<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-1
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 of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------------
13439 NORTH BROADWAY EXTENSION, SUITE 200
OKLAHOMA CITY, OKLAHOMA 73114
(405) 529-8500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
BRUCE R. KNOOIHUIZEN
13439 NORTH BROADWAY EXTENSION
SUITE 200
OKLAHOMA CITY, OKLAHOMA 73114
(405) 529-8500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
THEODORE M. ELAM, ESQ. JEREMY W. DICKENS, ESQ.
MCAFEE & TAFT A PROFESSIONAL CORPORATION WEIL, GOTSHAL & MANGES LLP
TENTH FLOOR, TWO LEADERSHIP SQUARE 767 FIFTH AVENUE
211 NORTH ROBINSON NEW YORK, NEW YORK 10153
OKLAHOMA CITY, OKLAHOMA 73102-7103 (212) 310-8000
(405) 235-9621
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
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 statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement 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 number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
<S> <C> <C>
Class A Common Stock, par value $.01 per share.............. $575,000,000 $159,850(1)
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(o).
(2) Includes amounts attributable to shares which the underwriters will have
the option to purchase to cover over-allotments.
------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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 it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not permitted.
<PAGE>
SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1999
PROSPECTUS
SHARES
[LOGO]
CLASS A COMMON STOCK
----------------------------------------------------------------------
This is our initial public offering of Class A common stock. We are offering
shares of our Class A common stock.
We are authorized to issue Class A common stock and Class B common stock.
The rights of each class are identical, except that each share of Class A common
stock entitles its holder to one vote per share and each share of Class B common
stock generally entitles its holder to ten votes per share. Following this
offering, holders of our Class B common stock as a group will benefically own
shares of Class B common stock representing approximately % of the total
combined voting power of our outstanding common stock.
We propose to list our Class A common stock on the Nasdaq National Market
under the symbol "DCEL." We expect the initial public offering price to be
between $ and $ per share.
INVESTING IN OUR CLASS A COMMON STOCK INVOLVES RISKS. RISK FACTORS BEGIN ON PAGE
11.
<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- -----------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discount....................................... $ $
Proceeds to Dobson Communications Corporation............... $ $
</TABLE>
We have granted the underwriters a 30-day option to purchase up to
additional shares of Class A common stock on the same terms and conditions set
forth above solely to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The underwriters expect to deliver the shares of Class A common stock on or
about , 2000.
- --------------------------------------------------------------------------------
JOINT BOOK RUNNING MANAGERS
LEHMAN BROTHERS SALOMON SMITH BARNEY
JOINT LEAD MANAGER
BANC OF AMERICA SECURITIES LLC
CO-MANAGERS
DEUTSCHE BANC ALEX. BROWN
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
, 2000
<PAGE>
[Map depicting Dobson-owned markets, American Cellular-owned markets, markets
Dobson proposes to acquire in pending acquisitions and markets of adjacent
roaming partners of each of the foregoing.]
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary..................... 1
Risk Factors........................... 11
Use of Proceeds........................ 21
Dividend Policy........................ 21
Dilution............................... 21
Capitalization......................... 22
The American Cellular Acquisition...... 25
Unaudited Pro Forma Consolidated
Financial Data....................... 28
Unaudited Proportionate Adjusted
Statements of Operations............. 35
Selected Consolidated Financial and
Other Data........................... 39
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 43
</TABLE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Industry Overview...................... 58
Business............................... 60
Management............................. 77
Certain Transactions................... 84
Principal Shareholders................. 89
Description of Capital Stock........... 90
Shares Eligible for Future Sale........ 97
Federal Income Tax Considerations...... 99
Underwriting........................... 103
Legal Matters.......................... 106
Experts................................ 106
Where You Can Find More Information.... 107
Index to Financial Statements.......... F-1
</TABLE>
ABOUT THIS PROSPECTUS
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of Class A common stock only in jurisdictions where offers and sales
are permitted.
Unless otherwise indicated, all information in this prospectus assumes:
- the filing of our amended and restated certificate of incorporation, which
will become effective immediately prior to the closing of this offering;
- our recapitalization, including a conversion of our existing common stock
into Class B common stock, a for stock split and the other
transactions described under "Capitalization--The Recapitalization," which
will occur immediately prior to the closing of this offering;
- the distribution of all of the outstanding capital stock of our
subsidiary, Logix Communications Enterprises, Inc., to our current
shareholders, which will occur prior to the closing of this offering; and
- no exercise of the underwriters' over-allotment option.
We have presented certain financial and operational information of us and
American Cellular Corporation on a proportionate combined basis, as adjusted for
the pro forma adjustments described in "Unaudited Pro Forma Consolidated
Financial Data" and "Unaudited Proportionate Adjusted Statements of Operations."
The proportionate presentation is an arithmetic combination of:
- the relevant pro forma data of our consolidated subsidiaries adjusted to
exclude the results attributable to the outstanding minority interests in
our subsidiaries; and
- our 50% share of the pro forma operating results of American Cellular
attributable to our interest in the joint venture with AT&T Wireless
Services, Inc., or AT&T Wireless, that has agreed to acquire American
Cellular.
The proportionate presentation has not been prepared in accordance with
generally accepted accounting principles, or GAAP, and is not intended to
replace our unaudited pro forma consolidated
ii
<PAGE>
financial data prepared and presented in accordance with the rules and
regulations of the Securities and Exchange Commission, or the Commission.
Because we will account for our interest in the American Cellular joint venture
using the equity method of accounting, our statement of operations will reflect
only our 50% share in the net income or loss of the joint venture. We are
presenting the proportionate data to facilitate a better understanding of the
financial and operating data attributable to our substantial investment in
American Cellular.
References in this prospectus to "Dobson," "we," "our" and "us" refer to
Dobson Communications Corporation and its predecessors and subsidiaries as a
combined entity, except where it is more clear that those terms mean only the
parent company. All references to our subsidiary, "Sygnet," which we acquired in
December 1998, are to Sygnet Wireless, Inc. and its subsidiaries as a combined
entity. All references to "American Cellular" are to American Cellular
Corporation and its predecessors and subsidiaries as a combined entity.
We were incorporated in Oklahoma on February 3, 1997, although our
predecessors have been engaged in the telecommunications business since 1936.
Our principal executive offices are located at Suite 200, 13439 North Broadway
Extension, Oklahoma City, Oklahoma 73114. Our telephone number is (405) 529-8500
and our Internet address is WWW.DOBSON.NET. Information contained on our Website
is not a part of this prospectus.
Information with respect to populations in our license areas are management
estimates based upon Kagan's Cellular Telephone Atlas 1998, Paul Kagan
Associates, Inc., Carmel, California, adjusted to exclude those portions of our
rural service areas, or RSAs, and metropolitan statistical areas, or MSAs, not
covered by our licenses.
All trademarks and trade names appearing in this prospectus are the property
of their respective holders.
iii
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY.
WHO WE ARE
We are a leading provider of rural and suburban cellular telephone services.
As of June 30, 1999, our systems covered a total population of approximately
5.8 million and we had 401,680 subscribers. On a proportionate basis, after
giving effect to our expected 50% interest in American Cellular, our systems
would have covered a net population of approximately 8.0 million and we would
have had 589,062 subscribers as of June 30, 1999. For the six months ended
June 30, 1999, we had total revenues of $146.3 million and EBITDA, which we
define as operating income (loss) before depreciation, amortization and
nonrecurring charges, of $64.6 million. On the same proportionate basis, we
would have had total revenues of $202.0 million and EBITDA of $97.2 million for
the six months ended June 30, 1999.
We began providing cellular telephone service in 1990 in Oklahoma and the
Texas Panhandle. We have expanded our cellular operations rapidly since then,
primarily through the acquisition of rural and suburban cellular systems. Since
1996, we have completed 12 acquisitions of cellular licenses and systems,
increasing the total population served by our systems by approximately 5.4
million and significantly expanding the geographic scope of our operations. We
believe we have been successful in integrating acquired systems into our
operations.
We believe that owning and operating a mix of rural and suburban cellular
systems provides strong growth opportunities because we believe these systems
currently have lower penetration rates, higher subscriber growth rates, a higher
proportion of roaming revenues and less competition for subscribers than
cellular systems located in larger metropolitan areas. We focus on acquiring
underdeveloped cellular systems that are adjacent to major metropolitan areas,
which include a high concentration of expressway corridors and tend to have a
significant amount of roaming activity.
We have a strategic relationship with AT&T Wireless, which recently became
one of our stockholders. Through this relationship, we have a coast-to-coast
roaming agreement that allows our customers to utilize wireless systems owned by
AT&T Wireless, and customers of AT&T Wireless to utilize our cellular systems,
each at favorable prices. AT&T Wireless customers accounted for approximately
35% of our roaming revenues, or approximately 15% of our total revenues, in the
six months ended June 30, 1999. We also have roaming agreements with AirTouch
Communications, Inc., Southwestern Bell Mobile Systems, Inc. and other leading
wireless providers.
We and AT&T Wireless have entered into an equally-owned joint venture to
acquire American Cellular for approximately $2.3 billion, before expenses.
American Cellular is one of the largest independent rural cellular telephone
operators in the United States. As of June 30, 1999, American Cellular's systems
covered a total population of approximately 4.9 million and it had 374,764
subscribers, primarily in rural areas of the midwestern and eastern United
States. Following completion of this acquisition, we will operate American
Cellular's systems. American Cellular's management organization, billing system,
network infrastructure and marketing programs are substantially similar to ours.
The closing of this offering is not contingent on the completion of the American
Cellular acquisition, which we expect to occur in the first quarter of 2000.
1
<PAGE>
CELLULAR MARKETS
The following table sets forth information with respect to our existing
cellular markets and the cellular markets of American Cellular as of June 30,
1998. Net population represents total population less minority ownership
interests in our licenses. We determine market penetration by dividing total
subscribers in each of our FCC cellular licensed areas at the end of the period
by the estimated total population covered by the applicable cellular license or
authorization.
<TABLE>
<CAPTION>
TOTAL NET TOTAL MARKET
CELLULAR MARKETS POPULATION POPULATION SUBSCRIBERS PENETRATION
---------------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
DOBSON
Northern Region (portions of NY, OH and PA)............ 2,633,700 2,633,700 212,582 8.1%
Central Region (portions of KS, MO, OK and TX)......... 1,240,600 1,153,219 61,706 5.0
Western Region (portions of AZ and CA)................. 952,048 874,912 57,105 6.0
Eastern Region (portions of MD, PA and WV)............. 951,100 951,100 70,287 7.4
---------- ---------- -------
Total--Dobson Regions............................ 5,777,448 5,612,931 401,680 7.0
========== ========== =======
AMERICAN CELLULAR
Upper Midwest Region (portions of MI, MN and WI)....... 1,856,000 1,845,097 152,327 8.2
New York Region (portions of NY)....................... 1,090,000 1,077,988 94,654 8.7
Kentucky Region (portions of KY and TN)................ 1,084,000 1,084,000 70,392 6.5
Mid-Atlantic Region (portions of OH, PA and WV)........ 862,000 862,000 57,391 6.7
---------- ---------- -------
Total--American Cellular Regions................. 4,892,000 4,869,085 374,764 7.7
Dobson's proportionate interest in American
Cellular..................................... 2,446,000 2,434,543 187,382 7.7
========== ========== =======
TOTAL DOBSON ON A PROPORTIONATE BASIS.................. 8,223,448 8,047,474 589,062 7.2
========== ========== =======
</TABLE>
We have the contractual right to acquire the license for, and certain assets
related to, Pennsylvania 2 RSA and we currently control and are managing the
operation of this market for the seller pending the closing of the acquisition.
As a result, we include the population and subscriber data related to this
market in our population and subscriber data in our Eastern Region. As of
June 30, 1999, the Pennsylvania 2 RSA had a total population of approximately
90,000. In addition to our pending acquisition of Pennsylvania 2 RSA and
American Cellular, we have pending acquisitions that, if completed, would have
increased the total population served by our cellular systems by approximately
0.5 million as of June 30, 1999.
COMPETITIVE STRENGTHS
We believe that our competitive strengths are:
- our established operating history in rural and suburban markets;
- our proven acquisition and integration capabilities;
- our strategic relationship with AT&T Wireless;
- our experienced management team; and
- our ability to offer a variety of digital services, including digital
voice services, to approximately 85% of our covered population.
STRATEGY
Our strategy is to capitalize on our competitive strengths and acquire,
develop and operate rural and suburban cellular systems. The principal elements
of our strategy include:
- acquiring additional cellular operations in RSAs and in smaller MSAs that
have attractive demographics and growth trends, a favorable competitive
environment and that are located adjacent to major metropolitan areas
served by operators with which we have established, or with which we
expect to establish, strategic relationships;
- integrating the cellular systems we acquire, including American Cellular,
with our existing operations to achieve economies of scale;
2
<PAGE>
- increasing system capacity and coverage and further upgrading the cellular
systems we acquire to attract additional subscribers, to increase the use
of our systems by existing subscribers, to increase roaming activity and
to further enhance the overall efficiency of our network;
- maintaining and expanding strategic relationships with operators of
wireless systems in major MSAs near our cellular systems, including
roaming agreements that allow our subscribers to use the wireless systems
of operators in neighboring MSAs and RSAs at favorable rates;
- distinguishing ourself in our markets as the leading cellular services
provider by stressing our service quality, local sales presence and
commitment to the community;
- offering distinctive rate plans to attract subscribers who we believe are
likely to generate high monthly revenues and low churn rates; and
- maintaining high levels of customer satisfaction through a variety of
techniques, including the maintenance of 24-hour customer service.
THE OFFERING
<TABLE>
<S> <C>
Class A Common Stock Offered.............. shares
Common Stock To Be Outstanding
After This Offering....................... shares of Class A common stock
shares of Class B common stock
total shares of common stock
Voting Rights............................. The Class A common stock and the Class B common stock
generally will vote together as a single class on all
matters submitted to a vote of shareholders, except as
required by law. Each share of Class A common stock is
entitled to one vote and each share of Class B common
stock is entitled to ten votes, except that each share
of Class B common stock is entitled to only one vote
with respect to any "going private" transaction.
Use of Proceeds........................... We intend to use the net proceeds of this offering as
follows:
- $372.5 million as a capital contribution to our joint
venture with AT&T Wireless to acquire American Cellular;
- $99.3 million to redeem all outstanding shares of our
Class E preferred stock held by our current
stockholders; and
- the balance for working capital and other general
corporate purposes.
The closing of this offering is not contingent upon
completion of the American Cellular acquisition. If we
do not complete the American Cellular acquisition, we
intend to use the net proceeds allocated for that
purpose:
- to reduce our outstanding indebtedness and to
potentially redeem a portion of our senior preferred
stock;
- to pay our share of any damages to American Cellular
that may arise under the American Cellular merger
agreement; and
- for working capital and other general corporate
purposes.
Proposed Nasdaq National Market
Symbol.................................. DCEL
</TABLE>
The shares of common stock to be outstanding after this offering do not
include shares of Class A common stock that we will issue upon the exercise of
options granted under our 1996 stock option plan. We have reserved a maximum of
shares of our Class A common stock for issuance upon the exercise of
options granted under this plan. After this offering, we will have outstanding
options to purchase an aggregate of shares of our Class A common stock
at a weighted average exercise price of $ per share.
3
<PAGE>
RISK FACTORS
You should consider carefully the information set forth under the caption
"Risk Factors" beginning on page 11 and all the other information set forth in
this prospectus before you decide whether to invest in our Class A common stock.
4
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables set forth certain historical consolidated financial and
other data for:
- us as of and for each of the three years in the period ended December 31,
1998 and as of and for each of the six month periods ended June 30, 1998
and June 30, 1999;
- American Cellular as of December 31, 1998 and for the period from
February 26, 1998 through December 31, 1998 and as of and for the six
months ended June 30, 1999; and
- American Cellular's predecessor as of and for each of the two years in the
period ended December 31, 1997 and as of and for the six months ended
June 30, 1998.
We derived our summary historical consolidated financial data for each of
the three years in the period ended December 31, 1998 from our audited
consolidated financial statements included elsewhere in this prospectus. We
derived our summary historical consolidated financial data as of June 30, 1999
and for each of the six month periods ended June 30, 1998 and June 30, 1999 from
our unaudited consolidated financial statements included elsewhere in this
prospectus which, in the opinion of our management, reflect all adjustments,
consisting only of normal recurring accruals, necessary to present fairly the
data presented for such periods.
We derived American Cellular's summary historical consolidated financial
data for the period from February 26, 1998 through December 31, 1998 from its
audited consolidated financial statements included elsewhere in this prospectus.
We derived the summary historical consolidated financial data for American
Cellular's predecessor for each of the two years in the period ended
December 31, 1997 and for the six months ended June 30, 1998 from its audited
consolidated financial statements included elsewhere in this prospectus. We
derived American Cellular's summary historical consolidated financial data for
the six months ended June 30, 1999 from its unaudited condensed consolidated
financial statements included elsewhere in this prospectus, which, in the
opinion of American Cellular's management, reflect all adjustments, consisting
only of normal recurring accruals, considered necessary for a fair presentation
of the results for the interim period.
Our operating results and those of American Cellular for the six month
periods ended June 30, 1998 and June 30, 1999 are not necessarily indicative of
results that may be expected for a full year. You should read the following
historical consolidated financial data in conjunction with "Capitalization,"
"Selected Consolidated Financial and Other Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and related notes that we include elsewhere in this prospectus.
In the following tables, EBITDA represents operating income (loss) before
depreciation, amortization and nonrecurring charges. We believe that EBITDA
provides meaningful additional information concerning a company's operating
results and its ability to service its long-term debt and other fixed
obligations and to fund its continued growth. Many financial analysts consider
EBITDA to be a meaningful indicator of an entity's ability to meet its future
financial obligations, and they consider growth in EBITDA to be an indicator of
future profitability, especially in a capital-intensive industry such as
wireless telecommunications. You should not construe EBITDA as an alternative to
operating income (loss) as determined in accordance with GAAP, as an alternative
to cash flows from operating activities as determined in accordance with GAAP or
as a measure of liquidity. Because EBITDA is not calculated in the same manner
by all companies, our EBITDA may not be comparable to other similarly titled
measures of other companies. EBITDA margin represents EBITDA as a percentage of
total operating revenues.
We determine market penetration by dividing our total subscribers at the end
of the period by our estimated total population. We calculate average monthly
cellular churn rates based on the number of cellular subscriber cancellations
during the period as a percentage of the weighted average total cellular
subscribers for the period. Average monthly revenues per cellular subscriber
exclude equipment sales and other revenues. For a more complete description of
the calculation of average monthly revenue per cellular subscriber, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Revenues."
5
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
-------- --------- --------- --------- --------
(UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SHARE AND PER
SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues:
Service revenues........................................ $ 17,593 $ 38,410 $ 69,402 $ 28,633 $ 77,017
Roaming revenues........................................ 7,852 26,263 66,479 25,856 63,305
Equipment sales and other revenues...................... 1,494 2,041 4,154 1,319 6,018
-------- --------- --------- --------- --------
Total operating revenues.............................. 26,939 66,714 140,035 55,808 146,340
-------- --------- --------- --------- --------
Operating expenses:
Cost of service......................................... 6,119 16,431 33,267 12,731 22,077
Cost of equipment....................................... 2,571 4,046 8,360 2,629 11,859
Marketing and selling................................... 4,462 10,669 22,393 9,279 21,710
General and administrative.............................. 3,902 11,555 26,051 9,550 26,068
Depreciation and amortization........................... 5,241 16,798 47,110 16,543 69,900
-------- --------- --------- --------- --------
Total operating expenses.............................. 22,295 59,499 137,181 50,732 151,614
-------- --------- --------- --------- --------
Operating income (loss)................................... 4,644 7,215 2,854 5,076 (5,274)
Interest expense.......................................... (4,284) (27,640) (38,979) (17,351) (55,528)
Other income (expense), net............................... (1,503) 2,777 3,858 2,792 1,903
Minority interests in income of subsidiaries.............. (675) (1,693) (2,487) (1,381) (1,480)
Income tax benefit........................................ 593 3,625 11,469 2,133 22,944
-------- --------- --------- --------- --------
Loss from continuing operations before
extraordinary items..................................... (1,225) (15,716) (23,285) (8,731) (37,435)
-------- --------- --------- --------- --------
Income (loss) from discontinued operations................ 331 332 (27,110) (3,910) (25,779)
Extraordinary items....................................... (527) (1,350) (2,166) (2,643) --
-------- --------- --------- --------- --------
Net loss.................................................. (1,421) (16,734) (52,561) (15,284) (63,214)
Dividends on preferred stock.............................. (849) (2,603) (23,955) (10,519) (31,872)
-------- --------- --------- --------- --------
Net loss applicable to common stockholders................ $ (2,270) $ (19,337) $ (76,516) $ (25,803) $(95,086)
======== ========= ========= ========= ========
Net loss applicable to common stockholders per common
share................................................... $ $ $ $ $
======== ========= ========= ========= ========
Weighted average common shares outstanding................
======== ========= ========= ========= ========
OTHER FINANCIAL DATA:
EBITDA.................................................... $ 9,885 $ 24,013 $ 49,964 $ 21,619 $ 64,626
EBITDA margin............................................. 36.7% 36.0% 35.7% 38.7% 44.2%
Cash flows provided by (used in) operating activities..... $ 5,239 $ 6,908 $ 28,024 $ (2,280) $ 2,587
Cash flows used in investing activities................... (43,894) (217,640) (999,063) (193,589) (66,639)
Cash flows provided by financing activities............... 38,904 212,505 990,610 202,450 44,579
Capital expenditures...................................... 13,536 17,773 55,289 13,927 31,181
OTHER DATA:
Cellular subscribers (at period end)...................... 33,955 100,093 352,005 151,249 401,680
Cellular penetration (at period end)...................... 5.8% 6.1% 6.8% 5.8% 7.0%
Average monthly cellular churn rates...................... 1.8% 1.9% 2.0% 1.8% 1.8%
Average monthly revenues per cellular subscriber,
excluding
roaming revenues........................................ $ 48 $ 41 $ 40 $ 39 $ 34
Average monthly revenues per cellular subscriber,
including
roaming revenues........................................ $ 70 $ 69 $ 79 $ 74 $ 62
Cell sites (at period end)................................ 67 135 414 210 447
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
1999
----------------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 2,850
Net fixed assets.......................................... 182,157
Total assets.............................................. 1,668,013
Total debt................................................ 1,041,556
Mandatorily redeemable preferred stock.................... 511,643
Stockholders' deficit..................................... (251,869)
</TABLE>
6
<PAGE>
AMERICAN CELLULAR CORPORATION
<TABLE>
<CAPTION>
PREDECESSOR AMERICAN CELLULAR
---------------------------------- ---------------------------------
PERIOD FROM
YEAR ENDED SIX MONTHS FEBRUARY 26, 1998 SIX MONTHS
DECEMBER 31, ENDED (DATE OF FORMATION) ENDED
-------------------- JUNE 30, THROUGH JUNE 30,
1996 1997 1998 DECEMBER 31, 1998 1999
--------- -------- ----------- ------------------- -----------
(UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues........................... $ 112,616 $181,000 $108,670 $ 137,487 $127,364
Operating expenses:
Cost of service............................ 29,571 48,691 20,911 25,995 11,099
Cost of equipment.......................... 10,073 12,841 5,365 7,271 8,017
Selling, general and administrative........ 34,502 53,485 30,230 37,625 35,518
Depreciation and amortization.............. 19,537 28,759 17,553 45,569 47,911
Nonrecurring charges....................... -- -- 4,889 4,355 --
--------- -------- -------- ----------- --------
Total operating expenses................. 93,683 143,776 78,948 120,815 102,545
--------- -------- -------- ----------- --------
Operating income............................. $ 18,933 $ 37,224 $ 29,722 $ 16,672 $ 24,819
========= ======== ======== =========== ========
OTHER FINANCIAL DATA:
EBITDA....................................... $ 38,470 $ 65,983 $ 52,164 $ 66,596 $ 72,730
EBITDA margin................................ 34.2% 36.5% 48.0% 48.4% 57.1%
Cash flows provided by operating
activities................................. $ 39,371 $ 49,026 $ 11,665 $ 35,295 $ 20,692
Cash flows used in investing activities...... (200,969) (36,284) (80,327) (1,512,745) (20,923)
Cash flows provided by (used in) financing
activities................................. 138,518 (51,749) 58,765 1,511,465 (1,417)
Capital expenditures......................... 29,470 25,717 20,517 24,260 33,934
OTHER DATA:
Cellular subscribers (at period end)......... 139,800 243,700 286,000 334,500 374,800
Cellular penetration (at period end)......... 3.6% 5.3% 5.9% 6.8% 7.7%
Average monthly cellular churn rates......... 1.6% 1.8% 1.4% 1.8% 1.7%
</TABLE>
7
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA
We derived the following summary unaudited pro forma consolidated financial
data from the unaudited pro forma consolidated financial statements included
elsewhere in this prospectus. The summary unaudited pro forma consolidated
financial data are based on currently available information and assumptions that
we believe are reasonable. The summary unaudited pro forma consolidated
financial data do not purport to represent what our results of operations would
have been if the pro forma transactions had been completed on the dates
indicated, nor do they purport to indicate our future financial position or
results of operations. The summary unaudited pro forma consolidated financial
data give effect to the particular transactions, as of the dates, described in
"Unaudited Pro Forma Consolidated Financial Data." You should read the summary
unaudited pro forma consolidated financial data in conjunction with
"Capitalization," "Unaudited Pro Forma Consolidated Financial Data," "Selected
Consolidated Financial and Other Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
related notes that we include elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
--------------------------- ----------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Operating revenues:
Service revenues........................................ $ 69,402 $ 134,188 $ 77,017 $ 77,017
Roaming revenues........................................ 66,479 94,514 63,305 63,305
Equipment sales and other revenues...................... 4,154 11,601 6,018 6,018
--------- --------- -------- --------
Total operating revenues.............................. 140,035 240,303 146,340 146,340
--------- --------- -------- --------
Operating costs and expenses:
Cost of services........................................ 33,267 45,038 22,077 22,830
Cost of equipment....................................... 8,360 18,804 11,859 11,859
Marketing and selling................................... 22,393 37,323 21,710 21,710
General and administrative.............................. 26,051 42,412 26,068 26,068
Depreciation and amortization........................... 47,110 117,049 69,900 69,467
--------- --------- -------- --------
Total operating expenses.............................. 137,181 260,626 151,614 151,934
--------- --------- -------- --------
Operating income (loss)................................... 2,854 (20,323) (5,274) (5,594)
Interest expense.......................................... (38,979) (90,043) (55,528) (50,299)
Equity in loss of unconsolidated subsidiary............... -- (27,750) -- (13,852)
Other income, net......................................... 3,858 3,539 1,903 1,903
--------- --------- -------- --------
Loss before minority interests and taxes.................. (32,267) (134,577) (58,899) (67,842)
Minority interests in income of subsidiaries.............. (2,487) (2,487) (1,480) (1,480)
Income tax benefit........................................ 11,469 41,539 22,944 21,078
--------- --------- -------- --------
Loss from continuing operations........................... (23,285) (95,525) (37,435) (48,244)
Dividends on preferred stock.............................. (23,955) (57,962) (31,872) (31,280)
--------- --------- -------- --------
Loss from continuing operations applicable to
common stockholders....................................... $ (47,240) $(153,487) $(69,307) $(79,524)
========= ========= ======== ========
Loss from continuing operations applicable to common
stockholders per common share............................. $ $ $ $
========= ========= ======== ========
Weighted average common shares outstanding................
========= ========= ======== ========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
--------------------------- ----------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
EBITDA.................................................... $ 49,964 $ 96,726 $ 64,626 $ 63,873
EBITDA margin............................................. 35.7% 40.3% 44.2% 43.6%
OTHER DATA:
Cellular subscribers (at period end)...................... 352,005 352,005 401,680 401,680
Cellular penetration (at period end)...................... 6.8% 6.8% 7.0% 7.0%
Average monthly cellular churn rates...................... 2.0% 1.7% 1.8% 1.8%
Average monthly revenues per cellular subscriber,
excluding roaming revenues.............................. $ 40 $ 36 $ 34 $ 34
Average monthly revenues per cellular subscriber,
including roaming revenues.............................. $ 79 $ 61 $ 62 $ 62
Cell sites (at period end)................................ 414 414 447 447
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-----------------------
HISTORICAL PRO FORMA
---------- ----------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 2,850 $ 2,850
Net fixed assets.......................................... 182,157 157,157
Total assets.............................................. 1,668,013 2,009,767
Total debt................................................ 1,041,556 1,054,644
Mandatorily redeemable preferred stock.................... 511,643 426,643
Stockholders' equity (deficit)............................ (251,869) 209,422
</TABLE>
9
<PAGE>
SUMMARY UNAUDITED PROPORTIONATE DATA
The following table sets forth summary unaudited proportionate data of us
and American Cellular on a proportionate combined basis, as adjusted for the pro
forma adjustments described in "Unaudited Pro Forma Consolidated Financial Data"
and "Unaudited Proportionate Adjusted Statements of Operations." The
proportionate presentation is an arithmetic combination of:
- the relevant pro forma data of our consolidated subsidiaries adjusted to
exclude the results attributable to the outstanding minority interests in
our subsidiaries; and
- our 50% share of the pro forma operating results of American Cellular
attributable to our interest in the American Cellular joint venture.
The proportionate presentation has not been prepared in accordance with GAAP and
is not intended to replace our unaudited pro forma consolidated financial data
prepared and presented in accordance with the rules and regulations of the
Commission. Under GAAP, our investment in the American Cellular joint venture
will be accounted for using the equity method of accounting and will be
reflected in a single line item entitled "Investment in unconsolidated
subsidiary" in our balance sheet and "Equity in income (loss) of unconsolidated
subsidiary" in our statement of operations. To the extent that the joint venture
incurs losses in the future, our "Investment in unconsolidated subsidiary" will
be reduced. Because we will account for our interest in the American Cellular
joint venture using the equity method of accounting, our statement of operations
will reflect only our 50% share in the net income or loss of the joint venture.
We are presenting the proportionate data to facilitate a better understanding of
the financial and operating data attributable to our substantial investment in
American Cellular.
EBITDA, on a proportionate basis, includes our pro forma EBITDA, as adjusted
to exclude the portion of our EBITDA attributable to the outstanding minority
interests in our subsidiaries, plus our 50% interest in American Cellular's pro
forma EBITDA. We explain our reasons for presenting EBITDA generally in this
prospectus summary under the caption "Summary Historical Consolidated Financial
and Other Data."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 SIX MONTHS ENDED JUNE 30, 1999
------------------------------------- -------------------------------------
HISTORICAL PROPORTIONATE HISTORICAL PROPORTIONATE
----------------- ----------------- ----------------- -----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C>
SUPPLEMENTAL PROPORTIONATE DATA:
Operating revenues.................... $ 140,035 $ 349,270 $ 146,340 $ 201,962
EBITDA................................ $ 49,964 $ 146,716 $ 64,626 $ 97,195
EBITDA margin......................... 35.7% 42.0% 44.2% 48.1%
Cellular subscribers (at period
end)................................ 352,005 519,255 401,680 589,062
Average monthly revenue per
subscriber, excluding roaming
revenues............................ $ 40 $ 40 $ 34 $ 32
Average monthly revenue per
subscriber, including roaming
revenues............................ $ 79 $ 61 $ 62 $ 58
Cash and cash equivalents................................................... $ 2,850 $ 19,050
Net fixed assets............................................................ 182,157 270,757
Total assets................................................................ 1,668,013 3,362,613
Total debt.................................................................. 1,041,556 1,826,556
Mandatorily redeemable preferred stock...................................... 511,643 426,643
</TABLE>
10
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW
BEFORE YOU DECIDE TO BUY OUR CLASS A COMMON STOCK. THESE ARE NOT THE ONLY RISKS
AND UNCERTAINTIES FACING US. ADDITIONAL RISKS AND UNCERTAINTIES WE EITHER ARE
NOT PRESENTLY AWARE OF OR BELIEVE ARE NOT MATERIAL ALSO MAY ADVERSELY AFFECT OUR
BUSINESS OPERATIONS. IF ANY OF THESE RISKS ACTUALLY OCCURS, OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD SUFFER. AS A RESULT, THE
TRADING PRICE OF OUR CLASS A COMMON STOCK COULD FALL, AND YOU COULD LOSE ALL OR
PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR ACQUISITION STRATEGY
IF WE ARE UNABLE TO COMPLETE THE AMERICAN CELLULAR ACQUISITION, WE MAY BE LIABLE
FOR SUBSTANTIAL DAMAGES OWED TO AMERICAN CELLULAR AND, WHETHER OR NOT WE ARE
LIABLE FOR DAMAGES, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE
SUBSTANTIALLY.
The closing of this offering is not contingent upon completion of the
American Cellular acquisition, which is not expected to occur until after we
complete this offering. If we are unable to complete the American Cellular
acquisition, we would not receive any of the benefits or synergies we expect the
acquisition will provide. In addition, the American Cellular acquisition is
subject to a number of closing conditions, including approval by the FCC. If the
joint venture defaults in its obligation to close the American Cellular
acquisition, it will be required to pay up to $500.0 million of damages incurred
by American Cellular as a result of that default. However, the joint venture is
only required to pay $100.0 million of liquidated damages to American Cellular
if the joint venture's default results from the refusal of its bank lenders to
provide funds under the joint venture's proposed credit facility for reasons
other than:
- the joint venture's breach of its obligations to the bank lenders;
- the joint venture's failure to satisfy funding conditions that are within
its control; or
- the joint venture's inability to reach a definitive loan agreement with
its bank lenders.
We will be required to pay our share of all damages that the joint venture may
be required to pay to American Cellular. See "The American Cellular
Acquisition." As a result, the trading price of our common stock could decline
substantially, and you could lose all or part of your investment.
WE WILL SHARE CONTROL OF THE AMERICAN CELLULAR JOINT VENTURE WITH AT&T WIRELESS,
WHICH MAY LIMIT OUR FLEXIBILITY IN MAKING MANAGEMENT DECISIONS AFFECTING THE
JOINT VENTURE AND AMERICAN CELLULAR.
Following the American Cellular acquisition, we and AT&T Wireless will each
own a 50% interest in the joint venture that will own American Cellular. A
management committee of four persons, two selected by us and two by AT&T
Wireless will govern the joint venture. The management committee will act by a
majority vote except for specified matters, which will require unanimous
consent.
Even though we will be responsible for the day-to-day operation of American
Cellular, the approval requirements imposed by the joint venture agreement may
limit our flexibility and ability to implement strategies and tactics that we
believe are in our and the joint venture's best interests. In the event the
joint venture is unsuccessful, we may be required to unwind those of our
operations that had been integrated with American Cellular, which could be
costly and disruptive to our business.
11
<PAGE>
NEITHER WE NOR AT&T WIRELESS IS OBLIGATED TO OFFER TO EACH OTHER OR TO THE JOINT
VENTURE ANY BUSINESS OPPORTUNITIES THAT MAY COME TO THE ATTENTION OF EITHER OF
US.
The American Cellular joint venture agreement will not require that either
we or AT&T Wireless present each other or American Cellular any business
opportunities that may come to the attention of either of us. AT&T Wireless has
other relationships and joint ventures with other wireless operators. Neither we
nor AT&T Wireless intend that our relationship or our joint venture to acquire
American Cellular will create any special duties between us, or between us and
the joint venture. As a result, we will continue to compete with AT&T Wireless
for business opportunities outside of American Cellular's market areas.
WE MAY HAVE TO CONTRIBUTE ADDITIONAL FUNDS TO OUR AMERICAN CELLULAR JOINT
VENTURE TO PROTECT OUR INVESTMENT IN THE JOINT VENTURE.
American Cellular has required, and will likely continue to require,
substantial capital to further develop, expand and upgrade its cellular systems.
American Cellular has budgeted approximately $70 million for capital
expenditures in 2000. We cannot be certain that the American Cellular joint
venture will generate sufficient cash flows from operations or otherwise have
sufficient access to capital to meet all of its debt service, capital
expenditure, working capital or other operating needs. If it does not, we may be
required to fund our 50% share of any capital needs of the American Cellular
joint venture in order to protect our substantial investment in the joint
venture.
THE NUMBER OF CELLULAR SYSTEMS AND BUSINESSES AVAILABLE FOR ACQUISITION IS
LIMITED. THE CELLULAR SYSTEMS WE ACQUIRE MAY BE UNSUCCESSFUL AND WE MAY
EXPERIENCE DIFFICULTY INTEGRATING THEM INTO OUR OPERATIONS.
A substantial part of our growth has been and is expected to continue to be
from acquisitions of cellular systems or businesses. There are a limited number
of cellular systems available for acquisition that meet our criteria and the
competition among purchasers for these cellular systems is increasing. In
addition, the cellular systems we acquire may not perform as we expect. As a
result, the operating results of cellular systems we acquire may not support the
indebtedness we incur or equity we issue to acquire, or the capital expenditures
needed to develop, those systems.
The expansion of our operations, including through the American Cellular
acquisition, 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. The
integration of acquired cellular systems and businesses may 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 and therefore must be replaced. 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 integrate successfully the cellular systems or
businesses we may acquire, including American Cellular. Our failure to integrate
and manage recently acquired cellular systems, including American Cellular,
could have a material adverse effect on our business, operating results and
financial condition.
WE MAY LOSE THE BENEFITS OF IMPROVEMENTS WE HAVE MADE TO CELLULAR SYSTEMS WE
MANAGE PENDING THEIR ACQUISITION BY US IF WE DO NOT COMPLETE THOSE
ACQUISITIONS.
From time to time we enter into agreements to manage the operations of
cellular systems we have agreed to acquire pending the closing of the
acquisition and we frequently provide funding for capital
12
<PAGE>
expenditures in these cellular systems prior to their acquisition by us. If any
of these pending acquisitions does not close, we may be forced to dispose of any
improvements we have made, redeploy them in our other cellular systems or
abandon them entirely. We could incur costs and expenses in connection with any
disposal, redeployment or abandonment, some of which could be material.
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF NET LOSSES. OUR FUTURE OPERATING RESULTS ARE UNCERTAIN AND
COULD FLUCTUATE SIGNIFICANTLY ON A QUARTERLY AND ANNUAL BASIS.
We sustained net losses from continuing operations of $37.4 million for the
six months ended June 30, 1999, $23.3 million in 1998, $15.7 million in 1997 and
$1.2 million in 1996. On a pro forma basis after giving effect to the
transactions described in our unaudited pro forma consolidated financial data
appearing elsewhere in this prospectus, we would have incurred a loss from
continuing operations of $48.2 million for the six months ended June 30, 1999
and $95.5 million for 1998. We expect to incur significant losses during the
next several years while we continue to acquire, develop and construct our
cellular systems and grow our subscriber base. Similarly, we expect American
Cellular to generate net losses over the next several years, and we will record
our proportionate share of those losses in the line item entitled "Investment in
unconsolidated subsidiary" in our balance sheet and "Equity in income (loss) of
unconsolidated subsidiary" in our statement of operations. Moreover, we have a
significant amount of amortization costs relating to license acquisition costs
from our past acquisitions. We expect that the losses we will recognize from our
investment in American Cellular and the amortization of our license acquisition
costs, together with our substantial interest expense and preferred stock
dividend requirements, will cause us to continue to experience net losses for
the foreseeable future.
In addition, we believe that our future operating results and cash flows
will be subject to quarterly and annual fluctuations due to many factors,
several of which are outside our control. These factors include the following:
- increased costs we may incur in connection with the buildout of our
networks and the further development, expansion and upgrade of our
cellular systems and those we may acquire;
- fluctuations in the demand for our services and equipment and wireless
services generally;
- increased competition, including price competition, which has led to
declining average monthly revenues per subscriber for us and our
competitors;
- changes in our regulatory environment;
- the cost and availability of equipment components; and
- changes in general economic conditions.
We cannot assure you that we will achieve or sustain profitability. To the
extent our quarterly or annual results of operations do not meet the
expectations of investors and securities analysts, our stock price could fall
and you could lose all or part of your investment.
WE ARE HIGHLY DEPENDENT ON OUR SUBSTANTIAL RELATIONSHIP WITH AT&T WIRELESS AND
OUR OTHER ROAMING PARTNERS.
Our results of operations are highly dependent on our substantial
relationship with AT&T Wireless and our other roaming partners. Roaming revenues
accounted for approximately 43% of our total revenues for the six months ended
June 30, 1999. AT&T Wireless's customers traveling through our areas accounted
for approximately 35% of our roaming revenues, or approximately 15% of our total
revenues, in the six months ended June 30, 1999. The roaming rates that we
receive under our roaming agreements with AT&T Wireless and our other roaming
partners will decline over the next several years. As a result, if we are unable
to lower our operating costs or increase roaming call volume, our operating
income may decline. Our roaming agreement with AT&T Wireless has a five-year
term, which expires in January 2003, and may be terminated by AT&T Wireless
prior to its expiration if we
13
<PAGE>
breach any of its material terms. We may be unable to renegotiate our roaming
agreements when they expire or to obtain additional roaming agreements with
other wireless providers, the failure of which could lead to a substantial
decline in our revenues, profits and the trading price of our common stock.
WE HAVE A SIGNIFICANT AMOUNT OF INDEBTEDNESS THAT MAY LIMIT OUR ABILITY TO MEET
OUR DEBT SERVICE AND DIVIDEND OBLIGATIONS, TO BORROW ADDITIONAL MONEY AND TO
SURVIVE A DOWNTURN IN OUR BUSINESS.
We have a significant amount of indebtedness and we expect that we will
incur significant additional indebtedness in the future as a result of the
buildout and upgrade of our networks and future acquisitions. At June 30, 1999,
on a pro forma basis after giving effect to the transactions described in our
unaudited pro forma consolidated financial data appearing elsewhere in this
prospectus, we would have had approximately $1.0 billion of consolidated
indebtedness, approximately $426.6 million aggregate liquidation preference of
senior preferred stock and consolidated stockholders' equity of approximately
$209.4 million. Our current and future levels of debt could have important
consequences to you, including the following:
- we must use a substantial portion of our cash flows from operations to
make principal and interest payments on our indebtedness, thereby reducing
funds that would otherwise be available to us for working capital, capital
expenditures, future business opportunities and other purposes;
- we may not be able to obtain additional financing for future acquisitions,
working capital, capital expenditures and other purposes on terms
favorable to us or at all;
- borrowings under our bank credit facilities are at variable interest
rates, which could cause us to be vulnerable to increases in interest
rates;
- we may be more highly leveraged than many of our competitors, which may
place us at a competitive disadvantage;
- we may be limited in our flexibility to react to changes in our business;
and
- our debt service requirements and the terms of our senior preferred stock
could prevent us from paying cash dividends on our common stock.
We cannot assure you that we will generate sufficient cash flow to service
current or future debt requirements, dividends on our preferred stock or working
capital and capital expenditure requirements.
WE EXPECT TO REQUIRE SUBSTANTIAL AMOUNTS OF CAPITAL IN THE FUTURE.
We have required, and will likely continue to require, substantial capital
to further develop, expand and upgrade our cellular systems and those we may
acquire. We had capital expenditures of $31.2 million during the first six
months of 1999 and we expect our capital expenditures for the last six months of
1999 to be approximately $41.0 million, excluding acquisitions. We have budgeted
approximately $115.0 million to $120.0 million for capital expenditures in 2000.
We may also require additional financing for future acquisitions and to
refinance our debt at its final maturities and to meet our mandatory redemption
provisions on our senior preferred stock. Our sources of additional capital may
include public and private equity and debt financings, including vendor
financing. The extent of the additional financing that we may require will
depend on the success of our operations. We may not be able to obtain additional
financing on terms acceptable to us and within the limitations contained in the
instruments governing our indebtedness and our senior preferred stock, or any
future financing arrangements. Moreover, our issuance of additional equity
securities may be dilutive to our stockholders. If we cannot raise sufficient
funds to meet our planned growth or debt and senior preferred stock repayment
obligations, including upon a change in control, we may delay or abandon some or
all of our planned expansion or seek to sell assets to raise additional funds,
which could materially limit our ability to compete in the cellular industry and
adversely affect the trading price for our Class A common stock.
14
<PAGE>
THE RESTRICTIVE COVENANTS IN OUR DEBT AND SENIOR PREFERRED STOCK INSTRUMENTS MAY
LIMIT OUR OPERATING FLEXIBILITY.
The instruments governing our indebtedness, including our credit facilities,
and the certificates of designation governing our senior preferred stock, impose
significant operating and financial restrictions on us. These restrictions
significantly limit, among other things, our ability and that of our
subsidiaries to incur additional indebtedness, pay dividends, repay junior
indebtedness prior to stated maturities, sell assets, make investments, engage
in transactions with stockholders and affiliates, create liens and engage in
some types of mergers or acquisitions. In addition, our credit facilities
require us to maintain specified financial ratios and substantially all our
assets are subject to liens securing our credit facilities. These restrictions
could limit our ability 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 to
comply with these restrictions could lead to a default under the terms of the
relevant indebtedness even though we are able to meet debt service and dividend
obligations.
If there were an event of a default under our credit facilities or other
indebtedness, the holders of the affected indebtedness could elect to declare
all of that indebtedness to be due and payable which, in turn, could cause all
of our other indebtedness could become due and payable. We cannot assure you
that we and our subsidiaries would have sufficient funds available to make these
payments or that we would be able to obtain sufficient funds from alternative
sources to make these payments. Even if we could obtain additional financing, we
cannot assure you that the terms would be favorable to us. If the amounts
outstanding under our credit facilities were accelerated, our lenders could
proceed against our assets and the stock of our subsidiaries. As a result, any
event of default could have a material adverse effect on our business and
financial condition, and could cause our stock price to decline substantially.
If this occurs, you could lose all or part of your investment.
WE INTEND TO DISTRIBUTE, PRIOR TO THIS OFFERING, THE STOCK OF OUR SUBSIDIARY,
LOGIX, TO OUR CURRENT STOCKHOLDERS. THE DISTRIBUTION OF THE LOGIX STOCK MAY
HAVE ADVERSE TAX CONSEQUENCES TO US.
Prior to the consummation of this offering, we intend to distribute the
stock of our subsidiary, Logix, to the current holders of our common stock.
Purchasers of our Class A common stock in this offering will not participate in
the distribution. We do not intend to seek a ruling from the Internal Revenue
Service regarding the tax consequences to us as a result of the distribution of
Logix stock. We will seek to obtain an opinion that is acceptable to us and our
shareholders from our independent public accountants, Arthur Andersen LLP, that
this distribution should not cause us to realize taxable income. Even if we
receive a favorable tax opinion, that opinion will not be binding on the
Internal Revenue Service. If the Internal Revenue Service should successfully
assert that our distribution of Logix stock was a taxable transaction, we would
realize taxable income equal to the amount by which the value of Logix at the
time of the distribution exceeded our tax basis in Logix. We believe that our
accumulated net operating losses for federal income tax purposes would
significantly offset the amount of any additional taxable income attributable to
the distribution of the Logix stock. To the extent our accumulated net operating
losses are not sufficient to offset the amount of additional taxable income, we
would be required to pay income tax based upon the amount by which any
additional taxable income exceeded our available net operating losses, plus any
applicable penalties and interest. In this event our ability to utilize net
operating losses to offset future taxable income, if any, would be diminished or
eliminated.
WE DEPEND ON THIRD-PARTY SERVICE MARKS TO MARKET OUR PRODUCTS AND SERVICES. THE
LOSS OF THE RIGHT TO USE THESE SERVICE MARKS COULD ADVERSELY AFFECT OUR
BUSINESS.
We use the registered service marks CELLULAR ONE-Registered Trademark- and
AIRTOUCH-TM- CELLULAR-Registered Trademark- to promote the services we offer in
many of our license areas. American Cellular uses the registered
15
<PAGE>
service mark CELLULAR ONE-Registered Trademark- for all of its services. We have
contracts with Cellular One Group and Vodafone AirTouch PLC that govern our use
of the CELLULAR ONE-Registered Trademark- and AIRTOUCH-TM-
CELLULAR-Registered Trademark- service marks, respectively. Under these
agreements, we must meet specified operating and service quality standards for
our systems. If the owners of these service marks terminate our license
agreements because we fail to meet the applicable operating or service quality
standards, or if the names CELLULAR ONE-Registered Trademark- or AIRTOUCH-TM-
CELLULAR-Registered Trademark- were to suffer diminished marketing appeal, our
ability both to attract new subscribers and to retain existing subscribers in
the applicable markets could be materially impaired.
OUR RELIANCE ON ONE VENDOR FOR OUR CUSTOMER BILLING MAY ADVERSELY AFFECT THE
TIMING OF OUR RECEIPT OF FUNDS.
Both we and American Cellular rely on the same vendor to produce our
customer billings. If this billing vendor were to encounter significant problems
for any reason in the performance of its billing operations, our ability to
generate customer billings would be materially impaired and could result in
lost, inaccurate and late billings and payments.
OUR BUSINESS DEPENDS ON A LIMITED NUMBER OF KEY PERSONNEL.
We are managed by a small number of management and operating personnel. The
loss of some 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.
POTENTIAL FAILURE OF COMPUTER SYSTEMS TO BECOME YEAR 2000 COMPLIANT MAY
ADVERSELY AFFECT OUR OPERATIONS.
Many computer systems and applications, including those embedded in
equipment and facilities, use two digit rather than four digit date fields to
designate an applicable year. As a result, these systems and applications may
not properly recognize the year 2000 or process data that includes it,
potentially causing data miscalculations, inaccuracies, operational malfunctions
or failures. In our business, these failures could result in our inability to
deliver calls to customers or to bill customers for the services that we provide
to them.
If our automated systems and those of our vendors are not year 2000
compliant, we could experience interruptions in services provided by and to us,
which could have a material adverse effect on our business, financial condition
and results of operations. Similarly, if the automated systems of American
Cellular and those of its vendors are not year 2000 compliant, American Cellular
could experience interruptions in service provided by and to American Cellular.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Impact of Year 2000 Issue."
RISKS RELATED TO OUR INDUSTRY
WE FACE INTENSE COMPETITION IN OUR BUSINESS AND MANY OF OUR COMPETITORS HAVE
GREATER RESOURCES THAN DO WE.
We compete with providers of cellular services, personal communications
services, or PCS, and other wireless services, including enhanced specialized
mobile radio networks, or ESMR. Currently, the FCC authorizes two cellular
licensees and up to six PCS licensees to operate in each license area. In
addition, Nextel Communications, Inc. utilizes ESMR licenses. We also compete,
although to a lesser extent, with resellers, paging companies and landline
telephone service providers. Many of our existing and potential competitors have
substantially greater financial, personnel, technical, marketing, sales and
distribution resources than we do.
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AT&T Wireless, Nextel and Sprint PCS operate substantially nationwide
networks, and Bell Atlantic Mobile Systems, VoiceStream Wireless Corporation and
Vodafone AirTouch, among others, through joint ventures and affiliation
arrangements, could operate a substantially nationwide wireless system. If any
of our roaming partners, including AT&T Wireless, were to acquire a PCS license
for any of our markets, they could build out PCS networks in our markets to
provide their customers wireless service, which would reduce our roaming
revenues. Any increased competition from PCS providers in rural markets covered
by our systems could also have the effect of further reducing the roaming rates
we could charge. Although AT&T Wireless has agreed not to build out PCS networks
in any of the markets currently served by American Cellular for five years after
the consummation of the American Cellular acquisition, AT&T Wireless is not
contractually restricted from building out a competing PCS network in our
markets. See "The American Cellular Acquisition--Operating Agreements."
We may also face competition from other technologies developed in the
future, including, but not limited to, satellite systems and services provided
over spectrum allocated by the FCC to general wireless communications services
and local multipoint distribution services. See "--Risks Related to Our
Business--We are highly dependent on our substantial relationship with AT&T
Wireless and our other roaming partners."
OUR BUSINESS COULD BE MATERIALLY AND ADVERSELY AFFECTED BY OUR FAILURE TO
ANTICIPATE AND REACT TO FREQUENT AND SIGNIFICANT TECHNOLOGICAL CHANGES.
The telecommunications industry is subject to rapid and significant changes
in technology. Rapid and significant changes are evidenced by:
- 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.
We may be required to select in advance one technology over another. At the
time we make our selection, it may be impossible to predict accurately which
technology may prove to be the most economic, efficient or capable of attracting
customer usage. Consequently, it is possible that we may be required to select a
technology that does not achieve widespread commercial success. Consequently,
our business, results of operations and financial condition could be materially
and adversely affected.
OUR BUSINESS IS REGULATED AND THERE IS POTENTIAL FOR ADVERSE REGULATORY CHANGE.
WE MAY BE UNABLE TO OBTAIN REGULATORY APPROVALS.
The FCC regulates the licensing, construction, operation, acquisition and
sale of our cellular systems, as well as the number of cellular and other
wireless licensees permitted in each of our markets. 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, some aspects of the Telecommunications Act of 1996 place additional
burdens upon us or subject us to increased competition and increase our costs of
doing business.
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All of our cellular licenses are subject to renewal upon expiration of each
license's initial ten-year term. Grants of cellular renewals are based upon FCC
rules establishing a presumption in favor of licensees that have complied with
their regulatory obligations during the ten-year license period. However, we
cannot assure you that the FCC will grant us any future renewal applications or
that our applications will be free from challenge.
EQUIPMENT FAILURE AND NATURAL DISASTERS MAY ADVERSELY AFFECT OUR OPERATIONS.
A major equipment failure or a natural disaster affecting our central
switching offices, our microwave links or some of our cell sites could have a
material adverse effect on our operations. Notwithstanding the insurance
coverage we have for these events, our inability to operate our cellular system
for an extended time period could result in a loss of subscribers or impair our
ability to attract new subscribers which would have a material adverse effect on
our business, results of operations and financial condition.
CONCERNS ABOUT HEALTH AND SAFETY-RELATED RISKS ASSOCIATED WITH WIRELESS
HANDSETS, AND THE POSSIBILITY OF RELATED LEGISLATION, MAY AFFECT OUR
PROSPECTS.
Media reports have suggested that radio frequency emissions from portable
wireless handsets may be linked to cancer, and may interfere with pacemakers and
other electronic medical devices. These and other health and safety-related
concerns over radio frequency emissions may have the effect of discouraging the
use of wireless handsets, which could have a material adverse effect on our
business.
Several states have proposed or enacted legislation that would limit or
prohibit the use or possession of mobile phones while driving an automobile. If
adopted, this legislation could have an adverse effect on our business.
RISKS RELATED TO THIS OFFERING
EVERETT R. DOBSON, OUR CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AND THE OTHER HOLDERS OF OUR CLASS B COMMON STOCK EFFECTIVELY CONTROL
US. THEIR INTERESTS MAY CONFLICT WITH YOURS.
Immediately following this offering, our current shareholders, including
Everett R. Dobson, our Chairman of the Board, President and Chief Executive
Officer; Russell L. Dobson, one of our directors and Everett Dobson's father;
J. W. Childs Equity Partners II, L.P., or Childs; and AT&T Wireless; will
beneficially own shares of our Class B common stock, representing
approximately % of the total voting power of our outstanding common stock
( % if the underwriters exercise their over-allotment option in full).
Everett R. Dobson will beneficially own shares of our Class B common stock,
representing approximately % of the total voting power of our outstanding
common stock, following this offering.
Shares of our Class B common stock are entitled to ten votes per share,
subject to certain exceptions. The holders of our Class B common stock have
entered into an investors agreement that enables them to appoint all of our
directors and which provides that they will vote their shares of common stock
together in a manner that will enable them to elect all of our directors and to
control the outcome of substantially all matters submitted to our stockholders
for a vote, including matters related to a change of control, except as provided
by applicable law. As a result, without the approval of the holders of our
Class B common stock, we would be unable to consummate transactions involving an
actual or potential change of control, including transactions in which you might
otherwise receive a premium for your shares over then current market prices.
THERE HAS BEEN NO PRIOR MARKET FOR OUR CLASS A COMMON STOCK. THE PRICE OF OUR
CLASS A COMMON STOCK IS LIKELY TO BE HIGHLY VOLATILE.
Prior to the offering, there has been no public market for our Class A
common stock. We cannot predict the extent to which investor interest in us will
lead to the development of an active trading market in our Class A common stock
or how liquid that market might become. The initial public
18
<PAGE>
offering price for the shares will be determined by negotiations between the
representatives of the underwriters and us and may not be indicative of prices
that will prevail in any future trading market.
The price of our Class A common stock may fluctuate substantially due to a
variety of factors, including:
- quarterly fluctuations in our operating and earnings per share results and
those of our competitors;
- changes in earnings estimates by market research analysts or our failure
to achieve results in line with or better than those anticipated by
analysts or investors;
- technological innovations or new product introductions by us or our
competitors;
- litigation;
- sales of common stock by existing holders;
- loss of key personnel; and
- economic conditions generally and in the telecommunications industry in
particular.
In addition, the stock market is subject to other factors outside our control
that can cause extreme price and volume fluctuations. Securities class action
litigation has often been brought against companies that experience volatility
in the market price of their securities. Litigation brought against us could
result in substantial costs and a diversion of management's attention and
resources, which could have a material adverse effect on our business, results
of operation and financial condition.
THE FUTURE SALE OF SHARES MAY HURT OUR MARKET PRICE.
Upon completion of the offering, we will have outstanding shares of
Class A common stock ( shares if the underwriters exercise their
over-allotment option in full) and shares of Class B common stock. A
substantial number of these shares will be freely transferable without
restriction under the Securities Act of 1933 immediately upon the expiration of
180-day lock up agreements, except for any of these shares purchased by our
"affiliates" as that term is defined in Rule 144 under the Securities Act. All
of the shares of our common stock held by our affiliates are "restricted"
securities under Rule 144 and may not be resold unless registered under the
Securities Act or sold pursuant to an applicable exemption from registration,
including the exemptions contained in Rule 144. If our stockholders sell, or if
there is a perception that they may sell, substantial amounts of our shares of
common stock in the public market following this offering, the market price of
our Class A common stock could fall. These sales or the perception that these
sales may occur might also make it more difficult for us to raise equity capital
in the future at times and prices that we deem appropriate. See "Shares Eligible
for Future Sale."
ANTI-TAKEOVER PROVISIONS COULD ADVERSELY AFFECT THE PRICE OF OUR CLASS A COMMON
STOCK.
Certain provisions of our certificate of incorporation, by-laws and Oklahoma
law could make it more difficult for a third party to acquire control of us,
even if a change of control might be beneficial to you. These provisions could
adversely affect the price of our Class A common stock.
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR
INVESTMENT.
The initial public offering price of the Class A common stock will be
substantially higher than the pro forma net tangible book value per share of the
outstanding Class A common stock. Pro forma net tangible book value represents
the amount of our tangible assets on a pro forma basis, less our total
liabilities, after giving effect to the conversion of all outstanding shares of
Class B common stock into Class A common stock. As a result, we currently expect
that you will incur immediate dilution of $
per share based upon an assumed initial public offering price of $ per share.
In the event we issue additional shares of common stock in the future, you may
experience further dilution. Furthermore, we have issued options to purchase our
Class A common stock at prices significantly below the initial public offering
price. To the extent these options are exercised, you will experience further
dilution.
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WE DO NOT ANTICIPATE PAYING DIVIDENDS IN THE FORSEEABLE FUTURE.
We currently intend to retain any future earnings for funding growth and,
therefore, we do not anticipate paying cash dividends on our common stock in the
foreseeable future. In addition, the terms of our indebtedness and our senior
preferred stock limit our ability to pay cash dividends.
THERE ARE RISKS THAT MAY MAKE IT DIFFICULT FOR US TO ACHIEVE THE OUTCOMES
PREDICTED IN OUR FORWARD-LOOKING STATEMENTS.
Many of the statements included in this prospectus, including the
description of our plans, strategies, capital expenditures, Year 2000
preparedness, pending or possible acquisitions, anticipated cost savings and
financing plans are forward-looking statements made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. You can
generally identify forward-looking statements by the use of terminology such as
"may," "will," "expect," "intend," "plan," "estimate," "anticipate," "believe,"
or similar phrases. Our actual future performance could differ materially from
these forward-looking statements. These forward-looking statements involve a
number of risks and uncertainties. Important factors that could cause actual
results to differ materially from our expectations include those risks
identified in the foregoing "Risk Factors," as well as other matters not yet
known to us or not currently considered material by us.
We caution you not to place undue reliance on these forward-looking
statements. All written and oral forward-looking statements attributable to us
or persons acting on our behalf are qualified in their entirety by those
cautionary statements.
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USE OF PROCEEDS
The net proceeds from the sale of the shares of Class A common stock we are
offering will be approximately $ ($ if the underwriters exercise their
over-allotment option in full), assuming an initial public offering price of
$ per share and after deducting underwriting discounts and commissions and
estimated offering expenses.
We intend to use $372.5 million of the net proceeds of this offering as a
capital contribution to our joint venture with AT&T Wireless. The joint venture
will use these proceeds, together with an equivalent contribution to the joint
venture by AT&T Wireless and proceeds from the joint venture's bank credit
facility, to acquire American Cellular. We intend to use $99.3 million of the
net proceeds of this offering to redeem all outstanding shares of our Class E
preferred stock held by our current stockholders, which will be issued upon
conversion of all outstanding shares of Class D preferred stock in our
recapitalization. We intend to use any remaining net proceeds for working
capital and other general corporate purposes.
The closing of this offering is not contingent upon completion of the
American Cellular acquisition. If we do not complete the American Cellular
acquisition, we intend to use the net proceeds allocated for that purpose:
- to reduce our outstanding indebtedness and to potentially redeem a portion
of our senior preferred stock;
- to pay our share of any damages to American Cellular that may arise under
the American Cellular merger agreement; and
- for working capital and other general corporate purposes.
We intend to invest the net proceeds in short-term, interest bearing,
investment grade securities pending their use as described above. See "The
American Cellular Acquisition."
DIVIDEND POLICY
We currently intend to retain all of our earnings to finance our operations,
repay indebtedness and fund future growth. We do not expect to pay any dividends
on our common stock for the foreseeable future. In addition, covenants contained
in our debt instruments and in our preferred stock limit our ability to pay cash
dividends on our common stock.
DILUTION
At June 30, 1999, we had a net tangible book value of approximately $ ,
or $ per share of Class A common stock. Net tangible book value per share
of Class A common stock at any date represents the amount of our total tangible
assets minus total liabilities divided by the total number of our outstanding
shares of Class A common stock after giving effect to the conversion of all
outstanding shares of Class B common stock into Class A common stock. After
giving effect to the sale of the shares of Class A common stock offered by this
prospectus at an assumed initial public offering price of $ per share (the
midpoint of the range shown on the cover page of this prospectus) and the
application of the estimated net proceeds as described in "Use of Proceeds," our
pro forma net tangible book value would have been approximately $ , or
$ per share. Thus, under these assumptions, purchasers of our Class A
common stock offered by this prospectus will pay $ per share and will
receive shares with a net tangible book value per share of Class A common stock
of $ , which represents an immediate dilution of $ per share.
The following table illustrates this per share dilution:
<TABLE>
<S> <C>
Assumed initial public offering price per share............. $
------------
Net tangible book value per share of Class A common stock at
June 30, 1999.............................................
Increase in pro forma net tangible book value per share of
Class A common stock attributable to new investors........
------------
Pro forma net tangible book value per share of Class A
common stock after this offering..........................
------------
Dilution per share of Class A common stock to new
investors................................................. $
============
</TABLE>
The foregoing computation of dilution excludes an aggregate of approximately
shares of our Class A common stock purchasable at a weighted average
exercise price of $ per share upon the exercise of outstanding stock
options, of which are currently exercisable.
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CAPITALIZATION
The following table sets forth our consolidated capitalization as of
June 30, 1999 adjusted to reflect our recapitalization described below, and on a
pro forma basis to reflect:
- the consummation of this offering of shares of Class A common stock at
an assumed offering price of $ per share;
- our acquisition of a 50% interest in the American Cellular joint venture
and its acquisition of American Cellular;
- the redemption of all of our outstanding Class E preferred stock;
- the establishment of a new credit facility to replace the existing credit
facilities of our subsidiary, Dobson Operating Company, or DOC, and Dobson
Cellular Operations Company, or DCOC, subsidiaries;
- the purchase of all $160.0 million aggregate principal amount of our
11 3/4% senior notes using proceeds provided by our new bank credit
facility;
- the purchase by our subsidiary, Dobson Tower Company, of cellular towers
from Sygnet and the subsequent sale of those towers to an unaffiliated
company and the use of the proceeds for the repayment of debt and
redemption of related preferred stock of Dobson Tower Company in October
1999; and
- the distribution, prior to the consummation of this offering, of all of
the outstanding capital stock of our subsidiary, Logix, to our current
shareholders.
You should read this table together with "Selected Consolidated Financial
and Other Data," "Unaudited Pro Forma Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements and notes thereto included
elsewhere in this prospectus.
If we do not complete the American Cellular acquisition, cash and cash
equivalents on a pro forma basis would increase by $372.5 million. In that
event, we intend to use the net proceeds allocated for the American Cellular
joint venture as discussed under "Use of Proceeds."
The term "restricted investments" includes securities that we have pledged
to secure interest payments on our Dobson/Sygnet 12 1/4% senior notes. The
June 30, 1999 pro forma information does not reflect the consummation of our
pending acquisitions, which have an aggregate purchase price of $131.0 million.
We expect to fund these acquisitions by drawing on our bank facilities.
The following table excludes shares of Class A common stock that we will
issue upon the exercise of options granted under our 1996 stock option plan. We
have reserved a maximum of shares of our Class A common stock for issuance
upon the exercise of options granted under this plan. After this offering, we
will have outstanding options to purchase an aggregate of shares of our
Class A common stock at a weighted average exercise price of $ per share.
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<TABLE>
<CAPTION>
JUNE 30, 1999
---------------------------------
AS ADJUSTED
FOR RECAPITALIZATION PRO FORMA
-------------------- ----------
(UNAUDITED)
($ IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 2,850 $ 2,850
Restricted investments...................................... 56,602 56,602
---------- ----------
Total cash and restricted investments..................... $ 59,452 $ 59,452
========== ==========
Long term debt, including current maturities:
Credit facilities:
Existing DOC and DCOC credit facilities................. $ 258,000 $ --
New credit facility..................................... -- 461,000
Existing Dobson/Sygnet credit facility.................. 402,000 389,588
Dobson/Sygnet notes....................................... 200,000 200,000
Senior notes.............................................. 160,000 --
Other long-term debt...................................... 4,056 4,056
---------- ----------
Total long-term debt.................................... 1,024,056 1,054,644
---------- ----------
Minority interests.......................................... 27,212 19,512
---------- ----------
12 1/4% senior preferred stock, $1.00 par value, 734,000
shares authorized, 256,643 shares issued and outstanding
on an as adjusted and pro forma basis..................... 256,643 256,643
13% senior preferred stock, $1.00 par value, 500,000 shares
authorized, 170,000 shares issued and outstanding on an as
adjusted and pro forma basis.............................. 170,000 170,000
Class E preferred stock, $1.00 par value, 85,000 shares
authorized, 75,093.7 shares issued and outstanding on an
as adjusted basis and none authorized, issued or
outstanding on a pro forma basis.......................... 85,000 --
Stockholders' equity:
Preferred stock, $.01 par value, shares
authorized, no shares issued and outstanding on an as
adjusted or a pro forma basis...........................
Class A common stock, $.01 par value, shares
authorized, shares and shares issued and
outstanding on an as adjusted and pro forma basis,
respectively............................................
Class B common stock, $.01 par value, shares
authorized, shares issued and outstanding on an as
adjusted and pro forma basis............................
Paid-in capital...........................................
Retained deficit.......................................... (270,168) (273,102)
---------- ----------
Total stockholders' (deficit) equity.................... (251,869) 209,422
---------- ----------
Total capitalization.................................. $1,311,042 $1,710,221
========== ==========
</TABLE>
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THE RECAPITALIZATION
We will complete our recapitalization immediately prior to the closing of
this offering. Our recapitalization will include:
- the conversion of our pre-recapitalization Class A common stock into new
Class B common stock;
- the retirement of 81,198 shares of pre-recapitalization Class A common
stock held as treasury stock;
- the creation of the new Class A common stock to be issued in this
offering;
- a for stock split of our new Class B common stock;
- the retirement of each share of our outstanding pre-recapitalization
Class A preferred stock, which is owned by one of our subsidiaries;
- the conversion of our outstanding pre-recapitalization Class D preferred
stock into one share of new Class A common stock and one share of Class E
preferred stock;
- the amendment of our 1996 stock option plan to permit the issuance of
options exercisable into new Class A common stock; and
- the conversion of outstanding options exercisable into
pre-recapitalization Class B or Class C common stock into options
exercisable into new Class A common stock.
The Class E preferred stock will be retired immediately following its
redemption with proceeds from this offering. Upon completion of this offering,
we will have only Class A common stock, Class B common stock and our senior
preferred stock authorized, issued and outstanding.
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THE AMERICAN CELLULAR ACQUISITION
OVERVIEW
In October 1999, we and AT&T Wireless entered into an equally-owned joint
venture to acquire, own and operate American Cellular. The aggregate acquisition
price for American Cellular is $2.3 billion, before expenses. American Cellular
is one of the largest independent rural cellular telephone operators in the
United States, with cellular telephone systems located primarily in rural areas
of the midwestern and eastern United States. The financing for the American
Cellular acquisition will come from a combination of equity contributions of
$372.5 million by each of AT&T Wireless and us, and by borrowings under the
joint venture's proposed new $1.75 billion credit facility.
THE ACQUISITION
The purchase price for American Cellular will bear interest at an annual
rate of 8% from January 1, 2000 until paid. If the joint venture defaults in its
obligations to close the American Cellular acquisition, it will be required to
pay up to $500.0 million of damages incurred by American Cellular as a result of
that default. However, the joint venture is only required to pay $100.0 million
of liquidated damages to American Cellular if the joint venture's default
results from the refusal of its bank lenders to provide funds under the joint
venture's credit facility for reasons other than:
- the joint venture's breach of its obligations to the bank lenders;
- the joint venture's failure to satisfy funding conditions that are within
its control; or
- the joint venture's inability to reach a definitive loan agreement with
its bank lenders.
We will be required to pay our share of all damages that the joint venture may
be required to pay to American Cellular.
The merger agreement contains several standard representations and
warranties of the parties and completion of the American Cellular acquisition is
subject to the satisfaction of several standard mutual conditions, including,
among others:
- the receipt of an FCC "final order" consenting to the change of control of
American Cellular;
- the expiration or termination of the applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976; and
- the receipt of any other necessary federal or state regulatory approvals.
In addition, the joint venture's obligation to complete the acquisition is
subject to satisfaction of, among others, the following conditions:
- the continuing approval of the transaction by American Cellular's
shareholders;
- not more than 5% of the holders of the outstanding Class A common stock of
American Cellular shall have demanded appraisal rights for their shares;
- the repayment of certain indebtedness owed by American Cellular's senior
management to American Cellular; and
- the absence of any material impairment in American Cellular's ability to
consummate the American Cellular merger.
There are no material conditions to be satisfied by the joint venture other
than the payment by the joint venture of the merger consideration.
Either American Cellular or the joint venture may terminate the merger
agreement if the American Cellular acquisition has not been completed by
April 5, 2000. This date will be extended to
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October 5, 2000 if the only unsatisfied closing condition remaining on April 5,
2000 is the approval of the merger by regulatory authorities, including FCC
approval and clearance under the Hart-Scott-Rodino Antitrust Improvements Act of
1976.
In addition, the joint venture may terminate the merger agreement if
American Cellular's Class A stockholders do not approve the transaction. The
holders of at least 70% of American Cellular's Class A common stock have entered
into a voting agreement with the joint venture under which they have agreed to
vote their shares in favor of the merger.
THE JOINT VENTURE AGREEMENT
We and AT&T Wireless have formed an equally-owned limited liability company
to acquire American Cellular. AT&T Wireless and we have agreed to each
contribute $372.5 million in cash to the joint venture to provide a portion of
the funds to be used to consummate the American Cellular acquisition. In the
event the proceeds of this offering are insufficient to permit us to fund our
entire investment in the joint venture, our principal shareholder, the Dobson CC
Limited Partnership, or the Dobson Partnership, has agreed to invest up to
$200.0 million in us to enable us to meet our commitment to the joint venture.
Management of the joint venture will be vested in a four-person management
committee, two members designated by AT&T Wireless and two designated by us. We
have agreed with AT&T Wireless to be responsible for the day-to-day operation of
American Cellular. If we experience a change of control and AT&T Wireless and
its affiliates own at least 40% of the joint venture, then AT&T Wireless and its
affiliates will have the right to initiate a buy/sell procedure to acquire our
interest in the joint venture or to require us to acquire their interest in the
joint venture. In addition, we will lose our right to 50% representation on the
management committee and our power to approve all significant matters. This
offering will not constitute a change of control under the joint venture
agreement.
Before the third anniversary of the American Cellular acquisition, neither
AT&T Wireless nor we may transfer any interest in the joint venture without the
consent of the other. Following the third anniversary of the American Cellular
acquisition, each of AT&T Wireless and we have the right to transfer up to 20%
of our economic interest in the joint venture, subject to a pro rata tag-along
right in favor of the other party. Any transfers above that 20% threshold will
be subject to a right of first refusal in favor of the other party. After the
fifth anniversary of the American Cellular acquisition, either AT&T Wireless or
we may elect to cause the joint venture to convert to a corporate form and to
conduct an underwritten initial public offering of up to 20% of the common stock
of the corporate joint venture. Additionally, following the fifth anniversary of
the American Cellular acquisition, whether or not an initial public offering has
occurred, either AT&T Wireless or we may initiate a buy/sell procedure by
proposing a cash purchase price for all of the interest of the party initiating
the procedure.
OPERATING ARRANGEMENTS
In connection with our joint venture, we, AT&T Wireless and American
Cellular have entered into a 20-year operating agreement. So long as American
Cellular continues to meet quality standards established by AT&T Wireless, AT&T
Wireless has agreed not to construct, own or acquire a controlling interest in,
or manage a communications system that provides mobile wireless services in
areas in which American Cellular operates its cellular systems for a period of
five years following the closing of the American Cellular acquisition. However,
AT&T Wireless may:
- resell or act as the agent for American Cellular to provide communications
services provided by American Cellular;
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<PAGE>
- continue to provide wireless services to its customers in American
Cellular's territory;
- provide or resell wireless telecommunications services to or from specific
locations; and
- act as an agent for other carriers in the geographic areas in which
American Cellular operates, but solely for existing national account
customers of AT&T Wireless.
For five years following the consummation of the American Cellular
acquisition,
- we will be the preferred provider of roaming services for American
Cellular's subscribers roaming in our markets;
- AT&T Wireless will be the preferred provider of roaming services for
American Cellular's subscribers roaming in AT&T Wireless's markets; and
- American Cellular will be the preferred provider of roaming services for
our and AT&T Wireless's subscribers roaming in American Cellular's
markets.
AT&T Wireless has the right to terminate the roaming preferences described
above upon a merger, consolidation, asset acquisition or other business
combination of AT&T Wireless with a business that:
- has annual telecommunication revenues in excess of $5.0 billion;
- derives less from one-third of its aggregate revenues from wireless
services; and
- owns FCC licenses to offer, and does offer, mobile wireless services
serving more than 25% of the population in the American Cellular markets.
JOINT VENTURE CREDIT FACILITY
The joint venture has received a commitment from Banc of America Securities
LLC and its affiliate, Bank of America, N.A., on behalf of a group of banks to
provide a $1.75 billion credit facility to the joint venture, the proceeds of
which will be used primarily to consummate the American Cellular acquisition.
Based on this commitment, we expect that this credit facility will consist of a
$300.0 million revolving credit facility and three term loan facilities. The
revolving credit facility will mature in 2007. Term loan A, which will mature in
2007, will be a $700.0 million facility; term loan B, which will mature in 2008,
will be a $350.0 million facility; and term loan C, which will mature in 2009,
will be a $400.0 million facility.
Borrowing under these credit facilities will bear interest at variable
rates, subject to reductions based on the joint venture's financial leverage.
Assuming the American Cellular acquisition occurs on or prior to March 31, 2000,
we expect that all these term loan facilities will be fully drawn and that the
joint venture will borrow an aggregate principal amount of $1.57 billion under
this credit facility. The joint venture's obligations under the credit facility
will be secured by a pledge of the stock of American Cellular and its
subsidiaries, and liens on all of the assets of the joint venture and of
American Cellular except its FCC licenses.
The joint venture will be required to amortize the term loan facilities
quarterly in amounts ranging from $42.5 million in 2001 to $196.0 million in
2009. In addition, the joint venture will be required to make prepayments of
amounts received from asset sales, excess cash flows and proceeds from new
borrowings or the sale of equity. The joint venture will have the right to
prepay the credit facility in total or in part at any time subject to the
payment of certain fees.
The credit facility will contain restrictive covenants that, among other
things, will limit the ability of the joint venture to incur additional
indebtedness, create liens and pay dividends. In addition, the joint venture
will be required to maintain certain financial ratios, including a ratio of
total indebtedness to EBITDA of 9.5 to 1; a ratio of EBITDA to debt service
requirements of 1.10 to 1; an interest coverage ratio of at least 1.25 to 1; and
a ratio of EBITDA minus capital expenditures to debt service requirements of
greater than 1.0 to 1.
27
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The accompanying unaudited pro forma balance sheet as of June 30, 1999 gives
effect to the following transactions as if they had occurred on June 30, 1999:
- the consummation of this offering of shares of Class A common stock at
an assumed offering price of $ per share;
- our acquisition of a 50% interest in the American Cellular joint venture
and its acquisition of American Cellular;
- the redemption of all of our outstanding Class E preferred stock;
- the establishment of a new credit facility to replace the existing credit
facilities of our DOC and DCOC subsidiaries;
- the purchase of all $160.0 million principal aggregate amount of our
11 3/4% senior notes using proceeds provided by our new bank credit
facility;
- the purchase by our subsidiary, Dobson Tower Company, of cellular towers
from Sygnet and the subsequent sale of those towers to an unaffiliated
company and the use of the proceeds for the repayment of debt and
redemption of related preferred stock of Dobson Tower Company in
October 1999; and
- the distribution, prior to the consummation of this offering, of all of
the outstanding capital stock of our subsidiary, Logix, to our current
stockholders.
In addition, the accompanying unaudited pro forma statements of operations
give effect to the above transactions and the following transactions as if each
had occurred on January 1, 1998:
- our second quarter 1999 issuance of $170.0 million aggregate liquidation
amount of our 13% senior preferred stock and the utilization of the net
proceeds from that issuance to redeem all our Class F and G preferred
stock and to reduce our bank debt; and
- for purposes of the unaudited pro forma statement of operations for the
year ended December 31, 1998, our acquisition of Sygnet and the related
financing transactions in December 1998.
As discussed under "Use of Proceeds," the closing of this offering is not
contingent on the completion of the American Cellular acquisition. If we do not
complete the American Cellular acquisition, cash and cash equivalents on a pro
forma basis would increase by $372.5 million. In that event, we intend to use
the net proceeds allocated for that purpose:
- to reduce our outstanding indebtedness and to potentially redeem a portion
of our senior preferred stock;
- to pay our share of any damages to American Cellular that may arise under
the American Cellular merger agreement; and
- for working capital and other general corporate purposes.
We provide the following unaudited pro forma consolidated financial
statements and the related notes for informational purposes only. The unaudited
pro forma consolidated financial statements are based upon currently available
information and assumptions that we believe are reasonable. The accompanying
data do not purport to represent what our results of operations would have been
if the pro forma transactions had been completed on the dates indicated, nor do
they purport to indicate our future financial position or results of operations.
You should read the unaudited pro forma consolidated financial statements and
notes thereto in conjunction with "Capitalization," "Selected Consolidated
Financial and Other Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the historical financial statements and
related notes that we include elsewhere in this prospectus.
28
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
DOBSON
COMMUNICATIONS AMERICAN CELLULAR
CORPORATION ADJUSTMENTS SUB-TOTAL ADJUSTMENTS TOTAL
-------------- ----------- --------- ----------------- --------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Operating revenues:
Service revenues....................... $ 77,017 $ -- $ 77,017 $ -- $ 77,017
Roaming revenues....................... 63,305 -- 63,305 -- 63,305
Equipment sales and other revenues..... 6,018 -- 6,018 -- 6,018
-------- ---------- -------- ----------- --------
Total operating revenues............. 146,340 -- 146,340 -- 146,340
-------- ---------- -------- ----------- --------
Operating expenses:
Cost of services....................... 22,077 753 (1) 22,830 -- 22,830
Cost of equipment...................... 11,859 -- 11,859 -- 11,859
Marketing and selling.................. 21,710 -- 21,710 -- 21,710
General and administrative............. 26,068 -- 26,068 -- 26,068
Depreciation and amortization.......... 69,900 (433)(2) 69,467 -- 69,467
-------- ---------- -------- ----------- --------
Total operating expenses............. 151,614 320 151,934 -- 151,934
-------- ---------- -------- ----------- --------
Operating loss........................... (5,274) (320) (5,594) -- (5,594)
-------- ---------- -------- ----------- --------
Interest expense......................... (55,528) 5,229 (3) (50,299) -- (50,299)
Equity in loss of unconsolidated
subsidiary............................. -- -- -- (13,852)(6) (13,852)
Other income, net........................ 1,903 -- 1,903 -- 1,903
-------- ---------- -------- ----------- --------
Loss before minority interests and income
taxes.................................. (58,899) 4,909 (53,990) (13,852) (67,842)
Minority interests in income of
subsidiaries........................... (1,480) -- (1,480) -- (1,480)
-------- ---------- -------- ----------- --------
Loss from continuing operations before
income taxes........................... (60,379) 4,909 (55,470) (13,852) (69,322)
Income tax benefit....................... 22,944 (1,866)(4) 21,078 -- 21,078
-------- ---------- -------- ----------- --------
Loss from continuing operations.......... (37,435) 3,043 (34,392) (13,852) (48,244)
Dividends on preferred stock............. (31,872) 592 (5) (31,280) -- (31,280)
-------- ---------- -------- ----------- --------
Loss from continuing operations
applicable to common stockholders...... $(69,307) $ 3,635 $(65,672) $ (13,852) $(79,524)
======== ========== ======== =========== ========
Loss from continuing operations
applicable to common stockholders per
share.................................. $ $ $
======== ======== ========
Weighted average shares outstanding......
======== ======== ========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated statement of
operations.
29
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(1) This reflects additional cost of service for lease payments on cellular
towers sold to an unaffiliated company.
(2) This reflects the elimination of depreciation and amortization relating to
the sale of the Sygnet towers.
(3) This reflects:
- the elimination of $1.9 million of interest expense as a result of the
redemption of $160.0 million aggregate principal amount of our 11 3/4%
senior notes with proceeds from our new credit facility having an assumed
weighted average interest rate of 8% per annum (each 1/8% increase in the
assumed weighted average interest rate would increase interest expense by
$0.1 million per six month period);
- the elimination of $1.2 million of interest expense from the repayment of
$12.4 million of Dobson/Sygnet bank debt and the $17.5 million Dobson
Tower credit facility with proceeds from the sale of towers sold to an
unaffiliated company;
- the elimination of $2.9 million of interest expense associated with the
repayment of $100.0 million of bank debt from a portion of the proceeds of
the sale of our 13% senior preferred stock; and
- the addition of $0.8 million of amortization of deferred financing costs
related to the new credit facility.
(4) This reflects the tax impact of the pro forma adjustments.
(5) This reflects:
- the elimination of $6.4 million of accrued dividends on our Class D
preferred stock associated with the conversion of our Class D preferred
stock into shares of our Class A common stock and Class E preferred stock
and the redemption of our Class E preferred stock;
- the elimination of $3.1 million of preferred stock dividends associated
with the redemption of our Class F and G preferred stock;
- the addition of $9.3 million of non-cash preferred stock dividend
requirements related to the issuance of our 13% senior preferred stock;
and
- the elimination of $0.4 million of preferred stock dividends associated
with the redemption of $7.5 million liquidation value of preferred stock
of our subsidiary, Dobson Tower Company, with a portion of the proceeds we
received from the sale of towers to an unaffiliated company.
(6) This reflects our 50% interest in the pro forma net loss of the American
Cellular joint venture.
30
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
DOBSON AMERICAN
COMMUNICATIONS CELLULAR
CORPORATION SYGNET ADJUSTMENTS SUB-TOTAL ADJUSTMENTS TOTAL
--------------- -------- ----------- --------- ----------- ---------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Service revenues............................. $ 69,402 $ 64,786 $ -- $ 134,188 $ -- $ 134,188
Roaming revenues............................. 66,479 28,035 -- 94,514 -- 94,514
Equipment sales and other revenues........... 4,154 7,447 -- 11,601 -- 11,601
-------- -------- -------- --------- -------- ---------
Total operating revenues................... 140,035 100,268 -- 240,303 -- 240,303
-------- -------- -------- --------- -------- ---------
Operating expenses:
Cost of services............................. 33,267 9,433 2,338 (1)(2) 45,038 -- 45,038
Cost of equipment............................ 8,360 10,444 -- 18,804 -- 18,804
Marketing and selling........................ 22,393 12,327 2,603 (2) 37,323 -- 37,323
General and administrative................... 26,051 19,796 (3,435)(2) 42,412 -- 42,412
Merger related costs......................... -- 1,884 (1,884)(3) -- -- --
Depreciation and amortization................ 47,110 27,498 42,441 (4) 117,049 -- 117,049
-------- -------- -------- --------- -------- ---------
Total operating expenses................... 137,181 81,382 42,063 260,626 -- 260,626
-------- -------- -------- --------- -------- ---------
Operating income (loss)........................ 2,854 18,886 (42,063) (20,323) -- (20,323)
-------- -------- -------- --------- -------- ---------
Interest expense............................... (38,979) (27,895) (23,169)(5) (90,043) (90,043)
Merger related costs........................... -- (5,206) 5,206 (3) -- -- --
Equity in loss of unconsolidated subsidiary.... -- -- -- -- (27,750)(8) (27,750)
Other income, net.............................. 3,858 (319) -- 3,539 -- 3,539
-------- -------- -------- --------- -------- ---------
Loss before minority interests and income
taxes........................................ (32,267) (14,534) (60,026) (106,827) (27,750) (134,577)
Minority interests in income of subsidiaries... (2,487) -- -- (2,487) -- (2,487)
-------- -------- -------- --------- -------- ---------
Loss from continuing operations before income
taxes........................................ (34,754) (14,534) (60,026) (109,314) (27,750) (137,064)
Income tax benefit............................. 11,469 -- 30,070 (6) 41,539 -- 41,539
-------- -------- -------- --------- -------- ---------
Loss from continuing operations................ (23,285) (14,534) (29,956) (67,775) (27,750) (95,525)
Dividends on preferred stock................... (23,955) -- (34,007)(7) (57,962) -- (57,962)
-------- -------- -------- --------- -------- ---------
Loss from continuing operations applicable to
common stockholders.......................... $(47,240) $(14,534) $(63,963) $(125,737) $ -- $(153,487)
======== ======== ======== ========= ======== =========
Loss from continuing operations applicable to
common stockholders per share................ $ $ $
======== ========= =========
Weighted average shares outstanding............
======== ========= =========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated statement of
operations.
31
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(1) This reflects additional cost of service for lease payments on cellular
towers sold to an unaffiliated company.
(2) This reclassifies certain operating expenses of Sygnet to conform with our
historical presentation.
(3) This eliminates costs that Sygnet incurred related to the consummation of
our acquisition of Sygnet.
(4) This reflects:
- the additional $43.3 million of depreciation and amortization resulting
from the allocation of the purchase price attributable to the Sygnet
acquisition of property and equipment, cellular license acquisition costs
and intangible assets; and
- the elimination of $0.9 million of depreciation and amortization relating
to the sale of the Sygnet towers.
(5) This reflects:
- the elimination of $27.9 million of interest expense associated with
Sygnet's senior notes and Sygnet's bank facility that we repaid as part of
our acquisition of Sygnet;
- the addition of $62.0 million of interest expense and amortization of
deferred financing costs relating to the Sygnet acquisition;
- the elimination of $8.7 million of interest expense associated with the
repayment of existing bank debt from the proceeds of our May 1999 offering
of 13% senior preferred stock;
- the elimination of $3.8 million of interest expense as a result of the
redemption of $160.0 million aggregate principal amount of our 11 3/4%
senior notes with proceeds from our new credit facility having an assumed
interest rate of 8% per annum (each 1/8% increase in the assumed weighted
average interest rate would increase interest expense by $0.2 million per
annum); and;
- the addition of $1.6 million of amortization of deferred financing costs
related to the new credit facility.
(6) This relects the tax impact of the pro forma adjustments.
(7) This reflects adjustments to dividends resulting from our offerings and
redemption of preferred stock, including the amortization of the issuance
costs and the accretion of discounts with respect thereto, as follows:
- the addition of $23.8 million for our 13% senior preferred stock that we
offered in May 1999;
- the addition of $10.1 million for our 12 1/4% senior preferred stock that
we offered in December 1998;
- the addition of $0.9 million for our senior preferred stock that we
offered in January 1998; and
- the elimination of $0.8 million of dividends on the Class B and C
preferred stock that we redeemed in December 1998.
(8) This reflects our 50% interest in the pro forma net loss of the American
Cellular joint venture.
32
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
DOBSON AMERICAN
COMMUNICATIONS CELLULAR
CORPORATION ADJUSTMENTS SUB-TOTAL ADJUSTMENTS TOTAL
-------------- ----------- ---------- ----------- ----------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets, net of
restricted investments...... $ 64,294 $ 372,500 (1) $ 436,794 $ (372,500)(5) $ 64,294
Restricted investments........ 56,602 -- 56,602 -- 56,602
Property, plant and
equipment................... 182,157 (25,000)(2) 157,157 -- 157,157
Receivable--affiliate......... 9,307 -- 9,307 -- 9,307
Cellular license acquisition
cost........................ 1,231,015 (13,000)(2) 1,218,015 -- 1,218,015
Deferred financing costs...... 70,187 7,254 (3) 77,441 -- 77,441
Other intangibles............. 50,579 -- 50,579 -- 50,579
Investment in unconsolidated
subsidiary.................. -- -- -- 372,500 (5) 372,500
Other assets.................. 3,872 -- 3,872 -- 3,872
---------- --------- ---------- ----------- ----------
Total assets.............. $1,668,013 $ 341,754 $2,009,767 $ -- $2,009,767
========== ========= ========== =========== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities........... $ 109,286 $ (6,725)(1) $ 84,673 $ -- $ 84,673
(17,888)(2)
Net liabilities of
discontinued operations..... 32,812 (32,812)(2) -- -- --
Long-term debt, net of current
portion..................... 1,013,552 (12,412)(2) 1,044,140 -- 1,044,140
43,000 (3)
Deferred credits.............. 225,377 -- 225,377 -- 225,377
Minority interests............ 27,212 (7,700)(2) 19,512 -- 19,512
Preferred stock............... 511,643 (85,000)(1) 426,643 -- 426,643
Stockholders' (deficit)
equity...................... (251,869) 464,225 (1) 209,422 -- 209,422
(35,746)(3)
32,812 (4)
---------- --------- ---------- ----------- ----------
Total liabilities and
stockholders' (deficit)
equity.................... $1,668,013 $ 341,754 $2,009,767 $ -- $2,009,767
========== ========= ========== =========== ==========
</TABLE>
See accompanying notes to the unaudited pro forma consolidated condensed balance
sheet.
33
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF JUNE 30, 1999
(1) This reflects:
- this offering of Class A common stock;
- the interim increase in cash that would occur if we do not complete the
American Cellular acquisition (see "Use of Proceeds" for a discussion of
how we intend to use the net proceeds from this offering if we do not
complete the American Cellular acquisition); and
- the conversion of our Class D preferred stock into shares of our Class A
common stock and Class E preferred stock and the redemption of our Class E
preferred stock.
(2) This reflects:
- the sale of the Sygnet towers;
- the repayment of the $17.5 million Dobson Tower credit facility and bank
debt under the Dobson/Sygnet Credit facility; and
- the redemption of the Dobson Tower preferred stock accounted for as
minority interests.
(3) This reflects:
- the net impact of the elimination of deferred financing costs associated
with the redemption of $160.0 million aggregate principal amount of our
11 3/4% senior notes with funds borrowed under our new bank credit
facility;
- the elimination of $8.7 million of deferred financing costs associated
with the refinancing of the current DOC and DCOC credit facilities and our
senior notes; and
- the capitalization of $16.0 million of costs related to our new credit
facility.
(4) This reflects the distribution of all of the outstanding capital stock of
Logix to our current shareholders.
(5) This reflects our purchase of a 50% interest in the American Cellular joint
venture.
34
<PAGE>
UNAUDITED PROPORTIONATE ADJUSTED STATEMENTS OF OPERATIONS
The following table sets forth selected unaudited statement of operations
data of us and American Cellular on a proportionate combined basis, as adjusted
for the pro forma adjustments described in "Unaudited Pro Forma Consolidated
Financial Data" and herein. The proportionate presentation is an arithmetic
combination of:
- the relevant pro forma data of our consolidated subsidiaries adjusted to
exclude the results attributable to the outstanding minority interests in
our subsidiaries; and
- our 50% share of the pro forma operating results of American Cellular
attributable to our interest in the joint venture with AT&T Wireless that
has agreed to acquire American Cellular.
The proportionate presentation has not been prepared in accordance with GAAP
and is not intended to replace our unaudited pro forma consolidated financial
data prepared and presented in accordance with the rules and regulations of the
Securities and Exchange Commission. Under GAAP, our investment in the American
Cellular joint venture will be accounted for using the equity method of
accounting and will be reflected in a single line item entitled "Investment in
unconsolidated subsidiary" in our balance sheet and "Equity in income (loss) of
unconsolidated subsidiary" in our statement of operations. To the extent that
the joint venture incurs losses in the future, our "Investment in unconsolidated
subsidiary" will be reduced. Because we will account for our interest in the
American Cellular joint venture using the equity method of accounting, our
statement of operations will reflect only our 50% share in the net income or
loss of the joint venture. We are presenting the proportionate data to
facilitate a better understanding of the financial and operating data
attributable to our substantial investment in American Cellular. Net loss from
continuing operations does not change as a result of the proportionate
presentation.
35
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
UNAUDITED PROPORTIONATE ADJUSTED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
AMERICAN DOBSON MINORITY
DOBSON CELLULAR INTEREST PROPORTIONATE
PRO FORMA(1) ADJUSTMENTS(2) ADJUSTMENTS(3) ADJUSTED
------------ -------------- --------------- -------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Operating revenues:
Service revenues...................... $ 77,017 $ 33,595 $(4,789) $ 105,823
Roaming revenues...................... 63,305 25,961 (2,864) 86,402
Equipment sales and other revenues.... 6,018 4,127 (408) 9,737
-------- -------- ------- ---------
Total operating revenues............ 146,340 63,683 (8,061) 201,962
Operating expenses:
Cost of services...................... 22,830 5,550 (1,785) 26,595
Cost of equipment..................... 11,859 4,009 (800) 15,068
Marketing and selling................. 21,710 7,170 (969) 27,911
General and administrative............ 26,068 10,589 (1,464) 35,193
Depreciation and amortization......... 69,467 28,504 (1,775) 96,196
-------- -------- ------- ---------
Total operating expenses............ 151,934 55,822 (6,793) 200,963
-------- -------- ------- ---------
Operating income (loss)................. (5,594) 7,861 (1,268) 999
-------- -------- ------- ---------
Interest expense...................... (50,299) (31,400) (2) (81,701)
Equity in loss of unconsolidated
subsidiary.......................... (13,852) 13,852 -- --
Other income, net..................... 1,903 1,196 3 3,102
-------- -------- ------- ---------
Loss before minority interests and
income taxes.......................... (67,842) (8,491) (1,267) (77,600)
Minority interests in income of
subsidiaries.......................... (1,480) -- 1,480 --
-------- -------- ------- ---------
Loss before income taxes................ (69,322) (8,491) 213 (77,600)
Income tax benefit...................... 21,078 8,491 (213) 29,356
-------- -------- ------- ---------
Loss from continuing operations......... $(48,244) $ -- $ -- $ (48,244)
======== ======== ======= =========
</TABLE>
See accompanying notes to the unaudited proportionate adjusted statements of
operations.
36
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
UNAUDITED PROPORTIONATE ADJUSTED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
AMERICAN DOBSON MINORITY
DOBSON CELLULAR INTEREST PROPORTIONATE
PRO FORMA(1) ADJUSTMENTS(2) ADJUSTMENTS(3) ADJUSTED
------------ -------------- --------------- -------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
Operating revenues:
Service revenues...................... $134,188 $88,999 $(8,652) $ 214,535
Roaming revenues...................... 94,514 26,806 (4,831) 116,489
Equipment sales and other revenues.... 11,601 7,274 (629) 18,246
-------- ------- ------- ---------
Total operating revenues............ 240,303 123,079 (14,112) 349,270
Operating expenses:
Cost of services...................... 45,038 23,453 (3,508) 64,983
Cost of equipment..................... 18,804 6,318 (976) 24,146
Marketing and selling................. 37,323 9,182 (2,137) 44,368
General and administrative............ 42,412 29,368 (2,723) 69,057
Depreciation and amortization......... 117,049 40,657 (2,242) 155,464
-------- ------- ------- ---------
Total operating expenses............ 260,626 108,978 (11,586) 358,018
-------- ------- ------- ---------
Operating income (loss)................. (20,323) 14,101 (2,526) (8,748)
-------- ------- ------- ---------
Interest expense...................... (90,043) (62,800) 79 (152,764)
Equity in loss of unconsolidated
subsidiary.......................... (27,750) 27,750 -- --
Other income, net..................... 3,539 3,942 (21) 7,460
-------- ------- ------- ---------
Loss before minority interests and
income taxes.......................... (134,577) (17,007) (2,468) (154,052)
Minority interests in income of
subsidiaries.......................... (2,487) -- 2,487 --
-------- ------- ------- ---------
Loss before income taxes................ (137,064) (17,007) 19 (154,052)
Income tax benefit...................... 41,539 17,007 (19) 58,527
-------- ------- ------- ---------
Loss from continuing operations......... $(95,525) $ -- $ -- $ (95,525)
======== ======= ======= =========
</TABLE>
See accompanying notes to the unaudited proportionate adjusted statements of
operations.
37
<PAGE>
NOTES TO UNAUDITED PROPORTIONATE ADJUSTED STATEMENTS OF OPERATIONS
(1) The Dobson unaudited pro forma amounts are from our unaudited pro forma
consolidated statements of operations presented in "Unaudited Pro Forma
Consolidated Financial Data" that we include elsewhere in this prospectus.
(2) The American Cellular adjustment column reflects our 50% share of the
revenues and expenses of the American Cellular joint venture. These amounts
are based on the historical results of American Cellular and its predecessor
adjusted for certain pro forma adjustments. The following pro forma
adjustments have been made to the historical results of American Cellular
and its predecessor:
- to adjust depreciation and amortization expense to reflect the allocation
of $2.3 billion of purchase price primarily to cellular license
acquisition costs, intangible assets and property and equipment. The
American Cellular joint venture will amortize cellular license acquisition
costs over 40 years, compared to 20 years, which was the amortization
period historically used by American Cellular;
- to adjust interest expense to reflect the replacement of American
Cellular's bank debt and senior notes with $1.57 billion of debt at an
assumed interest rate of 8%, from the joint venture's new $1.75 billion
credit facility; and
- to adjust the income tax benefit to reflect an effective tax rate of 38%
on the net pro forma taxable loss of the joint venture.
(3) The Dobson minority interest adjustment column reflects adjustments to
eliminate minority interest holders' shares of our revenues and expenses.
38
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables set forth certain of our historical consolidated
financial and other data as of and for each of the five years in the period
ended December 31, 1998 and as of and for each of the six month periods ended
June 30, 1998 and June 30, 1999. We derived our consolidated financial data as
of December 31, 1997 and December 31, 1998 and for each of the three years in
the period ended December 31, 1998 from our consolidated financial statements
included elsewhere in this prospectus, which have been audited by Arthur
Andersen LLP. We derived our consolidated financial data as of December 31,
1994, December 31, 1995 and December 31, 1996 and for each of the two years in
the period ended December 31, 1995 from our consolidated financial statements
not included in this prospectus, which have also been audited by Arthur Andersen
LLP. We derived our consolidated financial data as of and for each of the six
month periods ended June 30, 1998 and June 30, 1999 from our unaudited
consolidated financial statements included elsewhere in this prospectus, which,
in our opinion, reflect all adjustments, consisting only of normal recurring
accruals, necessary to present fairly the data presented for such periods.
The following tables also set forth certain of American Cellular's
historical consolidated financial data. We derived American Cellular's
consolidated financial data for the period from February 26, 1998 through
December 31, 1998 from its consolidated financial statements included elsewhere
in this prospectus, which have been audited by Ernst & Young LLP. We derived the
consolidated financial data of American Cellular's predecessor for the six
months ended June 30, 1998 and for each of the two years in the period ended
December 31, 1997 from its predecessor's consolidated financial statements
included elsewhere in this prospectus, which have also been audited by Ernst &
Young LLP. We derived the selected consolidated financial data of American
Cellular's predecessors as of and for each of the two years in the period ended
December 31, 1995 from its consolidated financial statements not included in
this prospectus, which have also been audited by Ernst & Young L.L.P. We derived
American Cellular's condensed consolidated financial data for the six months
ended June 30, 1999 from its unaudited condensed consolidated financial
statements included elsewhere in this prospectus, which in the opinion of
American Cellular's management, reflect all adjustments, consisting only of
normal recurring accruals, considered necessary for a fair presentation of the
results for the interim period.
Our historical data for each of the five years in the period ended
December 31, 1998 and for each of the six month periods ended June 30, 1998 and
June 30, 1999 include the operations of acquisitions we made, as applicable
during those years, from the date of each acquisition. These acquisitions
materially affect the comparability of data from one period to another. Our
operating results and those of American Cellular for the six month periods ended
June 30, 1998 and June 30, 1999 are not necessarily indicative of results that
may be expected for a full year. You should read the following historical
consolidated financial data in conjunction with "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes that we include elsewhere in this
prospectus.
In the following tables, EBITDA represents operating income (loss) before
depreciation, amortization and nonrecurring charges. We believe that EBITDA
provides meaningful additional information concerning a company's operating
results and its ability to service its long-term debt and other fixed
obligations and to fund its continued growth. Many financial analysts consider
EBITDA to be a meaningful indicator of an entity's ability to meet its future
financial obligations, and they consider growth in EBITDA to be an indicator of
future profitability, especially in a capital-intensive industry such as
wireless telecommunications. You should not construe EBITDA as an alternative to
operating income (loss) as determined in accordance with GAAP, as an alternative
to cash flows from operating activities as determined in accordance with GAAP or
as a measure of liquidity. Because EBITDA is not calculated in the same manner
by all companies, our EBITDA may not be comparable to other similarly titled
measures of other companies. EBITDA margin represents EBITDA as a percentage of
operating revenues.
39
<PAGE>
We determine market penetration by dividing our total subscribers at the end
of the period by our estimated total population. We calculate average monthly
cellular churn rates based on the number of cellular subscriber cancellations
during the period as a percentage of the weighted average total cellular
subscribers for the period. Average monthly revenues per cellular subscriber
exclude equipment sales and other revenues. For a more complete description of
the calculation of average monthly revenue per cellular subscriber, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Revenues."
DOBSON COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Operating revenues:
Service revenues................ $ 10,922 $ 13,949 $ 17,593 $ 38,410 $ 69,402 $ 28,633 $ 77,017
Roaming revenues................ 3,231 4,370 7,852 26,263 66,479 25,856 63,305
Equipment sales and other
revenues...................... 1,222 1,364 1,494 2,041 4,154 1,319 6,018
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating revenues...... 15,375 19,683 26,939 66,714 140,035 55,808 146,340
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating expenses:
Cost of service................. 2,991 4,654 6,119 16,431 33,267 12,731 22,077
Cost of equipment............... 1,502 2,013 2,571 4,046 8,360 2,629 11,859
Marketing and selling........... 3,098 3,103 4,462 10,669 22,393 9,279 21,710
General and administrative...... 3,193 3,035 3,902 11,555 26,051 9,550 26,068
Depreciation and amortization... 1,885 2,529 5,241 16,798 47,110 16,543 69,900
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses...... 12,669 15,334 22,295 59,499 137,181 50,732 151,614
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)........... 2,706 4,349 4,644 7,215 2,854 5,076 (5,274)
Interest expense.................. (1,195) (1,854) (4,284) (27,640) (38,979) (17,351) (55,528)
Other income (expense), net....... 106 (210) (1,503) 2,777 3,858 2,792 1,903
Minority interests in income of
subsidiaries.................... (1,105) (1,334) (675) (1,693) (2,487) (1,381) (1,480)
Income tax (provision) benefit.... (168) (347) 593 3,625 11,469 2,133 22,944
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations before
extraordinary items............. 344 604 (1,225) (15,716) (23,285) (8,731) (37,435)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from discontinued
operations...................... (110) 500 331 332 (27,110) (3,910) (25,779)
Extraordinary items............... 228 -- (527) (1,350) (2,166) (2,643) --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)................. 462 1,104 (1,421) (16,734) (52,561) (15,284) (63,214)
Dividends on preferred stock...... (83) (591) (849) (2,603) (23,955) (10,519) (31,872)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) applicable to
common stockholders............. $ 379 $ 513 $ (2,270) $ (19,337) $ (76,516) $ (25,803) $ (95,086)
========== ========== ========== ========== ========== ========== ==========
Net income (loss) applicable to
common stockholders per common
share........................... $ $ $ $ $ $ $
========== ========== ========== ========== ========== ========== ==========
Weighted average common shares
outstanding.....................
========== ========== ========== ========== ========== ========== ==========
</TABLE>
40
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
($ IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
OTHER FINANCIAL DATA:
EBITDA............................ $ 4,591 $ 6,878 $ 9,885 $ 24,013 $ 49,964 $ 21,619 $ 64,626
EBITDA margin..................... 29.9% 34.9% 36.7% 36.0% 35.7% 38.7% 44.2%
Cash flows provided by (used in)
operating activities............ $ 2,529 $ 4,634 $ 5,239 $ 6,908 $ 28,024 $ (2,280) $ 2,587
Cash flows provided by (used in)
investing activities............ 22 (6,538) (43,894) (217,640) (999,063) (193,589) (66,639)
Cash flows provided by (used in)
financing activities............ (2,985) 2,029 38,904 212,505 990,610 202,450 44,579
Capital expenditures.............. 5,267 3,925 13,536 17,773 55,289 13,927 31,181
OTHER DATA:
Cellular subscribers (at period
end)............................ 21,481 26,614 33,955 100,093 352,005 151,249 401,680
Cellular penetration (at period
end)............................ 6.5% 8.0% 5.8% 6.1% 6.8% 5.8% 7.0%
Average monthly cellular churn
rates........................... 0.9% 1.5% 1.8% 1.9% 2.0% 1.8% 1.8%
Average monthly revenues per
cellular subscriber, excluding
roaming revenues................ $ 50 $ 50 $ 48 $ 41 $ 40 $ 39 $ 34
Average monthly revenues per
cellular subscriber, including
roaming revenues................ $ 65 $ 66 $ 70 $ 69 $ 79 $ 74 $ 62
Cellular cell sites (at period
end)............................ 36 46 67 135 414 210 447
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
------------------------------------------------------ JUNE 30,
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- ---------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
($ IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 607 $ 732 $ 981 $ 2,752 $ 22,324 $ 2,850
Net fixed assets................................... 11,590 11,414 26,794 52,374 173,054 182,157
Total assets....................................... 33,111 37,711 95,376 359,645 1,703,427 1,668,013
Total debt......................................... 20,661 24,319 75,750 335,570 1,121,556 1,041,556
Mandatorily redeemable preferred stock............. -- 5,913 10,000 11,623 381,320 511,643
Stockholders' equity (deficit)..................... 28 (6,971) (9,802) (36,673) (156,783) (251,869)
</TABLE>
41
<PAGE>
AMERICAN CELLULAR CORPORATION
<TABLE>
<CAPTION>
PREDECESSOR AMERICAN CELLULAR
--------------------------------------------------------- ---------------------------------
PERIOD FROM
SIX MONTHS FEBRUARY 26, 1998 SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED (DATE OF FORMATION) ENDED
-------------------------------------------- JUNE 30, THROUGH JUNE 30,
1994 1995 1996 1997 1998 DECEMBER 31, 1998 1999
--------- --------- --------- -------- ---------- ------------------- -----------
(UNAUDITED)
($ IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total operating revenues........ $ 5,209 $ 41,504 $ 112,616 $181,000 $108,670 $ 137,487 $ 127,364
--------- --------- --------- -------- -------- ----------- ---------
Operating expenses:
Cost of service............... 1,892 10,694 29,571 48,691 20,911 25,995 11,099
Cost of equipment............. 814 4,951 10,073 12,841 5,365 7,271 8,017
Selling, general and
administrative.............. 6,005 16,512 34,502 53,485 30,230 37,625 35,518
Depreciation and
amortization................ 2,720 10,337 19,537 28,759 17,553 45,569 47,911
Nonrecurring charges.......... -- -- -- -- 4,889 4,355 --
--------- --------- --------- -------- -------- ----------- ---------
Total operating expenses.... 11,431 42,494 93,683 143,776 78,948 120,815 102,545
--------- --------- --------- -------- -------- ----------- ---------
Operating income (loss)......... (6,222) (990) 18,933 37,224 29,722 16,672 24,819
Gain (loss) on sale of
investments in cellular
operations.................... 6,819 11,598 (1,401) 8,423 (133) -- --
Interest expense................ (2,236) (22,953) (47,076) (67,392) (38,955) (61,477) (53,499)
Other income (expense), net..... 199 4,634 6,501 8,114 3,080 4,936 2,392
Income tax provision............ -- -- -- -- (530) (56)
--------- --------- --------- -------- -------- ----------- ---------
Net loss........................ (1,440) (7,711) (23,043) (13,631) (6,286) (40,399) (26,344)
Dividends on preferred stock.... -- -- (6,178) (6,540) (3,357) (21,375) (21,213)
--------- --------- --------- -------- -------- ----------- ---------
Net loss applicable to common
stockholders.................. $ (1,440) $ (7,711) $ (29,221) $(20,171) $ (9,643) $ (61,774) $ (47,557)
========= ========= ========= ======== ======== =========== =========
OTHER FINANCIAL DATA:
EBITDA.......................... $ (3,502) $ 9,347 $ 38,470 $ 65,983 $ 52,164 $ 66,596 $ 72,730
EBITDA margin................... (67.2)% 22.5% 34.2% 36.5% 48.0% 48.4% 57.1%
Cash flows provided by (used in)
operating activities.......... $ (831) $ 4,110 $ 39,371 $ 49,026 $ 11,665 $ 35,295 $ 20,692
Cash flows used in investing
activities.................... (130,350) (204,353) (200,969) (36,284) (80,327) (1,512,745) (20,923)
Cash flows provided by (used in)
financing activities.......... 176,355 278,276 138,518 (51,749) 58,765 1,511,465 (1,417)
Capital expenditures............ 3,013 6,794 29,470 25,717 20,517 24,260 33,934
OTHER DATA:
Cellular subscribers (at period
end).......................... 17,300 73,000 139,800 243,700 286,000 334,500 374,800
Cellular penetration (at period
end).......................... 1.0% 2.0% 3.6% 5.3% 5.9% 6.8% 7.7%
Average monthly cellular churn
rates......................... 2.7% 2.0% 1.6% 1.8% 1.4% 1.8% 1.7%
</TABLE>
The American Cellular joint venture will amortize cellular license
acquisition costs over 40 years, compared to 20 years, which was the
amortization period historically used by American Cellular.
