-------------------------------------
Company Dobson Cellular of California, Inc.
-----------------------------------
Address 13439 N. Broadway Ext.
-----------------------------------
City/State/Zip Oklahoma City, OK 73114
----------------------------
Phone 405/391-8500
-------------------------------------
Fax 405/391-8515
---------------------------------------
CONTACT FOR NOTICE PURPOSES:
Name Ronald L. Ripley
--------------------------------------
Title Senior Corporate Counsel
-------------------------------------
Company Dobson Communications Corporation
-----------------------------------
Address 13439 N. Broadway Ext.
-----------------------------------
City/State/Zip Oklahoma City, OK 73114
----------------------------
Phone 405/391-8500
-------------------------------------
Fax 405/391-8515
---------------------------------------
-3-
<PAGE>
CONTACT FOR BILLING PURPOSES:
Name Trent LaForce
-----------------------------------------
Title Controller
----------------------------------------
Company Dobson Communications Corporation
--------------------------------------
Address 13439 N. Broadway Ext.
--------------------------------------
City/State/Zip Oklahoma City, OK 73114
-------------------------------
Phone 405/391-8500
----------------------------------------
Fax 405/391-8515
------------------------------------------
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<PAGE>
AGREEMENT
THIS AGREEMENT by and between SANTA CRUZ CELLULAR TELEPHONE, INC., a
California corporation ("Licensee"), NATUBHAI PATEL AND OTHER SHAREHOLDERS OF
SANTA CRUZ CELLULAR TELEPHONE, INC., a California corporation ("Transferor"),
and DOBSON CELLULAR OF CALIFORNIA, INC., an Oklahoma corporation ("Transferee"),
is effective as of the 16th day of June, 1998.
WITNESSETH:
WHEREAS, Licensee and Cellular One Group ("Licensor") have entered into
a Cellular One License Agreement effective as of December 1, 1996 (the
"License Agreement") whereby Licensor granted Licensee certain rights to use
the Cellular One-Registered Trademark- mark and certain related marks in the
SANTA CRUZ, CALIFORNIA Metropolitan Statistical Area (the "Market")
recognized and defined by the Federal Communications Commission ("FCC");
WHEREAS, control of Licensee, which holds the FCC authorization for the
Market, has been transferred from Transferor to Transferee, and the FCC has
consented to such change of control; and
WHEREAS, both Licensee and Transferee desire to have Licensee continue
as a licensee under the License Agreements;
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Licensee and Transferee hereby acknowledge that Licensee shall
continue to be entitled to the rights, and subject to the obligations, of a
licensee under the License Agreements, and further shall remain subject to
any and all limitations, qualifications and disabilities contained in the
License Agreements and/or resulting from the application of any of the
provisions thereof (including the existence of any default or any event or
circumstance which but for the lapse of time would constitute a default, or
the existence of probation status pursuant to Section XI.E. of the Cellular
One License Agreement), all of which limitations, qualifications and
disabilities shall continue unaffected by virtue of this change of control of
Licensee. Upon Licensee's execution hereof, Licensee shall pay to Licensor,
in accordance with Licensor's invoice, the customary fee then charged by
Licensor in connection with such changes in control.
2. Licensee hereby agrees to continue to comply fully with the License
Agreement and all of the terms and provisions thereof.
-1-
<PAGE>
3. Nothing in the Agreement shall affect the obligations of Licensee
and Transferor, if any, under the License Agreements prior to the effective
date of this Agreement.
4. Transferee and Licensee hereby expressly acknowledge and agree that
the provisions of Section III.C. of the Cellular One License Agreement, which
provide for an advisory customer survey during the first year of a Licensee's
operation, are not intended to afford Licensee an additional advisory survey
as a result of this change of control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives, to be effective as of the
date first above written.
SANTA CRUZ CELLULAR TELEPHONE, INC
By: /s/ N.D. Patel
-------------------------------------------
Name: N.D. Patel
-----------------------------------------
Title: President
----------------------------------------
NATUBHAI PATEL AND OTHER SHAREHOLDERS OF
SANTA CRUZ CELLULAR TELEPHONE, INC.
By: /s/ N.D. Patel
-------------------------------------------
Name: N.D. Patel
-----------------------------------------
Title: Selling Representative
----------------------------------------
ACCEPTED AND AGREED TO:
CELLULAR ONE GROUP
By: /s/ Richard J. Lyons
-------------------------------------------
Richard J. Lyons
President
-2-
<PAGE>
DOBSON CELLULAR OF CALIFORNIA, INC.
By: /s/ EVERETT R. DOBSON
---------------------
PRIMARY CONTACT IN ORDINARY
COURSE OF BUSINESS:
Name: G. Edward Evans
---------------------------------------
Title: President
--------------------------------------
Company: Dobson Cellular of California, Inc.
------------------------------------
Address: 13439 N. Broadway Ext.
------------------------------------
City/State/Zip: Oklahoma City, OK 73114
-----------------------------
Phone: 405/391-8500
--------------------------------------
Fax: 405/391-8417
----------------------------------------
E-Mail:
-------------------------------------
CONTACT FOR NOTICE PURPOSES:
Name: Ronald L. Ripley
---------------------------------------
Title: General Counsel
--------------------------------------
Company: Dobson Communications Corp.
------------------------------------
Address: 13439 N. Broadway Ext.
------------------------------------
City/State/Zip: Oklahoma City, OK 73114
-----------------------------
Phone: 405/391-8500
--------------------------------------
Fax: 405/391-8515
----------------------------------------
E-Mail:
--------------------------------------
-3-
<PAGE>
CONTACT FOR BILLING PURPOSES:
Name: Don Haycraft
-----------------------------------------
Title: Regional Cellular Controller
----------------------------------------
Company: Dobson Cellular Systems
--------------------------------------
Address: 13439 N. Broadway Ext.
--------------------------------------
City/State/Zip: Oklahoma City, OK 73114
-------------------------------
Phone: 405/391-8500
----------------------------------------
Fax: 405/391-8417
------------------------------------------
E-Mail:
---------------------------------------
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<PAGE>
AFFILIATION AGREEMENT
THIS AFFILIATION AGREEMENT (this "Agreement") is made as of July 31,
1998, by and among DOBSON COMMUNICATIONS CORPORATION, an Oklahoma corporation
("DCC"), and DOBSON CELLULAR OF IMPERIAL, INC., an Oklahoma corporation
("Operator"), and AIRTOUCH CELLULAR, a California corporation ("AirTouch").
W I T N E S S E T H:
WHEREAS, AirTouch seeks, through operating its own Systems (as defined
below) and through affiliation, roaming and other arrangements with other
operators of Systems, to establish and maintain a seamless wireless
communications network and to establish among participants therein certain
minimum levels of common customer service and technical capabilities; and
WHEREAS, DCC and Operator have determined that certain benefits of
affiliation, including but not limited to those arising from increased scale
and scope of services, would inure to Operator by aligning itself with a
larger scale provider of wireless communications services.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereby agree as
follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
have the following meanings:
"AFFILIATE" means any Person that, directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with the Person specified.
"AFFILIATED SYSTEM" means an AirTouch System or any other System
that offers Services under the Brands.
"AIRTOUCH SYSTEMS" means those Systems controlled by AirTouch.
"BRANDS" mean the service marks, trademarks, trade names, symbols
or designs used, from time to time, by the AirTouch Systems in connection
with the offer and sale of Products and Services.
"CELLULAR SYSTEM" means a radio communications system authorized
under the rules for the domestic public cellular radio telecommunications
service designated as Subpart H of Part 22 of the FCC Rules in effect as of
the date hereof or any revision thereto or successor thereof which may be in
effect from time to time, including the network, marketing, distribution,
sales, customer interface and operations functions relating thereto.
"CONTROL" (including the terms "controlling," "controlled by" and
"under common control with") of a Person means (i) the possession, direct or
indirect, of the power to vote 50% or more of the voting securities or other
voting interests of such Person, or (ii) the possession, directly or
indirectly, of the affirmative power to direct, or cause the direction of,
the management and policies of such Person, whether through the ownership of
voting securities or other voting interests, by contract or otherwise.
-1-
<PAGE>
"EFFECTIVE DATE" means the date on which the closing of the
transactions contemplated by the Purchase Agreement occurs.
"ESMR SYSTEM" means any commercial mobile radio system authorized
under the rules for Enhanced Specialized Mobile Radio services designated
under Subpart S of Part 90 of the FCC Rules in effect as of the date hereof
or any revision or successor thereof, which may be in effect from time to
time, including the network, marketing, distribution, sales, customer
interface and operations functions relating thereto.
"FCC" means the Federal Communications Commission or any successor
agency or entity performing substantially the same functions.
"FEATURES" means the dialing plans, feature codes and other
technical capabilities related to the provision of Services.
"LICENSE" means any permit, license, waiver or authorization from
any governmental body having jurisdiction over a Person required for conduct
of an activity, including, without limitation, any FCC license or any
certificate of public convenience and necessity.
"OPERATOR'S SERVICE AREA" or "CALIFORNIA RSA #7" means the rural
service area designated by the FCC as Cellular Market California No. 7.
"OPERATOR'S SYSTEM" means the Cellular System controlled by
Operator in California RSA #7.
"PCS SYSTEM" means a radio communications system authorized under
the rules for broadband personal communications services designated as
Subpart E of part 24 of the FCC Rules as of the date hereof, or any revision
thereto or successor thereof which may be in effect from time to time,
including the network, marketing, distribution, sales, customer interface and
operations functions relating thereto.
"PERSON" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company,
trust, estate, unincorporated organization, governmental or regulatory body
or other entity.
"PLANS" means subscriber purchasing plans for Products and/or
Services.
"PRODUCTS" means subscriber equipment offered for sale or lease and
any goods and other property ancillary thereto.
"PURCHASE AGREEMENT" means that certain Asset Purchase Agreement
dated as of May 5, 1998 between Southern Cellular, Inc. and Operator, as such
agreement may be amended from time to time.
"ROAMING AGREEMENTS" means the roaming agreements described in
Section 4(a).
-2-
<PAGE>
"SERVICE AREA" means, as to any Person, the geographic territory in
which such Person provides Services.
"SERVICES" means commercial mobile radio services provided by
Systems, including, without limitation, voice and data transport, and the
services ancillary thereto.
"SYSTEM" means a Cellular System, an ESMR System or a PCS System.
"TRADEMARK LICENSE AGREEMENT" means the trademark license agreement
in the form attached as EXHIBIT A to be entered into between AirTouch and
Operator on the Effective Date, as amended from time to time, and any other
Brand license or sublicense agreement executed in substitution therefor.
2. PERFORMANCE STANDARDS.
(a) PERFORMANCE STANDARDS. AirTouch may establish minimum
standards for various aspects of the AirTouch Systems and for the operations
thereof (the "Performance Standards"), including but not limited to certain
minimum Features, Plans, Products and Services to be offered by the AirTouch
Systems. AirTouch may revise the Performance Standards from time to time in
its reasonable discretion. The Performance Standards will be generally
consistent with industry practices and capabilities. Set forth on EXHIBIT B
are the initial Performance Standards (the "Initial Performance Standards").
(b) COMPLIANCE WITH PERFORMANCE STANDARDS. Operator will cause
Operator's System to comply with the Initial Performance Standards and any
revised Performance Standards of which AirTouch has notified Operator and to
which Operator has not reasonably objected by notice to AirTouch within 10
days after receiving notification of the revised Performance Standard.
Operator shall be deemed to comply with a Performance Standard so long as
Operator's performance with such Performance Standard equals or exceeds the
median performance recorded in respect thereto for the same date or period by
the AirTouch System operating in the San Diego MSA. Subject to Section 7,
upon request of Operator and solely for the purpose of confirming the median
performance of the San Diego MSA System with a Performance Standard, AirTouch
shall furnish Operator with summary information for the applicable date or
period in respect of the performance of such System for any Performance
Standard as to which Operator fails to equal or exceed the median performance
of such System.
(c) SURVEYS.
(i) The parties recognize that Operator and AirTouch may
wish to obtain market research data or other information related to
Operator's System or to Features, Plans, Products or Services through the use
of surveys ("Surveys"). To this end, AirTouch agrees to conduct or cause a
third party or other Persons to conduct within Operator's Service Area (A) a
Survey of subscribers and (B) a Survey of technical performance, in each case
at least on an annual basis (the "Annual Surveys") and may, in its sole
discretion, conduct or cause a third party to conduct additional Surveys from
time to time.
(ii) Annually and at such other times as AirTouch determines
to conduct a Survey or cause a Survey to be conducted, Operator will, upon
AirTouch's request, furnish promptly to
-3-
<PAGE>
AirTouch or such third party a complete and accurate list of its subscribers
in such a format as may be reasonably requested by AirTouch or such third
party, together with such other information as AirTouch or such third party
organization determines is reasonably necessary to conduct the Surveys.
Operator authorizes AirTouch or such third party to contact any and all of
its subscribers solely for the purposes of conducting the Surveys. AirTouch
will furnish or cause any such third party to furnish Operator with copies of
such Surveys, the results therefrom and any market data so obtained with
respect to Operator's Service Area. AirTouch will treat and will cause any
third party to treat Operator's list of subscribers and the information
obtained or generated in connection with such Surveys in accordance with the
provisions of Section 7 hereof. All Annual Surveys shall be at Operator's
expense.
(d) INSPECTION. In order to determine the compliance of Operator's
System with the Performance Standards referred to in Section 2(a), AirTouch
and its representatives will have the right to meet with Operator's employees
and officers and to inspect the operations of Operator's System, including
conducting reasonable on-site tests. Such inspections will be conducted on
reasonable prior notice, during normal business hours and will be performed
in a manner which does not unreasonably interfere with the operations of
Operator's System. The costs of any such inspection will be borne by
AirTouch. If AirTouch determines that Operator's System is not in compliance
with any such Performance Standard, it will notify Operator in writing of (A)
the nature of the noncompliance and (B) the action (or omission) necessary to
cure the noncompliance. In such event, AirTouch may also specify within such
notice or by separate notice, a date not less than the number of days after
such notice is delivered to Operator consistent with Section 9(c) below, by
which such noncompliance must be remedied.
3. BRANDS: ADVERTISING; SERVICE PLANS; PROMOTIONS.
(a) BRANDS. (i) As soon as commercially reasonable, and in no
event later than the date that is three (3) months following Operator's
assumption of management control of California RSA #7 (the "Brand Launch
Date"), all Products and Services offered and sold by Operator's System will
be offered and sold exclusively under the Licensed Marks (as defined in the
Trademark License Agreement) pursuant to the terms and conditions of the
Trademark License Agreement, except for any Product that Operator is
prohibited from offering or selling under the Licensed Marks under the terms
of the purchase agreement therefor, in which case such Product may be offered
and sold under the brand of the manufacturer or distributor thereof. AirTouch
will have the right, in its sole discretion, to substitute other Brand(s) for
the Licensed Marks or to require Operator's System to use additional Brand(s)
in connection with some or all of the Products and Services; provided that
any Brand to be used by and licensed to Operator will be substantially the
same as a Brand used in the Southern California region by the AirTouch
Systems. If AirTouch designates any substitute or additional Brand, Operator
will enter into a license agreement in respect of such Brand in such form as
will be reasonably prescribed by AirTouch and will use such Brand only in
compliance with the terms and conditions set forth in such license agreement;
provided, however, that Operator will not be required to enter into any
license agreement that provides for compensation thereunder that is in
addition to that provided herein or the Trademark License Agreement.
(ii) Each of Operator's business locations shall at all
times during the term of this Agreement comply with AirTouch's reasonable
requirements for showroom and display capacity, appearance, accessibility,
equipment installation and maintenance capacity and efficiency, which
requirements shall take into consideration the location and environment of
Operator's Service Area.
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AirTouch will have the right to review and approve the plans, specifications
and renderings of the proposed business location, which approval will not be
unreasonably withheld or withdrawn. Operator further agrees to ensure that
each of its agents, dealers or other Persons who are authorized by Operator
to use the License Marks ("Operator's Distributors") is subject to the
obligations set forth in this subsection (ii).
(iii) Operator agrees that it will not permit any agent,
distributor or other person to use any of the Licensed Marks unless such
person has entered into a Trademark License Agreement with AirTouch in a form
reasonably acceptable to AirTouch.
(b) ADVERTISING.
(i) AirTouch and the Affiliated Systems may from time to
time implement or participate in advertising programs that directly or
indirectly promote the Brands on a national or regional basis
("Advertising"). Such Advertising may include, but is not limited to, (A)
newspaper, magazine and written periodical advertising; (B) radio scripts,
tape recordings and audio advertising; (C) television scripts, videotape
recording and electronic advertising; (D) telephone directories; (E)
billboards, in-store point of purchase or other display advertising; (F)
flyers or similar advertising; and (G) direct mail materials. Operator
acknowledges and agrees that AirTouch is not obligated to ensure that
Operator benefits from any Advertising.
(ii) Operator may elect to utilize any advertising materials
prepared by AirTouch. If Operator elects to utilize such materials, Operator
shall pay for (i) all printing and materials costs related to the materials
used by Operator, in addition to the cost of any customization of such
materials for Operator's use, and (ii) its pro rata share of costs associated
with the development, design, and production of such materials, which pro
rata share shall be calculated by multiplying the total applicable cost by a
fraction, the numerator of which is the total population within Operator's
Service Area (RSA #7) and the denominator of which is the total population
within the Operator's Service Area and the area covered by the AirTouch
Systems in Southern California (RSA #7, MSA #2 and MSA # 18). Operator shall
be solely responsible for the placement, publication, display, distribution,
mailing or airing of Advertising in Operator's Service Area, and shall use
materials purchased from AirTouch under this Agreement only within Operator's
Service Area.
(iii) Operator will use reasonable efforts to coordinate its
promotional activities (including without limitation promotion of Plans) with
Affiliated Systems in Service Areas which are adjacent to Operator's Service
Area and shall bear the costs and expenses of its own promotional activities.
(c) SERVICE PLANS.
During the term of this Agreement, Operator agrees to offer the following
Service plans within Operator's Service Area, in addition to any other local
Service plans that Operator elects, in its sole discretion, to offer within
Operator's Service Area: (i) at least two (2) basic digital Service plans
designated by AirTouch that conform as to pricing and other material terms
and conditions to digital plans offered by AirTouch within the neighboring
AirTouch System(s); (ii) at least two (2) basic analog Service plans
designated by AirTouch that conform as to pricing and other material terms
and conditions to analog plans offered by AirTouch within the neighboring
AirTouch System(s); and (iii) any prepaid Service plan(s) designated by
AirTouch that conform as to pricing and other material
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terms and conditions to prepaid service plan(s) offered by AirTouch within
the neighboring AirTouch System(s). Operator acknowledges and agrees that the
Service plans designated by AirTouch in accordance with the preceding
sentence may vary from time-to-time during the term of this Agreement.
Operator further acknowledges and agrees that the name of any local Service
plan offered by Operator within Operator's Service Area that does not conform
to AirTouch designated plans hereunder shall be distinguished from the names
of the AirTouch designated Service plans and shall apply only within
Operator's Service Area.
(d) PROMOTIONS AND ADVERTISING.
Unless otherwise mutually agreed to in advance by the parties, all promotions
and advertising by Operator within Operator's Service Area must clearly state
in writing that such promotions and advertising are applicable only within
Operator's Service Area, and all promotions and advertising by AirTouch
within AirTouch Systems must clearly state in writing that such promotions
and advertising apply only within the applicable AirTouch Systems.
4. ROAMING AGREEMENT.
(a) RECIPROCAL AGREEMENT. Operator and AirTouch will enter into
and maintain in effect during the term specified therein (and to the extent
provided in Section 4(b)), a roaming agreement in the form of attached
EXHIBIT C covering Operator's System and all AirTouch Systems designated
therein, which agreement will provide for mutual roaming rights between
Operator's System and each such AirTouch Systems (the "Roaming Agreement").
The Roaming Agreement will provide for an initial rate per billable minute of
$0.50 for each party. On each anniversary of this agreement (each a "Reset
Date") the roaming rate that the Home Carrier pays to the Serving Carrier
(each as defined in the Roaming Agreement) shall be recalculated by
multiplying the rate then in effect for such Home Carrier by a fraction, the
numerator of which shall be the product of the total billable minutes (less
all minutes attributable to fraud) of customers of the Home Carrier system
roaming in the markets of the Serving Carrier during the twelve month period
ending on the date that is twelve months prior to the Reset Date (the "Total
Billable Minutes") multiplied by 1.1, and the denominator of which shall be
the Total Billable Minutes of customers of the Home Carrier system roaming in
the markets of the Serving Carrier during the twelve month period ending on
the Reset Date, provided that in no event will the applicable roaming rate
(i) be reduced on any given Reset Date by more than 10% or (ii) be increased.
(b) CONTINUATION OF ROAMING AGREEMENTS. If this Agreement is
terminated for any reason prior to the fifth anniversary of the Effective
Date (the "Five Year Date"), Operator and DCC agree that AirTouch may, if it
so elects in its sole discretion, continue any or all of the Roaming
Agreements entered into pursuant to Section 4(a) until the Five Year Date.
Operator and DCC further agree that if Operator or DCC proposes to effect a
Transfer (as defined below) prior to the Five Year Date that would result in
a Change of Control of Operator's System, if AirTouch so elects in its sole
discretion, such Transfer will be subject to the condition (which may not be
waived) that the transferee assume and agree to perform any or all of the
Roaming Agreements entered into pursuant to Section 4(a) and that any such
Roaming Agreements continue until the Five Year Date notwithstanding any
termination of this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF AIRTOUCH. AirTouch represents to
Operator and DCC that:
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(a) ORGANIZATION. It is duly organized, validly existing and in
good standing under the laws of the state of its organization and has all
requisite power and authority to carry out its business as now conducted, and
to enter into this Agreement and to perform its obligations hereunder. It is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary.
(b) AUTHORITY. This Agreement has been duly authorized by all
necessary corporate action on the part of AirTouch. It has been duly executed
and delivered by one of its duly authorized officers and constitutes its
valid and binding obligation, enforceable against it in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or other laws affecting the enforceability of creditors'
rights generally and except that the remedy of specific performance or
similar equitable relief may be subject to equitable defenses and to the
discretion of the court before which enforcement is sought.
(c) AUTHORIZATIONS AND CONSENTS: NO VIOLATION.
(i) Neither its execution and delivery of this Agreement
nor its performance hereunder will conflict with, or result in any breach or
violation of, any provision of any of its formative organizational or
governance agreements; or constitute, with or without notice or the passage
of time or both, a breach, violation or default, create a lien or give rise
to any right of termination, modification, cancellation, prepayment or
acceleration under any order, writ, injunction, decree, law, statute, rule or
regulation, franchise, License or any mortgage, indenture, lease, agreement
or other instrument by which it is bound or to which its properties are
subject, except for breaches, violations, defaults, liens or rights of
termination, modification, cancellation, prepayment or acceleration which
would not, singly or in the aggregate, materially adversely affect its
ability to perform the obligations contemplated by this Agreement.
(ii) No authorizations are required to be obtained from any
governmental body with respect to its execution of this Agreement and its
performance hereunder.
(iii) No consents are reasonably anticipated to be required
to be obtained pursuant to any partnership, joint venture or other similar
agreement or any material contract, agreement, License or instrument to which
is a party with respect to its execution of this Agreement and its
performance hereunder.
(d) AGREEMENTS WITH THIRD PARTIES; EMPLOYMENT AND NON-COMPETITION
AGREEMENTS. Neither it nor any of its Affiliates is a party to any employment
agreement or a party to or otherwise bound by any non-competition,
non-solicitation or other similar agreement relating to the provision of
Services or that would otherwise be inconsistent with the performance of its
obligations under this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF OPERATOR AND DCC. Each of
Operator and DCC, jointly and severally, represent and warrant to AirTouch
that:
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(a) ORGANIZATION. It is duly organized, validly existing and in
good standing under the laws of the state of its organization and has all
requisite power and authority to carry out its business as now conducted, and
to enter into this Agreement and to perform its obligations hereunder. It is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary.
(b) AUTHORITY. This Agreement has been duly authorized by all
necessary partnership or corporate action, as applicable, on the part of
Operator and DCC. It has been duly executed and delivered by one of its duly
authorized officers or partners and constitutes its valid and binding
obligation, enforceable against it in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency, reorganization or other
laws affecting the enforceability of creditors' rights generally and except
that the remedy of specific performance or similar equitable relief may be
subject to equitable defenses and to the discretion of the court before which
enforcement is sought.
(c) AUTHORIZATIONS AND CONSENTS: NO VIOLATION.
(i) Neither its execution and delivery of this Agreement
nor its performance hereunder will conflict with, or result in any breach or
violation of, any provision of any of its formative organizational or
governance agreements; or constitute, with or without notice or the passage
of time or both, a breach, violation or default, create a lien or give rise
to any right of termination, modification, cancellation, prepayment or
acceleration under any order, writ, injunction, decree, law, statute, rule or
regulation, franchise, License or any mortgage, indenture, lease, agreement
or other instrument by which it is bound or to which its properties are
subject, except for breaches, violations, defaults, liens or rights of
termination, modification, cancellation, prepayment or acceleration which
would not, singly or in the aggregate, materially adversely affect its
ability to perform the obligations contemplated by this Agreement.
(ii) No authorizations are required to be obtained from any
governmental body with respect to its execution of this Agreement and its
performance hereunder.
(iii) No consents are reasonably anticipated to be required
to be obtained pursuant to any partnership, joint venture or other similar
agreement or any material contract, agreement, License or instrument to which
is a party with respect to its execution of this Agreement and its
performance hereunder.
(d) AGREEMENTS WITH THIRD PARTIES; EMPLOYMENT AND NON-COMPETITION
AGREEMENTS. Neither it nor any of its Affiliates is a party to any employment
agreement or a party to or otherwise bound by any non-competition,
non-solicitation or other similar agreement relating to the provision of
Services or that would otherwise be inconsistent with the performance of its
obligations under this Agreement.
(e) OWNERSHIP. DCC indirectly owns all of the outstanding equity
in and voting interests of Operator. On the Effective Date, Operator will be
the sole owner of all of the assets of Operator's System.
(f) FCC AND OTHER GOVERNMENTAL REPORTS AND APPLICATIONS. All
material reports, applications and other documents required to be filed with
the FCC, CPUC, and all other governmental
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or administrative authorities necessary for Operator to provide Services for
all of the territory within Operator's California RSA #7 service area, as
defined by the relevant System Information Update map dated March 1994 (the
"March 1994 SIU Map"), have been filed and are accurate and complete in all
material respects, and there has been no change in the Services actually
provided since March 1994 that would establish a service area materially
smaller in size than that shown in the March 1994 SIU Map.
(g) COVERAGE OF OPERATOR'S SYSTEM. On or before the date that is
120 days after the Effective Date and continuously thereafter during the term
of this Agreement, Operator shall design, construct and operate Operator's
System such that the contours of Operator's System defined by the March 1994
SIU Map will cover at least eighty-five percent (85%) of the population
within Operator's Service Area (the "Covered Territory"), which Covered
Territory shall include, without limitation, all of the Interstate 8 corridor
and all other major interstate and state highways located within the
Operator's Service Area and the towns of Calexico, Brawley and El Centro.
7. CONFIDENTIAL INFORMATION: NON-SOLICITATION.
(a) Each of DCC, Operator and AirTouch will, and will cause its
respective partners, shareholders, directors, officers, employees, and agents
(collectively, when used with respect to any party, its "Representatives"),
to keep secret and retain in strictest confidence, except as provided in
Section 7(b) hereof, any and all Confidential Information of the other party
and will not distribute, disseminate or disclose such Confidential
Information, and will cause its Representatives not to distribute,
disseminate or disclose such Confidential Information, except to (i) any
Representative of AirTouch or Operator on a "need to know" basis in
connection with this Agreement or the operation of Operator's System, the
AirTouch Systems (or the Affiliated Systems) and their respective businesses
or (ii) to any lender to Operator or AirTouch on a "need to know" basis in
connection with the financing of the Operator's System or the AirTouch
Systems, and any such Person receiving Confidential Information pursuant to
this Section 7(a) will use, and will cause its Representatives or lenders to
use, such Confidential Information only for the benefit of DCC, Operator,
AirTouch and the AirTouch Systems (or the Affiliated Systems) or for any
other specific purposes for which it was disclosed to such party.
All-Confidential Information disclosed pursuant to this Agreement will remain
the property of the Person whose property it was prior to such disclosure.
(b) In the event that DCC, Operator, AirTouch or any Person to
whom any of them transmits any Confidential Information becomes legally
compelled (by oral questions, interrogatories, requests for information or
documents, subpoena, investigative demand or similar process) to disclose any
of the Confidential Information, such Person will use its best efforts to
provide AirTouch and Operator with prompt written notice prior to disclosure
(not less than 24 hours) so that AirTouch, Operator, as applicable, may seek
a protective order or other appropriate remedy and/or waive compliance with
the provisions of this Agreement. In the event that such protective order or
other remedy is not obtained, or that DCC, Operator or AirTouch, as
applicable, waives compliance with the provisions of Section 7(a), the Person
who is compelled to disclose such Confidential Information will furnish only
that portion of the Confidential Information which (based on the advice of
counsel) it is legally required to disclose and will exercise its best
efforts to obtain reliable assurance that protective treatment will be
accorded the Confidential Information.
(c) Upon termination of this Agreement, Operator, DCC and AirTouch
will, and will cause their respective Representatives to, return to the
appropriate party all documents that contain Confidential Information or, if
the party so requests, cause such documents to be destroyed.
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(d) For purposes of this Section, "Confidential Information" means
all confidential documents and information (including, without limitation,
confidential commercial information and information with respect to customers
and proprietary technologies or processes and the design and development of
new products and services) concerning Operator, its Affiliates, Operator's
System or the Systems owned by Operator's Affiliates, AirTouch, its
Affiliates, the AirTouch Systems or the Affiliated Systems, furnished to or
obtained by a party to this Agreement by or from the other parties or their
Representatives (as such term is defined in Section 7(a) hereof) in
connection with this Agreement or the operation of Operator's System, the
Affiliated Systems or the parties' respective businesses, except to the
extent that such information is (i) generally available to the public other
than as a result of a breach by the receiving Person of the provisions of
Section 7 hereof, (ii) already in the possession of the receiving Person or
its Representatives without restriction and prior to any disclosure pursuant
to any of the terms of this Agreement; (iii) lawfully disclosed to the
receiving Person or its Representatives by a third party who is free lawfully
to disclose the same; or (iv) independently developed by the receiving Person
or its Representatives without use of any Confidential Information obtained
in connection with this Agreement or the operation of Operator's System, the
Affiliated Systems or the parties' respective businesses.
(e) During the term of this Agreement, (i) neither DCC, Operator
nor their respective affiliates will directly solicit, recruit, or otherwise
encourage any person employed within Southern California, Arizona or New
Mexico by AirTouch or its affiliates to leave his or her employment, and (ii)
neither AirTouch nor its affiliates will directly solicit, recruit, or
otherwise encourage any person employed within Southern California, Arizona
or New Mexico by DCC, Operator or their respective affiliates to leave his or
her employment.
8. INDEMNIFICATION.
(a) INDEMNIFICATION BY OPERATOR OR DCC. DCC and Operator jointly
and severally will, to the fullest extent permitted by law, indemnify, defend
and hold harmless AirTouch, its officers, directors, employees, agents and
control Persons from any and all losses, claims, damages, liabilities, costs
and expenses (including reasonable attorneys' fees and expenses)
(collectively "Losses") arising from claims by Persons other than AirTouch
and its Affiliates and their respective officers, directors, employees,
partners, agents and control Persons and which relate to the performance or
non-performance of Operator or DCC of their respective duties or breach of
their representations hereunder. except where such Losses are due to the
negligence or willful misconduct of AirTouch, its partners, officers,
directors, employees, agents and control Persons or where such Losses have
been reimbursed to AirTouch directly by Operator's or DCC's insurer.
(b) INDEMNIFICATION BY AIRTOUCH. AirTouch will, to the fullest
extent permitted by law, indemnify, defend and hold harmless DCC and
Operator, their partners, shareholders, officers, directors, employees,
agents and control Persons from any and all Losses arising from claims by
Persons other than Operator, DCC or their respective Affiliates and their
respective officers, directors, employees, agents and control Persons and
which relate to the performance or non-performance of AirTouch of its duties
or breaches of its representations hereunder, except where such Losses are
due to the negligence or willful misconduct of Operator or DCC, their
shareholders, officers, directors, employees, agents and control Persons or
where such Losses have been reimbursed to Operator directly by AirTouch's
insurer.
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(c) THIRD PARTY CLAIMS. Promptly after receipt by an indemnified
party under this Section 8 of notice of any claim or the commencement of any
action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under
this Section 8, deliver to the indemnifying party a written notice of the
claim or action and the indemnifying party will have the right to participate
in, and, to the extent the indemnifying party so desires and promptly
notifies the indemnified party in writing of such desire, jointly with any
other indemnifying party similarly noticed, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party; provided,
however, that an indemnified party will only have the right to retain its own
counsel, with the fees, disbursements and other charges to be paid by the
indemnifying party, if (i) representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate (based on
the reasonable advice of counsel to the indemnified party) due to actual or
potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding (provided that if such
other party is the indemnifying party, the indemnifying party will not have
the right to direct the defense of such action on the part of the indemnified
party), (ii) the indemnified party has reasonably concluded (based on the
reasonable advice of counsel) that there may be legal defenses available to
it or other indemnified parties that are different from or in addition to
those available to the indemnifying party, (iii) the indemnifying party has
not in fact employed counsel reasonably satisfactory to the indemnified party
within a reasonable time after receiving notice of the claim or commencement
of the action or (iv) the employment of counsel at the indemnifying party's
expense by the indemnified party has been authorized in writing by the
indemnifying party specifying that it will pay for such counsel. If, and only
to the extent that, the failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action results
in the forfeiture of substantive rights or defenses of the indemnifying party
in such action, such failure will relieve such indemnifying party of
liability to the indemnified party under this Section 8, but the omission so
to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 8. If the indemnifying party chooses to assume the defense of
any claim or action hereunder, it will not, without the indemnified party's
consent, consent to the entry of any judgment or enter into any settlement
that provides for injunctive or other non-monetary relief by the indemnified
party or that does not include as an unconditional term thereof the giving by
each claimant an unconditional release of the indemnified party from all
liability.
9. TERM: TERMINATION.
(a) TERM. The initial term of this Agreement will expire on the
twentieth anniversary of the Effective Date. Thereafter, the term will
automatically be extended for additional five-year periods unless either
Operator or AirTouch makes a valid election not to renew this Agreement. An
election not to renew will be valid only if in writing and delivered to the
other at least one year prior to the expiration of the then current term.
(b) TERMINATION BY OPERATOR. This Agreement may be terminated by
Operator at any time following the occurrence of any of the following events:
(i) a material breach of this Agreement by AirTouch which has
not been cured within 90 days after Operator has delivered written
notice to AirTouch of such breach;
(ii) a Change of Control of Operator's System;
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(iii) a termination of the Trademark License Agreement;
(iv) dissolution, liquidation or winding-up of AirTouch unless
an Affiliate of AirTouch or of AirTouch Communications, Inc. (or any
successor thereto whether by merger, spin-off or otherwise) assumes
AirTouch's obligations hereunder;
(v) the entry by a court having jurisdiction of (A) a decree
or order for relief in respect of AirTouch in an involuntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or (B) a decree or
order adjudicating AirTouch bankrupt or insolvent or approving as
properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of AirTouch under any
applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee or other similar official of AirTouch
or of any substantial part of its property;
(vi) the commencement by AirTouch of a voluntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent
by it to the entry of a decree or order for relief in respect of
AirTouch in any involuntary case or proceeding under applicable
federal or state bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency
case or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any
applicable federal or state law or the consent by it to the filing of
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or other similar
official of AirTouch or any substantial part of its property, or the
making by it of an assignment for the benefit of creditors; or
(vii) the suspension, revocation, or surrender of the FCC
License for either of the San Diego Service Area or the Los Angeles
Service Area which are currently held by AirTouch (unless such
suspended, revoked or surrendered FCC License is properly thereafter
awarded to AirTouch or a Permitted Assignee of AirTouch hereunder, as
defined in Section 12(e)(ii) below) or the sale or other disposition
of such FCC License to a Person other than AirTouch or a Permitted
Assignee of AirTouch hereunder (unless the right to use the Brands
are transferred to such Person in connection with such sale or other
disposition).
(c) TERMINATION BY AIRTOUCH. This Agreement may be terminated by AirTouch
at any time following the occurrence of any of the following events:
(i) a payment default which has not been cured within 60 days
or other material breach of this Agreement by Operator or DCC which
has not been cured within 90 days after AirTouch has delivered
written notice to the breaching party of such breach;
(ii) failure to comply with any Performance Standard within 60
days of the date specified in any notice delivered under Section 2(d)
with respect to any Network Performance Standard, or within 30 days of
the date specified in any notice delivered under Section 2(d) with
respect to any Customer Service Standard, provided that this
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Section 9(c)(ii) shall apply only to Performance Standard failures
that do not require the involvement of an outside vendor to be
remedied, and further provided that notwithstanding the date for
performance set forth in any notice delivered under Section 2(d),
Operator shall commence corrective action to remedy any such failure
as soon as possible after receiving notice thereof from AirTouch and
shall proceed with due diligence to completion;
(iii) failure to comply with any Performance Standard within 90
days of the date specified in any notice delivered under Section 2(d)
with respect to any Performance Standard failure that requires
involvement of an outside vendor to be remedied, provided that
notwithstanding the date for performance set forth in any notice
delivered under Section 2(d), Operator shall commence corrective
action to remedy any such failure as soon as possible after receiving
notice thereof from AirTouch and shall proceed with due diligence to
completion;
(iv) termination of the Trademark License Agreement;
(v) dissolution, liquidation or winding-up of Operator;
(vi) the suspension, revocation or other loss of, or
surrender, sale or other disposition of, Operator's FCC License for
all or any material portion of Operator's Service Area;
(vii) Operator's failure to consent to any revised Performance
Standard;
(viii) the occurrence of any event which is, or after notice or
passage of time or both would be an "event of default" under any
material debt of Operator or under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any debt by Operator, whether such debt now
exists or will hereafter be created, provided that such event will
not permit termination hereof unless either (A) such event will remain
uncured at the earlier of the end of any cure period available under
the applicable loan agreement or other instrument or six months from
the first occurrence thereof or (B) the lender, obligee or other
beneficiary will assert any remedies under the applicable loan
agreement or other instrument;
(ix) the entry by a court having jurisdiction of (A) a decree
or order for relief in respect of Operator in an involuntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or (B) a decree or
order adjudicating Operator bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of Operator under any
applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee or other similar of official of Operator
or of any substantial part of its property;
(x) the commencement by Operator of a voluntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent
by it to the entry of a decree or order for relief in respect of
Operator in any involuntary case or
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proceeding under applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing
by it of a petition or answer or consent seeking reorganization or
relief under any applicable federal or state law or the consent by it
to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee or
other similar of official of Operator or any substantial part of its
property, or the making by it of an assignment for the benefit of
creditors, or its failure to pay its debts generally as they become
due;
(xi) a Change of Control of Operator's System;
(xii) the acquisition and operation by AirTouch or its
Affiliate of Control of a System operating in the California RSA #7;
or
(xiii) the failure of Operator to build out and operate
Operator's System in strict compliance with in Section 6(g) above.
(d) For purposes of this Section 9, a "Change of Control" of
Operator's System will be deemed to have occurred at such time as: (i) DCC no
longer beneficially owns directly or indirectly (whether as a result of
merger, consolidation, sale, assignment, lease or otherwise, in one
transaction or series of related transactions) equity of Operator
constituting a majority of the outstanding equity in and voting interests of
Operator, (ii) any Person other than DCC, or group of Persons acting in
concert, acquires beneficial ownership, directly or indirectly, of 50% or
more of the outstanding equity in or voting interests of Operator or DCC or
(iii) Operator sells or otherwise disposes of (including, without limitation
in connection with the formation of a joint venture that is not controlled by
DCC) all or substantially all of the assets of Operator's System (including,
without limitation in connection with the sale or other disposition of all or
substantially all of the assets of Operator).
10. FUTURE SALE OF CALIFORNIA RSA #7. In the event that (i)
Operator proposes to transfer, sell, assign or otherwise dispose of all or
substantially all of the assets of Operator's System, including but not
limited to any transfer of its FCC License for Operator's Service Area, or
(ii) DCC proposes to transfer, sell, assign or otherwise dispose of, directly
or indirectly, a majority of the outstanding equity in or voting interests of
DCC or Operator (the transactions referred to in clauses (i) and (ii) being
referred to as a Transfer), other than (x) a Transfer to an Affiliate of DCC,
(y) a Transfer resulting from a Change of Control of Operator's System as a
result of the circumstances set forth in subsection 9(d)(ii) with respect to
DCC or (z) a Transfer in connection with the direct or indirect sale by DCC
and/or Operator to a single purchaser of the Operator's System and Cellular
Systems for two or more other metropolitan or rural service areas, the
following will apply:
(a) DCC and/or Operator will send a written notice of the proposed
Transfer (a "Transfer Notice") to AirTouch, which notice will describe the
assets or equity securities (the "Interest") proposed to be Transferred.
(b) During the 20-day period following delivery of the Transfer
Notice to AirTouch, Operator will not contact or initiate discussions with
(or entertain any approach from), or conduct negotiations with any Person
other than AirTouch with respect to any Transfer of the Interest.
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(c) AirTouch will have 20 days from its receipt of the Transfer
Notice to deliver to Operator its written offer to purchase the Interest
subject to the Transfer Notice (a "AirTouch Offer").
(d) If AirTouch makes an AirTouch Offer, DCC or Operator as
applicable will have the right to accept or reject the AirTouch Offer. If DCC
or Operator as applicable accepts the AirTouch Offer, the Interest will be
transferred to AirTouch subject to the terms and conditions contained in the
AirTouch Offer. If DCC or Operator rejects the AirTouch Offer, DCC or
Operator, as applicable, will be free to Transfer the Interest during the
12-month period after the date of the Transfer Notice to any other Person for
consideration having a fair market value that is no less than the fair market
value of the consideration set forth in the AirTouch Offer.
(e) If AirTouch does not make an AirTouch Offer, DCC or Operator,
as applicable, will be free to Transfer the Interest during the 12-month
period after the date of the Transfer Notice to any other Person without
limitation as to the amount of the consideration paid in respect of the
Transfer.
11. ACQUISITION OF ADDITIONAL SYSTEMS. If DCC or any of its Affiliates
acquires or obtains Control of any System that is adjacent to a System
controlled by DCC or any of its Affiliates and that is subject to an
affiliation agreement with AirTouch or any of its Affiliates (a "Future
System"), AirTouch and its Affiliates shall have an option to enter into an
affiliation agreement with DCC or its Affiliate (including a trademark
license agreement and a roaming agreement) with respect to such Future System
having substantially the same terms and conditions as this Agreement.
12. MISCELLANEOUS PROVISIONS.
(a) NOTICES. All notices, requests, demands or other
communications required by or otherwise with respect to this Agreement will
be in writing and will be deemed to have been duly given to any party (i)
when delivered personally (by courier service or otherwise), (ii) when
delivered by telecopy and confirmed by return telecopy, (iii) on the business
day after the date sent by a nationally recognized overnight courier service,
or (iv) seven days after being mailed by first-class, registered or certified
mail, postage prepaid and return receipt requested, in each case to the
applicable addresses set forth below:
If to DCC/Operator:
Dobson Communications Corporation
13439 N. Broadway Extension
Oklahoma City, OK 73114
Attention: Everett Dobson, President
With a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
Attention: Joseph A. Kuzneski, Jr., Esquire
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<PAGE>
If to AirTouch:
AirTouch Cellular
Legal Department
2999 Oak Road
Walnut Creek, CA 94596
Attention: Vice President-Legal
or to such other address or telecopy number as any party may have furnished
to the other parties in writing in accordance with this Section 11(a).
(b) GOVERNING LAW. This Agreement will be governed by California
law without regard to the conflicts of laws principles thereof.
(c) AMENDMENTS. Except as provided herein, this Agreement may be
modified or amended only by an instrument in writing signed by the parties
hereto.
(d) ENTIRE AGREEMENT. This Agreement, the Exhibits and the
Trademark License Agreement constitute the entire agreement between the
parties with respect to the matters covered hereby and supersede all prior
agreements, understandings, offers and negotiations, oral or written, with
regard to the subject matter hereof. In the event of any conflict between the
terms of this Agreement and the terms of the Trademark License Agreement, the
terms of the Trademark License Agreement shall control.
(e) ASSIGNMENT: SUCCESSORS AND ASSIGNS.
(i) Except as set forth in subsection 12(e)(ii) below, no
party will be entitled to sell, assign, or transfer this Agreement or any
right or obligation hereunder without the written consent of the other party.
(ii) AirTouch may assign this Agreement to any Affiliate of
AirTouch or of AirTouch Communications, Inc. or any successor thereto whether
by merger, spin-off or otherwise (such Affiliates and successors are
sometimes individually and collectively referred to herein as a "Permitted
Assignee"). Operator may assign this Agreement to any Affiliate of DCC in
connection with the transfer, sale, assignment or other disposition of all or
substantially all of the assets of Operator's System (including Operator's
FCC License for Operator's Service Area) to such Affiliate and may assign its
rights under this Agreement to any lender as collateral security for
financing provided to Operator or DCC. If this Agreement is assigned by
AirTouch or by Operator in accordance with the provisions of this subsection
12(e)(ii), the assignor will be released from its obligations hereunder upon,
and to the extent of, the assumption of such obligations by the assignee. In
the event all of AirTouch's prospective obligations hereunder are assumed by
an assignee, all references herein to AirTouch will be deemed references to
the Person that assumes the prospective obligations of AirTouch hereunder
after the date of such assumption and in the event all of Operator's
prospective obligations hereunder are assumed by an Affiliate of DCC all
references herein to Operator will be deemed references to the Affiliate of
DCC that assumes the prospective obligations of Operator hereunder after the
date of such assumption; each such assignee shall be required to execute and
deliver
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<PAGE>
a counterpart of this Agreement as of the date of the assignment and shall be
deemed to have made the representations and warranties of its assignor
contained herein as of the date thereof.
(iii) Subject to subsections (i) and (ii) above, all rights
and duties of the parties hereunder will inure to the benefit of their
respective successors and assigns.
(f) SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof (unless
such prohibition on unenforceability materially alters the intent of the
parties or the relative economic benefits of the parties, in which case the
materially affected party will have the right to terminate this Agreement),
and any such prohibition or unenforceability in any jurisdiction will not
invalidate or render unenforceable such provision in any other jurisdiction.
(g) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which will
constitute one and the same instrument, and will become effective when one
counterpart has been signed by each of the parties hereto and delivered, via
facsimile transmission or otherwise, to the other party.
(h) THIRD PARTY BENEFICIARIES. Nothing contained in this Agreement
is intended to, or will, confer upon any Person other than the parties hereto
any rights or remedies hereunder.
(i) WAIVER. The observance of any term of this Agreement may be
waived only with the written consent of the party against whom such waiver is
sought to be enforced. No waiver by any party of any default with respect to
any provision, condition or requirement hereof will be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof.
(j) SETOFF. AirTouch and Operator will have the right to set off
any amounts it would otherwise be required to remit to the other under this
Agreement or otherwise against amounts due to it hereunder.
(k) NO AGENCY OR OTHER RELATIONSHIP. Neither Operator nor DCC will
have any authority, express or implied, to act as an agent of AirTouch, the
Affiliated Systems or any of their respective Affiliates for any purpose; and
AirTouch will have no authority, express or implied, to act as agent of
Operator or DCC or their respective Affiliates. Further, nothing in this
Agreement will be construed to create a partnership, agency, reseller,
franchise or other relationship between the parties, or to make either party
liable for any debts or obligations incurred by the other.
(l) INSURANCE.
(i) REQUIREMENTS. Operator will procure, and will maintain
in full force and effect, at Operator's expense, an insurance policy or
policies protecting Operator against any demand or claim with respect to
personal injury, death or property damage, or any loss, liability, or expense
whatsoever arising or occurring upon or in connection with Operator's
business, the minimum forms and amounts of which are set forth in EXHIBIT D.
All insurance policies must provide for severability of interest or cross
liability; designate AirTouch and its partners, officers, directors,
employees and agents as additional insureds (except workers' compensation);
provide that such insurance is non-contributing primary coverage with respect
to all insureds; and contain a waiver of subrogation.
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(ii) CERTIFICATES OF INSURANCE. On the Effective Date and
thereafter at least 30 days prior to the expiration of any such policy or
upon the request of AirTouch, Operator shall deliver to AirTouch certificates
of insurance evidencing the proper coverage with limits not less than those
required hereunder. All certificates will expressly provide that not less
than 30 days' prior written notice shall be given AirTouch in the event of
material alteration to, or cancellation of, the coverages evidenced by such
certificates.
(m) DISPUTE RESOLUTION. Any dispute, controversy or claim between
the parties hereto arising out of or relating to this Agreement or any
breach, termination or claim of invalidity of this Agreement will be resolved
as follows:
(i) The dispute shall first be referred to the president of
Operator or DCC, as applicable, and AirTouch's general manager for the
Southern California Region (or their respective designees). Such Persons will
confer in an attempt to reach a resolution.
(ii) Any dispute which is not resolved by such Persons
(other than a dispute, controversy, or claim arising out of or in connection
with the exercise by any party of its right to approve or consent to any
action under this Agreement, which will not be appealable to, or reviewable
by, any court or arbitrator) within 30 days of referral of such dispute shall
be resolved by binding arbitration. To the fullest extent permitted by law,
the arbitration will be conducted in accordance with the United States
Arbitration Act (Title 9, U.S. Code) and under the Commercial Rules of the
American Arbitration Association ("AAA"), and not the law of any state
relating to procedure. The arbitration shall be administered by the AAA and,
notwithstanding Rule 11 of the AAA Commercial Rules or any other rule, the
locale of the hearing will be in Los Angeles, California unless all parties
to the arbitration agree to a different locale. A single neutral arbitrator
will preside over the arbitration and decide the dispute, controversy or
claim. The parties will cooperate with each other in causing the arbitration
to be held in as efficient and expeditious a manner as practicable and in
this connection furnish such documents and make available such of their
respective personnel as the arbitrator may request. Any controversy
concerning whether an issue is arbitrable will be determined by the
arbitrator. The arbitrator will have the power to set discovery limits, to
award specific performance, and to affirm or reject the exercise of
termination rights, but will not have the authority to award damages other
than actual damages. The decision of the arbitrator will be binding and
nonappealable. Judgment upon the arbitration award may be entered in any
court having jurisdiction. The arbitrator will render a decision within 90
days after accepting an appointment to serve as arbitrator unless the parties
otherwise agree or the arbitrator makes a finding that a party has carried
the burden of showing good cause for a longer period.
(n) EQUITABLE RELIEF. The parties agree that notwithstanding
anything to the contrary contained herein, any party may seek a temporary
restraining order or a preliminary injunction from any court of competent
jurisdiction in order to prevent immediate and irreparable injury, loss or
damage pending the selection of an arbitrator to render a decision on the
ultimate merits of any dispute, controversy or claim.
(o) ATTORNEYS' FEES. The "non-prevailing party" in any arbitration
conducted hereunder (as determined by the arbitrator) will pay all costs and
expenses incurred by the "prevailing party" in preparing for and conducting
the arbitration. If a party commences an action in court against another
party with respect to this Agreement, then the prevailing party in such
action (including appeals) will
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<PAGE>
be entitled to an award of reasonable costs and expenses of litigation,
including attorneys' fees, to be paid by the non-prevailing party. In the
event the parties settle a dispute, no party will be deemed a "prevailing
party."
(p) DOCUMENTS. Each party agrees to execute and, if necessary file
with the appropriate governmental entities, such documents as any other party
reasonably requests in order to carry out the purposes of this Agreement.
(q) FORCE MAJEURE. Neither Operator nor AirTouch will be liable or
deemed to be in default for a delay in or failure of performance of its
obligations, that results from any of the following causes beyond the
reasonable control of such party: strikes, work stoppages, shortages of
equipment, supplies or energy, malfunction or breakdown of a third Person's
equipment or telecommunications network, war, insurrection, acts of God or
the public enemy, or governmental action (whether in its sovereign or
contractual capacity). Any delay resulting from any such cause will extend
performance accordingly or excuse performance, in whole or in part, for such
time as may be reasonable; provided, however, that (i) such causes will not
excuse payment of any amounts due or owed at the time of such occurrence or
thereafter, (ii) the party asserting any such cause will promptly commence
and diligently pursue action to remedy its inability or failure to perform
hereunder, and (iii) in no event will such causes extend or excuse
performance for more than 120 consecutive days. If such failure of
performance has not been cured by the end of such 120 day period, the other
party may terminate this Agreement without further notice. Any party
asserting this Section 11(q) will promptly notify the other parties of the
occurrence and nature of any such cause and will thereafter regularly inform
the other parties of the progress of actions to remedy its inability or
failure to perform hereunder.
(r) OPERATOR RESPONSIBILITY. Operator will be solely responsible
for any and all costs, expenses, taxes and other liabilities incurred in
connection with its operations.
(s) COVENANTS AND ACKNOWLEDGMENTS.
(i) LEGAL COMPLIANCE. Operator agrees to comply with all
applicable laws and regulations, including but not limited to the rules and
regulations promulgated by the FCC under the Communications Act of 1934, as
amended, and to obtain and maintain all appropriate government Licenses
necessary to the operation of Operator's System. Operator agrees to notify
AirTouch in writing within five days after Operator becomes aware of the
commencement of any action, suit or proceeding, or of the issuance of any
order, writ, injunction, award or decree of any court, agency or other
governmental instrumentality, which could have a material effect on the
operations of the Affiliated Systems or the operations or financial condition
of Operator.
(ii) NO WARRANTY. AirTouch expressly disclaims the making
of, and Operator acknowledges that it has not received from AirTouch or any
Person acting on AirTouch's behalf, any warranty or guarantee, express or
implied, as to the extent of the market for Products or Services, or the
earnings or success resulting from Operator's operation of Operator's System
pursuant to this Agreement, or any representation, inducement, promise or
agreement, orally or otherwise, respecting this Agreement, which is not set
forth herein.
(iii) TELECOMMUNICATIONS ACT. Operator agrees not to take any
actions that would, in the reasonable judgment of AirTouch, cause Operator,
AirTouch, or any of their respective Affiliates to be in violation of the
Telecommunications Act of 1996, as amended.
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<PAGE>
(iv) NO OTHER DUTIES. DCC and Operator acknowledge and agree
that AirTouch will have no duties to Operator in the course of performance of
this Agreement except as specifically provided herein.
(v) NO PROMISE OF RENEWAL. DCC and Operator acknowledge
that the term of this Agreement is set forth in Section 9(a) hereof with no
promise or representation as to the renewal thereof or the execution of a new
Agreement.
(t) SURVIVAL. The provisions of Sections 4 and 7 will survive the
termination or expiration of this Agreement without limitation except as
provided therein. All indemnities and payment or reimbursement obligations
made hereunder will survive the termination or expiration of this Agreement
until expiration of the longest applicable statute of limitations (including
extensions and waivers) with respect to the matter for which a party would be
entitled to be indemnified, paid or reimbursed, as the case may be.
(u) EFFECTIVENESS. The provisions of Articles 2, 3 and 4 and
Section 11(l) will be effective only on the Effective Date. This Agreement
will terminate automatically in the event of the termination of the Purchase
Agreement prior to the Effective Date. The parties hereto agree to execute
and deliver the Trademark License Agreement and the Roaming Agreements on the
Effective Date.
(v) EXPENSES. Each party to this Agreement will bear its
respective expenses incurred in connection with the negotiation, preparation
and execution of this Agreement, including all fees and expenses of agents,
representatives, counsel and accountants.
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(w) INCOME TAXES. Each party to this Agreement shall be
responsible for paying its own federal, state and local income taxes.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
DOBSON COMMUNICATIONS CORPORATION,
an Oklahoma corporation
By /s/ EVERETT R. DOBSON
-------------------------------
Its CHAIRMAN AND CEO
-------------------------------
DOBSON CELLULAR OF IMPERIAL, INC.
an Oklahoma corporation
By /s/ G. EDWARD EVANS
-------------------------------
Its PRESIDENT
-------------------------------
AIRTOUCH CELLULAR,
a California corporation
By
-------------------------------
Its
-------------------------------
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EXHIBIT A
Form of Trademark License Agreement
<PAGE>
TRADEMARK LICENSE AGREEMENT
- --------------------------------------------------------------------------------
THIS TRADEMARK LICENSE AGREEMENT ("Agreement"), dated as of July 31,
1998, is between AIRTOUCH COMMUNICATIONS, INC., a Delaware corporation
("Licensor") and DOBSON CELLULAR OF IMPERIAL, INC., an Oklahoma corporation
("Licensee").
WITNESSETH:
WHEREAS, Licensor is the owner of state and federal trademark
applications for the marks AIRTOUCH and AIRTOUCH DESIGN, as defined below;
WHEREAS, AirTouch Cellular, a California corporation and a wholly owned
subsidiary of Licensor, Dobson Communications Corporation, an Oklahoma
corporation, and Licensee, have entered into an Affiliation Agreement dated
as of July 31, 1998 (the "Affiliation Agreement") pursuant to which
Operator's System will offer Services (each as defined in the Affiliation
Agreement) exclusively under the Licensed Marks, as defined below;
WHEREAS, Licensor believes that Licensee provides high quality goods and
services and further believes that Licensee will continue providing high
quality goods and services under the Licensed Marks; and
WHEREAS, Licensor wishes to license to Licensee, and Licensee wishes to
obtain from Licensor, the right to use certain trademarks subject to the
restrictions stated below;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, the parties hereto agree as follows:
I. DEFINITIONS
A. "LICENSED MARKS" means the trade name, "AirTouch Cellular", the
AIRTOUCH mark, and the AIRTOUCH DESIGN mark, as described in attached
Exhibit 1.
B. "PRODUCTS" means subscriber equipment offered for sale or lease and
any goods and other property ancillary thereto.
<PAGE>
TRADEMARK LICENSE AGREEMENT
- --------------------------------------------------------------------------------
C. "SERVICES" means commercial mobile radio services provided by Systems
(as defined in the Affiliation Agreement), including, without
limitation, voice and data transport, and the services ancillary
thereto.
D. "TERRITORY" means the rural service area designated by the FCC as
Cellular Market No. California 7 (California RSA #7).
II. LICENSE GRANT
A. SCOPE. Effective as of the date hereof and subject to the terms and
conditions of this Agreement, Licensor grants to Licensee a
royalty-free, nonexclusive, nontransferable, revocable license to use
the Licensed Marks in connection with the Products and Services and
the sale and marketing of the Products and Services in the Territory.
Licensor retains the right to concurrently use or license others to
use the Licensed Marks in the Territory in connection with any goods
and/or services. Licensee is expressly prohibited from adopting a
corporate or partnership name that includes, or would be confusingly
similar to, the Licensed Marks. Licensee may, only if required by
California law, file a fictitious business name statement using the
words AirTouch Cellular, but agrees to cancel and/or withdraw such
filing when this Agreement ends or is terminated.
B. QUALITY CONTROL. All uses of the Licensed Marks must appear identical
in substance to the Licensed Marks as they appear in Exhibit 1 and the
Manual as defined below. Licensee shall employ the guidelines stated
in the attached "Corporate Identity Program" (the "Manual"), and any
other reasonable standards that Licensor may adopt from time to time
and of which Licensee has been notified, when preparing any materials
in which the Licensed Marks are displayed. Prior to adopting any use
of the Licensed Marks, including without limitation, the use of the
Licensed Marks on documents, including packaging and labels of any
kind, Licensee shall deliver, at its own expense, one sample of each
manner in which the Licensed Marks are to be used to: Trademark
Counsel, AirTouch Communications, Inc., One California Street, 21st
Floor, San Francisco, CA 94111 ("AirTouch Quality Control"). For
purposes of this Agreement, a sample of a document means the document
itself, and a sample of a Product means either the Product or a very
clear photograph of the Product. AirTouch Quality Control shall have
ten business days from the date it receives the samples to approve or
disapprove of the sample, unless otherwise mutually agreed. The
2
<PAGE>
TRADEMARK LICENSE AGREEMENT
- --------------------------------------------------------------------------------
method of delivery shall be by overnight mail and the samples shall be
deemed received the next working day after Licensee sends them. In the
event that AirTouch Quality Control disapproves any sample, then
Licensee shall not employ that sample and shall immediately destroy
all other like samples, copies, and any other media bearing the
disapproved manner of use of the Licensed Marks.
C. RIGHT TO INSPECT. In addition to the foregoing, representatives of
Licensor shall have the right, at all reasonable times, to inspect the
manner in which Licensee uses the Licensed Marks and the quality of
the Products on which the Licensed Marks are affixed. Such inspection
may, at the election of Licensor, be by personal visit to Licensee or
by written request for information or samples. If the inspection is
by request for samples, then the entity conducting the inspection
shall reimburse Licensee for the cost of shipping said samples.
Licensee agrees to cooperate with such inspections. In the event that
Licensor determines that one or more manners in which Licensee uses
the Licensed Marks are inconsistent with the Manual or other standards
adopted by Licensor and of which Licensee has notice, or that the
quality of any of the Products on which the Licensed Marks are affixed
is not consistent with maintaining the goodwill inherent in the
Licensed Marks, then Licensor shall so notify Licensee, and Licensee
shall immediately cease use of any such disapproved usage of the
Licensed Marks and shall destroy all copies, samples and other media
that bear the disapproved usage. Within thirty (30) days after notice
from Licensor that a particular usage has been disapproved, Licensee
shall certify in writing to the person providing the notice that
Licensee has destroyed all media that bear said usage.
D. RECOGNITION OF OWNERSHIP. Licensee recognizes Licensor's title to the
Licensed Marks, and shall not at any time do or suffer to be done any
act or thing which will in any way impair the rights of Licensor in
and to the Licensed Marks or the goodwill inherent in said Licensed
Marks. It is understood that Licensee shall not acquire and shall not
claim any title to the Licensed Marks adverse to Licensor by virtue of
the license granted herein, or through Licensee's use of said Licensed
Marks, it being the intention of the parties that all use of the
Licensed Marks by Licensee shall at all times inure to the benefit of
Licensor. Licensee is estopped from challenging the validity of the
Licensed Marks or from setting up any claim adverse to Licensor.
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<PAGE>
TRADEMARK LICENSE AGREEMENT
- --------------------------------------------------------------------------------
E. SALES OUTSIDE TERRITORY. Licensee agrees not to sell any Products
bearing the Licensed Marks with knowledge that such products are to be
resold outside the Territory. Such sales shall constitute a breach of
this Agreement if made with Licensee's knowledge. If Licensee learns
of any such sales, it shall use its best efforts to obtain possession
of said Products and to prevent such sales in the future, including
refusing to sell Products bearing the Licensed Marks to the persons or
entities responsible for the resale outside the Territory.
III. INFRINGEMENTS
A. INFRINGEMENT BY OTHERS. Licensee shall review regularly the market for
Products and Services in the Territory and shall inform Licensor
promptly of any possible infringement of, or unfair competition
affecting, the Licensed Marks which comes to the attention of
Licensee. In the event affirmative action is taken against any such
possible infringement or act of unfair competition, Licensee agrees to
assist, in whatever reasonable manner is requested, and at the expense
of the requester. Recovery of damages resulting from any such action
shall be solely for the account of Licensor. Licensee shall have no
right to initiate any action to defend the Licensed Marks.
B. ACTIONS AGAINST LICENSEE OR LICENSOR. Should either party be involved
as a defendant in judicial action under the trademark laws or with
regard to an act of unfair competition in the Territory with regard to
the Licensed Marks, the parties agree to cooperate with each other to
the greatest possible extent in defending such an action.
IV. TERM AND TERMINATION
A. TERM. This Agreement will have an initial term of twenty 20 years from
the date hereof. Thereafter, the term will automatically be extended
for additional five-year periods unless either party makes a valid
election not to renew this Agreement. An election not to renew will be
valid only if in writing and delivered to the other party at least one
year prior to the expiration of the then current term. In the event of
a termination under this Paragraph, Licensee shall immediately cease
implementation of any new or expanded uses of the Licensed Marks and
shall discontinue existing uses of the Licensed Marks in accordance
with the procedure stated in Paragraph IV E below.
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<PAGE>
TRADEMARK LICENSE AGREEMENT
- --------------------------------------------------------------------------------
B. OPTIONAL TERMINATION. If Licensee fails to use one or more of the
Licensed Marks in the Territory within any given term that this
Agreement is in effect, then Licensor may, in its sole discretion,
terminate this Agreement as to the unused Licensed Mark or Marks. In
the event of a termination under this Paragraph, Licensee shall
immediately cease implementation of any new or expanded uses of the
Licensed Marks and shall discontinue existing uses of the Licensed
Marks in accordance with the procedure stated in Paragraph IV E below.
C. TERMINATION FOR UNAUTHORIZED USE. If Licensee uses the Licensed Marks
for purposes other than the sale of Products and Services or promoting
the sale of Products and Services within the Territory or if Licensee
fails to use the Licensed Marks in accordance with Section II above or
any other requirements of this Agreement, then Licensor shall notify
Licensee of such failure by written notice sent by overnight courier
or facsimile, including a detailed statement of the improper use. If
Licensee fails to correct such improper use within ten (10) days after
the date of such notice, then Licensor may seek an injunction to
compel Licensee to discontinue the specific unauthorized use of the
Licensed Marks and/or terminate this Agreement by written notice sent
by overnight courier or facsimile to Licensee. In the event of such
termination, Licensee shall immediately cease implementation of any
new or expanded uses of the Licensed Marks and shall discontinue
existing uses of the Licensed Marks in accordance with the procedure
stated in Paragraph IV E below.
D. TERMINATION OF AFFILIATION AGREEMENT. If the Affiliation Agreement
terminates in accordance with the terms and conditions thereof, then
Licensor may, in its sole discretion, provide written notice of
termination of this Agreement sent by overnight courier or facsimile.
The provisions of Paragraph IV E below shall govern Licensee's
transition away from the Licensed Marks.
E. PROCEDURE UPON TERMINATION: LICENSED MARKS REMOVAL PERIOD. Upon
termination of this Agreement pursuant to Paragraphs IV A through D
above, Licensee shall have three months in which to remove the
Licensed Marks from all advertisements, packaging, labels or other
documentation created by Licensee. Within six months after
termination of this Agreement pursuant to Paragraphs IV A through D
above, Licensee shall remove the Licensed Marks from all Products and
any other tangible items on which the Licensed Marks have been affixed
5
<PAGE>
TRADEMARK LICENSE AGREEMENT
- --------------------------------------------------------------------------------
or used by Licensee. At the end of each such period, Licensor shall be
allowed reasonable access to Licensee's premises to observe and
inspect to insure that Licensee is in compliance with the above
requirements and that the Licensed Marks are no longer in use.
Continued use of the Licensed Marks beyond the above specified removal
periods shall constitute infringement of the Licensed Marks by
Licensee and shall give rise to Licensor's remedy of specific
performance in accordance with Paragraph IV F. Licensee shall not
adopt any trade name, trademarks, or service marks that are
confusingly similar to the Licensed Marks in the event of termination
of this Agreement. Licensee may not, after termination of this
Agreement, use the Licensed Marks in any manner, including without
limitation, indicating that Licensee was formerly called "AirTouch" or
"AirTouch Cellular."
F. LICENSOR'S REMEDY OF SPECIFIC PERFORMANCE. Licensee acknowledges that
its failure to cease use of the Licensed Marks in accordance with the
provisions of this Agreement after termination hereof will result in
immediate and irreparable harm to Licensor for which there is no
adequate remedy at law. Licensor shall be entitled to bring an action
or proceeding for specific performance, injunctive relief and/or other
equitable relief to compel Licensee to discontinue the infringement of
the Licensed Marks, to cease and desist all unauthorized use of the
Licensed Marks, to take all affirmative acts necessary to ensure
discontinuance of use of the Licensed Marks after termination of this
Agreement, and to obtain such relief as may be necessary and proper.
G. BREACH. If Licensee breaches any provision of this Agreement, Licensor
may immediately give written notice of intention to terminate within
thirty days after the date of the notice, and, unless Licensee
notifies Licensor in writing of a correction of such breach within
said period, this Agreement shall automatically terminate at the
expiration of the thirty day notice period. Licensor may inspect
Licensee's premises during the period sixty to ninety days after this
Agreement has terminated to ensure that Licensee is no longer using
the Licensed Marks. Licensor retains all of its rights and remedies
to prevent Licensee from continuing to use the Licensed Marks after
termination of this Agreement due to breach.
H. NO DAMAGES. Notwithstanding any other provision in this or any other
agreement between the parties, should this Agreement be terminated for
6
<PAGE>
TRADEMARK LICENSE AGREEMENT
- --------------------------------------------------------------------------------
any reason, neither party shall be able to claim from the other party
any actual, consequential or incidental damages.
I. CONTINUING OBLIGATIONS. Termination of this Agreement for any reason
shall not affect those obligations which, from the context hereof, are
intended to survive termination of this Agreement.
J. NO WAIVER. Any waiver by either party of a breach of any term or
condition of this Agreement shall not be considered as a waiver of any
subsequent breach of the same or any other term or condition thereof.
K. ATTORNEYS' FEES. The prevailing party in any action arising under this
Agreement shall be entitled to collect its reasonable attorneys' fees
from the non-prevailing party. In the event that any such action is
resolved by a settlement agreement, then neither party shall be deemed
the "prevailing party" and each party shall be responsible for its own
attorneys' fees. In the event of bankruptcy of one of the parties
hereto, the attorneys' fees of the nondebtor party, incurred in
dealing with a bankruptcy, shall be considered actual pecuniary loss
under 11 USC section 365(b)(1).
V. MISCELLANEOUS
A. PARAGRAPH HEADINGS. The paragraph headings are for convenience only
and shall not be deemed to affect in any way the language of the
provisions to which they refer.
B. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without reference
to choice of law provisions. Selection of California law as the
governing law shall not be deemed to invoke any provision of
California law which would not otherwise be applicable to the
relationship contemplated hereunder. All actions arising under this
Agreement, including without limitation, actions regarding the
interpretation or breach of the Agreement, shall be brought in the
federal or state courts of California.
7
<PAGE>
TRADEMARK LICENSE AGREEMENT
- --------------------------------------------------------------------------------
C. NOTICES. All notices or other communications hereunder to Licensor,
except as otherwise specified above, shall be sent to:
AirTouch Communications, Inc.