42
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
"SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA" AND OUR CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES CONTAINED ELSEWHERE IN THIS PROSPECTUS. THE
FOLLOWING DISCUSSION DOES NOT INCLUDE THE RESULTS OF OUR PROPOSED ACQUISITION OF
AMERICAN CELLULAR, WHICH WE WILL ACCOUNT FOR USING THE EQUITY METHOD OF
ACCOUNTING. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. SEE "RISK FACTORS" ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We are a leading provider of rural and suburban cellular telephone services.
We began providing cellular telephone service in 1990 in Oklahoma and the Texas
Panhandle. We have expanded our cellular operations rapidly since then,
primarily through acquisitions. As of June 30, 1999, our cellular systems
covered a total population of approximately 5.8 million and we had 401,680
subscribers.
On October 5, 1999, we and AT&T Wireless entered into an equally-owned joint
venture to acquire, own and operate American Cellular for approximately
$2.3 billion, before expenses. American Cellular is one of the largest
independent rural cellular telephone operators in the United States. As of
June 30, 1999, American Cellular's systems covered a total population of
approximately 4.9 million and it had 374,764 subscribers, primarily in rural
areas of the midwestern and eastern United States.
We will account for our interest in the American Cellular joint venture
using the equity method of accounting. As a result, we will reflect our
proportionate share of the joint venture's equity in a single line item entitled
"Investment in unconsolidated subsidiary" in our balance sheet and we will
reflect our proportionate share of the joint venture's net income or losses in a
single line item entitled "Equity in income (loss) of unconsolidated subsidiary"
in our statement of operations. To the extent that the joint venture incurs
losses in the future, our "Investment in unconsolidated subsidiary" will be
reduced.
REVENUES
Our cellular revenues consist of service revenues, roaming revenues and
equipment sales and other revenues. There has been an industry trend of
declining average revenues per minute as competition among wireless service
providers has led to reductions in rates for airtime and subscriptions and other
charges. We believe that the impact of this trend will be mitigated by increases
in the number of wireless telecommunications subscribers and the number of
minutes of usage per subscriber. There has also been a broad trend in the
wireless telecommunications industry of declining average revenues per
subscriber. We believe that this downward trend results primarily from the
addition of new lower usage customers who utilize wireless services for personal
convenience, security or as a backup to their traditional landline telephone as
well as declining average revenues per minute.
Roaming revenues are revenues we derive from providing service to
subscribers of other wireless providers when those subscribers "roam" into our
markets and use our systems to carry their calls. Roaming accounted for 29.1%,
39.4%, 47.5%, 46.3% and 43.3% of our cellular revenue for the years ended
December 31, 1996, 1997 and 1998 and for the six months ended June 30, 1998 and
1999, respectively. Roaming revenues typically yield higher average per minute
rates and higher margins than revenues from our subscribers. We achieve these
higher margins because we incur virtually no costs related to equipment,
customer service or collections to earn roaming revenues. While the industry
trend is to reduce roaming rates, we believe that our roaming rates are
currently generally lower than roaming rates offered by others in or near our
markets and that our currently lower roaming rates will lessen the impact of
this trend with respect to our operations. However, we cannot assure you that
this trend will not materially impact us in the future. See "Risk Factors--Risks
Related to Our Business--
43
<PAGE>
We are highly dependent on our substantial relationship with AT&T Wireless and
our other roaming partners."
We include any toll, or long-distance, revenues related to our cellular and
roaming services in service revenues and roaming revenues. Our roaming yield
(roaming service revenues, which include airtime, toll charges and surcharges,
divided by roaming minutes of use) was $0.70, $0.72, $0.61, $0.65 and $0.53 per
minute for the years ended December 31, 1996, 1997, 1998 and for the six months
ended June 30, 1998 and 1999, respectively. Despite the decline in our roaming
yield, we have seen overall roaming revenues grow due to growth in roaming
minutes of use.
We derive roaming revenues from charges to our subscribers when those
subscribers roam into other wireless providers' markets. Our current accounting
practice is to net those revenues against the associated expenses charged to us
by third-party wireless providers (that is, the fees we pay the other wireless
providers for carrying our subscribers' calls on their network) and to record
the net expense as cost of service. Historically, we have been able to pass
through to our subscribers the majority of the costs charged to us by
third-party wireless providers. Recently, the industry has been moving to
pricing plans that include flat rate pricing and larger home areas. Under these
types of plans, amounts charged to us by other wireless providers may not
necessarily be passed through to our subscribers. Therefore, we are currently
assessing the need to report these revenues and expenses separately in our
statements of operations. If we had reported these revenues and expenses
separately in our statement of operations for the years ended December 31, 1997
and December 31, 1998 and the six months ended June 30, 1998 and six months
ended June 30, 1999, revenues would have been $74.0 million, $150.8 million,
$60.8 million and $166.3 million, respectively, average monthly revenues per
cellular subscriber, excluding roaming revenues, would have been $52, $48, $47
and $43, respectively, and EBITDA margin would have been 32.5%, 33.1%, 35.6% and
38.9%, respectively. Information prior to 1997 is not available.
Our overall cellular penetration rates increased for the six months ended
June 30, 1999 and the six months ended June 30, 1998 and in each of 1998, 1997
and 1996 due to incremental penetration gains in our markets. We believe that as
our cellular penetration rates increase, the increase in new subscriber revenues
will continue to exceed the loss of revenues attributable to our cellular
churns.
COSTS AND EXPENSES
Our primary operating expense categories include cost of service, cost of
equipment, marketing and selling costs, general and administrative costs, and
depreciation and amortization.
Our cost of service consists primarily of costs to operate and maintain our
facilities utilized in providing service to customers and amounts paid to
third-party cellular providers for providing service to our subscribers when our
subscribers roam into their markets.
Our cost of equipment represents the costs associated with telephone
equipment and accessories sold to customers. In recent years, we 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, we have incurred, and expect to continue to incur, losses on
equipment sales and increased marketing and selling costs per gross additional
subscriber. While we expect to continue these discounts and promotions, we
believe that these promotions will result in increased revenues from increases
in the number of our cellular subscribers.
Our 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. We pay
commissions to direct sales personnel for new business generated. Independent
sales agents receive commissions for generating new sales and ongoing sales to
existing customers.
44
<PAGE>
Our general and administrative costs include all infrastructure costs,
including costs for customer support, billing, collections and corporate
administration.
Our depreciation and amortization expense represents the costs associated
with the depreciation of our fixed assets and the amortization of our intangible
assets, primarily cellular license acquisition costs and customer lists.
Since 1996, we have completed 12 acquisitions of cellular licenses and
systems for an aggregate purchase price of $1,166.4 million, increasing the
total population service by our systems by approximately 5.4 million and
significantly expanding the geographical scope of our operations. Although our
cash flows from operations has increased as a result of our acquisitions, the
increased amortization, together with the increased interest expense and
dividend requirements associated with our outstanding indebtedness and preferred
stock, have resulted in increased losses applicable to common stockholders for
1997 and 1998 and for the six months ended June 30, 1999. We expect that our
interest in the American Cellular joint venture will result in an immediate
increase in our net losses. We expect our net losses to continue until we expand
our acquired systems and increase our subscriber base. Our recent acquisitions
affect the comparability of our historical results of operations for the periods
discussed, therefore these results may not be indicative of future performance.
As part of our recapitalization to be completed immediately prior to the
closing of this offering, the holders of our Class D preferred stock have agreed
to convert all of their Class D preferred shares into shares of Class A common
stock and Class E preferred stock. As a result of this conversion, we will
allocate the current carrying value of the Class D preferred stock of
$85.0 million to both the Class A common stock and Class E preferred stock based
on their relative fair market values at the time of conversion. In addition, we
will redeem all of the shares of Class E preferred stock for their aggregate
liquidation value of $85.0 million plus accrued dividends. The difference
between the allocated carrying value of the Class E preferred stock and their
liquidation value will be recognized as a preferred stock dividend at the date
of the redemption.
During the first quarter 2000, we expect to incur an extraordinary pretax
loss of approximately $8.7 million as a result of writing off previously
capitalized financing costs associated with the credit facilities of our DOC and
DCOC subsidiaries and our senior notes, each of which we expect to refinance in
2000.
RESULTS OF OPERATIONS
In the text below, financial statement numbers have been rounded; however,
the percentage changes are based on our actual financial statements.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
OPERATING REVENUES. For the six months ended June 30, 1999, our total
operating revenues increased $90.5 million, or 162.2%, to $146.3 million from
$55.8 million for the comparable 1998 period. Our total service revenues,
roaming revenues and equipment sales and other revenues represented 52.6%, 43.3%
and 4.1%, respectively, of total operating revenues for the six months ended
June 30, 1999 and 51.3%, 46.3%, and 2.4%, respectively, of total operating
revenues for the six months ended June 30, 1998.
45
<PAGE>
The following table sets forth the components of our revenues for the
periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
<S> <C> <C>
1998 1999
--------- ---------
(UNAUDITED)
<CAPTION>
($ IN THOUSANDS)
<S> <C> <C>
Operating revenues:
Service revenues................................. $28,633 $ 77,017
Roaming revenues................................. 25,856 63,305
Equipment sales and other revenues............... 1,319 6,018
------- --------
Total.......................................... $55,808 $146,340
======= ========
</TABLE>
For the six months ended June 30, 1999, our service revenues increased
$48.4 million, or 169.0%, to $77.0 million from $28.6 million for the comparable
1998 period. Of this increase, $42.9 million was attributable to acquisitions.
The remaining $5.5 million was primarily attributable to increased penetration
and usage in our existing markets. Our subscriber base increased 165.6% to
401,680 at June 30, 1999 from 151,249 at June 30, 1998. We added 195,503
subscribers since June 30, 1998, primarily as a result of acquisitions. For the
six months ended June 30, 1999, our average monthly service revenues per
subscriber decreased 12.8% to $34 from $39 for the comparable 1998 period due to
the addition of lower rate subscribers in our Northern Region and competitive
market pressures in all our markets.
For the six months ended June 30, 1999, our roaming revenues increased
$37.4 million, or 144.8%, to $63.3 million from $25.9 million for the comparable
1998 period. Of this increase, $25.2 million was attributable to acquisitions.
The remaining $12.2 million was primarily attributable to increased roaming
minutes in our existing markets due to expanded coverage areas, deployment of
digital technology in most of our markets, which enables us to capture a greater
portion of the roaming traffic in our service areas, and increased usage in
these markets.
For the six months ended June 30, 1999, equipment sales and other revenues
increased $4.7 million, or 356.3%, to $6.0 million from $1.3 million for the
comparable 1998 period. This increase was due to our growth in subscribers.
COST OF SERVICE. For the six months ended June 30, 1999, our total cost of
service increased $9.4 million, or 73.4%, to $22.1 million from $12.7 million
for the comparable 1998 period. Of this increase, $7.8 million was attributable
to acquisitions. The remaining $1.6 million was primarily attributable to
increased subscribers and minutes of use in our existing markets and payments we
made to other wireless service providers for the use of their network while our
customers were roaming in their service areas. As a percentage of service and
roaming revenues, our cost of cellular service decreased to 15.7% for the six
months ended June 30, 1999 from 23.4% for the same period in 1998. This decrease
is primarily a result of a reduction in rates charged by third-party cellular
providers for providing service to our subscribers.
COST OF EQUIPMENT. For the six months ended June 30, 1999, our cost of
equipment increased $9.3 million, or 351.1%, to $11.9 million compared to
$2.6 million for the comparable 1998 period, primarily as a result of increases
in the volume of equipment we sold due to the growth in subscribers.
MARKETING AND SELLING COSTS. For the six months ended June 30, 1999, our
marketing and selling costs increased $12.4 million, or 134.0%, to
$21.7 million from $9.3 million for the comparable 1998 period. As a percentage
of total operating revenues, marketing and selling costs decreased to 14.8% for
the six months ended June 30, 1999 from 16.6% for the comparable 1998 period.
This decrease is a result of efficiencies gained from integration of acquired
companies. We added 75,693 gross subscribers
46
<PAGE>
in the six months ended June 30, 1999 compared to 26,646 added in the six months
ended June 30, 1998. Gross subscriber additions do not include subscribers
acquired through business acquisitions.
GENERAL AND ADMINISTRATIVE COSTS. For the six months ended June 30, 1999,
our general and administrative costs increased $16.6 million, or 173.0%, to
$26.1 million from $9.5 million for the comparable 1998 period. The increase was
the result of increased infrastructure costs, including customer service,
billing, collections and administrative costs as a result of our overall growth.
As a percentage of total operating revenues, general and administrative costs
increased slightly to 17.8% for the six months ended June 30, 1999 from 17.1%
for the same period in 1998. However, our average monthly general and
administrative costs per subscriber decreased 45.0% to $11 for the six months
ended June 30, 1999 from $20 for the same period in 1998. The decrease was the
result of efficiencies gained from the integration of acquired companies.
DEPRECIATION AND AMORTIZATION EXPENSE. For the six months ended June 30,
1999, our depreciation and amortization expense increased $53.4 million, or
322.5%, to $69.9 million from $16.5 million for the comparable 1998 period.
Depreciation and amortization of assets that we acquired accounted for
substantially all of this increase. The remainder of this increase was from
depreciation attributable to our depreciable assets.
INTEREST EXPENSE. For the six months ended June 30, 1999, our interest
expense increased $38.1 million, or 220.0%, to $55.5 million from $17.4 million
for the comparable 1998 period. The increase was primarily the result of
increased borrowings in December 1998 to finance our acquisitions.
OTHER INCOME (EXPENSE), NET. For the six months ended June 30, 1999, our
other income decreased $0.9 million, or 31.8%, to $1.9 million from
$2.8 million for the comparable 1998 period. This decrease was primarily the
result of an increase in expenses that we incurred pursuing acquisitions that
were not consummated.
MINORITY INTERESTS IN INCOME OF SUBSIDIARIES. For the six months ended
June 30, 1999, our minority interests in income of subsidiaries increased
$0.1 million, or 7.2%, to $1.5 million from $1.4 million for the comparable 1998
period. This increase was attributable to increased income earned from
subsidaries in established markets in which we do not own a 100% interest, which
was offset by losses from subsidaries in newly-acquired markets in which we do
not own a 100% interest.
EXTRAORDINARY EXPENSE. During the first quarter 1998, we incurred an
extraordinary pretax loss of approximately $3.3 million as a result of writing
off previously capitalized financing costs associated with revolving credit
facilities that were refinanced in March 1998.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS. For the six months ended
June 30, 1999, our loss from discontinued operations increased $21.9 million to
$25.8 million from $3.9 million for the comparable 1998 period. The increase in
this loss is a result of increased losses by our local exchange carrier
subsidiary, Logix, that has substantially expanded its operations in 1998 and
1999. As previously discussed, prior to closing this offering, we intend to
distribute the capital stock of Logix to our current stockholders.
NET INCOME (LOSS). For the six months ended June 30, 1999, our net loss was
$63.2 million. Our net loss increased $47.9 million, or 313.6%, from
$15.3 million in the six months ended June 30, 1998. The increase in our net
loss is primarily attributable to increased depreciation and amortization
expense and interest expense resulting from our 1998 and 1999 business
acquisitions and financings, respectively, as well as the increase in our loss
from discontinued operations.
DIVIDENDS ON PREFERRED STOCK. For the six months ended June 30, 1999, our
dividends on preferred stock increased $21.4 million, or 203.0%, to
$31.9 million from $10.5 million for the comparable 1998
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period. This increase is primarily the result of additional dividends on our
December 1998 and May 1999 issuances of senior preferred stock.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
OPERATING REVENUES. For the year ended December 31, 1998, our total
operating revenues increased $73.3 million, or 109.9%, to $140.0 million from
$66.7 million for the year ended December 31, 1997. Our total service revenues,
roaming revenues and equipment sales and other revenues represented 49.6%, 47.5%
and 3.0%, respectively, of our total operating revenues for the year ended
December 31, 1998 and 57.6%, 39.4% and 3.1%, respectively, of our total
operating revenues, respectively, for the year ended December 31, 1997.
The following table sets forth the components of our revenues for the
periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------
1997 1998
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
Operating revenues:
Service revenues................................. $ 38,410 $ 69,402
Roaming revenues................................. 26,263 66,479
Equipment sales and other revenues............... 2,041 4,154
-------- --------
Total.......................................... $ 66,714 $140,035
======== ========
</TABLE>
For the year ended December 31, 1998, service revenues increased
$31.0 million, or 80.7%, to $69.4 million from $38.4 million for the year ended
December 31, 1997. Of this increase, $15.8 million was attributable to
acquisitions. The remaining $15.2 million was primarily attributable to
increased penetration and usage in our Central and Eastern Regions. Our
subscriber base increased 251.7% to 352,005 at December 31, 1998 from 100,093 at
December 31, 1997. We added 220,626 subscribers since December 31, 1997 as a
result of acquisitions. For the year ended December 31, 1998, our average
monthly service revenues per subscriber decreased 2.4% to $40 from $41 for the
year ended December 31, 1997 due to the addition of lower rate subscribers in
our Eastern Region and competitive market pressures in all our markets.
For the year ended December 31, 1998, roaming revenues increased
$40.2 million, or 153.1%, to $66.5 million from $26.3 million for the year ended
December 31, 1997. Of this increase, $25.0 million was attributable to
acquisitions. The remaining $15.2 million was primarily attributable to
increased roaming minutes in our Central and Eastern Regions due to expanded
coverage areas and increased usage in these markets.
For the year ended December 31, 1998, equipment sales and other revenues
increased $2.2 million, or 103.5%, to $4.2 million from $2.0 million for the
year ended December 31, 1997 due to increased sales of equipment as a result of
growth in subscribers.
COST OF SERVICE. For the year ended December 31, 1998, our total cost of
service increased $16.8 million, or 102.5%, to $33.3 million from $16.4 million
for the year ended December 31, 1997. Of this increase, $9.0 million was
attributable to acquisitions. The remaining $7.8 million was primarily
attributable to increased subscribers and minutes of use in our Central and
Eastern Regions and payments we made to other wireless service providers for the
use of their networks while our customers were roaming in their service areas.
As a percentage of service and roaming revenues, our cost of cellular service
remained constant at 24.5% for the year ended December 31, 1998 and the year
ended December 31, 1997.
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COST OF EQUIPMENT. For the year ended December 31, 1998, our cost of
equipment increased $4.3 million, or 106.6%, to $8.4 million from $4.0 million
in 1997, primarily as a result of increases in the volume of equipment we sold
due to the growth in subscribers.
MARKETING AND SELLING COSTS. For the year ended December 31, 1998, our
marketing and selling costs increased $11.7 million, or 109.9%, to
$22.4 million from $10.7 million for the year ended December 31, 1997. As a
percentage of total operating revenues, marketing and selling costs remained
constant at 16.0% for the year ended December 31, 1998 and the year ended
December 31, 1997. We added 65,665 gross subscribers in the year ended
December 31, 1998 and 33,354 gross subscribers in the year ended December 31,
1997. Gross subscriber additions do not include subscribers acquired through
business acquisitions.
GENERAL AND ADMINISTRATIVE COSTS. For the year ended December 31, 1998, our
general and administrative costs increased $14.5 million, or 125.5%, to
$26.1 million from $11.6 million for the year ended December 31, 1997. This
increase was the result of increased infrastructure costs, including customer
service, billing, collections and administrative costs as a result of overall
growth. As a percentage of total operating revenues, general and administrative
costs increased to 18.6% in the year ended December 31, 1998 from 17.3% in the
year ended December 31, 1997. The increase as a percentage of total operating
revenues resulted from initial inefficiencies created in our administrative
areas as a result of the fourth quarter 1998 operational split of our ongoing
wireless and our discontinued wireline business segments. In addition, we
experienced higher than expected levels of bad debt expenses in certain markets
in the fourth quarter of 1998.
DEPRECIATION AND AMORTIZATION EXPENSE. For the year ended December 31,
1998, our depreciation and amortization expense increased $30.3 million, or
180.5%, to $47.1 million from $16.8 million for 1997. Depreciation and
amortization of assets acquired in acquisitions accounted for $21.1 million of
this increase. The remainder of this increase was from depreciation attributable
to our depreciable assets.
INTEREST EXPENSE. For the year ended December 31, 1998, our interest
expense increased $11.3 million, or 41.0%, to $39.0 million from $27.6 million
for the year ended December 31, 1997. The increase resulted primarily from our
increased borrowings in 1998 to finance our acquisitions.
OTHER INCOME (EXPENSE), NET. For the year ended December 31, 1998, our
other income increased $1.1 million, or 38.9%, to $3.9 million from
$2.8 million for the year ended December 31, 1997. Of this increase,
$0.9 million was attributable to increased interest income in 1998. In 1998, we
had higher investment balances than in 1997, primarily related to proceeds from
the sale of securities pending their use and escrow deposits relating to
acquisitions completed in 1998.
MINORITY INTERESTS IN INCOME OF SUBSIDIARIES. For the year ended
December 31, 1998, our minority interests in income of subsidiaries increased
$0.8 million, or 46.9%, to $2.5 million from $1.7 million in 1997. This increase
was attributable to the increased income earned from our subsidiaries in
established markets in which we do not own a 100% interest, which was offset by
losses from subsidiaries in newly-acquired markets in which we do not own a 100%
interest.
EXTRAORDINARY EXPENSE. In 1998 and 1997, we incurred an extraordinary
pretax loss of approximately $3.3 million and $2.2 million, respectively, as a
result of writing off previously capitalized financing costs associated with
revolving credit facilities that were refinanced in March 1998 and
February 1997, respectively.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS. In the year ended December 31,
1998, we had a loss from discontinued operations of $27.1 million, compared to
income from discontinued operations of $0.3 million in the year ended
December 31, 1997. The loss was the result of increased losses by Logix,
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our local exchange carrier subsidiary, that substantially expanded its
operations in 1998. We intend to distribute, prior to this offering, the capital
stock of Logix to our current stockholders.
NET INCOME (LOSS). For the year ended December 31, 1998, our net loss was
$52.6 million. Our net loss increased $35.9 million, or 214.1%, from
$16.7 million in the year ended December 31, 1997. The increase in our net loss
was primarily attributable to increased depreciation and amortization expense
and interest expense resulting from our 1998 business acquisitions and related
financings and increased losses from discontinued operations.
DIVIDENDS ON PREFERRED STOCK. For the year ended December 31, 1998, our
dividends on preferred stock increased $21.4 million, or 820.2%, to
$24.0 million from $2.6 million in the year ended December 31, 1997. The
increase was primarily the result of additional dividends on our January 1998
issuance of preferred stock.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
OPERATING REVENUES. For the year ended December 31, 1997, our total
operating revenues increased $39.8 million, or 147.6%, to $66.7 million from
$26.9 million for the year ended December 31, 1996. Our total service revenues,
roaming revenues and equipment sales and other revenues represented 57.6%, 39.4%
and 3.1% of our total operating revenues, respectively, in the year ended
December 31, 1997 and 65.3%, 29.1% and 5.5% of our total operating revenues,
respectively, in the year ended December 31, 1996.
The following table sets forth the components of our revenues for the
periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------
1996 1997
-------- --------
($ IN THOUSANDS)
<S> <C> <C>
Operating revenues:
Service revenues................................... $17,593 $38,410
Roaming revenues................................... 7,852 26,263
Equipment sales and other revenues................. 1,494 2,041
------- -------
Total.......................................... $26,939 $66,714
======= =======
</TABLE>
For the year ended December 31, 1997, our service revenues increased
$20.8 million, or 118.3%, to $38.4 million from $17.6 million for the year ended
December 31, 1996. Of this increase, $15.0 million was attributable to the
acquisitions of our Maryland and Arizona properties in 1997 and the inclusion of
the operations of our Kansas/Missouri properties for all of 1997. The remaining
increase resulted primarily from increased penetration and usage in our Central
Region. Our subscriber base increased 194.8% to 100,093 at December 31, 1997
from 33,955 at December 31, 1996. We added 42,608 subscribers as a result of the
acquisitions of our East Maryland and West Maryland markets. For the year ended
December 31, 1997, our average monthly service revenues per subscriber decreased
15.0% to $41 from $48 for the year ended December 31, 1996 due to the addition
of lower rate subscribers in our Eastern Region and competitive market pressures
in all our markets.
For the year ended December 31, 1997, our roaming revenues increased
$18.4 million, or 234.4%, to $26.3 million from $7.9 million for the year ended
December 31, 1996. Of this increase, $15.6 million was attributable to the
acquisitions of our Maryland and Arizona markets in 1997 and the inclusion of
the operations of our Kansas/Missouri markets for all of 1997. The remaining
increase was primarily attributable to increased roaming minutes in our Central
Region due to expanded coverage areas and increased usage.
For the year ended December 31, 1997, equipment sales and other revenues
increased $0.5 million, or 36.7%, to $2.0 million from $1.5 million in 1996 due
to increased sales of equipment as a result of growth in subscribers.
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<PAGE>
COST OF SERVICE. For the year ended December 31, 1997, our total cost of
service increased $10.3 million, or 168.5%, to $16.4 million from $6.1 million
for the year ended December 31, 1996. Of this increase, $8.4 million was
attributable to the acquisitions of our Maryland and Arizona properties in 1997
and the inclusion of the operations of our Kansas/Missouri markets for all of
1997. The remaining increase was primarily the result of increased subscribers
and minutes of use in our Central Region and payments we made to other wireless
service providers for the use of their networks while our customers were roaming
in their service areas. As a percentage of service and roaming revenues, cost of
service increased to 25.4% for the year ended December 31, 1997 from 24.0% for
the year ended December 31, 1996. This increase was primarily due to the
increased payments we made to other wireless service providers for roaming
charges of our subcribers, as well as additional facility lease costs in East
Maryland.
COST OF EQUIPMENT. For the year ended December 31, 1997, our total cost of
equipment increased $1.4 million, or 57.3%, to $4.0 million from $2.6 million
for the year ended December 31, 1996, primarily as a result of increases in the
volume of equipment we sold due to the growth in subscribers.
MARKETING AND SELLING COSTS. For the year ended December 31, 1997, our
marketing and selling costs increased $6.2 million, or 139.1%, to $10.7 million
from $4.5 million for the year ended December 31, 1996. The increase was
primarily due to the higher level of subscribers we added during 1997. We added
33,354 gross subscribers in 1997 with subscribers added in our Eastern Region
and in Arizona 5 since their acquisitions making up 16,469 and 1,307,
respectively, of the gross subscribers added. We added 11,970 gross subscribers
in 1996. Gross subscriber additions do not include subscribers acquired through
business acquisitions.
GENERAL AND ADMINISTRATIVE COSTS. For the year ended December 31, 1997, our
general and administrative costs increased $7.7 million, or 196.2%, to
$11.6 million from $3.9 million for the year ended December 31, 1996. The
increase was primarily due to our increased billing costs as a result of the
growth in our wireless subscribers, our 1997 acquisitions, the inclusion of our
Kansas/Missouri markets for all of 1997, and increased salary costs resulting
from additional personnel. As a percentage of total operating revenues, general
and administrative costs increased from 14.5% in 1996 to 17.3% in 1997. This
increase resulted from the addition of personnel necessary to support our
expanded operations.
DEPRECIATION AND AMORTIZATION EXPENSE. For the year ended December 31,
1997, our depreciation and amortization expense increased $11.6 million, or
220.5%, to $16.8 million from $5.2 million for the year ended December 31, 1996.
Depreciation and amortization expense increased $12.1 million as a result of the
amortization of assets acquired in the acquisitions of our Maryland and Arizona
markets in 1997 and the Kansas/Missouri acquisition in 1996, which was partially
offset by a slight decrease related to our depreciation and amortization of
assets in our 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 for 1996. The
increase resulted primarily from our increased borrowings to finance the
acquisitions of the Maryland and Arizona properties.
OTHER INCOME (EXPENSE), NET. For the year ended December 31, 1997, our
other income increased $4.3 million to $2.8 million from other expense of
$1.5 million in the year ended December 31, 1996. The increase resulted
primarily from interest earned on securities we purchased and pledged to secure
payment of the first four semi-annual interest payments on our senior notes due
2007.
MINORITY INTERESTS IN INCOME OF SUBSIDIARIES. For the year ended
December 31, 1997, our minority interests in income of subsidiaries increased
$1.0 million, or 150.8%, to $1.7 million from $0.7 million in 1996. This
increase was attributable to the increased income earned from our subsidiaries
in
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<PAGE>
established markets in which we do not own a 100% interest, which was offset by
losses from subsidiaries in newly-acquired markets in which we do not own a 100%
interest.
EXTRAORDINARY EXPENSE. In 1997 and 1996, we 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 we refinanced in February 1997 and March 1996,
respectively.
INCOME (LOSS) FROM DISCONTINUED OPERATIONS. Our loss from discontinued
operations in the year ended December 31, 1997 of $0.3 million remained constant
from the year ended December 31, 1996.
NET INCOME (LOSS). For the year ended December 31, 1997, our net loss was
$16.7 million. Our net loss increased $15.3 million from $1.4 million in the
year ended December 31, 1996. The increase in our net loss is primarily
attributable to increased depreciation and amortization expense and interest
expense resulting from our 1997 business acquisitions and related financings.
DIVIDENDS ON PREFERRED STOCK. For the year ended December 31, 1997, our
dividends on preferred stock increased $1.8 million, or 206.6%, to $2.6 million
from $0.8 million in the year ended December 31 1996. This increase was
primarily the result of additional dividends on our preferred stock, which was
outstanding for all of 1997 but only part of 1996.
LIQUIDITY AND CAPITAL RESOURCES
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 our indebtedness, and dividends on our senior preferred stock
and common stock. Our subsidiaries are separate legal entities that have no
obligation to pay any amounts we owe or to make any funds available to us. The
ability of our subsidiaries to distribute funds to us is and will be limited by
the terms of their existing and future indebtedness, including their credit
facilities.
We have required, and will likely continue to require, substantial capital
to further develop, expand and upgrade our cellular systems and and those we may
acquire. We have financed our operations through cash flows from operating
activities, bank debt and the sale of debt and equity securities. We had capital
expenditures of $31.2 million during the first six months of 1999 and we expect
our capital expenditures for the last six months of 1999 to be approximately
$41.0 million, excluding acquisitions. We have budgeted approximately
$115.0 million to $120.0 million for capital expenditures in 2000. We may also
require additional financing for future acquisitions and to refinance our debt
at its final maturities and to meet our mandatory redemption provisions on our
senior preferred stock.
At June 30, 1999, we had a working capital deficit of $23.0 million, a ratio
of current assets to current liabilities of 0.8:1 and an unrestricted cash
balance of $2.9 million, which compares to working capital of $13.5 million, a
ratio of current assets to current liabilities of 1.1:1 and an unrestricted cash
balance of $22.3 million at December 31, 1998, and working capital of
$15.9 million, a ratio of current assets to current liabilities of 1.7:1 and an
unrestricted cash balance of $2.8 million at December 31, 1997.
Our net cash provided by operating activities totaled $2.6 million for the
six months ended June 30, 1999, while net cash used by operating activities
totaled $2.3 million for the six months ended June 30, 1998. The increase of
$4.9 million was primarily due to lower depreciation and amortization, which was
partially offset by a decrease in deferred credits, an increase in current
assets, a decrease in liabilities and our net loss for the period. Our net cash
provided by operating activities totaled $28.0 million for 1998 compared to
$6.9 million for 1997 and $5.2 million for 1996. The increase of $21.1 million
from 1997 to 1998 was primarily due to lower depreciation and amortization, a
decrease
52
<PAGE>
in current assets and an increase in liabilities, which was partially offset by
our net loss for the period. The increase of $1.7 million from 1996 to 1997 was
primarily due to a decrease in current assets, an increase in liabilities, lower
depreciation and amortization and an increase in deferred income taxes, which
was partially offset by our net loss for the period.
Our net cash used in investing activities, which totaled $66.6 million and
$193.6 million for the six months ended June 30, 1999 and June 30, 1998,
respectively, related primarily to acquisitions and capital expenditures in all
periods. Acquisitions and their related costs accounted for $27.3 million and
$177.4 million and capital expenditures were $31.2 million and $13.9 million for
the six months ended June 30, 1999 and June 30, 1998, respectively. Our cash
used in investing activities, which totaled $999.1 million, $217.6 million and
$43.9 million for 1998, 1997 and 1996, respectively, principally related to
acquisitions and capital expenditures in all periods. Acquisitions accounted for
$945.4 million, $190.7 million and $30.0 million in 1998, 1997 and 1996,
respectively, and capital expenditures were $55.3 million, $17.8 million and
$13.5 million in 1998, 1997 and 1996, respectively.
Net cash provided by financing activities was $44.6 million for the six
months ended June 30, 1999 compared to $202.4 million for the six months ended
June 30, 1998. Financing activity sources for the six months ended June 30, 1999
consisted primarily of the issuance of $170.0 million of senior preferred stock
and proceeds from long-term debt of $31.0 million, which was partially offset by
the redemption of $55.0 million of our Class F and Class G preferred stock and
repayments of long-term debt totaling $111.0 million. Net cash provided by
financing activities was $990.6 million for 1998 compared to $212.5 million for
1997 and $38.9 million for 1996. Financing activity sources for 1998 consisted
primarily of $740.0 million of proceeds from bank borrowings, the issuance of
$200.0 million of Dobson/Sygnet senior notes, the issuance of $225.0 million of
senior preferred stock and the issuance of $115.0 million of other preferred
stock. These activities were partially offset by financing activity uses,
including the purchase of $67.7 million of restricted investments to be used to
fund the first six semi-annual interest payments on the Dobson/Sygnet senior
notes and $62.0 million of deferred financing costs relating to new credit
facilities and the financing of our acquisition of Sygnet. Proceeds from
long-term debt borrowings exceeded long-term debt repayments by $768.5 million,
$256.3 million and $39.4 million in 1998, 1997 and 1996, respectively.
The minority partners in partnerships that own certain of our cellular
operations receive distributions equal to their share of the profit multiplied
by estimated income tax rates. Under our bank credit agreements, our 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 us is paid or extinguished.
We have agreed to purchase approximately $65.0 million of cell site and
switching equipment from Nortel Networks Corp. prior to November 2001. Of this
commitment, approximately $31.8 million remained outstanding at June 30, 1999.
Under another equipment supply agreement, we agreed to purchase approximately
$81.0 million of cell site and switching equipment from Lucent Technologies Inc.
by January 13, 2002. Of this commitment, $44.3 million remained outstanding at
June 30, 1999. We expect that these purchases will be financed using funds under
our credit facilities.
We have received a commitment from Bank of America, N.A. and its affiliate,
Banc of America Securities LLC, on behalf of a group of banks, to provide us
with an $800.0 million credit facility, the proceeds of which will be used
primarily to consolidate the indebtedness of DCOC under its $160.0 million
credit facility (the "DCOC Credit Facility") and of DOC under its
$250.0 million senior secured credit facility (the "DOC Credit Facility"), to
pay the cash portion of certain of our pending acquisitions and to fund our
expected repurchase of our outstanding $160.0 million principal amount of
11 3/4% senior notes due 2007. This new credit facility will include a
$300.0 million revolving credit facility and a $500.0 million term loan
facility, both of which will mature in 2007.
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<PAGE>
Advances under the credit facility will bear interest, at our option, at
prime rate or LIBOR plus, in each case, an additional 1.5% to 2.5% with respect
to the revolving credit facility and 2.75% to 3.0% with respect to the term loan
facility. Our obligations under the credit facility will be secured by a pledge
of the stock of our restricted subsidiaries, and upon request by the banks, by
liens on all of our assets and those of our restricted subsidiaries except FCC
licenses.
We will be required to amortize the term loan facility quarterly in amounts
ranging from $25.0 million in 2001 to $125.0 million in 2007. In addition, we
will be required to make prepayments of amounts received from asset sales,
excess cash flows and proceeds from new borrowings or the sale of equity, other
than this offering. We will have the right to prepay the credit facility in
whole or in part at any time subject to the payment of certain fees.
The new credit facility will contain a number of restrictive covenants that,
among other things, will limit our ability to incur additional indebtedness,
create liens and pay dividends. In addition, we will be required to maintain
certain financial ratios, including a ratio of total indebtedness to EBITDA of
7.75 to 1; a ratio of EBITDA to debt service requirements of 1.15 to 1; an
interest coverage ratio of at least 1.40 to 1; and a ratio of EBITDA minus
capital expenditures to debt service requirements of greater than 1.10 to 1.
Our new credit facility will replace the DCOC Credit Facility and the DOC
Credit Facility. As of June 30, 1999, we had outstanding indebtedness of
$100.0 million and we had no availability under the DCOC Credit Facility (which
increased to $50.0 million at July 2, 1999). As of June 30, 1999, we had
outstanding indebtedness of $158.0 million and we had $23.0 million of
availability under the DOC Credit Facility. DCOC's obligations under the DCOC
Credit Facility are secured by all existing and future assets of DCOC, and are
guaranteed by DCOC's subsidiaries. The DOC Credit 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 DCOC Credit Facility and the
DOC Credit Facility are not secured, however, by either company's FCC licenses.
Each of the DCOC Credit Facility and the DOC Credit Facility require that we
maintain specified financial ratios. The failure to maintain these ratios would
constitute an event of default, notwithstanding our ability to meet debt service
obligations. To date, we have met the required financial ratios. The DCOC Credit
Facility and the DOC Credit Facility each amortize quarterly beginning June 30,
2000 and terminate on June 30, 2006. The weighted average interest rate on the
DCOC Credit Facility was 7.9% as of June 30, 1999. The weighted average interest
rate on the DOC Credit Facility was 6.8% as of June 30, 1999.
Our subsidiary, Dobson/Sygnet, is a party to a credit agreement for an
aggregate of $430.0 million, consisting of a $50.0 million revolving credit
facility and $380.0 million of term loan facilities. Interest on the revolving
credit facility and the term loan facilities is based on a prime rate or a LIBOR
formula, and has ranged between 8.35% and 8.67% since inception. As of June 30,
1999, we had $402.0 million outstanding under the Dobson/Sygnet credit
facilities and we had $24.0 million of availability under the Dobson/Sygnet
credit facilities.
The average rate as of September 30, 1999 was 8.67%. The obligations under
the Dobson/Sygnet credit facilities are secured by a pledge of the capital stock
of Dobson/Sygnet's operating subsidiary as well as a lien on substantially all
of the assets of Dobson/Sygnet and its operating subsidiary. The Dobson/Sygnet
credit facilities require that Dobson/Sygnet and we maintain certain financial
ratios. The failure to maintain these ratios would constitute an event of
default, notwithstanding Dobson/Sygnet's ability to meet its debt service
obligations. The Dobson/Sygnet credit facilities amortize quarterly beginning on
December 31, 2000 and terminate on December 31, 2008. The weighted average
interest rate on the Dobson/Sygnet credit facilities was 8.5% as of June 30,
1999.
Dobson/Sygnet has outstanding $200.0 million aggregate principal amount of
senior notes that mature in 2008. The Dobson/Sygnet notes bear interest at an
annual rate of 12 1/4%, payable semi-annually on each June 15 and December 15,
beginning June 15, 1999. The Dobson/Sygnet note
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indenture contains restrictive covenants that, among other things, limit our
ability and that of Dobson/ Sygnet's subsidiaries to incur additional
indebtedness, create liens, pay dividends or make distributions in respect of
their capital stock, make investments or certain other restricted payments, sell
assets, redeem capital stock, issue or sell stock of restricted subsidiaries,
enter into transactions with stockholders or affiliates or effect a
consolidation or merger. Of the net proceeds from the sale of these notes, we
used $67.7 million, to purchase securities we have pledged to secure the first
six semi-annual interest payments on the notes.
We have outstanding $160.0 million aggregate principal amount of senior
notes which mature in April 2007. The senior notes bear interest at an annual
rate of 11 3/4%, payable semi-annually on each April 15 and October 15. We
expect to offer to repurchase all of our outstanding senior notes with funds
available under our new credit facility described above.
As of June 30, 1999, we have issued and outstanding 12 1/4% senior preferred
stock and 13% senior preferred stock with aggregate liquidation values of
$278.8 million and $173.5 million, respectively, including accrued stock
dividends. Each of the certificates of designation for our senior preferred
stock contains several restrictive covenants which may limit our ability to
issue indebtedness in the future.
We recently entered into definitive agreements to acquire the FCC licenses
for, and certain assets related to, Alaska 1 RSA, Alaska 3 RSA and
Michigan 3 RSA for an aggregate purchase price of $125.0 million. These
acquisitions are expected to close in the first quarter of 2000. We are also a
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 Pennsylvania 2 license remains subject to administrative and judicial review
the closing of that acquisition has been delayed. On October 18, 1999, the FCC
issued an order, which, when final, will dismiss all outstanding claims against
the seller's title. We expect this order to become final in November 1999 if
none of the dismissed parties files an appeal. Pending the closing of this
acquisition, we are managing and control the operation of the Pennsylvania 2
cellular market under the supervision of the seller. On June 28, 1999 we
concluded our purchase of the FCC license for, and certain assets related to,
Maryland 1 RSA and an unserved portion of Cumberland, Maryland MSA for
$9.1 million in cash using available funds under our credit facilities. In the
fourth quarter of 1999, we also acquired the FCC license for, and certain assets
related to, a portion of Arizona 1 RSA for $24.0 million. Arizona 1 is located
in northwestern Arizona. We have no definitive agreements with respect to any
acquisitions other than our acquisitions of Alaska 1, Alaska 3, Michigan 3 and
Pennsylvania 2 and the American Cellular acquisition.
The American Cellular joint venture has obtained a commitment for a bank
credit facility of $1.75 billion. After initial funding and borrowings under
this credit facility to complete the American Cellular acquisition, we expect
there will be approximately $75.0 million of credit availability under this
facility. American Cellular has required, and will likely continue to require,
substantial capital to further develop, expand and upgrade its cellular systems.
American Cellular has budgeted approximately $70.0 million for capital
expenditures in 2000. If American Cellular does not generate sufficient cash
flows from operations or otherwise have sufficient access to capital to meet all
of its debt service, capital expenditure, working capital or other operating
needs, we may be required to fund our 50% share of any capital needs of the
American Cellular joint venture in order to protect our substantial investment
in the joint venture. See "The American Cellular Acquisition--Joint Venture
Credit Facility."
Although we cannot provide any assurance, assuming successful implementation
of our strategy, including the further development of our cellular systems and
significant and sustained growth in our cash flows, we believe that borrowings
under our new credit facility, the net proceeds from this offering and cash
flows from operations should be sufficient to allow us to consummate our pending
acquisitions and are expected to be sufficient to satisfy our currently expected
capital expenditures, working capital and debt service obligations. The actual
amount and timing of our future capital
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requirements may differ materially from our estimates as a result of, among
other things, the demand for our services and regulatory, technological and
competitive developments. We currently expect that we may have to refinance our
indebtedness at their respective maturities commencing in 2006. We will also
need to refinance our mandatory redemption obligations under our senior
preferred stock. Sources of additional financing may include commercial bank
borrowings, vendor financing and the sale of equity or debt securities. We
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 utilize hedge accounting. Under SFAS 133, derivatives will
be recorded on the balance sheet as either an asset or liability measured at
their fair value, with changes in the fair value recognized in current earnings.
SFAS 133 will be effective for fiscal years beginning after June 15, 2000. Under
SFAS 133, we would record an asset of $0.4 million relating to an interest rate
hedge valuation at June 30, 1999. We have not determined the timing or method of
adoption of SFAS 133.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risk relates to changes in interest rates. Market risk is
the potential loss arising from adverse changes in market prices and rates,
including interest rates. The objective of our financial risk management is to
minimize the negative impact of interest rate fluctuations on our earnings and
equity. In March 1999, we entered into an interest rate swap that effectively
fixed the interest rate on $110.0 million of the principal outstanding amount of
the Dobson/Sygnet credit facilities at approximately 5.48% plus a factor based
on our leverage, approximately 8.78% at June 30, 1999. The term of the interest
rate swap is 24 months. In June 1999, we entered into an interest rate cap
agreement terminating on June 14, 2001. The cap agreement minimizes our interest
rate exposure by setting a maximum rate of 7.50% plus a factor based on our
leverage, approximately 9.50% at June 30, 1999, for $160.0 million of our
indebtedness. The counterparty to each of the interest rate swap and cap are
major financial institutions. Increases in interest expense relating to the
interest rate hedge for the six months ended June 30, 1998 and June 30, 1999
were reflected in income and were immaterial. We did not recognize any gains or
losses in 1998, 1997 or 1996 from such interest rate hedging. We do not enter
into derivatives or other financial instruments for trading or speculative
purposes.
The fair market value of long-term fixed interest rate debt is subject to
interest rate risk. Generally, the fair market value of fixed interest rate debt
will increase as interest rates fall and decrease as interest rates rise. The
estimated fair market values of our total long-term fixed rate debt and our
variable-rate debt are shown in Note 15 to our consolidated financial
statements. Based on our market risk sensitive instruments outstanding at
December 31, 1998, we have determined that there was no material market risk
exposure to our consolidated financial position, results of operations or cash
flows as of such date.
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<PAGE>
IMPACT OF YEAR 2000 ISSUE
Many computer systems and applications, including those embedded in
equipment and facilities, use two digit rather than four digit date fields to
designate an applicable year. As a result, these systems and applications may
not properly recognize the year 2000 or process data that includes it,
potentially causing data miscalculations, inaccuracies, operational malfunctions
or failures.
In April 1998, we established a multi-disciplined team to perform a year
2000 impact analysis. The team consists of representatives from each of our
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 that brought a structured approach to the
assessment and management reporting process, as well as disaster recovery
approach.
We completed an inventory of our automated systems and services and
identified significant risk areas by line of business, specific compliance
requirements and costs and estimated completion dates for affected systems. The
services we provide are based on the systems of Regional Bell Operating
Companies and other systems outside our control. We have had contact with all of
the vendors of products and services that we believe are critical to our
operations. Our vendors' representations pertaining to year 2000 compliance have
come in writing directly to us, in contracts and by accessing year 2000
information available at their web sites. While all of our vendors have provided
some type of assurance that their products will be year 2000 compliant, not all
have provided us expressly with a "year 2000 compliance statement" and/or a
"year 2000 warranty." Our focus with our vendors has been directed toward
obtaining assurances of year 2000 compliance in the form of documented year 2000
planning and testing and third party audits, whenever available.
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 our business and
operational support applications. Those applications that have not been
outsourced to service providers have been deployed using packaged software from
outside vendors. As a result, the focus of our remediation efforts is not a
large scale in-house effort, but rather an 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 our information
systems, services and telecommunications infrastructure, year 2000 compliant
versions were to be included as a part of existing maintenance and/or service
agreements at no additional cost to us and were in place and tested by the end
of the second quarter of 1999. All critical systems relating to call delivery,
billing, accounting, payroll and customer care were fully year 2000 compliant by
the end of October 1999. There are some non-critical systems that have yet to be
replaced or upgraded for business reasons. While these non-critical systems do
not represent a threat to the business, we will retire, upgrade or replace them
by the end of 1999. The cost of upgrading or replacing those systems that were
not covered by existing service or maintenance agreements was approximately
$0.75 million. Our estimated upgrade costs does not include the cost of
upgrading and/or replacing those non-year 2000 compliant systems that were
replaced or upgraded based on non-year 2000 related business reasons.
We will continue to analyze systems and services that utilize date-embedded
codes that may experience operational problems when 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 we do business to coordinate year 2000
compliance. Our year 2000 contingency and business continuity plans are in
development and will be completed during the fourth quarter of 1999. If we are
unable to provide systems and services to our customers, because either our own
systems or those of our vendors are not year 2000 compliant, our reasonably
likely worst case scenario is that we would experience a reduction in our
operating revenues, which could adversely affect our ability to meet our
operating and financial obligations.
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INDUSTRY OVERVIEW
Wireless communications systems use a variety of radio frequencies to
transmit voice and data. Broadly defined, the commercial wireless communication
industry includes one-way radio applications, such as paging or beeper services,
and two-way radio applications, such as cellular, PCS and ESMR services. Since
the introduction of commercial cellular service in 1983, the wireless
communications industry has experienced dramatic growth. The number of
subscribers for cellular, PCS and ESMR services has increased from an estimated
340,000 at the end of 1985 to over 76 million as of June 30, 1999 according to
the Cellular Telecommunications Industry Association, or CTIA, an international
association for the wireless industry. The following chart illustrates the
annual growth in U.S. wireless communication customers for cellular, PCS and
ESMR services through June 30, 1999.
<TABLE>
<CAPTION>
JUNE 30
WIRELESS INDUSTRY STATISTICS(1) 1993 1994 1995 1996 1997 1998 1999
- ------------------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Total service revenues (in billions)...... $ 10.9 $ 14.2 $ 19.1 $ 23.6 $ 27.5 $ 33.1 $ 19.4
Subscribers at end of period (in
millions)............................... 16.0 24.1 33.8 44.0 55.3 69.2 76.3
Subscriber growth......................... 45.1% 50.8% 40.0% 30.4% 25.6% 25.1% 25.4%
Average monthly service revenues per
subscriber, excluding roaming
revenues................................ $58.74 $51.48 $47.59 $44.66 $41.12 $39.66 $39.97
Average monthly service revenues per
subscriber, including roaming
revenues................................ $67.13 $59.08 $54.91 $50.61 $46.11 $44.35 $44.37
Penetration at end of period.............. 6.2% 9.4% 13.0% 16.3% 20.7% 25.7% 27.9%
</TABLE>
- ------------------------------
SOURCE: CELLULAR TELECOMMUNICATIONS INDUSTRY ASSOCIATION.
(1) Statistics for 1993 through 1998 were as of and for the years ended
December 31. Statistics for 1999 are as of and for the six months ended
June 30.
Cellular service, which operates in the 800 MHz frequency band of the radio
spectrum, is currently the predominant form of commercial mobile wireless voice
communications service. Cellular systems have historically been analog-based
systems, which use one continuous electronic signal that varies in amplitude or
frequency over a single radio channel. However, over the last several years
cellular operators have deployed digital service in most of the major
metropolitan markets and in many rural and suburban areas. Digital systems
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 increases the capacity of the networks of cellular
operators. 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, caller ID, call forwarding, call waiting and more
complex data transmission features, including facsimile, electronic mail,
internet and data network access.
The FCC began auctioning spectrum between 1850 to 1990 MHz in late 1994 to
be used by PCS licensees to provide wireless communications services which are
substantially similar to digital cellular services. PCS competes directly with
existing cellular telephone, paging and specialized mobile radio services. In
addition to PCS and cellular frequencies, ESMR licensees provide interconnected
two-way voice and data services within a 15 MHz band of spectrum.
Wireless communications systems are divided into multiple geographic
coverage areas, known as "cells." Each cell contains a transmitter, a receiver
and signaling equipment, collectively known as the "cell site." The cell site is
connected by microwave or landline telephone circuits to a switch that uses
computers to control the operation of the wireless systems for the entire
service area. The system controls the transfer of calls from cell to cell as a
subscriber's handset travels, coordinates calls to and from handsets, allocates
calls among the cells within the system and connects calls to the local landline
telephone system or to a long distance carrier. Wireless communications
providers establish interconnection agreements with local exchange carriers and
interexchange carriers, thereby integrating
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their system with the existing landline communications system. Because the
signal strength of transmission between a handset and a cell site declines as
the handset moves away from the cell site, the switching office and the cell
site monitor the signal strength of calls in progress. When the signal strength
of a call declines to a predetermined level, the switching office may "hand-off"
the call to another cell site where the signal strength is stronger. Cells are
typically designed on a grid, although terrain factors, including natural and
man-made obstructions, signal coverage patterns and capacity constraints may
result in irregularly shaped cells and overlaps or gaps in coverage.
Wireless system operators normally agree to provide service to subscribers
from other compatible wireless systems who are temporarily located in or
traveling through their service areas in a practice called "roaming." Agreements
among system operators provide that the carrier that normally provides services
to the roaming subscriber pays the serving carrier at rates prescribed by the
serving carrier. Analog cellular handsets are functionally compatible with
cellular systems in all markets within the United States. As a result, analog
cellular handsets may be used wherever a subscriber is located, as long as a
cellular system is operational in the area and necessary roaming arrangements
exist. Although cellular, PCS and ESMR systems utilize similar technologies and
hardware, they operate on different frequencies and use different technical and
network standards. Multi-mode phones, however, make it possible in many
instances for users of one type of system to roam on a different type of system
outside of their service area.
Wireless digital signal transmission is accomplished through the use of
various forms of "air interface protocols." The FCC has not mandated a single
national digital standard (as it did with the analog Advanced Mobile Phone
System historically used in cellular systems) and, as a result, the following
three distinct technologies have evolved as standards and have been deployed
nationally in digital cellular and PCS systems:
- TDMA--Time Divisional Multiple Access is the standard adopted and
certified by CTIA. It is the digital standard being deployed nationally by
AT&T Wireless and Southwestern Bell Mobile Systems.
- GSM--Global System for Mobile Communications is the digital standard that
originated in Europe and has been widely deployed by 1.9 GHz license
holders such as VoiceStream Communications, Omnipoint Corporation,
Powertel, Inc. and Aerial Communications, Inc.
- CDMA--Code Divisional Multiple Access is a spread-spectrum technology that
is predominantly being used by Sprint Corporation, AirTouch
Communications, Inc., U S WEST and Bell Atlantic Corporation.
GSM, TDMA and CDMA are currently incompatible with each other. However, a
subscriber using a multi-mode phone may obtain service from both digital and
analog systems and may also utilize both cellular and PCS services. Until
digital networks become fully built-out, these multi-mode handsets are necessary
for the portion of the digital subscriber base who wish to utilize wireless
service in areas currently without digital coverage that utilizes their
applicable digital standard.
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BUSINESS
OVERVIEW
We are a leading provider of rural and suburban cellular telephone services.
As of June 30, 1999, our systems covered a total population of approximately
5.8 million and we had 401,680 subscribers. On a proportionate basis, after
giving effect to our expected 50% interest in American Cellular, our systems
would have covered a net population of approximately 8.0 million and we would
have had 589,062 subscribers as of June 30, 1999. For the six months ended
June 30, 1999, we had total revenues of $146.3 million and EBITDA of
$64.6 million. On the same proportionate basis, we would have had total revenues
of $202.0 million and EBITDA of $97.2 million for the six months ended June 30,
1999.
We began providing cellular telephone service in 1990 in Oklahoma and the
Texas Panhandle. We have expanded our cellular operations rapidly since then,
primarily through the acquisition of rural and suburban cellular systems. Since
1996, we have completed 12 acquisitions of cellular licenses and systems,
increasing the total population served by our systems by approximately
5.4 million and significantly expanding the geographic scope of our operations.
We believe we have been successful in integrating acquired systems into our
operations.
We believe that owning and operating a mix of rural and suburban cellular
systems provides strong growth opportunities because we believe these systems
currently have lower penetration rates, higher subscriber growth rates, a higher
proportion of roaming revenues and less competition for subscribers than
cellular systems located in larger metropolitan areas. We focus on acquiring
underdeveloped cellular systems that are adjacent to major metropolitan areas,
which include a high concentration of expressway corridors and tend to have a
significant amount of roaming activity.
We have a strategic relationship with AT&T Wireless, which recently became
one of our stockholders. Through this relationship, we have a coast-to-coast
roaming agreement that allows our customers to utilize wireless systems owned by
AT&T Wireless, and customers of AT&T Wireless to utilize our cellular systems,
each at favorable prices. AT&T Wireless customers accounted for approximately
35% of our roaming revenues, or approximately 15% of our total revenues, in the
six months ended June 30, 1999. We also have roaming agreements with AirTouch,
Southwestern Bell Mobile Systems and other leading wireless providers.
We and AT&T Wireless have entered into an equally-owned joint venture to
acquire American Cellular for approximately $2.3 billion, before expenses.
American Cellular is one of the largest independent rural cellular telephone
operators in the United States. As of June 30, 1999, American Cellular's systems
covered a total population of approximately 4.9 million, and it had 374,764
subscribers, primarily in rural areas of the midwestern and eastern United
States. Following completion of this acquisition, we will operate American
Cellular's systems. American Cellular's management organization, billing system,
network infrastructure and marketing programs are substantially similar to ours.
The closing of this offering is not contingent on the completion of the American
Cellular acquisition, which we expect to occur in the first quarter of 2000.
OTHER PENDING ACQUISITIONS
In addition to the American Cellular acquisition, we recently acquired the
FCC license for, and certain assets related to, a portion of Arizona 1 RSA and
entered into definitive agreements to acquire the FCC licenses for, and certain
assets related to, Alaska 1 RSA, Alaska 3 RSA and Michigan 3 RSA. Each
acquisition is subject to FCC approval, compliance with requirements of the
Hart-Scott-Rodino Act and customary closing conditions. The following is a
summary of each acquisition:
ARIZONA 1 RSA. Subsequent to June 30, 1999, we entered into an agreement to
purchase the southern portion of Arizona 1 for $24.0 million. Our portion of
Arizona 1 is located in northwestern Arizona. The Arizona 1 market area had a
total population of approximately 135,000 as of June 30, 1999. Our acquisition
of Arizona 1 closed in the third quarter of 1999.
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ALASKA 1 RSA. On October 6, 1999, we entered into an agreement to purchase
Alaska 1 for $16.0 million, subject to adjustment. Alaska 1 is located in
central Alaska from the western coastline to the eastern border with Canada. The
Alaska 1 market area, which includes Fairbanks, had a total population of
approximately 128,000 as of June 30, 1999. Our acquisition of Alaska 1 is
expected to close in the first quarter of 2000. We are managing this system
pending its closing under the supervision and control of the seller.
ALASKA 3 RSA. On September 30, 1999, we entered into an agreement to
purchase Alaska 3 for $12.0 million, subject to adjustment. Alaska 3 is located
in the southeastern corner of the state. The Alaska 3 market area, which
includes Juneau and Ketchikan, had a total population of approximately 70,000 as
of June 30, 1999. Our acquisition of Alaska 3 is expected to close in the first
quarter of 2000. We are managing this system pending the closing under the
supervision and control of the seller.
MICHIGAN 3 RSA. On October 25, 1999, we entered into an agreement to
purchase Michigan 3 for $97.0 million, subject to adjustment. Michigan 3 is
located in northwestern Michigan. The Michigan 3 market area, which includes
Traverse City and Petoskey, had a total population of approximately 165,700 as
of June 30, 1999. Our acquisition of Michigan 3 is expected to close in the
first quarter of 2000.
PENNSYLVANIA 2 RSA. We are also a party to agreements to purchase the FCC
license for, and certain assets related to, Pennsylvania 2 RSA for
$6.0 million. Because the seller's title to its cellular license remains subject
to administrative and judicial review the closing of this acquisition has been
delayed. On October 18, 1999, the FCC issued an order that, when final, will
dismiss any and all claims made against the seller's title to the license. We
expect this order to become final in November 1999 if none of the dismissed
parties files an appeal of the FCC order. Pending the closing or finalization of
the order, we are managing and control the operation of this market under the
supervision and control of the seller. As a result, we include the population
and subscriber data related to this market in our population and subscriber data
in our Eastern Region. As of June 30, 199, the Pennsylvania 2 RSA had a total
population of 90,000.
COMPETITIVE STRENGTHS
We believe that our competitive strengths are:
- ESTABLISHED OPERATING HISTORY IN RURAL AND SUBURBAN MARKETS. We began
providing cellular telephone service in 1990 in Oklahoma and the Texas
Panhandle and since then have rapidly expanded our cellular operations to
include systems in rural and suburban markets covering a total population
of 5.8 million as of June 30, 1999. We believe that during this time we
have gained substantial experience as an operator of cellular systems in
rural and suburban markets.
- PROVEN ACQUISITION AND INTEGRATION CAPABILITIES. Since 1996 we have
successfully completed 12 acquisitions of cellular licenses and systems,
significantly expanding the geographic scope of our operations and
increasing our total subscribers from 26,614 as of December 31, 1995 to
352,005 as of December 31, 1998. We have grown our revenues from
$26.9 million for the year ended December 31, 1996 to $140.0 million for
the year ended December 31, 1998 and during the same period our EBITDA
increased from $9.9 million to $50.0 million. On December 23, 1998 we
acquired Sygnet, which increased the total population covered by our
cellular systems by 2.3 million. We substantially completed the
integration of Sygnet's systems and operations by the end of June 1999,
and since closing the Sygnet acquisition have increased the number of our
subscribers in the Sygnet markets from 178,751 to 199,457 as of June 30,
1999, an 11.6% increase.
- STRATEGIC RELATIONSHIP WITH AT&T WIRELESS. We have a strategic
relationship with AT&T Wireless, which recently became one of our
stockholders. Through this relationship, we have a coast-to-coast roaming
agreement that enables our customers to use AT&T Wireless's wireless
systems,
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and AT&T Wireless's customers to use our cellular systems, each at
favorable rates. AT&T Wireless customers accounted for approximately 35%
of our roaming revenues, or approximately 15% of our total revenues, in
the six months ended June 30, 1999. In addition, we and AT&T have entered
into an equally-owned joint venture to acquire American Cellular for
approximately $2.3 billion, which has further expanded the scope of our
relationship with AT&T.
- EXPERIENCED MANAGEMENT TEAM. We have an experienced management team. Both
Everett R. Dobson, our Chairman of the Board, President and Chief
Executive Officer and G. Edward Evans, our President of our cellular
subsidiaries, have substantial experience in the wireless communications
industry and both are actively involved in CTIA, the leading cellular
industry association.
- ABILITY TO OFFER A VARIETY OF DIGITAL SERVICES, INCLUDING DIGITAL VOICE
SERVICES, TO APPROXIMATELY 85% OF OUR COVERED POPULATION. We have upgraded
approximately 85% of our cellular network to digital technology, which
both enhances our attractiveness as a roaming partner to PCS and other
cellular providers and provides increased services to our current
subscribers, including digital voice services.
STRATEGY
We have developed organizational, marketing and operational programs
designed to increase the number and retention of our subscribers, promote
superior customer service, control subscriber acquisition costs and enhance
operating cash flow in our markets. We intend to apply these programs to the
properties we acquire, including American Cellular.
Our strategy is to capitalize on our competitive strengths and acquire,
develop and operate rural and suburban cellular systems. The principal elements
of our strategy include:
- CONTINUE TO GROW THROUGH DISCIPLINED ACQUISITIONS. We intend to acquire
additional cellular operations in RSAs and smaller MSAs that:
- have attractive demographics and growth trends;
- have a favorable competitive environment;
- are located adjacent to major metropolitan areas;
- include a high concentration of expressway corridors that have a
significant amount of roaming activity; and
- have the potential to further develop strategic relationships with
operators of neighboring wireless systems and the ability to offer
service under a leading brand name.
- INTEGRATE ACQUIRED OPERATIONS. We intend to integrate the operations of
cellular systems we acquire, including American Cellular, with our
existing operations to achieve economies of scale. We believe that these
increased efficiencies will come from the consolidation and centralized
control of pricing, customer service and marketing, system design,
engineering, purchasing, financial and administrative functions and
billing functions. We expect to consolidate American Cellular's call
service centers and one or more of our call centers. We intend to use our
increased leverage in negotiating prices and services from third party
service providers and equipment vendors.
- CONTINUE TO INCREASE SYSTEM CAPACITY AND COVERAGE AND FURTHER UPGRADE OUR
SYSTEMS THROUGH THE IMPLEMENTATION OF ADVANCED TECHNOLOGY. We believe that
increasing capacity and upgrading our systems will attract additional
subscribers, increase the use of our systems by existing subscribers,
increase roaming activity and further enhance the overall efficiency of
our network. Approximately 85% of our systems utilize digital technology
and we intend to upgrade our
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remaining cellular systems with digital technology to enable us to
increase roaming, serve the increasing number of digital cellular
subscribers and PCS subscribers with multimode phones, and provide
value-added, high margin, enhanced capabilities, including caller ID,
longer battery life and zone billing.
- EXPAND STRATEGIC RELATIONSHIPS. We intend to maintain and expand strategic
relationships with operators of wireless systems in major MSAs near our
cellular systems. These relationships include roaming agreements that
allow our subscribers to use the wireless systems of operators in
neighboring MSAs and RSAs at favorable rates. Under these agreements,
similar benefits are available to the MSA operators' subscribers roaming
in our areas. In addition, we deploy digital technology in our system area
that is the same as that selected by our roaming partners in the
neighboring MSA. We also market our cellular products and services under
the predominant brand name used in neighboring MSAs. These brand names
include CELLULAR ONE-Registered Trademark- and AIRTOUCH-TM-
CELLULAR-Registered Trademark-. We believe these strategic relationships
and agreements enable us to increase our roaming revenues, offer our
subscribers larger "home rate" areas and leverage the recognized brand
names of our roaming partners and their extensive marketing efforts.
- AGGRESSIVELY MARKET AND PROMOTE OUR CELLULAR SERVICES IN OUR LOCAL
MARKETS. Our marketing objective is to continue to distinguish ourself in
our markets as the leading cellular services provider by stressing our
service quality, local sales presence and commitment to the community. Our
sales efforts are conducted primarily through our retail outlets and our
direct sales force and, to a lesser extent, through independent agents.
Our local management teams have day-to-day operating authority with the
flexibility to respond to individual market requirements. Their presence
fosters a strong sense of customer service and community spirit. In
addition, we believe that our marketing and customer service functions are
more effective when tailored to the local market population.
- USE HIGHLY TARGETED SALES EFFORTS. We seek to attract subscribers who we
believe are likely to generate high monthly revenues 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 our
cellular services.
- PROVIDE SUPERIOR CUSTOMER SERVICE. We intend to maintain a high level of
customer satisfaction through a variety of techniques, including the
maintenance of 24-hour customer service. We support local customer service
through our direct sales force, our retail stores and regional customer
service centers. The regional presence of our call centers enhances our
knowledge of local markets, which improves our ability to provide customer
service, credit and collection and order activation.
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MARKETS AND SYSTEMS
The following table sets forth information with respect to our existing
cellular markets as of June 30, 1999 . Net population represents total
population less minority ownership interests in our licenses. We determine
market penetration by dividing total subscribers in each of our FCC cellular
licensed areas at the end of the period by the estimated total population
covered by the applicable cellular license or authorization.
<TABLE>
<CAPTION>
TOTAL NET TOTAL MARKET DATE
POPULATION POPULATION SUBSCRIBERS PENETRATION ACQUIRED
---------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
DOBSON
NORTHERN REGION
Youngstown (Youngstown, OH MSA, Sharon, PA MSA and
OH 11 RSA)........................................ 725,700 725,700 1998
OH 2 RSA............................................ 262,100 262,100 1999
Erie (Erie, PA MSA)................................. 280,600 280,600 1998
PA (PA 1, 2, 6 and 7 RSAs )......................... 880,100 880,100 1998
NY 3 RSA............................................ 485,200 485,200 1998
---------- ----------
Total............................................. 2,633,700 2,633,700 212,582 8.1%
---------- ---------- -------
CENTRAL REGION
Northwest OK (Enid, OK MSA and OK
2 RSA)............................................ 105,100 105,100 1991
OK 5 and 7 RSAs..................................... 148,500 95,634 1989
TX 2 RSA............................................ 88,500 53,985 1989
KS/MO (KS 5 RSAs, MO 1, 4 and 5 RSAs)............... 246,500 246,500 1996
TX 16 RSA........................................... 334,000 334,000 1998
TX 10 RSA........................................... 318,000 318,000 1998
---------- ----------
Total............................................. 1,240,600 1,153,219 61,706 5.0%
---------- ---------- -------
WESTERN REGION
AZ 5 RSA............................................ 179,848 134,886 1997
CA 7 RSA............................................ 149,300 149,300 1998
CA 4 RSA............................................ 377,300 377,300 1998
Santa Cruz, CA MSA.................................. 245,600 213,426 1998
---------- ----------
Total............................................. 952,048 874,912 57,105 6.0%
---------- ---------- -------
EASTERN REGION
West MD (Cumberland, MD MSA, Hagerstown, MD MSA,
MD 1 and 3 RSAs, and PA 10 West RSA).............. 497,400 497,400 1997
East MD (MD 2 RSA).................................. 453,700 453,700 1997
---------- ----------
Total............................................. 951,100 951,100 70,287 7.4%
---------- ---------- -------
Total--Dobson regions combined................ 5,777,448 5,612,931 401,680 7.0%
========== ========== =======
</TABLE>
We have the contractual right to acquire the license for, and certain assets
related to, Pennsylvania 2 RSA and we currently control and are managing the
operation of this market for the seller pending the closing of the acquisition.
As a result, we include the population and subscriber data related to this
market in our population and subscriber data in our Eastern Region. As of
June 30, 1999, the Pennsylvania 2 RSA had a total population of approximately
90,000. In addition to our pending acquisition of Pennsylvania 2 RSA and
American Cellular, we have pending acquisitions that, if completed, would have
increased the total population served by our cellular systems by approximately
0.5 million as of June 30, 1999.
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<PAGE>
The following table sets forth information as of June 30, 1999 with respect
to American Cellular's existing cellular markets.
<TABLE>
<CAPTION>
TOTAL NET TOTAL MARKET DATE
POPULATION POPULATION SUBSCRIBERS PENETRATION ACQUIRED
---------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
AMERICAN CELLULAR
UPPER MIDWEST REGION
Duluth MSA/MN 4 RSA/WI 2 RSA........................ 282,000 282,000 1994
Eau Claire MSA/WI 2 RSA............................. 174,000 168,140 1994
Wausau MSA/WI 6A RSA................................ 157,000 151,957 1995
MN 2A RSA........................................... 39,000 39,000 1995
MN 3 RSA............................................ 61,000 61,000 1994
MN 5 RSA............................................ 209,000 209,000 1995
MN 6 RSA............................................ 233,000 233,000 1994
WI 1 RSA............................................ 114,000 114,000 1994
WI 3 RSA/WI 2 RSA................................... 175,000 175,000 1994
WI 4 RSA............................................ 122,000 122,000 1997
WI 5 RSA............................................ 83,000 83,000 1997
MI 1 RSA............................................ 207,000 207,000 1995
---------- ----------
Total............................................. 1,856,000 1,845,097 152,327 8.2%
---------- ---------- -------
NY REGION
Orange County NY MSA................................ 328,000 328,000 1996
Poughkeepsie NY MSA................................. 273,000 260,988 1996
NY 5 RSA............................................ 376,000 376,000 1995
NY 6 RSA............................................ 113,000 113,000 1996
---------- ----------
Total............................................. 1,090,000 1,077,988 94,654 8.7%
---------- ---------- -------
KY REGION
KY 4 RSA............................................ 259,000 259,000 1997
KY 5 RSA............................................ 161,000 161,000 1997
KY 6 RSA............................................ 270,000 270,000 1997
KY 8 RSA............................................ 120,000 120,000 1997
TN 4 RSA............................................ 274,000 274,000 1998
---------- ----------
Total............................................. 1,084,000 1,084,000 70,392 6.5%
---------- ---------- -------
MID-ATLANTIC REGION
OH 7 RSA/OH 10A RSA................................. 324,000 260,000 1995
PA 9 RSA............................................ 187,000 187,000 1996
WV 2 RSA............................................ 79,000 79,000 1995
WV 3 RSA............................................ 272,000 272,000 1996
---------- ----------
Total............................................. 862,000 862,000 57,391 6.7%
---------- ---------- -------
Total--American Cellular regions combined....... 4,892,000 4,869,085 374,764 7.7%
========== ========== =======
</TABLE>
CELLULAR OPERATIONS--DOBSON COMMUNICATIONS
PRODUCTS AND SERVICES
We provide a variety of cellular services and products designed to address a
range of business and personal needs. In addition to mobile voice and data
transmission, we offer 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 we offer varies depending upon
market area. We also sell cellular equipment at discount prices and use free
phone promotions as a way to encourage use of our mobile services. We offer
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. We offer longer-term pricing
programs under single year and, to a lesser extent, multi-year service
contracts. Unlike some of our competitors, we design rate plans on a
market-by-market basis. Our local general managers generally have the authority
to initiate and modify rate plans, depending upon the 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.
65
<PAGE>
CUSTOMER SERVICE
Customer service is an essential element of our marketing and operating
philosophies. We are committed to attracting new subscribers and retaining
existing subscribers by providing consistently high-quality customer service. In
each of our cellular service areas, we maintain installation and repair
facilities and a local staff, including a market manager and customer service,
technical and sales representatives. In each of our cellular service areas, we
handle our own customer-related functions, such as customer activations, account
adjustments and rate plan changes. We believe our local offices and installation
and repair facilities enhance our knowledge of local markets and enable us to
better serve customers, schedule installations and make repairs. Through the use
of centralized monitoring equipment, we are able to centrally monitor the
technical performance of our cellular service areas.
In addition, our customers generally are able to report cellular telephone
service or account problems 24 hours a day to our regional customer service
centers located in Oklahoma City, Oklahoma and Frederick, Maryland on a
toll-free access number with no airtime charge. We believe that our emphasis on
customer service affords us a competitive advantage over our larger competitors.
We contact our subscribers frequently in order to evaluate and measure, on an
ongoing basis, the quality and competitiveness of our services.
SALES, MARKETING AND DISTRIBUTION
We focus our marketing program on attracting subscribers who we believe are
likely to generate high monthly revenues and low churn rates. We undertake
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 our cellular service. We have
established marketing alliances with neighboring cellular systems to create
larger home rate areas in order to increase our roaming revenues and to attract
new subscribers. We market our service offerings primarily through our direct
sales force and company-owned retail stores. We also use a network of dealers
and other agents, such as electronics stores, car dealerships and department
stores. In addition to these traditional channels, our marketing team
continuously evaluates other, less traditional, methods of distributing our
services and products, such as targeted telemarketing and direct mail programs.
We market our cellular products and services under national brand names and,
in selected markets, our own brand name. The service mark we select for use in
each of our markets depends, to a large extent, upon the service mark used by
the principal cellular operator in the neighboring MSAs.
We train and compensate our sales force in a manner designed to stress the
importance of customer service, high penetration levels and minimum acquisition
costs per subscriber. We believe that our direct sales force is better able to
select and screen new subscribers and select pricing plans that realistically
match subscriber means and needs than are independent agents. In addition, we
motivate our direct sales force to sell appropriate rate plans to subscribers,
thereby reducing churn, by linking payment of commissions to subscriber
retention. As a result, we believe that our 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 we use independent
agents. We had approximately 310 direct sales agents as of June 30, 1999.
We believe that our after-sale telemarketing program, which include courtesy
calls to our new customers and is conducted by our sales force and customer
service personnel, helps to reduce our churn rates. This program enhances
customer loyalty and allows our sales staff to check customer satisfaction as
well as to offer additional calling features, such as voicemail, call waiting
and call forwarding.
We operated 125 retail outlets as of June 30, 1999. Our retail stores range
in size from 420 square feet to 6,400 square feet. Each of our retail stores is
fully equipped to handle customer service and telephone maintenance and
installation. Some of these stores are also authorized warranty repair centers.
Our stores provide subscriber-friendly retail environments, including extended
hours, a large selection of products and services, an expert sales staff and
convenient locations, which are designed to make the sales process quick and
easy for the subscriber.
66
<PAGE>
ROAMING
We believe that regional roaming is an important service component for many
subscribers. Accordingly, where possible, we attempt to arrange roaming
agreements that allow customers to roam at competitive prices. We believe this
increases usage on all cellular systems, including our own. We focus on systems
that are adjacent to major metropolitan areas and include a high concentration
of expressway corridors, which tend to have a significant amount of roaming
activity. The following table lists our principal roaming partners in each of
our cellular markets:
<TABLE>
<CAPTION>
CELLULAR MARKETS PRINCIPAL CELLULAR ROAMING PARTNERS
- ---------------- -------------------------------------
<S> <C>
Northern Region...................... AirTouch
AT&T Wireless
Southwestern Bell Mobile
Central Region....................... AirTouch
AT&T Wireless
Houston Cellular
Southwestern Bell Mobile
U.S. Cellular
Western Region....................... AirTouch
AT&T Wireless
Bay Area Cellular
Eastern Region....................... AT&T Wireless
Southwestern Bell Mobile
</TABLE>
Our largest roaming partner is AT&T Wireless. For the six months ened
June 30, 1999, AT&T Wireless' customers accounted for 35% of our roaming
revenues, or 15% of our total operating revenues. Under our roaming agreement
with AT&T Wireless, we and AT&T Wireless charge each other favorable roaming
rates for each of our respective markets. This rate will decrease over time. The
agreement provides for the maintenance by us of certain call features and
related services to roaming customers, such as call waiting, call forwarding,
three-way calling, caller ID and voice mail. The roaming agreement may be
terminated or suspended by either party if the FCC revokes a license covering a
material portion of our or AT&T Wireless's markets, either party fails to
control subscriber fraud, either party fails to adhere to system technical
requirements and upgrades or either party breaches any of the material terms of
the roaming agreement. The agreement expires in January 2003.
We also have agreements with the North American Cellular Network, or NACN.
NACN is the largest wireless telephone network system in the world linking
cellular operators throughout the United States and Canada and enabling
customers to use their cellular phones to place and receive calls in these areas
as easily as they do in their home areas. Through NACN, customers are able to
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, NACN enables special services such as call forwarding and call waiting
to automatically follow subscribers as they travel.
SYSTEM DEVELOPMENT AND TECHNOLOGY
SYSTEM DEVELOPMENT. We develop or build out our cellular service areas in
response to projected subscriber demand and competitive factors by adding
channels to existing cell sites and by building new cell sites to increase
capacity with an emphasis on improving coverage for hand-held phones in heavily-
trafficked areas. We develop projected subscriber demand for each cellular
service area on a cell-by-cell basis. In January 1998, we entered into an
agreement with Lucent Technologies Inc. to purchase 300 cell sites, two switches
and related hardware and software for approximately $81.0 million over a four
year period. We estimate our aggregate remaining commitment under this agreement
as of June 30, 1999 was approximately $44.3 million. We are also a party to
another equipment supply agreement with
67
<PAGE>
Nortel to purchase approximately $65.0 million of cell site and switching
equipment through the period ending in November 2001. We estimate our aggregrate
remaining commitment under this agreement as of June 30, 1999 was approximately
$31.8 million.
We expect our cell site expansion to enable us to continue to add and retain
subscribers, enhance subscriber use of our systems, increase roaming traffic due
to the larger geographic area covered by our cellular network and further
enhance the overall efficiency of our cellular network. We believe that the
increased cellular coverage will have a positive impact on market penetration
and subscriber usage.
DIGITAL TECHNOLOGY. We use two basic protocols in our digital networks. Our
primary digital technology or protocol is TDMA, which divides each channel into
three subchannels providing service to three users instead of one. Our other
digital technology or protocol is CDMA, which converts analog signals into
digital for transmission over our cellular network. Our digital services include
digital voice channels, short messaging services, message writing indication and
caller ID services.
Approximately 85% of our systems currently utilize digital technology. We
match the digital protocols of our markets to those used by our roaming partners
in adjoining markets. The following table reflects the digital technology
currently used by us in each of our cellular markets.
<TABLE>
<CAPTION>
STATUS/EXPECTED
CELLULAR MARKET DIGITAL TECHNOLOGY COMPLETION DATE
- --------------- -------------------------- -------------------
<S> <C> <C>
NORTHERN REGION:
Youngstown............................... analog/TDMA IS-136 Completed
Erie..................................... analog/TDMA IS-136 Completed
New York................................. analog/TDMA IS-136 Completed
Pennsylvania............................. analog/TDMA IS-136 Completed
Ohio 2................................... analog/TDMA IS-136 Completed
and analog/CDMA First quarter 2000
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
Texas 10................................. analog/TDMA IS-136 Completed
Texas 16................................. analog/TDMA IS-136 Completed
Kansas/Missouri.......................... analog/TDMA IS-136 First quarter 2000
WESTERN REGION:
Arizona 5................................ analog/CDMA Completed
California 7............................. analog/CDMA Second quarter 2000
California 4............................. analog/TDMA IS-136 Fourth quarter 1999
Santa Cruz............................... analog/TDMA IS-136 Completed
EASTERN REGION:
East Maryland............................ analog/TDMA IS-136 Completed
West Maryland............................ analog/TDMA IS-136 Completed
</TABLE>
INFORMATION SYSTEMS. H.O. Systems, Inc. provides the billing function for
most of our cellular operations. Proprietary software furnished by H.O. Systems
serves all functions of billing for corporate and retail locations. All
administrative and customer maintenance functions are handled in-house.
H.O. Systems prints and processes all of our customer invoices. H.O. Systems'
software is in place and functioning in our Western Region markets and we expect
to have fully implemented the H.O. Systems' software throughout our remaining
regions by the end of the fourth quarter of 1999. We use software that
compliments this billing system, allowing the use of credit, collection and
switch interfaces.
68
<PAGE>
SERVICE MARKS
We own the service mark Dobson Cellular-TM-, which we use in our cellular
telephone systems in western Oklahoma and the Texas Panhandle. While we have not
attempted to federally register the brand name "Dobson Cellular," we believe
that our prior use of this brand name in the limited areas where it is used will
enable us to effectively police against any infringing uses of our brand name.
The following table sets forth the brand names used by us for products and
services in each of our cellular markets:
<TABLE>
<CAPTION>
CELLULAR MARKET SERVICE MARK
- --------------- -----------------------------------
<S> <C>
Northern Region................................ CELLULAR ONE-Registered Trademark-
AIRTOUCH-TM-
CELLULAR-Registered Trademark-
Central Region................................. Dobson Cellular-TM-
CELLULAR ONE-Registered Trademark-
Western Region................................. CELLULAR ONE-Registered Trademark-
AIRTOUCH-TM-
CELLULAR-Registered Trademark-
Eastern Region................................. CELLULAR ONE-Registered Trademark-
</TABLE>
CELLULAR ONE-Registered Trademark- is a registered service mark with the
U.S. Patent and Trademark Office. The service mark is owned by Cellular One
Group, a Delaware general partnership of Cellular One Marketing, Inc., a
subsidiary of Southwestern Bell Mobile Systems and Cellular One
Development, Inc., a subsidiary of AT&T Wireless. We use the CELLULAR
ONE-Registered Trademark- service mark to identify and promote our cellular
telephone service pursuant to licensing agreements with Cellular One Group. We
believe we obtain substantial marketing benefits from the name recognition
associated with this widely used service mark, both with existing subscribers
traveling outside of our service areas and with potential new subscribers moving
into our service areas. Licensing and advertising fees are determined based upon
the population of the licensed areas. The licensing agreements require us to
provide high-quality cellular telephone service to our 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 our option, subject to the
satisfaction of certain operating standards, for two additional five-year terms.
AIRTOUCH-TM- CELLULAR-Registered Trademark- is a registered service mark
licensed by Vodafone AirTouch. Our right to use the service mark is
non-exclusive and non-transferrable. The licensing agreement for the
AIRTOUCH-TM- CELLULAR-Registered Trademark- service mark requires us to provide
high-quality cellular telephone service to our customers and to otherwise
maintain reasonable standards set by Vodafone AirTouch. The licensing agreement
is for an initial term of 20 years with automatic extensions for additional
five-year periods.
CELLULAR OPERATIONS--AMERICAN CELLULAR
American Cellular is one of the largest independent rural cellular telephone
operators in the United States. At June 30, 1999, American Cellular's systems
covered a total population of approximately 4.9 million and it had 374,764
subscribers, primarily in rural areas of the midwestern and eastern United
States. American Cellular has concentrated its recent efforts on creating an
integrated network of cellular systems in its operating regions. American
Cellular operates four regions of cellular systems in New York, Kentucky and the
Upper Midwest and Mid-Atlantic regions as well as certain other markets and has
a number of other minority interests. American Cellular markets all of its
cellular products and services under the CELLULAR ONE-Registered Trademark-
brand name for its cellular systems. American Cellular offers digital voice
services in approximately 50% of its cellular systems and expects to convert the
remainder of its systems by the second quarter of 2000. American Cellular's
management, organization, billing system, network infrastructure and working
programs are substantially similar to ours.
69
<PAGE>
The majority of American Cellular's systems are in the early stages of their
growth cycle and, we believe, afford significant opportunities for improvements
in performance, particularly with respect to rates of penetration and churn.
There can be no assurances, however, that we, as the operator of these systems
under our joint venture with AT&T Wireless, will be able to achieve or maintain
such improvements.
EMPLOYEES AND AGENTS
As of June 30, 1999, we had approximately 1,020 employees. In addition, as
of that date, we had agreements with approximately 310 independent sales agents,
including car dealerships, electronics stores, paging service companies and
independent contractors. None of our employees is represented by a labor
organization, and we consider our employee relations to be good.
PROPERTIES
We maintain our corporate headquarters in Oklahoma City, Oklahoma. We lease
approximately 24,600 square feet at a monthly rental of approximately $19,000.
As of June 30, 1999, our cellular operations leased 125 sales and administrative
offices at aggregate annual rentals of approximately $3.4 million. We review
these leases from time to time and may, in the future, lease or acquire new
facilities as needed. We expect to lease or purchase additional sales and
administrative office spaces in connection with our pending acquisitions. We do
not anticipate encountering any material difficulties in meeting our future
needs for leased space. We also owned and leased approximately 447 cell sites as
of June 30, 1999.
COMPETITION
We compete with various companies in each of our markets. The following
table lists the principal competitors in each of our cellular markets:
<TABLE>
<CAPTION>
CELLULAR MARKET PRINCIPAL COMPETITORS
- --------------------------------------------------- ------------------------
<S> <C>
Northern Region.................................... ALLTEL
Bell Atlantic Mobile
Frontier Cellular
GTE Wireless
Central Region..................................... ALLTEL
AT&T Wireless
Chariton Cellular
GTE Wireless
Kansas Cellular
Pioneer Cellular
Southwestern Bell Mobile
Western Wireless
Western Region..................................... Bell Atlantic Mobile
Centennial Cellular
Citizens Mojave Cellular
GTE Wireless
Nextel
Sprint PCS
Eastern Region..................................... Bell Atlantic Mobile
Nextel
Sprint PCS
U.S. Cellular
</TABLE>
70
<PAGE>
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, we expect
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. Many of our competitors have been
operating for a number of years, operate nationwide systems, currently serve a
substantial subscriber base and have significantly greater financial, personnel,
technical, marketing, sales and distribution resources than we do. 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.
We compete primarily against one other facilities-based cellular carrier in
each of our cellular markets. We also compete with PCS and ESMR providers. We
compete for customers based principally upon price, the services and
enhancements offered, the quality of our cellular system, customer service,
system coverage and capacity. This 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.
We also face, to a lesser extent, competition from mobile satellite service
providers, as well as from resellers of these services and cellular service. In
the future, we may also compete more directly with traditional landline
telephone service providers. Recently, the FCC created potential sources of new
competition by auctioning additional PCS licenses, as well as licenses for
wireless communications services, local multipoint distribution service and 220
to 222 MHz service. Further, the FCC has announced plans to auction licenses in
the general wireless communnications services and 39 GHz Services, and has
allocated spectrum in the 700 MHz band that may be licensed for mobile use.
Continuing technological advances in telecommunications make it impossible to
predict the extent of future competition. However, due to the depth and breadth
of these competitive services offered by operators using these other
technologies, future competition from these operators could be intense.
REGULATION
OVERVIEW
The wireless telecommunications industry is subject to extensive
governmental regulation on the federal level and to varying degrees on the state
level. The enactment of the Telecommunications Act of 1996, or the
Telecommunications Act, has had an impact on many aspects of this regulation. In
addition, this regulation is currently the subject of administrative rulemakings
and judicial proceedings that are significant to us. The following is a summary
of the federal laws and regulations that materially affect the wireless
telecommunications industry, in general, and us, in particular, and a
description of applicable 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 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
71
<PAGE>
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. 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,
of at least 50 square miles, in areas 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. No entity may, directly or indirectly, own a
controlling interest in, or otherwise have the ability to control, both systems.
The FCC may prohibit or impose conditions on transfers of licenses. In addition,
under FCC rules, no person or entity 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 Commercial Mobile Radio Services, or
CMRS, with significant overlap in any geographic area except in RSAs, where a
total of 55MHz is lawful.
The FCC recently amended the ownership attribution rules to allow for
somewhat more ownership overlap. 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. Ownership limits on
overlapping cellular licensees were recently amended so that a party with a
controlling interest or otherwise attributable interest in a cellular licensee
may have a direct or indirect ownership interest of up to 5% in another cellular
licensee in overlapping CGSAs, and a party may have a direct or indirect
ownership interest of up to 20% in both cellular licensees in overlapping CGSAs
so long as neither interest is a controlling interest.
Cellular service providers also must satisfy a variety of FCC requirements
relating to technical and reporting matters. One 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. We are 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 federal universal
service programs, number portability regional database costs, centralized
administration of telephone numbering, telecommunications relay service, or 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 us of a controlling interest in any
license or construction permit, or any rights thereunder. Although we cannot
assure you that the FCC will approve or timely act upon any future requests for
approval of applications that we file, we have no reason to believe that the FCC
would not approve or grant such requests or applications 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 currently also
applies such cellular resale requirements to A and B Block (and A/B Block
controlled) broadband PCS and ESMR licensees. These 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. Moreover, federal legislation enacted in 1993 requires the
FCC to reduce the disparities in the regulatory treatment of similar mobile
services, such as cellular, PCS and ESMR. Under this regulatory structure, all
of our cellular licenses are classified as
72
<PAGE>
CMRS. As a CMRS provider, the FCC regulates us as a common carrier. The FCC,
however, has exempted cellular services from some typical common carrier
regulations, such as tariff filings.
The FCC has also adopted requirements for cellular and other CMRS providers
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. Our obligations to implement these services is scheduled to occur in
several stages, with the final stage beginning October 2001, but the FCC is
currently considering changes to these requirements. Legislation recently signed
into law may limit our liability relative to incompleted 911 calls. Federal law
also requires cellular and PCS carriers to provide law enforcement agencies with
capacity to support lawful wiretaps by March 12, 2001 and technical capabilities
for wiretaps beginning June 30, 2000 and to comply with wiretap-related
record-keeping and personnel-related obligations. These wireless 911 and law
enforcement wiretap requirements may create additional capital obligations for
us to make necessary system changes.
In addition, the FCC regulates the ancillary service offerings that cellular
and PCS licensees can provide and permits 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,
although the extent of lawful state regulation of such "wireless local loop"
service is undetermined. In this regard, the FCC has also adopted telephone
number portability rules for local exchange carriers, as well as cellular, 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, PCS and ESMR licensees to have the capability
to deliver calls from their systems to ported numbers effective December 31,
1998 and offer number portability and roaming to ported numbers by November 24,
2002 but this schedule may be expedited if deemed necessary by the FCC to
promote number conservation. These requirements may result in added capital
expenditures for us to make necessary system changes, although we currently have
no plans for any such expenditures.
The FCC has also adopted rules to govern customer billing by CMRS providers
and is considering whether to extend billing rules currently applicable to
landline carriers to CMRS carriers. Adoption of some of the FCC's proposals
could increase the complexity and costs of our billing processes and limit the
manner in which we bill for services. Finally, the FCC has initiated a
rulemaking proceeding to help facilitate the offering of so-called "calling
party pays" services whereby the party placing the call to a wireless customer
pays the wireless airtime charges. Adoption of a calling party pays system could
facilitate more competition between CMRS traditional landline carriers.
The FCC generally grants cellular and PCS licenses for terms of ten years
that are renewable upon application to the FCC. Near the conclusion of the
license term, we must file applications for renewal of licenses to obtain
authority to operate for an additional 10-year term. The FCC may revoke our
licenses and may deny our license renewal applications for cause after
appropriate notice and hearing. The FCC will award a renewal expectancy to us if
we meet certain standards of past performance. If we receive a renewal
expectancy, it is very likely that the FCC will renew our existing cellular
license without entertaining competing applications. To receive a renewal
expectancy, we must show that we have provided "substantial" service during our
past license term, and have substantially complied with applicable FCC rules and
policies and the Communications Act. The FCC defines "substantial" service as
service which is sound, favorable and substantially above a level of mediocre
service that might only minimally warrant renewal. If a licensee does not
receive a renewal expectancy, then the FCC will accept competing applications
for the license, subject to a comparative hearing, and the FCC may award the
license to another entity. To date, the FCC has renewed each of our licenses for
which a renewal application was required for a new ten year term. The balance of
our existing licenses begin to expire in October 2000.
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A PCS system operates under a protected geographic service area license
granted by the FCC for either a Major Trading Area, or MTA, or a Basic Trading
Area, 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 may deny applications for FCC authority, and in extreme cases revoke
licenses, if it 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. To our
knowledge, there are no activities, and no judicial or administrative
proceedings, involving either us or the licensees in which we hold a controlling
interest, that would warrant such a finding by the FCC.
If foreign nationals or their representatives, a foreign government or its
representative or any corporation organized under the laws of a foreign country
own of record or vote greater than 25 percent of our equity and the FCC
determines that the public interest would be so served, it may revoke our
cellular licenses or require an ownership restructuring. 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, or WTO. For investors from non-WTO
countries, the FCC will determine whether the home country of the foreign
investor extends reciprocal treatment called "equivalent competitive
opportunities" to U.S. entities. If these opportunities do not exist, it is
unlikely that the FCC will permit investment beyond the 25 percent benchmark.
These restrictions could adversely affect our ability to attract additional
equity financing. We have no knowledge that any foreign national owns any of our
capital stock.
The Telecommunications Act, which made significant changes to the
Communications Act and terminated the antitrust consent decree applicable to the
RBOCs, affects the telecommunications industry. This legislation, among other
things, affects competition for local telecommunications services,
interconnection arrangements for carriers, universal service funding and the
provision of interexchange services.
The 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. In a rulemaking proceeding pertaining to interconnection
between local exchange carriers, or LECs, and CMRS providers such as us, the FCC
concluded that LECs are required to compensate CMRS providers for the reasonable
costs incurred by these providers in terminating traffic that originates on LEC
facilities, and vice versa. Consistent with this ruling, the FCC has determined
that LECs may not charge a CMRS provider or other carrier for terminating
LEC-originated traffic and that LECs may not charge CMRS providers for number
activation and use fees. Depending on further FCC disposition of these issues,
we may or may not be successful in securing refunds, future relief or both, with
respect to charges for termination of LEC-originated local traffic. If the FCC
ultimately resolves these issues in favor of CMRS providers, then we will pursue
relief through settlement negotiations, administrative complaint procedures or
both. If these issues are ultimately decided in favor of the LECs, we likely
would be required to pay all past due contested charges and
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<PAGE>
may also be assessed interest and late charges for the withhold amounts. These
requirements could in the future have a material effect on us.
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. We have made such
payments as the FCC has required. The United States Court of Appeals for the
Fifth Circuit recently reversed many of the FCC's rules regarding carriers'
contribution obligations, and the FCC has recently adopted rules implementing
the court's decision. While it generally appears that our contributions to
federal universal service programs may decrease, our contributions to state
universal service programs may be subject to increases and, moreover, the FCC's
decision implementing the court's decision is subject to further administrative
and possibly judicial proceedings. Thus, the impact of the court's decision is
uncertain. We may also seek to qualify for payments from these programs in high
cost areas where we provide fixed wireless local exchange services, although we
are not certain that such payments will be available to cellular carriers.
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.
Additionally, 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. We currently provide "dial around" equal access to all of
our customers.
The Telecommunications Act also imposes restrictions on a telecommunications
carrier's use of customer proprietary network information, or CPNI, without
prior customer approval. FCC rules implementing these restrictions are being
revised but have the potential to impose upon us new costly obligations and
impose burdens on our current marketing activities. The FCC's rules implementing
the Telecommunications Act's CPNI provisions were recently vacated by the United
States Court of Appeals for the Tenth Circuit on First Amendment grounds. The
extent to which the FCC will need to modify its rules to address the court's
concerns is uncertain.
The Telecommunications Act also requires telecommunications carriers to make
their services accessible to persons with disabilities and the FCC has adopted
rules to implement these requirements. These rules generally require service
providers to offer equipment and services that are accessible to and usable by
persons with disabilities, if readily available, and to provide
complaint/grievance procedures for violations of these provisions. The impact of
these rules on wireless carriers is uncertain.
In addition, the FCC is currently considering rules to promote the
conservation of numbering resources. These efforts may affect wireless service
providers by imposing additional costs or limiting access to numbering
resources. The FCC has also authorized a number of states, including California,
to initiate limited numbering administration measures while the FCC's
consideration of federal rules remains pending, and other states, including
Ohio, have requested similar authority. The impact of the federal rules on
wireless carriers, and whether states will continue to have numbering
administration authority, is uncertain.
The FCC has determined that interstate interexchange (long distance) service
offerings of CMRS providers are subject to rate averaging and rate integration
requirements of the Telecommunications Act. Rate averaging requires us to
average our interstate long distance CMRS rates between high cost
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and urban costs. The FCC has delayed implementation of the rate integration
requirements with respect to wide area rate plans pending further
reconsideration of its rules, and has delayed the requirement that CMRS carriers
integrate their rates among CMRS affiliates. There is a pending proceeding in
which the FCC will determine how integration requirements apply to CMRS
offerings, including single rate plans. While this proceeding is pending, CMRS
providers are subject to long distance rate integration only where they
separately state a long distance toll charge and bill to customers, and the FCC
is not enforcing the requirement for wide-area plans. To the extent that we
offer services subject to these requirements our pricing flexibility is reduced,
and there is no assurance that the FCC will decline to impose these requirements
on us and/or across our various CMRS affiliates.
The overall impact of the Telecommunications Act on our business is unclear
and will likely remain so for the foreseeable future. For example, limitations
on local zoning requirements imposed by the Telecommunications Act 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. On the other
hand, 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 us to additional costs and
increased competition.
STATE, LOCAL AND OTHER REGULATION
The Communications Act preempts state or local regulation of the market
entry of, or the rates charged by, any CMRS 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,
we are free to establish rates and offer new products and service with a minimum
of regulatory requirements. The states in which we operate maintain nominal
oversight jurisdiction, primarily focusing upon prior approval of acquisitions
and transfers of licenses and resolution of customer complaints.
The location and construction of our 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 we can put a system into commercial operation, we 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.
We cannot assure you that any state or local regulatory requirements
currently applicable to our systems will not be changed in the future or that
regulatory requirements will not be adopted in those states and localities which
currently have none.
FUTURE REGULATION
From time to time, federal or state legislators propose legislation that
could affect us, either beneficially or adversely. We 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 our business. Changes such as the allocation by the FCC
of radio spectrum for services that compete with our business could adversely
affect our operating results.
LEGAL PROCEEDINGS
We are not currently aware of any pending or threatened litigation against
us or our subsidiaries that could have a material adverse effect on our
financial condition, results of operations or cash flows.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers are set forth below. Certain of the
officers and directors hold or have held positions in several of our
subsidiaries. The ages of the persons set forth below are as of September 30,
1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ----------------------------------
<S> <C> <C>
Everett R. Dobson (1)............. 40 Chairman of the Board, President,
Chief Executive Officer and
Director
G. Edward Evans................... 38 President of cellular subsidiaries
Bruce R. Knooihuizen.............. 43 Vice President and Chief Financial
Officer
R. Thomas Morgan.................. 43 Vice President and Chief
Information Officer
Craig T. Sheetz................... 40 Executive Vice President and Chief
Operating Officer
Timothy J. Duffy.................. 39 Senior Vice President and Chief
Technical Officer
Richard D. Sewell, Jr. ........... 42 Treasurer
Stephen T. Dobson (1)............. 36 Secretary and Director
Russell L. Dobson (1)............. 64 Director
Justin L. Jaschke................. 41 Director
Albert H. Pharis, Jr.............. 49 Director
Dana L. Schmaltz.................. 32 Director
</TABLE>
- ------------------------
(1) Everett R. Dobson and Stephen T. Dobson are sons of Russell L. Dobson.
We were incorporated in February 1997 in connection with a corporate
reorganization pursuant to which we became the holding company parent of our
subsidiary, Dobson Operating Company, or DOC. Unless otherwise indicated,
information below with respect to positions held by our executive officers and
directors refers to their positions with DOC and, since February 1997, also with
us.
EVERETT R. DOBSON has served as a director and officer since 1982. From 1990
to 1996, he served as a director, President and Chief Operating Officer of us
and President of our cellular subsidiaries. He was elected our Chairman of the
Board and Chief Executive Officer in April 1996. Mr. Dobson served on the board
of 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
its Investment Committee.
G. EDWARD EVANS has served as President of our cellular subsidiaries since
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 U.S. Cellular 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 holds a B.S. in Business Administration from the University of South
Florida and an M.B.A. from Georgia State University.
BRUCE R. KNOOIHUIZEN has served as Vice President and Chief Financial
Officer since 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
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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 has served as Vice President and Chief Information Officer
since 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 three 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.
CRAIG T. SHEETZ has served as Executive Vice President and Chief Operating
Officer since December 1998. Mr. Sheetz is responsible for the operations of the
company, including field sales and marketing, call center management, billing
and intercarrier services. Before joining us, he served as Vice President, Chief
Financial Officer and Treasurer of Sygnet Wireless, Inc. since 1990. Prior to
joining Sygnet, Mr. Sheetz served as Assistant Vice President at Mellon Bank and
PNC Bank where he specialized in the media and telecommunications industries.
Mr. Sheetz holds a B.A. in Economics from Albion College and an M.B.A. from the
University of Rochester.
TIMOTHY J. DUFFY has served as Chief Technical Officer and Senior Vice
President of Network Operations and Engineering for Dobson Cellular Systems
since December 1998. In this capacity, he manages Dobson's cellular network
facilities as well as engineering, design and build out of new cellular
networks. Prior to joining us, Mr. Duffy worked for Sygnet Communications from
1985 to 1998 in engineering and related management positions. In 1983 he was
employed as Director of Engineering for the Constrander Corporation where he was
responsible for seven AM and FM radio broadcast facilities in Ohio and
Pennsylvania. From 1976 to 1982 he served as Chief Engineer of radio station
WGRP in Greenville, Pennsylvania. Mr. Duffy holds a U.S. Patent concerning the
integration of wireless phone location information to make call management
decisions. He is a member of the Institute of Electrical and Electronics
Engineers and holds a degree in Electrical Engineering from Pennsylvania State
University.
RICHARD D. SEWELL, JR. has served as Treasurer since September 1998.
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-Treasurer from 1995 to 1997 and as Vice President-Financial
Reporting from 1990 to 1995. From 1979 to 1989, Mr. Sewell was employed by a
predecessor entity to 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 served as a director since 1990. He served as our
Treasurer from 1990 until September 1998, and he has served as Secretary since
1990. He has also served as General Manager and Secretary of Dobson Telephone
Company ("Telco") from 1994 to 1998 and 1990 to 1998, respectively. He became
President of Logix in January 1997. Mr. Dobson is a member of the Western Rural
Telephone 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 served as a director 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
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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 Oklahoma Telephone Association, WRTA and Organization for the Protection and
Advancement of Small Telephone Companies.
JUSTIN L. JASCHKE has served as a director 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 its merger with Nextel.
From May 1990 to April 1993, Mr. Jaschke served as President and Chief Executive
Officer 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 a director and a consultant since
December 1998. Mr. Pharis became Chief Executive Officer of our subsidiary,
Logix, in September 1999. He served as President, Chief Executive Officer and
Director of Sygnet from 1985 to December 1998. 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 in accordance with the terms of our
stockholders' agreement, dated December 23, 1998, with Childs. Mr. Schmaltz is a
Vice President of Childs and has been at Childs since February 1997. From 1995
to 1997, Mr. Schmaltz was an associate at DLJ Merchant Banking, Inc.
Mr. Schmaltz received an A.B. from Dartmouth College. Mr. Schmaltz graduated
from the Harvard Graduate School of Business Administration in 1995.
BOARD COMPOSITION
We currently have six directors on our board of directors and one vacancy.
Effective upon the closing of this offering, our board of directors will serve
staggered three-year terms as follows:
<TABLE>
<CAPTION>
MEMBERS EXPIRATION OF TERM
- ------- ------------------
<S> <C>
Everett R. Dobson...........................................
Stephen T. Dobson...........................................
Russell L. Dobson...........................................
Justin L. Jaschke...........................................
Albert H. Pharis, Jr........................................
Dana L. Schmaltz............................................
</TABLE>
This classification of our board of directors may have the effect of delaying or
preventing changes in our control or management. See "Risk Factors--Risks
Related to This Offering--Anti-takeover provisions could adversely affect the
price of our Class A common stock."
Shares of our Class B common stock are entitled to ten votes per share
subject to certain exceptions where they are restricted to one vote per share.
The holders of our Class B common stock have entered into an investors agreement
that enables them to appoint all of our directors and which provides that they
will vote their shares of common stock together in a manner that will enable
them to elect all of our directors and control the outcome of substantially all
matters submitted to our stockholders for a vote. Pursuant to the investors
agreement, the Dobson Partnership is entitled to designate four of our
directors, Childs is entitled to designate one of our directors, AT&T Wireless
is entitled to designate one of our directors and the Dobson Partnership, Childs
and AT&T Wireless are
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entitled to jointly designate one of our directors. AT&T Wireless has elected
not to exercise its right to designate a director at this time.
Upon the occurrence of certain voting rights triggering events under the
certificates of designation of our senior preferred stock, two additional
directors may be designated by the holders of our 12 1/4% senior preferred stock
and two additional directors may be designated by the holders of our 13% senior
preferred stock. See "Description of Capital Stock."
Our directors serve until they resign or are removed, or are otherwise
disqualified to serve, or until their successors are elected and qualified. Our
executive officers serve at the discretion of our board of directors. Our
officers are appointed at the board's first meeting after each annual meeting of
stockholders.
DIRECTOR COMPENSATION
We reimburse directors for out-of-pocket expenses incurred in attending
board meetings. In addition, we granted Justin L. Jaschke an option to acquire
shares of our Class A common stock at an exercise price of $ per share in
connection with his election as a director in October 1996. Mr. Jaschke's option
vests ratably over a five-year period and fully vests upon a change of control.
Directors who are our officers or our consultants receive no additional
compensation for services rendered as directors.
BOARD COMMITTEES
Our compensation committee currently consists of Russell L. Dobson and Dana
L. Schmaltz. The compensation committee reviews and evaluates the salaries,
supplemental compensation and benefits of our officers, reviews general policy
matters relating to compensation and benefits of our employees and makes
recommendations concerning these matters to the board of directors. The
compensation committee also administers our 1996 stock option plan.
Our audit committee currently consists of Justin L. Jaschke and Dana L.
Schmaltz. The audit committee reviews with our independent auditor, the scope
and timing of its audit services, the auditor's report on our financial
statements following completion of its audit and our policies and procedures
with respect to interal accounting and financial controls. In addition, the
audit committee makes annual recommendations to our board of directors for the
appointment of independent auditors for the following year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1998, the members of our 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 and is the father of Everett and Stephen Dobson. For a
description of certain transactions between Mr. Dobson and us, see "Certain
Transactions."
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EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation during
1998, 1997 and 1996 earned by our chief executive officer and our other four
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
SALARY BONUS(1) COMPENSATION OPTION AWARDS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(2) (# OF SHARES) ($)(3)
- --------------------------- -------- -------- ----------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Everett R. Dobson ........ 1998 380,400 250,000 39,700(4) -- 6,400
Chairman of the Board, 1997 300,000 250,000 54,800(4) -- 9,500
President, Chief 1996 300,000 142,400 77,100(4) -- 6,000
Executive Officer and
Director
Stephen T. Dobson ........ 1998 155,200 80,000 32,600(5) -- 4,700
Secretary and Director 1997 100,000 75,000 13,800(5) -- 6,500
1996 97,000 75,000 20,600(5) -- 3,900
G. Edward Evans .......... 1998 152,500 76,000 -- 1,000 4,300
President of cellular 1997 113,600 80,000(6) -- 6,033 --
subsidiaries 1996(7) -- -- -- -- --
Bruce R. Knooihuizen ..... 1998 165,000 102,500 -- 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 --
R. Thomas Morgan ......... 1998 135,000 60,000 -- 1,207 --
Vice President and 1997 6,000 40,000(9) -- -- --
Chief Information Officer 1996(7) -- -- -- -- --
</TABLE>
- ------------------------
(1) The bonuses for 1998 represent the bonuses paid in 1999 with respect to
services performed in 1998. The bonuses for 1997 represent the bonuses paid
in 1998 with respect to services performed in 1997. The bonuses for 1996
represent the bonuses paid in 1997 with respect to services performed in
1996, but do 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 us to the account of the
executive officer under our 401(k) Profit Sharing Plan.
(4) Includes $26,000, $36,600 and $62,900 for personal use of our aircraft and
$12,300, $18,200 and $12,500 for a company-provided vehicle in 1998, 1997
and 1996, respectively.
(5) Includes $16,100, $10,400 and $7,400 for personal use of our aircraft and
$16,300, $3,400 and $6,500 for a company-provided vehicle in 1998, 1997 and
1996, respectively.
(6) Includes $20,000 received upon commencement of employment.
(7) Not employed by us in 1996.
(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.
(9) Represents $40,000 received upon commencement of employment.
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The Named Executive Officers below were granted options to purchase shares
of our pre-recapitalization Class B common stock in 1998. As part of our
recapitalization, these options were amended to be exercisable into shares of
our Class A common stock on a for basis. The following tables provide
information regarding our outstanding options on a converted basis. No stock
options were exercised by the Named Executive Officers in 1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ANNUAL RATES OF
------------------------------ STOCK APPRECIATION FOR
NUMBER OF PERCENT OF TOTAL OPTION TERM(1)
OPTIONS OPTIONS GRANTED TO EXERCISE PRICE ------------------------
NAME GRANTED EMPLOYEES IN 1998 ($/SHARE) EXPIRATION DATE 5% 10%
- ---- --------- ------------------ -------------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
G. Edward Evans............ 9.1% $ 01/29/08 $188,668 $478,123
Bruce R. Knooihuizen....... 9.1% $ 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>
G. Edward Evans................. / $ 681,390 / $3,092,255
Bruce R. Knooihuizen............ / $1,704,040 / $2,921,625
R. Thomas Morgan................ / $ 124,321 / $372,963
</TABLE>
- ------------------------
(1) The value of unexercised in-the-money options at December 31, 1998 is
computed as the product of the stock value at December 31, 1998 less the
stock option exercise price, and the number of underlying securities at
December 31, 1998.
EMPLOYMENT AGREEMENTS
In connection with the employment of Bruce R. Knooihuizen in 1996 and G.
Edward Evans in 1997, we agreed to provide them compensation in the form of
salary, bonus, stock options and other benefits. The terms of Mr. Knooihuizen's
employment provide for 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
shares of our Class A common stock at $ per share vesting at the rate of
20% per year. The terms of Mr. Evans' employment provide for 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 shares of our Class A common stock at
$ per share, with 60% of the options vesting ratably over five years and 40%
vesting over five years based on the achievement of annual performance
objectives. We 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 our Class A common stock held by these
officers become fully vested upon a change of control.
Effective September 1, 1998, we entered into a consulting agreement with
Russell L. Dobson. Under the terms of the agreement, Mr. Dobson has been
retained by us from September 1, 1998 through August 31, 2008. In exchange for
Mr. Dobson's services, we agreed to provide monthly compensation of $15,000 and
insurance benefits commensurate with our employee plan. Mr. Dobson's
responsibilities include representing us at various functions, assisting with
regulatory matters and
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assisting executive officers in strategic planning and forecasting. In addition,
Mr. Dobson has agreed not to compete with us. During 1998, we paid Mr. Dobson
approximately $195,000 under the consulting agreement.
Effective December 23, 1998, Albert H. Pharis, Jr. became a consultant to us
to assist us on an as-needed basis for a term of five years. Mr. Pharis received
a fee of $40,000 for the first 90 days of such consulting period and is to
receive an annual fee of $60,000 thereafter. In addition, Mr. Pharis received
options to purchase shares of our Class A common stock at an exercise price
of $ per share. Mr. Pharis's options vest ratably over a five-year period and
fully vest upon a change of control.
STOCK OPTION PLAN
We adopted our 1996 stock option plan to encourage our key employees by
providing opportunities to participate in our ownership and future growth
through the grant of incentive stock options and nonqualified stock options. The
plan also permits the grant of options to our directors. The plan is presently
administered by our board of directors, but in the future may be administered by
a committee of the board (whether the board or a committee, the "committee"). In
connection with our recapitalization, we amended the plan to, among other
things, convert all outstanding options and issuable options to be exercisable,
at a split-adjusted price, for shares of our Class A common stock. The following
discussion gives effect to the conversion of our existing options.
The maximum number of shares for which we may grant options under the plan
is shares of Class A common stock, subject to adjustment in the event of
any stock dividend, stock split, recapitalization, reorganization or certain
defined change of control events. As of September 30, 1999, we had granted
options to purchase an aggregate of shares of our Class A common stock
under the plan. Shares subject to previously expired or terminated options
become available again for grants of options. The shares that we will issue
under the plan will be newly issued shares.
The committee determines the number of shares and other terms of each grant.
The price payable upon the exercise of an incentive stock option may not be less
than 100% of the fair market value of our Class A 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 our common stock, 110% of the fair market value on the date of grant. We may
grant incentive stock options to an employee only to the extent that the
aggregate exercise price of all such options under all of our 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 that we have granted or will grant 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 us, accompanied by
full payment of the purchase price in cash or, at the discretion of the
committee:
- common stock having a fair market value equal to the exercise price;
- 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);
- an assignment of proceeds from the sale of a portion of the stock subject
to the option being exercised; or
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- 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 our dissolution or liquidation.
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.
With certain exceptions, Section 162(m) of the Internal Revenue Code denies
a deduction to publicly-held corporations for compensation paid to certain
executive officers in excess of $1.0 million per executive per taxable year
(including any deduction with respect to the exercise of an option). An
exception exists, however, for amounts received upon exercise of stock options
pursuant to certain grandfathered plans. Options granted under our plan are
expected to satisfy this exception.
CERTAIN TRANSACTIONS
We have a policy requiring that any material transaction that we enter into
with with our officers, directors or principal stockholders and their affiliates
be on terms no less favorable to us 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 addition, the terms of our various debt instruments limit the ability
of us and of our subsidiaries to enter into transactions with our affiliates.
The Everett R. Dobson Irrevocable Family Trust, The Steven T. Dobson
Irrevocable Family Trust and The Robbin L. Dobson Irrevocable Family Trust,
(collectively, the "Dobson Trusts") are the limited partners of the Dobson
Partnership, which holds approximately of our Class B common stock. Everett
R. Dobson is the president and sole director and shareholder of the general
partner of the partnership.
Prior to November 1, 1998, we leased our 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, we entered into an agreement with the buyer to lease the building
for a one-year term at a monthly rent of approximately $19,000. Our lease, with
renewals, runs through October 2000.
We made a $300,000 home mortgage loan to G. Edward Evans in February 1997 in
connection with his employment. 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 our reorganization in February 1997, the shareholders of DOC exchanged
their DOC stock for our stock, and we assumed outstanding DOC stock options,
substituting shares of our common stock for the DOC stock subject to options.
Also, in February 1997, we issued 100,000 shares of our Class C preferred stock
to the Fleet Investors. At the time of this transaction, a principal of the
Fleet Investors became one of our directors.
Transactions with us described below refer to DOC if they occurred prior to
February 1997.
In March 1996, the Fleet Investors purchased 100,000 shares of our Class B
preferred stock for $10.0 million. In connection with this transaction, we
entered into a shareholders' agreement providing for, among other matters,
registration rights, restrictions on the transfer of our 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 us a stock option. In connection with our February
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<PAGE>
1997 reorganization, we entered into a new shareholders' agreement having
substantially the same terms and conditions.
The Dobson Trusts were co-borrowers with us and certain of our subsidiaries
under a prior bank facility, which we first entered into in 1994. We guaranteed,
and pledged the equity securities of certain of our subsidiaries as security
for, the obligations of the Dobson Trusts under a $6.0 million promissory note
maturing in 2004, or the Trust Loan, and the Dobson Partnership guaranteed our
loan obligations and those of our subsidiaries under the prior bank facility.
All borrowings were secured by shares of our pre-recapitalization Class A common
stock. We paid dividends on that 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 $0.5 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. We paid those fees. We used
$7.5 million of bank borrowings to pay a dividend to holders of our
pre-recapitalization Class A common stock, of which $6.0 million was used to
fully pay the Trust Loan and $0.5 million was used to pay indebtedness owed to
us 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 Associated Telecommunications and Technologies, Inc., or ATTI.
In December 1996, we consolidated $263,000 of ATTI's outstanding indebtedness to
us 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., a
wholly-owned subsidiary of ATTI, or Natelco, owed us $307,000, representing
funds we advanced during 1992, 1993 and 1995. That indebtedness accrued 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 our acquisition of the Arizona 5 market. We lent 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, we performed certain management services for
ATTI and its subsidiaries, including accounting, plant and central office
management and engineering. Billings for those services were based on the time
spent by, and hourly rates of, our 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 us 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 it subsidiaries for management
services rendered prior to September 30, 1997 were paid in October 1997 in
connection with the closing of our acquisition of Arizona 5. In connection with
our Arizona 5 acquisition, ATTI became our wholly owned subsidiary, and a new
company, NATELCO, LLC (an affiliate of Everett R. Dobson and Russell L. Dobson),
was created. For the years ended December 31, 1997 and 1998 the amounts billed
for management fees and expenses to NATELCO, LLC were $21,000 and $47,466,
respectively. The amounts owed by NATELCO, LLC to us for management fees at
December 31, 1997 and 1998 were $8,900 and $0, respectively.
ATTI beneficially owned a 20.55% partnership interest in the Arizona 5
partnership. In connection with our Arizona 5 acquisition, we 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 our negotiations with the other partner of the Arizona 5
partnership.
In March 1996, we made a $1.4 million unsecured loan to Everett R. Dobson.
He repaid that loan on October 1, 1997 in connection with our Arizona 5
acquisition. Interest on the amount borrowed was
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payable quarterly at the same annual rate as that payable under our 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 our favor for
approximately $354,000, which refinanced loans made to him during 1996, together
with accrued interest. He repaid that loan on October 1, 1997 in connection with
our Arizona 5 acquisition. The loan bore interest at 8% per annum. In December
1996, we 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, we made an additional loan to
Russell L. Dobson, in the principal amount of $423,000, of which $304,000
consolidated amounts owed to us from 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 our Arizona 5
acquisition. The interest rate charged on our loan to Everett R. Dobson
represented our costs of borrowed funds. The interest rate on the loans to
Russell L. Dobson approximated the prevailing market rates at the time we first
made the loans to him.
In 1995, we bought 75,000 shares of common stock of Zenex Long Distance,
Inc. 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, we 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 us and purchased our option for an aggregate of $825,000. At the same
time, we sold 30,000 shares of Zenex common stock to an unrelated party for
$142,000. In July 1997, we 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 our cost. In September 1997, we 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 our cost plus accrued interest. Everett R. Dobson was director of
Zenex from August 1995 to September 1997.
In November 1997, Everett R. Dobson purchased a $0.9 million interest in our
loan to Gila River Telecommunications Subsidiary, Inc., a wholly owned
subsidiary of the Gila River Indian Community. We repurchased this interest in
June 1998 for $0.9 million.
In January 1998, our subsidiary, Logix, 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, owed from Zenex to Everett R. Dobson, was paid in full.
In connection with the Sygnet acquisition in December 1998, the Fleet
Investors converted their Class B preferred stock into our pre-recapitalization
Class A common stock. We purchased for $1.9 million all of our outstanding
shares (100,000 shares) of Class C preferred stock held by Fleet Venture
Resources, Inc., Fleet Equity Partners VI, L.P. and Kennedy Plaza Partners,
collectively the Fleet Investors, and also purchased 43,348 shares of our
pre-recapitalization Class A common stock for $31.1 million. In addition, the
shareholders agreement with the Fleet Investors was terminated. Thadeus
J. Mocarski, a principal of the Fleet Investors, was one of our directors at the
time of our purchase and resigned as a director upon consummation of the Sygnet
acquisition. As part of the Sygnet acquisition, the Dobson Partnership acquired
37,630 shares of Class G preferred stock from us in exchange for 37,630 shares
of pre-recapitalization Class A common stock. On May 17, 1999 we redeemed all of
the outstanding shares of our Class G preferred stock for $25.0 million plus
accrued dividends of $1.0 million. All of the Class G preferred stock was
acquired by the Dobson Partnership in December 1998 as part of the financing of
our acquisition of Sygnet and in exchange for shares of our outstanding common
stock valued at $25.0 million.
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As part of the Sygnet acquisition in December 1998, our subsidiary, Dobson
Tower Company purchased cellular towers from Sygnet for $25.0 million and leased
the towers back to Sygnet. To finance the tower transaction, the Dobson
Partnership purchased preferred stock of Dobson Tower for $7.7 million and
Dobson Tower obtained a $17.5 million bank credit facility. We own all of Dobson
Tower's common stock. On October 15, 1999, Dobson Tower sold substantially all
of its towers to American Tower Corporation for a purchase price of
approximately $38.7 million. In connection with the sale, our subsidiary, Sygnet
Communications, leased the towers back from American Tower for an initial term
of ten years. A portion of the sale proceeds is being held in escrow pending
resolution of various title issues. With the proceeds of this sale, Dobson Tower
repaid its $17.5 million credit facility and Dobson Tower redeemed all of its
outstanding Class A preferred stock from the Dobson Partnership and repaid
certain costs and expenses incurred by the Dobson Partnership for a total of
$8.3 million. We used the balance of the sale proceeds to pay costs associated
with the tower sale and to reduce the credit facility of Sygnet.
In connection with our acquisition of Sygnet and the related financing, we
engaged in a number of transactions with the Dobson Partnership and with Childs.
On December 23, 1998, Childs and the Dobson Partnership purchased shares of
our Class D preferred stock for $85.0 million pursuant to an investment and
transaction agreement and entered into a stockholder and investor rights
agreement with us and certain of our shareholders, other than the holders of the
Class F preferred stock. The Dobson Partnership purchased 3,533.8 shares of our
Class D preferred stock for $4.0 million and Childs purchased 71,559.9 shares of
our Class D preferred stock for $81.0 million. Concurrently, Childs purchased
13,647.16 shares of our pre-recapitalization Class A common stock for $11.5
million from the Fleet Investors. Each share of Class D preferred stock is
convertible into one share of our pre-recapitalization Class A common stock and
one share of Class E preferred stock. On September 17, 1999, AT&T Wireless
acquired from Childs 15,472.4 shares of Class D preferred stock and 3,764.84
shares of our pre-recapitalization Class A common stock for $22.1 million. On
the same day, we entered into an amended stockholder and investor rights
agreement with the Dobson Partnership, Childs and AT&T Wireless. See
"Description of Capital Stock--Common Stock" for a description of the investors
agreement.
On September 13, 1999, our subsidiary, Logix, entered into an amended
revolving credit agreement with Bank of America, N.A., and other banks. As an
inducement to the lenders to enter into this credit agreement, the Dobson
Partnership guaranteed up to $50.0 million of the obligation of Logix
thereunder. Upon certain conditions and performance by Logix, the amount of the
obligation guaranteed by the Dobson Partnership may be reduced to $20.0 million
prior to the repayment in full of the credit agreement indebtedness by Logix.
The Dobson Partnership also entered into an agreement as of the same date
providing, among other things, for the Dobson Partnership to lend up to
$20.0 million to Logix under certain conditions.
On October 5, 1999, the Dobson Partnership provided a $50.0 million letter
of credit issued by Bank of America, N.A. for our subsidiary to use in
connection with its obligations as a 50% member of the American Cellular joint
venture with AT&T Wireless. On October 5, 1999, the Dobson Partnership obtained
from Bank of America a $200.0 million loan commitment and agreed to use the loan
proceeds, if drawn, to acquire shares of our preferred stock. We agreed to use
the $200.0 million to make part of our agreed upon capital contributions to the
American Cellular joint venture in the event we do not receive sufficient funds
in this offering.
The Dobson Partnership and unrelated third parties have acquired land and
have finalized financing for the construction of our new headquarters. We
anticipate completion of the project in the first quarter of 2001.
On November 9, 1999, our subsidiary, DCC PCS, Inc. entered into a license
acquisition agreement with AT&T Wireless, Royal Wireless, L.L.C. and Arnage
Wireless, L.L.C., under which DCC PCS will
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sell, subject to FCC approval, all of its PCS licenses to those two companies
for $1.1 million in addition to the assumption of DCC PCS's indebtedness of
approximately $4.1 million. AT&T Wireless has guaranteed the performance of the
obligations of Royal Wireless and Arnage Wireless under this agreement.
As described elsewhere in this prospectus, we intend to distribute the stock
of our subsidiary, Logix, to the current holders of our common stock. Our
directors and principal shareholders, Everett Dobson, Russell Dobson, Dana
Schmaltz, on behalf of Childs, and AT&T Wireless, will participate in the
distribution either directly or beneficially. See "Risk Factors--Risks to Our
Business-- We intend to distribute the stock of our subsidiary, Logix, to
holders of our common stock prior to this offering. The distribution of the
Logix stock may have adverse tax consequences to us."
The Dobson Partnership, Childs and AT&T Wireless own shares of our Class D
preferred stock. As part of our recapitalization, they will convert all
outstanding shares of our Class D preferred stock into shares of our
post-recapitalization Class A common stock and Class E preferred stock. We
expect to redeem the Class E preferred stock, together with accrued and unpaid
dividends thereon, for an aggregate redemption consideration of $99.3 million,
with net proceeds from this offering. Messrs. Everett Dobson and Dana Schmaltz
will receive a direct or indirect benefit from the redemption of our Class E
preferred stock.
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PRINCIPAL SHAREHOLDERS
The following table provides information concerning beneficial ownership of
each class of our common stock at , , and as adjusted to reflect the
sale of shares of Class A common stock offered by this prospectus, held by:
- each person or group of affiliated persons known by us to beneficially own
more than 5% of each voting class of our stock;
- each of our directors;
- each Named Executive Officer; and
- all directors, director nominees and executive officers as a group.
Unless otherwise indicated, each person named in the table has sole voting
power and investment power, or shares voting and investment power with his or
her spouse, for all shares listed as owned by such person. The number of shares
of common stock outstanding for each listed person includes any shares the
individual has the right to acquire within 60 days of this prospectus. For
purposes of calculating each person's or group's percentage ownership, stock
options exercisable within 60 days are included for that person or group, but
not for the stock ownership of any other person or group.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK (1) CLASS B COMMON STOCK
------------------------------------------ -------------------------
NUMBER PERCENT OF NUMBER
OF SHARES CLASS PERCENT OF OF SHARES
BENEFICIALLY BEFORE CLASS AFTER BENEFICIALLY PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED THE OFFERING THE OFFERING OWNED CLASS
- ------------------------------------ ------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Everett R. Dobson(3)...............
13439 N. Broadway Ext.
Oklahoma City, OK 73114
Russell L. Dobson..................
13439 N. Broadway Ext.
Oklahoma City, OK 73114
Dana L. Schmaltz(4)................
One Federal St.
Boston, MA 02110
All directors, nominees and
executive officers as a group
(12 persons)....................
<CAPTION>
PERCENT OF TOTAL PERCENT OF TOTAL
ECONOMIC INTEREST VOTING POWER(2)
---------------------- ----------------------
BEFORE THE AFTER THE BEFORE THE AFTER THE
NAME AND ADDRESS OF BENEFICIAL OWNER OFFERING OFFERING OFFERING OFFERING
- ------------------------------------ ---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Everett R. Dobson(3)...............
13439 N. Broadway Ext.
Oklahoma City, OK 73114
Russell L. Dobson..................
13439 N. Broadway Ext.
Oklahoma City, OK 73114
Dana L. Schmaltz(4)................
One Federal St.
Boston, MA 02110
All directors, nominees and
executive officers as a group
(12 persons)....................
</TABLE>
- ----------------------------------
* Less than 1%.
(1) The number of shares of Class A common stock does not include the shares of
Class A common stock issuable upon conversion of the outstanding shares of
Class B common stock.
(2) In calculating the percent of total voting power, the voting power of shares
of Class A common stock and the Class B common stock is aggregated. The
Class A common stock and the Class B common stock vote together as a single
class on all matters submitted to a vote of shareholders, except as required
by law. Each share of Class A common stock is entitled to one vote and each
share of Class B common stock is entitled to ten votes, except that each
share of Class B common stock is entitled to only one vote with respect to
any "going private" transaction.
(3) All such shares are held by the Dobson Partnership. As the president, a
director and sole shareholder of RLD, Inc., the general partner of the
partnership, Everett R. Dobson has voting and investment power with respect
to such shares.
(4) Mr. Schmaltz owns shares of our Class B common stock. Mr. Schmaltz also
has voting control over an additional shares of our Class B common
stock, of which he disclaims any beneficial ownership.
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DESCRIPTION OF CAPITAL STOCK
The following is a summary of the terms of our capital stock which will be
authorized following the closing of this offering and the use of proceeds
therefrom. This summary is qualified in its entirety by the provisions of our
Certificate of Incorporation and Bylaws and to the applicable provisions of
Oklahoma law.
COMMON STOCK
At the closing of this offering, we will be authorized to issue shares
of Class A common stock and shares of Class B common stock. Immediately
after this offering, there will be:
- shares of Class A common stock issued and outstanding ( shares if
the underwriters exercise their over-allotment option in full);
- shares of Class A common stock authorized for issuance upon the
exercise of options granted under our stock option plan and shares
of Class A common stock reserved for issuance upon exercise of future
options that may be granted under the plan; and
- shares of Class B common stock issued and outstanding.
The rights of holders of the Class A and Class B common stock are identical
in all respects, except as discussed below. All the outstanding shares of
Class A and B common stock are, and the shares of Class A common stock sold in
this offering will be, upon issuance and payment of the purchase price therefor,
validly issued, fully paid and nonassessable.
DIVIDENDS
Subject to the right of the holders of any class of preferred stock, holders
of shares of common stock are entitled to receive dividends that may be declared
by our board of directors out of legally available funds. No dividend may be
declared or paid in cash or property on any share of any class of common stock
unless simultaneously the same dividend is declared or paid on each share of
that and every other class of common stock; provided, that, in the event of
stock dividends, holders of a specific class of common stock shall be entitled
to receive only additional shares of that class.
VOTING RIGHTS
The Class A common stock and the Class B common stock vote together as a
single class on all matters submitted to a vote of shareholders, except as
required by law. Each share of Class A common stock is entitled to one vote and
each share of Class B common stock is entitled to 10 votes, except that each
share of common stock is entitled to one vote with respect to any "going
private" transaction under the Securities Exchange Act of 1934.
LIQUIDATION RIGHTS
Upon our liquidation, dissolution or winding-up, the holders of our common
stock are entitled to share ratably in all assets available for distribution
after payment in full to creditors and holders of our preferred stock, if any.
CONVERSION AND TRANSFERABILITY OF CLASS B COMMON STOCK
Shares of Class B common stock are convertible at any time, at the option of
the holder, into an equal number of fully paid and non-assessable shares of
Class A common stock. All conversion rights of Class B common stock are subject
to any necessary FCC approval. Shares of Class B common stock transferred to a
party other than a controlled affiliate of the transferor will automatically
convert into an equal number of fully paid and non-assessable shares of Class A
common stock.
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INVESTORS AGREEMENT
Under an investors agreement, each of Childs, AT&T Wireless and the Dobson
Partnership have certain demand and "piggy-back" registration rights for the
shares of Class A common stock, including those shares issuable upon sale or
conversion of their Class B common stock. The investors agreement provides that
seven directors will constitute our Board. In addition, so long as Childs owns
at least 35% of the Class B common stock acquired upon conversion of the
pre-recapitalization Class D preferred stock which it owned beneficially as of
April 13, 1999, Childs is entitled to designate one director. So long as AT&T
Wireless beneficially owns at least 50% of the Class B common stock acquired
upon conversion of the pre-recapitalization Class D preferred stock which it had
the right to acquire on April 13, 1999, AT&T Wireless is entitled to designate
one director. The Dobson Partnership shall be entitled to designate four
directors, and one director shall be selected jointly by Childs, AT&T Wireless
and the Dobson Partnership. So long as Childs and AT&T Wireless beneficially own
the 35% and 50%, respectively, of the number of shares of Class B common stock
acquired upon conversion of the pre-recapitalization Class D preferred stock
which each beneficially owned or had the right to acquire as of April 13, 1999,
each of Childs and AT&T Wireless shall have the right to have an observer
present at all meetings of our board of directors and any committees of our
board of directors. Notwithstanding the foregoing, an additional two directors
may be designated by the holders of our 12 1/4% senior preferred stock and an
additional two directors may be designated by the holders of our 13% senior
preferred stock in the event of the non-payment of dividends for certain
periods, a voting rights triggering event.
Childs, AT&T Wireless and the Dobson Partnership have preemptive rights with
respect to new common stock or securities convertible into common stock issued
by us, 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 in a sale of their shares by any of the others.
OTHER PROVISIONS
The holders of common stock are not entitled to preemptive or similar
rights.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
PREFERRED STOCK
GENERAL
We are authorized to issue shares of preferred stock, par value $.01 per
share. Our board of directors, in its sole discretion, may designate and issue
one or more series of preferred stock from the authorized and unissued shares of
preferred stock.
Subject to limitations imposed by law or our amended and restated
certificate of incorporation, the board of directors is empowered to determine:
- the designation of and the number of shares constituting a series of
preferred stock;
- the dividend rate, if any, for the series;
- the terms and conditions of any voting and conversion rights for the
series, if any;
- the number of directors, if any, which the series shall be entitled to
elect;
- the amounts payable on the series upon our liquidation, dissolution or
winding-up;
- the redemption prices and terms applicable to the series, if any; and
- the preferences and relative rights among the series of preferred stock.
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These rights, preferences, privileges and limitations of preferred stock could
adversely affect the rights of holders of common stock.
SENIOR PREFERRED STOCK
12 1/4% SENIOR PREFERRED STOCK
We have issued and outstanding 279,947 shares of our 12 1/4% senior
preferred stock, which, at June 30, 1999, had an aggregate liquidation
preference of $279.9 million.
The certificates of designation for our 12 1/4% senior preferred stock
provide for the following rights:
VOTING RIGHTS. The holders of our 12 1/4% senior 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 certificates of
designation provide that, upon the occurrence of a voting rights triggering
event, the number of directors constituting our board of directors will be
increased by two directors, whom the holders of 12 1/4% senior preferred stock
will be entitled to elect. Whenever the right of the holders of 12 1/4% senior
preferred stock to elect directors shall cease, the number of directors
constituting the board of directors will be restored to the number of directors
constituting the board of directors prior to the time of the event that entitled
the holders of 12 1/4% senior preferred stock to elect directors.
Under Oklahoma law, the holders of 12 1/4% senior preferred stock will be
entitled to vote as a class upon a proposed amendment to our certificate of
incorporation, whether or not entitled to vote thereon by our certificate of
incorporation, if the amendment would increase or decrease the par value of the
shares of that class, or alter or change the powers, preferences or special
rights of the shares of that class so as to affect them adversely.
DIVIDENDS. The holders of our 12 1/4% senior preferred stock are entitled
to receive cumulative dividends at the annual rate of 12 1/4% of the $1,000 per
share liquidation preference, as and when declared by the board of directors. We
may pay dividends in cash or, on or prior to January 15, 2003, in additional
fully paid and nonassessable shares of senior preferred stock having a
liquidation preference equal to the amount of the dividends.
REDEMPTION. We must redeem the 12 1/4% senior preferred stock on
January 15, 2008, subject to the legal availability of funds therefor, at 100%
of the liquidation preference, plus accrued and unpaid dividends.
At any time and from time to time on or after January 15, 2003, the 12 1/4%
senior preferred stock may be redeemed, in whole or in part, at our option, at a
redemption price expressed as a percentage of the liquidation preference of the
12 1/4% senior preferred stock as set forth below, plus accrued and unpaid
dividends, if such redemption occurs during the 12-month period beginning
January 15 of each of the following years:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003........................................................ 106.125%
2004........................................................ 104.084
2005........................................................ 102.042
2006 and thereafter......................................... 100.000
</TABLE>
Before January 15, 2001, we may redeem up to 35% of the aggregate
liquidation preference amount of the 12 1/4% senior preferred stock at a
redemption price equal to 112.25% of its liquidation preference amount, plus
accrued and unpaid dividends, with net proceeds from a sale of our common stock
if at least 65% of the aggregate liquidation preference amount of the 12 1/4%
senior preferred stock originally issued remains outstanding after any
redemption.
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OPTIONAL EXCHANGE. We may exchange the 12 1/4% senior preferred stock in
whole, but not in part, into our senior subordinated exchange debentures.
CHANGE OF CONTROL. Upon a change of control, we must make an offer to
purchase the 12 1/4% senior preferred stock at a purchase price equal to 100% of
the liquidation preference of the 12 1/4% senior preferred stock, plus accrued
and unpaid dividends. A change of control means, with respect to each series of
12 1/4% senior preferred stock, such time as:
- a shareholder becomes the beneficial owner of more than 35% of the total
voting power of our voting stock, on a fully diluted basis, and such
ownership represents a greater percentage of the total voting power of our
voting stock, on a fully diluted basis, than is held by Everett Dobson and
his affiliates on such date, or
- individuals who on the issue date of such 12 1/4% senior preferred stock
constituted the board of directors, together with any new directors whose
election by the board of directors or whose nomination for election by our
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 issue 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.
This offering will not result in a change of control under the certificate
of designation of our 12 1/4% senior preferred stock.
RESTRICTIVE COVENANTS. The certificate of designation that governs the
12 1/4% senior preferred stock contains certain restrictive covenants which,
among other things, limit our ability and that of our restricted subsidiaries to
incur additional indebtedness, create liens, pay dividends or make distributions
in respect of their capital stock, make investments or certain other restricted
payments, sell assets, redeem capital stock, issue or sell stock of restricted
subsidiaries, enter into transactions with stockholders or affiliates or effect
a consolidation or merger.
13% SENIOR PREFERRED STOCK
We have issued and outstanding 170,000 shares of our 13% senior preferred
stock which, at June 30, 1999, had an aggregate liquidation preference of
$170.0 million.
The certificate of designation for the 13% senior preferred stock provides
for the following rights:
VOTING RIGHTS. The holders of our 13% senior preferred stock have voting
rights substantially similar to the voting rights provided to the 12 1/4% senior
preferred stock.
DIVIDENDS. The holders of 13% senior preferred stock are entitled to
receive cumulative dividends at the annual rate of 13% of the $1,000 per share
liquidation preference, as and when declared by the board of directors. We may
pay dividends in cash or, on or prior to May 1, 2004, in additional fully paid
and nonassessable shares of 13% senior preferred stock having a liquidation
preference equal to the amount of the dividends.
REDEMPTION. We must redeem the 13% senior preferred Stock on May 1, 2009,
subject to the legal availability of funds therefor, at 100% of the liquidation
preference, plus accrued and unpaid dividends.
At any time and from time to time on or after May 1, 2004, we may redeem our
13% senior preferred stock, in whole or in part, at our option, at a redemption
price expressed as a percentage of the liquidation preference of the 13% senior
preferred stock as set forth below, plus accrued and
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unpaid dividends, if such redemption occurs during the 12-month period beginning
May 1 of each of the following years:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004........................................................ 106.500%
2005........................................................ 104.333
2006........................................................ 102.167
2007 and thereafter......................................... 100.000
</TABLE>
Before May 1, 2002, we may redeem up to 35% of the aggregate liquidation
preference amount of our 13% senior preferred stock at a redemption rate equal
to 113.00% of its liquidation preference amount, plus accrued and unpaid
dividends, with net proceeds from a sale of our common stock if at least 65% of
the aggregate liquidation preference amount of our 13% senior preferred stock
originally issued remain outstanding after any redemption.
OPTIONAL EXCHANGE. We may exchange our 13% senior exchangeable preferred
stock in whole, but not in part, into our senior subordinated exchange
debentures. Our exchange rights are substantially similar to our exchange rights
with respect to our 12 1/4% senior preferred stock.
CHANGE OF CONTROL. Upon a change of control, which is defined similarly to
the same term used in our 12 1/4% senior preferred stock, we will be required to
make an offer to purchase our outstanding 13% senior preferred stock at a
purchase price equal to 100% of its liquidation preference plus accrued and
unpaid dividends.
FOREIGN OWNERSHIP
Our certificate of incorporation restricts the ownership, voting and
transfer of our capital stock, including our common stock, in accordance with
the Communications Act and the rules of the FCC, which prohibits foreign
nationals or their representatives, a foreign government or its representative,
or any corporation organized under the laws of a foreign country from owning of
record or voting greater than 25% of our equity unless the FCC determines that
the public interest would be served by denying such foreign ownership. In
addition, our certificate authorizes our board of directors to take action to
enforce these prohibitions, including requiring redemptions of common stock to
the extent necessary to reduce aggregate foreign ownership to lawful limits and
placing a legend regarding restrictions on foreign ownership on the certificates
representing the common stock.
OKLAHOMA ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Our certificate of incorporation and bylaws and the Oklahoma Act include a
number of provisions that may have the effect of encouraging persons considering
unsolicited tender offers or other unilateral takeover proposals to negotiate
with our board of directors rather than pursue non-negotiated takeover attempts.
These provisions include a classified board of directors, authorized blank check
preferred stock, restrictions on business combinations, in certain circumstances
the nullification of voting rights of 20% or more shareholders and the
availability of authorized but unissued common stock.
CLASSIFIED BOARD OF DIRECTORS. Our certificate of incorporation and bylaws
contain provisions for a staggered board of directors with only one-third of the
board standing for election each year. Shareholders may only remove directors
for cause. A staggered board makes it more difficult for stockholders to change
the majority of the directors.
BLANK CHECK PREFERRED STOCK. Our certificate of incorporation authorizes
blank check preferred stock. Our board of directors can set the voting rights,
redemption rights, conversion rights and other rights relating to such preferred
stock and could issue preferred stock in either a private or public transaction.
In some circumstances, the blank check preferred stock could be issued and have
the effect of preventing a merger, tender offer or other takeover attempt which
our board of directors opposes.
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Our board of directors has no present intention to issue any new class or
series of preferred stock; however, our board of directors has the authority,
without further shareholder approval, to issue one or more series of preferred
stock that could, depending on the terms of such series, either impede or
facilitate the completion of a merger, tender offer or other takeover attempt.
Although our board of directors is required to make any determination to issue
such stock based on its judgment as to the best interest of our shareholders,
our board of directors could act in a manner that would discourage an
acquisition attempt or other transaction that some, or a majority, of the
shareholders might believe to be in their best interests or in which
shareholders might receive a premium for their stock over the then market price
of such stock. Our board of directors does not intend to seek shareholder
approval prior to any issuance of such stock, unless otherwise required by law.
OKLAHOMA TAKEOVER STATUTE. We are subject to Section 1090.3 of the Oklahoma
Act. In general, Section 1090.3 prevents an "interested stockholder" from
engaging in a "business combination" with an Oklahoma corporation for three
years following the date that person became an interested stockholder, unless:
- prior to the date such person became an interested stockholder, our board
of directors approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination;
- upon consummation of the transaction that resulted in the interested
stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of our voting stock outstanding at the time
the transaction commenced, excluding stock held by directors who are also
officers of the corporation and stock held by certain employee stock
plans; or
- on or subsequent to the date of the transaction in which such person
became an interested stockholder, the business combination is approved by
the board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder.
Section 1090.3 defines a "business combination" to include:
- any merger or consolidation involving the corporation and an interested
stockholder;
- any sale, transfer, pledge or other disposition involving an interested
stockholder of 10% or more of the assets of the corporation;
- subject to certain exceptions, any transaction which results in the
issuance or transfer by the corporation of any stock of the corporation to
an interested stockholder;
- any transaction involving the corporation which has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
- the receipt by an interested stockholder of any loans, guarantees, pledges
or other financial benefits provided by or through the corporation.
For purposes of Section 1090.3, the term "corporation" also includes our
majority-owned subsidiaries. In addition, Section 1090.3 defines an "interested
stockholder" as an entity or person beneficially owning 15% or more of our
outstanding voting stock and any entity or person affiliated with or controlling
or controlled by such entity or person.
OKLAHOMA CONTROL SHARE ACT. If we have 1,000 or more shareholders and meet
other conditions, we will be subject to Oklahoma's control share act. With
exceptions, this act prevents holders of more than 20% of the voting power of
our stock from voting their shares. This provision may delay the time it takes
anyone to gain control of us. Holders of our Class B common stock are presently
exempt from the Oklahoma control share act.
STOCKHOLDER ACTION. With respect to any act or action required of or by the
holders of our common stock, the affirmative vote of a majority of the total
combined voting power of all classes of
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our outstanding common stock, voting together as a single class, present in
person or represented by proxy at a meeting and entitled to vote thereon is
sufficient to authorize, affirm, ratify or consent to such act or actions,
except as otherwise provided by law or in our certificate of incorporation. The
Oklahoma Act requires the approval of the holders of a majority of the total
combined voting power of all classes of our outstanding common stock, voting
together as a single class for certain extraordinary corporate transactions,
such as a merger, sale of substantially all assets, dissolution or amendment of
our certificate of incorporation. Our certificate of incorporation provides for
a vote of the holders of two-thirds of the issued and outstanding stock having
voting power, voting as a single class, to amend, repeal or adopt any provision
inconsistent with the provisions of our certificate of incorporation limiting
director liability and repurchases of our outstanding common stock, and
providing for staggered terms of directors and indemnity for directors. Such
vote is also required for stockholders to amend, repeal or adopt any provisions
of our bylaws.
Pursuant to the Oklahoma Act, stockholders may take actions without the
holding of a meeting by written consent if the consent is signed by the holders
of at least the number of shares which would be necessary to approve the
transaction at a duly called shareholder's meeting. If we have one thousand or
more shareholders of record, actions taken by our shareholders by written
consent must be unanimous. Mr. Everett R. Dobson and the other directors and
executive officers as a group will beneficially own shares of Class B common
stock representing approximately of the total combined voting power of all
classes of our capital stock entitled to vote, considered as a single class
after the offering. Pursuant to the rules and regulations of the Commission, if
stockholder action is taken by written consent, we will be required to send each
stockholder entitled to vote on the matter acted on, but whose consent was not
solicited, an information statement containing information substantially similar
to that which would have been contained in a proxy statement.
EXCULPATION
Directors and officers shall not be personally liable for monetary damages
(including, without limitation, any judgment, amount paid in settlement,
penalty, punitive damages or expense of any nature (including, without
limitation, attorneys' fees and disbursements)) for any action taken, or any
failure to take any action, unless:
- the director or officer has breached his or her duty of loyalty to the
corporation or its shareholders;
- the breach or failure to perform constitutes an act or omission not in
good faith or which involves intentional misconduct or a knowing violation
of law; or
- for any transaction from which the director or officer derived an improper
personal benefit.
INDEMNIFICATION
To the fullest extent permitted by the Oklahoma General Corporation Act, we
will indemnify any person who was, is, or is threatened to be made, a party to a
proceeding by reason of the fact that he or she:
- is or was our director, officer, employee, or agent; or
- while our director, officer, employee or agent is or was serving at our
request as a director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust,
employee benefit plan or other enterprise.
Any indemnification of our directors, officers or others pursuant to the
foregoing provisions for liabilities arising under the Securities Act are, in
the opinion of the Commission, against public policy as expressed in the
Securities Act and are unenforceable.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our shares
of Class A common stock, and no prediction can be made as to the effect, if any,
that market sales of shares of common stock or the availability of shares of
common stock for sale will have on the market price of our shares of Class A
common stock prevailing from time to time. Nevertheless, sales of substantial
amounts of shares of common stock in the public market, or the perception that
such sales could occur, could adversely affect the market price of our shares of
Class A common stock and could impair our future ability to raise capital
through the sale of our equity securities.
Upon the closing of this offering, we will have an aggregate of
shares of Class A common stock outstanding, ( shares if the underwriters
exercise their over-allotted option in full) and shares of Class B common
stock outstanding. In addition, shares of Class A common stock will be
issuable upon exercise of outstanding stock options. The shares sold in this
offering will be freely tradable, except that any shares held by our
"affiliates" (as that term is defined in Rule 144 promulgated under the
Securities Act) may only be sold in compliance with the limitations described
below.
The shares of Class A common stock and shares of Class B
common stock outstanding after this offering and held by our affiliates will be
deemed "restricted securities" as defined under Rule 144. Restricted securities
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rule 144 promulgated under the Securities Act,
which is summarized below. After taking into account the 180-day lock-up
agreements described below and the provisions of Rule 144, additional shares
will be available for sale in the public market:
<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
- ---------------- ---------------------------------------------
<S> <C>
180 days after the date of this prospectus
At various times after 180 days after
the date of this prospectus
</TABLE>
Approximately of the shares of common stock that will become eligible
for resale after the expiration of the 180-day lock-up agreements are held by
affiliates and, therefore, will remain subject to the volume limitations and
other restrictions of Rule 144. See "Risk Factors--The future of sale shares may
hurt our market price."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated), including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of:
- 1% of the then outstanding shares of common stock (approximately
shares immediately after this offering); or
- the average weekly trading volume in the shares of common stock during the
four calendar weeks preceding the date on which notice of such sale is
filed, subject to certain restrictions.
A person who is not deemed to have been an affiliate at any time during the 90
days preceding a sale and who has beneficially owned the shares proposed to be
sold for at least two years would be entitled to sell such shares without regard
to the requirements described above. To the extent that shares were acquired
from an affiliate, the transferee's holding period for the purpose of effecting
a sale under Rule 144 commences on the date of transfer from the affiliate.
All of our directors, officers and shareholders, and our option holders,
have agreed that they will not, without the prior written consent of Lehman
Brothers Inc. and Salomon Smith Barney Inc., sell or
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otherwise dispose of any shares of common stock or options to acquire shares of
common stock during the 180-day period following the date of this prospectus.
See "Underwriting."
We intend to file a Form S-8 registration statement under the Securities Act
on or immediately after the date of this prospectus to register all shares of
Class A common stock issuable under our 1996 stock option plan. This
registration statement will automatically become effective upon filing.
Accordingly, shares covered by this registration statement will thereupon be
eligible for sale in the public markets, unless the options are subject to
vesting restrictions or the contractual restrictions described above. See
"Management."
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of the prospectus, except we
may issue, and grant options to purchase, shares of common stock and we may
offer and sell shares of common stock under our 1996 stock option plan.
Following this offering, in some circumstances and subject to conditions,
holders of our outstanding shares of Class B common stock will have demand
registration rights (subject to the 180-day lock-up arrangement described above)
to require us to register their shares of Class B common stock under the
Securities Act, and they will have rights to participate in any future
registration of securities by us. See "Description of Capital Stock--Common
Stock--Investors Agreement."
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FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain U.S. federal income tax
consequences of the ownership of our Class A common stock, including certain
anticipated U.S. income and estate tax consequences of the ownership and
disposition of our Class A common stock applicable to non-U.S. holders, as
defined below. This discussion does not consider the specific facts and
circumstances that may be relevant to particular holders and does not address
the treatment of holders of Class A common stock under the laws of any state,
local or foreign taxing jurisdiction. This discussion is based on the tax laws
of the U.S., including the Internal Revenue Code, as amended to the date hereof,
existing and proposed regulations thereunder, and administrative and judicial
interpretation thereof, as currently in effect. These laws and interpretations
are subject to change, possibly on a retroactive basis.
YOU SHOULD CONSULT YOUR OWN TAX ADVISORS WITH REGARD TO THE APPLICATION OF THE
FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR SITUATION, AS WELL AS TO THE
APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS TO WHICH YOU
MAY BE SUBJECT.
GENERAL
We believe that for federal income tax purposes neither we nor any U.S.
holder will recognize any income, gain or loss as a result of the issuance of
our Class A common stock. You are a "U.S holder" for U.S. federal income tax
purposes if you are a beneficial owner of common stock and are:
- a citizen or resident of the U.S.;
- a corporation, partnership or other entity created or organized under the
laws of the U.S. or any state;
- an estate, the income of which is subject to U.S. federal income tax
without regard to its source;
- a trust, if a court within the U.S. is able to exercise primary
supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the
trust; or
- subject to certain exceptions, an individual who is present in the U.S. on
at least 31 days in the current calendar year and for an aggregate of at
least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current
calendar year, one-third of the days present in the immediately preceding
calendar year, and one-sixth of the days present in the second preceding
year).
CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following discussion summarizes certain U.S. federal income and estate
tax consequences of the ownership and disposition of our Class A common stock by
"non-U.S. holders." You are a "non-U.S. holder" for U.S. federal income tax
purposes if you are:
- a non-resident alien individual;
- a foreign corporation;
- a foreign partnership; or
- an estate or trust that in either case is not subject to U.S. federal
income tax on a net income basis on income or gain from common stock.
DIVIDENDS
If you are a non-U.S. holder of our Class A common stock, dividends paid to
you are subject to withholding of U.S. federal income tax at a 30% rate or at a
lower rate if so specified in an applicable
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income tax treaty and certain filing requirements are met. If, however, the
dividends are effectively connected with your conduct of a trade or business
within the U.S., and they are attributable to a permanent establishment that you
maintain in the U.S., if that is required by an applicable income tax treaty as
a condition for subjecting you to U.S. income tax on a net income basis on such
dividends, then these "effectively connected" dividends generally are not
subject to withholding tax provided certain filing requirements are met.
Instead, the effectively connected dividends are taxed at rates applicable to
U.S. citizens, resident aliens and U.S. corporations.
Effectively connected dividends received by a non-U.S. corporation may,
under certain circumstances, be subject to an additional "branch profits tax" at
a 30% rate or at a lower rate if so specified in an applicable income tax
treaty.
Under currently effective U.S. Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country, unless the payor has knowledge to the contrary, for purposes of making
such dividends subject to the 30% withholding tax discussed above. Under current
interpretations of U.S. Treasury regulations, the presumption that dividends
paid to an address in a foreign country are paid to a resident of that country,
unless the payor has knowledge to the contrary, also applies for the purposes of
determining whether a lower tax treaty rate applies.
Under U.S. Treasury regulations, which will generally apply to dividends
paid after December 31, 2000 (the "final withholding regulations"), if you claim
the benefit of a lower treaty rate, you must satisfy certain certification
requirements. In addition, in the case of Class A common stock held by a foreign
partnership, the certification requirements generally will apply to the partners
of the partnership and the partnership must provide certain information,
including a U.S. taxpayer identification number. The final withholding
regulations also provide look-through rules for tiered partnerships.
If you are eligible for a reduced rate of U.S. withholding tax under a tax
treaty, you may obtain a refund of any excess amounts withheld by filing a
refund claim with the IRS.
GAIN ON DISPOSITION OF CLASS A COMMON STOCK
If you are a non-U.S. holder you generally will not be subject to U.S.
federal income tax on gain recognized on a disposition of our Class A common
stock unless:
- the gain is effectively connected to your conduct of a trade or business
in the U.S. (and the gain is attributable to a permanent establishment
that you maintain in the U.S., if that is required by an applicable income
tax treaty as a condition for subjecting you to U.S. taxation on a net
income basis on gain from the sale or other disposition of our Class A
common stock);
- you are an individual, you hold our Class A common stock as a capital
asset and you are present in the U.S. for 183 or more days in the taxable
year of the sale and certain other conditions exist; or
- We are or have been a "United States real property holding corporation"
for federal income tax purposes and you held, directly or indirectly, at
any time during the five-year period ending on the date of disposition,
more than 5% of our common stock (and you are not eligible for any treaty
exemption).
Effectively connected gains recognized by a corporate non-U.S. holder may
also, under certain circumstances, be subject to an additional "branch profits
tax" at a 30% rate or at a lower rate if so specified in an applicable income
tax treaty.
We have not been, are not, and do not anticipate becoming a "United States
real property holding corporation" for federal income tax purposes.
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FEDERAL ESTATE TAXES
Class A common stock held by a non-U.S. holder at the time of death, or by
certain trusts benefitting the non-U.S. holder as to which no U.S. person has
certain rights or powers will be included in the holder's gross estate for U.S.
federal estate tax purposes, unless an applicable estate tax treaty provides
otherwise.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, U.S. information reporting requirements and backup withholding
tax will not apply to dividends paid to you if you are either:
- subject to the 30% withholding tax discussed above;
- not subject to the 30% withholding tax because an applicable tax treaty
reduces or eliminates such withholding tax;
- not subject to the 30% withholding tax discussed above for the reason that
the dividends are effectively connected with your conduct of a trade or
business within the U.S.; or
- not subject to the 30% withholding tax pursuant to U.S. Treasury
Regulations providing relief from undue administrative burden,
although dividend payments to you will be reported for purposes of the
withholding tax (see "--Dividends" above). If you do not meet any of the above
requirements for exemption and you fail to provide certain information
(including your U.S. taxpayer identification number) or otherwise establish your
status as an "exempt recipient," you may be subject to backup withholding of
U.S. federal income tax at a rate of 31% on dividends paid with respect to our
Class A common stock.
Under current law, the payor may generally treat dividends paid to a payee
with a foreign address as exempt from backup withholding and information
reporting unless the payor has definite knowledge that the payee is a U.S.
person. However, under the final withholding regulations, dividend payments
generally will be subject to information reporting and backup withholding unless
certain certification requirements are met. (See the discussion under
"--Dividends" for the rules applicable to foreign partnerships under the final
withholding regulations.)
U.S. information reporting and backup withholding requirements generally
will not apply to a payment of the proceeds of a sale of common stock made
outside the U.S. through an office outside the U.S. of a non-U.S. broker.
However, U.S. information reporting, but not backup withholding, will apply to a
payment made outside the U.S. of the proceeds of a sale of our Class A common
stock through an office outside the U.S. of a broker that:
- is a U.S person;
- derives 50% or more of its gross income for certain periods from the
conduct of a trade or business in the U.S.;
- is a "controlled foreign corporation" as to the U.S.; or
- with respect to payments made after December 31, 2000, is a foreign
partnership, if at any time during its tax year:
- one or more of its partners are U.S. persons, as defined in the U.S.
Treasury regulation, who in the aggregate hold more than 50% of the
income or capital interest in the partnership; or
101
<PAGE>
- such foreign partnership is engaged in a U.S. trade or business, unless
the broker has documentary evidence in its records that the holder or
beneficial owner is a non-U.S. person or otherwise establishes an
exemption.
Payment of the proceeds of a sale of our Class A common stock to or through
a U.S. office of a broker is subject to both U.S. backup withholding and
information reporting unless the holder certifies its non-U.S. status under
penalty of perjury or otherwise establishes an exemption.
A non-U.S. holder generally may obtain a refund of any excess amounts
withheld under the backup withholding rules by filing a refund claim with the
IRS.
102
<PAGE>
UNDERWRITING
Under the underwriting agreement, which is filed as an exhibit to the
registration statement of which this prospectus is a part, each of the
underwriters named below, for whom Lehman Brothers Inc., Salomon Smith Barney
Inc., Banc of America Securities LLC, Deutsche Bank Securities Inc., Goldman,
Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as
representatives, has agreed to purchase from us the respective number of shares
of Class A common stock shown opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF CLASS A COMMON STOCK
- ----------- ------------------------
<S> <C>
Lehman Brothers Inc.......................................
Salomon Smith Barney Inc..................................
Banc of America Securities LLC............................
Deutsche Bank Securities Inc..............................
Goldman, Sachs & Co.......................................
Merrill Lynch, Pierce, Fenner & Smith Incorporated........
-----------------------
Total...................................................
=======================
</TABLE>
The underwriting agreement provides that the underwriters' obligations to
purchase shares of Class A common stock are subject to certain conditions, and
that if any of the foregoing shares of Class A common stock are purchased by the
underwriters pursuant to an underwriting agreement, all of the shares of
Class A common stock that the underwriters have agreed to purchase pursuant to
the underwriting agreement must be so purchased.
The representatives have advised us that the underwriters propose to offer
the shares of Class A common stock directly to the public at the public offering
price set forth on the cover page of this prospectus, and to certain selected
dealers, who may include the underwriters, at such public offering price less a
selling concession not in excess of $ per share. The underwriters may allow,
and the selected dealers may reallow, a concession not in excess of $ per
share to certain brokers and dealers. After the offering, the underwriters may
change the offering price and other selling terms.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
TOTAL
-------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
--------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions.... $ $ $
</TABLE>
We estimate that the total expenses of the offering, excluding underwriting
discounts and commissions, will be approximately $ .
We have granted to the underwriters an option to purchase up to an aggregate
of additional shares of Class A common stock exercisable solely to cover
over-allotments, if any, at the public offering price less the underwriting
discounts and commissions shown on the cover page of this prospectus. Such
option may be exercised at any time, and from time to time, until 30 days after
the date of the underwriting agreement. To the extent that the underwriters
exercise this option, each underwriter will be committed, subject to certain
conditions, to purchase a number of additional shares of Class A common stock
proportionate to such underwriter's initial commitment, as indicated in the
preceding table, and we will be obligated, under such over-allotment option, to
sell such shares of Class A common stock to the underwriters.
103
<PAGE>
We and all of our directors, officers, shareholders and option holders,
holding an aggregate of shares of common stock have agreed not to
offer to sell, sell or otherwise dispose of directly or indirectly any shares of
common stock during the 180-day period following the date of the prospectus
without the prior written consent of Lehman Brothers Inc. and Salomon Smith
Barney Inc., except that we may grant options to purchase and issue shares of
Class A common stock under our 1996 stock option plan. See "Risk Factors--You
will experience immediate and substantial dilution in the book value of your
investment" and "Shares Eligible for Future Sale."
Prior to the offering, there has been no public market for the shares of
Class A common stock. The initial public offering price was negotiated between
the representatives and us. In determining the initial public offering price of
the shares of Class A common stock, the representatives considered, among other
things and in addition to prevailing market conditions, our historical
performance and capital structure, estimates of our business potential and
earning prospects, an overall assessment of our management and the consideration
of the above factors in relation to market valuation of companies in related
businesses.
Application has been made to have the shares of Class A common stock
approved for quotation on the Nasdaq National Market under the symbol "DCEL."
We have agreed to indemnify the underwriters against liabilities related to
the offering, including liabilities under the Securities Act, and to contribute,
under defined circumstances, to payments that the underwriters may be required
to make in respect thereof.
Until the distribution of the shares of Class A common stock is completed,
rules of the Securities and Exchange Commission may limit the ability of the
underwriters and certain selling group members to bid for and purchase shares of
Class A common stock. As an exception to these rules, the representatives are
permitted to engage in transactions that stabilize the price of shares of
Class A common stock. These transactions may consist of bids or purchases for
the purpose of pegging, fixing or maintaining the price of the shares of
Class A common stock.
If the underwriters create a short position in the shares of Class A common
stock in connection with the offering (i.e., they sell more shares than are set
forth on the cover page of this prospectus), the representatives may reduce that
short position by purchasing shares of Class A common stock in the open market.
The representatives also may elect to reduce any short position by exercising
all or part of the over-allotment option described herein.
The representatives also may impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares of
Class A common stock in the open market to reduce the underwriters' short
position or to stabilize the price of the shares of Class A common stock, they
may reclaim the amount of the selling concession from the underwriters and
selling group members who sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of those purchases. The
imposition of a penalty bid could have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
an offering.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the shares of Class A common stock. In
addition, neither we nor any of the underwriters makes any representation that
the representatives will engage in these stabilizing transactions or that these
transactions, once commenced, will not be discontinued without notice.
Any offers in Canada will be made only pursuant to an exemption from the
requirements to file a prospectus in the relevant province of Canada in which a
sale is made.
104
<PAGE>
Purchasers of the shares of Class A common stock offered in this prospectus
may be required to pay stamp taxes and other charges under the laws and
practices of the country of purchase, in addition to the offering price listed
on the cover of this prospectus.
At our request, the underwriters have reserved up to % of the shares of
Class A common stock offered hereby for sale to certain of our employees,
directors and friends at the initial public offering price set forth on the
cover page of this prospectus. These persons must commit to purchase no later
than the close of business on the day following the date of this prospectus and
must agree to be subject to the 180-day lock-up described above. The number of
shares available for sale to the general public will be reduced to the extent
these persons purchase such reserved shares. We have agreed to indemnify the
underwriters against certain liabilities and expenses, including liabilities
under the Securities Act of 1933 in connection with sales of directed shares.
In the ordinary course of their respective businesses, the underwriters and
their affiliates have engaged, and in the future may engage, in commercial
banking and investment banking transactions with us and our affiliates.
Lehman Brothers Inc. has provided investment banking, financial advisory and
other services to us, for which services Lehman Brothers Inc. has received
customary fees. Lehman has acted for us as follows:
- Lehman Brothers Inc. is acting as our financial advisor in connection with
the pending acquisition of American Cellular;
- Lehman Brothers Inc. is acting as the dealer manager in the tender offer
consent solicitation for our 11 3/4% senior notes;
- Lehman Brothers Inc. is acting as our financial advisor in connection with
the spin-off of our Logix subsidiary;
- Lehman Brothers Inc. acted as the exclusive initial purchaser in
connection with the sale of our 13% senior preferred stock in May 1999.
- Lehman Brothers Inc. acted as an initial purchaser in connection with the
sale of the Dobson/ Sygnet 12 1/4% senior notes in December 1998; and
- Lehman Commercial Paper Inc., an affiliate of Lehman Brothers Inc., acted
as the managing agent under the Dobson/Sygnet credit facility in December
1998.
Banc of America Securities LLC has provided commercial and investment
banking services to us, for which services they have received customary fees.
Banc of America Securities LLC has acted for us as follows:
- Banc of America Securities LLC is acting as sole lead arranger for, and
Bank of America, N.A., an affiliate of Banc of America Securities LLC, is
acting as a lender under, our new credit facility and the credit facility
for our joint venture with AT&T Wireless;
- Banc of America Securities LLC acted as sole lead arranger for, and Bank
of America, N.A. acted as a lender under, the Dobson Partnership's credit
facility in October 1999;
- Banc of America Securities LLC acted as sole lead arranger for, and Bank
of America, N.A. acted as a lender under, our Logix credit facility in May
1999;
- Banc of America Securities LLC acted as arranging agent for, and Bank of
America, N.A. acted as a lender under, our DOC and DCOC credit facilities
in December 1998;
- Banc of America Securities LLC acted as lead arranger for, and Bank of
America, N.A. acted as a lender under, our Dobson/Sygnet credit facility
in December 1998;
105
<PAGE>
- Banc of America Securities LLC acted as lead manager in connection with
the sale of our Dobson/Sygnet 12 1/4% senior notes in December 1998;
- Banc of America Securities LLC acted as sole manager in connection with
the sale of our 12 1/4% senior preferred stock in December 1998;
- Banc of America Securities LLC acted as sole dealer manager in the tender
offer and consent solicitation for Sygnet's 11 1/2% senior notes in
December 1998;
- Banc of America Securities LLC acted as co-manager in connection with the
sale of our Logix 12 1/4% senior notes in June 1998; and
- Banc of America Securities LLC acted as co-manager in connection with the
sale of our 12 1/4% senior preferred stock in January 1998.
In February 1999, Alex. Brown & Sons Incorporated, a predecessor to Deutsche
Bank Securities Inc., acted as a co-manager in connection with the sale of our
11 3/4% senior notes due 2007.
In July 1999 American Cellular engaged Merrill Lynch, Pierce, Fenner & Smith
Incorporated as its financial advisor to assist the company in analyzing,
structuring, negotiating and effecting a proposed business combination between
American Cellular and other interested parties. American Cellular is obligated
to pay customary fees for these services upon the occurrence of certain events
and the consummation of a business combination involving the company. In
addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated acted as a
co-manager in connection with the sale of our 12 1/4% senior preferred stock in
January 1998.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Class A common
stock offered hereby are being passed upon for us by McAfee & Taft A
Professional Corporation, Oklahoma City, Oklahoma. Certain legal matters in
connection with this offering will be passed upon for the underwriters by Weil,
Gotshal & Manges LLP, New York, New York.
EXPERTS
The consolidated balance sheets of Dobson Communications Corporation and its
subsidiaries as of December 31, 1997 and December 31, 1998, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
each of the three years in the period ended December 31, 1998 included in this
prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
Ernst & Young LLP, independent auditors, have audited the following
financial statements. We have included these financial statements in this
prospectus in reliance on Ernst & Young LLP's reports, given on their authority
as experts in accounting and auditing.
- The consolidated financial statements of Sygnet Wireless, Inc. for the
years ended December 31, 1996 and December 31, 1997 and for the period
from January 1, 1998 through December 23, 1998.
- The consolidated financial statements of American Cellular Corporation and
subsidiaries at December 31, 1998 and for the period from February 26,
1998 to December 31, 1998.
- The consolidated financial statements of PriCellular Corporation and
subsidiaries at December 31, 1997 and June 30, 1998, and for the years
ended December 31, 1996 and December 31, 1997 and for the six months ended
June 30, 1998.
106
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement under the Securities Act with respect
to the sale of the Class A common stock offered by this prospectus.
The registration statement, including the attached exhibits and schedules,
that we filed with the Securities and Exchange Commission contains additional
information about us and our common stock. The rules and regulations of the
Commission allow us to omit certain information included in the registration
statement from this prospectus.
In addition, we file reports and other information with the Commission under
the Exchange Act. You may read and copy this information at the following
locations of the Commission:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. Further information on the
operation of the Commission's Public Reference Room in Washington, D.C. can be
obtained by calling the Commission at 1-800-SEC-0330.
The Commission also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, such as us, who
file electronically with the Commission. The address of that site is
http:\\www.sec.gov.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to give any information or make any representation
about us or this offering that is different from, or in addition to, that
contained in this prospectus or in any of the materials that we have
incorporated into this document. Therefore, if anyone does give you information
of this sort, you should not rely on it. If you are in a jurisdiction where
offers to sell, or solicitations of offers to buy, the securities offered by
this document are unlawful, or if you are a person to whom it is unlawful to
direct these types of activities, then the offer presented in this document does
not extend to you.
107
<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, 1997 and
1998.................................................... F-3
Consolidated statements of operations for the years ended
December 31, 1996, 1997
and 1998................................................ F-5
Consolidated statements of stockholders' deficit for
the years ended December 31, 1996, 1997 and 1998........ F-7
Consolidated statements of cash flows for the years ended
December 31, 1996, 1997 and 1998........................ F-8
Notes to consolidated financial statements................ F-10
Condensed consolidated balance sheets as of December 31,
1998 and June 30, 1999 (unaudited)..................... F-29
Condensed consolidated statements of operations for the
six months ended June 30, 1998 and 1999 (unaudited)..... F-31
Condensed consolidated statements of cash flows for the
six months ended June 30, 1998 and 1999 (unaudited)..... F-32
Notes to condensed consolidated financial statements
(unaudited)............................................. F-33
SYGNET WIRELESS, INC.
Report of independent auditors............................ F-43
Consolidated statements of operations for the years ended
December 31, 1996 and 1997 and for the period from
January 1, 1998 to December 23, 1998.................... F-44
Consolidated statements of shareholders' equity (deficit)
for the years ended December 31, 1996 and 1997 and for
the period from January 1, 1998 to December 23, 1998.... F-45
Consolidated statements of cash flows for the years ended
December 31, 1996 and 1997 and for the period from
January 1, 1998 to December 23, 1998.................... F-46
Notes to consolidated financial statements................ F-47
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
Report of independent auditors............................ F-55
Consolidated balance sheet as of December 31, 1998........ F-56
Consolidated statement of operations for the period from
February 26, 1998 to December 31, 1998.................. F-57
Consolidated statement of stockholders' equity for the
period from February 26, 1998 to December 31, 1998...... F-58
Consolidated statement of cash flows for the period from
February 26, 1998 to December 31, 1998.................. F-59
Notes to consolidated financial statements................ F-60
Condensed consolidated balance sheets as of June 30,
1999.................................................... F-69
Condensed consolidated statement of operations for the six
months ended June 30, 1999.............................. F-70
Condensed consolidated statement of cash flows for the six
months ended June 30, 1999.............................. F-71
Notes to condensed consolidated financial statements...... F-72
PRICELLULAR CORPORATION AND SUBSIDIARIES
Report of independent auditors............................ F-73
Consolidated balance sheets as of December 31, 1997 and
June 30, 1998........................................... F-74
Consolidated statements of operations for the years ended
December 31, 1996 and 1997 and for the six months ended
June 30, 1998........................................... F-75
Consolidated statements of stockholders' equity for the
years ended December 31, 1996 and 1997 and for the six
months ended June 30, 1998.............................. F-76
Consolidated statements of cash flows for the years ended
December 31, 1996 and 1997 and for the six months ended
June 30, 1998........................................... F-77
Notes to consolidated financial statements................ F-79
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Dobson Communications Corporation:
We have audited the accompanying consolidated balance sheets of Dobson
Communications Corporation (an Oklahoma corporation) and subsidiaries as of
December 31, 1997 and 1998, and the related consolidated statements of
operations, stockholders' deficit and cash flows for each of the three years in
the period ended December 31, 1998. 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 consolidated 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 consolidated financial position of
Dobson Communications Corporation and subsidiaries as of December 31, 1997 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
February 18, 1999
F-2
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
------------ --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,752,399 $ 22,323,734
Accounts receivable--
Due from customers, net of allowance for doubtful
accounts of $632,661 and $2,043,200 in 1997 and 1998,
respectively.......................................... 14,003,688 43,299,568
Affiliates.............................................. 633,146 --
Restricted cash and investments........................... 17,561,231 30,074,946
Inventory................................................. 1,229,420 5,158,512
Prepaid expenses and other................................ 2,384,683 2,026,538
Deferred income taxes..................................... 214,000 1,404,000
------------ --------------
Total current assets.................................... 38,778,567 104,287,298
------------ --------------
PROPERTY, PLANT AND EQUIPMENT, net.......................... 52,373,866 173,054,329
------------ --------------
OTHER ASSETS:
Receivables--Affiliates................................... 529,107 227,990
Notes receivable--Affiliates.............................. 5,852,282 7,047,272
Restricted investments.................................... 9,216,202 45,505,020
Cellular license acquisition costs, net of accumulated
amortization of $13,814,229 and $43,879,184 in 1997 and
1998, respectively...................................... 206,694,474 1,250,790,448
Deferred financing costs, net of accumulated amortization
of $2,628,777 and $2,511,661 in 1997 and 1998,
respectively............................................ 9,884,308 66,640,301
Other intangibles, net of accumulated amortization of
$851,107 and $2,071,047 in 1997 and 1998,
respectively............................................ 9,328,031 52,795,841
Investments in unconsolidated subsidiaries and other...... 6,911,002 3,078,134
Net assets of discontinued operations..................... 20,077,167 --
------------ --------------
Total other assets...................................... 268,492,573 1,426,085,006
------------ --------------
Total assets............................................ $359,645,006 $1,703,426,633
============ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
------------ --------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.......................................... $ 11,708,420 $ 47,536,672
Accrued expenses.......................................... 7,641,021 14,222,306
Notes payable............................................. -- 17,500,000
Deferred revenue and customer deposits.................... 1,979,508 5,738,381
Current portion of long-term debt......................... -- 198,871
Accrued dividends payable................................. 1,595,238 5,603,856
------------ --------------
Total current liabilities............................... 22,924,187 90,800,086
------------ --------------
Net liabilities of discontinued operations.................. -- 7,033,166
Payables--affiliates........................................ 8,206,935 5,011,438
Long-term debt, net of current portion...................... 335,570,059 1,103,857,333
Deferred Tax Liabilities.................................... 1,039,000 245,630,000
Minority Interests.......................................... 16,954,165 26,557,203
Commitments (Note 14)
Senior Exchangeable Preferred Stock, net.................... -- 241,320,000
Class B Convertible Preferred Stock......................... 10,000,000 --
Class C Preferred Stock..................................... 1,623,329 --
Class D Convertible Preferred Stock......................... -- 85,000,000
Class F Preferred Stock..................................... -- 30,000,000
Class G Preferred Stock..................................... -- 25,000,000
STOCKHOLDERS' DEFICIT:
Class A preferred stock................................... 100,000 314,286
Class A common stock, $.001 par value, 1,438,000 shares
authorized and 473,152 issued in 1997 and 573,152 issued
in 1998................................................. 473 573
Paid-in capital........................................... 5,980,964 18,298,072
Retained deficit.......................................... (42,754,106) (119,269,863)
------------ --------------
(36,672,669) (100,656,932)
------------ --------------
Less--
Stock held in treasury (81,198 shares of Class A common
stock and 314,296 shares of Class A preferred stock), at
cost.................................................... -- (56,125,661)
------------ --------------
Total stockholders' deficit............................. (36,672,669) (156,782,593)
------------ --------------
Total liabilities and stockholders' deficit............. $359,645,006 $1,703,426,633
============ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
OPERATING REVENUE:
Service revenue.................................... $17,593,317 $ 38,410,263 $ 69,402,405
Roaming revenue.................................... 7,852,532 26,262,370 66,479,068
Equipment sales.................................... 661,632 1,455,088 4,129,633
Other.............................................. 831,802 586,206 24,283
----------- ------------ ------------
Total operating revenue.......................... 26,939,283 66,713,927 140,035,389
----------- ------------ ------------
OPERATING EXPENSES:
Cost of service.................................... 6,118,734 16,430,603 33,267,093
Cost of equipment.................................. 2,571,531 4,045,500 8,359,739
Marketing and selling.............................. 4,462,227 10,669,485 22,392,927
General and administrative......................... 3,901,631 11,555,355 26,051,564
Depreciation and amortization...................... 5,241,446 16,797,780 47,109,937
----------- ------------ ------------
Total operating expenses......................... 22,295,569 59,498,723 137,181,260
----------- ------------ ------------
OPERATING INCOME..................................... 4,643,714 7,215,204 2,854,129
----------- ------------ ------------
INTEREST EXPENSE..................................... (4,283,482) (27,639,739) (38,978,898)
OTHER INCOME (EXPENSE), net.......................... (1,502,776) 2,776,730 3,858,290
----------- ------------ ------------
LOSS BEFORE MINORITY INTERESTS IN INCOME OF
SUBSIDIARIES, INCOME TAXES AND EXTRAORDINARY
ITEMS.............................................. (1,142,544) (17,647,805) (32,266,479)
MINORITY INTERESTS IN INCOME OF SUBSIDIARIES......... (675,098) (1,693,372) (2,487,441)
----------- ------------ ------------
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS..... (1,817,642) (19,341,177) (34,753,920)
INCOME TAX BENEFIT................................... 593,307 3,624,610 11,469,000
----------- ------------ ------------
LOSS FROM CONTINUING OPERATIONS...................... (1,224,335) (15,716,567) (23,284,920)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, net of
income tax expense (benefit) of $182,512 in 1996,
$470,170 in 1997 and $(13,352,877) in 1998
(Note 3)........................................... 331,058 332,141 (27,110,387)
----------- ------------ ------------
LOSS BEFORE EXTRAORDINARY ITEMS...................... (893,277) (15,384,426) (50,395,307)
</TABLE>
F-5
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
----------- ------------ ------------
<S> <C> <C> <C>
EXTRAORDINARY EXPENSE, net of income tax benefit of
$323,205 in 1996, $827,210 in 1997 and $1,149,000
in 1998 (Note 6)................................... $ (527,334) $ (1,349,659) $ (2,165,439)
----------- ------------ ------------
NET LOSS............................................. (1,420,611) (16,734,085) (52,560,746)
DIVIDENDS ON PREFERRED STOCK......................... (849,137) (2,603,362) (23,955,011)
----------- ------------ ------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS........... $(2,269,748) $(19,337,447) $(76,515,757)
=========== ============ ============
BASIC NET LOSS APPLICABLE TO COMMON STOCKHOLDERS PER
COMMON SHARE:
Before discontinued operations and extraordinary
expense.......................................... (4.38) (38.72) (99.75)
Discontinued operations............................ .70 .70 (57.25)
Extraordinary expense.............................. (1.12) (2.85) (4.57)
----------- ------------ ------------
BASIC NET LOSS APPLICABLE TO COMMON STOCKHOLDERS PER
COMMON SHARE....................................... $ (4.80) $ (40.87) $ (161.57)
=========== ============ ============
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING..... 473,152 473,152 473,564
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<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, 1995......... -- $ -- 300 $ 1,000 1,000 $ 1,000 1,000 $ (1,000) $ 5,980,437
Net loss................ -- -- -- -- -- -- -- -- --
Recapitalization
(Note 8).............. -- -- 472,852 (527) (1,000) (1,000) (1,000) 1,000 527
Cash dividends declared
on preferred stock.... -- -- -- -- -- -- -- -- --
Cash dividends declared
on common stock....... -- -- -- -- -- -- -- -- --
------- -------- ------- -------- ------- -------- ------- -------- -----------
DECEMBER 31, 1996......... -- -- 473,152 473 -- -- -- -- 5,980,964
Net loss................ -- -- -- -- -- -- -- -- --
Cash dividends declared
on preferred stock.... -- -- -- -- -- -- -- -- --
Cash dividends declared
on common stock....... -- -- -- -- -- -- -- -- --
Preferred stock
dividend.............. -- -- -- -- -- -- -- -- --
Issuance of preferred
stock................. 100,000 100,000 -- -- -- -- -- -- --
------- -------- ------- -------- ------- -------- ------- -------- -----------
DECEMBER 31, 1997......... 100,000 100,000 473,152 473 -- -- -- -- 5,980,964
Net loss................ -- -- -- -- -- -- -- -- --
Conversion of Class B
Preferred Stock....... -- -- 100,000 100 -- -- -- -- 12,531,394
Purchase of treasury
stock, at cost........ -- -- -- -- -- -- -- -- --
Issuance of preferred
stock................. 214,286 214,286 -- -- -- -- -- -- (214,286)
Preferred stock
dividend.............. -- -- -- -- --
------- -------- ------- -------- ------- -------- ------- -------- -----------
DECEMBER 31, 1998......... 314,286 $314,286 573,152 $ 573 -- $ -- -- $ -- $18,298,072
======= ======== ======= ======== ======= ======== ======= ======== ===========
<CAPTION>
TREASURY RETAINED
STOCK, AT EARNINGS
COST (DEFICIT)
------------ -------------
<S> <C> <C>
DECEMBER 31, 1995......... $(11,913,000) $ (1,040,000)
Net loss................ -- (1,420,611)
Recapitalization
(Note 8).............. 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)
Issuance of preferred
stock................. -- --
------------ -------------
DECEMBER 31, 1997......... -- (42,754,106)
Net loss................ -- (52,560,746)
Conversion of Class B
Preferred Stock....... -- --
Purchase of treasury
stock, at cost........ (56,125,661) --
Issuance of preferred
stock................. -- --
Preferred stock
dividend.............. -- (23,955,011)
------------ -------------
DECEMBER 31, 1998......... $(56,125,661) $(119,269,863)
============ =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
------------- ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations............. $ (1,751,669) $ (17,066,226) $(25,450,359)
Adjustments to reconcile net loss to net cash
provided by operating activities--
Depreciation and amortization................. 5,241,446 16,797,780 47,109,937
Deferred income taxes and investment tax
credits, net................................ (97,287) (4,108,699) (14,677,558)
Loss on disposition of assets, net............ 1,799,570 205,694 158,067
Extraordinary loss on financing cost.......... 850,539 2,176,867 3,314,439
Minority interests in income of
subsidiaries................................ 675,098 1,693,372 2,487,441
Equity in income of unconsolidated
partnerships................................ (125,000) (140,227) (283,798)
Changes in current assets and liabilities--
Accounts receivable........................... (1,089,370) (7,279,109) (8,358,070)
Inventory..................................... (546,907) (143,890) (860,921)
Income taxes receivable....................... (1,133,063) 288,063 845,000
Prepaid expenses and other.................... 26,518 (1,422,629) 418,482
Accounts payable.............................. 1,310,062 8,656,849 30,206,977
Accrued expenses.............................. (50,933) 6,459,876 (7,888,703)
Deferred revenue and customer deposits........ 129,699 789,889 1,003,412
------------- ------------- ------------
Net cash provided by operating activities... 5,238,703 6,907,610 28,024,346
------------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................ (13,535,759) (17,773,118) (55,288,571)
Purchase of cellular license and properties..... (30,000,000) (190,719,765) (945,420,000)
Proceeds from sale of property, plant and
equipment..................................... 377,178 332,331 12,600
Proceeds from sale of investment in
unconsolidated subsidiary..................... 967,000 -- --
(Increase) decrease in deposits................. (1,350,000) 1,583,706 (149,379)
Decrease in receivable--affiliate............... 953,736 (2,537,600) 301,117
Decrease in payable--affiliate.................. -- -- (3,195,497)
Increase in notes receivable.................... (1,004,435) (2,585,517) (1,194,990)
Deferred costs.................................. 124,739 -- --
Investment in unconsolidated subsidiaries and
other, net.................................... (426,811) (5,940,344) 5,871,788
------------- ------------- ------------
Net cash used in investing activities....... (43,894,352) (217,640,307) (999,062,932)
------------- ------------- ------------
</TABLE>
F-8
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
------------- ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable..................... $ -- $ -- $ 17,500,000
Proceeds from long-term debt.................... 63,738,694 343,500,000 940,000,000
Repayments of long-term debt.................... (24,318,859) (87,171,765) (171,513,855)
Dividend distributions--
Preferred stock................................. (176,748) (117,186) --
Common stock...................................... (549,564) (7,633,620) --
Distributions to partners....................... (145,005) (458,378) (911,223)
Issuance of preferred stock..................... 10,000,000 -- 340,000,000
Purchase of treasury stock...................... (5,913,000) -- (31,125,661)
Minority interest in Dobson Tower Company....... -- -- 7,718,750
Purchase of restricted investments.............. -- (38,389,299) (67,733,293)
Maturities of restricted investments............ -- 10,836,243 17,483,654
Deferred financing costs........................ (3,731,741) (9,725,288) (62,038,663)
Amortization of deferred financing costs and
bond premium.................................. -- 1,663,818 1,230,212
------------- ------------- ------------
Net cash provided by financing activities... 38,903,777 212,504,525 990,609,921
------------- ------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS......... 248,128 1,771,828 19,571,335
CASH AND CASH EQUIVALENTS, beginning of year...... 732,443 980,571 2,752,399
------------- ------------- ------------
CASH AND CASH EQUIVALENTS, end of year............ $ 980,571 $ 2,752,399 $ 22,323,734
============= ============= ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for--
Interest (net of amounts capitalized)......... $ 5,055,749 $ 19,858,250 $ 39,113,948
Income taxes.................................. $ 463,100 $ -- $ --
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Issuance of Class G Preferred Stock for the
purchase of treasury stock.................... $ -- $ -- $ 25,000,000
Conversion of Class B Preferred Stock........... $ -- $ -- $ 12,531,394
Purchase of PCS licenses with debt issuance..... $ -- $ 4,056,204 $ --
Allocation of noncash purchase price to license
cost.......................................... $ -- $ 3,747,000 $ --
Stock dividend paid through the issuance of
preferred stock............................... $ -- $ 1,623,329 $ 16,320,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
Dobson Communications Corporation ("DCC" or 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 cellular 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 6), 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 (collectively, the "January 1998 Reorganization"). DCOC was
created as the holding company for subsidiaries formed to effect certain
cellular acquisitions. DCOC has been designated an unrestricted subsidiary under
the Senior Note Indenture which covers the DCC Senior Notes discussed in
Note 6. DOC Cellular Subsidiary was created as the holding company for the then
existing cellular 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.
On September 30, 1998, the Company adopted a plan to spin off Logix as
discussed in Note 3 (the "September 1998 Reorganization").
In conjunction with the December 1998 acquisition of Sygnet Wireless, Inc.
("Sygnet Acquisition"), the Company formed a new subsidiary, Dobson/Sygnet
Communications Company ("Dobson/Sygnet") (the "December 1998 Reorganization").
Dobson/Sygnet was created as the holding company for the subsidiaries acquired
in the Sygnet Acquisition. Collectively, the January 1998 Reorganization, the
September 1998 Reorganization and the December 1998 Reorganization are known as
the "1998 Reorganizations."
CAPITAL RESOURCES AND GROWTH
The Company's total indebtedness and debt service requirements have
substantially increased as a result of the transactions described in Note 9 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 6, including financial covenants, the
Company will be unable to borrow
F-10
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION: (CONTINUED)
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.
2. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
all majority owned subsidiaries. For financial reporting purposes, the Company
reports 100% of revenues and expenses for the markets for which it provides
cellular 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.
The Company is responsible for managing and providing administrative
services for certain partnerships of which the Company is the majority partner.
The Company is accountable to the partners and shareholders 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 and corporation.
The books and records of these partnerships and corporation are also maintained
by the Company.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents on the accompanying consolidated balance sheets
includes cash and short-term investments with original maturities of three
months or less.
INVENTORY
The Company values its inventory at the lower of cost or market on the
first-in, first-out method of accounting.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company assesses potential impairments of long-lived assets, certain
identifiable intangibles and goodwill when there is evidence that events or
changes in circumstances indicate that an asset's carrying value may not be
recoverable. An impairment loss is recognized when the sum of the expected
future net cash flows is less than the carrying amount of the asset, including
intangible assets. The amount of any recognized impairment would be based on the
estimated fair value of the asset subject
F-11
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
to impairment compared to the carrying amount of such asset. The fair value of
intangible assets will be determined based on the discounted cash flows of the
market or markets to which the intangible assets relate. 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 fifteen years. Amortization
expense of $1,596,794, $10,528,125 and $30,064,955 was recorded in 1996, 1997
and 1998, 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.
DEFERRED COSTS
Deferred costs consist primarily of fees incurred to secure long-term debt.
Deferred financing costs are being amortized on a straight-line basis over the
term of the debt of eight to ten years. Amortization expense related to these
costs of $401,871, $1,074,845 and $1,965,461 was recorded in 1996, 1997 and
1998, 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. 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 $0, $851,107 and
$1,219,940 was recorded in 1996, 1997 and 1998, respectively.
ADVERTISING COSTS
Advertising costs are expensed as incurred and are included as marketing and
selling expenses in the accompanying consolidated statements of operations.
INCOME TAXES
The Company files a consolidated income tax return. Income taxes are
allocated among the various entities included in the consolidated tax return, as
agreed, based on the ratio of each entity's taxable income (loss) to
consolidated taxable income (loss). Deferred income taxes reflect the estimated
future tax effects of differences between financial statement and tax bases of
assets and liabilities at year end.
REVENUE RECOGNITION
The Company records service revenues over the period they are earned. The
cost of providing service is recognized as incurred. Airtime and toll revenue is
billed in arrears. The Company accrued estimated unbilled revenues for services
provided of approximately $1,209,000 and $3,445,000 as of December 31, 1997 and
1998, respectively, which are included in accounts receivable in the
F-12
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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
In 1997, the Company adopted SFAS No. 128, "Earnings Per Share." As a
result, the Company's reported net loss per common share for 1996 was restated.
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.
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
56% of the Company's cellular roaming revenue was earned from two cellular
carriers during the year ended December 31, 1996. Approximately 45% and 59% of
the Company's cellular roaming revenue was earned from three cellular carriers
during the years ended December 31, 1997 and 1998, respectively.
RECENTLY ISSUED ACCOUNTING 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. Under SFAS 133, the Company would
record a liability of $5.4 million relating to its interest rate hedge valuation
at December 31, 1998. The Company has not determined the timing or method of
adoption of SFAS 133.
3. DISCONTINUED OPERATIONS
The Company intends to distribute the stock of Logix to certain of the
Company's shareholders in a tax-free spin-off. The timing of the spin-off is
subject to receipt of a favorable tax ruling or favorable tax opinion acceptable
to the Company and its shareholders. The wireline segment, or Logix and its
subsidiaries, operates as an integrated communications provider under the
LOGIXSM brand name in
F-13
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. DISCONTINUED OPERATIONS (CONTINUED)
Oklahoma and Texas, owns local telephone exchanges in Oklahoma and operates
regional fiber optic transmission networks in Oklahoma, Texas and Colorado.
Pursuant to Accounting Principles Board Opinion ("APB") No. 30, "Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual, and Infrequently Occurring Events and
Transactions," the consolidated financial statements have been restated for all
periods presented to reflect the wireline operations, assets and liabilities as
discontinued operations. The assets and liabilities of such operations have been
classified as "Net assets (liabilities) of discontinued operations" on the
consolidated balance sheets and consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
------------- -------------
($ IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents........................... $ 254 $ 31,675
Restricted investments--current..................... -- 37,572
Other current assets................................ 2,758 36,747
Property, plant and equipment, net.................. 35,976 89,508
Restricted investments--non-current................. -- 61,988
Goodwill............................................ -- 126,244
Other assets........................................ 12,965 21,769
------- --------
Total assets...................................... 51,953 405,503
Current liabilities................................. 2,544 36,299
Long-term debt, net of current portion.............. 27,498 376,149
Other liabilities................................... 1,834 88
------- --------
Total liabilities................................. 31,876 412,536
------- --------
Net assets (liabilities) of discontinued
operations........................................ $20,077 $ (7,033)
======= ========
</TABLE>
The net income from operations of the wireline segment was classified on the
consolidated statement of operations as "Income (loss) from discontinued
operations." Summarized results of discontinued operations are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1996 1997 1998
-------- -------- --------
($ IN THOUSANDS)
<S> <C> <C> <C>
Net revenues.................................... $17,908 $20,177 $ 67,703
Income (loss) before income taxes............... 514 886 (40,196)
Income tax benefit (provision).................. (183) (337) 12,924
Extraordinary item, net......................... -- (217) --
Cumulative effect of change in accounting
principle, net................................ -- -- (699)
Income from discontinued operations............. 331 332 (27,110)
</TABLE>
F-14
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. 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 any
capitalized interest. For the years ended December 31, 1996, 1997 and 1998,
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, 1997 and 1998:
<TABLE>
<CAPTION>
USEFUL
LIFE 1997 1998
-------- ----------- ------------
<S> <C> <C> <C>
Cellular systems and equipment............. 2-10 $42,279,323 $143,501,214
Buildings and improvements................. 5-40 10,387,759 25,089,448
Vehicles, aircraft and other work
equipment................................ 3-10 1,895,477 4,402,975
Furniture and office equipment............. 5-10 3,716,401 14,461,676
Plant under construction................... 4,456,878 15,232,700
Land....................................... 217,892 1,915,733
----------- ------------
Property, plant and equipment............ 62,953,730 204,603,746
Accumulated depreciation................... 10,579,864 31,549,417
----------- ------------
Property, plant and equipment, net....... $52,373,866 $173,054,329
=========== ============
</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.
5. NOTES PAYABLE:
On December 23, 1998, the Company's subsidiary, Dobson Tower Company,
obtained a $17,500,000 term loan maturing on December 22, 1999. Interest on the
term loan accrues at 8.0%. Proceeds were used to finance the Sygnet Acquisition
discussed in Note 9. The term loan is secured by all assets of Dobson Tower
Company.
F-15
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT:
The Company's long-term debt as of December 31, 1997 and 1998, consisted of
the following:
<TABLE>
<CAPTION>
1997 1998
------------ --------------
<S> <C> <C>
Revolving credit facilities.................... $171,513,855 $ 740,000,000
Dobson/Sygnet Senior Notes..................... -- 200,000,000
DCC Senior Notes............................... 160,000,000 160,000,000
Other notes payable............................ 4,056,204 4,056,204
------------ --------------
Total debt................................. 335,570,059 1,104,056,204
Less--Current maturities....................... -- 198,871
------------ --------------
Total long-term debt....................... $335,570,059 $1,103,857,333
============ ==============
</TABLE>
REVOLVING CREDIT FACILITIES
The Company's revolving credit facilities consist of the following:
<TABLE>
<CAPTION>
INTEREST RATE
AMOUNT (WEIGHTED AVERAGE
OUTSTANDING AT RATE AT
MAXIMUM DECEMBER 31, DECEMBER 31,
CREDIT FACILITY AVAILABILITY 1998 1998)
- --------------- ------------ -------------- -----------------
<S> <C> <C> <C>
Dobson/Sygnet Credit
Facilities..................... $430,000,000 $407,000,000 8.9%
DCOC Credit Facility............. 200,000,000 200,000,000 8.2%
DOC Credit Facility.............. 250,000,000 133,000,000 7.0%(1)
</TABLE>
- ------------------------
(1) Weighted average computation is based on actual interest rates without
giving effect to the interest rate hedge discussed below.
On December 23, 1998, the Company's subsidiary, Dobson/Sygnet, obtained $430
million of senior secured credit facilities ("Dobson/Sygnet Credit Facilities")
from NationsBank, N.A., consisting of (a) a $50.0 million, 7 3/4 year reducing
revolving credit facility ("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").
Dobson/Sygnet's obligations under the Dobson/Sygnet Credit Facility are secured
by all current and future assets of Dobson/Sygnet. Initial proceeds were used
primarily to finance the Sygnet Acquisition described in Note 9. The Company
expects to use the remaining availability to finance Dobson/Sygnet's capital
expenditures and general operations.
F-16
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT: (CONTINUED)
Commencing with the quarter ending December 31, 2000, the borrowing 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, the borrowing under
the 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>
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>
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. At the same time, the Company's subsidiary DOC established a $250 million
senior secured credit facility (the "DOC Credit Facility") to replace its
existing revolving credit facility established on February 28, 1997 ("1997
Credit Facility") and discussed below. The DOC Credit 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 Credit Facility.
Initial proceeds from the DCOC Credit Facility and DOC Credit Facility were used
primarily to refinance existing indebtedness and finance the 1998 acquisitions
described above. The Company expects to use the remaining availability under the
DCOC Credit Facility and DOC
F-17
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT: (CONTINUED)
Credit Facility to finance capital expenditures, consummate future acquisitions
and fund general corporate operations. The facilities will terminate in 2006.
The Dobson/Sygnet Credit Facilities, the DCOC Credit Facility and the DOC
Credit Facility require the Company to maintain certain financial ratios. The
failure to maintain such ratios would constitute an event of default,
notwithstanding the Company's ability to meet its debt service obligations.
In connection with the closing of the DOC Credit Facility, the Company
extinguished its 1997 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 consolidated statement of operations, net of tax, for
the year ended December 31, 1998 as an extraordinary expense.
On February 28, 1997, the Company amended and restated its existing bank
credit agreement ("1996 Credit Facility") and established the 1997 Credit
Facility. In connection with the closing of the 1997 Credit Facility, the
Company extinguished its 1996 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 1996 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 its existing bank credit
agreement ("Old Credit Facility") and established the 1996 Credit Facility. In
connection with this amendment, the Company extinguished its Old Credit Facility
and recognized 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.
SENIOR NOTES
On December 23, 1998, the Company's subsidiary issued $200 million of 12.25%
Senior Notes maturing in 2008 ("Dobson/Sygnet Senior Notes"). The net proceeds
were used to finance the Sygnet Acquisition described in Note 9 and to purchase
$67.7 million of securities pledged to secure payment of the first six
semi-annual interest payments on the Dobson/Sygnet Senior Notes, which begin on
June 15, 1999. The pledged securities are reflected as restricted cash and
investments in the Company's consolidated balance sheets. The Dobson/Sygnet
Senior Notes are redeemable at the option of the Company in whole or in part, on
or after December 15, 2003, initially at 106.125%. Prior to December 15, 2001,
the Company may redeem up to 35% of the principal amount of the Dobson/ Sygnet
Senior Notes at 112.25% with proceeds from equity offerings, provided that at
least $130 million remains outstanding.
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 in Note 9 and to purchase securities
pledged to secure payment of the first four semi-annual interest payments on the
DCC Senior Notes, which began on October 15, 1997. The pledged securities are
reflected as restricted cash and investments in the Company's 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
F-18
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. LONG-TERM DEBT: (CONTINUED)
the principal amount of the DCC Senior Notes at 111.750% with proceeds from
equity offerings, provided that after any such redemption at least $104 million
remains outstanding.
OTHER NOTES PAYABLE
Other notes payable represents the amount financed with the United States
Government for nine PCS licenses as discussed in Note 9.
Minimum future payments of long-term debt for years subsequent to
December 31, 1998, are as follows:
<TABLE>
<S> <C>
1999........................................................ $ 198,871
2000........................................................ 54,066,729
2001........................................................ 80,918,390
2002........................................................ 80,946,762
2003........................................................ 109,651,942
2004 and thereafter......................................... 778,273,510
--------------
$1,104,056,204
==============
</TABLE>
INTEREST RATE HEDGES
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 DOC Credit Facility. In 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 Company is currently negotiating an interest rate swap agreement to
establish a fixed interest rate on $75 million of its indebtedness under the
Dobson/Sygnet Credit Facilities.
7. RESTRICTED CASH AND INVESTMENTS:
Restricted cash and investments consist of interest pledge deposits for the
Dobson/Sygnet Senior Notes and the DCC Senior Notes. The Dobson/Sygnet Senior
Notes interest pledge deposit includes the initial deposit of $67.7 million (as
discussed in Note 6), plus interest earned. The DCC Senior Notes interest pledge
deposit of approximately $9.3 million includes an initial deposit of
$38.4 million (as discussed in Note 6), net of interest earned and payments
issued to bondholders. Amortization expense of $322,850 and $269,101 was
recorded in 1997 and 1998, respectively, for bond premiums recorded with the
purchase of the restricted investments. At December 31, 1998, the carrying value
of these investments exceeded the market value by approximately $326,000.
F-19
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCKHOLDERS' DEFICIT:
As of December 31, 1998, the Company's authorized and outstanding capital
stock is as follows:
<TABLE>
<CAPTION>
LIQUIDATION
# OF SHARES # OF SHARES PAR VALUE PREFERENCE
CLASS TYPE AUTHORIZED ISSUED PER SHARE DIVIDENDS PER SHARE
- --------------------- ---------------- ----------- ----------- --------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Class A Common Stock 1,438,000 573,152 $ .001 As declared --
Class B Common Stock 31,000 -- $ .001 As declared --
Class C Common Stock 31,000 -- $ .001 As declared --
--------- -------
1,500,000 573,152
Senior
Exchangeable Preferred Stock 550,000 191,320 $ 1.00 12.25% Cumulative $ 1,000
Additional Preferred Stock 184,000 64,646 $ 1.00 12.25% Cumulative $ 1,000
Class A Preferred Stock 450,000 314,286 $ 1.00 5% Non-cumulative $ 70
Class B Preferred Stock -- -- $ 1.00 8% Cumulative $ 100
Class C Preferred Stock 100,000 -- $ 1.00 8% Cumulative $ 16.23
Class D Preferred Stock 85,000 75,094 $ 1.00 15% Cumulative $1,131.92
Class E Preferred Stock 405,000 -- $ 1.00 15% Cumulative $1,131.92
Class F Preferred Stock 205,000 30,000 $ 1.00 16% Cumulative $ 1,000
Class G Preferred Stock 62,000 37,853 $ 1.00 16% Cumulative $ 660.40
Class H Preferred Stock 62,000 -- $ 1.00 16% Cumulative $ 660.45
Other Preferred Stock 397,000 -- $ 1.00 -- --
--------- -------
2,500,000 713,199
<CAPTION>
OTHER
FEATURES,
RIGHTS,
PREFERENCES
CLASS REDEMPTION DATE AND POWERS
- --------------------- ---------------- ------------
<S> <C> <C>
Class A -- Voting
Class B -- Non-voting
Class C -- Non-voting
Senior
Exchangeable Jan. 15, 2008 Non-voting
Additional Jan. 15, 2008 Non-voting
Class A -- Non-voting
Class B -- Voting,
Convertible
Class C -- Non-voting
Class D after Convertible
Dec. 23, 2010
Class E after Non-voting
Dec. 23, 2010
Class F Dec. 31, 2010 Non-voting
Class G 90 days after an Non- voting,
initial public convertible
offering
Class H after Non-voting
Dec. 23, 2010
Other -- --
</TABLE>
On December 23, the Company issued 75,093.7 shares of Class D Convertible
Preferred Stock, including 3,534 shares to its majority shareholder for
aggregate proceeds of $85 million. The Company also issued 30,000 shares of
Class F Preferred Stock to the former shareholders of Sygnet as consideration
for the Sygnet Acquisition.
On December 23, 1998, Fleet, the holder of Class B Preferred Stock,
converted all of its shares to Class A Common Stock. In addition, the Company
redeemed all of the outstanding shares of Class C Preferred Stock which were
held by Fleet for $1.9 million. On December 23, 1998, the Company and one of its
subsidiaries purchased 43,345 shares of its Class A Common Stock from Fleet for
approximately $31.1 million. In addition, the Company purchased 37,853 shares of
its Class A Common Stock from its majority shareholder. In exchange, the Company
issued 37,853 shares of Class G Preferred Stock to its majority shareholder.
These Class A Common Stock shares are held in treasury stock at cost.
As discussed in Note 1, 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
F-20
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCKHOLDERS' DEFICIT: (CONTINUED)
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 cellular 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 6, the Company canceled
its then outstanding Class A and Class B common stock and authorized the capital
structure of the Company to consist of 1,000,000 shares of Class A voting common
stock, $1 par value per share, 31,000 shares of Class B common stock, $1 par
value per share, 59,130 shares of 10% cumulative, compounded, convertible,
redeemable Class A preferred stock, $100 par value per share, and 100,000 shares
of Class B convertible preferred stock ("Class B Preferred"), $1 par value per
share, 8% dividend that accrues on a daily basis. On the same date, the Company
issued 100,000 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.
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.
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.
9. ACQUISITIONS:
On February 28, 1997, the Company purchased the FCC cellular licenses for,
and certain assets relating to two MSAs and two RSAs located in Maryland and
Pennsylvania for $77.6 million. The properties are located immediately outside
the Washington/Baltimore metropolitan area.
F-21
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. ACQUISITIONS: (CONTINUED)
On March 3, 1997, the Company purchased the FCC cellular license for, and
certain assets relating to Maryland RSA 2 for $75.8 million. The property is
located to the east of the Washington/Baltimore metropolitan area. This
acquisition and the one completed on February 28, 1997, are referred to together
as the "Maryland/Pennsylvania Acquisition."
On October 1, 1997, the Company purchased a 75% interest in the Gila River
Cellular General Partnership (the "Arizona 5 Partnership"), which owns the
cellular license for Arizona RSA 5, as well as the associated tangible operating
assets, and Gila River Telecommunications Subsidiary, Inc. ("GRTSI") purchased a
25% interest in the Arizona 5 Partnership. The Company paid a net purchase price
of $39.8 million for its 75% interest in the Arizona 5 Partnership. In addition,
the Company financed approximately $5.2 million of the $13.3 million purchase
price paid by GRTSI for its 25% interest in the Arizona 5 Partnership. The
$5.2 million note receivable bears interest at the Company's available rate
under its revolving credit facility. Principal and interest will be paid from
60% of partnership distributions beginning after September 30, 1998. Any unpaid
amounts of principal and interest are due on December 31, 2013.
On January 26, 1998, the Company purchased the FCC cellular license for, and
certain assets relating toTexas 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 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 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 July 29, 1998, the Company purchased the FCC cellular license and certain
assets of 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 September 2, 1998, the Company completed the acquisition of the FCC
license of Ohio 2 RSA. The Company is currently negotiating with AirTouch for
the purchase of subscribers and the lease of certain equipment necessary to
operate the system. The purchase price of $39.3 million is being held in escrow
pending resolution of claims made against the titles to the FCC licenses of the
sellers. Ohio 2 is located in north central Ohio and covers an estimated
population of 262,100.
On December 2, 1998, the Company completed the acquisition of the FCC
license for Texas 10 RSA. The Company is currently negotiating with AT&T
Wireless for the purchase of subscribers and the lease of certain equipment
necessary to operate the system. The purchase price of $55.0 million is being
held in escrow pending resolution of claims made against the titles to the FCC
licenses of the sellers. Texas 10 is located in central Texas and covers an
estimated population of 317,900.
F-22
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. ACQUISITIONS: (CONTINUED)
On December 23, 1998, the Company's subsidiary, Dobson/Sygnet acquired
Sygnet Wireless, Inc. for $337.5 million in cash and preferred stock and
assumption of approximately $309 million of debt, which was immediately
refinanced (See Note 6). The newly acquired Sygnet markets include cellular
systems in Ohio, Pennsylvania and New York covering an estimated population base
of 2.4 million.
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 1998, respectively, as if the purchases occurred at
the beginning of 1997. The unaudited pro forma information is presented for
informational purposes only and is not necessarily indicative of the results of
operations that actually would have been achieved had the acquisitions been
consummated at that time:
<TABLE>
<CAPTION>
1997 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
Operating revenue..................................... $ 211,300 $ 254,447
Loss before discontinued operations and extraordinary
items............................................... (83,000) (81,977)
Net loss.............................................. (117,181) (124,130)
Net loss applicable to common stockholders............ (142,022) (148,978)
Basic net loss applicable to common stockholders per
common share........................................ $ (300.16) $ (314.59)
</TABLE>
PCS LICENSES
In the second quarter of 1997, the Company was granted PCS licenses in the
FCC "F" Block auction for nine markets adjacent to or overlapping the Company's
existing cellular footprint in Oklahoma, Kansas and Missouri. The aggregate bid
for these licenses was $5.1 million after a 15% discount. The Company financed
approximately $4.1 million of the purchase price in July 1997 by notes payable
to the United States Government at an annual interest rate of 6.25% (see Note
6). Interest only payments are due quarterly on January 15, April 15, July 15
and October 15 for the first two years. The principal obligations will be
amortized quarterly over an eight-year period beginning in 1999.
10. 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
$109,000, $179,000 and $274,000 during the years ended December 31, 1996, 1997
and 1998, respectively.
STOCK OPTION PLAN
The Company has adopted a stock option plan, the 1996 Stock Option Plan, as
amended (the "Plan"). The Company accounts for the Plan under APB Opinion 25,
under which no compensation
F-23
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. EMPLOYEE BENEFIT PLANS: (CONTINUED)
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 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 and Class C Common Stock. Since the 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 and 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, otherwise, the additional 8% of such
shares become fully vested at the end of the ten year term. The remaining
options issued in 1997 and all of the options issued in 1998 and 1996 vest at a
rate of 20% per year. The Company has reserved 30,166 shares of authorized but
unissued Class B Common Stock ("Class B") and 30,166 shares of authorized but
unissued Class C Common Stock ("Class C") for issuance under the Plan.
Stock options outstanding under the Plan are presented for the periods
indicated.
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------ ------------------------
NUMBER OF OPTION PRICE NUMBER OF OPTION PRICE
SHARES RANGE SHARES RANGE
--------- ------------ --------- ------------
<S> <C> <C> <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 -- --
------ --------- ----- ---------
Granted.......................................... 8,540 $300-$665 2,414 $400-$420
Exercised........................................ -- -- -- --
Canceled......................................... 1,207 $ 100 -- --
------ --------- ----- ---------
Outstanding December 31, 1998.................... 29,766 $100-$665 2,414 $400-$420
------ --------- ----- ---------
Exercisable at December 31, 1997................. 1,675 $ 100 -- --
------ --------- ----- ---------
Exercisable at December 31, 1998................. 7,122 $100-$150 -- --
------ --------- ----- ---------
</TABLE>
The following schedule shows the Company's net loss and net loss per share
for the last three years, had compensation expense been determined consistent
with the Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation. The pro forma information
F-24
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. EMPLOYEE BENEFIT PLANS: (CONTINUED)
presented below is based on several assumptions and should not be viewed as
indicative of the Company in future periods.
<TABLE>
<CAPTION>
($ IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS) 1996 1997 1998
- ---------------------------------------------- -------- -------- --------
<S> <C> <C> <C>
Net loss applicable to common stockholders:
As reported............................................... $(2,270) $(19,337) $(76,516)
Pro forma................................................. $(2,309) $(19,540) $(76,943)
Basic net loss applicable to common stockholders per common
share:
As reported............................................... $ (4.80) $ (40.87) $(161.57)
Pro forma................................................. $ (4.88) $ (41.30) $(162.48)
</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 1996, 1997 and 1998, respectively:
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------ --------
(AMOUNTS EXPRESSED IN PERCENTAGES) 1996 1997 1998 1998
- ---------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest rate.................................. 6.98% 6.60% 5.60% 5.80%
Dividend yield................................. -- -- -- --
Expected volatility............................ 39.88% 40.27% 39.79% 40.20%
</TABLE>
The weighted average fair value of options granted using the Black-Scholes
option pricing model for Class B in 1996, 1997 and 1998 was $64.84, $71.42 and
$205.88, respectively, and for Class C in 1998 was $255.23 assuming an expected
life of ten years.
11. TAXES:
Benefit for income taxes for the years ended December 31, 1996, 1997 and
1998, were as follows:
<TABLE>
<CAPTION>
1996 1997 1998
--------- ----------- ------------
<S> <C> <C> <C>
Federal income taxes--
Current............................... $(452,000) $ -- $ --
Deferred.............................. (83,000) (3,243,000) (10,883,000)
State income taxes (current and
deferred)............................. (58,000) (382,000) (586,000)
--------- ----------- ------------
Total income tax benefit............ $(593,000) $(3,625,000) $(11,469,000)
========= =========== ============
</TABLE>
F-25
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. TAXES: (CONTINUED)
The provisions for income taxes for the years ended December 31, 1996, 1997
and 1998, differ from amounts computed at the statutory rate as follows:
<TABLE>
<CAPTION>
1996 1997 1998
--------- ----------- ------------
<S> <C> <C> <C>
Income taxes at statutory rate (34%).... $(618,000) $(6,576,000) $(11,816,000)
State income taxes, net of Federal
income tax effect..................... (73,000) (774,000) (1,390,000)
Losses for which no benefit is
recognized............................ -- 3,747,000 1,608,000
Other, net.............................. 98,000 (22,000) 129,000
--------- ----------- ------------
$(593,000) $(3,625,000) $(11,469,000)
========= =========== ============
</TABLE>
The tax effects of the temporary differences which gave rise to deferred tax
assets and liabilities at December 31, 1997 and 1998, were as follows:
<TABLE>
<CAPTION>
1997 1998
----------- -------------
<S> <C> <C>
Current deferred income taxes:
Allowance for doubtful accounts receivable..... $ 152,000 $ 812,000
Accrued liabilities............................ 45,000 592,000
Deferred expenses.............................. 17,000 --
----------- -------------
Net current deferred income tax asset........ 214,000 1,404,000
----------- -------------
Noncurrent deferred income taxes:
Fixed assets................................... (1,566,000) (2,440,000)
Cellular license costs and other intangibles... (9,859,000) (291,375,000)
Tax credits and carryforwards.................. 10,386,000 48,185,000
----------- -------------
Net noncurrent deferred income tax asset
(liability)................................ (1,039,000) (245,630,000)
----------- -------------
Total deferred income taxes.................. $ (825,000) $(244,226,000)
=========== =============
</TABLE>
At December 31, 1998, the Company had NOL carryforwards of approximately
$124 million, which may be utilized to reduce future Federal income taxes
payable. The Company's NOL carryforwards begin to expire in 2012.
12. RELATED PARTY TRANSACTIONS:
At December 31, 1997 and 1998, the Company had notes and interest receivable
of $5,852,282 and $7,047,272 due from related parties, including $295,612 and
$290,150 at December 31, 1997 and 1998, 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, 1998.
F-26
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. ACCRUED EXPENSES:
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
---------- -----------
<S> <C> <C>
Interest............................................ $6,006,257 $ 5,846,071
Sygnet acquisition costs (see Note 9)............... -- 5,439,095
Vacation, wages and other........................... 1,839,144 2,937,140
---------- -----------
Total accrued expenses............................ $7,845,401 $14,222,306
========== ===========
</TABLE>
14. COMMITMENTS:
The Company entered into an equipment supply agreement on June 24, 1997, and
as amended, 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 the newly acquired and existing MSAs and RSAs.
Of the commitment, approximately $32.3 million remained at December 31, 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 the newly acquired and
existing MSAs and RSAs. Of this commitment, approximately $58.4 million remained
at December 31, 1998.
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, 1998, are as follows:
<TABLE>
<S> <C>
1999................................ $ 6,207,303
2000................................ 5,062,326
2001................................ 3,946,908
2002................................ 2,774,654
2003................................ 2,188,040
2004 and thereafter................. 15,151,228
</TABLE>
Lease expense under the above leases was approximately $226,000, $866,000
and $3,034,000 for the years ended December 31, 1996, 1997 and 1998,
respectively.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Unless otherwise noted, the carrying value of the Company's financial
instruments approximates fair value. The Company estimates the fair value of its
long-term debt based on quoted market prices for publicly traded debt or on the
current rates available to the Company for debt with similar terms and remaining
maturation.