Legal Department
One California Street, 21st Floor
San Francisco, CA 94111
Attn: Trademark Counsel
and if to Licensee, shall be sent to:
Dobson Communications Corporation
13439 N. Broadway Extension
Oklahoma City, OK 73114
Attention: Everett Dobson, President
with a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
Attention: Joseph A. Kuzneski, Jr.
Any such notice or communication shall be in writing and shall be
deemed to have been received on the day of delivery if sent via
facsimile with confirmation of valid transmission, or after seven
calendar days from mailing if sent via certified mail, postage prepaid
or on the next business day if sent by overnight courier. Either party
may designate a new address to which notices or other communications
may be sent by giving notice to the other party.
D. SEVERABILITY. If any provision of this Agreement shall be held illegal
or invalid by any court, this Agreement shall be construed and
enforced as if such illegal or invalid provision had not been
contained herein, and this Agreement shall be deemed an agreement of
the parties to the full extent permitted by law. If any provision
shall be declared invalid or unenforceable because of its breadth,
scope or duration, such provision shall be severed from the rest of
this Agreement, and the remaining portions of the Agreement shall
remain valid and enforceable.
8
<PAGE>
TRADEMARK LICENSE AGREEMENT
- --------------------------------------------------------------------------------
E. ASSIGNABILITY. Licensee may not assign or sublicense any of its rights
or delegate any of its duties under this Agreement. Any attempted
assignment, sublicense, or delegation by Licensee shall be null and
void.
F. COMPLETE AGREEMENT. This Agreement, together with the Affiliation
Agreement, embodies all of the terms and conditions of the agreement
between the parties with respect to the matters set forth herein.
There are no statements, terms, conditions, representations, or
warranties which have not been embodied herein.
G. MODIFICATIONS. This Agreement may not be modified or amended, except
in a writing signed on behalf of both parties by their duly authorized
representatives which refers specifically to this Agreement.
H. FORCE MAJEURE. Neither party shall be in default under this Agreement
by reason of its delay in the performance of or failure to perform any
of its obligations herein if such delay or failure is caused by
strikes, acts of God or the public enemy, riots, incendiaries,
interference by civil or military authorities, compliance with
governmental laws, rules, and regulations, delays in transit or
delivery, or any fault beyond its control or without its fault or
negligence.
I. WAIVER. The failure of either party at any time to require performance
of any provision of this Agreement by the other party shall not be
deemed a waiver and shall not deprive that party of its full right to
require such performance in a particular instance or at any other
time. Any waiver must be in a writing executed by a duly authorized
representative of the waiving party.
J. DISPUTE RESOLUTION. Any dispute regarding this Agreement, including
without limitation, the interpretation, performance, or termination of
this Agreement, shall be handled pursuant to the dispute resolution
provisions contained in the Affiliation Agreement.
SIGNATURE ON FOLLOWING PAGE
9
<PAGE>
TRADEMARK LICENSE AGREEMENT
- --------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized representatives as of the day and year
first set forth above.
LICENSOR:
AirTouch Communications, Inc.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
LICENSEE:
Dobson Cellular of Imperial, Inc.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
10
<PAGE>
EXHIBIT 1 -- LICENSED MARKS
1. The AIRTOUCH mark referred to in Paragraph I A above shall be used only
in the following manner:
AIRTOUCH-TM- or AirTouch-TM-
Licensee must use fonts from the Times or Univers families when this mark is
used on Products or in advertising for Products.
2. The AIRTOUCH DESIGN mark referred to in Paragraph IA above shall conform
to the Manual referred to in Paragraph II B above. Licensee shall always
place the letters "TM" as a superscript directly behind the letter "H" in the
AIRTOUCH DESIGN or such other designation as Licensor may direct. Licensee
may not vary the typeface, spacing, or general structure or configuration of
the AIRTOUCH DESIGN mark. Licensee may employ different sizes of the
AIRTOUCH DESIGN mark so long as those different sizes conform the Manual. Use
of color in connection with the AIRTOUCH DESIGN must also conform to the
Manual.
3. The "AirTouch Cellular" trade name referred to in Paragraph I A above
shall be used on in the following manner:
AIRTOUCH CELLULAR or AirTouch Cellular
Licensee must use fonts from the Times or Univers families when this trade
name is used on Products or in advertising for Products.
4. Licensee acknowledges that the Licensed Marks as described in this
Exhibit 1 may be modified, discontinued or altered from time to time by
Licensor, at Licensor's sole discretion. Licensor shall notify Licensee in
writing of any such changes in the Licensed Marks and Licensee agrees to
comply with the changes set forth in such notice within the guidelines
established therein.
<PAGE>
EXHIBIT B
NETWORK PERFORMANCE STANDARDS
A. ANALOG SERVICE.
DROPPED CALLS:
On an annual basis, dropped calls as a percentage of total completed calls
(system wide) must not exceed 2% as measured on a bouncing (sigma) busy
hour basis.
BLOCKED CALLS:
On an annual basis, blocked calls as a percentage of total call attempts
(system wide) must not exceed 3% as measured on a bouncing (sigma) busy
hour basis.
SYSTEM AVAILABILITY:
System availability must not drop below 99% as measured by the following
equation on an annual basis:
The amount of time that each sector is up, in minutes, is added together.
That number is divided by the number of sectors, times 60 minutes per hour,
times 24 hours per day, times 100. This equates to system availability as a
percentage of total minutes in a day.
VOICE QUALITY: (No voice quality standards available for system design at this
time)
MINIMUM PLANS, PRODUCTS, FEATURES AND SERVICES:
Voice transport, Call forwarding, Call waiting, Conference calling,
Automatic call delivery to roaming customers, Voicemail
FRAUD CONTROL
Operator will use authenticatable subscriber and network equipment and will
ensure that only authenticatable subscriber equipment is offered through
the direct and indirect distribution channels controlled by Operator
B. DIGITAL SERVICE.
TECHNOLOGY: CDMA
[Vendor: _______]
DROPPED CALLS:
On an annual basis, dropped calls as a percentage of total completed calls
(system wide) must not exceed 3% as measured on a bouncing (sigma) busy
hour basis.
BLOCKED CALLS:
On an annual basis, blocked calls as a percentage of total call attempts
must not exceed 2% as measured on a bouncing (sigma) busy hour basis.
<PAGE>
SYSTEM AVAILABILITY:
System availability must not drop below 99% as measured by the following
equation on an annual basis:
The amount of time that each sector is up, in minutes, is added together.
That number is divided by the number of sectors, times 60 minutes per hour,
times 24 hours per day, times 100. This equates to system availability as a
percentage of total minutes in a day.
VOICE QUALITY: (No voice quality standards available for system design at this
time)
MINIMUM PLANS PRODUCTS, FEATURES AND SERVICES:
Voice transport, Call forwarding, Call waiting, Conference calling,
Automatic call delivery to roaming customers, Voicemail, Caller ID, Display
(text) messaging with notification
FRAUD CONTROL:
Operator will ensure that all customary authentication hardware and
software is incorporated into the network
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CUSTOMER SERVICE STANDARDS
Customer satisfaction rating:
Operator must not underperform the median performance for the AirTouch
System operating in the San Diego MSA by more than 10% in each of the
following measures as determined in any Survey: (1) call clarity, (2)
coverage, (3) service reliability, (4) bill timing and accuracy, (5)
overall satisfaction and (6) willingness to switch carriers.
Availability and responsiveness of customer service representatives:
Calls to customer service are answered within an average of 30 seconds
(Average Speed of Answer) or less.
Customer service representatives must be available to respond to customer
inquiries 24 hours per day, 7 days per week and 365 days per year.
The average rate of abandoned calls to customer service must be less than
6% of calls received as measured on an annual basis.
<PAGE>
INTERCARRIER ROAMER SERVICE AGREEMENT
THIS AGREEMENT, dated as of the 31st day of July, 1998, is entered
into by and between AirTouch Cellular, sometimes referred to as "ATC", and
Dobson Cellular of Imperial, Inc., sometimes referred to as "Dobson", on behalf
of themselves and those legal entities set forth in Appendix I, which is
attached hereto and hereby incorporated herein. The entities listed in Appendix
I as the "ATC Licensees and Permittees" are herein referred to collectively as
the "ATC Markets" or individually as an "ATC Market". The entities listed in
Appendix I as the "Dobson Licensees and Permittees" are herein referred to
collectively as the "Dobson Markets" or individually as a "Dobson Market". The
ATC Markets and Dobson Markets may be generically referred to herein as
"Markets" or the "Market". ATC and Dobson are sometimes herein referred to
collectively as the "Parties" and individually as a "Party".
RECITAL
WHEREAS, ATC and Dobson have entered into an Affiliation Agreement dated as
of July 31, 1998 (the "Affiliation Agreement") pursuant to which "Operator's
System" will offer "Products" and "Services" exclusively under the "Licensed
Marks" (each as defined in the Affiliation Agreement); and
WHEREAS, the Parties desire to make arrangements to facilitate the
provision of wireless service to Roamers in accordance with the terms and
conditions of this Agreement and Appendices I-III, which are attached hereto and
hereby incorporated herein. The "General Terms and Conditions for Roaming,"
attached hereto as Appendix II, and "Operating Procedures," attached hereto as
Appendix III are sometimes referred to herein as the "General Terms".
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein set forth
and intending to be legally bound hereby, the Parties do hereby agree as follows
1. Under the conditions set forth herein, to be bound by the General
Terms attached hereto, as they may be properly amended from time to time.
2. The Home Carrier shall be liable to the Serving Carrier in accordance
with Paragraph 2.1 of Appendix II for all of the service and pass-through
charges for all calls chargeable to the Home Carrier's customers (including the
customers of its resellers) and invoiced by the Serving Carrier to the Home
Carrier in accordance with Appendix III. "Home Carrier" and "Serving Carrier"
are defined in Appendix II.
3. In the event that roaming becomes technically or administratively
impracticable in either Party's Market(s), or if an unacceptable level of
unauthorized use occurs, either Party may suspend roamer service to its
customers in the manner specified in Paragraph 4.2 of Appendix II. The Serving
Carrier, when communicating with the customers of the Home Carrier, will use an
explanation for the suspension of service mutually agreed upon by the Parties.
In the specific event that the impracticability of roamer service is caused by
the testing or commercial service of a carrier other than the Serving Carrier
operating in the area served by the Serving Carrier and where the Serving
Carrier is not, in any respect, responsible for the impracticability, the Home
Carrier may include with its notice to its customers the following statement:
"NOTICE
Previously you have been able to obtain service as a roamer in [Serving
Carrier's Affected Service Area] on [Serving Carrier's] system. Presently, you
may experience difficulty in using your service in [Serving Carrier's Affected
Service Area]. This is because [interfering carrier] is now [testing/operating]
its wireless system in [Serving Carrier's Affected Service Area], and the
difficulty is not the fault of [Serving Carrier]."
2
<PAGE>
INTERCARRIER ROAMER SERVICE AGREEMENT
THIS AGREEMENT, dated as of the 31st day of July, 1998, is entered
into by and between AirTouch Cellular, sometimes referred to as "ATC", and
Dobson Cellular of Imperial, Inc., sometimes referred to as "Dobson", on behalf
of themselves and those legal entities set forth in Appendix I, which is
attached hereto and hereby incorporated herein. The entities listed in Appendix
I as the "ATC Licensees and Permittees" are herein referred to collectively as
the "ATC Markets" or individually as an "ATC Market". The entities listed in
Appendix I as the "Dobson Licensees and Permittees" are herein referred to
collectively as the "Dobson Markets" or individually as a "Dobson Market". The
ATC Markets and Dobson Markets may be generically referred to herein as
"Markets" or the "Market". ATC and Dobson are sometimes herein referred to
collectively as the "Parties" and individually as a "Party".
RECITAL
WHEREAS, ATC and Dobson have entered into an Affiliation Agreement dated as
of July 31, 1998 (the "Affiliation Agreement") pursuant to which "Operator's
System" will offer "Products" and "Services" exclusively under the "Licensed
Marks" (each as defined in the Affiliation Agreement); and
WHEREAS, the Parties desire to make arrangements to facilitate the
provision of wireless service to Roamers in accordance with the terms and
conditions of this Agreement and Appendices I-III, which are attached hereto and
hereby incorporated herein. The "General Terms and Conditions for Roaming,"
attached hereto as Appendix II, and "Operating Procedures," attached hereto as
Appendix III are sometimes referred to herein as the "General Terms".
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein set forth
and intending to be legally bound hereby, the Parties do hereby agree as follows
1. Under the conditions set forth herein, to be bound by the General Terms
attached hereto, as they may be properly amended from time to time.
2. The Home Carrier shall be liable to the Serving Carrier in accordance
with Paragraph 2.1 of Appendix II for all of the service and pass-through
charges for all calls chargeable to the Home Carrier's customers (including the
customers of its resellers) and invoiced by the Serving Carrier to the Home
Carrier in accordance with Appendix III. "Home Carrier" and "Serving Carrier"
are defined in Appendix II.
3. In the event that roaming becomes technically or administratively
impracticable in either Party's Market(s), or if an unacceptable level of
unauthorized use occurs, either Party may suspend roamer service to its
customers in the manner specified in Paragraph 4.2 of Appendix II. The Serving
Carrier, when communicating with the customers of the Home Carrier, will use an
explanation for the suspension of service mutually agreed upon by the Parties.
In the specific event that the impracticability of roamer service is caused by
the testing or commercial service of a carrier other than the Serving Carrier
operating in the area served by the Serving Carrier and where the Serving
Carrier is not, in any respect, responsible for the impracticability, the Home
Carrier may include with its notice to its customers the following statement:
"NOTICE
Previously you have been able to obtain service as a roamer in [Serving
Carrier's Affected Service Area] on [Serving Carrier's] system. Presently, you
may experience difficulty in using your service in [Serving Carrier's Affected
Service Area]. This is because [interfering carrier] is now [testing/operating]
its wireless system in [Serving Carrier's Affected Service Area], and the
difficulty is not the fault of [Serving Carrier]."
2
<PAGE>
4. Notices required to be sent pursuant to this Agreement shall comply
with Section X of Appendix II, "Notices and Authorized Representatives", and
shall be addressed as follows:
A. Dobson Communications Corporation
13439 N. Broadway Extension
Oklahoma City, OK 73114
Attention: Everett Dobson, President
and
B. AirTouch Cellular
c/o Director Revenue Assurance
P.O. Box 19750
Irvine, CA 92713
5. ATC (as to its Markets only) and Dobson (as to its Markets only)
represent and warrant that (a) they have been authorized by the ATC Markets and
Dobson Markets, respectively, to enter into this Agreement on such Markets'
behalf and (b) each of the ATC Markets and Dobson Markets is a Licensee or
Permittee of the domestic wireless telecommunications system(s) and station(s)
shown on the attached Appendix I serving the area(s) referred to therein. ATC
and Dobson may hereafter each seek to amend Appendix I of this Agreement to
delete an ATC Market or Dobson Market, upon written notice to the other Party
and with the consent of the other Party, which consent shall not be unreasonably
withheld or delayed. ATC and Dobson may hereafter each seek to amend Appendix I
of this Agreement to add an ATC Market or Dobson Market, respectively, upon
written notice to the other Party and with the consent of the other Party, which
consent may be withheld at the sole discretion of the other Party. Approved
additions and deletions of Markets shall become effective between such
additional Markets and all the existing Parties hereto, as of the date set forth
in an agreed-upon amended Appendix I.
3
<PAGE>
6. This Agreement and the Affiliation Agreement constitute the entire
agreement between the Parties with respect to the subject matter hereof, and
supersedes all other prior agreements and undertakings, both oral and written,
among the Parties, or any of them, with respect to the subject matter hereof.
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of
the date first above written.
AirTouch Cellular Dobson Cellular of Imperial, Inc.
By: By:
----------------------- -----------------------------
Name: Name:
--------------------- ---------------------------
Title: Title:
-------------------- --------------------------
4
<PAGE>
Effective Date
Appendix
July 31,
APPENDIX I TO
INTERCARRIER ROAMER SERVICE AGREEMENT
BETWEEN
AIRTOUCH CELLULAR
and
DOBSON CELLULAR OF IMPERIAL NC.
ATC LICENSEES AND PERMITTEES
<TABLE>
<CAPTION>
SYSTEM STATION MSA/ LICENSE
COVERED SID/BID RSA GRANTED
- -------------------------------------------------------------------
<S> <C>
ARIZONA
AirTouch KNKA205 Phoenix 1/83
Communications
00048
KNKN300 Winslow AZ-3 9/89
01028
KNKQ399 Nogales AZ-6 7/90
30936
TuCell
Ltd Partnership
KNKA286 Tucson 4/85
00140
Coconino, Arizona
RSA Ltd Partnership
KNKN232 Flagstaff AZ-2 6/89
01026
Yuma, Arizona
RSA Ltd Partnership
KNKN256 Yuma AZ-4 7/89
01030
Gila River
Cellular Partnership
KNKN498 Casa Grande AZ-5 3/90
01032
5
<PAGE>
COLORADO
AirTouch
Communications
KNKA220 Denver 6/83
00058
KNKA371 Colorado Springs 10/85
00180
30994
KNKA714 Fort Collins-Loveland 1/98
00336
KNKA526 Greeley 1/98
00360
Colorado RSA No3
Ltd Partnership
KNKN398 Dillon CO-3 12/89
01088
30832
IDAHO
Boise City MSA
Ltd Partnership
KNKA490 Boise City 1/98
00272
Idaho Rsa No. 1
Ltd Partnership
KNKN289 N. Idaho Boundary 9/89
01164
26196
Idaho RSA No. 2
Ltd Partnership
KNKN599 Idaho 5/90
01166
Idaho RSA 3
Ltd Partnership
KNKN400 Lemhi 12/85
01168
AirTouch
Communications
KNKN592 Elmore 4/90
01170
KNKQ387 Butte 12/89
02076
6
<PAGE>
IOWA
Des Moines
Cellular Partnership
KNKA402 Des Moines 6/86
00150
Iowa RSA No. 2
Ltd Partnership
KNKN492 Union 2/90
01214
RSA 7 Ltd
Partnership
KNKN611 Audubon 5/90
01224
Iowa RSA No. 10
Ltd Partnership
KNKN363 Humbolt 11/89
01230
CALIFORNIA
LA SMSA KNKA 209 Los Angeles 6/13/84
Ltd 00002
AirTouch KNKA 235 San Diego 8/13/85
Cellular 00004
Sacramento
Valley KNKA 273 Sacramento 7/22/85
L.P. 00112
KNKA378 Stockton 11/18/86
00224
KNKA397 Modesto 2/04/87
30520
00294 Chico
30180 Sierra
30184 Modoc
Oxnard Ventura
Simi L.P.KNKA 328 Ventura/ 7/22/84
00002 Simi Valley
Redding KNKA 751 Redding 5/26/88
MSA L.P. 30374
7
<PAGE>
NEVADA
Washoe KNKA 462 Reno 1/6/87
Communications Co.
00498 Reno
30186 White Pine
30188 Mineral
30190 Storey
MINNESOTA
Duluth MSA
Ltd Partnership
KNKA439 Des Moines 1/98
00316
AirTouch
Communications
KNKA219 Minneapolis-St. Paul 5/90
00026
KNKN539 Minnesota 4 - Lake 3/90
01358
NEW MEXICO
AirTouch
Communications
KNKA272 Albuquerque 10/84
00110
KNKN264 New Mexico 1 - San Juan 7/89
30996
NM 4-Santa Fe RSA West
Ltd Partnership
KNKQ334 New Mexico 4 - Santa Fe 5/90
26148
30262
NEBRASKA
Omaha Cellular
Telephone Co
KNKA336 Omaha 2/85
00137
NORTH DAKOTA
AirTouch
Communications
KNKA713 Fargo - Moorehead 1/98
8
<PAGE>
00330
KNKA714 Grand Forks 1/98
00356
N. Dakota RSA
Ltd Partnership
KNKN527 North Dakota 3 - Barnes 3/90
01552
OREGON
AirTouch
Communications
KNKA465 Eugene - Springfield 1/98
00328
KNKA212 Portland 5/83
00030
KNKN446 Salem 8/87
30748
KNKN411 Oregon 1 - Clatsop 1/90
01600
KNKN413 Oregon 4 - Lincoln 1/90
01606
UTAH
AirTouch
Communications
KNKA259 Salt Lake City 4/84
00094
03004
KNKA728 Provo - Orem 1/98
00488
KNKA586 Utah 1 - Box Elder 4/90
01734
Wasatch Utah RSA 2
Ltd Partnership
KNKN242 Utah 2 - Morgan 7/89
01736
WASHINGTON
Seattle SMSA
Ltd Partnership
KNKA680 Bremerton 1/98
00276
KNKA215 Seattle - Everett 6/83
9
<PAGE>
00006
KNKA280 Tacoma 10/84
KNKN359 Washington 1 - Clallam 11/89
01774
26192
Olympia Cellular
Ltd Partnership
KNKA719 Olympia 1/98
00456
26166
26178
AirTouch
Communications
KNKA545 Bellingham 1/98
00258
KNKN238 Washington 2 - Okanagon 6/89
01776
26194
KNKN243 Washington 3 - Ferry 7/89
01778
Spokane SMSA
Ltd Partnership
KNKA408 Spokane 6/85
00222
Grays Harbor - Mason
Cellular Ltd Partnership
KNKN612 Washington 4 - Grays Harbor 5/90
01780
WYOMING
AirTouch
Communications
KNKA733 Casper 4/87
00284
KNKN305 Wyoming 4 - Niobrara 9/89
01830
KNKN202 Wyoming 5 - Converse 1/89
00284
</TABLE>
See Attached Technical Data Sheets for Details
10
<PAGE>
DOBSON LICENSEES AND PERMITTEES
<TABLE>
<CAPTION>
MARKET/
SYSTEM STATION SERVICE LICENSE
COVERED SID/BID AREA GRANTED
- ------- ------- ------- -------
<S> <C> <C> <C>
Dobson Cellular KNKN205 Imperial Valley
of Imperial 1072 CA RSA - 7
</TABLE>
See Attached Technical Data Sheets for Details
Dobson Cellular of Imperial, Inc. AirTouch Cellular
By: By:
------------------ -------------------
Name: Name:
---------------- -----------------
Title: Title:
--------------- ----------------
11
<PAGE>
APPENDIX II TO
INTERCABRIER ROAMER SERVICE AGREEMENT
BETWEEN
AIRTOUCH CELLULAR
AND
DOBSON CELLULAR OF IMPERIAL, INC.
GENERAL TERMS AND CONDITIONS FOR ROAMING
DEFINITIONS
A. The "Agreement" means the Intercarrier Roamer Service Agreement,
including all appendices attached thereto, to which these General Terms and
Conditions for Roaming are also attached.
B. The phrase "wireless service" means domestic public wireless
telecommunications service.
C. "Home Carrier" means a Party who is providing wireless service(s) to
its registered customers in a geographic area where it holds a license or permit
for a domestic public wireless telecommunication system and station.
D. "Serving Carrier" means a Party (or its Markets) who provides wireless
service for registered customers of another Party (or its Markets) while such
customers are out of their home Market's geographic area and in a Market for
which the Serving Carrier holds a license or permit for a domestic public
wireless telecommunication system and station.
E. "Roamer" means a customer who seeks wireless service in a geographic
area outside of the area served by the Party (or a Market) with whom it is
registered.
F. "Authorized Roamer" means a Roamer using equipment with the NPA/NXX
combinations listed in accordance with the "Exchange of Information" Article III
below for whom the Serving Carrier has received authorization from the Home
Carrier in accordance with the provisions of said Article III.
12
<PAGE>
G. "CIBER" means Cellular Intercarrier Billing Exchange Record.
H. "CIBER Record" means the publication prepared by CIBERNET Corporation,
a wholly-owned subsidiary of the Cellular Telecommunications Industry
Association, as a service to the wireless service industry.
I. "ESN" means the Electronic Serial Number that is "burned" in the
customer's wireless telephone set by the manufacturer.
J. "MIN" means the "Mobile Identification Number" which is assigned by a
Home Carrier to each of its registered customers.
K. "NPA/NXX combinations" means the six-digit numerical combinations
assigned by regulatory authorities to identify the area code and prefix for
wireless service.
L. "Authorized Receipt Point" or "ARP" means the location or address of
the entity designated by the "Home Carrier" as the delivery point for its CIBER
records and authorized agent for performing CIBER edits.
M. "Clearinghouse" means that entity which provides for the exchange of
CIBER Records and performs industry accepted CIBER edits.
N. Unless specifically provided otherwise in the Agreement, all words and
phrases defined in the CIBER Record shall have the meaning herein that they have
therein.
O. "Positive File" means the file containing information regarding
Authorized Roamers who are resident in a VLR as a result of a positive
notification to a verification request and in accordance with Article III
hereof.
P. "Positive Validations/Verification" (or "PV") is the process by which
a Roamer becomes an Authorized Roamer as a result of pre-call verification by
the Serving Carrier of the status of the Roamer, including Verification
Requirements and Service Requirements provided by the Home System. Although
neither Party is obligated to provide validation through a specific method, the
preferred pre-call verification method as of the date of this contract is
through the use of IS-41 messaging via SS7 transport.
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Q. "Verification Requirements" is the set of parameters that defines an
Authorized Roamer as sent by the Home Carrier, including but not limited to, the
period of authorization.
R. "Service Requirements" are features, restrictions, and auxiliary
services sent by the Home Carrier to the Serving Carrier. These Service
Requirements specifically define an Authorized Roamer's service profile,
including, but not limited to, origination and termination capabilities, and
long distance dialing capabilities or restrictions.
S. "VLR" or "Visitor Location Register" is the location register used by
a wireless switch to retrieve information for handling visiting subscriber
information, including allowed features, and inbound and outbound calling
capabilities.
I. PROVISION OF SERVICE
1.1 Each Party shall provide, to any Authorized Roamer who so
requests, wireless service in accordance with rates as set forth in Attachment B
hereto and with the terms and conditions of this Agreement.
1.2 Notwithstanding anything in this Agreement to the contrary, if a
Serving Carrier suspends or terminates roamer service to an Authorized Roamer in
accordance with the terms of this Agreement, such suspension or termination
shall not affect the rights and obligations of the Parties for roamer service
furnished hereunder prior to such termination or suspension.
1.3 In connection with its service to Roamers, no Serving Carrier
shall use recorded announcements or other inducements for an Authorized Roamer
to discontinue the wireless service of its Home Carrier or, unless otherwise
authorized herein, Roamer's use of a Serving Carrier's system.
II. DIVISION OF REVENUE
2.1 Each Home Carrier, whose customers (including the customers of
its resellers) receive wireless service(s) from a Serving Carrier as Authorized
Roamers
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under this Agreement, shall pay to the Serving Carrier who provided such
wireless service(s) the rates and charges set forth in Attachment B.
III. EXCHANGE OF INFORMATION
3.1 Attachment A to this Appendix II is a list furnished by the
respective Parties of the valid NPA/NXX combinations used by their respective
customers. These NPA/NXX combinations shall be accepted by the other Parties.
Each NPA/NXX combination is and shall be within the entire line range
(0000-9999), or a specified portion thereof, in accordance with Appendix III.
Each Party shall be responsible for all billings properly made under this
Agreement to any number listed by such Party within the range or ranges
specified by it in Attachment A. Additions, deletions, or changes to NPA/NXX
combinations and line number range(s) for their respective customers shall be
sent by each Party to the other in the form of an amendment to Attachment A,
with an effective date as defined in Appendix III.
3.2 Each Party hereby agrees to indemnify the other Party (and the
other Party's Markets), together with their partners and any and all of their
officers, directors, employees, agents and/or affiliates, against, and hold them
harmless from, any and all claims, suits, demands, losses and expenses,
including attorneys' fees and disbursements, which may result in any way
whatsoever from the indemnified Party's denial of Roamer or local wireless
service to any wireless telephone which has been identified by the
indemnifying Party as not being authorized to receive service.
3.3 To control fraudulent Roamer usage, each Party is required to use
a Positive Validation/Verification ("PV") system provided by a mutually agreed
upon validation/verification service in all Markets set forth in Appendix I.
Each Party shall provide to the other Party a list of all Markets and their PV
status within the technical data sheet which is included with Attachment A.
Attachment A shall be promptly updated as changes occur in the PV status of any
Market. The Parties shall cooperate in good faith to control fraudulent Roamer
usage in their Markets. The Parties agree that calls completed
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<PAGE>
by a Serving Carrier after a PV request has determined that a Roamer is not a
valid subscriber of the Home Carrier or is unauthorized for service by the
Serving Carrier, shall be the sole responsibility of the Serving Carrier. PV
requests will be made on all MIN/ESN combinations observed by a Serving Carrier.
The Parties understand that, at the time of the execution of this Agreement, the
Dobson Market is not using a system which provides Positive
Validation/Verification. Dobson agrees to provide Positive
Validation/Verification to AirTouch customers within six (6) months of the
execution of this Agreement, and until such time, shall be solely responsible
for calls completed within the Dobson Market which are deemed by AirTouch to be
fraudulent or invalid, and AirTouch will not be responsible for payment of same.
3.4 All information not of public record that is exchanged pursuant
to this Agreement shall be treated as confidential. Parties obtaining such
confidential information through this Agreement shall use it only as necessary
to carry out the purposes of this Agreement or as necessary to comply with
federal, state or local law. Parties obtaining confidential information through
this Agreement shall not disclose its contents except as necessary to its duly
authorized agents to carry out the purposes of this Agreement or as necessary to
comply with federal, state or local law. The obligation to protect the
confidentiality of information shall survive the termination of the agreement
for a period of five years.
IV. BILLING
4.1 Each Home Carrier shall be responsible for billing to, and
collecting from, its own customers all charges that are incurred by such
customers as a result of service provided to them as Authorized Roamers by the
Serving Carrier. The Home Carrier shall also be responsible for billing its
customers for, and remitting to, the federal government all federal excise tax
that may be due in connection with the service being billed by it to its
customers. while the Serving Carrier will be responsible for the computation and
remittance of all state and local taxes, each Home Carrier shall be liable
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<PAGE>
to the Serving Carrier for all such state and local taxes remitted by the
Serving Carrier, regardless of whether these amounts are paid to the Home
Carrier by its customers.
4.2 The Parties will cooperate in order to minimize fraudulent or
other unwarranted use of theft systems. If any Party decides that, in its sole
judgment, despite due diligence and cooperation pursuant to the preceding
sentence, fraudulent or other unwarranted use has reached an unacceptable level
of financial loss, such Party may provide a written request that all or a
portion of its NPA/NXX's be removed. The Serving Carrier will comply with this
request within five (5) business days of receiving the request. At such time as
the Home Carrier would like to have its NPA/NXX's reinstated in the Serving
Carrier's switch(es), the Home Carrier will provide the Serving Carrier a
written request to reload the NPA/NXX's previously removed.
4.3 Each Serving Carrier who provides wireless service to an
Authorized Roamer pursuant to this Agreement shall forward roaming billing
information for each Market listed in Appendix I, on at least a weekly basis, in
accordance with the procedures and standards set forth in the CIBER Record, to
the Home Carrier's Authorized Receipt Point. Except for Serving Carriers
utilizing the CIBERNET Corporation Net Settlement Program, each Serving Carrier
who provides wireless service to an Authorized Roamer pursuant to this Agreement
shall send the Home Carrier a paper invoice within the time period specified in
Appendix III. This invoice shall reflect all charges relating to service for
which Authorized Roamer billing information was forwarded to the Home Carrier
during the previous "Billing Period", as defined in Appendix III. The Serving
Carrier will use the information provided by its Clearinghouse for invoice
preparation and support. The Home Carrier will only pay for Authorized Roamer
charges based on the settlement report provided by its Clearinghouse and
pursuant to the provisions of Section 4.1 and Attachment B hereto.
4.4 Where the Authorized Roamer billing information required to be
provided by the Serving Carrier in accordance with Paragraph 4.3 above is not in
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accordance with the CIBER Record, the Home Carrier may return the defective
record to the Serving Carrier as provided in the CIBER Record. Returning the
defective record will be in accordance with CIBER Record established procedures.
The Serving Carrier may correct the defective record and return it to the Home
Carrier for billing, provided that the time period from the date of the call to
the receipt of the corrected record does not exceed the time period specified
under "Message Date Edit" in Appendix III.
4.5 No credit for insufficient data or defective records except as
provided in Paragraph 4.4 above, shall be permitted, unless mutually agreed upon
by Dobson and ATC. Any credit that is requested by the Home Carrier must be
fully documented and submitted utilizing the format set forth in Attachment C.
V. SETTLEMENT
5.1 Each Party will settle its accounts with the other Parties on the
basis of billing information received pursuant to Section IV hereof as of the
"Close of Billing", as that phrase is defined in Appendix III. The Home Carrier
shall remit to the Serving Carrier's designated account by wire transfer or
check such amounts as are due to the Serving Carrier as of the Close of Billing.
Carriers utilizing net settlement procedures set forth in the CIBER Record are
not required to submit a paper invoice and will make payments in accordance with
such net settlement procedures.
5.2 Any payment which is received later than the date permitted in
Appendix III shall be subject to a late charge equal to that set forth in
Appendix III. The only exception to this requirement shall be late payments
which are delayed in forwarding through circumstances which are beyond the
control of the Home Carrier and are consented to by the Serving Carrier, which
consent shall not be unreasonably withheld.
VI. TERM AND TERMINATION OF AGREEMENT
6.1 This Agreement shall have a term commencing on the date first
written above and continuing for a period of five years. Thereafter, this
Agreement shall
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renew automatically on a year-to-year basis unless either Party terminates the
Agreement by providing written notice to the other Party at least 90 days prior
to the conclusion of the original or any subsequent term. After ten years, the
Agreement may be terminated by either Party at any time upon 90 days prior
written notice.
6.2 This Agreement may be terminated by either Party upon written
notice to the other of a Default (as defined in Section VII) by the other Party.
6.3 In the event of a change by state or federal licensing
authorities barring or severely impairing the provisioning of wireless service
to Roamers by either Party, which, individually or in the aggregate, is material
to the business of the affected Party, this Agreement may be terminated
immediately upon written notice from one Party to the other Party.
6.4 The termination of this Agreement shall not affect the rights and
liabilities of the Parties under this Agreement with respect to all Authorized
Roamer charges incurred prior to the effective date of such termination.
VII. DEFAULT; DISPUTE RESOLUTION
7.1 A Party will be in default under this Agreement upon the
occurrence of any of the following events:
(a) A material breach of any term of this Agreement, if such
breach shall continue for thirty (30) days after receipt of written notice
thereof from the non-breaching Party;
(b) Voluntary liquidation or dissolution or the approval by
management, board of directors, stockholders, or owners of a Party of any
plan or arrangement for the voluntary liquidation or dissolution of the
Party;
(c) A final order by the Federal Communications Commission
("FCC") revoking or denying renewal of CMRS licenses or permits granted to
such Party which, individually or in the aggregate, are material to the
business of such Party;
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(d) Such Party (i) filing, pursuant to a statute of the United
States or of any state, a petition for bankruptcy or insolvency or for
reorganization or for the appointment of a receiver or trustee for all or a
portion of such Party's property, (ii) has filed against it, pursuant to a
statute of the United States or of any state, a petition for bankruptcy or
insolvency or for reorganization or for the appointment of a receiver or
trustee for all or a portion of such Party's property, provided that within
sixty (60) days after the filing of any such petition such Party fails to
obtain a discharge thereof, or (iii) making an assignment for the benefit
of creditors or petitioning for, or voluntarily entering into, an
arrangement of similar nature, and provided that such filing, petition, or
appointment is still continuing; or
(e) Any termination or expiration of the Affiliation Agreement;
provided however that if the Affiliation Agreement is terminated for any
reason prior to the fifth anniversary of its effective date (the "Five Year
Date"), Dobson agrees that AirTouch may, if it so elects in its sole
discretion, continue any or all of this Agreement until the Five Year Date.
Dobson further agrees that if Dobson proposes to effect a Transfer (as
defined in the Affiliation Agreement) prior to the Five Year Date that
would result in a Change of Control of Operator's System (each as defined
in the Affiliation Agreement), if AirTouch so elects in its sole
discretion, such Transfer will be subject to the condition (which may not
be waived) that the transferee assume and agree to perform any or all of
Dobson's obligations under this Agreement and that this Agreement continue
until the Five Year Date notwithstanding any termination of the Affiliation
Agreement.
7.2 All claims and disputes relating in any way to the performance,
interpretation, validity, or breach of this Agreement, including, but not
limited to a claim based on or arising from an alleged tort, shall be resolved
as provided in this Section 7.2. It is the intent of the Parties that any
disagreements be resolved amicably to the greatest extent possible.
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7.2.1 If a disagreement cannot be resolved by the
representatives of the Parties with day-to-day responsibility for this
Agreement, such matter shall be referred to a senior-level manager of each of
the Parties. The senior-level managers shall conduct face-to-face negotiations
at a neutral location or such location as shall be mutually agreed upon. If
these representatives are unable to resolve the dispute within ten business days
after either Party requests the involvement of the senior-level managers, then
either Party may, but is not required to, refer the matter to mediation or
arbitration, as applicable in accordance with Sections 7.2.2 and 7.2.3
7.2.2 In any case where the amount claimed or at issue is One
Million Dollars ($1,000,000) or more and the Parties are unsuccessful in
resolving the disagreement, the Parties agree to submit the disagreement to
non-binding mediation upon written notification by either Party. The Parties
shall mutually select an independent mediator experienced in telecommunications
systems disputes. The specific format for the mediation shall be left to the
discretion of the mediator. If mediation does not result in resolution of the
disagreement within thirty days of the initial request for mediation, then
either Party may, but is not required to, refer the matter to arbitration.
7.2.3 Any disagreements not finally resolved in accordance
with the foregoing provisions of this Section 7.2 shall, upon written notice by
either Party to the other, be resolved by final and binding arbitration. Subject
to the Section 7.2.3, such arbitration shall be conducted through, and in
accordance with the rules of, JAMS/Endispute. A single arbitrator shall decide
all disputes. Each Party shall bear its own expenses (including attorneys' fees)
with respect to the arbitration, except that the costs of arbitration proceeding
itself, including the fees and expenses of the arbitrator, shall be shared
equally by the Parties. The arbitration shall take place in a neutral location
selected by the arbitrator. The arbitrator may permit discovery to the full
extent permitted by the Federal Rules of Civil Procedure or to such lesser
extent as the arbitrator determines is reasonable. The arbitrator shall be bound
by and strictly enforce the terms of
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this Agreement. The arbitrator shall make a good faith effort to apply
applicable law, but an arbitration decision and award shall not be subject to
review because of errors of law. The arbitrator shall have the sole authority to
resolve issues of the arbitrability of any agreement, including the
applicability or running of any applicable statute of limitation. The arbitrator
shall not have the power to award damages in connection with any dispute in
excess of actual compensatory damages nor to award punitive damages nor any
damages that are excluded under this Agreement and each Party irrevocably waives
any claim thereto. The award of any arbitration shall be final, conclusive and
binding on the Parties. Judgment on the award may be entered in any court having
jurisdiction over the Party against whom the award was made. Nothing contained
in this Section 7.2.3 shall be deemed to prevent either Party from seeking any
interim equitable relief, such as preliminary injunction or temporary
restraining order, pending the results of the arbitration. The United States
Arbitration Act and federal arbitration law shall govern the interpretation,
enforcement, and proceeding pursuant to the arbitration clause in this
Agreement.
VIII. SUCCESSORS AND ASSIGNS
8.1 Neither ATC nor Dobson may sell, assign, transfer, or convey its
interest in this Agreement or any of its rights or obligations hereunder without
the written consent of the other Party, which consent shall not be unreasonably
withheld or delayed. No person other than a Party to this Agreement shall
acquire any right hereunder as a third-Party beneficiary or otherwise by virtue
of this agreement.
IX. NO PARTNERSHIP OR AGENCY RELATIONSHIP IS CREATED
9.1 Nothing contained in this Agreement shall constitute the Parties
as partners with one another or render any Party liable for any debts or
obligations of any other Party, nor shall any Party hereby be constituted the
agent of any other Party.
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X. NOTICES AND AUTHORIZED REPRESENTATIVES
10.1 Unless otherwise specified in this Agreement, (a) all notices
required under this Agreement shall be given in writing; and, (b) all notices
shall be either personally delivered, delivered by overnight carrier, or sent by
certified mail return receipt requested to the persons and addresses specified
in this Agreement or to such other persons at such other addresses as either ATC
or Dobson may designate by written notice to the other.
10.2 For the purposes of this Agreement, each Party shall be the
authorized representative for all Markets (as identified in Appendix I) which
have a partnership, agency or other relationship to the Party.
XI. MISCELLANEOUS
11.1 The Parties agree to comply with, conform to, and abide by all
applicable and valid laws, regulations, rules and orders of all governmental
agencies and authorities, and agree that this Agreement is subject to such laws,
regulations, rules and orders.
11.2 The Parties agree to use their respective good faith efforts to
fulfill all of their obligations under this Agreement. The Parties further
recognize that to effectuate all purposes of this Agreement, it may be necessary
to enter into other agreements or to amend this Agreement, or both. In that
event, the Parties agree to negotiate with each other in good faith in an effort
to so amend this Agreement and/or enter into other agreements. In no event,
however, are the Parties obligated to amend this Agreement and/or enter into
other agreements if the efforts to negotiate in good faith do not result in such
an amendment or other agreement that is satisfactory to both Parties.
11.3 This Agreement and the Affiliation Agreement constitute the full
and complete agreement among the Parties with respect to the subject matter
hereof. Any prior agreements among the Parties with respect to this subject
matter are hereby superseded. This Agreement may not be amended, except by the
written consent of the
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Parties. Waiver of any breach of any provision of this Agreement must be in
writing signed by AirTouch in the case of a breach by Dobson or a Dobson Market,
or by Dobson in the case of breach by AirTouch or an AirTouch Market, and such
waiver shall not be deemed to be a waiver of any preceding or succeeding breach
of the same or any other provision. The failure of a Party to insist upon strict
performance of any provision of this Agreement or any obligation under this
Agreement shall not be a waiver of such Party's right to demand strict
compliance therewith in the future.
11.4 The headings in this Agreement are inserted for convenience and
identification only and are not intended to describe, interpret, define or limit
the scope, extent or intent of this Agreement or any provision thereof.
11.5 This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same Agreement.
XII. CHOICE OF LAW
12.1 Except to the extent governed by United States law that preempts
state law, this Agreement shall be interpreted under and governed in accordance
with the domestic laws of the State of California, irrespective of that State's
conflict of laws principles.
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[ATTACHMENT A]
CIBER RECORD
METHODS AND PROCEDURES
The following information is furnished pursuant to Paragraph 3.1 of
Appendix II to the Intercarrier Roamer Service Agreement between the Parties:
- --------------------------------------------------------------------------------
NPA/NXX LINE RANGE SID CODE CITY START DATE END DATE
- --------------------------------------------------------------------------------
SEE ATTACHED TECHNICAL DATA SHEET
Dobson Cellular of Imperial, Inc.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Issue Date:
------------------------
(The effective date shall be
that date defined in Paragraph 7 of
Appendix III.)
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[ATTACHMENT A]
CIBER RECORD
METHODS AND PROCEDURES
The following information is furnished pursuant to Paragraph 3.1 of
Appendix II to the Intercarrier Roamer Service Agreement between the Parties:
- --------------------------------------------------------------------------------
NPA/NXX LINE RANGE SID CODE CITY START DATE END DATE
- --------------------------------------------------------------------------------
SEE ATTACHED TECHNICAL DATA SHEET
AirTouch Cellular
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Issue Date:
------------------------
(The effective date shall be
that date defined in Paragraph 7 of
Appendix III.)
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[ATTACHMENT B]
ROAMING RATES AND SERVICE CHARGES
The following rates and charges shall apply to the wireless services
provided pursuant to the terms and conditions of this Agreement:
Basic Rates:
I. Airtime Rate per Minute: The initial rate per billable minute shall be
$0.50 for each party. On each anniversary of this Agreement (each a "Reset
Date") the roaming rate that the Home Carrier pays to the Serving Carrier
shall be recalculated by multiplying the rate then in effect for such Home
Carrier by a fraction, the numerator of which shall be the product of the
total billable minutes (set forth on the GTE TSI Settlement Reports) less
billed fraud minutes (per settled fraud claims for the same period) of
customers of the Home Carrier system roaming in the Markets of the Serving
Carrier during the twelve month period ending on the date that is twelve
months prior to the Reset Date (the "Total Net Billable Minutes")
multiplied by 1.1, and the denominator of which shall be the Total Net
Billable Minutes of customers of the Home Carrier system roaming in the
markets of the Serving Carrier during the twelve month period ending on the
Reset Date, provided that in no event will the applicable roaming rates be
(i) reduced on any given Reset Date by more than 10%, (ii) increased, or
(iii) reduced below a rate of $0.20. The recalculated roaming rates will be
rounded down to the nearest whole cent (for example, $0.48765 will be
rounded to $0.48). The effective date of any new rates will be thirty (30)
days after the Reset Date.
II. Daily Surcharge per Roamer: $0.00
III. Additional charges as applicable:
International and Domestic Long Distance Rate: 100% pass through at the
rates charged by the long distance carrier.
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[ATTACHMENT C]
CREDIT REQUEST
Home Carrier____________________________________________________________________
Serving Carrier_________________________________________________________________
Date of Invoice_________________________________________________________________
Date of Rated Usage Record______________________________________________________
Data____________________________________________________________________________
Batch # and Date________________________________________________________________
Number of Records_______________________________________________________________
Amount of Invoice Not Justified $_______________________________________________
(Airtime & Toll Charges, Other Charges & Taxes)
_________Payment Withheld ______Charge Back
Reasons for Withholding Payment or Charge Back
______ 1. Invoice is inconsistent with the Rated Usage Record Data with
respect to
_____ a. Taxes;
_____ b. Other pass-through charges;
_____ c. Wireless service charges;
_____ d. Percentage of wireless service;
_____ e. Other (see attached reports)
_____ 2. Rated Usage Record Data is incomplete for the charges on the
attached sheet
_____ 3. NPA/NXX combination is not on the list authorized
by the Home Carrier
Mobile ID Number__________________________________
Electronic Serial Number__________________________
_____ 4. Charges for Roamer usage specified on the attached sheet that are
not authorized by the Home Carrier;
_____ 5. Batch totals and detail charges do not balance or batch is out of
sequence.
______ 6. CIBER rejects
______ 7. Other (specify below)
Home Carrier:
Date By:
------------------- -------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
Effective Date of
Appendix III
is July 31, 1998
APPENDIX III TO
INTERCARRIER ROAMER SERVICE AGREEMENT
BETWEEN
DOBSON
AND
AIRTOUCH CELLULAR
OPERATING PROCEDURES
1. OPERATING PROCEDURES. The Parties agree that the operating
procedures set forth in this Appendix III shall govern and control unless and
until the Parties mutually agree, in writing, to amend said operating
procedures.
2. CLOSE OF BILLING. "Close of Billing" shall be the fifteenth
(15th) day of each calendar month or the immediately preceding business day if
the fifteenth (15th) is not a business day.
3. INVOICING. Invoicing must occur within fifteen (15) days after
the Close of Billing.
4. BILLING PERIOD. The "Billing Period" is the period running from
the day after the Close of Billing through the Close of Billing day in the
subsequent month (normally the sixteenth (16th) through the fifteenth (15th),
unless the fifteenth (15th) falls on a-non-business day).
5. PAYMENT. Payment in the form of a check or wire transfer must be
received by the payee within thirty (30) days ("Payment Due Date") following the
date of the invoice. Payments received later than the Payment Due Date shall be
subject to a late charge of either one and a half percent (1.5%) of the
outstanding balance for each thirty (30) day period (or portion thereof) that
such payments are late or the highest percentage of the outstanding balance
permitted by law, whichever is lower.
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6. MINIMUM LINE RANGE. The "Minimum Line Range" within an NPA/NXX is
1,000 line numbers.
7. NPA/NXX NOTIFICATION. The maximum time allowed before changes,
additions or deletions of NPA/NXX's are effective shall be fifteen (15) days
from the date of receipt of notification of such changes, additions or deletions
by either Party.
8. MESSAGE DATE EDIT. Message records shall be considered to have
failed the CIBER Record Edit if the message is more than thirty (30) days old
when it is received at the Home Carrier's Authorized Receipt Point ("ARP").
Message records which are rejected from the Home Carrier's ARP and returned to
the Serving Carrier shall be considered to have failed the CIBER Record Edit if
the message is more than sixty (60) days old. Determination of the age of a
message record is from the date of the call.
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AMENDMENT TO INTERCARRIER ROAMER SERVICE AGREEMENT
This Amendment to an Intercarrier Roamer Service Agreement
(hereinafter the "Amendment") is effective as of July 31, 1998, and is entered
into by AIRTOUCH CELLULAR (hereinafter "ATC") and DOBSON CELLULAR OF IMPERIAL,
INC. (hereinafter "Dobson"), on behalf of those partnerships set forth in
Attachment A, which is attached hereto and is hereby incorporated herein.
RECITALS
A. Dobson and ATC currently offer roamer cellular radiotelephone service
to each other's subscribers pursuant to the Intercarrier Roamer Service
Agreement dated July 31, 1998 (hereinafter the "Agreement").
B. Each party to this Amendment desires to limit its liability for
charges resulting from fraudulent usage of the other party's systems.
NOW THEREFORE, the parties do hereby agree as follows:
1. Paragraph 2.1 of Appendix II of the Agreement is hereby deleted in its
entirety and replaced by the following Paragraphs 2.1 through 2.9:
"2.1 Each Home Carrier, whose customers (including the customers of
its resellers) receive wireless services from a Serving Carrier as
Authorized Roamers under this Agreement, shall initially pay to the Serving
Carrier who provided such wireless services all of the Serving Carrier's
charges for wireless services and all pass-through charges (i.e., any toll
or other charges owed by the Serving Carrier to any toll or other carrier
in connection with providing such cellular services) set forth in
Attachment B. The Home Carrier may then receive payment for certain credits
due to Fraudulent Calls as defined in this Paragraph 2.
2.2 In this Agreement, a "Fraudulent Call" is any call that (i) is
not billable to an active customer of the Home Carrier because the MIN/ESN
combination used to make the call was invalid (i.e., not active in the Home
Carrier's switch), or (ii) was made by a MIN/ESN combination for which
there is a valid active subscriber of the Home Carrier but for which such
subscriber cannot be billed, as evidenced by "proof of fraud".
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Proof of fraud shall mean (1) overlapping calls appearing on a subscriber's
bill, or (2) calls made from different locations and so close in time that
it would have been impossible for the valid subscriber to have traveled
between the different locations, or (3) reasonable determination that the
valid active subscriber cannot be billed for the involved calls either
because such subscriber did not make the calls or because it is not
feasible to separate calls that were made by the valid subscriber from
calls that were not so made.
2.3 If the Home Carrier's switch was available for validation at the
time Fraudulent Calls were made, the Home Carrier shall receive credits for
the following portions of the Serving Carrier's charges for Fraudulent
Calls:
100% of daily service charges
100% of per minute usage charges less an administrative fee of $0.10
per minute
100% of pass-through toll charges
100% of total taxes
Where the Serving Carrier's Market does not provide a Positive
Validation/Verification system as defined in Section P and referenced in
Section 3.3 of Appendix II, credits will not be reduced by the
administrative fee of $0.10 per minute.
2.4 In order for the Home Carrier to receive payment for any
Fraudulent Call credits, the Home Carrier must submit a written claim
("Credit Claim"). The Credit Claim must be supported by applicable call
detail records, although such records need not be attached to each claim.
Each Credit Claim must contain the MIN/ESN's, date range of fraudulent
calls, total fraudulent charges (including airtime, surcharges, taxes and
toll charges passed through by the Serving Carrier), and the Serving
Carrier's SID. At the Serving Carrier's request, the Home Carrier must
certify that the MIN/ESN combination that was cloned has since been
restricted from roaming. Upon receiving a Credit Claim, the Serving Carrier
may request from the Home Carrier copies of subscriber bills or other call
detail records for a sample of the MIN's (sample size will not exceed 10
MINs for the first $200,000 in claims per month and an additional 5 MINs
for every
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additional $100,000 in claims per month) submitted or other reasonable
evidence that demonstrates that the calls claimed for credit are Fraudulent
Calls ("Proof of Fraud"). Except pursuant to an audit as provided herein,
any request for Proof of Fraud must be received by the Home Carrier within
thirty (30) days of the Serving Carrier's receipt of the Credit Claim, with
the Proof of Fraud received by the Serving Carrier within sixty (60) days
of the receipt of such request. For each account for which Proof of Fraud
is not adequate or timely received ("Error Account") the Serving Carrier
will have the right to require Proof of Fraud for an additional five
accounts. This request for Proof of Fraud for the additional accounts must
be received by the Home Carrier within thirty (30) days of the receipt of
the initial Proof of Fraud by the Serving Carrier. The Serving Carrier will
then, within thirty (30) days of the receipt of the request for Proof of
Fraud for the additional accounts, determine and inform the Home Carrier of
the adequacy of the additional Proofs of Fraud. If the five replacement
accounts are adequate, the requirements for Proof of Fraud for the Error
Account will have been met. If the five replacement accounts are not
adequate, the requirements for Proof of Fraud for the Error Account will
not have been met. The fraud credits issued for the month in which such
Proof of Fraud is not met shall be reduced on a pro rata basis for the
number of accounts for which no or unsatisfactory Proof of Fraud is
submitted, e.g., if 2 of 10 accounts for which Proof of Fraud are requested
are not submitted or are unsatisfactory, and 7 of the 10 replacement
accounts are also unsatisfactory, 45% of the applicable Credit Claim shall
be denied; if, however, 10 of 10 replacement accounts are satisfactory,
100% of the Credit Claim will be paid. If the Serving Carrier indicates to
the Home Carrier that the Serving Carrier needs, for criminal prosecution
purposes, and affidavit executed by the Home Carrier's subscriber stating
that the subscriber did not place the Fraudulent Calls, the Home Carrier
shall make its best efforts to obtain an appropriate affidavit.
2.5 The Home Carrier shall not submit more than one Credit Claim per
calendar month to any Serving Carrier, and no Credit Claim shall be
submitted for an amount which is less than Two Thousand Dollars
($2,000.00). No Credit Claim shall seek credit for a Fraudulent Call that
was made more than one hundred eighty (180) days prior to the date the Home
Carrier delivers the Credit Claim to the Serving Carrier, and no Credit
Claim shall contain any Fraudulent Call attributable to an MIN/ESN to which
less than Two Hundred Dollars ($200.00) in Fraudulent Calls is attributable
in that Credit Claim.
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2.6 The Serving Carrier shall make payment to the Home Carrier within
sixty (60) days after receiving a Credit Claim. The Serving Carrier shall
not be required to pay a Credit Claim, however, until any outstanding
balances due to the Serving Carrier from the Home Carrier and more than
thirty (30) days overdue are paid.
2.7 The Serving Carrier shall have the right to conduct an audit, at
its own expense, of Credit Claims which have been submitted and paid,
provided that such audit is requested within one year after the date that
the claim was paid. The parties agree to work together to minimize the
administration of this amendment and ensure that all claims are processed
in accordance with the provisions of this Agreement.
2.8 Except as provided for in Sections 2.1 through 2.7, above, the
Home Carrier shall be solely responsible for all of its own personnel,
administrative, billing, and any other costs associated with cellular
fraud.
2.9 Each party agrees to expeditiously notify the other should
fraudulent usage become apparent on either party's system, and the parties
agree to work as rapidly as possible under the circumstances to correct the
problem relating to cellular fraud and to minimize fraudulent usage of
their cellular systems."
2. Except as modified herein, all terms and conditions of the Agreement
shall remain unchanged and in full force and effect.
AIRTOUCH CELLULAR, DOBSON CELLULAR OF IMPERIAL, INC.
("ATC") ("Dobson")
By: By:
--------------------------- ---------------------------
Name: Name:
------------------------- ------------------------
Title: Title:
------------------------ -----------------------
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EXHIBIT D
Operator Insurance Requirements
<TABLE>
<S> <C>
General Liability (Commercial)
General aggregate $2,000,000
Products - completed
operation aggregate $2,000,000
Personal and advertising
injury $1,000,000
Each occurrence $1,000,000
Fire damage $ 300,000
Medical expense $ 5,000
Excess Liability (Umbrella)
Each occurrence $5,000,000
Aggregate $5,000,000
Automobile Liability $1,000,000
Workers' Compensation statutory
Employer's Liability $1,000,000
</TABLE>
<PAGE>
AFFILIATION AGREEMENT
THIS AFFILIATION AGREEMENT (this "Agreement") is made as of August 28, 1998
(the "Execution Date"), by and among DOBSON COMMUNICATIONS CORPORATION, an
Oklahoma corporation ("DCC"), and Dobson Cellular of Sandusky, Inc., an Oklahoma
corporation ("Operator"), and NEW PAR, a Delaware general partnership, on behalf
of itself and its subsidiaries and affiliates, d/b/a AIRTOUCH CELLULAR
(collectively "AirTouch").
WITNESSETH:
WHEREAS, AirTouch seeks, through operating its own Systems (as defined
below) and through affiliation, roaming and other arrangements with other
operators of Systems, to establish and maintain a seamless wireless
communications network and to establish among participants therein certain
minimum levels of common customer service and technical capabilities; and
WHEREAS, DCC and Operator have determined that certain benefits of
affiliation, including but not limited to those arising from increased scale
and scope of services, would inure to Operator by aligning itself with a
larger scale provider of wireless communications services; and
WHEREAS, pursuant to an Interim Operating Authority granted by the
Federal Communications Commission in the public interest, AirTouch has
operated and continues to operate a Cellular System serving the Ohio RSA #2
(each as defined below); and
WHEREAS, AirTouch, DCC and Operator mutually desire to transition
operation of the Ohio RSA #2 System and to transfer Subscribers (as defined
below) from AirTouch to Operator, and to provide for a continuing affiliation
between AirTouch and Operator for the Ohio RSA #2 System, upon the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties hereby agree as
follows:
1. DEFINITIONS AND TRANSITION.
(a) DEFINITIONS. For purposes of this Agreement, the following
terms have the following meanings:
"AFFILIATE" means any Person that, directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common
control with the Person specified.
"AFFILIATED SYSTEM" means an AirTouch System or any other System
that offers Services under the Brands.
"AIRTOUCH SYSTEMS" means those Systems controlled by AirTouch.
"BRANDS" mean the service marks, trademarks, trade names, symbols or
designs used, from time to time, by the AirTouch Systems in connection with the
offer and sale of Products and Services.
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"CELLULAR SYSTEM" means a radio communications system authorized
under the rules for the domestic public cellular radio telecommunications
service designated as Subpart H of Part 22 of the FCC Rules in effect as of
the date hereof or any revision thereto or successor thereof which may be in
effect from time to time, including the network, marketing, distribution,
sales, customer interface and operations functions relating thereto.
"CONTROL" (including the terms "controlling," "controlled by" and
"under common control with") of a Person means (i) the possession, direct or
indirect, of the power to vote 50% or more of the voting securities or other
voting interests of such Person, or (ii) the possession, directly or
indirectly, of the affirmative power to direct, or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities or other voting interests, by contract or otherwise.
"ESMR SYSTEM" means any commercial mobile radio system authorized
under the rules for Enhanced Specialized Mobile Radio services designated
under Subpart S of Part 90 of the FCC Rules in effect as of the date hereof
or any revision or successor thereof, which may be in effect from time to
time, including the network, marketing, distribution, sales, customer
interface and operations functions relating thereto.
"EXECUTION DATE" shall have the meaning first set forth above in
the preamble to this Agreement.
"FCC" means the Federal Communications Commission or any successor
agency or entity performing substantially the same functions.
"FEATURES" means the dialing plans, feature codes and other
technical capabilities related to the provision of Services.
"FINAL EFFECTIVE DATE" means the date, following the Initial
Effective Date, upon which Operator commences commercial operation of
Operator's System to serve Ohio RSA #2, including the provision of all
switching services related thereto, and certain other activities take place
as specified in Section 1(b)(ii) below, which date shall be as mutually
agreed by the parties, but in no event later than September 30, 1999.
"INITIAL EFFECTIVE DATE" means the date upon which Operator
commences the provision of customer care and billing services within Ohio #2
RSA, and certain other activities take place as specified in Section 1(b)(i)
below, which date shall be as mutually agreed by the parties, but in no event
later than December 1, 1998.
"LICENSE" means any permit, license, waiver or authorization from
any governmental body having jurisdiction over a Person required for conduct
of an activity, including, without limitation, any FCC license or any
certificate of public convenience and necessity.
"OPERATOR'S SERVICE AREA" or "Ohio RSA #2" means the rural service
area designated by the FCC as Cellular Market Ohio No. 2.
"OPERATOR'S SYSTEM" means the Cellular System that will be
constructed and controlled by Operator in Ohio RSA #2.
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"PCS SYSTEM" means a radio communications system authorized under
the rules for broadband personal communications services designated as
Subpart E of part 24 of the FCC Rules as of the date hereof, or any revision
thereto or successor thereof which may be in effect from time to time,
including the network, marketing, distribution, sales, customer interface and
operations functions relating thereto.
"PERSON" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company,
trust, estate, unincorporated organization, governmental or regulatory body
or other entity.
"PLANS" means subscriber purchasing plans for Products and/or
Services.
"PRODUCTS" means subscriber equipment offered for sale or lease and
any goods and other property ancillary thereto.
"ROAMING AGREEMENTS" means the roaming agreements described in
Section 4(a).
"SERVICE AREA" means, as to any Person, the geographic territory in
which such Person provides Services.
"SERVICES" means commercial mobile radio services provided by
Systems, including, without limitation, voice and data transport, and the
services ancillary thereto.
"SUBSCRIBERS" means subscribers with the following NPA/NXXs
designated for the Ohio RSA #2: 419-357-XXXX; 419-366-XXXX; 419-618-XXXX;
419-307-XXXX; 419-706-XXXX; 419-217-XXXX; 419-619-XXXX.
"SYSTEM" means a Cellular System, an ESMR System or a PCS System.
"TRADEMARK LICENSE AGREEMENT" means the trademark license agreement
in the form attached as EXHIBIT A to be entered into between AirTouch and
Operator on or before the Initial Effective Date, as amended from time to
time, and any other Brand license or sublicense agreement executed in
substitution therefor.
(b) TRANSITION. This Section 1(b) sets forth the mutual
understanding and agreement of the parties with respect to the transition of
operations within Ohio RSA #2 from AirTouch to Operator during the term of
this Agreement. Prior to and until the Initial Effective Date, AirTouch shall
continue to operate and maintain the AirTouch System within Ohio RSA #2,
including the provision of billing and customer services for the Subscribers,
and AirTouch shall retain all revenues related thereto.
(i) INITIAL EFFECTIVE DATE. Section 3 ("Brands; Advertising;
Service Plans; Promotions"), Section 4 ("Roaming Agreement"), and Section 2
("Performance Standards") to the extent applicable to Customer Services
Standards, shall be effective as of the Initial Effective Date. In addition,
the following shall take place on or before the Initial Effective Date and
shall be effective as of the Initial Effective Date:
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(A) TRANSFER OF SUBSCRIBERS. Subject to obtaining
necessary consents or approvals, if any, which AirTouch, DCC and Operator
shall cooperate in good faith to obtain, AirTouch shall assign the
Subscribers to Operator, and Operator shall pay to AirTouch in cash or other
immediately available funds AirTouch's direct cost of acquiring the
Subscribers, which shall be deemed to be in the amount of Two Hundred Twenty
Five and 00/100 Dollars ($225.00) per Subscriber. Operator shall also pay to
AirTouch an amount equal to all unbilled installments on Subscriber equipment
provided by AirTouch to the Subscribers prior to the Initial Effective Date.
(B) INTERIM EQUIPMENT AND SERVICES LEASE. AirTouch and
Operator will enter into a mutually acceptable Interim Equipment Lease and
Switching Agreement which shall provide, without limitation, that for a
period commencing on the Initial Effective Date and ending on the Final
Effective Date, AirTouch shall lease to Operator, and Operator shall lease
from AirTouch, equipment and services related to the AirTouch System for Ohio
RSA #2, at the rates set forth in EXHIBIT E attached hereto.
(C) CONTOUR EXTENSION AGREEMENT(S). AirTouch and Operator
will enter into mutually acceptable Contour Extension Agreement(s) which
shall include, without limitation, the understanding and agreement of the
parties with respect to service area boundaries between Ohio RSA #2 and the
adjacent AirTouch Systems.
(D) CUSTOMER CARE AND BILLING SERVICES. Operator shall
start providing, and shall be solely responsible for, all customer care and
billing services for the Subscribers in accordance with this Agreement,
including without limitation the Customer Service Standards described in
Section 2 below and in attached EXHIBIT B.
(E) ASSUMPTION OF RETAIL STORE LEASES, PURCHASE OF RETAIL
STORE ASSETS AND TRANSFER OF RETAIL STORE EMPLOYEES. Subject to obtaining
any necessary landlord consents or approvals and any additional mutually
acceptable terms and conditions as are agreed to in writing by AirTouch and
Operator on or before the Initial Effective Date: (a) Operator shall assume
AirTouch's obligations under that certain Lease dated September 13, 1996 by
and between Entrepreneurial Ventures, Inc., as Lessor, and New Par, as
Lessee, regarding AirTouch Center #509 in Tiffin, Ohio, and that certain
Agreement of Lease dated as of March 1, 1997 by and between C & J Realty,
Inc., as lessor, and New Par, as lessee, regarding AirTouch Center #508 in
Sandusky, Ohio (such centers are referred to herein as the "Retail Stores");
(b) Operator will purchase from AirTouch such Retail Store assets as Operator
elects to purchase from AirTouch (which Retail Store assets will be selected
by Operator from a list of available assets and their respective prices that
will be provided to Operator by AirTouch prior to the Initial Effective
Date); and (c) Operator will make offers of employment in accordance with
Operator's compensation and benefits plans to the following eight (8)
personnel currently employed by AirTouch at the Retail Stores: Dean M.
Michalski, Sr. Service Technician; Babbetta J. Karr, Retail Sales
Representative; Shannon Wasiniak, Retail Sales Representative; Michael V. Mag,
Retail Sales Representative; Ronald A. Sarrica, Business Account
Representative; Jude A. Poggiali, Business Account Representative; Randy A.
Mortensen, Business Account Representative; and Dawn Mari Sehnert, Sr. Retail
Sales Representative.
(ii) FINAL EFFECTIVE DATE. Section 2 ("Performance Standards")
to the extent applicable to Network Performance Standards, shall become
effective as of the Final Effective Date. In addition, the following shall
take place on or before the Final Effective Date and shall be effective as of
the Final Effective Date:
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(A) CO-LOCATION AGREEMENT(S). If Operator elects to
locate cell site equipment for Operator's System at any of the AirTouch cell
site towers and shelters within Ohio RSA #2 after the Final Effective Date,
AirTouch and Operator will enter into mutually acceptable Co-Location
Agreement(s) which shall provide, without limitation, that AirTouch will
lease to Operator, and Operator will lease from AirTouch, non-exclusive use
of such AirTouch cell sites (i.e., tower and shelter space) within Ohio RSA
#2 at the rates specified in attached EXHIBIT E.
(B) COMMERCIAL OPERATION OF OPERATOR'S SYSTEM. Operator
shall commence commercial operation of Operator's System to serve Ohio RSA
#2, including the provision of all switching services related thereto, in
accordance with this Agreement, including without limitation the Network
Performance Standards described in Section 2 below and in attached EXHIBIT B.
(C) EXPIRATION OF INTERIM EQUIPMENT LEASE AND SWITCHING
AGREEMENT. The Interim Equipment Lease and Switching Agreement referred to in
Section 1(b)(i)(B) shall expire.
(iii) FURTHER ASSURANCES. AirTouch, DCC and Operator agree to
cooperate with each other, to negotiate in good faith, and to take all such
other actions and execute, acknowledge and deliver any and all additional
papers, documents and other assurances, as are reasonably necessary in
connection with the performance of their obligations and to carry out the
intent of the parties under this Section 1(b).
2. PERFORMANCE STANDARDS.
(a) PERFORMANCE STANDARDS. AirTouch may establish minimum standards
for various aspects of the AirTouch Systems and for the operations thereof
(the "Performance Standards"), including but not limited to certain minimum
Features, Plans, Products and Services to be offered by the AirTouch Systems.
AirTouch may revise the Performance Standards from time to time in its
reasonable discretion. The Performance Standards will be generally consistent
with industry practices and capabilities. Set forth on EXHIBIT B are the
initial Performance Standards (the "Initial Performance Standards").
(b) COMPLIANCE WITH PERFORMANCE STANDARDS. Operator will cause
Operator's System to comply with the Initial Performance Standards and any
revised Performance Standards of which AirTouch has notified Operator and to
which Operator has not reasonably objected by notice to AirTouch within 10
days after receiving notification of the revised Performance Standard.
Operator shall be deemed to comply with a Performance Standard so long as
Operator's performance with such Performance Standard equals or exceeds the
median performance recorded in respect thereto for the same date or period by
the AirTouch System operating in the Toledo MSA. Subject to Section 7, upon
request of Operator and solely for the purpose of confirming the median
performance of the Toledo MSA System with a Performance Standard, AirTouch
shall furnish Operator with summary information for the applicable date or
period in respect of the performance of such System for any Performance
Standard as to which Operator fails to equal or exceed the median performance
of such System.
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(c) SURVEYS.
(i) The parties recognize that Operator and AirTouch may wish
to obtain market research data or other information related to Operator's
System or to Features, Plans, Products or Services through the use of surveys
("Surveys"). To this end, AirTouch agrees to conduct or cause a third party
or other Persons to conduct within Operator's Service Area (A) a Survey of
subscribers and (B) a Survey of technical performance, in each case at least
on an annual basis (the "Annual Surveys") and may, in its sole discretion,
conduct or cause a third party to conduct additional Surveys from time to
time.
(ii) Annually and at such other times as AirTouch determines
to conduct a Survey or cause a Survey to be conducted, Operator will, upon
AirTouch's request, furnish promptly to AirTouch or such third party a
complete and accurate list of its subscribers in such a format as may be
reasonably requested by AirTouch or such third party, together with such
other information as AirTouch or such third party organization determines is
reasonably necessary to conduct the Surveys. Operator authorizes AirTouch or
such third party to contact any and all of its subscribers solely for the
purposes of conducting the Surveys. AirTouch will furnish or cause any such
third party to furnish Operator with copies of such Surveys, the results
therefrom and any market data so obtained with respect to Operator's Service
Area. AirTouch will treat and will cause any third party to treat Operator's
list of subscribers and the information obtained or generated in connection
with such Surveys in accordance with the provisions of Section 7 hereof. All
Annual Surveys shall be at Operator's expense.