F-27
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. FAIR VALUE OF FINANCIAL INSTRUMENTS: (CONTINUED)
Indicated below are the carrying amounts and estimated fair values of the
Company's financial instruments as of December 31:
<TABLE>
<CAPTION>
1997 1998
--------------------------- ---------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revolving credit
facilities.......... $171,513,855 $171,513,855 $740,000,000 $740,000,000
Dobson/Sygnet Senior
Notes............... -- -- 200,000,000 205,000,000
DCC Senior Notes...... 160,000,000 169,200,000 160,000,000 163,200,000
Other notes payable... 4,056,204 4,200,695 4,056,204 4,057,164
Interest rate hedge... -- (2,644,414) -- (5,407,420)
</TABLE>
F-28
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
-------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 22,323,734 $ 2,850,293
Restricted cash and investments........................... 30,074,946 21,966,851
Accounts receivable, net.................................. 43,299,568 54,357,714
Other current assets...................................... 8,589,050 7,085,921
-------------- --------------
Total current assets.................................... 104,287,298 86,260,779
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT, net.......................... 173,054,329 182,157,035
-------------- --------------
OTHER ASSETS:
Receivables--affiliates................................... 7,275,262 9,306,574
Restricted investments.................................... 45,505,020 34,635,000
Cellular license acquisition costs, net................... 1,250,790,448 1,231,015,108
Deferred costs, net....................................... 66,640,301 70,187,211
Other intangibles, net.................................... 52,795,841 50,579,295
Other..................................................... 3,078,134 3,872,175
-------------- --------------
Total other assets...................................... 1,426,085,006 1,399,595,363
-------------- --------------
Total assets.......................................... $1,703,426,633 $1,668,013,177
============== ==============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-29
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, CONTINUED
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
-------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable.......................................... $ 47,536,672 $ 42,215,660
Accrued expenses.......................................... 14,222,306 14,941,286
Notes payable............................................. 17,500,000 17,500,000
Deferred revenue and customer deposits.................... 5,738,381 6,620,600
Current portion of long-term debt......................... 198,871 10,504,005
Accrued dividends payable................................. 5,603,856 17,504,108
-------------- ---------------
Total current liabilities............................... 90,800,086 109,285,659
NET LIABILITIES OF DISCONTINUED OPERATIONS.................. 7,033,166 32,812,163
ACCOUNTS PAYABLE--AFFILIATE................................. 5,011,438 --
LONG-TERM DEBT, net of current portion...................... 1,103,857,333 1,013,552,199
DEFERRED CREDITS............................................ 245,630,000 225,376,713
MINORITY INTERESTS.......................................... 26,557,203 27,212,346
SENIOR EXCHANGEABLE PREFERRED STOCK, net.................... 241,320,000 426,642,522
Class D Convertible Preferred Stock......................... 85,000,000 85,000,000
Class F Preferred Stock..................................... 30,000,000 --
Class G Preferred Stock..................................... 25,000,000 --
STOCKHOLDERS' DEFICIT:
Class A Preferred Stock................................... 314,286 314,286
Class A Common Stock, $.001 par value 1,438,000 shares
authorized and 573,152 shares issued.................... 573 573
Paid-in capital........................................... 18,298,072 18,298,072
Retained deficit.......................................... (119,269,863) (214,355,695)
-------------- ---------------
(100,656,932) (195,742,764)
Less--
Class A Common Stock held in treasury (81,198 shares), at
cost.................................................... (56,125,661) (56,125,661)
-------------- ---------------
Total stockholders' deficit............................. (156,782,593) (251,868,425)
-------------- ---------------
Total liabilities and stockholders' deficit........... $1,703,426,633 $ 1,668,013,177
============== ===============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-30
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
----------------------------
1998 1999
------------ -------------
<S> <C> <C>
OPERATING REVENUES:
Service revenue........................................... $ 28,633,336 $ 77,016,366
Roaming revenue........................................... 25,855,607 63,305,157
Equipment sales and other................................. 1,319,022 6,018,097
------------ -------------
Total operating revenues................................ 55,807,965 146,339,620
------------ -------------
OPERATING EXPENSES:
Cost of service........................................... 12,731,202 22,077,370
Cost of equipment......................................... 2,628,701 11,858,855
Marketing and selling..................................... 9,279,408 21,709,854
General and administrative................................ 9,549,740 26,067,555
Depreciation and amortization............................. 16,543,413 69,900,020
------------ -------------
Total operating expenses................................ 50,732,464 151,613,654
------------ -------------
OPERATING INCOME (LOSS)..................................... 5,075,501 (5,274,034)
INTEREST EXPENSE............................................ (17,351,138) (55,528,311)
OTHER INCOME, net........................................... 2,793,027 1,903,695
------------ -------------
LOSS BEFORE MINORITY INTERESTS IN INCOME OF SUBSIDIARIES,
INCOME TAXES AND EXTRAORDINARY ITEMS...................... (9,482,610) (58,898,650)
MINORITY INTERESTS IN INCOME OF SUBSIDIARIES................ (1,381,234) (1,480,189)
------------ -------------
LOSS BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS............ (10,863,844) (60,378,839)
INCOME TAX BENEFIT.......................................... 2,133,297 22,943,959
------------ -------------
LOSS FROM CONTINUING OPERATIONS............................. (8,730,547) (37,434,880)
LOSS FROM DISCONTINUED OPERATIONS, net of income tax benefit
of $15,800,000 and $881,000 for the six months ended June
30, 1999 and 1998, respectively........................... (3,910,349) (25,778,997)
------------ -------------
LOSS BEFORE EXTRAORDINARY ITEMS............................. (12,640,896) (63,213,877)
EXTRAORDINARY EXPENSE, net of income tax benefit of $671,000
for six months ended June 30, 1998........................ (2,643,439) --
------------ -------------
NET LOSS.................................................... (15,284,335) (63,213,877)
DIVIDENDS ON PREFERRED STOCK................................ (10,519,084) (31,871,955)
------------ -------------
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS.................. $(25,803,419) $ (95,085,832)
============ =============
BASIC NET LOSS APPLICABLE TO COMMON STOCKHOLDERS PER COMMON
SHARE
Before discontinued operations and extraordinary
expense................................................. $ (40.68) $ (140.88)
Discontinued operations................................... (8.27) (52.40)
Extraordinary expense..................................... (5.59) --
------------ -------------
BASIC NET LOSS APPLICABLE TO COMMON STOCKHOLDERS PER COMMON
SHARE..................................................... $ (54.54) $ (193.28)
============ =============
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING............ 473,152 491,954
============ =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-31
<PAGE>
DOBSON COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------
1998 1999
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations....................... $ (11,373,986) $ (37,434,880)
Adjustments to reconcile net loss to net cash provided by
operating activities--
Depreciation and amortization........................... 16,543,413 69,900,020
Amortization of bond premium and financing cost......... 1,035,568 2,648,822
Deferred income taxes and investment tax credits, net... (1,598,280) (20,253,287)
Extraordinary loss on financing cost.................... 3,314,439 --
Minority interests in income of subsidiaries............ 1,446,815 655,143
Other................................................... 26,795 346,101
Changes in current assets and liabilities--
Accounts receivable..................................... (7,484,376) (11,058,146)
Other current assets.................................... 591,264 1,503,129
Accounts payable........................................ 1,772,484 (5,321,012)
Accrued expenses........................................ (7,147,884) 718,980
Deferred revenue and customer deposits.................. 593,786 882,219
------------- -------------
Net cash provided by (used in) operating activities... (2,279,962) 2,587,089
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (13,927,228) (31,180,901)
Acquisitions.............................................. (177,438,919) (27,278,079)
Decrease in payable--affiliate............................ -- (5,011,438)
Increase in receivables--affiliate........................ (7,039,172) (2,031,312)
Acquisition escrow deposit................................ 5,973,245 --
Investments in unconsolidated subsidiaries and other...... (1,163,384) (2,241,147)
Proceeds on sale of assets................................ 6,700 1,103,509
------------- -------------
Net cash used in investing activities................. (193,588,758) (66,639,368)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.............................. 198,000,000 31,000,000
Repayments of long-term debt.............................. (171,513,855) (111,000,000)
Cash dividends............................................ -- (3,470,801)
Issuance of preferred stock............................... 179,942,000 170,000,000
Redemption of preferred stock............................. -- (55,000,000)
Maturities of restricted investments, net of interest..... 8,585,977 20,425,221
Deferred financing costs.................................. (12,564,470) (7,375,582)
------------- -------------
Net cash provided by financing activities............. 202,449,652 44,578,838
------------- -------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS...... 6,580,932 (19,473,441)
CASH AND CASH EQUIVALENTS, beginning of period............ 2,752,399 22,323,734
------------- -------------
CASH AND CASH EQUIVALENTS, end of period.................. $ 9,333,331 $ 2,850,293
============= =============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-32
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED 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,
1996...................... 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 carrying value of
preferred stock.........
Net proceeds from issuance
of common shares to
Boston Ventures.........
Exchange of common
shares..................
---- -------- ------ -------- -------- --------- ---------- -----------
Balance as of December 31,
1997...................... -- -- -- -- -- -- -- --
Net loss..................
Exchange of common
shares..................
---- -------- ------ -------- -------- --------- ---------- -----------
Balance as of December 23,
1998...................... -- $ -- -- $ -- -- $ -- -- $ --
==== ======== ====== ======== ======== ========= ========== ===========
<CAPTION>
SYGNET WIRELESS, SYGNET WIRELESS,
INC. INC.
-------------------- --------------------- NOTE
CLASS A CLASS B ADDITIONAL RETAINED RECEIVABLE
-------------------- --------------------- PAID-IN EARNINGS FROM OFFICER/
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) SHAREHOLDER
--------- -------- ---------- -------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of January 1,
1996...................... -- $ -- -- $ -- $ 4,170,368 $ 753,675 $(249,952)
Net loss.................. (5,288,375)
Dividends declared........ (261,625)
Corporate merger.......... 48,840
Retirement of treasury
stock................... (1,718,991)
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 carrying value of
preferred stock......... (925,534)
Net proceeds from issuance
of common shares to
Boston Ventures......... 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)
Net loss.................. (14,534,055)
Exchange of common
shares.................. 731,893 7,319 (731,893) (7,319)
--------- ------- ---------- -------- ----------- ------------ ---------
Balance as of December 23,
1998...................... 4,742,546 $47,426 4,428,084 $ 44,280 $47,598,498 $(42,756,179) $(249,952)
========= ======= ========== ======== =========== ============ =========
<CAPTION>
TREASURY STOCK
----------------------
SHARES AMOUNT
-------- -----------
<S> <C> <C>
Balance as of January 1,
1996...................... 48,197 $(1,718,991)
Net loss..................
Dividends declared........
Corporate merger..........
Retirement of treasury
stock................... (48,197) 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 carrying value of
preferred stock.........
Net proceeds from issuance
of common shares to
Boston Ventures.........
Exchange of common
shares..................
------- -----------
Balance as of December 31,
1997...................... -- --
Net loss..................
Exchange of common
shares..................
------- -----------
Balance as of December 23,
1998...................... -- $ --
======= ===========
</TABLE>
See accompanying notes.
F-45
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
YEAR ENDED DECEMBER 31, THROUGH
---------------------------- DECEMBER 23,
1996 1997 1998
------------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss........................................... $ (5,288,375) $(20,616,394) $(14,534,055)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation................................... 5,948,693 16,018,841 15,085,641
Amortization................................... 4,089,746 12,700,096 12,412,046
Compensation expense from issuance of stock
options...................................... -- 306,000 --
Loss on disposal of equipment.................. 177,633 102,955 96,128
Extraordinary loss on extinguishment of debt... 1,420,864 -- --
Changes in operating assets and liabilities:
Accounts receivable.......................... (184,315) (1,854,599) (1,526,182)
Inventory.................................... (287,900) (170,493) (921,077)
Prepaid and deferred expenses................ 28,649 232,548 30,380
Accounts payable and accrued expenses........ 2,424,406 2,866,653 3,494,470
Accrued interest payable..................... 6,481,912 (190,868) (3,366,590)
------------- ------------ ------------
Net cash provided by operating activities.......... 14,811,313 9,394,739 10,770,761
INVESTING ACTIVITIES
Acquisitions of Horizon and Erie................... (254,150,136) (599,442) --
Purchases of property and equipment................ (10,049,999) (25,575,837) (13,654,200)
Proceeds from sale of equipment.................... -- 405,995 444,500
------------- ------------ ------------
Net cash used in investing activities.............. (264,200,135) (25,769,284) (13,209,700)
FINANCING ACTIVITIES
Dividends paid..................................... (261,625) -- --
Proceeds from long-term debt....................... 320,750,000 30,500,000 21,800,000
Principal payments on long-term debt............... (78,000,000) (37,250,000) (18,800,000)
Increase in financing costs........................ (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 --
------------- ------------ ------------
Net cash provided by financing activities.......... 251,198,278 14,976,883 3,000,000
------------- ------------ ------------
Increase (decrease) in cash and cash equivalents... 1,809,456 (1,397,662) 561,061
Cash and cash equivalents at beginning of year..... 448,292 2,257,748 860,086
------------- ------------ ------------
Cash and cash equivalents at end of year........... $ 2,257,748 $ 860,086 $ 1,421,147
============= ============ ============
</TABLE>
SEE ACCOMPANYING NOTES.
F-46
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. REDEEMABLE PREFERRED STOCK AND WARRANTS (CONTINUED)
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. No warrants were issued.
For financial reporting purposes, 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.
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.
The Company has also authorized 10 million shares of Voting Preferred Stock,
par value $.01 per share, none of which are issued.
9. SHAREHOLDERS' EQUITY
On June 20, 1997, the Company issued and sold 3,000,000 shares of Class A
Common Stock, $0.01 par value, to Boston Ventures Limited Partnership V (Boston
Ventures) at a price of $15 per share (Common Stock Sale). The proceeds of $43.6
million, net of issuance fees of $1.4 million, were used to redeem the remaining
outstanding Preferred Stock as described in Note 8 and to reduce amounts
outstanding under the Bank Credit Facility. As a condition of the Common Stock
Sale, 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 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 September 20, 1996. These shares are
entitled to ten votes per share.
Under the most restrictive of the covenants discussed in Note 5, the Company
could not declare any dividends on its common stock through December 23, 1998.
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 required annual payment of interest at 8.23% with
principal repayment commencing on December 31, 1998 through December 31, 2001.
The officer/shareholder repaid 100% of the note and interest accrued on
December 29, 1998.
10. 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 23, 1998,
F-52
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES (CONTINUED)
the Company has net deferred tax assets of $37.0 million which includes net
operating loss carryforwards of $45.2 million that expire in 2012 and 2013. For
financial reporting purposes, a valuation allowance of $12.6 million has been
recognized to offset the net deferred tax assets related primarily to the net
operating loss carryforwards.
The components of the income tax provision (benefit) in the consolidated
statements of operations for the years ended December 31, 1996 and 1997, and for
the period January 1, 1998 through December 23, 1998, are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Cumulative effect of conversion from S to C corporation
status............................................... $ 745,000 $ -- $ --
Deferred income tax (benefit).......................... (1,898,500) (6,697,800) (4,782,900)
Valuation allowance.................................... 1,153,500 6,097,800 4,782,900
----------- ----------- -----------
Total provision for income tax (benefit)............... $ -- $ -- $ --
=========== =========== ===========
</TABLE>
11. 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 APB Opinion 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 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 stock
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 would have
increased by $24,000 and $625,000 from the amounts reported in 1996 and 1997,
respectively, and $419,000 from the amounts reported for the period from
January 1, 1998 through December 23, 1998.
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 1996, 1997 and 1998:
risk-free interest rates ranging from 6.9% to 5.9% and average expected lives
ranging from 5.0 to 7.5 years for issued options.
F-53
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. STOCK OPTION PLAN (CONTINUED)
A summary of the status of the Company's stock option plan as of
December 31, 1996 and 1997, and December 23, 1998, and changes during the
periods then ended is presented below:
<TABLE>
<CAPTION>
1996 1997 1998
-------------------- -------------------- --------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- --------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year............ -- $ -- 533,200 $10.00 716,200 $10.08
Granted..................................... 533,200 10.00 183,000 10.31 210,500 18.03
Exercised................................... -- -- -- -- -- --
Canceled.................................... -- -- -- -- (1,000) 20.00
------- ------ ------- ------ ------- ------
Outstanding at year end..................... 533,200 $10.00 716,200 $10.08 925,700 $11.88
======= ====== ======= ====== ======= ======
Options exercisable at year end............. -- 651,200 815,700
======= ======= =======
Weighted-average fair value of options
granted during the year................... $ -- $ 7.80 $ 1.65
======= ======= =======
Weighted-average remaining contractual
life...................................... 9.68 8.87 8.71
======= ======= =======
</TABLE>
At December 23, 1998, there were 324,300 options available for future grant.
12. COMMITMENTS
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 million and the
transaction is expected to close in 1999.
F-54
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
American Cellular Corporation
We have audited the consolidated balance sheet of American Cellular
Corporation and subsidiaries (the Company) as of December 31, 1998, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the period from February 26, 1998 (Date of Formation) to December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
American Cellular Corporation and subsidiaries at December 31, 1998, and the
consolidated results of its operations and its cash flows for the period from
February 26, 1998 (Date of Formation) to December 31, 1998, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
March 15, 1999
F-55
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
<S> <C>
Current assets:
Cash and cash equivalents................................. $ 34,015
Restricted short-term investments......................... 26,550
Accounts receivable, net of allowance for doubtful
accounts of $2,084...................................... 26,494
Inventories............................................... 2,005
Prepaids and other current assets......................... 1,569
----------
Total current assets........................................ 90,633
Cellular facilities, equipment, and other, net.............. 159,792
Other assets................................................ 1,267,175
----------
Total assets................................................ $1,517,600
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 3,000
Accounts payable.......................................... 6,022
Interest payable.......................................... 22,061
Accrued operating expenses................................ 14,749
Income and other taxes payable............................ 3,398
Deferred revenue.......................................... 6,170
Other current liabilities................................. 2,860
----------
Total current liabilities................................... 58,260
Long-term debt.............................................. 1,195,971
Stockholders' equity:
Series A cumulative redeemable preferred stock, $0.01 par
value, net of $2,000 notes receivable from stockholders;
authorized 5,000,000 shares; 3,250,000 shares issued and
outstanding, including $21,375 of accrued dividends..... 344,375
Common Stock, $0.01 par:
Class A: Authorized 475,000 shares; 250,000 issued and
outstanding........................................... 3
Class B: Authorized 25,000 shares; 19,687 shares issued
and 19,387 outstanding................................ --
Additional paid-in capital................................ 25,191
Accumulated deficit....................................... (106,200)
----------
Total stockholders' equity.................................. 263,369
----------
Total liabilities and stockholders' equity.................. $1,517,600
==========
</TABLE>
See notes to consolidated financial statements.
F-56
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
PERIOD FROM FEBRUARY 26, 1998 (DATE OF FORMATION) TO DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES
Subscriber revenues......................................... $ 74,000
Roaming revenues............................................ 36,542
Toll revenues............................................... 19,180
Equipment sales............................................. 3,740
Other....................................................... 4,025
--------
Total revenue............................................... 137,487
COSTS AND EXPENSES
Cost of cellular service.................................... 25,995
Cost of equipment sold...................................... 7,271
General and administrative.................................. 19,262
Sales and marketing......................................... 18,363
Depreciation and amortization............................... 45,569
Nonrecurring charges........................................ 4,355
--------
Total costs and expenses.................................... 120,815
--------
Operating income............................................ 16,672
OTHER INCOME (EXPENSE)
Interest expense............................................ (61,477)
Interest income............................................. 5,036
Other expense, net.......................................... (100)
--------
Total other expense......................................... (56,541)
--------
Loss before provision for income taxes...................... (39,869)
Provision for income taxes.................................. (530)
--------
Net loss.................................................... $(40,399)
========
</TABLE>
See notes to consolidated financial statements.
F-57
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM FEBRUARY 26, 1998 (DATE OF FORMATION) TO DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK COMMON STOCK
-------------------- ------------------- -------------------
SERIES A CLASS A CLASS B ADDITIONAL
-------------------- ------------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
--------- -------- -------- -------- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial capital
contributions............ 3,250,000 $323,000 250,000 $ 3 -- $-- $24,997 $ --
Capital contributions,
net...................... -- -- -- -- 19,387 -- 194 --
Excess purchase price over
predecessor basis........ -- -- -- -- -- -- -- (44,426)
Accrued preferred stock
dividends................ -- 21,375 -- -- -- -- -- (21,375)
Net loss for the period
from February 26, 1998
(Date of Formation) to
December 31, 1998........ -- -- -- -- -- -- (40,399)
--------- -------- ------- --- ------ --- ------- ---------
Balance December 31, 1998.. 3,250,000 $344,375 250,000 $ 3 19,387 $-- $25,191 $(106,200)
========= ======== ======= === ====== === ======= =========
</TABLE>
See notes to consolidated financial statements.
F-58
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
PERIOD FROM FEBRUARY 26, 1998 (DATE OF FORMATION) TO DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................... $ (40,399)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization expense..................... 45,569
Amortization of deferred financing costs.................. 2,393
Accretion of discount on Senior Notes..................... 137
Amortization of premium on restricted investments......... 222
Amortization of covenant not to compete................... (500)
Change in working capital components, net of the effect of
the merger with PriCellular Corporation:
Accounts receivable................................... 2,666
Inventories........................................... (1,211)
Prepaids and other current assets..................... 297
Accounts payable...................................... 2,074
Accrued operating expenses............................ (472)
Interest payable...................................... 22,061
Income and other taxes payable........................ (19)
Deferred revenue...................................... 1,537
Other current liabilities............................. 940
-----------
Net cash provided by operating activities................... 35,295
INVESTING ACTIVITIES
Acquisition of cellular operations, net of cash acquired.... (1,418,741)
Purchase of fixed assets.................................... (24,260)
Purchase of restricted investments, net..................... (69,744)
-----------
Net cash used in investing activities....................... (1,512,745)
FINANCING ACTIVITIES
Proceeds from sale of preferred and common stock............ 348,194
Proceeds from issuance of Senior Notes...................... 282,834
Borrowings against credit facility.......................... 916,000
Deferred financing costs.................................... (35,563)
-----------
Net cash provided by financing activities................... 1,511,465
Increase in cash and cash equivalents....................... 34,015
Cash and cash equivalents at beginning of period............ --
-----------
Cash and cash equivalents at end of period.................. $ 34,015
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................... $ 36,886
Income taxes................................................ 351
</TABLE>
See notes to consolidated financial statements.
F-59
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. ORGANIZATION AND BASIS OF PRESENTATION
American Cellular Corporation, a Delaware corporation, was formed on
February 26, 1998 to acquire the operations of PriCellular Corporation (see Note
3). Accordingly, the accompanying consolidated financial statements include
results of operations from February 26, 1998, the date of formation, through
December 31, 1998. American Cellular Corporation and Subsidiaries, (the
Company), is principally engaged in the ownership and operation of cellular
telephone systems. The Company operates in one business segment pursuant to
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures About
Segments of an Enterprise and Related Information."
The consolidated financial statements include the assets, liabilities, and
results of operations of entities in which the Company has a controlling
interest. All significant intercompany balances and transactions have been
eliminated.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, restricted investments,
accounts receivable and accounts payable approximate fair value. See Note 5 for
fair value of long-term debt.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost (first in, first out method) or
market. Inventories consist primarily of cellular telephones and accessories.
CELLULAR FACILITIES, EQUIPMENT AND OTHER
Cellular facilities, equipment, and other fixed assets are recorded at cost,
including labor and capitalized interest associated with construction.
Depreciation is computed using the straight-line method over the estimated
useful lives, typically three to seven years.
INVESTMENTS IN CELLULAR OPERATIONS
The Company owns a 44.5% interest in a joint venture with SBC
Communications, Inc. (SBC). Under the terms of the joint venture agreement, the
Company receives annual preferential distributions increasing to $5.8 million in
1999. Such preferential distributions are guaranteed by SBC. The Company also
has an option to put its joint venture interest to SBC at prices escalating to
$39.0 million at November 30, 1999. SBC has operating control of the properties
and has certain rights to purchase the
F-60
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Company's interests on November 30, 1999. The Company's guaranteed preferential
distributions from the joint venture for the period from June 25, 1998, the date
of the PriCellular acquisition, through December 31, 1998 amounted to $2.6
million and are included in other revenues.
OTHER ASSETS
Other assets consist of the following (in thousands):
<TABLE>
<S> <C>
Goodwill/cellular licenses.................................. $1,175,479
Investments in cellular operations.......................... 35,531
Deferred financing costs.................................... 35,563
Restricted investments...................................... 42,972
Subscriber lists............................................ 11,233
Accumulated amortization.................................... (33,603)
----------
$1,267,175
==========
</TABLE>
Goodwill/cellular licenses represents the excess of purchase price over the
fair value assigned to the net tangible and identifiable intangible assets of
the business acquired (see Note 3).
The Company uses a 20-year life to amortize goodwill/cellular licenses.
Accumulated amortization of goodwill/cellular licenses was approximately $29.3
million as of December 31, 1998. The Company periodically reviews the carrying
value of goodwill/cellular licenses to determine whether such amounts are
recoverable based on undiscounted future cash flows of the Company in order to
determine whether a reduction to fair value is necessary. The Company has
determined that no such reductions were necessary through December 31, 1998.
Deferred financing costs primarily represent underwriting and related fees
incurred in connection with the issuance of the Company's long-term debt. These
costs are amortized using the effective yield method and the amortization
expense is included in interest expense. Accumulated amortization of deferred
financing costs was approximately $2.4 million as of December 31, 1998.
Approximately $82.4 million of the proceeds from the issuance of the 10.5%
Senior Notes (see Note 5) was used to acquire certain treasury securities
sufficient to pay the first six scheduled interest payments of those notes.
Approximately $12.7 million of securities were sold in 1998 to satisfy the first
interest payment with no realized gain or loss. These securities are held in an
escrow account pursuant to a Pledge Escrow and Assignment Agreement. The
restricted investments are classified in the balance sheet according to their
maturities. These treasury securities mature from May 1999 to May 2001, bear
interest rates from 5.625% to 6.375%, and are considered as held to maturity.
The Company amortizes subscriber lists over a three-year period. Accumulated
amortization was approximately $1.9 million as of December 31, 1998.
REVENUE RECOGNITION
The Company earns revenue by providing access to its cellular system and for
usage of its cellular system (collectively subscriber revenues), for providing
service to customers from other cellular systems
F-61
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
who roam through the service area (roaming revenues), and for long-distance
calls placed by the Company's customers and those of other carriers within the
Company's service area (toll revenues). Access revenue is billed one month in
advance and is recognized when earned. Airtime, long-distance, and roaming
revenues are recognized when the service is rendered. Equipment sales are
recognized on delivery of the equipment to the customer.
ADVERTISING COSTS
Advertising costs relating to new subscribers are expensed in the period
that they are incurred. Advertising expense amounted to $3.7 million for the
period end December 31, 1998.
COMPREHENSIVE LOSS
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
Net loss for the period ended December 31 1998 is the same as comprehensive loss
defined pursuant to SFAS No. 130.
CONCENTRATIONS OF CREDIT RISK
No single customer is large enough to pose a significant financial risk to
the Company. The Company maintains an allowance for losses based on the expected
collectibility of accounts receivable. Credit losses have been within
management's expectations.
PENDING ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities," which will
be adopted by the Company effective January 1, 2000. The Statement will require
the Company to recognize all derivatives, including interest rate swaps and
collars, on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in fair value of derivatives will
either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company has not yet determined what the effect of
Statement 133 will be on the earnings and financial position of the Company.
3. ACQUISITION OF PRICELLULAR CORPORATION
On June 25, 1998, the Company acquired PriCellular Corporation (PCC)
pursuant to an Agreement and Plan of Merger (the Merger Agreement) dated March
6, 1998 for approximately $1.5 billion. The acquisition was accounted for
utilizing the purchase method of accounting. The results of operations for PCC
are included in the Company's consolidated statement of operations beginning
July 1, 1998. The results of operations do not differ materially than if the
closing date had been used.
F-62
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
3. ACQUISITION OF PRICELLULAR CORPORATION (CONTINUED)
The allocation of the purchase price to the fair value of net assets
acquired is as follows (in thousands):
<TABLE>
<S> <C>
Cash........................................................ $ 51,460
Accounts receivable......................................... 29,160
Cellular facilities and equipment........................... 149,891
Investment in cellular operations........................... 35,531
Other assets................................................ 2,660
Goodwill.................................................... 1,175,479
Subscriber lists............................................ 11,233
Excess purchase price over predecessor basis................ 44,426
Total liabilities assumed................................... (29,639)
----------
Total merger consideration.................................. 1,470,201
Less:
Cash acquired............................................. 51,460
----------
Total cash paid............................................. $1,418,741
==========
</TABLE>
PCC had been partially owned (6.39%) by a group of investors, which also own
approximately 27.2% of the Company (the 6.39% is considered to be the continuing
ownership interest). The cost to acquire the continuing ownership interest in
the net assets of PCC in excess of the predecessor basis has been reflected as a
reduction of stockholders' equity of the Company pursuant to generally accepted
accounting principles.
Nonrecurring charges recorded in the period ended December 31, 1998
represent stay-on bonuses paid by American Cellular Corporation to retain
employees through the completion of the Merger.
4. CELLULAR FACILITIES, EQUIPMENT, AND OTHER
The components of the Company's cellular facilities, equipment and other
include the following (in thousands):
<TABLE>
<S> <C>
Cellular facilities and equipment........................... $158,381
Furniture and other......................................... 15,770
--------
174,151
Less accumulated depreciation............................... (14,359)
--------
$159,792
========
</TABLE>
Depreciation expense for the period ending December 31, 1998 was $14.4
million.
F-63
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1998 FMV
------------ ----------
(IN THOUSANDS)
<S> <C> <C>
Borrowings under $1,000,000,000 Credit Facility:
Revolver Credit Loans............................. $ 66,000 $ 66,000
Tranche A Term Loans.............................. 450,000 450,000
Tranche B Term Loans.............................. 200,000 200,000
Tranche C Term Loans.............................. 200,000 200,000
10.5% Senior Notes due 2008....................... 282,971 276,450(1)
---------- ----------
1,198,971 $1,192,450
==========
Less current portion................................ (3,000)
----------
$1,195,971
==========
</TABLE>
(1) Based on quoted market price.
The bank syndicated Credit Facility provides a subsidiary of the Company up
to $1 billion in four tranches ($450 million on Tranche A, $200 million for each
Tranche B and C, and up to $150 million on the Revolver). Payments under the
Credit Facility are due quarterly, in varying installments beginning June 1999
and maturing December 2007. Additional payments are required for excess cash
flow pursuant to the Credit Facility agreement. Interest is payable quarterly at
the adjusted prime rate plus the applicable margin for each tranche (0.625% for
the Revolver and Tranche A, 1.5% for Tranche B and 1.75% for Tranche C) or LIBOR
plus the applicable margin for each tranche (1.625% or the Revolver and Tranche
A, 2.5% for Tranche B and 2.75% for Tranche C), based on the subsidiary
consolidated leverage ratio. As of December 31, 1998, the interest rates
applicable on the tranches of the Credit Facility ranged from approximately
7.41% to 8.78%, yielding a weighted-average rate of 7.9%. In addition,
commitment fees of 0.5% on the unutilized portion of the Revolver are payable
quarterly. Substantially all of the subsidiary's assets are pledged as
collateral to the Credit Facility. The Credit Facility contains several
financial covenants related to subsidiary's leverage and debt service ratios and
restrictions on the subsidiary's incurrance of additional debt, payment of
dividends, incurrance of liens, and payments and transfers of net assets from
the subsidiary to the Company. Restricted net assets of the Company approximated
$465.5 million as of December 31, 1998.
On May 13, 1998, the Company issued approximately $285.0 million aggregate
principal amount of 10.5% Senior Notes (the Notes) due 2008. The Notes are
unsecured and subordinated to the Credit Facility. Approximately $82.4 million
of the proceeds were used to purchase treasury securities that were placed in an
escrow account (see Note 2). The remaining funds were used to finance the
acquisition of PCC. The Notes were issued at a price of 99.24% or $282.8
million. The original issue discount on the Notes accretes, compounded
semiannually, to yield an effective rate of 10.63%. Interest is payable
semiannually on each May 15 and November 15. The first six scheduled interest
payments on the Notes will be funded from the securities held in escrow.
F-64
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
5. LONG-TERM DEBT (CONTINUED)
The Notes are subject to redemption at any time on or after May 15, 2003, at
the option of the Company, in amounts of $1,000 at the following redemption
prices, if redeemed during the 12-month period beginning May 15 of the years
indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICES
- ---- ----------
<S> <C>
2003........................................................ 105.25%
2004........................................................ 103.50
2005........................................................ 101.75
Thereafter.................................................. 100.00
</TABLE>
The holders of record receive the redemption price plus any accrued and
unpaid interest. In addition, at any time prior to May 15, 2001, the Company may
use the net cash proceeds of one or more equity offerings to redeem up to an
aggregate 35% of the principal amount of Notes originally issued at a redemption
price equal to 110.50%, plus any accrued and unpaid interest.
As part of its interest rate risk management program, the Company utilizes
interest rate swap and collar agreements to hedge variable interest rate risk
under the Credit Facility. Net interest paid or received related to such
agreements is recorded using the accrual method and as an adjustment to interest
expense. At December 31, 1998, the Company had interest rate collars with an
aggregate notional amount of $700 million, effectively fixing the interest rate
between 5.38% and 6.00%, expiring in 2001. At December 31, 1998, the Company had
an interest rate swap with a notional amount of $100 million, effectively fixing
the interest rate to 5.84%, expiring in 2001. The Company has not incurred any
gains or losses on terminations of interest rate agreements. The fair market
value of the Company's interest rate agreements is $(11.6) million at December
31, 1998, based on current underlying spot rates.
F-65
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
5. LONG-TERM DEBT (CONTINUED)
The maturities of the Company's long-term debt are as follows (in
thousands):
<TABLE>
<S> <C>
1999........................................................ $ 3,000
2000........................................................ 4,000
2001........................................................ 49,000
2002........................................................ 49,000
2003........................................................ 71,500
Thereafter.................................................. 1,022,471
----------
$1,198,971
==========
</TABLE>
6. INCOME TAXES
The significant components of the Company's deferred tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1998
------------
<S> <C>
Deferred tax liabilities:
Cellular facilities, equipment and other.................. $(26,055)
Intangible assets......................................... (5,393)
State and local deferred taxes............................ (5,656)
Investment in Joint Venture............................... (4,312)
Other..................................................... (2,571)
Deferred tax assets:
Net operating loss carryforwards.......................... 76,362
Accruals.................................................. 3,376
Other..................................................... 1,324
--------
Net deferred tax assets..................................... 37,075
Valuation allowance......................................... (37,075)
--------
Net deferred tax liability.................................. $ --
========
</TABLE>
At December 31, 1998, the Company had tax net operating loss carryforwards
(NOLs) of approximately $193.6 million, which are available to offset future
taxable income. NOLs begin expiring in the year 2007 through 2018 as follows:
2007--$1.3 million; 2009--$2.7 million; 2010--$1.7 million; 2011--$5.6 million,
2012--$8.8 million and 2018--$173.5 million. To the extent preacquisition NOLs
of approximately $163.9 million are utilized in the future, goodwill established
at the date of the acquisition will be reduced.
The Company established a valuation allowance in accordance with generally
accepted accounting principles. The Company continually reviews the adequacy of
the valuation allowance and recognizes the benefits of deferred tax assets only
as assessment indicates that it is more likely than not that the deferred tax
assets will be realized.
F-66
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
6. INCOME TAXES (CONTINUED)
A reconciliation of the income tax provision based upon the federal
statutory rate to the actual income tax provision is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
FEBRUARY 26, 1998
(DATE OF FORMATION)
TO DECEMBER 31,
1998
-------------------
<S> <C>
Income tax benefit at federal statutory rate............... $(13,954)
Effect of:
State income tax expense, net of federal benefit......... 344
Amortization of goodwill/cellular licenses............... 6,459
Increase in valuation allowance.......................... 7,681
--------
Income tax expense....................................... $ 530
========
</TABLE>
Income tax expense is comprised solely of current state taxes payable.
7. STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Company issued 3,250,000 shares of Series A Preferred Stock for gross
proceeds of $325 million. The preferred stock accrues dividends daily at the
rate of 12% per annum, compounded quarterly. Such dividends shall accrue and be
cumulative on the stated value of $100 per share. Dividends shall be payable
quarterly, in arrears, on the last day of each December, March, June, and
September. Dividends shall be paid in cash. If the payment does not occur on a
regular dividend date, dividends shall accrue to the final payment date.
The holders of Series A Preferred Stock have preference and priority over
the holders of shares of any stock of the Company ranking junior to the
Series A Preferred Stock, with respect to the payment of dividends or
distribution of assets, whether upon liquidation, dissolution, winding up, or
otherwise (Junior Stock). No dividend or distribution shall be declared or paid,
either directly or indirectly, nor shall any Junior Stock, or any warrants,
rights, calls or options exercisable or convertible into any Junior Stock be
redeemed, purchased, retired, or otherwise acquired for any consideration,
unless as of such date the Company has paid all dividends accrued and payable to
date on the Series A Preferred Stock.
If the Company shall adopt a plan of liquidation, dissolution, or winding
up, no distribution shall be made to the holders of shares of Junior Stock,
unless the holders of Series A Preferred Stock have received in cash the stated
value, $100 per share, plus all accrued but unpaid dividends thereon.
The Company shall have the right to redeem outstanding shares of Series A
Preferred Stock at any time in aggregate amounts of $5 million or more at any
one time. The redemption price shall be $100 per share plus the amount of all
accrued and unpaid dividends through the redemption date.
The Series A Preferred Stock have no voting rights, except certain actions
in which each share of Series A Preferred Stock shall have one vote.
F-67
<PAGE>
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
7. STOCKHOLDERS' EQUITY (CONTINUED)
CLASS B COMMON STOCK
The Company has reserved 21,739 shares of its Class B Common Stock for
issuance to certain of its employees. As of December 31, 1998, 19,387 shares are
outstanding. The shares vest in equal, annual increments over a four-year period
starting on the date of employment. The shares are convertible into shares of
Class A Common Stock on a one-to-one basis, and automatically convert when
vested. None are vested as of December 31, 1998.
OTHER
Upon termination of employment without cause, certain employees have the
right to put their Class A and B Common Stock and Series A Preferred Stock at
the fair market value, provided the Company will have the right to pay certain
amounts by issuing shares of Series A Preferred Stock.
8. DEFINED-CONTRIBUTION PLAN
Substantially all employees of the Company are covered by a
defined-contribution 401(k) plan. The Company can make discretionary matching
contributions. No matching contributions were made for the period ended December
31, 1998.
9. LEASE COMMITMENTS
Minimum rental commitments as of December 31, 1998, for all noncancelable
operating leases, consisting principally of leases for office space, real
estate, and tower space, were as follows (in thousands):
<TABLE>
<S> <C>
1999........................................................ $ 4,386
2000........................................................ 3,989
2001........................................................ 3,495
2002........................................................ 3,129
2003........................................................ 2,184
Thereafter.................................................. 2,708
-------
$19,891
=======
</TABLE>
Total rent expense amounted to approximately $2.7 million for the period
ended December 31, 1998.
10. RELATED PARTIES
The Company obtains customer information management and billing services
from a vendor in which two of the Company's directors have an indirect and
noncontrolling ownership interest. Since June 25, 1998, services provided to the
Company by this vendor totaled $4.9 million, pursuant to the terms of a license
agreement.
F-68
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
PriCellular Corporation
We have audited the consolidated balance sheets of PriCellular Corporation
and subsidiaries as of December 31, 1997 and June 30, 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the two years in the period ended December 31, 1997 and for the six
months ended June 30, 1998. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
PriCellular Corporation and subsidiaries at December 31, 1997 and June 30, 1998,
and the consolidated results of their operations and their cash flows for each
of the two years in the period ended December 31, 1997 and for the six months
ended June 30, 1998, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
March 15, 1999
F-73
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
PriCellular Corporation and subsidiaries, including its wholly owned
subsidiary, PriCellular Wireless Corporation (Wireless) (collectively, the
Company), is principally engaged in the ownership and operation of cellular
telephone systems primarily in rural areas of the Midwestern and Eastern
portions of the United States. The Company operates in one business segment
pursuant to SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information."
The consolidated financial statements include the accounts of the Company
and its wholly owned and majority owned subsidiaries. The assets, liabilities,
and results of operations of entities in which the Company has a controlling
interest have been consolidated. All significant intercompany balances and
transactions have been eliminated.
On June 25, 1998, American Cellular Corporation acquired all of the
operations of the Company pursuant to an agreement and plan of merger. For
further discussion of the merger see Note 8. The accompanying consolidated
financial statements include results of operations of the Company through June
30, 1998, the Company's normal month-end. The results of operations of the
Company do not differ materially from if the actual closing date of the merger
had been used.
USE OF ESTIMATES
The preparation of the 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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable,
investment in cellular operations and accounts payable in the consolidated
balance sheet approximate fair value. The fair value of long-term debt in the
consolidated balance sheet approximated $733.5 million at June 30, 1998.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
INVENTORY
Inventory is stated at the lower of cost (first in, first out method) or
market. Inventory consists primarily of cellular telephones and accessories.
FIXED ASSETS
Cellular facilities, equipment, and other fixed assets are recorded at cost,
including labor associated with construction. Depreciation is computed using the
straight-line method over the estimated useful lives, typically three to seven
years. Depreciation expense for the years ended December 31, 1996 and
F-79
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
1997 and for the six months ended June 30, 1998, was $10.0 million, $16.1
million, and $10.2 million, respectively.
INVESTMENTS IN CELLULAR OPERATIONS
The Company has a 44.5% interest in a joint venture with SBC Communications,
Inc. (SBC). Under the terms of the joint venture agreement, the Company receives
preferential distributions in the first four years of the joint venture
increasing from $3.3 million in 1996 to $5.8 million in 1999. Such preferential
distributions are guaranteed by SBC. The Company also has an option to put its
joint venture interest to SBC at prices escalating to $39.0 million in 1999. SBC
has operating control of the properties and has certain rights to purchase the
Company's interests on November 30, 1999. The Company's guaranteed preferential
distributions from the joint venture for the years ended December 31, 1996 and
1997 and for the six months ended June 30, 1998, amounted to $3.4 million,
$4.3 million, and $2.6 million, respectively, which are included in other
revenues.
CELLULAR LICENSES
Cellular licenses represent the excess of purchase price over the underlying
fair value of assets acquired, and are being amortized on a straight-line basis
over 40 years. Amortization expense for the years ended December 31, 1996 and
1997 and for the six months ended June 30, 1998, was $9.5 million, $12.7
million, and $7.3 million, respectively.
The Company periodically reviews the carrying value of cellular licenses to
determine whether such amounts are recoverable based on undiscounted future cash
flows of the market to which the license relates and by comparing the cellular
license to the estimated market value of the cellular system in order to
determine whether a reduction to fair value is necessary. The Company has
determined that no such reductions were necessary through June 30, 1998.
DEFERRED FINANCING COSTS
Deferred financing costs primarily represent underwriting and related fees
incurred in connection with the issuance of the Company's long-term debt. These
costs are being amortized over the terms of the related debt and the
amortization expense is included in interest expense.
REVENUE RECOGNITION
The Company earns revenue by providing access to its cellular system, for
usage of its cellular system for long-distance calls placed by the Company's
customers and those of other carriers within the Company's service area, and for
providing service to customers from other cellular systems who roam through the
service area. Access revenue is billed one month in advance and is recognized
when earned. Airtime, long-distance, and roaming revenues are recognized when
the service is rendered. Equipment sales are recognized on delivery of the
equipment to the customer.
F-80
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
Marketing costs relating to new subscribers are expensed in the period in
which they are incurred. Advertising expense amounted to $2.3 million, $3.7
million, and $2.5 million for the years ended December 31, 1996 and 1997 and for
the six months ended June 30, 1998, respectively.
COMMON STOCK SPLITS
On February 29, 1996 and October 1, 1996, the Company authorized 5- for 4-
stock splits in the form of 25% stock dividends of Class A and Class B common
stock payable March 11, 1996 and October 21, 1996, respectively. All footnote
disclosures and applicable per share data have been restated to reflect these
splits.
NET LOSS PER SHARE
In computing dilutive loss per share for the years ended December 31, 1996
and 1997 and for the six months ended June 30, 1998, no effect has been given to
options outstanding under the Company's 1994 Stock Option Plan, outstanding
warrants to purchase Class B common stock, the 10.75% Senior Subordinated
Convertible Discount Notes, or the Cumulative Convertible Preferred Stock, since
the exercise of any of these items would have an antidilutive effect on net loss
per share.
COMPREHENSIVE INCOME
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
Net loss for the years ended December 31, 1996 and 1997 and for the six months
ended June 30, 1998, is the same as comprehensive loss defined pursuant to SFAS
No. 130.
CONCENTRATIONS OF CREDIT RISK
No single customer is large enough to pose a significant financial risk to
the Company. The Company maintains an allowance for losses based on the expected
collectibility of accounts receivable. Credit losses have been within
management's expectations.
RECLASSIFICATIONS
Certain items have been reclassified in the 1996 and 1997 consolidated
financial statements to conform to the current presentation.
2. ACQUISITIONS AND DIVESTITURES
The following acquisitions were completed in 1996, 1997, and 1998. All
acquisitions were accounted for utilizing the purchase method of accounting. The
results of operations of the acquired
F-81
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
2. ACQUISITIONS AND DIVESTITURES (CONTINUED)
entities are included in the Company's consolidated results of operations from
their respective dates of acquisition.
<TABLE>
<CAPTION>
ACQUISITION PURCHASE NET POPS
MARKET DATE PRICE ACQUIRED
- ------ -------------------------------------- -------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
1998
TN-4 RSA January 15, 1998...................... $ 73,000 264,000
---------
264,000
=========
1997
KY-4, KY-5, KY-6, and January 7, 1997....................... $115,500(a) 785,000
KY-8 RSAs
WI-4 RSA January 7, 1997....................... 6,300 119,000
WI-5 RSA May 29, 1997.......................... 10,600 81,000
---------
985,000
=========
1996
WI-2 RSA November 18, 1996..................... 4,300 85,645
---------
85,645
=========
PA-9 RSA February 2, 1996...................... 26,100 188,096
WV-3 RSA July 23, 1996......................... 35,000 269,709
---------
457,805
=========
NY-6 RSA April 23, 1996........................ 19,800(b) 111,373
Poughkeepsie, NY MSA April 23, 1996........................ 38,900(b)(c) 218,890
Orange County, NY MSA October 17, 1996...................... (c) 327,053
---------
657,316
=========
Various October 17, 1996...................... (c) 70,740
---------
1,271,506
=========
</TABLE>
- ------------------------
(a) The Company acquired from a subsidiary of Horizon Cellular Telephone
Company, L. P. (Horizon) the system serving four RSAs in Kentucky for
approximately $96.4 million in cash and 1,948,052 shares of the Company's
Class A common stock valued at approximately $19.1 million. On February 4,
1997, the Company repurchased and retired the 1,948,052 shares from Horizon
for $15.3 million.
F-82
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
2. ACQUISITIONS AND DIVESTITURES (CONTINUED)
(b) The Company acquired from a subsidiary of United States Cellular Corporation
the system serving the NY-6 RSA for approximately $19.8 million and 83% of
the stock of the system serving the Poughkeepsie, NY MSA for approximately
$38.9 million, with one-half paid in cash and the balance in a three-year
note (subsequently repaid in November 1996.
(c) The Company exchanged with Vanguard Cellular Systems, Inc. its OH-9 RSA, the
majority of its OH-10 RSA and its Parkersburg, WV/Marietta, OH MSA for the
Orange County, NY MSA, an additional 11.1% of the Poughkeepsie, NY MSA,
12.2% of the Janesville, WI MSA and 28,509 additional Pops, including small
interests in the Eau Claire, WI and Wausau, WI MSAs (in each of which the
Company currently has a majority interest).
The pro forma unaudited condensed consolidated results of operations
assuming the TN-4 RSA acquisition was consummated as of January 1, 1997, are as
follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31 JUNE 30
1997 1998
----------- ----------
<S> <C> <C>
Revenues.................................................... $196,264 $108,670
======== ========
Net loss after adjustment for accrued preferred stock
dividend.................................................. $(20,497) $ (9,643)
======== ========
Basic and diluted loss per common share..................... $ (0.56) $ (0.28)
======== ========
</TABLE>
The Company made the following dispositions of cellular properties and interests
(in thousands):
<TABLE>
<CAPTION>
SALES GAIN
DATE DESCRIPTION PRICE (LOSS)
- ---- ----------- -------- --------
<S> <C> <C> <C>
1998
June Sale of Minority Pops............................... $ 1,352 $ (133)
=======
1997
January Florence, AL MSA and AL-1B RSA, sale of license..... $22,396 $ 8,451
April Sale of Minority Pops............................... 1,255 (28)
-------
$ 8,423
=======
1996
July AL-4 RSA, sale of license........................... $25,000 $(1,640)
September Sale of Minority Pops............................... 2,813 1,817
November MI-2 RSA, sale of license........................... 6,500 (1,578)
-------
$(1,401)
=======
</TABLE>
F-83
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
3. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ --------
<S> <C> <C>
14% Senior Subordinated Discount Notes due 2001........... $165,000 $165,000
10.75% Senior Subordinated Convertible Discount Notes due 45,623 48,054
2004....................................................
12.25% Senior Subordinated Discount Notes due 2003........ 187,700 199,101
10.75% Senior Notes due 2004.............................. 170,000 170,000
Senior Secured Reducing Revolver.......................... -- 60,000
-------- --------
$568,323 $642,155
======== ========
</TABLE>
On November 23, 1994, Wireless issued $165.0 million aggregate principal
amount of 14% Senior Subordinated Discount Notes due 2001 (the 14% Notes)
primarily to finance the acquisition of Cellular Information Systems, Inc.
(CIS). The 14% Notes were issued at a price of 66.834% or $110.3 million. The
original issue discount on the 14% Notes accreted at a rate of 14% through
November 1997, compounded semiannually, to an aggregate principal amount of
$165.0 million. Interest is currently accruing at the rate of 14% per annum,
payable semiannually in cash.
On August 21, 1995, the Company issued $60.0 million aggregate principal
amount of 10.75% Senior Subordinated Convertible Discount Notes due 2004 (the
10.75% Notes). The 10.75% Notes were issued at a price of 59.345% or $35.6
million. The original issue discount on the 10.75% Notes accretes at a rate of
10.75%, compounded semiannually, to an aggregate principal amount of
approximately $60.0 million by August 15, 2000. Interest will thereafter accrue
at 10.75% per annum, payable semiannually, in cash beginning February 15, 2001.
The 10.75% Notes are convertible into the Company's Class A common stock at a
conversion price of $9.94 per share.
On September 27, 1995, Wireless issued $205.0 million aggregate principal
amount of 12.25% Senior Subordinated Discount Notes due 2003 (12.25% Notes) to
finance the acquisition of the OH-7 RSA; OH-9 RSA; OH-10 RSA; Parkersburg,
WV/Marietta; OH MSA; WV-2 RSA; AL-4 RSA; PA-9 RSA; and NY-5 RSA cellular
systems. The 12.25% Notes were issued at a price of 69.906% or $143.3 million.
The original issue discount on the 12.25% Notes accretes at a rate of 12.25%
compounded semiannually, to an aggregate principal amount of approximately
$205.0 million by October 1, 1998. Interest will thereafter accrue at 12.25% per
annum payable semiannually in cash beginning April 1, 1999.
On November 6, 1996, Wireless issued $170.0 million principal amount of
10.75% Senior Notes due 2004, primarily to finance the acquisition in January
1997 of the Kentucky cluster for $115.5 million consisting of approximately
$96.4 million in cash and $19.1 million in the Company's Class A common stock.
Approximately $19.0 million of the proceeds was used to repay the note issued in
connection with the purchase on April 23, 1996, of the Poughkeepsie, NY MSA.
Interest is payable semiannually on each May 1 and November 1.
On January 15, 1998, the Company borrowed $60.0 million under a Senior
Secured Reducing Revolver (the Borrowing). The Borrowing matures eight years
from the closing date with repayment
F-84
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
commencing in the year 2001 with final payment in the year 2005 in amounts
ranging from 10.0% to 25.0%. Interest will be charged at the LIBOR rate plus a
premium ranging from 1.500% to 2.250% depending on the ratio of debt to cash
flow as defined. The Borrowing requires the attainment by the Company of certain
financial ratios in order to maintain the permitted indebtedness. The Borrowing
is secured by the assets of Kyle Cellular, a wholly owned subsidiary of the
Company.
The Company's long-term debt includes restrictions on Wireless' incurrence
of additional debt, the payment of dividends, the incurrence of liens, and on
payments and transfer of net assets from Wireless to the Company. Restricted net
assets of the Company as of June 30, 1998, approximated $175.6 million.
The maturities of the Company's long-term debt for each of the periods
subsequent to June 30, 1998, are as follows (in thousands):
<TABLE>
<S> <C> <C>
Six months ending December 31, 1998......................... $ --
Years ending December 31:
1999...................................................... --
2000...................................................... --
2001...................................................... 169,500
2002...................................................... 10,500
2003...................................................... 211,101
Thereafter................................................ 251,054
--------
Total................................................... $642,155
========
</TABLE>
4. INCOME TAXES
The significant components of the Company's deferred tax liabilities and
assets are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ --------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.............................................. $ (9,652) $(11,638)
Amortization.............................................. (11,407) (14,799)
License basis difference.................................. (3,797) (3,797)
Other..................................................... (4,385) (4,356)
Deferred tax assets:
Net operating loss carryforwards.......................... 6,915 15,630
Amortization of original issue discount................... 33,726 37,373
State and local deferred taxes............................ 2,280 1,058
Accruals.................................................. 2,049 2,020
Other..................................................... 2,504 1,462
-------- --------
Net deferred tax assets..................................... 18,233 22,953
Valuation allowance......................................... (22,030) (26,750)
-------- --------
Net deferred tax liability.................................. $ (3,797) $ (3,797)
======== ========
</TABLE>
F-85
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
At June 30, 1998, the Company had tax net operating loss carryforwards
(NOLs) of approximately $43.3 million, which are available to offset future
taxable income. NOLs begin expiring in the year 2007 through 2018 as follows:
2007--$1.3 million, 2009--$2.7 million, 2010--$1.7 million, 2011--$5.6 million,
2012--$20.8 million and 2018--$11.2 million.
The Company established a valuation allowance in accordance with the
provisions of SFAS No. 109, "Accounting for Income Taxes." The Company
continually reviews the adequacy of the valuation allowance and recognizes the
benefits of deferred tax assets only as assessment indicates that it is more
likely than not that the deferred tax assets will be realized.
5. STOCKHOLDERS' EQUITY
COMMON STOCK
In January 1996, Price Communications, an affiliate of the Company, acquired
warrants which are convertible directly into 1,820,000 shares of Class B common
stock from former executives of an acquired company. The effective exercise
price is $5.42 per share of Class B common stock at June 30, 1998.
On February 4, 1997, the Company purchased and retired, under separate
authorization of its Board of Directors, 1,948,052 shares of its Class A common
stock from Horizon, which Horizon received in connection with the Kentucky
Cluster acquisition.
In July 1997, the Company repurchased and retired 3,994,945 shares of its
Class B common stock from Aeneas Venture Corp., an affiliate of Harvard Private
Capital Group, Inc. (Harvard) at $9.00 per share, which was the current market
price at the date of the transaction. In addition, 56,275 warrants to purchase
Class B common stock, also owned by Harvard, were redeemed at a net cash
expenditure of $3.83 per warrant ($9.00 current market price less the exercise
price of $5.17).
In November 1997, Robert Price, Chairman of the Board of the Company,
exercised options for 742,188 shares of the Company's Class A common stock.
Subsequently, the Company purchased from Robert Price 200,000 of the 742,188
shares issued at market ($11.25 per share), and simultaneously retired the same
shares.
Shares of Class A common stock reserved for issuance at June 30, 1998 and
December 31, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
Options issued to employees................................. 1,477
Options reserved for issuance............................... 401
Warrants.................................................... 1,820
Shares reserved for convertible securities.................. 32,856
------
36,554
======
</TABLE>
PREFERRED STOCK
The Company issued Series A Cumulative Convertible Preferred Stock, par
value $.01 per share (the Series A Preferred Stock) for gross proceeds of $80.0
million. The preferred stock accrues dividends at the rate of 6.25% per annum
compounded quarterly. Such dividends will not be paid in cash but will accrue
and be calculated on the face value of $1,000 per share. The cumulative accrued
F-86
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
5. STOCKHOLDERS' EQUITY (CONTINUED)
dividends are $16.1 million at June 30, 1998. The number of shares of Class A
common stock into which the Series A Preferred Stock is convertible is equal to
the quotient obtained by dividing the conversion value (initially $83.2 million
and increasing to $96.0 million by the third anniversary of the original date of
issuance or earlier upon the occurrence of certain contingencies, plus, in each
case, accrued dividends through the date of conversion or, upon the occurrence
of certain contingencies, through the fifth anniversary of the date of issuance)
by the conversion price ($8.83 per share subject to adjustment). The holder of
each share of Series A Preferred Stock is entitled to the number of votes equal
to the number of shares of Class A common stock the holder would receive upon
conversion.
STOCK OPTION PLAN
Under the Company's 1994 Stock Option Plan (the Plan), the Board of
Directors can grant options to purchase up to 2,636,000 shares of Class A common
stock to certain eligible employees and directors (Class A shares are entitled
to one vote per share). During 1996, the Company registered approximately
2,636,000 shares of Class A common stock reserved for issuance under the Plan.
The Plan provides that the option price cannot be less than the fair market
value of the stock on the date of grant. All options granted subsequent to
January 1, 1995 have a 10 year term and vest and become fully exercisable at the
end of three years of continued employment.
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." However, as permitted under SFAS No. 123, the Company continues
to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," in accounting for its stock option plan. Under APB No. 25,
because the number of options is fixed and the option price is market price at
the date of grant, no compensation expense is required. Pro forma information
regarding net loss and basic and diluted loss per common share is required by
SFAS No. 123, and has been determined as if the Company has accounted for its
employee stock options under the fair value method using the Black-Scholes
valuation method.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
The fair value for the Company's options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1996 and 1997: risk free interest rate of 6.25%; dividend yield
of 0%; a volatility factor of .480 for 1996 and .323 for 1997 and a
weighted-average expected life of the options of four years. There were no
option grants in 1998.
F-87
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
5. STOCKHOLDERS' EQUITY (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands, except per share):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Net loss after adjustment for accrued preferred stock
dividend:
As reported.......................................... $(29,221) $(20,171) $ (9,643)
Pro forma............................................ (29,996) (21,318) (10,276)
Basic and diluted loss per common share:
As reported.......................................... (0.76) (0.55) (0.28)
Pro forma............................................ (0.78) (0.58) (0.29)
</TABLE>
Because compensation expense associated with option grants is recognized
over the vesting period, the initial impact of applying FAS 123 on pro forma net
loss is not representative of the potential impact on pro forma net loss in
future years when the effect of recognition of a portion of compensation expense
from multiple awards would be reflected.
A summary of the Company's stock option activity, and related information is
as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES UNDER
OPTIONS PRICE PER SHARE
------------ ----------------
<S> <C> <C>
Balance at December 31, 1995........................... 1,769,140 $ 3.71 to $8.72
Options granted........................................ 343,125 $10.80 to $10.90
Options exercised...................................... (8,329) $ 4.54 to $4.67
Options returned for future issuance................... (55,704) $ 4.54 to $10.90
--------- ----------------
Balance at December 31, 1996........................... 2,048,232 $ 3.71 to $10.90
Options granted........................................ 217,500 $ 8.88
Options exercised...................................... (750,649) $ 3.71 to $8.72
Options returned for future issuance................... (38,102) $ 4.55 to $10.90
--------- ----------------
Balance at December 31, 1997 and June 30, 1998......... 1,476,981 $ 3.71 to $10.90
========= ================
</TABLE>
The weighted-average grant date fair value of options granted in 1997 and
1996 were $3.38 and $4.84, respectively.
F-88
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
The following table summarizes information about stock options outstanding
at June 30, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ -----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
- --------------- ----------- ---------------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$3.71 to $ 4.67............... 848,957 6.6 years $ 4.29 848,957 $ 4.29
$8.72 to $ 8.88............... 314,899 8.3 years $ 8.83 153,232 $ 8.78
$10.80 to $11.40.............. 313,125 8.1 years $10.88 160,833 $10.89
</TABLE>
At December 31, 1997, 846,057 options were exercisable.
6. LEASE COMMITMENTS
Minimum rental commitments as of June 30, 1998, for all noncancelable
operating leases, consisting principally of leases for office space, real estate
and tower space, are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Six months ending December 31, 1998......................... $ 2,193
Years ending December 31:
1999...................................................... 4,386
2000...................................................... 3,989
2001...................................................... 3,495
2002...................................................... 3,129
2003...................................................... 2,184
Thereafter.................................................. 2,708
-------
$22,084
=======
</TABLE>
Total rent expense amounted to approximately $2.4 million, $3.4 million, and
$2.0 million for the years ended December 31, 1996 and 1997, and the six months
ended June 30, 1998, respectively, of which $137,000 and $47,000 were paid to an
affiliate during 1996 and 1997, respectively.
7. ACCOUNTS PAYABLE, ACCRUED EXPENSES, AND OTHER CURRENT LIABILITIES
Accounts payable and accrued expenses consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ --------
<S> <C> <C>
Accounts payable........................................... $ 5,259 $ 3,948
Accrued operating expenses................................. 16,612 8,917
Income and other taxes payable............................. 1,847 2,951
Other...................................................... 4,328 4,600
------- -------
$28,046 $20,416
======= =======
</TABLE>
F-89
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
7. ACCOUNTS PAYABLE, ACCRUED EXPENSES, AND OTHER CURRENT LIABILITIES (CONTINUED)
Other current liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ --------
<S> <C> <C>
Unearned covenant not to compete........................... $ 2,125 $ 500
Interest payable........................................... 5,920 6,444
------- -------
$ 8,045 $ 6,944
======= =======
</TABLE>
8. MERGER WITH AMERICAN CELLULAR CORPORATION
On June 25, 1998, American Cellular Corporation acquired all of the
operations of the Company pursuant to an Agreement and Plan of Merger (the
Merger Agreement). At the effective time, as defined in the Merger Agreement,
the holders of each issued and outstanding share of Class A common stock and
Class B common stock received $14 in cash, without interest, and each issued and
outstanding share of Series A Preferred Stock received the product of $14 and
the number of Class A Shares into which each such share of Series A Preferred
Stock is convertible at such time in connection with a change of control.
F-90
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
[LOGO]
CLASS A COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 2000
JOINT BOOK RUNNING MANAGERS
LEHMAN BROTHERS SALOMON SMITH BARNEY
JOINT LEAD MANAGER
BANC OF AMERICA SECURITIES LLC
CO-MANAGERS
DEUTSCHE BANC ALEX. BROWN
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an itemization of the costs that we expect to incur in
connection with the offer and sale of the securities that we are registering.
With the exception of the Securities Act and NASD fees, all amounts are
estimates.
<TABLE>
<CAPTION>
<S> <C>
Securities Act Registration Fee............................. $ 159,850
NASD Filing Fee............................................. 30,500
Printing and Engraving Expenses.............................
Legal Fees and Expenses.....................................
Accounting Fees and Expenses................................
Miscellaneous...............................................
----------
Total.....................................................
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Oklahoma General Corporation Act under which the Company
is incorporated, 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 15. RECENT SALE OF UNREGISTERED SECURITIES
In March 1996, the Registrant closed a private sale for cash of 100,000
shares of its Class B Convertible Preferred Stock. The aggregate consideration
received by the Registrant was $10 million. All of such shares were sold to
Fleet Venture Resources, Inc., Fleet Equity Partners VI, L.P. and Kennedy Plaza
Partners, the Fleet Investors, each of whom was an accredited investor. Each
purchaser represented that the shares of the Registrant's Class B Convertible
Preferred Stock were being acquired
II-1
<PAGE>
for such purchaser's own account for investment and not with a view to the
distribution of such shares. The shares of Class B Convertible Preferred Stock
were not registered under the Securities Act in reliance upon the exemption
provided by Section 4(2) of the Securities Act.
On February 28, 1997, the Registrant closed a private sale for cash of its
11 3/4% Senior Notes due 2007. The gross proceeds received by the Registrant
were $160 million. All of such securities were sold to Morgan Stanley & Co.
Incorporated, Alex. Brown & Sons Incorporated, First Union Capital Markets Corp.
and Nationsbanc Capital Markets, Inc. as the Placement Agents, who offered the
securities only to Qualified Institutional Buyers (as defined in Rule 144A of
the Securities Act), institutional accredited investors (as defined in Rule
501(a)(1), (2), (3) or (7) of the Securities Act) and outside the United States
in compliance with Regulation S under the Securities Act. The securities were
not registered under the Securities Act in reliance upon the exemptions from
registration provided by Section 4(2) of, and Rule 144A promulgated under, the
Securities Act.
On January 22, 1998, the Registrant closed a private sale for cash of
175,000 shares of its 12 1/4% Senior Exchangeable Preferred Stock due 2008. The
gross proceeds received by the Registrant were $175 million. All of such
securities were sold to Morgan Stanley & Co. Incorporated, Merrill Lynch,
Pierce, Fenner and Smith Incorporated and NationsBanc Montgomery Securities LLC
as the Placement Agents, who offered the securities only to Qualified
Institutional Buyers (as defined in Rule 144A of the Securities Act),
institutional accredited investors (as defined in Rule 501(a)(1), (2), (3) or
(7) of the Securities Act) and outside the United States in compliance with
Regulation S under the Securities Act. The securities were not registered under
the Securities Act in reliance upon exemptions from registration provided by
Section 4(2) of, and Rule 144A promulgated under, the Securities Act.
On June 12, 1998, the Registrant's subsidiary, Logix Communications
Enterprises, Inc. (formerly, Dobson Wireless Company) closed a private sale for
cash of its 12 1/4% Senior Notes due 2008. The gross proceeds received by the
Registrant were $350 million. All of such securities were sold to Morgan Stanley
& Co. Incorporated and NationsBanc Montgomery Securities LLC, as the Placement
Agents, who offered the securities only to Qualified Institutional Buyers (as
defined in Rule 144A of the Securities Act), institutional accredited investors
(as defined in Rule 501(a)(1), (2), (3) or (7) of the Securities Act) and
outside the United States in compliance with Regulation S under the Securities
Act. The securities were not registered under the Securities Act in reliance
upon the exemption provided by Section 4(2) of, and Rule 144A promulgated under,
the Securities Act.
On December 23, 1998, the Registrant's subsidiary, Dobson/Sygnet
Communications Company, closed a private sale for cash of its 12 1/4% Senior
Notes due 2008. The gross proceeds received by the Registrant were
$200 million. All of such securities were sold to NationsBanc Montgomery
Securities, LLC, Lehman Brothers Inc., First Union Capital Markets and TD
Securities (USA) Inc. as the Initial Purchasers, who offered the securities only
to Qualified Institutional Buyers (as defined in Rule 144A of the Securities
Act) and outside the United States in compliance with Regulation S under the
Securities Act. The securities were not registered under the Securities Act in
reliance upon the exemptions provided by Section 4(2) of, and Rule 144A
promulgated under, the Securities Act.
On December 23, 1998, the Registrant closed a private sale for cash of
65,646 shares of its 12 1/4% Senior Exchangeable Preferred Stock. The gross
proceeds received by the Registrant were $50 million. All of such securities
were sold to NationsBanc Montgomery Securities LLC as the Initial Purchaser, who
offered a portion of the securities only to Qualified Institutional Buyers (as
defined in Rule 144A of the Securities Act). The securities were not registered
under the Securities Act in reliance upon the exemptions provided by
Section 4(2) of, and Rule 144A promulgated under, the Securities Act.
On December 23, 1998, the Registrant issued an aggregate of 30,000 shares of
its Class F Preferred Stock and warrants to purchase shares of its Class A
Common Stock for an aggregate cash consideration of $30 million. No underwriters
were involved in the transaction. The shares of Class F Preferred Stock and
Warrants were sold to seven purchasers, each of whom was an accredited investor
II-2
<PAGE>
(as defined in Rule 501(a) promulgated under the Securities Act), and each of
who represented that the Registrant's securities were being acquired for the
purchaser's own account for investment, and not with a view to a distribution
thereof. The securities were not registered under the Securities Act in reliance
upon exemptions from registration provided by Section 4(2) of the Securities Act
and Regulation D promulgated thereunder.
On December 23, 1998, the Registrant issued an aggregate of 75,093.7 shares
of its Class D Preferred Stock for an aggregate cash consideration of
$85 million. No underwriters were involved in the transaction. The shares of
Class D Preferred Stock were sold to thirty-three purchasers, each of whom was
an accredited investor (as defined in Rule 501(a) promulgated under the
Securities Act), and each of who represented that the Registrant's securities
were being acquired for the purchaser's own account for investment, and not with
a view to a distribution thereof. The securities were not registered under the
Securities Act in reliance upon exemptions from registration provided by Section
4(2) of the Securities Act and Regulation D promulgated thereunder.
On December 23, 1998, the Registrant issued an aggregate of 100,000 shares
of its Class A Common Stock upon conversion of the Registrant's outstanding
shares of Class B Convertible Preferred Stock. No cash or other consideration
was received by the Registrant in connection with such conversion. No
underwriters were involved in the transaction. The securities were not
registered under the Securities Act in reliance upon exemptions from
registration provided by Section 4(2) of the Securities Act and Regulation D
promulgated thereunder.
On December 23, 1998, the Registrant issued an aggregate of 37,853 shares of
its Class G Preferred Stock for an aggregate purchase price of $25 million in
exchange for 37,853 shares of the Registrant's Class A Common Stock which had
been valued at $25 million by the Registrant's Board of Directors. No
underwriters were involved in the transaction. The shares of Class G Preferred
Stock were sold to the Registrant's principal shareholder who is also an
accredited investor (as defined in Rule 501(a) promulgated under the Securities
Act). The purchaser represented that the shares of the Registrant's Class G
Preferred Stock were being acquired for the purchaser's own account for
investment, and not with a view to a distribution thereof. The securities were
not registered under the Securities Act in reliance upon exemptions from
registration provided by Section 4(2) of the Securities Act and Regulation D
promulgated thereunder.
On May 5, 1999, the Registrant closed a private sale for cash of 170,000
shares of its 13% Senior Exchangeable Preferred Stock due 2009. The gross
proceeds received by the Registrant were $170 million. All of such securities
were sold to Lehman Brothers Inc., as the Initial Purchaser, who offered the
securities only to Qualified Institutional Buyers (as defined in Rule 144A of
the Securities Act). The securities were not registered under the Securities Act
in reliance upon the exemptions from registration provided by Section 4(2) and
Rule 144A of the Securities Act.
From time to time during 1997, 1998 and 1999, the Registrant has granted
options to purchase shares of its Class B Common Stock and Class C Common Stock
pursuant to its existing Stock Option Plan. As of June 30, 1999, options to
purchase an aggregate of 28,560 shares of its Class B Common Stock and
3,622 shares of its Class C Common Stock were outstanding. No options which have
been granted have been exercised. The per share exercise price of each option is
the fair market value of the underlying share of common on the date the option
was granted as determined by the Registrant's Board of Directors. No
underwriters were involved in the grant of options. Each option agreement
requires, as a condition to exercise of the option, that the purchaser agree
that shares acquired upon exercise of the option will be acquired for the
purchaser's own account for investment, and not with a view to the distribution
of such shares. The securities were not registered under the Securities Act in
reliance upon exemptions from registration provided by Section 4(2) of the
Securities Act.
Beginning in September 1998, the Registrant's subsidiary, Logix
Communications Enterprises, Inc., has granted options to purchase shares of
Logix's common stock pursuant to its existing stock option
II-3
<PAGE>
plan. At June 30, 1999, options to purchase an aggregate of 1,728,500 shares of
Logix common stock were outstanding. No options which have been granted have
been exercised. The per share exercise price of each option is the fair market
value of the underlying common stock on the date of grant as determined by
Logix's Board of Directors. No underwriters have been involved in the grant of
options. Each option agreement requires, as a condition to exercise of the
option that the purchaser agree that the shares acquired upon exercise of the
option will be acquired for the purchaser's own account for investment, and not
with a view to the distribution of such shares.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
--------------------- ----------- -------------------------------
<C> <S> <C>
1.1 Underwriting Agreement dated as of , 1999 among
Lehman Brothers Inc., Salomon Smith Barney, Deutsche Banc
Securities Inc., Goldman Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and the Registrant. **
2.1 Asset Purchase Agreement dated October 9, 1997 between
Texas 16 Cellular Telephone Company and Dobson Cellular
of Texas, Inc. (1) [2.1]
2.2.1 Stock Purchase Agreement dated November 17, 1997 as amended
by Amendment No. 1 thereto effective as of March 18, 1998
between the shareholders of Cellular 2000 Telephone Co.
listed therein and Dobson Cellular of California, Inc. (2) [2.6.1]
2.2.2 Stock Purchase Agreement dated March 19, 1998 between RSA
339, Inc. and AT&T Wireless Services, Inc. and Dobson
Cellular of California, Inc. (2) [2.6.2]
2.3 Securities 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. (2) [2.7]
2.4 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). (3) [2.0]
2.5 Asset Purchase Agreement dated August 20, 1998, between Ohio
Wireless Communications, L.L.C. and Dobson Cellular of
Sandusky. (4) [2.9]
2.6 Asset Purchase Agreement dated as of September 2, 1998
between A-1 Cellular of Texas, L.P. and Dobson Cellular of
Navarro, Inc. (4) [2.10]
2.7 Asset Purchase Agreement dated November 24, 1998 between
First Cellular of Maryland, Inc. and Dobson Cellular of
Maryland, Inc. (4) [2.11]
2.8 Agreement to furnish unfiled schedules. (4) [2.12]
2.9 Asset Purchase Agreement dated September 8, 1999 by and
between ACC Arizona Cellular Communications, Inc. and
Dobson Cellular of Imperial, Inc. (5)
2.10 Asset Purchase Agreement dated September 30, 1999 between
Alaska 3 Cellular, LLC and Dobson Cellular Systems, Inc. (5)
2.11 Agreement and Plan of Merger dated October 5, 1999 among ACC
Acquisition LLC, ACC Acquisition Co. and American Cellular
Corporation. (5)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
--------------------- ----------- -------------------------------
<C> <S> <C>
2.12 Asset Purchase Agreement dated October 6, 1999 between
Pacific Telecom Cellular of Alaska RSA 1, Inc. and Dobson
Cellular Systems, Inc. (5)
2.13 Asset Purchase Agreement dated October 25, 1999 between
Trillium Cellular Corp., Interstate Cellular Holdings
Corp., Universal Telecell, Inc. (d/b/a Unitel Wireless
Communications Systems, Inc.) and Dobson Cellular Systems,
Inc. (5)
3.1 Registrant's Amended and Restated Certificate of
Incorporation. **
3.2 Registrant's Amended and Restated Bylaws. (5)
4.1 Third Amended and Restated Credit Agreement among the Agents
and Lenders named therein and Dobson Operating Company (6) [4.1]
dated March 25, 1998, as amended. (7) [10.1]
4.2 $120 million Revolving Credit Agreement among Dobson
Cellular Operations Company and the Agents and Lenders (6) [4.2]
named therein dated as of March 25, 1998, as amended. (7) [10.1]
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, as (6) [4.3]
amended. (7) [10.1]
4.4 Credit Agreement among the Agents and Lenders named therein
and Dobson/Sygnet Operating Company, dated as of
December 23, 1998. (4) [4.4]
4.5 $17.5 million Term Loan Agreement between Dobson Tower
Company and NationsBank, N.A. dated as of December 23,
1998. (4) [4.5]
4.6 New credit facility. **
4.7 Telephone Loan Contract dated as of November 7, 1958 between
Dobson Telephone Company, Inc. and United States of
America. (8) [4.2]
4.8 Telephone Loan Contract dated as of March 19, 1956 between
McLoud Telephone Company and United States of America. (8) [4.3]
4.9 Telephone Loan Contract dated as of January 15, 1993 between
Dobson Telephone Company, Inc., Rural Telephone Bank and
United States of America. (8) [4.4]
4.10 Restated Mortgage, Security Agreement and Financing
Statement dated as of May 15, 1993 between Dobson
Telephone Company, Rural Telephone Bank and United States
of America. (8) [4.5]
4.11 Indenture dated as of February 28, 1997 between the
Registrant, as Issuer, and United States Trust Company of
New York, as Trustee. (8) [4.6]
4.12 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. (8) [4.9]
4.13 Agreement to furnish unfiled debt instruments. (2) [4.12]
4.14 Indenture dated December 23, 1998 between Dobson/Sygnet
Communications Company, as Issuer, and United States Trust
Company of New York, as Trustee. (3) [4.1]
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
--------------------- ----------- -------------------------------
<C> <S> <C>
4.15 Collateral Pledge and Security 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. (4) [4.18]
4.16 Form of Certificate representing Common Stock. **
5 Opinion of McAfee & Taft A Professional Corporation. **
10.1.1* Registrant's 1996 Stock Option Plan, as amended. (4) [10.1.1]
10.1.2* 1998 Stock Option Plan of Logix Communications Enterprises,
Inc. (f/k/a Dobson Wireline Company). (4) [10.1.2]
10.2.2 Promissory Note dated February 10, 1997 of G. Edward Evans
in the amount of $300,000 in favor of Western Financial
Services Corp. (8) [10.2.1]
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]
10.2.3.1 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]
10.2.4 Stock Purchase Agreement, dated December 23, 1998 among the
Registrant, the Fleet Investors and the other entities
listed therein. (4) [10.2.5]
10.2.5 Asset Purchase Agreement dated December 23, 1998 by and
between Sygnet Communications, Inc. and Dobson Tower
Company. (4) [10.2.6]
10.2.6.1 Asset Purchase Agreement dated July 6, 1999 by and among
American Tower Corporation, American Tower, LP, Dobson
Tower Company and the Registrant as Sole Shareholder of
Dobson Tower, as amended. (5)
10.2.7 Master Site License Agreement dated December 23, 1998 by and
between Sygnet Communications, Inc. and Dobson Tower
Company. (4) [10.2.7]
10.3.1* Letter dated June 3, 1996 from Registrant to Bruce R.
Knooihuizen describing employment arrangement. (8) [10.3.2]
10.3.2* Letter dated October 15, 1996 from Fleet Equity Partners to
Justin L. Jaschke regarding director compensation. (8) [10.3.3]
10.3.3* Letter dated December 26, 1996 from Registrant to G. Edward
Evans describing employment arrangement. (8) [10.3.1]
10.3.4* Letter dated September 16, 1997 from Registrant to William
J. Hoffman, Jr. describing employment arrangement. (2) [10.3.4]
10.3.5* Letter dated October 28, 1997 from Registrant to R. Thomas
Morgan describing employment arrangement. (2) [10.3.5]
10.3.6* Letter dated August 25, 1998 from Registrant to Richard D.
Sewell, Jr. describing employment arrangement. (4) [10.3.6]
10.3.7* Consulting Agreement dated December 21, 1998 between
Registrant and Albert H. Pharis, Jr. (4) [10.3.7]
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
--------------------- ----------- -------------------------------
<C> <S> <C>
10.3.8* Consulting Agreement dated August 15, 1998 between the
Registrant and Russell L. Dobson (6) [10.3.8]
10.4.1 North American Cellular Network Services Agreement dated
August 26, 1992 between North American Cellular Network,
Inc. and Dobson Cellular Systems, Inc. (8) [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. (8) [10.4.1]
10.4.3 General Purchase Agreement dated January 13, 1998 between
Lucent Technologies, Inc. and Dobson Cellular Systems,
Inc. (2) [10.4.7]
10.4.4 Operating Agreement dated January 16, 1998 between AT&T (5)
Wireless Services, Inc. and Dobson Cellular Systems, Inc. (4)[10.4.5]
10.4.5 Fourth Amended General Purchase Agreement dated January 5,
1999 between Northern Telecom Inc. and Registrant. (2) [10.4.8]
10.6 Second Amended and Restated Partnership Agreement of Gila
River Cellular General Partnership dated September 30,
1997. (11) [10.8]
10.7.1 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). (4) [10.8.1]
10.7.2 Stockholder and Investor Rights Agreement, dated
December 23, 1998 among the Registrant and the
shareholders listed therein, (without exhibits). (4) [10.8.2]
10.7.2.1 Amendment to Stockholder and Investors Rights Agreement,
dated April 13, 1999 among the Registrant and the
Shareholders listed therein (without exhibits). (4) [10.8.2.1]
10.7.2.2 Amended and Restated Stockholders and Investor Rights
Agreement dated September 17, 1999 by and among the
Registrant and the Cash Equity Investors, as listed and
defined therein (without exhibits). (5)
10.7.3 Investors Agreement, dated December 23, 1998, among the
Registrant, and certain shareholders of Sygnet Wireless,
Inc. and their affiliates listed therein. (4) [10.8.3]
10.8 License Agreement dated February 15, 1999 between Registrant
and H.O. Systems, Inc. (10) [10.9]
21 List of Subsidiaries. (5)
23.1 Consent of McAfee & Taft A Professional Corporation will be
contained in Exhibit 5 hereto. **
23.2 Consent of Arthur Andersen LLP (Oklahoma City--DCC). (5)
23.3 Consent of Ernst & Young LLP (Cleveland--Sygnet). (5)
23.4 Consent of Ernst & Young LLP (Chicago--American Cellular). (5)
23.5 Consent of Paul Kagan Associates, Inc. (Carmel, CA). (5)
24 Power of Attorney. **
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
--------------------- ----------- -------------------------------
<C> <S> <C>
27 Financial Data Schedule. (12)[27]
</TABLE>
- ------------------------
* Management contract or compensatory plan or arrangement.
** To be filed by amendment.
(1) Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on
April 10, 1998, as the exhibit number indicated in brackets and incorporated
by reference herein.
(2) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997 as the exhibit number indicated in brackets and
incorporated by reference herein.
(3) Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on
January 7, 1999, as the exhibit number indicated in brackets and
incorporated by reference herein.
(4) Filed as an exhibit to the Registrant's Registration Statement on Form S-4
(Registration No. 333-71633), as the exhibit number indicated in brackets
and incorporated by reference herein.
(5) Filed herewith.
(6) Filed as an exhibit to the Registrant's Registration Statement on Form S-4
(Registration No. 333-50107), as the exhibit number indicated in brackets
and incorporated by reference herein.
(7) Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on
May 27, 1999, as the exhibit number indicated in brackets and incorporated
by reference herein.
(8) Filed as an exhibit to the Registrant's Registration Statement of Form S-4
(Registration No. 333-23769), as the exhibit number indicated in brackets
and incorporated by reference herein.
(9) Filed as an exhibit to the Registrant's Current Report on Form 8-K on
June 30, 1998, as the exhibit number indicated in brackets and incorporated
by reference herein.
(10) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998 as the exhibit number indicated in brackets and
incorporated by reference herein.
(11) Filed as an exhibit to the Registrant'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.
(12) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the period ended June 30, 1999 as the exhibit number indicated in brackets
and incorporated by reference herein.
(b) Financial Statement Schedules
None.
ITEM 17. UNDERTAKINGS.
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unforceable. 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
II-8
<PAGE>
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of
such issue.
(2) The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of this registration statement as of the time it was
declared effective.
(b) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus 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.
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Oklahoma City, State of
Oklahoma, on the 12th day of November, 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 12th day of November, 1999.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<C> <S>
/s/ EVERETT R. DOBSON Chairman of the Board, President, Chief
------------------------------------------- Executive Officer and Director (Principal
Everett R. Dobson Executive Officer)
/s/ STEPHEN T. DOBSON
------------------------------------------- Secretary and Director
Stephen T. Dobson
/s/ BRUCE R. KNOOIHUIZEN
------------------------------------------- Vice President and Chief Financial Officer
Bruce R. Knooihuizen (Principal Financial Officer)
/s/ TRENT LEFORCE
------------------------------------------- Corporate Controller (Principal Accounting
Trent LeForce Officer)
/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>
II-10
<PAGE>
INDEX TO EXHIBITS
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
--------------------- ----------- -------------------------------
<C> <S> <C>
1.1 Underwriting Agreement dated as of , 1999 among
Lehman Brothers Inc., Salomon Smith Barney, Deutsche Banc
Securities Inc., Goldman Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and the Registrant. **
2.1 Asset Purchase Agreement dated October 9, 1997 between
Texas 16 Cellular Telephone Company and Dobson Cellular
of Texas, Inc. (1) [2.1]
2.2.1 Stock Purchase Agreement dated November 17, 1997 as amended
by Amendment No. 1 thereto effective as of March 18, 1998
between the shareholders of Cellular 2000 Telephone Co.
listed therein and Dobson Cellular of California, Inc. (2) [2.6.1]
2.2.2 Stock Purchase Agreement dated March 19, 1998 between RSA
339, Inc. and AT&T Wireless Services, Inc. and Dobson
Cellular of California, Inc. (2) [2.6.2]
2.3 Securities 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. (2) [2.7]
2.4 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). (3) [2.0]
2.5 Asset Purchase Agreement dated August 20, 1998, between Ohio
Wireless Communications, L.L.C. and Dobson Cellular of
Sandusky. (4) [2.9]
2.6 Asset Purchase Agreement dated as of September 2, 1998
between A-1 Cellular of Texas, L.P. and Dobson Cellular of
Navarro, Inc. (4) [2.10]
2.7 Asset Purchase Agreement dated November 24, 1998 between
First Cellular of Maryland, Inc. and Dobson Cellular of
Maryland, Inc. (4) [2.11]
2.8 Agreement to furnish unfiled schedules. (4) [2.12]
2.9 Asset Purchase Agreement dated September 8, 1999 by and
between ACC Arizona Cellular Communications, Inc. and
Dobson Cellular of Imperial, Inc. (5)
2.10 Asset Purchase Agreement dated September 30, 1999 between
Alaska 3 Cellular, LLC and Dobson Cellular Systems, Inc. (5)
2.11 Agreement and Plan of Merger dated October 5, 1999 among ACC
Acquisition LLC, ACC Acquisition Co. and American Cellular
Corporation. (5)
2.12 Asset Purchase Agreement dated October 6, 1999 between
Pacific Telecom Cellular of Alaska RSA 1, Inc. and Dobson
Cellular Systems, Inc. (5)
2.13 Asset Purchase Agreement dated October 25, 1999 between
Trillium Cellular Corp., Interstate Cellular Holdings
Corp., Universal Telecell, Inc. (d/b/a Unitel Wireless
Communications Systems, Inc.) and Dobson Cellular Systems,
Inc. (5)
3.1 Registrant's Amended and Restated Certificate of
Incorporation. **
3.2 Registrant's Amended and Restated Bylaws. (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
--------------------- ----------- -------------------------------
<C> <S> <C>
4.1 Third Amended and Restated Credit Agreement among the Agents
and Lenders named therein and Dobson Operating Company (6) [4.1]
dated March 25, 1998, as amended. (7) [10.1]
4.2 $120 million Revolving Credit Agreement among Dobson
Cellular Operations Company and the Agents and Lenders (6) [4.2]
named therein dated as of March 25, 1998, as amended. (7) [10.1]
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, as (6) [4.3]
amended. (7) [10.1]
4.4 Credit Agreement among the Agents and Lenders named therein
and Dobson/Sygnet Operating Company, dated as of
December 23, 1998. (4) [4.4]
4.5 $17.5 million Term Loan Agreement between Dobson Tower
Company and NationsBank, N.A. dated as of December 23,
1998. (4) [4.5]
4.6 New credit facility. **
4.7 Telephone Loan Contract dated as of November 7, 1958 between
Dobson Telephone Company, Inc. and United States of
America. (8) [4.2]
4.8 Telephone Loan Contract dated as of March 19, 1956 between
McLoud Telephone Company and United States of America. (8) [4.3]
4.9 Telephone Loan Contract dated as of January 15, 1993 between
Dobson Telephone Company, Inc., Rural Telephone Bank and
United States of America. (8) [4.4]
4.10 Restated Mortgage, Security Agreement and Financing
Statement dated as of May 15, 1993 between Dobson
Telephone Company, Rural Telephone Bank and United States
of America. (8) [4.5]
4.11 Indenture dated as of February 28, 1997 between the
Registrant, as Issuer, and United States Trust Company of
New York, as Trustee. (8) [4.6]
4.12 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. (8) [4.9]
4.13 Agreement to furnish unfiled debt instruments. (2) [4.12]
4.14 Indenture dated December 23, 1998 between Dobson/Sygnet
Communications Company, as Issuer, and United States Trust
Company of New York, as Trustee. (3) [4.1]
4.15 Collateral Pledge and Security 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. (4) [4.18]
4.16 Form of Certificate representing Common Stock. **
5 Opinion of McAfee & Taft A Professional Corporation. **
10.1.1* Registrant's 1996 Stock Option Plan, as amended. (4) [10.1.1]
10.1.2* 1998 Stock Option Plan of Logix Communications Enterprises,
Inc. (f/k/a Dobson Wireline Company). (4) [10.1.2]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
--------------------- ----------- -------------------------------
<C> <S> <C>
10.2.2 Promissory Note dated February 10, 1997 of G. Edward Evans
in the amount of $300,000 in favor of Western Financial
Services Corp. (8) [10.2.1]
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]
10.2.3.1 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]
10.2.4 Stock Purchase Agreement, dated December 23, 1998 among the
Registrant, the Fleet Investors and the other entities
listed therein. (4) [10.2.5]
10.2.5 Asset Purchase Agreement dated December 23, 1998 by and
between Sygnet Communications, Inc. and Dobson Tower
Company. (4) [10.2.6]
10.2.6.1 Asset Purchase Agreement dated July 6, 1999 by and among
American Tower Corporation, American Tower, LP, Dobson
Tower Company and the Registrant as Sole Shareholder of
Dobson Tower, as amended. (5)
10.2.7 Master Site License Agreement dated December 23, 1998 by and
between Sygnet Communications, Inc. and Dobson Tower
Company. (4) [10.2.7]
10.3.1* Letter dated June 3, 1996 from Registrant to Bruce R.
Knooihuizen describing employment arrangement. (8) [10.3.2]
10.3.2* Letter dated October 15, 1996 from Fleet Equity Partners to
Justin L. Jaschke regarding director compensation. (8) [10.3.3]
10.3.3* Letter dated December 26, 1996 from Registrant to G. Edward
Evans describing employment arrangement. (8) [10.3.1]
10.3.4* Letter dated September 16, 1997 from Registrant to William
J. Hoffman, Jr. describing employment arrangement. (2) [10.3.4]
10.3.5* Letter dated October 28, 1997 from Registrant to R. Thomas
Morgan describing employment arrangement. (2) [10.3.5]
10.3.6* Letter dated August 25, 1998 from Registrant to Richard D.
Sewell, Jr. describing employment arrangement. (4) [10.3.6]
10.3.7* Consulting Agreement dated December 21, 1998 between
Registrant and Albert H. Pharis, Jr. (4) [10.3.7]
10.3.8* Consulting Agreement dated August 15, 1998 between the
Registrant and Russell L. Dobson (6) [10.3.8]
10.4.1 North American Cellular Network Services Agreement dated
August 26, 1992 between North American Cellular Network,
Inc. and Dobson Cellular Systems, Inc. (8) [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. (8) [10.4.1]
10.4.3 General Purchase Agreement dated January 13, 1998 between
Lucent Technologies, Inc. and Dobson Cellular Systems,
Inc. (2) [10.4.7]
10.4.4 Operating Agreement dated January 16, 1998 between AT&T (5)
Wireless Services, Inc. and Dobson Cellular Systems, Inc. (4)[10.4.5]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBERS DESCRIPTION METHOD OF FILING
--------------------- ----------- -------------------------------
<C> <S> <C>
10.4.5 Fourth Amended General Purchase Agreement dated January 5,
1999 between Northern Telecom Inc. and Registrant. (2) [10.4.8]
10.6 Second Amended and Restated Partnership Agreement of Gila
River Cellular General Partnership dated September 30,
1997. (11) [10.8]
10.7.1 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). (4) [10.8.1]
10.7.2 Stockholder and Investor Rights Agreement, dated
December 23, 1998 among the Registrant and the
shareholders listed therein, (without exhibits). (4) [10.8.2]
10.7.2.1 Amendment to Stockholder and Investors Rights Agreement,
dated April 13, 1999 among the Registrant and the
Shareholders listed therein (without exhibits). (4) [10.8.2.1]
10.7.2.2 Amended and Restated Stockholders and Investor Rights
Agreement dated September 17, 1999 by and among the
Registrant and the Cash Equity Investors, as listed and
defined therein (without exhibits). (5)
10.7.3 Investors Agreement, dated December 23, 1998, among the
Registrant, and certain shareholders of Sygnet Wireless,
Inc. and their affiliates listed therein. (4) [10.8.3]
10.8 License Agreement dated February 15, 1999 between Registrant
and H.O. Systems, Inc. (10) [10.9]
21 List of Subsidiaries. (5)
23.1 Consent of McAfee & Taft A Professional Corporation will be
contained in Exhibit 5 hereto. **
23.2 Consent of Arthur Andersen LLP (Oklahoma City--DCC). (5)
23.3 Consent of Ernst & Young LLP (Cleveland--Sygnet). (5)
23.4 Consent of Ernst & Young LLP (Chicago--American Cellular). (5)
23.5 Consent of Paul Kagan Associates, Inc. (Carmel, CA). (5)
24 Power of Attorney. **
27 Financial Data Schedule. (12)[27]
</TABLE>
- ------------------------
* Management contract or compensatory plan or arrangement.
** To be filed by amendment.
(1) Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on
April 10, 1998, as the exhibit number indicated in brackets and incorporated
by reference herein.
(2) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997 as the exhibit number indicated in brackets and
incorporated by reference herein.
(3) Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on
January 7, 1999, as the exhibit number indicated in brackets and
incorporated by reference herein.
(4) Filed as an exhibit to the Registrant's Registration Statement on Form S-4
(Registration No. 333-71633), as the exhibit number indicated in brackets
and incorporated by reference herein.
(5) Filed herewith.
<PAGE>
(6) Filed as an exhibit to the Registrant's Registration Statement on Form S-4
(Registration No. 333-50107), as the exhibit number indicated in brackets
and incorporated by reference herein.
(7) Filed as an exhibit to the Registrant's Current Report on Form 8-K filed on
May 27, 1999, as the exhibit number indicated in brackets and incorporated
by reference herein.
(8) Filed as an exhibit to the Registrant's Registration Statement of Form S-4
(Registration No. 333-23769), as the exhibit number indicated in brackets
and incorporated by reference herein.
(9) Filed as an exhibit to the Registrant's Current Report on Form 8-K on
June 30, 1998, as the exhibit number indicated in brackets and incorporated
by reference herein.
(10) Filed as an exhibit to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998 as the exhibit number indicated in brackets and
incorporated by reference herein.
(11) Filed as an exhibit to the Registrant'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.
(12) Filed as an exhibit to the Registrant's Quarterly Report on Form 10-Q for
the period ended June 30, 1999 as the exhibit number indicated in brackets
and incorporated by reference herein.
<PAGE>
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
ACC-ARIZONA CELLULAR COMMUNICATIONS, INC.
("SELLER")
AND
DOBSON CELLULAR OF IMPERIAL, INC.
("PURCHASER")
DATED AS OF SEPTEMBER 8, 1999
<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
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 . . . . . . . . . . . . . . . . . . . . . . .5
SECTION 5.01. PURCHASE PRICE . . . . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 5.02. DEPOSIT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
SECTION 5.03. PAYMENT OF PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . .5
SECTION 5.04. ALLOCATION OF PURCHASE PRICE . . . . . . . . . . . . . . . . . . . .5
SECTION 5.05. PURCHASE PRICE ADJUSTMENT. . . . . . . . . . . . . . . . . . . . . .6
ARTICLE VI - CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 6.01. PRIMARY CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 6.02. FINAL CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
ARTICLE VII - SELLER'S REPRESENTATIONS . . . . . . . . . . . . . . . . . . . . . . .9
SECTION 7.01. ORGANIZATION; QUALIFICATION; SUBSIDIARIES. . . . . . . . . . . . . .9
SECTION 7.02. CONSENTS, AUTHORIZATION, EXECUTION AND DELIVERY OF AGREEMENT . . . .9
SECTION 7.03. TITLE TO ASSETS; CONDITION OF ASSETS . . . . . . . . . . . . . . . .9
SECTION 7.04. REAL PROPERTY - OWNED . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 7.05. REAL AND PERSONAL PROPERTY - LEASED . . . . . . . . . . . . . . . .10
SECTION 7.06. EXISTING CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 7.07. GOVERNMENTAL LICENSES . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 7.08. COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . . . . .11
SECTION 7.09. NO VIOLATION OF EXISTING AGREEMENTS . . . . . . . . . . . . . . . .12
SECTION 7.10. LITIGATION AND LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . .12
SECTION 7.11. ENVIRONMENTAL COMPLIANCE. . . . . . . . . . . . . . . . . . . . . .12
SECTION 7.12. LABOR MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 7.13. EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . .13
SECTION 7.14. TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 7.15. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 7.16. SUBSCRIBERS/AGENTS. . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 7.17. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 7.18. BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 7.19. HART-SCOTT-RODINO . . . . . . . . . . . . . . . . . . . . . . . . .16
SECTION 7.20. UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . .16
SECTION 7.21. ACCOUNTS RECEIVABLE AND BAD DEBTS . . . . . . . . . . . . . . . . .17
SECTION 7.22. YEAR 2000 COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . .17
SECTION 7.23. DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
<PAGE>
ARTICLE VIII - PURCHASER'S REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . .17
SECTION 8.01. ORGANIZATION; QUALIFICATION . . . . . . . . . . . . . . . . . . . .17
SECTION 8.02. CONSENTS; AUTHORIZATION; EXECUTION AND DELIVERY OF AGREEMENT. . . .17
SECTION 8.03. LITIGATION AND LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . .17
SECTION 8.04. BROKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
ARTICLE IX - SELLER'S AND PURCHASER'S AFFIRMATIVE COVENANTS . . . . . . . . . . . .18
SECTION 9.01. FINANCIAL STATEMENTS AND CELLULAR SYSTEM INFORMATION. . . . . . . .18
SECTION 9.02. ACCESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
SECTION 9.03. CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 9.04. GOVERNMENTAL APPROVALS. . . . . . . . . . . . . . . . . . . . . . .21
SECTION 9.05. THIRD PARTY CONSENTS; CLOSING CONDITIONS. . . . . . . . . . . . . .21
SECTION 9.06. INTENTIONALLY OMITTED . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 9.07. NO SHOPPING . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 9.08. SUPPLEMENTAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . .22
SECTION 9.09. LITIGATION MATTERS. . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 9.10 EMPLOYEE MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 9.11. RETURN OF ASSETS ON TERMINATION AFTER PRIMARY CLOSING . . . . . . .23
ARTICLE X - CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO PRIMARY CLOSING . . .23
SECTION 10.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF THIS
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 10.02. DIRECTORS RESOLUTIONS . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 10.03. INCUMBENCY CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . .23
SECTION 10.04. THIRD PARTY CONSENT; FCC GRANT. . . . . . . . . . . . . . . . . . .24
SECTION 10.05. NO MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . . . . . . .24
SECTION 10.06. OPINION OF COUNSEL TO SELLER. . . . . . . . . . . . . . . . . . . .24
SECTION 10.07. OPINIONS OF FCC COUNSEL TO SELLER. . . . . . . . . . . . . . . . .24
SECTION 10.08. SAB EXTENSIONS. . . . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 10.09. RELATED AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . .25
ARTICLE XI - CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO PRIMARY CLOSING . . . .24
SECTION 11.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF THIS
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
SECTION 11.02. DIRECTORS' RESOLUTIONS. . . . . . . . . . . . . . . . . . . . . . .25
SECTION 11.03. INCUMBENCY CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . .25
SECTION 11.04. HART-SCOTT ACT. . . . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 11.05. OPINION OF COUNSEL TO PURCHASER . . . . . . . . . . . . . . . . . .25
ARTICLE XII - CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION AT FINAL CLOSING . . .25
SECTION 12.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF THIS
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 12.02. OPINION OF FCC COUNSEL TO SELLER. . . . . . . . . . . . . . . . . .25
ARTICLE XIII - CASUALTY LOSSES. . . . . . . . . . . . . . . . . . . . . . . . . . .26
ARTICLE XIV - INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . .26
SECTION 14.01. INDEMNIFICATION BY SELLER . . . . . . . . . . . . . . . . . . . . .26
SECTION 14.02. INDEMNIFICATION BY PURCHASER. . . . . . . . . . . . . . . . . . . .27
SECTION 14.03. NOTICE OF CLAIMS; DEFENSE OF THIRD PARTY. . . . . . . . . . . . . .27
SECTION 14.04. PURCHASE ESCROW AGREEMENT . . . . . . . . . . . . . . . . . . . . .28
SECTION 14.05. LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
ARTICLE XV - CONFIDENTIALITY AND PRESS RELEASES . . . . . . . . . . . . . . . . . .29
SECTION 15.01. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . .29
SECTION 15.02. PRESS RELEASES. . . . . . . . . . . . . . . . . . . . . . . . . . .29
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SECTION 15.03. DISCLOSURES REQUIRED BY LAW . . . . . . . . . . . . . . . . . . . .29
ARTICLE XVI - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 16.01. TERMINATION PRIOR TO FINAL CLOSING. . . . . . . . . . . . . . . . .30
ARTICLE XVII - BROKERS' FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE XVIII - WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . .31
ARTICLE XIX - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
SECTION 19.01. ADDITIONAL INSTRUMENTS OF TRANSFER. . . . . . . . . . . . . . . . .31
SECTION 19.02. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
SECTION 19.03. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 19.04. TRANSFER TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 19.05. COLLECTION PROCEDURES . . . . . . . . . . . . . . . . . . . . . . .33
SECTION 19.06. SPECIFIC PERFORMANCE. . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 19.07. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 19.08. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 19.09. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . . .34
SECTION 19.10. AMENDMENTS; WAIVERS . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 19.12. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 19.13. THIRD PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . .34
SECTION 19.14. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 19.15. Section Headings. . . . . . . . . . . . . . . . . . . . . . . . . .35
Section 19.16. Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . .35
Section 19.17. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . .35
Section 19.18. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . .35
</TABLE>
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<PAGE>
DEFINED TERMS
TERM SECTION CITE
---- ------------
Algreg Proceeding Article III
Asserting Party 14.03
Assets 2.01
Assumed Liabilities Article III
Assumption Agreement 4.02
Authorizations 7.07
Base Price 5.01
Bill of Sale and Assignment 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
Employee Pension 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)
Excluded Contracts 7.06
Existing Contracts 7.06
FCC Recitals
FCC Authorization Recitals
Final Closing 6.01
Final Closing Date 6.02
Final Order 6.02
Hazardous Substance 7.11(b)
Indemnified Purchaser Parties 14.01(a)
Indemnity Escrow Amount 5.03
Independent Accountants 5.05(c)
Interest or Interests 9.05
Liens Article I
Liquidated Damages Amount 5.02
Material Adverse Effect 7.06
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Multiemployer Plan 7.13
Non-Assumed Liabilities Article III
PBGC 7.13
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
Retained Employees 9.10
Seller Introduction
Seller's Estimate 5.05(c)
Size of Person Test 7.19
Third Party Claim 14.03
Working Capital Adjustment 5.05(b)
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<PAGE>
SCHEDULES
- ---------
A MAP OF CELLULAR SYSTEM
1 PERMITTED LIENS
2.01(a) CONTRACTS AND LICENSES
2.01(c) TANGIBLE PERSONAL PROPERTY
2.01(d) REAL PROPERTY LEASEHOLDS
2.01(f) INTANGIBLE PERSONAL PROPERTY
2.02 EXCLUDED ASSETS
7.03 LIENS
7.07 GOVERNMENTAL LICENSES
7.08 COMPLIANCE WITH LAWS
7.10 LITIGATION
7.12 EMPLOYEES
7.13 EMPLOYEE BENEFITS
7.14 TAX MATTERS
7.15(a)(i) HISTORICAL FINANCIAL STATEMENTS
7.15(a)(ii) CURRENT FINANCIAL STATEMENTS
7.15(c) SUBSEQUENT EVENTS
7.16 SUBSCRIBERS/AGENTS
7.17 INSURANCE
7.21 ACCOUNTS RECEIVABLE AGING
9.05(a) FORM OF LANDLORD CONSENT
9.05(b) FORM OF LANDLORD CONSENT AND ESTOPPEL CERTIFICATE
9.10 RETAINED EMPLOYEES
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EXHIBITS
- --------
A. BILL OF SALE AND ASSIGNMENT
B. ASSUMPTION AGREEMENT
C. DEPOSIT ESCROW AGREEMENT
D. PURCHASE ESCROW AGREEMENT
E. OPINION OF COUNSEL FOR SELLER
F. OPINION OF FCC COUNSEL FOR SELLER TO BE DELIVERED AT PRIMARY CLOSING
G. OPINION OF FCC COUNSEL FOR SELLER TO BE DELIVERED AT FINAL CLOSING
H. OPINION OF COUNSEL FOR PURCHASER
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 8th day of
September, 1999, by and between ACC-ARIZONA CELLULAR COMMUNICATIONS, INC., a
Nevada corporation doing business as Cellular One/Mohave ("Seller"), and DOBSON
CELLULAR OF IMPERIAL, INC., an Oklahoma corporation ("Purchaser").
R E C I T A L S
WHEREAS, Seller is the owner of that certain license issued under call
sign KNKN268 (the "FCC Authorization") granted by the Federal Communications
Commission (the "FCC") to provide a block A cellular telecommunications service
in portions of RSA #1 (such portions, the "RSA") in Mojave County, Arizona, as
more particularly depicted on the map attached hereto as Schedule A; and
WHEREAS, Seller owns all rights to develop, construct, own and operate a
cellular system (the "Cellular System") in the RSA (the "Business").
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.
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
or otherwise being contested in good faith and for which appropriate reserves
have been established and will be taken into account in the Working Capital
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.
<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) subscribers and prospective subscribers 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, 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 (including leases and licenses of towers and tower space) of Seller
used in or relating to the Business, as described on SCHEDULE 2.01(d) attached
hereto.
(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
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<PAGE>
and renewals thereof), and such rights, patents and copyrights as are
described on SCHEDULE 2.01(f) attached hereto.
(g) All prepayments and prepaid expenses.
(h) All claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind, except to the extent described in
Section 2.02(b) or on Schedule 2.02.
(i) The right to receive and retain mail, accounts receivable
payments and other communications.
(j) The right to bill and receive payment for products shipped or
delivered and/or services performed but unbilled or unpaid as of the Primary
Closing.
(k) All advertising, marketing and promotional materials and all
other related printing or written materials.
(l) All subscriber notes receivable (if any) and accounts
receivable (including subscriber receivables and roaming revenue receivables).
(m) All rebates from vendors.
(n) All goodwill as a going concern.
(o) Any assets of the type described above which are acquired
after the date hereof but prior to 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 corporate records, books of account, cash, bank deposits or
cash equivalents of Seller at the time of the Primary Closing.
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), 2.01(c) and 2.01(d); and (ii) all other
obligations of Seller entered into during
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<PAGE>
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
"Algreg 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 and Assignment in substantially the form
attached hereto as EXHIBIT A (the "Bill of Sale and Assignment"), (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 Twenty-Four Million Dollars ($24,000,000). (The "BASE PRICE"), as
adjusted in accordance with the provisions of Section 5.05 hereof (as adjusted,
the "PURCHASE PRICE").
SECTION 5.02. DEPOSIT. Purchaser has deposited into escrow with Chase
Manhattan Trust Company, National Association (the "Escrow Agent") One Million
Dollars ($1,000,000) (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
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<PAGE>
the provisions of Section 16.01(e) prior to the Primary Closing, and at the
time of such termination Seller is not in breach of any of its
representations, warranties, covenants or agreements set forth in this
Agreement 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
breach of its representations or obligations under this 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 amount of $250,000 (the "Early Release Amount")
and 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. The Early
Release Amount shall be paid to Seller on the Primary Closing Date by wire
transfer of immediately available funds. Seller shall be paid the earnings on
amounts held pursuant to the Purchase Escrow Agreement on a quarterly basis. In
the event this Agreement is terminated after the Primary Closing for any reason
under Article XVI of this Agreement, (i) the funds held pursuant to the Purchase
Escrow Agreement (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, including without limitation the Early Release Amount. At
Final Closing, an amount equal to the Escrowed Amount less the sum of (x)
amounts held in respect of pending but unpaid claims by Purchaser for Purchase
Price adjustments pursuant to Section 5.05(d) or for indemnification pursuant to
Section 14.01 and (y) $1,000,000 (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; provided
that the amount in clause (y) shall not be retained in escrow if such amount has
already been released by the Escrow Agent pursuant to a request made by Seller
pursuant to Section 4(e) of the Purchase Escrow Agreement after the one (1) year
anniversary of the Primary Closing.
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
-5-
<PAGE>
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.
SECTION 5.05. PURCHASE PRICE ADJUSTMENT.
(a) As used in this Section 5.05, the following terms shall have the
meaning set forth below:
"CURRENT ASSETS" means the Cellular System's (i) accounts receivable that
are less than 91 days past due net of a reserve for bad debts, which reserve
shall equal the sum of the following amounts: zero percent (0%) of such
accounts receivable that are not past due or that are thirty (30) or fewer days
past due, ten percent (10%) of such accounts receivable that are more than
thirty (30) but less than sixty-one (61) days past due and fifty percent (50%)
of such accounts receivable that are more than sixty (60) but less than
ninety-one (91) days past due; (ii) inventory which is reasonably expected,
based on past practice, to be consumed in the normal course of business
within six months after the Primary Closing, reflected at net book value, and
(iii) prepaid items to the extent Purchaser will receive the benefit thereof
after the Primary Closing, all determined as of the Primary Closing Date in
accordance with generally accepted accounting principles ("GAAP"). For
purposes of this definition, an account receivable is "past due" if it has
not been paid in full within 30 days of the date of billing.
"CURRENT LIABILITIES" means the Cellular System's (i) trade payables and
accrued expenses which were incurred in the normal course of business, (ii)
subscriber deposits received and (iii) deferred revenue, all determined as of
the Primary 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 four
(4) business days prior to the Primary Closing Date, a written good faith
estimate of the amount of the Working Capital Adjustment and resulting Purchase
Price (the "SELLER'S ESTIMATE") along with all supporting documents and
information. The Seller's Estimate shall be based upon the books and records of
the Cellular System. The Seller's Estimate shall be accompanied by a
certificate signed by the President of Seller certifying that Seller's Estimate
was calculated in good faith and in accordance with the provisions of this
Section 5.05. After delivery of Seller's Estimate and prior to the Primary
Closing, Purchaser and Seller shall attempt to resolve any disputes between
Seller and Purchaser with respect to Seller's Estimate. In connection
therewith, Purchaser shall have full access to all of Seller's records related
to the preparation of Seller's Estimate. Not later than two (2) business days
prior to the Primary Closing Date, Purchaser shall advise Seller in writing as
to any dispute Purchaser has with Seller's Estimate and provide Seller with
Purchaser's
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calculation of the Working Capital Adjustment and the resulting 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
greater than Seller's Estimate, the Primary Closing shall proceed with the
Purchase Price based on Purchaser's Estimate. In the event Purchaser's
Estimate is equal to or less than Seller's Estimate, and the difference
between Purchaser's Estimate and Seller's Estimate is less than $50,000, the
Closing shall proceed with the Purchase Price based upon Seller's Estimate.
In the event the difference between Purchaser's Estimate and Seller's
Estimate is greater than $50,000, then the mid-point between Seller's
Estimate and Purchaser's Estimate shall be used as the Purchase Price for
purposes of Closing.
(d) Within 90 days after the Primary Closing Date, Purchaser shall
deliver to Seller a certificate (the "CLOSING CERTIFICATE") signed by the
President or Chief Financial Officer of Purchaser providing its calculation of
the Working Capital Adjustment to be made to the Base Price pursuant to this
Section 5.05, including any changes in the Working Capital Adjustment used to
determine the Purchase Price at Primary Closing, together with a copy of any
supporting documents, work papers, 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 its 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 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, and the differences arise from the interpretation of accounting
principles, then either party may request that the matter be resolved by
PricewaterhouseCoopers, LLP (the "INDEPENDENT ACCOUNTANTS") or some mutually
acceptable independent big 5 accounting firm. 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
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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 five (5) business 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(d)
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(d) and not paid when due may also be paid from the funds held pursuant
to the Purchase Escrow Agreement, provided that Purchaser has requested such
amount from Seller pursuant to the terms and conditions of this Agreement and
the terms and conditions of the Purchase Escrow Agreement and such amount
remains unpaid for thirty (30) days from the date of such notice.
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 ten (10) business days after
the date on which the FCC's order granting its consent to the assignment of the
FCC Authorization from Seller to Purchaser has become a Final Order and the
other conditions precedent to the Primary Closing have been satisfied (the
"Primary 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.
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 the LATER to occur of the following: (a)
the Primary Closing Date; and (b) the date that is within five (5) business days
after satisfaction of the conditions to Final Closing contained in Article XII
(the "Final Closing Date").
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ARTICLE VII
SELLER'S REPRESENTATIONS
Seller hereby represents, warrants, covenants and agrees that:
SECTION 7.01. ORGANIZATION; QUALIFICATION; SUBSIDIARIES. Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. Seller has all corporate 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 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. Seller is qualified to do business as a foreign corporation
and is in good standing in Arizona and in all other jurisdictions where failure
to be so qualified or in good standing is reasonably likely, individually or in
the aggregate, to have a material adverse effect on the Assets or the Business.
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 7.02. 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
board of directors and shareholder action. This Agreement is a valid and
binding obligation of Seller, enforceable against it in accordance with its
terms.
SECTION 7.03. TITLE TO ASSETS; 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.
The tangible property included among the Assets as of the date hereof are in
good working order and repair, reasonable wear and tear excepted. The Assets
constitute all of the assets used or useful by Seller in connection with the
operation of the Business. No officer, director, stockholder or employee of
Seller, or any other individual, partnership, corporation, person or entity (a
"Person") (other than Seller) controlling, controlled by or affiliated with or
family member of any such officer, director, stockholder or employee, 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 industry generally, the
tangible property included in the Assets are technically sufficient and capable
of providing cellular telephone service in the Cellular System in accordance
with applicable FCC regulations. All of the buildings, towers, antenna,
fixtures and improvements owned 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 by
Seller (or in
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the case of such buildings, towers, antenna, fixtures, improvements,
equipment, facilities and structural components which are leased by Seller,
to Seller's knowledge) 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 maintenance as is customary in the cellular telephone
industry generally and the repair of ordinary wear and tear.
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
2.01(d) (in the case of real property) and SCHEDULE 2.01(c) (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. All of the leases set forth on SCHEDULE
2.01(c) AND 2.01(d) 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
after the Primary Closing 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. Except as set forth in
Schedule 2.01(d), each of the real property leases to which Seller is a party
may be terminated by Purchaser after the Primary Closing on no greater than 30
days' prior written notice, without incurring any premium, penalty or other
additional obligation under such lease.
SECTION 7.06. EXISTING CONTRACTS. SCHEDULE 2.01(a) sets forth all
contracts, commitments and agreements in effect on the date hereof with Seller's
subscribers (other than standard subscriber agreements for cellular service and
standard roaming agreements with other carriers), and all other contracts,
commitments and agreements (other than agreements with annual payments of less
than $2,000 and which agreements, 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 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"). No 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 employer 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. 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
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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, Seller has not 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 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 within, and the
operation of, the Cellular System in connection with applicable FCC regulations
(collectively referred to as the "Authorizations"). All Authorizations are in
full force and effect. Seller has complied in all material respects with the
terms of the Authorizations. Except for matters affecting the cellular industry
generally, 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 due and payable to
governmental authorities pursuant to the Authorizations have been paid and
subject to the outcome of the Algreg 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 to be filed in connection with the Authorizations have been
timely filed and are accurate and complete in all material respects. 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 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. To Seller's knowledge, 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. Neither Seller nor any of its affiliates have filed for or
obtained from the Arizona Corporation Commission or any other state public
utilities commission any license, permit or other authority to conduct the
Business.
SECTION 7.08. COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 7.08
attached hereto, Seller is in compliance 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.
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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, or
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
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
pursuant to or in connection with the provisions of this Agreement. Except as
set forth on SCHEDULE 7.10, there are no proceedings 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 pursuant to or in connection with the provisions
of this Agreement, 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. The
pendency of the Algreg 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 Algreg Proceeding.
SECTION 7.11. ENVIRONMENTAL COMPLIANCE. (a)(i) Seller has not
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 by Seller during
Seller's ownership of the Assets or the Business has been and is being handled
or dealt with in compliance with 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.
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(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. SCHEDULE 7.12 sets 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, 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.
There are no pending, or, to Seller's knowledge threatened (a) union
representation petitions respecting the employees of Seller, (b) efforts being
made to organize any of the employees of Seller, or (c) strikes, slow downs,
work stoppages, or lockouts or threats affecting Seller.
SECTION 7.13. EMPLOYEE BENEFITS. Except as set forth on SCHEDULE 7.13
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
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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.
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 Internal Revenue Service ("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 7.14. TAX MATTERS. Except as set forth on SCHEDULE 7.14 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 unresolved questions or claims
raised by any Taxing authority concerning the Tax liability of Seller, (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 and (g) 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. Seller has made a timely and valid election to be treated as
an S Corporation (as defined in Section 1361(a) of the Internal Revenue Code),
effective beginning January 1, 1996. 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.
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SECTION 7.15. FINANCIAL STATEMENTS.
(a) Purchaser has heretofore been furnished with the following:
(i) true and complete copies of the unaudited balance sheet
of Seller as of December 31, 1997 and December 31, 1998 (the
"BALANCE SHEET DATE") and the related unaudited statements of income
and retained earnings and cash flows for the years then ended, each
of such balance sheet and income statement being attached hereto as
SCHEDULE 7.15(a)(i) (collectively, the "HISTORICAL FINANCIAL
STATEMENTS"); and
(ii) true and complete copies of the unaudited balance sheet
(the "JUNE BALANCE SHEET") of Seller at June 30, 1999 and the
related unaudited statement of income for the three months then
ended (the "FIVE-MONTH INCOME STATEMENT" and together with the June
Balance Sheet, the "CURRENT FINANCIAL STATEMENTS"), such balance
sheet and income statement being attached hereto as
SCHEDULE 7.15(a)(ii).
(b) Each of the Historical and Current Financial Statements delivered
under Section 7.15(a)(i) and (ii) hereof were prepared in accordance with GAAP,
except for the omission of certain footnotes and other presentation items
required by GAAP with respect to audited financial statements and except that
all accounting has been done on a cash basis rather than an accrual basis,
applied on a basis consistent with prior periods and past practices and, with
respect to the Current Financial Statements, subject to usual and customary
year-end adjustments; each of the balance sheets included in such Historical and
Current Financial Statements fairly presents in all material respects the
financial condition of Seller, as at the close of business on the date thereof;
and each of the statements of income included in such Historical and Current
Financial Statements fairly presents in all material respects the results of
operations of Seller, for the fiscal period then ended.
(c) Except as set forth on SCHEDULE 7.15(c) attached hereto, since the
Balance Sheet Date, 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;
(iii) entered into any other transaction, except in the
ordinary course of business, or entered into any transaction with
any officer, director, partner or shareholder of Seller, or any
affiliate or family member of any such Person;
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(iv) suffered any material damage, destruction or casualty
loss with respect to the Assets, whether or not covered by
insurance;
(v) made any distribution of any of the Assets to any
officer, director, partner or shareholder of Seller or any affiliate
or family member of such officer, director or shareholder;
(vi) obligated itself or the Business to give free or reduced
price service to subscribers with respect to the Business; or
(vii) entered into any agreement or understanding to do any of
the foregoing.
SECTION 7.16. SUBSCRIBERS/AGENTS. The number of subscribers receiving
service from the Cellular System as of May 25, 1999 was at least 804; a list of
Seller's current subscribers is set forth at SCHEDULE 7.16. SCHEDULE 7.16
attached hereto also sets forth a list of all agents who sell cellular telephone
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 from January 1, 1999 to July 26, 1999. SCHEDULE 7.16 also summarizes the
current rate plans offered to Seller's subscribers.
SECTION 7.17. INSURANCE. Attached hereto as SCHEDULE 7.17 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 7.18. BROKERS. Except Columbia Capital, Seller has not engaged
any agent, broker or other person acting pursuant to the express or implied
authority of Seller which 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 7.19. 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.
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 in the May 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.
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SECTION 7.21. ACCOUNTS RECEIVABLE AND BAD DEBTS. All notes and accounts
receivable of Seller shown on the June 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 Primary Closing in accordance with
Section 5.05). SCHEDULE 7.21 attached hereto sets forth a true, complete and
accurate list, as of the end of the most recent normal billing cycle of Seller,
listing the total amounts of subscriber accounts receivable and the aging of
such subscriber receivables.
SECTION 7.22. YEAR 2000 COMPLIANCE. Seller has advised Purchaser that
Seller's switch is not year 2000 compliant, and can not be made year 2000
compliant. Seller is not representing that any of its Assets are Year 2000
compliant.
SECTION 7.23. DISCLOSURE. No provision of this Agreement relating to
Seller, the Business or the Assets or any other document, Schedule, Exhibit or
other information furnished by Seller to Purchaser in connection with the
execution, delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact required to be
stated in order to make the statement, in light of the circumstances in which it
is made, 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. 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. Except as set forth on
SCHEDULE 8.03, 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
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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. Except for Daniels & Associates, 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. FINANCIAL STATEMENTS AND CELLULAR SYSTEM INFORMATION.
Seller covenants and agrees that during the period after the execution of this
Agreement and prior to the Primary Closing, Seller shall provide Purchaser,
within 45 days of the end of each calendar quarter, Seller's unaudited balance
sheet and income statement for such quarter ("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 Current Financial Statements except for the
absence of footnotes, subject to usual and customary adjustments, and will
present fairly in all material respects the financial position of Seller at the
date indicated and the results of Seller's operations for such period. Seller
also shall provide Purchaser within 10 business days of the end of each monthly
billing cycle the number of subscribers receiving service from the Cellular
System at the beginning and end of such billing cycle. Seller further covenants
and agrees to provide Purchaser with copies of any other reports reasonably
requested by Purchaser provided that such reports are normally generated by or
for Seller on a monthly basis.
SECTION 9.02. ACCESS. (a) Purchaser shall have the right, itself or
through its representatives, during normal business hours, after reasonable
notice (which may be oral) to an officer of Seller 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
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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.
(c) All information collected and generated as a result of the
environmental due diligence authorized by Section 9.02(b) will be subject to the
terms and conditions of Section 15.01 of this Agreement. Purchaser shall
provide to Seller copies of all draft and final reports, assessments and other
information composed or compiled by Purchaser's environmental consultants within
five (5) business days of Purchaser's receipt of copies thereof.
(d) 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. Purchaser shall
provide to Seller copies of all draft and final reports, assessments and other
information composed or compiled by Purchaser's engineers or engineering
consultants within five (5) business days of Purchaser's receipt of copies
thereof.
SECTION 9.03. CONDUCT OF BUSINESS. From the date hereof until the
Primary Closing Seller shall:
(a) operate the Cellular System in accordance with the
Authorizations, including without limitation FCC Authorization, and comply in
all material respects with all laws, rules and regulations applicable to Seller,
including without limitation the regulations of the FCC;
(b) except for inventory (other than Excluded Assets) 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 Existing Contracts, and from waiving or
canceling any default or breach (other than the waiver of late fees) 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;
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(d) maintain insurance on the Assets comparable to that maintained
prior to the date hereof, and subject to Article XIII, use the proceeds of any
claims for loss under such policies, together with such other funds as may be
required, to repair, replace, or restore to their former condition any Assets
which may be damaged by fire or other casualty, all as soon as reasonably
possible;
(e) maintain its books and records in accordance with prior
practice; maintain all of its property and assets in their present condition,
ordinary wear and tear excepted; maintain supplies of inventory and spare parts
consistent with past practice; and otherwise operate the Business in the
ordinary course in accordance with past practices;
(f) refrain from hiring any employees without Purchaser's prior
written consent and notify Purchaser of any material change in job function of
an employee, and the termination of any employee;
(g) continue to advertise, promote and market the Cellular System
and its services in a manner consistent with past practice;
(h) refrain from subjecting any of the Assets to any new Lien
other than Permitted Liens;
(i) 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 Existing Contract;
(j) provide to the Purchaser, concurrently with filing thereof,
copies of all reports to and other filings with the FCC and any other
governmental agency;
(k) 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;
(l) 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;
(m) refrain from taking any action not in Seller's usual course of
business regarding the Cellular System or the Assets without Purchaser's prior
approval; and
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(n) 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 9.04. GOVERNMENTAL APPROVALS. 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. Both parties have filed
Form 603 with the FCC seeking its approval of the assignment of the FCC
Authorization to Purchaser, and the FCC has granted its approval. Both parties
hereby agree to diligently pursue the grant of the assignment of the FCC
Authorization to Purchaser becoming a Final Order, and to file for any other
necessary regulatory approvals for the consummation of the transactions
contemplated by this Agreement within five (5) 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.
SECTION 9.05. 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 Assets. 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 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 9.05(a) 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. In addition, Seller shall
use its commercially reasonable best efforts to obtain from lessors under real
property leases with remaining terms in excess of one (1) year the form of
Landlord Consent and Estoppel Certificate attached as Schedule 9.05(b). 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,
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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. INTENTIONALLY OMITTED.
SECTION 9.07. NO SHOPPING. Neither Seller nor any of their respective
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 Seller's capital stock, or any similar transaction involving
Seller.
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 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 Algreg Proceeding, shall be the
responsibility of Seller, and that Seller shall control the defense of the
Algreg Proceeding, subject to Purchaser's right to assist in the defense.
Seller agrees to its best efforts to defend the FCC Authorization in the Algreg
Proceeding, and Seller and Purchaser agree to cooperate in good faith in such
defense, but Seller shall have the right to settle the Algreg Proceeding without
the prior written consent of Purchaser, provided Seller bears the entire
economic consequence of any such settlement.
SECTION 9.10. EMPLOYEE MATTERS. As of the Primary Closing, Purchaser
shall have extended offers of employment to those employees of Seller that are
listed on SCHEDULE 9.10, which Schedule shall be delivered to Seller five (5)
business days before the Primary Closing Date (such employees are hereinafter
referred to as "Retained Employees"); PROVIDED, HOWEVER, that any such offer of
employment shall not be construed to limit the ability of Purchaser to terminate
any Retained Employee following the Primary Closing Date for any reason. Seller
shall have terminated the employment of all Retained Employees immediately prior
to the Primary Closing and any cost, expense or liability related to the
employment of the Retained
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Employees up to the Primary Closing (including accrued salaries, bonuses,
benefits, vacation or sick pay expense and other remuneration for services
rendered prior to the Primary Closing) and any cost, expense or liability
resulting from, or incurred in connection with, such terminations shall be
the sole responsibility of Seller.
SECTION 9.11. RETURN OF ASSETS ON TERMINATION AFTER PRIMARY CLOSING.
Seller acknowledges and agrees that Purchaser shall be under no obligation to
retain or maintain any of the Assets (other than the FCC Authorization) after
the Primary Closing. In the event this Agreement is terminated after the
Primary Closing, Purchaser will transfer to Seller all of its right, title and
interest in the Assets as they exist at the time of termination (the "Returned
Assets") in exchange for no additional consideration other than Seller's
agreement to assume all of the liabilities arising under the Returned Assets
that accrue and are to be performed from and after the date of transfer,
including any obligations that arise as a result of the transfer of the Returned
Assets. Seller acknowledges and agrees that Purchaser will make no
representation or warranty as to the condition of any of the Returned Assets
(other than the FCC Authorization) in connection with their transfer to Seller.
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 Primary Closing in
all material respects (except those representations and warranties qualified by
materiality, which shall be true and correct in all 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 a duly authorized representative of Seller, dated
as of the Primary Closing, certifying to the fulfillment of the foregoing
conditions.
SECTION 10.02. DIRECTORS RESOLUTIONS. Seller shall deliver to Purchaser
copies of the resolutions of the board of directors and stockholders 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
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agreement to be delivered pursuant to this Agreement, which incumbency
certificate shall include the true signatures of such officers.
SECTION 10.04. THIRD PARTY CONSENT; FCC 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 (other than
conditions generally imposed by the FCC in cellular assignment grants) which
Purchaser determines, in its sole discretion, to be materially adverse, and the
order granting such consent shall have become a Final Order.
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, properties
or prospects of the Cellular System from the date hereof to the Primary Closing.
SECTION 10.06. OPINION OF COUNSEL TO SELLER. Purchaser shall have been
furnished with an opinion of Schreck Morris, Nevada 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 10.07. OPINION OF FCC COUNSEL TO SELLER. Purchaser shall have
been furnished with an opinion of Brown, Nietert & Kaufman, 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
attached hereto.
SECTION 10.08. RELATED AGREEMENTS. Seller shall have executed and
delivered to Purchaser the Bill of Sale and Assignment, Assumption Agreement and
Purchase Escrow Agreement in the forms set forth as Exhibits A, B and D,
respectively.
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
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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 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. OPINION OF FCC COUNSEL TO SELLER. Purchaser shall have
been furnished an opinion of Brown, Nietert & Kaufman, 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
attached hereto.
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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 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 Primary Closing Date. To the
extent the repair, rebuild or replacement of the portion of the Assets damaged,
destroyed or lost prior to the Primary 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 Primary 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.
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;
(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, but only to the extent they
arise out of Seller's 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;
(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 and Assignment, 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
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(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.
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, its
shareholders, officers, directors and employees harmless from and against and in
respect of any Losses incurred by Seller arising from or related to:
(i) Any and all 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,
but only to the extent they arise out of Purchaser's ownership,
operation or control of the Assets or the Business after the Primary
Closing;
(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 XII hereof; 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 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
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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 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 $50,000 (the "Deductible"), and then indemnification shall only be
required to be made by the Defending Party to the extent
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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 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 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 7.08 (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 limitations, 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.
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 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 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; 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 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
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and the delay in the Primary Closing is not directly attributable to
allegations filed with the FCC against that party.
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
WAIVER OF JURY TRIAL
PURCHASER AND SELLER 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 Primary 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 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.
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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:
Dobson Cellular of Imperial, Inc.
c/o Dobson Communications Corporation
13439 N. Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
Attention: Everett Dobson
Telecopy No.: (405) 529-8515
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with a copy to:
Edwards & Angell, LLP
One BankBoston Plaza
Providence, Rhode Island 02903
Attention: David K. Duffell, Esq.
Telecopy No.: (401) 276-6602
(ii) If to Seller:
ACC-Arizona Cellular Communications, Inc.
1600 Stadium Avenue
Big Spring, TX 79720
Attention: M. Gregg Ryan
Telecopy No.: (915) 267-3718
with a copy to:
Brown Nietert & Kaufman, Chartered
Suite 660
1920 N Street, N.W.
Washington, DC 20036
Attention: David Kaufman, Esq.
Telecopy No.: (202) 457-0126
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 four (4) business days 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.
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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 Nevada (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 the parent company of Purchaser, and (ii) after
the Primary Closing, to assign its rights and obligations under this Agreement
to any third party. A party shall provide prompt written notice to the other
party of any such assignment.
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 May 12, 1999, 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
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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 Primary 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.
[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:
ACC-ARIZONA CELLULAR COMMUNICATIONS, INC.
By: /s/ M. GREGG RYAN
--------------------------------------
Name: M. Gregg Ryan
Title: President
PURCHASER:
DOBSON CELLULAR OF IMPERIAL, INC.
By: /s/ G. EDWARD EVANS
--------------------------------------
Name: G. Edward Evans
Title: President
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ASSET PURCHASE AGREEMENT
between
ALASKA-3 CELLULAR, LLC
and
DOBSON CELLULAR SYSTEMS, INC.
DATED AS OF SEPTEMBER 30, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I PURCHASE AND SALE....................................................1
ARTICLE II DESCRIPTION OF ASSETS, EXCLUDED ASSETS...............................2
SECTION 2.01. ASSETS...............................................................2
SECTION 2.02. EXCLUDED ASSETS......................................................3
ARTICLE III ASSUMPTION OF LIABILITIES............................................4
ARTICLE IV INSTRUMENTS OF TRANSFER AND ASSUMPTION...............................4
SECTION 4.01. TRANSFER DOCUMENTS...................................................4
SECTION 4.02. ASSUMPTION DOCUMENTS.................................................5
ARTICLE V PURCHASE PRICE; ALLOCATION...........................................5
SECTION 5.01. PURCHASE PRICE.......................................................5
SECTION 5.02. DEPOSIT..............................................................5
SECTION 5.03. PAYMENT OF PURCHASE PRICE............................................5
SECTION 5.04. ALLOCATION OF PURCHASE PRICE.........................................5
SECTION 5.05. PURCHASE PRICE ADJUSTMENT............................................6
ARTICLE VI CLOSING..............................................................8
SECTION 6.01. PRIMARY CLOSING......................................................8
SECTION 6.02. FINAL CLOSING........................................................8
ARTICLE VII SELLER'S REPRESENTATIONS.............................................9
SECTION 7.01. ORGANIZATION, QUALIFICATION..........................................9
SECTION 7.02. CONSENTS, AUTHORIZATION, EXECUTION AND DELIVERY OF AGREEMENT.........9
SECTION 7.03. SUBSIDIARIES AND INTERESTS IN OTHER COMPANIES........................9
SECTION 7.04. TITLE TO ASSETS; CONDITION OF ASSETS.................................9
SECTION 7.05. REAL PROPERTY - OWNED...............................................10
SECTION 7.06. REAL AND PERSONAL PROPERTY - LEASED.................................10
SECTION 7.07. EXISTING CONTRACTS..................................................10
SECTION 7.08. GOVERNMENTAL LICENSES...............................................11
SECTION 7.09. COMPLIANCE WITH LAWS................................................12
SECTION 7.10. NO VIOLATION OF EXISTING AGREEMENTS.................................12
SECTION 7.11. LITIGATION AND LEGAL PROCEEDINGS....................................12
SECTION 7.12. ENVIRONMENTAL COMPLIANCE............................................12
SECTION 7.13. EMPLOYEES...........................................................13
SECTION 7.14. EMPLOYEE BENEFITS...................................................13
SECTION 7.15. TAX MATTERS.........................................................14
SECTION 7.16. FINANCIAL STATEMENTS................................................15
SECTION 7.17. SUBSCRIBERS/AGENTS..................................................16
SECTION 7.18. INSURANCE...........................................................16
SECTION 7.19. BROKERS.............................................................17
SECTION 7.20. UNDISCLOSED LIABILITIES.............................................17
SECTION 7.21. PRICING OF SERVICES.................................................17
SECTION 7.22. PROPRIETARY RIGHTS..................................................17
SECTION 7.23. ACCOUNTS RECEIVABLE AND BAD DEBTS...................................17
SECTION 7.24. PRODUCT INFORMATION.................................................18
SECTION 7.25. CERTAIN BUSINESS RELATIONSHIPS WITH SELLER..........................18
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SECTION 7.26. YEAR 2000 COMPLIANCE................................................18
SECTION 7.27. DISCLOSURE..........................................................18
SECTION 7.28. HART-SCOTT-RODINO...................................................18
ARTICLE VIII PURCHASER'S REPRESENTATIONS.........................................18
SECTION 8.01. ORGANIZATION; QUALIFICATION.........................................18
SECTION 8.02. CONSENTS; AUTHORIZATION; EXECUTION AND DELIVERY OF AGREEMENT........19
SECTION 8.03. LITIGATION AND LEGAL PROCEEDINGS....................................19
SECTION 8.04. BROKERS.............................................................19
ARTICLE IX SELLER'S AND PURCHASER'S COVENANTS..................................19
SECTION 9.01. INTENTIONALLY OMITTED...............................................19
SECTION 9.02. GOVERNMENTAL APPROVALS..............................................19
SECTION 9.03. THIRD PARTY CONSENTS; CLOSING CONDITIONS............................20
SECTION 9.04. ACCESS..............................................................20
SECTION 9.05. CONDUCT OF BUSINESS.................................................21
SECTION 9.06. NO SHOPPING.........................................................23
SECTION 9.07. EMPLOYEES...........................................................24
SECTION 9.08. SUPPLEMENTAL DISCLOSURE.............................................24
SECTION 9.09. MANAGEMENT AGREEMENT................................................24
SECTION 9.10. LITIGATION MATTERS..................................................24
ARTICLE X CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO PRIMARY CLOSING...24
SECTION 10.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF THIS
AGREEMENT..........................................................................24
SECTION 10.02. CERTIFIED AUTHORIZATIONS............................................25
SECTION 10.03. INCUMBENCY CERTIFICATE..............................................25
SECTION 10.04. THIRD PARTY CONSENTS; FCC GRANT.....................................25
SECTION 10.05. NO MATERIAL ADVERSE CHANGE..........................................25
SECTION 10.06. OPINION OF COUNSEL TO SELLER..........................,.............25
SECTION 10.07. OPINIONS OF FCC COUNSEL TO SELLER...................................25
SECTION 10.08. PURCHASE ESCROW AGREEMENT AND MANAGEMENT AGREEMENT..................26
SECTION 10.09. TITLE INSURANCE; ESTOPPEL...........................................26
SECTION 10.10. INTENTIONALLY OMITTED...............................................26
SECTION 10.11. OPERATION OF CELLULAR SYSTEM........................................26
ARTICLE XI CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO PRIMARY CLOSING......26
SECTION 11.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF THIS
AGREEMENT..........................................................................26
SECTION 11.02. DIRECTORS' RESOLUTIONS..............................................26
SECTION 11.03. INCUMBENCY CERTIFICATE..............................................27
SECTION 11.04. FCC.................................................................27
SECTION 11.05. OPINION OF COUNSEL TO PURCHASER.....................................27
SECTION 11.06. PURCHASE ESCROW AGREEMENT AND MANAGEMENT AGREEMENT..................27
ARTICLE XII - CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION AT FINAL CLOSING.....27
SECTION 12.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF THIS
AGREEMENT..........................................................................27
SECTION 12.02. FCC FINAL ORDER.....................................................27
SECTION 12.03. OPINION OF FCC COUNSEL TO SELLER....................................27
ARTICLE XIII CASUALTY LOSSES.....................................................28
ARTICLE XIV INDEMNIFICATION.....................................................28
SECTION 14.01. INDEMNIFICATION BY SELLER...........................................28
SECTION 14.02. INDEMNIFICATION BY PURCHASER........................................29
SECTION 14.03. NOTICE OF CLAIMS; DEFENSE OF THIRD PARTY............................29
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SECTION 14.04. LIMITATIONS.........................................................31
SECTION 14.05. PURCHASE ESCROW AGREEMENT...........................................31
ARTICLE XV CONFIDENTIALITY AND PRESS RELEASES..................................31
SECTION 15.01. CONFIDENTIALITY.....................................................31
SECTION 15.02. PRESS RELEASES......................................................32
SECTION 15.03. DISCLOSURES REQUIRED BY LAW.........................................32
ARTICLE XVI TERMINATION.........................................................32
SECTION 16.01. BREACHES AND DEFAULTS; OPPORTUNITY TO CURE..........................32
SECTION 16.02. TERMINATION.........................................................33
ARTICLE XVII BROKERS' FEES.......................................................34
ARTICLE XVIII MISCELLANEOUS.......................................................34
SECTION 18.01. ADDITIONAL INSTRUMENTS OF TRANSFER..................................34
SECTION 18.02. NOTICES.............................................................34
SECTION 18.03. EXPENSES............................................................35
SECTION 18.04. TRANSFER TAXES......................................................35
SECTION 18.05. COLLECTION PROCEDURES...............................................36
SECTION 18.06. SPECIFIC PERFORMANCE................................................36
SECTION 18.07. GOVERNING LAW.......................................................36
SECTION 18.08. ASSIGNMENT..........................................................36
SECTION 18.09. SUCCESSORS AND ASSIGNS..............................................36
SECTION 18.10. AMENDMENTS; WAIVERS.................................................36
SECTION 18.11. ENTIRE AGREEMENT....................................................36
SECTION 18.12. COUNTERPARTS........................................................37
SECTION 18.13. SEVERABILITY........................................................37
SECTION 18.14. SECTION HEADINGS....................................................37
Section 18.15. INTERPRETATION......................................................37
Section 18.16. FURTHER ASSURANCES..................................................37
Section 18.17. THIRD PARTIES.......................................................37
Section 18.18. WAIVER OF JURY......................................................37
</TABLE>
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<PAGE>
DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION CITE
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<S> <C>
Asserting Party 13.03
Assets 2.01
Assumed Contracts Article III
Assumption Agreement 4.02
Assumed Liabilities Article III
Audited Historical Financial Statements 7.16(a)(i)
Authorizations 7.08
Balance Sheet Date 7.16(a)(ii)
Base Price 5.01
Bill of Sale 4.01
Breaching Party 15.01
Business Recitals
Cellular System Recitals
CERCLA 7.12(b)
Claims Article XIII
Closing Article VI
Closing Certificate 5.05(c)
Closing Date Article VI
Code 7.14
Controlled Group Member 7.14
Current Assets 5.05(a)
Current Financial Statements 7.16(a)(ii)
Current Liabilities 5.05(a)
Deductible 14.05(a)
Defending Party 14.03
Defined Benefit Pension Plan 7.14
Deposit 5.02
Deposit Escrow Agreement 5.02
Disclosing Party 15.01
Employee Benefit Plans 7.14
Environmental Laws 7.12(c)
ERISA 7.14
ERISA Affiliate 7.14
Escrow Agent 5.03
Escrow Payment 5.03
Excluded Assets 2.02(a)
Existing Contracts 7.07
FCC Recitals
FCC Authorization Recitals
Final Closing 6.02
Final Closing Date 6.02
Final Order 6.02
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<S> <C>
Finality Waiver Notice 10.04
Full Network Deployment 6.01
GAAP 5.05(a)
Hazardous Substances 7.12(b)
Historical Financial Statements 7.16(a)(ii)
Indemnified Purchaser Parties 14.01(a)
Indemnity Escrow Amount 5.03
Independent Accountants 5.05(c)
Interest 9.03
Interim Balance Sheet 7.16(a)(ii)
Interim Income Statement 7.16(a)(ii)
Interim Financial Statements 9.01
Inventory 5.05(a)
Liens Article I
Losses 14.01(a)
Management Agreement 9.09
Manager Recitals
Material Adverse Effect 10.01
Material Loss 10.01
Multiemployer Plan 7.14
Non-Assumed Liabilities Article III
Non-Breaching Party 16.01
Outside Date 16.02(f)
Permitted Liens Article I
Person 7.04
Phase I Assessment 9.05(b)
Phase II Assessment 9.05(b)
Primary Closing 6.01
Primary Closing Date 6.02
Purchase Escrow Agreement 5.03
Purchase Price 5.01
Purchaser Introduction
Purchaser's Estimate 5.05(c)
RCLA 7.12(b)
RCRA 7.12(b)
Recipient Party 15.01
Response Period 5.05(c)
RSA Recitals
Seller Introduction
Seller's Estimate 5.05(c)
Special Temporary Authority 10.04
Survival Period 14.04
Tax 7.15
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<S> <C>
Third Party Claim 14.03
Working Capital Adjustment 5.05(b)
Year 2000 Problem 6.01
</TABLE>
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<PAGE>
SCHEDULES
1 Permitted Liens
2.01(a) Contracts and Licenses
2.01(d) Interests in Real Property
2.01(f) Intangible Personal Property
2.02 Excluded Assets
7.04 Encumbrances; Condition of Assets
7.08 Governmental Licenses
7.09 Compliance with Laws
7.10 Consents
7.11 Litigation
7.12 Environmental Compliance
7.13 Employees
7.14 Employee Benefits
7.15 Tax Matters
7.16(a)(i) Audited Historical Financial Statements
7.16(a)(ii) Current Financial Statements
7.16(c) Certain Transactions Since Balance Sheet Date
7.17 Subscribers; Agents
7.18 Insurance
7.21 Pricing of Services
7.23 Accounts Receivable Aging
7.24 Product Information
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7.25 Certain Business Relationships
7.26 Year 2000 Problems
9.03 Form of Consent Letter
9.05 Condition of Assets
EXHIBITS
A. Bill of Sale
B. Assumption Agreement
C. Purchase Escrow Agreement
D. Management Agreement
E. Opinion of Counsel for Seller
F-1. Opinion of FCC Counsel for Seller (Primary Closing)
F-2. Opinion of FCC Counsel for Seller (Final Closing)
G. Opinion of Counsel for Purchaser
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 30th day of September,
1999 by and between ALASKA-3 CELLULAR, LLC, a Mississippi limited liability
company ("Seller"), and DOBSON CELLULAR SYSTEMS, INC., an Oklahoma
corporation or its designee ("Purchaser").
R E C I T A L S
WHEREAS, Seller owns all right, title and interest in that certain
license (the "FCC Authorization") granted by the Federal Communications
Commission (the "FCC") to provide non-wireline cellular radio telephone
service in the Alaska #3 rural service area (the "RSA") #317A Haines, Alaska
(the "Cellular System");
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 Cellular System (the
"Business"), 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 Purchaser or its designee
(the "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
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 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 and are taken into
account in the Working Capital Adjustment, (ii) 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
<PAGE>
Liens), (iii) the Lien granted to Purchaser in connection with the Management
Agreement, 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
rights owned or used 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 the Primary Closing (collectively, the "Assets"). Such Assets shall be
free and clear of all Liens other than Permitted Liens as of the Primary
Closing. Such Assets shall include, without limitation:
(a) All licenses (including the FCC Authorization), leases,
agreements, licenses, permits, authorizations, 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 (including subscriber deposits), 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 are
more particularly set forth on SCHEDULE 2.01(a) attached hereto.
(b) 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.
(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, testing equipment,
motor vehicles, office equipment, computers and related software, furniture
and fixtures, supplies, inventory, spare parts, and other physical assets,
used in or relating to the Business, and all modifications, additions,
restorations or replacements of the whole or any part thereof.
(d) All real property, leaseholds and other interests in real
property of Seller used in or relating to the Business, as are 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 used or intended for use in connection with the
Business.
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(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.
(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, causes in action, rights of
recovery and rights of set-off of any kind.
(j) The right to receive and retain mail, accounts receivable
payments and other communications.
(k) The right to bill and receive payment for products shipped or
delivered and/or services performed but unbilled or unpaid as of the Primary
Closing.
(l) All advertising, marketing and promotional materials and all
other related printing or written materials.
(m) All notes receivable and accounts receivable (including
subscriber receivables and roaming revenue receivables).
(n) All goodwill as a going concern.
(o) 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 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 on the date hereof.
(c) The Buildout Assets (as defined in the Management Agreement)
shall be purchased by Purchaser pursuant to the terms of the Management
Agreement.
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(d) Roaming receivables accrued as of the date hereof.
ARTICLE III
ASSUMPTION OF LIABILITIES
At the Primary Closing, Purchaser shall assume and agree to perform and
discharge the following to the extent not previously performed or discharged
as of the Primary Closing: (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 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 Primary Closing by Seller in the ordinary course of its business in
accordance with the provisions of Section 9.05 below or that were identified
to and consented by Purchaser (all of such permits, authorizations, licenses,
leases, rights of way, easements and other agreements referred to in items
(i) and (ii) being referred to hereinafter as the "Assumed Contracts"); and
(iii) all "Current Liabilities" (as defined in Section 5.05(a) hereof) but
only if and to the extent that Purchaser receives a credit against the
Purchase Price at the Primary Closing as described in Section 5.05(b) hereof
(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
environmental liabilities related to or arising from Seller's and its
predecessors' ownership, operation or control of the Assets, the Cellular
System or the Business (including with respect to Seller's and its
predecessors' interests in owned or leased real property) for the period
prior to the Primary Closing or 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 any reason of the proceedings relating
to the FCC Authorization in FCC File No. 10008CLP317A88, including any
obligations relating to any settlement thereof (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 Primary Closing, Seller will
deliver to Purchaser (a) a Bill 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 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.
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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 Twelve Million Dollars ($12,000,000) (the "Base Price"), as adjusted
in accordance with the provisions of Section 5.05 hereof (as adjusted, the
"Purchase Price").
SECTION 5.02. DEPOSIT. Purchaser has deposited as a good faith deposit
Two Hundred Fifty Thousand Dollars ($250,000) (the "Deposit") with Chase
Manhattan Trust Company, National Association (the "Escrow Agent"), being
held, invested and disbursed pursuant to the terms of a certain Deposit
Escrow Agreement dated September 23, 1999 (the "Deposit Escrow Agreement").
The Deposit and all earnings thereon will be repaid to Purchaser upon
execution of this Agreement whereupon the Deposit Escrow Agreement shall
terminate.
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 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 C attached hereto (the "Purchase Escrow
Agreement"). 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) $900,000 (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. Prior to the Primary
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 5.03 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
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<PAGE>
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 Cellular System's (i) subscriber accounts
receivable, excluding roaming revenue receivables, that are current to less
than 91 days past due, net of a reserve for bad debts equal to the sum of the
following amounts: five percent (5%) of such accounts receivable that are
not past due or that are thirty (30) or fewer days past due, fifteen percent
(15%) of such accounts receivable that are more than thirty (30) but less
than sixty-one (61) days past due and fifty percent (50%) of such accounts
receivable that are more than sixty (60) but less than ninety-one (91) days
past due; (ii) inventory of cellular telephone handsets and ancillary
equipment held for sale to subscribers and which are reasonably to be
expected based on past practices to be consumed in the normal course of
business within six months after the Primary Closing and are not otherwise
obsolete, reflected at net book value (the "Inventory"); provided in no event
shall the net book value of the Inventory used to determine Current Assets
exceed $25,000; and (iii) prepaid items which Purchaser will receive the
benefit of after the Primary Closing such as prepaid rent, property taxes,
utility charges, fees and deposits paid, all determined as of 12:01 a.m. on
the date hereof in accordance with GAAP.
"CURRENT LIABILITIES" means the Cellular System's (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, (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 date hereof 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
date hereof (the "Working Capital Adjustment").
(c) Seller shall prepare and submit to Purchaser, not later than five
(5) business days prior to the Primary Closing Date, a written good faith
estimate of the amount of the Working Capital 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 Cellular
System. The Seller's Estimate shall be accompanied by a certificate
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<PAGE>
signed by the Manager, 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 Primary Closing, Purchaser and Seller
shall attempt to resolve any disputes between Seller and Purchaser with
respect to Seller's proposed Working Capital Adjustment. In connection
therewith, Purchaser shall have full access to all Seller's records related
to Seller's proposed Working Capital Adjustment. Prior to Primary 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 Primary 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 Primary Closing.
Within 90 days after the Primary 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 the Primary Closing Date, 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 thirty (30) days after its 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 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 amount, if any, as to which there is no
discrepancy. Purchaser and Seller shall use good faith efforts to jointly
resolve their discrepancies within fifteen (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 resolved by Coopers, 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.
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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 an 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
five (5) days of receipt of the Independent Accountants' decision with
respect to such dispute, Purchaser or Seller, as the case may be, shall pay
the amount which it is obligated to pay as determined by the Independent
Accountants. Any amounts owed by Purchaser to Seller in accordance with this
Section 5.05(c) shall not bear interest and shall be paid by wire transfer of
immediately available funds into the Purchase Escrow Account. Any amounts
owed by Seller to Purchaser under this Section 5.05(c) shall be paid by wire
transfer of immediately available funds and shall not bear any interest, and
if not paid when due, may also be paid from the Purchase Escrow Agreement.
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, 2800 BankBoston Plaza, Providence, Rhode
Island 02903 on the date (the "Primary Closing Date") that is the later of
(a) ten (10) 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, or
(b) the earlier of (i) the date on which Full Network Deployment occurs, or
(ii) February 28, 2000. As used herein, the term "Full Network Deployment"
shall mean the later of the date that (a) Purchaser shall have installed a
switch which eliminates any risk that computer applications used by Seller may
be unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date on or after December 31, 1999 (the "Year
2000 Problem") and such switch shall be fully operational, or (b) Purchaser
shall have updated the radio frequency equipment on all of the Cellular System's
cell sites.
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, 2800 BankBoston Plaza, Providence, Rhode Island 02903 on
a date designated by Purchaser (provided that such date shall be after the
Primary Closing) that is within ten (10) business days after the date on which
the FCC order 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
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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 and warrants that:
SECTION 7.01. ORGANIZATION, QUALIFICATION. Seller is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Mississippi; 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 Authorization 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. 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 and member 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. Except as set forth
on SCHEDULE 7.04, Seller has, and will convey to Purchaser at the Primary
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 the Final 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 except as disclosed on SCHEDULE 7.04. 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, limited liability company, 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 industry generally, the tangible property included in the Assets are
technically
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sufficient and capable of providing cellular telephone service in the RSA in
accordance with applicable FCC regulations except as set forth on SCHEDULE
7.08. All of the buildings, towers, transmitters, antenna, fixtures and
improvements 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, and, except as disclosed on SCHEDULE 7.04, 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 such Schedules (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 service), 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
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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 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 Authorization 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 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 and 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 to be filed in connection
with the Authorizations have been timely filed and are accurate and complete.
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 Authorizations or (i) is aware of any reason why the
Authorizations might not be renewed in the ordinary course, (ii) why any of
the Authorizations might be revoked, or (iii) 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
manager, officer or member 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 manager, officer or member 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 manager, officer or
member 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 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
Seller's or its predecessors' ownership or use of the Assets, the conduct of
the Business or on, in or under any property or facility used, owned or
leased by Seller 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 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.
SECTION 7.13. EMPLOYEES. SCHEDULE 7.13 sets forth a true and complete
list of the names and current salaries of all employees of 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. SCHEDULE 7.13 sets forth the only 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. There are no
pending or, to Seller's knowledge, threatened or anticipated strikes, slow
downs, work stoppages or lockouts or threats affecting Seller.
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
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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 with all applicable
requirements of ERISA, the Code, and other applicable law. Each of the
Employee Benefit Plans has been administered 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 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 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 Primary 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
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property taxes, and any other taxes, customs duties, stamp duties, fees,
assessments or similar charges in the nature of a tax, together with any
interest, fines and penalties imposed by any governmental authority
(including federal, state, provincial, municipal and foreign governmental
authorities), and whether disputed or not.
SECTION 7.16. FINANCIAL STATEMENTS.
(a) The Purchaser has heretofore been furnished with the following:
(i) true and complete copies of the audited balance sheets of
Seller as of December 31, 1996, December 31, 1997, and December 31,
1998 and the related statements of income and retained earnings and
cash flows for the years then ended, each of such balance sheet and
income statement being attached hereto as SCHEDULE 7.16(a)(i)
(collectively, the "Historical Financial Statements"); and
(ii) true and complete copies of the unaudited balance sheet (the
"Interim Balance Sheet") of Seller as of June 30, 1999 (the "Balance
Sheet Date") and the related unaudited statement of income for the
six-month period then ended (the "Interim Income Statement" and
together with the Interim Balance Sheet, the "Current Financial
Statements"), such balance sheet and income statement being attached
hereto as SCHEDULE 7.16(a)(ii).
(b) Each of the Historical and Current Financial Statements delivered
under Section 7.16 (a)(i) and (ii) hereof was prepared in accordance with GAAP
applied on a basis consistent with prior periods and past practices and, with
respect to the Current Financial Statements, subject to usual and customary
year-end adjustments and except for the omission of certain footnotes and other
presentation items required by GAAP with respect to audited financial
statements; subject to the following proviso, each of the balance sheets
included in such Historical and Current Financial Statements fairly presents 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 and Current Financial Statements fairly presents 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 the
Balance Sheet Date, 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;
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(ii) waived any material rights, whether or not in the ordinary
course of business;
(iii) entered into any other transaction, except in the ordinary
course of business, or entered into any transaction with any 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 or 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 the Cellular System
and as of a date within five (5) days prior to the date hereof, (b) a list of
all agents who sell cellular telephone 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) all marketing and
promotional plans Seller has used, is using, or proposes to use during 1999 to
acquire subscribers. For purposes of this Agreement, the term "subscriber"
means a person or entity subscribing for cellular telephone service on the
Cellular System (i) who pays for service under the Cellular System's normal rate
plan for that category of subscriber, (ii) whose account is active within the
normal practices and procedures of the Cellular System and in no case is more
than 60 days past due from the due date and (iii) who was obtained as a
subscriber (A) in the normal course of business of the Cellular System
consistent with past practice and not as a result of marketing efforts that are
not customary in the cellular telephone industry generally or which were not
utilized by Seller during 1999 on a regular basis or (B) any other plans for
which the Seller obtain Purchaser's prior written consent, which consent will
not be unreasonably withheld.
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
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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 for the Cellular System 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 Interim 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 the
Cellular 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 Interim Balance Sheet or thereafter
acquired were or (to the extent not heretofore collected) are valid and
genuine, were acquired in the ordinary course of business and are subject to
no asserted counterclaims, defenses or setoffs (subject to reserves therefor
as will be taken into account in the determination of Current Assets at
Closing in accordance with Section 5.05). SCHEDULE 7.23 attached hereto sets
forth a true, complete and accurate list, as of the end of the most recent
normal billing cycle of the Cellular System, listing the total amounts of
subscriber receivables and the aging of such subscriber receivables of the
Cellular System based on the following Schedule: 0-30 days, 31-60 days, 61-90
days and over 90 days, from the date thereof.
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SECTION 7.24. PRODUCT INFORMATION. Except as disclosed on SCHEDULE 7.24,
Seller has not sold and does not have in its inventory any refurbished telephone
handsets. SCHEDULE 7.24 sets forth a list of manufacturers of telephone
handsets presently in Seller's inventory.
SECTION 7.25. CERTAIN BUSINESS RELATIONSHIPS WITH SELLER. Except as set
forth in SCHEDULE 7.25 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.
SECTION 7.26. YEAR 2000 PROBLEMS. Attached hereto as SCHEDULE 7.26 is a
description of areas of Seller's business and operations which Seller believes
could be adversely affected by the Year 2000 Problem.
SECTION 7.27. DISCLOSURE. No provision of this Agreement relating to
Seller, the Business or the Assets or any other document, Schedule, Exhibit or
other information furnished by Seller to Purchaser in connection with the
execution, delivery and performance of this Agreement, or the consummation of
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
required to be stated in order to make the statement, in light of the
circumstances in which it is made, not misleading. In connection with the
preparation of this Agreement and the documents, descriptions, opinions,
certificates, Exhibits, Schedules or written material prepared by Seller and
appended hereto or delivered or to be delivered hereunder, Seller agrees it will
disclose to Purchaser any fact known to Seller which Seller knows or believes
would affect Purchaser's decision to proceed with the execution of this
Agreement. Except for facts affecting the cellular telephone industry
generally, there is no fact now known to Seller relating to the Business or
Assets which in Seller's reasonable opinion adversely affects the condition of
the Assets, the status of the FCC Authorization or the ownership, operation,
financial condition or prospects of the Business which has not been disclosed to
Purchaser or set forth in the Exhibits or Schedules attached hereto.
SECTION 7.28. 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.
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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.
ARTICLE IX
SELLER'S AND PURCHASER'S COVENANTS
SECTION 9.01. INTENTIONALLY OMITTED.
SECTION 9.02. GOVERNMENTAL APPROVALS. 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 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. Each of Purchaser and
Seller hereby agrees to file the necessary Forms 490 and 702 with the FCC
transferring or assigning control of the FCC Authorization for the Business 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. Seller and
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Purchaser shall share equally all filing fees in connection with any filings
pursuant to this Section 9.02(a).
SECTION 9.03. THIRD PARTY CONSENTS; CLOSING CONDITIONS. (a) Seller
covenants and agrees to use its best 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 best 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. 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 Primary 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
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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.
(c) Seller shall allow Purchaser the opportunity to conduct an
engineering review of the Assets to confirm that the Assets comply with the
FCC Authorization and the regulations of the FCC and, except as disclosed on
SCHEDULE 7.04, are otherwise in good condition and repair, reasonable wear
and tear excepted.
SECTION 9.05. CONDUCT OF BUSINESS. From and after the date hereof Seller
shall:
(a) operate the Cellular System in accordance with the FCC
Authorization, 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
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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 Cellular System's 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;
(g) 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 Cellular System, 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 certificate of formation or
operating agreement in any way which would materially adversely affect
its power or authority to enter into and perform this Agreement, or
which would otherwise materially adversely affect its performance of
this Agreement;
(k) continue to advertise, promote and market the Cellular
System and its services in a manner consistent with past practice, and
in any event from the date hereof through the Primary Closing, spend
on advertising, marketing and promotion, on an aggregate basis from
the date hereof to the Primary Closing and consult regularly with
Purchaser on the status and effectiveness of promotions and on any
modifications to promotions to increase the number of subscribers to
the Cellular System;
(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;
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(n) provide to the Purchaser, concurrently with filing thereof,
copies of all reports to and other filings with the FCC;
(o) 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 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;
(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 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 Cellular System; 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
Primary Closing Date;
(s) refrain from taking any action not in Seller's usual course
of business regarding the Cellular System 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 Primary 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 Primary Closing to Purchaser's billing system and (z)
Purchaser's efforts to upgrade equipment (at Purchaser's cost) after
Primary Closing.
SECTION 9.06. NO SHOPPING. Prior to the Primary 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.
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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.
SECTION 9.08. SUPPLEMENTAL DISCLOSURE. Seller shall promptly from time to
time prior to the Primary 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 such breach in writing
to Seller.
SECTION 9.09. MANAGEMENT AGREEMENT. Simultaneously with the execution of
this Agreement, the Manager and Seller shall enter into the Management Agreement
in the form attached hereto as EXHIBIT E (the "Management Agreement") pursuant
to which the Manager will provide management services to Seller prior to the
Primary Closing.
SECTION 9.10. LITIGATION MATTERS. Seller and Purchaser agree that any and
all costs of litigation and other proceedings pertaining to the FCC
Authorization, shall be the responsibility of Seller, and that Seller shall
control the defense of such litigation or proceeding, subject to Purchaser's
right to assist in the defense.
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, any of which may be
waived in writing by Purchaser:
SECTION 10.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
THIS AGREEMENT. Except as they have been affected by Purchaser's actions, all
of the representations and warranties made by Seller in this Agreement shall be
true and correct at and as of the Primary 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 14.01) in excess of $10,000 in the aggregate (a "Material Loss") or
otherwise result in a Material Adverse Effect; provided however, that should
Purchaser elect not to close the transaction contemplated hereby due to a breach
by Seller that causes a Material Loss or a Material Adverse Effect, Seller shall
have the right to cure such breach or inaccuracy as set forth in Section 16.01.
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 Primary 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
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Adverse Effect. Purchaser shall have been furnished with a certificate or
certificates of Seller's President, dated as of the Primary 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 industry generally.
SECTION 10.02. CERTIFIED AUTHORIZATIONS. Seller shall deliver to Purchaser
copies of the resolutions of the members and, if applicable, the managers 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.
SECTION 10.04. THIRD PARTY CONSENTS; FCC GRANT. Seller shall have
delivered to Purchaser such instruments, consents and approvals (the form and
substance of which shall be reasonably satisfactory to Purchaser) as are
necessary to assign to Purchaser without modification thereof, as of the
Closing, the Assets and the Assumed Contracts. Prior to Primary Closing Date,
the FCC shall have granted its consent to the assignment of the FCC
Authorization to Purchaser without any conditions which the Purchaser reasonably
deems to be adverse. Anything herein to the contrary notwithstanding, but
subject to the provisions of Section 17.01, the Purchaser shall have the right
(in its sole discretion) to waive the requirement set forth in the preceding
sentence by delivery to Seller of a written notice to such effect (the "Finality
Waiver Notice").
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,
properties or prospects of the Cellular System or Assets, from June 30, 1999 to
the Primary Closing unless such material adverse change occurred as a direct
result of Purchaser's actions or as a result of a Year 2000 Problem.
SECTION 10.06. OPINION OF COUNSEL TO SELLER. Purchaser shall have been
furnished with opinions of Young, Williams, Henderson & Fusilier, P.A., counsel
to Seller, dated as of the Primary 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 Lukas, Nace, Gutierrez & Sachs, FCC counsel for
Seller, dated as of the Primary Closing and addressed to Purchaser, and to any
financial institution designated by
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Purchaser which has provided the financing in connection with the
transactions contemplated by this Agreement, in substantially the form of
EXHIBIT F-1 attached hereto.
SECTION 10.08. PURCHASE ESCROW AGREEMENT AND MANAGEMENT AGREEMENT. Seller
and the Escrow Agent each shall have executed and delivered the Purchase Escrow
Agreement, and Seller shall have executed and delivered the Management
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. INTENTIONALLY OMITTED.
SECTION 10.11. OPERATION OF CELLULAR SYSTEM. Seller shall have continued
to operate the Cellular System and market the Cellular System's services in the
normal course of business and in accordance with past practice.
ARTICLE XI
CONDITIONS PRECEDENT TO
SELLER'S OBLIGATION TO PRIMARY CLOSING
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 Primary
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 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 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. The FCC shall have issued an order granting its
consent to the assignment of the FCC Authorization 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 G hereto.
SECTION 11.06. PURCHASE ESCROW AGREEMENT AND MANAGEMENT AGREEMENT.
Purchaser and the Escrow Agent each shall have executed and delivered the
Purchase Escrow Agreement, and Purchaser shall have executed and delivered the
Management Agreement, to Seller.
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 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 Lukas, Nace, Gutierrez & Sachs, 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.
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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 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 Primary Closing Date. To the
extent the repair, rebuild or replacement of the portion of the Assets damaged,
destroyed or lost prior to the Primary 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 Primary 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.
ARTICLE XIV
INDEMNIFICATION
SECTION 14.01. INDEMNIFICATION BY SELLER. (a) After the Primary 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 Non-Assumed Liability, 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, the Cellular
System or the Business or any other state of facts which existed at or
prior to Primary Closing, including, without limitation, any
environmental liabilities arising out of Seller's or its predecessors'
interests in real property or any fines or forfeitures imposed or
threatened to be imposed by the FCC for the operation, at or prior to
the Primary Closing, of the Cellular System 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 Deposit Escrow Agreement, the
Purchase Escrow Agreement, the Management Agreement, the Bill of Sale,
the Assumption Agreement or in any closing certificate delivered by
Seller to Purchaser pursuant to Article X hereof;
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(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 Primary Closing Date; and
(iv) All costs and expenses (including reasonable attorneys'
fees) incurred by Purchaser in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the
matters Purchaser is indemnified against by Seller in this Agreement.
(b) In addition and subject to the terms of this Article XIV, 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 14.02. INDEMNIFICATION BY PURCHASER. After the Primary 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, and its managers,
officers, members, employees, representatives and agents harmless from and
against and in respect of any Losses incurred by Seller from:
(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; 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 Deposit Escrow
Agreement, the Purchase Escrow Agreement, the Management 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 Primary 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 14.03. NOTICE OF CLAIMS; DEFENSE OF THIRD PARTY. A party claiming
indemnification under this Article XIV (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,
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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 14.03, the Defending Party
shall not be liable for any fees and expenses of counsel for the Asserting
Party incurred thereafter in connection with the Third Party Claim (except in
the case of actual or potential differing interests, as provided in the
preceding sentence), but shall not agree to any settlement of such Third
Party Claim which does not include an unconditional release of the Asserting
Party by the third party claimant on account thereof, PROVIDED that such
requirement shall be deemed waived to the extent that the Asserting Party
does not undertake to provide and promptly execute and, concurrently with the
delivery of any such release, deliver a corresponding release of the third
party claimant with respect to such Third Party Claim. If the Defending
Party does not assume liability for and the defense of the Third Party Claim
pursuant to this Section 14.03, the Asserting Party shall have the right (i)
to control the defense thereof and (ii), if the Asserting Party shall have
notified the Defending Party of the Asserting Party's intention to negotiate
a settlement of the Third Party Claim (at the Defending Party's expense to
the extent the matter is determined to be subject to indemnification
hereunder), which notice shall include the material terms of any proposed
settlement in reasonable detail, to settle the Third Party Claim (at the
Defending Party's expense to the extent the matter is determined to be
subject to indemnification hereunder) on terms not materially inconsistent
with those set forth in such notice, unless the Defending Party shall have
notified the Asserting Party in writing of the Defending Party's election to
assume liability for and the defense of the Third Party Claim pursuant to
this Section 14.03 within ten days after receipt of such notice, and the
Defending Party promptly thereafter shall have taken appropriate action to
implement such defense. The Asserting Party shall not be entitled to settle
any such Third Party Claim pursuant to the preceding sentence unless such
settlement includes an unconditional release of the Defending Party by the
Third party claimant on account thereof, PROVIDED that such requirement shall
be deemed waived to the extent that the Defending Party does not undertake to
provide and promptly execute and, concurrently with delivery of any such
release, deliver a corresponding release of the third party claimant with
respect to such Third Party Claim. The Asserting Party and the Defending
Party shall use all reasonable efforts to cooperate fully with respect to the
defense and settlement of any Third Party Claim covered by this Article XIV.
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SECTION 14.04. 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 $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 14.02(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 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 sentence of Section 7.04,
and Section 7.15 shall survive the Primary Closing for an unlimited duration and
(y) the representations and warranties contained in Sections 7.09 and 7.12 (as
it may relate to Environmental Laws) shall survive the Primary Closing until the
sixth 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.
SECTION 14.05. 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.
ARTICLE XV
CONFIDENTIALITY AND PRESS RELEASES
SECTION 15.01. 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,
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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 15.03. If the Recipient Party breaches,
or threatens to commit a breach of, any of the provisions of this Article XV,
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 15.02. PRESS RELEASES. No press release or public disclosure,
either written or oral, of the existence or terms of this Agreement shall be
made by either Purchaser or Seller without the consent of the other subject to
the provisions of Section 15.03, and Purchaser and Seller shall each furnish to
the other advance copies of any release which it proposes to make public
concerning this Agreement or the transactions contemplated hereby and the date
upon which Purchaser or Seller, as the case may be, proposes to make such press
release.
SECTION 15.03. DISCLOSURES REQUIRED BY LAW. This Article XV shall not,
however, be construed to prohibit any party from making any disclosures to any
governmental authority that it is required to make by law or from filing this
Agreement with, or disclosing the terms of this Agreement to, any institutional
lender to such party, or prohibit Seller, Purchaser or any of their affiliates
from disclosing to its investors, partners, accountants, auditors, attorneys,
parent company and broker/dealers such terms of this transaction as are
customarily disclosed to them in connection with the sale or acquisition of a
cellular telephone system; PROVIDED, HOWEVER, that 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 XVI
TERMINATION
SECTION 16.01. 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 16.02).
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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 16.02. 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 Final Closing (except 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) subject to Section 16.01, 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) 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) subject to Section 16.01, by Seller, if Purchaser shall
have materially breached any of its representations or covenants
herein and such breaches, in the aggregate, would reasonably be
expected to have a Material Adverse Effect; or
(f) by either Seller or Purchaser if the Primary Closing shall
not have occurred on or before May 31, 2000 (the "Outside Date"),
unless the failure to have the Closing shall be due to the failure of
the party seeking to terminate this Agreement to perform in any
material respect its obligations under this Agreement required to be
performed by it at or prior to the Primary Closing.
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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
MISCELLANEOUS
SECTION 18.01. ADDITIONAL INSTRUMENTS OF TRANSFER. (a) From time to time
after the Primary 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 have not been obtained by Seller as of the Primary Closing
and Purchaser elects to proceed with the Primary Closing, Seller shall, for the
remaining term of such Interest, use its commercially 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 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 any proceedings against the third party, from whom such approval,
consent or waiver is requested.
SECTION 18.02. NOTICES. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if delivered, sent by telecopier, recognized overnight delivery
service or registered or certified mail, return receipt requested, postage
prepaid, to the following addresses:
(i) If to Purchaser:
13439 N. Broadway Extension
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Suite 200
Oklahoma City, Oklahoma 73114
Attention: Everett R. Dobson
Facsimile No.: (405) 529-8515
with a required copy to:
Edwards & Angell, LLP
2800 BankBoston Plaza
Providence, Rhode Island 02903
Attention: Joseph A. Kuzneski, Jr., Esq.
Facsimile No.: (401) 276-6602
(ii) If to Seller:
Alaska-3 Cellular, LLC
c/o Alaska-3 Cellular Corporation, Manager
111 East Capitol Street, Suite 500
Jackson, MS 39201
Attention: E. B. Martin, Jr.
Facsimile No.: (601) 914-8285
with a required copy to:
Young, Williams, Henderson & Fusilier, P.A.
2000 Deposit Guaranty Plaza
Jackson, MS 39201
Attention: Donald Goode, Esq.
Facsimile No.: (601) 360-9041
Notices delivered personally shall be effective upon delivery against
receipt. Notices transmitted by telecopy shall be effective when received,
provided that the burden of proving notice when notice is transmitted by
telecopy shall be the responsibility of the party providing such notice.
Notices delivered by overnight mail shall be effective when received. Notices
delivered by registered or certified mail shall be effective on the date set
forth on the receipt of registered or certified mail, or seventy-two (72) hours
after mailing, whichever is earlier.
SECTION 18.03. EXPENSES. Each party shall bear its own expenses and
costs, including the fees of any corporate 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, and other governmental filing fees.
SECTION 18.04. 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
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Section 18.04, Purchaser shall in no event be responsible in any manner for
the payment of any Taxes on any income or gain which Seller may realize as a
result of the sale of the Assets or otherwise related to the transactions
contemplated by this Agreement.
SECTION 18.05. COLLECTION PROCEDURES. From and after the 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 the Seller any checks or drafts received on account of
any such items.
SECTION 18.06. SPECIFIC PERFORMANCE. The parties recognize and
acknowledge that in the event either party shall fail to perform its obligations
under the terms of this Agreement, money damages alone will not be adequate to
compensate such party. The parties, therefore, agree and acknowledge that in
the event either party fails to perform its obligations under this Agreement
prior to Final Closing, the other party 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 18.07. 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 18.08. 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 (i) this Agreement
to any of its affiliates or (ii) its rights under this Agreement after the
Primary Closing to any institutional lender.
SECTION 18.09. SUCCESSORS AND ASSIGNS. All agreements made and entered
into in connection with this transaction shall be binding upon and inure to the
benefit of the parties hereto, their successors and permitted assigns.
SECTION 18.10. AMENDMENTS; WAIVERS. No alteration, modification or change
of this Agreement shall be valid except by an agreement in writing executed by
the parties hereto. No failure or delay by any party hereto in exercising any
right, power or privilege hereunder (and no course of dealing between or among
any of the parties) shall operate as a waiver of any such right, power or
privilege. No waiver of any default on any one occasion shall constitute a
waiver of any subsequent or other default. No single or partial exercise of any
such right, power or privilege shall preclude the further or full exercise
thereof.
SECTION 18.11. ENTIRE AGREEMENT. This Agreement merges all previous
negotiations and agreements between the parties hereto, either verbal or
written, and constitutes the entire agreement and understanding between the
parties with respect to the subject matter of this Agreement.
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SECTION 18.12. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which when so executed shall be an original, but all
of which together shall constitute one agreement. Facsimile signatures shall be
deemed original signatures.
SECTION 18.13. SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law, but only
as long as the continued validity, legality and enforceability of such provision
or application does not materially (a) alter the terms of this Agreement, (b)
diminish the benefits of this Agreement or (c) increase the burdens of this
Agreement, for any person.
SECTION 18.14. SECTION HEADINGS. The section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement.
SECTION 18.15. INTERPRETATION. As both parties have participated in the
drafting of this Agreement, any ambiguity shall not be construed against either
party as the drafter.
SECTION 18.16. FURTHER ASSURANCES. For a period of twelve (12) months
after Closing, 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 Primary Closing which the Purchaser reasonably requests
in the future in connection with the Purchaser's financing efforts now or in the
future or in connection with any FCC or other regulatory filing.
SECTION 18.17. THIRD PARTIES. Except with respect to 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 18.18. 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:
ALASKA-3 CELLULAR, LLC
By: Alaska-3 Cellular Corporation, its
Manager
By: /s/ E. B. MARTIN, JR.
-------------------------------------------
Print Name: E. B. Martin, Jr.
-----------------------------------
Title: Vice President
----------------------------------------
PURCHASER:
DOBSON CELLULAR SYSTEMS, INC.
By: /s/ TIMOTHY J. DUFFY
-------------------------------------------
Print Name: Timothy J. Duffy
------------------------------------
Title: Senior Vice President of Engineering
-----------------------------------------
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AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 5, 1999
AMONG
ACC ACQUISITION LLC,
A DELAWARE LIMITED LIABILITY COMPANY
ACC ACQUISITION CO.,
A DELAWARE CORPORATION
AND
AMERICAN CELLULAR CORPORATION,
A DELAWARE CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I.THE MERGER..............................................................................................1
1.1 THE MERGER................................................................................................1
1.2 CLOSING...................................................................................................2
1.3 EFFECTIVE TIME............................................................................................2
1.4 EFFECTS OF THE MERGER.....................................................................................2
1.5 CERTIFICATE OF INCORPORATION..............................................................................2
1.6 BYLAWS....................................................................................................2
1.7 DIRECTORS AND OFFICERS....................................................................................2
1.8 EFFECT ON CAPITAL STOCK...................................................................................3
1.9 SURRENDER AND PAYMENT; DISSENTING SHARES..................................................................4
ARTICLE II.REPRESENTATIONS AND WARRANTIES.........................................................................7
2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................................7
2.2 REPRESENTATIONS AND WARRANTIES OF BUYER..................................................................19
2.3 REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB...................................................22
ARTICLE III.COVENANTS RELATING TO CONDUCT OF BUSINESS............................................................22
3.1 COVENANTS OF THE COMPANY.................................................................................22
3.2 COVENANTS OF BUYER AND MERGER SUB........................................................................25
3.3 ADVICE OF CHANGES........................................................................................26
3.4 CONTROL OF OTHER PARTY'S BUSINESS........................................................................26
ARTICLE IV.ADDITIONAL AGREEMENTS.................................................................................26
4.1 COMPANY STOCKHOLDERS MEETING.............................................................................26
4.2 ACCESS TO INFORMATION....................................................................................27
4.3 COOPERATION; FILINGS AND APPROVALS.......................................................................27
4.4 NO SHOPPING..............................................................................................29
4.5 EMPLOYEE BENEFITS........................................................................................30
4.6 FEES AND EXPENSES........................................................................................30
4.7 INDEMNIFICATION; DIRECTORS'AND OFFICERS'INSURANCE........................................................31
4.8 PUBLIC ANNOUNCEMENTS.....................................................................................32
4.9 FCC APPLICATION..........................................................................................32
4.10 FINANCING................................................................................................33
4.11 TERMINATION OF EQUITY DOCUMENTS..........................................................................34
4.12 FURTHER ASSURANCES.......................................................................................34
ARTICLE V.CONDITIONS PRECEDENT...................................................................................34
5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER...............................................34
5.2 CONDITIONS TO THE OBLIGATIONS OF BUYER AND MERGER SUB TO EFFECT THE MERGER...............................35
5.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO EFFECT THE MERGER........................................37
ARTICLE VI.TERMINATION AND AMENDMENT.............................................................................37
6.1 TERMINATION..............................................................................................37
6.2 EFFECT OF TERMINATION....................................................................................39
6.3 AMENDMENT................................................................................................40
6.4 EXTENSION; WAIVER........................................................................................40
ARTICLE VII.GENERAL PROVISIONS...................................................................................41
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7.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; NO OTHER REPRESENTATIONS AND WARRANTIES......41
7.2 NOTICES..................................................................................................41
7.3 INTERPRETATION...........................................................................................43
7.4 COUNTERPARTS.............................................................................................43
7.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES...........................................................43
7.6 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL........................................................44
7.7 SEVERABILITY.............................................................................................44
7.8 ASSIGNMENT...............................................................................................45
7.9 ENFORCEMENT..............................................................................................45
7.10 DEFINITIONS..............................................................................................45
</TABLE>
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GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
LOCATION OF
DEFINITION DEFINED TERM
<S> <C>
Acquisition Proposal....................................................................................Section 4.4
Action...............................................................................................Section 5.2(e)
Agreement..................................................................................................Preamble
Bank................................................................................................Section 4.10(a)
Bank Commitment Letter ...........................................................................Section 2.2(g)(i)
Bank Credit Facility................................................................................Section 4.10(a)
Bank Financing Failure .................................................................................Section 6.2
Board of Directors..................................................................................Section 7.10(a)
Business Day........................................................................................Section 7.10(b)
Buyer......................................................................................................Preamble
Buyer Disclosure Schedule...............................................................................Section 2.2
Buyer SEC Reports....................................................................................Section 2.2(c)
Certificate of Merger...................................................................................Section 1.3
CMRS............................................................................................Section 2.1(e)(iii)
Class A Common Stock.................................................................................Section 1.8(c)
Class B Common Stock.................................................................................Section 1.8(d)
Closing.................................................................................................Section 1.2
Closing Date............................................................................................Section 1.2
Code.................................................................................................Section 1.9(h)
Commitment Letter...................................................................................Section 4.10(a)
Common Stock Purchase Price..........................................................................Section 1.8(c)
Communications Act..............................................................................Section 2.1(c)(iii)
Company....................................................................................................Preamble
Company 10-K......................................................................................Section 2.1(d)(i)
Company Benefit Plans.............................................................................Section 2.1(k)(i)
Company Board..............................................................................................Recitals
Company Common Stock.................................................................................Section 1.8(d)
Company Disclosure Schedule.............................................................................Section 2.1
Company Permits......................................................................................Section 2.1(f)
Company SEC Reports...............................................................................Section 2.1(d)(i)
Company Stockholders Meeting.........................................................................Section 4.1(a)
Company Voting Debt.............................................................................Section 2.1(b)(iii)
Confidentiality Agreement ..............................................................................Section 4.2
Definitive Financing Agreements.....................................................................Section 4.10(b)
Delaware Secretary of State.............................................................................Section 1.3
DGCL.......................................................................................................Recitals
Direct Preferred Stock Purchase......................................................................Section 1.8(e)
Dissenting Shares ...................................................................................Section 1.9(i)
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Effective Time..........................................................................................Section 1.3
ERISA.............................................................................................Section 2.1(k)(i)
Exchange Act......................................................................................Section 2.1(d)(i)
Exchange Agent.......................................................................................Section 1.9(a)
Executive Agreements.............................................................................Section 2.1(b)(iv)
Expenses................................................................................................Section 4.6
Extension Conditions.................................................................................Section 6.1(b)
FAA...............................................................................................Section 2.1(f)(i)
FCC.....................................................................................................Section 1.1
FCC Application......................................................................................Section 4.9(a)
FCC Licenses......................................................................................Section 2.1(e)(i)
FCC Transfer Approvals...............................................................................Section 5.1(d)
Final Order..........................................................................................Section 5.2(c)
Financing...........................................................................................Section 4.10(a)
GAAP.............................................................................................Section 2.1(d)(ii)
Governmental Entity.............................................................................Section 2.1(c)(iii)
Grant Agreements ....................................................................................Section 1.8(d)
HSR Act.........................................................................................Section 2.1(c)(iii)
Indemnified Party....................................................................................Section 4.7(a)
Intellectual Property ..............................................................................Section 7.10(c)
Investment Agreement.............................................................................Section 2.1(c)(ii)
Laredo Joint Venture ................................................................................Section 2.1(r)
Liens............................................................................................Section 2.1(b)(ii)
Liquidated Damages Amount ..............................................................................Section 6.2
Majority Holders...........................................................................................Recitals
Material Adverse Effect.............................................................................Section 7.10(d)
Material Contracts...................................................................................Section 2.1(j)
Merger.....................................................................................................Recitals
Merger Consideration.................................................................................Section 1.8(e)
Merger Sub.................................................................................................Preamble
Merrill Lynch........................................................................................Section 2.1(n)
Organizational Documents............................................................................Section 7.10(e)
Outside Date.........................................................................................Section 6.1(b)
Outstanding Indebtedness..........................................................................Section 2.1(b)(v)
Payment Fund ........................................................................................Section 1.9(a)
Pending Acquisitions.................................................................................Section 2.1(r)
Pending Dispositions.................................................................................Section 2.1(r)
Pending Transaction Documents........................................................................Section 2.1(r)
Person..............................................................................................Section 7.10(f)
Preferred Stock Liquidation Preference...............................................................Section 1.8(e)
Proxy Statement......................................................................................Section 4.1(b)
Real Property........................................................................................Section 2.1(s)
Repurchase Option ...................................................................................Section 1.8(d)
Required Company Vote................................................................................Section 2.1(m)
Required Regulatory Approvals........................................................................Section 5.1(c)
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SEC...............................................................................................Section 2.1(d)(i)
Securities Act....................................................................................Section 2.1(d)(i)
Senior Notes........................................................................................Section 4.10(a)
Series A Preferred Stock.............................................................................Section 1.8(e)
Stay Bonuses....................................................................................Section 2.1(b)(vii)
Subsidiary..........................................................................................Section 7.10(g)
Superior Proposal....................................................................................Section 4.4(b)
Surviving Corporation...................................................................................Section 1.1
Surviving Corporation Common Stock...................................................................Section 1.8(a)
Tax.................................................................................................Section 7.10(h)
Taxable.............................................................................................Section 7.10(h)
Taxes...............................................................................................Section 7.10(h)
Tax Return..........................................................................................Section 7.10(h)
Terminating Buyer Breach.............................................................................Section 6.1(f)
Terminating Company Breach...........................................................................Section 6.1(e)
Transaction Fees and Expenses...................................................................Section 2.1(b)(vii)
Unrestricted Equity Agreement ...................................................................Section 2.2(g)(ii)
Violation........................................................................................Section 2.1(c)(ii)
Voting Agreement ..........................................................................................Recitals
WARN ................................................................................................Section 3.3(f)
Written Consent of Shareholders......................................................................Section 2.1(m)
</TABLE>
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THIS AGREEMENT AND PLAN OF MERGER, dated as of October 5, 1999
(this "AGREEMENT"), is among ACC Acquisition LLC, a Delaware limited liability
company ("BUYER"), ACC Acquisition Co., a Delaware corporation and a wholly
owned subsidiary of Buyer ("MERGER SUB"), and American Cellular Corporation, a
Delaware corporation (the "COMPANY").
WHEREAS, the Board of Managers of Buyer, the Board of
Directors of Merger Sub and the Board of Directors of the Company (the "COMPANY
BOARD") have each approved the acquisition of the Company by Buyer upon the
terms and subject to the conditions of this Agreement pursuant to which, among
other things, Merger Sub will merge with and into the Company (the "MERGER") in
accordance with the General Corporation Law of the State of Delaware (the
"DGCL"), and have each unanimously declared this Agreement and the transactions
contemplated hereby, including the Merger, to be advisable and in the best
interests of the members of Buyer and the stockholders of each of Merger Sub and
the Company;
WHEREAS, Buyer, Merger Sub and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger as set forth
in this Agreement; and
WHEREAS, concurrently with the execution of this Agreement and
as an inducement to Buyer and Merger Sub to enter into this Agreement, certain
stockholders of the Company owning a majority of the Company's Class A Common
Stock ("MAJORITY HOLDERS") have entered into a Stockholder Voting Agreement,
dated as of the date hereof, with Buyer and Merger Sub (the "VOTING AGREEMENT")
pursuant to which, among other things, the Majority Holders have agreed to vote
their shares of the Company's Class A Common Stock in favor of this Agreement,
the Merger and the other transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I.
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement (including the approval of the Federal
Communications Commission (the "FCC")), at the Effective Time (defined
below), Merger Sub shall be merged with and into the Company in accordance
with the DGCL. Following the Merger, the separate corporate existence of
Merger Sub shall cease, and the Company shall continue as the surviving
corporation and as a wholly owned subsidiary of Buyer (the "SURVIVING
CORPORATION").
<PAGE>
1.2 CLOSING. The closing of the Merger (the "CLOSING") shall
take place as soon as practicable but not later than the second business day,
after satisfaction or waiver (as permitted by this Agreement and applicable
law) of the conditions (excluding conditions that, by their terms, cannot be
satisfied until the Closing Date) set forth in Article V (the "CLOSING
DATE"), unless another time or date is agreed to in writing by the parties
hereto. The Closing shall be held at the offices of Latham & Watkins, 885
Third Avenue, Suite 1000, New York, New York 10022-4802, unless another place
is agreed to in writing by the parties hereto.
1.3 EFFECTIVE TIME. Upon the Closing, the parties shall file
with the Secretary of State of the State of Delaware (the "DELAWARE SECRETARY
OF STATE") a certificate of merger (the "CERTIFICATE OF MERGER"), in form and
substance satisfactory to the Company and Buyer executed in accordance with
the relevant provisions of the DGCL and shall make all other filings,
recordings or publications required under the DGCL in connection with the
Merger. The Merger shall become effective at such time as the Certificate of
Merger is duly filed with the Delaware Secretary of State, or at such other
time as the parties may agree and specify in the Certificate of Merger (the
time the Merger becomes effective being herein referred to as the "EFFECTIVE
TIME").
1.4 EFFECTS OF THE MERGER. At and after the Effective Time, the
Merger will have the effects set forth in Section 259 of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the rights, privileges, powers and franchises of the
Company and Merger Sub shall be vested in the Surviving Corporation, and the
Surviving Corporation shall become subject to all of the restrictions,
disabilities and duties of the Company and Merger Sub.
1.5 CERTIFICATE OF INCORPORATION. At the Effective Time and
without any further action on the part of the Company or Merger Sub, the
certificate of incorporation of the Company shall be amended in its entirety
to read as the certificate of incorporation of Merger Sub reads as in effect
immediately prior to the Effective Time and, as so amended, shall be the
certificate of incorporation of the Surviving Corporation until thereafter
amended as provided therein or by applicable law, provided that provisions
therein relating to the indemnification and exculpation of officers and
directors shall be no less favorable than those set forth in the Company's
certificate of incorporation as in effect immediately prior to the Effective
Time.
1.6 BYLAWS. The bylaws of Merger Sub in effect immediately
prior to the Effective Time shall be the bylaws of the Surviving Corporation
until thereafter amended as provided therein or by applicable law, provided
that provisions therein relating to the indemnification and exculpation of
officers and directors shall be no less favorable than those set forth in the
Company's bylaws as in effect immediately prior to the Effective Time.
1.7 DIRECTORS AND OFFICERS. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the
Surviving Corporation from and after the Effective Time, until the earlier of
their resignation or removal or otherwise ceasing to be a director or until
their respective successors are duly elected and qualified, as the case may
be. The officers of Merger Sub immediately prior to the Effective Time shall
be the officers of the Surviving Corporation from and after the Effective
Time, until the earlier of their resignation or removal or
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otherwise ceasing to be an officer or until their respective successors are
duly elected and qualified, as the case may be.
1.8 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of Buyer, Merger Sub, the
Company or the holder of any shares of capital stock of Buyer, Merger Sub or
the Company:
(a) CONVERSION OF CAPITAL STOCK OF MERGER SUB. Each share
of capital stock of Merger Sub outstanding immediately prior to the Effective
Time shall be converted into and become one fully paid and nonassessable
share of common stock, par value $.01 per share, of the Surviving Corporation
("SURVIVING CORPORATION COMMON STOCK"). Each certificate that, prior to the
Effective Time, represented one or more shares of capital stock of Merger Sub
shall thereafter represent that number of shares of Surviving Corporation
Common Stock into which the shares of capital stock of Merger Sub shall have
been converted pursuant to this Section 1.8(a). Each record holder of a
certificate that, prior to the Effective Time, represented one or more shares
of capital stock of Merger Sub shall receive, upon surrender of such
certificate, a new certificate or certificates evidencing and representing
the number of shares of Surviving Corporation Common Stock to which such
record holder shall be entitled pursuant to this Section 1.8(a).
(b) CANCELLATION OF TREASURY STOCK AND BUYER-OWNED STOCK.
Each share of capital stock of the Company that is held by the Company in its
treasury or that is owned by Buyer or any Subsidiary of Buyer immediately
prior to the Effective Time shall automatically be retired and shall cease to
exist, and no Merger Consideration shall be delivered in exchange therefor.
(c) CONVERSION OF CLASS A COMMON STOCK. Subject to Section
1.9(i), each share of Class A Common Stock, par value $.01 per share, of the
Company (the "CLASS A COMMON STOCK") (other than shares of Class A Common
Stock to be canceled in accordance with Section 1.8(b), but including shares
of Class B Common Stock converted to Class A Common Stock in accordance with
Section 1.8(d)) issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive an amount equal to
$3,244.24 per share in cash as adjusted pursuant to the last sentence of this
Section 1.8(c), plus interest thereon for the period commencing on January 1,
2000 through and including the Closing Date at a rate of eight percent (8%)
per annum (compounded daily calculated on the basis of a 365-day year for the
actual number of days elapsed) (the "COMMON STOCK PURCHASE PRICE"). As of the
Effective Time, all such shares of Class A Common Stock shall no longer be
outstanding and shall automatically be retired and shall cease to exist, and
each holder of a certificate representing any such shares of Class A Common
Stock shall cease to have any rights with respect thereto, except the right
to receive, upon the surrender of such certificates, the Common Stock
Purchase Price. If any shares of Company Common Stock are repurchased
pursuant to stock repurchase rights, the Common Stock Purchase Price shall be
the amount determined pursuant to the following formula: (A) $873,956,081
minus the amount paid to repurchase shares of Company Common Stock, plus
interest on such difference for the period commencing on January 1, 2000
through and including the Closing Date at a rate of eight percent (8%) per
annum (compounded daily
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<PAGE>
calculated on the basis of a 365-day year for the actual number of days
elapsed), divided by (B) the number of shares of Company Common Stock
outstanding after such repurchase.
(d) CONVERSION OF CLASS B COMMON STOCK. Subject to the
terms of the Executive Agreements or the subscription agreement with respect
thereto, as they may be amended from time to time, identified in Section
2.1(b)(iv)(3), (4) and (5) of the Company Disclosure Schedule (collectively,
the "GRANT AGREEMENTS"), each share of Class B Common Stock, par value $.01
per share, of the Company (the "CLASS B COMMON STOCK" and, together with the
Class A Common Stock, the "COMPANY COMMON STOCK") (other than shares of Class
B Common Stock to be canceled in accordance with Section 1.8(b)) issued and
outstanding immediately prior to the Effective Time, whether or not then
vested or subject to a repurchase option in favor of the Company (a
"REPURCHASE OPTION"), shall become fully vested and the Repurchase Option, if
any, with respect thereto shall lapse and each such share shall automatically
be converted, without any action on the part of any holder thereof, into one
share of Class A Common Stock pursuant to and in accordance with the terms of
the Grant Agreements, and shall thereupon be subject to conversion into the
right to receive the Common Stock Purchase Price in accordance with the
provisions of Section 1.8(c), less any applicable withholding.
(e) TREATMENT OF SERIES A PREFERRED STOCK. Each share of
Series A Preferred Stock, par value $.01 per share, of the Company (the
"SERIES A PREFERRED STOCK") (other than shares of Series A Preferred Stock to
be canceled in accordance with Section 1.8(b)) issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive $100 per share in cash plus an additional amount in cash equal to and
representing all accrued or accumulated but unpaid dividends thereon to and
including the Effective Time (the "PREFERRED STOCK LIQUIDATION PREFERENCE"
and, together with the Common Stock Purchase Price, the "MERGER
CONSIDERATION"). As of the Effective Time, all such shares of Series A
Preferred Stock shall no longer be outstanding and shall automatically be
retired and shall cease to exist, and each holder of a certificate
representing any such shares of Series A Preferred Stock shall cease to have
any rights with respect thereto, except the right to receive upon the
surrender of such certificates, the Preferred Stock Liquidation Preference.
Notwithstanding the foregoing, at the election of Buyer given on or before
October 30, 1999, the Company shall use commercially reasonable efforts
(which shall not require the Company to make any payment) to cause the
holders of Series A Preferred Stock to sell their shares of Series A
Preferred Stock directly to Buyer or its designee simultaneously with the
Closing at the Preferred Stock Liquidation Preference (the "DIRECT PREFERRED
STOCK PURCHASE"). The agreement with respect to the Direct Preferred Stock
Purchase shall provide representations and warranties only as to title,
authority to sell such shares and absence of liens thereon and shall also
provide that such sale be without recourse (other than with respect to such
representations and warranties given), and that all representations and
warranties shall be several and not joint.
1.9 SURRENDER AND PAYMENT; DISSENTING SHARES
(a) EXCHANGE AGENT. Prior to the Effective Time, Buyer
shall designate a bank or trust company reasonably acceptable to the Company
to act as agent (the "EXCHANGE
4
<PAGE>
AGENT") for the holders of shares of Company Common Stock and Series A
Preferred Stock in connection with the exchange of certificates representing
shares of Company Common Stock or Series A Preferred Stock in the Merger for
the payment of the Merger Consideration to which holders of shares of Company
Common Stock and Series A Preferred Stock shall become entitled pursuant to
Section 1.8. Prior to the Effective Time, Buyer or Merger Sub shall deposit
with the Exchange Agent cash in an aggregate amount equal to the sum of (i)
the product of (A) the number of shares of Company Common Stock issued and
outstanding (other than shares to be canceled pursuant to Section 1.8(b) and
Dissenting Shares) immediately prior to the Effective Time (assuming for
purposes of this clause (A) the conversion of all shares of Class B Common
Stock to shares of Class A Common Stock in accordance with Section 1.8(d)),
multiplied by (B) the Common Stock Purchase Price, PLUS (ii) the product of
(A) the number of shares of Series A Preferred Stock issued and outstanding
(and not to be canceled pursuant to Section 1.8(b)) immediately prior to the
Effective Time, multiplied by (B) the Preferred Stock Liquidation Preference.
The deposit made by Buyer or Merger Sub pursuant to the preceding sentence is
hereinafter referred to as the "PAYMENT FUND." The Exchange Agent shall cause
the Payment Fund to be held for the benefit of the holders of Company Common
Stock and Series A Preferred Stock and to be promptly applied to the payment
of the Merger Consideration to such holders. The Payment Fund shall not be
used for any purpose that is not provided for herein.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable
after the Effective Time, Buyer shall, or shall cause the Exchange Agent to,
provide to each holder of record of a certificate or certificates or other
instrument or instruments which immediately prior to the Effective Time
represented issued and outstanding shares of Company Common Stock or Series A
Preferred Stock, (i) a letter of transmittal (which shall be upon customary
terms and shall specify that delivery shall be effected, and risk of loss and
title to the certificate shall pass, only upon proper delivery of such
certificate to the Exchange Agent) and (ii) instructions for use in effecting
the surrender of certificates in exchange for the Merger Consideration. Upon
surrender of a certificate for cancellation to the Exchange Agent in
accordance with this Section 1.9(b), together with such letter of
transmittal, duly executed in accordance with the instructions thereto, and
such other documents as may reasonably be required by the Exchange Agent, the
Exchange Agent shall pay the surrendering holder the Merger Consideration to
which such holder may be entitled pursuant to Section 1.8 and the certificate
so surrendered shall forthwith be canceled. If any portion of such payment is
to be made to a Person other than the registered holder of the shares of
Company Common Stock or Series A Preferred Stock, as the case may be,
represented by the certificate surrendered in exchange therefor, it shall be
a condition to such payment that the certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
Person requesting such payment shall pay to the Exchange Agent any transfer
or other Taxes required as a result of such payment to a Person other than
the registered holder of such shares or establish to the satisfaction of the
Exchange Agent that such Taxes have been paid or that none are payable. Until
surrendered as contemplated by this Section 1.9(b), (i) each certificate
representing shares of Company Common Stock (other than certificates
representing Dissenting Shares or shares retired pursuant to Section 1.8(b))
shall be deemed at any time after the Effective Time to represent only the
right to receive the Common Stock Purchase Price upon such surrender, and
(ii) each certificate representing shares of Series A Preferred Stock (other
than shares retired pursuant to Section 1.8(b)) shall be deemed at any
5
<PAGE>
time after the Effective Time to represent only the right to receive the
Preferred Stock Liquidation Preference upon such surrender.
(c) NO FURTHER OWNERSHIP RIGHTS. All Merger Consideration
paid upon the surrender for exchange of certificates representing shares of
Company Common Stock or Series A Preferred Stock, as the case may be, in
accordance with the terms of this Article I shall be deemed to have been paid
in full satisfaction of all rights pertaining to such shares of Company
Common Stock or Series A Preferred Stock theretofore represented by such
certificates. As of and after the Effective Time, there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of shares of Company Common Stock or Series A Preferred Stock.
If, after the Effective Time, certificates are presented to the Surviving
Corporation or the Exchange Agent for any reason, they shall be canceled and
exchanged as provided in this Article I.
(d) TERMINATION OF PAYMENT FUND; UNCLAIMED FUNDS. Any
portion of the Payment Fund made available to the Exchange Agent pursuant to
Section 1.9(a) that remains unclaimed by holders of shares of Company Common
Stock or Series A Preferred Stock for twelve (12) months after the Effective
Time shall be delivered to the Surviving Corporation, upon demand, and any
holders of Certificates who have not theretofore complied with this Article I
shall thereafter look only to the Surviving Corporation for the payment of
the Merger Consideration to which such Person is entitled pursuant to Section
1.8 and only as general creditors thereof for payment of their claim for the
Merger Consideration.
(e) NO LIABILITY. None of Buyer, Merger Sub, the Company or
the Exchange Agent shall be liable to any Person in respect of any payments
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
(f) INVESTMENT OF FUNDS. The Payment Fund shall be invested
by the Exchange Agent in obligations of, or guaranteed by, the United States
of America, in commercial paper obligations rated A-1 or P-1 or better by
Moody's Investor Services, Inc. or Standard & Poor's Ratings Services,
respectively, in each case with maturities not exceeding seven (7) days. All
interest and earnings thereon shall inure to the benefit of the Surviving
Corporation.
(g) LOST CERTIFICATES. In the event that any certificate
representing shares of Company Common Stock or Series A Preferred Stock shall
have been lost, stolen or destroyed before the Company has notice that the
certificate has been acquired by a protected purchaser (as such term is
defined in Section 8-303 of the Delaware Uniform Commercial Code), upon the
making of an affidavit of that fact by the Person claiming such certificate
to be lost, stolen or destroyed and, if required by Buyer, the execution of
an agreement by such Person indemnifying Buyer against any claim that may be
made against it with respect to such certificate or any payment with respect
thereto indemnifying the Surviving Corporation against any loss or expense
related thereto, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed certificate the payment of the Merger Consideration to
which such Person is entitled pursuant to Section 1.8.
6
<PAGE>
(h) WITHHOLDING RIGHTS. The Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock or
Series A Preferred Stock such amounts as are required to be deducted and
withheld with respect to the making of such payment under the terms of the
Internal Revenue Code of 1986, as amended (the "CODE"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the shares of Company Common Stock or
Series A Preferred Stock, as the case may be, in respect of which such
deduction and withholding was made by such party.
(i) DISSENTING SHARES. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock outstanding
immediately prior to the Effective Time and held by a holder who has not
voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such shares in accordance with Section 262 of the DGCL
(the "DISSENTING SHARES") shall not be converted into the right to receive
the Common Stock Purchase Price, unless such holder fails to perfect or
withdraws or otherwise loses its right to appraisal. If after the Effective
Time such holder fails to perfect or withdraws or loses its right to
appraisal, such Dissenting Shares shall be treated as if they had been
converted as of the Effective Time into a right to receive the Common Stock
Purchase Price to which such holder is entitled. The Company shall give Buyer
prompt notice of any demands received by the Company for appraisal of shares
of Company Common Stock and Buyer shall have the right to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Buyer which consent shall not
be unreasonably withheld or delayed, make any payment with respect to, or
settle or offer to settle, any such demands.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as
specifically set forth or cross referenced in the corresponding section of
the disclosure schedule delivered by the Company to Buyer at or prior to the
execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE"), the Company
represents and warrants to Buyer and Merger Sub as follows:
(a) ORGANIZATION, STANDING AND POWER. Except as set forth in
Section 2.1(a) of the Company Disclosure Schedule, each of the Company and
its Subsidiaries has been duly organized and is validly existing and in good
standing under the laws of its jurisdiction of organization and has requisite
power and authority to carry on its business as presently conducted. Each of
the Company and its Subsidiaries is duly qualified and in good standing or
otherwise authorized to do business in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification necessary, except where the failure to so qualify would not
individually or in the aggregate have a Material Adverse Effect on the
Company. Copies of the Organizational Documents of the Company and each
Subsidiary of the Company have been previously furnished to Buyer and are
true, complete and correct copies of such documents as in effect on the date
of this Agreement.
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<PAGE>
(b) CAPITAL STRUCTURE
(i) As of the date of this Agreement, the
authorized capital stock of the Company consists of (A) 475,000 shares
of Class A Common Stock, of which 254,671.75 shares are outstanding,
(B) 25,000 shares of Class B Common Stock, of which 15,315.25 shares
are outstanding (including 600 shares held by the Company in its
treasury), and (C) 5,000,000 shares of preferred stock, par value $.01
per share, of which 3,250,000 shares of Series A Preferred Stock are
outstanding. All issued and outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and
nonassessable, and at the Closing no class of capital stock will be
entitled to preemptive rights. As of the date of this Agreement, there
are no outstanding options, warrants or other rights to acquire capital
stock from the Company, except with respect to the issuance of Class A
Common Stock in connection with the conversion and vesting of shares of
Class B Common Stock outstanding as of the date hereof.
(ii) Except as set forth in Section 2.1(b)(ii) of
the Company Disclosure Schedule, all of the issued and outstanding
capital stock (or other ownership interests) of each of the Company's
Subsidiaries is owned, directly or indirectly, by the Company or one of
its wholly-owned Subsidiaries and are duly authorized, validly issued,
fully paid and nonassessable and are owned by the Company or one of its
wholly-owned Subsidiaries free and clear of any liens, claims,
encumbrances, mortgages, security interests, rights of first refusal,
rights of first offer, puts, calls, obligations to buy or sell assets
or equity interests, restrictions or any other claims of any third
party ("LIENS").
(iii) As of the date of this Agreement, no bonds,
debentures, notes or other indebtedness of the Company or any of its
Subsidiaries which are issued or outstanding provide to the holder of
such debt the right to vote prior to default on any matters on which
stockholders may vote ("COMPANY VOTING DEBT").
(iv) Except as otherwise set forth in this
Section 2.1(b), as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company or its
Subsidiaries is a party or by which any of them is bound obligating the
Company or any of its Subsidiaries to issue, deliver or sell, or cause
to be issued, delivered or sold, additional shares of capital stock or
other voting securities of the Company or any such Subsidiary or
obligating the Company or such Subsidiary to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. As of the date of this
Agreement, except pursuant to the terms of the Series A Preferred Stock
as set forth in the Company's Organizational Documents and rights under
those certain Executive Agreements, each dated June 22, 1998 (together
the "EXECUTIVE AGREEMENTS"), between the Company and John Fujii and
Brian McTernan, respectively, there are no outstanding obligations of
the Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or such
Subsidiary.
8
<PAGE>
(v) As of the date of this Agreement, the only
outstanding indebtedness for borrowed money of the Company and its
Subsidiaries is (a) indebtedness under the Bank Credit Facility in an
amount not exceeding $915.0 million, (b) indebtedness under the Senior
Notes in principal amount not exceeding $285.0 million (plus interest
thereon) and (c) other indebtedness for borrowed money (including
capital leases and for the deferred purchase price for goods and
services and excluding accounts payable) not exceeding $10.0 million
in the aggregate (all such indebtedness referred to in clauses (a) -
(c) being referred to as the "OUTSTANDING INDEBTEDNESS").
(vi) As of the date of this Agreement, the
aggregate Preferred Stock Liquidation Preference does not exceed $379.0
million.
(vii) The aggregate amounts payable (a) for "stay
bonuses" to be offered as a result of the transactions contemplated by
this Agreement (the "STAY BONUSES"), (b) fees and expenses including
investment banking, legal and accounting fees and expenses for the
transactions contemplated hereby payable on behalf of the Company and
(c) by the Company to the employees, officers, directors and
consultants of the Company and its Subsidiaries and other Persons
pursuant to any employment agreement, consulting agreement, investment
agreement, the Executive Agreements, benefit plan, stock option
agreement or any other plan, contract or arrangement pursuant to or as
a result of a change in control of the Company (excluding (x) amounts
payable under Article I of this Agreement at the Effective Time to any
such persons in their capacity as shareholders of the Company and (y)
amounts which are not paid or payable by the Company or any Subsidiary
of the Company but are deemed 280G payments under the Code), will not
exceed a total of $18.5 million (collectively, the "TRANSACTION FEES
AND EXPENSES").
(viii) Immediately upon (and from and after) the
Closing, there will be no agreements or arrangements pursuant to which
(a) the Company or any Subsidiary is or could be required to register
shares of its capital stock or other securities under the Securities
Act or (b) the Company is a party and which restricts the voting or
disposition of any capital stock of the Company.
(c) AUTHORITY; NO CONFLICTS. Except as set forth in Section
2.1(c) of the Company Disclosure Schedule:
(i) The Company has all requisite corporate
power and authority to enter into this Agreement and, subject to the
adoption of this Agreement and approval of the Merger by the majority
vote of the stockholders of the Company, to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part
of the Company, subject in the case of the consummation of the Merger
to the adoption of this Agreement by the requisite vote of the
stockholders of the Company. This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding
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agreement of the Company, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or
affecting creditors generally and by general equity principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) The execution, delivery and performance of
this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby do not and will not, conflict
with, or result in any breach or violation of, or constitute a default
(with or without notice or lapse of time, or both) under, or give rise
to a right of consent, termination, amendment, cancellation or
acceleration of any obligation or the loss of a material benefit under,
the creation of a Lien on any asset or the triggering of any change of
control provision (any such conflict, violation, default, right of
consent, termination, amendment, cancellation or acceleration, loss,
creation or triggering, a "VIOLATION") pursuant to (A) any provision of
the Organizational Documents of the Company or any of its Subsidiaries
or any partnership agreement, stockholders agreement, limited liability
company agreement, organizational document or similar agreement or
arrangement to which the Company or any such Subsidiary is a party
which governs or defines the relationship by and among the Company and
its Subsidiaries, on the one hand, and other direct or indirect equity
owners of any direct or indirect Subsidiary of the Company, on the
other, including any such agreement or arrangement providing for a
Lien (each an "INVESTMENT AGREEMENT") (assuming receipt of the
approval of the Company's stockholders referred to in Section
2.1(c)(i)), or (B) any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the
Company, the Company's Subsidiaries or their respective properties or
assets, except, with respect to either clause (A) or (B), as would not
have or be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company or Buyer and
subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in
Section 2.1(c)(iii) or otherwise contemplated in this Agreement.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, any supranational,
national, state, municipal or local government, any instrumentality,
subdivision, court, administrative agency or commission or other
authority thereof, or any quasi-governmental or private body exercising
any regulatory, taxing, or other governmental or quasi-governmental
authority (a "GOVERNMENTAL ENTITY"), is required by or with respect to
the Company or any of its Subsidiaries in connection with the
execution, delivery and performance by the Company of this Agreement
or the consummation by the Company of the transactions contemplated
hereby, except for (A) those required under or in relation to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT"), or any antitrust or other competition laws of other
jurisdictions; (B) compliance with any applicable requirements of the
Communications Act of 1934, as amended, and the rules and regulations
promulgated thereunder (collectively, the "COMMUNICATIONS ACT") and
the
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decisions of the FCC, and any applicable requirements of any public
service or utility commissions or similar entities; (C) the filing and
recordation of appropriate merger or other documents pursuant to and in
accordance with the DGCL; and (D) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of
which to make or obtain could not be reasonably expected to have a
Material Adverse Effect on the Company or would not materially impair
or delay the ability of the Company to consummate the transactions
contemplated hereby.
(d) CERTAIN REPORTS AND FINANCIAL STATEMENTS; NO UNDISCLOSED
LIABILITIES.
(i) The Company has filed with the Securities
and Exchange Commission (the "SEC") (A) the Company's Annual Report on
Form 10-K for the period from February 26, 1998 (date of formation) to
December 31, 1998 (the "COMPANY 10-K"), (B) the Company's Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1999, (C)
the Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1999, and (D) all registration statements, forms and
except where the omissions to file would not individually or in the
aggregate have a Material Adverse Effect on the Company, all other
material documents required by the Securities Act or the Exchange Act
to be filed by the Company with the SEC since December 31, 1998 (the
documents identified in clauses (A), (B), (C) and (D), including all
exhibits thereto, are collectively referred to herein as the "COMPANY
SEC REPORTS"). No Subsidiary of the Company is required to separately
file any form, report or other document with the SEC. None of the
Company SEC Reports, as of their respective dates (and, if amended or
supplemented by a filing prior to the date of this Agreement or as of
the Closing Date, then on the date of such filing), contained any
untrue statement of a material fact or omitted to state any material
fact necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The Company
SEC Reports, as of their respective dates (and as of the date of any
amendment thereto, as applicable), complied as to form in all material
respects with the applicable requirements of the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder
(the "SECURITIES ACT") and the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder (the
"EXCHANGE ACT"), as the case may be.
(ii) Except as set forth in Section 2.1(d) of the
Company Disclosure Schedule, each of the financial statements
(including the related notes) included in the Company SEC Reports
presents fairly, in all material respects, the consolidated financial
position and consolidated results of operations and cash flows of the
Company and its Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with U.S.
generally accepted accounting principles ("GAAP") consistently applied
during the periods involved except as otherwise indicated in the notes
thereto or, in the case of unaudited interim financial statements, as
permitted by Form 10-Q, and subject further, in the case of the
unaudited interim financial statements, to normal year-end adjustments
that have not been and are not expected to be material in amount.
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<PAGE>
(iii) None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in
the Proxy Statement will, either at the date such Proxy Statement is
first mailed to the Company's shareholders or at the time of the
Company Stockholder Meeting, including by reason of amendment, contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading, and the Proxy Statement will comply as to form
in all material respects with the requirements of the Exchange Act,
except that in each case no representation is made by the Company with
respect to statements made or incorporated by reference therein based
upon information supplied in writing by Merger Sub or Buyer
specifically for inclusion therein.
(e) FCC MATTERS
(i) The Company or its Subsidiaries hold all
licenses, permits and other authorizations issued by the FCC to the
Company or its Subsidiaries set forth in Section 2.1(e)(i) of the
Company Disclosure Schedule (the "FCC LICENSES"), except where the
failure to so hold such FCC Licenses individually or in the aggregate
has not had and would not reasonably be expected to have a Material
Adverse Effect on the Company. The FCC Licenses constitute all of the
licenses, permits, franchises, consents and authorizations from the
FCC that are necessary or appropriate for the operations and businesses
of the Company and its Subsidiaries as they are now operated, except
where the failure to have all such licenses, permits, franchises,
consents and authorizations has not had and would not reasonably be
expected to have a Material Adverse Effect on the Company.
(ii) Except where the failure to so list such
applications or provide such information would be reasonably expected
to have a Material Adverse Effect on Buyer, Section 2.1(e)(ii) of the
Company Disclosure Schedule sets forth each application that the
Company and its Subsidiaries have pending before the FCC and sets
forth the expiration date for each of the cellular FCC Licenses. The
Company has provided a copy, except where the FCC has not issued a
written microwave authorization, to Buyer of each of the FCC Licenses
and the applications listed in Section 2.1(e)(ii) of the Company
Disclosure Schedule.
(iii) The FCC Licenses are valid and in full force
and effect, unimpaired by any condition or restriction or any act or
omission by the Company or any of its Subsidiaries which individually
or in the aggregate has had or would reasonably be expected to have a
Material Adverse Effect on the Company. There are no modifications,
amendments, applications, revocations or other proceedings, or
complaints, pending or, to the knowledge of the Company, threatened,
with respect to the FCC Licenses (other than proceedings that apply to
the cellular or commercial mobile radio service ("CMRS") industry
generally) which individually or in the aggregate has had or would
reasonably be expected to have a Material Adverse Effect on the Company
or Buyer, and, except as set forth in Section 2.1(e) of the Company
Disclosure Schedule, all fees due and payable to
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<PAGE>
the FCC have been paid and no event has occurred which, with or without
the giving of notice or lapse of time or both, would constitute grounds
for revocation of FCC Licenses which individually or in the aggregate
has had or would reasonably be expected to have a Material Adverse
Effect on the Company or Buyer.
(iv) Except where a lack of compliance would not
individually or in the aggregate be reasonably expected to have a
Material Adverse Effect, since June 25, 1998 all reports required by
the Communications Act or required to be filed with the FCC or any
other Governmental Entity by the Company or its Subsidiaries have been
filed and are accurate and complete in all material respects.
(v) Except where a lack of compliance would not
individually or in the aggregate be reasonably expected to have a
Material Adverse Effect, the Company and its Subsidiaries have operated
their cellular systems in compliance with the Communications Act and
the rules, regulations, policies and orders of the relevant state
public utilities commissions and the Federal Aviation Administration.
The Company and its Subsidiaries have not received any written notice
(or otherwise been advised in writing) to the effect that they are in
violation of any of such statutes, rules, regulations, policies or
orders.
(vi) Without limiting the generality of the
foregoing, except where any action would individually or in the
aggregate not reasonably be expected to have a Material Adverse Effect
on the Company or Buyer, no adverse finding has been made, no consent
decree entered, no adverse action has been approved or taken by the
FCC or any court or other administrative body, and to the knowledge of
the Company, no admission of liability has been made with respect to
the Company or any of its Subsidiaries or any of the Company's
stockholders or any management employee of the Company or its
Subsidiaries concerning any civil or criminal suit, action or
proceeding brought under the provision of any federal, state,
territorial or local law relating to any of the following: any felony;
unlawful restraint of trade or monopoly; unlawful combination, contract
or agreement in restraint of trade; the use of unfair methods of
competition; fraud; unfair labor practice; or discrimination.
Notwithstanding the foregoing, to the actual knowledge of Messrs. Fujii
and McTernan and Mr. Stephen J. Easley, none of the Company or any
management employee is the subject of any criminal suit or any action
or proceeding involving a felony or fraud.
(f) COMPLIANCE WITH APPLICABLE LAWS; REGULATORY MATTERS. The
Company and its Subsidiaries hold all permits, licenses, certificates,
franchises, registrations, consents, variances, exemptions, orders and
approvals of all Governmental Entities (other than the FCC Licenses) (the
"COMPANY PERMITS") necessary for the conduct by the Company and its
Subsidiaries of their respective operations as now being conducted, except
for those as to which the failure to so hold such Company Permits
individually or in the aggregate would not be reasonably expected to have a
Material Adverse Effect on the Company. Except as set forth in Section 2.1(f)
of the Company Disclosure Schedule, the Company and its Subsidiaries are in
compliance with the terms of the Company Permits, except where the failure so
to comply
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<PAGE>
individually or in the aggregate would not be reasonably expected to have a
Material Adverse Effect on the Company. Except as set forth in Section 2.1(f)
of the Company Disclosure Schedule, the businesses of the Company and its
Subsidiaries are not being and have not been conducted in violation of any
law, ordinance, regulation, judgment, decree, injunction, rule or order of
any Governmental Entity, except for violations which individually or in the
aggregate would not be reasonably expected to have a Material Adverse Effect
on the Company. Except as set forth in Section 2.1(f) of the Company
Disclosure Schedule, as of the date of this Agreement, no investigation by
any Governmental Entity with respect to the Company or any Subsidiary is
pending or, to the knowledge of the Company, threatened, other than
investigations which individually or in the aggregate would not be reasonably
expected to have a Material Adverse Effect on the Company.
(g) LITIGATION. Except as set forth in Section 2.1(g) of the
Company Disclosure Schedule, there is no litigation, arbitration, claim,
suit, action, investigation or proceeding pending or, to the knowledge of the
Company, threatened, against or affecting the Company or any Subsidiary
which, if determined or resolved adversely to the Company or such Subsidiary
in accordance with the plaintiff's demands, would individually or in the
aggregate be reasonably expected to have a Material Adverse Effect on the
Company, nor is there any judgment, award, decree, injunction, rule or order
of any Governmental Entity or arbitrator outstanding against the Company or
any Subsidiary which would be reasonably be expected to have a Material
Adverse Effect on the Company.
(h) TAXES. Except as set forth on Section 2.1(h) of the Company
Disclosure Schedule (i) the Company and its Subsidiaries have duly and timely
filed (taking into account any extension of time within which to file) all
Tax Returns required to be filed by any of them and all such filed Tax
Returns are complete and accurate in all material respects, except where such
failure to timely file such Tax Returns would not have a Material Adverse
Effect on the Company; (ii) the Company and its Subsidiaries have paid all
Taxes required to be paid prior to the date of this Agreement that are shown
as due on such filed Tax Returns or that the Company or any Subsidiary is
obligated to withhold from amounts owing to any employee, creditor or third
party, except with respect to matters contested in good faith and for such
amounts that would not have a Material Adverse Effect on the Company; (iii)
as of the date of this Agreement, there are no pending or, to the knowledge
of the Company, threatened in writing audits, examinations, investigations or
other proceedings in respect of Taxes or Tax matters relating to the Company
or any Subsidiary which, if determined adversely to the Company or such
Subsidiary, would have a Material Adverse Effect on the Company; (iv) there
are no deficiencies or claims for any Taxes that have been proposed, asserted
or assessed against the Company or any Subsidiary which, if such deficiencies
or claims were finally resolved against the Company or such Subsidiary, would
have a Material Adverse Effect on the Company; (v) there are no Liens for
Taxes upon the assets of the Company or any Subsidiary, other than Liens for
current Taxes not yet due and payable, and Liens for Taxes that are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been made on the balance sheet of the Company at June 30, 1999;
(vi) neither the Company nor any Subsidiary has made an election under
Section 341(f) of the Code and (vii) except as would not have a Material
Adverse Effect on the Company, none of the Company or any Subsidiary is a
party to any agreement or
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<PAGE>
arrangement that could reasonably be expected to result, individually or in
the aggregate, in the actual or deemed payment by the Company or a Subsidiary
of any "excess parachute payments" within the meaning of Section 280G of the
Code or for which a deduction would be disallowed under Section 162(m) of the
Code.