(d) INSPECTION. In order to determine the compliance of Operator's
System with the Performance Standards referred to in Section 2(a), AirTouch
and its representatives will have the right to meet with Operator's employees
and officers and to inspect the operations of Operator's System, including
conducting reasonable on-site tests. Such inspections will be conducted on
reasonable prior notice, during normal business hours and will be performed
in a manner which does not unreasonably interfere with the operations of
Operator's System. The costs of any such inspection will be borne by
AirTouch. If AirTouch determines that Operator's System is not in compliance
with any such Performance Standard, it will notify Operator in writing of (A)
the nature of the noncompliance and (B) the action (or omission) necessary to
cure the noncompliance. In such event, AirTouch may also specify within such
notice or by separate notice, a date not less than the number of days after
such notice is delivered to Operator consistent with Section 9(c) below, by
which such noncompliance must be remedied.
3. BRANDS; ADVERTISING; SERVICE PLANS; PROMOTIONS.
(a) BRANDS. (i) On or before the Initial Effective Date, Operator
and AirTouch will enter into and maintain in effect during the term specified
therein, a Trademark License Agreement in the form of attached EXHIBIT A. On
and after the Initial Effective Date, all Products and Services offered and
sold by Operator's System will be offered and sold exclusively under the
Licensed Marks (as defined in the Trademark License Agreement) pursuant to
the terms and conditions of the Trademark License Agreement, except for any
Product that Operator is prohibited from offering or selling under the
Licensed Marks under the terms of the purchase agreement therefor, in which
case such Product may be offered and sold under the brand of the manufacturer
or distributor thereof. AirTouch will have the right, in its sole discretion,
to substitute other Brand(s) for the Licensed Marks or to require Operator's
System to use additional Brand(s) in connection with some or all of the
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Products and Services; provided that any Brand to be used by and licensed to
Operator will be substantially the same as a Brand used in the Great Lakes
region by the AirTouch Systems. If AirTouch designates any substitute or
additional Brand, Operator will enter into a license agreement in respect of
such Brand in such form as will be reasonably prescribed by AirTouch and will
use such Brand only in compliance with the terms and conditions set forth in
such license agreement; provided, however, that Operator will not be required
to enter into any license agreement that provides for compensation thereunder
that is in addition to that provided herein or the Trademark License
Agreement.
(ii) Each of Operator's business locations shall at all times
during the term of this Agreement comply with AirTouch's reasonable
requirements for showroom and display capacity, appearance, accessibility,
equipment installation and maintenance capacity and efficiency, which
requirements shall take into consideration the location and environment of
Operator's Service Area. AirTouch will have the right to review and approve
the plans, specifications and renderings of the proposed business location,
which approval will not be unreasonably withheld or withdrawn. Operator
further agrees to ensure that each of its agents, dealers or other Persons
who are authorized by Operator to use the License Marks ("Operator's
Distributors") is subject to the obligations set forth in this subsection
(ii).
(iii) Operator agrees that it will not permit any agent,
distributor or other person to use any of the Licensed Marks unless such
person has entered into a Trademark License Agreement with AirTouch in a form
reasonably acceptable to AirTouch.
(b) ADVERTISING.
(i) AirTouch and the Affiliated Systems may from time to time
implement or participate in advertising programs that directly or indirectly
promote the Brands on a national or regional basis ("Advertising"). Such
Advertising may include, but is not limited to, (A) newspaper, magazine and
written periodical advertising; (B) radio scripts, tape recordings and audio
advertising; (C) television scripts, videotape recording and electronic
advertising; (D) telephone directories; (E) billboards, in-store point of
purchase or other display advertising; (F) flyers or similar advertising; and
(G) direct mail materials. Operator acknowledges and agrees that AirTouch is
not obligated to ensure that Operator benefits from any Advertising.
(ii) Operator may elect to utilize any advertising materials
prepared by AirTouch. If Operator elects to utilize such materials, Operator
shall pay for (i) all printing and materials costs related to the materials
used by Operator, in addition to the cost of any customization of such
materials for Operator's use, and (ii) its pro rata share of costs associated
with the development, design, and production of such materials, which pro
rata share shall be calculated by multiplying the total applicable cost by a
fraction, the numerator of which is the total population within Operator's
Service Area and the denominator of which is the total population within the
Operator's Service Area and the area covered by the AirTouch Systems in Ohio.
Operator shall be solely responsible for the placement, publication, display,
distribution, mailing or airing of Advertising in Operator's Service Area,
and shall use materials purchased from AirTouch under this Agreement only
within Operator's Service Area.
(iii) Operator will use reasonable efforts to coordinate its
promotional activities (including without limitation promotion of Plans) with
Affiliated Systems in Service Areas which are
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adjacent to Operator's Service Area and shall bear the costs and expenses of
its own promotional activities.
(c) SERVICE PLANS.
Commencing on the Initial Effective date and thereafter during the term of
this Agreement, Operator agrees to offer the following Service plans within
Operator's Service Area, in addition to any other local Service plans that
Operator elects, in its sole discretion, to offer within Operator's Service
Area: (i) at least two (2) basic digital Service plans designated by AirTouch
that conform as to pricing and other material terms and conditions to digital
plans offered by AirTouch within the neighboring AirTouch System(s); (ii) at
least two (2) basic analog Service plans designated by AirTouch that conform
as to pricing and other material terms and conditions to analog plans offered
by AirTouch within the neighboring AirTouch System(s); and (iii) any prepaid
Service plan(s) designated by AirTouch that conform as to pricing and other
material terms and conditions to prepaid service plan(s) offered by AirTouch
within the neighboring AirTouch System(s). Operator acknowledges and agrees
that the Service plans designated by AirTouch in accordance with the
preceding sentence may vary from time-to-time during the term of this
Agreement. Operator further acknowledges and agrees that the name of any
local Service plan offered by Operator within Operator's Service Area that
does not conform to AirTouch designated plans hereunder shall be
distinguished from the names of the AirTouch designated Service plans and
shall apply only within Operator's Service Area.
(d) PROMOTIONS AND ADVERTISING.
Unless otherwise mutually agreed to in advance by the parties, all promotions
and advertising by Operator within Operator's Service Area must clearly state
in writing that such promotions and advertising are applicable only within
Operator's Service Area, and all promotions and advertising by AirTouch
within AirTouch Systems must clearly state in writing that such promotions
and advertising apply only within the applicable AirTouch Systems.
4. ROAMING AGREEMENT.
(a) RECIPROCAL AGREEMENT. On or before the Initial Effective Date,
Operator and AirTouch will enter into and maintain in effect during the term
specified therein (and to the extent provided in Section 4(b)), a roaming
agreement in the form of attached EXHIBIT C covering Operator's System and
all AirTouch Systems designated therein, which agreement will provide for
mutual roaming rights between Operator's System and each such AirTouch
Systems (the "Roaming Agreement"). The Roaming Agreement will provide for an
initial rate per billable minute of $0.40 for each party. On each anniversary
of this agreement (each a "Reset Date") the roaming rate that the Home
Carrier pays to the Serving Carrier (each as defined in the Roaming
Agreement) shall be recalculated by multiplying the rate then in effect for
such Home Carrier by a fraction, the numerator of which shall be the product
of the total billable minutes (less all minutes attributable to fraud) of
customers of the Home Carrier system roaming in the markets of the Serving
Carrier during the twelve month period ending on the date that is twelve
months prior to the Reset Date (the "Total Billable Minutes") multiplied by
1.1, and the denominator of which shall be the Total Billable Minutes of
customers of the Home Carrier system roaming in the markets of the Serving
Carrier during the twelve month period ending on the Reset Date, provided
that in no event will the applicable roaming rate (i) be reduced on any given
Reset Date by more than 10% or (ii) be increased.
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(b) CONTINUATION OF ROAMING AGREEMENTS. If this Agreement is
terminated for any reason prior to the fifth anniversary of the Initial
Effective Date (the "Five Year Date"), Operator and DCC agree that AirTouch
may, if it so elects in its sole discretion, continue any or all of the
Roaming Agreements entered into pursuant to Section 4(a) until the Five Year
Date. Operator and DCC further agree that if Operator or DCC proposes to
effect a Transfer (as defined below) prior to the Five Year Date that would
result in a Change of Control of Operator's System, if AirTouch so elects in
its sole discretion, such Transfer will be subject to the condition (which
may not be waived) that the transferee assume and agree to perform any or all
of the Roaming Agreements entered into pursuant to Section 4(a) and that any
such Roaming Agreements continue until the Five Year Date notwithstanding any
termination of this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF AIRTOUCH. AirTouch represents to
Operator and DCC that:
(a) ORGANIZATION. It is duly organized, validly existing and in
good standing under the laws of the state of its organization and has all
requisite power and authority to carry out its business as now conducted, and
to enter into this Agreement and to perform its obligations hereunder. It is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary.
(b) AUTHORITY. This Agreement has been duly authorized by all
necessary corporate action on the part of AirTouch. It has been duly executed
and delivered by one of its duly authorized officers and constitutes its
valid and binding obligation, enforceable against it in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or other laws affecting the enforceability of creditors'
rights generally and except that the remedy of specific performance or
similar equitable relief may be subject to equitable defenses and to the
discretion of the court before which enforcement is sought.
(c) AUTHORIZATIONS AND CONSENTS: NO VIOLATION.
(i) Neither its execution and delivery of this Agreement nor
its performance hereunder will conflict with, or result in any breach or
violation of any provision of any of its formative organizational or
governance agreements; or constitute, with or without notice or the passage
of time or both, a breach, violation or default, create a lien or give rise
to any right of termination, modification, cancellation, prepayment or
acceleration under any order, writ, injunction, decree, law, statute, rule or
regulation, franchise, License or any mortgage, indenture, lease, agreement
or other instrument by which it is bound or to which its properties are
subject, except for breaches, violations, defaults, liens or rights of
termination, modification, cancellation, prepayment or acceleration which
would not, singly or in the aggregate, materially adversely affect its
ability to perform the obligations contemplated by this Agreement.
(ii) No authorizations are required to be obtained from any
governmental body with respect to its execution of this Agreement and its
performance hereunder.
(iii) Except as otherwise expressly stated herein, no consents
are reasonably anticipated to be required to be obtained pursuant to any
partnership, joint venture or other similar
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agreement or any material contract, agreement, License or instrument to which
is a party with respect to its execution of this Agreement and its
performance hereunder.
(d) AGREEMENTS WITH THIRD PARTIES; EMPLOYMENT AND NON-COMPETITION
AGREEMENTS. Neither it nor any of its Affiliates is a party to any employment
agreement or a party to or otherwise bound by any non-competition,
non-solicitation or other similar agreement relating to the provision of
Services or that would otherwise be inconsistent with the performance of its
obligations under this Agreement.
6. REPRESENTATIONS AND WARRANTIES OF OPERATOR AND DCC. Each of
Operator and DCC, jointly and severally, represent and warrant to AirTouch
that:
(a) ORGANIZATION. It is duly organized, validly existing and in
good standing under the laws of the state of its organization and has all
requisite power and authority to carry out its business as now conducted, and
to enter into this Agreement and to perform its obligations hereunder. It is
duly qualified or licensed to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary.
(b) AUTHORITY. This Agreement has been duly authorized by all
necessary partnership or corporate action, as applicable, on the part of
Operator and DCC. It has been duly executed and delivered by one of its duly
authorized officers or partners and constitutes its valid and binding
obligation, enforceable against it in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency, reorganization or other
laws affecting the enforceability of creditors' rights generally and except
that the remedy of specific performance or similar equitable relief may be
subject to equitable defenses and to the discretion of the court before which
enforcement is sought.
(c) AUTHORIZATIONS AND CONSENTS: NO VIOLATION.
(i) Neither its execution and delivery of this Agreement nor
its performance hereunder will conflict with, or result in any breach or
violation of, any provision of any of its formative organizational or
governance agreements; or constitute, with or without notice or the passage
of time or both, a breach, violation or default, create a lien or give rise
to any right of termination, modification, cancellation, prepayment or
acceleration under any order, writ, injunction, decree, law, statute, rule or
regulation, franchise, License or any mortgage, indenture, lease, agreement
or other instrument by which it is bound or to which its properties are
subject, except for breaches, violations, defaults, liens or rights of
termination, modification, cancellation, prepayment or acceleration which
would not, singly or in the aggregate, materially adversely affect its
ability to perform the obligations contemplated by this Agreement.
(ii) No authorizations are required to be obtained from any
governmental body with respect to its execution of this Agreement and its
performance hereunder.
(iii) No consents are reasonably anticipated to be required to
be obtained pursuant to any partnership, joint venture or other similar
agreement or any material contract, agreement, License or instrument to which
is a party with respect to its execution of this Agreement and its
performance hereunder.
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(d) AGREEMENTS WITH THIRD PARTIES; EMPLOYMENT AND NON-COMPETITION
AGREEMENTS. Neither it nor any of its Affiliates is a party to any employment
agreement or a party to or otherwise bound by any non-competition,
non-solicitation or other similar agreement relating to the provision of
Services or that would otherwise be inconsistent with the performance of its
obligations under this Agreement.
(e) OWNERSHIP. DCC indirectly owns all of the outstanding equity
in and voting interests of Operator. Operator will be the sole owner of all
of the assets of Operator's System.
(f) FCC AND OTHER GOVERNMENTAL REPORTS AND APPLICATIONS. All
material reports, applications and other documents required to be filed with
the FCC, Ohio PUC, and all other governmental or administrative authorities
necessary for Operator to provide Services for all of the territory within
Ohio RSA #2 have been filed and are accurate and complete in all material
respects.
(g) COVERAGE OF OPERATOR'S SYSTEM. On the Final Effective Date and
continuously thereafter during the term of this Agreement, Operator shall
design, construct and operate Operator's System such that the 32 dBu contours
of Operator's System will cover at least eighty-five percent (85%) of the
population within Operator's Service Area (the "Covered Territory"), which
Covered Territory shall include, without limitation, the Ohio Turnpike
(Interstates 80 and 90) and all other major interstate and state highways
located within the Operator's Service Area and the towns of Tiffin, Sandusky,
Fremont, Norwalk and Huron.
7. CONFIDENTIAL INFORMATION; NON-SOLICITATION.
(a) Each of DCC, Operator and AirTouch will, and will cause its
respective partners, shareholders, directors, officers, employees, and agents
(collectively, when used with respect to any party, its "Representatives"),
to keep secret and retain in strictest confidence, except as provided in
Section 7(b) hereof, any and all Confidential Information of the other party
and will not distribute, disseminate or disclose such Confidential
Information, and will cause its Representatives not to distribute,
disseminate or disclose such Confidential Information, except to (i) any
Representative of AirTouch or Operator on a "need to know" basis in
connection with this Agreement or the operation of Operator's System, the
AirTouch Systems (or the Affiliated Systems) and their respective businesses
or (ii) to any lender to Operator or AirTouch on a "need to know" basis in
connection with the financing of the Operator's System or the AirTouch
Systems, and any such Person receiving Confidential Information pursuant to
this Section 7(a) will use, and will cause its Representatives or lenders to
use, such Confidential Information only for the benefit of DCC, Operator,
AirTouch and the AirTouch Systems (or the Affiliated Systems) or for any
other specific purposes for which it was disclosed to such party. All
Confidential Information disclosed pursuant to this Agreement will remain the
property of the Person whose property it was prior to such disclosure.
(b) In the event that DCC, Operator, AirTouch or any Person to
whom any of them transmits any Confidential Information becomes legally
compelled (by oral questions, interrogatories, requests for information or
documents, subpoena, investigative demand or similar process) to disclose any
of the Confidential Information, such Person will use its best efforts to
provide AirTouch and Operator with prompt written notice prior to disclosure
(not less than 24 hours) so that AirTouch, Operator, as applicable, may seek
a protective order or other appropriate remedy and/or waive compliance with
the provisions of this Agreement. In the event that such protective order or
other remedy is not obtained, or that DCC, Operator or AirTouch, as
applicable, waives compliance with the
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provisions of Section 7(a), the Person who is compelled to disclose such
Confidential Information will furnish only that portion of the Confidential
Information which (based on the advice of counsel) it is legally required to
disclose and will exercise its best efforts to obtain reliable assurance that
protective treatment will be accorded the Confidential Information.
(c) Upon termination of this Agreement, Operator, DCC and AirTouch
will, and will cause their respective Representatives to, return to the
appropriate party all documents that contain Confidential Information or, if
the party so requests, cause such documents to be destroyed.
(d) For purposes of this Section, "Confidential Information" means
all confidential documents and information (including, without limitation,
confidential commercial information and information with respect to customers
and proprietary technologies or processes and the design and development of
new products and services) concerning Operator, its Affiliates, Operator's
System or the Systems owned by Operator's Affiliates, AirTouch, its
Affiliates, the AirTouch Systems or the Affiliated Systems, furnished to or
obtained by a party to this Agreement by or from the other parties or their
Representatives (as such term is defined in Section 7(a) hereof) in
connection with this Agreement or the operation of Operator's System, the
Affiliated Systems or the parties' respective businesses, except to the
extent that such information is (i) generally available to the public other
than as a result of a breach by the receiving Person of the provisions of
Section 7 hereof; (ii) already in the possession of the receiving Person or
its Representatives without restriction and prior to any disclosure pursuant
to any of the terms of this Agreement; (iii) lawfully disclosed to the
receiving Person or its Representatives by a third party who is free lawfully
to disclose the same; or (iv) independently developed by the receiving Person
or its Representatives without use of any Confidential Information obtained
in connection with this Agreement or the operation of Operator's System, the
Affiliated Systems or the parties' respective businesses.
(e) Except as otherwise expressly stated herein, during the term
of this Agreement, (i) neither DCC, Operator nor their respective affiliates
will directly solicit, recruit, or otherwise encourage any person employed
within Ohio or Michigan by AirTouch or its affiliates to leave his or her
employment, and (ii) neither AirTouch nor its affiliates will directly
solicit, recruit, or otherwise encourage any person employed within Ohio or
Michigan by DCC, Operator or their respective affiliates to leave his or her
employment.
8. INDEMNIFICATION.
(a) INDEMNIFICATION BY OPERATOR OR DCC. DCC and Operator jointly
and severally will, to the fullest extent permitted by law, indemnify, defend
and hold harmless AirTouch, its officers, directors, employees, agents and
control Persons from any and all losses, claims, damages, liabilities, costs
and expenses (including reasonable attorneys' fees and expenses)
(collectively "Losses") arising from claims by Persons other than AirTouch
and its Affiliates and their respective officers, directors, employees,
partners, agents and control Persons and which relate to the performance or
non-performance of Operator or DCC of their respective duties or breach of
their representations hereunder, except where such Losses are due to the
negligence or willful misconduct of AirTouch, its partners, officers,
directors, employees, agents and control Persons or where such Losses have
been reimbursed to AirTouch directly by Operator's or DCC's insurer.
(b) INDEMNIFICATION BY AIRTOUCH. AirTouch will, to the fullest
extent permitted by law, indemnify, defend and hold harmless DCC and
Operator, their partners, shareholders, officers,
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directors, employees, agents and control Persons from any and all Losses
arising from claims by Persons other than Operator, DCC or their respective
Affiliates and their respective officers, directors, employees, agents and
control Persons and which relate to the performance or non-performance of
AirTouch of its duties or breaches of its representations hereunder, except
where such Losses are due to the negligence or willful misconduct of Operator
or DCC, their shareholders, officers, directors, employees, agents and
control Persons or where such Losses have been reimbursed to Operator
directly by AirTouch's insurer.
(c) THIRD PARTY CLAIMS. Promptly after receipt by an indemnified
party under this Section 8 of notice of any claim or the commencement of any
action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under
this Section 8, deliver to the indemnifying party a written notice of the
claim or action and the indemnifying party will have the right to participate
in, and, to the extent the indemnifying party so desires and promptly
notifies the indemnified party in writing of such desire, jointly with any
other indemnifying party similarly noticed, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party; provided,
however, that an indemnified party will only have the right to retain its own
counsel, with the fees, disbursements and other charges to be paid by the
indemnifying party, if (i) representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate (based on
the reasonable advice of counsel to the indemnified party) due to actual or
potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding (provided that if such
other party is the indemnifying party, the indemnifying party will not have
the right to direct the defense of such action on the part of the indemnified
party), (ii) the indemnified party has reasonably concluded (based on the
reasonable advice of counsel) that there may be legal defenses available to
it or other indemnified parties that are different from or in addition to
those available to the indemnifying party, (iii) the indemnifying party has
not in fact employed counsel reasonably satisfactory to the indemnified party
within a reasonable time after receiving notice of the claim or commencement
of the action or (iv) the employment of counsel at the indemnifying party's
expense by the indemnified party has been authorized in writing by the
indemnifying party specifying that it will pay for such counsel. If, and only
to the extent that, the failure to deliver written notice to the indemnifying
party within a reasonable time of the commencement of any such action results
in the forfeiture of substantive rights or defenses of the indemnifying party
in such action, such failure will relieve such indemnifying party of
liability to the indemnified party under this Section 8, but the omission so
to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 8. If the indemnifying party chooses to assume the defense of
any claim or action hereunder, it will not, without the indemnified party's
consent, consent to the entry of any judgment or enter into any settlement
that provides for injunctive or other non-monetary relief by the indemnified
party or that does not include as an unconditional term thereof the giving by
each claimant an unconditional release of the indemnified party from all
liability.
9. TERM; TERMINATION.
(a) TERM. The initial term of this Agreement will expire on the
twentieth anniversary of the Execution Date. Thereafter, the term will
automatically be extended for additional five-year periods unless either
Operator or AirTouch makes a valid election not to renew this Agreement. An
election not to renew will be valid only if in writing and delivered to the
other at least one year prior to the expiration of the then current term.
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(b) TERMINATION BY OPERATOR. This Agreement may be terminated by
Operator at any time following the occurrence of any of the following events:
(i) a material breach of this Agreement by AirTouch which has
not been cured within 90 days after Operator has delivered written
notice to AirTouch of such breach;
(ii) a Change of Control of Operator's System;
(iii) a termination of the Trademark License Agreement;
(iv) dissolution, liquidation or winding-up of AirTouch unless
an Affiliate of AirTouch or of AirTouch Communications, Inc. (or any
successor thereto whether by merger, spin-off or otherwise) assumes
AirTouch's obligations hereunder;
(v) the entry by a court having jurisdiction of (A) a decree or
order for relief in respect of AirTouch in an involuntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or (B) a decree or
order adjudicating AirTouch bankrupt or insolvent or approving as
properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of AirTouch under any
applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee or other similar official of AirTouch or
of any substantial part of its property;
(vi) the commencement by AirTouch of a voluntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent
by it to the entry of a decree or order for relief in respect of
AirTouch in any involuntary case or proceeding under applicable
federal or state bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency
case or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any
applicable federal or state law or the consent by it to the filing of
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or other similar
official of AirTouch or any substantial part of its property, or the
making by it of an assignment for the benefit of creditors; or
(vii) the suspension, revocation, or surrender of the FCC License
for any Service Area adjacent to Ohio RSA #2 which are currently held
by AirTouch (unless such suspended, revoked or surrendered FCC License
is properly thereafter awarded to AirTouch or a Permitted Assignee of
AirTouch hereunder, as defined in Section 12(e)(ii) below) or the sale
or other disposition of such FCC License to a Person other than
AirTouch or a Permitted Assignee of AirTouch hereunder (unless the
right to use the Brands are transferred to such Person in connection
with such sale or other disposition).
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(c) TERMINATION BY AIRTOUCH. This Agreement may be terminated by
AirTouch at any time following the occurrence of any of the following events:
(i) a payment default which has not been cured within 60 days
or other material breach of this Agreement by Operator or DCC which
has not been cured within 90 days after AirTouch has delivered written
notice to the breaching party of such breach;
(ii) failure to comply with any Performance Standard within 60
days of the date specified in any notice delivered under Section 2(d)
with respect to any Network Performance Standard, or within 30 days of
the date specified in any notice delivered under Section 2(d) with
respect to any Customer Service Standard, provided that this Section
9(c)(ii) shall apply only to Performance Standard failures that do not
require the involvement of an outside vendor to be remedied, and
further provided that notwithstanding the date for performance set
forth in any notice delivered under Section 2(d), Operator shall
commence corrective action to remedy any such failure as soon as
possible after receiving notice thereof from AirTouch and shall
proceed with due diligence to completion;
(iii) failure to comply with any Performance Standard within 90
days of the date specified in any notice delivered under Section 2(d)
with respect to any Performance Standard failure that requires
involvement of an outside vendor to be remedied, provided that
notwithstanding the date for performance set forth in any notice
delivered under Section 2(d), Operator shall commence corrective
action to remedy any such failure as soon as possible after receiving
notice thereof from AirTouch and shall proceed with due diligence to
completion;
(iv) termination of the Trademark License Agreement;
(v) dissolution, liquidation or winding-up of Operator;
(vi) the suspension, revocation or other loss of, or surrender,
sale or other disposition of Operator's FCC License for all or any
material portion of Operator's Service Area;
(vii) Operator's failure to consent to any revised Performance
Standard;
(viii) the occurrence of any event which is, or after notice or
passage of time or both would be an "event of default" under any
material debt of Operator or under any mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any debt by Operator, whether such debt now
exists or will hereafter be created, provided that such event will not
permit termination hereof unless either (A) such event will remain
uncured at the earlier of the end of any cure period available under
the applicable loan agreement or other instrument or six months from
the first occurrence thereof or (B) the lender, obligee or other
beneficiary will assert any remedies under the applicable loan
agreement or other instrument;
(ix) the entry by a court having jurisdiction of (A) a decree
or order for relief in respect of Operator in an involuntary case or
proceeding under any applicable federal or
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state bankruptcy, insolvency, reorganization or other similar law or
(B) a decree or order adjudicating Operator bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of Operator
under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee or other similar of official
of Operator or of any substantial part of its property;
(x) the commencement by Operator of a voluntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent
by it to the entry of a decree or order for relief in respect of
Operator in any involuntary case or proceeding under applicable
federal or state bankruptcy, insolvency, reorganization or other
similar law or to the commencement of any bankruptcy or insolvency
case or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any
applicable federal or state law or the consent by it to the filing of
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or other similar of
official of Operator or any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or its
failure to pay its debts generally as they become due;
(xi) a Change of Control of Operator's System;
(xii) the acquisition and operation by AirTouch or its Affiliate
of Control of a System operating in the Ohio RSA #2; or
(xiii) the failure of Operator to build out and operate
Operator's System in strict compliance with in Section 6(g) above.
(d) For purposes of this Section 9, a "Change of Control" of
Operator's System will be deemed to have occurred at such time as: (i) DCC no
longer beneficially owns directly or indirectly (whether as a result of
merger, consolidation, sale, assignment, lease or otherwise, in one
transaction or series of related transactions) equity of Operator
constituting a majority of the outstanding equity in and voting interests of
Operator, (ii) any Person other than DCC, or group of Persons acting in
concert, acquires beneficial ownership, directly or indirectly, of 50% or
more of the outstanding equity in or voting interests of Operator or DCC or
(iii) Operator sells or otherwise disposes of (including, without limitation
in connection with the formation of a joint venture that is not controlled by
DCC) all or substantially all of the assets of Operator's System (including,
without limitation in connection with the sale or other disposition of all or
substantially all of the assets of Operator).
10. FUTURE SALE OF OHIO RSA #2. In the event that (i) Operator proposes
to transfer, sell, assign or otherwise dispose of all or substantially all of
the assets of Operator's System, including but not limited to any transfer of
its FCC License for Operator's Service Area, or (ii) DCC proposes to
transfer, sell, assign or otherwise dispose of directly or indirectly, a
majority of the outstanding equity in or voting interests of DCC or Operator
(the transactions referred to in clauses (i) and (ii) being referred to as a
Transfer), other than (x) a Transfer to an Affiliate of DCC, (y) a Transfer
resulting from a Change of Control of Operator's System as a result of the
circumstances set forth in subsection 9(d)(ii) with respect to DCC or (z) a
Transfer in connection with the direct or indirect sale by DCC
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and/or Operator to a single purchaser of the Operator's System and Cellular
Systems for two or more other metropolitan or rural service areas, the
following will apply:
(a) DCC and/or Operator will send a written notice of the proposed
Transfer (a "Transfer Notice") to AirTouch, which notice will describe the
assets or equity securities (the "Interest") proposed to be Transferred.
(b) During the 20-day period following delivery of the Transfer
Notice to AirTouch, Operator will not contact or initiate discussions with
(or entertain any approach from), or conduct negotiations with any Person
other than AirTouch with respect to any Transfer of the Interest.
(c) AirTouch will have 20 days from its receipt of the Transfer
Notice to deliver to Operator its written offer to purchase the Interest
subject to the Transfer Notice (a "AirTouch Offer").
(d) If AirTouch makes an AirTouch Offer, DCC or Operator as
applicable will have the right to accept or reject the AirTouch Offer. If DCC
or Operator as applicable accepts the AirTouch Offer, the Interest will be
transferred to AirTouch subject to the terms and conditions contained in the
AirTouch Offer. If DCC or Operator rejects the AirTouch Offer, DCC or
Operator, as applicable, will be free to Transfer the Interest during the
12-month period after the date of the Transfer Notice to any other Person for
consideration having a fair market value that is no less than the fair market
value of the consideration set forth in the AirTouch Offer.
(e) If AirTouch does not make an AirTouch Offer, DCC or Operator,
as applicable, will be free to Transfer the Interest during the 12-month
period after the date of the Transfer Notice to any other Person without
limitation as to the amount of the consideration paid in respect of the
Transfer.
11. ACQUISITION OF ADDITIONAL SYSTEMS. If DCC or any of its Affiliates
acquires or obtains Control of any System that is adjacent to a System
controlled by DCC or any of its Affiliates and that is subject to an
affiliation agreement with AirTouch or any of its Affiliates (a "Future
System"), AirTouch and its Affiliates shall have an option to enter into an
affiliation agreement with DCC or its Affiliate (including a trademark
license agreement and a roaming agreement) with respect to such Future System
having substantially the same terms and conditions as this Agreement.
12. MISCELLANEOUS PROVISIONS.
(a) NOTICES. All notices, requests, demands or other
communications required by or otherwise with respect to this Agreement will
be in writing and will be deemed to have been duly given to any party (i)
when delivered personally (by courier service or otherwise), (ii) when
delivered by telecopy and confirmed by return telecopy, (iii) on the business
day after the date sent by a nationally recognized overnight courier service,
or (iv) seven days after being mailed by first-class, registered or certified
mail, postage prepaid and return receipt requested, in each case to the
applicable addresses set forth below:
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If to DCC/Operator:
Dobson Communications Corporation
13439 N. Broadway Extension
Oklahoma City, OK 73114
Attention: Everett Dobson, President
With a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
Attention: Joseph A. Kuzneski, Jr., Esquire
If to AirTouch:
AirTouch Cellular
Legal Department
5175 Emerald Parkway
Dublin, OH 43017
With a copy to:
AirTouch Communications, Inc.
Legal Department
One California Street
San Francisco, CA 94111
Attention: Vice President - Legal
or to such other address or telecopy number as any party may have furnished
to the other parties in writing in accordance with this Section 11(a).
(b) GOVERNING LAW. This Agreement will be governed by Ohio law
without regard to the conflicts of laws principles thereof.
(c) AMENDMENTS. Except as provided herein, this Agreement may be
modified or amended only by an instrument in writing signed by the parties
hereto.
(d) ENTIRE AGREEMENT. This Agreement, including the exhibits
hereto, constitute the entire agreement between the parties with respect to
the matters covered hereby and supersede all prior agreements,
understandings, offers and negotiations, oral or written, with regard to the
subject matter hereof In the event of any conflict between the terms of this
Agreement and the terms of the Trademark License Agreement, the terms of the
Trademark License Agreement shall control.
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(e) ASSIGNMENT: SUCCESSORS AND ASSIGNS.
(i) Except as set forth in subsection 12(e)(ii) below, no
party will be entitled to sell, assign, or transfer this Agreement or any
right or obligation hereunder without the written consent of the other party.
(ii) AirTouch may assign this Agreement to any Affiliate of
AirTouch or of AirTouch Communications, Inc. or any successor thereto whether
by merger, spin-off or otherwise (such Affiliates and successors are
sometimes individually and collectively referred to herein as a "Permitted
Assignee"). Operator may assign this Agreement to any Affiliate of DCC in
connection with the transfer, sale, assignment or other disposition of all or
substantially all of the assets of Operator's System (including Operator's
FCC License for Operator's Service Area) to such Affiliate and may assign its
rights under this Agreement to any lender as collateral security for
financing provided to Operator or DCC. If this Agreement is assigned by
AirTouch or by Operator in accordance with the provisions of this subsection
12(e)(ii), the assignor will be released from its obligations hereunder upon,
and to the extent of, the assumption of such obligations by the assignee. In
the event all of AirTouch's prospective obligations hereunder are assumed by
an assignee, all references herein to AirTouch will be deemed references to
the Person that assumes the prospective obligations of AirTouch hereunder
after the date of such assumption and in the event all of Operator's
prospective obligations hereunder are assumed by an Affiliate of DCC all
references herein to Operator will be deemed references to the Affiliate of
DCC that assumes the prospective obligations of Operator hereunder after the
date of such assumption; each such assignee shall be required to execute and
deliver a counterpart of this Agreement as of the date of the assignment and
shall be deemed to have made the representations and warranties of its
assignor contained herein as of the date thereof.
(iii) Subject to subsections (i) and (ii) above, all rights
and duties of the parties hereunder will inure to the benefit of their
respective successors and assigns.
(f) SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction will, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof (unless
such prohibition on unenforceability materially alters the intent of the
parties or the relative economic benefits of the parties, in which case the
materially affected party will have the right to terminate this Agreement),
and any such prohibition or unenforceability in any jurisdiction will not
invalidate or render unenforceable such provision in any other jurisdiction.
(g) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which will
constitute one and the same instrument, and will become effective when one
counterpart has been signed by each of the parties hereto and delivered, via
facsimile transmission or otherwise, to the other party.
(h) THIRD PARTY BENEFICIARIES. Nothing contained in this Agreement
is intended to, or will, confer upon any Person other than the parties hereto
any rights or remedies hereunder.
(i) WAIVER. The observance of any term of this Agreement may be
waived only with the written consent of the party against whom such waiver is
sought to be enforced. No waiver by any party of any default with respect to
any provision, condition or requirement hereof will be deemed to be a
continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof.
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<PAGE>
(j) SETOFF. AirTouch and Operator will have the right to set off any
amounts it would otherwise be required to remit to the other under this
Agreement or otherwise against amounts due to it hereunder.
(k) NO AGENCY OR OTHER RELATIONSHIP. Neither Operator nor DCC will
have any authority, express or implied, to act as an agent of AirTouch, the
Affiliated Systems or any of their respective Affiliates for any purpose; and
AirTouch will have no authority, express or implied, to act as agent of
Operator or DCC or their respective Affiliates. Further, nothing in this
Agreement will be construed to create a partnership, agency, reseller,
franchise or other relationship between the parties, or to make either party
liable for any debts or obligations incurred by the other.
(l) INSURANCE.
(i) REQUIREMENTS. Operator will procure, and will maintain
in full force and effect, at Operator's expense, an insurance policy or
policies protecting Operator against any demand or claim with respect to
personal injury, death or property damage, or any loss, liability, or expense
whatsoever arising or occurring upon or in connection with Operator's
business, the minimum forms and amounts of which are set forth in EXHIBIT D.
All insurance policies must provide for severability of interest or cross
liability; designate AirTouch and its partners, officers, directors,
employees and agents as additional insureds (except workers' compensation);
provide that such insurance is non-contributing primary coverage with respect
to all insureds; and contain a waiver of subrogation.
(ii) CERTIFICATES OF INSURANCE. On or before the Initial
Effective Date and thereafter at least 30 days prior to the expiration of any
such policy or upon the request of AirTouch, Operator shall deliver to
AirTouch certificates of insurance evidencing the proper coverage with limits
not less than those required hereunder. All certificates will expressly
provide that not less than 30 days' prior written notice shall be given
AirTouch in the event of material alteration to, or cancellation of, the
coverages evidenced by such certificates.
(m) DISPUTE RESOLUTION. Any dispute, controversy or claim between
the parties hereto arising out of or relating to this Agreement or any
breach, termination or claim of invalidity of this Agreement will be resolved
as follows:
(i) The dispute shall first be referred to the president of
Operator or DCC, as applicable, and AirTouch's general manager for the Great
Lakes Region (or their respective designees). Such Persons will confer in an
attempt to reach a resolution.
(ii) Any dispute which is not resolved by such Persons
(other than a dispute, controversy, or claim arising out of or in connection
with the exercise by any party of its right to approve or consent to any
action under this Agreement, which will not be appealable to, or reviewable
by, any court or arbitrator) within 30 days of referral of such dispute shall
be resolved by binding arbitration. To the fullest extent permitted by law,
the arbitration will be conducted in accordance with the United States
Arbitration Act (Title 9, U.S. Code) and under the Commercial Rules of the
American Arbitration Association ("AAA"), and not the law of any state
relating to procedure. The arbitration shall be administered by the AAA and,
notwithstanding Rule 11 of the AAA Commercial Rules or any other rule, the
locale of the hearing will be held in Dublin, Ohio, unless all parties to the
arbitration agree to a different locale. A single neutral arbitrator will
preside over the arbitration and decide the
-20-
<PAGE>
dispute, controversy or claim. The parties will cooperate with each other in
causing the arbitration to be held in as efficient and expeditious a manner
as practicable and in this connection furnish such documents and make
available such of their respective personnel as the arbitrator may request.
Any controversy concerning whether an issue is arbitrable will be determined
by the arbitrator. The arbitrator will have the power to set discovery
limits, to award specific performance, and to affirm or reject the exercise
of termination rights, but will not have the authority to award damages other
than actual damages. The decision of the arbitrator will be binding and
nonappealable. Judgment upon the arbitration award may be entered in any
court having jurisdiction. The arbitrator will render a decision within 90
days after accepting an appointment to serve as arbitrator unless the parties
otherwise agree or the arbitrator makes a finding that a party has carried
the burden of showing good cause for a longer period.
(n) EQUITABLE RELIEF. The parties agree that notwithstanding
anything to the contrary contained herein, any party may seek a temporary
restraining order or a preliminary injunction from any court of competent
jurisdiction in order to prevent immediate and irreparable injury, loss or
damage pending the selection of an arbitrator to render a decision on the
ultimate merits of any dispute, controversy or claim.
(o) ATTORNEYS' FEES. The "non-prevailing party" in any arbitration
conducted hereunder (as determined by the arbitrator) will pay all costs and
expenses incurred by the "prevailing party" in preparing for and conducting
the arbitration. If a party commences an action in court against another
party with respect to this Agreement, then the prevailing party in such
action (including appeals) will be entitled to an award of reasonable costs
and expenses of litigation, including attorneys' fees, to be paid by the
non-prevailing party. In the event the parties settle a dispute, no party
will be deemed a "prevailing party."
(p) FURTHER ASSURANCES. Each party hereto agrees to cooperate with
the others, and to take all such actions and execute, acknowledge and deliver
any and all additional papers, documents and other assurances, as are
reasonably necessary in connection with the performance of their obligations
hereunder and to carry out the intent of the parties.
(q) FORCE MAJEURE. Neither Operator nor AirTouch will be liable or
deemed to be in default for a delay in or failure of performance of its
obligations, that results from any of the following causes beyond the
reasonable control of such party: strikes, work stoppages, shortages of
equipment, supplies or energy, malfunction or breakdown of a third Person's
equipment or telecommunications network, war, insurrection, acts of God or
the public enemy, or governmental action (whether in its sovereign or
contractual capacity). Any delay resulting from any such cause will extend
performance accordingly or excuse performance, in whole or in part, for such
time as may be reasonable; provided, however, that (i) such causes will not
excuse payment of any amounts due or owed at the time of such occurrence or
thereafter, (ii) the party asserting any such cause will promptly commence
and diligently pursue action to remedy its inability or failure to perform
hereunder, and (iii) in no event will such causes extend or excuse
performance for more than 120 consecutive days. If such failure of
performance has not been cured by the end of such 120 day period, the other
party may terminate this Agreement without further notice. Any party
asserting this Section 11(q) will promptly notify the other parties of the
occurrence and nature of any such cause and will thereafter regularly inform
the other parties of the progress of actions to remedy its inability or
failure to perform hereunder.
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<PAGE>
(r) OPERATOR RESPONSIBILITY. Operator will be solely responsible
for any and all costs, expenses, taxes and other liabilities incurred in
connection with its operations.
(s) COVENANTS AND ACKNOWLEDGMENTS.
(i) LEGAL COMPLIANCE. Operator agrees to comply with all
applicable laws and regulations, including but not limited to the rules and
regulations promulgated by the FCC under the Communications Act of 1934, as
amended, and to obtain and maintain all appropriate government Licenses
necessary to the operation of Operator's System. Operator agrees to notify
AirTouch in writing within five days after Operator becomes aware of the
commencement of any action, suit or proceeding, or of the issuance of any
order, writ, injunction, award or decree of any court, agency or other
governmental instrumentality, which could have a material effect on the
operations of the Affiliated Systems or the operations or financial condition
of Operator.
(ii) NO WARRANTY. AirTouch expressly disclaims the making of,
and Operator acknowledges that it has not received from AirTouch or any
Person acting on AirTouch's behalf, any warranty or guarantee, express or
implied, as to the extent of the market for Products or Services, or the
earnings or success resulting from Operator's operation of Operator's System
pursuant to this Agreement, or any representation, inducement, promise or
agreement, orally or otherwise, respecting this Agreement, which is not set
forth herein.
(iii) TELECOMMUNICATIONS ACT. Operator agrees not to take any
actions that would, in the reasonable judgment of AirTouch, cause Operator,
AirTouch, or any of their respective Affiliates to be in violation of the
Telecommunications Act of 1996, as amended.
(iv) NO OTHER DUTIES. DCC and Operator acknowledge and agree
that AirTouch will have no duties to Operator in the course of performance of
this Agreement except as specifically provided herein.
(v) NO PROMISE OF RENEWAL. DCC and Operator acknowledge
that the term of this Agreement is set forth in Section 9(a) hereof with no
promise or representation as to the renewal thereof or the execution of a new
Agreement.
(t) SURVIVAL. The provisions of Sections 4 and 7 will survive the
termination or expiration of this Agreement without limitation except as
provided therein. All indemnities and payment or reimbursement obligations
made hereunder will survive the termination or expiration of this Agreement
until expiration of the longest applicable statute of limitations (including
extensions and waivers) with respect to the matter for which a party would be
entitled to be indemnified, paid or reimbursed, as the case may be.
(u) EFFECTIVENESS. Except as otherwise expressly stated herein,
the provisions of this Agreement shall become effective as of the Execution
Date.
(v) EXPENSES. Each party to this Agreement will bear its
respective expenses incurred in connection with the negotiation, preparation
and execution of this Agreement, including all fees and expenses of agents,
representatives, counsel and accountants.
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<PAGE>
(w) INCOME TAXES. Each party to this Agreement shall be
responsible for paying its own federal, state and local income taxes.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
DOBSON COMMUNICATIONS CORPORATION,
an Oklahoma corporation
By /s/ Everett R. Dobson
----------------------------------------------
Its Chief Executive Officer
---------------------------------------------
DOBSON CELLULAR OF SANDUSKY, INC.,
an Oklahoma corporation
By /s/ Everett R. Dobson
----------------------------------------------
Its Chief Executive Officer
---------------------------------------------
NEW PAR, d/b/a AIRTOUCH CELLULAR,
a Delaware general partnership
By: AirTouch Cellular of Michigan
Its: General Partner
By /s/ Terry A. Tindel
----------------------------------------------
Its EVP - Eastern Region
---------------------------------------------
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<PAGE>
EXHIBIT A
Form of Trademark License Agreement
<PAGE>
TRADEMARK LICENSE AGREEMENT
THIS TRADEMARK LICENSE AGREEMENT ("Agreement"), dated as of
____________, 1998, is between AIRTOUCH COMMUNICATIONS, INC., a Delaware
corporation ("Licensor") and DOBSON CELLULAR OF SANDUSKY, INC., an Oklahoma
corporation ("Licensee").
WITNESSETH:
WHEREAS, Licensor is the owner of state and federal trademark
applications for the marks AIRTOUCH and AIRTOUCH DESIGN, as defined below;
WHEREAS, New Par, a Delaware general partnership, d/b/a AirTouch
Cellular, a wholly owned subsidiary of Licensor, Dobson Communications
Corporation, an Oklahoma corporation, and Licensee, have entered into an
Affiliation Agreement dated as of August 28, 1998 (the "Affiliation
Agreement") pursuant to which Operator's System will offer Services (each as
defined in the Affiliation Agreement) exclusively under the Licensed Marks,
as defined below;
WHEREAS, Licensor believes that Licensee provides high quality goods and
services and further believes that Licensee will continue providing high
quality goods and services under the Licensed Marks; and
WHEREAS, Licensor wishes to license to Licensee, and Licensee wishes to
obtain from Licensor, the right to use certain trademarks subject to the
restrictions stated below;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises, the parties hereto agree as follows:
I. DEFINITIONS
A. "LICENSED MARKS" means the trade name, "AirTouch Cellular", the
AIRTOUCH mark, and the AIRTOUCH DESIGN mark, as described in attached
Exhibit 1.
B. "PRODUCTS" means subscriber equipment offered for sale or lease and
any goods and other property ancillary thereto.
<PAGE>
TRADEMARK LICENSE AGREEMENT
- ------------------------------------------------------------------------------
C. "SERVICES" means commercial mobile radio services provided by Systems
(as defined in the Affiliation Agreement), including, without
limitation, voice and data transport, and the services ancillary
thereto.
D. "TERRITORY" means the rural service area designated by the FCC as Ohio
Cellular Market No. 2 (Ohio RSA #2).
II. LICENSE GRANT
A. SCOPE. Effective as of the date hereof and subject to the terms and
conditions of this Agreement, Licensor grants to Licensee a
royalty-free, nonexclusive, nontransferable, revocable license to use
the Licensed Marks in connection with the Products and Services and
the sale and marketing of the Products and Services in the Territory.
Licensor retains the right to concurrently use or license others to
use the Licensed Marks in the Territory in connection with any goods
and/or services. Licensee is expressly prohibited from adopting a
corporate or partnership name that includes, or would be confusingly
similar to, the Licensed Marks. Licensee may, only if required by Ohio
law, file a fictitious business name statement using the words
AirTouch Cellular, but agrees to cancel and/or withdraw such filing
when this Agreement ends or is terminated.
B. QUALITY CONTROL. All uses of the Licensed Marks must appear identical
in substance to the Licensed Marks as they appear in Exhibit 1 and the
Manual as defined below. Licensee shall employ the guidelines stated
in the attached "Corporate Identity Program" (the "Manual"), and any
other reasonable standards that Licensor may adopt from time to time
and of which Licensee has been notified, when preparing any materials
in which the Licensed Marks are displayed. Prior to adopting any use
of the Licensed Marks, including without limitation, the use of the
Licensed Marks on documents, including packaging and labels of any
kind, Licensee shall deliver, at its own expense, one sample of each
manner in which the Licensed Marks are to be used to: Trademark
Counsel, AirTouch Communications, Inc., One California Street, 21st
Floor, San Francisco, CA 94111 ("AirTouch Quality Control"). For
purposes of this Agreement, a sample of a document means the document
itself, and a sample of a Product means either the Product or a very
clear photograph of the Product. AirTouch Quality Control shall have
ten business days from the date it receives the samples to approve or
disapprove of the sample, unless otherwise mutually agreed. The
2
<PAGE>
TRADEMARK LICENSE AGREEMENT
- ------------------------------------------------------------------------------
method of delivery shall be by overnight mail and the samples shall
be deemed received the next working day after Licensee sends them. In
the event that AirTouch Quality Control disapproves any sample, then
Licensee shall not employ that sample and shall immediately destroy
all other like samples, copies, and any other media bearing the
disapproved manner of use of the Licensed Marks.
C. RIGHT TO INSPECT. In addition to the foregoing, representatives of
Licensor shall have the right, at all reasonable times, to inspect the
manner in which Licensee uses the Licensed Marks and the quality of
the Products on which the Licensed Marks are affixed. Such inspection
may, at the election of Licensor, be by personal visit to Licensee or
by written request for information or samples. If the inspection is
by request for samples, then the entity conducting the inspection
shall reimburse Licensee for the cost of shipping said samples.
Licensee agrees to cooperate with such inspections. In the event that
Licensor determines that one or more manners in which Licensee uses
the Licensed Marks are inconsistent with the Manual or other standards
adopted by Licensor and of which Licensee has notice, or that the
quality of any of the Products on which the Licensed Marks are affixed
is not consistent with maintaining the goodwill inherent in the
Licensed Marks, then Licensor shall so notify Licensee, and Licensee
shall immediately cease use of any such disapproved usage of the
Licensed Marks and shall destroy all copies, samples and other media
that bear the disapproved usage. Within thirty (30) days after notice
from Licensor that a particular usage has been disapproved, Licensee
shall certify in writing to the person providing the notice that
Licensee has destroyed all media that bear said usage.
D. RECOGNITION OF OWNERSHIP. Licensee recognizes Licensor's title to the
Licensed Marks, and shall not at any time do or suffer to be done any
act or thing which will in any way impair the rights of Licensor in
and to the Licensed Marks or the goodwill inherent in said Licensed
Marks. It is understood that Licensee shall not acquire and shall not
claim any title to the Licensed Marks adverse to Licensor by virtue of
the license granted herein, or through Licensee's use of said Licensed
Marks, it being the intention of the parties that all use of the
Licensed Marks by Licensee shall at all times inure to the benefit of
Licensor. Licensee is estopped from challenging the validity of the
Licensed Marks or from setting up any claim adverse to Licensor.
3
<PAGE>
TRADEMARK LICENSE AGREEMENT
- ------------------------------------------------------------------------------
E. SALES OUTSIDE TERRITORY. Licensee agrees not to sell any Products
bearing the Licensed Marks with knowledge that such products are to be
resold outside the Territory. Such sales shall constitute a breach of
this Agreement if made with Licensee's knowledge. If Licensee learns
of any such sales, it shall use its best efforts to obtain possession
of said Products and to prevent such sales in the future, including
refusing to sell Products bearing the Licensed Marks to the persons or
entities responsible for the resale outside the Territory.
III. INFRINGEMENTS
A. INFRINGEMENT BY OTHERS. Licensee shall review regularly the market for
Products and Services in the Territory and shall inform Licensor
promptly of any possible infringement of, or unfair competition
affecting, the Licensed Marks which comes to the attention of
Licensee. In the event affirmative action is taken against any such
possible infringement or act of unfair competition, Licensee agrees to
assist, in whatever reasonable manner is requested, and at the expense
of the requester. Recovery of damages resulting from any such action
shall be solely for the account of Licensor. Licensee shall have no
right to initiate any action to defend the Licensed Marks.
B. ACTIONS AGAINST LICENSEE OR LICENSOR. Should either party be involved
as a defendant in judicial action under the trademark laws or with
regard to an act of unfair competition in the Territory with regard to
the Licensed Marks, the parties agree to cooperate with each other to
the greatest possible extent in defending such an action.
IV. TERM AND TERMINATION
A. TERM. This Agreement will have an initial term of twenty 20 years from
the date hereof. Thereafter, the term will automatically be extended
for additional five-year periods unless either party makes a valid
election not to renew this Agreement. An election not to renew will be
valid only if in writing and delivered to the other party at least one
year prior to the expiration of the then current term. In the event of
a termination under this Paragraph, Licensee shall immediately cease
implementation of any new or expanded uses of the Licensed Marks and
shall discontinue existing uses of the Licensed Marks in accordance
with the procedure stated in Paragraph IV E below.
4
<PAGE>
TRADEMARK LICENSE AGREEMENT
- ------------------------------------------------------------------------------
B. OPTIONAL TERMINATION. If Licensee fails to use one or more of the
Licensed Marks in the Territory within any given term that this
Agreement is in effect, then Licensor may, in its sole discretion,
terminate this Agreement as to the unused Licensed Mark or Marks. In
the event of a termination under this Paragraph, Licensee shall
immediately cease implementation of any new or expanded uses of the
Licensed Marks and shall discontinue existing uses of the Licensed
Marks in accordance with the procedure stated in Paragraph IV E below.
C. TERMINATION FOR UNAUTHORIZED USE. If Licensee uses the Licensed Marks
for purposes other than the sale of Products and Services or promoting
the sale of Products and Services within the Territory or if Licensee
fails to use the Licensed Marks in accordance with Section II above or
any other requirements of this Agreement, then Licensor shall notify
Licensee of such failure by written notice sent by overnight courier
or facsimile, including a detailed statement of the improper use. If
Licensee fails to correct such improper use within ten (10) days after
the date of such notice, then Licensor may seek an injunction to
compel Licensee to discontinue the specific unauthorized use of the
Licensed Marks and/or terminate this Agreement by written notice sent
by overnight courier or facsimile to Licensee. In the event of such
termination, Licensee shall immediately cease implementation of any
new or expanded uses of the Licensed Marks and shall discontinue
existing uses of the Licensed Marks in accordance with the procedure
stated in Paragraph IV E below.
D. TERMINATION OF AFFILIATION AGREEMENT. If the Affiliation Agreement
terminates in accordance with the terms and conditions thereof, then
Licensor may, in its sole discretion, provide written notice of
termination of this Agreement sent by overnight courier or facsimile.
The provisions of Paragraph IV E below shall govern Licensee's
transition away from the Licensed Marks.
E. PROCEDURE UPON TERMINATION; LICENSED MARKS REMOVAL PERIOD. Upon
termination of this Agreement pursuant to Paragraphs IV A through D
above, Licensee shall have three months in which to remove the
Licensed Marks from all advertisements, packaging, labels or other
documentation created by Licensee. Within six months after
termination of this Agreement pursuant to Paragraphs IV A through D
above, Licensee shall remove the Licensed Marks from all Products and
any other tangible items on which the Licensed Marks have been affixed
5
<PAGE>
TRADEMARK LICENSE AGREEMENT
- ------------------------------------------------------------------------------
or used by Licensee. At the end of each such period, Licensor shall be
allowed reasonable access to Licensee's premises to observe and
inspect to insure that Licensee is in compliance with the above
requirements and that the Licensed Marks are no longer in use.
Continued use of the Licensed Marks beyond the above specified removal
periods shall constitute infringement of the Licensed Marks by
Licensee and shall give rise to Licensor's remedy of specific
performance in accordance with Paragraph IV F. Licensee shall not
adopt any trade name, trademarks, or service marks that are
confusingly similar to the Licensed Marks in the event of termination
of this Agreement. Licensee may not, after termination of this
Agreement, use the Licensed Marks in any manner, including without
limitation, indicating that Licensee was formerly called "AirTouch" or
"AirTouch Cellular."
F. LICENSOR'S REMEDY OF SPECIFIC PERFORMANCE. Licensee acknowledges that
its failure to cease use of the Licensed Marks in accordance with the
provisions of this Agreement after termination hereof will result in
immediate and irreparable harm to Licensor for which there is no
adequate remedy at law. Licensor shall be entitled to bring an action
or proceeding for specific performance, injunctive relief and/or other
equitable relief to compel Licensee to discontinue the infringement of
the Licensed Marks, to cease and desist all unauthorized use of the
Licensed Marks, to take all affirmative acts necessary to ensure
discontinuance of use of the Licensed Marks after termination of this
Agreement, and to obtain such relief as may be necessary and proper.
G. BREACH. If Licensee breaches any provision of this Agreement, Licensor
may immediately give written notice of intention to terminate within
thirty days after the date of the notice, and, unless Licensee
notifies Licensor in writing of a correction of such breach within
said period, this Agreement shall automatically terminate at the
expiration of the thirty day notice period. Licensor may inspect
Licensee's premises during the period sixty to ninety days after this
Agreement has terminated to ensure that Licensee is no longer using
the Licensed Marks. Licensor retains all of its rights and remedies
to prevent Licensee from continuing to use the Licensed Marks after
termination of this Agreement due to breach.
H. NO DAMAGES. Notwithstanding any other provision in this or any other
agreement between the parties, should this Agreement be terminated for
6
<PAGE>
TRADEMARK LICENSE AGREEMENT
- ------------------------------------------------------------------------------
any reason, neither party shall be able to claim from the other party
any actual, consequential or incidental damages.
I. CONTINUING OBLIGATIONS. Termination of this Agreement for any reason
shall not affect those obligations which, from the context hereof, are
intended to survive termination of this Agreement.
J. NO WAIVER. Any waiver by either party of a breach of any term or
condition of this Agreement shall not be considered as a waiver of any
subsequent breach of the same or any other term or condition thereof.
K. ATTORNEYS' FEES. The prevailing party in any action arising under this
Agreement shall be entitled to collect its reasonable attorneys' fees
from the non-prevailing party. In the event that any such action is
resolved by a settlement agreement, then neither party shall be deemed
the "prevailing party" and each party shall be responsible for its own
attorneys' fees. In the event of bankruptcy of one of the parties
hereto, the attorneys' fees of the nondebtor party, incurred in
dealing with a bankruptcy, shall be considered actual pecuniary loss
under 11 USC section 365(b)(1).
V. MISCELLANEOUS
A. PARAGRAPH HEADINGS. The paragraph headings are for convenience only
and shall not be deemed to affect in any way the language of the
provisions to which they refer.
B. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California without reference
to choice of law provisions. Selection of California law as the
governing law shall not be deemed to invoke any provision of
California law which would not otherwise be applicable to the
relationship contemplated hereunder. All actions arising under this
Agreement, including without limitation, actions regarding the
interpretation or breach of the Agreement, shall be brought in the
federal or state courts of California.
7
<PAGE>
TRADEMARK LICENSE AGREEMENT
- ------------------------------------------------------------------------------
C. NOTICES. All notices or other communications hereunder to Licensor,
except as otherwise specified above, shall be sent to:
AirTouch Communications, Inc.
Legal Department
One California Street, 21st Floor
San Francisco, CA 94111
Attn: Trademark Counsel
and if to Licensee, shall be sent to:
Dobson Communications Corporation
13439 N. Broadway Extension
Oklahoma City, OK 73114
Attention: Everett Dobson, President
with a copy to:
Edwards & Angell
2700 Hospital Trust Tower
Providence, RI 02903
Attention: Joseph A. Kuzneski, Jr.
Any such notice or communication shall be in writing and shall be
deemed to have been received on the day of delivery if sent via
facsimile with confirmation of valid transmission, or after seven
calendar days from mailing if sent via certified mail, postage
prepaid or on the next business day if sent by overnight courier.
Either party may designate a new address to which notices or other
communications may be sent by giving notice to the other party.
D. SEVERABILITY. If any provision of this Agreement shall be held illegal
or invalid by any court, this Agreement shall be construed and
enforced as if such illegal or invalid provision had not been
contained herein, and this Agreement shall be deemed an agreement of
the parties to the full extent permitted by law. If any provision
shall be declared invalid or unenforceable because of its breadth,
scope or duration, such provision shall be severed from the rest of
this Agreement, and the remaining portions of the Agreement shall
remain valid and enforceable.
8
<PAGE>
TRADEMARK LICENSE AGREEMENT
- ------------------------------------------------------------------------------
E. ASSIGNABILITY. Licensee may not assign or sublicense any of its rights
or delegate any of its duties under this Agreement. Any attempted
assignment, sublicense, or delegation by Licensee shall be null and
void.
F. COMPLETE AGREEMENT. This Agreement, together with the Affiliation
Agreement, embodies all of the terms and conditions of the agreement
between the parties with respect to the matters set forth herein.
There are no statements, terms, conditions, representations, or
warranties which have not been embodied herein.
G. MODIFICATIONS. This Agreement may not be modified or amended, except
in a writing signed on behalf of both parties by their duly authorized
representatives which refers specifically to this Agreement.
H. FORCE MAJEURE. Neither party shall be in default under this Agreement
by reason of its delay in the performance of or failure to perform any
of its obligations herein if such delay or failure is caused by
strikes, acts of God or the public enemy, riots, incendiaries,
interference by civil or military authorities, compliance with
governmental laws, rules, and regulations, delays in transit or
delivery, or any fault beyond its control or without its fault or
negligence.
I. WAIVER. The failure of either party at any time to require performance
of any provision of this Agreement by the other party shall not be
deemed a waiver and shall not deprive that party of its full right to
require such performance in a particular instance or at any other
time. Any waiver must be in a writing executed by a duly authorized
representative of the waiving party.
J. DISPUTE RESOLUTION. Any dispute regarding this Agreement, including
without limitation, the interpretation, performance, or termination of
this Agreement, shall be handled pursuant to the dispute resolution
provisions contained in the Affiliation Agreement.
SIGNATURE ON FOLLOWING PAGE
9
<PAGE>
TRADEMARK LICENSE AGREEMENT
- ------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized representatives as of the day
and year first set forth above.
LICENSOR:
AirTouch Communications, Inc.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
LICENSEE:
Dobson Cellular of Sandusky, Inc.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
10
<PAGE>
EXHIBIT 1 -- LICENSED MARKS
1. The AIRTOUCH mark referred to in Paragraph I A above shall be used only
in the following manner:
AIRTOUCH-TM- or AirTouch-TM-
Licensee must use fonts from the Times or Univers families when this mark is
used on Products or in advertising for Products.
2. The AIRTOUCH DESIGN mark referred to in Paragraph IA above shall conform
to the Manual referred to in Paragraph II B above. Licensee shall always
place the letters "TM" as a superscript directly behind the letter "H" in the
AIRTOUCH DESIGN or such other designation as Licensor may direct. Licensee
may not vary the typeface, spacing, or general structure or configuration of
the AIRTOUCH DESIGN mark. Licensee may employ different sizes of the
AIRTOUCH DESIGN mark so long as those different sizes conform the Manual. Use
of color in connection with the AIRTOUCH DESIGN must also conform to the
Manual.
3. The "AirTouch Cellular" trade name referred to in Paragraph I A above
shall be used on in the following manner:
AIRTOUCH CELLULAR or AirTouch Cellular
Licensee must use fonts from the Times or Univers families when this trade
name is used on Products or in advertising for Products.
4. Licensee acknowledges that the Licensed Marks as described in this
Exhibit 1 may be modified, discontinued or altered from time to time by
Licensor, at Licensor's sole discretion. Licensor shall notify Licensee in
writing of any such changes in the Licensed Marks and Licensee agrees to
comply with the changes set forth in such notice within the guidelines
established therein.
<PAGE>
EXHIBIT B
NETWORK PERFORMANCE STANDARDS
A. ANALOG SERVICE.
DROPPED CALLS:
On an annual basis, dropped calls as a percentage of total completed calls
(system wide) must not exceed 2% as measured on a bouncing (sigma) busy
hour basis.
BLOCKED CALLS:
On an annual basis, blocked calls as a percentage of total call attempts
(system wide) must not exceed 2% as measured on a bouncing (sigma) busy
hour basis.
SYSTEM AVAILABILITY:
System availability must not drop below 99% as measured by the following
equation on an annual basis:
The amount of time that each sector is up, in minutes, is added together.
That number is divided by the number of sectors, times 60 minutes per hour,
times 24 hours per day, times 100. This equates to system availability as a
percentage of total minutes in a day.
VOICE QUALITY: (No voice quality standards available for system design at this
time)
MINIMUM PLANS, PRODUCTS, FEATURES AND SERVICES:
Voice transport, Call forwarding, Call waiting, Conference calling,
Automatic call delivery to roaming customers, Voicemail, Intersystem
handoff with all adjacent Systems.
FRAUD CONTROL
Operator will use authenticatable subscriber and network equipment and will
ensure that only authenticatable subscriber equipment is offered through
the direct and indirect distribution channels controlled by Operator
B. DIGITAL SERVICE.
TECHNOLOGY: CDMA - The System (vendor) selected will provide industry
standard features functionally compatible with features and services provided
on the AirTouch Systems adjacent to the Ohio RSA #2. This includes
intersystem handoff, call delivery, short messaging service, etc. The System
must also be compliant with the current IS95 and IS41 standards.
DROPPED CALLS:
On an annual basis, dropped calls as a percentage of total completed calls
(system wide) must not exceed 2% as measured on a bouncing (sigma) busy
hour basis.
<PAGE>
BLOCKED CALLS:
On an annual basis, blocked calls as a percentage of total call attempts
must not exceed 2% as measured on a bouncing (sigma) busy hour basis.
SYSTEM AVAILABILITY:
System availability must not drop below 99% as measured by the following
equation on an annual basis:
The amount of time that each sector is up, in minutes, is added together.
That number is divided by the number of sectors, times 60 minutes per hour,
times 24 hours per day, times 100. This equates to system availability as a
percentage of total minutes in a day.
VOICE QUALITY: (No voice quality standards available for system design at this
time)
MINIMUM PLANS, PRODUCTS, FEATURES AND SERVICES:
Voice transport, Call forwarding, Call waiting, Conference calling,
Automatic call delivery to roaming customers, Voicemail, Caller ID, Display
(text) messaging with notification, intersystem handoff with all adjacent
Systems
FRAUD CONTROL:
Operator will ensure that all customary authentication hardware and
software is incorporated into the network
- -------------------------------------------------------------------------------
CUSTOMER SERVICE STANDARDS
Customer satisfaction rating:
Operator must not underperform the median performance for the AirTouch
System operating in the Toledo MSA by more than 10% in each of the
following measures as determined in any Survey: (1) call clarity, (2)
coverage, (3) service reliability, (4) bill timing and accuracy, (5)
overall satisfaction and (6) willingness to switch carriers.
Availability and responsiveness of customer service representatives:
Calls to customer service are answered within an average of 30 seconds
(Average Speed of Answer) or less.
Customer service representatives must be available to respond to customer
inquiries 24 hours per day, 7 days per week and 365 days per year.
The average rate of abandoned calls to customer service must be less
than 6% of calls received as measured on an annual basis.
<PAGE>
EXHIBIT C
Form of Roaming Agreement
<PAGE>
INTERCARRIER ROAMER SERVICE AGREEMENT
THIS AGREEMENT, dated as of the _____ day of_________, 1998, is entered
into by and between New Par, a Delaware general partnership, on behalf of
itself and itself and its subsidiaries and affiliates, (d/b/a AirTouch
Cellular, sometimes referred to as "ATC", and Dobson Cellular of Sandusky,
Inc., sometimes referred to as "Dobson", on behalf of themselves and those
legal entities set forth in Appendix I, which is attached hereto and hereby
incorporated herein. The entities listed in Appendix I as the "ATC Licensees
and Permittees" are herein referred to collectively as the "ATC Markets" or
individually as an "ATC Market". The entities listed in Appendix I as the
"Dobson Licensees and Permittees" are herein referred to collectively as the
"Dobson Markets" or individually as a "Dobson Market". The ATC Markets and
Dobson Markets may be generically referred to herein as "Markets" or the
"Market". ATC and Dobson are sometimes herein referred to collectively as the
"Parties" and individually as a "Party".
RECITAL
WHEREAS, ATC and Dobson have entered into an Affiliation Agreement dated
as of August 28, 1998 (the "Affiliation Agreement") pursuant to which
"Operator's System" will offer "Products" and "Services" exclusively under
the "Licensed Marks" (each as defined in the Affiliation Agreement); and
WHEREAS, the Parties desire to make arrangements to facilitate the
provision of wireless service to Roamers in accordance with the terms and
conditions of this Agreement and Appendices I-III, which are attached hereto
and hereby incorporated herein. The "General Terms and Conditions for
Roaming," attached hereto as Appendix II, and "Operating Procedures,"
attached hereto as Appendix III are sometimes referred to herein as the
"General Terms".
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein set forth
and intending to be legally bound hereby, the Parties do hereby agree as
follows
1. Under the conditions set forth herein, to be bound by the General
Terms attached hereto, as they may be properly amended from time to time.
2. The Home Carrier shall be liable to the Serving Carrier in
accordance with Paragraph 2.1 of Appendix II for all of the service and
pass-through charges for all calls chargeable to the Home Carrier's customers
(including the customers of its resellers) and invoiced by the Serving
Carrier to the Home Carrier in accordance with Appendix III. "Home Carrier"
and "Serving Carrier" are defined in Appendix II.
3. In the event that roaming becomes technically or administratively
impracticable in either Party's Market(s), or if an unacceptable level of
unauthorized use occurs, either Party may suspend roamer service to its
customers in the manner specified in Paragraph 4.2 of Appendix II. The
Serving Carrier, when communicating with the customers of the Home Carrier,
will use an explanation for the suspension of service mutually agreed upon by
the Parties. In the specific event that the impracticability of roamer
service is caused by the testing or commercial service of a carrier other
than the Serving Carrier operating in the area served by the Serving Carrier
and where the Serving Carrier is not, in any respect, responsible for the
impracticability, the Home Carrier may include with its notice to its
customers the following statement:
"NOTICE
Previously you have been able to obtain service as a roamer in [Serving
Carrier's Affected Service Area] on [Serving Carrier's] system. Presently, you
may experience difficulty in using your service in [Serving Carrier's Affected
Service Area]. This is because [interfering carrier] is now [testing/operating]
its wireless system in [Serving Carrier's Affected Service Area], and the
difficulty is not the fault of [Serving Carrier]."
2
<PAGE>
4. Notices required to be sent pursuant to this Agreement shall
comply with Section X of Appendix II, "Notices and Authorized
Representatives", and shall be addressed as follows:
A. Dobson Communications Corporation
13439 N. Broadway Extension
Oklahoma City, OK 73114
Attention: Everett Dobson, President
and
B. AirTouch Cellular
c/o Director Revenue Assurance
P.O. Box 19750
Irvine, CA 92713
5. ATC (as to its Markets only) and Dobson (as to its Markets only)
represent and warrant that (a) they have been authorized by the ATC Markets
and Dobson Markets, respectively, to enter into this Agreement on such
Markets' behalf and (b) each of the ATC Markets and Dobson Markets is a
Licensee or Permittee of the domestic wireless telecommunications system(s)
and station(s) shown on the attached Appendix I serving the area(s) referred
to therein. ATC and Dobson may hereafter each seek to amend Appendix I of
this Agreement to delete an ATC Market or Dobson Market, upon written notice
to the other Party and with the consent of the other Party, which consent
shall not be unreasonably withheld or delayed. ATC and Dobson may hereafter
each seek to amend Appendix I of this Agreement to add an ATC Market or
Dobson Market, respectively, upon written notice to the other Party and with
the consent of the other Party, which consent may be withheld at the sole
discretion of the other Party. Approved additions and deletions of Markets
shall become effective between such additional Markets and all the existing
Parties hereto, as of the date set forth in an agreed-upon amended Appendix I.