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1999
through the date of this Agreement, the Company and its Subsidiaries have
conducted their respective businesses in the ordinary course and have not
incurred any material liability, except in the ordinary course of their
respective businesses and except as set forth in Section 2.1(i) of the
Company Disclosure Schedule, and there has not been (A) any change in the
business, assets financial condition or results of operations of the Company
or its Subsidiaries that individually or in the aggregate has had or would be
reasonably likely to have a Material Adverse Effect on the Company; (B) any
declaration, setting aside or payment of any dividend or other distribution
with respect to any capital stock of the Company, or any issuance, award,
grant, sale, repurchase, redemption or other acquisition by the Company or
any Subsidiary of any outstanding shares of capital stock or other securities
of, or ownership interests in, the Company or any Subsidiary (other than
repurchases of 200 shares of Company Common Stock from employees leaving the
Company); (C) any amendment of any material term of any outstanding security
of the Company or any Subsidiary, or any reorganization, recapitalization,
split, consolidation or reclassification with respect to any capital stock of
the Company or any Subsidiary; (D) any material change in any method of
accounting or accounting practice by the Company or any Subsidiary, except
for any such change required by reason of a change in GAAP; or (E) other than
in the ordinary course of business, any (x) entry by the Company or its
Subsidiaries into any employment agreement, severance agreement or
termination agreement with any officer of the Company, (y) except for regular
increases in the ordinary course of business consistent with past practices,
increase in benefits payable under existing employment, severance or
termination agreements or pay policies (with the exception of the Stay
Bonuses), or (z) except for regular increases in the ordinary course of
business consistent with past practices, increase in compensation, bonus or
other benefits payable to the executive officers of the Company or any
Subsidiary.
(j) CERTAIN AGREEMENTS. All contracts listed as exhibits to the
Company SEC Reports under the rules and regulations of the SEC relating to
the business of the Company and its Subsidiaries and any contract involving
the receipt or payment of more than $250,000 per year on an annualized basis
(the "MATERIAL CONTRACTS") have been or, if entered into after the date of
the Agreement, will be promptly provided to Buyer and are valid and in full
force and effect except to the extent they have previously expired or been
terminated in accordance with their terms, and neither the Company nor any of
its Subsidiaries has violated any provision of any Material Contract to which
it is a party, or committed or failed to perform any act thereunder which,
with or without notice, lapse of time, or both, would constitute a default
under the provisions of, any such Material Contract, except for defaults
which individually or in the aggregate have not had and would not be
reasonably expected to have a Material Adverse Effect on the Company. To the
knowledge of the Company, no counterparty to any such Material Contract has
violated any provision of, or committed or failed to perform any act which,
with or without notice, lapse of time, or both, would constitute a default or
other breach under the provisions of, such Material Contract, except for
defaults or breaches which individually or in the
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<PAGE>
aggregate have not had and would not be reasonably expected to have a
Material Adverse Effect on the Company. Except for contour extension
agreements or agreements of similar import entered into in the ordinary
course of business, neither the Company nor any Subsidiary has entered into
or will enter into any agreement or arrangement limiting or otherwise
restricting the Company or any of its Subsidiaries from engaging in or
competing in any line of business or in any geographic area which materially
impacts or will materially impact any of the following lines of business of
the Company, Dobson Communications Corporation or AT&T Corp.:
telecommunications (including, without limitation, local, long distance,
internet and wireless), cable and video entertainment, data access,
communications consulting and systems integration and network management.
(k) EMPLOYEE BENEFIT PLANS; LABOR MATTERS
(i) The Company has made available to Buyer a
true and complete copy of each employee benefit plan as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and each other material employee benefit plan,
program, arrangement and contract (including any bonus, deferred
compensation, stock bonus, profit sharing, stock purchase, restricted
stock, stock option, stock appreciation rights, post-retirement
benefits or other forms of incentive compensation or benefits,
consulting, employment, termination, change in control and severance
plan, program, arrangement and contract), to which the Company or any
Subsidiary is a party or which is maintained or contributed to by the
Company or any Subsidiary (the "COMPANY BENEFIT PLANS"). Section
2.1(k) of the Company Disclosure Schedule contains a list of all
Company Benefit Plans.
(ii) Each of the Company Benefit Plans that is an
"employee pension benefit plan" within the meaning of Section 3(2) of
ERISA and that is intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter from the United
States Internal Revenue Service which determination letter includes any
new or modified provisions required by Section 401(a) of the Code for
which the remedial amendment period under Section 401(b) of the Code
has expired as of the Closing Date, and which determination letter
includes the determination that the corresponding trust created under
any such Company Benefit Plan is exempt from tax under Section 501(a)
of the Code and the Company is not aware of any circumstances which
would reasonably be expected to result in the revocation of any such
favorable determination letter that would have a Material Adverse
Effect on the Company.
(iii) None of the Company Benefit Plans is subject
to (i) Title IV of ERISA or (ii) the minimum funding requirements of
Title I of ERISA or Section 412 of the Code. None of the Company
Benefit Plans is a "multiemployer plan" as defined in Section 3(37) of
ERISA and neither the Company nor any Subsidiary has ever contributed
to or had an obligation to contribute to any multiemployer plan.
(iv) There are no investigations by any
governmental authority, termination proceedings or other claims (except
claims for benefits payable in the normal
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<PAGE>
operation of the Company Benefit Plans), suits or proceedings pending
of which the Company has written notice or, to the knowledge of the
Company, threatened or anticipated, against or involving any Company
Benefit Plan or asserting any rights or claims to benefits under any
Company Benefit Plan that could give rise to any material liability on
the part of Company or any Subsidiary.
(v) With respect to the Company Benefit Plans,
no event has occurred and, to the knowledge of the Company, there
exists no condition or set of circumstances, in connection with
which the Company or any Subsidiary could be subject to any liability
under the terms of such Company Benefit Plans, ERISA, the Code or any
other applicable law which would have a Material Adverse Effect on the
Company.
(vi) Neither of the Company nor any Subsidiary is
a party to any collective bargaining or other labor union contracts and
no collective bargaining agreement is being negotiated by the Company
or any Subsidiary. There is no pending labor dispute, strike or work
stoppage against the Company or any Subsidiary which may interfere with
the respective business activities of the Company or any Subsidiary,
except where such dispute, strike or work stoppage would not have a
Material Adverse Effect on the Company. There is no pending charge or
complaint against the Company or any Subsidiary by the National Labor
Relations Board or any comparable state agency, except where such
unfair labor practice, charge or complaint would not have a Material
Adverse Effect on the Company.
(l) INTELLECTUAL PROPERTY. Except as set forth in Section
2.1(l) of the Company Disclosure Schedule, the Company and its Subsidiaries
own or have the right to use, the Intellectual Property used in their
respective businesses, except where the failure to own or have the right to
use such Intellectual Property, individually or in the aggregate, does not
have and would not reasonably be expected to have a Material Adverse Effect
on the Company. Except as would not have a Material Adverse Effect on the
Company, to the knowledge of the Company (i) no claims are pending or
threatened that the Company or any Subsidiary is infringing on or otherwise
violating the rights of any person with regard to any Intellectual Property
and (ii) no person is infringing on or otherwise violating any right of the
Company or any Subsidiary with respect to any Intellectual Property owned by
and/or licensed to the Company or any Subsidiary.
(m) VOTE REQUIRED. The affirmative vote of the holders of a
majority of the outstanding shares of Class A Common Stock (the "REQUIRED
COMPANY VOTE") is the only vote of the holders of any class or series of
capital stock of the Company necessary to approve and adopt this Agreement,
the Merger and the transactions contemplated hereby and such vote may be
validly taken pursuant to a written consent in lieu of a shareholders meeting
executed by the holders of a majority of the outstanding Class A Common Stock
(a "WRITTEN CONSENT OF SHAREHOLDERS").
(n) BROKERS OR FINDERS. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in connection
with any of the transactions contemplated by this Agreement
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based upon arrangements made by or on behalf of the Company, except Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MERRILL LYNCH"), whose fees and
expenses will be paid by the Company in accordance with the Company's letter
agreement with such firm dated July 14, 1999 and shall not exceed the amount
set forth in such letter. A true and complete copy of such agreement has been
delivered to Buyer prior to the date hereof. Upon payment of such fees and
expenses, there shall be no additional financial or other obligations of the
Surviving Corporation to Merrill Lynch under such letter agreement.
(o) TAKEOVER STATUTE. The Company has taken all the necessary
steps to prevent the application of any state takeover statute (including the
provisions of Section 203 of the DGCL or similar statute or regulation of the
State of Delaware or the states in which the Company is conducting business)
to this Agreement or any of the transactions contemplated herein, including
the Merger.
(p) OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated the date
of this Agreement, to the effect that, as of such date, the Common Stock
Purchase Price is fair, from a financial point of view, to the holders of
Company Common Stock.
(q) ASSETS. All tangible assets of the Company and its
Subsidiaries are in good operating condition and sufficient for their
respective use thereof, normal wear and tear excepted, except where such
failure to be in good operating condition could not reasonably be expected to
result in a Material Adverse Effect on the Company. The Company and its
Subsidiaries own or have the right to use all assets necessary for the
conduct of their business and operations and reflected on the balance sheet
included in the most recent Form 10-Q filed by the Company with the SEC,
except where the lack of such ownership or usage rights would not be
expected, individually or in the aggregate, to have a Material Adverse Effect
on the Company.
(r) ACQUISITIONS AND DISPOSITIONS. Except with respect to the
sale of the Company's interest in the Texas/Illinois Cellular Limited
Partnership (the "LAREDO JOINT VENTURE"), Section 2.1(r) of the Company
Disclosure Schedule describes the material terms (including the buyer,
purchase price, assets or equity interests to be sold, escrow provisions and
any other material terms) of each proposed or pending disposition of assets
or equity interests owned by the Company or any Subsidiary (the "PENDING
DISPOSITIONS") involving in the aggregate a sales price in excess of $25.0
million. Section 2.1(r) of the Company Disclosure Schedule describes the
material terms (including the seller, purchase price, assets or equity
interests to be acquired, escrow provisions and any other material terms) of
each proposed or pending acquisition of assets or equity interests by the
Company or any Subsidiary (the "PENDING ACQUISITIONS") involving in the
aggregate a sales price in excess of $25.0 million. The Company has delivered
to Buyer true and complete copies of the executed contracts, agreements and
other documents relating to each Pending Acquisition and Pending Disposition
or, where definitive documentation has not been executed as of the date of
this Agreement, the most current drafts thereof (such contracts, agreements,
drafts and other documents referred to as the "PENDING TRANSACTION
DOCUMENTS").
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(s) REAL PROPERTY - OWNED. Except as set forth in Section
2.1(s) of the Company Disclosure Schedule, the Company or a Subsidiary has
good and marketable or insurable title to all of the real property ("REAL
PROPERTY") reflected as owned on the consolidated balance sheet of the
Company at June 30, 1999 free and clear of all Liens, except for Liens that
would not materially interfere with the continued use of the property as it
is currently being used. Section 2.1(s) of the Company Disclosure Schedule
correctly identifies each parcel of Real Property owned by the Company and
its Subsidiaries except where the failure to so identify a parcel of Real
Property would not result in or would not be reasonably likely to result in a
Material Adverse Effect on the Buyer.
(t) REAL AND PERSONAL PROPERTY - LEASED. Except as set forth in
Section 2.1(s) of the Company Disclosure Schedule, set forth on Section
2.1(t)(A) (in the case of real property) and Section 2.1(t)(B) (in the case
of personal property) of the Company Disclosure Schedule are true and
accurate listings of all real and personal property leases to which the
Company or a Subsidiary is a party (other than personal property leases with
individual annual payment of less than $100,000) setting forth (i) the name
of the lessor and lessee, (ii) the property subject to the lease and the use
thereof (cell site, retail, office, etc.), (iii) the expiration date of the
lease, (iv) the annual rent and (v) with respect to the real property leases,
a description of the property leased. Except as set forth on Section
2.1(t)(A) (in the case of leased real property) and Section 2.1(t)(B) (in
case of leased personal property) of the Company Disclosure Schedule, (i) all
of the leases set forth on such Schedules are in full force and effect and
are valid, binding and enforceable in accordance with their respective terms,
(ii) all accrued currently payable rents and other payments required by such
leases have been paid, (iii) each of the Company and its Subsidiaries and, to
their knowledge, each other party thereto have complied with all respective
covenants and provisions of such leases, (iv) neither the Company or a
Subsidiary nor, to their 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, and (vi) no waiver, indulgence or
postponement of any obligations thereunder has been granted by any party. The
representations in this Section 2.1(t) read without giving effect to the
parenthetical immediately before subclause (i) in the first sentence will not
be breaches of this Agreement unless in the aggregate they are inaccurate so
as to result in or be reasonably likely to result in a Material Adverse
Effect on the Company or Buyer. Notwithstanding any provision of this
Agreement or any item set forth in Section 2.1(t) of the Company Disclosure
Schedule, the parties acknowledge that the Company has no obligation to
identify or disclose the existence of any "change in control" or similar
provision in any agreement with respect to the leased real or personal
property set forth on Sections 2.1(t)(A) and 2.1(t)(B) of the Company
Disclosure Schedule.
2.2 REPRESENTATIONS AND WARRANTIES OF BUYER. Except as
specifically set forth or cross-referenced in the corresponding section of
the disclosure schedule delivered by Buyer to the Company at or prior to the
execution of this Agreement (the "BUYER DISCLOSURE SCHEDULE"), Buyer
represents and warrants to the Company as follows:
(a) ORGANIZATION, STANDING AND POWER. Buyer has been duly
organized as a limited liability company and is validly existing and in good
standing under the laws of its jurisdiction of organization and has requisite
limited liability company power and authority to
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carry on its business as presently conducted. Buyer is duly qualified and in
good standing or otherwise authorized to do business in each jurisdiction in
which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, except where the failure so to
qualify would not have a Material Adverse Effect on Buyer. Copies of the
Organizational Documents as in effect on the date of this Agreement of Buyer
have been previously furnished or made available to the Company and are true,
complete and correct copies of such documents as in effect on the date of
this Agreement.
(b) AUTHORITY; NO CONFLICTS
(i) Buyer has all requisite limited liability
company power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary limited liability company action on the part of Buyer. This
Agreement has been duly executed and delivered by Buyer and constitutes
a valid and binding agreement of Buyer, enforceable against it in
accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors generally, or by general equity
principles (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
(ii) The execution, delivery and performance of
this Agreement by Buyer and the consummation by Buyer of the
transactions contemplated hereby do not and will not, conflict with or
result in any breach of or other Violation pursuant to (A) any
provision of the Organizational Documents of Buyer or any of its
Subsidiaries, or (B) except as would not have a Material Adverse Effect
on Buyer and subject to obtaining or making the consents, approvals,
orders, authorizations, registrations, declarations and filings
referred to in Section 2.2(b)(iii) below, any loan or credit agreement,
note, mortgage, bond, indenture, lease, benefit plan or other
agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Buyer, any of its Subsidiaries or their
respective properties or assets.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Buyer or any of its
Subsidiaries in connection with the execution, delivery and performance
by Buyer of this Agreement or the consummation by Buyer of the
transactions contemplated hereby, except for (A) the consents,
approvals, orders, authorizations, registrations, declarations and
filings required under or in relation to Section 2.1(c)(iii)(A), (B)
and (C), and (B) such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make or
obtain would not have a Material Adverse Effect on Buyer or would not
materially impair or delay the ability of Buyer to consummate the
transactions contemplated hereby.
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(c) NO VOTE REQUIRED. No vote of the members of Buyer is
necessary to approve this Agreement or any of the transactions contemplated
hereby other than those which have already been obtained.
(d) BROKERS OR FINDERS. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in connection
with any of the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Buyer or Merger Sub, except fees payable
by Buyer to Lehman Brothers Inc. and Toronto Dominion Securities Inc.
(e) OWNERSHIP OF COMPANY CAPITAL STOCK. As of the date of this
Agreement, neither Buyer nor any of its Subsidiaries or, to its knowledge,
any of its affiliates or associates (as such terms are defined under the
Exchange Act) (i) beneficially owns, directly or indirectly or (ii) is party
to any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, in case of either clause (i) or (ii), shares
of capital stock of the Company.
(f) FCC QUALIFICATION. Buyer and Merger Sub are and at the
Effective Time will be legally, technically and otherwise qualified under the
Communications Act and all rules, regulations and policies of the FCC to
acquire, own or control and operate the assets and business of the Company
and its Subsidiaries. There are no facts or proceedings known or with
reasonable due diligence should be known to Buyer which would disqualify
Buyer or Merger Sub under the Communications Act or otherwise from acquiring
or operating any of the assets and business of the Company and its
Subsidiaries or would cause the FCC not to approve the FCC Application. Buyer
has no knowledge of any fact or circumstance relating to Buyer, Merger Sub or
any other affiliate of Buyer that would (i) cause the filing of any objection
to the FCC Application or (ii) lead to a delay in the processing by the FCC
of the FCC Application. As of the date hereof, no waiver of any FCC rule or
policy is necessary to be obtained for the approval of the FCC Application,
and no processing pursuant to any exception or rule of general applicability
will be requested or required in connection with the consummation of the
transactions contemplated by this Agreement.
(g) FINANCING
(i) Buyer's members have received a commitment
letter dated October 4, 1999 (the "BANK COMMITMENT LETTER") from Bank
of America, N.A. and Banc of America Securities LLC pursuant to which
such parties have agreed to provide, subject to the terms and
conditions set forth therein, $1.75 billion of financing to Buyer for
the purpose of funding a portion of Buyer's financing for the
acquisition of the Company. A true copy of the Bank Commitment Letter
has been delivered to the Company, is in effect on the date hereof, has
not been amended or modified and there is no breach or default by Buyer
or Merger Sub existing, or which with notice or the passage of time may
exist, thereunder as of the date hereof.
(ii) AT&T Wireless Services, Inc., AT&T Wireless
Services JV Co., a Delaware corporation, and Buyer have entered into an
Unrestricted Equity
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Agreement dated as of the date hereof (the "UNRESTRICTED EQUITY
AGREEMENT") of which the Company is a third-party beneficiary thereof.
A true copy of the Unrestricted Equity Agreement has been delivered to
the Company, is in full force and effect and has not been amended or
modified.
2.3 REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB.
Buyer and Merger Sub represent and warrant to the Company as follows:
(a) ORGANIZATION, STANDING AND POWER. Merger Sub is a wholly
owned Subsidiary of Buyer and is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. Copies
of the Organizational Documents of Merger Sub have been previously furnished
or made available to the Company and are true, complete and correct copies of
such documents.
(b) AUTHORITY; NO CONFLICTS
(i) Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and
performance by Merger Sub of this Agreement and the consummation by
Merger Sub of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Merger Sub.
This Agreement has been duly executed and delivered by Merger Sub and
constitutes a valid and binding agreement of Merger Sub, enforceable
against it in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to or affecting creditors generally, or
by general equity principles (regardless of whether such enforceability
is considered in a proceeding in equity or at law).
(ii) The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby do not and will not contravene or
conflict with the Organizational Documents of Merger Sub.
(c) NO BUSINESS ACTIVITIES. Merger Sub is not a party to any
material agreements (other than this Agreement and any agreement contemplated
hereby) and, since the date of its incorporation, has not conducted any
activities other than in connection with or as contemplated by this Agreement
and the arranging of the Financing. Merger Sub has no Subsidiaries.
ARTICLE III.
COVENANTS RELATING TO CONDUCT OF BUSINESS
3.1 COVENANTS OF THE COMPANY. During the period from the date of this
Agreement and continuing until the Effective Time (except as expressly
permitted by this Agreement or identified in the Company Disclosure Schedule
or to the extent that Buyer shall otherwise consent in writing, which consent
shall not be unreasonably withheld or delayed with respect to
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Section 3.1(d), (e), (j) or (k)) the provisions set forth in paragraphs (a)
to (l) of this Section 3.1 shall apply. For purposes of this Section 3.1,
wherever any action on the part of the Company or its Subsidiaries requires
the consent of Buyer, Buyer shall be deemed to have consented in writing if
Mr. Everett Dobson or another designee of Buyer of which the Company has
prior written notice has received a written request (delivered to Mr. Dobson
by a nationally recognized overnight mail or courier service with signature
required upon receipt with a copy to Edwards & Angell, LLP and Friedman
Kaplan & Seiler LLP at the addresses and to the attention of the persons set
forth in Section 7.2) to consent to an action to be taken by the Company and
7 business days have lapsed since the date of such written request and Mr.
Dobson or such other designee has not responded in writing to such request.
(a) ORDINARY COURSE. The Company shall, and shall cause its
Subsidiaries to, carry on their respective businesses in the usual, regular
and ordinary course in all material respects, and shall use reasonable
commercial efforts to preserve intact their present business organizations,
maintain their rights and franchises, and preserve their relationships with
customers, suppliers and others having business dealings with them. Without
limiting the generality of the foregoing, except as otherwise specifically
permitted by this Agreement, the Company and its Subsidiaries shall operate
their respective businesses substantially in accordance with the budget for
advertising, promotion and capital expenditures previously delivered to Buyer
and as set forth in Section 3.1(a) of the Company Disclosure Schedule.
(b) DIVIDENDS; CHANGES IN SHARE CAPITAL. The Company shall not,
and shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, or (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable or exchangeable for any shares of its capital stock except (A) as
permitted under John Fujii's and Brian McTernan's Executive Agreements and as
may be required under existing management compensation agreements identified
in Section 3.1(b) of the Company Disclosure Schedule, (B) with respect to
Series A Preferred Stock, as may be required under the Company's
Organizational Documents, or (C) with respect to the exchange of shares of
Class B Common Stock on a one for one basis for shares of Class A Common
Stock (which shares are included in the Company's outstanding common stock
represented in Section 2.1(b)).
(c) ISSUANCE OF SECURITIES. The Company shall not, and shall
cause its Subsidiaries not to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock of
any class, any Company Voting Debt or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such
shares or Company Voting Debt, or enter into any agreement with respect to
any of the foregoing, other than the issuance of Class A Common Stock in
exchange for Class B Common Stock (which shares are included in the Company's
outstanding common stock represented in Section 2.1(b)) on a one for one
basis, in accordance with the terms, including the vesting schedule, set
forth in the instruments governing the grant thereof of the Class B Common
Stock.
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(d) ORGANIZATIONAL DOCUMENTS. Except to the extent required to
comply with their respective obligations hereunder or required by law, the
Company and its Subsidiaries shall not amend or propose to amend their
respective Organizational Documents.
(e) INDEBTEDNESS. The Company shall not, and shall not permit any
Subsidiary to, (i) incur or permit to exist any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities
or warrants or rights to acquire any debt securities of the Company or any
Subsidiary or guarantee any debt securities of other Persons (other than
indebtedness of the Company or its Subsidiaries to the Company or its
Subsidiaries), except (A) under the Bank Credit Facility, (B) the Senior
Notes and (C) other indebtedness not exceeding $10.0 million in the
aggregate, (ii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than by the Company or its
Subsidiaries to or in the Company or its Subsidiaries or (iii) pay, discharge
or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than in the case of
clauses (ii) and (iii) above, loans, advances, capital contributions,
investments, payments, discharges or satisfactions incurred or committed to
in the ordinary course of business consistent with past practice.
(f) EMPLOYEE COMPENSATION; BENEFIT PLANS. The Company shall not,
and shall not permit its Subsidiaries to, (i) increase the compensation
payable or to become payable to any of its officers, (ii) except as
contemplated by Section 3.1(l) or as noted in Section 2.1(b)(iv)(3), (4) and
(5) of the Company Disclosure Schedule, adopt or amend (except as may be
required or prudent under law) any Company Benefit Plans, or take any action
with respect to the grant of any severance or termination pay, or stay bonus
or other incentive arrangement (other than pursuant to Company Benefit Plans
and policies in effect on the date of this Agreement, the Stay Bonuses and
other items identified in Section 2.1(k) of the Company Disclosure Schedule),
except any such increases or grants to non-executive officers made in the
ordinary course of business reasonably consistent with past practices or as
provided in Section 4.5 or (iii) effectuate a "plant closing" or "mass
layoff" as those terms are defined in the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN"), affecting in whole or in part any site of
employment, facility, operating unit or employee of the Company or any
Subsidiary other than in compliance with the provisions thereof.
(g) OTHER ACTIONS. The Company shall not, and shall not permit
its Subsidiaries to, take any action that would result in (i) any of the
representations or warranties of the Company set forth in this Agreement that
are qualified as to materiality becoming untrue or inaccurate, (ii) any of
such representations and warranties that are not so qualified becoming untrue
or inaccurate in any material respect or (iii) except as otherwise permitted
by Section 4.1(a) or 4.4, any of the conditions to the Merger set forth in
Article V not being satisfied.
(h) ACCOUNTING METHODS; INCOME TAX ELECTIONS. Except as disclosed
in the Company SEC Reports filed prior to the date of this Agreement, as set
forth in Section 2.1(d) of the Company Disclosure Schedule, or as required by
a Governmental Entity, the Company shall not change its methods of accounting
in effect at December 31, 1998, except as required by
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changes in GAAP as concurred in by the Company's independent auditors. The
Company shall not (i) change its fiscal year, (ii) make any Tax election
which would have a Material Adverse Effect on the Company or (iii) settle or
compromise any material Federal, State, local or foreign Tax liability.
(i) COOPERATION WITH RESPECT TO HSR AND FCC FILINGS. The Company
shall cooperate with Buyer (including if necessary in Buyer's reasonable
judgment or in the opinion of Buyer's HSR and FCC counsel, modification of
Buyer's existing HSR and FCC filings) to modify or amend any HSR and FCC
filings with respect to the Pending Acquisitions and Pending Dispositions.
(j) ACQUISITIONS AND DISPOSITIONS. Except with respect to the
Laredo Joint Venture, none of the Company or its Subsidiaries shall enter
into any agreement or commitment to merge or consolidate with any Person or
acquire or dispose of any assets (including asset swaps) or equity interests
(i) having a value in excess of (A) $25.0 million in the case of all such
dispositions taken collectively or (B) $25.0 million in the case of all such
mergers, consolidations and acquisitions taken collectively or (ii) if in the
judgment of FCC counsel approved by both parties in their written opinion it
would have a Material Adverse Effect on the FCC's approval of the transfer of
the FCC Licenses to Buyer or Buyer's ability to operate the business of the
Company and its Subsidiaries substantially as now conducted or have a
Material Adverse Effect on the FCC's approval process.
(k) SETTLEMENT OF CLAIMS AND LITIGATION. The Company shall not,
and shall cause its Subsidiaries not to, compromise or settle any claim by or
against the Company or any Subsidiary, or any litigation, arbitration or
other proceeding in which the Company or a Subsidiary is the claiming or
defending party, except in the ordinary course of business consistent with
past practice and which, in the aggregate, do no involve the payment or
receipt of payments (or other consideration) in excess of $5.0 million.
(l) 401(k) PLAN. The Company shall complete self-correction of
its 401(k) plan for those operational compliance matters identified on
Section 2.1(d) of the Company Disclosure Schedule prior to Closing but
failure to complete such self-correction shall not constitute a breach unless
the reasonably estimated payments and costs to complete compliance would
exceed $1 million.
3.2 COVENANTS OF BUYER AND MERGER SUB. During the period from the
date of this Agreement and continuing until the Effective Time (except as
expressly contemplated or permitted by this Agreement or to the extent that
the Company shall otherwise consent in writing):
(a) ORDINARY COURSE. Buyer shall carry on its business in the
usual, regular and ordinary course in all material respects, and shall not,
and shall not permit any of its Subsidiaries to, take any action that would
result in (i) any of the representations or warranties of the Buyer or Merger
Sub set forth in this Agreement that are qualified as to materiality becoming
untrue or inaccurate, (ii) any of such representations and warranties that
are not so qualified becoming untrue or inaccurate in any material respect,
(iii) any of the conditions to the Merger
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set forth in Article V not being satisfied, or (iv) other than as
contemplated in Section 4.10, any amendment to the Bank Commitment Letter,
unless such amendment would not adversely affect the Company or the
consummation of the transactions contemplated hereby. In addition, Buyer
shall not incur any debt or obligations other than its obligations hereunder
or which are related to, or intended to facilitate the financing or
consummation of the transactions contemplated by, this Agreement.
(b) OBLIGATIONS OF MERGER SUB. Buyer hereby agrees to cause
Merger Sub to comply with and perform its obligations under this Agreement
and to cause Merger Sub to consummate the Merger as contemplated and on the
terms and conditions set forth herein. Whenever this Agreement requires
Merger Sub to take any action, such requirement shall be deemed to include an
undertaking of Buyer to cause Merger Sub to take such action.
3.3 ADVICE OF CHANGES. Each party shall: (i) confer on a regular and
frequent basis with the other; (ii) promptly notify the other orally and in
writing of any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate
or any such representation or warranty that is not so qualified becoming
untrue or inaccurate in any material respect and (iii) promptly notify the
other orally or in writing of the failure by such party (A) to comply with or
satisfy in any respect any covenant, condition or agreement required to be
complied with or satisfied by it under this Agreement that is qualified as to
materiality or (B) to comply with or satisfy in any material respect any
covenant, condition or agreement required to be complied with or satisfied by
it under this Agreement that is not so qualified as to materiality; PROVIDED,
HOWEVER, that, in any case, no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
3.4 CONTROL OF OTHER PARTY'S BUSINESS. Nothing contained in this
Agreement shall give the Company, on the one hand or Buyer or Merger Sub, on
the other hand, the right, directly or indirectly, to control or direct the
other party's operations or business prior to the Effective Time. Prior to
the Effective Time, each of the Company and Buyer shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision over its respective operations and business.
ARTICLE IV.
ADDITIONAL AGREEMENTS
4.1 COMPANY STOCKHOLDERS MEETING
(a) If required by law or requested by the Company's Board of
Directors, the Company shall cause a meeting of its stockholders (the
"COMPANY STOCKHOLDERS MEETING") to be duly called and held as soon as
reasonably practicable for the purpose of obtaining the Required Company
Vote, and the Company shall, through the Company Board, recommend to its
stockholders that they vote in favor of the approval of the Merger and the
adoption of this Agreement and Buyer shall vote or cause to be voted all the
shares of Company Common Stock owned of record by Buyer, Merger Sub or any of
Buyer's other Subsidiaries in favor of the approval of the Merger and
adoption of this Agreement. After the date hereof, Buyer shall not
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purchase, offer to purchase, or enter into any contract, agreement or
understanding regarding the purchase of shares of Company Common Stock,
except pursuant to the terms of the Merger and the Voting Agreement.
(b) If required by law or requested by the Company's Board of
Directors, the Company shall prepare a proxy or information statement for
distribution to its stockholders for purposes of the Company Stockholders
Meeting (the "PROXY STATEMENT"). If applicable, the Company shall use
reasonable efforts to cause the Proxy Statement and all other proxy materials
for the Company Stockholders Meeting to be mailed to the Company's
stockholders as promptly as practicable.
4.2 ACCESS TO INFORMATION. From the date hereof until the earlier of
the Effective Time or the termination of this Agreement, upon reasonable
notice, the Company shall afford to the officers, employees, accountants,
counsel, financial advisors and other representatives of Buyer reasonable
access during normal business hours, to the Company's and its Subsidiaries'
properties, books, contracts, commitments and records located at its
corporate headquarters in Schaumburg, Illinois and its corporate-level
officers, management employees, accountants and representatives and, during
such period, the Company shall furnish promptly to Buyer, consistent with its
legal obligations (and subject to existing confidentiality and similar
non-disclosure obligations and the preservation of attorney client and work
product privileges), all information concerning its business, properties and
personnel as Buyer may reasonably request; PROVIDED, HOWEVER, the Company may
restrict any such access to the extent that (i) a Governmental Entity
expressly requires the Company or any of its Subsidiaries to restrict access
to any properties or information reasonably related to any such contract on
the basis of applicable laws and regulations, (ii) any law, treaty, rule or
regulation of any Governmental Entity applicable to the Company or any of its
Subsidiaries requires the Company or any of its Subsidiaries to restrict
access to any properties or information, or (iii) such access would
unreasonably disrupt or interfere with the operations or business of the
Company; and PROVIDED FURTHER that the Company shall use its reasonable
efforts to obtain the consent or release of the parties to confidentiality
and non-disclosure agreements which authorize the delivery of the
confidential or non-disclosable information to Buyer. Buyer acknowledges that
any such information received by Buyer or its representatives from or on
behalf of the Company pursuant to this Section 4.2 shall be deemed received
pursuant to, and shall be held in confidence by Buyer and its representatives
to the extent required by, and in accordance with, the provisions of that
certain letter agreement, dated August 3, 1999 (as amended, the
"CONFIDENTIALITY AGREEMENT"), between the Company and Buyer, which
Confidentiality Agreement shall, notwithstanding language in such
Confidentiality Agreement to the contrary, remain in full force and effect
and shall be incorporated herein by reference with the same effect as if
fully set forth herein; provided Buyer may use any such information for the
purposes referred to in Section 4.3(d).
4.3 COOPERATION; FILINGS AND APPROVALS
(a) Subject to the terms and conditions of this Agreement, each
of the Company, Buyer and Merger Sub shall cooperate with each other and
shall use (and shall cause their respective Subsidiaries to use) its
commercially reasonable best efforts to take or cause to
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be taken all actions, and do or cause to be done all things, necessary,
proper or advisable on their part under this Agreement and applicable laws to
consummate and make effective the Merger and the other transactions
contemplated by this Agreement as soon as practicable, including, without
limitation, (i) preparing and filing as promptly as practicable all
documentation to effect all necessary applications, notices, petitions,
filings, tax ruling requests and other documents and to obtain as promptly as
practicable all consents, waivers, licenses, orders, registrations,
approvals, permits, tax rulings and authorizations necessary or advisable to
be obtained from any third party and/or any Governmental Entity in order to
consummate the Merger or any of the other transactions contemplated by this
Agreement (including the consent of the FCC), and (ii) taking all steps as
may be necessary to obtain all such consents, waivers, licenses,
registrations, permits, authorizations, tax rulings, orders and approvals;
provided that the Company shall not be required to incur any significant
expense or liability or agree to any significant modification to any
contractual arrangement or Company Permit to obtain any of the foregoing.
(b) The Company and its Subsidiaries and Buyer shall file all
reports required to be filed by each of them with any Governmental Entity
between the date of this Agreement and the Effective Time and shall (to the
extent permitted by law or regulation or any applicable confidentiality
agreement) deliver to the other party copies of all such reports promptly
after the same are filed. Subject to applicable laws relating to the exchange
of information, each of the Company and Buyer shall have the right to review
in advance, and to the extent practicable each will consult with the other,
with respect to all the information relating to the other party and each of
their respective Subsidiaries, which appears in any filings, announcements or
publications made with, or written materials submitted to, any Governmental
Entity in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto agrees to act
reasonably and as promptly as practicable. Notwithstanding the foregoing, the
Company will not be obligated to deliver any tax returns on a regular basis
pursuant to this Section 4.3(b) unless reasonably requested by Buyer.
(c) Each of the Company and Buyer agrees to make all necessary
filings in connection with the Required Regulatory Approvals as promptly as
practicable after the date of this Agreement, and to use its reasonable best
efforts to furnish or cause to be furnished, as promptly as practicable, all
information and documents required with respect to such Required Regulatory
Approvals and shall otherwise cooperate with the applicable Governmental
Entity in order to obtain any Required Regulatory Approvals in as expeditious
a manner as possible. Each party agrees that, to the extent practicable, it
will consult with the other party with respect to the obtaining of all
permits, consents, approvals and authorizations of all third Persons
(including lessors) and Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Agreement and Seller agrees
to cooperate with Buyer and Buyer's representatives seeking to comply with
any material leases or other material agreements which would be violated as a
result of the consummation of the transactions contemplated hereby and each
party will keep the other party apprised of the status of matters relating to
completion of the transactions contemplated hereby. Without limiting the
generality of the foregoing, Buyer and Merger Sub agree to take all actions
necessary to comply with the HSR Act so as to consummate the Merger as
promptly as practicable, including, without limitation, (i) filing, no later
than
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twenty (20) business days following the date hereof, with the Federal Trade
Commission and the United States Department of Justice all documents required
to be filed pursuant to the HSR Act, and (ii) causing the expiration of the
notice and waiting periods under the HSR Act with respect to the transactions
contemplated by this Agreement as promptly as possible after the date of this
Agreement. Each of the Company and Buyer shall take all commercially
reasonable action necessary to resolve such objections, if any, as may be
asserted by any Governmental Entity with respect to this Agreement and the
transactions contemplated hereby in connection with the Required Regulatory
Approvals. If any administrative or judicial suit, action or proceeding is
instituted (or threatened to be instituted) by a Person or Governmental
Entity challenging this Agreement and the transactions contemplated hereby as
violative of applicable antitrust or competition laws, each of the Company
and Buyer shall cooperate and shall contest and resist, except insofar as the
Company and Buyer shall otherwise agree, any such suit, action or proceeding,
including any suit, action or proceeding that seeks a temporary restraining
order or preliminary injunction that would prohibit, prevent or restrict
consummation of the Merger or any other transaction contemplated by this
Agreement.
(d) The Company and Buyer each shall, upon request by the other,
furnish the other with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as may reasonably
be necessary or advisable in connection with the Proxy Statement, the
Financing or alternative financing for the transactions contemplated by this
Agreement (including a public debt and/or equity financing by Buyer and/or
its affiliates) or any other statement, filing, tax ruling request, notice or
application made by or on behalf of the Company, Buyer or any of their
respective Subsidiaries to any third party and/or any Governmental Entity in
connection with the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, the Company shall, and shall use
commercially reasonably efforts, to cause its accountants and other
representatives, to cooperate with Buyer and its Affiliates in connection
with the Financing (or any alternative financing for the Merger proposed by
Buyer), including (i) authorization to include the Company's financial
statements and other relevant information in any filing with the SEC or other
Governmental Entity and obtaining comfort letters customary in public
financing, (ii) incurring borrowings under its existing credit facilities
contemporaneously with the Closing, but not in excess of the maximum amount
permitted under such facilities, and (iii) cause Ernst & Young LLP to prepare
the Company's year-end audit in the ordinary course.
4.4 NO SHOPPING. Unless and until this Agreement shall have been
terminated by either party pursuant to Article VI, the Company shall not, and
shall not authorize any of its officers, directors, agents, representatives
or advisors to, directly or indirectly, solicit, initiate, negotiate with or
knowingly encourage any Person (other than Buyer, Merger Sub or their
respective designees) to make or submit an offer, indication of interest or
proposal to acquire all or a majority of the Company's consolidated business
or more than a total of 9.9% of any class of the Company's capital stock,
whether by merger, consolidation or other business combination, purchase of
assets, tender or exchange offer or otherwise (other than the transactions
contemplated by this Agreement) (each of the foregoing, an "ACQUISITION
PROPOSAL") or provide any Person any non-public information concerning the
Company or its Subsidiaries which the Company has reason to believe will be
used in connection with an Acquisition Proposal.
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4.5 EMPLOYEE BENEFITS
(a) For a period of 12 months immediately following the Closing
Date, the Surviving Corporation shall (i) provide aggregate compensation
(including base salary, bonus opportunities (other than the Stay Bonus
provision and one-time payments made as a result of a change in control in
connection with the transactions contemplated by this Agreement) and
benefits) to each employee (other than Messrs. Fujii and McTernan) of the
Company and its Subsidiaries as of the Closing Date for so long as such
employee is employed by the Surviving Corporation which is no less favorable
than that provided to each such employee prior to the Closing Date, and (ii)
maintain in effect employee benefit plans and arrangements (including
severance, change of control and termination benefits) which provide benefits
for such employees which in the aggregate have a value which is at least
comparable to the benefits provided by the Company Benefit Plans.
(b) For purposes of determining eligibility to participate,
waiting periods, vesting and accrual or entitlement to benefits where length
of service is relevant under any employee benefit plan or arrangement of
Buyer, the Surviving Corporation or any of their respective Subsidiaries, if
employees of the Company or any of its Subsidiaries are eligible to
participate therein, employees of the Company and its Subsidiaries as of the
Effective Time shall receive service credit for service with the Company and
its Subsidiaries to the same extent such service credit was granted under the
Company Benefit Plans, subject to offsets for previously accrued benefits and
no duplication of benefits. If employees of the Company or any of its
Subsidiaries are eligible to participate in any medical, dental or health
plan maintained or established by the Surviving Corporation (other than the
plan or plans which such employees participated in immediately prior to the
Effective Time), such plan or plans shall not include pre-existing condition
exclusions, except to the extent such exclusions were applicable under the
plans in which such employees participated immediately prior to the Effective
Time, and shall provide credit for any deductibles and co-payments applied or
made with respect to each such employee in the calendar year of the change in
plan.
(c) Buyer shall cause the Surviving Corporation to assume and
honor in accordance with their terms all written employment, severance and
termination plans, policies and agreements (including change in control
provisions) of employees of the Company and its Subsidiaries as in effect on
the date of this Agreement and the Stay Bonus program, each of which plans,
policies, agreements and programs are listed in Section 4.5 of the Company
Disclosure Schedule and are subject to Section 4.5(a). The Company agrees to
consult with Buyer regarding the aggregate amount and allocation of such
aggregate amount payable under the Stay Bonus program.
4.6 FEES AND EXPENSES. Whether or not the transactions contemplated
hereby are consummated, all Expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such Expenses, except if the Merger is consummated, the Surviving
Corporation shall pay, or cause to be paid, any and all property or transfer
taxes imposed on the Company or its Subsidiaries and any real property
transfer tax imposed on any holder of shares of capital stock of the Company
resulting from the Merger. As
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used in this Agreement, "EXPENSES" includes all out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto
and its affiliates) incurred by a party or on its behalf in connection with
or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the Financing.
4.7 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
(a) Buyer and the Surviving Corporation shall cause to be
maintained in effect for a period of six (6) years after the Effective Time
the current provisions regarding indemnification of current or former
officers and directors (each an "INDEMNIFIED PARTY") contained in the
Organizational Documents of the Company or its Subsidiaries and in any
agreements between an Indemnified Party and the Company or its Subsidiaries
(which provisions, unless required by applicable law, shall not be amended,
repealed or otherwise modified for such six-year period in any manner that
would adversely affect the rights thereunder of any Indemnified Party),
provided that in the event any claim or claims are asserted or made within
such six-year period, all rights to indemnification in respect of any claim
or claims shall continue until final disposition of any and all such claims,
and
(b) either (i) Buyer and the Surviving Corporation shall cause to
be maintained in effect for a period of six (6) years after the Effective
Time the current policies of directors' and officers' liability insurance and
fiduciary liability insurance maintained by the Company provided that Buyer
or the Surviving Corporation may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured and provided further that such
substitution shall not result in any gaps or lapses in coverage with respect
to matters occurring on or prior to the Effective Time; and provided further,
that the annual premium therefor is not in excess of two hundred percent
(200%) of the last annual premium paid by the Company prior to the date
hereof (or if such premium is in excess of such amount, such policies of
directors' and officers' liability insurance and fiduciary liability
insurance providing for as much coverage as can be obtained for such amount)
with respect to claims arising from facts or events that occurred on or
before the Effective Time or (ii) at the Company's election and so long as
the Company advises Buyer of such election not less than 60 days prior to
Closing Buyer shall purchase a tail policy to be in effect until the sixth
anniversary of Closing for directors' and officers' liability insurance and
fiduciary liability insurance at a one time premium cost not to exceed
$100,000. This covenant is intended to be for the benefit of, and shall be
enforceable by, each of the Indemnified Parties and their respective heirs
and legal representatives. For a period of six (6) years after the Effective
Time (provided that in the event any claim or claims are asserted or made
within such six-year period, all rights to indemnification in respect of any
claim or claims shall continue until final disposition of any and all such
claims), Buyer shall indemnify the Indemnified Parties to the same extent as
such Indemnified are entitled to indemnification under the Organizational
Documents pursuant to Section 4.7(a). Without limitation of the foregoing, in
the event after the Effective Time any such Indemnified Party is or becomes
involved in any action, proceeding or investigation in connection with any
matter occurring prior to or on the Effective Time, including the
transactions contemplated hereby, and a conflict of interest exists which
would prohibit
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counsel for the Company or counsel for one or more other Persons from
representing such Indemnified Party, then the Surviving Corporation will pay
as incurred such Indemnified Party's reasonable fees and expenses of counsel
selected by the Surviving Corporation (including the cost of any
investigation and preparation and the cost of any appeal) incurred in
connection therewith. This covenant shall survive the closing of the
transactions contemplated hereby and is intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties and their
respective heirs and legal representatives. Buyer hereby guarantees the
compliance by the Surviving Corporation with the provisions of, and the
performance of the obligations of the Surviving Corporation under, this
Section 4.7.
4.8 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, the
Company and Buyer shall use all reasonable efforts to develop a joint
communications plan and each party shall use all reasonable efforts (i) to
ensure that all press releases and other public statements with respect to
the transactions contemplated hereby shall be consistent with such joint
communications plan and (ii) unless otherwise required by applicable law or
by obligations pursuant to any listing agreement with or rules of any
securities exchange, to consult with each other before issuing any press
release or otherwise making any public statement with respect to this
Agreement or the transactions contemplated hereby.
4.9 FCC APPLICATION
(a) As promptly as practicable after the execution and delivery
of this Agreement, Buyer, Merger Sub and the Company shall prepare all
appropriate applications for FCC consent, and such other documents as may be
required, with respect to the transfer of control of the Company to Buyer
(collectively, the "FCC APPLICATION"). Not later than the twentieth Business
Day following the date of this Agreement, Buyer and Merger Sub shall deliver
to the Company their respective completed portions of the FCC Application,
and not later than the thirtieth Business Day following the date of this
Agreement, the Company shall file or cause to be filed the FCC Application.
The Company and Buyer shall prosecute the FCC Application in good faith and
with due diligence in order to obtain such FCC consent as expeditiously as
practicable. If the Closing shall not have occurred for any reason within the
initial effective period of the granting of approval by the FCC of the FCC
Application, and neither the Company nor Buyer shall have terminated this
Agreement pursuant to Section 6.1, the Company and Buyer shall jointly
request one or more extensions of the effective period of such grant. No
party hereto shall knowingly take or fail to take any action the intent or
reasonably anticipated consequence of which action or failure to act would be
to cause the FCC not to grant approval of the FCC Application or delay either
such approval or the consummation of the transfer of control of the Company
pursuant to this Agreement.
(b) The Company shall pay any fees that may be payable in
connection with the filing or granting of approval of the FCC Application.
Buyer and the Company shall each oppose any objection or petition against the
FCC Application, and shall oppose any request for reconsideration or judicial
review of the granting of the FCC Application. The Company shall pay any
costs incurred in connection with complying with the FCC notice and
advertisement
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requirements in connection with the transfer of control of the Company
pursuant to this Agreement.
4.10 FINANCING
(a) Buyer has delivered to the Company a true and complete copy
of the Bank Commitment Letter, which when combined with the equity to be
contributed to Buyer by its members will be sufficient to allow Buyer (i) to
pay in full all payments to be made in connection with the Merger (including
the purchase of the Series A Preferred Stock) and the other transactions
contemplated hereby, (ii) to refinance and retire all outstanding
indebtedness of the Company at the Effective Time under (A) the Credit
Agreement, dated June 25, 1998, among American Cellular Wireless LLC, as
borrower, certain guarantors, arrangers and agents signatory thereto, the
lenders party thereto and Toronto Dominion (Texas), Inc., as administrative
agent for the lenders (as amended, supplemented or modified from time to
time, the "BANK CREDIT FACILITY"), and (B) the 10 1/2% Senior Notes due 2008
issued by the Company pursuant to the Indenture, dated as of May 13, 1998,
between the Company and Chase Manhattan Bank and Trust Company, National
Association, as trustee (the "SENIOR NOTES"), and (iii) to satisfy all
Transaction Fees and Expenses and all other costs arising in connection
therewith. The financing to be provided under the Bank Commitment Letter (or
such other financing as Buyer may arrange with a bank or institutional lender
having capital and surplus in excess of $3.0 billion and a Thomson Bank Watch
Rating of "B" or better (any such bank or institutional lender is referred to
herein as the "BANK") that is on terms and conditions that are no less
favorable to Buyer than those contained in the Bank Commitment Letter) is
referred to in this Agreement as the "FINANCING."
(b) Buyer agrees to use its commercially reasonable efforts to
promptly negotiate and obtain definitive agreements with respect to the
Financing upon the terms provided in the Bank Commitment Letter (or such
replacement commitment letter that has substantially similar terms as the
Bank Commitment Letter and is in any event no less favorable to Buyer than
those set forth in the Bank Commitment Letter) (the "DEFINITIVE FINANCING
AGREEMENTS") and if such Definitive Financing Agreements are entered into, to
consummate the Financing upon satisfaction of (i) the conditions set forth in
Article V and (ii) the conditions precedent to any extension of credit under
the Definitive Financing Agreements (other than those conditions which are
within Buyer's control which conditions Buyer shall cause to be satisfied).
Buyer shall use reasonable commercial efforts to satisfy all requirements of
the Bank Commitment Letter (or such replacement commitment letter that has
substantially similar terms as the Bank Commitment Letter and is in any event
no less favorable to Buyer than those set forth in the Bank Commitment
Letter) and of the Definitive Financing Agreements which are conditions
precedent to closing the transactions constituting the Financing and to
drawing the cash proceeds thereunder. The Company shall provide such
cooperation as is reasonably requested by the Buyer in order to satisfy those
conditions to closing the transactions constituting the Financing which are
applicable to the Company, provided that the Company shall not be obligated
to incur any Expense in order to comply with this obligation.
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4.11 TERMINATION OF EQUITY DOCUMENTS. At or prior to the Effective
Time, the Company shall cause (i) the Stockholders Agreement, dated as of
March 5, 1998, by and among the Company and each of the stockholders of the
Company signatory thereto, as amended, supplemented or modified from time to
time, (ii) the Stock Purchase Agreement, dated as of March 5, 1998, by and
among the Company and each of the stockholders of the Company signatory
thereto, as amended, supplemented or modified from time to time, and (iii)
the Registration Rights Agreement, dated as of March 5, 1998, by and among
the Company and each of the stockholders of the Company signatory thereto, as
amended, supplemented or modified from time to time, each to be terminated
and of no further force and effect (except for provisions thereof which by
their terms survive any such termination and do not adversely impact Buyer or
the Surviving Corporation in a material manner).
4.12 FURTHER ASSURANCES. If at any time after the Effective Time any
further action is reasonably necessary to carry out the purposes of this
Agreement, the proper officers of the Company, Buyer and Merger Sub shall
take any such further action and shall be authorized to execute and deliver,
in the name and on behalf of the Company, Buyer or Merger Sub, as the case
may be, any deeds, bills of sale, assignments or assurances and to take any
other actions to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under
any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of or in connection with
the Merger.
ARTICLE V.
CONDITIONS PRECEDENT
5.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
obligations of the Company, Buyer and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or prior to the Effective Time of
the following conditions:
(a) HSR ACT. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or
shall have expired.
(b) NO INJUNCTIONS OR RESTRAINTS, ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued
by a court or other Governmental Entity of competent jurisdiction shall be in
effect and have the effect of making the Merger illegal or otherwise
restraining or prohibiting consummation of the Merger or any of the other
transactions contemplated by this Agreement; PROVIDED, HOWEVER, that the
provisions of this Section 5.1(b) shall not be available to any party whose
failure to fulfill its obligations pursuant to Section 4.3 shall have been
the cause of, or shall have resulted in, such order or injunction.
(c) REQUIRED REGULATORY APPROVALS. All consents, waivers,
authorizations, permits, orders and approvals of, and declarations and
filings with, and all expirations of waiting periods imposed by, any
Governmental Entity (other than the FCC) which, if not obtained in connection
with the execution, delivery and performance by the parties of this Agreement
and the consummation of the transactions contemplated hereby, would have a
Material Adverse Effect on the Company or the Surviving Corporation, or
materially impair the ability of the Company, Buyer or Merger Sub to
consummate the transactions contemplated hereby (collectively,
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"REQUIRED REGULATORY APPROVALS"), shall have been obtained, waived, declared
or filed or have occurred, as the case may be, and all such Required
Regulatory Approvals shall be in full force and effect.
(d) FCC TRANSFER APPROVALS. Except as set forth in Section 5.2(c),
all consents, waivers, approvals and authorizations (the "FCC TRANSFER
APPROVALS") required to be obtained from, and all filings or notices required
to be made by Buyer and the Company prior to the consummation of the
transactions contemplated by this Agreement shall have been obtained from or
made with, the FCC.
5.2 CONDITIONS TO THE OBLIGATIONS OF BUYER AND MERGER SUB TO EFFECT THE
MERGER. In addition to the conditions set forth in Section 5.1, the
obligations of Buyer and Merger Sub to effect the Merger are further subject
to the satisfaction or waiver on or prior to the Effective Time of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company set forth in this Agreement shall be true and
correct as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date, except to the extent (i) any inaccuracies
in such representations and warranties, individually or in the aggregate,
would not have a Material Adverse Effect on the Company (provided that,
solely for purposes of this Section 5.2(a), any representation or warranty of
the Company that is qualified by materiality (or words of similar import) or
Material Adverse Effect shall be read as if such language were not present),
or (ii) such representations and warranties speak as of an earlier date.
Buyer shall have received a certificate executed on behalf of the Company by
its Chief Executive Officer or Chief Financial Officer to such effect.
(b) PERFORMANCE OF OBLIGATIONS AND COVENANTS. The Company shall have
performed or complied in all material respects with all of its obligations
and covenants required to be performed by the Company under this Agreement at
or prior to the Closing Date. Buyer shall have received a certificate
executed on behalf of the Company by its Chief Executive Officer or Chief
Financial Officer to such effect.
(c) FINAL ORDER. Each of the FCC Transfer Approvals shall have
become a Final Order. For purposes of this Agreement, "FINAL ORDER" shall
mean an action by the FCC: (i) that is not reversed, stayed, enjoined, set
aside, annulled or suspended within the deadline, if any, provided by
applicable statute or regulation, (ii) with respect to which no request for
stay, motion or petition for reconsideration or rehearing, application or
request for review, or notice of appeal or other judicial petition for review
that is filed within such period is pending, and (iii) as to which the
deadlines, if any, for filing any such request, motion, petition,
application, appeal or notice, and for the entry of orders staying,
reconsidering or reviewing on the FCC's own motion have expired.
Notwithstanding anything to the contrary contained in this Agreement, (A)
Buyer may, at its option by written notice to the Company, waive, on behalf
of all parties, the requirement that each of the FCC Transfer Approvals shall
have become a Final Order, and (B) in the case of the required FCC Transfer
Approvals regarding the transfer of the microwave and PCS licenses only,
Buyer shall, on behalf of all parties, deem either initial FCC approvals or
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special temporary authority to transfer the microwave or PCS licenses, as the
case may be, to satisfy this condition and, in such case, upon receipt of
either the initial FCC approvals or such special temporary authority, each
party shall be obligated hereunder as though a Final Order with respect
thereto had been received.
(d) DELIVERIES. Buyer shall have received (i) payoff letters in
customary form with respect to the Bank Credit Facility and shall have
received a certificate from the Company's Chief Financial Officer with
respect to the amount of the Transaction Fees and Expenses and the amount of
Outstanding Indebtedness; (ii) resignations of all directors of the Company
effective as of the Effective Time; (iii) written statements contemplated by
Section 5.2(d) of the Company Disclosure Schedule from Messrs. Fujii and
McTernan; and (iv) agreements and instruments in form and substance
reasonably satisfactory to Buyer evidencing the termination of each of the
agreements and instruments as provided in Section 4.11 of this Agreement.
(e) NO LITIGATION. Except as set forth on Section 2.1(g) of the
Company Disclosure Schedule, there shall not be pending any suit, action,
investigation (of which the Company has received written notice that it is a
target) or proceeding by any Governmental Entity (an "ACTION") (i) seeking to
restrain or prohibit the consummation of the Merger or any of the other
transactions contemplated by this Agreement or seeking to obtain damages from
the Company or Buyer or any of their respective Subsidiaries, which, if
determined adversely to the Company, would be reasonably likely to have a
Material Adverse Effect on the Company; (ii) seeking to prohibit or limit the
ownership or operation by the Company or any of its Subsidiaries or Buyer of
any material portion of the business or assets of the Company and its
Subsidiaries; (iii) seeking to require the Company or any of its Subsidiaries
or Buyer to dispose of or hold separate any material portion of the business
or assets of the Company and its Subsidiaries as a result of the Merger or
any of the other transactions contemplated by this Agreement; (iv) seeking to
prohibit Buyer from effectively controlling in any material respect the
business or operations of the Company and its Subsidiaries, including the
exercise of any purported right under a Lien with respect to any Subsidiary,
or (v) seeking to impose limitations on the ability of Buyer or Merger Sub to
hold, or exercise full rights of ownership of, any shares of Company Common
Stock, including without limitation, the right to vote shares of Company
Common Stock on all matters properly presented to the shareholders of the
Company or which otherwise would have a Material Adverse Effect on the
Company.
(f) MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall not have been a Material Adverse Effect on the Company.
(g) DISSENTING SHARES. The holders of not more than 5% of all
outstanding Class A Common Stock shall have demanded (and not withdrawn)
appraisal for their shares in accordance with Section 262 of the DGCL.
(h) DEBT REPAYMENT. Messrs. Fujii and McTernan shall have repaid all
outstanding indebtedness owed by them to the Company and its Subsidiaries.
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(i) SHAREHOLDER APPROVAL. The Written Consent of Shareholders
approving and adopting this Agreement and the transactions contemplated
hereby, including the Merger in accordance with the DGCL, shall be in full
force and effect as of the Closing Date.
5.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO EFFECT THE MERGER.
In addition to the conditions set forth in Section 5.1, the obligations of
the Company to effect the Merger are further subject to the satisfaction or
waiver on or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer and Merger Sub set forth in this Agreement shall be true
and correct as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date, except to the extent (i) any
inaccuracies in such representations and warranties, individually or in the
aggregate, would not have a Material Adverse Effect on Buyer or Merger Sub
(provided that, solely for purposes of this Section 5.2(a), any
representation or warranty of Buyer or Merger Sub that is qualified by
materiality (or words of similar import) or Material Adverse Effect shall be
read as if such language were not present), or (ii) such representations and
warranties speak as of an earlier date. The Company shall have received an
officer's certificate executed on behalf of Buyer and Merger Sub to such
effect.
(b) PERFORMANCE OF OBLIGATIONS AND COVENANTS. Buyer and Merger Sub
shall have performed or complied with in all material respects all of their
respective obligations and covenants required to be performed by them under
this Agreement at or prior to the Closing Date and the Company shall have
received an officer's certificate executed on behalf of Buyer and Merger Sub
to such effect.
ARTICLE VI.
TERMINATION AND AMENDMENT
6.1 TERMINATION. This Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, by action taken or
authorized by the Board of Directors of the terminating party or parties,
whether before or after approval of this Agreement and the transactions
contemplated hereby by the stockholders of the Company:
(a) By mutual written consent of Buyer and the Company, by action of
their respective Boards of Directors;
(b) By either the Company or Buyer if the Merger shall not have been
consummated by the date which is six (6) months from the date of this
Agreement (the "OUTSIDE DATE"); PROVIDED, HOWEVER, that such Outside Date
shall be extended to the date which is twelve (12) months from the date of
this Agreement in the event all conditions to effect the Merger other than
those set forth in Sections 5.1(a), (b), (c) and (d) and 5.2(c) (the
"EXTENSION CONDITIONS") have been or are, in the reasonable judgment of
either Seller or Buyer, capable of being satisfied (or if the party for whose
benefit such condition runs is in such party's discretion, waived) at the
time of such extension and the Extension Conditions have been or are
reasonably capable of being satisfied on or prior to such extended date;
PROVIDED FURTHER that the right to terminate this
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Agreement under this Section 6.1(b) shall not be available to any party whose
failure (or, if Buyer is the terminating party, the failure of Buyer or
Merger Sub) to fulfill any obligation under this Agreement has been the
primary cause of, or resulted in, the failure of the Merger to occur on or
before such Outside Date, as the same may be extended pursuant to this
Section 6.1(b) (except that, notwithstanding the provisions of this Section
6.1(b), if, at the Outside Date, all conditions precedent to Buyer's
obligation to consummate the Merger set forth in Article V have been
satisfied (or waived by Buyer) and the Merger has not closed solely as a
result of a Bank Financing Failure, Buyer shall have the right to terminate
this Agreement pursuant to this Section 6.1(b) upon payment to the Company of
the Liquidated Damages Amount);
(c) By either the Company or Buyer if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any Governmental Entity shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or other
action the terminating party (including, if Buyer is the terminating party,
Merger Sub) shall have used its commercially reasonable efforts to resist,
resolve or lift, as applicable, subject to the provisions of Section 4.3)
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other
action shall have become final and nonappealable;
(d) By Buyer if the approval by the stockholders of the Company
required for the consummation of the Merger or the other transactions
contemplated hereby shall not have been obtained by reason of the failure to
obtain the required vote at the Company Stockholders Meeting or at any
adjournment thereof or pursuant to a written consent in lieu of a
shareholders meeting;
(e) By Buyer, upon a material breach of any covenant or agreement on
the part of the Company set forth in this Agreement, or if (i) any
representation or warranty of the Company that is qualified as to materiality
shall have become untrue or (ii) any representation or warranty of the
Company that is not so qualified shall have become untrue in any material
respect (a "TERMINATING COMPANY BREACH"); PROVIDED, HOWEVER, Buyer shall
promptly give the Company written notice specifying such breach and if such
Terminating Company Breach is capable of being cured by the Company prior to
the earlier of 30 days or the tenth day prior to the Outside Date through the
exercise of its reasonable commercial efforts, so long as the Company
continues to exercise its reasonable commercial efforts to cure such
Terminating Company Breach, Buyer may not terminate this Agreement under this
Section 6.1(e);
(f) By the Company, upon a material breach of any covenant or
agreement on the part of Buyer or Merger Sub set forth in this Agreement, or
if (i) any representation or warranty of Buyer or Merger Sub that is
qualified as to materiality shall have become untrue or (ii) any
representation or warranty of Buyer or Merger Sub that is not so qualified
shall have become untrue in any material respect ("TERMINATING BUYER
BREACH"); PROVIDED, HOWEVER, the Company shall promptly give Buyer written
notice specifying such breach and if such Terminating Buyer Breach is capable
of being cured by Buyer prior to the earlier of 30 days or the tenth day
prior to the Outside Date through the exercise of reasonable commercial
efforts, so long as Buyer and Merger Sub continue to exercise their
respective reasonable commercial
38
<PAGE>
efforts to cure such Terminating Buyer Breach, the Company may not terminate
this Agreement under this Section 6.1(f);
(g) By Buyer upon any action by the parties to the Voting Agreement
or the Written Consent of Shareholders, the effect of which is that the
approval or consent of a majority of the Company's stockholders entitled to
vote on the Merger is no longer in effect.
The party desiring to terminate this Agreement pursuant to Section 6.1(b),
(c), (d), (e), (f) or (g) shall provide the other party notice of such
termination in accordance with Section 7.2.
6.2 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either the Company or Buyer as provided in Section 6.1, this Agreement
shall forthwith become void and of no further force and effect and there
shall be no liability or obligation on the part of Buyer, Merger Sub or the
Company or their respective officers or directors except with respect to the
Company, Buyer and Merger Sub (i) as provided in the last sentence of Section
4.2, Section 4.6, this Section 6.2 and Article VII, and (ii) for damages
incurred by any party as a result of a breach by the other party of any of
its covenants, representations, warranties or other agreements set forth in
this Agreement, including damages incurred as a result of any termination
that results from such a breach, and in the case of a breach by Buyer or
Merger Sub, to the full extent of such damages up to but not exceeding $500
million. Notwithstanding the foregoing, in the event that the conditions
precedent to Buyer's obligations to consummate the Merger set forth in
Article V have been satisfied (or waived by Buyer) and the Merger fails to
occur by the date on which such conditions have been so satisfied (or waived
by Buyer) solely because either (i) Buyer has received written notice from
Bank of America N.A. and Banc of America Securities LLC that they will not
fund the financing contemplated by the Bank Commitment Letter (or, if Buyer
has substituted a Bank pursuant to Section 4.10(a), a similar written notice
from such Bank) for any reason other than (x) a breach by Buyer of its
obligations to the banks under the Bank Commitment Letter or the Definitive
Financing Agreements (or, if Buyer has substituted a Bank pursuant to Section
4.10(a), a breach by Buyer of its obligations to such Bank under any
commitment letter or other financing agreements with such Bank) or (y) the
failure of Buyer to satisfy a condition to the funding of such financing that
is within Buyer's control or (ii) Buyer and Bank of America N.A. and Banc of
America Securities LLC have been unable, despite good faith efforts, to
negotiate, execute and deliver the Definitive Financing Agreements (or, if
Buyer has substituted a Bank pursuant to Section 4.10(a), Buyer and Bank have
been unable, despite good faith efforts, to negotiate, execute and deliver
definitive financing agreements) (a "BANK FINANCING FAILURE"), then in the
event of termination of this Agreement by either party in accordance with the
terms hereof, Buyer shall pay the Company, as liquidated damages, the sum of
$100 million without the necessity of proof by the Company of actual damages
(the "LIQUIDATED DAMAGES AMOUNT"). The parties acknowledge that the
Liquidated Damages Amount is a fair and reasonable measure of the damages
that the Company and its stockholders would sustain as a result of the
failure of Buyer to consummate the Merger due to a Bank Financing Failure,
and that the amount of actual damages in the event of a Bank Financing
Failure would be impossible to ascertain. For the avoidance of doubt, the
parties hereby acknowledge that a Bank Financing Failure cannot occur if
there is a breach (after giving effect to any applicable cure period provided
in this Agreement) by Buyer of its obligations under this
39
<PAGE>
Agreement, and in the event of such breach the Company shall be entitled to
pursue its remedies against Buyer to the full extent of such damages up to
but not exceeding $500 million as provided in Section 6.2(a)(ii); PROVIDED,
HOWEVER, the Company covenants and agrees that in the event a court of
competent jurisdiction renders a final nonappealable order that Buyer did not
breach its obligations under this Agreement and that a Bank Financing Failure
had occurred, then upon the payment of the Liquidated Damages Amount, neither
Buyer nor Merger Sub (nor any affiliate thereof) will have any further
liability to the Company, and the Company shall not pursue any other action
or claim against the Buyer or any of its affiliates, arising out of or
relating to this Agreement, the Unrestricted Equity Agreement or any other
related agreement or the transactions contemplated hereby and thereby.
Notwithstanding any other provision of this Agreement, no party hereto may be
liable for any punitive, consequential or special damages in any action based
on a breach by the other party of any of its covenants, representations,
warranties or other agreements set forth in this Agreement. For the avoidance
of doubt, in the event a Bank Financing Failure occurs prior to the
satisfaction (or waiver by Buyer) of all of the conditions precedent to
Buyer's obligations to consummate the Merger set forth in Article V, Buyer's
obligations to consummate the transactions contemplated by this Agreement in
accordance with the terms hereof shall remain in full force and effect;
PROVIDED, HOWEVER, the Liquidated Damages Amount shall not be payable prior
to the satisfaction (or waiver by Buyer) of all of the conditions precedent
to Buyer's obligations to consummate the Merger set forth in Article V.
Nothing in this Section 6.2 or any other section of this Agreement shall be
construed in any manner to condition Buyer's obligation to consummate the
transactions contemplated by this Agreement upon Buyer's obtaining the
Financing or any substitute financing.
6.3 AMENDMENT. This Agreement may be amended by all the parties hereto,
by action taken or authorized by their respective Boards of Directors, at any
time whether before or after approval of this Agreement and the transactions
contemplated hereby by the stockholders of the Company, but, after any such
approval, no amendment shall be made which by law requires further approval
by such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
6.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party. No delay on the part of any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party hereto of any right, power or privilege
hereunder operate as a waiver of any other right, power or privilege
hereunder, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. Unless otherwise
provided, the rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which the parties hereto may
40
<PAGE>
otherwise have at law or in equity. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
ARTICLE VII.
GENERAL PROVISIONS
7.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS; NO OTHER
REPRESENTATIONS AND WARRANTIES. None of the representations, warranties,
covenants and other agreements in this Agreement or in any instrument
delivered pursuant to this Agreement, including any rights arising out of any
breach of such representations, warranties, covenants and other agreements,
shall survive the Effective Time, except for those covenants and agreements
contained herein and therein that by their terms apply or are to be performed
in whole or in part after the Effective Time and this Article VII. Each party
hereto agrees that, except for the representations and warranties contained
in this Agreement the Unrestricted Equity Agreement, none of the Company,
Buyer or Merger Sub makes any other representations or warranties, and each
hereby disclaims any other representations and warranties made by itself or
any of its officers, directors, employees, agents, financial and legal
advisors or other representatives, with respect to the execution and delivery
of this Agreement, the documents and the instruments referred to herein, or
the transactions contemplated hereby or thereby, notwithstanding the delivery
or disclosure to the other party or the other party's representatives of any
documentation or other information with respect to any one or more of the
foregoing.
7.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, (b) on the first Business Day following the date of
dispatch if delivered by a nationally recognized next-day courier service,
(c) on the earlier of the date of receipt or the tenth Business Day following
the date of mailing if delivered by registered or certified mail, return
receipt requested, postage prepaid or (d) if sent by facsimile transmission,
when transmitted and receipt is confirmed by telephone. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions
as may be designated in writing by the party to receive such notice:
(a) if to Buyer or Merger Sub, to:
ACC Acquisition LLC
c/o Dobson Communication Corporation
13439 N. Broadway Extension, Suite 200
Oklahoma City, OK 73114
Attention: Everett Dobson, President
Fax No.: 405-529-8515
with copies to:
Dobson Communications Corporation
13439 N. Broadway Extension, Suite 200
Oklahoma City, OK 73114
41
<PAGE>
Attention: Everett Dobson, President
Fax No.: 405-529-8515
and:
AT&T Wireless Services, Inc.
7727 164th Avenue, N.E.
Redmond, WA 98025
Attention: William Hague
Fax No.: 425-580-8405
Edwards and Angell, LLP
2800 BankBoston Plaza
Providence, RI 02903
Attention: David K. Duffell, Esquire
Fax No.: 401-276-6602
and:
Friedman Kaplan & Seiler LLP
875 Third Avenue
New York, NY 10022
Attention: Matthew S. Haiken, Esquire
Fax No.: 212-355-6401
(b) if to Seller, to:
American Cellular Corporation
1375 E. Woodfield Road, Suite 700
Schaumburg, IL 6017
Attention: John Fujii, Chief Executive Officer
with copies to:
Latham & Watkins
885 Third Avenue
New York, NY 10022
Attention: Roger H. Kimmel, Esquire
and:
American Cellular Corporation
1500 K Street, N.W.
Suite 450
42
<PAGE>
Washington, DC 20005
Attention: Stephen Easley, General Counsel
Davis Wright Tremaine LLP 1500 K Street, N.W.
Suite 450
Washington, DC 20005
Attention: Lawrence Roberts
7.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table
of contents, glossary of defined terms and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation." The parties have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties and no presumption or
burden or proof shall arise favoring or disfavoring any party by virtue of
the authorship of any of the provisions of this Agreement. Any reference to
any federal, state, local or foreign statue or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. It is understood and agreed that neither the
specifications of any dollar amount in this Agreement nor the inclusion of
any specific item in the Schedules or Exhibits is intended to imply that such
amounts or higher or lower amounts, or the items so included or other items,
are or are not material, and neither party shall use the fact of setting of
such amounts or the fact of the inclusion of such item in the Schedules or
Exhibits in any dispute or controversy between the parties as to whether any
obligation, item or matter is or is not material for purposes hereof.
7.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that
both parties need not sign the same counterpart.
7.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES
(a) This Agreement (including the Schedules and Exhibits hereto)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidentiality Agreement, which
Confidentiality Agreement shall survive the execution and delivery of this
Agreement.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by
43
<PAGE>
reason of this Agreement, other than Article I and Sections 4.7 and 6.2 (each
of which is intended to be for the benefit of the Persons covered thereby and
may be enforced by such Persons).
7.6 GOVERNING LAW; JURISDICTION; WAIVER OF JURY TRIAL
(a) This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware, without regard to the laws that might
be applicable under conflicts of laws principles.
(b) Each of the parties hereto hereby irrevocably and
unconditionally submits, for itself and its property, to the exclusive
jurisdiction of any court in the State of Delaware, or Federal court of the
United States of America sitting in Delaware, and any appellate court of such
jurisdiction, in any action or proceeding arising out of or relating to this
Agreement or the agreements delivered in connection herewith or the
transactions contemplated hereby or thereby or for recognition or enforcement
of any judgment relating thereto, and each of the parties hereby irrevocably
and unconditionally (i) agrees not to commence any such action or proceeding
except in such courts, (ii) agrees that any claim in respect of any such
action or proceeding may be heard and determined in such Delaware state court
or, to the extent permitted by law, in such Federal court, (iii) waives, to
the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any such action or
proceeding in any such Delaware state or Federal court, and (iv) waives, to
the fullest extent permitted by law, the defense of an inconvenient forum to
the maintenance of such action or proceeding in any such Delaware state or
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Each party to this Agreement irrevocably consents to service of process in
the manner provided for notices in Section 7.2. Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.
(c) Each party acknowledges and agrees that any controversy which
may arise under this agreement is likely to involve complicated and difficult
issues, and therefore it hereby irrevocably and unconditionally waives any
right it may have to a trial by jury in respect of any litigation directly or
indirectly arising out of or relating to this agreement and any of the
agreements delivered in connection herewith or the transactions contemplated
hereby or thereby. Each party certifies and acknowledges that (i) no
representative, agent or attorney of any other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce either of such waivers, (ii) it understands and
has considered the implications of such waivers, (iii) it makes such waivers
voluntarily, and (iv) it has been induced to enter into this agreement by,
among other things, the mutual waivers and certifications in this section
7.6(c).
7.7 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy,
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 shall
44
<PAGE>
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 transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible. Any provision of this Agreement
held invalid or unenforceable only in part, degree or certain jurisdictions
will remain in full force and effect to the extent not held invalid or
unenforceable. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
7.8 ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto, in
whole or in part (whether by operation of law or otherwise), without the
prior written consent of the other parties, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties and their respective permitted
successors and assigns.
7.9 ENFORCEMENT. The parties 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. It is accordingly agreed that except
as otherwise provided in Section 6.2 the parties shall be entitled to
specific performance of the terms hereof, this being in addition to any other
remedy to which they are entitled at law or in equity.
7.10 DEFINITIONS. As used in this Agreement:
(a) "BOARD OF DIRECTORS" means the Board of Directors of any
specified Person and any properly serving and acting committees thereof.
(b) "BUSINESS DAY" means any day on which banks are not required or
authorized to close in the City of New York.
(c) "INTELLECTUAL PROPERTY" means patents, copyrights, trademarks
(registered and unregistered), service marks, brand names, trade names, and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing.
(d) "MATERIAL ADVERSE EFFECT" means, with respect to any Person, any
change, circumstance, event or effect that, individually or in the aggregate
with all other changes, circumstances and effects has had or is reasonably
likely to have a material adverse effect on the business, operations,
financial condition or results of operations of such Person and its
Subsidiaries taken as a whole. As used in this Agreement, the term "Material
Adverse Effect" (i) shall include, without limitation, any change,
circumstance, event or effect (A) with respect to Buyer, that is materially
adverse to Buyer's ability to pay the Merger Consideration or otherwise
perform its obligations under this Agreement or that would otherwise
materially impair the ability of Buyer to consummate the transactions
contemplated hereby, and (B) with respect to the Company, that would
materially impair the ability of the Company to consummate the transactions
contemplated hereby, and (ii) shall not include, with respect to the Company,
any change, circumstance, event or effect that relates to or results
primarily from changes in general
45
<PAGE>
economic conditions, financial markets or conditions in the cellular or
wireless telephone or telecommunications industry or related industries.
(e) "ORGANIZATIONAL DOCUMENTS" means, with respect to any entity,
the certificate of incorporation, bylaws, partnership agreement, limited
liability company agreement or other governing documents of such entity.
(f) "PERSON" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, entity or
group (as defined in the Exchange Act).
(g) "SUBSIDIARY" when used with respect to any Person means any
other corporation or other organization, whether incorporated or
unincorporated, (i) of which such Person or any other Subsidiary of such
Person is a general partner (excluding partnerships in which the general
partnership interests held by such Person or any direct or indirect
Subsidiary of such Person do not have a majority of the voting or economic
interests in such partnership), or (ii) of which such Person or any other
Subsidiary of such Person (or such Person and one or more of its
Subsidiaries) directly or indirectly owns or controls (by ownership; contract
or otherwise) securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization, or (iii) which is, or which in accordance with GAAP should be,
consolidated for purposes of the Company's financial reporting.
(h) "TAX" (including, with correlative meaning, the terms "TAXES"
and "TAXABLE") means all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties, fines and additions to tax imposed with respect to such
amounts and any interest in respect of such penalties and additions to tax,
and "TAX RETURN" means all returns and reports (including elections, claims,
declarations, disclosures, schedules, estimates, computations and information
returns) required to be supplied to a Tax authority in any jurisdiction
relating to Taxes.
(i) "THE OTHER PARTY" means, with respect to the Company, Buyer and
means, with respect to Buyer, the Company.
[SIGNATURE PAGE FOLLOWS]
46
<PAGE>
IN WITNESS WHEREOF, Buyer, Merger Sub and the Company have
caused this Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
ACC ACQUISITION LLC,
a Delaware limited liability company
By: Dobson JV Company, Member
By: /s/ Everett R. Dobson
----------------------------------
Name: Everett R. Dobson
----------------------------------
Title: President
----------------------------------
By: AT&T Wireless Services JV Co., Member
By: /s/ Don Adams
----------------------------------
Name: Don Adams
----------------------------------
Title: Vice President
----------------------------------
ACC ACQUISITION CO.,
a Delaware corporation
By: /s/ Everett R. Dobson
----------------------------------
Name: Everett R. Dobson
----------------------------------
Title: President
----------------------------------
AMERICAN CELLULAR CORPORATION,
a Delaware corporation
By: /s/ John Fujii
----------------------------------
Name: John Fujii
----------------------------------
Title: CEO
----------------------------------
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
<PAGE>
ASSET PURCHASE AGREEMENT
between
PACIFIC TELECOM CELLULAR OF ALASKA RSA #1, INC.
and
DOBSON CELLULAR SYSTEMS, INC.
DATED AS OF OCTOBER 6, 1999
<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
ARTICLE III ASSUMPTION OF LIABILITIES 4
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 5
Section 5.01. Purchase Price 5
Section 5.02. Intentionally Omitted 5
Section 5.03. Payment of Purchase Price 5
Section 5.04. Allocation of Purchase Price 5
Section 5.05. Purchase Price Adjustment 5
ARTICLE VI CLOSING 8
ARTICLE VII SELLER'S REPRESENTATIONS 8
Section 7.01. Organization, Qualification 8
Section 7.02. Consents, Authorization, Execution and Delivery of Agreement 8
Section 7.03. Subsidiaries and Interests in Other Companies 9
Section 7.04. Title to Assets; Condition of Assets 9
Section 7.05. Real Property - Owned 9
<PAGE>
Section 7.06. Real and Personal Property - Leased 9
Section 7.07. Existing Contracts 9
Section 7.08. Governmental Licenses 10
Section 7.09. Compliance with Laws 11
Section 7.10. No Violation of Existing Agreements 11
Section 7.11. Litigation and Legal Proceedings 11
Section 7.12. Environmental Compliance 11
Section 7.13. Employees 12
Section 7.14. Employee Benefits 12
Section 7.15. Tax Matters 13
Section 7.16. Financial Statements 14
Section 7.17. Subscribers/Agents 15
Section 7.18. Insurance 15
Section 7.19. Brokers 16
Section 7.20. Undisclosed Liabilities 16
Section 7.21. Pricing of Services 16
Section 7.22. Proprietary Rights 16
Section 7.23. Accounts Receivable and Bad Debts 16
Section 7.24. Product Information 17
Section 7.25. Certain Business Relationships with Seller 17
Section 7.26. Disclosure 17
ARTICLE VIII PURCHASER'S REPRESENTATIONS 17
Section 8.01. Organization; Qualification 17
Section 8.02. Consents; Authorization; Execution and Delivery of Agreement 17
Section 8.03. Litigation and Legal Proceedings 18
Section 8.04. Brokers 18
<PAGE>
ARTICLE IX SELLER'S AND PURCHASER'S COVENANTS 18
Section 9.01. Financial Statements and Cellular System Information 18
Section 9.02. Governmental Approvals 19
Section 9.03. Third Party Consents; Closing Conditions 19
Section 9.04. Access 20
Section 9.05. Conduct of Business 21
Section 9.06. No Shopping 23
Section 9.07. Employees 23
Section 9.08. Supplemental Disclosure 23
Section 9.09. Management Agreement 24
Section 9.10. Purchaser's Financial Condition 24
ARTICLE X CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE 24
Section 10.01. Accuracy of Representations and Warranties; Performance of
this Agreement 24
Section 10.02. Resolutions 24
Section 10.03. Incumbency Certificate 24
Section 10.04. Third Party Consents; FCC; Hart-Scott Act 25
Section 10.05. No Material Adverse Change 25
Section 10.06. Opinion of Counsel to Seller 25
Section 10.07. Opinions of FCC Counsel to Seller 25
Section 10.08. Closing Escrow Agreement 25
Section 10.09. Title Insurance; Estoppel 26
Section 10.11. Operation of Cellular System 26
ARTICLE XI CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE 26
Section 11.01. Accuracy of Representations and Warranties; Performance of
this Agreement 26
Section 11.02. Directors' Resolutions 26
Section 11.03. Incumbency Certificate 26
<PAGE>
Section 11.04. FCC; Hart-Scott Act 26
Section 11.05. Opinion of Counsel to Purchaser 27
Section 11.06. Closing Escrow Agreement 27
ARTICLE XII CASUALTY LOSSES 27
ARTICLE XIII INDEMNIFICATION 27
Section 13.01. Indemnification by Seller 27
Section 13.02. Indemnification by Purchaser 28
Section 13.03. Notice of Claims; Defense of Third Party 29
Section 13.04. Limitations 30
ARTICLE XIV CONFIDENTIALITY AND PRESS RELEASES 31
Section 14.01. Confidentiality 31
Section 14.02. Press Releases 31
Section 14.03. Disclosures Required By Law 31
ARTICLE XV TERMINATION 32
Section 15.01. Breaches and Defaults; Opportunity to Cure 32
Section 15.02. Termination 32
ARTICLE XVI BROKERS' FEES 33
ARTICLE XVII MISCELLANEOUS 33
Section 17.01. Additional Instruments of Transfer 33
Section 17.02. Notices 33
Section 17.03. Expenses 34
Section 17.04. Transfer Taxes 35
Section 17.05. Collection Procedures 35
Section 17.06. Specific Performance 35
Section 17.07. Governing Law 35
<PAGE>
Section 17.08. Assignment 35
Section 17.09. Successors and Assigns 35
Section 17.10. Amendments; Waivers 35
Section 17.11. Entire Agreement 36
Section 17.12. Counterparts 36
Section 17.13. Severability 36
Section 17.14. Section Headings 36
Section 17.15. Interpretation 36
Section 17.16. Further Assurances 36
Section 17.17. Third Parties 36
Section 17.18. Waiver of Jury 36
</TABLE>
<PAGE>
DEFINED TERMS
TERM SECTION CITE
---- ------------
Asserting Party 13.03
Assets 2.01
Assumed Contracts Article III
Assumption Agreement 4.02
Assumed Liabilities Article III
Authorizations 7.08
Balance Sheet Date 7.16(a)(ii)
Base Price 5.01
Bill of Sale 4.01
Breaching Party 15.01
Business Recitals
Cellular System Recitals
CBA 7.13
CERCLA 7.12(b)
Closing Article VI
Closing Certificate 5.05(c)
Closing Date Article VI
Closing Escrow Agreement 5.03
Code 7.14
Controlled Group Member 7.14
Current Assets 5.05(a)
Current Financial Statements 7.16(a)(ii)
Current Liabilities 5.05(a)
Deductible 13.04(a)
Defending Party 13.03
Defined Benefit Pension Plan 7.14
Disclosing Party 14.01
DOJ 10.04
Employee Benefit Plans 7.14
Environmental Laws 7.12(c)
ERISA 7.14
ERISA Affiliate 7.14
Escrow Agent 5.03
Escrow Amount 5.03
Excluded Assets 2.02(a)
Excluded Contracts 7.07
Existing Contracts 7.07
FCC Recitals
FCC Authorization Recitals
Final Order 10.04
Final Working Capital Adjustment 5.05(c)
Finality Waiver Notice 10.04
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FTC 10.04
GAAP 5.05(a)
Hart-Scott Act 9.02(b)
Hazardous Substances 7.12(b)
Historical Financial Statements 7.16(a)(i)
Indemnified Purchaser Parties 13.01(a)
Independent Accountants 5.05(c)
Interest or Interests 9.03
Interim Balance Sheet 7.16(a)(ii)
Interim Income Statement 7.16(a)(ii)
Interim Financial Statements 9.01
Inventory 5.05(a)
IRS 7.14
Liens Article I
Losses 13.01(a)
Management Agreement 9.09
Manager Recitals
Material Adverse Effect 10.01
Material Loss 10.01
Multiemployer Plan 7.14
Non-Assumed Liabilities Article III
Non-Breaching Party 15.01
Operating Budget 9.01
Outside Date 15.02(e)
PBGC 7.14
Permitted Liens Article I
Person 7.04
Phase I Assessment 9.04(b)
Phase II Assessment 9.04(b)
Purchase Price 5.01
Purchaser Introduction
Purchaser's Estimate 5.05(c)
RCLA 7.12(b)
RCRA 7.12(b)
Recipient Party 14.01
Response Period 5.05(c)
RSA Recitals
Seller Introduction
Seller's Estimate 5.05(c)
Survival Period 13.04(b)
Tax or Taxes 7.15
Third Party Claim 13.03
Working Capital Adjustment 5.05(b)
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SCHEDULES
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2.01(a) Contracts and Licenses
2.01(c) Tangible Assets
2.01(d) Interests in Real Property
2.01(f) Intangible Personal Property
2.02 Excluded Assets
5.05 Exceptions to Current Liabilities
7.04 Encumbrances
7.08 Governmental Licenses
7.09 Compliance with Laws
7.10 Consents
7.11 Litigation
7.12 Environmental Compliance
7.13 Employees
7.14 Employee Benefits
7.15 Tax Matters
7.16(a)(i) Audited Historical Financial Statements
7.16(a)(ii) Current Financial Statements
7.16(c) Certain Transactions Since Balance Sheet Date
7.16(g)(iii) Budget for Montly Capital Expenditures
7.17 Subscribers; Agents
7.18 Insurance
7.21 Pricing of Services
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7.23 Accounts Receivable Aging
7.24 Product Information
7.25 Certain Business Relationships
8.05 Purchaser's Balance Sheet
9.01 Operating Budget
9.03 Form of Consent Letter
9.05(e) Repairs
EXHIBITS
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A. Bill of Sale
B. Assumption Agreement
C. Closing Escrow Agreement
D. Management Agreement
E. Opinion of Counsel for Seller
F. Opinion of FCC Counsel for Seller
G. Opinion of Counsel for Purchaser
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of the 6th day of October, 1999
by and between PACIFIC TELECOM CELLULAR OF ALASKA RSA #1, INC., an Alaska
corporation ("Seller"), and DOBSON CELLULAR SYSTEMS, INC., an Oklahoma
corporation or its designee ("Purchaser").
R E C I T A L S
WHEREAS, Seller owns all right, title and interest in that certain license
(the "FCC Authorization") granted by the Federal Communications Commission (the
"FCC") to provide non-wireless cellular radio telephone service in the Alaska #1
rural service area (the "RSA") #315 Wade Hampton (the "Cellular System");
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 Cellular System (the "Business"), 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 Dobson Communications Corporation, an
Oklahoma corporation or a subsidiary thereof (the "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
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
and are taken into account in the Working Capital Adjustment, and (ii) 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
<PAGE>
imperfections and restrictions, reservations in land patents, zoning ordinances
or other similar Liens).
ARTICLE II
DESCRIPTION OF ASSETS; EXCLUDED ASSETS
SECTION 2.01. ASSETS. The assets to be conveyed to Purchaser shall
include all real and personal tangible and intangible assets, properties and
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) All licenses (including the FCC Authorization), 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, 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 are more
particularly described on SCHEDULE 2.01(a) attached hereto.
(b) 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.
(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, testing equipment,
motor vehicles, office equipment, computers and related software, furniture and
fixtures, supplies, inventory, spare parts, and other physical assets, used in
or relating to the Business, and all modifications, additions, restorations or
replacements of the whole or any part thereof including the assets described on
SCEDULE 2.01(c) attached hereto.
(d) All Seller's right, title and interest in and to real property,
leaseholds and other interests in real property of Seller used in or relating to
the Business, as are 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 used or intended for use in connection with the Business.
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(f) All of Seller's right, title and interest to intangible personal
property used in or relating to the Business, including all rights, patents and
copyrights used by 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.
(g) All of Seller's right, title and interest in any 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 owned or
leased by Seller and used in the Business, wherever such items may be located.
(h) All prepayments and prepaid expenses.
(i) All claims, causes of action, causes in action, rights of
recovery and rights of set-off of any kind.
(j) The right to receive and retain mail, accounts receivable
payments and other communications.
(k) The right to bill and receive payment for products shipped or
delivered and/or services performed but unbilled or unpaid as of the Closing.
(l) All advertising, marketing and promotional materials and all
other related printing or written materials.
(m) All notes receivable and accounts receivable (including
subscriber receivables and roaming revenue receivables).
(n) All goodwill as a going concern.
(o) 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 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.
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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 or that
were identified to and consented by Purchaser (all of such permits,
authorizations, licenses, leases, rights of way, easements and other agreements
referred to in items (i) and (ii) being referred to hereinafter as the "Assumed
Contracts"); and (iii) all "Current Liabilities" (as defined in Section 5.05(a)
hereof) but only if and to the extent that Purchaser receives a credit against
the Purchase Price in the Net Working Capital Adjustment (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 environmental liabilities related to or
arising from Seller's and its predecessors' ownership, operation or control of
the Assets, the Cellular System or the Business (including with respect to
Seller's and its predecessors' interests in owned or leased real property) for
the period prior to the Closing or 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"); provided, however, that any
breach of a representation, warranty or covenant by Seller hereunder shall be
handled in accordance with and subject to the indemnification provisions of
Article XIII hereof.
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 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 an Assumption Agreement in substantially the form
attached hereto as EXHIBIT B (the
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"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 Sixteen Million Dollars ($16,000,000) (the "Base Price"), as adjusted
in accordance with the provisions of Section 5.04 hereof (as adjusted, the
"Purchase Price").
SECTION 5.02. INTENTIONALLY OMITTED.
SECTION 5.03. PAYMENT OF PURCHASE PRICE. The Purchase Price, less Five
Hundred Thousand Dollars ($500,000) (the "Escrow Amount") shall be paid to
Seller by Purchaser by wire transfer of immediately available funds at Closing.
At the Closing, the Escrow Amount shall be wired by Purchaser to the Trust
Department of Regions Bank, Monroe, Louisiana (the "Escrow Agent") to be held,
invested and disbursed pursuant to the terms of the Closing Escrow Agreement
substantially in the form of EXHIBIT C attached hereto (the "Closing Escrow
Agreement").
SECTION 5.04. ALLOCATION OF PURCHASE PRICE. Within sixty (60) days after
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 5.03 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 Cellular System's (i) subscriber accounts
receivable that are current to less than 91 days past due, net of a reserve for
bad debts equal to the sum of the following amounts: zero percent (0%) of such
accounts receivable that are unbilled accounts receivable or that are not past
due or that are thirty (30) or fewer days from date of billing, fifteen percent
(15%) of such accounts receivable that are more than thirty (30) but less than
sixty-one (61) days from date of billing and fifty percent (50%) of such
accounts receivable that are more than sixty (60) but less than ninety-one (91)
days from date of billing; (ii) inventory of cellular
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telephone handsets and ancillary equipment held for sale to subscribers and
which are reasonably to be expected based on past practices to be consumed in
the normal course of business within six months after the Closing and are not
otherwise obsolete, reflected at net book value (the "Inventory"); (iii)
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, and (iv) 100% of all accounts receivable from carriers that are less
than ninety-one (91) days past due.
"CURRENT LIABILITIES" means the Cellular System's (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, (v) expenses for goods and services
received in the normal course of business including Taxes, utility charges,
special assessments, commissions, fees and (vi) except as described on
SCHEDULE 5.05, 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 five (5)
business days prior to the Closing Date, a written good faith estimate of the
amount of the Working Capital 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 Cellular System. 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 Adjustment. In connection therewith, Purchaser shall
have full access to all Seller's records related to Seller's proposed Working
Capital Adjustment. Prior to Closing, Purchaser shall advise Seller in writing
of its acceptance or of any dispute Purchaser has with Seller's Estimate. In
the event Purchaser disputes Seller's calculation, Purchaser shall 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 in accordance with the provisions of this Section 5.05 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 $25,000 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 $25,000 less than Seller's Estimate, then the mid-point between
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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 (such amount being referred to as the "Final Working Capital
Adjustment"). If Seller shall conclude that the Closing Certificate does not
accurately reflect the Final Working Capital Adjustment to be made to the Base
Price in accordance with this Section 5.05, Seller shall, within thirty (30)
days after its 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 fifteen (15) days of Purchaser's receipt of Seller's
written statement of discrepancies, which resoluton, 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
resolved by PriceWaterhouseCoopers (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 five (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
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Purchaser from Seller under this Section 5.05 and not paid when due may also
be paid from the funds held pursuant to the Closing 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, 2800 BankBoston Plaza,
Providence, Rhode Island 02903, on the date (the "Closing Date") which is the
latest of (a) the tenth (10th) day after the date that (i) the FCC granted its
consent to the assignment of the FCC Authorization 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
10.04); or (b) the tenth (10th) day after the expiration or early termination of
the waiting period under the Hart-Scott Act; PROVIDED, HOWEVER, that the Closing
Date shall be the last day of a calendar month. The Closing shall be effective
as of 12:01 a.m. on the Closing Date.
ARTICLE VII
SELLER'S REPRESENTATIONS
Seller hereby represents and warrants that:
SECTION 7.01. ORGANIZATION, QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Alaska; 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 Authorization 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. 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
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.
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SECTION 7.04. TITLE TO ASSETS; CONDITION OF ASSETS. Except as set forth
on SCHEDULE 7.04, 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 used 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, limited liability company, 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 industry generally, the tangible property included in the Assets are
technically sufficient and capable of providing cellular telephone service in
the RSA in accordance with applicable FCC regulations except as set forth on
SCHEDULE 7.08. All of the buildings, towers, transmitters, antenna, fixtures
and improvements 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.
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 $3,000 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 such Schedules (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, or prior to the Closing will be, 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 service), all leases (other than personal property
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leases with annual payments of less than $3,000 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 $3,000 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 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 $3,000 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 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 Authorization 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. 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 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. 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, and to the extent not covered by a more specific representation or
warranty herein which specific representation or warranty shall control,
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 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
Seller's or its predecessors' ownership or use of the Assets, the conduct of
the Business or on, in or under any property or facility used, owned or
leased by Seller 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 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
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the Assets or the Business, has been and is being handled or dealt with in
compliance with all 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 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.
SECTION 7.13. EMPLOYEES. By separate letter of even date herewith,
Seller has delivered to Purchaser a true and complete list of the names and
current salaries of all employees of Seller involved in the operation of the
Business. 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. SCHEDULE 7.13 sets forth the only collective
bargaining agreements covering any of the employees of Seller. Seller has not
breached or otherwise failed to comply with any provision of the Collective
Bargaining Agreement described on Schedule 7.13 (the "CBA"). 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. There are no pending or, to Seller's knowledge,
threatened or anticipated strikes, slow downs, work stoppages or lockouts or
threats affecting Seller.
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"). Other than the CBA, Seller is not a party
to any employment contract.
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Except as set forth on SCHEDULE 7.14, 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. No employee of Seller participates in any "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA) which has any unfunded liability.
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 with all applicable
requirements of ERISA, the Code, and other applicable law. Each of the
Employee Benefit Plans has been administered in accordance with its terms and
with applicable legal requirements. All "employee pension plans" (within the
meaning of Section 3(2) of ERISA) which are intended to be qualified plans
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. Except as set
forth on SCHEDULE 7.14, 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 (or extensions with respect thereto) which it is
required to file; (b) all such returns are complete and accurate and disclose
all Taxes required to be paid for the periods covered thereby; (c) 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 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
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other assessments including all income, sales, use, goods and services, value
added, capital, capital gains, alternative net worth, transfer, profits,
withholding, payroll, employer health, excise, real property and personal
property taxes, and any other taxes, customs duties, stamp duties, fees,
assessments or similar charges in the nature of a tax, together with any
interest, fines and penalties imposed by any governmental authority
(including federal, state, provincial, municipal and foreign governmental
authorities), and whether disputed or not.
SECTION 7.16. FINANCIAL STATEMENTS.
(a) The Purchaser has heretofore been furnished with the following:
(i) true and complete copies of the unaudited balance sheet of
Seller as of December 31, 1998 and the related statements of income
and retained earnings and cash flows, each of such balance sheet and
income statement being attached hereto as SCHEDULE 7.16(a)(i)
(collectively, the "Historical Financial Statements");
(ii) true and complete copies of the unaudited balance sheet
(the "Interim Balance Sheet") of Seller as of June 30, 1999 (the
"Balance Sheet Date") and the related unaudited statement of income
for the six-month period then ended (the "Interim Income Statement"
and together with the Interim Balance Sheet, the "Current Financial
Statements"), such balance sheet and income statement being attached
hereto as SCHEDULE 7.16(a)(ii); and
(iii) the budget for monthly capital expenditures on the
Cellular System during 1999 is attached hereto as SCHEDULE
7.16(g)(iii).
(b) Each of the Historical and Current Financial Statements delivered
under Section 7.16(a)(i) and (ii) hereof was prepared in accordance with GAAP
applied on a basis consistent with prior periods and past practices (to the
extent applicable) and, with respect to the Current Financial Statements,
subject to usual and customary year-end adjustments and except for the omission
of certain footnotes and other presentation items required by GAAP with respect
to reviewed financial statements; each of the balance sheets included in such
Historical and Current Financial Statements fairly presents the financial
condition of Seller, as at the close of business on the date thereof; and each
of the statements of income included in such Historical and Current Financial
Statements fairly presents the results of operations of Seller, for the fiscal
period then ended.
(c) Except as set forth on SCHEDULE 7.16(c) attached hereto, since the
Balance Sheet Date, 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
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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;
(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 or 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 the Cellular
System and as of a date within five (5) days prior to the date hereof, (b) a
list of all agents who sell cellular telephone 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) all
marketing and promotional plans Seller has used, is using, or proposes to use
during 1999 to acquire subscribers. For purposes of this Agreement, the term
"subscriber" means a person or entity subscribing for cellular telephone
service on the Cellular System (i) who pays for service under the Cellular
System's normal rate plan for that category of subscriber, (ii) whose account
is active within the normal practices and procedures of the Cellular System
and in no case is more than 60 days past due from the due date and (iii) who
was obtained as a subscriber (A) in the normal course of business of the
Cellular System consistent with past practice and not as a result of
marketing efforts that are not customary in the cellular telephone industry
generally or which were not utilized by Seller during 1999 on a regular basis
or (B) any other plans for which the Seller obtain Purchaser's prior written
consent, which consent will not be unreasonably withheld.
SECTION 7.18. INSURANCE. Seller has delivered previously to Purchaser
a list of 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
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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 for the Cellular System with the insurance carriers, in
such amounts and for such losses or casualties as are described on SCHEDULE
7.18 and such insurance shall remain in effect with respect to the Cellular
System until the Closing.
SECTION 7.19. BROKERS. Except for Falkenberg Capital, 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 Interim 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 the
Cellular 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, to the extent assignable, 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 Interim Balance Sheet or thereafter
acquired were or (to the extent not heretofore collected) are valid and
genuine, were acquired in the ordinary course of business and are subject to
no asserted counterclaims, defenses or setoffs (subject to reserves therefor
as will be taken into account in the determination of Current Assets at
Closing in accordance with Section 5.05). SCHEDULE 7.23 attached hereto sets
forth a true, complete and accurate list, as of the end of the most recent
normal billing cycle of the Cellular System, listing the total amounts
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of subscriber receivables and the aging of such subscriber receivables of the
Cellular System based on the following Schedule: 0-30 days, 31-60 days, 61-90
days and over 90 days, from the date thereof.
SECTION 7.24. PRODUCT INFORMATION. Except as disclosed on SCHEDULE
7.24, Seller has not sold and does not have in its inventory any refurbished
telephone handsets. SCHEDULE 7.24 sets forth a list of manufacturers of
telephone handsets presently in Seller's inventory.
SECTION 7.25. CERTAIN BUSINESS RELATIONSHIPS WITH SELLER. Except as
set forth in SCHEDULE 7.25 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.
SECTION 7.26. DISCLOSURE. No provision of this Agreement relating to
Seller, the Business or the Assets or any other document, Schedule, Exhibit
or other information furnished by Seller to Purchaser in connection with the
execution, delivery and performance of this Agreement, or the consummation of
the transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
required to be stated in order to make the statement, in light of the
circumstances in which it is made, not misleading. In connection with the
preparation of this Agreement and the documents, descriptions, opinions,
certificates, Exhibits, Schedules or written material prepared by Seller and
appended hereto or delivered or to be delivered hereunder, Seller agrees it
will disclose to Purchaser any fact known to Seller which Seller knows or
believes would affect Purchaser's decision to proceed with the execution of
this Agreement. Except for facts affecting the cellular telephone industry
generally, there is no fact now known to Seller relating to the Business or
Assets which in Seller's reasonable opinion adversely affects the condition
of the Assets, the status of the FCC Authorization or the ownership,
operation, financial condition or prospects of the Business which has not
been disclosed to Purchaser or set forth in the Exhibits or Schedules
attached hereto.
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
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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. BALANCE SHEET. The balance sheet of Purchaser dated June
30, 1999 attached hereto as SCHEDULE 8.05 accurately reflects the assets and
liabilities of Purchaser in all material respects as of such date.
SECTION 8.06. UNION MATTERS. Purchaser has reviewed the CBA and has
been represented by counsel to the extent it believes necessary in order to
comply with all labor laws with respect to employees of the Business
beginning on the Closing Date.
ARTICLE IX
SELLER'S AND PURCHASER'S COVENANTS
SECTION 9.01. FINANCIAL STATEMENTS AND CELLULAR SYSTEM INFORMATION.
Seller covenants and agrees that during the period after the execution of
this Agreement and prior to the Closing, Seller shall provide Purchaser,
within twenty-one (21) days of the end of each calendar month, Seller's
unaudited balance sheet and income statement for such month ("Interim
Financial Statements"). The Interim Financial Statements will be true and
correct in all material respects, will be prepared using the same accounting
methods and procedures as used in the preparation of the 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.
Seller also shall provide Purchaser within twenty-one (21) days of the end of
each calendar month (i) a comparison of the results of Seller's income from
operations for such month as reflected in the Interim Financial Statements to
the amount budgeted for such month and the year to date (as reflected in the
operating budget delivered to Purchaser, a copy of which is annexed hereto as
SCHEDULE 9.01 (the "Operating Budget"), (ii) the number of subscribers on the
Cellular System at the beginning and end of such month with a comparison to
the Operating Budget, (iii) an accounts receivable aging report for
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the Cellular System and (iv) other reports generated by the Seller's billing
system as reasonably requested by Purchaser.
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 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 use all reasonable efforts to provide adequate
prior written notice to Purchaser of any meeting with governmental
authorities the purpose of which is to seek a consent or approval to the
transactions contemplated hereby, and Purchaser shall use all reasonable
efforts to furnish a representative to attend meetings with appropriate
government authorities for the purpose of obtaining such consents or
approvals. Each of Purchaser and Seller hereby agrees to file the necessary
Form(s) 490 and 702 with the FCC transferring or assigning control of the FCC
Authorization for the Business to Purchaser and diligently pursue 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. Seller and
Purchaser shall share equally all filing fees in connection with any filings
pursuant to this Section 9.02(a).
(b) Seller and Purchaser shall each cooperate and use their
reasonable best efforts to prepare and file with the Federal Trade Commission
and the Department of Justice and other regulatory authorities as promptly as
possible all requisite applications and amendments thereto together with
related information, data and exhibits necessary to satisfy the requirements
of the Hart-Scott-Rodino Antitrust Improvements Act ("Hart-Scott Act").
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 best 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 best 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 use commercially reasonable efforts to 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. 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
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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, at its own expense and subject
to any restrictions placed thereon by an owner or lessor of the real property
involved, 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.
(c) Seller shall allow Purchaser the opportunity to conduct an
engineering review of the Assets to confirm that the Assets comply with the
FCC Authorization and the regulations of the FCC and are otherwise in good
condition and repair, reasonable wear and tear excepted.
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SECTION 9.05. CONDUCT OF BUSINESS. From and after the date hereof Seller
shall:
(a) operate the Cellular System in accordance with the FCC
Authorization, 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 Cellular System's 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;
(g) 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;
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(i) use its commercially reasonable efforts to (x) keep its
business organization intact, (y) retain the services of the key
employees of the Cellular System, 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 Cellular
System and its services in a manner consistent with past practice, and
in any event from the date hereof through the Closing, spend on
advertising, marketing and promotion, on an aggregate basis from the
date hereof to the Closing, at least the amounts set forth in the
Operating Budget and consult regularly with Purchaser on the status
and effectiveness of promotions and on any modifications to promotions
to increase the number of subscribers to the Cellular System;
(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 the FCC Authorization to expire or to be
surrendered or voluntarily modified in a manner 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;
(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 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 Cellular System; notify
Purchaser of the hiring of any new employee, any material change in
job function of an employee, and the
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termination of any employee, provided that all such actions shall be in
compliance with the terms and conditions of the CBA;
(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 Cellular System 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 and (z)
Purchaser's efforts to upgrade equipment (at Purchaser's cost) after
Closing.
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. (a) 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.
(b) During the term of the Management Agreement, Purchaser shall treat all
employees in accordance with applicable labor and employment laws.
SECTION 9.08. SUPPLEMENTAL DISCLOSURE. (a) 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 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.
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(b) From the date hereof until the Closing Date, Purchaser shall promptly
notify Seller if Purchaser obtains actual knowledge of any actual breach of any
representation, warranty, covenant or obligation of Seller, or any actual
failure of a condition hereunder of which Purchaser obtains actual knowledge.
SECTION 9.09. MANAGEMENT AGREEMENT. Simultaneously with the execution of
this Agreement, the Manager and Seller shall enter into the Management Agreement
in the form attached hereto as EXHIBIT D (the "Management Agreement") pursuant
to which the Manager will provide management services to Seller prior to the
Closing.
SECTION 9.10. PURCHASER'S FINANCIAL CONDITION. From the date hereof until
the date of Closing, there shall have been no material adverse change in
Purchaser's balance sheet attached as SCHEDULE 8.05.
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 industry 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
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agreement to be delivered pursuant to this Agreement, which incumbency
certificate shall include the true signatures of such officers.
SECTION 10.04. THIRD PARTY CONSENTS; FCC; HART-SCOTT ACT. Seller shall
have delivered to Purchaser such instruments, consents and approvals (the
form and substance of which shall be reasonably satisfactory to Purchaser) as
are necessary to assign to Purchaser without modification thereof, as of the
Closing, the Assets and the Assumed Contracts. Prior to Closing Date, the
FCC's grant of its consent to the assignment of the FCC Authorization 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 17.01, the
Purchaser shall have the right (in its sole discretion) to waive the
requirement set forth in the preceding sentence 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 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.
SECTION 10.05. NO MATERIAL ADVERSE CHANGE. Other than changes affecting
the cellular telephone industry generally, there shall not have been any
Material Adverse Effect in the financial condition, assets, business,
properties or prospects of the Cellular System or Assets, from December 31, 1998
to the Closing.
SECTION 10.06. OPINION OF COUNSEL TO SELLER. Purchaser shall have been
furnished with opinions of Boles, Boles & Ryan, 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 Wiley, Rein & Fielding, FCC counsel for Seller,
dated as of the Closing and addressed to Purchaser, and to any financial
institution designated by Purchaser which has provided the 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 and the Escrow Agent
each shall have executed and delivered the Closing Escrow Agreement.
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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. OPERATION OF CELLULAR SYSTEM. Seller shall have continued
to operate the Cellular System and market the Cellular System's services in the
normal course of business and in accordance with past practice.
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.
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 issued an order
granting its consent to the assignment of the FCC Authorization to Purchaser.
In addition, all applicable
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waiting periods under the Hart-Scott Act 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 Closing Escrow Agreement.
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.