3
<PAGE>
6. This Agreement and the Affiliation Agreement constitute the entire
agreement between the Parties with respect to the subject matter hereof and
supersedes all other prior agreements and undertakings, both oral and
written, among the Parties, or any of them, with respect to the subject
matter hereof
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
of the date first above written.
ATC:
New Par, d/b/a AirTouch Cellular
By: AirTouch Cellular of Michigan
Its: General Partner
By:
--------------------------
Its:
-------------------------
Title:
-----------------------
DOBSON:
Dobson Cellular of Sandusky, Inc.
By:
--------------------------
Its:
-------------------------
Title:
-----------------------
4
<PAGE>
Effective Date of
Appendix I is
______________, 199___
APPENDIX I TO
INTERCARRIER ROAMER SERVICE AGREEMENT
BETWEEN
NEW PAR, d/b/a AIRTOUCH CELLULAR
and
DOBSON CELLULAR OF SANDUSKY, INC.
ATC LICENSEES AND PERMITTEES
<TABLE>
<CAPTION>
SYSTEM STATION MSA/ LICENSE
COVERED SID/BID RSA GRANTED
- ------- ------- ------------------------- -------
<S> <C> <C> <C>
GEORGIA
AirTouch KNKA 315 Atlanta 1/31/87
Cellular 00041
Atlanta KNKA 709 Athens 1/31/87
00265
KNKQ 304 Rome 1/31/87
30315
KNKN 547 Madison 1/31/87
30321
MICHIGAN
Detroit
Cellular KNKA 244 Detroit 7/85
Tele. Co. 00021
Flint KNKA 375 Flint 7/85
Cellular 30617
Tele. Co.
Grand Rapids
Cellular KNKA 375 Grand Rapids 5/86
Tele. Co. 30621
Lansing
Cellular KNKA 365 Lansing 6/86
Tele. Co. 30613
5
<PAGE>
Muskegon
Cellular KNKA 552 Muskegon 7/87
Tele. Co. 30615
PacTel
Cellular KNKA 707 Lima 12/88
Inc of 30625
Lima
PacTel
Cellular KNKA 725 Saginaw 9/88
Inc of 30619
Saginaw
NEBRASKA
Omaha Cellular
Telephone Co
KNKA336 Omaha 2/85
00137
OHIO
Toledo KNKA 240 Toledo 2/86
Cellular 30623
Tele. Co.
Northern
Ohio KNKA 235 Cleveland 5/85
Cellular 00015
Tele. Co.
Akron KNKA 312 Akron 12/86
Cellular 00073
Tele. Co.
Canton
Cellular KNKA 374 Canton 12/86
Tele. Co. 00073
Lorain-
Elyria KNKA 509 Lorain/Elyria 4/88
Cellular 00015
Tele. Co.
Northern
Ohio KNKA 557 Mansfield 9/88
Cellular 00447
Tele. Co.
6
<PAGE>
Columbus
Cellular KNKA 541 Columbus 7/86
Tele. Co. 00133
Springfield
Cellular KNKA 641 Springfield 5/88
Tele. Co. 00163
Dayton
Cellular KNKA 344 Dayton 8/86
Tele. Co. 00163
Hamilton
Cellular KNKA 499 Hamilton/ 6/87
Tele. Co. 00051 Middletown
Southern
Ohio KNKA 235 Cincinnati 8/86
Tele. Co. 00051
Northern
Ohio KNKA 852 Mercer 12/91
Cellular 01563
Tele. Co.
</TABLE>
See Attached Technical Data Sheets for Details
7
<PAGE>
<TABLE>
Caption
Dobson Licensees and Permittees
-------------------------------
MARKET/
SYSTEM STATION SERVICE LICENSE
COVERED SID/BID AREA GRANTED
- ------- ------- ------- -------
<S> <C> <C> <C>
Dobson Cellular Kxxx Sandusky
of Sandusky 1559 OH RSA-2
</TABLE>
See Attached Technical Data Sheets for Details
ATC:
New Par, d/b/a AirTouch Cellular
By: AirTouch Cellular of Michigan
Its: General Partner
By:
----------------------
Its:
---------------------
Title:
-------------------
DOBSON:
Dobson Cellular of Sandusky, Inc.
By:
----------------------
Its:
---------------------
Title:
-------------------
8
<PAGE>
APPENDIX II TO
INTERCARRIER ROAMER SERVICE AGREEMENT
BETWEEN
NEW PAR d/b/a AIRTOUCH CELLULAR
and
DOBSON CELLULAR OF SANDUSKY, INC.
GENERAL TERMS AND CONDITIONS FOR ROAMING
DEFINITIONS
A. The "Agreement" means the Intercarrier Roamer Service Agreement,
including all appendices attached thereto, to which these General Terms and
Conditions for Roaming are also attached.
B. The phrase "wireless service" means domestic public wireless
telecommunications service.
C. "Home Carrier" means a Party who is providing wireless service(s)
to its registered customers in a geographic area where it holds a license or
permit for a domestic public wireless telecommunication system and station.
D. "Serving Carrier" means a Party (or its Markets) who provides
wireless service for registered customers of another Party (or its Markets)
while such customers are out of their home Market's geographic area and in a
Market for which the Serving Carrier holds a license or permit for a domestic
public wireless telecommunication system and station.
E. "Roamer" means a customer who seeks wireless service in a
geographic area outside of the area served by the Party (or a Market) with
whom it is registered.
F. "Authorized Roamer" means a Roamer using equipment with the
NPA/NXX combinations listed in accordance with the "Exchange of Information"
Article III below for whom the Serving Carrier has received authorization
from the Home Carrier in accordance with the provisions of said Article III.
9
<PAGE>
G. "CIBER" means Cellular Intercarrier Billing Exchange Record.
H. "CIBER Record" means the publication prepared by CIBERNET
Corporation, a wholly-owned subsidiary of the Cellular Telecommunications
Industry Association, as a service to the wireless service industry.
I. "ESN" means the Electronic Serial Number that is "burned" in the
customer's wireless telephone set by the manufacturer.
J. "MIN" means the "Mobile Identification Number" which is assigned
by a Home Carrier to each of its registered customers.
K. "NPA/NXX combinations" means the six-digit numerical combinations
assigned by regulatory authorities to identify the area code and prefix for
wireless service.
L. "Authorized Receipt Point" or "ARP" means the location or address
of the entity designated by the "Home Carrier" as the delivery point for its
CIBER records and authorized agent for performing CIBER edits.
M. "Clearinghouse" means that entity which provides for the exchange
of CIBER Records and performs industry accepted CIBER edits.
N. Unless specifically provided otherwise in the Agreement, all words
and phrases defined in the CIBER Record shall have the meaning herein that
they have therein.
O. "Positive File" means the file containing information regarding
Authorized Roamers who are resident in a VLR as a result of a positive
notification to a verification request and in accordance with Article III
hereof.
P. "Positive Validations/Verification" (or "PV") is the process by
which a Roamer becomes an Authorized Roamer as a result of pre-call
verification by the Serving Carrier of the status of the Roamer, including
Verification Requirements and Service Requirements provided by the Home
System. Although neither Party is obligated to provide validation through a
specific method, the preferred pre-call verification method as of the date of
this contract is through the use of IS-41 messaging via SS7 transport.
10
<PAGE>
Q. "Verification Requirements" is the set of parameters that defines
an Authorized Roamer as sent by the Home Carrier, including but not limited
to, the period of authorization.
R. "Service Requirements" are features, restrictions, and auxiliary
services sent by the Home Carrier to the Serving Carrier. These Service
Requirements specifically define an Authorized Roamer's service profile,
including, but not limited to, origination and termination capabilities, and
long distance dialing capabilities or restrictions.
S. "VLR" or "Visitor Location Register" is the location register used
by a wireless switch to retrieve information for handling visiting subscriber
information, including allowed features, and inbound and outbound calling
capabilities.
I. PROVISION OF SERVICE
1.1 Each Party shall provide, to any Authorized Roamer who so
requests, wireless service in accordance with rates as set forth in
Attachment B hereto and with the terms and conditions of this Agreement.
1.2 Notwithstanding anything in this Agreement to the contrary,
if a Serving Carrier suspends or terminates roamer service to an Authorized
Roamer in accordance with the terms of this Agreement, such suspension or
termination shall not affect the rights and obligations of the Parties for
roamer service furnished hereunder prior to such termination or suspension.
1.3 In connection with its service to Roamers, no Serving
Carrier shall use recorded announcements or other inducements for an
Authorized Roamer to discontinue the wireless service of its Home Carrier or,
unless otherwise authorized herein, Roamer's use of a Serving Carrier's
system.
II. DIVISION OF REVENUE
2.1 Each Home Carrier, whose customers (including the customers
of its resellers) receive wireless service(s) from a Serving Carrier as
Authorized Roamers
11
<PAGE>
under this Agreement, shall pay to the Serving Carrier who provided such
wireless service(s) the rates and charges set forth in Attachment B.
III. EXCHANGE OF INFORMATION
3.1 Attachment A to this Appendix II is a list furnished by the
respective Parties of the valid NPA/NXX combinations used by their respective
customers. These NPA/NXX combinations shall be accepted by the other Parties.
Each NPA/NXX combination is and shall be within the entire line range
(0000-9999), or a specified portion thereof, in accordance with Appendix III.
Each Party shall be responsible for all billings properly made under this
Agreement to any number listed by such Party within the range or ranges
specified by it in Attachment A. Additions, deletions, or changes to NPA/NXX
combinations and line number range(s) for their respective customers shall be
sent by each Party to the other in the form of an amendment to Attachment A,
with an effective date as defined in Appendix III.
3.2 Each Party hereby agrees to indemnify the other Party (and
the other Party's Markets), together with their partners and any and all of
their officers, directors, employees, agents and/or affiliates, against, and
hold them harmless from, any and all claims, suits, demands, losses and
expenses, including attorneys' fees and disbursements, which may result in
any way whatsoever from the indemnified Party's denial of Roamer or local
wireless service to any wireless telephone which has been identified by the
indemnifying Party as not being authorized to receive service.
3.3 To control fraudulent Roamer usage, each Party is required
to use a Positive Validation/Verification ("PV") system provided by a
mutually agreed upon validation/verification service in all Markets set forth
in Appendix I. Each Party shall provide to the other Party a list of all
Markets and their PV status within the technical data sheet which is included
with Attachment A. Attachment A shall be promptly updated as changes occur in
the PV status of any Market. The Parties shall cooperate in good faith to
control fraudulent Roamer usage in their Markets. The Parties agree that
calls completed
12
<PAGE>
by a Serving Carrier after a PV request has determined that a Roamer is not a
valid subscriber of the Home Carrier or is unauthorized for service by the
Serving Carrier, shall be the sole responsibility of the Serving Carrier. PV
requests will be made on all MIN/ESN combinations observed by a Serving
Carrier. The Parties understand that, at the time of the execution of this
Agreement, the Dobson Market is not using a system which provides Positive
Validation/Verification. Dobson agrees to provide Positive
Validation/Verification to AirTouch customers within six (6) months of the
execution of this Agreement, and until such time, shall be solely responsible
for calls completed within the Dobson Market which are deemed by AirTouch to
be fraudulent or invalid, and AirTouch will not be responsible for payment of
same.
3.4 All information not of public record that is exchanged
pursuant to this Agreement shall be treated as confidential. Parties
obtaining such confidential information through this Agreement shall use it
only as necessary to carry out the purposes of this Agreement or as necessary
to comply with federal, state or local law. Parties obtaining confidential
information through this Agreement shall not disclose its contents except as
necessary to its duly authorized agents to carry out the purposes of this
Agreement or as necessary to comply with federal, state or local law. The
obligation to protect the confidentiality of information shall survive the
termination of the agreement for a period of five years.
IV. BILLING
4.1 Each Home Carrier shall be responsible for billing to, and
collecting from, its own customers all charges that are incurred by such
customers as a result of service provided to them as Authorized Roamers by
the Serving Carrier. The Home Carrier shall also be responsible for billing
its customers for, and remitting to, the federal government all federal
excise tax that may be due in connection with the service being billed by it
to its customers. While the Serving Carrier will be responsible for the
computation and remittance of all state and local taxes, each Home Carrier
shall be liable
13
<PAGE>
to the Serving Carrier for all such state and local taxes remitted by the
Serving Carrier, regardless of whether these amounts are paid to the Home
Carrier by its customers.
4.2 The Parties will cooperate in order to minimize fraudulent
or other unwarranted use of their systems. If any Party decides that, in its
sole judgment, despite due diligence and cooperation pursuant to the
preceding sentence, fraudulent or other unwarranted use has reached an
unacceptable level of financial loss, such Party may provide a written
request that all or a portion of its NPA/NXX's be removed. The Serving
Carrier will comply with this request within five (5) business days of
receiving the request. At such time as the Home Carrier would like to have
its NPA/NXX's reinstated in the Serving Carrier's switch(es), the Home
Carrier will provide the Serving Carrier a written request to reload the
NPA/NXX's previously removed.
4.3 Each Serving Carrier who provides wireless service to an
Authorized Roamer pursuant to this Agreement shall forward roaming billing
information for each Market listed in Appendix I, on at least a weekly basis,
in accordance with the procedures and standards set forth in the CIBER
Record, to the Home Carrier's Authorized Receipt Point. Except for Serving
Carriers utilizing the CIBERNET Corporation Net Settlement Program, each
Serving Carrier who provides wireless service to an Authorized Roamer
pursuant to this Agreement shall send the Home Carrier a paper invoice within
the time period specified in Appendix III. This invoice shall reflect all
charges relating to service for which Authorized Roamer billing information
was forwarded to the Home Carrier during the previous "Billing Period", as
defined in Appendix III. The Serving Carrier will use the information
provided by its Clearinghouse for invoice preparation and support. The Home
Carrier will only pay for Authorized Roamer charges based on the settlement
report provided by its Clearinghouse and pursuant to the provisions of
Section 4.1 and Attachment B hereto.
4.4 Where the Authorized Roamer billing information required to
be provided by the Serving Carrier in accordance with Paragraph 4.3 above is
not in
14
<PAGE>
accordance with the CIBER Record, the Home Carrier may return the defective
record to the Serving Carrier as provided in the CIBER Record. Returning the
defective record will be in accordance with CIBER Record established
procedures. The Serving Carrier may correct the defective record and return
it to the Home Carrier for billing, provided that the time period from the
date of the call to the receipt of the corrected record does not exceed the
time period specified under "Message Date Edit" in Appendix III.
4.5 No credit for insufficient data or defective records except
as provided in Paragraph 4.4 above, shall be permitted, unless mutually
agreed upon by Dobson and ATC. Any credit that is requested by the Home
Carrier must be fully documented and submitted utilizing the format set forth
in Attachment C.
V. SETTLEMENT
5.1 Each Party will settle its accounts with the other Parties
on the basis of billing information received pursuant to Section IV hereof as
of the "Close of Billing", as that phrase is defined in Appendix III. The
Home Carrier shall remit to the Serving Carrier's designated account by wire
transfer or check such amounts as are due to the Serving Carrier as of the
Close of Billing. Carriers utilizing net settlement procedures set forth in
the CIBER Record are not required to submit a paper invoice and will make
payments in accordance with such net settlement procedures.
5.2 Any payment which is received later than the date permitted
in Appendix III shall be subject to a late charge equal to that set forth in
Appendix III. The only exception to this requirement shall be late payments
which are delayed in forwarding through circumstances which are beyond the
control of the Home Carrier and are consented to by the Serving Carrier,
which consent shall not be unreasonably withheld.
VI. TERM AND TERMINATION OF AGREEMENT
6.1 This Agreement shall have a term commencing on the date
first written above and continuing for a period of five years. Thereafter,
this Agreement shall
15
<PAGE>
renew automatically on a year-to-year basis unless either Party terminates
the Agreement by providing written notice to the other Party at least 90 days
prior to the conclusion of the original or any subsequent term. After ten
years, the Agreement may be terminated by either Party at any time upon 90
days prior written notice.
6.2 This Agreement may be terminated by either Party upon
written notice to the other of a Default (as defined in Section VII) by the
other Party.
6.3 In the event of a change by state or federal licensing
authorities barring or severely impairing the provisioning of wireless
service to Roamers by either Party, which, individually or in the aggregate,
is material to the business of the affected Party, this Agreement may be
terminated immediately upon written notice from one Party to the other Party.
6.4 The termination of this Agreement shall not affect the
rights and liabilities of the Parties under this Agreement with respect to
all Authorized Roamer charges incurred prior to the effective date of such
termination.
VII. DEFAULT; DISPUTE RESOLUTION
7.1 A Party will be in default under this Agreement upon the
occurrence of any of the following events:
(a) A material breach of any term of this Agreement, if such
breach shall continue for thirty (30) days after receipt of written notice
thereof from the non-breaching Party;
(b) Voluntary liquidation or dissolution or the approval by
management, board of directors, stockholders, or owners of a Party of any
plan or arrangement for the voluntary liquidation or dissolution of the
Party;
(c) A final order by the Federal Communications Commission
("FCC") revoking or denying renewal of CMRS licenses or permits granted to
such Party which, individually or in the aggregate, are material to the
business of such Party;
16
<PAGE>
(d) Such Party (i) filing, pursuant to a statute of the
United States or of any state, a petition for bankruptcy or insolvency or
for reorganization or for the appointment of a receiver or trustee for all
or a portion of such Party's property, (ii) has filed against it, pursuant
to a statute of the United States or of any state, a petition for
bankruptcy or insolvency or for reorganization or for the appointment of a
receiver or trustee for all or a portion of such Party's property, provided
that within sixty (60) days after the filing of any such petition such
Party fails to obtain a discharge thereof, or (iii) making an assignment
for the benefit of creditors or petitioning for, or voluntarily entering
into, an arrangement of similar nature, and provided that such filing,
petition, or appointment is still continuing; or
(e) Any termination or expiration of the Affiliation
Agreement; provided however that if the Affiliation Agreement is terminated
for any reason prior to the fifth anniversary of its effective date (the
"Five Year Date"), Dobson agrees that AirTouch may, if it so elects in its
sole discretion, continue any or all of this Agreement until the Five Year
Date. Dobson further agrees that if Dobson proposes to effect a Transfer
(as defined in the Affiliation Agreement) prior to the Five Year Date that
would result in a Change of Control of Operator's System (each as defined
in the Affiliation Agreement), if AirTouch so elects in its-sole
discretion, such Transfer will be subject to the condition (which may not
be waived) that the transferee assume and agree to perform any or all of
Dobson's obligations under this Agreement and that this Agreement continue
until the Five Year Date notwithstanding any termination of the Affiliation
Agreement.
7.2 All claims and disputes relating in any way to the
performance, interpretation, validity, or breach of this Agreement,
including, but not limited to a claim based on or arising from an alleged
tort, shall be resolved as provided in this Section 7.2. It is the intent of
the Parties that any disagreements be resolved amicably to the greatest
extent possible.
17
<PAGE>
7.2.1 If a disagreement cannot be resolved by the
representatives of the Parties with day-to-day responsibility for this
Agreement, such matter shall be referred to a senior-level manager of each of
the Parties. The senior-level managers shall conduct face-to-face
negotiations at a neutral location or such location as shall be mutually
agreed upon. If these representatives are unable to resolve the dispute
within ten business days after either Party requests the involvement of the
senior-level managers, then either Party may, but is not required to, refer
the matter to mediation or arbitration, as applicable in accordance with
Sections 7.2.2 and 7.2.3
7.2.2 In any case where the amount claimed or at issue is
One Million Dollars ($1,000,000) or more and the Parties are unsuccessful in
resolving the disagreement, the Parties agree to submit the disagreement to
non-binding mediation upon written notification by either Party. The Parties
shall mutually select an independent mediator experienced in
telecommunications systems disputes. The specific format for the mediation
shall be left to the discretion of the mediator. If mediation does not result
in resolution of the disagreement within thirty days of the initial request
for mediation, then either Party may, but is not required to, refer the
matter to arbitration.
7.2.3 Any disagreements not finally resolved in accordance
with the foregoing provisions of this Section 7.2 shall, upon written notice
by either Party to the other, be resolved by final and binding arbitration.
Subject to the Section 7.2.3, such arbitration shall be conducted through,
and in accordance with the rules of JAMS/Endispute. A single arbitrator shall
decide all disputes. Each Party shall bear its own expenses (including
attorneys' fees) with respect to the arbitration, except that the costs of
arbitration proceeding itself, including the fees and expenses of the
arbitrator, shall be shared equally by the Parties. The arbitration shall
take place in a neutral location selected by the arbitrator. The arbitrator
may permit discovery to the full extent permitted by the Federal Rules of
Civil Procedure or to such lesser extent as the arbitrator determines is
reasonable. The arbitrator shall be bound by and strictly enforce the terms
of
18
<PAGE>
this Agreement. The arbitrator shall make a good faith effort to apply
applicable law, but an arbitration decision and award shall not be subject to
review because of errors of law. The arbitrator shall have the sole authority
to resolve issues of the arbitrability of any agreement, including the
applicability or running of any applicable statute of limitation. The
arbitrator shall not have the power to award damages in connection with any
dispute in excess of actual compensatory damages nor to award punitive
damages nor any damages that are excluded under this Agreement and each Party
irrevocably waives any claim thereto. The award of any arbitration shall be
final, conclusive and binding on the Parties. Judgment on the award may be
entered in any court having jurisdiction over the Party against whom the
award was made. Nothing contained in this Section 7.2.3 shall be deemed to
prevent either Party from seeking any interim equitable relief such as
preliminary injunction or temporary restraining order, pending the results of
the arbitration. The United States Arbitration Act and federal arbitration
law shall govern the interpretation, enforcement, and proceeding pursuant to
the arbitration clause in this Agreement.
VIII. SUCCESSORS AND ASSIGNS
8.1 Neither ATC nor Dobson may sell, assign, transfer, or convey
its interest in this Agreement or any of its rights or obligations hereunder
without the written consent of the other Party, which consent shall not be
unreasonably withheld or delayed. No person other than a Party to this
Agreement shall acquire any right hereunder as a third-Party beneficiary or
otherwise by virtue of this agreement.
IX. NO PARTNERSHIP OR AGENCY RELATIONSHIP IS CREATED
9.1 Nothing contained in this Agreement shall constitute the
Parties as partners with one another or render any Party liable for any debts
or obligations of any other Party, nor shall any Party hereby be constituted
the agent of any other Party.
19
<PAGE>
X. NOTICES AND AUTHORIZED REPRESENTATIVES
10.1 Unless otherwise specified in this Agreement, (a) all
notices required under this Agreement shall be given in writing; and, (b) all
notices shall be either personally delivered, delivered by overnight carrier,
or sent by certified mail return receipt requested to the persons and
addresses specified in this Agreement or to such other persons at such other
addresses as either ATC or Dobson may designate by written notice to the
other.
10.2 For the purposes of this Agreement, each Party shall be the
authorized representative for all Markets (as identified in Appendix I) which
have a partnership, agency or other relationship to the Party.
XI. MISCELLANEOUS
11.1 The Parties agree to comply with, conform to, and abide by
all applicable and valid laws, regulations, rules and orders of all
governmental agencies and authorities, and agree that this Agreement is
subject to such laws, regulations, rules and orders.
11.2 The Parties agree to use their respective good faith efforts
to fulfill all of their obligations under this Agreement. The Parties further
recognize that to effectuate all purposes of this Agreement, it may be
necessary to enter into other agreements or to amend this Agreement, or both.
In that event, the Parties agree to negotiate with each other in good faith
in an effort to so amend this Agreement and/or enter into other agreements.
In no event, however, are the Parties obligated to amend this Agreement
and/or enter into other agreements if the efforts to negotiate in good faith
do not result in such an amendment or other agreement that is satisfactory to
both Parties.
11.3 This Agreement and the Affiliation Agreement constitute the
full and complete agreement among the Parties with respect to the subject
matter hereof. Any prior agreements among the Parties with respect to this
subject matter are hereby superseded. This Agreement may not be amended,
except by the written consent of the
20
<PAGE>
Parties. Waiver of any breach of any provision of this Agreement must be in
writing signed by AirTouch in the case of a breach by Dobson or a Dobson
Market, or by Dobson in the case of breach by AirTouch or an AirTouch Market,
and such waiver shall not be deemed to be a waiver of any preceding or
succeeding breach of the same or any other provision. The failure of a Party
to insist upon strict performance of any provision of this Agreement or any
obligation under this Agreement shall not be a waiver of such Party's right
to demand strict compliance therewith in the future.
11.4 The headings in this Agreement are inserted for convenience
and identification only and are not intended to describe, interpret, define
or limit the scope, extent or intent of this Agreement or any provision
thereof.
11.5 This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same Agreement.
XII. CHOICE OF LAW
12.1 Except to the extent governed by United States law that
preempts state law, this Agreement shall be interpreted under and governed in
accordance with the domestic laws of the State of Ohio, irrespective of that
State's conflict of laws principles.
21
<PAGE>
[ATTACHMENT A]
CIBER RECORD
METHODS AND PROCEDURES
The following information is furnished pursuant to Paragraph 3.1 of
Appendix II to the Intercarrier Roamer Service Agreement between the Parties:
- -------------------------------------------------------------------------------
NPA/NXX LINE RANGE SID CODE CITY START DATE END DATE
- -------------------------------------------------------------------------------
SEE ATTACHED TECHNICAL DATA SHEET
Dobson Cellular of Sandusky, Inc.
By:
---------------------
Name:
-------------------
Title:
------------------
Issue Date:
-------------
(The effective date shall be
that date defined in Paragraph 7 of
Appendix III.)
22
<PAGE>
[ATTACHMENT A]
CIBER RECORD
METHODS AND PROCEDURES
The following information is furnished pursuant to Paragraph 3.1 of
Appendix II to the Intercarrier Roamer Service Agreement between the Parties:
- -------------------------------------------------------------------------------
NPA/NXX LINE RANGE SID CODE CITY START DATE END DATE
- -------------------------------------------------------------------------------
SEE ATTACHED TECHNICAL DATA SHEET
New Par d/b/a AirTouch Cellular
By: AirTouch Cellular of Michigan
Its: General Partner
By:
---------------------
Name:
-------------------
Title:
------------------
Issue Date:
-------------
(The effective date shall be
that date defined in Paragraph 7 of
Appendix III.)
23
<PAGE>
[ATTACHMENT B]
ROAMING RATES AND SERVICE CHARGES
The following rates and charges shall apply to the wireless
services provided pursuant to the terms and conditions of this Agreement:
Basic Rates:
I. Airtime Rate per Minute: The initial rate per billable minute shall be
$0.40 for each party. On each anniversary of this Agreement (each a "Reset
Date") the roaming rate that the Home Carrier pays to the Serving Carrier
shall be recalculated by multiplying the rate then in effect for such Home
Carrier by a fraction, the numerator of which shall be the product of the
total billable minutes (set forth on the GTE TSI Settlement Reports) less
billed fraud minutes (per settled fraud claims for the same period) of
customers of the Home Carrier system roaming in the Markets of the Serving
Carrier during the twelve month period ending on the date that is twelve
months prior to the Reset Date (the "Total Net Billable Minutes")
multiplied by 1.1, and the denominator of which shall be the Total Net
Billable Minutes of customers of the Home Carrier system roaming in the
markets of the Serving Carrier during the twelve month period ending on the
Reset Date, provided that in no event will the applicable roaming rates be
(i) reduced on any given Reset Date by more than 10%, (ii) increased, or
(iii) reduced below a rate of $0.20. The recalculated roaming rates will be
rounded down to the nearest whole cent (for example, $0.48765 will be
rounded to $0.48). The effective date of any new rates will be thirty (30)
days after the Reset Date.
II. Daily Surcharge per Roamer: $0.00
III. Additional charges as applicable:
International and Domestic Long Distance Rate: 100% pass through at the
rates charged by the long distance carrier.
24
<PAGE>
[ATTACHMENT C]
CREDIT REQUEST
Home Carrier
---------------------------------------------------- --------------
Serving Carrier
------------------------------------------------- --------------
Date of Invoice
------------------------------------------------- --------------
Date of Rated Usage Record Data
--------------------------------- --------------
Batch # and Date
------------------------------------------------ --------------
Number of Records
----------------------------------------------- --------------
Amount of Invoice Not Justified $
---------------------------
(Airtime & Toll Charges, Other Charges & Taxes)
_______ Payment Withheld ______ Charge Back
Reasons for Withholding Payment or Charge Back
_____ 1. Invoice is inconsistent with the Rated Usage Record
Data with respect to
_____a. Taxes;
_____b. Other pass-through charges;
_____c. Wireless service charges;
_____d. Percentage of wireless service;
_____e. Other (see attached reports)
_____ 2. Rated Usage Record Data is incomplete for the charges on the
attached sheet
_____ 3. NPA/NXX combination is not on the list authorized by the Home
Carrier
Mobile ID Number______________________________________
Electronic Serial Number______________________________
_____ 4. Charges for Roamer usage specified on the attached sheet that are
not authorized by the Home Carrier;
_____ 5. Batch totals and detail charges do not balance or batch is out of
sequence.
_____ 6. CIBER rejects
_____ 7. Other (specify below)
Home Carrier:
Date By:
------------------- ---------------------------
Name:
-------------------------
Title:
------------------------
<PAGE>
Effective Date of
Appendix III
is ______________, 199_____
APPENDIX III TO
INTERCARRIER ROAMER SERVICE AGREEMENT
BETWEEN
DOBSON
and
AIRTOUCH CELLULAR
OPERATING PROCEDURES
1. OPERATING PROCEDURES. The Parties agree that the operating
procedures set forth in this Appendix III shall govern and control unless and
until the Parties mutually agree, in writing, to amend said operating
procedures.
2. CLOSE OF BILLING. "Close of Billing" shall be the fifteenth
(15th) day of each calendar month or the immediately preceding business day
if the fifteenth (15th) is not a business day.
3. INVOICING. Invoicing must occur within fifteen (15) days after
the Close of Billing.
4. BILLING PERIOD. The "Billing Period" is the period running
from the day after the Close of Billing through the Close of Billing day in
the subsequent month (normally the sixteenth (16th) through the fifteenth
(15th), unless the fifteenth (15th) falls on a non-business day).
5. PAYMENT. Payment in the form of a check or wire transfer must
be received by the payee within thirty (30) days ("Payment Due Date")
following the date of the invoice. Payments received later than the Payment
Due Date shall be subject to a late charge of either one and a half percent
(1.5%) of the outstanding balance for each thirty (30) day period (or portion
thereof) that such payments are late or the highest percentage of the
outstanding balance permitted by law, whichever is lower.
26
<PAGE>
6. MINIMUM LINE RANGE. The "Minimum Line Range" within an NPA/NXX
is 1,000 line numbers.
7. NPA/NXX NOTIFICATION. The maximum time allowed before changes,
additions or deletions of NPA/NXX's are effective shall be fifteen (15) days
from the date of receipt of notification of such changes, additions or
deletions by either Party.
8. MESSAGE DATE EDIT. Message records shall be considered to have
failed the CIBER Record Edit if the message is more than thirty (30) days old
when it is received at the Home Carrier's Authorized Receipt Point ("ARP").
Message records which are rejected from the Home Carrier's ARP and returned
to the Serving Carrier shall be considered to have failed the CIBER Record
Edit if the message is more than sixty (60) days old. Determination of the
age of a message record is from the date of the call.
27
<PAGE>
AMENDMENT TO INTERCARRIER ROAMER SERVICE AGREEMENT
This Amendment to an Intercarrier Roamer Service Agreement (hereinafter
the "Amendment") is effective as of____________________, 1998, and is entered
into by NEW PAR, a Delaware general partnership, on behalf of itself and its
subsidiaries and affiliates, d/b/a AIRTOUCH CELLULAR (hereinafter "ATC") and
DOBSON CELLULAR OF SANDUSKY, INC. (hereinafter "Dobson"), on behalf of those
partnerships set forth in Attachment A, which is attached hereto and is
hereby incorporated herein.
RECITALS
A. Dobson and ATC currently offer roamer cellular radiotelephone
service to each other's subscribers pursuant to the Intercarrier Roamer
Service Agreement dated as of even date herewith (hereinafter the
"Agreement").
B. Each party to this Amendment desires to limit its liability for
charges resulting from fraudulent usage of the other party's systems.
NOW THEREFORE, the parties do hereby agree as follows:
1. Paragraph 2.1 of Appendix II of the Agreement is hereby deleted in
its entirety and replaced by the following Paragraphs 2.1 through 2.9:
"2.1 Each Home Carrier, whose customers (including the customers of
its resellers) receive wireless services from a Serving Carrier as
Authorized Roamers under this Agreement, shall initially pay to the Serving
Carrier who provided such wireless services all of the Serving Carrier's
charges for wireless services and all pass-through charges (i.e., any toll
or other charges owed by the Serving Carrier to any toll or other carrier
in connection with providing such cellular services) set forth in
Attachment B. The Home Carrier may then receive payment for certain credits
due to Fraudulent Calls as defined in this Paragraph 2.
2.2 In this Agreement, a "Fraudulent Call" is any call that (i) is
not billable to an active customer of the Home Carrier because the MIN/ESN
combination used to make the call was invalid (i.e., not active in the Home
Carrier's switch), or (ii) was made by a MIN/ESN combination for which
there is a valid active subscriber of the Home Carrier but for which such
subscriber cannot be billed, as evidenced by "proof of fraud". Proof of
fraud shall mean (1) overlapping calls appearing on a subscriber's
1
<PAGE>
bill, or (2) calls made from different locations and so close in time that
it would have been impossible for the valid subscriber to have traveled
between the different locations, or (3) reasonable determination that the
valid active subscriber cannot be billed for the involved calls either
because such subscriber did not make the calls or because it is not
feasible to separate calls that were made by the valid subscriber from
calls that were not so made.
2.3 If the Home Carrier's switch was available for validation at the
time Fraudulent Calls were made, the Home Carrier shall receive credits for
the following portions of the Serving Carrier's charges for Fraudulent
Calls:
100% of daily service charges
100% of per minute usage charges less an administrative fee of $0.21
per minute
100% of pass-through toll charges
100% of total taxes
Where the Serving Carrier's Market does not provide a Positive
Validation/Verification system as defined in Section P and referenced in
Section 3.3 of Appendix II, credits will not be reduced by the
administrative fee of $0.10 per minute.
2.4 In order for the Home Carrier to receive payment for any
Fraudulent Call credits, the Home Carrier must submit a written claim
("Credit Claim"). The Credit Claim must be supported by applicable call
detail records, although such records need not be attached to each claim.
Each Credit Claim must contain the MIN/ESN's, date range of fraudulent
calls, total fraudulent charges (including airtime minutes of use,
surcharges, taxes and toll charges passed through by the Serving Carrier),
and the Serving Carrier's SID. At the Serving Carrier's request, the Home
Carrier must certify that the MIN/ESN combination that was cloned has since
been restricted from roaming. Upon receiving a Credit Claim, the Serving
Carrier may request from the Home Carrier copies of subscriber bills or
other call detail records for a sample of the MIN's (sample size will not
exceed 10 MINs for the first $200,000 in claims per month and an additional
5 MINs for every additional $100,000 in claims per month)
2
<PAGE>
submitted or other reasonable evidence that demonstrates that the calls
claimed for credit are Fraudulent Calls ("Proof of Fraud"). Except pursuant
to an audit as provided herein, any request for Proof of Fraud must be
received by the Home Carrier within thirty (30) days of the Serving
Carrier's receipt of the Credit Claim, with the Proof of Fraud received by
the Serving Carrier within sixty (60) days of the receipt of such request.
For each account for which Proof of Fraud is not adequate or timely
received ("Error Account") the Serving Carrier will have the right to
require Proof of Fraud for an additional five accounts. This request for
Proof of Fraud for the additional accounts must be received by the Home
Carrier within thirty (30) days of the receipt of the initial Proof of
Fraud by the Serving Carrier. The Serving Carrier will then, within thirty
(30) days of the receipt of the request for Proof of Fraud for the
additional accounts, determine and inform the Home Carrier of the adequacy
of the additional Proofs of Fraud. If the five replacement accounts are
adequate, the requirements for Proof of Fraud for the Error Account will
have been met. If the five replacement accounts are not adequate, the
requirements for Proof of Fraud for the Error Account will not have been
met. The fraud credits issued for the month in which such Proof of Fraud
is not met shall be reduced on a pro rata basis for the number of accounts
for which no or unsatisfactory Proof of Fraud is submitted, e.g., if 2 of
10 accounts for which Proof of Fraud are requested are not submitted or
are unsatisfactory, and 7 of the 10 replacement accounts are also
unsatisfactory, 45% of the applicable Credit Claim shall be denied; if,
however, 10 of 10 replacement accounts are satisfactory, 100% of the
Credit Claim will be paid. If the Serving Carrier indicates to the Home
Carrier that the Serving Carrier needs, for criminal prosecution purposes,
and affidavit executed by the Home Carrier's subscriber stating that the
subscriber did not place the Fraudulent Calls, the Home Carrier shall
make its best efforts to obtain an appropriate affidavit.
2.5 The Home Carrier shall not submit more than one Credit Claim per
calendar month to any Serving Carrier, and no Credit Claim shall be
submitted for an amount which is less than One Thousand Dollars
($1,000.00). No Credit Claim shall seek credit for a Fraudulent Call that
was made more than one hundred twenty (120) days of a settlement cycle
prior to the date the Home Carrier delivers the Credit Claim to the Serving
Carrier, and no Credit Claim shall contain any Fraudulent Call attributable
to an MIN/ESN to which less than One Hundred Dollars ($100.00) in
Fraudulent Calls is attributable in that Credit Claim.
3
<PAGE>
2.6 The Serving Carrier shall make payment to the Home Carrier within
thirty (30) days after receiving a Credit Claim. The Serving Carrier shall
not be required to pay a Credit Claim, however, until any outstanding
balances due to the Serving Carrier from the Home Carrier and more than
thirty (30) days overdue are paid.
2.7 The Serving Carrier shall have the right to conduct an audit, at
its own expense, of Credit Claims which have been submitted and paid,
provided that such audit is requested within one year after the date that
the claim was paid. The parties agree to work together to minimize the
administration of this amendment and ensure that all claims are processed
in accordance with the provisions of this Agreement.
2.8 Except as provided for in Sections 2. 1 through 2.7, above, the
Home Carrier shall be solely responsible for all of its own personnel,
administrative, billing, and any other costs associated with cellular
fraud.
2.9 Each party agrees to expeditiously notify the other should
fraudulent usage become apparent on either party's system, and the parties
agree to work as rapidly as possible under the circumstances to correct the
problem relating to cellular fraud and to minimize fraudulent usage of
their cellular systems."
2. Except as modified herein, all terms and conditions of the
Agreement shall remain unchanged and in full force and effect.
ATC: Dobson:
NEW PAR d/b/a AIRTOUCH CELLULAR, DOBSON CELLULAR OF SANDUSKY, INC.
By: AirTouch Cellular of Michigan By:
----------------------
Its: General Partner Name:
--------------------
Title:
-------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
4
<PAGE>
EXHIBIT D
Operator Insurance Requirements
<TABLE>
<S> <C>
General Liability (Commercial)
General aggregate $ 2,000,000
Products - completed
operation aggregate $ 2,000,000
Personal and advertising
injury $ 1,000,000
Each occurrence $ 1,000,000
Fire damage $ 300,000
Medical expense $ 5,000
Excess Liability (Umbrella)
Each occurrence $ 5,000,000
Aggregate $ 5,000,000
Automobile Liability $ 1,000,000
Workers' Compensation statutory
Employer's Liability $ 1,000,000
</TABLE>
<PAGE>
EXHIBIT E
EQUIPMENT AND SWITCH FEES FOR AIRTOUCH SYSTEM WITHIN OHIO RSA #2
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
SERVICE/PARTS FEE
- ---------------------------------------------------------------------------------------------------
<S> <C>
Cell-Site $2,000 per month per cell site
- ---------------------------------------------------------------------------------------------------
Electronic Equipment Lease $100 per channel on AirTouch Network per month
- ---------------------------------------------------------------------------------------------------
Routine Maintenance $220 per cell site per month
- ---------------------------------------------------------------------------------------------------
Utilities for AirTouch System Pass-through basis, at AirTouch cost
- ---------------------------------------------------------------------------------------------------
Emergency Maintenance $150 per cell site per hour
- ---------------------------------------------------------------------------------------------------
Switch Usage $0.0275 per MOU (1)
- ---------------------------------------------------------------------------------------------------
Alarm Monitor/Traffic Reporting $1,000 per month
- ---------------------------------------------------------------------------------------------------
Interconnect Facilities Pass-through basis, at AirTouch cost
- ---------------------------------------------------------------------------------------------------
LEC Interconnect $0.01 per mobile to land MOU
- ---------------------------------------------------------------------------------------------------
Local Termination Fees through AirTouch Network Included in cost of switching
- ---------------------------------------------------------------------------------------------------
Positive Roamer Validation Included in cost of switching
- ---------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------
(1) MOU as used herein shall mean an aggregated 60 seconds of time from actual
call duration in seconds. Only those seconds that represent airtime that can be
passed on as a charge to a Subscriber will be aggregated.
<PAGE>
[EXECUTION COPY]
================================================================================
DOBSON COMMUNICATIONS CORPORATION
INVESTMENT AND TRANSACTION AGREEMENT
dated as of December 23, 1998
================================================================================
<PAGE>
INVESTMENT AND TRANSACTION AGREEMENT
INVESTMENT AND TRANSACTION AGREEMENT, dated as of December 23, 1998 (this
"AGREEMENT"), by and among the investors referred to on Schedule I (the
"PURCHASERS"), and Dobson Communications Corporation, an Oklahoma corporation
(the "COMPANY").
WHEREAS:
(A) The Company wishes to authorize and create new classes of preferred
stock, including, Class D Preferred Stock (such term and each other capitalized
term used but not defined in these recitals having the meaning given such term
in Article I), Class E Preferred Stock, Class G Preferred Stock and Class H
Preferred Stock. Class D Preferred Stock shall be convertible into Class A
Common Stock and Class E Preferred Stock and Class G Preferred Stock shall be
convertible into Class A Common Stock and Class H Preferred Stock and the
holders of Class D Preferred Stock and Class G Preferred Stock shall participate
in and receive the economic benefits of the Logix Communications Spin-Off upon
its occurrence; and
(B) The Company wishes to authorize and create a new class of Common
Stock, Class C Common Stock, which shall be issued to employees and managers of
the Company pursuant to the New Company Stock Option Plan; and
(C) The parties wish to amend the Certificate of Incorporation and to file
the Certificates of Designation for each of the Class D Preferred Stock, the
Class E Preferred Stock, the Class G Preferred Stock, and the Class H Preferred
Stock with the office of the Secretary of State for the State of Oklahoma in
order to reflect, among other things, the authorization of the securities being
issued by the Company hereunder, and the parties wish to enter into certain
agreements relating to the parties' rights and obligations in connection with
the New Company; and
(D) The JWC Group and the Dobson Partnership wish to acquire Class D
Preferred Stock to be issued by the Company in the amounts set forth opposite
such Purchasers' names on Schedule I, and the Company wishes to sell and issue
such securities to such Purchasers, all on the terms and subject to the
conditions herein set forth; and
(E) The Company wishes to issue to the Dobson Partnership 37,853 shares of
Class G Preferred with an aggregate value of $25.0 million in exchange for the
redemption by the Company from the Dobson Partnership of 37,853 shares of
Class A Common Stock on the terms and subject to the conditions herein set
forth; and
(F) Certain of the parties hereto are party to the Fleet Purchase
Agreement pursuant to which Fleet Equity will sell to the Company 100,000
shares of Class C Preferred Stock and convert 100,000 shares of Class B
Preferred Stock into shares of Class A Common Stock and sell
<PAGE>
such shares of Class A Common Stock to such other parties on the terms and
conditions contained therein; and
(G) On or prior to the Closing, the Company and Fleet Equity, will
terminate the Fleet Equity Purchase Agreement and the Company and its current
shareholders will terminate the Former Shareholders' Agreement and the Company
and its Stockholders will enter into the Stockholder and Investor Rights
Agreement pursuant to which the Company will replace its current management
stock option plan with the New Company Stock Option Plan and the Company will
establish a management stock option plan for its Subsidiary, Logix
Communications, substantially in the form of the Logix Communications 1998 Stock
Option Plan.
NOW, THEREFORE, in consideration of the promises and the mutual
representations, warranties, covenants, conditions and agreements hereinafter
set forth, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section I.1 CERTAIN DEFINED TERMS. As used herein, the following terms
have the following meanings (unless indicated otherwise, all Section and Article
references are to Sections and Articles in this Agreement, and all Schedule and
Exhibit references are to Schedules and Exhibits to this Agreement):
"AFFILIATE" shall have the meaning given such term in Rule 501(b)
under the Securities Act.
"CELLULAR SUBSIDIARIES" mean the Company's Subsidiaries which own the
Cellular Systems currently owned by the Company.
"CELLULAR SYSTEM" means a mobile communication system constructed and
operated in a MSA or RSA (or any successor territorial designations or
subdivision thereof authorized by the FCC) exclusively using frequencies in
the 800 MHz band, or portions thereof, pursuant to a License therefor
issued by the FCC.
"CERTIFICATES OF DESIGNATION" shall mean collectively the Certificates
of Designation of the Company in respect of each class of Preferred Stock,
substantially in the forms of Exhibits A-1 through A-4 hereto.
<PAGE>
"CLAIM" has the meaning set forth in Section 8.4(a).
"CLASS A COMMON STOCK" shall mean the Class A Common Stock, par value
$0.001 per share, of the Company.
"CLASS A PREFERRED STOCK" shall mean the Class A Preferred Stock of
the Company, par value $1.00 per share.
"CLASS B COMMON STOCK" shall mean the Class B Common Stock, par value
$0.001 per share, of the Company.
"CLASS B PREFERRED STOCK" shall mean the Class B Preferred Stock of
the Company, par value $1.00 per share, which has been redeemed as of the
date of this Agreement.
"CLASS C COMMON STOCK" shall mean the Class C Common Stock of the
Company, par value $0.001 per share, which is designed to track the
financial performance of the Wireless Subsidiaries.
"CLASS C PREFERRED STOCK" shall mean the Class C Preferred Stock of
the Company, par value $1.00 per share.
"CLASS D PREFERRED STOCK" shall mean the Class D Preferred Stock of
the Company, par value $1.00 per share.
"CLASS E PREFERRED STOCK" shall mean the Class E Preferred Stock of
the Company, par value $1.00 per share.
"CLASS F PREFERRED STOCK" shall mean the Class F Preferred Stock of
the Company, par value $1.00 per share.
"CLASS F PREFERRED STOCK DOCUMENTS" shall mean the Class F Preferred
Stock Investors Agreement, the Class F Preferred Stock Warrants and the
Class F Preferred Stock (and the Certificate of Designation relating
thereto).
"CLASS F PREFERRED STOCK WARRANT AGREEMENT" shall mean the Warrant
Agreement entered into by the Company in respect of the Class F Preferred
Stock Warrants.
"CLASS F PREFERRED STOCK WARRANT SHARES" shall mean the Class A Common
Stock issued by the Company upon exercise of the Class F Preferred Stock
Warrants.
3
<PAGE>
"CLASS F PREFERRED STOCK WARRANTS" shall mean any warrant certificate
evidencing warrants to purchase Class A Common Stock issued by the Company
in conjunction with the Class F Preferred Stock.
"CLASS G PREFERRED STOCK" shall mean the Class G Preferred Stock of
the Company, par value $1.00 per share.
"CLASS H PREFERRED STOCK" shall mean the Class H Preferred Stock of
the Company, par value $1.00 per share.
"CLOSING" has the meaning set forth in Section 2.1.
"CLOSING DATE" has the meaning set forth in Section 2.1.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"COMMON STOCK" shall mean, collectively, the Class A Common Stock, the
Class B Common Stock and the Class C Common Stock.
"COMPANY" has the meaning set forth in the preamble.
"CONSENTS" shall mean all consents and approvals of Governmental
Authorities or other third parties necessary to authorize, approve or
permit the parties hereto to consummate the transactions contemplated
hereby and for the Company to operate its business after the Closing Date
as currently contemplated.
"CREDIT AGREEMENTS" shall mean (i) the Credit Agreement, dated as of
March 25, 1998, among First Union National Bank (as successor by merger to
CoreStates Bank, N.A.) as Administrative Agent, Dobson Operating Company,
as Borrower, the Company, as Guarantor, and the Company Subsidiaries party
thereto, (ii) the Revolving Credit Agreement, dated as of March 25, 1998,
among Dobson Cellular Operations Company as Borrower, and NationsBank, N.A.
(as successor by merger to NationsBank of Texas, N.A.), as Administrative
Agent, (iii) the 364-Day Revolving Credit and Term Loan Agreement, dated as
of March 25, 1998, between Dobson Cellular Operations Company, as Borrower,
and NationsBank, N.A. (as successor by merger to NationsBank of Texas,
N.A.), as Administrative Agent, (iv) the Credit Agreement, dated the date
hereof, between Dobson/Sygnet Operating Company, as Borrower and
NationsBank N.A., as Administrative Agent and (v) the Term Loan Agreement,
dated as of the date hereof, among Dobson Tower Company and Nationsbank,
N.A.
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"CREDIT DOCUMENTS" shall mean, collectively, the Credit Agreements
and all documents and instruments evidencing or securing or guarantying
indebtedness thereunder.
"DCC OPTION" shall mean the option held by the Dobson Partnership to
purchase from Fleet Equity 40,000 shares of Class B Preferred Stock
pursuant to the Option Agreement, dated as of March 19, 1996, among the
Dobson Partnership and Fleet Equity.
"DOBSON PARTNERSHIP" means Dobson CC Limited Partnership, an Oklahoma
limited partnership.
"DOBSON/SYGNET" shall mean Dobson/Sygnet Communications Company, an
Oklahoma corporation.
"DOBSON/SYGNET NOTE DOCUMENTS" shall mean, collectively, the
Dobson/Sygnet Note Indenture, the Dobson/Sygnet Note Purchase Agreement,
the Dobson/Sygnet Notes and the Dobson/Sygnet Notes Registration Rights
Agreement.
"DOBSON/SYGNET NOTE INDENTURE" shall mean the Indenture, dated the
date hereof, among Dobson/Sygnet, and United States Trust Company of New
York, as trustee thereunder in respect of the Dobson/Sygnet Notes.
"DOBSON/SYGNET NOTE PURCHASE AGREEMENT" shall mean the Purchase
Agreement, dated as of December 16, 1998, among Dobson/Sygnet, and
NationsBanc Montgomery Securities LLC.
"DOBSON/SYGNET NOTES" shall mean the $200 million in aggregate
principal amount of 12 1/4% Senior Notes due 2008 issued by Dobson/Sygnet
pursuant to the Dobson/Sygnet Note Indenture.
"DOBSON/SYGNET REGISTRATION RIGHTS AGREEMENT" shall mean the
Registration Rights Agreement, dated as of the date hereof, among
Dobson/Sygnet and NationsBanc Montgomery Securities LLC.
"EMPLOYEE PLANS" has the meaning set forth in Section 4.16.
"ENVIRONMENTAL CLAIM" means any claim, action cause of action,
investigation or notice by any person or entity alleging potential
liability resulting from (a) the presence, Release or threatened Release of
any Hazardous Materials or (b) circumstances forming the basis of any
violation, or alleged violation of any Environmental Law.
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"ENVIRONMENTAL LAWS" means all Federal, state and local laws and
regulations relating to pollution or protection of human health or the
environment, including without limitation, laws relating to the
manufacture, distribution, use, treatment, storage, Release, disposal,
transport or handling of Hazardous Materials.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC
promulgated from time to time thereunder.
"FCC" shall mean the Federal Communications Commission or similar
regulatory authority established in replacement thereof.
"FCC LAW" shall mean the Communications Act of 1934, as amended,
including as amended by the Telecommunications Act of 1996, and the rules,
regulations and policies promulgated thereunder.
"FINANCING AGREEMENTS" shall mean, collectively, the Senior Note
Documents, the Dobson/Sygnet Note Documents, the Credit Documents, the
Senior PIK Preferred Stock Certificate of Designation, the Sygnet PIK
Preferred Stock Documents, the Class F Preferred Stock Documents, and this
Agreement, and, as appropriate, all documents, instruments and agreements
evidencing, or securing the foregoing and any refinancings or amendments
thereto permitted by Section 12.5 of the Stockholder and Investor Rights
Agreement. This definition shall not be construed in accordance with the
final sentence of Section 1.2.
"FLEET EQUITY" shall mean collectively Fleet Equity Partners, Fleet
Venture Resources and Kennedy Plaza Partners.
"FLEET EQUITY PARTNERS" means Fleet Equity Partners VI, L.P., a
Delaware limited partnership.
"FLEET EQUITY PURCHASE AGREEMENT" shall mean the Securities Purchase
Agreement, dated as of March 19, 1996, among the Company and the purchasers
named therein as amended by Amendment No.1 thereto, dated as of February
26, 1997.
"FLEET PURCHASE AGREEMENT" means the Stock Purchase Agreement, dated
the date hereof, among Fleet Equity and the other parties thereto.
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"FLEET VENTURE RESOURCES" means Fleet Venture Resources, Inc., a
Delaware corporation.
"FORMER SHAREHOLDERS' AGREEMENT" shall mean the Shareholders'
Agreement, dated as of February 26, 1997, among the Company and the
shareholders named therein and which has been terminated, effective as of
the execution of this Agreement.
"GUARANTEED PENSION PLAN" shall mean any employee pension benefit plan
within the meaning of Section 3(2) of ERISA maintained or contributed to by
the Company or any ERISA Affiliate the benefits of which are guaranteed on
termination in full or in part by the PBGC pursuant to Title IV of ERISA,
other than a Multiemployer Plan.
"GOVERNMENTAL AUTHORITY" shall mean a Federal, State or local court,
legislature, governmental agency (including, without limitation, the United
States Department of Justice), commission or regulatory or administrative
authority or instrumentality.
"HAZARDOUS MATERIALS" means all substances defined as Hazardous
Substances, Oils, Pollutants or Contaminants in the National Oil and
Hazardous Substances Pollution Contingency Plan, 40 C.F.R. Section 300.5,
or defined as such by any Environmental Law.
"HSR ACT" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8.4(a).
"INDEMNIFYING PARTY" has the meaning set forth in Section 8.4(a).
"INTELLECTUAL PROPERTY" shall mean trademarks, service marks, trade
names, Internet domain names, designs, logos, slogans, and general
intangibles of like nature, together with all goodwill, registrations and
applications related to the foregoing (collectively, "Trademarks"); patents
and industrial design registrations or applications (including any
continuations, divisionals, continuations-in-part, renewals, reissues, and
applications for any of the foregoing); copyrights (including any
registrations and applications for any of the foregoing); "mask works" (as
defined use 17 USC Section 901) and any registrations and applications for
"mask works"; Software; any of the following that is not known to the
general public, that confers a material economic advantage for the entity
claiming rights in the same: technology, trade secrets and other
confidential information, know-how, proprietary processes, formulate,
algorithms, models, and methodologies (collectively, "Trade Secrets");
rights of publicity and privacy relating to the use of the names,
likenesses, voices, signatures and biographical information of real
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persons; in each case used in or necessary for the conduct of the Company's
and each of its Subsidiaries' business are currently conducted or
contemplated to be conducted.
"INVESTOR QUESTIONNAIRE" means the Investor Questionnaire, dated the
date hereof, completed and delivered to the Company by each Purchaser who
is a member of the JWC Group.
"JWC" means J.W. Childs Equity Partners II, L.P., a Delaware limited
partnership and its affiliated funds.
"JWC COMMON STOCK" means the 17,412 shares of Class A Common Stock
purchased by JWC from Fleet Equity pursuant to the Fleet Purchase
Agreement, dated the date hereof, among Fleet Equity and the purchasers
named therein.
"JWC GROUP" means JWC together with its affiliated funds and
co-investors as set forth on Schedule I hereto.
"JWC TRANSACTION FEE" means the transaction fee of $500,000 payable by
wire transfer of immediately available funds by the Company to JWC at the
Closing.
"KPP" means Kennedy Plaza Partners.
"LAW" shall mean applicable common law and any statute, ordinance,
code or other law, rule, permit, permit condition, regulation, order,
decree, technical or other standard, requirement or procedure enacted,
adopted, promulgated, applied or followed by any Governmental Authority.
"LICENSE" shall mean a license, permit, certificate of authority,
waiver, approval, certificate of public convenience and necessity,
registration or other authorization, consent or clearance to construct or
operate a facility, including any emissions, discharges or releases
therefrom, or to transact an activity or business, to construct a tower or
to use an asset or process, in each case issued or granted by a
Governmental Authority.
"LIEN" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, right of first refusal or right of
others therein, or encumbrance of any nature whatsoever in respect of such
asset.
"LOGIX COMMUNICATIONS" shall mean Logix Communications Enterprises,
Inc., an Oklahoma corporation.
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"LOGIX COMMUNICATIONS 1998 STOCK OPTION PLAN" shall mean the Logix
Communications Enterprises, Inc. 1998 Stock Option Plan.
"LOGIX COMMUNICATIONS COMMON STOCK" shall mean the Common Stock, par
value $1.00 per share, of Logix Communications.
"LOGIX COMMUNICATIONS SPIN-OFF" shall mean the consummation of the
proposed spin-off by the Company of the business of Logix Communications.
"LOSSES" has the meaning set forth in Section 8.2.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect in the
business, assets, properties (tangible and intangible), operations,
condition (financial or otherwise), liabilities or prospects of the Company
and the Subsidiaries, taken as a whole, whether or not in the ordinary
course of business, whether separately or in the aggregate with other
occurrences or developments, and whether insured against or not or any
event, circumstances or conditions which reasonably may have such a
material adverse effect.
"MSA" means a Metropolitan Statistical Area, comprised of one or more
counties in the United States, as listed in Public Notice Report No.
CL-92-40, "Common Carrier Public Mobile Services Information, Cellular
MSA/RSA Markets and Counties," dated January 24, 1992. DA 92-109.
"MULTIEMPLOYER PLAN" shall mean any multiemployer plan within the
meaning of Section 3(37) of ERISA at any time maintained or contributed to
by the Company or any ERISA Affiliate or to which the Company of any ERISA
Affiliate is or was obligated to contribute.
"NEW COMPANY STOCK OPTION PLAN" shall mean the Dobson Communications
Corporation 1996 Stock Option Plan, adopted on February 6, 1997, as amended
by Amendment No. 1 dated December 21, 1998.
"NEW YORK COURTS" has the meaning set forth in Section 9.6.
"PBGC" has the meaning set forth in Section 4.16.
"PERMITTED LIENS" shall mean (i) Liens arising in favor of sellers or
lessors for indebtedness and obligations incurred to purchase or lease
fixed or capital assets, PROVIDED that such liens secure only the
indebtedness and obligations created thereunder and are limited to the
assets purchased or leased pursuant thereto and the proceeds
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thereof; (ii) mechanic's and workmen's Liens, Liens for taxes,
assessments or other governmental charges; (iii) pledges or deposits to
secure obligations under workmen's compensation, unemployment insurance
or social security laws or similar legislation; (iv) deposits to secure
performance or payment bonds, bids, tenders, contracts, leases,
franchises or public and statutory obligations required in the ordinary
course of business; (v) deposits to secure surety, appeal or custom
bonds required in the ordinary course of business; (vi) statutory
landlord Liens; (vii) all Liens of the FCC, and (viii) to the extent not
described in clauses (i) through (vii), all Liens permitted under the
Financing Agreements or any instrument refinancing indebtedness under
any Financing Agreement permitted pursuant to Section 12.5 of the
Stockholder and Investor Rights Agreement.
"PERSON" shall mean an individual, corporation, partnership, limited
liability company, association, joint stock company, Governmental
Authority, business trust, unincorporated organization, or other legal
entity.
"PREFERRED STOCK" shall mean collectively, the Senior PIK Preferred
Stock, the Sygnet PIK Preferred Stock, the Class A Preferred Stock, the
Class D Preferred Stock, the Class E Preferred Stock, the Class F Preferred
Stock, the Class G Preferred Stock and the Class H Preferred Stock.
"PURCHASER REPRESENTATIVE" means JWC acting on behalf of the JWC Group
for purposes of Regulation D under the Securities Act.
"PURCHASERS" has the meaning set forth in the preamble.
"RELATED AGREEMENTS" shall mean the Stockholder and Investor Rights
Agreement, the Certificates of Designation for each of the Class D
Preferred Stock, the Class E Preferred Stock, the Class G Preferred and the
Class H Preferred, the New Company Stock Option Plan, and the Logix
Communications 1998 Stock Option Plan and the Investor Questionnaires.
"RELEASE" means any release, spill, emission, discharge, leaking,
pumping, injection, deposit, disposal, leaching or migration of Hazardous
Materials into the environment (including without limitations, ambient air,
surface water, groundwater and surface or subsurfaces strata) or into or
out of any property owned or operated by the Company or any of its
Subsidiaries.
"RESTATED BYLAWS" shall mean the Amended and Restated Bylaws of the
Company, in the form of Exhibit B, to be adopted as of the Closing Date.
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"RESTATED CERTIFICATE" shall mean the Amended and Restated Certificate
of Incorporation of the Company, in the form of Exhibit C, to be filed with
the office of the Secretary of State of the State of Oklahoma on the
Closing Date.
"RETURNS" has the meaning set forth in Section 4.18.
"RSA" means a Rural Statistical Area, comprised of one or more
counties in the United States, as listed in Public Notice Report No.
CL-92-40, "Common Carrier Public Mobile Services Information, Cellular
MSA/RSA Markets and Counties," dated January 24, 1992, DA 92-109.
"SEC" means the Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean each statement, report, registration
statement, definitive proxy statement and any other document filed by the
Company with the SEC pursuant to the Securities Act or the Exchange Act,
including all amendments, schedules and exhibits thereto.
"SECTION 8.2 INDEMNIFIED PARTY" has the meaning set forth in
Section 8.2.
"SECTION 8.3 INDEMNIFIED PARTY" has the meaning set forth in
Section 8.3.
"SECURITIES" shall mean, collectively, the shares of Class D Preferred
Stock being issued by the Company hereunder and the 37,853 shares of Class
G Preferred Stock being transferred by the Company to the Dobson
Partnership, together with any shares of stock issued upon conversion of or
delivered in substitution or exchange for any of the foregoing, including
without limitation, in the case of the Class D Preferred Stock, Class A
Common Stock and Class E Preferred Stock and in the case of the Class G
Preferred Stock, the Class H Preferred Stock.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SENIOR NOTE DOCUMENTS" means, collectively, the Senior Note
Indenture, the Senior Notes Escrow and Security Agreement and the Senior
Notes.
"SENIOR NOTES ESCROW AND SECURITY AGREEMENT" means the Escrow and
Security Agreement, dated February 28, 1997, among, the Company and the
placement agents, party thereto, and United States Trust Company of New
York, as Trustee thereunder.
"SENIOR NOTE INDENTURE" means the Indenture, dated as of February 28,
1997 among the Company and United States Trust Company of New York, as
Trustee
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thereunder, in respect of the Senior Notes.
"SENIOR NOTES" means the 11 3/4% Senior Notes due 2007 issued by the
Company pursuant to the Senior Note Indenture.
"SENIOR PIK PREFERRED STOCK" means the 12 1/4% Senior Exchangeable
Preferred Stock of the Company issued on January 22, 1998 Mandatorily
Redeemable 2008, par value $1.00 per share.
"SOFTWARE" means any and all (a) computer programs, including any and
all software implementation of algorithms, models and methodologies,
whether in source code or object code form, (b) databases and compilations,
including any and all data and collections of data, and (c) all
documentation, including user manuals and training materials, relating to
any of the foregoing.
"SENIOR PIK PREFERRED STOCK CERTIFICATE OF DESIGNATION" shall mean the
Senior PIK Certificate of Designation in respect of the Senior PIK
Preferred Stock.
"STOCKHOLDER AND INVESTOR RIGHTS AGREEMENT" shall mean the Stockholder
and Investor Rights Agreement, by and among the Company and the
stockholders named therein, dated as of the date hereof.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more
of the other Subsidiaries of that Person or a combination thereof, or (ii)
if a partnership, association or other business entity, a majority of the
partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest
in a partnership, association, or other business entity if such Person or
Persons shall be allocated a majority of partnership, association or other
business entity gains or losses or shall be or control the managing general
partner of such partnership, association or other business entity.
"SYGNET ACQUISITION" shall mean the acquisition by the Company's
wholly owned subsidiary, Dobson/Sygnet, of all of the outstanding capital
stock of Sygnet Wireless, Inc., an Ohio corporation, pursuant to the Sygnet
Merger Agreement dated July 28, 1998,
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as amended, between Dobson/Sygnet Operating Company and Sygnet Wireless,
Inc.
"SYGNET ACQUISITION DOCUMENTS" shall mean, collectively, the Sygnet
Merger Agreement and all certificates, authorizations, instruments and
other documents delivered in connection with the Sygnet Acquisition.
"SYGNET MERGER AGREEMENT" shall mean the Agreement and Plan of Merger,
dated as of July 28, 1998, between Dobson/Sygnet Operating Company and
Sygnet Wireless, Inc.
"SYGNET PIK PREFERRED STOCK" means the Sygnet PIK Preferred Stock of
the Company, par value $1.00 per share.
"SYGNET PIK PREFERRED STOCK DOCUMENTS" shall mean, collectively, the
Sygnet PIK Preferred Stock Purchase Agreement, the Sygnet PIK Preferred
Stock, and the Sygnet PIK Preferred Stock Registration Rights Agreement.
"SYGNET PIK PREFERRED STOCK PURCHASE AGREEMENT" shall mean the
Purchase Agreement, dated December 16, 1998, between the Company and
NationsBanc Montgomery Securities LLC, in respect of the Sygnet PIK
Preferred Stock.
"SYGNET PIK PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT" shall mean
the Registration Rights Agreement, dated the date hereof, between the
Company and NationsBanc Montgomery Securities LLC.
"SYSTEM" means the Cellular Systems currently owned by the Company.
"TAX ACCRUAL" has the meaning set forth in Section 4.18.
"TRANSFER TAXES" has the meaning set forth in Section 2.3.
"WIRELESS SUBSIDIARIES" shall mean collectively DCC PCS, Inc., Western
Financial Services, Inc., Dobson Cellular Operations Company, Dobson
Operating Company, Dobson Tower Company, DOC Cellular Subsidiary Company,
Dobson/Sygnet, and their respective Subsidiaries.
Section I.2 OTHER DEFINITIONAL PROVISIONS. Terms defined in this Agreement
in Sections other than Section 1.1 shall have the meanings as so defined when
used in this Agreement. As used herein, accounting terms relating to the Company
and its Subsidiaries not defined or to the extent not defined, shall have the
respective meanings given to them under generally accepted
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accounting principles ("GAAP"). References to a document or agreement shall
be to such document or agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
ARTICLE II
CLOSING
Section II.1 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "CLOSING") is taking place concurrently with the
execution hereof at the offices of Mayer, Brown & Platt, 1675 Broadway, New
York, New York 10019 (the "CLOSING DATE").
Section II.2 CLOSING ACTIONS AND DELIVERIES. Simultaneous with the
execution hereof the parties are taking the following actions:
(a) JWC PAYMENTS TO COMPANY. JWC is delivering by wire transfer of
immediately available funds to the Company, to the account designated by
the Company on Schedule II, $81.0 million, in full consideration for the
issuance and sale of 71,559.9 shares of Class D Preferred Stock to the JWC
Group.
(b) DOBSON PARTNERSHIP PAYMENTS TO COMPANY. The Dobson Partnership is
delivering by wire transfer of immediately available funds to the Company,
to the account designated by the Company on Schedule II, $4.0 million, in
full consideration for the issuance and sale of 3,533.8 shares of Class D
Preferred Stock to the Dobson Partnership.
(c) ISSUANCE AND EXCHANGE OF CLASS G PREFERRED STOCK SHARES. The
Company is issuing and transferring 37,853 shares of Class G Preferred
Stock, having an aggregate value of $25.0 million, to the Dobson
Partnership in exchange for the transfer to the Company by the Dobson
Partnership of 37,853 shares of Class A Common Stock, together with duly
executed stock powers.
(d) OTHER DELIVERIES. The parties are executing and delivering or
causing to be executed and delivered all other documents, instruments,
opinions and certificates contemplated by this Agreement to be delivered at
the Closing or necessary and appropriate in order to consummate the
transactions contemplated to be consummated on the Closing Date.
Section II.3 PAYMENT OF TRANSFER TAXES. The Company shall pay or cause to
be paid at the Closing or, if due thereafter, promptly when due, all gross
receipts taxes, gains taxes
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(including, without limitation, real property gains tax or other similar
taxes), transfer taxes, sales taxes, stamp taxes, and any other taxes, but
excluding any Federal, State or local income taxes (collectively, "TRANSFER
TAXES"), payable in connection with the transfer by it of any Securities.
Section II.4 RESTRICTIVE LEGENDS. Each certificate representing
Securities (including Securities originally issued hereunder or delivered upon
conversion of the Class D Preferred Stock, or delivered in substitution or
exchange for any of the foregoing) will bear a legend reading substantially as
follows until such Securities have been sold pursuant to an effective
registration statement under the Securities Act, Rule 144 under the Securities
Act, or an opinion of counsel reasonably satisfactory in form and substance to
the Company that such registration is not required and otherwise in full
compliance with any other applicable restrictions on transfer, including those
contained in this Agreement and the Stockholder and Investor Rights Agreement:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE 'ACT'), OR UNDER ANY STATE
SECURITIES OR 'BLUE SKY' LAWS. SAID SECURITIES MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF,
UNLESS AND UNTIL REGISTERED UNDER THE ACT AND THE RULES AND
REGULATIONS THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR 'BLUE
SKY' LAWS OR EXEMPTED THEREFROM UNDER THE ACT AND ALL APPLICABLE STATE
SECURITIES OR 'BLUE SKY' LAWS."