ARTICLE XIII
INDEMNIFICATION
Notwithstanding anything in this Agreement to the contrary, Seller's
obligation for pre-closing liabilities, debts, contracts and agreements
including, without limitation, any environmental liabilities related to or
arising from Seller's and its predecessors operation ownership, operation or
control of the Assets, the Cellular System or the Business, shall be governed by
the provisions of this Article XIII.
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
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sale of the Assets, the Cellular System or the Business or any other
state of facts which existed at or prior to Closing, including, without
limitation, any environmental liabilities arising out of Seller's or
its predecessors' interests in real property or any fines or
forfeitures imposed or threatened to be imposed by the FCC for the
operation, at or prior to Closing, of the Cellular System 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 Management 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 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:
(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 Management Agreement, the Assumption Agreement
or in any closing certificate delivered by Purchaser to Seller
pursuant to Article XI hereof;
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(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
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
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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 $25,000 (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) Notwithstanding any other provisions of this Agreement to the
contrary, the aggregate indemnification obligations for any party shall not
exceed $4,500,000; provided, however, that the foregoing "cap" shall not apply
to (i) any breach by Seller of any representations and warranties contained in
Sections 7.09 and 7.12 of this Agreement with respect to the Eilson Air Force
Base and North Pole cell sites, or (ii) subject to the last sentence of Article
III, any obligation to indemnify Purchaser for Non-Assumed Liabilities.
(c) 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 7.09 and 7.12 (as it may
relate to Environmental Laws) shall survive the Closing until the third
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
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such claim is finally determined or settled. Each party shall be precluded
from asserting claims against the other party after the applicable Survival
Period.
(d) 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 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.
<PAGE>
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 breaches, in the aggregate, would reasonably be
expected to have a Material Adverse Effect; or
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(e) by either Seller or Purchaser if the Closing shall not
have occurred on or before April 30, 2000 (the "Outside Date"), unless
the failure to have the Closing shall be due to the failure of the
party seeking to terminate this Agreement to perform in any material
respect its obligations under this Agreement required to be performed
by it at or prior to the Closing.
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 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) 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 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,
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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 R. Dobson
Facsimile No.: (405) 391-8515
with a required copy to:
Edwards & Angell, LLP
2800 BankBoston Plaza
Providence, Rhode Island 02903
Attention: Joseph A. Kuzneski, Jr., Esq.
Facsimile No.: (401) 276-6602
(ii) If to Seller:
Pacific Telecom Cellular of Alaska RSA #1, Inc.
100 Century Park Drive
Monroe, LA 71203
Attention: R. Stewart Ewing, Jr. and Stacey W. Goff, Esq.
Facsimile No.: (318) 388-9488
with a required copy to:
Boles, Boles & Ryan
1805 Tower Drive
Monroe, LA 71201
Attention: William R. Boles, Jr.
Facsimile No.: (318) 329-9150
Notices delivered personally shall be effective upon delivery against
receipt. Notices transmitted by telecopy shall be effective when received,
provided that the burden of proving notice when notice is transmitted by
telecopy shall be the responsibility of the party providing such notice .
Notices delivered by overnight mail shall be effective when received. Notices
delivered by registered or certified mail shall be effective on the date set
forth on the receipt of registered or certified mail, or seventy-two (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
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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 or Purchaser shall fail to perform their
respective obligations under the terms of this Agreement, money damages alone
will not be adequate to compensate the other party hereto. The parties,
therefore, agree and acknowledge that in the event the Seller or Purchaser
fails to perform its obligations under this Agreement prior to Closing, the
Purchaser or Seller, as the case may be, 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
this Agreement at any time to any of its affiliates and 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 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
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<PAGE>
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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<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:
PACIFIC TELECOM CELLULAR OF ALASKA RSA #1, INC.
By: /s/ R. Stewart Ewing, Jr.
-----------------------------
Print Name: R. Stewart Ewing, Jr.
------------------------
Title:
-----------------------------
PURCHASER:
DOBSON CELLULAR SYSTEMS, INC.
By: /s/ G. Edward Evans
-----------------------------
Print Name: G. Edward Evans
------------------------
Title: President
-----------------------------
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<PAGE>
ASSET PURCHASE AGREEMENT
between
TRILLIUM CELLULAR CORP.,
INTERSTATE CELLULAR HOLDINGS CORP.,
UNIVERSAL TELECELL, INC. (D/B/A
UNITEL WIRELESS COMMUNICATIONS
SYSTEMS, INC.), as Sellers
and
DOBSON CELLULAR SYSTEMS, INC., as Purchaser
DATED AS OF OCTOBER 25, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I PURCHASE AND SALE..........................................................8
ARTICLE II DESCRIPTION OF ASSETS, EXCLUDED ASSETS....................................9
SECTION 2.01. ASSETS...............................................................9
SECTION 2.02. EXCLUDED ASSETS.....................................................11
ARTICLE III ASSUMPTION OF LIABILITIES...............................................12
ARTICLE IV INSTRUMENTS OF TRANSFER AND ASSUMPTION...................................13
SECTION 4.01. TRANSFER DOCUMENTS..................................................13
SECTION 4.02. ASSUMPTION DOCUMENTS................................................13
ARTICLE V PURCHASE PRICE; ALLOCATION................................................13
SECTION 5.01. PURCHASE PRICE......................................................13
SECTION 5.02. PAYMENT OF PURCHASE PRICE...........................................13
SECTION 5.03. ALLOCATION OF PURCHASE PRICE........................................13
SECTION 5.04. PURCHASE PRICE ADJUSTMENT...........................................14
ARTICLE VI CLOSING..................................................................17
ARTICLE VII SELLERS' REPRESENTATIONS................................................17
SECTION 7.01. ORGANIZATION........................................................17
SECTION 7.02. CONSENTS, AUTHORIZATION, EXECUTION AND DELIVERY OF AGREEMENT........18
SECTION 7.03. SUBSIDIARIES AND INTERESTS IN OTHER COMPANIES.......................18
SECTION 7.04. TITLE TO ASSETS; CONDITION OF ASSETS................................18
SECTION 7.05. REAL PROPERTY - OWNED...............................................19
SECTION 7.06. REAL AND PERSONAL PROPERTY - LEASED.................................19
SECTION 7.07. EXISTING CONTRACTS..................................................19
SECTION 7.08. GOVERNMENTAL LICENSES...............................................20
SECTION 7.09. COMPLIANCE WITH LAWS................................................21
SECTION 7.10. NO VIOLATION OF EXISTING AGREEMENTS.................................21
SECTION 7.11. LITIGATION AND LEGAL PROCEEDINGS....................................21
SECTION 7.12. ENVIRONMENTAL COMPLIANCE............................................21
SECTION 7.13. EMPLOYEES...........................................................22
SECTION 7.14. EMPLOYEE BENEFITS...................................................23
SECTION 7.15. TAX MATTERS.........................................................24
SECTION 7.16. FINANCIAL STATEMENTS................................................24
SECTION 7.17. SUBSCRIBERS/AGENTS; OPERATING DATA..................................26
SECTION 7.18. INSURANCE...........................................................26
SECTION 7.19. BROKERS.............................................................27
SECTION 7.20. UNDISCLOSED LIABILITIES.............................................27
SECTION 7.21. PRICING OF SERVICES.................................................27
SECTION 7.22. PROPRIETARY RIGHTS..................................................27
SECTION 7.23. ACCOUNTS RECEIVABLE AND BAD DEBTS...................................27
SECTION 7.24. PRODUCT INFORMATION.................................................28
SECTION 7.25. CERTAIN BUSINESS RELATIONSHIPS WITH SELLER..........................28
SECTION 7.26. YEAR 2000 COMPLIANCE................................................28
SECTION 7.27. ICHC................................................................28
SECTION 7.28. DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES..................28
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ARTICLE VIII PURCHASER'S REPRESENTATIONS............................................28
SECTION 8.01. ORGANIZATION; QUALIFICATION.........................................28
SECTION 8.02. CONSENTS; AUTHORIZATION, EXECUTION AND DELIVERY OF AGREEMENT........28
SECTION 8.03. LITIGATION AND LEGAL PROCEEDINGS....................................28
SECTION 8.04. BROKERS.............................................................29
SECTION 8.05. COMPLIANCE WITH LAWS................................................29
SECTION 8.06. FCC MATTERS.........................................................29
SECTION 8.07. NO VIOLATION OF EXISTING AGREEMENTS.................................29
ARTICLE IX SELLERS' AND PURCHASER'S COVENANTS.......................................29
SECTION 9.01. FINANCIAL STATEMENTS AND CELLULAR SYSTEM INFORMATION.................29
SECTION 9.02. GOVERNMENTAL APPROVALS..............................................30
SECTION 9.03. THIRD PARTY CONSENTS, CLOSING CONDITIONS............................31
SECTION 9.04. ACCESS..............................................................32
SECTION 9.05. CONDUCT OF BUSINESS.................................................34
SECTION 9.06. NO SHOPPING.........................................................35
SECTION 9.07. EMPLOYEES...........................................................35
SECTION 9.08. SUPPLEMENTAL DISCLOSURE.............................................36
SECTION 9.09. TRANSITION SERVICES.................................................36
SECTION 9.10. TERMINATION OF LIENS................................................36
ARTICLE X CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATION TO CLOSE...................36
SECTION 10.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
THIS AGREEMENT......................................................36
SECTION 10.02. DIRECTORS RESOLUTIONS...............................................37
SECTION 10.03. INCUMBENCY CERTIFICATE..............................................37
SECTION 10.04. THIRD PARTY CONSENTS; FCC; HART-SCOTT ACT...........................37
SECTION 10.05. INTENTIONALLY LEFT BLANK............................................38
SECTION 10.06. NO MATERIAL ADVERSE CHANGE..........................................38
SECTION 10.07. OPINION OF COUNSEL TO SELLERS.......................................38
SECTION 10.08. OPINIONS OF FCC COUNSEL TO SELLERS..................................38
SECTION 10.09. CLOSING ESCROW AGREEMENT............................................39
SECTION 10.10. YEAR 2000 PROBLEMS..................................................39
SECTION 10.11. OPERATION OF THE CELLULAR SYSTEM....................................39
SECTION 10.12. TITLE INSURANCE.....................................................39
SECTION 10.13. PAYOFF LETTER.......................................................41
ARTICLE XI CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE.....................41
SECTION 11.01. ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
THIS AGREEMENT......................................................41
SECTION 11.02. DIRECTORS' RESOLUTIONS..............................................42
SECTION 11.03. INCUMBENCY CERTIFICATE..............................................42
SECTION 11.04. FCC, HART-SCOTT ACT.................................................42
SECTION 11.05. OPINION OF COUNSEL TO PURCHASER.....................................42
ARTICLE XII CASUALTY LOSSES.........................................................42
ARTICLE XIII INDEMNIFICATION........................................................43
SECTION 13.01. INDEMNIFICATION BY SELLERS..........................................43
SECTION 13.02. INDEMNIFICATION BY PURCHASER........................................43
SECTION 13.03. NOTICE OF CLAIMS, DEFENSE OF THIRD PARTY............................44
SECTION 13.04. CLOSING ESCROW AGREEMENT............................................45
SECTION 13.05. LIMITATIONS.........................................................45
ARTICLE XIV DISCLOSURE AND PRESS RELEASES...........................................46
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<PAGE>
SECTION 14.01. PRESS RELEASES......................................................47
SECTION 14.02. DISCLOSURES REQUIRED BY LAW.........................................47
ARTICLE XV TERMINATION..............................................................47
SECTION 15.01. BREACHES AND DEFAULTS; OPPORTUNITY TO CURE..........................47
SECTION 15.02. TERMINATION.........................................................49
ARTICLE XVI BROKERS' FEES...........................................................48
ARTICLE XVII MISCELLANEOUS..........................................................48
SECTION 17.01. ADDITIONAL INSTRUMENTS OF TRANSFER..................................48
SECTION 17.02. NOTICES.............................................................49
SECTION 17.03. EXPENSES............................................................50
SECTION 17.04. TRANSFER TAXES......................................................50
SECTION 17.05. COLLECTION PROCEDURES...............................................50
SECTION 17.06. SPECIFIC PERFORMANCE................................................50
SECTION 17.07. GOVERNING LAW.......................................................50
SECTION 17.08. ASSIGNMENT..........................................................50
SECTION 17.09. SUCCESSORS AND ASSIGNS..............................................50
SECTION 17.10. AMENDMENTS, WAIVERS.................................................51
SECTION 17.11. ENTIRE AGREEMENT....................................................51
SECTION 17.12. COUNTERPARTS........................................................51
SECTION 17.13. SEVERABILITY........................................................51
SECTION 17.14. SECTION HEADINGS....................................................51
SECTION 17.15. INTERPRETATION......................................................51
SECTION 17.16. FURTHER ASSURANCES..................................................51
SECTION 17.17. THIRD PARTIES.......................................................51
SECTION 17.18. KNOWLEDGE...........................................................51
</TABLE>
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DEFINED TERMS
TERM SECTION CITE
- ---- ------------
Adjustment 5.04(c)
ALTA 10.12
Asserting Party 13.03
Assets 2.01
Assumed Contracts Article III
Assumption Agreement 4.02
Assumed Liabilities Article III
Authorizations 7.08
Balance Sheet Date 7.16(a)(ii)
Base Price 5.01
Bill of Sale 4.01
Breaching Party 15.01
Budget 7.16(a)(iii)
Business Recitals
Business Day 5.04(a)
Cap 13.05(a)
Capital Expenditure Certificate 5.04(d)
Cellular Authorizations 2.01 (a)
Cellular Systems Recitals
CERCLA 7.12(b)
Claims Article XII
Closing Article VI
Closing Certificate 5.04(c)
Closing Date Article VI
Closing Escrow Agent 5.02
Closing Escrow Agreement 5.02
Closing Escrow Payment 5.02
Code 7.14
Controlled Group Member 7.14
Credit Documents 9.10
Cure Request 15.01
Current Assets 5.04(a)
Current Financial Statements 7.16(a)(ii)
Current Liabilities 5.04(a)
Deductible 13.05(a)
Defending Party 13.03
Defined Benefit Pension Plan 7.14
DOJ 10.04
Employee Benefit Plans 7.14
Environmental Laws 7.12(c)
ERISA 7.14
ERISA Affiliate 7.14
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Excluded Management Rights 2.01(n)
Excluded Assets 2.02(a)
Excluded Contracts 7.07
Existing Contracts 7.07
FCC Recitals
FCC Authorizations 2.01(a)
Final Order 10.04
FTC 10.04
GAAP 5.04(a)
Governmental Body 7.09
Hart-Scott Act 9.02(b)
Hazardous Substance 7.12(b)
Historical Financial Statements 7.16(a)(i)
ICHC Introduction
Immediate Family 7.25
Indemnified Purchaser Parties 13.01
Independent Accountants 5.04(c)
Interest or Interests 9.03(a)
Interest Rate 5.04(c)
Interim Financial Statements 9.01
Inventory 5.04(a)
IRS 7.14
ITDS 2.02(b)
ITDS Agreement 2.02(b)
July Balance Sheet 7.16(a)(ii)
Knowledge 17.18
Leased Real Property 10.12(i)
Liens Article I
Loss or Losses 13.01
Management Agreement Recitals
Material Adverse Effect 10.01
Michigan 3 Cellular Area Recitals
Michigan 3 Cellular System Recitals
Michigan 5 Cellular Area Recitals
Michigan 5 Cellular System Recitals
Microwave Authorizations 2.01(a)
Multiemployer Plan 7.14
Non-Assumed Liabilities Article III
Non-Breaching Party 15.01
Outside Date 15.02(e)
PBGC 7.14
Permitted Liens Article I
Permitted Title Exceptions 10.12(i)(c)
Person 7.03
Phase I Assessment 9.04(b)
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Phase II Assessment 9.04(b)
Purchase Price 5.01
Purchaser Introduction
Purchaser's Estimate 5.04(c)
Radiofone Recitals
RCLA 7.12(b)
RCRA 7.12(b)
Required As-Built Survey 10.12(ii)(D)
Response Period 5.04(c)
RSA Recitals
S Corporation 7.15
Sellers Introduction
Sellers' Estimate 5.04(c)
Seven-Month Income Statement 7.16(a)(ii)
Special Temporary Authority 10.04
Support Documents 5.04(c)
Survival Period 13.05(b)
Switching Services Agreement 7.16(d)
Tax/Taxes 7.15
TCC Introduction
Third Party Claim 13.03
Title Commitment 10.12(i)(D)
Title Company 10.12(i)
Trillium Introduction
Unitel Introduction
Working Capital Adjustment 5.04(b)
Y2K Plan 7.26
Year 2000 Problem 7.26
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SCHEDULES
1 Permitted Liens
2.01(a) Contracts and Licenses
2.01(c) Tangible Asset List
2.01(d) Interests in Real Property
2.01(f) Intangible Personal Property
2.02 Excluded Assets
7.04 Encumbrances
7.08 Governmental Licenses
7.09 Compliance with Laws
7.10 Consents
7.11 Litigation
7.12 Environmental Compliance
7.13 Employees
7.14 Employee Benefits
7.15 Taxes
7.16(a)(i) Historical Financial Statements
7.16(a)(ii) Current Financial Statements
7.16(a)(iii) 1999 Operating and Capital Expense Budget
7.16(c) Certain Transactions Since Balance Sheet Date
7.17(a) Subscribers; Agents
7.17(b) Subscriber History
7.17(c) Average Revenue and MOU Information
7.17(d) Top 5 Roaming Partners - Outcollect/Incollect Revenue
7.21 Pricing of Services
7.23 Accounts Receivable Aging
7.24 Product Information
7.25 Certain Business Relationships
7.26 Status of Y2K Plan
9.03(a) Form of Consent Letter
9.03(b) Form of Landlord Estoppel Certificate
9.05 Amount to Be Spent on Advertising, Marketing and Promotion
9.09 Transition of Billing
10.04 Material Consents
EXHIBITS
A. Bill of Sale
B. Assumption Agreement
C. Closing Escrow Agreement
D. Opinion of FCC Counsel for Seller
E. Opinion of Counsel for Purchaser
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ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into as of October 25, 1999 by and
among TRILLIUM CELLULAR CORP., a Florida corporation ("TCC" or "Trillium"),
UNIVERSAL TELECELL, INC. (D/B/A UNITEL WIRELESS COMMUNICATIONS SYSTEMS), a
Delaware corporation ("Unitel"), and INTERSTATE CELLULAR HOLDINGS CORP., a
Florida corporation ("ICHC", and together with TCC and Unitel, "Sellers"),
and DOBSON CELLULAR SYSTEMS, INC., an Oklahoma corporation ("Purchaser").
R E C I T A L S
WHEREAS, TCC owns all right, title and interest in those certain
licenses listed on Schedule 2.01(a) attached to this Agreement granted by the
Federal Communications Commission ("FCC") to provide cellular radio telephone
service in the FCC's rural service area ("RSA") No. 3, Michigan-3-Emmet (the
"Michigan-3 Cellular Area") and, together with Unitel, owns and operates the
non-wireline cellular telephone system in the Michigan-3 Cellular Area (the
"Michigan-3 Cellular System"); and
WHEREAS, Radiofone, Inc. ("Radiofone") is the owner of a license granted
by the FCC to provide cellular radio telephone service in the FCC's RSA No.
5, Michigan-5-Manistee (the "Michigan-5 Cellular Area") and owns and operates
the non-wireline cellular telephone system in the Michigan-5 Cellular Area
(the "Michigan-5 Cellular System"; and together with the Michigan-3 Cellular
System, the "Cellular Systems"); and
WHEREAS, pursuant to the terms of a Management Agreement dated August
20, 1991 between Radiofone and ICHC (the "Management Agreement"), ICHC
manages and operates in conjunction with Unitel and TCC the Michigan-5
Cellular System for Radiofone; and
WHEREAS, Purchaser desires to purchase from TCC and Unitel, and TCC and
Unitel desire to sell and transfer to Purchaser, substantially all of the
assets and rights of TCC and Unitel relating to the ownership and operation
of the cellular radio telephone business in the Michigan-3 Cellular Area and
Purchaser desires to purchase from Sellers and Sellers desire to sell and
transfer to Purchaser the management and operation of the cellular radio
telephone business in the Michigan-5 Cellular Area pursuant to the Management
Agreement (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, Sellers
agree to sell, convey, assign, transfer and deliver to Purchaser, and
Purchaser agrees to purchase from Sellers at the Closing, all of Sellers'
right, title and interest in and to the Assets (as defined in
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Section 2.01 hereof), free and clear of all debts, liabilities, obligations,
and taxes, other than Assumed Liabilities, and free and clear of all security
interests, liens, pledges, charges, rights of first refusal, rights of first
offer 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 to the
extent 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 listed on the disclosure schedule hereto (other than a
Lien provided for in any contract excluded from the Assets pursuant to
Section 2.02) and not related to any indebtedness for borrowed money and in
which no Seller has granted a security interest on any of its Assets to the
other party or parties, (iv) any Lien affecting real property that does not
secure a monetary obligation and which does not materially interfere with the
use by a Seller of the property subject thereto or affected thereby
(including any easements, rights of way, restrictions, installations of
public utilities, title imperfections and restrictions, reservations in land
patents, zoning ordinances or other similar Liens), (iv) as to leaseholds,
interests of the lessors thereof and Liens affecting the interests of such
lessors, (v) any Lien set forth on Schedule 1 attached hereto and (vi)
obligations imposed by the FCC which generally affect all holders of licenses
granted by the FCC to provide cellular radio telephone service.
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 Sellers of whatever description which relate in any way to
the ownership, operation or management of the Business, except assets
excluded pursuant to Section 2.02 hereof and except that with respect to
Unitel the parties hereto acknowledge and agree that only the assets,
properties and rights owned (or hereafter acquired) by Unitel which relate
exclusively to the operation or management of the Business or which are
located in Michigan shall be subject to the terms of this Agreement
notwithstanding any provision to the contrary, and including all such assets,
properties and rights acquired or obtained by any Seller from the date hereof
through the Closing Date (collectively, the "Assets"). Such Assets shall be
free and clear of all Liens other than Permitted Liens as of the Closing, and
shall include, without limitation:
(a) TCC's FCC authorizations to operate a cellular radio telephone
system in the Michigan-3 Cellular Area (the "Cellular Authorizations") and
microwave paths used in connection with such cellular operations, if any (the
"Microwave Authorizations" and together with the Cellular Authorizations, the
"FCC Authorizations"); all leases, agreements, licenses and permits (to the
extent such leases, agreements, licenses or permits are transferable),
instruments, commitments, guarantees, consents, revenue sharing agreements,
and agreements for the reception or transmission of signals by microwave to
which a Seller is a party and which relate to the Michigan-3 Cellular System
or the Michigan-5 Cellular System; all easements, appurtenances,
rights-of-way and construction permits, if any, related to the Michigan-3
Cellular System or the Michigan-5 Cellular System; all right, title and
interest, if any, in and to all streets,
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roads and public places, open or proposed related to the Michigan-3 Cellular
System or the Michigan-5 Cellular System; all agreements between a Seller and
any suppliers, cellular telephone service companies and subscribers and all
other similar rights and agreements, (including so-called roaming
agreements), including all applications therefor, which in any way may relate
to or concern the operation or management by a 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) or 2.01(d) attached hereto.
(b) Originals or copies (at Sellers' option) of all of Sellers'
files of correspondence, lists, records and reports concerning (i) customers
and prospective customers of the Business and (ii) all dealings with Federal,
state and local regulatory agencies with respect to the Business, including,
but not limited to, all reports filed by or on behalf of a Seller with the
FCC with respect to the Business.
(c) All of Sellers' right, title and interest in and to towers,
tower equipment, antennas, switching and cell site equipment and buildings,
construction in progress, microwave equipment, machinery, testing equipment,
motor vehicles, office equipment, computers and related software to the
extent transferable, furniture and fixtures, supplies, Inventory, spare
parts, and other physical assets, if any, used in or relating to the
Michigan-3 Cellular System or the Michigan-5 Cellular System, 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, but excluding the
items set forth on Schedule 2.02.
(d) All real property, leaseholds and other interests in real
property (including leases and licenses of towers and tower space) of Sellers
located in the State of Michigan used in or relating to the Business, as
described on Schedule 2.01(d) attached hereto, but excluding any leaseholds
described on Schedule 2.02.
(e) All of Sellers' right, title and interest to engineering
records, files, data, drawings, blueprints, schematics, maps, reports, lists
and plans and processes intended for use in connection with the Business
(provided that Sellers may retain the originals thereof so long as Purchaser
is provided with copies thereof).
(f) All of the following to the extent used by a Seller in
connection with the Business, along with all related income, royalties,
damages and payments, if any, due or payable on or after the Closing Date:
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, software source codes and object codes, data, data bases,
documentation thereof, trade secrets and other confidential information, and
all 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, but excluding the
items set forth on Schedule 2.02.
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(g) all electrical, mechanical, plumbing and other building
systems, security and surveillance systems and wiring and cable installations
owned by a Seller and located on the property owned or leased by such Seller
in the State of Michigan in connection with the Business.
(h) All prepayments and prepaid expenses related to the Business.
(i) All claims, causes of action, choses in action, rights of
recovery and rights of set-off of any kind, except TCC's claims against
Ameritech and those described in Section 2.02(b) or on Schedule 2.02.
(j) The right to receive and retain mail relating exclusively to
the Business, accounts receivable (including subscriber accounts receivable)
payments relating to trade accounts receivable that are less than 91 days
past due as of the Closing Date.
(k) The right to bill and receive payment for products shipped or
delivered relating exclusively to the Business and/or services performed
relating exclusively to the Business but unbilled or unpaid as of the Closing.
(l) All advertising, marketing and promotional materials and all
other related printing or written materials exclusively related to the
Business.
(m) All notes receivable and all subscriber accounts receivable
which are less than 91 days past due as of the Closing Date.
(n) All of ICHC's rights under the Management Agreement, other
than the rights set forth in Sections 4.3 and 5.3 thereof (the "Excluded
Management Rights"), although it is understood that the assignment to
Purchaser of those of ICHC's rights to be assigned under this provision will
not be a condition precedent to Purchaser's obligations under this Agreement.
(o) All roaming revenue receivable.
(p) All goodwill.
(q) 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) Those 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 included in the Assets, shall be retained by Sellers
and shall not be sold, assigned or transferred to Purchaser pursuant to this
Agreement (the "Excluded Assets").
(b) In addition to the Excluded Assets identified in Section (a)
of this Section 2.02, anything in this Agreement to the contrary
notwithstanding, the Assets sold to the Purchaser pursuant to the terms of
this Agreement shall not include (i) subscriber accounts
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receivable that are more than 91 days past due as of the Closing Date; (ii)
inventory held for sale to subscribers which will not reasonably be expected,
based on TCC's past practice, to be consumed in the normal course of business
within six months after the Closing; (iii) prepaid items of which Purchaser
shall not receive the benefit after the Closing and are not included in the
Working Capital Adjustment; (iv) each Seller's corporate records, books of
account, cash, bank deposits and cash equivalents at the time of the Closing;
(v) the Excluded Management Rights; (vi) the Software License Agreement
between TCC and International Telecommunication Data Systems, Inc. ("ITDS")
dated on or about September 8, 1995, as amended to date (the "ITDS
Agreement"); (vii) insurance policies and rights and claims thereunder;
(viii) intangible rights which may not be assigned or otherwise transferred
to Purchaser, as described on Schedule 2.02; (ix) intercompany accounts
receivable and accounts payable; and (x) claims for reimbursement for
expenditures made prior to the Closing Date, and claims against and/or
refunds from taxing authorities for the period prior to the Closing Date
and/or claims against and/or refunds from insurance carriers and contractual
rights relating to or arising under contracts, agreements and other
instruments not included in the Assumed Contracts.
ARTICLE III
ASSUMPTION OF LIABILITIES
Notwithstanding anything in this Agreement to the contrary, 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 Sellers which accrue and are to be performed from and after
the Closing under the Management Agreement (if assigned to Purchaser at
Closing) and under those permits, authorizations, licenses, leases, rights of
way, easements and other agreements either set forth on Schedules 2.01(a),
2.01(d) and 2.01(f) 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 Sellers entered into during
the period from the date hereof to the Closing by Sellers in the ordinary
course of their business in accordance with the provisions of Section 9.05
below and that were identified to and consented to by Purchaser (all of such
permits, authorizations, licenses, leases, rights of way, easements and the
Management Agreement 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 5.04(a) hereof) to the extent
used in the calculation of the Working Capital Adjustment (such items (i)
through (iii) are collectively referred to herein as the "Assumed
Liabilities"). Purchaser shall not be liable for any liabilities, debts,
contracts, agreements, including without limitation any contracts or
agreements set forth on Schedule 2.02, or other obligations of Sellers of any
nature whatsoever other than the Assumed Liabilities (such other liabilities,
debts, contracts, agreements or obligations of Sellers other than the Assumed
Liabilities being referred to as the "Non-Assumed Liabilities").
ARTICLE IV
INSTRUMENTS OF TRANSFER AND ASSUMPTION
Section 4.01. Transfer Documents. At the Closing, Sellers will deliver
to Purchaser (a) one or more Bills of Sale in substantially the form attached
hereto as Exhibit A (a "Bill of
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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 Sellers, as shall be effective to vest in
Purchaser all of Sellers' right and title to, and interest in, the Assets;
and (c) all contracts and commitments, instruments, books and records (except
as otherwise provided in Section 2.02 hereof) and other data included in the
Assets.
Section 4.02. Assumption Documents. At the Closing, Purchaser and
Sellers 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 Sellers 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 Ninety-Seven Million Dollars ($97,000,000) (the "Base Price"), as
adjusted in accordance with the provisions of Section 5.04 hereof (as
adjusted, the "Purchase Price").
Section 5.02. Payment of Purchase Price. The Purchase Price, less an
amount equal to Two Million Five Hundred Thousand Dollars ($2,500,000) (the
"Closing Escrow Payment"), shall be payable at Closing by wire transfer of
immediately available funds into accounts designated by Sellers to Purchaser
at least one day in advance of the Closing. The Closing Escrow Payment shall
be paid by Purchaser at Closing to Chase Manhattan Trust Company, N.A., as
escrow agent (the "Closing Escrow Agent") to be held, invested and disbursed
pursuant to the terms of the Closing Escrow Agreement substantially in the
form of Exhibit C attached hereto (the "Closing Escrow Agreement").
Section 5.03. Allocation of Purchase Price. Within thirty (30) days
prior to the Closing, Purchaser and Sellers 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. It is agreed, however, that the portion
of the Purchase Price allocable to the Management Agreement, if assigned to
Purchaser at Closing, is $1,000.00. Purchaser and Sellers each further agree
to file their income tax returns and their other tax returns and IRS Form
8594 reflecting the allocation as determined in this Section 5.03 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 and the Assumed Liabilities shall be determined by a nationally
recognized appraisal firm mutually agreeable to Sellers and Purchaser and the
costs of such appraisal shall be borne equally by Sellers and Purchaser.
Section 5.04. Purchase Price Adjustment.
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(a) As used in this Section 5.04 and in this Agreement, the
following terms shall have the meaning set forth below:
"Business Day" means any day other than a day that the commercial
banks located in the State of Michigan or the State of Oklahoma are not open
for business.
"Current Assets" means the Michigan-3 Cellular System's (i) the
current portion of any note receivable (including interest due) and all
accounts receivable, including roaming revenue receivables that are current
to less than 91 days past due, net of a reserve for bad debts which reserve
shall equal the sum of the following amounts: zero percent (0%) of such
accounts receivable that are not past due or that are thirty (30) or fewer
days past due, ten percent (10)% of such accounts receivable that are more
than thirty (30) days past due but less than sixty-one (61) days past due and
fifty percent (50%) of such accounts receivable that are more than sixty (60)
but less than ninety-one (91) days past due; (ii) inventory held for sale to
subscribers which will reasonably be expected, based on past practice, to be
consumed in the normal course of TCC's business within six months after the
Closing had TCC retained the Assets and Business rather than selling the
Assets and Business as contemplated by this Agreement, reflected at net book
value, provided in no event shall the net book value of the inventory used to
determine Current Assets exceed $250,000 (the "Inventory"); and (iii) prepaid
items of which Purchaser will receive the benefit 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 Michigan-3 Cellular System's (i)
subscriber deposits received, but not transferred to Purchaser, (ii) deferred
revenue, (iii) employee vacation expenses (whether or not to be paid or
vacation time to be taken by the employee after the Closing) and sick pay
expense accrued prior to Closing, but to be paid or taken following Closing,
(iv) salaries, bonuses, fringe benefits and other remuneration payable to
employees for periods ending prior to the Closing to be hired by Purchaser to
the extent not paid by Sellers prior to the Closing Date, (v) expenses for
goods and services received in the normal course of business, including
taxes, utility charges, special assessments, commissions and fees to the
extent not paid by Sellers prior to the Closing Date, 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) Sellers shall prepare and submit to Purchaser, not later than
5 Business Days prior to the Closing Date, a written good faith estimate of
the amount of the Working Capital Adjustment (the "Adjustment") and the
Purchase Price resulting from the Adjustments ("Sellers' Estimate").
Sellers' Estimate shall be accompanied by detailed supporting documents, work
papers and other data supporting the Adjustment ("Support Documents") and
Sellers'
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Estimate. Sellers' Estimate shall be based upon the books and records of the
Michigan-3 Cellular System. Sellers' Estimate shall be accompanied by a
certificate signed by the President or Vice President - Finance of TCC
certifying that Sellers' Estimate was calculated in good faith and in
accordance with the provisions of this Section 5.04. After the delivery of
Sellers' Estimate and Support Documents and prior to the Closing, Purchaser
and Sellers shall attempt to resolve any disputes between Sellers and
Purchaser with respect to Sellers' Estimate. In connection therewith,
Purchaser shall have full access to all Sellers' records related to Sellers'
proposed Adjustment. Prior to Closing, Purchaser shall advise Sellers in
writing as to any dispute Purchaser has with Sellers' Estimate and provide
Sellers with Purchaser's calculation of the 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 in accordance with the provisions of this Section 5.04
and shall be accompanied by Support Documents, 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 $50,000 less than Sellers'
Estimate, the Closing shall proceed with the Purchase Price based upon
Sellers' Estimate. In the event the Purchaser's Estimate of the Purchase
Price is more than $50,000 less than Sellers' Estimate, then the mid-point
between Sellers' Estimate and Purchaser's Estimate shall be used as the
Purchase Price for purposes of Closing and the Closing shall proceed.
Within 60 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 the Adjustment to be made
pursuant to this Section 5.04 including any changes in the Adjustment used to
determine the Purchase Price at Closing, together with a copy of any Support
Documents relating to such Closing Certificate and such other supporting
evidence as Sellers may reasonably request either prior to or after delivery
thereof. If Sellers either have not received the Closing Certificate within
the required 60 days or shall conclude that the Closing Certificate does not
accurately reflect the Adjustment to be made to the Base Price in accordance
with this Section 5.04, Sellers 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 setting forth
any discrepancies believed to exist or that Sellers have not received the
Closing Certificate in which event no change to the Adjustment will be made.
If Sellers fail to so notify Purchaser of any discrepancies, then the
calculation of the Purchase Price set forth in the Purchaser's Closing
Certificate shall be controlling for all purposes hereof and Purchaser or
Sellers, as the case may be, shall on or before the fifth 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 (5th) Business Day following the earlier to occur of the
expiration of the Response Period and the date Purchaser receives Sellers'
statement of discrepancies, Purchaser or Sellers, as the case may be, shall
pay the other the amount, if any, as to which there is no discrepancy.
Purchaser and Sellers shall use good faith efforts to jointly resolve their
discrepancies within fifteen (15) days of Purchaser's receipt of Sellers'
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 Sellers are unable to resolve their differences
within such fifteen (15) day period, then any party may request that the
matter be resolved by Price Waterhouse Coopers (the "Independent
Accountants"). In submitting a dispute to the Independent Accountants, each
of the parties shall
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furnish, at its own expense, the Independent Accountants and the other party
with such Support Documents and information as the Independent Accountants
may reasonably request. Each party may also furnish to the Independent
Accountants such other information and documents as it deems relevant with
the appropriate copies and notification being given to the other party. The
Independent Accountants may conduct a conference concerning the disagreements
between Sellers and Purchaser at which conference each party shall have the
right to present additional documents, 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 on the one hand and Sellers on the other. Within 5 days of receipt
of the Independent Accountants' decision with respect to such dispute, if
Purchaser is determined to owe an amount to Sellers including any interest
accrued thereon at a rate equal to the Prime Rate as reflected in the Money
Rate Section of Eastern Edition of THE WALL STREET JOURNAL on the Closing
Date (provided the Closing Date falls on a day on which said edition of THE
WALL STREET JOURNAL is published, otherwise on the next day on which said
edition of THE WALL STREET JOURNAL is published) (the "Interest Rate") since
the Closing Date, Purchaser shall pay such amount thereof to Sellers, and if
Sellers are determined to owe an amount to Purchaser, Sellers shall pay such
amount thereof to Purchaser, including any interest accrued thereon at the
Interest Rate since the Closing Date. All amounts owed by Purchaser or
Sellers to the other in accordance with this Section 5.04(c) shall be paid by
wire transfer of immediately available funds and shall bear interest at the
Interest Rate which interest shall be deemed to have started to accrue on the
Closing Date. Any amount due Purchaser from Sellers under this Section 5.04
and not paid when due may also be paid from the funds held pursuant to the
Closing Escrow Agreement.
(d) TCC shall prepare and deliver to Purchaser, at least 5 days
prior to the Closing, a certificate (the "Capital Expenditure Certificate")
setting forth in reasonable detail the specific equipment and other capital
expenditures (determined in accordance with GAAP) purchased for or made to
the Michigan-3 Cellular System during the period commencing on the date
hereof through the Closing Date. At Closing, Purchaser will reimburse TCC,
by wire transfer in the same manner described in Section 5.02 of this
Agreement, for each equipment purchase or other capital expenditure set forth
on the Capital Expenditure Certificate for which TCC has previously paid and
which equipment purchase or other capital expenditure either is set forth on
Schedule 7.16(a)(iii) (except that, with respect to the construction of the
tower and equipment base station on the leased real property that is the
subject of the the real property lease that is listed as item 42 on Schedule
2.01(d), Sellers shall not incur any capital expenditures in connection with
such construction unless Sellers shall have obtained the special use permit
that is the subject of the litigation referenced on Schedule 7.11) or
Purchaser shall have specifically approved in writing.
ARTICLE VI
CLOSING
Subject to the terms and conditions hereof, the closing (the "Closing")
shall take place at the offices of Edwards & Angell, LLP, 2800 Hospital Trust
Tower, Providence, Rhode Island
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02903, on the date (the "Closing Date") which is the latest of (a) the tenth
(10th) day after the FCC granted its consent to the assignment of the
Cellular Authorizations from TCC to the Purchaser by a Final Order (as
defined in Section 10.04); (b) the expiration or early termination of the
waiting period under the Hart-Scott Act; (c) if applicable, the tenth (10th)
day after the date that the FCC granted a Special Temporary Authority (as
defined in Section 10.04) for Purchaser to operate the microwave facilities,
if any, that are the subject of the Microwave Authorizations on a temporary
basis; or (d) January 15, 2000; provided if such latest date is not a
Business Day, the Closing Date shall be the next following Business Day. The
Closing shall be effective as of 12:01 a.m. Eastern Time 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 Sellers)
and Article XI (for Purchaser) of this Agreement, and Purchaser shall deliver
to Sellers, by wire transfer of immediately available funds to one or more
bank accounts as specified by Sellers in wire transfer instructions to be
delivered to Purchaser at least one day prior to the Closing Date, the
Purchase Price as required pursuant to Section 5.02.
ARTICLE VII
SELLERS' REPRESENTATIONS
The disclosure schedules referenced in this Article VII are incorporated
into this Agreement by reference and are made an integral part hereof.
Disclosure of any information in any one of the disclosure schedules shall be
deemed to be disclosed in any other disclosure schedule that requires
disclosure of a similar nature to the extent it is reasonably clear that the
disclosure of such information is also required to be disclosed on such other
disclosure schedule. By way of clarification, the disclosure in one
disclosure schedule of a party to a contract in which a default has occurred
shall not be deemed to be disclosure of such default unless the nature of
such default is described in the disclosure schedule. Sellers hereby jointly
and severally represent and warrant to Purchaser that:
Section 7.01. Organization.
(a) Each of TCC and ICHC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida and
Unitel is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, and each Seller has all necessary
corporate power and authority to own and operate its properties and to carry
on the Business as now being conducted and to carry out the transactions
contemplated by this Agreement.
Section 7.02. Consents, Authorization, Execution and Delivery of
Agreement. Except for those consents, approvals, waivers and/or
authorizations described in Section 7.10 hereto or on Schedule 7.10 attached
hereto, all necessary consents and approvals have been obtained by Sellers
for the execution and delivery of this Agreement. The execution, delivery
and performance of this Agreement by Sellers and the transfer of the Assets
by Sellers to Purchaser have been duly and validly authorized and approved by
all necessary corporate and stockholder action, if necessary. This Agreement
is a valid and binding obligation of each Seller, enforceable
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against it in accordance with its terms subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and similar laws and laws,
rules or regulations relating generally to the rights of creditors general
equitable principles (whether considered at law or in equity) and an implied
covenant of good faith and fair dealing. Each Seller has the full corporate
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.
Section 7.03. Subsidiaries and Interests in Other Companies. Neither
TCC nor ICHC has any subsidiaries, and does not own or control any shares or
other securities of, or have any other proprietary interest in, any
corporation, partnership, limited liability company, joint venture, business
association or other entity or person (a "Person").
Section 7.04. Title to Assets; Condition of Assets. Except as set
forth on Schedule 7.04, TCC has good and marketable title to the Assets
(other than the Asset described in Section 2.01(n) hereof) to be transferred
by it to Purchaser and will convey good title to such Assets to Purchaser at
Closing, free and clear of all Liens other than Permitted Liens. All Liens
in effect on the date hereof other than Permitted Liens are listed on
Schedule 7.04 hereto and all of which are to be discharged prior to or
simultaneously with the Closing. 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 held
for use in the operation of the Business as it is currently being conducted
by Sellers, other than the Excluded Assets. Except as disclosed on Schedule
7.25 or Schedule 7.04, and except for the licenses, use permits, lease
agreements and easements set forth on Schedules 2.01(a), 2.01(c), 2.01(d)
and/or 2.01(f) which by their terms reserve rights in the licensor, grantor
or lessor, as the case may be, no officer, director, stockholder or employee
of any Seller or any other Person other than the Sellers owns, leases or has
any rights in any property, license or other assets used in the Business.
Except for factors typically affecting propagation and reception in the
cellular telephone industry generally, the tangible property included in the
Assets are technically sufficient and capable of providing cellular telephone
service in the Cellular Area in accordance with applicable FCC regulations.
With respect to the Assets, all of the buildings, towers, antenna, fixtures
and improvements owned or leased by Sellers, 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 that are owned or leased by Sellers comply with or have been
permitted under applicable zoning laws and the building, health and fire
protection codes of all applicable governmental jurisdictions, and have no
structural defects.
Section 7.05. Real Property - Owned. No Seller owns any real property
and the real property leased by a Seller related to the Business has never
been owned by a 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 relating to the Business and included in
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the Assets to which either TCC or Unitel is a party (other than personal
property leases with annual payments of less than $6,000 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 $75,000 or which are terminable without penalty on one month's or less
notice) setting forth (a) the name of the lessor, (b) the property subject to
the lease, (c) the expiration date of the lease and (d) with respect to the
real property leases, a 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), (t) all of the
leases set forth on such Schedules are in full force and effect and are
valid, binding and enforceable against TCC or Unitel (as applicable) in
accordance with their respective terms subject to bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and similar laws and laws,
rules or regulations relating generally to the rights of creditors, general
equitable principles (whether considered at law or in equity) and an implied
covenant of good faith and fair dealing; (u) all accrued and currently
payable rents and other payments required by such leases have been paid, (v)
each of TCC and Unitel (as applicable) and, to Sellers' Knowledge, each other
party thereto have complied with all respective covenants and provisions of
such leases, (w) neither TCC or Unitel (as applicable) nor, to Sellers'
Knowledge, any other party is in default in any respect under any such
leases, (x) no party has asserted any defense, set-off, or counter claim
thereunder, (y) no waiver, indulgence or postponement of any obligations
thereunder has been granted by any party, and (z) 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. Neither Unitel nor TCC has received
any written notice of such default under such real and personal property
leases set forth in Schedule 2.01(a) and 2.01(d).
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 TCC's subscribers (other than standard subscriber agreements for
cellular service), all leases (other than personal property leases with
annual payments of less than $6,000 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 $75,000 or which
are terminable without penalty on one month's or less notice) to which Unitel
or TCC is a party and which relate to the ownership of the Assets or the
operation of the Business, and all other contracts, commitments and
agreements (other than agreements with annual payments of less than $6,000
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 $75,000 or which are terminable without penalty
on one month's or less notice) or commitments (written or oral) to which
Unitel or TCC is a party which relate to the ownership of the Assets or the
management or 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 officer, director or employee of Unitel or TCC or any
Person (other than Sellers) 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. Sellers
have heretofore delivered to Purchaser true and correct copies of the
Existing Contracts. Except as disclosed on Schedules 2.01(a) and (d),
neither Unitel nor TCC has any Knowledge of any breach or anticipated breach
by the other
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parties to any Existing Contracts. The Existing Contracts are in full force
and effect and each Seller is in compliance with its obligations under such
Existing Contracts. Except for the Existing Contracts, neither TCC nor
Unitel has entered into any other contract, commitment or agreement (other
than agreements with annual payments of less than $6,000 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 $75,000 or which are terminable without penalty on three month's
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.
Section 7.08. Governmental Licenses. Except as set forth on Schedule
7.08, TCC holds all FCC Authorizations and all other licenses, consents,
permits, approvals and authorizations of public and governmental bodies
including, without limitation, the state, counties and municipalities served
by the Business which are required in connection with the ownership of the
Assets (other than the Asset described in Section 2.01(n) hereof)
(collectively with the FCC Authorizations referred to as the
"Authorizations"). All Authorizations are in full force and effect. TCC 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 (other than the Asset
described in Section 2.01(n) hereof) or the operation of the Business. All
fees due and payable as of the date of this Agreement TCC to governmental
authorities pursuant to the Authorizations have been paid. All reports
required of TCC to be filed as of the date of this Agreement in connection
with the Authorizations have been timely filed and are accurate and complete.
True and correct copies of the Authorizations, and all amendments thereto to
the date hereof, have been delivered by TCC to Purchaser and are identified
on Schedule 2.01(a) hereto. The ownership of the Assets and the operation of
the Business by Sellers are not subject to regulation or supervision by any
applicable state public utilities commission or other similar state
governmental instrumentality.
Section 7.09. Compliance with Laws. Except as set forth on Schedule
7.09 and except as addressed in any other section of this Agreement, each
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, ordinance, decree, order, rule, regulation of any governmental body
("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 (other than Excluded Contracts)
identified in Schedule 7.10 being obtained, the execution, delivery and
performance of this Agreement by Sellers and the Sellers' transfer of the
Assets to Purchaser (i) will not, subject to obtaining the FCC's approval to
assign the FCC Authorizations, violate any provisions of any law or
regulation of any Governmental Body applicable to the Assets or the Business,
(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.
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Section 7.11. Litigation and Legal Proceedings. Except as set forth on
Schedule 7.11, there is no outstanding judgment against a Seller or any
director, officer or stockholder of a Seller affecting the Business or the
Assets or which questions the validity of any action taken or to be taken by
a Seller pursuant to or in connection with the provisions of this Agreement
and there is no litigation, proceeding or investigation pending, or, to
Sellers' Knowledge, threatened, against a Seller or any director, officer or
stockholder of a Seller affecting the Business or the Assets or which
questions the validity of any action taken or to be taken by a 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 a
Seller or any director, officer or stockholder of a Seller is a party or, to
Sellers' Knowledge, threatened, nor has a Seller received written notice of
any demands by any Governmental Body or other Person, to terminate, modify or
adversely change the terms and conditions of Sellers' 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) no Seller has
generated, used, transported, treated, stored, released or disposed of, or
affirmatively 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 caused by a Seller or, to the Sellers' Knowledge, any other Person
in connection with a Seller's ownership or use of the Assets, the conduct of
the Business or on, in or under any property or facility located in the State
of Michigan used, owned or leased by a Seller and used in the conduct of 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 on or under any property
or facility owned, used or leased by Unitel or TCC; (iv) any Hazardous
Substance handled or dealt with in any way with respect to the Assets or the
Business by a Seller during such 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, (v) no Seller is subject to any order, decree,
injunction or other arrangement with any Governmental Body or any indemnity
or other agreement with any third party relating to any Environmental Law or
Hazardous Substance and (vi) there are no other circumstances or conditions
caused by a Seller or, to the Sellers' Knowledge, any other Person that could
reasonably be expected to result in any claim, liability, investigation, cost
or restriction on the ownership, use or transfer of the Assets pursuant to
any Environmental Law.
(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
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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.
Section 7.13. Employees. Schedule 7.13 sets forth a true and complete
list of the names and current salaries of all employees of any Seller
involved in the operation of the Business. Except as set forth on Schedule
7.13, such employees are employees of only Unitel and are employees at will.
Unitel has withheld all amounts required by law or agreement to be withheld
by it from the wages, salaries and other payments to its employees involved
in the operation of the Business and Unitel is not is 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
Unitel involved in the operation of the Business. Unitel 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
involved in the operation of the Business. 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 the Knowledge of Unitel 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
Unitel, before any federal, state, or local board, department, commission or
agency or (b) unfair labor practice charges or complaints, disputes or
grievances affecting Unitel. There are no pending, or, to the Knowledge of
Unitel, threatened or anticipated (a) union representation petitions
respecting the employees of Unitel, (b) efforts being made to organize any of
the employees of Unitel, or (c) strikes, slow downs, work stoppages, or
lockouts or threats affecting Unitel.
Section 7.14. Employee Benefits. Except as set forth on Schedule 7.14
attached hereto, no Seller has any 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") which relate to any employees
involved in the operation of the Business. Except as set forth on Schedule
7.13 or Schedule 7.14, no Seller is a party to any employment contract in
respect of an employee involved in the operation of the Business. Except as
set forth on Schedule 7.14, no officer, director or employee of any Seller
participates or is eligible to
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participate in a "defined benefit pension plan" as defined in Section 3(35)
of ERISA, maintained or made available by such Seller. No Seller nor any
Controlled Group Member maintains or contributes to, or ever maintained or
contributed to, a plan under which any employee of such 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 any Seller pursuant to Section 414(b),
(c), (m) or (o) of the Code. No 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 any Seller pursuant to Section
4001(b)(1) of ERISA. Sellers have furnished Purchaser with true and complete
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 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 any 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 any Seller. No Seller has 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. No
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) each Seller has timely filed (taking into consideration
any extension of time) all Tax (as defined below) returns and statements
which it is required to file as of the date hereof; (b) to Sellers' Knowledge
all such returns are complete and accurate and disclose all Taxes required to
be paid for the periods covered thereby; (c) no Seller has waived any statute
of limitations in respect of Taxes or agreed to an extension of time with
respect to a Tax assessment or deficiency; (d) no assessment of any
additional Taxes for periods for which returns have been filed has been
asserted and no basis exists therefor; (e) to the Knowledge of the Sellers,
there are no unresolved questions or claims raised by any Taxing authority
concerning the Tax liability of any Seller, (f) all Taxes which a Seller is
required by law to withhold or to collect for payment as of the date hereof
have been duly withheld and collected, and have been paid and (g) each of TCC
and ICHC has made a valid election to be taxed as an "S Corporation" (as
defined in Section 1361 of the Code), and will be classified for Federal
income tax purposes as an S Corporation for the period from the date of its
incorporation through the Closing Date. Each Seller has paid all
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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) TCC has provided Purchaser with the following:
(i) true and complete copies of the audited balance sheet
of TCC as of December 31, 1996, December 31, 1997 and December 31, 1998 and
the related audited statements of income and retained earnings and cash flows
for the years then ended, each of such balance sheet and income statement
being attached hereto as Schedule 7.16(a)(i) (collectively, the "Historical
Financial Statements"); and
(ii) true and complete copies of the unaudited balance sheet
(the "July Balance Sheet") of TCC at July 31, 1999 (the "Balance Sheet Date")
and the related unaudited statement of income for the seven-month period then
ended (the "Seven Month Income Statement" and together with the July Balance
Sheet, the "Current Financial Statements"), such balance sheet and income
statement being attached hereto as Schedule 7.16(a)(ii).
(iii) the 1999 operating and capital expense budget for the
Michigan-3 Cellular System is attached hereto as Schedule 7.16(a)(iii) (the
"Budget").
(b) Each of the Historical and Current Financial Statements
delivered under Section 7.16(a)(i) and (ii) hereof was prepared in accordance
with GAAP applied on a basis consistent with prior periods and past practices
and, with respect to the Current Financial Statements, subject to usual and
customary year-end adjustments and without footnotes and other presentation
items required by GAAP with respect to audited financial statements; subject
to the variations from GAAP identified in this Section 7.16(b), each of the
balance sheets included in such Historical and Current Financial Statements
fairly presents in all material respects the financial condition of TCC, as
at the close of business on the date thereof; and subject to the variations
from GAAP identified in this Section 7.16(b), each of the statements of
income included in such Historical and Current Financial Statements fairly
presents in all material respects the results of operations of TCC for the
fiscal period then ended.
(c) Except as set forth on Schedule 7.16(c) attached hereto, since
the Balance Sheet Date, TCC 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
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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), or canceled any material debts or
material claims;
(ii) waived any material rights which affect the Business,
whether or not in the ordinary course of business;
(iii) entered into any other transaction which affects its
Business, except in the ordinary course of business, and except that, it is
understood that TCC has continued and will continue to make capital
improvements or purchase capital additions consistent with the Budget, or
entered into any transaction with any officer, director or shareholder of
TCC, or any affiliate or family member of any such Person;
(iv) suffered any material damage, destruction or casualty
loss with respect to its Assets, whether or not covered by insurance;
(v) made any distribution of any of its Assets to any
officer, director or shareholder of TCC or any affiliate or family member of
such officer, director or shareholder;
(vi) except as disclosed in writing by TCC to Purchaser,
obligated TCC or its 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 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.
(d) A true and complete copy of the Management Agreement has been
provided by Sellers to Purchaser. In fiscal year 1998 Sellers recovered from
Radiofone not less than $1,435,653 for management and switching services
comprised of approximately $492,811 in direct expenses, $614,704 in
administrative expenses and $328,138 for switching services. In the event
Radiofone shall terminate the Management Agreement as a result of the
assignment of ICHC's rights thereunder to Purchaser, Purchaser shall have the
right to prevent the renewal of the Switching Services Agreement between TCC
and Radiofone dated June 25, 1991 (the "Switching Services Agreement") upon
written notice to Radiofone given at least 90 days in advance of the then
current term.
Section 7.17. Subscribers/Agents; Operating Data.
(a) Schedule 7.17(a) attached hereto sets forth (a) the number of
subscribers receiving cellular telephone service from the Michigan-3 Cellular
System as of a date within 5 days prior to the date hereof and (b) a list of
all agents who sell cellular telephone equipment and/or service on behalf of
Sellers as of the date within 5 days prior to the date hereof, together with
such agent's address and the number of gross activations produced by each
agent from January 1, 1998 to December 31, 1998.
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(b) Schedule 7.17(b) sets forth for the twelve month period ended
July 31, 1999 the monthly gross additions, disconnects, net additions, total
month end subscribers and monthly churn percentage for the Michigan-3
Cellular System.
(c) Schedule 7.17(c) sets forth the average revenue and minutes of
use for the Michigan-3 Cellular System for the twelve month period ended July
31, 1999 by month specifying home minutes of use, home revenue, revenue per
minute of use, beginning number of subscribers, ending number of subscribers,
average subscribers, average home revenue per subscriber and average monthly
bill.
(d) Schedule 7.17(d) sets forth the cellular outcollect and
incollect roaming revenue for the top five revenue producing or collecting
roaming partners for the Michigan-3 Cellular System for the twelve month
period ended July 31, 1999.
Section 7.18. Insurance. TCC has delivered previously to Purchaser all
policies of title, liability, fire, worker's compensation and other forms of
insurance (including bonds) which insure against risks and liabilities to an
extent and in a manner customary in the cellular industry and which are
adequate to provide coverage against risks of a nature to which Sellers would
normally be exposed in the operation of the Business. All such insurance
policies and binders are in full force and effect. TCC has complied in all
material respects 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 TCC 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 TCC
or has given any notice or other indication of its intention to cancel or
reduce any such coverage. All premiums due and payable as of the date of
this Agreement under any such insurance policies or binders of TCC have been
duly paid, or accrued, to the extent taken into account in the Working
Capital Adjustment.
Section 7.19. Brokers. Except for Daniels & Associates, no Seller 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 7.20. Undisclosed Liabilities. TCC does not have any
liabilities or obligations of any nature, whether absolute, accrued,
contingent or otherwise, which are not reflected or reserved against on the
July Balance Sheet except for liabilities and obligations that have arisen in
the ordinary and usual course of business and consistent with past practice
and except for (x) liabilities and obligations under the Management
Agreement, (y) those arising under contracts to be assumed by Purchaser and
(z) liabilities and obligations directly related to the transactions
contemplated hereby.
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Section 7.21. Pricing of Services. Schedule 7.21 sets forth a
description of all rate plans offered by Sellers to subscribers of the
Michigan-3 Cellular System or the Michigan-5 Cellular System as of the date
of this Agreement.
Section 7.22. Proprietary Rights. TCC possesses, and the Assets will
include, all intellectual property rights that are necessary to the conduct
of the Business, as currently conducted.
Section 7.23. Accounts Receivable and Bad Debts. Except as set forth
on Schedule 7.11, all notes and accounts receivable of TCC shown on the July
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 5.04).
Schedule 7.23 attached hereto sets forth a true, complete and accurate list,
as of the end of the most recent normal billing cycle of the Michigan-3
Cellular System, listing the total amounts of subscriber receivables and the
aging of such subscriber receivables based on the following Schedule: 0-30
days, 31-60 days, -61-90 days and over 90 days, from the date thereof.
Section 7.24. Product Information. Except as disclosed on Schedule
7.24, neither Unitel nor TCC has sold and does not have in its inventory any
refurbished telephone handsets which are subject to the terms of this
Agreement. Schedule 7.24 sets forth a list of manufacturers of telephone
handsets presently in TCC's or Unitel's inventory.
Section 7.25. Certain Business Relationships with Seller. Except as
set forth in Schedule 7.25 attached hereto, no officer, director or
shareholder of a Seller or any member of the Immediate Family of the
foregoing persons (the term "Immediate Family" for the purposes hereof shall
include such person's spouse, parents, siblings or children) or any
corporation, limited or general partnership or other legal entity in which a
Seller or any of the foregoing persons has an equity interest, except less
than two percent of the outstanding capital stock of a corporation that is
publicly traded on any recognized exchange or in the over-the-counter market,
has a pecuniary interest in, or is a party to, any of the following: (i) any
of the Assets, or (ii) any of the Assumed Contracts.
Section 7.26. Year 2000 Compliance. Attached to this Agreement as
Schedule 7.26 is the remediation plan of the Sellers (the "Y2K Plan") to
eliminate any Year 2000 Problem (as defined below). For purposes of this
Agreement, the term "Year 2000 Problem" shall mean the inability of computer
applications used by a Seller to recognize and perform properly date
sensitive function involving certain dates prior to and any date on or after
December 31, 1999. Schedule 7.26 also sets forth true and complete copies of
all written material received by TCC, as of the date of this Agreement, from
third party vendors and suppliers of the Sellers with respect to Year 2000
Problems.
Section 7.27. ICHC. The only asset or property (real or personal,
tangible or intangible) owned by ICHC, and the only contract, agreement,
permit or license to which ICHC is a party (other than the letter agreement
by and between ICHC and Unitel dated January 1, 1998, which
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letter agreement shall be terminated as of the Closing) in connection with
the operation of the Business is the Management Agreement. ICHC has good and
marketable title to its rights under the Management Agreement, free and clear
of all Liens other than Permitted Liens. No approval or consent of the FCC
is required in order for ICHC to transfer to Purchaser those of its rights
and obligations under the Management Agreement being assigned to Purchaser
under this Agreement. ICHC has no Knowledge of any breach by Radiofone of
the Management Agreement. The Management Agreement is in full force and
effect and ICHC is in compliance with its obligations thereunder.
Section 7.28 DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES.
EXCEPT AS EXPRESSLY SET FORTH IN TIES ARTICLE VII AND IN SCHEDULES REQUIRED
BY THIS ARTICLE VII, NO SELLER MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS
OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF THE BUSINESS, THE ASSETS OR
ITS OPERATION OF EITHER THE MICHIGAN-3 CELLULAR SYSTEM OR THE MICHIGAN-5
CELLULAR SYSTEM, INCLUDING WITHOUT LIMITATION, WITH RESPECT TO
MERCHANTABILITY OR FITNESS FOR PARTICULAR PURPOSE, AND ANY SUCH
REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.
ARTICLE VIII
PURCHASER'S REPRESENTATIONS
Purchaser hereby represents and warrants to the Sellers 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 corporate power and authority to (i)
own and operate its properties, (ii) carry on its business as it is now being
conducted, and (iii) carry out the transactions contemplated by this
Agreement and to own and operate the Assets and the Business, subject to
obtaining all necessary consents required for the transfer by Sellers of the
Assets.
Section 8.02. Consents; Authorization, Execution and Delivery of
Agreement. All necessary consents and approvals have been obtained by
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 corporate power and authority to execute and deliver and perform its
obligations under this Agreement and to undertake and perform the transaction
contemplated hereby. This Agreement is a valid and binding obligation of
Purchaser, enforceable against it in accordance with its terms except as may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting the rights of creditors
generally, general equitable principles (whether considered in proceedings at
law or in equity) and an implied covenant of good faith and fair dealing.
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
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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 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.
Section 8.05. Compliance with Laws. Purchaser is currently complying
with and has so complied with, and is not in default under or in violation
of, and neither its business nor any of its assets nor the operation or
maintenance thereof, contravenes in any respect any statute, law (including
environmental or employment laws), ordinance, decree, order, rule, regulation
of any governmental body applicable to its assets or its business, including,
without limitation, rules and regulations of the FCC.
Section 8.06. FCC Matters. Purchaser knows of no reason why the FCC
will not grant its consent to the assignment of the FCC Authorizations from
TCC to Purchaser. Neither Purchaser, nor any "real party in interest" (as
defined by Section 22.108 of the FCC's rules) (i) has had the FCC deny an
application for an authorization, (ii) has had the FCC revoke an
authorization granted to it, or (iii) has been the subject of an
investigation by the FCC and, to its knowledge, is not the subject of an
investigation pending before the FCC.
Section 8.07. No Violation of Existing Agreements. The execution,
delivery and performance of this Agreement by Purchaser and Purchaser's
purchase of the Assets from the Sellers (i) will not, subject to the receipt
of the FCC's approval to assign the FCC Authorizations, violate any
provisions of any law and (ii) will not, with or without the giving of notice
or the passage of time, or both, conflict with or result in a breach of any
of the terms or conditions of, or constitute a default under any contract,
instrument or other document to which Purchaser is a part of.
ARTICLE IX
SELLERS' AND PURCHASER'S COVENANTS
Section 9.01. Financial Statements and Cellular System Information.
TCC covenants and agrees that during the period after the execution of this
Agreement and prior to the Closing, TCC shall provide Purchaser, within 30
days of the end of each calendar month, TCC's unaudited balance sheet and
income statement for such month ("Interim Financial Statements"). The
Interim Financial Statements will be true and correct in all material
respects, will be prepared using the same accounting methods and procedures
as used in the preparation of the Current Financial Statements except for the
absence of footnotes, subject to usual and customary adjustments, and will
present fairly in all material respects the financial position of TCC at the
date indicated and the results of TCC's operations for such period. TCC also
covenants and agrees that during the period after the execution of this
Agreement and prior to the Closing, TCC shall provide Purchaser, within 10
days after the end of each calendar month (i) the number of
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subscribers on Michigan-3 Cellular System at the beginning and end of such
month, (ii) an accounts receivable aging report for the Michigan-3 Cellular
System, (iii) the GTE net settlement reports for the Michigan-3 Cellular
System, (iv) TCC's monthly billing reports, (v) the outcollect and incollect
revenue for the top five roaming partners of the Michigan-3 Cellular System,
and (vi) other reports normally generated by TCC's financial accounting and
billing system as reasonably requested by Purchaser.
Section 9.02. Governmental Approvals.
(a) Purchaser covenants and agrees that it will cooperate with
Sellers, and do all things reasonably necessary to assist Sellers, to obtain
all consents and approvals necessary for assignment to Purchaser of the
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. Sellers shall use all reasonable
efforts to provide adequate prior written notice to Purchaser of any meeting
with governmental authorities the purpose of which is to seek a consent or
approval to the transactions contemplated hereby, and Purchaser shall use all
reasonable efforts to furnish a representative to attend meetings with
appropriate government authorities for the purpose of obtaining such consents
or approvals. Purchaser and Sellers hereby agree to file the necessary
Form(s) 490 and 702 with the FCC transferring or assigning control of the FCC
Authorization for the Business to Purchaser within five Business Days after
the execution of this Agreement and diligently pursue the processing of the
assignment of the FCC Authorization to Purchaser and promptly to file for all
other necessary regulatory approvals for the consummation of the transactions
contemplated by this Agreement to the extent any such filings have not been
made prior to the date of execution of this Agreement. Sellers and Purchaser
shall share equally all filing fees in connection with any filings pursuant
to this Section 9.02(a).
(b) Sellers and Purchaser shall each cooperate and use their
reasonable best efforts to prepare and file with the Federal Trade Commission
and the Department of Justice and other regulatory authorities as promptly as
possible all requisite applications and amendments thereto together with
related information, data and exhibits necessary to satisfy the requirements
of the Hart-Scott-Rodino Antitrust Improvements Act ("Hart-Scott Act"). The
parties agree to make the initial filing required under the Hart-Scott Act
not later than thirty (30) days following the date of this Agreement.
Purchaser shall pay for all filing fees in connection with any filings
pursuant to this Section 9.02(b).
(c) (i) Sellers shall, at their sole expense, undertake to obtain
(or modify, if appropriate) the approvals for the transfer to Purchaser of
all licenses, permits or authorizations for the microwave facilities, if any,
listed on Schedule 2.01(a); (ii) in the event that Sellers have not obtained,
or the FCC has not granted its consent to the assignment of, such licenses,
permits or authorizations to Purchaser before Closing, Purchaser and Sellers
shall cooperate to obtain a Special Temporary Authority permitting Purchaser
to operate the microwave facilities, if any, listed on Schedule 2.01(a) on a
temporary basis; and (iii) in the event that the Special Temporary Authority
is obtained, Purchaser and Sellers shall cooperate after the Closing in
obtaining FCC consent to the assignment to Purchaser of such licenses,
permits or authorizations on a permanent
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basis. Sellers shall not enter into any agreements or understandings with
any party relating to the microwave facilities, if any, listed on Schedule
2.01(a) and which affect the Assets or Business without the prior written
consent of the Purchaser, which consent shall not be unreasonably withheld.
Section 9.03. Third Party Consents, Closing Conditions.
(a) Sellers covenant and agree to use all 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), Sellers agree
that the instrument whereby Sellers request the consent of the lessor
thereunder to the assignment of such lease to such Purchaser shall be in the
form of the letter attached hereto as Schedule 9.03(a) (or a form that is
functionally equivalent) and that Sellers shall use all commercially
reasonable efforts (provided, however, that such efforts shall not include
the payment of any money) to obtain each such lessor's consent to such
assignment by having each such lessor countersign such letter in the space
provided; provided, however, that the failure of any lessor to sign or
deliver any such consent shall not constitute a breach by any Seller of this
covenant so long as Sellers used commercially reasonable efforts to obtain
such lessor's signature. Sellers also agree, with respect to each real
property lease identified on Schedule 2.01(d), to use commercially reasonable
efforts (provided, however, that such efforts shall not include the payment
of any money) to obtain each such lessor's signature to the landlord estoppel
certificate required by Purchaser's senior lenders the form of which is
attached hereto as Schedule 9.03(b), provided, however, that the failure of
any lessor to sign or deliver any such estoppel certificate shall not
constitute a breach by any Seller of this covenant so long as Sellers used
commercially reasonable efforts to obtain such lessor's signature. Purchaser
covenants and agrees to cooperate with Sellers and assist Sellers in
obtaining such consents and approvals including the furnishing of financial
and other information, with respect to the Purchaser, or the Sellers, as the
case may be, reasonably required by the Person whose consent or approval is
being sought and executing instruments pursuant to which Purchaser assumes
Sellers' lease obligations for the period following the Closing.
Notwithstanding the foregoing, to the extent that any Assumed Contracts
(other than the Management Agreement) listed on Schedules 2.01(a) or 2.01(d)
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 and Purchaser elects to proceed with the Closing, 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 and Purchaser elects to proceed with
the Closing, this Agreement shall not constitute a sale, assignment, transfer
or conveyance thereof, or an attempted assignment, transfer or conveyance
thereof; provided Sellers shall use all commercially reasonable efforts to
provide Purchaser the benefits of any such Interest as provided in Section
17.01(b).
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(b) Purchaser and Sellers hereby covenant and agree to use all
reasonable efforts to satisfy, or assist the other party in satisfying, the
closing conditions applicable to the Purchaser in Article X hereof and the
Sellers in Article XI hereof prior to the Closing Date.
Section 9.04. Access.
(a) Purchaser shall have the right, itself or through its
representatives, during normal business hours, after reasonable notice (which
may be oral) to Sellers and without undue disruption to Sellers' 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 Sellers shall furnish Purchaser
with such information respecting the Assets and Business and financial
records as Purchaser may, from time to time, reasonably request.
(b) Sellers acknowledge and agree, subject to any restrictions
placed thereon by an owner or lessor of any real property involved, that
Purchaser may commission, at Purchaser's cost and expense, a so-called "Phase
I" 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 at Purchaser's cost and expense. Purchaser will
provide Sellers and their counsel a copy of any Phase I Assessment and Phase
II Assessment report. Such reports shall be kept confidential by the
parties, except that after the Closing the parties shall have no obligation
to maintain the confidentiality thereof. Seller will comply with any
reasonable request for information made by Purchaser or its agents in
connection with any such assessment. Sellers covenant that any response to
any such request for information will be complete and correct in all material
respects. Sellers will afford Purchaser and its agents access to all
operations of the Sellers at all reasonable times and in a reasonable manner
in connection with any such assessment subject to any required approval of
Sellers' landlords, which approval Sellers will use their best efforts to
obtain. Should Purchaser commission such an assessment, such assessment will
have no effect upon the representations and warranties made by Sellers 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 Sellers' representations or warranties herein, Sellers shall not
have breached such representation or warranty if Sellers cure such breach in
accordance with the provisions of this Agreement and then the Sellers shall
have the options of (i) remediating the subject site(s) at their sole expense
(in which case the Closing Date would, if necessary, be postponed for a
reasonable period of time not to exceed one hundred eighty (180) days from
the date the Sellers exercise their option herein to remediate the site or
sites), (ii) relocating the particular Assets or operations from the subject
site(s) at their sole expense (in which case the Closing Date would, if
necessary, be postponed for a reasonable period of time not to exceed one
hundred eight (180) days from the date the Sellers exercise their option
herein to relocate), or (iii) terminating this Agreement by providing notice
to the Purchaser within ten (10) Business Days of the Sellers' receipt of the
Phase II Environmental Audit Reports.
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(c) Sellers shall allow Purchaser the opportunity to conduct an
engineering review of the Assets to confirm that the Assets comply with the
FCC Authorizations and the regulations of the FCC and are otherwise in good
condition and repair, reasonable wear and tear excepted.
Section 9.05. Conduct of Business. From and after the date hereof and
until the Closing Date, Sellers shall:
(a) operate and manage the Cellular Systems in accordance with the
FCC Authorizations, and comply in all material respects with all laws, rules
and regulations applicable to Sellers, including the regulations of the FCC;
(b) except for inventory (other than Excluded Assets) sold in the
ordinary course of business, refrain from making any sale, lease, transfer or
other disposition of any of the Assets other than in connection with
replacements with assets of like use and value, or with the prior written
approval of Purchaser which approval will not be unreasonably withheld;
(c) refrain from modifying, amending or altering in any material
respect, or terminating any of the Assumed Contracts, and from waiving or
canceling any default or breach (other than the waiver of late fees) or
modifying, altering or terminating any right 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 their books and records relating to the Business in
accordance with prior practice; maintain all of their property and assets
relating to the Business in their present condition, ordinary wear and tear
excepted; and maintain supplies of inventory and spare parts relating to the
Business consistent with past practice;
(f) refrain from changing the Cellular Systems' agents' commission
rate, sales practices (including the quality of the credit of subscribers
contracting for cellular telephone service) or marketing practices without
Purchaser's approval, which approval will not be unreasonably withheld;
(g) except for customary increases consistent with past practices
or policies, refrain from increasing the compensation payable or to become
payable to any employee or agent involved in the Business by more than 5% of
base salary without Purchaser's approval, which approval will not be
unreasonably withheld;
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(h) refrain from entering into any contract or renewal of any
existing contract for the employment of any employee or agent of a Seller
involved in the Business other than "at-will" employees and agents;
(i) use their commercially reasonable efforts to (x) keep their
business organization intact, (y) retain the services of the key employees of
the Cellular Systems, and (z) maintain good relationships with its employees,
suppliers, advertisers, subscribers, agents and others having business
relations with them in connection with the operation of the Business, in each
case in accordance with past practices;
(j) refrain from changing their Charters or by-laws in any way
which would materially adversely affect their power or authority to enter
into and perform this Agreement, or which would otherwise materially
adversely affect their performance of this Agreement;
(k) continue to advertise, promote and market the Cellular Systems
and their services in a manner consistent with past practice; and in any
event from the date hereof through the Closing, spend on advertising,
marketing and promotion, on an aggregate basis from the date hereof to the
Closing, at least the amounts set forth in Schedule 9.05;
(l) refrain from subjecting any of the Assets to any Lien not in
effect on the date hereof 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 regarding the
Cellular Systems or the Business;
(o) not permit using commercially reasonable efforts, 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 a Seller in any court
with respect to the Business or the Assets, or any action relating to its
Assets or its Business against a Seller before the FCC or any other
Governmental Body, and notify Purchaser in writing promptly upon receipt of
any administrative or court order relating to the Assets or the Business;
(q) if Sellers deem it to be prudent, promptly replace any
employee who leaves the employ of the Cellular Systems; notify Purchaser of
the hiring of any new employee involved in the Business, any material change
in job function of an employee involved in the Business, and the termination
of any employee involved in the Business;
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(r) except with respect to Taxes that are being contested in good
faith provided such contested Taxes have been properly accrued, pay or cause
to be paid or provide for all Taxes of or relating to Sellers, the Assets and
the employees involved in the Business 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 Sellers' usual course of
business regarding the Cellular Systems or the Assets without Purchaser's
prior approval;
(t) cooperate with Purchaser in connection with (x) Purchaser's
efforts to identify the current employees working for Michigan-3 Cellular
System or Michigan-5 Cellular System 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 Purchasers billing
system and (z) Purchaser's efforts to upgrade equipment (at Purchaser's cost)
after Closing;
(u) continue to implement the Y2K Plan as promptly as practicable
and in any event such that the Michigan-3 Cellular System will be Y2K
compliant by December 31, 1999. No material change in the Y2K Plan or in the
manner or timing of its implementation shall be made without Purchaser's
prior written approval; and
(v) continue to (i) pay all fees due and payable to governmental
authorities pursuant to the Authorizations, (ii) timely file all reports
(which reports shall be true and complete) in connection with the
Authorizations, (iii) timely file (considering any extensions) all Tax
returns and statements; (iv) withhold, collect for payment and pay all Taxes
which a Seller is required by law to withhold, collect for payment and pay
(except with respect to Taxes that are being contested in good faith provided
such contested Taxes have been properly accrued), and (v) pay all premiums
due and payable under any insurance policies and binders.
Sellers shall cause the appropriate engineering, computer
information system and other personnel of Sellers to meet monthly after the
date hereof with representatives of Purchaser to discuss the status of the
implementation of the Y2K Plan and such representatives shall be provided
full access to all information, data, equipment and personnel reasonably
necessary for such representatives to determine the status and effectiveness
of the Y2K Plan.
Section 9.06. No Shopping. No Seller nor any affiliate, advisor or
representative of a Seller 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 a Seller any similar
transaction involving a Seller; provided, however, that nothing set forth in
this Section 9.06 shall prohibit Unitel from selling its interests in
cellular markets other than the Cellular Systems.
Section 9.07. Employees. Nothing contained in this Agreement shall
confer upon any employee working for Michigan-3 Cellular Systems or
Michigan-5 Cellular System any right with respect to continued employment by
Unitel or Purchaser. Purchaser understands Unitel's
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employees are not contractually obligated to become employees of Purchaser.
No provision of this Agreement shall create any third-party rights in any
such employee, or any beneficiary or dependent thereof, with respect to the
compensation, terms and conditions of employment and benefits that may be
provided to such employee by Purchaser or under any benefit plan that
Purchaser may maintain.
Section 9.08. Supplemental Disclosure. Sellers 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 Sellers made in this Agreement unless Purchaser
fails to object in writing to Sellers to any such supplemental disclosure
within ten (10) Business Days after Purchaser's receipt thereof.
Section 9.09. Transition Services. Purchaser has advised Sellers that
it intends to utilize a billing vendor other than ITDS after the Closing
Date. In order to facilitate a smooth transition of the billing services for
the Michigan-3 Cellular System and Michigan-5 Cellular System, Sellers
covenant and agree to take the actions set forth on Schedule 9.09.
Section 9.10. Termination of Liens. TCC shall use all reasonable
commercial efforts to obtain, and arrange for the filing of, all UCC-3
Termination Statements and any other necessary instruments to terminate all
Liens other than Permitted Liens and to obtain releases of such Liens,
including, without limitation, those set forth on Schedule 7.04, which were
granted by TCC in connection with that certain Revolving Credit Agreement,
dated December 18, 1997, by and among TCC, Durango Cellular Telephone
Company, MJ Cellular Company, LLC, CoreStates Bank, N.A. as Agent and Issuer
of Letters of Credit and the Lenders referred to therein, as amended, and all
other agreement, documents and instruments entered into in connection
therewith (collectively, the "Credit Documents").
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 Sellers
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 result in a Material Adverse
Effect (as defined below). Sellers shall have complied with and performed
all of the agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the Closing except for such
noncompliances which, in the aggregate, have not caused and would not
reasonably be expected to result in a Material Adverse Effect, PROVIDED,
HOWEVER; that there shall be no Liens (other than Permitted Liens) with
respect to the Assets, yet in the event there exists a Lien (other than a
Permitted Lien) with regard to any Assets as of the
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scheduled Closing Date, the scheduled Closing shall be postponed until the
earliest of the following to occur: (i) the curing, removal, payment or
satisfaction of any such Lien (other than a Permitted Lien); (ii) Purchaser's
waiver of the condition precedent set forth in this Section 10.01 that the
Assets be free and clear of all Liens (other than Permitted Liens); or (iii) the
date that is sixty (60) days from the scheduled Closing Date. Purchaser shall
have been furnished with a certificate or certificates of each 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 financial condition, Assets,
Business or properties of the Cellular Systems taken as a whole, other than
effects affecting the cellular telephone, personal communications services and
enhanced specialized mobile radio industries.
Section 10.02. Directors Resolutions. Each Seller shall deliver to
Purchaser copies of the resolutions of the board of directors of such 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 such Seller.
Section 10.03. Incumbency Certificate. Purchaser shall have received a
certificate or certificates of an officer of each Seller, certifying as to the
genuineness of the signatures of officers of such 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.
Section 10.04. Third Party Consents; FCC; Hart-Scott Act. Sellers shall
have delivered to Purchaser such instruments, consents and approvals of third
parties and Governmental Bodies (the form and substance of which shall be
reasonably satisfactory to Purchaser) as are necessary to assign to Purchaser
without modification thereof, as of the Closing, the Assets and the Assumed
Contracts (except that Radiofone's consent to the assignment of the Management
Agreement to Purchaser shall not be a condition to Closing so long as the
Purchaser has the right to terminate the Switching Services Agreement without
penalty by giving notice within 90 days prior to the end of the then current
term), such instruments, consents and approvals being set forth on
Schedule 10.04 and Purchaser shall have obtained all Authorizations necessary
for the consummation of the transactions contemplated by this Agreement;
PROVIDED, HOWEVER, that if Sellers are not capable of delivering to Purchaser
all of the instruments, consents and/or approvals of the third parties and/or
Governmental Bodies set forth on Schedule 10.04 as of the scheduled Closing Date
and Purchaser refuses to waive the condition precedent set forth in this Section
10.04 that instruments, consents and/or approvals set forth on Schedule 10.04 be
delivered to it on or prior to Closing and proceed with the Closing, then the
Closing shall be postponed until the earliest of the following to occur: (i)
Sellers make other arrangements that are satisfactory to Purchaser with respect
to those Assets and/or Assumed Contracts for which Sellers are unable to deliver
the instrument, consents and/or approvals set forth in Schedule 10.04; (ii)
Sellers deliver all of the instruments, consents and/or approvals set forth on
Schedule 10.04; (iii) Purchaser waives the condition precedent set forth in this
Section 10.04 that all of the instruments, consents or approvals set forth on
Schedule 10.04 be delivered to it on or prior to Closing; (iv) Sellers deliver
to Purchaser written notice that it is terminating this Agreement and Purchaser
does not, within five (5) days of its receipt of said notice, deliver a
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written notice to Sellers which indicates that Purchaser elects to waive,
pursuant to Section 10.04(iii) above, the condition precedent set forth in
this Section 10.04; or (v) May 31, 2000. The FCC's grant of its consent to
the assignment of the Cellular Authorizations to Purchaser shall have become
a Final Order and (ii) if applicable, the FCC's grant of its consent to the
assignment of the Microwave Authorizations to Purchaser shall have become a
Final Order or a Special Temporary Authority granting FCC's consent to
Purchaser to operate the microwave facilities that are the subject of the
Microwave Authorizations including authorizations for those facilities, if
any, listed in Schedule 2.01(a), each without any material conditions,
excepting conditions applied on an industry-wide basis, which the Purchaser
reasonably deems to be adverse. In addition, all applicable waiting periods
under the Hart-Scott Act shall have expired or been terminated and no action
seeking to enjoin the transactions contemplated by this Agreement will have
been initiated by the Federal Trade Commission ("FTC") or the United States
Department of Justice ("DOJ"). For the purposes of this Agreement, the term
"Final Order" shall mean action by the FCC as to which (i) no request for
stay by the FCC, as applicable, of the action is pending, no such stay is in
effect, and, if any deadline for filing any such request is designated by
statute or regulation, such deadline has passed; (ii) no petition for
rehearing or reconsideration of the action is pending before the FCC, and the
time for filing any such petition has passed; (iii) the FCC, does not have
the action under reconsideration on its own motion and the time for such
reconsideration has passed; and (iv) no appeal to a court, or request for
stay by a court, of the FCC's action, as applicable, is pending or in effect,
and, if any deadline for filing any such appeal or request is designated by
statute or rule, it has passed. For purposes of this Agreement, the term
"Special Temporary Authority" shall mean the applications assigning the
Microwave Authorizations, if any, to Purchaser have been filed, the public
notice period for comments has expired, no petitions to deny the assignment
of the Microwave Authorizations, if any, to Purchaser are on file and the FCC
has either granted such applications or the FCC has granted a special
temporary authority permitting the Purchaser to operate the microwave
facilities that are the subject of the Microwave Authorizations, if any, on a
temporary basis.
Section 10.05. Intentionally Left Blank.
Section 10.06. No Material Adverse Change. Other than changes affecting
the cellular telephone, personal communications services and enhanced
specialized mobile radio industries generally, there shall not have been any
material adverse change in the financial condition, assets, business or
properties of the Cellular Systems or Assets, from July 31, 1999 to the Closing.
Section 10.07. Opinion of Counsel to Sellers. Purchaser shall have been
furnished with an opinion of Pepper Hamilton LLP, counsel to Sellers, dated as
of the Closing and addressed to Purchaser, and to any institution designated by
Purchaser which has provided financing in connection with the transactions
contemplated by this Agreement, in a form mutually satisfactory to Purchaser's
counsel and Sellers' counsel.
Section 10.08. Opinions of FCC Counsel to Sellers. Purchaser shall have
been furnished with opinions of Moir & Hardman, FCC counsel for Sellers, 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 D attached hereto.
Section 10.09. Closing Escrow Agreement. Sellers shall have executed and
delivered the Closing Escrow Agreement to Purchaser.
Section 10.10. Year 2000 Problems. None of the Assets nor the Business
shall have any Year 2000 Problems that have manifested themselves as of the
Closing. In addition, no Seller shall have had a Year 2000 Problem that
resulted in a loss of more than 5 percent of the subscribers of the Michigan-3
Cellular System.
Section 10.11. Operation of the Cellular System. Sellers shall have
continued to operate and manage the Cellular Systems and market the Cellular
Systems' services in the normal course of business and in accordance with past
practice.
Section 10.12. Title Insurance. Sellers shall have provided to Purchaser
the following with respect to each parcel of Leased Real Property:
(i) an American Land Title Association ("ALTA") commitment issued (in
blank as to the proposed policy amount) in customary and current
form by a nationally recognized title insurance company licensed
to do business in the State of Michigan (or by a duly licensed
agent of such company) as selected by Sellers (the "Title
Company"), that obligates the Title Company to issue at Closing,
an owner's blanket policy of leasehold title insurance naming the
Purchaser as insured and with respect to the leased real property
identified on Schedule 2.01(d) attached to this Agreement and any
other leased real property that is the subject of a real property
lease entered into by Sellers for use in the operation of the
Business during the period commencing on the date hereof through
the Closing Date in accordance with the provisions of this
Agreement (collectively, the "Leased Real Property"), which
policy:
(A) shall be issuable by the Title Company upon payment of the
premium and endorsement fees therefor at regular rates,
but Sellers will have no obligation or responsibility for
the issuance of such policy, and the issuance will not be
a condition to the performance by Purchaser of its
obligations under this Agreement so long as Sellers
deliver such title commitment in accordance with the
provisions of this Section 10.12);
(B) shall have a policy coverage amount of not greater than
the fair market value of the leases in respect of the
Leased Real Property;
(C) shall insure that Purchaser's title to the Leased Real
Property is subject to no Liens, encumbrances, title
objections or other
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exceptions to title other than (I) the printed form
exceptions to title (except the survey exception) set
forth on Schedule B-II of such commitment, (II) any
Lien or encumbrance entered into by Purchaser at or
following Closing, and (III) the Permitted Liens,
which Permitted Liens include, for the purposes of
this Agreement, notations of the items (provided any
such item does not materially interfere with
Purchaser's intended use and enjoyment of the Leased
Real Property) disclosed on each "Required As-Built
Survey" (as defined below in clause (ii) of this
Section 10.12) (the items described in clauses (I),
(II) and (III) being defined collectively in this
Agreement as the "Permitted Title Exceptions"); and
(D) shall contain such customary endorsements and affirmative
coverage for items other than the Permitted Title
Exceptions as Purchaser may reasonably require (the "Title
Commitment"); and
(ii) an as-built survey of each parcel of Leased Real Property and
survey certificates, which survey:
(A) shall be performed by an independent, duly licensed,
registered land surveyor in the State of Michigan selected
by Sellers;
(B) shall be certified to the Title Company, Sellers and
Purchaser; and
(C) shall conform to the applicable ALTA/American Congress of
Surveying and Mapping Minimum Detail Requirements
(rev.1997) for the parcel mapped on such survey and,
without limiting the generality of the foregoing, there
shall be surveyed and shown on such survey the following:
the locations on such parcel of all the buildings,
structures and other improvements and the established
building setback lines; the lines of streets abutting the
sites and width thereof; all access and other easements
appurtenant to the sites; all roadways, paths, driveways,
easements, encroachments and overhanging projections and
similar encumbrances affecting the parcel, whether
recorded, apparent from a physical inspection of the
parcel or otherwise known to the surveyor; any
encroachments on any adjoining property by the building
structures and improvements on the parcel; if the parcel
is described as being on a filed map, a legend relating
the survey to said map; and the flood zone designation, if
any, in which the parcel is located; and
(D) shall be in form and substance as reasonably required by
the Title Company in accordance with customary protocol
(and in addition
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to payment of any additional premium therefor) to
remove the printed form survey exception from the
Title Commitment upon issuance of any policy of title
insurance based upon the Title Commitment (a "Required
As-Built Survey").
Sellers and Purchaser each shall bear one-half (1/2) of the title search
fees, if any, separately incurred (in addition to any premium payable by
Purchaser at Closing to issue a title insurance policy based upon the Title
Commitment) to cause the Title Company to issue the Title Commitment and the
fees and disbursements payable to each surveyor to cause each Required As-Built
Survey to be performed and delivered to Sellers and Purchaser; provided, in no
event shall Sellers' liability for all of such items cumulatively exceed
Eighteen Thousand Dollars ($18,000.00). Purchaser shall bear any and all
liability for the remainder of such fees and disbursements that cumulatively
exceed Eighteen Thousand Dollars ($18,000.00) and the full premium for the title
insurance policy.
Sellers and Purchaser acknowledge and agree that if, as of the scheduled
Closing Date, the Title Company fails or refuses to remove from the Title
Commitment any Lien, encumbrance or title exception other than a Permitted Lien,
the scheduled Closing shall be postponed in accordance with, and Sellers shall
have the opportunity to cure such title defect as set forth in Section 10.01 of
this Agreement.
Notwithstanding anything to the contrary set forth in this Section 10.12,
Sellers shall deliver to Purchaser no later than 15 days prior to the Closing
true and accurate legal descriptions of each parcel of Leased Real Property.
Section 10.13. Payoff Letter. Purchaser shall have received a payoff
letter in customary form from First Union National Bank, N.A. and shall have
received a certificate from Unitel's Vice President-Finance to the effect that
there is no other indebtedness for borrowed money secured by the Assets.
ARTICLE XI
CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
The obligations of each 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 Sellers:
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.
Sellers shall have been furnished with a certificate of an executive officer of
Purchaser, dated as of the Closing, certifying to the fulfillment of the
foregoing conditions.
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Section 11.02. Directors' Resolutions. Purchaser shall deliver to Sellers
copies of the resolutions of its Board of Directors authorizing the execution,
delivery and performance of this Agreement and all instruments and documents to
be delivered in connection herewith and the transactions contemplated hereby,
duly certified by an authorized officer of Purchaser.
Section 11.03. Incumbency Certificate. Sellers 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's grant of its consent to the
assignment of the Cellular Authorizations to Purchaser shall have become a Final
Order and, if applicable, the FCC's grant of its consent to the assignment of
the Microwave Authorizations to Purchaser shall have become a Final Order or a
Special Temporary Authority granting the FCC's consent to the operation by
Purchaser of the microwave facilities, if any, that are the subject of the
Microwave Authorizations including authorizations for those facilities, if any,
listed in Schedule 7.08. In addition, all applicable waiting periods under the
Hart-Scott Act shall have expired or been terminated and no action seeking to
enjoin the transactions contemplated by this Agreement will have been initiated
by the FTC or DOJ.
Section 11.05. Opinion of Counsel to Purchaser. Sellers shall have been
furnished with an opinion of Edwards & Angell, counsel to Purchaser, dated as of
the Closing and addressed to Sellers in substantially the form of Exhibit E
hereto.
ARTICLE XII
CASUALTY LOSSES
In the event that there shall have been suffered between the date hereof
and the Closing any casualty loss relating to the Assets that becomes known to
any Seller, Sellers will promptly notify Purchaser of such event. Without
limiting Sellers' rights under Section 9.04(b) of this Agreement, Sellers shall,
at their option, (i) repair, rebuild or replace the portion of the Assets
damaged, destroyed or lost prior to the Closing Date, (ii) assign to Purchaser
at Closing all claims to insurance proceeds or other rights of Sellers against
third parties arising from such casualty loss (the "Claims"), or (iii) exercise
their rights to cure, remediate or terminate as provided under Section 9.04(b)
of this Agreement; PROVIDED, HOWEVER, that if such insurance proceeds are or
will not be sufficient in Purchaser's reasonable judgment to cover the entire
casualty loss, then the Sellers shall pay the difference at Closing or, if such
"difference" exceeds $3,000,000, Sellers will have the right to terminate this
Agreement in which event neither Sellers nor Purchaser will have any obligation
to the other with respect to this Agreement. To the extent any Claim is not
assignable, such claim may be pursued by Purchaser, for its own account and
benefit, in the name of Sellers.
ARTICLE XIII
INDEMNIFICATION
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Section 13.01. Indemnification by Sellers. After the Closing, but
subject to the terms of this Article XIII, Sellers jointly and severally agree
to indemnify and to hold Purchaser, its affiliates, 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
and judgments suffered or incurred (each a "Loss" and collectively "Losses") by
Purchaser arising from:
(i) Any Non-Assumed Liability, whether or not known or
asserted at or prior to Closing, relating to or arising from the ownership,
operation, management, control or sale of the Assets of the Cellular Systems or
the Business or fines or forfeitures imposed or threatened to be imposed by the
FCC for the operation, at or prior to Closing, of the Michigan-3 Cellular System
or performance of ICHC's obligations under the Management Agreement, or the
Business;
(ii) Any misrepresentation or breach of warranty in, or
omission from, any representation or warranty of Sellers in this Agreement, the
Schedules or Exhibits hereto, the Bill of Sale, or in any closing certificate
delivered by any Seller to Purchaser pursuant to Article X hereof, which
misrepresentation, breach or omission, together with (x) all other
misrepresentations, breaches and omissions described in this Section 13.01(ii)
and (y) all breaches and non-fulfillments described in Section 13.01(iii) would
have, or would reasonably be expected to have, in the aggregate, a Material
Adverse Effect;
(iii) Any breach or non-fulfillment of any covenant or agreement
on the part of a Seller under this Agreement to be performed on or following the
Closing Date, which breach or non-fulfillment, together with (x) all other
breaches and nonfulfillments described in this Section 13.01(iii) and (y) all
misrepresentations, breaches and omissions described in Section 13.01(ii), would
have, or would reasonably be expected to have, in the aggregate, a Material
Adverse Effect; and
(iv) All costs and expenses (including reasonable attorneys'
fees) incurred by Purchaser in connection with any action, suit, proceeding,
demand, assessment or judgment incident to any of the matters Purchaser is
indemnified against by Sellers in this Agreement.
Section 13.02. Indemnification by Purchaser. After the Closing, and
regardless of any investigation made at any time by or on behalf of Sellers or
any information Sellers may have, but subject to the terms of this Article XIII,
Purchaser agrees to indemnify and to hold each Seller, and its affiliates,
directors, officers, stockholders, employees, representatives and agents
harmless from and against and in respect of any Losses incurred by any Seller
from:
(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 without limitation on account of the Assumed Liabilities;
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(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, or in any closing certificate delivered by
Purchaser to Sellers pursuant to Article XI hereof, which misrepresentation,
breach or omission, together with (x) all other misrepresentations, breaches and
omissions described in this Section 13.02(ii) and (y) all breaches and
nonfulfillments described in Section 13.02(iii), would have, or would reasonably
be expected to have, in the aggregate, a Material Adverse Effect;
(iii) Any breach or non-fulfillment of any covenant or agreement
on the part of Purchaser under this Agreement to be performed, prior to, on or
following the Closing Date, which breach or nonfulfillment, together with
(x) all other breaches and nonfulfillments described in this Section 13.02(iii)
and (y) all misrepresentations, breaches and omissions described in
Section 13.02(ii), would have, or would reasonably be expected to have, in the
aggregate, a Material Adverse Effect; and
(iv) All reasonable costs and expenses (including reasonable
attorneys' fees) incurred by Sellers in connection with any action, suit,
proceeding, demand, assessment or judgment incident to any of the matters with
respect to which any 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 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
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
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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. Closing Escrow Agreement. The obligation of Sellers to
indemnify Purchaser for Losses arising from or related to the matters described
in Section 13.01 shall be secured by the amounts in the Closing Escrow Payment
held pursuant to the Closing Escrow Agreement but the Escrow Fund shall not
represent a limit on the amount of losses for which Purchaser is indemnified
hereunder.
Section 13.05. Limitations. The Defending Party's obligations to
indemnify the Asserting Party pursuant to this Article XIII shall be subject to
the following limitations:
(a) No indemnification shall be required to be made by the Defending
Party until the aggregate amount of the Asserting Party's Losses exceeds
$475,000 (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, notwithstanding anything else set forth in this
Agreement to the contrary, the Deductible shall not be applicable to (i)
Sellers' obligation to indemnify Purchaser for Non-Assumed Liabilities,
(ii) Purchaser's obligation to indemnify Sellers for Assumed Liabilities, (iii)
adjustments to the Purchase Price provided for in Section 5.04, (iv) a breach by
Sellers of their representations set forth in Section 7.02, or the first two
sentences of Section 7.04, and Section 7.15, or (v) Losses resulting from fraud.
Under no circumstance will either the Sellers or Purchaser have any right to
recover any amounts under this indemnification or otherwise in excess of
$15 million (the "Cap"); provided, however, notwithstanding anything else set
forth in this Agreement to the contrary, the Cap shall not be
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applicable to (i) Sellers' obligation to indemnify Purchaser for Non-Assumed
Liabilities, (ii) Purchaser's obligation to indemnify Sellers for Assumed
Liabilities, (iii) adjustments to the Purchase Price provided in Section
5.04, (iv) a breach by Sellers of their representations set forth in Section
7.02 and the first two sentences of Section 7.04 and (v) Losses resulting
from fraud. The remedies provided to Sellers and Purchaser under this
Article XIII and Section 17.06 are and will be the sole and exclusive
remedies available to Sellers and Purchaser with respect to any loss or other
cost or expense incurred, whether or not paid, in connection with the
transactions and other matters which are the subject matter or referred to in
this Agreement.
(b) All representations and warranties contained in this Agreement
shall survive the Closing until the first anniversary thereof; provided,
however, that notwithstanding the foregoing, (x) the representations and
warranties contained in Section 7.02, the first two sentences of Section 7.04,
Section 7.15 and Section 8.02 shall survive the Closing for an unlimited
duration and (y) the representations and warranties contained in Sections 7.12
shall survive the Closing until the sixth 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 Survival Period applicable to the claim sought
to be asserted.
(c) The indemnification obligation of a Defending Party shall be
reduced to the extent of any available insurance proceeds; provided, however,
that such reduction shall not be effective until the Asserting Party has
received any such insurance proceeds. The Defending Party shall pay its
indemnification obligations as and when required by this Article XIII and the
Asserting Party shall refund to the Defending Party any such amounts determined
to be in excess of the Defending Party's obligations due to reductions pursuant
to this Section 13.05(c). Additionally, the Asserting Party shall refund
promptly to the Defending Party any amount of the Asserting Party's Losses that
are subsequently recovered by the Asserting Party pursuant to a settlement or
otherwise.
(d) Purchaser's remedies with respect to Losses specified in
Section 13.02 shall be satisfied first by the assertion of its rights under the
Escrow Agreement in respect of the Closing Escrow Payment.
(e) Notwithstanding anything to the contrary set forth in this
Agreement, all Losses suffered or incurred by Purchaser related to (x) any
misrepresentation, breach or omission described in Section 13.01(ii) or (y) any
breach or nonfulfillment described in Section 13.01(iii) and which the Purchaser
knew about prior to the Closing, but for which the Purchaser was unable to
terminate this Agreement because the closing condition in Section 10.01 was
satisfied, shall be included in the calculation in determining whether the
Material Adverse Effect and Deductible thresholds in this Article XIII have been
satisfied.
ARTICLE XIV
DISCLOSURE AND PRESS RELEASES
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Section 14.01. Press Releases. Subject to the provisions of
Section 14.02, no press release or public disclosure, either written or oral, of
the existence or terms of this Agreement shall be made by Purchaser or Sellers
without the consent of the other, and Purchaser and Sellers shall each furnish
to the other advance copies of any release which it proposes to make public
concerning this Agreement or the transactions contemplated hereby and the date
upon which Purchaser or Sellers, as the case may be, proposes to make such press
release.
Section 14.02. Disclosures Required By Law. This Article XIV shall not,
however, be construed to prohibit any party (i) from making any disclosures to
any governmental authority that it is required to make by law; (ii) from filing
this Agreement with, or disclosing the terms of this Agreement to, any
institutional lender to such party or; (iii) prohibit Sellers, Purchaser or any
of their affiliates from disclosing to its investors, partners, accountants,
auditors, attorneys, parent company and broker/dealers such terms of this
transaction as are customarily disclosed to them in connection with the sale or
acquisition of a cellular telephone system; provided, however, that any such
party shall be informed of the confidential nature of such information and shall
agree to keep such information confidential; and provided, however, that each
party shall provide to the 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 (the "Cure Request"), whereupon the Breaching Party shall have
ten (10) days from the receipt of such notice to cure such breach (except a
breach not susceptible of cure, as to which there shall be no cure period) to
the reasonable satisfaction of the Non-Breaching Party. This right of
termination shall be in addition to, and not in lieu of, any legal or equitable
remedies available to the Non-Breaching Party.
Section 15.02. Termination. This Agreement may be terminated and the
transactions contemplated herein may be abandoned, by written notice given to
the other party hereto, at any time prior to the Closing:
(a) by mutual written consent of Sellers and Purchaser;
(b) by either Purchaser or Sellers, if any court of competent
jurisdiction in the United States or other United States governmental body shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise permanently prohibiting the sale of the
Assets to Purchaser (which Sellers and Purchaser shall have used all reasonable
efforts to have lifted or reversed) and such order, decree, ruling or other
action shall have become final and nonappealable;
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(c) subject to Section 15.01, by Purchaser, if any Seller shall have
breached any of its representations or covenants herein and such breaches, in
the aggregate, would reasonably be expected to cause Purchaser to suffer a
material loss or otherwise result in a Material Adverse Effect;
(d) subject to Section 15.01, by Sellers, if Purchaser shall have
materially breached any of its representations or covenants herein; or
(e) by Sellers or Purchaser if the Closing shall not have occurred on
or before May 31, 2000, as may be extended pursuant to the cure provisions set
forth in Sections 9.04(b), 10.01, 10.04 and 10.12 (the "Outside Date"), unless
the failure to have the Closing shall be due to the failure of the party seeking
to terminate this Agreement to perform in any material respect its obligations
under this Agreement required to be performed by it at or prior to the Closing.
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, assumption
agreements, deeds and other instruments, as may be reasonably necessary or
proper to carry out the specific provisions of this Agreement, including
transfer to Purchaser all of Sellers' right, title and interest in and to the
Assets. Such efforts and assistance shall be at the cost of the requesting
party.
(b) Anything in this Agreement to the contrary notwithstanding, no Seller
is 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 Sellers as of the
Closing and Purchaser elects to proceed with the Closing, Sellers shall, for the
remaining term of such Interest, use commercially reasonable efforts to (i)
obtain the consent of any such third party; (ii) cooperate with Purchaser in any
reasonable and lawful arrangements designed to provide the benefits (including,
without limitation, the payment to Purchaser of any monies received by Sellers
in connection therewith) of such Interest to Purchaser so long as Purchaser
performs all obligations with respect to the Interest (and the payment of all
expenses in connection therewith); and (iii) enforce, at the request of
Purchaser and at the expense and for the account of Purchaser, any rights of any
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,
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that neither Purchaser nor Sellers 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 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, reputable overnight delivery
service or registered or certified mail, return receipt requested, postage
prepaid, to the following addresses:
(i) If to Purchaser:
Dobson Cellular Systems, Inc.
13439 N. Broadway Extension
Oklahoma City, OK 73114
Attention: Everett Dobson, President
Telephone: (405) 391-8500
Facsimile No.: (405) 391-8515
with a required copy to:
Edwards & Angell, LLP
2800 Hospital Trust Tower
Providence, Rhode Island 02903
Attention: David K. Duffell, Esq.
Telephone: (401) 276-6586
Facsimile No.: (401) 276-6602
(ii) If to Trillium Cellular Corp., Interstate Cellular Holdings Corp.
or Universal Telecell, Inc.:
c/o Unitel Wireless Communications Systems
3122 Fire Road, Suite 200
Egg Harbor Township, NJ 08234-5859
Telephone: (609) 646-9400
Facsimile No.: (609) 645-9696
with a required copy (which shall not of itself constitute
notice) to:
Pepper Hamilton LLP
3000 Two Logan Square
18th and Arch Street
Philadelphia, PA 19103-2799
Attn: Cary S. Levinson, Esq.
Telephone: (215) 981-4091
Facsimile No.: (215) 981-4750
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Notices delivered personally shall be effective upon delivery against
receipt. Notices transmitted by telecopy shall be effective when received,
provided that the burden of proving notice when notice is transmitted by
telecopy shall be the responsibility of the party providing such notice.
Notices delivered by overnight mail shall be effective when received. Notices
delivered by registered or certified mail shall be effective on the date set
forth on the receipt of registered or certified mail, whichever is earlier.
Section 17.03. Expenses. Except as otherwise specifically provided in
this Agreement, 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 17.04. Transfer Taxes. Purchaser shall bear 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 a 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 accounts receivable included as part of the Assets which were less
than 91 days past due as of the Closing Date and all other items to which it is
entitled as provided in this Agreement and to endorse with the name of the
Sellers any checks or drafts received on account of any such items.
Section 17.06. Specific Performance. The parties recognize and
acknowledge that in the event Sellers shall fail to perform their obligations
under the terms of this Agreement, money damages alone will not be adequate to
compensate Purchaser. The parties, therefore, agree and acknowledge that in the
event any Seller fails to perform its obligations under this Agreement prior to
Closing, Purchaser shall be entitled, 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 Michigan (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.
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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 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 to be 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 or
(b) diminish the benefits or burdens of this Agreement.
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. Sellers agree to provide to Purchaser
from time to time until twelve months after the Closing any information that
Sellers possess with respect to the operation of the Business and Assets prior
to the Closing which the Purchaser reasonably requests in 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. Knowledge. As used in this Agreement, the term "Knowledge"
as applied to Sellers, TCC, Unitel or ICHC shall mean the knowledge of (a) the
President or Vice President - Finance of Unitel or (b) the General Manager,
Engineering Manager or Accountant of any of the Cellular Systems.
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[SIGNATURES FOLLOW ON NEXT PAGE]
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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.
SELLERS:
TRILLIUM CELLULAR CORP.
By: /s/ Micheal Azeez
-------------------------------------
Name: Micheal Azeez
Title: President
INTERSTATE CELLULAR HOLDINGS CORP.
By: /s/ Micheal Azeez
-------------------------------------
Name: Micheal Azeez
Title: President
UNIVERSAL TELECELL, INC. (D/B/A UNITEL
WIRELESS COMMUNICATIONS SYSTEMS)
By: /s/ Micheal Azeez
-------------------------------------
Name: Micheal Azeez
Title: President
PURCHASER:
DOBSON CELLULAR SYSTEMS, INC.
By: /s/ G. Edward Evans
-------------------------------------
Name: G. Edward Evans
Title: President
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<PAGE>
BYLAWS
OF
DOBSON COMMUNICATIONS CORPORATION
(formerly, Dobson Holdings Corporation)
(As amended through April 29, 1999)
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Oklahoma
City, County of Oklahoma, State of Oklahoma.
Section 2. The corporation may also have offices at such other places
both within and out of the State of Oklahoma as the Board of Directors may
from time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. With respect to voting powers, except as otherwise required
by the Oklahoma General Corporation Act, the voting rights of all shares are
as set forth in the Certificate of Incorporation, as may be amended, on file
with the Oklahoma Secretary of State.
Section 2. Meetings of shareholders for any purpose may he held at
such time and place, within or without the State of Oklahoma, as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 3. Annual meetings of shareholders, commencing with the year
1997, shall be held on the second Tuesday of April, if not a legal holiday,
and if a legal holiday, then on the next secular day following, at 9:00 a.m.,
or at such time or date as shall be determined by the board of Directors. At
the annual meeting, shareholders shall elect a board of directors, and
transact such other business as may be properly brought before the meeting.
Section 4. Written notice of the annual meeting, stating the place,
date and hour of such meeting, shell be given to each shareholder entitled to
vote thereat not less than ten (10) days nor more than sixty (60) days before
the data of the meeting unless otherwise required by law.
Section 5. The Officer who has charge of the stock ledger of the
corporation
<PAGE>
shall prepare and make, at least ten (10) days before every meeting of
shareholders, a complete list of the shareholders entitled to vote at the
meeting, arranged in alphabetical order, showing the address of and the number
of shares registered in the name of each shareholder. Such list shall be open
to the examination of any shareholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior
to the election, either at a place within the city where the meeting is to be
held or at the place where the meeting is to be held, and the list shall be
produced and kept at the time and place of the meeting during the whole time
thereof, and subject to the inspection of any shareholder who may be present.
Section 6. Special meetings of the shareholders, for any purpose or
purposes, unless otherwise prescribed by law or by the Certificate of
Incorporation, may be called by the Chairman of the Board of Directors or the
President and shall be called by the President or Secretary at the request in
writing of a majority of the board of Directors, or at the request in writing
of shareholders owning a majority in amount of the entire capital stock of the
corporation issued and outstanding and entitled to vote. Such request shall
state the purpose or purposes of the proposed meeting.
Section 7. Written notice of a special meeting of shareholders,
stating the place, date, hour and the purpose or purposes thereof, shall be
given to each shareholder entitled to vote thereat, not less than ten (10)
days nor more than sixty (60) days before the date fixed for the meeting
unless otherwise required by law. Business transacted at any special meeting
of the shareholders shall be limited to the purposes stated in the notice.
Section 8. The chairman of any meeting of Shareholders or the holders
of a majority of the outstanding shares entitled to vote thereat, present in
person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting; provided,
however, that if the date of any adjourned meeting is more than thirty (30)
days after the date of which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting, written notice of the place,
date and hour of the adjourned meeting shall be given in conformity herewith.