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each of the Dobson Partnership and JWC (on behalf of itself and the other
members of the JWC Group), severally and not jointly, represents and warrants to
the Company and each of the other parties, as to itself, as follows:
Section III.1 ORGANIZATION, POWER AND AUTHORITY. (a) Each of the
Purchasers, other than Purchasers who are individuals, is a corporation,
limited liability company, trust, general partnership or limited partnership, or
other entity, duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and has the requisite power and
authority to perform its obligations under this Agreement and the Stockholder
and Investor Rights Agreement and the transactions contemplated hereby and
thereby.
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(b) The execution and delivery of this Agreement by it and the
consummation by it of the transactions contemplated hereby have been duly and
validly authorized by its Board of Directors (or equivalent body), if any
and no other proceedings on its part which have not been taken (including,
without limitation, approval of its stockholders, partners or members) are
necessary to authorize this Agreement or to consummate such transactions.
(c) This Agreement has been duly executed and delivered by it and
constitutes its valid and binding obligation, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or
relating to enforcement of creditors' rights generally, by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law) or by an implied covenant of good faith and
fair dealing.
Section III.2 CONSENTS; NO CONFLICTS; APPROVAL. Neither the execution,
delivery and performance by it of this Agreement nor the consummation of the
transactions contemplated hereby will (a) conflict with, or result in a
breach or violation of, any provision of its organizational documents; or (b)
require any Consent, other than those set forth on Schedule 3.2 or the
approval of its board of directors, general partner, stockholders or similar
constituent bodies; or (c) require any approvals or filings under any state
"blue sky" laws or related securities laws except for any necessary
post-closing filings under state laws; except in each case, where such breach
or violation or the failure to obtain or give such Consent would not
materially adversely affect the transactions contemplated hereby or its
ability to perform its obligations hereunder.
Section III.3 LITIGATION. There is no action, proceeding or
investigation pending or, to its knowledge, threatened against it or any of
its properties or assets that would be expected to have a material adverse
effect on its ability to fulfill its obligations under this Agreement.
Section III.4 FCC COMPLIANCE. The fact that it owns the interest in
the Company contemplated by this Agreement will not cause the Company or its
wholly owned Subsidiaries to be ineligible under FCC rules to hold PCS
licenses in general or the licenses to be held by the Company's wholly owned
Subsidiaries.
Section III.5 BROKERS. It has not employed any broker, finder or
investment banker or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with this Agreement.
Section III.6 NO DISTRIBUTION. It is acquiring the Securities to be
purchased by it hereunder for the purpose of investment and not with a view
to or for sale in connection with any public distribution thereof (other than
in compliance with the Securities Act and all applicable
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state securities laws).
Section III.7 INVESTOR ACKNOWLEDGMENTS. (a) Each Purchaser is an
"accredited investor" as defined in Regulation D of the Securities Act or it
has such knowledge and experience in financial and business affairs that it
is capable of evaluating the merits and risks of purchasing the Securities it
is purchasing hereunder and it is able to financially bear the risks thereof.
Each Purchaser has (i) been provided with all suitable information in
respect of the transactions contemplated hereby by the Company (or, in the
case of Purchasers who are members of the JWC Group, by the Purchaser
Representative) pursuant to Rule 502(b) of Regulation D of the Securities
Act, (ii) has been provided with an opportunity to ask questions of, and have
received answers thereto from, the Company and its representatives (or, in
the case of Purchasers who are members of the JWC Group, by the Purchaser
Representative) `regarding the terms and conditions of its purchase of
Securities, and the Company and its proposed business generally, and (iii)
has obtained all additional information requested by it to verify the
accuracy of all information furnished to it in connection with such purchase.
(b) It is not relying on and acknowledges that no representation
is being made by any other Purchaser, the Company, the Dobson Partnership or
any of their respective officers, employees, Affiliates, agents or
representatives, except for representations and warranties expressly set
forth in this Agreement, and, in particular, it is not relying on, and
acknowledges that no representation is being made in respect of, (x) any
projections, estimates or budgets delivered to or made available to them of
future revenues, expenses or expenditures, or future results of operations
and (y) any other information or documents delivered or made available to it
or its representatives, except for representations and warranties expressly
set forth in this Agreement.
(c) In deciding to invest in the Company, it has relied
exclusively on the representations and warranties of the Company expressly
set forth in this Agreement and the investigations made by itself and its
representatives and the Purchaser Representative and its representatives and
the knowledge of the Purchaser Representative and its representatives of the
industry in which the Company proposes to operate. Based solely on such
representations and warranties of the Company and such investigations and
knowledge, it or its Purchase Representative has determined that the
Securities it is acquiring are a suitable investment for it.
(d) It understands that (i) the Securities have not been
registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated under the
Securities Act, (ii) the Securities must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
exempt from such registration, (iii) the Securities will bear a legend to
such effect and (iv) the Company will make
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notations on its respective transfer books to such effect.
Section III.8 POWER OF ATTORNEY. Each Purchaser who is a member of the
JWC Group has properly executed and delivered a valid, irrevocable and
effective Power of Attorney in the form of Exhibit F hereto appointing Dana
Schmaltz its attorney-in-fact for the purposes of this Agreement and the
Related Agreements and the transactions contemplated hereby and thereby, and
such Power of Attorney is in full force and effect under the laws of the
jurisdiction governing its execution and delivery and permits the
attorney-in-fact to bind the relevant Purchaser as a party hereto and binds
such relevant Purchaser to the terms of the Stockholder and Investor Rights
Agreement.
Section III.9 PURCHASER REPRESENTATIVE REPRESENTATIONS. (a) JWC has
complied with, and is currently in compliance with, the provisions of Rule
501 of Regulation D of the Securities Act ("RULE 501") with respect to its
appointment as Purchaser Representative (as defined in Rule 501) for the JWC
Group, and such appointment has not been rescinded or modified in any way as
to result in the non-compliance of JWC with the provisions of Rule 501.
(b) The JWC Group does not contain more than 35 purchasers of
Securities, as calculated in accordance with Rule 501.
(c) Each member of the JWC Group who is a natural person had the
legal capacity to complete and sign the Investor Questionnaire.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Purchasers as set
forth in this Article IV. For the purpose of this Agreement and the exhibits
and schedules hereto, references to "know" or "knowledge" of the Company
shall mean (i) information actually known to any member of the Company's or
any of its Subsidiaries' senior management, or (ii) information which members
of the Company's senior management should have known through the exercise of
reasonable diligence in the exercise of their management responsibilities.
Section IV.1 ORGANIZATION, POWER AND AUTHORITY. (a) Each of the
Company and each of its Subsidiaries is a corporation, duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has the requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted and proposed to be conducted. Exhibits A-1, A-2, A-3, A-4, B and
C, respectively, contain a true and
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correct copy of its Certificate of Designation for the Class D Preferred
Stock, Class E Preferred Stock, Class G Preferred Stock and Class H Preferred
Stock, Restated Bylaws and Restated Certificate, as in effect on the Closing
Date.
(b) Each of the Company and each of its Subsidiaries has the
requisite power and authority to execute, deliver and perform this Agreement
and each of the Related Agreements to which it is a party and each other
instrument, document, certificate and agreement required or contemplated to
be executed, delivered and performed by it hereunder and thereunder to which
it is or will be a party.
(c) Each of the Company and each of its Subsidiaries is duly
qualified to do business in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes
such qualification necessary other than any such jurisdiction in which the
failure to be so qualified would not have a Material Adverse Effect on the
Company or such Subsidiary or materially adversely affect the transactions
contemplated hereby or its ability to perform its obligations hereunder or
under the Related Agreements upon their execution and delivery.
(d) The execution and delivery of this Agreement and the Related
Agreements to which it is a party by the Company and each of the Subsidiaries
and the consummation of the transactions contemplated hereby and thereby have
been duly and validly authorized by the Board of Directors of the Company
and, where necessary the Board of Directors of each of the Subsidiaries and
no other proceedings on the part of the Company or any Subsidiary which have
not been taken (including, without limitation, approval of its shareholders)
are necessary to authorize this Agreement or to consummate such transactions.
(e) This Agreement and each of the Related Agreements to which it
is a party has been duly executed and delivered by the Company and the
Subsidiaries, as the case may be, and constitutes the valid and binding
obligation of the Company and each of the Subsidiaries, if applicable,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally, by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
Section IV.2 CONSENTS; NO CONFLICTS. Assuming the consummation of the
transactions contemplated by the Class F Preferred Stock Documents, the
Sygnet Acquisition Documents and the Sygnet PIK Preferred Stock Documents,
all to be consummated concurrently with the transactions contemplated hereby,
neither the execution, delivery and performance by the Company or any of its
Subsidiaries of this Agreement and, upon its execution, delivery and
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performance, the Related Agreements to which it is a party nor the
consummation of the transactions contemplated hereby or thereby will (a)
conflict with, or result in a breach or violation of, any provision of the
organizational documents of the Company or its Subsidiaries; (b) subject to
obtaining the Consents set forth on Schedule 4.2, constitute, with or without
the giving of notice or passage of time or both, a breach, violation or
default, create a Lien, or give rise to any right of termination,
modification, cancellation, prepayment or acceleration, under (i) any Law, or
(ii) any note, bond, mortgage, indenture, lease, agreement or other
instrument, in each case which is applicable to or binding upon the Company
or any of its Subsidiaries or any of their assets (including, without
limitation, the Financing Agreements); or (c) require any Consent on the part
of the Company or any of its Subsidiaries, other than those set forth on
Schedule 4.2 or the approval of the Company's Board of Directors (which
approval has been obtained), except in each case where such breach,
violation, default, Lien, right, or the failure to obtain or give such
Consent would not have a Material Adverse Effect on the Company or any of its
Subsidiaries or materially adversely affect the transactions contemplated
hereby, its ability to perform its obligations under the Related Agreements
or the operation of the business of the Company and its Subsidiaries after
the Closing Date substantially as such business of the Company and its
Subsidiaries is being operated as of the Closing Date. To its knowledge,
there is no fact relating to it or its Affiliates that would be reasonably
expected to prevent it from consummating the transactions contemplated hereby
or performing its obligations under the Related Agreements.
Section IV.3 LITIGATION. There is no action, proceeding or
investigation pending or, to the knowledge of the Company or any of its
Subsidiaries, threatened against the Company or any of its Subsidiaries or
any of its or their properties or assets that would have a Material Adverse
Effect on the ability of the Company to consummate the transactions
contemplated hereby or to fulfill its obligations under this Agreement, or,
in the case of the Company and its Subsidiaries, to operate the business of
the Company and its Subsidiaries after the Closing Date, substantially as
such business of the Company and its Subsidiaries is being operated as of the
Closing Date or which seeks to prevent or challenge the transactions
contemplated hereby. There is no judgment, decree, injunction, rule or order
outstanding against the Company which would limit in any material respect the
ability of the Company or its Subsidiaries taken as a whole to operate the
business of the Company and its Subsidiaries in the manner currently
contemplated.
Section IV.4 REGULATORY COMPLIANCE.
(a) The Company and its Subsidiaries have all FCC Licenses and
orders of Governmental Authorities necessary to enable the Company and its
Subsidiaries to conduct the business of the Company and its Subsidiaries,
substantially as conducted as of the Closing Date (the "Company Licenses").
The Company Licenses are in full force and effect except where the failure
would not result in a Material Adverse Effect, and the conduct of the
business or
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operations of the Company and its Subsidiaries is in accordance with the
Company Licenses in all material respects. The Company has no reason to
believe that the Company Licenses will not be renewed by the FCC or other
granting authority in the ordinary course.
(b) Each of the Company and the Subsidiaries has filed with the
FCC and all Governmental Authorities all material reports, documents,
instruments, information and applications required to be filed pursuant to
the FCC's rules, regulations and requests and the rules, regulations and
requests of such Governmental Authorities. No notice has been issued by the
FCC or any Governmental Authority which could permit, or after notice or
lapse of time or both could permit, revocation or termination of any Company
License prior to the expiration dates thereof or which could reasonably be
expected to result in any other material impairment of any of the Company's
or the Subsidiaries' rights thereunder and which could reasonably be expected
to, singly or in the aggregate, have a Material Adverse Effect.
(c) Each of the Company and its Subsidiaries has complied and is
currently in compliance with each law, regulation, ordinance and code
promulgated by any Federal, state, local or foreign governmental authority
applicable to the operation, conduct or ownership of the property or business
of the Company and the Subsidiaries (including without limitation those
relating to the offering and sale of securities, communications,
environmental protection, occupational safety and health, equal employment
practices, antitrust, consumer protection, and employee benefits and
pensions), except where such failure to comply with any such law, regulation,
ordinance or code could not reasonably be expected to have, in the aggregate
with all such failures, a Material Adverse Effect.
(d) There is not issued, outstanding or pending any Notice of
Violation, Notice of Apparent Liability, Order to Show Cause, material
complaint or investigation by or before the FCC or any Governmental Authority
which could materially threaten or materially adversely affect any of the
Company Licenses or which could reasonably be expected to result, singly or
in the aggregate, in any Material Adverse Effect.
Section IV.5 BROKERS. Neither the Company nor any of its Subsidiaries
has employed any broker, finder or investment banker or incurred any
liability for any brokerage fees, commissions or finder's fees in connection
with this Agreement.
Section IV.6 FINANCIAL STATEMENTS. The Company has furnished to the
Purchasers (i) its audited consolidated financial statements for the fiscal
years ended 1997, 1996 and 1995 (including all management letters, if any,
issued in connection therewith) consisting of the audited consolidated
balance sheets, income statements, cash flow statements and statements of
stockholders' equity for each such fiscal year, and (ii) its unaudited
consolidated quarterly financial statements for the quarters ending March 31,
June 30, and September 30, 1998,
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consisting of the unaudited consolidated balance sheets, income statements
and cash flow statements for each such quarter (all of the preceding
financial statements being, collectively, the "FINANCIAL STATEMENTS". The
Financial Statements are accurate and complete, consistent with the books and
records of the Company, have been prepared in accordance with GAAP,
consistently applied, and fairly present in all material respects the
financial position of the Company and its Subsidiaries and the results of its
operations and cash flows and financial position for the periods covered
thereby, except, in the case of the unaudited Financial Statements, for
normal year-end adjustments and the omission of certain footnote disclosures.
Section IV.7 SEC DOCUMENTS. (a) The Purchasers have been provided by
the Company with true and complete copies of each SEC Document on its behalf
or on behalf of any of its Subsidiaries filed with the SEC since January 1,
1998 which are all the documents (other than preliminary material) that the
Company has been required to file with the SEC since such date. As of their
respective dates, the SEC Documents complied in all material respects with
the requirements of the Securities Act and the Exchange Act applicable to the
SEC Documents. None of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The financial statements of the Company included in the SEC
Documents referred to in Section 4.7(a) comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present in all
material respects (subject, in the case of unaudited statements, to normal
annual footnotes and year-end audit adjustments) the respective consolidated
financial positions of the Company and its consolidated Subsidiaries as at
the dates thereof and the consolidated results of operations and cash flows
and changes in financial condition for the periods then ended.
Section IV.8 MATERIAL ADVERSE CHANGE. Since December 31, 1997, the
business of the Company and its Subsidiaries has been conducted in the
ordinary course and in substantially the same manner as previously conducted
and, to the extent that any of the following would produce a Material Adverse
Effect, there has not been (i) any adverse change in its financial
performance or results of operations; (ii) any damage, destruction or loss,
whether covered by insurance or not, adversely affecting the properties or
business of the Company and its Subsidiaries taken as a whole; (iii) any
declaration, setting aside or payment of any dividend or distribution in
respect of the capital stock of the Company or any redemption or acquisition
of such stock by the Company; (iv) any increase in the compensation payable
or to become payable by the Company or its Subsidiaries to any of their
officers or key employees other than increases in the ordinary
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course of business; (v) any adoption of, or increase in, any bonus, incentive
compensation, pension, profit sharing, retirement, insurance, medical
reimbursement or other employee benefit plan, payment or arrangement made to,
for or with any officers or key employees of the Company and its
Subsidiaries, other than increases made in the ordinary course of business
consistent with prior practice; (vi) any sale or other disposition of any
assets, including, without limitation, Intellectual Property, other than
sales or other dispositions made in the ordinary course of business and sales
or other dispositions which individually or in the aggregate are not material
to the operations of the Company and its Subsidiaries taken as a whole; (vii)
any write-offs or write-downs of accounts receivable by the Company or its
Subsidiaries other than in the ordinary course of business and consistent
with prior practice; (viii) any borrowings by the Company or its Subsidiaries
other than in the ordinary course of business and as contemplated by the
Financing Agreements; (ix) any change in its accounting principles or
methods; or (x) any agreement by the Company or any of its Subsidiaries to
take any action described in this Section 4.8. Since December 31, 1997, (i)
except pursuant to the Financing Agreements, the Company has not issued any
notes, bonds or other debt securities or any securities, convertible,
exchangeable or exercisable for any capital stock or equity securities of the
Company, and (ii) except under the Financing Agreements, mortgaged or pledged
any of its properties or assets or subjected them to any Lien, except Liens
for current property taxes not yet due and payable.
Section IV.9 CAPITALIZATION. Schedule 4.9 hereto sets forth the
stockholders of the Company as of the Closing Date. As of the Closing Date,
after giving effect to the filing of the Restated Certificate, the authorized
capital stock of the Company will consist of (i) 1,500,000 shares of Common
Stock, comprising 1,438,000 shares of Class A Common Stock, of which 491,954
shares are issued and outstanding, 31,000 shares of Class B Common Stock, of
which 28,934 shares are subject to options which have been granted but not
exercised, and 31,000 shares of Class C Common Stock, of which no shares are
issued and outstanding, and (ii) 2,500,000 shares of preferred stock, par
value $1.00 per share, comprising (A) 550,000 shares of Senior PIK Preferred
Stock, of which 185,513 shares are issued and outstanding, (B) 180,000 shares
of Sygnet PIK Preferred Stock, of which 64,646 shares are issued and
outstanding, (C) 150,000 shares of Class A Preferred Stock, of which 100,000
shares are issued and outstanding, (D) 90,000 shares of Class D Preferred
Stock, of which 75,093.7 shares are issued and outstanding, (E) 405,000
shares of Class E Preferred Stock, of which zero shares are issued and
outstanding, (F) 205,000 shares of Class F Preferred Stock, of which 30,000
shares are issued and outstanding, (G) 62,000 shares of Class G Preferred
Stock, of which 37,853 shares are issued and outstanding, and (H) 62,000
shares of Class H Preferred Stock, of which no shares are issued and
outstanding. The record and beneficial owners of such outstanding shares of
Common Stock and Preferred Stock, as of the Closing Date, after giving effect
to the transactions contemplated hereby, are set forth on Schedule 4.9. On
the Closing Date, after giving effect to the transactions contemplated
hereby, there will not be any existing options, warrants, securities, calls,
subscriptions, or other rights, or other agreements or commitments,
obligating the Company to
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issue, transfer or sell any shares of capital stock of the Company, except
for shares of Common Stock issuable (i) pursuant to the New Company Stock
Option Plan, (ii) the Logix Communications 1998 Stock Option Plan, (iii) upon
the conversion of the Class D Preferred Stock and the Class G Preferred Stock
and (iv) upon the exercise of the Class F Preferred Stock Warrants, in each
case as set forth on Exhibit I hereto.
Section IV.10 SHARES. The shares of Class D Preferred Stock (and the
Class A Common Stock and Class E Preferred Stock, Logix Communications Common
Stock or other capital stock issued upon conversion, exchange, as a
distribution or otherwise in respect of the Class D Preferred Stock) and
Class G Preferred Stock (and any Class H Preferred or other capital stock
issued upon conversion, exchange, as a distribution or otherwise in respect
of the Class G Preferred Stock) being issued to the Purchasers hereunder,
when issued and paid for pursuant to the terms of this Agreement will be duly
authorized, validly issued, fully paid and nonassessable, and will be free of
any Liens caused or created by the Company.
Section IV.11 NO UNDISCLOSED LIABILITIES; SUBSIDIARIES. As of the date
hereof before giving effect to the transactions contemplated hereby, the
Financing Agreements and the Sygnet Acquisition, the Company has no material
indebtedness or liability of any nature whatsoever, absolute or contingent,
liquidated or unliquidated. The Company owns all of the outstanding shares
of capital stock of each of its Subsidiaries, free and clear of any Liens,
except Permitted Liens and Liens granted to the lenders under the Credit
Agreements pursuant to the Credit Documents. Schedule 4.11 contains a
complete list of the Company's direct and indirect Subsidiaries as of the
date hereof. Except in accordance with the Logix Communications 1998 Stock
Option Plan, no equity securities of any Subsidiary of the Company are or may
become required to be issued by reason of any options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible or exchangeable into, shares
of any capital stock of any Subsidiary, and there are no contracts,
commitments, understandings or arrangements by which any such Subsidiary is
bound to issue additional shares of its capital stock, or options, warrants
or rights to purchase or acquire any additional share of its capital stock.
Except for the Liens of the lenders under the Credit Agreements, all of such
shares so owned, are owned directly and are nonassessable and are owned free
and clear of any Lien with respect thereto.
Section IV.12 OFFERING OF SECURITIES. (a) Neither the Company nor
anyone acting on its behalf has offered the Class A Common Stock being sold
by it hereunder or any similar equity securities of the Company for sale to,
or solicited any offers to buy such shares of Class A Common Stock or any
similar equity securities of the Company from, any Person, other than JWC.
(b) Neither the Company nor anyone acting on its behalf will,
directly or indirectly, take any action which might subject the offering,
issuance or sale of the Class A
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Common Stock being sold by it hereunder to the registration and prospectus
delivery requirements of Section 5 of the Securities Act.
(c) Assuming the accuracy of the representations and warranties of
the Purchasers contained in Sections 3.6 and 3.7 and in the Investor
Questionnaires (in the case of the JWC Group), each of the offering and sale
of shares of Preferred Stock under this Agreement to the Purchasers complies
with all applicable requirements of Federal and state securities laws.
Section IV.13 USE OF PROCEEDS. The Company shall use the net cash
proceeds of its sale of the Securities being sold by it hereunder to finance
a portion of the Sygnet Acquisition.
Section IV.14 TITLE TO PROPERTIES; LIENS; ENCUMBRANCES; INSURANCE. The
Company and its Subsidiaries have marketable title to all of their respective
real properties in fee simple absolute (except for leasehold interests, in
which event the entity directly holding such interest has a valid leasehold
interest) and have marketable title to all of their respective other
properties and assets (except for leased properties and assets, in which case
the lessee has a valid leasehold interest) material to the business subject
only to (i) statutory Liens arising or incurred in the ordinary course of
business with respect to which the underlying obligations are not delinquent
or the validity of which is being contested in good faith by appropriate
proceedings, (ii) Liens for taxes not yet delinquent or the validity of which
is being contested in good faith by appropriate proceedings, (iii) Liens
pursuant to the Financing Agreements, and (iv) Liens and defects in title
except as would not have a Material Adverse Effect. The Company and its
Subsidiaries maintain insurance in such amounts and of such character as is
consistent with industry practice and reasonable for the conduct of the
business of the Company and its Subsidiaries.
Section IV.15 MATERIAL CONTRACTS. None of the Company and its
Subsidiaries is in default of any provision under or has failed in the
performance of any of its obligations under any material contract, except for
defaults which would not have a Material Adverse Effect and each material
contract is in full force and effect and is a legal, valid and binding
obligation of the Company or its Subsidiaries, as the case may be,
enforceable against it in accordance with its terms. To the knowledge of the
Company and its Subsidiaries, no party to any material contract is in default
under any material contract. No event has occurred which (whether with or
without notice, lapse of time or the happening or occurrence of any other
event) would constitute a default by any of the Company or its Subsidiaries
under any material contract or, to the best knowledge of the Company, by any
other party thereto, except for defaults which would not have a Material
Adverse Effect.
Section IV.16 EMPLOYEE PLANS. For purposes of this Section 4.16, an
"ERISA Affiliate" shall mean any trade or business, whether or not incorporated,
that, together with the Company, would be deemed a "single employer" within the
meaning of Section 4001(b) of ERISA. The
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Company, its Subsidiaries, their ERISA Affiliates and each Employee Plan are
in substantial compliance in all respects with the applicable provisions of
ERISA and the Code and the regulations thereunder. No "reportable event" (as
described in ERISA and the regulations thereunder) has occurred with respect
to any employee benefit plan, program or arrangement, whether or not subject
to ERISA, pension, profit-sharing, health, welfare, severance, bonus,
incentive plan, program or arrangement to which the Company or any Subsidiary
is a party or by which any of them are bound or under which any of them have,
or within the last five years, had any liability (the "EMPLOYEE PLANS"),
which reportable event could subject the Company and its Subsidiaries to any
material liability. Each Employee Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the
Code. Each Employee Plan intended to satisfy the requirements of Section
501(c)(9) has satisfied such requirements. No amounts payable under the
Employee Plans will fail to be deductible for federal income tax purposes by
virtue of Section 162(a)(1), 162(m) or 280G of the Code. The consummation of
the transactions contemplated by this Agreement will not, either alone or in
combination with another event, (i) entitle any current or former employee or
officer of the Company or any ERISA Affiliate to severance pay, unemployment
compensation or any other payment, or (ii) accelerate the time of payment or
vesting, or increase the amount of compensation due any such employee or
officer. No liability to the Pension Benefit Guaranty Corporation (the
"PBGC") has been incurred, or is expected to be incurred, by any of the
Company and its Subsidiaries or any other person with respect to any Employee
Plan of the Company and its Subsidiaries, other than liability for insurance
premiums which are not in default. The Company does not know of any event or
condition which presents a substantial risk of termination of any such
Employee Plan by the PBGC, nor does it have notice or knowledge that any
proceedings for termination or partial termination of any such plan have been
instituted by the PBGC, where such termination or partial termination would
result in any material liability to the Company or any member of its
"controlled group" (as defined in ERISA). With respect to any pension plan
(other than a multiemployer plan or a multiple employer plan) that is an
Employee Plan, the present value (determined on the basis of actuarial
assumptions used for purposes of determining ongoing contributions to such
plan) of the accrued benefits under each such plan did not, as of the last
annual valuation date, exceed the fair market value of the assets of each
such plan available for the payment of such benefits and nothing has occurred
prior to the date hereof which could reasonably be expected to cause such
present value to exceed the value of such assets. Neither the Company nor
any Subsidiary has incurred any liability which remains unpaid to any
multiemployer plan within the last three years, other than liability for
contributions which are not in default. For purposes of this Section 4.16,
the term "multiemployer plan" shall have the meaning set forth in Section
4001 of ERISA and the term "multiple employer plan" shall mean a plan
referred to in Section 4063 of ERISA. There are no other related entities
other than the Subsidiaries.
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Section IV.17 LABOR MATTERS. Since December 31, 1997, to the best
knowledge of the Company, there has been no strike or labor dispute between
the Company and its Subsidiaries, on one hand, and any group of employees, on
the other hand which would result in a Material Adverse Effect. No employees
of the Company and its Subsidiaries are the subject of any collective
bargaining agreement.
Section IV.18 TAXES. Federal income tax returns of the Company and its
Subsidiaries have been closed through the fiscal year ended December 31,
1997. (i) The Company and its Subsidiaries have filed or been included in,
and will, before the Closing Date, file or be included in, all returns,
declarations and reports and information returns and statements required to
be filed by them before the Closing Date relating to any Taxes (as defined
below) with respect to any income, properties or operations of the Company or
any of its Subsidiaries before the Closing Date (collectively, "RETURNS") and
all such Returns were, or are, correct and complete in all material respects;
(ii) the Company and its Subsidiaries have timely paid or made provision for
all Taxes that have been shown as due and payable on the Returns that have
been filed and are not delinquent in the payment of any amount of Taxes
attributable to settlements with governmental authorities; (iii) the charges,
accruals and reserves (the "TAX ACCRUAL") for Taxes (including deferred
taxes) currently reflected on the books of the Company and its Subsidiaries
are and will be as of the Closing Date adequate in accordance with generally
accepted accounting principles to cover all unpaid Tax liabilities accruing
or payable by the Company and its Subsidiaries in respect of periods that end
before the Closing Date and for any periods that begin before the Closing
Date and end after the Closing Date to the extent such Taxes are attributable
to the portion of any such period ending at the Closing Date (determined on a
closing of the books method); (iv) neither the Company nor any of its
Subsidiaries has requested any extension of time within which to file any
Return, which Return has not since been filed; (v) no deficiency for any
amount of Taxes has been proposed, asserted or assessed in writing against
the Company or any of its Subsidiaries; (vi) neither the Company nor any of
its Subsidiaries has granted any extension of the limitation period
applicable to any Tax claims; (vii) neither the Company nor any of its
Subsidiaries is or has been a party to any tax sharing agreement with any
corporation which, as of the Closing Date, is not a member of the affiliated
group of which the Company is a member; (viii) neither the Company nor any of
its Subsidiaries has made any election under Section 341(f) of the Code; (ix)
neither the Company nor any of its Subsidiaries has agreed to or is required
to make any adjustment pursuant to Section 481(a) of the Code by reason of a
change in accounting method initiated by the Company or any of its
Subsidiaries and neither the Company nor any of its Subsidiaries has any
knowledge that the Internal Revenue Service has proposed any such adjustment
or change in accounting method; (x) neither the Company nor any of its
Subsidiaries has filed with respect to any item a disclosure statement
pursuant to Section 6661 of the Code or any comparable disclosure with
respect to foreign, state and/or local tax statutes and (xi) the Company has
not, for the 5-year period preceding the Closing Date, been a United States
real property holding corporation within the meaning of Section 897(c)(2) of
the
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Code. The term "Tax" or "Taxes" means with respect to any person a net
income, gross income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
transfer, occupation, premium, property or windfall profit tax, custom duty
or other tax, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest and any penalty, addition to tax or
additional amount imposed by any jurisdiction or other taxing authority
(domestic or foreign) on such person.
Section IV.19 AFFILIATE TRANSACTIONS. Except as set forth on Schedule
4.19, as of the date of this Agreement, there are no existing agreements,
understandings or arrangements between the Company or any Subsidiary, on the
one hand, and any of its stockholders or any of their respective Affiliates,
on the other hand, other than transactions in the ordinary course of
business, or transactions involving amounts less than $500,000 provided,
however that it is contemplated that the Company and its Subsidiaries may
lease on an arms-length basis a commercial property from Affiliates of the
Dobson Partnership.
Section IV.20 SOLVENCY; ADEQUATE CAPITAL. Following the sale of the
Securities to the Purchasers, the Company will have adequate capital and
surplus in order to perform its obligations hereunder and to consummate the
transactions contemplated by this Agreement and the Related Agreements
(including the exchange and conversion of Class D Preferred Stock for and
into Class A Common Stock and Class E Preferred Stock and the issuance of
Logix Communications Common Stock upon the occurrence of the Logix
Communications Spin-Off, the exchange and conversion of Class G Preferred
Stock for and into Class H Preferred Stock, the issuance of Class F Preferred
Stock Warrant Shares upon the exercise of the Class F Preferred Stock
Warrants), and the Company and its Subsidiaries will be able to pay their
respective debts as they become due.
Section IV.21 INTELLECTUAL PROPERTY. (a) The Company or one of its
Subsidiaries owns, or has a valid right to use, free and clear of all Liens
(except Liens pursuant to the Financing Agreements and to the FCC), all
Intellectual Property that is material to the conduct of its business as
presently conducted or as planned to be conducted. To the best of the
Company's knowledge, all Intellectual Property used by the Company or any of
its Subsidiaries is subsisting, in full force and effect, has not been
cancelled, expired or abandoned, and is valid and enforceable.
(b) The conduct of the Company's and its Subsidiaries' business as
currently conducted or planned to be conducted does not infringe in any
material respect upon (either directly or indirectly) any Intellectual
Property rights of any third party. There is no pending or, to the best of
the Company's knowledge, threatened claim, suit, arbitration or other
adversarial proceeding (i) alleging that the conduct of the Company's or any
of its Subsidiaries' business does or will violate or constitute the
unauthorized use of any third party's Intellectual Property
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rights, or (ii) challenging the ownership, use, validity or enforceability of
any Intellectual Property owned by the Company or any of its Subsidiaries
which, if adversely determined, would have a Material Adverse Effect.
(c) To the best of the Company's knowledge, no third party is
misappropriating, infringing, diluting or violating any Intellectual Property
right owned or used by the Company or any of its Subsidiaries in any material
respect, and no such claims, suits, arbitrations or other adversarial
proceedings have been brought by the Company or any of its Subsidiaries which
remain unresolved.
(d) The Company has provided or made available to JWC or its
representatives true and complete copies of all material license agreements,
development agreements, distribution agreements, settlement agreements,
consent to use agreements and covenants not to sue to which the Company or
one of its Subsidiaries is a party and which (i) grant or obtain any right to
use or practice rights under any Intellectual Property, or (ii) restrict the
Company's or any Subsidiary's rights to use any Intellectual Property
(collectively, the "License Agreements"). To the best of the Company's
knowledge, the License Agreements are valid and binding obligations of all
parties thereto, enforceable in accordance with their terms, and there exists
no event or condition which will result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default by
any party under such License Agreements, except for such defaults which would
not, individually or in the aggregate, have a Material Adverse Effect.
(e) To the best of the Company's knowledge, no current or former
partner, director, officer or employee of the Company or any of its
Subsidiaries (or any of their respective predecessors in interest) will,
after giving effect to the transactions contemplated herein, own or retain
any rights in or to any of the Intellectual Property owned or used by the
Company. To the best of the Company's knowledge, no Trade Secret has been
disclosed or authorized to be disclosed to any third party other than
pursuant to a non-disclosure agreement, the disclosure of which would have a
Material Adverse Effect. To the best of the Company's knowledge, no party to
any non-disclosure agreement relating to its Trade Secrets is in breach or
default thereof, which would have a Material Adverse Effect.
(f) The consummation of the transactions contemplated hereby will
not result in the loss or impairment of the Company's or any of its
Subsidiaries' rights to own or use any of the Intellectual Property, nor will
it require the consent of any Governmental Authority or third party in
respect of such Intellectual Property.
Section IV.22 ENVIRONMENTAL COMPLIANCE. To the knowledge of the
Company, except as disclosed in the Environmental Reports and except as would
not have a Material Adverse Effect:
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10 The Company and its Subsidiaries have not received any notice
whether from a Governmental Authority, citizens' group, employee
or otherwise alleging that the Company or any of its Subsidiaries
is not in compliance with Environmental Laws.
20 There is no Environmental Claim pending or threatened against the
Company or any of its Subsidiaries or against any Person whose
liability the Company has assumed by contract or by law.
30 There are no conditions that would reasonably form the basis of
any Environmental Claim against the Company or any of its
Subsidiaries or against any Person whose liability the Company
has assumed by contract or by law.
40 The Company has delivered or otherwise made available for
inspection to the Purchasers true, complete and correct copies of
the Environmental Reports identified in Schedule 4.22 hereto.
Section IV.23 DISCLOSURE REPRESENTATION. No representations or
warranties by the company in this Agreement and no statement of the Company
contained in any document (including, without limitation, the Financial
Statements and the exhibits and schedules attached hereto) or certificate
furnished or to be furnished by the Company to the Purchasers or any of their
representatives pursuant to the provisions hereof or in connection with any
of the transactions contemplated hereby, contains or will contain any untrue
statement of material fact or omits or will omit to state any material fact
necessary, in light of the circumstances under which it was made, in order to
make the statements herein or therein not misleading.
Section IV.24 YEAR 2000. Any reprogramming required to permit the
proper functioning (but only to the extent that such proper functioning would
otherwise be impaired by the occurrence of the year 2000) in and following
the year 2000 of computer systems and other equipment containing embedded
microchips, in either case owned or operated by the Company and/or its
Subsidiaries or used or relied upon in the conduct of its business (including
any such systems and other equipment supplied by others or with which the
computer systems of the Company or its Subsidiaries interface), and the
testing of all such systems and other equipment as so reprogrammed, will be
completed by December 31, 1999. The costs to the Company that have not been
incurred as of the date hereof for such reprogramming and testing and for the
other reasonably foreseeable consequences to them of any improper functioning
of other computer systems and equipment containing embedded microchips due to
the occurrence of the year 2000 could not reasonably be expected to have a
Material Adverse Effect. Except for any reprogramming referred to above, the
computer systems of the Company and its Subsidiaries are
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and, with ordinary course upgrading and maintenance, will continue to be,
sufficient for the conduct of its business as currently conducted.
ARTICLE V
COVENANTS
The Company covenants that so long as each Purchaser holds Class D
Preferred Stock or Class E Preferred Stock or Class A Common Stock received
upon conversion thereof representing at least 35% of such Purchaser's
investment in such Class D Preferred Stock or Class E Preferred Stock or
Class A Common Stock as of the Closing, the Company will comply, and the
Company will cause each of the Subsidiaries to comply, with the following
provisions unless otherwise consented to in writing by each of the Purchasers:
Section V.1 RECORDS AND ACCOUNTS. Each of the Company and the
Subsidiaries will keep true and accurate records and books of account in
which full, true and correct entries will be made in accordance with GAAP and
in all other respects consistent with industry practices.
Section V.2 EXISTENCE; RELATED SECURITIES; MAINTENANCE OF PROPERTIES.
Each of the Company and the Subsidiaries will preserve and keep in full force
and effect and in good standing its corporate or partnership existence, as
the case may be, rights and franchises except for any combination or merger
with and into the Company or a Subsidiary or where the failure to do so would
not have a Material Adverse Effect.
Section V.3 INSURANCE. Each of the Company and the Subsidiaries will
maintain with financially sound and reputable insurance companies, funds or
underwriters insurance of the kinds, covering the risks and in the relative
proportionate amounts usually carried by reasonable and prudent companies
conducting businesses similar to that of the Company and the Subsidiaries,
except where the failure to do so would not have a Material Adverse Effect.
Section V.4 TAXES. Each of the Company and the Subsidiaries will pay
and discharge, or cause to be paid and discharged, before the same shall
become overdue, all Taxes, assessments and other governmental charges imposed
upon it and its real properties, sales and activities, or any part thereof,
or upon the income or profits therefrom, as well as all claims for labor,
materials or supplies, which if unpaid might by law become a Lien upon any of
their properties and would have a Material Adverse Effect; PROVIDED, HOWEVER,
that any such Tax, assessment, charge, levy or claim need not be paid if the
validity or amount thereof shall currently be contested in good faith by
appropriate proceedings and if the Company or the applicable Subsidiary shall
have set aside on its books adequate reserves with respect thereto; and
PROVIDED,
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FURTHER, that the Company and the applicable Subsidiary will pay or cause to
be paid all such Taxes, assessments, charges, levies or claims forthwith upon
the commencement of foreclosure on any Lien which may have attached as
security therefor.
Section V.5 INSPECTION OF PROPERTIES AND BOOKS. Each of the Company
and the Subsidiaries shall permit each Purchaser or any of its designated
representatives, at the Company's cost, to visit and inspect any of its
properties, to examine its books of account (and to make copies thereof and
extracts therefrom), and to discuss its affairs, finances and accounts with,
and to be advised as to the same by, officers or partners of such Persons,
all at such times and intervals as such Purchaser may reasonably request.
Section V.6 COMPLIANCE WITH LAWS, CONTRACTS, LICENSES AND PERMITS.
Each of the Company and the Subsidiaries will comply in all material respects
with (a) all FCC laws and regulations, all Oklahoma Corporations Commission
laws and regulations and all other material laws and regulations wherever its
business is conducted, (b) the provisions of its Restated Certificate and
Restated Bylaws, (c) all other material agreements and instruments by which
it or any of its properties may be bound (including, without limitation, the
Related Agreements and the agreements, documents and instruments executed and
delivered by it in connection with the Financing Agreements), (d) all
applicable decrees, orders and judgments, and (e) all required FCC and
Oklahoma Corporations Commission approvals, permits and licenses and all
other material approvals, permits and licenses, if, in the case of clauses
(a), (c) and (e), the failure to comply would have a Material Adverse
Effect.
Section V.7 EMPLOYEE BENEFIT PLANS. Neither the Company nor any ERISA
Affiliate will:
(a) engage in any "prohibited transaction" within the meaning of
Section 406 of ERISA or Section 4975 of the Code;
(b) permit any Guaranteed Pension Plan to incur an "accumulated
funding deficiency", as such term is defined in Section 302 of ERISA,
whether or not such deficiency is or may be waived;
(c) fail to contribute to any Guaranteed Pension Plan to an extent
which, or terminate any Guaranteed Pension Plan in a manner which, could
result in the imposition of a lien or encumbrance on the assets of the
Company or any of the Subsidiaries pursuant to Section 302(f) or Section
4068 of ERISA; or
(d) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of Section 4001 of ERISA) of all
Guaranteed Pension Plans
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exceeding the value of the aggregate assets of such Plans, disregarding
for this purpose the benefit liabilities and assets of any such Plan with
assets in excess of benefit liabilities,
if, in each such case, such action or failure would have a Material Adverse
Effect.
The Company will (i) promptly upon filing the same with the Department of
Labor or Internal Revenue Service, furnish to each of the Purchasers a copy
of the most recent actuarial statement required to be submitted under Section
103(d) of ERISA and Annual Report, Form 5500, with all required attachments,
in respect of each Guaranteed Pension Plan, and (ii) promptly upon receipt or
dispatch, furnish to each Purchaser any notice, report or demand sent or
received in respect of a Guaranteed Pension Plan under Sections 302, 4041,
4042, 4043, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer
Plan, under Section 4041A, 4202, 4219, 4242 or 4245 of ERISA.
Section V.8 FURTHER ASSURANCES. Each of the Company and the
Subsidiaries will cooperate with the Purchasers and execute such further
instruments and documents as the Purchasers shall reasonably request to carry
out to the satisfaction of the Purchasers the transactions contemplated by
this Agreement or any other Related Agreement.
Section V.9 DISTRIBUTIONS. The Company shall not make any distribution
except (a) repurchases of management, employee or consultant stock and
options pursuant to contractual rights, PROVIDED, that no such repurchases
shall exceed $500,000 in any fiscal year or in any event $1,500,000 in the
aggregate (other than stock and options owned, directly or indirectly, by
members of the Dobson family unless approved by two of the directors selected
in clauses (i) and (iii) of Section 3.1(a) of the Stockholder and Investor
Rights Agreement; PROVIDED, HOWEVER, that in the event that the two directors
in clause (iii) thereof have been selected by the Dobson Partnership without
the approval of JWC, then the consent of the director designated by JWC in
clause (i) of Section 3.1(a) thereof shall be required to approve the
repurchase), (b) the sale or redemption of up to $25.0 million in aggregate
principal amount by Dobson Partnership of Company securities, plus any
accrued and unpaid dividends thereon, in one transaction or a series of
transactions; PROVIDED that no financing or refinancing by the Company in
connection with any such redemption or sale may have an interest rate in
excess of 14% per annum (the "Rate Cap"); and PROVIDED FURTHER that after the
first anniversary of the date hereof, the Rate Cap will not apply to any
financing or refinancing to the extent that the Company has met or exceeded
its EBITDA projections as set forth in the budget attached as Exhibit D
hereto for the previous four fiscal quarters, (c) required distributions in
respect of Sygnet PIK Preferred Stock and Class F Preferred Stock (and
related warrants and warrant shares) issued in connection with the Sygnet
Acquisition, (d) distributions provided by the Restated Certificate, (e)
distributions required or permitted by the Stockholder and Investor Rights
Agreement, including the put and call provisions therein, and (d) the Logix
Communications Spin-Off.
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Section V.10 MERGER, CONSOLIDATION, SALE OF ASSETS OR OTHER
DISPOSITIONS. Neither the Company nor any Subsidiary will become a party to
any merger or consolidation, or sell, lease, sublease or otherwise transfer
or dispose of any shares of or other equity interests in a Subsidiary or any
substantial portion of its assets, rights and licenses to any Person, or turn
over the management of, or enter into any management contract with respect
to, any of its assets, properties, rights or licenses, whether directly or
indirectly or in a single transaction or a series of related transactions,
without the approval by a vote of 50.1% of the Board of Directors, or, in the
case of any such transaction involving 10% or more of the Company's
consolidated assets as of the end of the most recently completed fiscal
quarter, the unanimous approval by the Company Board of Directors, provided,
that the foregoing will not apply to (a) any pledges, Liens or security
interests in connection with Company financing, (b) any merger,
consolidation, sale, lease, sublease, transfer or disposition solely among or
involving the Company and/or its Subsidiaries, (c) the Logix Communications
Spin-Off, (d) management stock options and incentives approved by the
Company's Board of Directors, (e) sale of Sygnet PIK Preferred Stock and
Class F Preferred Stock (and related warrants and warrant shares) issued in
connection with the Sygnet Acquisition, and (f) transactions in the ordinary
course of business.
Section V.11 SALE AND LEASEBACK OF PROPERTY. Neither the Company nor
any Subsidiary will enter into any arrangement, directly or indirectly, with
any Person whereby it shall sell or transfer any property, whether real,
personal or a combination thereof, used or useful in its business, whether
now owned or hereinafter acquired, and thereafter rent or lease such
property, without the approval by a vote of 50.1% of the Board of
Directors, or, in the case of any such transaction involving 10% or more of
the Company's consolidated assets as of the end of the most recently
completed fiscal quarter, the unanimous approval by the Company Board of
Directors, PROVIDED that no such approval shall be required in connection
with the sale and leaseback by the Company or any Subsidiary of cellular
towers owned by Sygnet Communications, Inc. prior to its acquisition by the
Company
Section V.12 INVESTMENTS. The Company will not, and will not permit
any Subsidiary to, have outstanding or acquire or commit itself to acquire or
hold any investment except investments in: (a) marketable direct obligations
issued or guaranteed by the United States of America which mature within one
year from the date of acquisition thereof or which are subject to a
repurchase agreement, exercisable within 90 days from the date of acquisition
of such agreement, with any commercial bank or trust company incorporated
under the laws of the United States of America or any State thereof or the
District of Columbia, (b) commercial paper maturing within one year from the
date of acquisition thereof and having, at the date of acquisition thereof,
the highest rating obtainable from Moody's Investors Service, Inc. or
Standard & Poor's Ratings Services, Inc., (c) bankers' acceptances eligible
for rediscount under Federal Reserve Board requirements accepted by any
commercial bank or trust company referred to in clause (a) hereof, (d)
certificates of deposit maturing within one year from the date of
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acquisition thereof issued by any commercial bank or trust company referred
to in clause (a) hereof and having capital and surplus of at least
$500,000,000, (e) certificates of deposit issued by banks organized under the
laws of any other jurisdiction, each having combined capital and surplus of
not less than $500,000,000, (f) investments by the Company and each
Subsidiary existing on the date of this Agreement, (g) investments by the
Company and its Subsidiaries in the Company or in Subsidiaries of the
Company, (h) investments up to $25,000,000 in aggregate, and (i) investments
permitted by the Company's Financing Agreements.
Section V.13 MERGER, CONSOLIDATION OR OTHER ACQUISITIONS. Neither the
Company nor any Subsidiary shall directly or indirectly, by operation of law
or otherwise, merge with, consolidate with, acquire all or substantially all
of the assets or capital stock of, or otherwise combine with, any Person
without the approval of 50.1% of the Board of Directors, or, in the case of
any such transaction involving 10% or more of the Company's consolidated
assets as of the end of the most recently completed fiscal quarter, the
unanimous consent of the Board of Directors, provided, that the foregoing
will not apply to (a) any merger, consolidation or acquisition solely among
or involving the Company and/or its Subsidiaries, (b) capital expenditures or
capital projects approved by the Board of Directors, and (c) transactions in
the ordinary course of business.
Section V.14 SELL-DOWN OF JWC COMMON STOCK. The JWC Common Stock shall
be converted at JWC's option on a dollar-for-dollar basis into shares of
Class D Preferred Stock (valued at a purchase price of $1131.92 per share of
Class D Preferred Stock) in the event that (i) JWC has not received a
commitment reasonably satisfactory to JWC to purchase up to $33.3 million of
JWC's initial investment in Class D Preferred Stock and JWC Common Stock for
an amount equal to JWC's purchase price of such Securities hereunder plus the
value of any accrued and unpaid dividends thereon, within two months of the
Closing or (ii) JWC has not sold such percentage of securities within three
months of the Closing; PROVIDED that JWC shall have notified the Company of
its election to convert pursuant to this Section 5.14 within 120 days of the
Closing. If the JWC Common Stock is converted into Class D Preferred Stock
pursuant to this paragraph, for purposes of determining accrued dividends,
the effective date of such conversion shall be the Closing Date.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Company hereby agrees that so long as any shares of the Preferred
Stock or any shares of the Common Stock are held by any Purchaser, it will
comply with, and it will cause each Subsidiary to comply with, the following
provisions:
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Section VI.1 ANNUAL STATEMENTS. (a) As soon as available and in any
event within 90 days after the close of each fiscal year of the Company, the
Company will deliver to each Purchaser audited consolidated and unaudited
consolidating balance sheets and statements of income and retained earnings
and of cash flows of the Company audited by Arthur Andersen, L.L.P. or any
other public accounting firm selected by the Company and reasonably
acceptable to the Purchasers, showing the financial condition of the Company
as of the close of such fiscal year and the results of the Company's
operations during such fiscal year, all on a consolidated basis.
(b Each of the financial statements delivered pursuant to this
SECTION 6.1 shall be certified without qualification by the applicable
accounting firm to have been prepared in accordance with GAAP consistently
applied.
Section VI.2 QUARTERLY STATEMENTS. Within forty-five (45) days after
the end of each quarter, the Company will deliver to each Purchaser
consolidated and consolidating unaudited balance sheets and statements of
income and retained earnings and of cash flows of the Company as of the end
of each such quarter and for the period of the then current fiscal year to
the end of such month, and presenting on a comparative basis the
corresponding figures for such period in the preceding fiscal year and the
then current Budget (as defined below), in each case by region, certified by
the Chief Financial Officer of the Company to be true and correct and to have
been prepared in accordance with GAAP subject to normal year-end adjustments
described in reasonable detail.
Section VI.3 BUDGETS AND OTHER REPORTS. (a) The Company will deliver
to the Purchasers, prior to the commencement of each fiscal year project
spending and capital budgets for the five immediately succeeding fiscal
years, projected monthly statements of income and cash flow for such fiscal
years (the "Budget"), projected quarterly balance sheets for such fiscal
years and as soon as practical after preparation thereof, complete and
correct copies of all quarterly (if any) or annual budgetary analyses or
forecasts of the Company and the Subsidiaries in the form customarily
prepared by management for its own internal use or the use of the Company.
The Company and the Purchasers shall once each calendar year, conduct an
annual off-site meeting to review the Company's projections and business
plans with respect to such fiscal year and the immediately succeeding four
fiscal years.
(b) The Company shall also furnish to each Purchaser (i) within
five (5) days of the Company's receipt thereof, copies of all management
letters of the Company's accountants; (ii) within five (5) days of the
Company's receipt thereof, notice with respect to any material pending or
threatened litigation to which the Company or any Subsidiary is or may become
a party; (iii) within five (5) days of the Company's receipt thereof, notice
of any default or event of default with respect to any material agreement to
which the Company or any Subsidiary is a
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party; (iv) within five (5) days of the filing thereof, copies of all
material filings made by or on behalf of the Company or any Subsidiary with
any governmental regulatory agency; and (v) such other information as any
Purchaser may reasonably request from time to time.
(c) Within thirty (30) days after the end of each calendar month,
the Company will deliver to each Purchaser monthly and year-to-date
summaries, in a form and to the same extent prepared by the Company
management on a consolidated basis broken down for each market in which the
Company or any Subsidiary operates any System compared on a monthly and
year-to-date basis to the Company's Budget, of the following: (a) number of
Pops, (b) number of subscribers, (c) gross activations, (d) net activations,
(e) deactivations (and setting forth the reason therefor), (f) acquisition
cost per gross activation, (g) average monthly revenue per subscriber, (h)
total number of roaming minutes, (i) total roaming revenue and (j) any other
reasonable information which the Purchasers may request from time to time.
ARTICLE VII
ADDITIONAL CLOSING DELIVERIES
Section VII.1 DELIVERIES AT CLOSING. At the Closing, each of the
following deliveries shall be made:
(a) The Stockholder and Investor Rights Agreement shall have been
executed and delivered by the parties thereto and each shareholder shall
have performed in all material respects all agreements contained therein
required to be performed by it at or before the Closing.
(b) The Purchasers shall have received a copy, certified by its duly
authorized officer to be true and complete as of the Closing Date, of the
Restated Bylaws thereof, and (b) a certificate, dated not more than ten
days prior to the Closing Date, of the relevant governmental authority or
other appropriate official of the State of Oklahoma and of each state in
which it is qualified to do business, as to such Person's corporate good
standing or qualification to do business, as the case may be. The
Purchasers shall have received from the Company an incumbency certificate,
dated the Closing Date, signed by a duly authorized officer thereof and
giving the name and bearing a specimen signature of each individual who
shall be authorized to sign, in the name and on behalf of the Company, this
Agreement and each Related Agreement to which the Company is or is to
become a party on or prior to the Closing Date.
(c) The Purchasers shall have received from the Company copies
certified by the
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Secretary or Assistant Secretary thereof to be true and complete as of
the Closing Date, of the records of all corporate action taken to
authorize the execution, delivery and performance of this Agreement and
each Related Agreement to be executed on or prior to the Closing Date to
which the Company is a party.
(d) The Purchasers shall have received legal opinions from each of
(i) McAfee and Taft, (ii) Mayer, Brown & Platt, special New York counsel
to the Company, and (iii) Wilkinson, Barker, Knauer & Quinn, LLP, FCC
counsel to the Company, in form and substance reasonably satisfactory to
Purchasers.
(e) The Purchasers shall have received an executed copy of the Fleet
Purchase Agreement.
(f) On the Closing Date, JWC shall have received the JWC Transaction
Fee.
(g) The Company shall have received an opinion of Skadden, Arps,
Meagher, Slate & Flom, LLP, special counsel to the JWC Group, in form and
substance reasonably satisfactory to the Company.
(h) The Company shall have received an executed Investor
Questionnaire from each Purchaser who is a member of the JWC Group in
substantially the form attached hereto as EXHIBIT E.
(i) The Company shall have received copies of duly executed,
irrevocable and effective Powers of Attorney of each Purchaser who is a
member of the JWC Group appointing Dana Schmaltz as its attorney-in-fact
for the purposes of the transactions contemplated by this Agreement and the
Related Agreements substantially in the form attached hereto as EXHIBIT F.
Section VII.2 CLOSING DATE EXCHANGE AND CONVERSION OF SECURITIES.
Immediately after the Purchasers' purchase and receipt of stock certificates
representing shares of Class A Common Stock from Fleet Equity pursuant to the
Fleet Purchase Agreement, the Purchasers shall return such stock certificates
to the Company and the Company shall issue stock certificates evidencing
ownership of such shares of Class A Common Stock by such Purchasers and the
Company shall cancel the stock certificates in respect of such shares of
Class A Common Stock evidencing ownership thereof by Fleet Equity.
ARTICLE VIII
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SURVIVAL AND INDEMNIFICATION
Section VIII.1 SURVIVAL. The representations and warranties made in
this Agreement shall survive the Closing until the third anniversary thereof
and shall thereupon expire together with any right to indemnification in
respect thereof (except to the extent a written notice asserting a claim for
breach of any such representation or warranty and describing such claim in
reasonable detail shall have been given prior to such date to the party which
made such representation or warranty). The covenants and agreements
contained in this Agreement to be performed or complied with after the
Closing shall survive the Closing; PROVIDED that the right to indemnification
pursuant to this Article VIII in respect of a breach of a representation or
warranty shall expire on the third anniversary of the Closing (except to the
extent written notice asserting a claim thereunder and describing such claim
in reasonable detail shall have been given prior to such date to the party
from whom such indemnification is sought); PROVIDED, FURTHER, that the
representations and warranties contained in SECTIONS 4.16 and 4.18 shall
survive the Closing and continue to full force and effect until 60 days
following expiration of any applicable statutes of limitations. After the
Closing, the sole and exclusive remedy of the parties for any breach or
inaccuracy of any representation or warranty contained in this Agreement, or
any other claim (whether or not alleging a breach of this Agreement) that
arises out of the facts and circumstances constituting such breach or
inaccuracy, shall be the indemnity provided in this Article VIII.
Section VIII.2 INDEMNIFICATION BY THE PURCHASERS. Each of DCC, L.P.
and JWC, severally and not jointly, shall indemnify and hold harmless each
other, the Company, and their respective Affiliates, and the shareholders,
members, managers, officers, employees, agents and/or the legal
representatives of any of them (each, a "SECTION 8.2 INDEMNIFIED PARTY"),
against all liabilities and expenses (including amounts paid in satisfaction
of judgments, in compromise, as fines and penalties, and as counsel fees)
(collectively, "LOSSES") incurred by such SECTION 8.2 Indemnified Party in
connection with the investigation, defense, or disposition of any action,
suit or other proceeding in which such Section 8.2 Indemnified Party may be
involved or with which he or it may be threatened that arises out of or
results from (a) any representation or warranty of such indemnifying party
contained in this Agreement or any Related Agreement being untrue in any
material respect as of the date on which it was made, including, but not
limited to, any representation made under Article III hereof by any Purchaser
or by the Purchaser Representative, or (b) any material default by such
indemnifying party or any of its Affiliates in the performance of their
respective obligations under this Agreement and any Related Agreement, except
to the extent (but only to the extent) any such Losses arise out of or result
from the gross negligence or willful misconduct of such Section 8.2
Indemnified Party or its Affiliates.
Section VIII.3 INDEMNIFICATION BY THE COMPANY. The Company shall
indemnify and
39
<PAGE>
hold harmless each of the Purchasers, and their respective Affiliates, and
the shareholders, members, managers, officers, employees, agents and/or the
legal representatives of any of them (each, a "SECTION 8.3 INDEMNIFIED
PARTY"), against all Losses incurred by him or it in connection with the
investigation, defense, or disposition of any action, suit or other
proceeding in which any Section 8.3 Indemnified Party may be involved or with
which he or it may be threatened that arises out of or results from (a) any
representation or warranty of the Company contained in this Agreement or any
Related Agreement being untrue in any material respect as of the date on
which it was made or (b) any material default by the Company or any of its
Affiliates in the performance of their respective obligations under this
Agreement and any Related Agreement, except to the extent (but only to the
extent) any such Losses arise out of or result from the gross negligence or
willful misconduct of such Section 8.3 Indemnified Party or its Affiliates.
Section VIII.4 PROCEDURES. (a) The terms of this Section 8.4 shall
apply to any claim (a "CLAIM") for indemnification under the terms of
Sections 8.2 or 8.3. The Section 8.2 Indemnified Party or Section 8.3
Indemnified Party (each, an "INDEMNIFIED PARTY"), as the case may be, shall
give prompt written notice of such Claim to the indemnifying party (the
"INDEMNIFYING PARTY") under the applicable Section, which party may assume
the defense thereof, PROVIDED that any delay or failure to so notify the
Indemnifying Party shall relieve the Indemnifying Party of its obligations
hereunder only to the extent, if at all, that it is materially prejudiced by
reason of such delay or failure. The Indemnified Party shall have the right
to approve any counsel selected by the Indemnifying Party and to approve the
terms of any proposed settlement, such approval not to be unreasonably
delayed or withheld (unless such settlement provides only, as to the
Indemnified Party, the payment of money damages actually paid by the
Indemnifying Party and a complete release of the Indemnified Party in respect
of the claim in question). The Indemnified Party may retain separate
co-counsel at its sole cost and expense and participate in the defense of any
Claim; PROVIDED, however that the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement agreement with respect to
such Claim without the prior written consent of the Indemnifying Party, such
approval not to be unreasonably withheld or delayed. Notwithstanding any of
the foregoing to the contrary, the provisions of this Article VIII shall not
be construed so as to provide for the indemnification of any Indemnified
Party for any liability to the extent (but only to the extent) that such
indemnification would be in violation of applicable law or that such
liability may not be waived, modified or limited under applicable law, but
shall be construed so as to effectuate the provisions of this Article VIII to
the fullest extent permitted by law.
(b In the event that the Indemnifying Party undertakes the
defense of any Claim, the Indemnifying Party will keep the Indemnified Party
advised as to all material developments in connection with such Claim,
including, but not limited to, promptly furnishing the Indemnified Party with
copies of all material documents filed or served in connection therewith.
40
<PAGE>
(c) In the event that the Indemnifying Party fails to assume the
defense of any Claim within ten business days after receiving written notice
thereof, the Indemnified Party shall have the right, subject to the
Indemnifying Party's right to assume the defense pursuant to the provisions
of this Article VIII, to undertake the defense, compromise or settlement of
such Claim for the account of the Indemnifying Party. Unless and until the
Indemnifying Party assumes the defense of any Claim, the Indemnifying Party
shall advance to the Indemnified Party any of its reasonable attorneys' fees
and other costs and expenses incurred in connection with the defense of any
such action or proceeding. Each Indemnified Party shall agree in writing
prior to any such advancement that, in the event he or it receives any such
advance, such Indemnified Party shall reimburse the Indemnifying Party for
such fees, costs and expenses to the extent that it shall be determined that
he or it was not entitled to indemnification under this Article VIII.
(d) In no event shall an Indemnifying Party be required to pay in
connection with any Claim for more than one firm of counsel (and local
counsel) for each of the following groups of Indemnified Parties: (i) the
Purchasers, their respective Affiliates, and the shareholders, members,
managers, officers, employees, agents and/or the legal representatives of any
of them; and (ii) the Company, and its shareholders, members, managers,
officers, employees, agents and/or the legal representatives of any of them.
(e) If for any reason the indemnification provided for in Section
8.2 or 8.3 is unavailable to an Indemnified Party as contemplated therein,
then the Indemnifying Party, in lieu of indemnification shall contribute to
the amount paid or payable by the Indemnified Party as a result of such loss,
claim, damage, expense or liability (or action in respect thereof) in such
proportion as is appropriate to reflect not only the relative benefits
received by the Indemnified Party and the Indemnifying Party, but also the
relative fault of the Indemnified Party and the Indemnifying Party, as well
as any other relevant equitable considerations No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of any such fraudulent misrepresentation. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or relates to information
supplied by, such Indemnifying Party or Indemnified Party, and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such action.
Section VIII.5 REGISTRATION RIGHTS. Notwithstanding anything to the
contrary in this Article VIII, the indemnification and contribution
provisions set forth in Sections 5(e) and 5(f) of the Stockholder and
Investor Rights Agreement shall govern any claim made with respect to the
registration statements filed pursuant to Section 5 of the Stockholder and
Investor Rights Agreement or sales made thereunder.
41
<PAGE>
ARTICLE IX
MISCELLANEOUS PROVISIONS
Section IX.1 AMENDMENT AND MODIFICATION. This Agreement may be
amended, modified or supplemented only by written agreement of each of the
parties.
Section IX.2 WAIVER OF COMPLIANCE; CONSENTS. Any failure of any of the
parties to comply with any obligation, covenant, agreement or condition
herein may be waived by the party or parties entitled to the benefits thereof
only by a written instrument signed by the party granting such waiver, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. Whenever this
Agreement requires or permits consent by or on behalf of any party hereto,
such consent shall be given in writing in a manner consistent with the
requirement for a waiver of compliance as set forth in this Section 9.2.
Section IX.3 NOTICES. All notices or other communications hereunder
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in person, by facsimile transmission, or by
registered or certified mail (return receipt requested), postage prepaid,
with an acknowledgment of receipt signed by the addressee or an authorized
representative thereof, addressed as follows (or to such other address for a
party as shall be specified by like notice; PROVIDED that notice of a change
of address shall be effective only upon receipt thereof):
If to the JWC Group:
J.W. Childs Equity Partners II, L.P.
One Federal Street
Twenty-First Floor
Boston, MA 02110
Telephone: (617) 753-1100
Attention: Dana L. Schmaltz
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street, 31st Floor
Boston, MA 02108
Attention: Louis A. Goodman
42
<PAGE>
Facsimile: (617) 573-4822
If to the Company, to it:
Dobson Communications Corporation
13439 N. Broadway Extension
Suite 200
Oklahoma City, OK 73114
Attention: Everett R. Dobson, President
Facsimile (405) 391-8515
With a copy to the Company at the same address to:
Attention: Ronald L. Ripley, Senior Corporate Counsel
Facsimile: (405) 391-8765
With a further copy to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: James B. Carlson
Facsimile: (212) 262-1910
Section IX.4 EXPENSES. The Company agrees, in the event the
transactions contemplated hereby are consummated, to (i) pay the JWC
Transaction Fee, and (ii) pay and save JWC and the Dobson Partnership
harmless against, the reasonable expenses of JWC and the Dobson Partnership
(including the reasonable fees and expenses of counsel and accountants to JWC
and the Dobson Partnership) in connection with the preparation, negotiation,
execution and delivery of this Agreement, the instruments and documents
executed pursuant hereto or in connection herewith, and the consummation of
the transactions contemplated hereby.
Section IX.5 PARTIES IN INTEREST; ASSIGNMENT. This Agreement is
binding upon and is solely for the benefit of the parties hereto and their
respective permitted successors, legal representatives and permitted assigns.
None of the Company, any Purchaser, or any Selling Shareholder may assign
its rights and obligations hereunder without the prior written consent of
each of the other parties; PROVIDED, that: any Purchaser may assign its
rights and obligations hereunder to any Affiliate, PROVIDED, that such
assignee shall have assumed in writing all the obligations of such Purchaser
hereunder and no such assignment shall relieve such Purchaser of its
obligations hereunder.
43
<PAGE>
Section IX.6 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without giving
effect to the conflicts of law principles thereof. The parties hereto hereby
irrevocably and unconditionally consent to submit to the non-exclusive
jurisdiction of the courts of the State of New York and of the United States
of America located in the County of New York, New York (the "NEW YORK
COURTS") for any litigation arising out of or relating to this Agreement and
the transactions contemplated hereby, waive any objection to the laying of
venue of any such litigation in the New York Courts and agrees not to plead
or claim in any New York Court that such litigation brought therein has been
brought in an inconvenient forum.
Section IX.7 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
Section IX.8 INTERPRETATION. The article and section headings
contained in this Agreement are for convenience of reference only, are not
part of the agreement of the parties and shall not affect in any way the
meaning or interpretation of this Agreement. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the referenced Person may require.
Section IX.9 ENTIRE AGREEMENT. This Agreement and the Related
Agreements, including the exhibits and schedules hereto and thereto and the
certificates and instruments delivered pursuant to the terms of this
Agreement and the Related Agreements, embody the entire agreement and
understanding of the parties hereto in respect of the transactions
contemplated hereby, save for those matters the subject of Related Agreements
to be executed subsequent to the Closing Date. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other than
those expressly set forth or referred to herein or the Related Agreements
executed as of the date hereof. This Agreement supersedes and, together with
the Related Agreements upon their execution, will supersede, all prior
agreements and understandings between the parties with respect to such
transactions.
Section IX.10 PUBLICITY. So long as this Agreement is in effect, the
parties agree to consult with each other in issuing any press release or
otherwise making any public statement with respect to the transactions
contemplated hereby, and no party shall issue any press release or make any
such public statement prior to such consultation, except as may be required
by Law. No press release or other public statement by the parties hereto
shall disclose any of the financial terms of the transactions contemplated
hereby without the prior consent of the other parties, except as may be
required by Law. A breach of the provisions of this Section 9.10 by a party
shall not give rise to any right to terminate this Agreement.
44
<PAGE>
Section IX.11 SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
New York Courts.
Section IX.12 REMEDIES CUMULATIVE. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law
or in equity shall be cumulative and not alternative, and the exercise or
beginning of the exercise of any thereof by any party shall not preclude the
simultaneous or later exercise of any other such right, power or remedy by
such party.
45
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
DOBSON COMMUNICATIONS CORPORATION
By: /s/ Everett Dobson
--------------------------------------------------------
Name: Everett Dobson
Title: President
PURCHASERS:
DOBSON CC LIMITED PARTNERSHIP,
By: RLD, Inc., its General Partner
By: /s/ Everett Dobson
--------------------------------------------------------
Name: Everett Dobson
Title: President
<PAGE>
PURCHASERS:
J.W. CHILDS EQUITY PARTNERS II, L.P.
By: J.W. Childs Advisors II, L.P.,
its general partner
By: J.W. Childs Associates, L.P.,
its general partner
By: J.W. Childs Associates, Inc.,
its general partner
By: /s/ Dana L. Schmaltz
--------------------------------------------------------
Name: Dana L. Schmaltz
Title: Vice President
<PAGE>
SCHEDULE I
JWC GROUP STOCKHOLDERS
Dobson CC Limited Partnership
J.W. Childs Equity Partners II, L.P.
JWC Equity Funding II, Inc.
Bock Family Trust
John W. Childs
Richard S. Childs
James E. Childs
Timothy J. Healy
Glenn A. Hopkins
Jerry D. Horn
B. Lane MacDonald
Raymond B. Rudy
Dana L. Schmaltz
Chechesse Creek Trust
Steven G. Segal
SGS 1995 Family Limited Partnership
Steven G. Segal 1995 Irrevocable Trust
SGS-III Family Limited Partnership
Adam L. Suttin
Adam L. Suttin Irrevocable Family Trust
Suttin Family Trust II
Eugene N. Suttin IRA
Edward D. Yun
Yun Family Trust
Ed Kozlowski
Jim Murphy
Rebacliff, Baker & Dobbs, LLC
Benno C. Schmidt
Mario Soussou
Bill Watts
OFS Investment Partners II
<PAGE>
SCHEDULE 3.2
PURCHASER CONSENTS
The execution, delivery and performance of the Agreement will or may
require the following consents, approvals and reviews:
1. The Federal Trade Commission/Department of Justice.
<PAGE>
SCHEDULE 4.2
COMPANY AND SELLING SHAREHOLDER CONSENTS
The execution, delivery and performance of the Agreement will or may
require the following consents, approvals and reviews:
1. The Federal Trade Commission/Department of Justice.
2. Consents under the Credit Agreements.
<PAGE>
SCHEDULE 4.9
CAPITALIZATION
OWNERSHIP OF OUTSTANDING STOCK AND MANAGEMENT
OPTIONS TO PURCHASE STOCK OF
DOBSON COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
Shares Prior to Shares After
Closing Closing
------- -------
<S> <C> <C>
CLASS A COMMON STOCK
Dobson CC Limited Partnership 469,998 471,338
Russell L. Dobson 3,154 3,154
J.W. Childs -0- 17,412
CLASS B NON-VOTING COMMON STOCK* 28,934 28,934
CLASS C NON-VOTING COMMON STOCK* -0- 4,453
CLASS A 5% NON-CUMULATIVE. NON-
VOTING, NON-CONVERTIBLE PREFERRED STOCK
Dobson Operating Company 100,000 22,000
CLASS B CONVERTIBLE PREFERRED STOCK
Fleet Venture Resources, Inc. 69,446 -0-
Fleet Equity Partners VI, L.P. 29,762 -0-
Kennedy Plaza Partners 792 -0-
CLASS C 8% CUMULATIVE NON-VOTING,
NON-CONVERTIBLE PREFERRED STOCK
Fleet Venture Resources, Inc. 69,446 -0-
Fleet Equity Partners VI, L.P. 29,762 -0-
Kennedy Plaza Partners 792 -0-
CLASS D 15% CONVERTIBLE PREFERRED
STOCK
J.W. Childs -0- 71,559.9
Dobson CC Limited Partnership -0- 3,533.8
CLASS F 16% NON-CONVERTIBLE
PREFERRED STOCK -0- 30,000
CLASS G 16% CONVERTIBLE
PREFERRED STOCK
Dobson CC Limited Partnership -0- 37,853
SR. 12 1/4% EXCHANGEABLE PIK 185,513 250,159
</TABLE>
*Options issued. not stock outstanding
<PAGE>
SCHEDULE 4.11
SUBSIDIARIES
DOBSON COMMUNICATIONS CORPORATION SUBSIDIARIES AND PARTNERSHIPS
(As of December 22, 1998)
<TABLE>
<CAPTION>
CORPORATIONS: STATE OF ORGANIZATIONS:
<S> <C>
Dobson Communications Corporation Oklahoma
Associated Telecommunications and Technologies, Inc. Oklahoma
DCC PCS, Inc. Oklahoma
DOC Cellular Subsidiary Company Oklahoma
Dobson Cellular of Arizona, Inc. Oklahoma
Dobson Cellular of California, Inc. Oklahoma
Dobson Cellular of Enid, Inc. Oklahoma
Dobson Cellular of Imperial, Inc. Oklahoma
Dobson Cellular of Kansas/Missouri, Inc. Oklahoma
Dobson Cellular of Maryland, Inc. Oklahoma
Dobson Cellular of Navarro, Inc. Oklahoma
Dobson Cellular of Sandusky, Inc. Oklahoma
Dobson Cellular of Texas, Inc. Oklahoma
Dobson Cellular of Woodward, Inc. Oklahoma
Dobson Cellular Operations Company Oklahoma
Dobson Cellular Systems, Inc. Oklahoma
Dobson Fiber/FORTE of Colorado, Inc. Oklahoma
Dobson Operating Company Oklahoma
Dobson Telephone Company, a/k/a
McLoud Telephone Company Oklahoma
Dobson Tower Company Oklahoma
Dobson/Sygnet Operating Company Ohio
Dobson/Sygnet Communications Company Oklahoma
Logix Communications Corporation Oklahoma
Logix Communications Enterprises, Inc. Oklahoma
Santa Cruz Cellular Telephone, Inc. California
Western Financial Services Corp. Oklahoma
PARTNERSHIPS: STATE OF ORGANIZATION:
Gila River Cellular General Partnership Arizona
Forte of Colorado, General Partnership Colorado
Oklahoma Independent RSA 5 Partnership Oklahoma
Oklahoma Independent RSA 7 Partnership Oklahoma
Oklahoma RSA 3 Limited Partnership Oklahoma
Oklahoma RSA 5 Limited Partnership Oklahoma
Oklahoma RSA 7 Limited Partnership Oklahoma
Texas RSA No. 2 Partnership Oklahoma
</TABLE>
<PAGE>
SCHEDULE 4.19
AFFILIATED TRANSACTIONS
Affiliated Transactions in excess of $500,000 since December 31, 1997
1. In June 1998, Logix Communications Corporation acquired for $4.8
million substantially all of the long distance customers and accounts
receivable from Zenex Long Distance, Inc. The $4.8 million was paid by
paying 3 promissory notes due by Zenex and by paying $2.3 million to WorldCom
- - MCI in satisfaction of a Zenex past due bill.
2. In June 1998, Dobson Communications Corporation acquired from
Everett R. Dobson for $1.1 million (a) an $886,145 promissory note of the
Gila River Indian Community; (b) 35,000 shares of Zenex Long Distance, Inc.
and (c) a $265,069 promissory note of Zenex Long Distance, Inc., this Zenex
Note was paid by Logix as part of the $4.8 million consideration paid for the
Zenex assets.
<PAGE>
SCHEDULE 4.21
ENVIRONMENTAL REPORTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Assessment: Site: Prepared by: Date:
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Phase I 29 Sites in Madera, Merced, San Foster Wheeler December 29, 1997
Benito, Fresno, Mariposa and Environmental
Stanislaus Counties, California Corporation
- ---------------------------------------------------------------------------------------------------
2. Phase I 14 Sites in Santa Cruz and Santa Foster Wheeler January 26, 1998
Clara Counties California Environmental
Corporation
- ---------------------------------------------------------------------------------------------------
3. Phase I American Telco, Texas Foster Wheeler March 31, 1998
Environmental
Corporation
- ---------------------------------------------------------------------------------------------------
4. Phase I Sites leased by American Telco, Foster Wheeler March 31, 1998
Texas Environmental
Corporation
- ---------------------------------------------------------------------------------------------------
5. Phase I Communication Tower Facility Deep Bentley August, 1998
Creek Lake Site, Garrett County, Environmental
Maryland Engineering, Inc.
- ---------------------------------------------------------------------------------------------------
6. Phase I Communication Tower Facility Bentley August, 1998
Gantsville Site, Garrett County, Environmental
Maryland Engineering, Inc.
- ---------------------------------------------------------------------------------------------------
7. Phase I Communication Tower Facility Bentley August, 1998
Keyser Site, Mineral County, West Environmental
Virginia Engineering, Inc.
- ---------------------------------------------------------------------------------------------------
8. Phase I Communication Tower Facility Deer Bentley August, 1998
Park Site, Garrett County, Environmental
Maryland Engineering, Inc.
- ---------------------------------------------------------------------------------------------------
9. Phase I Communication Tower Facility Bentley August, 1998
Friendville Site, Garrett County, Environmental
Maryland Engineering, Inc.
- ---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS
Section 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . .2
Section 1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . 12
ARTICLE II CLOSING
Section 2.1 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . 13
Section 2.2 Closing Actions and Deliveries. . . . . . . . . . . . . . . . . . . 13
Section 2.3 Payment of Transfer Taxes . . . . . . . . . . . . . . . . . . . . . 13
Section 2.4 Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Section 3.1 Organization, Power and Authority . . . . . . . . . . . . . . . . . 14
Section 3.2 Consents; No Conflicts; Approval. . . . . . . . . . . . . . . . . . 15
Section 3.3 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.4 FCC Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.6 No Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 3.7 Investor Acknowledgments. . . . . . . . . . . . . . . . . . . . . . 15
Section 3.8 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.9 Purchaser Representative Representations. . . . . . . . . . . . . . 17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
i
<PAGE>
Section 4.1 Organization, Power and Authority . . . . . . . . . . . . . . . . . 17
Section 4.2 Consents; No Conflicts. . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.3 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.4 Regulatory Compliance . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.5 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.6 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.7 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4.8 Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.9 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.10 Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 4.11 No Undisclosed Liabilities; Subsidiaries. . . . . . . . . . . . . . 22
Section 4.12 Offering of Securities. . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.13 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.14 Title to Properties; Liens; Encumbrances; Insurance . . . . . . . . 23
Section 4.15 Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.16 Employee Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 4.17 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.18 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.19 Affiliate Transactions. . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.20 Solvency; Adequate Capital. . . . . . . . . . . . . . . . . . . . . 26
Section 4.21 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.22 Environmental Compliance. . . . . . . . . . . . . . . . . . . . . . 27
Section 4.23 Disclosure Representation . . . . . . . . . . . . . . . . . . . . . 28
Section 4.24 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE V COVENANTS
Section 5.1 Records and Accounts. . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.2 Existence; Related Securities; Maintenance of Properties. . . . . . 29
Section 5.3 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.4 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.5 Inspection of Properties and Books. . . . . . . . . . . . . . . . . 29
Section 5.6 Compliance with Laws, Contracts, Licenses and Permits . . . . . . . 29
Section 5.7 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.8 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 30
ii
<PAGE>
Section 5.9 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.10 Merger, Consolidation, Sale of Assets or Other Dispositions . . . . 31
Section 5.11 Sale and Leaseback of Property. . . . . . . . . . . . . . . . . . . 31
Section 5.12 Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 5.13 Merger, Consolidation or Other Acquisitions . . . . . . . . . . . . 32
Section 5.14 Sell-Down of JWC Common Stock . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI AFFIRMATIVE COVENANTS
Section 6.1 Annual Statements . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.2 Quarterly Statements. . . . . . . . . . . . . . . . . . . . . . . . 33
Section 6.3 Budgets and Other Reports . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE VII ADDITIONAL CLOSING DELIVERIES
Section 7.1 Deliveries at Closing . . . . . . . . . . . . . . . . . . . . . . . 34
Section 7.2 Closing Date Exchange and Conversion of Securities. . . . . . . . . 35
ARTICLE VIII SURVIVAL AND INDEMNIFICATION
Section 8.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 8.2 Indemnification by the Purchasers . . . . . . . . . . . . . . . . . 36
Section 8.3 Indemnification by the Company. . . . . . . . . . . . . . . . . . . 36
Section 8.4 Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 8.5 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE IX MISCELLANEOUS PROVISIONS
Section 9.1 Amendment and Modification. . . . . . . . . . . . . . . . . . . . . 38
iii
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Section 9.2 Waiver of Compliance; Consents. . . . . . . . . . . . . . . . . . . 39
Section 9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 9.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.5 Parties in Interest; Assignment . . . . . . . . . . . . . . . . . . 40
Section 9.6 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 9.8 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.9 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.10 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.11 Specific Performance. . . . . . . . . . . . . . . . . . . . . . . . 41
Section 9.12 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
iv
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SCHEDULES
Schedule I -- Purchasers
Schedule II -- Company Wire Transfer and other Information
Schedule 3.2 -- Purchaser Consents
Schedule 4.2 -- Company Consents
Schedule 4.9 -- Capitalization
Schedule 4.11 -- Subsidiaries
Schedule 4.19 -- Affiliated Transactions
Schedule 4.21 -- Environmental Reports
EXHIBITS
Exhibit A-1 -- Form of Certificate of Designation for Class D Preferred
Stock
Exhibit A-2 -- Form of Certificate of Designation for Class E Preferred
Stock
Exhibit A-3 -- Form of Certificate of Designation for Class G Preferred
Stock
Exhibit A-4 -- Form of Certificate of Designation for Class H Preferred
Stock
Exhibit B -- Form of Restated Bylaws
Exhibit C -- Form of Restated Certificate
Exhibit D -- EBITDA Projections
Exhibit E -- Form of Investor Questionnaire
Exhibit F -- Form of Power of Attorney
Exhibit G -- Logix Communications 1998 Stock Option Plan
Exhibit H -- New Company Stock Option Plan
Exhibit I -- Options Granted Under the Stock Option Plans
v
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EXECUTION COPY
- -------------------------------------------------------------------------------
DOBSON COMMUNICATIONS CORPORATION
STOCKHOLDER AND INVESTOR RIGHTS AGREEMENT
dated as of December 23, 1998
- -------------------------------------------------------------------------------
<PAGE>
STOCKHOLDER AND INVESTOR RIGHTS AGREEMENT
STOCKHOLDER AND INVESTOR RIGHTS AGREEMENT, dated as of December 23, 1998
(this "Agreement"), by and among the investors listed on Schedule I
(individually, each a "Cash Equity Investor" and, collectively, with any of
its Affiliated Successors, the "Cash Equity Investors") and Dobson
Communications Corporation, an Oklahoma corporation (the "Company"). Each of
the foregoing Persons, together with all other Persons who, in connection
with a Transfer (as hereinafter defined) are required to become a party to
this Agreement (other than the Company) are sometimes referred to herein,
individually, as a "Stockholder" and, collectively, as the "Stockholders."
RECITALS
WHEREAS:
(A) The Company and certain of its stockholders have agreed to enter
into this Agreement following the termination of the Stockholders Agreement
of the Company, dated as of February 26, 1997, and in order to provide for
the management of the Company and to impose certain restrictions with respect
to the sale, transfer or other disposition of Common Stock and Preferred
Stock on the terms and conditions hereinafter set forth; and
(B) The authorized capital stock of the Company consists of: (a)
1,500,000 shares of common stock, par value $0.001 per share ("Common
Stock"), consisting of (i) 1,438,000 shares of Class A Common Stock ("Class
A Common Stock"), of which 491,954 shares are issued and outstanding, (ii)
31,000 shares of Class B Non-Voting Common Stock ("Class B Common Stock"), of
which 28,934 shares are subject to options which have been granted but not
exercised, and (iii) 31,000 shares of Class C Common Stock ("Class C Common
Stock"), of which no shares are issued and outstanding; and (b) 2,500,000
shares of preferred stock, par value $1.00 per share ("Preferred Stock"),
consisting of (i) 550,000 shares designated 12 1/4% Senior Exchangeable
Preferred Stock ("Senior PIK Preferred Stock"), Mandatorily Redeemable 2007,
of which 185,513 shares are issued and outstanding, (ii) 180,000 shares
designated 12 1/4% Senior Exchangeable Preferred Stock ("Sygnet PIK Preferred
Stock"), Mandatorily Redeemable 2008, of which 64,646 shares are issued and
outstanding, (iii) 150,000 shares designated Class A 5% Non-Cumulative,
Non-Voting, Non-Convertible Preferred Stock ("Class A Preferred Stock"), of
which 100,000 shares are issued and outstanding, (iv) 90,000 shares
designated Class D Convertible Preferred Stock ("Class D Preferred Stock"),
of which 75,093.7 shares are issued and outstanding, (v) 405,000 shares
designated Class E Preferred Stock ("Class E Preferred Stock"), of which zero
shares are issued and outstanding, (vi) 30,000 shares designated Class F
Preferred Stock ("Class F Preferred Stock"), of which 30,000 shares are
issued and outstanding, (vii) 62,000 shares designated Class G Preferred
Stock ("Class G Preferred Stock"), of which 37,853 shares are issued and
outstanding, and (viii) 62,000 shares
<PAGE>
designated Class H Preferred Stock ("Class H Preferred Stock"), of which zero
shares are issued and outstanding; and
(C) Each Stockholder is the registered owner of the respective shares
of Common Stock and Preferred Stock set forth opposite its name on Schedule
II.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, conditions and agreements hereinafter
set forth, the parties agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used herein, the following terms have
the following meanings (unless indicated otherwise, all Section and Article
references are to Sections and Articles in this Agreement, and all Schedule
and Exhibit references are to Schedules and Exhibits to this Agreement):
"ADVICE" shall have the meaning set forth in Section 5(d)(xvii).
"AFFILIATE" shall have the meaning given such term in Rule 501(b) under
the Securities Act.
"AFFILIATED SUCCESSOR" shall mean, with respect to any Person, an
Affiliate thereof that is a transferee or a successor in interest to any or
all of such Person's Company Stock and that is required to become a party to
this Agreement in accordance with the terms hereof; PROVIDED, HOWEVER, that,
for purposes of Section 4, with respect to any Cash Equity Investor,
"Affiliated Successor" shall also include partners, limited partners or
members of a Cash Equity Investor that are transferees of Preferred Stock or
Common Stock pursuant to distributions in accordance with the partnership
agreement or operating agreement of such Cash Equity Investor.
"AVAILABLE CASH" shall have the meaning given to such term in the
Subordinated Put Note.
"BENEFICIALLY OWN" shall have the meaning set forth in Rule 13d-3 of
the Exchange Act.
"BOARD OF DIRECTORS" shall mean the Board of Directors of the Company,
as duly constituted in accordance with this Agreement, or any committee
thereof duly constituted in accordance with this Agreement, the by-laws and
applicable law and duly authorized to make the
<PAGE>
relevant determination or take the relevant action. To the extent that the
Board of Directors is required under this Agreement to authorize or approve,
or make a determination in respect of a transaction between the Company, on
the one hand, and a Stockholder, and/or a Stockholder's Affiliates, on the
other hand, the Board of Directors shall be deemed to exclude such
Stockholder, any of its Affiliates, and any of the directors, officers,
employees, agents or representatives of such Stockholder and/or its
Affiliates, who are members of the Board of Directors.
"BTA" shall mean a geographic area established by the Rand McNally 1992
Commercial Atlas & Marketing Guide, 123rd Edition, as modified by the FCC to
form the initial geographic area of license for the C, D, E and F blocks of
broadband PCS spectrum as defined in Section 24.202 of the FCC's rules.
"CALL NOTICE" shall have the meaning set forth in Section 13.2.
"CASH EQUITY INVESTORS" shall have the meaning set forth in the preamble.
"CELLULAR SYSTEM" shall mean a mobile communication system constructed
and operated in a MSA or a RSA (or any successor territorial designations or
subdivision thereof authorized by the FCC) exclusively using frequencies in
the 800 MHz band, or portions thereof, pursuant to a License therefor issued
by the FCC.
"CELLULAR TERRITORY" shall mean the cellular geographic service area in
an MSA or RSA in which the Company or its Subsidiaries has been granted a
licence to operate a Cellular System by the FCC.
"CERTIFICATES OF DESIGNATION" shall mean collectively the Certificates
of Designation of the Company in respect of each class of Preferred Stock,
substantially in the forms of Exhibits B-1 through B-6 hereto.
"CHANGE OF CONTROL" shall mean (i) prior to an IPO, any transaction as a
result of which Everett Dobson and his Affiliates, directly or indirectly,
cease to control 50.1% of the Company's Voting Securities, (ii) following an
IPO, any transaction as a result of which Everett Dobson and his Affiliates,
directly or indirectly, cease to control 35% of the Company's Voting
Securities, or (iii) the sale of all or substantially all of the Company's
stock, business or assets (including through a merger or otherwise),
PROVIDED, HOWEVER, that a Change of Control will not be deemed to occur in
connection with (x) the sale or redemption by the Dobson Partnership of up to
$25.0 million in aggregate principal amount of capital stock of the Company,
together with any accrued and unpaid dividends thereon, in one transaction or
a series of transactions in accordance with Section 4.2(e), and (y) an IPO.
3
<PAGE>
"CLASS A COMMON STOCK" shall have the meaning given such term in recital
(B) hereto.
"CLASS A PREFERRED STOCK" shall have the meaning set forth in recital
(B) hereto.
"CLASS B COMMON STOCK" shall have the meaning given such term in recital
(B) hereto.
"CLASS B PREFERRED STOCK" shall mean the Class B Convertible Preferred
Stock of the Company, which has been redeemed as of the date of this
Agreement.
"CLASS C COMMON STOCK" shall have the meaning set forth in recital (B)
hereto, which is designed to track the financial performance of the Wireless
Subsidiaries.
"CLASS C PREFERRED STOCK" shall mean the Class C 8% Cumulative,
Non-Voting, Non-Convertible, Preferred Stock of the Company, which has been
redeemed as of the date of this Agreement.
"CLASS D PREFERRED STOCK" shall have the meaning set forth in recital
(B) hereto.
"CLASS E PREFERRED STOCK" shall have the meaning set forth in recital
(B) hereto.
"CLASS F PREFERRED STOCK" shall have the meaning set forth in recital
(B) hereto.
"CLASS F PREFERRED STOCK DOCUMENTS" shall mean the Class F Preferred
Stock Investors Agreement, the Class F Preferred Stock Warrants and the Class
F Preferred Stock (and the Certificate of Designation relating thereto).
"CLASS F PREFERRED STOCK SUBSCRIPTION AGREEMENTS" shall mean the
Subscription Agreements between the Company and certain former Sygnet
Wireless, Inc. stockholders, in respect of the Class F Preferred Stock
Warrants.
"CLASS F PREFERRED STOCK WARRANT SHARES" shall mean the Class A Common
Stock to be issued by the Company upon exercise of the Class F Preferred
Stock Warrants.
"CLASS F PREFERRED STOCK WARRANTS" shall mean the Class F Preferred
Stock Warrants issued by the Company in conjunction with the Class F
Preferred Stock.
"CLASS G PREFERRED STOCK" shall have the meaning set forth in recital
(B) hereto. The terms of the Class G Preferred Stock are set forth in the
form of Certificate of Designation on Exhibit B-5 hereto.
"CLASS H PREFERRED STOCK" shall have the meaning set forth in recital
(B) hereto. The
4
<PAGE>
terms of the Class H Preferred Stock are set forth in the form of Certificate
of Designation set forth on Exhibit B-6 hereto.
"CLAWBACK EXERCISE PRICE" shall have the meaning given such term in
Article 11.
"COMMISSION" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"COMMON STOCK" shall collectively mean the Class A Common Stock, the
Class B Common Stock and the Class C Common Stock.
"COMPANY" shall have the meaning set forth in the preamble.
"COMPANY STOCK" shall mean the Preferred Stock and the Common Stock.
"CONFIDENTIAL INFORMATION" shall have the meaning assigned to such term
in Section 6.3(a).
"CONSOLIDATED LEVERAGE RATIO" shall be calculated in accordance with the
Senior Notes Indenture regardless of whether or not the Senior Notes
Indenture is still in effect.
"CREDIT AGREEMENTS" shall mean (i) the Credit Agreement, dated as of
March 25, 1998, among First Union National Bank (as successor by merger to
CoreStates Bank, N.A.) as Administrative Agent, Dobson Operating Company, as
Borrower, the Company, as Guarantor, and the Company Subsidiaries party
thereto, (ii) the Revolving Credit Agreement, dated as of March 25, 1998,
among Dobson Cellular Operations Company as Borrower, and NationsBank, N.A.
(as successor by merger to NationsBank of Texas, N.A.), as Administrative
Agent, (iii) the 364-Day Revolving Credit and Term Loan Agreement, dated as
of March 25, 1998, between Dobson Cellular Operations Company, as Borrower,
and NationsBank, N.A. (as successor by merger to NationsBank of Texas, N.A.),
as Administrative Agent, (iv) the Credit Agreement, dated the date hereof,
between Dobson/Sygnet Operating Company, as Borrower and NationsBank N.A., as
Administrative Agent and (v) the Term Loan Agreement, dated as of the date
hereof, among Dobson Tower Company and NationsBank, N.A.
"CREDIT DOCUMENTS" shall mean, collectively, the Credit Agreements and
all documents and instruments evidencing or securing or guarantying
indebtedness thereunder.
"DOBSON PARTNERSHIP" shall mean Dobson CC Limited Partnership, an
Oklahoma limited partnership.
"DOBSON/SYGNET" shall mean Dobson/Sygnet Communications Company, an
Oklahoma
5
<PAGE>
corporation.
"DOBSON/SYGNET NOTE DOCUMENTS" shall mean, collectively, the
Dobson/Sygnet Note Indenture, the Dobson/Sygnet Note Purchase Agreement, the
Dobson/Sygnet Notes and the Dobson/Sygnet Note Registration Rights Agreement.
"DOBSON/SYGNET NOTE INDENTURE" shall mean the Indenture, dated the date
hereof, among Dobson/Sygnet and United States Trust Company of New York, as
trustee thereunder, in respect of the Dobson/Sygnet Notes.
"DOBSON/SYGNET NOTE PURCHASE AGREEMENT" shall mean the Purchase
Agreement, dated as of December 16, 1998, among Dobson/Sygnet and NationsBanc
Montgomery Securities LLC.
"DOBSON/SYGNET NOTES" shall mean the $200 million in aggregate principal
amount of 12 1/4% Senior Notes due 2008 issued by Dobson/Sygnet pursuant to
the Dobson/Sygnet Note Indenture.
"DOBSON/SYGNET NOTE REGISTRATION RIGHTS AGREEMENT" shall mean the
Registration Rights Agreement, dated the date hereof, among Dobson/Sygnet and
NationsBanc Montgomery Securities LLC.
"EQUITY SECURITIES" shall mean, with respect to any Person, any shares
of stock of, or partnership interest or other ownership or beneficial
interest in, such Person, in each case outstanding at any time.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FCC" shall mean the Federal Communications Commission or similar
regulatory authority established in replacement thereof.
"FINANCING AGREEMENTS" shall mean, collectively, the Senior Note
Documents, the Dobson/Sygnet Notes Documents, the Credit Documents, the
Senior PIK Preferred Stock Certificate of Designation, the Sygnet PIK
Preferred Stock Documents, the Class F Preferred Stock Documents, the
Investment and Transaction Agreement and, as appropriate, all documents,
instruments and agreements evidencing or securing the foregoing and any
amendments or refinancings permitted by Section 12.5. This definition shall
not be construed in accordance with the final sentence of Section 1.2.
"FLEET EQUITY" shall mean collectively Fleet Venture Resources, Inc.,
Fleet Equity Partners VI, L.P. and Kennedy Plaza Partners together with their
respective Affiliates.
6
<PAGE>
"FLEET EQUITY PURCHASE AGREEMENT" shall mean the Securities Purchase
agreement, dated as of March 19, 1996, among the Company and the Purchasers
named therein as amended by Amendment No.1 thereto, dated as of February 26,
1997.
"FLEET BUYOUT STOCK" shall mean collectively the 17,412 shares of Class
A Common Stock purchased by JWC, the 22,459 shares of Class A Common Stock
purchased by the Company, the 17,412 shares of Class A Common Stock purchased
by the Dobson Partnership and the 20,886 shares of Class A Common Stock
purchased by Dobson Operating Company directly, in each case from Fleet
Equity on the date hereof pursuant to the terms of the Stock Purchase
Agreement among Fleet Equity and each such purchaser.
"FORMER SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement
of the Company, dated as of February 26, 1996, among the Company and the
shareholders named therein, and which has been terminated, effective as of
the execution of this Agreement.
"FULLY DILUTED BASIS" shall mean with respect to any Equity Securities
issued by any Person, without duplication, (a) all shares or units of, or
interests in, such Equity Securities outstanding at the time of
determination, and (b) all convertible securities, or other rights to acquire
such Equity Securities, whether or not exercisable or convertible at the time
of such determination.
"GOVERNMENTAL AUTHORITY" shall mean a Federal, state or local court,
legislature, governmental agency (including, without limitation, the United
States Department of Justice), commission or regulatory or administrative
authority or instrumentality.
"INDEBTEDNESS" means any indebtedness (including, without limitation,
Senior Indebtedness), whether or not contingent, in respect of borrowed money
or evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or representing the
deferred and unpaid balance of the purchase price of any property (including
pursuant to capital leases), and any financial hedging obligations, if and to
the extent such indebtedness (other than a financial hedging obligation)
would appear as a liability upon a balance sheet of such person prepared on a
consolidated basis in accordance with generally accepted accounting
principles, other than a trade payable or accrued expense, and also includes,
the guarantee of items that would be included within this definition.
"INDEMNIFIED PARTY" shall have the meaning set forth in Section 5(e)(v).
"INDEMNIFIED STOCKHOLDER" shall have the meaning set forth in Section
5(e)(i).
"INDEMNIFYING PARTY" shall have the meaning set forth in Section 5(e)(v).
7
<PAGE>
"INVESTMENT AND TRANSACTION AGREEMENT" shall mean the Investment and
Transaction Agreement, dated as of December 23, 1998, among the Company and
the Purchasers named therein.
"IPO" shall mean an initial public offering of Class A Common Stock
pursuant to an effective Registration Statement under the Securities Act, the
aggregate gross proceeds from such public offering equals or exceeds $50.0
million (or, where the context expressly provides otherwise in this
Agreement, such other amount as is expressly stated).
"IPO DATE" shall mean the first date on which an IPO occurs.
"JWC" AND "JWC GROUP STOCKHOLDERS" each mean J.W. Childs Equity Partners
II, L.P., a Delaware limited partnership, and its affiliated funds and
co-investors listed on Schedule I hereto.
"JWC COMMON STOCK" shall mean the 17,412 shares of Class A Common Stock
purchased by JWC from Fleet Equity pursuant to the Fleet Purchase Agreement,
dated the date hereof, among Fleet Equity and the purchasers named.
"JWC SELLDOWN" shall mean the sale by JWC of up to $33.3 million of its
initial investment in Company Stock, pursuant to Section 5.14 of the
Investment and Transaction Agreement.
"LAW" shall mean applicable common law and any statute, ordinance, code
or other law, rule, permit, permit condition, regulation, order, decree,
technical or other standard, requirement or procedure enacted, adopted,
promulgated, applied or followed by any Governmental Authority.
"LICENSE" shall mean a license, permit, certificate of authority,
waiver, approval, certificate of public convenience and necessity,
registration or other authorization, consent or clearance to construct or
operate a facility, including any emissions, discharges or releases
therefrom, or to transact an activity or business, to construct a tower or to
use an asset or process, in each case issued or granted by a Governmental
Authority.
"LIENS" shall mean, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, right of first refusal or right of others
therein or encumbrance of any nature whatsoever in respect of such asset.
"LIQUIDATION PREFERENCE" shall mean, with respect to each share of
Preferred Stock, the liquidation preference therefore, calculated in
accordance with the Certificate of Designation for
8
<PAGE>
the relevant class of Preferred Stock.
"LIQUIDITY EVENT" shall mean any of the following events, the occurrence
of the IPO Date, the sale of all or substantially all of the Company Stock or
the Company's business and assets (including through a merger or otherwise),
the substantial recapitalization of the Company or any other event which
provides substantial financial liquidity to the Company's Stockholders in
respect of their investment in the Company.
"LOGIX COMMUNICATIONS" shall mean Logix Communications Enterprises, Inc.
an Oklahoma corporation.
"LOGIX COMMUNICATIONS 1998 STOCK OPTION PLAN" shall mean the Logix
Communications 1998 Stock Option Plan.
"LOGIX COMMUNICATIONS COMMON STOCK" shall mean Common Stock, par value
$1.00 per share, of Logix Communications.
"LOGIX COMMUNICATIONS SPIN-OFF" shall mean the consummation of the
proposed spin-off by the Company of the business of Logix Communications.
"MSA" means a Metropolitan Statistical Area, comprised of one or more
counties in the Unites States, as listed in Public Notice Report No.
CL-92-40, "Common Carrier Public Mobile Services Information, Cellular
MSA/RSA Markets and Counties," dated January 24, 1992. DA 92-109.
"MTA" shall mean a geographic area established by the Rand McNally 1992
Commercial Atlas & Marketing Guide, 123rd Edition, as modified by the FCC to
form the initial geographic area of license for the A and B blocks of
broadband PCS spectrum as defined in Section 24.202 of the FCC's rules.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Association of Securities Dealers'
Automated Quotation System.
"NEW COMPANY STOCK OPTION PLAN" shall mean the Dobson Communications
Corporation 1996 Stock Option Plan, adopted on February 6, 1997, as amended
by Amendment No. 1 thereto, dated December 21, 1998.
"NEW SECURITIES" shall have the meaning set forth in Section 4.7(b).
9
<PAGE>
"PCS SYSTEM" shall mean a mobile communication system constructed and
operated in a BTA or a MTA (or any successor territorial designations or
subdivision thereof authorized by the FCC) exclusively using the 1850 MHZ to
1910 MHZ and 1930 MHZ to 1990 MHZ frequencies, or portions thereof, pursuant
to a License therefor issued by the FCC.
"PCS TERRITORY" shall mean an MTA or BTA in which the Company or any of
its Subsidiaries has been granted a license to operate a PCS System by the
FCC.
"PERSON" shall mean an individual, corporation, partnership, limited
liability company, association, joint stock company, Governmental Authority,
business trust or other legal entity.
"POPS" shall mean, with respect to any Licensed area, the residents of
such area based on the most recent publication by Equifax Marketing Decision
Systems, Inc.
"PREFERRED STOCK" shall mean collectively, the Senior PIK Preferred
Stock, the Sygnet PIK Preferred Stock, the Class A Preferred Stock, the Class
D Preferred Stock, the Class E Preferred Stock, the Class F Preferred Stock,
the Class G Preferred Stock and the Class H Preferred Stock.
"PREFERRED STOCK PUT RIGHT" shall have the meaning given such term in
Section 12.1.
"PROHIBITED TRANSFEREE" shall mean any Person that is one of the five
largest providers of wireless telecommunications services (based on revenue
derived from the provision of such wireless telecommunications services
during the most recent fiscal year for which such information is available)
in any PCS Territory or Cellular Territory or any entity which is controlled
by any such Person; or a Person (other than the Company) who derives a
material portion of its business by providing wireless telecommunications
services in any PCS Territory or Cellular Territory.
"PROSPECTUS" shall have the meaning set forth in Section 5(d)(i).
"QUALIFIED HOLDER" shall mean any Stockholder or group of Stockholders
that Beneficially Owns shares of Common Stock reasonably expected to, upon
sale, result in aggregate gross proceeds of at least $50.0 million.
"REGISTRABLE SECURITIES" shall mean (a) the Common Stock now owned or
hereafter acquired by any Stockholder or issuable upon conversion of any
Equity Security or exchange of Common Stock, and (b) all Common Stock issued
or issuable upon conversion, exchange or exercise of any Equity Security
which is issued pursuant to a stock split, stock dividend or other similar
distribution or event with respect to Common Stock but with respect to any
Common Stock, only until such time as such Common Stock (i) has been
effectively registered under the
10
<PAGE>
Securities Act and disposed of in accordance with the Registration Statement
covering it, (ii) has been sold to the public pursuant to Rule 144 (or any
similar provision then in force), (iii) shall otherwise have been
transferred, a new certificate evidencing such Common Stock without a legend
restricting further transfer shall have been delivered by the Company, and
subsequent public distribution of such Common Stock shall neither require
registration under the Securities Act nor qualification (or any similar
filing) under any state securities or "blue sky" law then in effect, or (iv)
shall have ceased to be issued and outstanding.
"REGISTRATION" shall have the meaning set forth in Section 5(d).
"REGISTRATION EXPENSES" shall have the meaning set forth in Section 5(g).
"REGISTRATION STATEMENT" shall have the meaning set forth in Section
5(d)(i).
"REPRESENTATIVES" shall have the meaning set forth in Section 6.3(a).
"RELEVANT PERCENTAGE INTEREST" shall have the meaning given such term in
Section 3.4.
"RESTATED BY-LAWS" shall mean the Amended and Restated By-Laws of the
Company in the form of Exhibit C.
"RESTATED CERTIFICATE" shall mean the Amended and Restated Certificate
of Incorporation of the Company, in the form of Exhibit A.
"RSA" means a Rural Statistical Area, comprised of one or more counties
in the United States, as listed in Public Notice Report No. CL-92-40, "Common
Carrier Public Mobile Services Information, Cellular MSA/RSA Markets and
Counties," dated January 24, 1992, DA 92-109.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act (or
any similar rule as may be in effect from time to time).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING STOCKHOLDER" shall have the meaning set forth in Section 4.2(a).
"SENIOR INDEBTEDNESS" shall mean the principal, interest on, premium, if
any, fees (including, without limitation, any attorneys', commitment, agency,
facility, structuring, restructuring or other fee), costs, expenses,
indemnities, and other amounts due on or in connection with the Financing
Agreements and any refinancings or replacements of the
11
<PAGE>
foregoing prior to the date of issuance of any Subordinated Put Note, in
accordance with Section 12.5 hereof or from the date of issuance of any
Subordinated Put Note, in accordance with the terms of such Subordinated Put
Note, in each case whether or not with new lenders, now or hereafter
incurred, any documents executed under or in connection therewith, and any
amendments, modifications, deferrals, renewals of the Financing Agreements
prior to the date of issuance of any Subordinated Put Note, in accordance
with Section 12.5, or from the date of issuance of any Subordinated Put Note,
in accordance with the terms of such Subordinated Put Note, any amounts owed
in respect of any Indebtedness incurred in refinancing, replacing or
refunding the foregoing prior to the date of issuance of any Subordinated Put
Note, in accordance with Section 12.5 or from the date of issuance of any
Subordinated Put Note, in accordance with the terms of such Subordinated Put
Note, in each case whether or not with new lenders, unless the terms of such
Indebtedness expressly provide that such Indebtedness is not Senior
Indebtedness with respect to any Subordinated Put Note.
"SENIOR NOTE DOCUMENTS" shall mean, collectively, the Senior Note
Indenture, the Senior Notes and the Senior Notes Escrow and Security
Agreement.
"SENIOR NOTE INDENTURE" shall mean the Indenture, dated as of February
28, 1997, among the Company and United States Trust Company of New York, as
Trustee thereunder, in respect of the Senior Notes.
"SENIOR NOTES" shall mean the 11 3/4% Senior Notes due 2007 issued by
the Company pursuant to the Senior Note Indenture.
"SENIOR NOTES ESCROW AND SECURITY AGREEMENT" shall mean the Escrow and
Security Agreement, dated February 28, 1997, among, the Company and the
placement agents, party thereto, and United States Trust Company of New York,
as Trustee thereunder.
"SENIOR PIK PREFERRED STOCK" shall have the meaning set forth in recital
(B) hereto.
"SENIOR PIK PREFERRED STOCK CERTIFICATE OF DESIGNATION" shall mean the
Certificate of Designation in respect of the Senior PIK Preferred Stock.
"STOCKHOLDER" shall have the meaning set forth in the preamble.
"SUBORDINATED PUT NOTE" shall mean any Negotiable Junior Subordinated
Unsecured Note of the Company, substantially in the form of Exhibit D, issued
in accordance with the terms of this Agreement in connection with the
exercise of Preferred Stock Put Rights.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a
corporation, a majority of the total voting power of
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shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a partnership, association or other business
entity, a majority of the partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or indirectly, by any
Person or one or more Subsidiaries of that person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association, or other business entity if
such Person or Persons shall be allocated a majority of partnership,
association or other business entity gains or losses or shall be or control
the managing general partner of such partnership, association or other
business entity.
"SYGNET ACQUISITION" shall mean the acquisition by the Company's wholly
owned subsidiary, Dobson/Sygnet, of all of the outstanding capital stock of
Sygnet Wireless, Inc., an Ohio corporation, pursuant to the Sygnet Merger
Agreement dated July 28, 1998, as amended, between Dobson/Sygnet operating
Company and Sygnet Wireless, Inc.
"SYGNET MERGER AGREEMENT" shall mean the Agreement and Plan of Merger,
dated as of July 28, 1998, between Dobson/Sygnet Operating Company and Sygnet
Wireless, Inc.
"SYGNET PIK PREFERRED STOCK" shall have the meaning set forth in recital
(B) hereof.
"SYGNET PIK PREFERRED STOCK DOCUMENTS" shall mean, collectively, the
Sygnet PIK Preferred Stock Purchase Agreement, the Sygnet PIK Preferred Stock
and the Sygnet PIK Preferred Stock Registration Rights Agreement.
"SYGNET PIK PREFERRED STOCK PURCHASE AGREEMENT" means the Purchase
Agreement, dated December 16, 1998, between the Company and NationsBanc
Montgomery Securities LLC in respect of the Sygnet PIK Preferred Stock.
"SYGNET PIK PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT" shall mean
the Registration Rights Agreement between the Company and NationsBanc
Montgomery Securities LLC in respect of the Signet PIK Preferred Stock.
"TAG-ALONG EVENT" shall have the meaning set forth in Section 4.2(a).
"TAG-ALONG EVENT PURCHASER" shall have the meaning set forth in Section
4.2(a).
"TAG-ALONG NOTICE" shall have the meaning set forth in Section 4.2(a).
"TAG-ALONG STOCK" shall have the meaning set forth in Section 4.2(a).
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"TERRITORY" shall mean, collectively, all of the PCS Territories and
all of the Cellular Territories.
"TRANSFER" shall have the meaning set forth in Section 4.1(a).
"VOTING SECURITIES" shall mean equity securities of a Person having the
right to vote generally in the election of the directors of such Person.
"WIRELESS SUBSIDIARIES" shall mean collectively DCC PCS Inc., Western
Financial Services, Inc., Dobson Cellular Operations Company, DOC Cellular
Subsidiary Company, Dobson Operating Company, Dobson Tower Company,
Dobson/Sygnet Communications Company and their respective Subsidiaries.
1.2 OTHER DEFINITIONAL PROVISIONS. Each definition or pronoun herein
shall be deemed to refer to the singular, plural, masculine, feminine or
neuter as the context requires. Words such as "herein," "hereinafter,"
"hereof," "hereto" and "hereunder" refer to this Agreement as a whole, unless
the context otherwise requires. References to a document or agreement shall
be to such document or agreement, as the same may be amended, supplemented or
otherwise modified from time to time.
ARTICLE 2.
STOCKHOLDER APPROVAL
2.1 ORGANIZATIONAL DOCUMENTS. The Stockholders consent to the
amendment of the By-Laws and their replacement by the Restated By-Laws and
adopt and approve the Restated By-Laws.
2.2 APPROVAL OF STOCK OPTION PLANS. The Stockholders approve and
adopt the New Company Stock Option Plan and the Logix Communications 1998
Stock Option Plan and consent to the issuance of stock options and common
stock in accordance with the terms thereof and to the consummation of the
other transactions contemplated thereby.
2.3 LOGIX COMMUNICATIONS SPIN-OFF. The Stockholders hereby approve
and consent to the consummation of the Logix Communications Spin-Off provided
that such Logix Communications Spin-Off occurs within 12 months of the
receipt by the Company of a private letter ruling by the Internal Revenue
Service with respect to the Logix Communications Spin-Off under the currently
pending application therefor by the Company. The Stockholders acknowledge
that the holders of Class D Preferred Stock will participate in the Logix
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Communications Spin-Off on a pro rata basis according to their percentage
ownership of Common Stock on a Fully Diluted Basis at the time of the Logix
Communications Spin-Off (assuming for this purpose that all options issued
under the Logix Communications 1998 Stock Option Plan have been exercised).
The JWC Common Stock shall participate in the Logix Communications Spin-Off
on the same terms as all other shares of Class A Common Stock.
ARTICLE 3.
MANAGEMENT OF THE COMPANY
3.1 BOARD OF DIRECTORS. (a) The Board of Directors shall, subject to
the other provisions hereof, consist of seven (7) directors; PROVIDED,
HOWEVER, that the number of directors constituting the Board of Directors
shall be reduced in the circumstances set forth in this Section 3.1. Each of
the Stockholders hereby agrees that it will vote all of the shares of its
Common Stock and Preferred Stock (to the extent entitled to vote) owned or
held of record by it (whether now owned or hereafter acquired), in person or
by proxy, to cause the election of directors and thereafter the continuation
in office of such directors as follows:
(i) one director selected by JWC, in its sole discretion, so long
as it Beneficially Owns at least 35% of the Class D Preferred Stock (or the
Class A Common Stock or Class E Preferred Stock acquired upon conversion
thereof) it holds as of the date of this Agreement;
(ii) four directors selected by the Dobson Partnership, in its
sole discretion; and
(iii) two directors jointly selected by JWC and the Dobson
Partnership.
JWC shall have the right so long as it holds its Relevant
Percentage Interest to require that Fleet Equity has the right to designate a
Person to serve as a director of the Company (who shall be substituted for
one of the directors referenced in clause (iii) above) in the event that
Fleet Equity purchases from JWC at least $10.0 million in principal amount of
JWC's original investment in Class D Preferred Stock and JWC Common Stock.
In addition, JWC shall have the right to, so long as it holds its Relevant
Percentage Interest, designate one director for the Board of Directors of
each Subsidiary of the Company.
If, for any reason, no director is designated pursuant to clause
(iii) hereof, then such directors will be selected by the Dobson Partnership.
In the event that any Class D Preferred Stock is converted into Class A
Common Stock and Class E Preferred Stock in accordance with the terms
thereof, the rights of the holders of such Preferred Stock to vote to appoint
directors in accordance with the terms hereof shall survive such conversion.
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Any nomination or designation of directors and the acceptance
thereof pursuant to Section 3.1 shall be evidenced in writing.
(b) The Stockholders acknowledge the rights of the holders of
Senior PIK Preferred Stock to designate an additional 2 directors, the right
of the holders of Sygnet PIK Preferred Stock to designate an additional 2
directors and the right of the holders of the Class F Preferred Stock to
designate one additional director, in the event that the triggering events
described in paragraph (iii) of the Senior PIK Preferred Stock Certificate of
Designation, paragraph (iii) of the Sygnet PIK Preferred Stock Certificate of
Designation, and subparagraph (c)(iii) of the Class F Preferred Stock
Certificate of Designation, respectively occur.
3.2 REMOVAL; FILLING OF VACANCIES. Except as set forth in Section 3.1,
each Stockholder agrees it will not vote any shares of Company Stock
Beneficially Owned by such Stockholder, and shall not permit any Affiliated
Successor of such Stockholder holding any Company Stock, to vote for the
removal without cause of any director designated by any other Stockholder in
accordance with Section 3.1. Any Stockholder or group of Stockholders who
has the right to designate any member(s) of the Board of Directors shall have
the right to replace any member(s) so designated by it (whether or not such
member is removed from the Board of Directors with or without cause or ceases
to be a member of the Board of Directors by reason of death, disability or
for any other reason) upon written notice to the other Stockholders, the
Company and the members of the Board of Directors which notice shall set
forth the name of the member(s) being replaced and the name of the new
member(s). Each of the Stockholders agrees to vote, and to cause its
Affiliated Successors to vote, its shares of Preferred Stock and Common
Stock, or shall otherwise take any action as is necessary to cause the
election of any successor director designated by any Stockholder pursuant to
this Section 3.2.
3.3 DIRECTORS. In accordance with the Oklahoma General Corporation Law
and pursuant to the provisions of Section 3.1 of this Agreement, the
Stockholders hereby consent to the election of and do hereby elect in
accordance with Section 3.1 hereof the persons designated in Schedule III
hereto as directors of the Company. Such persons shall hold office until
their successors are duly elected and qualified, except as otherwise provided
in this Agreement, the Restated Certificate or the Restated By-Laws.
3.4 COMPENSATION AND REIMBURSEMENT. The members of the Board of
Directors (other than the directors selected pursuant to Section 3.1(iii))
shall not be compensated for their services as a director or as a member of
any committee of the Board of Directors. For so long as JWC Beneficially
Owns at least 35% of the number of shares of Class D Preferred Stock (or any
Class A Common Stock or Class E Preferred Stock into which it may have been
converted) which it owns as of the date of this Agreement (the "Relevant
Percentage Interests"), JWC shall
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have the right to have an observer present at all meetings of the Board of
Directors and any committees thereof (in addition to the director appointed
pursuant to Section 3.1(a)(i) above). The Company will reimburse the
observer appointed pursuant to this Section in connection with such person's
role as observer and each member of the Board of Directors for the reasonable
and documented out-of-pocket expenses and costs (including travel expenses),
incurred by such observer or such director in connection with such the
performance of his service as an observer or as a director or as a member of
any committee of the Board of Directors.
3.5 BUSINESS OF THE COMPANY. The business and affairs of the Company
shall be conducted by the officers of the Company under the supervision of
the Board of Directors. The Board of Directors of the Company shall meet at
least once per fiscal quarter. The Board of Directors of Logix
Communications shall meet at least once in every two month period.
3.6 REQUIRED VOTES. All actions of the Board of Directors of the
Company shall require the vote of at least a majority of the entire Board of
Directors, unless otherwise required by Law, the Restated Certificate, the
Restated By-Laws or this Agreement.
3.7 TRANSACTIONS BETWEEN THE COMPANY AND THE STOCKHOLDERS OR THEIR
AFFILIATES. Any transaction or series of transactions outside the ordinary
course of business and agreements or transactions entered into from time to
time and involving, in any 12-month period, in the aggregate, more than $1.0
million, between the Company or its Subsidiaries, on the one-hand, and its
Stockholders or Affiliates, or any of them, on the other hand, must be
approved by any two of the directors selected in clauses (i) and (iii) of
Section 3.1(a), provided that no such approval will be required in connection
with (A) this Agreement, the Investment and Transaction Agreement, the New
Company Stock Option Plan and the Logix Communications 1998 Stock Option
Plan, any Financing Agreement to be entered into simultaneously herewith, (B)
the Logix Communications Spin-Off, and (C) the proposed arms-length
development and lease by the Company and its Subsidiaries of space in an
office building in which the Dobson family has an ownership interest;
PROVIDED, HOWEVER, that in the event that the two directors in clause (iii)
above have been selected by the Dobson Partnership without the approval of
JWC, then the consent of the director designated by JWC in clause (i) of
Section 3.1(a) shall be required to approve a transaction of the type
described in this Section 3.7.
3.8 BOARD COMMITTEES. If a committee of the Board of Directors is
established, the director selected pursuant to Section 3.1(a)(i) shall be
entitled to be a member of such committee.
3.9 OTHER ACTIONS. The Company shall not, and shall not permit any of
its Subsidiaries to, take any of the following actions without the prior
approval of a majority of directors of the Board of Directors of the Company:
(i) register securities under the Securities Act or grant registration
rights; (ii) change the size of the Board of Directors; (iii) change the
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Company's independent public accountants; (iv) amend this Agreement; (v)
adversely amend or alter any preferences, rights or powers of the Class D
Preferred Stock, whether such rights be set forth in the Restated Certificate
or Restated Bylaws or in any other agreement; (vi) redeem, repurchase or pay
any dividends on any stock that is junior to, or on a parity with, the Class
D Preferred Stock, except for repurchases of management, employee or
consultant stock or stock options pursuant to contractual rights which do not
exceed $500,000 in any fiscal year of the Company or $1,500,000 in the
aggregate; (vii) issue or authorize any shares of capital stock of the
Company having a preference over, or being on parity with, the Class D
Preferred Stock, including the issuance of additional shares of Class D
Preferred Stock PROVIDED, that the Company may issue and authorize shares of
capital stock in connection with (x) public or private (which provides for
registration within one year of issuance)/144A preferred stock financing in
connection with future acquisitions and capital projects and the financing
thereof, and (y) the Logix Communications Spin-Off; or (viii) merge or
consolidate with or into another Person, or sell all or substantially all of
its assets or liquidate its assets or business. Nothing in this Section 3.9
is intended to imply that by virtue of the approval of the Board of Directors
pursuant to this Section 3.9 the Company can take any action that it is
otherwise prohibited from taking.
ARTICLE 4.
TRANSFERS OF SHARES
4.1 GENERAL.
(a) Each Cash Equity Investor agrees that at all times prior to,
the earliest of (A) the IPO Date (B) the fifth anniversary hereof or (C) a
Change of Control, it shall not, directly or indirectly, transfer, sell,
assign, pledge, or tender or otherwise grant or create a Lien in or upon,
give, or otherwise voluntarily or involuntarily (including transfers by
testamentary or intestate succession) dispose of by operation of law, offer
or otherwise (any such action being referred to herein as a "Transfer") any
of the shares of Company Stock Beneficially Owned by such Stockholder as of
the date hereof or which may hereafter be acquired by such Stockholder,
except that a Cash Equity Investor may Transfer shares of Preferred Stock and
Common Stock (i) to an Affiliate or an Affiliated Successor (notwithstanding
anything else to the contrary in this Article 4), (ii) to family members and
trusts and partnerships which are Affiliates thereof, (iii) to another
Stockholder, (iv) in connection with a public sale in accordance with Rule
144, (v) by JWC under the JWC Selldown, and (vi) to any other Person after
complying with Section 4.2, if applicable, PROVIDED, that in the case of
clauses (i), (ii), (iii), and (v) each such transferee shall execute a
counterpart of and become a party to this Agreement and shall agree in a
writing in form and substance reasonably satisfactory to the Company to be
bound and becomes bound by the terms of this Agreement. Nothing in this
Agreement shall prohibit a bona fide pledge of
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Company Stock by co-investors in the JWC Group (other than JWC) to a bank or
financial institution.
(b) Notwithstanding anything to the contrary contained in this
Article 4, JWC Common Stock shall not be subject to Section 4.1, provided
that any transferee of such shares shall execute a counterpart of and become
party to this Agreement and shall agree in a writing in form and substance
satisfactory to the Company to be bound and becomes bound by the terms of
this Agreement. Fleet Buyout Stock shall be subject to the provisions of
Section 4.2 and 4.5 of this Agreement.
4.2 TAG-ALONG RIGHTS.
(a) Subject to Section 4.2(e), no Stockholder ("Selling
Stockholder") shall, directly or indirectly, Transfer, in any single
transaction or series or related transactions to one or more Persons who are
not Affiliated Successors of such Stockholder (each such Person a "Tag-Along
Event Purchaser") shares of Preferred Stock or Common Stock (collectively,
"Tag-Along Stock") constituting 5% or more of such Stockholder's investment
in the Company (a "Tag-Along Event"), unless the terms and conditions of such
sale to such Tag-Along Event Purchaser shall include an offer to each
Stockholder (including the Selling Stockholder) to Transfer to such Tag-Along
Event Purchasers up to that number of shares determined as follows:
(i) each JWC Group Stockholder shall have the right to Transfer
to such Tag-Along Event Purchaser up to that number of shares of Tag-Along
Stock then Beneficially Owned by such JWC Group Stockholder (without
duplication) as are equal in value to (x) the aggregate value of the shares
of Tag-Along Stock that such Tag-Along Event Purchaser has offered to
purchase (the "Total Tag-Along Value"), times (y) a fraction, the numerator
of which is the value of the shares of Class A Common Stock and Class E
Preferred Stock (valued at its Liquidation Preference) at that time
Beneficially Owned (without duplication) by such JWC Group Stockholder, and
the denominator of which is the value of all then outstanding Class A
Common Stock (the aggregate value of all of the shares of Tag-Along Stock
that may be purchased by the JWC Group Stockholders is hereinafter referred
to as the "JWC Group Value", and the Total Tag-Along Value minus the JWC
Group Value is hereinafter referred to as the "Remaining Value");
(ii) each Stockholder that is not a JWC Group Stockholder
(together with the Selling Stockholders, the "Remaining Offerees") shall
have the right to Transfer to such Tag-Along Event Purchaser up to that
number of shares of Tag-Along Stock then Beneficially Owned by such
Remaining Offeree (without duplication) as are equal in value to (x) the
Remaining Value, times (y) a fraction, the numerator of which is the
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value of shares of Class A Common Stock and Class E Preferred Stock (other
than such stock held by Dobson Partnership) (valued at its Liquidation
Preference) at that time Beneficially Owned (without duplication) by such
Remaining Offeree, and the denominator of which is the value of all then
outstanding Class A Common Stock.
If the Selling Stockholders receive a bona fide offer from a Tag-Along
Event Purchaser to purchase shares of Tag-Along Stock in circumstances in
which would result in a Tag-Along Event, and which offer such Selling
Stockholders wish to accept, the Selling Stockholders shall then cause the
Tag-Along Event Purchaser's offer to be reduced to writing (which writing
shall include an offer to purchase shares of Tag-Along Stock from each
Stockholder according to the terms and conditions set forth in this Section
4.2) and the Selling Stockholders shall send written notice of the Tag-Along
Event Purchaser's offer (the "Tag-Along Notice") to each Stockholder, which
Tag-Along Notice shall specify (i) the names of the Selling Stockholders,
(ii) the names and addresses of the proposed acquiring Person, (iii) the
amount of shares proposed to be Transferred and the price, form of
consideration and other terms and conditions of such Transfer (including, if
in a series of related transactions, such information with respect to shares
of Tag-Along Stock theretofore Transferred), (iv) that the acquiring Person
has been informed of the rights provided for in this Section 4.2 and has
agreed to purchase shares of Tag-Along Stock in accordance with the terms
hereof, and (v) the date by which each other Selling Stockholder may exercise
its respective rights contained in this Section 4.2, which date shall not be
less than thirty (30) days after the giving of the Tag-Along Notice. The
Tag-Along Notice shall be accompanied by a true and correct copy of the
Tag-Along Event Purchaser's offer. At any time within thirty (30) days after
receipt of the Tag-Along Notice, each Stockholder may accept the offer
included in the Tag-Along Notice for up to such number of shares of Tag-Along
Stock as is determined in accordance with this Section 4.2, by furnishing
written notice of such acceptance to each Selling Stockholder, and
delivering, to an escrow agent (which shall be a bank or a law or accounting
firm designated by the Company), on behalf of the Selling Stockholders, the
certificate or certificates representing the shares of Tag-Along Stock to be
sold pursuant to such offer by each Stockholder, duly endorsed in blank,
together with a limited power-of-attorney authorizing the escrow agent, on
behalf of the Stockholder, to sell the shares to be sold pursuant to the
terms of such Tag-Along Event Purchaser's offer.
If any Stockholder desires to sell less than its proportionate
amount of shares of Tag-Along Stock that it is entitled to sell pursuant to
this Section 4.2, then each of the other Stockholders shall have the right to
sell to the Tag-Along Event Purchaser an additional amount of shares of
Tag-Along Stock as shall be calculated in accordance with the allocations and
procedures set forth in the immediately preceding paragraph. Such process
shall be repeated in series until all of the remaining Stockholders agree to
sell their remaining proportionate number of shares of Tag-Along Stock.
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Schedule IV sets forth an illustrative example for this Section 4.2,
PROVIDED, HOWEVER that in the event of any conflict between such illustration
and this Section 4.2, Section 4.2 shall govern.
(b) The purchase from each Tag-Along Event Offeree pursuant to this
Section 4.2 shall be on the same terms and conditions, including the price per
share received by the Selling Stockholders and stated in the Tag-Along Notice
provided to each Stockholder. In the event that the Tag-Along Stock is Common
Stock, all Stockholders shall be required, as a condition of participating in
such transaction (in cases where the Preferred Stock is convertible into Common
Stock), to convert the required amount of its Preferred Stock into Common Stock
and Transfer Common Stock to the Tag-Along Event Purchaser.
(c) Simultaneously with the consummation of the sale of the shares of
Tag-Along Stock to the Tag-Along Event Purchaser pursuant to the Tag-Along
Event Purchaser's offer, the Selling Stockholders shall notify each Stockholder
and shall cause the Tag-Along Event Purchaser to remit to each Stockholder the
total sales price of the shares of Tag-Along Stock held by each Stockholder sold
pursuant thereto and shall furnish such other evidence of the completion and
time of completion of such sale and the terms thereof as may be reasonably
requested by each Stockholder.
(d) If within thirty (30) days after receipt of the Tag-Along Notice,
a Stockholder has not accepted the offer contained in the Tag-Along Notice, such
Stockholder shall be deemed to have waived any and all rights with respect to
the sale described in the Tag-Along Notice (but not with respect to any
subsequent sale, to the extent this Section 4.2 is applicable to such subsequent
sale) and the Selling Stockholders shall have sixty (60) days from the initial
delivery of the last Tag-Along Notice in which to sell not more than the number
of shares of Tag-Along Stock described in the Tag-Along Notice, on terms not
more favorable to the Selling Stockholders than were set forth in the Tag-Along
Notice; PROVIDED, HOWEVER, that if such purchase is subject to the consent of
the FCC or any public service or public utilities commission, the purchase of
such shares shall be closed on the first business day after all such consents
shall have been obtained by Final Order.
(e) Without limiting Section 4.1(a), Section 4.2 will not apply to
(i) Transfers of Company Stock made after the IPO Date in a public offering in
accordance with Section 5 or pursuant to Rule 144(ii) the sale or redemption of
up to $25.0 million in aggregate principal amount by the Dobson Partnership of
Company Stock, together with any dividends thereon, in one transaction or a
series of transactions so long as such sale or redemption is permitted by
Section 5.9 of the Investment and Transaction Agreement, (iii) the sale of any
Class F Preferred Stock and (iv) pursuant to Sections 4(a)(i), (ii), (iii), (v)
or (vi) hereof (and similar Transfers of Fleet Buyout Stock).
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4.3 ADDITIONAL CONDITIONS TO PERMITTED TRANSFERS.
(a) As a condition to any Transfer to an Affiliated Successor
permitted pursuant to Section 4.1, or any Transfer pursuant to Section 4.2, each
transferee that is not a party hereto shall, prior to such Transfer, agree in
writing to be bound by all of the provisions of this Agreement applicable to the
Stockholders (and shall thereby become a Stockholder for all purposes of this
Agreement). Any Transfer without compliance with such provisions of this
Agreement shall be null and void and such transferee shall have no rights as a
Stockholder of the Company.
(b) Notwithstanding anything to the contrary contained in this
Agreement (other than the next sentence) each Stockholder agrees that it will
not effect a Transfer of shares of Company Stock to a Prohibited Transferee. In
the event that the Dobson Partnership Transfers any Preferred Stock or Common
Stock to a Prohibited Transferee, JWC shall equally be entitled to transfer such
securities to such Person pursuant to Section 4.2. It shall be deemed a breach
of this Section 4.3(b) by a Stockholder Beneficially Owning more than 10% of the
Common Stock outstanding if any Prohibited Transferee shall acquire, directly or
indirectly, in a private sale Beneficial Ownership of more than 33% of any
class of equity securities or equity interest in, such Stockholder and the
Dobson Partnership shall not have Transferred any shares of Company Stock to
such Prohibited Transferee.
4.4 STOP-TRANSFER. The Company agrees not to effect any Transfer of shares
of Company Stock by any Stockholder whose proposed Transfer is subject to
Section 4.2 until it has received evidence reasonably satisfactory to it that
the rights provided to any other Stockholders pursuant to such Section, if
applicable to such Transfer, have been complied with and satisfied in all
respects. No Transfer of any shares of Preferred Stock and/or Common Stock
shall be made except in compliance with all applicable securities laws. Any
Transfer made in violation of this Agreement shall be null and void.
4.5 DRAG ALONG RIGHTS. If at any time the Board of Directors shall
approve the sale or exchange (in a business combination or otherwise) by
Stockholders of Common Stock and Class D Preferred Stock and Class E Preferred
Stock of the Company in a bona fide arm's-length transaction to a third party
pursuant to an agreement that (i) treats equally, on an "as-if-converted basis,"
the value of all holders of Common Stock, Class D Preferred Stock and Class E
Preferred Stock, except as provided in the Restated Certificate of
Incorporation, (ii) is approved by the Board of Directors as fair to all
Stockholders, and (iii) which shall have been approved by Stockholders holding
50.1% of the outstanding Common Stock of the Company on an as-if-converted
basis, then, upon the written request of the Company, each Stockholder shall be
obligated to, and shall, if so requested by such third party, (a) sell, transfer
and deliver or cause to be sold, transferred and delivered to such third party,
shares of Common Stock and Preferred Stock owned by such Stockholder, and (b) if
Stockholder approval of the transaction is required,
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vote his, her or its shares of Company Stock in favor thereof. Notwithstanding
the previous sentence, a Cash Equity Investor may not be obligated to sell
any shares of Class D Preferred Stock or Class E Preferred Stock unless it
receives as consideration for such shares at least their Liquidation
Preference and it may not be obligated to sell any shares of Common Stock
unless all of the shares of Class D Preferred Stock or Class E Preferred
Stock then held by such Cash Equity Investors are to be sold for cash in such
transaction.
4.6 REDEMPTION RIGHTS. Subject to the terms of the Financing Agreements
and not giving rise to either a default or an event of default thereunder, the
Class D Preferred Stock (or Class E Preferred Stock) will be redeemed within 90
days following the vote of holders of a majority of the outstanding shares of
the Class D Preferred Stock (or Class E Preferred Stock as the case may be), at
any time (a) after twelve years from the date of this Agreement or (b) upon the
completion of an IPO by the Company of Common Stock. Upon redemption of Class D
Preferred Stock, the holders of Class D Preferred Stock so redeemed will receive
a cash payment equivalent to the then current Liquidation Preference per share
plus the number of shares of Class A Common Stock such holders would have
received had they converted such Class D Preferred Stock into shares of Class E
Preferred Stock and Class A Common Stock immediately prior to such redemption.
4.7 RIGHT OF FIRST REFUSAL FOR NEW SECURITIES; CAPITAL RAISING.
(a) The Company hereby grants to JWC, on the same terms and
conditions, a right of first refusal, to the extent necessary to maintain their
fully diluted ownership in the Company, to purchase shares of any New Securities
(as defined below) which the Company may, from time to time, propose to issue
and sell to private equity investors (and not through a public offering or a
private placement (which provides for registration within one year of
issuance)/Rule 144A offering, which, together with any supplemental or
additional offerings, results in gross proceeds in excess of $50.0 million).
Such right of first refusal shall allow JWC to purchase a pro rata portion of
the New Securities proposed to be issued, determined with reference to the
aggregate number of outstanding shares of Common Stock (on an as-if-converted
basis) held by JWC before the proposed issuance of New Securities. The right of
first refusal granted hereunder shall terminate if unexercised within 30
calendar days after receipt of notice from the Company to the Cash Equity
Investors.
(b) "New Securities" shall mean any authorized but unissued shares,
and any treasury shares, of preferred stock or common stock of the Company and
all rights, options or warrants to purchase common stock, and securities of any
type whatsoever that are, or may become, convertible into common stock;
PROVIDED, HOWEVER, that the term "New Securities" does not include (i) shares of
Common Stock or stock options issued to officers, employees, directors,
consultants of the Company or others in connection with their services pursuant
to a
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plan or plans approved by the Board of Directors; (ii) securities issued upon
conversion of shares of Class D Preferred Stock to Class A Common Stock and
Class E Preferred Stock or shares issued upon the conversion of any Class G
Preferred Stock for Class H Preferred Stock; (iii) securities issued by the
Company pursuant to the acquisition of another corporation by the Company by
merger, purchase of all or substantially all of the assets or other
reorganization whereby the Company shall become the owner of more than 50% of
the voting power of such corporation; (iv) shares of Common Stock issued in
connection with any stock split or stock dividend of the Company; (v) capital
stock (including warrants, options or other rights to purchase capital stock,
or that are convertible into or exchangeable for capital stock of the
Company) issued directly in connection with any borrowings or the incurrence
of any indebtedness by the Company or its Subsidiaries in connection with
acquisitions or capital projects; (vi) shares of Class A Common Stock issued
pursuant to any IPO in excess of $50.0 million (taken together with any
supplemental or additional offerings) or Rule 144A promulgated thereunder
which provide for registration of such Capital Stock within one year of their
issuance; or (vii) shares issuable upon exercise of the Sygnet PIK Preferred
Stock Warrants.
(c) If the Company or any Subsidiary in the future proposes to raise
equity capital it shall provide JWC with the terms of such proposal prior to
approaching other potential investors and shall grant JWC the initial
opportunity to make any such investment, provided that nothing herein shall
require the Company to enter into any agreement or sale with the Company on
terms less favorable than the prevailing market terms and rates offered to
comparable companies to the Company.
ARTICLE 5.
REGISTRATION RIGHTS
The Company will not grant registration rights for Company capital stock to
a Person other than the Cash Equity Investors on terms pari passu with or senior
to or more favorable than those granted to the Cash Equity Investors.
(a) DEMAND REGISTRATION RIGHTS.
(i) RIGHT TO DEMAND REGISTRATION. At any time following 180 days
after the IPO Date (or such longer period as may be reasonably required by the
managing underwriters of the Company's IPO) and (A) the Dobson Partnership shall
have the right to make one written request and (B) JWC shall have the right to
make two written requests, (each a "Demanding Stockholder" and, collectively,
the "Demanding Stockholders") to the Company for registration with the
Commission, under and in accordance with the provisions of the Securities Act,
of all or
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part of their Registrable Securities pursuant to an underwritten offering (a
"Demand Registration"), which request shall specify the number of Registrable
Securities proposed to be sold in the offering; PROVIDED, HOWEVER, that (x)
the Company need not effect a Demand Registration unless the sale of the
Registrable Securities proposed to be sold by the Demanding Stockholder shall
reasonably be expected to result in aggregate gross proceeds of at least
$25.0 million, and (y) if the Board of Directors determines that a Demand
Registration would interfere with any pending or contemplated material
acquisition, disposition, financing or other material transaction, the
Company may defer a Demand Registration (including by withdrawing any
Registration Statement filed in connection with a Demand Registration); so
long as that the aggregate of all such deferrals shall not exceed ninety (90)
days in any 360-day period. A Demand Registration shall not be deemed a
Demand Registration hereunder until such Demand Registration has been
declared effective by the Commission (without interference by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency, for any reason), and maintained continuously effective
for a period of at least six (6) months or such shorter period when all
Registrable Securities included therein have been sold in accordance with
such Demand Registration. A Demanding Stockholder may make a written request
for a Demand Registration in accordance with the foregoing in respect of
Company Stock that it intends to convert into shares of Common Stock upon the
effectiveness of the Registration Statement prepared in connection with such
demand, and the Company shall fulfill its obligations under this Article 5 in
a manner that permits such Demanding Stockholder to exercise its conversion
rights in respect of such Company Stock and substantially contemporaneously
sell the shares of Common Stock issuable upon such conversion under such
Registration Statement.
In addition to the rights set forth above, each of the Demanding
Stockholders shall have the right to demand that the Company file a registration
statement on Form S-3 (or any successor form to Form S-3) for an offering of
Registrable Securities in which at least $15.0 million of gross proceeds are
reasonably expected therefrom, PROVIDED that the Company is not obligated to
participate in any "road-show" or exceptional marketing, diligence or other
efforts in connection with such offering. This additional demand registration
may be a one year "shelf-registration." The procedures and limitations for
effecting the registration of the Registrable Securities on Form S-3 (or any
successor form to Form S-3), including the procedure used for any underwriting
limitation, shall be as set forth in this Article 5.
Within ten (10) days after receipt of the request for a Demand
Registration, the Company will send written notice (the "Demand Notice") of such
Registration request and its intention to comply therewith to all Stockholders
who are holders of Registrable Securities and, subject to Section 5(a)(ii), the
Company will include in such Demand Registration all Registrable Securities of
such Stockholders with respect to which the Company has received written
requests for inclusion therein within twenty (20) days after the last date such
Demand Notice was deemed
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to have been given pursuant to Section 14.1.
(ii) PRIORITY ON REGISTRATION. If the managing underwriter or
underwriters advise the Company and the holders of the Registrable Securities to
be registered in writing that in its or their opinion the number of Registrable
Securities proposed to be sold in any Registration (including, without
limitation, a Piggyback Registration) and any other securities of the Company
requested or proposed to be included in such Registration exceeds the number
that can be sold in such offering without (A) creating a substantial risk that
the proceeds or price per share that will be derived from such Registration will
be materially reduced or that the number of Registrable Securities to be
registered is too large a number to be reasonably sold, or (B) materially and
adversely affecting such Registration in any other respect, the Company will (x)
include in such Registration the aggregate number of Registrable Securities
recommended by the managing underwriter (the number of Registrable Securities to
be registered for each Stockholder to be reduced FIRSTLY, against the Dobson
Partnership, SECONDLY, against the other Stockholders (other than JWC) and
LASTLY, against JWC; in each case PRO RATA based on the amount of Registrable
Securities of the Stockholders in the applicable class requested to be included
in such Registration), and (y) not allow any securities other than Registrable
Securities to be included in such Registration unless all Registrable Securities
requested to be included shall have been included therein, and then only to the
extent recommended by the managing underwriter or determined by the Company
after consultation with an investment banker of nationally recognized standing
(notification of which number shall be given by the Company to the holders of
Registrable Securities).
(iii) SELECTION OF UNDERWRITERS. The offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an
underwritten offering. The Demanding Stockholder that initiated such Demand
Registration will select a managing underwriter or underwriters of recognized
national standing to administer the offering, which managing underwriter or
underwriters shall be reasonably acceptable to the Company.
(b) PIGGYBACK REGISTRATION RIGHTS.
RIGHT TO PIGGYBACK. If the Company proposes to register any shares of
Common Stock (or securities convertible into or exchangeable for Common Stock)
with the Commission under the Securities Act (other than a Registration on Form
S-4 or Form S-8, or any successor forms), and the Registration form to be used
may be used for the Registration of the Registrable Securities (a "Piggyback
Registration"), the Company will give written notice (a "Piggyback Notice") to
all Stockholders, at least thirty (30) days prior to the anticipated filing
date, of its intention to effect such a Registration, which notice will specify
the proposed offering price (if determined at that time), the kind and number of
securities proposed to be registered, the distribution arrangements and will,
subject to Section 5(a)(ii), include in such Piggyback
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Registration all Registrable Securities with respect to which the Company has
received written requests (which requests have not been withdrawn) for
inclusion therein within twenty (20) days after the last date such Piggyback
Notice was deemed to have been given pursuant to Section 15.1. If at any
time after giving the Piggyback Notice and prior to the effective date of the
Registration Statement filed in connection with such Registration, the
Company determines for any reason not to register or to delay Registration,
the Company may, at its election, give written notice of such determination
to each holder of Registrable Securities that has requested inclusion of
Registrable Securities in such Registration and (A) in the case of a
determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such Registration, and
(B) in the case of a determination to delay registering, shall be permitted
to delay registering any Registrable Securities for the same period as the
delay in registering such other securities.
No Stockholder may obtain a Piggyback Registration on a Demand
Registration initiated by JWC.
(c) SELECTION OF UNDERWRITERS. Except as set forth in Section
5.1(a)(iii), the Company (by action of the Board of Directors) will select the
managing underwriter or underwriters to administer offerings of its capital
stock, which managing underwriter or underwriters will be of nationally
recognized standing.
(d) REGISTRATION PROCEDURES. With respect to any Demand Registration
or Piggyback Registration (each, a "Registration"), the Company shall, subject
to Sections 5(a)(i) and (5)(a)(ii) and Section 5(b)(i), as expeditiously as
practicable:
(i) prepare and file with the Commission, as promptly as
reasonably practicable (but in no event more than forty-five (45) days) after
the receipt of the Registration requests under Sections 5(a) or 5(b), a
registration statement or registration statements (each, a "Registration
Statement") relating to the applicable Registration on any appropriate form
under the Securities Act, which form shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution thereof; cooperate and assist in any filings required to be made
with the NASD; and use its reasonable best efforts to cause such Registration
Statement to become and (to the extent provided herein) remain effective;
PROVIDED, HOWEVER, that before filing a Registration Statement or prospectus
related thereto (a "Prospectus") or any amendments or supplements thereto, the
Company shall furnish to the holders of the Registrable Securities covered by
such Registration Statement and the underwriters, if any, copies of all such
documents proposed to be filed, which documents will be subject to the
reasonable review of such holders and underwriters and their respective counsel,
and the Company shall not file any Registration Statement or amendment thereto
or any Prospectus or any supplement thereto to which the holders of a majority
of the Registrable
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Securities covered by such Registration Statement or the underwriters, if
any, shall reasonably object;
(ii) prepare and file with the Commission such amendments and
supplements to the Registration Statement as may be necessary to keep each
Registration Statement effective for six (6) months (nine (9) months in the case
of any shelf registration requested by a Qualified Holder pursuant to this
Section 5) or such shorter period that will terminate when all Registrable
Securities covered by such Registration Statement have been sold; cause each
Prospectus to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Securities Act; and
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement during the applicable
period in accordance with the intended method or methods of distribution by the
sellers thereof set forth in such Registration Statement or supplement to the
Prospectus;
(iii) promptly notify the selling holders of Registrable
Securities and the managing underwriters, if any (and, if requested by any such
Person or entity, confirm such advice in writing), (A) when the Prospectus or
any Prospectus supplement or post-effective amendment has been filed, and, with
respect to the Registration Statement or any post-effective amendment, when the
same has become effective; (B) of any request by the Commission for amendments
or supplements to the Registration Statement or the Prospectus or for additional
information; (C) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; (D) if at any time the representations and
warranties of the Company contemplated by subsection (xiv) of this subsection
(d) below cease to be true and correct; (E) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale under the securities or blue sky laws of any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and (F) of the happening of any event which makes any statement made in
the Registration Statement, the Prospectus or any document incorporated therein
by reference untrue or which requires the making of any changes in the
Registration Statement, the Prospectus or any document incorporated therein by
reference in order to make the statements therein not misleading;
(iv) use its reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of (I) the Registration Statement, or
(II) the qualification of the Registrable Securities for sale under the
securities or blue sky laws of any jurisdiction at the earliest possible time;
(v) if requested by the managing underwriter or underwriters
or a holder of Registrable Securities being sold in connection with an
underwritten offering, promptly
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incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters and the holders of a majority of the
Registrable Securities being sold agree should be included therein relating
to the plan of distribution with respect to such Registrable Securities,
including, without limitation, information with respect to the number of
Registrable Securities being sold to such underwriters, the purchase price
being paid therefor by such underwriters and any other terms of the
underwritten (or best efforts underwritten) offering of the Registrable
Securities to be sold in such offering; and make all required filings of such
Prospectus supplement or post-effective amendment as soon as notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(vi) furnish to each selling holder of Registrable Securities
and each managing underwriter, without charge, at least one signed copy of the
Registration Statement and any amendment thereto, including financial statements
and schedules, all documents incorporated therein by reference and all exhibits
(including those incorporated by reference);
(vii) deliver to each selling holder of Registrable Securities
and the underwriters, if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement thereto
as such selling holder of Registrable Securities underwriters may reasonably
request in order to facilitate the public sale or other disposition of the
securities owned by such selling holder;
(viii) prior to any public offering of Registrable Securities,
use its reasonable best efforts to register or qualify or cooperate with the
selling holders of Registrable Securities, the underwriters, if any, and their
respective counsel in connection with the Registration or qualification of such
Registrable Securities for offer and sale under the securities or "blue sky"
laws of such jurisdictions in the United States as any seller or underwriter
reasonably requests in writing, use its reasonable best efforts to obtain all
appropriate registrations, permits and consents required in connection
therewith, and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by the Registration Statement; PROVIDED, HOWEVER, that the
Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action that would
subject it to taxation or general service of process in any such jurisdiction
where it is not then so subject;
(ix) cooperate with the selling holders of Registrable
Securities and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold and not bearing any restrictive legends and to be in such denominations
and registered in such names as the managing underwriters may request at least
two (2) business days prior to any sale of Registrable Securities to the
underwriters;
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(x) use its reasonable best efforts to cooperate with any
selling holder to cause the Registrable Securities covered by the applicable
Registration Statement to be registered with or approved by such other
governmental agencies or authorities in the United States as may be necessary to
enable the seller or sellers thereof or the underwriters, if any, to consummate
the disposition of such Registrable Securities;
(xi) upon the occurrence of any event contemplated by
subsection (iii)(F) above, promptly prepare a supplement or post-effective
amendment to the Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
not misleading;
(xii) cause all Registrable Securities covered by any
Registration Statement to be listed on each securities exchange on which similar
securities issued by the Company are then listed, or, if not so listed, cause
such Registrable Securities to be authorized for trading on the NASDAQ National
Market System if any similar securities issued by the Company are then so
authorized, if requested by the holders of a majority of such Registrable
Securities or the managing underwriters, if any;
(xiii) not later than the effective date of the applicable
Registration, provide a CUSIP number for all Registrable Securities;
(xiv) enter into such customary agreements (including in the
case of a Demand Registration that is an underwritten offering, an underwriting
agreement in customary form) and take all such other actions reasonably required
in connection therewith in order to expedite or facilitate the disposition of
such Registrable Securities and in such connection, whether or not an
underwriting agreement is entered into and whether or not the Registration is an
underwritten Registration, (A) make such representations and warranties to the
holders of such Registrable Securities and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters in
primary underwritten offerings; (B) use reasonable best efforts to obtain
opinions of counsel to the Company and updates thereof (which opinions of
counsel shall be in form, scope and substance reasonably satisfactory to the
managing underwriters, if any, and to the holders of a majority of the
Registrable Securities being sold), addressed to each selling holder and the
underwriters, if any, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by such holders and underwriters; (C) use reasonable best efforts to
obtain "cold comfort" letters and updates thereof from the Company's independent
certified public accountants addressed to the selling holders of Registrable
Securities and the underwriters, if any, such letters to be in customary form
and covering matters of the type
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customarily covered in "cold comfort" letters by underwriters in connection
with primary underwritten offerings; and (D) deliver such documents and
certificates as may be reasonably requested by the holders of a majority of
the Registrable Securities being sold and the managing underwriters, if any,
to evidence compliance with subsection (xi) above and with any customary
conditions contained in the underwriting agreement or other agreement entered
into by the Company. All the above in this Section 5(d)(xiv) shall be done at
each closing under each underwriting or similar agreement or as and to the
extent required thereunder;
(xv) make available for inspection by a representative of each
Demanding Stockholder or selling holder, any underwriter participating in any
disposition pursuant to such Registration, and any attorney or accountant
retained by the sellers or underwriter, copies or extracts of all financial and
other records, pertinent corporate documents and properties of the Company as
shall be reasonably necessary, in the opinion of the holders' or underwriter's
counsel, to enable them to fulfill their due diligence responsibilities; and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any such representative, underwriter, attorney or
accountant in connection with such Registration Statement; PROVIDED, HOWEVER,
that the Company shall not be required to comply with this paragraph (xv) unless
such Person executes confidentiality agreements whereby such person agrees that
any records, information or documents that are designated by the Company in
writing as confidential shall be kept confidential by such Persons and used only
in connection with the proposed Registration unless disclosure of such records,
information or documents is required by court or administrative order or any
regulatory body having jurisdiction; and each seller of Registrable Securities
agrees that it will, upon learning that disclosure of such records, information
or documents is sought in a court of competent jurisdiction or by a governmental
agency, give notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of any records,
information or documents deemed confidential; PROVIDED FURTHER, HOWEVER,
notwithstanding any designation of confidentiality by the Company, confidential
information shall not include information which (i) becomes generally available
to the public other than as a result of a disclosure by or on behalf of any such
Person, or (ii) becomes available to any such Person on a non-confidential basis
from a source other than the Company or its advisors, provided that such source
is not to such Person's knowledge bound by a confidentiality agreement with or
other obligations of secrecy to the Company or another party with respect to
such information;
(xvi) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to its security holders, earnings statements satisfying the provisions
of Section 11(a) of the Securities Act, no later than forty-five (45) days after
the end of any twelve (12)-month period (or ninety (90) days, if such period is
a fiscal year) (A) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm or best efforts
underwritten offering, or
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(B) if not sold to underwriters in such an offering, beginning with the first
month of the Company's first fiscal quarter commencing after the effective
date of the Registration Statement, which statements shall cover said twelve
(12)-month periods; and
(xvii) promptly prior to the filing of any document that is to
be incorporated by reference into any Registration Statement or Prospectus
(after initial filing of the Registration Statement), provide copies of such
document to counsel to the selling holders of Registrable Securities and to the
managing underwriters, if any, make the Company's executive officers and other
representatives available for discussion of such document and make such changes
in such document prior to the filing thereof as counsel for such selling holders
or underwriters may reasonably request.
The Company may require each seller of Registrable Securities as to
which any Registration is being effected to furnish to the Company such
information regarding the proposed distribution of such securities as the
Company may from time to time reasonably request in writing. Each holder of
Registrable Securities agrees by acquisition of such Registrable Securities
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 5(d)(xi), such holder shall forthwith
discontinue disposition of Registrable Securities until such holder's receipt of
the copies of the supplemented or amended prospectus contemplated by Section
5(d)(xi), or until it is advised in writing (the "Advice") by the Company that
the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus; and, if so directed by the Company, such holder shall deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such seller's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the event the
Company gives any such notice, the time periods regarding the maintenance of the
effectiveness of any Registration Statement in Sections 5(d)(ii) shall be
extended by the number of days during the period from and including the date of
the receipt of such notice pursuant to Section 5(d)(iii)(F) hereof to and
including the date when each seller of Registrable Securities covered by such
Registration Statement shall have received the copies of the supplemented or
amended prospectuses contemplated by Section 5(d)(xi) or the Advice.
(e) INDEMNIFICATION.
(i) In the event of the Registration or qualification of any
Registrable Securities under the Securities Act or any other applicable
securities laws pursuant to the provisions of this Section 5, the Company agrees
to indemnify and hold harmless each Stockholder thereby offering such
Registrable Securities for sale (an "Indemnified Stockholder"), underwriter,
broker or dealer, if any, of such Registrable Securities, and each other person,
if any, who controls any such Indemnified Stockholder, underwriter, broker or
dealer within the
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meaning of the Securities Act or any other applicable securities laws, from
and against any and all losses, claims, damages, expenses or liabilities (or
actions in respect thereof), joint or several, to which such Indemnified
Stockholder, underwriter, broker or dealer or controlling person may become
subject under the Securities Act or any other applicable federal or state
securities laws or otherwise, insofar as such losses, claims, damages,
expenses or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such Registrable
Securities were registered or qualified under the Securities Act or any other
applicable securities laws, any preliminary prospectus or final prospectus
relating to such Registrable Securities, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, or any violation by the
Company of any rule or regulation under the Securities Act or any other
applicable federal or state securities laws applicable to the Company or
relating to any action or inaction required by the Company in connection with
any such Registration or qualification, and will reimburse each such
Indemnified Stockholder, underwriter, broker or dealer and each such
controlling person for any legal or other expenses reasonably incurred by
such Indemnified Stockholder, underwriter, broker or dealer or controlling
person in connection with investigating or defending any such loss, claim,
damage, expense, liability or action; PROVIDED, HOWEVER, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, expense or liability arises out of or is based upon an untrue
statement or omission contained in such Registration Statement, such
preliminary prospectus, such final prospectus or such amendment or supplement
thereto, made in reliance upon and in conformity with written information
furnished to the Company by such Indemnified Stockholder, underwriter,
broker, dealer or controlling person specifically and expressly for use in
the preparation thereof or by the failure of such Indemnified Stockholder,
underwriter, broker or dealer, or controlling person to deliver a copy of the
Registration Statement, such preliminary prospectus, such final prospectus or
such amendment or supplement thereto after the Company has furnished such
party with a sufficient number of copies of the same and such party failed to
deliver or otherwise provide a copy of the final prospectus to the person
asserting an untrue statement or omission or alleged untrue statement or
omission at or prior to the written confirmation of the sale of securities to
such person, if such statement or omission was in fact corrected in such
final prospectus.
(ii) In the case of an underwritten offering in which the
Registration Statement covers Registrable Securities, the Company agrees to
enter into an underwriting agreement in customary form and substance with
such underwriters and to indemnify the underwriters, their officers and
directors, if any, and each person, if any, who controls such underwriters
within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act, to the same extent as provided in the preceding paragraph with
respect to the indemnification of the holders of Registrable Securities;
PROVIDED, HOWEVER, the Company shall not be required to indemnify
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any such underwriter, or any officer or director of such underwriter or any
person who controls such underwriter within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act, to the extent that the
loss, claim, damage, expense or liability (or actions in respect thereof) for
which indemnification is sought results from such underwriter's failure to
deliver or otherwise provide a copy of the final prospectus to the person
asserting an untrue statement or omission or alleged untrue statement or
omission at or prior to the written confirmation of the sale of securities to
such person, if such statement or omission was in fact corrected in such
final prospectus.
(iii) In the event of the Registration or qualification of any
Registrable Securities of the Stockholders under the Securities Act or any other
applicable federal or state securities laws for sale pursuant to the provisions
hereof, each Indemnified Stockholder agrees severally, and not jointly, to
indemnify and hold harmless the Company, each person who controls the Company
within the meaning of the Securities Act, and each officer and director of the
Company from and against any losses, claims, damages, expenses or liabilities
(or actions in respect thereof), joint or several, to which the Company, such
controlling person or any such officer or director may become subject under the
Securities Act or any other applicable securities laws or otherwise, insofar as
such losses, claims, damages, expenses or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement of any material
fact contained in any Registration Statement under which such Registrable
Securities were registered or qualified under the Securities Act or any other
applicable securities laws, any preliminary prospectus or final prospectus
relating to such Registrable Securities, or any amendment or supplement thereto,
or arise out of or are based upon an untrue statement therein or the omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, which untrue statement or omission was
made therein in reliance upon and in conformity with written information
furnished to the Company by such Indemnified Stockholder specifically and
expressly for use in connection with the preparation thereof, and will reimburse
the Company, such controlling person and each such officer or director for any
legal or any other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, expense, liability or
action; PROVIDED, HOWEVER, an Indemnified Stockholder's liability under this
Section 5(e)(iii) shall not exceed the net proceeds received by such Indemnified
Stockholder with respect to the sale of any Registrable Securities.
(iv) In the case of an underwritten offering of Registrable
Securities, each holder of a Registrable Security included in a Registration
Statement shall agree to enter into an underwriting agreement in customary form
and substance with such underwriters, and to indemnify such underwriters, their
officers and directors, if any, and each person, if any, who controls such
underwriters within the meaning of Section 15 of the Securities Act and Section
20 of the Exchange Act, to the same extent as provided in the preceding
paragraph with respect to indemnification by such holder of the Company, but
subject to the same limitation as provided in
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Section 5(e)(ii) with respect to indemnification by the Company of such
underwriters, officers, directors and control persons.
(v) Promptly after receipt by a person entitled to indemnification
under this Section 5(e) (an "Indemnified Party") of notice of the commencement
of any action or claim relating to any Registration Statement filed under this
Section 5 as to which indemnity may be sought hereunder, such Indemnified Party
will, if a claim for indemnification hereunder in respect thereof is to be made
against any other party hereto (an "Indemnifying Party"), give written notice to
each such Indemnifying Party of the commencement of such action or claim, but
the omission to so notify each such Indemnifying Party will not relieve any such
Indemnifying Party from any liability which it may have to any Indemnified Party
otherwise than pursuant to the provisions of this Section 5(e) and shall also
not relieve any such Indemnifying Party of its obligations under this Section
5(e) except to the extent that any such Indemnifying Party is actually
prejudiced thereby. In case any such action is brought against an Indemnified
Party, and such Indemnified Party notifies an Indemnifying Party of the
commencement thereof, such Indemnifying Party will be entitled (at its own
expense) to participate in and, to the extent that it may wish, jointly with any
other Indemnifying Party similarly notified, to assume the defense, with counsel
reasonably satisfactory to such Indemnified Party, of such action and/or to
settle such action and, after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party will not be liable to such Indemnified Party for any legal or
other expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof, other than the reasonable cost of investigation;
PROVIDED, HOWEVER, that no Indemnifying Party shall consent to the entry of any
judgment or enter into any settlement agreement without the prior written
consent of the Indemnified Party unless such Indemnified Party is fully released
and discharged from any such liability, and no Indemnified Party shall consent
to the entry of any judgment or enter into any settlement of any such action the
defense of which has been assumed by an Indemnifying Party without the consent
of each Indemnifying Party. Notwithstanding the foregoing, the Indemnified Party
shall have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (a) the employment of such counsel shall have been authorized in writing
by the Indemnifying Party in connection with the defense of such suit, action,
claim or proceeding; (b) the Indemnifying Party shall not have employed counsel
(reasonably satisfactory to the Indemnified Party) to take charge of the defense
of such action, suit, claim or proceeding; or (c) such Indemnified Party shall
have reasonably concluded, based upon the advice of counsel, that there may be
defenses available to it which are different from or additional to those
available to the Indemnifying Party which, if the Indemnifying Party and the
Indemnified Party were to be represented by the same counsel, could result in a
conflict of interest for such counsel or materially prejudice the prosecution of
the defenses available to such Indemnified Party. If any of the events specified
in clauses (a), (b) or (c) of the preceding sentence shall have occurred or
shall otherwise be applicable, then the fees
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and expenses of one counsel or firm of counsel selected by a majority in
interest of the Indemnified Parties (and reasonably acceptable to the
Indemnifying Party) shall be borne by the Indemnifying Party. If, in any such
case, the Indemnified Party employs separate counsel, the Indemnifying Party
shall not have the right to direct the defense of such action, suit, claim or
proceeding on behalf of the Indemnified Party and the Indemnified Party shall
assume such defense and/or settle such action; PROVIDED, HOWEVER, that an
Indemnifying Party shall not be liable for the settlement of any action,
suit, claim or proceeding effected without its prior written consent, which
consent shall not be unreasonably withheld.
The provisions of this Section 5(e) shall be in addition to any
liability which any party may have to any other party and shall survive any
termination of this Agreement.
(f) CONTRIBUTION. If for any reason the indemnification provided for
in Section 5(e)(i) or 5(e)(iii) is unavailable to an Indemnified Party as
contemplated therein, then the Indemnifying Party, in lieu of indemnification
shall contribute to the amount paid or payable by the Indemnified Party as a
result of such loss, claim, damage, expense or liability (or action in respect
thereof) in such proportion as is appropriate to reflect not only the relative
benefits received by the Indemnified Party and the Indemnifying Party, but also
the relative fault of the Indemnified Party and the Indemnifying Party, as well
as any other relevant equitable considerations, provided that no Stockholder
shall be required to contribute in an amount greater than the net proceeds
received by such Stockholder with respect to the sale of any Registrable
Securities less all amounts already contributed by such Stockholder with respect
to such claims, including amounts paid for any legal or other fees or expenses
incurred by such Stockholder. No person guilty of a fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of any such
fraudulent misrepresentation. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such Indemnifying Party or
Indemnified Party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
(g) REGISTRATION EXPENSES. Except as hereinafter provided, all
expenses incident to the Company's performance of or compliance with this
Section 5 will be borne by the Company, including, without limitation, all
Registration and filing fees under the Securities Act and the Exchange Act, the
fees and expenses of the counsel and accountants for the Company (including the
expenses of any "cold comfort" letters and special audits required by or
incident to the performance of such persons), all other costs and expenses of
the Company incident to the preparation, printing and filing under the
Securities Act of the Registration Statement (and all amendments and supplements
thereto), and furnishing copies thereof and of the Prospectus
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included therein, all out-of-pocket expenses of underwriters customarily paid
for by issuers to the extent provided for in any underwriting agreement, the
costs and expenses incurred by the Company in connection with the
qualification of the Registrable Securities under the state securities or
"blue sky" laws of various jurisdictions, the costs and expenses associated
with filings required to be made with the NASD, the costs and expenses of
listing the Registrable Securities for trading on a national securities
exchange or authorizing them for trading on NASDAQ and all other costs and
expenses incurred by the Company in connection with any Registration
hereunder. In addition, the Company shall pay or reimburse the sellers of
Registrable Securities the reasonable fees and expenses of one law firm to
such sellers incurred in connection with a registration (collectively, with
the expenses referred to in the immediately preceding sentence, the
"Registration Expenses"). Except as provided in the immediately preceding
sentence, each Stockholder shall bear the costs and expenses of any
underwriters' discounts and commissions, brokerage fees or transfer taxes
relating to the Registrable Securities sold by such Stockholder and the fees
and expenses of any attorneys, accountants or other representatives retained
by the Stockholder.
(h) PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Stockholder may
participate in any underwritten Registration hereunder unless such Stockholder
(i) agrees to sell its Registrable Securities on the basis provided in any
customary and reasonable underwriting arrangements approved by the persons
entitled hereunder to select the underwriter, and (ii) accurately completes in a
timely manner and executes all questionnaires, powers of attorney, underwriting
agreements, indemnities and other documents customarily required under the terms
of such underwriting arrangements.
(i) HOLDBACK AGREEMENTS.
(i) Each holder of Registrable Securities whose securities
are included in a Registration Statement agrees not to effect any sale, transfer
or other disposition of Company Stock or any securities convertible into
Company Stock or other interest in the Company, including through any hedging or
derivative transaction or to effect any distribution of the issue being
registered or a similar security of the Company, or any securities convertible
into or exchangeable or exercisable for such securities, including a sale
pursuant to Rule 144 or Rule 144A under the Securities Act, during the fifteen
(15) days prior to, and during the one hundred eighty (180)-day period (or such
longer period as reasonably requested by the managing underwriter or
underwriters in the case of an underwritten public offering) beginning on, the
effective date of such Registration Statement (except as part of such
Registration), if and to the extent requested by the managing underwriter or
underwriters in an underwritten public offering.
(ii) The Company agrees not to effect any public sale or
distribution of the issue being registered or a similar security of the Company,
or any securities convertible into
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or exchangeable or exercisable for such securities (other than any such sale
or distribution of such securities in connection with any merger or
consolidation by the Company or any Subsidiary or the acquisition by the
Company or any Subsidiary of the capital stock or substantially all of the
assets of any other Person), during the fifteen (15) days prior to, and
during the ninety (90)-day period beginning on, the effective date of each
Demand Registration.
(j) PUBLIC INFORMATION REPORTING. (i) The Company hereby covenants
and agrees to and with the Stockholders that at all times following the IPO Date
it shall provide and file such financial and other information concerning the
Company as may from time to time be required by the Commission and any other
governmental authority having jurisdiction, so as to comply with all reporting
requirements under the Exchange Act, and shall, upon request, state in writing
that it has complied with all such requirements, and further agrees that, for so
long as (following the IPO Date) the Company is not subject to Section 13 or
15(d) of the Exchange Act, the Company shall comply in all respects with
paragraph (c)(2) of Rule 144.
(ii) If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company
covenants that it will file the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by the
Commission thereunder (or, if the Company is not required to file such reports,
it will, upon the request of any holder of Registrable Securities, make publicly
available other information), and it will take such further action as any holder
of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such holder to sell shares of Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by (i) Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities, the Company will deliver to such holder a written statement as to
whether it has complied with such requirements. Upon the request of a holder of
Registrable Securities, the Company covenants and agrees to provide the
information required by Rule 144A(d)(4) under the Securities Act.
ARTICLE 6.
ADDITIONAL RIGHTS AND COVENANTS
6.1 WHOLLY-OWNED SUBSIDIARIES. All of the Company's Subsidiaries shall be
direct or indirect wholly owned Subsidiaries of the Company, and the Company
shall not, and shall not permit any Subsidiary to, sell or issue, transfer,
encumber or otherwise dispose of any shares of capital stock of any of the
Company's Subsidiaries to any Person other than the Company and its
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direct or indirect wholly owned Subsidiaries, except for a pledge of any such
shares in connection with the incurrence of indebtedness.
6.2 AMENDMENTS OF THE RESTATED CERTIFICATE AND BY-LAWS. Prior to the IPO
Date, the Company shall not authorize or adopt any amendment, modification or
repeal of any provision of the Restated Certificate or the Restated By-Laws,
unless such amendment is consistent with the terms of this Agreement, and the
Restated Certificate and has been approved by a majority of directors of the
Board of Directors.
6.3 CONFIDENTIALITY.
(a) Each party shall, and shall cause each of its Affiliates, and its
and their respective stockholders, members, managers, directors, officers,
employees and agents (collectively "Representatives") to, keep secret and retain
in strictest confidence any and all information relating to the Company or any
other party that is designated in writing by the party providing such
information or the Company as confidential ("Confidential Information") and
shall not disclose such information, and shall cause its Representatives not to
disclose such information, to anyone except such Affiliates, Representatives or
any other Person that agrees in writing to keep in confidence all such
information in accordance with the terms of this Section 6.3. Each party agrees
to use such information received from another party or the Company only in
connection with its ownership interest in the Company but not for any other
purpose. All such information furnished pursuant to this Agreement shall be
returned promptly to the party to whom it belongs upon request by such party.
(b) To the fullest extent permitted by law, if a party or any of its
Affiliates or Representatives breaches, or threatens to commit a breach of, this
Section 6.3, the party whose Confidential Information shall be disclosed, or
threatened to be disclosed, shall have the right and remedy to have this Section
6.3 specifically enforced by any court having jurisdiction, it being
acknowledged and agreed that money damages will not provide an adequate remedy
to such party. Nothing in this Section 6.3 shall be construed to limit the
right of any party to collect money damages in the event of breach of this
Section 6.3.
(c) Anything else in this Agreement notwithstanding, each party shall
have the right to disclose any information, including Confidential Information
of the other party or such other party's Affiliates, in any filing with any
regulatory agency, court or other authority or any disclosure to a trustee of
public debt of a party to the extent that the disclosing party determines in
good faith that it is required by Law, regulation or the terms of such debt to
do so; PROVIDED, HOWEVER, that any such disclosure shall be as limited in scope
as possible and shall be made only after giving the other party as much notice
as practicable of such required disclosure and an opportunity to contest such
disclosure if possible.
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6.4 JWC SALE OF LOGIX COMMUNICATIONS STOCK. If JWC proposes to sell any
number of shares of Logix Communications Common Stock which sale would result in
a reduction in the ownership interest of JWC in Logix Communications below 35%
of the JWC Logix Communications ownership interest on the Logix Communications
Spin-Off (calculated with reference only to shares of Logix Communications
issued with respect to the Class D Preferred Stock (or any Class A Common Stock
or other capital stock issued with respect thereto other than the JWC Common
Stock) issued at the closing under the Investment and Transaction Agreement),
JWC shall give 10 Business Days written notice thereof to the Company (the "JWC
NOTICE PERIOD") and during such JWC Notice Period the Company may elect to
purchase such Logix Communications Common Stock at a price which is the average
of the daily closing prices for Logix Communications Stock on the market on
which such stock is traded during such JWC Notice Period. In the event the
Company elects to purchase such Logix Communications Common Stock, it shall have
30 days from the date of receipt of the JWC written notice in which to purchase
such Logix Communications Common Stock. This purchase right shall terminate
upon the earliest to occur of (i) the consummation by the Company of an IPO,
(ii) the fifth anniversary of the date of this Agreement, (iii) the exercise by
the Stockholders of the call right pursuant to the terms of Article 11, or (iv)
the expiration of the call right pursuant to the terms of Article 11.
6.5 CLASS PROTECTION. The Company shall not, without first obtaining
consent or approval of the holders of at least a majority of the holders of each
affected class of Company Stock, voting as a separate class: (i) adversely amend
or alter any preferences, rights or powers of any such class of Company Stock;
or (ii) redeem, repurchase or pay any dividends on any junior stock or parity
stock, except for repurchases of stock or stock options issued to management,
employees or consultants which do not exceed $500,000 in any fiscal year of the
Company or in any event $1,500,000 in the aggregate.
6.6 NEW SECURITIES. (a) Subject to the terms of the Class D Preferred
Stock Certificate of Designation, any Common Stock (other than JWC Common Stock)
and any Logix Communications Common Stock issued to holders of Class D Preferred
Stock or to the Cash Equity Investors after conversion of the Class D Preferred
Stock shall receive anti-dilution protection, as determined reasonably in good
faith by the Board of Directors to protect the holders thereof in connection
with (i) dilution from the issuance or the exercise of warrants issued in
connection with the Sygnet Acquisition, (ii) any dilution relating to options
then issued or committed as of the Closing Date under the New Company Stock
Option Plan, (iii) any dilution resulting from the issuance of options with
respect to an aggregate maximum of 5% of the Logix Communications Stock, (iv)
the redemption of all shares of Class B Preferred Stock and Class C Preferred
Stock pursuant to the terms of the Investment and Transaction Agreement and (v)
dilution relating to the conversion of the Class G Preferred Stock into Class H
Preferred Stock and Class A Common Stock.
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(b) Without the prior written consent of JWC (except where any such
issuance would not have a dilutive effect on JWC's Beneficial Ownership
interest in either the Common Stock (including Common Stock issuable upon
conversion of Class D Preferred Stock) or the Logix Communications Common
Stock, or both) (as determined reasonably and in good faith by the Board of
Directors) the corporation shall not (i) issue any options pursuant to the
New Corporation Stock Option Plan other than such options as are committed on
the Closing Date, or (ii) issue options with respect to more than 5% in the
aggregate of Logix Communications Common Stock.
6.7 LOGIX COMMUNICATIONS SPIN-OFF. (a) Upon the consummation of the
Logix Communications Spin-off, the holders of Class D Preferred Stock and the
holders of Class E Preferred Stock (including Common Stock issuable upon
conversion of Class D Preferred Stock) shall immediately receive their PRO
RATA share, calculated on a Fully Diluted Basis, of such number of shares of
Class A Common Stock equal to the value of the 4,454 options to purchase
shares of Class C Common Stock outstanding on the Closing Date (the "Wireless
Options"), as determined reasonably and in good faith by the Board of
Directors (the "Wireless Option Value Shares").
(b) In the event that the Logix Communications Spin-off is not
consummated, the holders of Class D Preferred Stock and the holders of Class
E Preferred Stock will receive, immediately prior to the consummation of a
Liquidity Event, Wireless Option Value Shares plus their PRO RATA share,
calculated on a Fully-Diluted Basis as determined reasonably, and in good
faith by the Board of Directors, of Class A Common Stock equal to the value
of Logix Communications stock options that are issued (up to a maximum of 5%
of Logix Communications Common Stock).
(c) An example of the implementation and intent of this Section 6.7 is
set forth on Exhibit E hereto.
6.8 REGULATION M. In the event of any IPO, the Cash Equity Investors
shall not sell, transfer or otherwise dispose any Company Stock or purchase
Company Stock or securities convertible into Company Stock or any interests
in the Company, or otherwise engage in any transaction that would involve a
prohibited market manipulation, whether under Regulation M under the
Securities Act, or otherwise.
6.9 (a) POOLING OF INTERESTS. In the event that the Company is sold
in a transaction involving a "pooling of interests" transaction, for a period
of not more than 90 days following consummation of such transaction, no
Stockholder shall sell, transfer or otherwise dispose of any Company Stock,
securities convertible into Company Stock or any other interest in the
Company, if any such sale, transfer or other disposition would limit or deny
the applicability of
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the treatment of such pooling of interests.
(b) In the event of the Logix Communications Spin-off, the Company
shall enter into a stockholders agreement with the stockholders of Logix
Communications, substantially similar to this Agreement except that there
shall be no transfer restrictions analogous to Section 4.1.
6.10 OTHER TAX MATTERS. JWC intend that (i) pay in kind dividends on
the Class D Preferred Stock when paid and (ii) any constructive distribution
on the Class D Preferred Stock when deemed paid, will not be includible in
JWC's gross income for Federal, state or local tax purposes. Accordingly,
unless the Company reasonably concludes in good faith that it cannot make or
file any tax return that is consistent with the Purchaser's intention in the
preceding sentence, the Company shall not make or file any tax return that is
inconsistent with such intention. In the event the Company concludes it is
required to file any tax return that is inconsistent with the Purchaser's
intention in the preceding sentence, the Company will notify the holders of
Class D Preferred Stock at least 60 days before filing such return and will
attempt, through discussions with the holders and their representatives, to
reach mutual agreement on such filing requirement.
6.11 CLASS A PREFERRED STOCK TRANSFER RESTRICTION. In the event that
any share of Class D Preferred Stock or Class E Preferred Stock is at any
time outstanding and held by JWC, (A) the Class A Preferred Stock held by
Dobson Operating Company as of December 23, 1998 shall not be transferred,
directly or indirectly, to any Person; provided, however, that such shares of
Class A Preferred Stock may be transferred at any time (i) by Dobson
Operating Company to any wholly owned Subsidiary of the Company and (ii) by
any wholly-owned Subsidiary of the Company to any other wholly-owned
Subsidiary of the Company, and (B) such shares of Class A Preferred Stock
must be owned by a wholly-owned Subsidiary of the Company.
ARTICLE 7.
EXCLUSIVITY
7.1 EXCLUSIVITY. Prior to the earlier of five years after the date of
this Agreement or the date on which the relevant Cash Equity Investor
Beneficially Owns less than 50% of the Common Stock it Beneficially Owns as
of the date of this Agreement on an "as-if converted" basis, none of the
Stockholders or their respective Affiliates will provide or resell, or act as
the agent for any Person offering, within the Territory, mobile wireless
telecommunications services that compete with those provided by the Company
using wireless technologies and frequencies licensed by the FCC without the
Company's prior written consent. Nothing in this Article 7 shall (i) prohibit
JWC or its Affiliates from providing such services in any part of the
Territory in
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which the Company did not provide such services at the time that JWC or any
Affiliate initially began providing them or (ii) restrict the ability of
limited partners of any of JWC or its Affiliates to invest in Persons
engaged, directly or indirectly, in the mobile wireless telecommunications
industry.
ARTICLE 8.
AFTER-ACQUIRED SHARES; RECAPITALIZATION.
8.1 AFTER ACQUIRED SHARES; RECAPITALIZATION.
(a) Except as expressly set forth herein, all of the provisions of
this Agreement shall apply to all of the shares of Company Stock now owned or
hereafter issued or transferred to a Stockholder or to his, her or its
Affiliated Successors as a consequence of any additional issuance,
conversion, purchase, exchange or reclassification of shares of Company
Stock, corporate reorganization, or any other form of recapitalization, or
consolidation, or merger, or share split, or share dividend, or which are
acquired by a Stockholder or its Affiliated Successors in any other manner.
(b) Whenever the number of outstanding shares of Company Stock is
changed by reason of a stock dividend or a subdivision or combination of
shares effected by a reclassification of shares, each specified number of
shares referred to in this Agreement shall be adjusted accordingly.
8.2 AMENDMENT OF RESTATED CERTIFICATE. Whenever the number of shares
of authorized Common Stock is not sufficient in order to issue shares of
Common Stock upon conversion of Class D Preferred Stock and Class G Preferred
Stock or upon exercise of the Class F Preferred Stock Warrants in accordance
with the Restated Certificate and the Certificates of Designation, (i) the
Company shall promptly amend the Restated Certificate in order to authorize a
sufficient number of shares of Common Stock, and (ii) each Stockholder agrees
to vote its shares of Preferred Stock and Common Stock in favor of such
amendment.
ARTICLE 9.
SHARE CERTIFICATES
9.1 RESTRICTIVE ENDORSEMENTS; REPLACEMENT CERTIFICATES. (a) Each
certificate representing the shares of Company Stock now or hereafter held by
a Stockholder (including any
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such certificate delivered upon conversion of the Preferred Stock) or
delivered in substitution or exchange for any of the foregoing certificates
shall be stamped with legends in substantially the following form:
The shares represented by this Certificate have been acquired for
investment and have not been registered under the Securities Act of
1933, as amended (the "Act"), or under any state securities or "Blue
Sky" laws. Said securities may not be sold, transferred, assigned,
pledged, hypothecated or otherwise disposed of, unless and until
registered under the Act and the rules and regulations thereunder and
all applicable state securities or "Blue Sky" laws or exempted
therefrom under the Act and all applicable state securities or "Blue
Sky" laws.
The shares represented by this Certificate are also subject to a
Stockholder and Investor Rights Agreement dated as of December 23,
1998, a copy of which is on file at the offices of the Company and
will be furnished by the Company to the holder hereof upon written
request. Such Stockholder and Investor Rights Agreement provides,
among other things, for the granting of certain restrictions on the
sale, transfer, pledge hypothecation or other disposition of the
shares represented by this Certificate, and that under certain
circumstances, the holder hereof may be required to sell the shares
represented by this Certificate. By acceptance of this Certificate,
each holder hereof agrees to be bound by the provisions of such
Stockholder and Investor Rights Agreement. The Company reserves the
rights to refuse to transfer the shares represented by this
Certificate unless and until the conditions to transfer set forth in
such Stockholder and Investor Rights Agreement have been fulfilled.
Each Stockholder agrees that he, she or it will deliver all certificates
for shares of Company Stock owned by him, her or it to the Company for the
purpose of affixing such legends thereto.
(b) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any certificate
representing shares of Company Stock subject to this Agreement and of a bond
or other indemnity reasonably satisfactory to the Company, and upon
reimbursement to the Company of all reasonable expenses incident thereto, and
upon surrender of such certificate, if mutilated, the Company will make and
deliver a new certificate of like tenor in lieu of such lost, stolen,
destroyed or mutilated certificate.
ARTICLE 10.
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EQUITABLE RELIEF
10.1 EQUITABLE RELIEF. The parties hereto agree and declare that legal
remedies may be inadequate to enforce the provisions of this Agreement and
that, in addition to being entitled to exercise all of the rights provided
herein or in the Restated Certificate or granted by law, including recovery
of damages, equitable relief, including specific performance and injunctive
relief, may be used to enforce the provisions of this Agreement.
ARTICLE 11.
STOCKHOLDER CALL RIGHT
11.1 STOCKHOLDER CALL RIGHT. The Dobson Partnership and the other
Stockholders (including optionholders under the New Company Stock Option Plan
at closing under the Investment and Transaction Agreement) and their
respective assignees will have the right to call up to 35% of the Class D
Preferred Stock issued at closing under the Investment and Transaction
Agreement (and/or Class A Common Stock, Class E Preferred Stock, Logix
Communications Stock or other capital stock, issued upon conversion,
exchange, as a distribution or otherwise in respect of the Class D Preferred
Stock and the Class E Preferred Stock, other than the JWC Common Stock) on a
Fully Diluted basis, together, in each case, with all accrued and unpaid
dividends thereon (collectively, the "Equity Investor Package") at (i) a
price payable by wire transfer of immediately available funds to an account
designated by the JWC Representative, equal to 35% times the following
valuations (each, the "Clawback Exercise Price"), (A) at any time prior to
the twenty-fourth month anniversary of the date of issuance of the Class D
Preferred Stock at a valuation which is equal to three times the original
purchase price of the original purchase of the Class D Preferred Stock, and
(B) at any time following the twenty-fourth month anniversary of the date of
issuance of such shares and prior to the sixtieth-month anniversary thereof,
at a valuation which is equal to an amount equal to the sum of (x) three
times the original purchase price of the Class D Preferred Stock, plus (y)
one times such original purchase price multiplied by a fraction, the
numerator of which is the number of quarterly periods elapsed after such
twenty-fourth month anniversary of their date of issuance (measured from the
commencement of such twenty-fifth month anniversary), up to 12 quarterly
periods, and the denominator of which is 12. Schedule V set forth an
illustrative example for this Article 11, PROVIDED, HOWEVER that in the case
of any conflict between such illustration and this Article 11, this Article
11 shall govern. In the event of a sale or sales by JWC of any portion of
the final 35% of its investment in Logix Communications Common Stock as of
the date of the Logix Communications Spin-off (calculated with reference only
to shares of Logix Communications issued with respect to the Class D
Preferred Stock (or any Class A Common Stock or other capital stock issued in
respect thereto other than the JWC Common Stock) issued at closing
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<PAGE>
under the Investment and Transaction Agreement), then the Clawback Exercise
Price shall, if applicable, be reduced by the aggregate amount of the net
proceeds of such sales, PROVIDED that proceeds received by JWC from the
exercise by the Company of its purchase right under Section 6.4 shall not so
reduce the Clawback Exercise Price.
This call right may only be exercised in respect of the entire part of
the Equity Investor Package subject thereto and the initial determination
whether to exercise this call right will be made by the Dobson Partnership on
behalf of all the Stockholders, PROVIDED that after such determination, each
Stockholder will make its own determination whether to consummate the call
right. This call right shall terminate upon the earlier of the occurrence of
(A) the IPO Date, (B) the fifth anniversary of issuance of the Class D
Preferred Stock, (C) a Change of Control or (D) the exercise in full of this
call right, PROVIDED, that this call right may be exercised in connection and
concurrently with an IPO and the proceeds resulting from such public offering
may be applied by the Company in payment of the Clawback Exercise Price.
Except pursuant to Sections 4.2, 4.5 and Article 12 of this Agreement, each
Cash Equity Investor will agree not to sell or transfer the securities
included in their Equity Investor Package (excluding Logix Communications
Common Stock) until the call right expires if, after such sale or transfer,
such Cash Equity Investor would hold less than 35% of (x) the Class D
Preferred Stock it had originally acquired, (y) any class of securities
issued in respect of the Class D Preferred Stock (other than Logix
Communication Stock), or (z) each class of securities included in the Equity
Investor Package (excluding Logix Communications Common Stock).
ARTICLE 12.
CLASS D AND CLASS E PREFERRED STOCK PUT RIGHT
12.1 RIGHT TO PUT. At any time upon the earliest to occur of (i) the
seventh anniversary of the date of this Agreement, (ii) a Change of Control,
or (iii) the consummation of an IPO, each Cash Equity Investor shall have the
right to sell all of the Class D Preferred Stock or Class E Preferred Stock
held by it to the Company (the "Preferred Stock Put Right") following a vote
by a majority of the holders of shares of Class D Preferred Stock or Class E
Preferred Stock (as the case may be) to require the Company to redeem all of
the shares of Class D Preferred Stock or Class E Preferred Stock then held by
holders of Class D Preferred Stock or Class E Preferred Stock and the Company
shall have the obligation to purchase the shares as to which the Preferred
Stock Put Rights are exercised. The Company shall, within 120 days (or
immediately in the case of a Change of Control) pay (A) in the case of a put
of Class D Preferred Stock a cash amount per share equal to the then current
Liquidation Preference thereon plus the number of shares of Class A Common
Stock that the holder of such Class D Preferred Stock would have received
upon conversion immediately prior to such put and (B) in the case of Class E
Preferred Stock a
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<PAGE>
cash amount per share held by such Stockholder equal to its Liquidation
Preference. The closing of any redemption pursuant to this Section 12 shall
take place at the Company's offices or at such reasonable other location as
the Company may notify in writing.
12.2 PAYMENT; RESTRICTIONS ON PAYMENT. Upon the surrender of the
certificate or certificates evidencing the shares of Class D Preferred Stock
or Class E Preferred Stock to be repurchased by the Company, the repurchase
price in respect of such shares shall be paid to the order of the Person
whose name appears on such certificate or certificates in cash by wire
transfer of immediately available funds, provided, that if there is no
Available Cash under the Financing Agreements and consistent with the
limitations set forth in Section 12.3, the Company shall arrange additional
credit facilities or borrowing availability to obtain cash to meet its
obligations upon the exercise of the Preferred Stock Put Right. If the
Company cannot, within the time periods stated in Section 12.1, obtain cash
to meet its obligations upon the exercise of the Preferred Stock Put Right,
then the Company shall issue to the Cash Equity Investor exercising the
Preferred Stock Put Right a Subordinated Put Note, dated as of the date of
exercise of the Preferred Stock Put Right, which shall rank senior to each
class of Preferred Stock existing on the date hereof other than the Senior
PIK Preferred Stock and the Sygnet PIK Preferred Stock. Each surrendered
certificate evidencing shares of Class E Preferred Stock shall be canceled
and/or retired. In the event that a Cash Equity Investor receives a
Subordinated Put Note, such Cash Equity Investors shall be entitled to all of
the rights of the holders of Preferred Stock hereunder as if such Cash Equity
Investors were holders of Preferred Stock until the Subordinated Put Notes
are paid in full. In the event that Subordinated Put Notes are issued, all
such Subordinated Put Notes will rank pari passu and shall share pro rata in
any Available Cash, PROVIDED, HOWEVER, that in the event that any
Subordinated Put Note shall have matured, such Subordinated Put Note shall
rank senior to any Subordinated Put Note which has not yet matured.
12.3 RESTRICTIONS ON PAYMENTS BY THE COMPANY. Notwithstanding anything
to the contrary contained in this Agreement, the payment of cash upon
exercise of the Preferred Stock Put Rights and pursuant to any Subordinated
Put Notes pursuant to this Article shall be subject to (i) applicable
restrictions contained in any applicable law, including the availability of
adequate capital and surplus for corporate law purposes and (ii) restrictions
contained in the Financing Agreements (other than the Class F Preferred Stock
Documents) each as refinanced or amended and in effect from time to time in
accordance with Section 12.5, and restrictions contained in any Senior
Indebtedness. If any such restrictions or unavailability prohibit the
repurchase of Securities or other capital stock of the Company hereunder
which the Company is otherwise entitled or required to make, the Company
shall make such repurchases as soon as it is permitted to do so under such
restrictions.
12.4 PAYMENT OF CASH. Notwithstanding anything else in this Article 12
to the
47
<PAGE>
contrary, in the event of a Change of Control, and in each case in which
Stockholders receive cash, cash equivalents or marketable securities for the
sale or transfer of the Company's Voting Securities, then the holders of the
Class D Preferred Stock and Class E Preferred Stock shall be paid cash upon
exercise of the Class E Preferred Stock Put Right and shall not be issued
Subordinated Put Notes in lieu of cash.
12.5 FINANCING AGREEMENTS; INDEBTEDNESS. The Class D Preferred Stock
and Class E Preferred Stock, including any redemptions (except as set forth
below), puts and calls and any Subordinated Put Notes issued pursuant to such
puts, are subject to the terms and restrictions contained in the Financing
Agreements. The Company will be permitted to refinance or replace (whether or
not with new lenders) any Financing Agreement and/or incur additional
indebtedness in connection with acquisitions and capital projects at any time
prior to the issuance of any Subordinated Put Note issued in connection with
the Preferred Stock Put Right, so long as such refinancing, replacement or
additional indebtedness (i) is not more restrictive with respect to the
Preferred Stock than the Financing Agreements and (ii) specifically permits
the payment of amounts owing by the Company upon exercise of such Preferred
Stock Put Right or to the holder of any such Subordinated Put Note if after
giving pro forma effect to any such payment, the Consolidated Leverage Ratio
would be less than 8 to 1. Following the issuance of any Subordinated Put
Note issued in connection with the Preferred Stock Put Right, the Company may
not undertake any refinancing or replacement (but shall be free to obtain
waivers from the holders of existing indebtedness) or incur additional
financing indebtedness in excess of $1,000,000, in the aggregate, without the
prior written consent of the holder of such Subordinated Put Note. Nothing
herein shall limit the right of the Company to incur indebtedness in order to
discharge all amounts owing under any such outstanding Subordinated Put
Notes. No refinancing replacement or additional financing indebtedness shall
adversely affect, and shall be expressly subordinate to, the redemption
rights of the Preferred Stock set forth in the Certificates of Designation of
the Preferred Stock. The Cash Equity Investors shall deliver acknowledgments
of the foregoing to the Company's creditors under the Financing Agreements
upon the request of the Company.
ARTICLE 13.
COMPANY CALL RIGHT
13.1 COMPANY RIGHT TO CALL AGAINST CASH EQUITY INVESTORS. On or
immediately prior to an IPO, the Company or its assignees shall have the
right to purchase all or any portion of the outstanding shares of Class D
Preferred Stock held by a Cash Equity Investor and upon the exercise of such
right, each Cash Equity Investor shall have the obligation to sell such
shares of Class D Preferred Stock held by such Cash Equity Investor to the
Company. The call purchase
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<PAGE>
price for each share of Class D Preferred Stock shall be the Liquidation
Preference thereof plus the number of shares of Class A Common Stock that
would have been received by the holder of such Class D Preferred Stock had
such Class D Preferred Stock been converted immediately prior to the exercise
of the call. Notwithstanding anything herein to the contrary, a holder of
Class D Preferred Stock may upon receiving a Call Notice (as defined below)
elect to convert his Class D Preferred Stock into Class E Preferred Stock and
Class A Common Stock, in which event the Company's right pursuant to this
Article 13 will apply to such Class E Preferred Stock. The call purchase
price of any such Class E Preferred Stock shall be the Liquidation Preference
thereof.
13.2 PROCEDURE. The Company may exercise the Call Rights by providing
to the Cash Equity Investors a written notice (a "Call Notice") that the
Company will repurchase the shares of Company Stock described in Section
13.1. The Company shall within thirty (30) days after the determination of
the relevant call price, and the notification of the Cash Equity Investors
and in any event no later than the receipt by the Company of the proceeds of
the IPO, redeem the shares held by the Stockholders to whom the Company
provided a Call Notice by paying to such Stockholders an amount for each
share held by such Stockholder equal to the relevant call price by wire
transfer of immediately available funds. The closing of the repurchase of
the shares pursuant to this Article 13 shall take place at the office of the
Company, or at such other reasonable location, as it shall notify the
relevant party to whom the Call Notice was sent.
13.3 PAYMENT. Upon the surrender of the certificate or certificates
evidencing the shares of Class D Preferred Stock or Class E Preferred Stock
to be repurchased by the Company pursuant to this Article 13, the applicable
call price in respect of such shares shall be paid by wire transfer of
immediately available funds to the order of the Person whose name appears on
such certificate or certificates in cash in immediately available funds
(which shall include any accrued and unpaid dividends to the date of
repurchase of such shares of Class D Preferred Stock or Class E Preferred
Stock). Each surrendered certificate evidencing the shares of Class D
Preferred Stock or Class E Preferred Stock being repurchased shall be
canceled and/or retired.
ARTICLE 14.
MISCELLANEOUS
14.1 JWC GROUP STOCKHOLDER REPRESENTATIVE. (a) Each JWC Group
Stockholder hereby designates and irrevocably appoints Dana L. Schmaltz, as
his attorney-in-fact with full power of substitution (the "JWC Group
Stockholder Representative"), to serve as the representative of each such JWC
Group Stockholder to (i) perform all such acts as are required, authorized or
contemplated by this Agreement to be performed by such JWC Group Stockholder
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<PAGE>
and (ii) exercise such rights, power and authority as are incidental to this
Agreement and hereby acknowledges that the JWC Group Stockholder
Representative shall be the only person authorized to take any action so
required, authorized or contemplated by this Agreement by each such person.
Any such actions taken, exercises of rights, power or authority and any
decision or determination made by the JWC Group Stockholder Representative
consistent therewith, shall be absolutely and irrevocably binding on each JWC
Group Stockholder as if such JWC Group Stockholder personally had taken such
action, exercised such rights, power or authority or made such decision or
determination in such Stockholder's individual capacity. Each such JWC Group
Stockholder further acknowledges that the foregoing appointment and
designation shall be deemed to be coupled with an interest and shall survive
the death or incapacity of such JWC Group Stockholder. The other parties
hereto are and will be entitled to rely on any action taken or any notice
given by the JWC Group Stockholder Representative and are and will be
entitled and authorized to give notices only to the JWC Group Stockholder
Representative for any notice contemplated by this Agreement to be given to
any such person. A successor to the JWC Group Stockholder Representative may
be chosen by a majority in interest of the JWC Group Stockholders, provided
that notice thereof is given by the new JWC Group Stockholder Representative
to the Company.
(b) The JWC Group Stockholder Representative shall not be liable
to the JWC Group Stockholders for the performance of any act or the failure
to act under or in connection with this Agreement so long as he acted or
failed to act in good faith in what he believed to be the scope of his
authority and for a purpose which he believed to be in the best interests of
the JWC Group Stockholders. Each of the JWC Group Stockholders will
indemnify the JWC Group Stockholder Representative, from and against any
loss, liability, damage, deficiency, cost and expense (including without
limitation reasonable expenses of investigation and reasonable attorney's
fees incurred in connection with any claim, suit or proceeding brought
against him) incurred or sustained by him as a result of his individual acts
or omissions in connection with this Agreement, so long as he acted or failed
to act in good faith.
14.2 NOTICES. All notices or other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by facsimile transmission, or by registered
or certified mail (return receipt requested), postage prepaid, with an
acknowledgment of receipt signed by the addressee or an authorized
representative thereof, addressed as follows (or to such other address for a
party as shall be specified by like notice; provided that notice of a change
of address shall be effective only upon receipt thereof:
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<PAGE>
If to a Cash Equity Investor, to:
J. W. Childs Associates, L.P.
One Federal Street
Twenty-First Floor
Boston, MA 02110
Telephone: (617) 753-1100
Facsimile: (617) 753-1101
Attention: Dana L. Schmaltz
With a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street
Boston, MA 02108
Facsimile: (617) 573-4822
Telephone: (617) 573-4800
Attention: Louis Goodman
If to the Company, to it:
Dobson Communications Corporation
13439 N. Broadway Extension
Suite 200
Oklahoma City, OK 73114
Facsimile: (405) 391-8515
Telephone: (405) 391-8305
Attention: Everett R. Dobson, President
With a copy to the Company at the same address to:
Attention: Ron Ripley, Senior Corporate Counsel
Facsimile: (405) 391-8765
Telephone: (405) 391-8500
With a further copy to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Telephone: (212) 506-2515
Facsimile: (212) 262-1910
Attention: James B. Carlson
51
<PAGE>
14.3 ENTIRE AGREEMENT; AMENDMENT; CONSENTS.
(a) This Agreement constitutes the entire agreement among the parties
with respect to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the parties or any
of them with respect to the subject matter hereof, including, without
limitation, the Former Shareholders' Agreement.
(b) No change or modification of this Agreement shall be valid,
binding or enforceable unless the same shall be in writing and signed by the
Company, the Dobson Partnership and the holders of a majority of the shares of
each class of Common Stock and Preferred Stock; PROVIDED, HOWEVER, that in the
event any party hereto shall cease to own any shares of Company Stock such party
hereto shall cease to be a party to this Agreement and the rights and
obligations of such party hereunder shall terminate.
(c) Whenever in this Agreement the consent or approval of a
Stockholder is required, except as expressly provided herein, such consent or
approval may be given or withheld in the sole and absolute discretion of each
Stockholder.
14.4 TERM.
(a) This Agreement shall terminate upon the earliest to occur of any
of the following events and provided that no Subordinated Put Notes are
outstanding:
(i) The consent in writing of all of the parties hereto; or
(ii) The expiration of twelve (12) years from the date of
execution and delivery of this Agreement; or
(iii) One Stockholder shall Beneficially Own all of the Common
Stock.
(b) In the event that JWC shall Beneficially Own less than 35% of
shares of Common Stock or Class E Preferred Stock received from conversion of
the original Class D Preferred Stock investment (in each case on an
"as-if-converted" basis) Beneficially Owned by JWC on the date hereof, the
provisions of Section 3.1(a)(i) shall terminate. In the event the provisions
of either Section 3.1(a)(i) is terminated pursuant to this Section 14.3(b),
the director designated by JWC pursuant to Section (i), shall resign (or the
other directors or Stockholders shall remove such director from the Board of
Directors) and the remaining directors shall take such action so that the
number of directors constituting the entire Board of Directors is accordingly
reduced.
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<PAGE>
Notwithstanding anything in this Agreement to the contrary, the holder
of any Subordinated Put Note shall be entitled to all of the rights and benefits
of the Cash Equity Investors hereunder and under the Certificate of Designations
for the Class D Preferred Stock and the Investment and Transaction Agreement, as
if such holder still held the shares of Class D Preferred Stock for which such
Subordinated Put Note was issued until such Subordinated Put Note has been paid
in full.
14.5 SURVIVAL. Nothing contained in Section 14.5 shall impair any rights
or obligations of any party hereto arising prior to the time of the termination
of this Agreement, or which may arise by an event causing the termination of
this Agreement. The provisions of Article 5 shall survive any termination of
this Agreement and shall continue in full force and effect until the twentieth
anniversary of the date hereof. The provisions of Section 6.3 and Section 14
shall survive the termination of this Agreement.
14.6 WAIVER. No failure or delay on the part of any Stockholder in
exercising any right, power or privilege hereunder, nor any course of dealing
between the Company and any Stockholder shall operate as a waiver thereof nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude the simultaneous or later exercise of any other right, power or
privilege. The rights and remedies herein expressly provided are cumulative and
not exclusive of any rights and remedies which any Stockholder would otherwise
have. No notice to or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Stockholders or any of
them to take any other or further action in any circumstances without notice or
demand.
14.7 OBLIGATIONS SEVERAL. The obligations of each Stockholder under this
Agreement shall be several with respect to each such Stockholder.
14.8 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the law of the State of New York without reference to the
conflicts of law principles thereof.
14.9 DISPUTE RESOLUTION; WAIVER OF JURY TRIAL.
(a) The parties shall use and strictly adhere to the following
dispute resolution processes, except as otherwise expressly provided in this
Section 14.9, to resolve any and all disputes, controversies or claims, whether
based on contract, tort, statute, fraud, misrepresentation or any other legal or
equitable theory (hereinafter, "Dispute(s)"), arising out of or relating to this
Agreement (and any prior agreement this Agreement supersedes), including without
limitation, its making, termination, non-renewal, its alleged breach and the
subject matter of this Agreement (e.g., products or services furnished hereunder
or those related to those
53
<PAGE>
furnished):
(b) The parties shall first attempt to settle each Dispute through
good faith negotiations. The aggrieved party shall initiate such negotiations
by giving the other party(ies) written notice of the existence and nature of the
Dispute. The other party(ies) shall in a writing to the aggrieved party
acknowledge such notice of Dispute within ten (10) business days. Such
acknowledgment may also set forth any Dispute that the acknowledging party
desires to have resolved in accordance with this Section.
(c) Thereafter, if any Dispute is not resolved by the parties through
negotiation within thirty (30) calendar days of the date of the notice of
acknowledgment, either party may terminate informal negotiations with respect to
that Dispute and have the right, by delivery of written notice thereof (the
"Arbitration Notice") to the other party, to submit the matter to be finally
settled by arbitration in accordance with the Commercial Arbitration Rules then
in effect of the American Arbitration Association, as modified herein (the "AAA
Rules"). The place of arbitration shall be Oklahoma City, Oklahoma. All
matters so submitted to arbitration shall be settled by three arbitrators. JWC
and the Company shall each designate one arbitrator within 20 days of the
delivery of the Arbitration Notice. If either JWC or the Company fails so to
timely designate an arbitrator, the matter shall be resolved by the one
arbitrator timely designated. JWC and the Company shall cause the designated
arbitrators to mutually agree upon and to designate a third arbitrator,
provided, however, that failing such agreement within 45 days of delivery of the
Arbitration Notice, the third arbitrator shall be appointed in accordance with
the AAA Rules. JWC and the Company shall be responsible for the payment of the
fees and expenses of their respectively designated arbitrators and shall bear
equally the fees and expenses of the third arbitrator. JWC and the Company
shall cause the arbitrators to decide the matter to be arbitrated pursuant
hereto within 60 days after the appointment of the last arbitrator. The
arbitral tribunal is not empowered to award damages in excess of compensatory
damages and each party hereby irrevocably waives any right to recover punitive,
exemplary or similar damages with respect to any Dispute. The final decision of
the majority of the arbitrators shall be furnished to JWC, the Company and each
of the Stockholders in writing and shall constitute a conclusive determination
of the matter in question, binding upon JWC, the Company and the Stockholders
and shall not be contested by any of them. Such decision may be used in a court
of law only for the purpose of seeking enforcement of the arbitrators' award.
Any arbitration proceeding, decision or award rendered hereunder and the
validity, effect and interpretation of this arbitration agreement shall be
governed by the Federal Arbitration Act, 9 U.S.C. Sections 1-16, and judgment
upon any award may be entered in any court of competent jurisdiction.
(d) The Company and each of the Stockholders hereby irrevocably
consents to the exclusive jurisdiction of the state or federal courts in the
State of New York, and all state or federal courts competent to hear appeals
therefrom, over any actions which may be commenced
54
<PAGE>
against any of them under or in connection with this Agreement. The Company
and each Stockholder hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which any of them may now or
hereafter have to the laying of venue of any such dispute brought in such
court or any defense of inconvenient forum for the maintenance of such
dispute in the Southern District of New York and New York County. The Company
and each Stockholder hereby agree that a judgment in any such dispute may be
enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. The Company and each Stockholder hereby consent to
process being served by any party to this Agreement in any actions by the
transmittal of a copy thereof in accordance with the provisions of Section 14.2.
14.10 BENEFIT AND BINDING EFFECT; SEVERABILITY. This Agreement shall be
binding upon and shall inure to the benefit of the Company, its successors and
assigns, and each of the Stockholders and their respective executors,
administrators and personal representatives and heirs and permitted assigns. If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced by any law or public policy or any listing requirement
applicable to the Common Stock, all other terms and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto affected by such determination in any material respect shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the provisions hereof are given effect as originally contemplated to the
greatest extent possible.
14.11 AMENDMENT OF BY-LAWS. The Stockholders agree that the terms of
this Agreement shall supersede any inconsistent provision that is contained in
the Restated By-Laws and, to the extent required by Oklahoma law or the Restated
By-Laws, this Agreement shall be deemed to constitute a written action taken by
the Stockholders of the Company and shall be deemed an amendment of the Restated
By-Laws.
14.12 FCC AND REGULATORY APPROVALS. Notwithstanding anything contained
in this Agreement to the contrary, no transaction or action contemplated herein
shall be consummated and no interests or rights transferred, converted or
exchanged prior to receiving FCC approvals with respect thereto to the extent
such FCC approvals are necessary.
14.13 EXPENSES. The Company shall pay the reasonable fees and expenses
of counsel and accountants to the Stockholders incurred in connection with the
preparation, negotiation and execution of this Agreement and of any amendment or
modification hereof. Except as provided in Section 14.14, all other attorneys'
fees incurred by the Stockholders in connection with this Agreement (including,
without limitation, in the preparation of notices (and responses thereto) and
consents) shall be borne by the Stockholder(s) incurring such fees.
14.14 ATTORNEYS' FEES. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision
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<PAGE>
hereof is validly asserted as a defense, the successful party shall be
entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
14.15 HEADINGS. The captions in this Agreement are for convenience
only and shall not be considered a part of or affect the construction or
interpretation of any provision of this Agreement.
14.16 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has executed or consent this
Agreement to be executed by its duly authorized officers as of the date first
written above.
COMPANY:
DOBSON COMMUNICATIONS CORPORATION
By: /s/ Everett Dobson
--------------------------
Name: Everett Dobson
Title: President
CASH EQUITY INVESTORS:
DOBSON CC LIMITED PARTNERSHIP
By: RLD, Inc., its General Partner
By: /s/ Everett Dobson
--------------------------
Name: Everett Dobson
Title: President
DOBSON OPERATING COMPANY
By: /s/ Everett Dobson
--------------------------
Name: Everett Dobson
Title: President
<PAGE>
J.W. CHILDS EQUITY PARTNERS II, L.P.
By: J.W. Childs Advisors II, L.P.,
its general partner
By: J.W. Childs Associates, L.P.,
its general partner
By: J.W. Childs Associates, Inc.,
its general partner
By: /s/ Dana L. Schmaltz
--------------------------
Name: Dana L. Schmaltz
Title: Vice President
/s/ Dana L. Schmaltz
-----------------------------
Dana L. Schmaltz, as agent and attorney-in-fact
for the JWC Group Stockholders under Purchaser
Appointment of Agent and Power of Attorney
and not in his individual capacity
<PAGE>
Schedule I
CASH EQUITY INVESTORS:
Dobson CC Limited Partnership
c/o Dobson Communications Corporation
13439 N. Broadway Extension
Suite 200
Oklahoma City, OK 73114
Telephone: (405) 391-8500
Attention: Senior Corporate Counsel
Dobson Operating Company
c/o Dobson Communications Corporation
13439 N. Broadway Extension
Suite 200
Oklahoma City, OK 73114
Telephone: (405) 391-8500
Attention: Senior Corporate Counsel
J.W. Childs Equity Partners II, L.P.
One Federal Street
Twenty-First Floor
Boston, MA 02110
Telephone No. (617) 753-1100
Attention: Dana Schmaltz
JWC Group Stockholders:
(See attached sheet)
<PAGE>
ATTACHMENT
JWC GROUP STOCKHOLDERS
J.W. Childs Equity Partners II, L.P.
JWC Equity Funding II, Inc.
Bock Family Trust
John W. Childs
Richard S. Childs
James E. Childs
Timothy J. Healy
Glenn A. Hopkins
Jerry D. Horn
B. Lane MacDonald
Raymond B. Rudy
Dana L. Schmaltz
Chechesse Creek Trust
Steven G. Segal
SGS 1995 Family Limited Partnership
Steven G. Segal 1995 Irrevocable Trust
SGS-III Family Limited Partnership
Adam L. Suttin
Adam L. Suttin Irrevocable Family Trust
Suttin Family Trust II
Eugene N. Suttin IRA
Edward D. Yun
Yun Family Trust
Ed Kozlowski
Jim Murphy
Rebacliff, Baker & Dobbs, LLC
Benno C. Schmidt
Mario Soussou
Bill Watts
OFS Investment Partners II
<PAGE>
Schedule II
CAPITALIZATION
Filed under Exhibit 10.8.1 Schedule 4.9.
<PAGE>
Schedule III
NEW DIRECTORS
Everett R. Dobson
Russell L. Dobson
Stephen T. Dobson
Albert W. Pharis
Dana L. Schmaltz
Justin L. Jaschke
[Initially Vacant]
<PAGE>
SCHEDULE IV
EXAMPLE: OFFER BY TAG-ALONG EVENT PURCHASER TO PURCHASE COMMON STOCK OF A
STOCKHOLDER 1 YEAR AFTER CLOSING
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Shares of Common Stock to be Purchased Under Tag-Along Event 100,000.0
Total Common Equity Valuation $ 1,000,000,000
Total Shares of Common Stock Equivalents Outstanding 595,981.7
Total Value Allocations of
to Calculate JWC 100,000
Class A Common Stock(1) Class E Preferred Stock Allocation of Shares to be
----------------------- -------------------------- Tag-Along Stock Sold if All
Shares Value(2) Shares Value(3) as per Section 4.2 Investors Tag(4)
------ ----- ------ ----- ------------------ ----------------
DCC LP 474,921.8 $ 796,873,125 3,533.8 $ 4,599,972 $ - 70,961.8
R. Dobson 3,154.0 5,292,109 - - - 471.3
Mgmt Options 28,934.0 48,548,471 - - - 4,323.3
JWC 88,971.9 149,286,295 71,559.9 93,150,028 242,436,323 24,243.6
--------- -------------- -------- ----------- --------------- ---------
595,981.7 $1,000,000,000 75,093.7 $97,750,000 $ 1,000,000,000 100,000.0
</TABLE>
- --------------------
(1) CALCULATED ON AN AS-IF CONVERTED BASIS FOR THE SERIES D PREFERRED STOCK
(2) HYPOTHETICAL COMMON EQUITY VALUE FOR PURPOSES OF ILLUSTRATION.
(3) ESTIMATED AT $85.0 MILLION OF SERIES D PREFERRED OUTSTANDING FOR ONE YEAR
WITH 15% ACCRUED DIVIDENDS.
(4) FORMULA FOR JWC REPRESENTS TOTAL SHARES TO BE SOLD UNDER TAG-ALONG EVENT
MULTIPLIED BY A FRACTION EQUAL TO (X) THE VALUE OF JWC'S COMMON STOCK
PLUS THE VALUE OF JWC'S CLASS E PREFERRED STOCK DIVIDED BY (Y) THE TOTAL
VALUE OF THE COMMON STOCK. ALLOCATIONS OF THE TAG-ALONG SHARES NOT
ALLOCATED TO JWC SHALL BE OFFERED PRO RATA BASED ON COMMON STOCK
OWNERSHIP OF THE NON-JWC STOCKHOLDERS.
<PAGE>
SCHEDULE V
EXAMPLE: CALL EXERCISED IN YEAR 5, PRIOR TO SPIN-OFF OF LOGIX COMMUNICATIONS,
NO SALES BY STOCKHOLDERS
<TABLE>
<CAPTION>
<S> <C>
Original Purchase Price for Series D Preferred/Equity Investor Package: $ 85,000,000
Multiple of Original Purchase Price in Year 5 4.0x
---------------
Valuation for Calculating the Clawback Exercise Price $ 340,000,000
Amount of Equity Investor Package Subject to Call 35.00%
---------------
Clawback Exercise Price $ 119,000.000
EXAMPLE: CALL EXERCISED IN YEAR 5, AFTER SPIN-OFF OF LOGIX COMMUNICATIONS,
STOCKHOLDERS HAVE SOLD 80% OF LOGIX STOCK
Original Purchase Price for Series D Preferred/Equity Investor Package $ 85,000,000
Multiple of Original Purchase Price in Year 5 4.0x
---------------
Valuation for Calculating the Clawback Exercise Price $ 340,000,000
Amount of Equity Investor Package Subject to Call 35.00%
---------------
Clawback Exercise Price Pre-Credit $ 119,000,000
% of Logix Communications Stock Sold by Stockholders 80.00%
Sales by Stockholders of Final 35% of Logix Communications Stock 15.00%
Net Proceeds Realized on Sale of Such 15.00% of Logix
Communications Stock $ 20,000,000
Clawback Exercise Price Pre-Credit $ 119,000,000
Amount of Credit from Sales of Logix Communications Stock (20,000,000)
---------------
Clawback Exercise Price $ 99,000,000
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>
SECTION PAGE
- ------- ----
<S> <C>
ARTICLE 1. Definitions
1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 2. Stockholder Approval
2.1 Organizational Documents. . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Approval of Stock Option Plans. . . . . . . . . . . . . . . . . . . . . . 13
2.3 Logix Communications Spin-Off . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 3. Management of the Company
3.1 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Removal; Filling of Vacancies . . . . . . . . . . . . . . . . . . . . . . 15
3.3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.4 Compensation and Reimbursement. . . . . . . . . . . . . . . . . . . . . . 15
3.5 Business of the Company . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.6 Required Votes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.7 Transactions between the Company and the Stockholders or their
Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.8 Board Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.9 Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 4. Transfers of Shares
i
<PAGE>
4.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.2 Tag-Along Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.3 Additional Conditions to Permitted Transfers. . . . . . . . . . . . . . . 20
4.4 Stop-Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.5 Drag Along Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.6 Redemption Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.7 Right of First Refusal for New Securities; Capital Raising. . . . . . . . 21
ARTICLE 5. Registration Rights
(a) Demand Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Piggyback Registration Rights . . . . . . . . . . . . . . . . . . . . . . 24
(c) Selection of Underwriters . . . . . . . . . . . . . . . . . . . . . . . . 25
(d) Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . 25
(e) Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(f) Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(g) Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(h) Participation in Underwritten Registrations . . . . . . . . . . . . . . . 34
(i) Holdback Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(j) Public Information Reporting. . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE 6. Additional Rights and Covenants
6.1 Wholly-Owned Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 35
6.2 Amendments of the Restated Certificate and By-Laws. . . . . . . . . . . . 36
6.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.4 JWC Sale of Logix Communications Stock. . . . . . . . . . . . . . . . . . 36
6.5 Class Protection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.6 New Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.7 Logix Communications Spin-off . . . . . . . . . . . . . . . . . . . . . . 38
6.8 Regulation M. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.9 Pooling of Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ii
<PAGE>
6.10 Other Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.11 Class A Preferred Stock Transfer Restriction. . . . . . . . . . . . . . . 39
ARTICLE 7.
Exclusivity
7.1 Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 8. After-Acquired Shares; Recapitalization
8.1 After Acquired Shares; Recapitalization . . . . . . . . . . . . . . . . . 39
8.2 Amendment of Restated Certificate . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 9. Share Certificates
9.1 Restrictive Endorsements; Replacement Certificates. . . . . . . . . . . . 40
ARTICLE 10.
Equitable Relief
10.1 Equitable Relief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 11.
Stockholder Call Right
11.1 Stockholder Call Right. . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE 12. Class D and Class E Preferred Stock Put Right
iii
<PAGE>
12.1 Right to Put. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
12.2 Payment; Restrictions on Payment. . . . . . . . . . . . . . . . . . . . . 43
12.3 Restrictions on Payments by the Company . . . . . . . . . . . . . . . . . 44
12.4 Payment of Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
12.5 Financing Agreements; Indebtedness. . . . . . . . . . . . . . . . . . . 44
ARTICLE 13. Company Call Right
13.1 Company Right to Call Against Cash Equity Investors . . . . . . . . . . . 45
13.2 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
13.3 Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE 14. Miscellaneous
14.1 JWC Group Stockholder Representative. . . . . . . . . . . . . . . . . . . 46
14.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
14.3 Entire Agreement; Amendment; Consents . . . . . . . . . . . . . . . . . . 48
14.4 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
14.5 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.6 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.7 Obligations Several . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
14.9 Dispute Resolution; WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . 49
14.10 Benefit and Binding Effect; Severability. . . . . . . . . . . . . . . . . 51
14.11 Amendment of By-Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
14.12 FCC and Regulatory Approvals. . . . . . . . . . . . . . . . . . . . . . . 51
14.13 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
14.14 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
14.15 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
14.16 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
</TABLE>
iv
<PAGE>
SCHEDULES
Schedule I -- Cash Equity Investors
Schedule II -- Capitalization
Schedule III -- New Directors
Schedule IV -- Tag Along Exercise Illustrative Calculation
Schedule V -- Stock Call Rights Illustrative Calculation
EXHIBITS
Exhibit A -- Form of Restated Certificate
Exhibit B-1 -- Form of Class A Preferred Stock Certificate of
Designation
Exhibit B-2 -- Form of Class D Preferred Stock Certificate of
Designation
Exhibit B-3 -- Form of Class E Preferred Stock Certificate of
Designation
Exhibit B-4 -- Form of Class F Preferred Stock Certificate of
Designation
Exhibit B-5 -- Form of Class G Preferred Stock Certificate of
Designation
Exhibit B-6 -- Form of Class H Preferred Stock Certificate of
Designation
Exhibit C -- Form of Restated By-Laws
Exhibit D -- Form of Subordinated Put Note
Exhibit E -- Logix Spin-Off Dilution Protection Example
v
<PAGE>
INVESTORS AGREEMENT
INVESTORS AGREEMENT (the "Agreement"), dated as of December 23, 1998,
between Dobson Communications Corporation, an Oklahoma corporation (together
with any successors and assigns, the "Company"), Dobson CC Limited Partnership,
an Oklahoma limited partnership (the "Partnership"), and the investors
designated as Purchasers on the signature page hereto (individually, a
"Purchaser" and collectively, the "Purchasers").
WHEREAS, each Purchaser has executed a Subscription Agreement, dated as of
December 23, 1998, pursuant to which the Purchasers have subscribed for the
purchase of an aggregate of 30,000 Units, each Unit consisting of one share of
the Company's Class F Preferred Stock, par value $1.00 per share (the "Preferred
Stock"), and one common stock purchase warrant (each a "Warrant" and
collectively, the "Warrants") for the purchase of shares of the Company's Class
A common stock, par value $.001 per share (the "Common Stock") (the Common Stock
issuable upon exercise of the Warrants being referred to herein as the "Warrant
Shares");
WHEREAS, the Company has agreed to amend its certificate of incorporation
(the "Certificate of Incorporation") and to file a certificate of designation
for the Preferred Stock (the "Certificate of Designation") with the office of
the Secretary of State of Oklahoma in order to reflect, among other things, the
authorization of the Preferred Stock; and
WHEREAS, the Company, the Partnership and the Purchasers desire to enter
into this Agreement to set forth, among other things, certain agreements with
respect to the Preferred Stock, Warrants and Warrant Shares, including, without
limitation, the terms and conditions on which they may be transferred;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
ARTICLE I
GENERAL PROVISIONS REGARDING
PREFERRED STOCK, WARRANTS, AND WARRANT SHARES
I.1 TERMS OF PREFERRED STOCK; CERTIFICATE OF DESIGNATION. The
Certificate of Designation for the Preferred Stock to be filed with the office
of the Secretary of State of
<PAGE>
Oklahoma shall be in the form, and contain the terms and provisions, as set
forth in the form of Certificate of Designation which is attached hereto as
Exhibit A.
I.2 PREFERRED STOCK CERTIFICATE. The Company will issue and deliver a
certificate or certificates ("Preferred Stock Certificate") to each Purchaser
which shall evidence the number of shares of Preferred Stock purchased by each
Purchaser ("Preferred Stock Certificate"). Each Preferred Stock Certificate
shall be in registered form only and shall be dated the date of issuance by the
Company.
I.3 WARRANT CERTIFICATE. The Company will issue and deliver to each
Purchaser a certificate or certificates (the "Warrant Certificates") evidencing
the number of Warrants purchased pursuant to the Subscription Agreement which
shall be substantially in the form of the Warrant Certificate attached as
Exhibit B hereto). Each Warrant Certificate shall be in registered form only
and shall be dated the date of issuance by the Company.
I.4 RESTRICTIVE LEGENDS. Each Preferred Stock Certificate, each Warrant
Certificate and, if applicable, each certificate evidencing Warrant Shares shall
bear the following legend, or contain words of similar import:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE 'ACT'), OR UNDER ANY STATE SECURITIES OR 'BLUE
SKY' LAWS. SAID SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, UNLESS AND UNTIL
REGISTERED UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER AND
ALL APPLICABLE STATE SECURITIES OR 'BLUE SKY' LAWS OR EXEMPTED
THEREFROM UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES OR 'BLUE
SKY' LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO AN
INVESTORS AGREEMENT DATED AS OF DECEMBER 23, 1998, A COPY OF WHICH IS
ON FILE AT THE OFFICES OF THE COMPANY AND WILL BE FURNISHED BY THE
COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST. SUCH AGREEMENT
PROVIDES, AMONG OTHER THINGS, FOR CERTAIN RIGHTS TO SELL THE
SECURITIES REPRESENTED BY THIS CERTIFICATE, AND THAT UNDER CERTAIN
CIRCUMSTANCES, THE HOLDER HEREOF MAY BE REQUIRED TO SELL THE
SECURITIES REPRESENTED BY THIS CERTIFICATE. BY ACCEPTANCE OF THIS
CERTIFICATE, EACH HOLDER HEREOF AGREES TO BE BOUND BY THE PROVISIONS
OF SUCH AGREEMENT. THE COMPANY RESERVES THE RIGHT TO REFUSE
<PAGE>
TO TRANSFER THE SECURITIES REPRESENTED BY THIS CERTIFICATE UNLESS AND UNTIL
THE CONDITIONS TO TRANSFER THE SECURITIES REPRESENTED BY THIS CERTIFICATE
SET FORTH IN SUCH AGREEMENT HAVE BEEN FULFILLED."
I.5 DISTRIBUTION OF LOGIX. The Purchasers have been advised that the
Company intends to distribute all of the outstanding capital stock of Logix
Communications Enterprises, Inc. ("Logix") to and among certain holders of the
Company's outstanding capital stock. The Purchasers acknowledge and agree that
holders of the Preferred Stock and unexercised Warrants will not participate in
the Company's distribution of the Logix capital stock.
I.6 PAYMENT OF TAXES. The Company will pay all documentary stamp taxes
and other governmental charges (excluding all foreign, federal or state income,
franchise, property, estate, inheritance, gift or similar taxes) in connection
with the issuance or delivery of the Preferred Stock, the Warrants and the
Warrant Shares hereunder. The Company shall not, however, be required to pay
any tax that may be payable in respect of any subsequent transfer of the
Preferred Stock, the Warrants and the Warrant Shares or any transfer involved in
the issuance and delivery of Warrant Shares in a name other than that in which
the Warrants to which such issuance relates were registered, and, if any such
tax would otherwise be payable by the Company, no such issuance or delivery
shall be made unless and until the person requesting such issuance has paid to
the Company the amount of any such tax, or it is established to the reasonable
satisfaction of the Company that any such tax has been paid.
I.7 RESERVATION OF WARRANT SHARES. The Company shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock or its authorized and issued Common
Stock held in its treasury, for the purpose of enabling it to satisfy any
obligation to issue Warrant Shares upon exercise of Warrants, the maximum number
of shares of Common Stock which may then be deliverable upon the exercise of all
outstanding Warrants.
ARTICLE II
PARTICIPATION RIGHTS
II.1 TAG-ALONG RIGHTS.
II.1.1 Subject to Section 2.1.5, the Partnership agrees that it
shall not, directly or indirectly, transfer, in any single transaction or series
of related transactions, to one or more persons who are not Affiliated
Successors of the
<PAGE>
Partnership (each such person a "Tag-Along Event Purchaser") shares of Common
Stock (a "Tag-Along Event") representing 50% or more of the Partnership's total
shares of Common Stock, unless the terms and conditions of such sale to such
Tag-Along Event Purchaser shall include an offer to each holder of Warrant
Shares ("Tag-Along Stock") other than the Partnership (each, a "Tag-Along Event
Offeree") to transfer to such Tag-Along Event Purchaser up to that number of
shares of Tag-Along Stock then beneficially owned by each Tag-Along Event
Offeree that bears the same proportion to the total number of shares of
Tag-Along Stock at that time beneficially owned (without duplication) by each
such Tag-Along Event Offeree as the number of the shares of Common Stock being
transferred by the Partnership (including shares theretofore transferred if in
any applicable series of related transactions) bears to the total number of
shares of Common Stock at the time beneficially owned (without duplication) by
the Partnership.
"Affiliated Successor" means any affiliate (as defined in Rule 501(b) of
Regulation D adopted under the Securities Act of 1933) of the Partnership that
is a transferee or a successor in interest to any or all of the Partnership's
Common Stock and also includes partners of the Partnership that are transferees
of Common Stock by the Partnership. An Affiliated Successor shall be required
to become a party to this Agreement in accordance with Section 4.7 hereof. For
purposes of this Agreement, the term "Partnership" shall be deemed to include
the Affiliated Successors, as an entirety.
If, at any time prior to Company's initial offering of its Common Stock
registered pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), in which the Company receives gross proceeds of at least $50 million (an
"IPO") the Partnership receives a bona fide offer from a Tag-Along Event
Purchaser to purchase shares of Common Stock in circumstances in which, after
giving effect to such sales would result in a Tag-Along Event, and which offer
the Partnership wishes to accept, the Partnership shall then cause the Tag-Along
Event Purchaser's offer to be reduced to writing (which writing shall include an
offer to purchase shares of Tag-Along Stock from each Tag-Along Event Offeree
according to the terms and conditions set forth in this Section 2.1) and the
Partnership shall send written notice of the Tag-Along Event Purchaser's offer
(the "Tag-Along Notice") to each Tag-Along Event Offeree, which Tag-Along Notice
shall specify (i) the name and address of the Tag-Along Event Purchaser (ii) the
amount of shares proposed to be transferred and the price, form of consideration
and other terms and conditions of such transfer (including, if in a series of
related transactions, such information with respect to shares of Common Stock
theretofore transferred), (iii) that the Tag-Along Event Purchaser has been
informed of the rights provided for in this Section 2.1 and has agreed to
purchase shares of Tag-Along
<PAGE>
Stock in accordance with the terms hereof, and (iv) the date by which each
Tag-Along Event Offeree may exercise its respective rights contained in this
Section 2.1, which date shall not be less than thirty (30) days after the giving
of the Tag-Along Notice. The Tag-Along Notice shall be accompanied by a true
and correct copy of the Tag-Along Event Purchaser's offer. At any time within
thirty (30) days after receipt of the Tag-Along Notice (or within such longer
period as may be provided for in the Tag-Along Notice), each Tag-Along Event
Offeree may accept the offer included in the Tag-Along Notice for up to such
number of shares of Tag-Along Stock as is determined in accordance with this
Section 2.1, by furnishing written notice of such acceptance to the Partnership,
and delivering to an escrow agent (which shall be a bank or a law or accounting
firm designated by the Company) the certificate or certificates representing the
shares of Tag-Along Stock to be sold pursuant to such offer by each Tag-Along
Event Offeree, duly endorsed in blank, together with a limited power-of-attorney
authorizing the escrow agent, on behalf of the Tag-Along Event Offeree, to sell
the shares to be sold pursuant to the terms of such Tag-Along Event Purchaser's
offer.
In the event that the Tag-Along Event Purchaser does not agree to purchase
all of the shares of Common Stock proposed to be sold by the Partnership and
Tag-Along Stock proposed to be sold by the Tag-Along Event Offerees, then the
Partnership and each Tag-Along Event Offeree shall have the right to sell to the
Tag-Along Event Purchaser that number of shares of Common Stock and Tag-Along
Stock, respectively, as shall be equal to (x) the number of shares of the
relevant Common Stock which the Tag-Along Event Purchaser has agreed to purchase
times (y) a fraction, the numerator of which is the number of shares of
Tag-Along Stock at that time beneficially owned (without duplication) by each
such Tag-Along Event Offeree and the denominator of which is the total Common
Stock owned by the Partnership plus the total Tag-Along Stock owned by each
Purchaser, in the aggregate, as of the date of the Tag-Along Notice.
If any Tag-Along Event Offeree desires to sell less than the amount of
shares of Tag-Along Stock that it is entitled to sell pursuant to this Section
2.1, then the Partnership and the remaining Tag-Along Event Offerees shall have
the right to sell to the Tag-Along Event Purchaser an additional amount of
shares of Common Stock and Tag-Along Stock, respectively, as shall be equal to
(x) the number of shares of Tag-Along Stock not being sold by any such Tag-Along
Event Offeree times (y) a fraction, the numerator of which is the number of
shares of the Common Stock or Tag-Along Stock, as the case may be, beneficially
owned (without duplication) by the Partnership or remaining Tag-Along Event
Offeree and the denominator of which is the aggregate number of shares of the
Common Stock and Tag-
<PAGE>
Along Stock beneficially owned (without duplication) by the Partnership and all
remaining Tag-Along Event Offerees in the aggregate. Such process shall be
repeated in series until the Partnership and all of the remaining Tag-Along
Event Offerees agree to sell their remaining proportionate number of shares of
Tag-Along Stock.
II.1.2 The purchase from each Tag-Along Event Offeree pursuant to
this Section 2.1 shall be on the same terms and conditions, including the price
per share received by the Partnership and stated in the Tag-Along Notice
provided to each Tag-Along Event Offeree. All Tag-Along Event Offerees shall be
required, as a condition of participating in such transaction, to convert all
Warrants into Warrant Shares and transfer Common Stock to the Tag-Along Event
Purchaser at the closing.
II.1.3 Simultaneously with the consummation of the sale of the
shares of Common Stock of the Partnership and shares of Tag-Along Stock of each
Tag-Along Event Offeree to the Tag-Along Event Purchaser pursuant to the
Tag-Along Event Purchaser's offer, the Partnership shall notify each Tag-Along
Event Offeree and shall cause the Tag-Along Event Purchaser to remit to each
Tag-Along Event Offeree the total sales price of the shares of Tag-Along Stock
held by each Tag-Along Event Offeree sold pursuant thereto and shall furnish
such other evidence of the completion and time of completion of such sale and
the terms thereof as may be reasonably requested by each Tag-Along Event
Offeree.
II.1.4 If within thirty (30) days after receipt of the Tag-Along
Notice, a Tag-Along Event Offeree has not accepted the offer contained in the
Tag-Along Notice, such Tag-Along Event Offeree shall be deemed to have waived
any and all rights with respect to the sale described in the Tag-Along Notice
and the Partnership shall have sixty (60) days in which to sell not more than
the number of shares of Common Stock described in the Tag-Along Notice, on terms
not more favorable to the Partnership than were set forth in the Tag-Along
Notice; provided, however, that if such purchase is subject to the consent of
the Federal Communications Commission or any public service or public utilities
commission, the purchase of the Common Stock shall be closed on the first
business day after all such consents shall have been obtained by final order.
II.1.5 After the IPO, the Purchasers' rights to participate in any
subsequent sale of Common Stock by the Partnership shall terminate.
II.2 DRAG ALONG RIGHTS. If at any time the Board of Directors shall
approve the sale or exchange (in a business combination or otherwise) by holders
of Common Stock in a bona fide arm's-length transaction to a third party
pursuant to an
<PAGE>
agreement (i) in which the same price per share shall be payable in respect of
all shares of Common Stock, (ii) which shall have been approved by the Board of
Directors as fair to all stockholders, and (iii) which shall have been approved
by stockholders holding two-thirds of the total shares of the Company determined
as of the date of such approval, then, upon the written request of the Company,
each Purchaser shall be obligated to, and shall, if so requested by such third
party, (a) exercise all Warrants and sell, transfer and deliver or cause to be
sold, transferred and delivered to such third party, all Warrant Shares owned by
such Purchaser, and (b) if approval by the Purchasers of the transaction is
required, vote his, her or its shares of Common Stock in favor thereof. After
the IPO, the Company's rights under this Section 2.2 shall terminate.
ARTICLE III
REGISTRATION RIGHTS
III.1 SHELF REGISTRATION.
(i) COMPANY OBLIGATION. The Company shall, on or prior to the
180th day following the date on which the Purchasers first acquired the
Preferred Stock and Warrants (such date of acquisition herein referred to as the
"Closing Date"), file with the Securities and Exchange Commission (the
"Commission") a registration statement under the Securities Act, (a "Shelf
Registration Statement") relating to the offer and sale of the Preferred Stock,
the Warrants and the Warrant Shares by the Purchasers from time to time in
accordance with the methods of distribution elected by such Purchasers and set
forth in such Shelf Registration Statement and Rule 415 under the Securities
Act. (All such Warrants and Preferred Stock owned by the Purchasers on the
Closing Date, and all Warrant Shares thereafter acquired by such Purchasers
pursuant to the exercise of such Warrants shall be collectively referred to
herein as the "Registrable Securities".)
(ii) EFFECTIVENESS. The Company shall use its best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act as promptly as possible after filing thereof, and, in any case,
on or before the 360th day after the Closing Date, and to keep such Shelf
Registration Statement continuously effective in order to permit the prospectus
(the "Prospectus") contained therein to be usable by Purchasers for a period of
three years from the effective date of the Shelf Registration Statement or such
shorter period that will terminate when (x) all the Registrable Securities
covered by the Shelf Registration Statement have been sold by the initial
holders thereof or (y) when all Registrable Securities covered by the Shelf
Registration Statement shall become eligible for sale by the initial holders
thereof during
<PAGE>
any three month period pursuant to Rule 144 adopted pursuant to the Securities
Act, or any successor provision (in any such case, such period being called the
"Shelf Registration Period").
(iii) PENALTY. If the Shelf Registration Statement is not declared
effective by the Commission on or prior to December 31, 2001, the dividend rate
on the Preferred Stock held by any Purchaser shall increase by .5% per annum,
payable in cash or additional shares of Preferred Stock, in accordance with the
Certificates of Designation, until such Registration Statement is declared
effective.
III.2 PIGGYBACK REGISTRATION RIGHTS.
(i) RIGHT TO PIGGYBACK. If at any time the Company proposes to
register any shares of Common Stock (or securities convertible into or
exchangeable for Common Stock) with the Commission under the Securities Act
(other than a Registration on Form S-4 or Form S-8, or any successor forms), and
the registration form to be used may be used for the Registration of the Warrant
Shares (a "Piggyback Registration"), the Company will give written notice (a
"Piggyback Notice") to all holders of Warrants and Warrant Shares, at least
thirty (30) days prior to the anticipated filing date, of its intention to
effect such a Registration, which notice will specify the proposed offering
price (if determined at that time), the kind and number of securities proposed
to be registered, the distribution arrangements and will, subject to Section
3.2(b)(ii), include in such Piggyback Registration all Warrant Shares with
respect to which the Company has received written requests (which requests have
not been withdrawn) for inclusion therein within twenty (20) days after the last
date such Piggyback Notice was deemed to have been given pursuant to Article IV.
If at any time after giving the Piggyback Notice and prior to the effective date
of the Registration Statement filed in connection with such registration, the
Company determines for any reason not to register or to delay registration, the
Company may, at its election, give written notice of such determination to each
holder of Warrant Shares that has requested inclusion of Warrant Shares in such
Registration Statement and
(A) in the case of a determination not to register, shall be
relieved of its obligation to register any Warrant Shares,
and
(B) in the case of a determination to delay registering, shall be
permitted to delay registering any Warrant Shares for the
same period as the delay in registering such other
securities,
<PAGE>
PROVIDED, HOWEVER, no holder of Warrants or Warrant Shares shall be entitled to
Piggyback Registration in connection with any IPO which does not include any
other selling shareholder; PROVIDED FURTHER, that no holder of Warrants or
Warrant Shares shall be entitled to Piggyback Registration on a demand
registration initiated by J.W. Childs Equity Partners II, L.P., or any affiliate
thereof ("JWC").
(ii) PRIORITY ON PIGGYBACK REGISTRATIONS. If the managing
underwriter or underwriters, if any, advise the Company and the holders of
Registrable Securities in writing that in its or their opinion, that the number
securities proposed to be sold in such registration (including Registrable
Securities to be included pursuant to Section 3.2(i)) exceeds the number that
can be sold in such offering without
(A) creating a substantial risk that the proceeds or price per
share the Company will derive from such registration will be
reduced, or that the number of shares to be registered is too
large a number to be reasonably sold or
(B) materially and adversely affecting such registration in any
other respect, without any reduction in the amount of
securities the Company proposes to issue and sell for its own
account or in the amount of securities any other security
holder proposes to sell for its own account pursuant to a
demand registration right,
the number of Registrable Securities to be registered for each selling holder
shall be reduced FIRSTLY, against the Partnership and the holders of Registrable
Securities on a PRO RATA BASIS, and LASTLY, against JWC, based on the amount of
securities each of them requested to be included in such registration, to the
extent necessary to reduce the number of Registrable Securities to be registered
to the number recommended by the managing underwriter or determined by the
Company after consultation with its investment banker (notification of which
number shall be given by the Company to the holders of Registrable Securities of
such determination).
III.3 REGISTRATION PROCEDURES. Subject to Sections 3.1(i) and 3.1(ii) and
Sections 3.2(i) and 3.2(ii), with respect to any registration the Company shall,
(i) cooperate and assist in any filings required to be made with
the NASD and use its reasonable best efforts to cause such Registration
Statement to become and (to the extent provided herein) remain effective;
PROVIDED, HOWEVER, that
<PAGE>
before filing a Registration Statement or Prospectus or any amendments or
supplements thereto, the Company shall furnish to counsel to the holders of the
Registrable Securities covered by such Registration Statement copies of all such
documents proposed to be filed, which documents will be subject to the
reasonable review of such holders and their counsel, and the Company shall not
file any Registration Statement or amendment thereto or any Prospectus or any
supplement thereto to which the holders of a majority of the Registrable
Securities covered by such Registration Statement shall reasonably object in
writing;
(ii) prepare and file with the Commission such amendments and
supplements to the Shelf Registration Statement as may be necessary to keep each
such Registration Statement effective during the Shelf Registration Period
provided in Section 3.1(ii); cause each Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by the
Shelf Registration Statement during the Shelf Registration Period in accordance
with the intended method or methods of distribution by the sellers thereof set
forth in such Registration Statement or supplement to the Prospectus;
(iii) promptly notify the selling holders of Registrable Securities
(A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with
respect to the Registration Statement or any
post-effective amendment, when the same has become
effective;
(B) of any request by the Commission for amendments or
supplements to the Registration Statement or the
Prospectus or for additional information;
(C) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for
that purpose;
(D) if at any time the representations and warranties of
the Company contemplated by subsection (xii) of this
Section 3.3 below cease to be true and correct;
<PAGE>
(E) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the
Registrable Securities for sale under the securities
or blue sky laws of any jurisdiction or the initiation
or threatening of any proceeding for such purpose; and
(F) of the happening of any event which makes any
statement made in the Registration Statement, the
Prospectus or any document incorporated therein by
reference untrue or which requires the making of any
changes in the Registration Statement, the Prospectus
or any document incorporated therein by reference in
order to make the statements therein not misleading;
(iv) use its reasonable best efforts to obtain the withdrawal of
any order suspending the effectiveness of
(A) the Registration Statement, or
(B) the qualification of the Registrable Securities for
sale under the securities or blue sky laws of any
jurisdiction at the earliest possible time;
(v) if requested by holders of a majority of the Registrable
Securities being sold in connection with an underwritten offering, promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters and the holders of a majority of the
Registrable Securities being sold agree should be included therein relating to
the plan of distribution with respect to such Registrable Securities, including,
without limitation, information with respect to the number of Registrable
Securities being sold to such underwriters, the purchase price being paid
therefor by such underwriters and any other terms of the underwritten (or best
efforts underwritten) offering of the Registrable Securities to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as soon as notified of the matters to be incorporated
in such Prospectus supplement or post-effective amendment;
(vi) deliver to each selling holder of Registrable Securities,
without charge, as many copies of the Prospectus (including each preliminary
Prospectus) and any amendment or supplement thereto as such selling holder of
<PAGE>
Registrable Securities may reasonably request in order to facilitate the public
sale or other disposition of the securities owned by such selling holder;
(vii) prior to any public offering of Registrable Securities, use
its reasonable best efforts to register or qualify or cooperate with the selling
holders of Registrable Securities, and their respective counsel, in connection
with the Registration or qualification of such Registrable Securities for offer
and sale under the securities or "blue sky" laws of such jurisdictions in the
United States as any selling Holder reasonably requests in writing, use its
reasonable best efforts to obtain all appropriate registrations, permits and
consents required in connection therewith, and do any and all other acts or
things reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; PROVIDED, HOWEVER, that the Company will not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified
or to take any action that would subject it to taxation or general service of
process in any such jurisdiction where it is not then so subject;
(viii) cooperate with the selling holders of Registrable Securities
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends at
least two (2) business days prior to any sale of Registrable Securities;
(ix) upon the occurrence of any event contemplated by Section
3.3(iii)(F) above, promptly prepare a supplement or post-effective amendment to
the Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the purchasers of the Registrable Securities, the
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading;
(x) cause all Registrable Securities covered by any Registration
Statement to be listed on each securities exchange on which similar securities
issued by the Company are then listed, or, if not so listed, cause such
Registrable Securities to be authorized for trading on the Nasdaq National
Market if any similar securities issued by the Company are then so authorized,
if requested by the holders of a majority of such Registrable Securities;
(xi) not later than the effective date of the applicable
Registration Statement, provide a CUSIP number for the applicable Registrable
Securities;
<PAGE>
(xii) enter into such customary agreements and take all such other
actions reasonably required in connection therewith in order to expedite or
facilitate the disposition of such Registrable Securities and in such
connection, whether or not an underwriting agreement is entered into and whether
or not the Registration is an underwritten Registration,
(A) make such representations and warranties to the
holders of such Registrable Securities as are
customary;
(B) use reasonable best efforts to obtain opinions of
counsel to the Company and updates thereof (which
opinions of counsel shall be in form, scope and
substance reasonably satisfactory to the holders of a
majority of the Registrable Securities being sold),
addressed to each selling Holder covering the matters
customarily covered in opinions requested in similar
offerings and such other matters as may be reasonably
requested by such holders;
(C) use reasonable best efforts to obtain "cold comfort"
letters and updates thereof from the Company's
independent certified public accountants addressed to
the selling holders of Registrable Securities such
letters to be in customary form and covering matters
of the type customarily covered in "cold comfort"
letters in similar transactions; and
(D) deliver such documents and certificates as may be
reasonably requested by the holders of a majority of
the Registrable Securities being sold to evidence
compliance with subsection (x) above and with any
customary conditions contained therein;
(xiii) make available for inspection by a representative of holders
of a majority of the Registrable Securities copies of extracts of all financial
and other records, pertinent corporate documents and properties of the Company
as shall be reasonably necessary, in the opinion of the holders' counsel, to
enable them to fulfill their due diligence responsibilities; and cause the
Company's officers and employees
<PAGE>
to supply all information reasonably requested by any such representative in
connection with such Registration Statement; PROVIDED, HOWEVER, that the Company
shall not be required to comply with this paragraph (xiii) unless such person
executes confidentiality agreements whereby such person agrees that any records,
information or documents that are designated by the Company in writing as
confidential shall be kept confidential by such persons and used only in
connection with the proposed registration unless disclosure of such records,
information or documents is required by court or administrative order or any
regulatory body having jurisdiction; and each seller of Registrable Securities
agrees that it will, upon learning that disclosure of such records, information
or documents is sought in a court of competent jurisdiction or by a governmental
agency, give notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of any records,
information or documents deemed confidential; PROVIDED FURTHER, HOWEVER,
notwithstanding any designation of confidentiality by the Company, confidential
information shall not include information which (i) becomes generally available
to the public other than as a result of a disclosure by or on behalf of any such
Person, or (ii) becomes available to any such Person on a non-confidential basis
from a source other than the Company or its advisors, provided that such source
is not to such Person's knowledge bound by a confidentiality agreement with or
other obligations of secrecy to the Company or another party with respect to
such information; and
(xiv) promptly after the filing of any document that is to be
incorporated by reference into any Registration Statement or Prospectus (after
initial filing of the Registration Statement), provide copies of such document
to counsel to the selling holders of Registrable Securities, and make the
Company's executive officers and other representatives reasonably available for
discussion of such document.
The Company may require each seller of Registrable Securities for which any
registration is being effected to furnish to the Company such information
regarding the proposed distribution of such securities as the Company may from
time to time reasonably request in writing. Each holder of Registrable
Securities agrees by acquisition of such Registrable Securities that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 3.3(iii)(F), such holder shall forthwith discontinue
disposition of Registrable Securities until such holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3.3(ix), or
until it is advised in writing (the "Advice") by the Company that the use of the
Prospectus may be resumed, and has received copies of additional or supplemental
filings that are incorporated by reference in the Prospectus;
<PAGE>
and, if so directed by the Company, such holder shall deliver to the Company (at
the Company's expense) all copies, other than permanent file copies then in such
seller's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event the Company gives
any such notice, the time periods regarding the maintenance of the effectiveness
of any Registration Statement in Sections 3.1(ii) shall be extended by the
number of days during the period from and including the date of the receipt of
such notice pursuant to Section 3.3(iii)(F) hereof to and including the date
when each seller of Registrable Securities covered by such Registration
Statement shall have received the copies of the supplemented or amended
prospectuses contemplated by Section 3.3(ix) or the Advice.
III.4 INDEMNIFICATION AND CONTRIBUTION.
(i) INDEMNIFICATION OF PURCHASERS. In the event of the
Registration or qualification of any Registrable Securities under the Securities
Act or any other applicable securities laws pursuant to the provisions of this
Article III, the Company agrees to indemnify and hold harmless each holder
thereby offering such Registrable Securities for sale (an "Indemnified Holder"),
and each other person, if any, who controls any such Indemnified Holder within
the meaning of the Securities Act or any other applicable securities laws, from
and against any and all losses, claims, damages, expenses or liabilities (or
actions in respect thereof), joint or several, to which such Indemnified Holder
or controlling person may become subject under the Securities Act or any other
applicable federal or state securities laws or otherwise, insofar as such
losses, claims, damages, expenses or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any Registration Statement under which such
Registrable Securities were registered or qualified under the Securities Act or
any other applicable securities laws, any preliminary prospectus or final
prospectus relating to such Registrable Securities, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of any rule or regulation under the Securities Act or any other
applicable federal or state securities laws applicable to the Company or
relating to any action or inaction required by the Company in connection with
any such Registration or qualification, and will reimburse each such Indemnified
Holder, underwriter, broker or dealer and each such controlling person for any
legal or other expenses reasonably incurred by such Indemnified Holder,
underwriter, broker or dealer or controlling person in connection with
investigating o defending any such loss, claim,
<PAGE>
damage, expense, liability or action; PROVIDED, HOWEVER, that the Company will
not be liable in any such case to the extent that any such loss, claim, damage,
expense or liability arises out of or is based upon an untrue statement or
omission contained in such Registration Statement, such preliminary Prospectus,
such final Prospectus or such amendment or supplement thereto, made in reliance
upon and in conformity with written information furnished to the Company by such
Indemnified Holder or controlling person specifically and expressly for use in
the preparation thereof or by the failure of such Indemnified Holder or
controlling person to deliver a copy of the Registration Statement, such
preliminary Prospectus, such final Prospectus or such amendment or supplement
thereto after the Company has furnished such party with a sufficient number of
copies of the same and such party failed to deliver or otherwise provide a copy
of the final Prospectus to the person asserting an untrue statement or omission
or alleged untrue statement or omission at or prior to the written confirmation
of the sale of securities to such person, if such statement or omission was in
fact corrected in such final Prospectus.
(ii) INDEMNIFICATION OF COMPANY. In the event of the Registration
or qualification of any Registrable Securities of the Indemnified Holders under
the Securities Act or any other applicable federal or state securities laws for
sale pursuant to the provisions hereof, each Indemnified Holder agrees
severally, and not jointly, to indemnify and hold harmless the Company, each
person who controls the Company within the meaning of the Securities Act, and
each officer and director of the Company from and against any losses, claims,
damages, expenses or liabilities (or actions in respect thereof), joint or
several, to which the Company, such controlling person or any such officer or
director may become subject under the Securities Act or any other applicable
securities laws or otherwise, insofar as such losses, claims, damages, expenses
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement of any material fact contained in any Registration
Statement under which such Registrable Securities were registered or qualified
under the Securities Act or any other applicable securities laws, any
preliminary prospectus or final prospectus relating to such Registrable
Securities, or any amendment or supplement thereto, or arise out of or are based
upon an untrue statement therein or the omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, which untrue statement or omission was made therein in reliance
upon and in conformity with written information furnished to the Company by such
Indemnified Holder specifically and expressly for use in connection with the
preparation thereof, and will reimburse the Company, such controlling person and
each such officer or director for any legal or any other expenses reasonably
incurred by them in connection with investigating or
<PAGE>
defending any such loss, claim, damage, expense, liability or action; PROVIDED,
HOWEVER, an Indemnified Holder's liability under this Section 5(e)(iii) shall
not exceed the net proceeds received by such Indemnified Holder with respect to
the sale of any Registrable Securities.
(iii) INDEMNIFICATION OF UNDERWRITERS. In the case of an
underwritten offering of Registrable Securities, the Company and each holder of
a Registrable Security included in a Registration Statement shall agree to enter
into an underwriting agreement in customary form and substance with such
underwriters, and to indemnify such underwriters, their officer and directors,
if any, and each person, if any, who controls such underwriters within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act,
to the same extent as provided in the preceding paragraph with respect to
indemnification by such holder of the Company.
(iv) MECHANICS. Promptly after receipt by a person entitled to
indemnification under this Section 3.4 (an "Indemnified Party") of notice of the
commencement of any action or claim relating to any Registration Statement filed
under this Article III as to which indemnity may be sought hereunder, such
Indemnified Party will, if a claim for indemnification hereunder in respect
thereof is to be made against any other party hereto (an "Indemnifying Part"),
give written notice to each such Indemnifying Party of the commencement of such
action or claim, but the omission to so notify each such Indemnifying Party will
not relieve any such Indemnifying Party from any liability which it may have to
any Indemnified Party otherwise than pursuant to the provisions of this Section
3.4 and shall also not relieve any such Indemnifying Party of its obligations
under this Section 5(e) except to the extent that any such Indemnifying Party is
actually prejudiced thereby. In case any such action is brought against an
Indemnified Party, and such Indemnified Party notifies an Indemnifying Party of
the commencement thereof, such Indemnifying Party will be entitled (at its own
expense) to participate in and, to the extent that it may wish, jointly with any
other Indemnifying Party similarly notified, to assume the defense, with counsel
reasonably satisfactory to such Indemnified Party, of such action and/or to
settle such action and, after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume the defense thereof, expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof, other than the reasonable cost of investigation; PROVIDED, HOWEVER,
that no Indemnifying Party shall consent to the entry of any judgment or enter
into any settlement agreement without the prior written consent of the
Indemnified Party unless such Indemnified Party is fully released and discharged
from any such liability, and no Indemnified Party shall consent to the entry of
any judgment or enter into any settlement of any such action the defense of
<PAGE>
which has been assumed by an Indemnifying Party without the consent of each
Indemnifying Party. Notwithstanding the foregoing, the Indemnified Party shall
have the right to employ its own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Party
unless
(A) the employment of such counsel shall have been authorized in
writing by the Indemnifying Party in connection with the
defense of such suit, action, claim or proceeding;
(B) the Indemnifying Party shall not have employed counsel
(reasonably satisfactory to the Indemnified Party) to take
charge of the defense of such action, suit, claim or
proceeding; or
(C) such Indemnified Party shall have reasonably concluded, based
upon the advice of counsel, that there may be defenses
available to it which are different from or additional to
those available to the Indemnifying Party which, if the
Indemnifying Party and the Indemnified Party were to be
represented by the same counsel, could result in a conflict
of interest for such counsel or materially prejudice the
prosecution of the defenses available to such Indemnified
Party.
If any of the events specified in clauses (A), (B) or (C) of the preceding
sentence shall have occurred or shall otherwise be applicable, then the fees and
expenses of one counsel or firm of counsel selected by a majority in interest of
the Indemnified Parties (and reasonably acceptable to the Indemnifying Party)
shall be borne by the Indemnifying Party. If, in any such case, the Indemnified
Party employs separate counsel, the Indemnifying Party shall not have the right
to direct the defense of such action, suit, claim or proceeding on behalf of the
Indemnified Party and the Indemnified Party shall assume such defense and/or
settle such action; PROVIDED, HOWEVER, that an Indemnifying Party shall not be
liable for the settlement of any action, suit, claim or proceeding effected
without its prior written consent, which consent shall not be unreasonably
withheld.
The provisions of this Section 3.4 shall be in addition to any liability
which any party may have to any other party and shall survive any termination of
this Agreement.
III.5 CONTRIBUTION. If for any reason the indemnification provided for in
Section 3.4(i) or 3.4(ii) is
<PAGE>
unavailable to an Indemnified Party as contemplated therein, then the
Indemnifying Party, in lieu of indemnification shall contribute to the amount
paid or payable by the Indemnified Party as a result of such loss, claim,
damage, expense or liability (or action in respect thereof) in such proportion
as its appropriate to reflect not only the relative benefits received by the
Indemnified Party and the Indemnifying Party, but also the relative fault of the
Indemnified Party and the Indemnifying Party, as well as any other relevant
equitable considerations, provided that no holder of Registrable Securities
shall be required to contribute in an amount greater than the difference between
the net proceeds received by such holder of Registrable Securities with respect
to the sale of any Registrable Securities and all amounts already contributed by
such holder with respect to such claims, including amounts paid for any legal or
other fees or expenses incurred by such holder. No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of any such fraudulent misrepresentation. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by
such Indemnifying Party or Indemnified Party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action.
III.6 REGISTRATION EXPENSES. Except as hereinafter provided, all expenses
incident to the Company's performance of or compliance with this Article III
will be borne by the Company, including, without limitation, all Registration
and filing fees under the Securities Act and the Exchange Act, the fees and
expenses of the counsel and accountants for the Company (including the expenses
of any "cold comfort" letters and special audits required by or incident to the
performance of such persons), all other costs and expenses of the Company
incident to the preparation, printing and filing under the Securities Act of the
Registration Statement (and all amendments and supplements thereto), and
furnishing copies thereof and of the Prospectus included therein, all
out-of-pocket expenses of underwriters customarily paid for by issuers to the
extent provided for in any underwriting agreement, the costs and expenses
incurred by the Company in connection with the qualification of the Registrable
Securities under the state securities or "blue sky" laws of various
jurisdictions, the costs and expenses associated with filings required to be
made with the NASD, the costs and expenses of listing the Registrable Securities
for trading on a national securities exchange or authorizing them for trading on
Nasdaq and all other costs and expenses incurred by the Company in connection
with any
<PAGE>
Registration hereunder. In addition, the Company shall pay or reimburse the
sellers of Registrable Securities the reasonable fees and expenses of one
attorney to such sellers (selected by holders of a majority of the Registrable
Securities to be sold) incurred in connection with a registration subject to
this Article III (collectively, with the expenses referred to in the immediately
preceding sentence, the "Registration Expenses"). Except as provided in the
immediately preceding sentence, each holder of Registrable Securities
participating in the sale of such Registrable Securities shall bear the costs
and expenses of any underwriters' discounts and commissions, brokerage fees or
transfer taxes relating to the Registrable Securities sold by such holder and
the fees and expenses of any attorneys, accountants or other representatives
retained by the holder.
III.7 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No holder of
Registrable Securities may participate in any underwritten Registration
hereunder unless such holder (i) agrees to sell its Registrable Securities on
the basis provided in any customary and reasonable underwriting arrangements
approved by the Company, and (ii) accurately completes in a timely manner and
executes all questionnaires, powers of attorney, underwriting agreements,
indemnities and other documents customarily required under the terms of such
underwriting arrangements.
III.8 HOLDBACK AGREEMENT. Each holder of Registrable Securities whose
securities are included in a Registration Statement agrees not to effect any
other public sale or distribution of the issue being registered or a similar
security of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144 or Rule
144A under the Securities Act, during the fifteen (15) days prior to, and during
the ninety (90)-day period (or such longer period as requested by the managing
underwriter or underwriters in the case of an underwritten public offering)
beginning on, the effective date of such Registration Statement (except as part
of such Registration), if and to the extent requested by the managing
underwriter or underwriters in an underwritten public offering.
ARTICLE IV
MISCELLANEOUS
IV.1 NOTICES. Any notice or demand authorized by this Agreement to be
given or made by any Holder to or on the Company shall be sufficiently given or
made when received at the office of the Company expressly designated by the
Company as its office for purposes of this Agreement until the Holders are
otherwise notified in accordance with this Section by the Company), as follows:
<PAGE>
Dobson Communications Corporation
13439 N. Broadway Extension, Suite 200
Oklahoma City, Oklahoma 73114
with a copy to:
Theodore M. Elam, Esq.
McAfee & Taft A Professional Corporation
Two Leadership Square, 10th Floor
211 North Robinson
Oklahoma City, Oklahoma 73102
Any notice pursuant to this Agreement to be given by the Company to the
Holder(s) shall be sufficiently given when received by such Holder(s) at the
address appearing in the Subscription Agreement (until the Company is otherwise
notified in accordance with this Section by such Holder).
IV.2 SUCCESSORS. All the covenants and provisions of this Agreement by
or for the benefit of the Company or any Holder shall bind and inure to the
benefit of their respective successors and assigns hereunder.
IV.3 GOVERNING LAW. This Agreement shall be deemed to be a contract made
under the laws of the State of Oklahoma and for all purposes shall be construed
in accordance with the internal laws of said state.
IV.4 BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
Partnership and the Purchasers any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Partnership and the Purchasers.
IV.5 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
IV.6 AMENDMENT AND WAIVER. Except as provided in (b) below, (a) no
provision of this Agreement may be amended or waived except by an instrument in
writing signed by the party sought to be bound; and (b) the Company may from
time to time supplement or amend this Agreement without the approval of any
holders of Preferred Stock and Warrants only in order to cure any ambiguity or
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provision herein, or to make any other provisions
in
<PAGE>
regard to matters or questions arising hereunder which the Company may deem
necessary or desirable and which shall not in any way adversely affect the
interests of any holder. No failure or delay by any party in exercising any
right or remedy hereunder shall operate as a waiver thereof, and a waiver of a
particular right or remedy on one occasion shall not be deemed a waiver of any
other right or remedy or a waiver of the same right or remedy on any subsequent
occasion.
IV.7 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent holders of Preferred Stock or Warrants. If any
transferee of any holder of Preferred Stock or Warrants shall acquire Preferred
Stock or Warrants, in any manner, whether by operation of law or otherwise, such
Preferred Stock or Warrants shall be held subject to all of the terms of this
Agreement, and by taking and holding such Preferred Stock or Warrants such
person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement and such person shall be
entitled to receive the benefits hereof.
IV.8 COMPANY REPRESENTATION. The Company represents to the Purchasers
that neither the creation, offer or sale of the Class F Preferred Stock or the
Warrants, nor the execution, delivery and performance of the Company's
obligations thereunder or under this Agreement violate or are in contravention
of the Company's Certificate of Incorporation (including the Certificates of
Designation filed therewith), Bylaws or any debt instrument to which the Company
is a party, or any federal law or any law of the State of Oklahoma.
4.9 COMPANY COVENANT. The Company hereby covenants with the Purchasers
that
(i) The Company will not redeem or repurchase, nor will the Company
permit any of its subsidiaries to repurchase, more than 90,000
shares of Class D Preferred Stock or more than 517,000 shares of
Class E Preferred Stock, in each case, at a maximum redemption price
of $1,132.00 per share, and
(ii) shares of Class E Preferred Stock will only be issued upon
conversion of Class D Preferred Stock or in payment of dividends on
Class D Preferred Stock.
IN WITNESS WHEREOF, each of the parties has executed this Agreement as of
the date first written above.
<PAGE>
COMPANY: DOBSON COMMUNICATIONS CORPORATION
By /s/ Everett R. Dobson
-------------------------------
Name: Everett R. Dobson
Title: Chief Executive Officer
THE PARTNERSHIP: DOBSON CC LIMITED PARTNERSHIP
By RLD, Inc., its General Partner
By: /s/ Everett R. Dobson
----------------------------
Name: Everett R. Dobson
Title: President
PURCHASERS: BOSTON VENTURES, LIMITED
PARTNERSHIP V
By Boston Ventures Company V, LLC
-------------------------------
its General Partner
By: /s/ Roy F. Coppedge III
----------------------------
Name: Roy F. Coppedge III
----------------------
Title: Managing Director
---------------------
WPW, III CAPITAL LIMITED PARTNERSHIP
By WPW, III Capital, Inc.
-------------------------------
its General Partner
By: /s/ Ralph A. Beard
----------------------------
Name: Ralph A. Beard
----------------------
Title: Sec/Treas
---------------------
WPW, III INVESTMENT LIMITED PARTNERSHIP
By WPW, III Investment, Inc.
-------------------------------
its General Partner
<PAGE>
By: /s/ Ralph A. Beard
---------------------------
Name: Ralph A. Beard
----------------------
Title: Sec/Treas
---------------------
JDW, II CAPITAL LIMITED PARTNERSHIP
By JDW, II Capital, Inc.
-------------------------------
its General Partner
By: /s/ Ralph A. Beard
----------------------------
Name: Ralph A. Beard
----------------------
Title: Sec/Treas
---------------------
JDW, II INVESTMENT LIMITED PARTNERSHIP
By JDW, II Investment, Inc.
-------------------------------
its General Partner
By: /s/ Ralph A. Beard
---------------------------
Name: Ralph A. Beard
----------------------
Title: Sec/Treas
---------------------
RST CAPITAL LIMITED PARTNERSHIP
By RST Capital, Inc.
-------------------------------
its General Partner
By /s/ Ralph A. Beard
-------------------------------
Name: Ralph A. Beard
----------------------
Title: Sec/Treas
---------------------
/s/ Albert H. Pharis, Jr.
--------------------------------------
Albert H. Pharis, Jr., Trustee of
the Albert H. Pharis, Jr. Revocable
<PAGE>
Trust
<PAGE>
Exhibit 12
Dobson Communications Corporation
Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to
Combined Fixed Charges and Preferred Stock Dividends
<TABLE>
Year ended December 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net income (loss) $(16,734,085) $(1,420,611) $1,104,180 $ 462,000 $ 541,000
Extraordinary (gain) loss 1,567,147 527,334 - (228,278) -
Accounting changes - - - - (640,629)
Interest expense, net 27,257,794 6,476,576 3,823,305 2,925,695 2,276,269
Amortization of deferred financing - 267,000 87,859 6,415 -
Income tax provision (benefit) (3,287,740) (410,795) 738,235 119,436 (78,774)
------------ ----------- ---------- ---------- ----------
Earnings $ 8,803,116 $ 5,439,504 $5,753,579 $3,285,268 $2,097,866
Interest expense $ 27,257,794 $ 6,476,579 $3,823,305 $2,925,695 $2,276,269
Amortization of deferred financing - 267,000 87,859 6,415 -
------------ ----------- ---------- ---------- ----------
Fixed charges $ 27,257,794 $ 6,743,579 $3,911,164 $2,932,110 $2,276,269
Preferred dividends 2,603,362 849,137 591,300 83,388 -
------------ ----------- ---------- ---------- ----------
Combined Fixed Charges and Preferred
Stock Dividends $ 29,861,156 $ 7,592,713 $4,502,464 $3,015,498 $2,276,269
------------ ----------- ---------- ---------- ----------
------------ ----------- ---------- ---------- ----------
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends (1) (2) 1.28 1.09 N/A
------------ ----------- ---------- ---------- ----------
------------ ----------- ---------- ---------- ----------
Nine months ended September 30,
-------------------------------
1998 1997
------------ -------------
Net income (loss) $(30,874,869) $(12,187,756)
Extraordinary (gain) loss 2,643,439 2,186,223
Accounting changes - -
Interest expense, net 21,880,147 15,726,284
Amortization of deferred financing - -
Income tax provision (benefit) (4,864,070) (498,758)
------------ -------------
Earnings $(11,215,353) $ 5,225,993
Interest expense $ 21,880,147 $ 15,726,284
Amortization of deferred financing - -
------------ -------------
Fixed charges $ 21,880,147 $ 15,726,284
Preferred dividends 16,748,786 727,646
------------ -------------
Combined Fixed Charges and Preferred
Stock Dividends $ 38,628,933 $ 16,453,930
------------ -------------
------------ -------------
Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends (3) (4)
------------ -------------
------------ -------------
</TABLE>
(1) Earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $21,058,040.
(2) Earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $2,153,209.
(3) Earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $49,844,286.
(4) Earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $11,227,937.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF DOBSON COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
No. Corporation State of Incorporation
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<S> <C> <C>
1. Associated Telecommunications and Oklahoma
Technologies, Inc.
- -----------------------------------------------------------------------------
2. DCC PCS, Inc. Oklahoma
- -----------------------------------------------------------------------------
3. Dobson Cellular of Arizona, Inc. Oklahoma
- -----------------------------------------------------------------------------
4. Dobson Cellular of California, Inc. Oklahoma
- -----------------------------------------------------------------------------
5. Dobson Cellular of Enid, Inc. Oklahoma
- -----------------------------------------------------------------------------
6. Dobson Cellular of Imperial, Inc. Oklahoma
- -----------------------------------------------------------------------------
7. Dobson Cellular of Kansas/Missouri, Inc. Oklahoma
- -----------------------------------------------------------------------------
8. Dobson Cellular of Maryland, Inc. Oklahoma
- -----------------------------------------------------------------------------
9. Dobson Cellular of Navarro, Inc. Oklahoma
- -----------------------------------------------------------------------------
10. Dobson Cellular of Sandusky, Inc. Oklahoma
- -----------------------------------------------------------------------------
11. Dobson Cellular of Texas, Inc. Oklahoma
- -----------------------------------------------------------------------------
12. Dobson Cellular of Woodward, Inc. Oklahoma
- -----------------------------------------------------------------------------
13. Dobson Cellular Operations Company Oklahoma
- -----------------------------------------------------------------------------
14. Dobson Cellular Subsidiary Company Oklahoma
- -----------------------------------------------------------------------------
15. Dobson Cellular Systems, Inc. Oklahoma
- -----------------------------------------------------------------------------
16. Dobson Fiber/Forte Colorado, Inc. Oklahoma
- -----------------------------------------------------------------------------
17. Dobson Operating Company Oklahoma
- -----------------------------------------------------------------------------
18. Dobson Telephone Company, Inc. Oklahoma
- -----------------------------------------------------------------------------
19. Dobson Tower Company Oklahoma
- -----------------------------------------------------------------------------
20. Logix Communications Enterprises, Inc., Oklahoma
f/k/a Dobson Wireline Company
- -----------------------------------------------------------------------------
21. Logix Communications Corporation f/k/a Oklahoma
Dobson Wireless, Inc.
- -----------------------------------------------------------------------------
22. Dobson/Sygnet Communications Company Oklahoma
f/k/a Dobson/Sygnet Holdings, Inc.
- -----------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
No. Corporation State of Incorporation
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
23. Sygnet Wireless, Inc., f/k/a Ohio
Dobson/Sygnet Operating Company f/k/a
Front Nine Operating Company
- -----------------------------------------------------------------------------
24. RSA 339, Inc. California
- -----------------------------------------------------------------------------
25. Western Financial Services Corp. Oklahoma
- -----------------------------------------------------------------------------
26. Texas RSA No. 2 Limited Partnership Texas
- -----------------------------------------------------------------------------
27. Oklahoma RSA 5 Limited Partnership Oklahoma
- -----------------------------------------------------------------------------
28. Oklahoma RSA 7 Limited Partnership Oklahoma
- -----------------------------------------------------------------------------
29. Cellular 2000, a general partnership Michigan
- -----------------------------------------------------------------------------
30. Gila River Cellular General Partnership Arizona
- -----------------------------------------------------------------------------
31. Oklahoma Independent RSA 5 Partnership Oklahoma
- -----------------------------------------------------------------------------
32. Oklahoma Independent RSA 7 Partnership Oklahoma
- -----------------------------------------------------------------------------
33. Sygnet Communications, Inc. Ohio
- -----------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report on the consolidated financial statements of Dobson Communications
Corporation (and all references to our Firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
January 29, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated January 27, 1997, with respect to the combined
financial statements of The Cellular Telephone Business of Selected Systems of
Horizon Cellular Telephone Company, L.P. included in the Registration Statement
on Form S-4 and related Prospectus of Dobson Communications Corporation for the
registration of 67,148 shares of its 12 1/4% Senior Exchangeable Preferred
Stock.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
January 29, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) as it relates to Gila River Cellular
General Partnership included in or made a part of this registration statement.
It should be noted that we have not audited any financial statements of Gila
River Cellular General Partnership subsequent to December 31, 1996 or performed
any audit procedures subsequent to the date of our report.
ARTHUR ANDERSEN LLP
Denver, Colorado,
January 29, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report dated February 13, 1998, on the financial statements of Cellular 2000 (A
Partnership) (and all references to our Firm) included in or made a part of this
registration statement.
HOLLIDAY, LEMONS & COX, P.C.
(formerly Holliday, Lemons, Thomas &
Cox, P.C.)
Texarkana, Texas
January 29, 1999
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated February 6, 1998, with respect to the consolidated
financial statements of Sygnet Wireless, Inc. included in the Registration
Statement on Form S-4 and related Prospectus of Dobson Communications
Corporation for the registration of 67,148 shares of its 12 1/4% Senior
Exchangeable Preferred Stock.
/s/ Ernst & Young LLP
Cleveland, Ohio
February 1, 1999
<PAGE>
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 Mandatorily Redeemable due 2008,
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 29th day of January, 1999.
DOBSON COMMUNICATIONS CORPORATION
By: /S/EVERETT R. DOBSON
-----------------------------------------
Everett R. Dobson, CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 29th day of January, 1999.
Name Title
---- -----
/S/EVERETT R. DOBSON Chairman of the Board, President and
- ------------------------------ Chief Executive Officer and
Everett R. Dobson Director (Principal Executive Officer)
/S/ BRUCE R. KNOOIHUIZEN Vice President and Chief Financial
- ------------------------------ Officer (Principal Financial Officer)
Bruce R. Knooihuizen
/S/ TRENT LEFORCE Corporate Controller (Principal
- ------------------------------ Accounting Officer)
Trent LeForce
/S/ STEPHEN T. DOBSON Director
- ------------------------------
Stephen T. Dobson
/S/ RUSSELL L. DOBSON Director
- ------------------------------
Russell L. Dobson
/S/ JUSTIN L. JASCHKE Director
- ------------------------------
Justin L. Jaschke
/S/ ALBERT H. PHARIS, JR. Director
- ------------------------------
Albert H. Pharis, Jr.
/S/ DANA L. SCHMALTZ Director
- ------------------------------
Dana L. Schmaltz
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 5,041,044
<SECURITIES> 18,508,358
<RECEIVABLES> 32,054,707
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 60,821,621
<PP&E> 90,856,057
<DEPRECIATION> 14,495,599
<TOTAL-ASSETS> 701,040,942
<CURRENT-LIABILITIES> 49,925,050
<BONDS> 448,056,204
197,136,329
100,000
<COMMON> 473,152
<OTHER-SE> (84,869,476)
<TOTAL-LIABILITY-AND-EQUITY> 701,040,942
<SALES> 96,346,055
<TOTAL-REVENUES> 96,346,055
<CGS> 27,769,595
<TOTAL-COSTS> 27,769,595
<OTHER-EXPENSES> 60,788,521
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,039,213
<INCOME-PRETAX> (13,947,360)
<INCOME-TAX> (4,864,070)
<INCOME-CONTINUING> (11,046,598)
<DISCONTINUED> (17,184,832)
<EXTRAORDINARY> (2,643,439)
<CHANGES> 0
<NET-INCOME> (30,874,869)
<EPS-PRIMARY> (65.25)
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,752,399
<SECURITIES> 26,777,433
<RECEIVABLES> 14,636,349
<ALLOWANCES> 632,661
<INVENTORY> 1,229,420
<CURRENT-ASSETS> 38,778,567
<PP&E> 62,953,730
<DEPRECIATION> 10,579,864
<TOTAL-ASSETS> 359,645,006
<CURRENT-LIABILITIES> 22,924,187
<BONDS> 335,570,059
11,623,329
100,000
<COMMON> 473,152
<OTHER-SE> (37,245,821)
<TOTAL-LIABILITY-AND-EQUITY> 359,645,006
<SALES> 66,713,927
<TOTAL-REVENUES> 66,713,927
<CGS> 20,476,103
<TOTAL-COSTS> 20,476,103
<OTHER-EXPENSES> 43,068,120
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,639,739
<INCOME-PRETAX> (19,341,177)
<INCOME-TAX> (3,624,610)
<INCOME-CONTINUING> (15,716,567)
<DISCONTINUED> 332,141
<EXTRAORDINARY> (1,349,659)<F1>
<CHANGES> 0
<NET-INCOME> (16,734,085)
<EPS-PRIMARY> (40.87)
<EPS-DILUTED> 0<F2>
<FN>
<F1>Net of income tax expense of $827,210.
<F2>Diluted net loss per share has been omitted because the impact of stock
options and convertible preferred stock on the Company's net loss per
share is anti-dilutive.
</FN>
</TABLE>
<PAGE>
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
[ ], 1999 (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>
<S> <C> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND: BY FACSIMILE:
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
P.O. Box 844 Corporate Trust 111 Broadway Institutions Only)
Cooper Station Operations Lower Level
New York, NY Department New York, NY 10006 CONFIRM BY TELEPHONE:
10276-0844 770 Broadway- Attention: Corporate (800) 548-6565
Attention: Corporate 13th Floor Trust Services
Trust Services New York, NY 10003
(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 [ ],
1999 (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. Beneficial holders whose shares are
held of record by Cede & Co. (as nominee for the Depository Trust Company) will
not receive any fractional shares in the Exchange Offer or as dividends. Dobson
has been advised that any fractional shares otherwise distributable to DTC
participants will be sold and the cash distributed. 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 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 December 23, 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 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
<PAGE>
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.
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
DESCRIPTION OF OLD SHARES TENDERED HEREWITH
-------------------------------------------------------------------------------------------
AGGREGATE
LIQUIDATION
NAME(S) AND ADDRESS(ES) PREFERENCE
OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED BY AMOUNT
(PLEASE FILL IN) NUMBER(S) SHARES TENDERED*
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL
- ---------------------------------------------------------------------------------------------
* UNLESS OTHERWISE INDICATED, THE HOLDER WILL BE DEEMED TO HAVE TENDERED ALL OLD SHARES
INCLUDED. SEE INSTRUCTION 2.
- ---------------------------------------------------------------------------------------------
</TABLE>
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 stock power
from the registered holder.
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."
<PAGE>
/ / 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: ___________________________________________________________________
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 aggregate liquidation
preference 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
broker-dealer (whether or not it is also an "affiliate" of Dobson within the
meaning of Rule 405 under the Securities Act) that will receive New 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.
<PAGE>
All authority herein conferred or agreed to be conferred shall survive the
death, bankruptcy or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
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: ___________________, 1999
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on
certificate(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.: ____________________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature: ______________________________________________________
Name: ______________________________________________________________________
Title: _____________________________________________________________________
Address: ___________________________________________________________________
Name of Firm: ______________________________________________________________
Area Code and Telephone No.: _______________________________________________
Dated: __________________, 1999
- --------------------------------------------------------------------------------
<PAGE>
PAYOR'S NAME: DOBSON COMMUNICATIONS CORPORATION
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------------------------------------
SUBSTITUTE Name (If joint names, list first and circle the name of the person or
FORM W-9 entity whose number you enter in Part I below.)
Department of the
Treasury
Internal Revenue
Service
Payor's Request for
Taxpayer
Identification
Number ("TIN")
and Certification
------------------------------------------------------------------------
Address
------------------------------------------------------------------------
City, state and Zip Code
------------------------------------------------------------------------
Part I--PLEASE PROVIDE YOUR TAXPAYER
IDENTIFICATION NUMBER ("TIN") IN THE BOX AT RIGHT
AND CERTIFY BY SIGNING AND DATING BELOW
Social Security
number or Employer
Identification
Number
------------------------------------------------------------------------
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-------
- ----------------------------------------------------------------------------------------------
</TABLE>
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.
<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 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
<PAGE>
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 Transmit-tal 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.
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
<PAGE>
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 NOTES. 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 Trans-mittal. 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 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 Shares 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.
<PAGE>
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>
<CAPTION>
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 Company of Company of (For Eligible
New York New York New York Institutions
P.O. Box 844 Corporate Trust 111 Broadway Only)
Cooper Station Operations Lower Level
New York, NY Department New York, NY 10006 CONFIRM BY TELEPHONE:
10276-0844 770 Broadway- Attention: Corporate (800) 548-6565
Attention: Corporate 13th Floor Trust Services
Trust Services New York, NY 10003
(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 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
<TABLE>
<S> <C>
Signature(s) of Registered Owner(s) or Name(s) of Registered Holder(s):
Authorized Signatory: --------------------------------------------
- -------------------------------------------- --------------------------------------------
- -------------------------------------------- --------------------------------------------
Principal Amount of Old Shares Tendered: Address:
- -------------------------------------------- --------------------------------------------
Certificate No(s). of Old Shares Area Code and Telephone No.:
(if available): --------------------------------------------
- -------------------------------------------- Date:
- --------------------------------------------
</TABLE>
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.
<TABLE>
<S> <C>
Name of Firm: ---------------------Address: Authorized Signature:
- -------------------------------------------- Name:
- -------------------------------------------- Title:
Area Code and Telephone No.: Date:
- --------------------------------------------
</TABLE>
3
<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
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 [ ], 1999 (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 its outstanding
12 1/4% Senior Exchangeable Preferred Stock initially issued on December 29,
1998 and all additional shares of its 12 1/4% Senior Exchangeable Preferred
Stock issued in the payments of dividends thereon (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 December 23,
1998, between the Company and the other signatory 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 [ ], 1999;
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 [ ], 1999 (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.
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.
<PAGE>
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>
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 [ ],
1999 (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 initially issued on December 23, 1998 and all additional shares
of its 12 1/4% Senior Exchangeable Preferred Stock issued in the payment of
dividends thereon (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. The New Shares will accrue dividends (as do the Old Shares) at
a rate equal to 12 1/4% per annum from January 15, 1999. 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. Beneficial holders whose shares are held
of record by Cede & Co. (as nominee for the Depository Trust Company) will
not receive any fractional shares in the Exchange Offer or as dividends.
Dobson has been advised that any fractional shares otherwise distributable
to DTC participants will be sold and the cash distributed. 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.
3. The Exchange Offer is not conditioned on any minimum number of Old
Shares being tendered.
<PAGE>
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 [ ], 1999, 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.
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<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:
<TABLE>
<S> <C>
/ / Do not tender any Old Shares
/ / Tender Old Shares in the number of
</TABLE>
SIGNATURE:
______________________________________
NAME OF BENEFICIAL OWNER (PLEASE
PRINT)
By ___________________________________
SIGNATURE
______________________________________
ADDRESS
______________________________________
ZIP CODE
______________________________________
AREA CODE AND TELEPHONE NUMBER
Dated: , 1999
<PAGE>
EXHIBIT 99.6
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>
<CAPTION>
GIVE THE GIVE THE EMPLOYER
SOCIAL SECURITY IDENTIFICATION
FOR THIS TYPE OF ACCOUNT NUMBER OF-- FOR THIS TYPE OF ACCOUNT NUMBER OF--
- ----------------------------------- ------------------------ ----------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
1. An individual's account The individual 9. A valid trust, estate, The legal entity (Do not
or 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 10. Corporate account The corporation
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the 11. Religious, charitable, The organization
account) account or, if joint or educational
funds, either person(1) organization account
4. Custodian account of a The minor(2) 12. Partnership account held The partnership
minor (Uniform Gift to in the name of the
Minors Act) business
5. Adult and minor (joint The adult or, if the 13. Association, club or The organization
account) minor is the only other tax-exempt
contributor, the organization
minor(1)
6. Account in the name of The ward, minor, or 14. A broker or registered The broker or nominee
guardian or committee incompetent person(3) nominee
for a designated ward,
minor, or incompetent
person
7. a. The usual revocable The grantor-trustee(1) 15. Account with the The public entity
savings trust Department of
account (grantor is Agriculture in the name
also trustee) of a public entity (such
b. So-called trust The actual owner(1) as a State or local
account that is not government, school
a legal or valid district, or prison)
trust under State that receives
law agricultural program
payments
8. Sole proprietorship The owner(4)
account
</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.
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<PAGE>
- 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.
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