At such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted at the meeting as originally noticed.
Section 9. The holders of a majority of the shared of stock issued and
outstanding and entitled to vote thereat present in person or represent, by
proxy, shall constitute a quorum at all meetings of the shareholders for the
transaction of business except as otherwise provided by law or by the
Certificate of Incorporation. Where a separate vote by a class or classes is
required, a majority of the outstanding shares of such class or classes,
present in person or represented by proxy, shall constitute a quorum entitled
to take action with respect to the vote on that matter.
Section 10. When a quorum is present at any meeting, the affirmative
vote of
<PAGE>
the holders of a majority of the shared of stock having Voting power Present
in person or represented by proxy shall decide any question brought before
such meeting other than elections of directors, unless the question is one
upon which, by express provision of law or of the Certificate of
Incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of such question, Unless
otherwise required by the Certificate of Incorporation, all elections of
directors shall be decided by a plurality vote, and, where a separate vote by
a class or classes is required, the affirmative vote of the majority of shares
of such class or classes present in person or represented by Proxy at the
meeting shall be the act of such class.
Section 11. Each shareholder entitled to vote shall at every meeting
of the shareholders be entitled to vote in person or by proxy, but no proxy
shall be voted or acted upon after three (3) years from its date unless the
proxy provides for a longer period.
Section 12. Any action required to or which may be taken at any annual
or special meeting of the shareholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
having not less than a minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
Corporate action by the Shareholders without a meeting by less than unanimous
written consent shall be given to those shareholders who have not consented in
writing.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
Board shall be at least one (1) and not more than fifteen (15). The number of
directors shall be increased (1) by two (2) upon a "Voting Rights Triggering
Event," as defined in the Corporation's Certificate of Designation for its
Senior Exchangeable Preferred Stock filed with the Oklahoma Secretary of State
on January 21, 1998, such two (2) directors to be elected by the holders of
Senior Exchangeable Preferred Stock issued pursuant to and as provided in such
Certificate of Designation therefor; (ii) by two (2) upon a "Voting Rights
Triggering Event," as defined in the Certificate of Designation for its Senior
Exchangeable Preferred Stock to be filed with the Oklahoma Secretary of State
on or about December 23, 1998, such two (2) directors to be elected by the
holders of Senior Exchangeable Preferred Stock issued Pursuant to and as
provided in such Certificate of Designation therefor; and (iii) by two (2)
upon a "Voting Rights Triggering Event," as defined in the Corporation's
Certificate of Designation for its Senior Exchangeable Preferred Stock due
2009, such two (2) directors to be elected by the holders of Senior
Exchangeable Preferred Stock issued pursuant to and as Provided in
<PAGE>
such Certificate of Designation therefor. Within the limits above specified,
the number of directors shall be determined from time to time by resolution of
the Board of Directors or by the shareholders. Except for the election held by
the Incorporator and except as provided in Section 2 and in Section 14 of this
Article III and in aforementioned the Certificates of Designation, the
directors shall be elected at the annual meeting of shareholders. Each
director elected shall hold office until such director's successor is elected
and qualified, or until such directors earlier resignation or removal.
Directors need not be shareholders.
Section 2. Except as provided in Section 14 of this Article III,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors elected by all the shareholders having the
right to vote as a single class may be filled by a majority of the directors
then in office, though less than a quorum, or by a sole remaining director,
and any director so chosen shall hold office until the next annual election
and until such directors successor is duly elected and shall qualify, unless
such director resigns or is removed. Whenever the holders of any class or
classes of stock or series thereof are entitled to elect one (1) or more
directors by the provisions of the Certificate of Incorporation, vacancies and
newly created directorships of such class or classes or series may be filled
by a majority of the directors elected by such class or classes or series
thereof then in office, or by a sole remaining director so elected.
Section 3. The business of the corporation shall be managed by its
Board of Directors which may exercise all such powers of the corporation and
do all such lawful acts and things as are not by law or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or done
by the shareholders.
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Oklahoma.
Section 5. Regular meetings of the Board of Directors may be held at
such time and at such place as shall from time to time be determined by the
Board. Five (5) days' notice of all regular meetings shall be given, and such
notice shall state the place, date, hour and the business to be transacted at
and purpose of such meeting.
Section 6. Special meetings of the Board may be called by the
President on three (3) days' notice to each director either personally, by
mail, by telegram or by facsimile transmission. Special meetings shall be
called by the President or Secretary in like manner and on like notice on the
written request of two (2) directors unless the corporation has at that time
less than three (3) directors, in which later event the request of only one
(1) director shall be required. Notice of any special meeting shall state the
place, date, hour and the business to be transacted at and the purpose of such
meeting.
Section 7. At all meetings of the Board, a majority of the directors
shall
<PAGE>
constitute a quorum for the transaction of business, and the act of a
majority of the directors present at any meetings at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law or by the Certificate of Incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be
present.
Section 8. The Board of Directors may, by resolution, passed by a
majority of the whole Board, designate one or more committees, each committee
to consist of one (1) or more of the directors of the corporation, which, to
the extent provided in the resolution and permitted by the Oklahoma General
Corporation Act, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the corporation and
may authorize the seal of the corporation to be affixed to all papers which
may require it. Such committee or committees shall have such name or names as
may be determined from time to time by resolution adopted by the Board of
Directors.
Section 9. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
Section 10. Members of the Board of Directors, or of any committee
thereof, may participate in a meeting of such Board or committee by means of
conference telephone or similar communications equipment that enables all
persons participating in the meeting to hear each other. Such participation
shall constitute presence in person at such meeting.
Section 11. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if a written consent of such action is signed by all
members of the Board or of such committee as the case may be, and such written
consent is filed with the minutes of proceedings of the Board or committee.
Section 12. The directors may be paid their expenses, if any, of
attendance of such meeting of the Board of Directors any may be paid a fixed
sum for attendance at such meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
Section 13. The Board of Directors at any time may, by affirmative
vote of a majority of the members of the Board then in office, remove any
officer elected or appointed by the Board of Directors for cause or without
cause.
<PAGE>
Section 14. Any director may be removed, for cause or without cause,
by a majority vote of the shareholders entitled to vote for the election of
such director at any annual or special meeting of the shareholders. Whenever
the holders of any class or series are entitled to elect one or more directors
by the provisions of the Certificate of Incorporation, any director so elected
may be removed without cause only upon the vote of the holders of the
outstanding shares of that class or series and not the vote of the outstanding
shams as a whole. Upon such removal of a director, the shareholders (and not
the remaining directors) shall elect a director to replace such removed
director at the same shareholders' meeting at which such removal took place or
at a subsequent shareholders' meeting.
ARTICLE IV
NOTICES
Section 1. Notices of directors and shareholders shall be in writing
and delivered personally or mailed to the directors or shareholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be deposited in the United
States mail, postage prepaid Notice to directors may also be given by telegram
or facsimile transmission. Notice by telegram shall be deemed to be given when
delivered to the sending telegraph office. Notice by facsimile transmission
shall be deemed to be given when received.
Section 2. Whenever any notice is required to be given under the
provisions of law or of the Certificate of incorporation or by these Bylaws, a
waiver thereof in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall, at a minimum, consist of a President and a
Secretary. The Board of Directors may also choose additional officers,
including a Chairman, Vice-Chairman of the Board of Directors, one or more
Vice-Presidents who may be classified by their specific function, a Secretary,
a Treasurer and one or more Assistant Secretaries and Assistant Treasurers.
Two or more offices may be held by the same person, except the offices of
President and Secretary.
Section 2. The Board of Directors at its first meeting and after each
annual meeting of shareholders shall choose a Chairman of the Board of
Directors, a
<PAGE>
President and a Secretary, and may choose such other officers and agents as it
shall deem necessary.
Section 3. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the corporation shall hold office until
their successors are chosen and qualify, until their earlier resignatIon or
removal. My vacancy occurring in any office of the corporation shall be filled
by the Board of Directors.
Section 5. The Chairman, or, in the absence of the Chairman, a
Vice-Chairman of the Board of Directors, if chosen, shall preside at all
meetings of the Board of Directors, and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe. If the Board of Directors designates the Chairman of the Board to
act as Chief Executive Officer, such duties shall be performed by such person.
Section 6. The President, shall be the chief executive officer of the
corporation, shall provide at all meetings of the shareholders and, unless a
Chairman or Vice-Chairman of the Board has been chosen, be at all meetings of
the Board of Directors, and shall have general and active management of the
business of the corporation and shall see that all orders and resolutions of
the Board of Directors, are carried into effect. If the Board of Directors
designates the Chairman of the Board to act as Chief Executive Officer, the
President shall serve as Chief Operating Officer of the corporation.
Section 7. The President shall execute bonds, mortgages end other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the corporation.
Section 8. The Vice-President, or if there shall be more than one, the
Vice Presidents in The order determined by the Board of Directors, shall, in
the absence or disability of the President, perform the duties and exercise
the powers of the President and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 9. The Secretary shall attend the meetings of The Board of
Directors and all meetings of the shareholders and record all the proceedings
of the meetings of the corporation and the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing
committees when required. The Secretary shall give, or cause to be given,
notice of all meetings of the shareholders and regular and special meetings of
the Board of Directors, and shall perform such other duties as may be
prescribed by the Board of Directors or President, under whose supervision
<PAGE>
the Secretary shall be. Additionally, the Secretary shall have custody of the
corporate seal of the corporation, and the Secretary or an Assistant
Secretary, shall have the authority to affix the same on any instrument
requiring it, and when so affixed, it may be attested by the Secretary's
signature or by the signature of such Assistant Secretary. The Board of
Directors may give general authority to any other officer to affix the seal of
the corporation and to attest the affixing by the Secretary's signature.
Section 10. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary and shall perform such other duties and
have such other powers as the Board of Directors from time to time prescribe.
Section 11. The Treasurer, if one is chosen, or if not, the Secretary,
shall have the custody of the corporate funds and securities and shall keep
full and accurate accounts of receipts and disbursements in books belonging to
the corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the corporation in such depositories as may be
designated by the Board of Directors.
Section 12. The Treasurer, if one is chosen, or if not, the Secretary,
shall disburse the funds of the corporation as may be ordered by the Board of
Directors' taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors, at its regular meetings, or when the
Board of Directors so requires, an account of all transactions performed by
the Treasurer (or Secretary, as the case may be) and of the financial
condition of the corporation.
Section 13. If required by the Board of Directors, the Treasurer, if
one is chosen or, if not, the Secretary, shall give the corporation a bond
(which shall be renewed every six (6) years) in such sum and with such surety
or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of the office of a treasurer and for the
restoration to the corporation, in case of the Treasurer's (or Secretary's, as
the case may be) death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in the
possession or under the control of the Treasurer (or Secretary, as the case
may be) belonging to the corporation.
Section 14. The Assistant Treasurer, or if them shall be more than
one, the Assistant Treasurers in the order determined by the Board of
Directors, shall, in the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer and shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
<PAGE>
ARTICLE VI
CERTIFICATES OF STOCK, TRANSFERS OF STOCK
CLOSING OF TRANSFER BOOKS AND
REGISTERED SHAREHOLDERS
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by the
Chairman or Vice Chairman of the Board of Directors, or the President or a
Vice-President, and by the Treasurer or an Assistant Treasurer, or the
Secretary or an Assistant Secretary of the corporation, certifying the number
of shared owned by the shareholder in the corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case an officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if the
person who signed the certificate was such officer, transfer agent or
registrar at the date of issue.
Section 3. The Board of Directors may direct a new Certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost or stolen or
destroyed, upon the making of an affidavit of that fad by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing
such issue of a new certificate or certificates, the Board of Directors may,
in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or
certificates, or such owner's legal representative, advertise the same in such
manner as the corporation shall require and/or to give the corporation a bond
in such sum as the corporation may direct as indemnity against any claim that
may be made against the corporation with respect to the certificate alleged to
have been lost, stolen or destroyed.
Section 4. Subject to transfer restrictions permitted by Section 1055
of title 18 of the Oklahoma Statutes and to stop transfer orders directed in
good faith by the corporation to any transfer agent to prevent possible
violations of federal or state securities laws, rules or regulatIons, upon
surrender to the corporation or the transfer agent of corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 5. The Board of Directors may fix a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of any
meeting of shareholders, nor more than sixty (60) days prior to the time for
the other action hereinafter described, as of which them shall be determined
the shareholders who are entitled; to notice of or to vote at any meeting of
shareholders or any adjournment thereof; to express consent to corporate
action in writing without a meeting; to receive payment of any dividend or
other distribution or allotment of any rights; or to exercise
<PAGE>
any rights with respect to any other lawful action.
Section 6. The corporation shall be entitled to treat the person in
whose name any share of stock is registered on the books of the corporation as
the owner thereof for all purposes and shall not be bound to recognize any
equitable or other claim or other interest in such shares in the part of any
other person, whether or not the corporation shall have express or other
notice thereof.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law.
Section 2. There may be set apart out of any of the funds of the
corporation available for dividends such amounts as the Board of Directors
deems proper as a reserve or reserves for working capital, depreciation,
losses in value, or for any other proper corporate purpose, and the Board of
Directors may increase, decrease or abolish any such reserve in the manner in
which it was created.
Section 3. The Board of Directors shall present at each annual meeting
and at any special muting of the shareholders, when called for by vote of the
shareholders, a full and clear statement of the business and condition of the
corporation.
Section 4. All checks and demands for money and notes of the
corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
Section 5. The fiscal year of the corporation shall be as fixed by the
Board of Directors.
Section 6. The Board of Directors may provide a suitable seal,
containing the name of the corporation, which seal shall be in the charge of
the Secretary. If and when so directed by the Board of Directors or a
committee thereof, duplicates of the seal may be kept and used by the
Treasurer or by the Assistant Secretary or Assistant Treasurer. The seal may
be used by causing it, or a facsimile thereof, to be impressed or affixed or
in any other manner reproduced.
Section 7. The books of account and other records of the corporation
may be kept (subject to any provisions of Oklahoma law) at the principal place
of business and chief executive office of the corporation.
<PAGE>
ARTICLE VIII
INDEMNIFICATION OF OFFICERS, DIRECTORS,
EMPLOYEES AND AGENTS
To the extent and in the manner permitted by the laws of the State of
Oklahoma and specifically as is permitted under Section 1031 of Title 18 of
the Oklahoma Statutes, the corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened pending or
completed action, suit or proceeding, whether civil, criminal, admInistrative
or investigative, including an action by or in the right of the Corporation,
by reason of the fact that such person is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses.
including attorneys' fees, judgments, fines and amounts paid in settlement.
ARTICLE IX
AMENDMENTS
The Bylaws may be amended and repealed, or new bylaws may be adopted,
by the shareholders or by the Board of Directors at any annual or special
meeting of the shareholders or of the Board of Directors if, notice of such
amendment, repeal, or adoption of new bylaws be contained in the notice of
such meeting.
<PAGE>
ASSET PURCHASE AGREEMENT
By and Among
AMERICAN TOWER CORPORATION,
AMERICAN TOWER, L.P.,
DOBSON TOWER COMPANY
and
DOBSON COMMUNICATIONS CORPORATION,
AS THE SOLE VOTING STOCKHOLDER OF
DOBSON TOWER COMPANY
Dated as of
July 6, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES. . . . . . 2
2.1 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Assumption of Certain Liabilities, Retained Liabilities . . 3
2.4 Required Consents . . . . . . . . . . . . . . . . . . . . . 5
2.5 Consent of Third Parties. . . . . . . . . . . . . . . . . . 5
2.6 Bulk Transfer Laws. . . . . . . . . . . . . . . . . . . . . 5
2.7 Defective Sites . . . . . . . . . . . . . . . . . . . . . . 6
2.8 Rejected Sites. . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 3 PURCHASE PRICE; CLOSING . . . . . . . . . . . . . . . . . . . . . 7
3.1 Purchase Price.. . . . . . . . . . . . . . . . . . . . . . 7
3.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF TARGET. . . . . . . . . . . . . 9
4.1 Organization and Business; Power and Authority;
Effect of Transaction.. . . . . . . . . . . . . . . . . . .10
4.2 Intentionally Omitted. . . . . . . . . . . . . . . . . . .11
4.3 Material Statements and Omissions; Absence of Events. . . .11
4.4 Title to Properties; Leases . . . . . . . . . . . . . . . .11
4.5 Compliance with Private Authorizations. . . . . . . . . . .12
4.6 Compliance with Governmental Authorizations and Applicable
Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
4.7 Intangible Assets . . . . . . . . . . . . . . . . . . . . .14
4.8 Related Transactions. . . . . . . . . . . . . . . . . . . .14
4.9 Insurance . . . . . . . . . . . . . . . . . . . . . . . . .15
4.10 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . .15
4.11 Employee Retirement Income Security Act of 1974 . . . . . .15
4.12 FIRPTA. . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.13 Employment and Consulting Arrangements. . . . . . . . . . .16
4.14 Material Agreements . . . . . . . . . . . . . . . . . . . .16
4.15 Ordinary Course of Business . . . . . . . . . . . . . . . .16
4.16 Broker or Finder. . . . . . . . . . . . . . . . . . . . . .17
4.17 Environmental Matters . . . . . . . . . . . . . . . . . . .17
4.18 Capital Stock . . . . . . . . . . . . . . . . . . . . . . .19
4.19 Year 2000 Compliant.. . . . . . . . . . . . . . . . . . . .19
<PAGE>
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF ATLP. . . . . . . . . . . . . .19
5.1 Organization and Business; Power and Authority;
Effect of Transaction.. . . . . . . . . . . . . . . . . . .19
5.2 ATC SEC Reports.. . . . . . . . . . . . . . . . . . . . . .20
5.3 Material Statements and Omissions; Absence of Events. . . .21
5.4 Broker or Finder. . . . . . . . . . . . . . . . . . . . . .21
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE TARGET
STOCKHOLDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
6.1 Organization and Business; Power and Authority;
Effect of Transaction.. . . . . . . . . . . . . . . . . . .22
ARTICLE 7 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
7.1 Access to Information; Confidentiality. . . . . . . . . .22
7.2 Agreement to Cooperate; Certain Other Covenants. . . . . .24
7.3 Public Announcements. . . . . . . . . . . . . . . . . . . .25
7.4 Notification of Certain Matters.. . . . . . . . . . . . . .25
7.5 No Solicitation.. . . . . . . . . . . . . . . . . . . . . .25
7.6 Conduct of Business by Target Pending the Closing.. . . . .26
7.7 Preliminary Title Reports.. . . . . . . . . . . . . . . . .28
7.8 Environmental Site Assessments. . . . . . . . . . . . . . .28
7.9 Lease of Office Space . . . . . . . . . . . . . . . . . . .28
ARTICLE 8 CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . .28
8.1 Conditions to Obligations of Each Party.. . . . . . . . . .28
8.2 Conditions to Obligations of ATLP . . . . . . . . . . . . .29
8.3 Conditions to Obligations of Target . . . . . . . . . . . .31
ARTICLE 9 TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . .32
9.1 Termination.. . . . . . . . . . . . . . . . . . . . . . . .32
9.2 Effect of Termination.. . . . . . . . . . . . . . . . . . .33
ARTICLE 10 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . .34
10.1 Survival. . . . . . . . . . . . . . . . . . . . . . . . . .34
10.2 Indemnification.. . . . . . . . . . . . . . . . . . . . . .34
10.3 Limitation of Liability.. . . . . . . . . . . . . . . . . .35
10.4 Notice of Claims. . . . . . . . . . . . . . . . . . . . . .35
10.5 Defense of Third Party Claims.. . . . . . . . . . . . . . .36
10.6 Assignment of Rights; Additional Indemnification. . . . . .36
<PAGE>
ARTICLE 11 GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . .37
11.1 Waivers; Amendments.. . . . . . . . . . . . . . . . . . . .37
11.2 Fees, Expenses and Other Payments.. . . . . . . . . . . . .38
11.3 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . .38
11.4 Specific Performance; Other Rights and Remedies.. . . . . .39
11.5 Severability. . . . . . . . . . . . . . . . . . . . . . . .39
11.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . .40
11.7 Section Headings. . . . . . . . . . . . . . . . . . . . . .40
11.8 Governing Law.. . . . . . . . . . . . . . . . . . . . . . .40
11.9 Further Acts. . . . . . . . . . . . . . . . . . . . . . . .40
11.10 Entire Agreement. . . . . . . . . . . . . . . . . . . . . .40
11.11 Assignment. . . . . . . . . . . . . . . . . . . . . . . . .41
11.12 Parties in Interest.. . . . . . . . . . . . . . . . . . . .41
</TABLE>
<PAGE>
APPENDIX A: Definitions
EXHIBITS:
EXHIBIT A: Form of Deposit Escrow Agreement (Fourth Recital).
EXHIBIT B: Opinion of Edwards & Angell, LLP (Section 8.2(b)).
EXHIBIT C: Form of Non-Assignable Contracts Agreement (Section 8.2(g)).
EXHIBIT D: Form of Indemnity Escrow Agreement (Section 8.2(h)).
EXHIBIT E: Form of Master Lease from ATLP to Sygnet (Section 8.2(i)).
EXHIBIT F: Form of Build-to-Suit Agreement (Section 8.2(l)).
EXHIBIT G: Opinion of Sullivan & Worcester LLP (Section 8.3(b)).
ATTACHMENTS: Target Disclosure Schedule
-v-
<PAGE>
ASSET PURCHASE AGREEMENT
Asset Purchase Agreement, dated as of July 6, 1999, by and among American
Tower Corporation, a Delaware corporation, American Tower, L.P., a Delaware
limited partnership ("ATLP"), Dobson Tower Company, an Oklahoma corporation
("Target"), and Dobson Communications Corporation, an Oklahoma corporation, as
the sole voting stockholder of Target (the "Target Stockholder").
W I T N E S S E T H:
WHEREAS, the Board of Directors of Target has determined that the sale of
the assets (the "Purchase") of Target used in Target's tower rental and
ownership business (the "Target Business") to ATLP on the terms and conditions
set forth in this Asset Purchase Agreement (this "Agreement") is consistent with
and in furtherance of the long-term business strategy of Target, and is fair to,
and in the best interests of, Target and its stockholders;
WHEREAS, the Boards of Directors of ATC, ATC GP, Inc., the general partner
of ATLP and Target have approved and adopted this Agreement and, in the case of
Target, have directed that this Agreement be submitted to its sole voting
stockholder for its adoption and approval;
WHEREAS, as a condition of the willingness of ATC and ATLP to enter into
this Agreement, and as an inducement thereto, the Target Stockholder is
delivering its written consent approving and adopting the Purchase and this
Agreement; and
WHEREAS, simultaneously with the execution and delivery of this Agreement,
ATC, Target and Chase Manhattan Trust Company, National Association, as escrow
agent, have entered into an escrow agreement dated as of the date hereof in the
form of Exhibit A attached hereto and made a part hereof (the "Deposit Escrow
Agreement"), and, in accordance with the terms thereof, ATC is making a deposit
(the "Escrow Deposit") in the amount of Three Million Eight Hundred Thousand
Dollars ($3,800,000) pursuant thereto;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained and other valuable
consideration, the receipt and adequacy whereof are hereby acknowledged, the
parties hereto hereby, intending to be legally bound, represent, warrant,
covenant and agree as follows:
ARTICLE 1
DEFINED TERMS
As used herein, unless the context otherwise requires, the terms defined in
Appendix A shall have the respective meanings set forth therein. Terms defined
in the singular shall have a
<PAGE>
comparable meaning when used in the plural, and VICE VERSA, and the reference
to any gender shall be deemed to include all genders. Unless otherwise
defined or the context otherwise clearly requires, terms for which meanings
are provided in this Agreement shall have such meanings when used in the
Target Disclosure Schedule, and each Collateral Document executed or required
to be executed pursuant hereto or thereto or otherwise delivered, from time
to time, pursuant hereto or thereto. References to "hereof," "herein" or
similar terms are intended to refer to the Agreement as a whole and not a
particular section, and references to "this Section" or "this Article" are
intended to refer to the entire section or article and not a particular
subsection thereof. The term "either party" shall, unless the context
otherwise requires, refer to ATC and ATLP, on the one hand, and Target and
the Target Stockholder, on the other hand.
ARTICLE 2
PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES
2.1 ASSETS. Subject to the terms and conditions of this Agreement, Target
shall grant, convey, sell, assign, transfer and deliver to ATLP on the Closing
Date, and ATLP shall purchase on the Closing Date from Target, all right, title
and interest of Target in and to all of the assets, properties and rights of
Target specifically set forth below in this Section 2.1 (collectively the
"Target Assets"), free and clear of any Liens of any nature whatsoever, except
for Permitted Liens; provided that the Target Assets shall not include any
Excluded Assets:
(a) all Tower Structures;
(b) all of Target's rights to all Tower Sites;
(c) all Tower Related Assets; and
(d) all rights under any Governmental Authorizations (excluding FCC
licenses) and any Private Authorizations held with respect to the ownership or
use of the Tower Structures or Tower Sites, except to the extent such
Governmental Authorizations or Private Authorizations are not transferable to
ATLP and except to the extent (and only to the extent) any such Governmental
Authorizations and Private Authorizations are needed by Target in the operation
of its businesses following the Closing.
2.2 EXCLUDED ASSETS. All assets of Target and its Affiliates (including,
without limitation, Sygnet) not set forth in Section 2.1 shall be excluded from
the Target Assets and retained by Target and its respective Affiliates,
including, without limitation, the following (collectively, "Excluded Assets"):
(a) all equipment shelter foundations used or occupied by Target or
Sygnet; existing equipment cabinets, shelters and buildings used or occupied by
Target or Sygnet; mounting platforms used or occupied by Target or Sygnet;
wiring; coaxial cabling; conduits; microwave antennas and other transport
related equipment and housings; cable; equipment generators; fuel
-2-
<PAGE>
tanks; electrical panels; the single power pole at each Tower Site that
serves as the point of demarcation between Target or Sygnet and the utility
service provider; the utility service entrance equipment (including conduits
and wiring) connecting such power pole to any of Target's or Sygnet's
equipment; power protection and connection boxes; antennas and antenna
connection boxes; communications and other radio equipment and amplifiers;
waveguides and ice bridges; provided, that in the event that such Excluded
Assets are used or occupied by any third party tenant as of the Closing Date,
Target will continue to allow, and will use its best efforts to cause Sygnet
to continue to allow, such third party tenant to use or occupy such Excluded
Assets to the extent necessary to convey the Target Assets to ATLP;
(b) the rights that accrue or will accrue to Target under this Agreement
or any of the other Collateral Documents, including the consideration paid or to
be paid to Target hereunder (subject to the provisions of Article 10) and all
accounts receivable, including rents and other amounts under the Tower Leases,
which accrue or are prorated prior to the Closing Date;
(c) all books and records of Target which do not specifically relate to
the Target Assets, subject to the right of ATC to have access and to copy for a
period of three (3) years from the Closing Date; the records described herein
shall further include without limitation all corporate seals, certificates of
incorporation, minute books, stock books, Tax Returns or other records having to
do with the corporate organization of Target;
(d) any claims or rights against third parties arising or relating to
periods prior to the Closing Date except to the extent that such claims or
rights relate to Assumed Liabilities; and
(e) all assets, properties and rights related to Rejected Sites.
2.3 ASSUMPTION OF CERTAIN LIABILITIES, RETAINED LIABILITIES.
(a) ASSUMPTION OF ASSUMED LIABILITIES. Subject to Section 2.3(b), as of
the Closing Date, ATLP shall acquire the Target Assets subject only to, and ATLP
shall undertake, assume, perform and otherwise pay, satisfy and discharge, and
on the terms set forth in Article 10 hold Target harmless from, the following
Liabilities (collectively, the "Assumed Liabilities"):
(i) all Liabilities of Target under all Contracts included within
the Target Assets (including, without limitation, the Site Leases and Tower
Leases), but only to the extent such Liabilities accrue or relate to the
period from and after the Closing;
(ii) the rents, revenues, Taxes, charges and payments that are
apportioned for the account of ATLP pursuant to Section 3.1(b) hereof; and
(iii) all Liabilities, whenever and however incurred or accrued,
which arise in connection with the ownership, lease, use or occupancy of or
under the Target Assets from and after the Closing, except for the Retained
Liabilities and except as may be limited pursuant to the foregoing
provisions of Sections 2.3(a)(i) and (ii).
-3-
<PAGE>
Notwithstanding the assumption of the Assumed Liabilities as set forth above,
nothing herein shall be deemed or construed to relieve Target, or to be an
assumption by ATLP, of any Liability arising from any event, condition,
occurrence or other matter which is the subject of a breach by Target of a
representation, warranty or covenant contained in this Agreement or in any
Contract.
(b) LIMITATIONS ON ASSUMPTION OF LIABILITIES. Notwithstanding Section
2.3(a), ATLP is not assuming under this Agreement or any Collateral Document any
Liabilities that are not specifically described in Section 2.3(a) as an Assumed
Liability (each, a "Retained Liability"). On the terms set forth in Article 10,
Target and the Target Stockholder shall hold ATLP harmless from the Retained
Liabilities. By way of example and not limitation, each of the following
represents a Retained Liability: (i) any Liabilities arising out of any actual
or alleged breach or nonperformance by Target (or their respective Affiliates)
prior to the Closing of any provision of any Contract; (ii) any product
liability or similar claim for injury to any Person or property, regardless of
when made or asserted, that arises out of or is based upon any express or
implied representation, warranty, agreement or guarantee made by Target or
alleged to have been made by Target, or which is imposed or asserted to be
imposed by operation of Law in connection with any service performed or product
sold or leased by or on behalf of Target prior to the Closing; (iii) any
federal, state, local or foreign income or other Tax payable with respect to the
Target Assets or other properties or operations of Target or any member of any
affiliated group of which Target was a member for any period, in each case prior
to the Closing; (iv) any Liabilities arising prior to, after or as a result of
the Closing to or with respect to any employees, agents or independent
contractors of Target; (v) any Liabilities of Target arising from or incurred in
connection with the preparation, negotiation, execution and performance of this
Agreement or any Collateral Documents, except as otherwise provided herein and
therein; (vi) any Liabilities, whether known or unknown, arising from or related
to (A) any violation by Target prior to the Closing of any Environmental Laws
relating to the ownership, use or occupancy of the Target Assets, or (B) any
Environmental Condition existing prior to the Closing which Target caused,
whether by action or inaction; (vii) any Liabilities caused by or attributable
to the ownership, possession, occupancy, use or operation of the Target Assets
by Target prior to the Closing; (viii) the rents, revenues, Taxes, chrges and
payments that are apportioned for the account of Target pursuant to Section
3.1(b) hereof; (ix) any Liability arising out of the matters disclosed on
Schedule 4.6(c) or any Liability of Target arising out of any Legal Action that
is pending or threatened in writing to Target as of the Closing Date or any
actual or alleged violation by Target of any Applicable Law prior to the
Closing; (x) any Liability of Target that relates primarily to, or that arises
primarily out of, any Excluded Asset, or that arises out of the ownership by
Target of the Excluded Assets or realization of the benefits of any Excluded
Asset; (xi) any Liability or obligation from or relating to breach of any
warranty or any misrepresentation by Target under this Agreement or any
Collateral Document; (xii) any Liability or obligation from or relating to
breach or violation of, or failure to perform, any of Target's obligations,
covenants, agreements or undertakings set forth in this Agreement or any
Collateral Document, including without limitation Article 7; (xiii) any
Liability or obligation or liability with respect to capitalized lease
obligations or Indebtedness for Money Borrowed; (xiv) any Contract with any
Affiliate of Target; (xv) any Liability arising from the failure of Target or
Sygnet to obtain any necessary third party consents to the transfer of any of
the Target Assets from Sygnet to Target; and (xvi) all other obligations or
liabilities of Target of any nature whatsoever (whether express or implied,
fixed or contingent, known or unknown) other than
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the Assumed Liabilities. All Retained Liabilities shall remain and be the
obligations and liabilities solely of Target.
2.4 REQUIRED CONSENTS. Attached to this Agreement as Section 2.4 of the
Target Disclosure Schedule and made a part hereof by this reference, is a
listing of all of the third party consents which Target reasonably believes are
necessary and desirable in connection with the transfer and assignment to ATLP
by Target of the Target Assets, including, without limitation, Contracts, Site
Leases and Tower Leases (each a "Required Consent"). Target will use all
commercially reasonable efforts to obtain the Required Consents prior to the
Closing Date. To the extent that any such Required Consent is not obtained,
Target will subcontract to ATLP the performance of all obligations and the right
to receive all benefits thereunder; provided, however, that to the extent the
consent of the counterparty to such subcontracting is required under the terms
of any such Contract, Target will only be required to use all commercially
reasonable efforts to obtain such consent; and Target will only subcontract as
described in the immediately preceding sentence in those cases, if any, in which
subcontracting is permitted by the Contract or applicable Law. If (and only if)
such Contract is a Site Lease or Tower Lease, then Target shall notify ATLP in
writing prior to or on August 1, 1999 that it has been unable to obtain such
consent, and Target and ATLP shall cooperate in good faith to continue to
attempt to obtain such consent; provided that the failure to obtain a Required
Consent with respect to such Contract prior to August 31, 1999 shall be deemed
to be a Defect and the Tower Site in question shall be deemed to be a Defective
Site after such time, and such Defect and Defective Site shall be governed by
the applicable provisions of Sections 2.7 and 2.8.
2.5 CONSENT OF THIRD PARTIES. Nothing in this Agreement shall be
construed as an attempt by Target to assign to ATLP pursuant to this
Agreement any Contract, Governmental Authorization, Private Authorization,
franchise, claim or asset included in the Target Assets that is by its terms
or by Law non-assignable without the consent of any other party or parties,
unless such consent or approval shall have been given, or as to which all the
remedies for the enforcement thereof available to Target would not by Law
pass to ATLP as an incident of the assignments provided for by this Agreement
(a "Non-Assignable Contract"). To the extent that any consent in respect of,
or a novation of, a Non-Assignable Contract has not been obtained, Target
shall continue to use commercially reasonable efforts to obtain any such
consent or novation until such time as it shall have been obtained (but in no
event longer than 180 days following the Closing), and Target shall use
commercially reasonable efforts to cooperate with ATLP to provide that ATLP
shall receive the interest of Target in the benefits under such
Non-Assignable Contract, including performance by Target as agent if
commercially reasonable, provided that ATLP shall undertake to pay or satisfy
the corresponding Liabilities under the terms of such Non-Assignable Contract
to the extent that ATLP would have been responsible therefor if such consent
or approval had been obtained. With respect to any Non-Assignable Contract
for which the applicable consent of any Authority or other Person is not
obtained prior to the Closing Date and for which ATLP does not deliver, on or
prior to the Closing Date, a notification to Target in writing that ATLP
consents to the transfer or assignment of such Non-Assignable Contract (an
"Acceptance Notice") despite the failure or inability of ATLP and Target to
obtain the approval or consent of an Authority or other Person, Target and
ATLP shall enter into the Non-Assignable Contracts Agreement.
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2.6 BULK TRANSFER LAWS. ATLP hereby waives compliance by Target with the
provisions of any and all Laws under the uniform commercial codes as adopted in
the states where the Target Assets are located relating to bulk transfer in
connection with the sale of the Target Assets. Target shall indemnify ATLP from
and against any and all Liabilities (including reasonable attorneys' fees)
arising out of noncompliance with such bulk transfer Laws, except with respect
to items which are Assumed Liabilities.
2.7 DEFECTIVE SITES. Target and the Target Stockholder shall have the
right, at any time prior to fifteen (15) days before the date of Closing, to
cure Defects that exist with respect to the Defective Sites. Target and the
Target Stockholder shall provide ATC and ATLP with notice of any cure effected
with respect to a Defective Site (a "Cure Notice"), and shall request ATC's and
ATLP's consent to remove such Defective Site from the adjustments to the
Purchase Price described in Section 3.1(a). The Cure Notice shall describe in
reasonable detail the cure which Target and the Target Stockholder reasonably
believe in good faith should cause the Defective Site to be removed from the
adjustment to the Purchase Price, and shall include a copy of any instrument,
document or other writing which evidences the curative action taken. Within ten
(10) days of receipt of a Cure Notice with respect to a Defective Site, ATC and
ATLP shall: (i) provide Target with written notice that ATC and ATLP have
satisfactorily completed their due diligence investigation of the curative
action taken with respect to such Defective Site and are prepared, subject to
the terms and conditions of this Agreement, to acquire such Target Assets at
Closing subject to the Permitted Liens, in which case such Defective Site shall
be and become an Accepted Site, and such site shall be deemed to be removed from
the adjustment to the Purchase Price described in Section 3.1(a); or (ii)
provide Target with written notice (A) that states that ATC and ATLP have
determined in good faith that the curative action taken is incomplete in a
material way for the purpose of curing the Defect in question and (B) that
describes in reasonable detail the manner in which the Defect remains uncured
and describes the curative action, if any, that would cure such Defect, in which
event the Defect shall continue as such and the site in question shall remain a
Defective Site. A Defect that exists solely by reason of a Required Consent
that needs to be obtained shall be deemed to have been cured by Target obtaining
such Required Consent prior to Closing or, if permitted, by entering into a
subcontracting or similar arrangement pursuant to Section 2.4 or by entering
into the Non-Assignable Contracts Agreement. ATC and ATLP agree that they shall
not unreasonably withhold their consent to removing a Defective Site from the
adjustments to the Purchase Price upon Target effecting a reasonable cure to or
of such Defect.
2.8 REJECTED SITES.
(a) At least thirty (30) days prior to Closing, ATLP shall provide notice
to Target and Target Stockholder as to whether ATLP desires to purchase any
Target Assets that are Defective Sites; any such sites which ATLP desires to
purchase shall be deemed to be accepted by ATLP ("Accepted Sites") and shall be
deemed to be removed from the adjustments to the Purchase Price in Section
3.1(a), and the certificate to be delivered by Target and the Target Stockholder
pursuant to Section 8.2(c) may be modified by Target and the Target Stockholder
to qualify or omit the representations and warranties of Target and the Target
Stockholder with respect to the applicable Defect, with no adjustment to the
Purchase Price. Such Accepted Sites shall be transferred and conveyed at the
Closing subject to both the applicable Defect and any Permitted Liens.
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(b) Immediately prior to Closing, all Defective Sites that have not been
accepted by ATLP pursuant to Section 2.8(a) or whose Defects have not been cured
in accordance with the provisions of Section 2.7 shall be designated as rejected
sites (the "Rejected Sites") and shall be placed on Section 2.8(b) of the Target
Disclosure Schedule, and the Purchase Price shall be adjusted as provided in
Section 3.1(a).
(c) At least thirty-five (35) days prior to the Closing Date, but in any
event by August 31, 1999, Target and the Target Stockholder shall deliver to ATC
and ATLP, a list of those Target Assets (identified by Tower Site) with respect
to which a Defect exists. Such notice shall identify (i) such Target Assets,
(ii) the relevant Defects, and (iii) the specific circumstance ("Circumstance")
which, in the opinion of Target and the Target Stockholder, prevents them from
curing such Defect. ATLP will continue to cooperate in good faith with Target
to obtain any Required Consent which gives rise to the Defect. With respect to
the Target Assets (identified by Tower Site) identified in such notice, the
Defects in which have not been cured pursuant to Section 2.7, ATC and ATLP shall
have the right in accordance with this Section 2.8 to either (A) designate each
such Target Asset (identified by Tower Site) to be a Rejected Site and adjust
the Purchase Price as provided in Section 3.1(a), or (B) acquire such Target
Assets at the Closing without an adjustment to the Purchase Price, in which
event all such sites shall be deemed to be Accepted Sites, and shall be
supplementally added to the notice provided by ATLP pursuant to Section 2.8(a),
and the certificate delivered by Target and the Target Stockholder pursuant to
Section 8.2(c) may be modified by Target and the Target Stockholder to qualify
or omit the representations and warranties with respect to such Target Assets
based upon the Circumstance applicable to such Target Assets.
ARTICLE 3
PURCHASE PRICE; CLOSING
3.1 PURCHASE PRICE.
(1) The purchase price for the Target Assets and the Target Business (the
"Purchase Price") shall be an amount equal to (subject to Section 3.1(b)) Thirty
Eight Million Seven Hundred Sixteen Thousand Nine Hundred Eighty Dollars
($38,716,980), minus an amount equal to $358,490 for each Rejected Site.
(2) CERTAIN APPORTIONMENTS. Notwithstanding any provision to the contrary
in this Section 3.1(b) or elsewhere in this Agreement, at the Closing the
following items shall be apportioned between Target, on the one hand, and ATLP,
on the other hand, with such adjustments to be made as of the Closing Date by
the party that on a net basis owes money to the other party under this Section
3.1(b) by wire transfer of immediately available funds to such accounts as such
other party shall specify in writing: (a) rents and revenues under all Contracts
included in the Target Assets; (b) prepaid expenses relating to the Target
Assets, (c) Pro Ratable Taxes paid or payable with respect to the Target Assets;
and (d) charges and payments under all Contracts included in the Target Assets.
Such apportionments shall be made pro rata on a per diem basis as of the Closing
Date so that all such rents, revenues, Taxes, charges and payments attributable
to the period prior to and
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including the Closing Date are for the account of Target; and all such rents,
revenues, Taxes, charges and payments attributable to the period after the
Closing Date are for the account of ATLP. If any of the aforesaid
apportionments cannot be calculated accurately on the Closing Date, then the
same shall be calculated and adjusted once by Target and ATLP after the
Closing Date in accordance with the following procedures. Within five (5)
business days after the last day of the third full calendar month following
the Closing Date, Target and ATLP shall exchange their respective
post-Closing calculations of such apportionments. Target and ATLP shall in
good faith attempt to agree upon the post-Closing apportionments on or before
the last day of the fourth full calendar month following the Closing Date. If
at the end of such period, Target and ATLP cannot agree on the post-Closing
apportionments, Target and ATLP shall submit to an independent accounting
firm (the "Accounting Firm") for review and resolution any and all matters
which remain in dispute. The Accounting Firm shall be a nationally recognized
independent public accounting firm as shall be agreed upon by Target and ATLP
in writing. The Accounting Firm shall be instructed to, within thirty (30)
days after the submission of any disputed matters, review and resolve all
such disputed matters and to report its resolution thereof to Target and
ATLP, and such report shall be final, binding and conclusive on Target and
ATLP with respect to all such disputed matters. The fees and expenses of the
Accounting Firm incurred pursuant to this Section 3.1(b) shall be borne fifty
percent (50%) by Target on the one hand, and fifty percent (50%) by ATLP, on
the other hand. No other post-Closing apportionments shall be made by the
parties. Either party owing the other party a sum of money based on the
agreed-upon post-Closing apportionments shall pay said sum to the other party
on or before the last day of the fifth full calendar month following the
Closing Date, or sooner if the parties so agree. If payment of any such
amount is not paid when due, interest shall accrue on the past due amount at
a rate equal to the Prime Rate plus two percent (2%) per annum from the due
date to the date of payment. The aforesaid post-Closing adjustment shall be
the only post-Closing adjustment of the items to be apportioned under this
Section 3.1(b). The provisions of this Section 3.1(b) shall not affect the
obligations of Target and ATLP under this Agreement with respect to the
Retained Liabilities and the Assumed Liabilities, respectively.
Nothing contained in this Section 3.1(b) is intended or shall be deemed to
amend or modify the indemnification provisions of Article 10 nor to reallocate
responsibility for the matters set forth herein.
(3) Pursuant to the Indemnity Escrow Agreement, $8,140,000 (subject to
reduction in an amount equal to $75,000 per Rejected Site) of the Purchase Price
to be otherwise paid to Target on the Closing Date shall be deposited into
escrow pursuant to the terms of the Indemnity Escrow Agreement.
(4) The parties shall negotiate in good faith to determine the value of
the various components of the Target Assets. In the event they are unable to
reach agreement, ATLP shall have the right, at its sole discretion, to engage
BIA Consulting, Inc. to conduct and use its reasonable best efforts to complete,
within forty-five (45) days, an appraisal of the Target Assets which shall be
the basis for an allocation schedule (the "Tax Allocation Schedule") pursuant to
which the Purchase Price shall be allocated among the Target Assets. Such
appraisal shall be conducted in a manner which does not interfere with or
inconvenience in any material matter any of the landlords or tenants
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at any of Target's sites and shall not, in any event, affect the Purchase
Price. The cost of such appraisal, if undertaken, shall be borne by ATLP.
Each of Target and ATLP shall report the purchase and sale of the Target
Assets and the Target Business and the other Transactions in accordance with the
Tax Allocation Schedule for purposes of all federal, state and local Tax Returns
and shall not take, and shall cause their respective Affiliates,
representatives, successors and assigns not to take, any position on any
federal, state or local Tax Return or report, inconsistent with such reporting
position. Each of Target and ATLP shall promptly give the other notice of any
disallowance of or challenge to such reporting by any Taxing Authority.
Notwithstanding the provisions of this Section, the parties to this Agreement
will rely solely on their own advisors in determining the tax consequences of
the transactions contemplated by this Agreement and each party is not relying,
and will not rely, on any representations or assurances of any other party
regarding such consequences other than the representations, warranties,
covenants and agreements set forth in writing in this Agreement or furnished
pursuant to the provisions hereof. For purposes of this Section 3.1(d), each of
ATC, ATLP, Target and the Target Stockholder agree that they shall not allocate
any portion of the Purchase Price to the Build-to-Suit Agreement.
3.2 CLOSING. Unless this Agreement shall have been terminated pursuant to
Section 9.1 and subject to the satisfaction or, to the extent permitted by
Applicable Law, waiver of the conditions set forth in Article 8, the closing of
the Purchase (the "Closing") will take place, at 10:00 a.m., on the Closing
Date, at the offices of Sullivan & Worcester LLP, One Post Office Square,
Boston, Massachusetts 02109, on the business date that is the fifth (5th)
business day after the date on which all of the conditions set forth in Article
8 (other than those which require delivery of opinions or documents at the
Closing) shall have been satisfied or waived, unless another date, time or place
is agreed to in writing by the parties. The date on which the Closing occurs is
herein referred to as the "Closing Date." At the Closing, each of the parties
shall deliver such bills of sale, assignments, assumptions of liabilities,
opinions and other instruments and documents as are described in this Agreement
or as may be otherwise reasonably requested by the parties and their respective
counsel. The Purchase Price shall be payable by (a) ATC or ATLP instructing the
escrow agent with respect to the Escrow Deposit to deliver the Escrow Deposit
(together with interest and other earnings thereon) to Target, and (b) by wire
transfer of immediately available funds to (i) the escrow agent under the
Indemnity Escrow Agreement in the amount of Eight Million One Hundred Forty
Thousand Dollars ($8,140,000) (subject to reduction in an amount equal to
$75,000 per Rejected Site) and (ii) Target for the balance of the Purchase Price
to such account (or accounts) in the United States as Target shall designate in
written instructions to ATLP delivered not later than two (2) business days
prior to the Closing.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF TARGET
Target and the Target Stockholder, jointly and severally, hereby represent
and warrant to ATC and ATLP as follows:
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4.1 ORGANIZATION AND BUSINESS; POWER AND AUTHORITY; EFFECT OF TRANSACTION.
(1) Target is a corporation duly organized, validly existing and in good
standing under the Laws of its jurisdiction of organization, has all requisite
corporate power and authority to own or hold under lease its properties and to
conduct its business as now conducted and is duly qualified and in good standing
as a foreign corporation in each other jurisdiction (as shown on Section 4.1(a)
of the Target Disclosure Schedule) in which the character of the property owned
or leased by it or the nature of its business or operations requires such
qualification, except for such qualifications the failure of which to obtain,
individually or in the aggregate, has not had and will not reasonably be
expected to have a Material Adverse Effect on Target or the Target Assets.
(2) Target has all requisite corporate power and authority necessary to
enable it to execute and deliver, and to perform its obligations under, this
Agreement and each Collateral Document executed or required to be executed by it
pursuant hereto or thereto and to consummate the Transactions; and the
execution, delivery and performance by Target of this Agreement and each
Collateral Document executed or required to be executed by it pursuant hereto or
thereto have been duly authorized by all requisite corporate and stockholder
action on the part of Target. This Agreement has been duly executed and
delivered by Target and constitutes, and each Collateral Document executed or
required to be executed by it pursuant hereto or thereto or to consummate the
Transactions when executed and delivered by Target will constitute, legal, valid
and binding obligations of Target, enforceable in accordance with their
respective terms, except as such enforceability may be subject to bankruptcy,
moratorium, insolvency, reorganization, arrangement, voidable preference,
fraudulent conveyance and other similar Laws relating to or affecting the rights
of creditors and except as the same may be subject to the effect of general
principles of equity.
(3) Except as set forth in Section 4.1(c) of the Target Disclosure
Schedule, neither the execution and delivery by Target of this Agreement or any
Collateral Document executed or required to be executed by it pursuant hereto or
thereto, nor the consummation of the Transactions, nor compliance with the
terms, conditions and provisions hereof or thereof by Target:
(1) will conflict with, or result in a breach or violation of, or
constitute a default under, any Organic Document of Target or any
Applicable Law, or will conflict with, or result in a breach or violation
of, or constitute a default under, or permit the acceleration of any
obligation or liability in, or but for any requirement of giving of notice
or passage of time or both would constitute such a conflict with, breach or
violation of, or default under, or permit any such acceleration in, any
Contractual Obligation of Target; or
(2) will require Target to make or obtain any Governmental
Authorization, Governmental Filing or Private Authorization, except (A) a
filing under the Hart-Scott-Rodino Act and (B) such other Governmental
Authorizations, Governmental Filings, and Private Authorizations the
failure of which to be made or obtained would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
Target or the Target Assets.
(4) Target does not have any Subsidiaries.
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4.2 INTENTIONALLY OMITTED.
4.3 MATERIAL STATEMENTS AND OMISSIONS; ABSENCE OF EVENTS. Neither any
representation or warranty made by Target contained in this Agreement or any
certificate, document or other instrument furnished or to be furnished by
Target pursuant to the provisions hereof nor the Target Disclosure Schedule
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact required to make any statement contained
herein or therein, in light of the circumstances under which they were made,
not misleading. Since December 24, 1998, there has been no change with
respect to, and there is no Event known to, Target that has had or will
reasonably be expected to have a Material Adverse Effect on Target or the
Target Assets, except (a) to the extent specifically described in Section 4.3
of the Target Disclosure Schedule, (b) for matters affecting the tower
rental, ownership and construction industry generally, and (c) for any Event
arising out of the execution or public announcement of this Agreement.
4.4 TITLE TO PROPERTIES; LEASES.
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(1) Section 4.4(a) of the Target Disclosure Schedule contains a true,
accurate and complete description of all real property owned by Target.
Except as set forth on Section 4.4(a) of the Target Disclosure Schedule,
Target has good indefeasible, marketable and insurable title to all of its
real property (other than easement and leasehold real property) and good
indefeasible and marketable title to all of its other property and assets,
tangible and intangible comprising the Target Assets; all of the Target
Assets are so owned, in each case, free and clear of all Liens, except (i)
Permitted Liens, and (ii) Liens set forth on Section 4.4(a) of the Target
Disclosure Schedule. Except for financing statements evidencing Liens
referred to in the immediately preceding sentence (a true, accurate and
complete list and description of which is set forth in Section 4.4(a) of the
Target Disclosure Schedule), no financing statements under the Uniform
Commercial Code and no other filing which names Target as debtor or which
covers or purports to cover any of the Target Assets is on file in any state
or other jurisdiction, and Target has not signed or agreed to sign any such
financing statement or filing or any agreement authorizing any secured party
thereunder to file any such financing statement or filing. Except as
disclosed in Section 4.4(a) of the Target Disclosure Schedule, to Target's
knowledge, all improvements on the real property owned or leased by Target
are in compliance with applicable zoning, wetlands and land use Laws,
ordinances and regulations and applicable title covenants, conditions,
restrictions and reservations in all respects necessary to conduct the
operations as presently conducted, except for any instances of non-compliance
which do not and will not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the use of any Tower Site or on
Target or the Target Assets, as the case may be. Except as disclosed in
Section 4.4(a) of the Target Disclosure Schedule, to Target's knowledge, all
such improvements comply in all aspects with all Applicable Laws,
Governmental Authorizations and Private Authorizations, except where the
failure to so comply would reasonably be expected to have a Material Adverse
Effect on Target or the Target Assets. To Target's knowledge, all of the
transmitting towers, ground radials, guy anchors, transmitting buildings and
related improvements, if any, located on the real property owned or leased by
Target are located entirely on such real property. There is no pending or,
to Target's knowledge, threatened or contemplated action to take by eminent
domain or otherwise to condemn any material part of any real property owned
or leased by Target. To Target's knowledge, such transmitting towers, ground
radials, guy anchors, transmitting buildings and related improvements and
other material items of personal property, including equipment are in a state
of good repair and maintenance and sound operating condition, normal wear and
tear excepted, and have been maintained in a manner consistent with generally
accepted standards of sound engineering practice.
(2) Section 4.4(b) of the Target Disclosure Schedule contains a true,
accurate and complete description of all Leases under which any real property
is leased to Target by any Person or by Target to any Person. Except as
otherwise set forth in Section 4.4(b) of the Target Disclosure Schedule, each
Lease under which Target holds real or personal property constituting a part
of the Target Assets has been duly authorized, executed and delivered by
Target and, to its knowledge, each of the other parties thereto, and is a
legal, valid and binding obligation of Target, and, to its knowledge, each of
the other parties thereto, enforceable in accordance with its terms, except
as such enforceability may be limited by bankruptcy, moratorium, insolvency
and similar Laws affecting the rights and remedies of creditors and
obligations of debtors generally and by general principles of equity. Except
as set forth in Section 4.4(b) of the Target Disclosure Schedule, Target has
a valid leasehold interest in and enjoys peaceful and undisturbed possession
under all Leases pursuant to
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which it holds any such real property or tangible personal property, subject
to the terms of each Lease and Applicable Law. None of the fixed assets or
equipment comprising a part of the Target Assets is subject to contracts of
sale, and none is held by Target as lessee or as conditional sales vendee
under any Lease or conditional sales contract and none is subject to any
title retention agreement. True, accurate and complete copies of each of
such Leases have been made available by Target to ATC and Target has provided
ATC with photocopies of all such Leases requested by ATC (or true, accurate
and complete descriptions thereof have been set forth in Section 4.4(b) of
the Target Disclosure Schedule, with respect to those that are oral). Except
as set forth in Section 4.4(b) of the Target Disclosure Schedule, neither
Target nor, to Target's knowledge, any other party thereto, has failed to
duly comply with all of the terms and conditions of each such Lease or has
done or performed, or failed to do or perform (and no Claim is pending or, to
the knowledge of Target, threatened to the effect that Target has not so
complied, done and performed or failed to do and perform) any act which would
invalidate or provide grounds for the other party thereto to terminate (with
or without notice, passage of time or both) any of such Leases or in any
respect impair the rights or benefits of, or increase the costs to, Target
under any of such Leases in a manner which would reasonably be expected to
have a Material Adverse Effect on Target or the Target Assets.
4.5 COMPLIANCE WITH PRIVATE AUTHORIZATIONS. Target has obtained all
Private Authorizations that are necessary for the ownership or operation of
the Target Assets or the conduct of the Target Business, as currently
conducted or proposed to be conducted on or prior to the Closing Date, which,
if not obtained and maintained, could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Target or the
Target Assets and a true, accurate and complete list and description of each
of such Private Authorizations is set forth in Section 4.5 of the Target
Disclosure Schedule. All of such Private Authorizations are valid and are in
full force and effect. Target is not in material breach or violation of, or
in default in the performance, observance or fulfillment of, any such Private
Authorization, and no Event exists or has occurred which constitutes, or but
for any requirement of giving of notice or passage of time or both would
constitute, such a material breach, violation or default, under any such
Private Authorization. No such Private Authorization is the subject of any
pending or, to Target's knowledge, threatened attack, revocation or
termination.
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4.6 COMPLIANCE WITH GOVERNMENTAL AUTHORIZATIONS AND APPLICABLE LAW.
(1) Section 4.6(a) of the Target Disclosure Schedule contains a true,
complete and accurate description of each Governmental Authorization required
under Applicable Law (i) to own and operate the Target Assets and conduct the
Target Business, as currently conducted or proposed to be conducted on or
prior to the Closing Date, or (ii) that is necessary to permit Target to
execute and deliver this Agreement and to perform its obligations hereunder,
except those Governmental Authorizations the failure of which to obtain would
not reasonably be expected to have a Material Adverse Effect on Target or the
Target Assets. Target has obtained all Governmental Authorizations that are
necessary for the ownership or operation of the Target Assets or the conduct
of the Target Business as now conducted and which, if not obtained and
maintained, could, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on Target or the Target Assets. Except as
described in Section 4.6(a) of the Target Disclosure Schedule, none of the
Governmental Authorizations listed in Section 4.6(a) of the Target Disclosure
Schedule is subject to any restriction or condition that could limit in any
respect the ownership or operations of the Target Assets or the conduct of
the Target Business as currently conducted, except for restrictions and
conditions generally applicable to Governmental Authorizations of such type
and except for such restrictions which do not or will not in the aggregate
reasonably be expected to have a Material Adverse Effect on Target or the
Target Assets. Except as described in Section 4.6(a) of the Target Disclosure
Schedule, the Governmental Authorizations listed in Section 4.6(a) of the
Target Disclosure Schedule are valid and in good standing, are in full force
and effect and are not impaired in any respect by any act or omission of
Target or its officers, directors, employees or agents, and the ownership and
operation of the Target Assets and the conduct of the Target Business are in
accordanc in all respects with the Governmental Authorizations, except where
(i) the failure of any such Governmental Authorization to be valid, in good
standing and in full force and effect or (ii) any such impairment of such
Governmental Authorizations by any act or omission of Target or its officers,
directors, employees or agents, would not reasonably be expected to have a
Material Adverse Effect on Target or the Target Assets. All material
reports, forms and statements required to be filed by Target with all
Authorities with respect to the Target Business have been filed and are true,
complete and accurate in all respects, except where the failure to be true,
complete and accurate would not reasonably be expected to have a Material
Adverse Effect on Target or the Target Assets. No such Governmental
Authorization is the subject of any pending or, to Target's knowledge,
threatened challenge or proceeding to revoke or terminate any such
Governmental Authorization.
(2) Except as otherwise specifically set forth in Section 4.6(b) of the
Target Disclosure Schedule, since December 24, 1998 (and, to Target's
knowledge, from January 1, 1997 through December 23, 1998), Target has
conducted its business and owned and operated its property and assets in
accordance with all Applicable Laws (excluding Environmental Laws) and
Governmental Authorizations, except for such breaches, violations and
defaults as, individually or in the aggregate, have not had and will not
reasonably be expected to have a Material Adverse Effect on Target or the
Target Assets. Except as otherwise specifically described in Section 4.6(b)
of the Target Disclosure Schedule, Target is not in and is not charged by any
Authority with, and, to Target's knowledge, is not threatened or under
investigation by any Authority with respect to, any breach or violation of,
or default in the performance, observance or fulfillment of, any Applicable
Law relating to the
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ownership and operation of the Target Assets or the conduct of the Target
Business which, individually or in the aggregate, has had or will reasonably
be expected to have a Material Adverse Effect on Target or the Target Assets.
Except as otherwise specifically described in Section 4.6(b) of the Target
Disclosure Schedule, to Target's knowledge, no Event exists or has occurred,
which constitutes, or but for any requirement of giving of notice or passage
of time or both would constitute, such a breach, violation or default, under
any Governmental Authorization or any Applicable Law, except for such
breaches, violations or defaults as, individually or in the aggregate, have
not had and will not reasonably be expected to have a Material Adverse Effect
on Target or the Target Assets. With respect to matters, if any, of a nature
referred to in Section 4.6(b) of the Target Disclosure Schedule, except as
otherwise specifically described in Section 4.6(b) of the Target Disclosure
Schedule, all such information and matters set forth in the Target Disclosure
Schedule, if adversely determined against Target, individually or in the
aggregate, will not reasonably be expected to have a Material Adverse Effect
on Target or the Target Assets.
(3) Except as set forth in Section 4.6(c) of the Target Disclosure
Schedule, there are no Legal Actions of any kind pending or, to Target's
knowledge, threatened, and, to Target's knowledge, there have not been any
Legal Actions during the past three years, at Law, in equity or before any
Authority against Target or any of its officers or directors relating to the
ownership or operation of the Target Assets or the conduct of the Target
Business. Except as set forth in Section 4.6(c) of the Target Disclosure
Schedule, such disclosed Legal Actions, if determined adversely to Target,
individually or in the aggregate, will not reasonably be expected to have a
Material Adverse Effect on Target or the Target Assets.
4.7 INTANGIBLE ASSETS. Section 4.7 of the Target Disclosure Schedule
sets forth a true, accurate and complete description of all material
Intangible Assets (other than Governmental Authorizations and Private
Authorizations) relating to the ownership and operation of the Target Assets
or the conduct of the Target Business held or used by Target, including
without limitation the nature of Target's interest in each and the extent to
which the same have been duly registered in the offices as indicated therein.
Except as set forth in Section 4.7 of the Target Disclosure Schedule, no
Intangible Assets (except Governmental Authorizations, Private
Authorizations, and the Intangible Assets so set forth) are required for the
ownership or operation of the Target Assets or the conduct of the Target
Business as currently owned, operated and conducted or proposed to be owned,
operated and conducted on or prior to the Closing Date. Target does not, to
its knowledge, wrongfully infringe upon or unlawfully use any Intangible
Assets owned or claimed by another which could reasonably be expected to have
a Material Adverse Effect on Target or the Target Assets, and Target has not
received any notice of any claim or infringement relating to any such
Intangible Asset.
4.8 RELATED TRANSACTIONS. Target is not a party or subject to any
Contractual Obligation relating to the ownership or operation of the Target
Assets or the conduct of the Target Business between Target and any of its
officers or directors or, to the knowledge of Target, any member of the
Immediate Family of any thereof, or any Affiliate of any of the foregoing,
including without limitation any Contractual Obligation providing for the
furnishing of services to or by, providing for rental of property, real,
personal or mixed, to or from, or providing for the lending or borrowing of
money to or from or otherwise requiring payments to or from, any such Person,
other than (a)
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Contractual Obligations between Target and any of the foregoing, that will be
terminated, at no cost or expense to Target, prior to the Closing, or (b) as
specifically set forth in Section 4.8 of the Target Disclosure Schedule.
4.9 INSURANCE. Target maintains policies of fire and extended coverage
and casualty, liability and other forms of insurance in such amounts and
against such risks and losses as are set forth in Section 4.9 of the Target
Disclosure Schedule.
4.10 TAX MATTERS.
(1) Target is a member of a consolidated group for tax purposes, and is
a party to a Tax sharing agreement by and among the Target Stockholder and
its subsidiaries. Target has in accordance with all Applicable Laws filed
all Tax Returns which are required to be filed, and has paid, or made
adequate provision for the payment of, all Taxes which have or may become due
and payable pursuant to said Tax Returns and all other governmental charges
and assessments received to date. The Tax Returns of Target have been
prepared in all material respects in accordance with all Applicable Laws.
All Taxes which Target is required by Law to withhold and collect have been
duly withheld and collected, and have been paid over, in a timely manner, to
the proper Authorities to the extent due and payable. Target has not
executed any waiver to extend, or otherwise taken or failed to take any
action that would have the effect of extending, the applicable statute of
limitations in respect of any Tax liabilities of Target for the fiscal years
prior to and including the most recent fiscal year. Target is not a
"consenting corporation" within the meaning of Section 341(f) of the Code.
Target has at all times been Taxable as a Subchapter C corporation under the
Code.
(2) All record and beneficial holders of Target Common Stock are
"United States persons" within the meaning of Section 7701(a)(30) of the Code.
4.11 EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974. Except as set
forth in Section 4.11 of the Target Disclosure Schedule, Target (which for
purposes of this Section shall include any Person that is treated as a single
employer with Target under Sections 414(b), (c), (m) or (o) of the Code or
Section 4001(b)(1) of ERISA) does not currently sponsor, maintain or
contribute to any Plans or Benefit Arrangements. Target does not contribute
to or have an obligation to contribute to, and has not at any time
contributed to or had an obligation to contribute to, (i) an employee pension
benefit plan as defined in Section 3(2) of ERISA, (ii) a Multiemployer Plan,
or (iii) a Plan subject to Section 412 of the Code, Section 302 of ERISA or
Title IV of ERISA. Target has no actual or potential liability under Title
IV of ERISA. Target does not maintain and does not have any obligation or
liability with respect to any Plan or other arrangement that provides for
post-retirement medical, dental, health, hospitalization, disability, life
insurance or other benefits.
4.12 FIRPTA. To Target's knowledge, no Person has beneficially owned
more than five percent (5%) of the then outstanding Target Common Stock at
any time during the part five (5) years, other than Persons who are "United
States persons" within the meaning of Section 7701(a)(30) of the Code.
Target is a "United States person" within the meaning of Section 7701(a)(30)
of the Code.
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4.13 EMPLOYMENT AND CONSULTING ARRANGEMENTS. Target does not have any
employees or consultants (other than with respect to Contracts with
consultants that are terminable at will without penalty). Target has no
obligation or liability, contingent or other, under any Employment
Arrangement.
4.14 MATERIAL AGREEMENTS. Listed on Section 4.14 of the Target
Disclosure Schedule are all Material Agreements (other than Leases) relating
to the ownership or operation of the Target Assets or the conduct of the
Target Business or to which Target is a party or to which it is bound or
which any of the Target Assets is subject. True, accurate and complete
copies of each of such Material Agreements have been made available by Target
to ATC, and Target has provided ATC with photocopies of all such Material
Agreements requested by ATC (or true, accurate and complete descriptions
thereof have been set forth in Section 4.14 of the Target Disclosure Schedule
with respect to Material Agreements that are oral). All of such Material
Agreements are valid, binding and legally enforceable obligations of Target
and, to its knowledge, all other parties thereto, except as such
enforceability may be limited by bankruptcy, moratorium, insolvency and
similar Laws affecting the rights and remedies of creditors and obligations
of debtors generally and by general principles of equity. Neither Target
nor, to its knowledge, any other party thereto, has failed to duly comply
with all of the terms and conditions of each such Material Agreement or has
done or performed, or failed to do or perform (and no Claim is pending or, to
the knowledge of Target, threatened in writing to the effect that Target has
not so complied, done and performed or failed to do and perform) any act
which would invalidate or provide grounds for the other party thereto to
terminate (with or without notice, passage of time or both) any such Material
Agreement or impair in any respect the rights or benefits of, or materially
increase the costs to, Target under any of such Material Agreement, except
such failures or performances as would not reasonably be expected to have a
Material Adverse Effect on Target or the Target Assets.
4.15 ORDINARY COURSE OF BUSINESS. Target, after December 23, 1998 to
the date hereof, except (i) as may be described on Section 4.15 of the Target
Disclosure Schedule or (ii) as may be required by the terms of this Agreement:
(1) has operated its business in all material respects in the normal,
usual and customary manner in the ordinary and regular course of business,
consistent with prior practice;
(2) except in each case in the ordinary course of business, consistent
with prior practice:
(1) has not incurred any obligation or liability (fixed, contingent
or other) individually having a value in excess of $25,000;
(2) has not sold or otherwise disposed of or contracted to sell or
otherwise dispose of any of its properties or assets having a value in
excess of $25,000 (other than Distributions or payments of cash or other
intangible assets to Affiliates, stockholders or lenders under its existing
bank credit facility);
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(3) has not entered into any individual commitment having a value
in excess of $25,000 (other than retaining the services of Daniels &
Associates, L.P. in connection with the Purchase); and
(4) has not canceled any debts or claims having a value in excess
of $25,000;
(3) has not created or permitted to be created any Lien on any of the
Target Assets, except for Permitted Liens;
(4) has not made or committed to make any additions to its property or any
purchases of equipment, except in the ordinary course of business consistent
with past practice or for normal maintenance and replacements;
(5) has not suffered any material damage, destruction or loss (whether or
not covered by insurance) or any acquisition or taking of property by any
Authority;
(6) has not waived any rights of material value without fair and adequate
consideration;
(7) has not experienced any work stoppage;
(8) except in the ordinary course of business, has not entered into,
amended or terminated any Lease, Governmental Authorization, Private
Authorization, Material Agreement, Plan, Benefit Arrangement or Employment
Arrangement, or any transaction, agreement or arrangement with any officer,
director or Affiliate of Target;
(9) has not issued or sold, or agreed to issue or sell, any shares of
Target Common Stock, other shares of capital stock, Convertible Securities or
Option Securities;
(a) has not made, paid, set aside or declared any Distribution other than
Distributions to Affiliates and preferred stockholders of Target; and
(10) has not entered into any transactions or series of related
transactions which individually or in the aggregate is material to the Target
Assets or the Target Business.
4.16 BROKER OR FINDER. No Person assisted in or brought about the
negotiation of this Agreement or the Purchase in the capacity of broker, agent
or finder or in any similar capacity on behalf of Target or the Target
Stockholder, other than Daniels & Associates, L.P., whose fees and expenses will
be paid by Target.
4.17 ENVIRONMENTAL MATTERS. Except as set forth in Section 4.17 of the
Target Disclosure Schedule, Target:
(1) has not been notified that it is potentially liable under, has not
received any request for information or other correspondence concerning its
potential liability with respect to any site or facility under, and, to Target's
knowledge, is not a "potentially responsible party" under, the
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Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, the Resource Conservation Recovery Act, as amended, or any
similar state Law;
(2) has not entered into or received any consent decree, compliance
order or administrative order issued pursuant to any Environmental Law;
(3) is not a party in interest or in default under any judgment, order,
writ, injunction or decree issued pursuant to any Environmental Law;
(4) has, to its knowledge, obtained all Environmental Permits required
under Environmental Laws, and has, to its knowledge, filed all applications,
notices and other documents required to be filed to effect the timely renewal
or issuance of all Environmental Permits for the continued ownership or
operation of the Target Assets or conduct of the Target Business in the
manner currently owned, operated and conducted or proposed to be owned,
operated and conducted prior to the Closing Date;
(5) is in compliance in all material respects with all Environmental
Laws, and is not the subject of or, to Target's knowledge, threatened with
any Legal Action involving a demand for damages or other potential liability,
including any Lien, with respect to violations or breaches of any
Environmental Law;
(6) has not conducted or received any site assessment, audit or other
investigation as to material environmental matters at any property currently
owned, leased, operated or occupied by Target;
(7) has not installed or used any above ground or underground storage
tanks, friable asbestos, polychlorinated biphenyls or urea formaldehyde foam
insulation on any property currently owned, leased or operated by Target and,
to its knowledge, there are no above ground or underground storage tanks,
friable asbestos, polychlorinated biphenyls or urea formaldehyde foam
insulation on any property currently owned, leased or operated by Target; and
(8) has no knowledge of any past or present Event related to Target's
properties, operations or business, which Event, individually or in the
aggregate, could reasonably be expected to interfere with or prevent
continued compliance in all material respects with all Environmental Laws
applicable to the ownership or operation of the Target Assets or to the
conduct of the Target Business substantially in the manner now conducted or
proposed to be conducted on or prior to the Closing Date, or which,
individually or in the aggregate, may form the basis of any material Claim
for or arising out of the release or threatened release into the environment
of any Hazardous Material.
Section 4.17 of the Target Disclosure Schedule sets forth a true,
correct and complete list of all existing Phase I environmental site
assessment reports (an "Environmental Report") on each parcel of real
property owned or leased by Target for which an Environmental Report has
previously been prepared for Target (true, correct and complete copies of
which have heretofore been delivered by Target to ATC).
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4.18 CAPITAL STOCK. The authorized and outstanding capital stock of
Target is as set forth in Section 4.18 of the Target Disclosure Schedule.
All of such outstanding capital stock has been duly authorized and validly
issued, is fully paid and nonassessable and is not subject to any preemptive
or similar rights and is owned of record and, to Target's knowledge,
beneficially as shown in Section 4.18 of the Target Disclosure Schedule.
Target has not granted or issued, nor has Target agreed to grant or issue,
any shares of its capital stock or any Option Security or Convertible
Security, and Target is not a party to or bound by any agreement, put or
commitment pursuant to which it is obligated to purchase, redeem or otherwise
acquire any shares of capital stock or any Option Security or Convertible
Security.
4.19 YEAR 2000 COMPLIANT. Target has reviewed the areas within its
business and operations which Target believes could be adversely affected by
the "Year 2000 Problem" (that is, the risk that computer applications used by
Target may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date on or after December
31, 1999), and has made related inquiry of material suppliers, vendors and
customers. Based on such review, Target believes that the "Year 2000 Problem"
will not reasonably be expected to have a Material Adverse Effect on Target
or the Target Assets. Except as set forth in Section 4.19 of the Target
Disclosure Schedule, each hardware, software and firmware product
(collectively "Software") used by Target in its business is Year 2000
compliant, except for such noncompliances that, individually or in the
aggregate, have not had and will not reasonably be expected to have a
Material Adverse Effect on Target or the Target Assets. The current status,
projected cost and prognosis of any Year 2000 remedial efforts with respect
to non-compliant Software and with respect to any identified Year 2000 issues
with any material supplier, vendor or customer are listed in Section 4.19 of
the Target Disclosure Schedule.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF ATLP
Each of ATC and ATLP hereby represents and warrants to Target and the
Target Stockholder as follows:
5.1 ORGANIZATION AND BUSINESS; POWER AND AUTHORITY; EFFECT OF TRANSACTION.
(1) ATC is a corporation and ATLP is a limited partnership, and each is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, has all requisite power and authority (corporate
and other) to own or hold under lease its properties and to conduct its business
as now conducted and is duly qualified and in good standing as a foreign
corporation or foreign limited partnership, as the case may be, in each other
jurisdiction in which the character of the property owned or leased by it or the
nature of its business or operations requires such qualification, except for
such qualifications the failure of which to obtain, individually or in the
aggregate, have not had and will not reasonably be expected to have a material
adverse effect on ATC.
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(2) Each of ATC and ATLP has all requisite power and authority
(corporate and other) and has in full force and effect all Governmental
Authorizations and Private Authorizations necessary to enable it to execute
and deliver, and to perform its obligations under, this Agreement and each
Collateral Document executed or required to be executed by it pursuant hereto
or thereto and to consummate the Transactions; and the execution, delivery
and performance by ATC and ATLP of this Agreement and each Collateral
Document executed or required to be executed by it pursuant hereto or thereto
have been duly authorized by all requisite corporate or other action on the
part of ATC or ATLP, as the case may be. This Agreement has been duly
executed and delivered by ATC and ATLP and constitutes, and each Collateral
Document executed or required to be executed by each of them pursuant hereto
or thereto or to consummate the Transactions when executed and delivered by
ATC or ATLP, as the case may be, will constitute, legal, valid and binding
obligations of each of ATC and ATLP, enforceable in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
moratorium, insolvency and similar Laws affecting the rights and remedies of
creditors and obligations of debtors generally and by general principles of
equity.
(3) Neither the execution and delivery by ATC or ATLP of this Agreement
or any Collateral Document executed or required to be executed by them
pursuant hereto or thereto, nor the consummation of the Transactions, nor
compliance with the terms, conditions and provisions hereof or thereof by ATC
or ATLP:
(1) will conflict with, or result in a breach or violation of, or
constitute a default under, any Organic Document of ATC or ATLP or any
Applicable Law, or will conflict with, or result in a breach or violation
of, or constitute a default under, or permit the acceleration of any
obligation or liability in, or but for any requirement of giving of notice
or passage of time or both would constitute such a conflict with, breach or
violation of, or default under, or permit any such acceleration in, any
Contractual Obligation of ATC or ATLP; or
(2) will require ATC or ATLP to make or obtain any Governmental
Authorization, Governmental Filing or Private Authorization, except (A)
filings under the Hart-Scott-Rodino Act, (B) for FCC or FAA approvals, (C)
the filing with the SEC of such reports under Section 13(a) or 15(d) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby, and (D) such other Governmental
Authorizations, Governmental Filings, and Private Authorizations the
failure of which to be made or obtained would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on ATC.
5.2 ATC SEC REPORTS. ATC has heretofore made available to Target (i)
ATC's Annual Report on Form 10-K for its most recent fiscal year for which
such a report has been filed, (b) its Quarterly Report on Form 10-Q for its
most recent fiscal quarter for which such a report has been filed the
quarter, (c) its most recent Proxy Statement, if any, on Schedule 14A, and
(d) all Current Reports on Form 8-K filed since the end of the most recent
fiscal year for which it has filed its Annual Report on Form 10-K
(collectively, the "ATC SEC Documents"). As of the respective dates thereof,
the ATC SEC Documents were prepared in all material respects in accordance
with the Exchange Act and did not contain any untrue statement of a material
fact or omit to state any
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material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. ATC has timely filed all forms, reports and documents with
the SEC required to be filed by it pursuant to the Securities Act and the
Exchange Act which complied as to form, at the time such form, document or
report was filed, in all material respects with the applicable requirements
of the Securities Act and the Exchange Act. The consolidated financial
statements of ATC included in the ATC SEC Documents (the "ATC Financial
Statements"), including in each case the notes thereto, have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, except as otherwise noted therein, are true, accurate and
complete in all material respects, and fairly present the consolidated
financial condition and the consolidated results of operations and cash flow
of ATC, on the bases therein stated, as of the respective dates thereof, and
for the respective periods covered thereby subject, in the case of unaudited
financial statements, to normal nonmaterial year-end audit adjustments and
accruals.
5.3 MATERIAL STATEMENTS AND OMISSIONS; ABSENCE OF EVENTS. Neither any
representation or warranty made by ATC or ATLP contained in this Agreement or
any certificate, document or other instrument furnished or to be furnished by
ATC or ATLP pursuant to the provisions hereof nor the ATC SEC Documents
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact required to make any statement contained
herein or therein, in light of the circumstances under which they were made,
not misleading. Since the date of the most recent financial statements
constituting a part of the ATC Financial Statements there has been no change
with respect to, and there is no Event known to, ATC that has had or will
reasonably be expected to have a material adverse effect on ATC, except (a)
to the extent set forth in any of the ATC SEC Documents, (b) for matters
affecting the tower rental, ownership and construction industry generally,
and (c) for any Event arising out of the execution or public announcement of
this Agreement. Neither ATC nor ATLP is aware of any impending or
contemplated Event that would cause any of the representations and warranties
made by it in this Article not to be true, correct and complete on the date
of such Event as if made on that date.
5.4 BROKER OR FINDER. No agent, broker, investment banker, financial
advisor other firm or Person engaged by or on behalf of ATC or any of its
Affiliates is or will be entitled to an fee or commission in connection with
the transactions contemplated by this Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE TARGET STOCKHOLDER
The Target Stockholder represents and warrants to ATC and ATLP as follows:
6.1 ORGANIZATION AND BUSINESS; POWER AND AUTHORITY; EFFECT OF TRANSACTION.
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(1) This Agreement has been duly executed and delivered by the Target
Stockholder and constitutes, and each Collateral Document executed or
required to be executed by the Target Stockholder pursuant hereto or thereto
when executed and delivered by the Target Stockholder will constitute, legal,
valid and binding obligations of the Target Stockholder, enforceable in
accordance with their respective terms, except as such enforceability may be
subject to bankruptcy, moratorium, insolvency, reorganization, arrangement,
voidable preference, fraudulent conveyance and other similar Laws relating to
or affecting the rights of creditors and except as the same may be subject to
the effect of general principles of equity.
(2) Except for consents as set forth in Section 2.4 of the Target
Disclosure Schedule, neither the execution and delivery by the Target
Stockholder of this Agreement or any Collateral Document executed or required
to be executed by the Target Stockholder pursuant hereto or thereto, nor the
consummation of the Transactions, nor compliance with the terms, conditions
and provisions hereof or thereof by the Target Stockholder:
(1) will conflict with, or result in a breach or violation of, or
constitute a default under, any Applicable Law, or will conflict with, or
result in a breach or violation of, or constitute a default under, or
permit the acceleration of any obligation or liability in, or but for any
requirement of the giving of notice or passage of time or both would
constitute such a conflict with, breach or violation of, or default under,
or permit any acceleration in, any of its Contractual Obligations;
(2) will result in or permit the creation or imposition of any Lien
upon any property or asset of the Target Stockholder, except for such Liens
as do not and will not reasonably be expected to have, in the aggregate, a
material adverse effect on the Target Stockholder; or
(3) will require any Governmental Authorization or Governmental
Filing or Private Authorization of the Target Stockholder, except as
required by the Hart-Scott-Rodino Act.
ARTICLE 7
COVENANTS
7.1 ACCESS TO INFORMATION; CONFIDENTIALITY.
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(1) Target and ATLP shall afford the other and its accountants,
counsel, financial advisors and other representatives (the "Representatives")
full access during normal business hours throughout the period prior to the
Closing Date to all of its (and its Subsidiaries', if any) properties, books,
contracts, insurance policies, studies and reports, environmental studies and
reports, commitments and records (including without limitation Tax Returns)
and, during such period, shall furnish promptly upon written request (i) a
copy of each report, schedule and other document filed or received by any
party pursuant to the requirements of any Applicable Law or filed by it with
any Authority in connection with the Purchase or any other report, schedule
or documents which may have a material effect on the businesses, operations,
properties, prospects, personnel, condition (financial or other), or results
of operations of their respective businesses, (ii) to the extent not provided
for pursuant to the immediately preceding clause, in the case of Target, all
financial records, ledgers, work papers and other sources of financial
information possessed or controlled by it or its accountants deemed by ATLP
or its Representatives necessary or useful for the purpose of performing an
audit of the business and assets of Target, and (iii) such other information
concerning any of the foregoing as ATLP or Target shall reasonably request.
All Confidential Information furnished pursuant to the provisions of this
Agreement, including without limitation this Section, will be kept
confidential and shall not, without the prior written consent of the party
disclosing such Confidential Information, be disclosed by the other party in
any manner whatsoever, in whole or in part, and, except as required by
Applicable Law (including without limitation in connection with any
registration, proxy or information statement or similar document filed
pursuant to any federal or state securities Law) shall not be used for any
purposes, other than in connection with the Purchase. Except as otherwise
herein provided, each party agrees to reveal such Confidential Information
only to those of its Representatives or other Persons whom it believes need
to know such Confidential Information for the purpose of evaluating and
onsummating the Purchase. For purposes of this Agreement, "Confidential
Information" shall mean any and all information related to the business or
businesses of ATLP and its Affiliates or Target and its Affiliates, including
any of their respective successors and assigns, other than information that
(i) has been or is obtained from a source independent of the disclosing party
that, to the receiving party's knowledge, is not subject to any
confidentiality restriction, (ii) is or becomes generally available to the
public other than as a result of unauthorized disclosure by the receiving
party, or (iii) is independently developed by the receiving party without
reliance in any way on information provided by the disclosing party or a
third party independent of the disclosing party that, to the receiving
party's knowledge, is not subject to any confidentiality restrictions.
(2) Notwithstanding the provisions of Section 7.1(a), (i) each party
may disclose such information as it may reasonably determine to be necessary
in connection with seeking all Governmental and Private Authorizations or
that is required by Applicable Law to be disclosed, including without
limitation in any registration, proxy or information statement or other
document required to be filed under any federal or state securities Law, (ii)
ATLP may, with the prior written consent of Target, which consent shall not
be unreasonably withheld, delayed or conditioned, disclose the subject matter
of this Agreement to Persons with whom Target has a business or contractual
relationship in connection with ATLP's due diligence investigation of Target,
and (iii) Target may file this Agreement and the Collateral Documents with
court(s) in connection with the Centerpointe Litigation. In the event that
this Agreement is terminated in accordance with its terms, each party shall
promptly redeliver all written Confidential Information provided pursuant to
this
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Section or any other provision of this Agreement or otherwise in connection
with the Purchase and shall not retain any copies, extracts or other
reproductions in whole or in part of such written material, other than one
copy thereof which shall be delivered to independent counsel for such party
which shall be bound by the provisions of Section 7.1(a).
(3) Anything in this Section or elsewhere in this Agreement to the
contrary notwithstanding, either party may disclose information received or
retained by it in accordance with the provisions of this Agreement if it can
demonstrate (i) such information is generally available to or known by the
public from a source other than the party seeking to disclose such
information or (ii) was obtained by the party seeking to disclose such
information from a source other than the other party, provided that such
source was not, to the knowledge of the disclosing party, bound by a duty of
confidentiality to the other party or another party with respect to such
information.
(4) No investigation pursuant to this Section or otherwise shall affect
any representation or warranty in this Agreement of any party or any
condition to the obligations of the parties hereto.
7.2 AGREEMENT TO COOPERATE; CERTAIN OTHER COVENANTS.
(1) Each of the parties hereto shall use reasonable business efforts
(x) to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under Applicable Law to
consummate the Purchase and the other Transactions, and (y) to refrain from
taking, or cause to be refrained from taking, any action and to refrain from
doing or causing to be done, anything which could impede or impair the
consummation of the Purchase or the consummation of the other Transactions,
including, in all cases, without limitation using its reasonable business
efforts (i) to prepare and file with the applicable Authorities as promptly
as practicable after the execution of this Agreement all requisite
applications and amendments thereto, together with related information, data
and exhibits, necessary to request issuance of orders approving the Purchase
by all such applicable Authorities, (ii) to obtain all necessary or
appropriate waivers, consents and approvals, (iii) to effect all necessary
registrations, filings and submissions (including without limitation filings
within ten (10) business days of the date of this Agreement under the
Hart-Scott-Rodino Act and all filings necessary for ATLP to own and operate
the Target Assets and the Target Business), (iv) to lift any injunction or
other legal bar to the Purchase (and, in such case, to proceed with the
Purchase as expeditiously as possible), (v) to obtain the satisfaction of the
conditions specified in Article 8, and (vi) to advise the other of, in the
case of Target, any changes that would be required in the Target Disclosure
Schedule if the applicable representations and warranties set forth in
Article 4 did not refer to the date of this Agreement. The provisions of
this Section shall apply to all Subsidiaries, if any, of ATC and Target.
(2) The parties shall cooperate with one another in the preparation of
all Tax Returns, questionnaires, applications or other documents regarding
any Taxes or transfer, recording, registration or other fees which become
payable in connection with the Purchase that are required to be filed on or
before the Closing Date.
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(3) ATC and ATLP shall promptly provide to Target all information
(including, without limitation, non-confidential financial information)
reasonably required of parties to Contracts as a condition to their consent
to the Transactions.
(4) Promptly after Closing, but in no event later than 30 days after
the Closing Date, ATLP or ATC shall make all required filings with the FAA
and the FCC to reflect the changed ownership of the Tower Structures.
7.3 PUBLIC ANNOUNCEMENTS. Until the Closing or the termination of this
Agreement, each party shall consult with the other before issuing any press
release or otherwise making any public statements with respect to this
Agreement or the Purchase and shall not issue any such press release or make
any such public statement without the prior written approval of the other.
Notwithstanding the foregoing, the parties acknowledge and agree that they
may, without each other's prior consent, issue such press releases or make
such public statements as may be required by Applicable Law, in which case
the issuing party shall use all reasonable efforts to consult with the other
party and agree upon the nature, content and form of such press release or
public statement; provided, however, that without the prior written approval
of the other parties hereto, no public statement shall be made by either
party until the earlier of (i) five (5) business days after the date of this
Agreement or (ii) the filing of this Agreement and the Collateral Documents
with court(s) in connection with the Centerpointe Litigation.
7.4 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt
notice to the other of the occurrence or non-occurrence of any Event the
occurrence or non-occurrence of which would be reasonably likely to cause (a)
any representation or warranty made by it contained in this Agreement to be
untrue or inaccurate in any material respect or (b) any failure by it to
comply with or satisfy, or be able to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement in any material respect, such that, in
any such case, one or more of the conditions of Closing would not be
satisfied; provided, however, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect the rights and remedies
available hereunder to the party receiving such notice or the obligations of
the party delivering such notice and shall not, in any event, affect the
representations, warranties, covenants and agreements of the parties or the
conditions to their respective obligations under this Agreement.
7.5 NO SOLICITATION. Target agrees that it and its officers,
employees, agents and representatives (including without limitation any
investment bankers, brokers, financial advisors, finders, attorneys or
accountants) (a) shall not, directly or indirectly, (i) initiate, solicit,
encourage or otherwise facilitate any inquiries, or the making of any
proposal or offer with respect thereto, that constitutes, or may reasonably
be expected to lead to, an Alternative Transaction, or (ii) engage or
participate in any discussions or negotiations or otherwise cooperate or
provide assistance (including by way of furnishing non-public information)
relating to or in contemplation of an Alternative Transaction, (b) have
terminated any discussions or negotiations with, and the provisions of
information or data (whether or not of a non-public nature) to any Person
relating to or in contemplation of an Alternative Transaction, and (c) have,
or within five (5) business days after the Closing Date will have, requested
in writing, with a copy to ATLP, to each Person that has
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heretofore executed a confidentiality agreement in connection with its
consideration of an Alternative Transaction to return or destroy all
confidential information heretofore furnished to such Person by or on behalf
of Target and will not waive any "standstill" provision of any such, or any
other, agreement. If Target, the Target Stockholder or its or any of their
Representatives receives any inquiry with respect to an Alternative
Transaction while this Agreement is in effect, Target or the Target
Stockholder shall inform the inquiring party that it is not entitled to enter
into discussions or negotiations relating to an Alternative Transaction.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any director or officer
of Target or any investment banker, broker, financial advisor, finder,
attorney, accountant or other agent or representative of Target, whether or
not acting on behalf of Target, shall be deemed to be a breach of this
Section by Target.
7.6 CONDUCT OF BUSINESS BY TARGET PENDING THE CLOSING. Except as set
forth in Section 7.6 of the Target Disclosure Schedule or as otherwise
contemplated by this Agreement, after the date hereof and prior to the
Closing Date or earlier termination of this Agreement, unless Target complies
with the last paragraph of this Section 7.6, Target shall:
(1) conduct its business in the ordinary and usual course of business
and consistent with past practice;
(2) not (i) amend or propose to amend its Organic Documents, (ii)
split, combine or reclassify (whether by stock dividend or otherwise) its
outstanding capital stock or issue or authorize the issue of any other
securities in respect of, in lieu of, or in substitution for, shares of its
capital stock, or (iii) declare, set aside, pay or make, or agree to declare,
set aside, pay or make, any Distribution (other than Distributions to
Affiliates and preferred stockholders of Target, consistent with past
practice);
(3) not issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any shares of Target Common Stock, other shares of
capital stock, Convertible Securities or Option Securities;
(4) not (i) incur or become contingently liable with respect to any
Indebtedness for Money Borrowed, other than borrowings (A) to finance
permitted Restricted Transactions, (B) existing Indebtedness outstanding on
the date of this Agreement under Target's existing bank credit facility and
(C) other borrowings not to exceed $2,000,000 in the aggregate outstanding at
any one time, (ii) redeem, purchase, acquire or offer or agree to redeem,
purchase or acquire any shares of its capital stock, Convertible Securities
or Option Securities, or (iii) sell, lease, license, pledge, dispose of or
encumber any properties or assets or sell any businesses other than (x)
non-material assets in the ordinary course of business, (y) Liens arising in
accordance with the provisions of Indebtedness in effect on the date hereof
and in accordance with their present terms, and (z) leases of towers and
shelter space to third-party customers;
(5) not enter or agree to enter into any Restricted Transaction (or
group of related Restricted Transactions), whether for its own account or for
any other Person, if (i) the aggregate amount reasonably expended by Target
in connection with such individual Restricted Transaction
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(together with any group of related Restricted Transactions) exceeds
$500,000, or (ii) the aggregate amount to be expended in connection with all
Restricted Transactions (together with any group of related Transactions)
exceeds $2,000,000; provided, however, that the foregoing restriction shall
not apply to any Restricted Transaction pursuant to agreements which are
described in Section 7.6(e) of the Target Disclosure Schedule;
(6) use reasonable business efforts to preserve intact its business
organization and goodwill, keep available the services of its present
officers and key employees, and preserve the goodwill and business
relationships with customers and others having business relationships with
them and not engage in any action, directly or indirectly, with the intent to
adversely impact the transactions contemplated by this Agreement;
(7) confer on a regular and frequent basis with one or more
representatives of ATLP to report material operational matters and the
general status of ongoing operations;
(8) not adopt, enter into, amend or terminate any employment,
severance, special pay arrangement with respect to termination of employment
or other similar arrangements or agreements with any directors, officers or
key employees;
(9) maintain with financially responsible insurance companies insurance
on the Target Assets and the Target Business in such amounts and against such
risks and losses as are consistent with past practice;
(10) not make any Tax election that could reasonably be expected to have
a Material Adverse Effect on Target or the Target Assets or settle or
compromise any income Tax liability;
(11) except in the ordinary course of business or except as would not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on Target or the Target Assets, not modify, amend or terminate
any Material Agreement to which Target is a party or by which any of the
Target Assets may be bound or to which any of them may be subject or waive,
release or assign any material rights or claims thereunder;
(12) except in the ordinary course of business and in accordance with
past practices and policies, not enter into any Lease or other agreement with
respect to any antenna site on any of its towers, whether presently owned or
hereafter acquired by Target;
(13) except as set forth in Section 4.15 of the Target Disclosure
Schedules, except in the ordinary course, not enter into, amend in any
material respect or terminate any Governmental Authorization, material
Private Authorization or Material Agreement;
(14) not voluntarily take or permit to be taken any action which if
taken between the end of its most recent fiscal quarter and prior to the date
of this Agreement would have been required to be noted as an exception on
Section 4.15 of the Target Disclosure Schedule, other than pursuant to the
conduct of its business in the ordinary and usual course of business and
consistent with past practice; and
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(15) not authorize or enter into any agreement that would violate any of
the foregoing.
In the event that Target desires to take any of the actions prohibited
by the provisions of this Section, it shall give prompt written notice to
ATLP, referring to the provisions of this Section. In the event that ATLP
does not object to the taking of such action (which objection, if any, shall
be reasonable) within ten (10) business days of receipt of such notice and
all material information requested by ATLP with respect thereto, Target shall
have the right to take such action. ATLP's failure to object to the taking
of any such action shall not, in any event, relieve Target from the
obligation to comply with the provisions of this Agreement and shall not be
deemed to be a waiver of any condition of ATLP's obligations to consummate
the Purchase set forth in Section 8.2.
7.7 PRELIMINARY TITLE REPORTS. As promptly as practicable after the
execution of this Agreement, Target shall, at its cost and expense, deliver
or cause to be delivered to ATLP either (i) a standard preliminary title
report (the "Title Report") dated on or after the date of this Agreement
(which may include a Title Report dated prior to the date of this Agreement
if such Title Report is accompanied by an updated report dated on or after
the date of this Agreement) issued by such title company or companies as
Target and ATLP shall mutually reasonably agree with respect to each parcel
of real property owned or leased by Target or, if applicable, any of its
Affiliates; or (ii) copies of title policies or marked up commitments to
issue title policies, with policies to be provided when issued.
7.8 ENVIRONMENTAL SITE ASSESSMENTS. As promptly as practicable after
the execution of this Agreement, ATLP may at its own cost and expense obtain,
and deliver to Target full and complete copies of, an Environmental Report on
each parcel of real property owned or leased by Target or, if applicable, any
of its Affiliates for which an Environmental Report has not heretofore been
delivered by Target to ATLP (or as to which ATLP has heretofore indicated
that the existing Environmental Report raises questions of potential
liability that has had or could reasonably be expected to have a Material
Adverse Effect on Target or the Target Assets). Site assessments shall be
conducted by such consultants and professionals as ATLP shall select and as
shall be reasonably acceptable to Target and shall be arranged at times
mutually convenient to the parties. Each of Target and ATLP shall be
entitled to have representatives present at the time such site assessments
are conducted and shall receive copies of all correspondence with the company
preparing such Environmental Reports, as well as a copy of each such
Environmental Report within five (5) business days of its receipt thereof.
7.9 LEASE OF OFFICE SPACE. Target and the Target Stockholder agree to
use their best efforts to cause Sygnet to lease to ATLP mutually agreed upon
adequate office space without charge to ATLP for a minimum term of one (1)
year from the Closing Date.
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ARTICLE 8
CLOSING CONDITIONS
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each party to consummate the Purchase shall, except as
hereinafter provided in this Section, be subject to the satisfaction at or
prior to the Closing Date of the following conditions, any or all of which
may be waived, in whole or in part, to the extent permitted by Applicable Law:
(1) As of the Closing Date, no Legal Action shall be pending before any
Authority seeking to enjoin, restrain, prohibit or make illegal or to impose
any materially adverse condition in connection with, the consummation of the
Purchase, it being understood and agreed that a written request by any
Authority for information with respect to the Purchase, which information
could be used in connection with such Legal Action, shall not in itself be
deemed to be a Legal Action pending before any such Authority, and it being
further understood that the foregoing shall not include the Centerpointe
Litigation if such Centerpointe Litigation is still pending as of the Closing
Date;
(2) Any waiting period (and any extension thereof) applicable to the
consummation of the Purchase under the Hart-Scott-Rodino Act shall have
expired or been terminated; and
(3) Except with respect to the Hart-Scott-Rodino Act (which is
addressed in Section 8.1(b)), all authorizations, consents, waivers, orders
or approvals required to be obtained from all Authorities, and all filings,
submissions, registrations, notices or declarations required to be made by
any of the parties with any Authority, prior to the consummation of the
Purchase, shall have been obtained from, and made with, all such Authorities,
except for such authorizations, consents, waivers, orders, approvals,
filings, registrations, notices or declarations the failure to obtain or make
would not, in the reasonable business judgment of ATLP, reasonably be
expected to have a Material Adverse Effect on Target or the Target Assets.
8.2 CONDITIONS TO OBLIGATIONS OF ATLP. The obligation of ATLP to
consummate the Purchase shall be subject to the satisfaction of the following
conditions, any or all of which may be waived, in whole or in part, by ATC
and ATLP to the extent permitted by Applicable Law:
(1) All agreements, certificates, opinions and other documents required
to be delivered pursuant to the provisions of this Agreement shall be
reasonably satisfactory in form, scope and substance to ATLP and its counsel,
and ATLP and its counsel shall have received all information and copies of
all documents, including records of corporate proceedings, which they may
reasonably request in connection therewith, such documents where appropriate
to be certified by proper Authorities or corporate officers;
(2) Target shall have furnished ATLP and, at ATLP's request, any bank
or other financial institution providing credit to ATLP, with a favorable
opinion, dated the Closing Date, of Edwards & Angell, LLP, counsel for Target
and the Target Stockholder, substantially in the form attached
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hereto as Exhibit B and made a part hereof, and with respect to such other
matters xarising after the date of this Agreement as ATLP or its counsel may
reasonably request;
(3) (i) The representations and warranties of Target and the Target
Stockholder contained in this Agreement or otherwise made in writing by or on
behalf of it or any of them pursuant hereto or otherwise made in connection
with the Purchase shall be true and correct at and as of the Closing Date
with the same force and effect as though made on and as of such date, except
(x) to the extent such representations and warranties expressly speak as of
an earlier date (in which case such representations and warranties shall be
true and correct as of such earlier date) and (y) to the extent that the
failure of such representations and warranties to be true and correct,
individually or in the aggregate, have not had and will not reasonably be
expected to have a Material Adverse Effect on Target or the Target Assets;
provided, however, that for the purpose of this clause (y) representations
and warranties that are qualified as to materiality (including by reference
to "material adverse effect") shall not be deemed to be so qualified; (ii)
each and all of the agreements and covenants to be performed or satisfied by
Target or the Target Stockholder hereunder at or prior to the Closing Date
shall have been duly performed or satisfied in all material respects; and
(iii) Target and the Target Stockholder shall have furnished ATLP with such
certificates and other documents evidencing the truth of such
representations, warranties, covenants and agreements and the performance of
such agreements or conditions as ATLP or its counsel shall have reasonably
requested;
(4) All (i) Required Consents (other than Required Consents that relate
to Rejected Sites or Accepted Sites) shall have been obtained and (ii) all
other authorizations, consents, waivers, orders or approvals required by the
provisions of this Agreement to be obtained from all Persons (other than
Authorities) prior to the consummation of the Purchase, including without
limitation those required in order for ATLP to continue to own all of the
Target Assets and continue to operate the Target Business as conducted
immediately prior to the Closing shall have been obtained, without the
imposition of any condition or requirement, except such other authorizations,
consents, waivers, orders or approvals the failure of which to obtain would
not reasonably be expected to have a Material Adverse Effect on Target or the
Target Assets;
(5) Between the date of this Agreement and the Closing Date, there
shall not have been any material adverse change in Target or the Target
Assets, and there shall not have been any change in the Target Assets which
could reasonably be expected to have a Material Adverse Effect on the Target
or the Target Assets;
(6) As of the Closing Date, except as otherwise set forth in Section
4.6(c) of the Target Disclosure Schedule, no Legal Action shall be pending
before any Authority (i) that could, individually or in the aggregate, in the
reasonable business judgment of ATLP based upon the advice of counsel,
reasonably be expected to have a Material Adverse Effect on the Target Assets
or the Target Business, or (ii) insofar as it relates to the Purchase,
seeking the potential divestiture by ATC of any material portion of the
Target Assets or the assets of ATC;
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(7) Target shall have executed and delivered to ATLP an agreement
substantially in the form attached hereto as Exhibit C and made a part hereof
(the "Non-Assignable Contracts Agreement");
(8) Target shall have executed and delivered to ATLP an agreement
substantially in the form attached hereto as Exhibit D and made a part hereof
(the "Indemnity Escrow Agreement");
(9) Sygnet shall have executed and delivered to ATLP a master lease
relating to the use by Sygnet of the towers forming part of the Target
Assets, including schedules thereto relating to each such tower,
substantially in the form attached hereto as Exhibit E and made a part hereof
(the "Master Lease");
(10) no more than 20 Defective Sites shall be Rejected Sites;
(11) Each of the agreements listed in Section 8.2(k) of the Target
Disclosure Schedule shall have been terminated by Target, or amended on the
terms and conditions set forth in such Section, in each case, at no cost or
expense to ATC or ATLP; and
(12) Sygnet shall have executed and delivered to ATLP a "build-to-suit"
agreement substantially in the form attached hereto as Exhibit F and made a
part hereof (the "Build-to-Suit Agreement").
8.3 CONDITIONS TO OBLIGATIONS OF TARGET. The obligation of Target to
consummate the Purchase shall be subject to the satisfaction of the following
conditions, any or all of which may be waived, in whole or in part, by Target
to the extent permitted by Applicable Law:
(1) All agreements, certificates, opinions and other documents required
to be delivered pursuant to the provisions of this Agreement shall be
reasonably satisfactory in form, scope and substance to Target and its
counsel, and Target and its counsel shall have received all information and
copies of all documents, including records of corporate proceedings, which
they may reasonably request in connection therewith, such documents where
appropriate to be certified by proper Authorities or corporate officers;
(2) ATLP shall have furnished Target, with favorable opinions, dated
the Closing Date, of Sullivan & Worcester LLP, counsel for ATLP,
substantially in the form attached hereto as Exhibit G and made a part
hereof, and with respect to such other matters arising after the date of this
Agreement as Target or its counsel may reasonably request; and
(3) (i) The representations and warranties of ATC and ATLP contained in
this Agreement or otherwise made in writing by it or on its behalf pursuant
hereto or otherwise made in connection with the Purchase shall be true and
correct in all material respects at and as of the Closing Date with the same
force and effect as though made on and as of such date, except (x) to the
extent such representations and warranties expressly speak as of an earlier
date (in which case such representations and warranties shall be true and
correct as of such earlier date) and (y) to the extent that the failure of
such representations and warranties to be true and correct, individually or
in the
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aggregate, would not reasonably be expected to have a material adverse effect
on ATC or ATLP; provided, however, that for the purpose of this clause (y)
representations and warranties that are qualified as to the materiality
(including by reference to "material adverse effect") shall not be deemed to
be so qualified; (ii) each and all of the agreements and covenants to be
performed or satisfied by ATC or ATLP hereunder at or prior to the Closing
Date shall have been duly performed or satisfied in all material respects;
and (iii) ATC and ATLP shall have furnished Target with such certificates and
other documents evidencing the truth of such representations, warranties,
covenants and agreements and the performance of such agreements or conditions
as Target or its counsel shall have reasonably requested;
(4) Between the date of this Agreement and the Closing Date, there
shall not have occurred and be continuing any material adverse change in ATC
from that reflected in the most recent ATC Financial Statements;
(5) As of the Closing Date, no Legal Action shall be pending before any
Authority which could, individually or in the aggregate, in the reasonable
business judgment of Target based upon the advice of counsel, reasonably be
expected to have a material adverse effect on ATLP;
(6) ATLP shall, if it has not waived the condition set forth in Section
8.2(g), have executed and delivered the Non-Assignable Contracts Agreement;
(7) ATLP shall have executed and delivered to Sygnet the Master Lease,
including schedules thereto relating to each of the towers forming part of
the Target Assets, and the Build-to-Suit Agreement; and
(8) no more than 20 Defective Sites shall be Rejected Sites.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing only pursuant to the following provisions:
(1) by mutual consent of Target and ATLP; or
(2) by ATLP or Target if any injunction, decree or judgment of any
Authority preventing consummation of the Purchase shall have become final and
nonappealable; or
(3) by Target in the event (i) neither Target nor the Target Stockholder
is in material breach of this Agreement and none of its or any of their
representations or warranties shall have become and continue to be untrue in any
manner that would cause the condition set forth in Section 8.2(c) not to be
satisfied, and (ii) either (A) the Termination Date has occurred without the
consummation of the Purchase, or (B) ATC or ATLP is in material breach of this
Agreement or any
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of ATC's or ATLP's representations or warranties shall have been or become
and continue to be untrue in any manner that would cause the conditions set
forth in Section 8.3(c) not to be satisfied, and such a breach or untruth
exists and is not capable of being cured by and will prevent or delay
consummation of the Purchase by or beyond the Termination Date; or
(4) by ATLP in the event (i) neither ATC nor ATLP is in material breach
of this Agreement and none of its or any of their representations or
warranties shall have become and continue to be untrue in any manner that
would cause the condition set forth in Section 8.3(c) not to be satisfied,
and (ii) either (A) the Termination Date has occurred without the
consummation of the Purchase, or (B) Target or the Target Stockholder is in
material breach of this Agreement or any of Target's or the Target
Stockholder's representations or warranties shall have been or become and
continue to be untrue in any manner that would cause the conditions set forth
in Section 8.2(c) not to be satisfied, and such a breach or untruth exists
and is not capable of being cured by and will prevent or delay consummation
of the Purchase by or beyond the Termination Date.
The term "Termination Date" shall mean October 31, 1999 or such other
date as the parties may, from time to time, mutually agree in writing.
The right of ATLP or Target to terminate this Agreement pursuant to this
Section shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any party, any Person controlling any
such party or any of their respective Representatives whether prior to or
after the execution of this Agreement.
9.2 EFFECT OF TERMINATION.
(1) Except as provided in Sections 7.1 (with respect to
confidentiality), 7.3 and 11.2 and this Section, in the event of the
termination of this Agreement pursuant to Section 9.1, this Agreement shall
forthwith become void, there shall be no liability on the part of any party,
or any of their respective stockholders, officers or directors, to the other
and all rights and obligations of any party shall cease; provided, however,
that such termination shall not relieve any party from liability for any
willful or intentional misrepresentation or breach of any of its warranties,
covenants or agreements set forth in this Agreement.
(b) In the event this Agreement is terminated by Target pursuant to the
provisions of Section 9.1(c), then Target shall be entitled to liquidated
damages of an amount equal to the Escrow Deposit, together with interest and
other earnings thereon, it being agreed that such amount shall constitute
full payment for any and all damages suffered by Target by reason of ATLP's
or ATC's failure to consummate the Transactions. ATLP, ATC, Target and the
Target Stockholder agree in advance that actual damages would be difficult to
ascertain and that such liquidated damages is a fair and equitable amount to
reimburse Target for damages sustained due to ATLP's or ATC's failure to
consummate the Transactions for the above-stated reasons.
(c) In the event this Agreement is terminated by ATLP pursuant to the
provisions of Section 9.1(d), then ATLP shall be entitled to the amount of
the Escrow Deposit, together with interest and other earnings thereon,
without prejudice to ATLP's right to pursue damages or other
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remedies hereunder. Notwithstanding the foregoing, each party shall have the
right to seek specific performance pursuant to the provisions of Section 11.4.
(d) In the event this Agreement is terminated pursuant to the
provisions of Section 9.1(a) or 9.1(b), neither of the parties shall have any
further rights or remedies, except that ATLP shall be entitled to the Escrow
Deposit, together with interest and earnings thereon.
ARTICLE 10
INDEMNIFICATION
10.1 SURVIVAL. The representations and warranties of the parties
contained in or made pursuant to this Agreement or any Collateral Document
shall survive the Closing and shall remain operative and in full force and
effect for a period of eighteen (18) months after the Closing Date, except
that in the case of matters of a nature referred to in Sections 4.1, 4.10,
4.11, 4.17, 4.18 and 5.1, and Article 6 which shall survive and remain
operative and in full force and effect for the applicable statute of
limitations, regardless of any investigation or statement as to the results
thereof made by or on behalf of any party hereto. The covenants and
agreements of the parties contained in or made pursuant to this Agreement or
any Collateral Document shall survive the Closing (unless any such covenant
or agreement by its express terms in this Agreement does not so survive) and
shall remain operative and in full force and effect for the statute of
limitations applicable to contractual obligations. The term "Indemnity
Period" shall mean the applicable period with respect to which a
representation, warranty, covenant or agreement survives the Closing as
provided in this Section. No claim for indemnification, other than with
respect to fraud or intentional and willful breach or misrepresentation, may
be asserted after the expiration of the Indemnity Period. Notwithstanding
anything herein to the contrary, any representation, warranty, covenant and
agreement which arises and is the subject of a Claim which is asserted in
writing prior to the expiration of the applicable Indemnity Period shall
survive with respect to such Claim or any dispute with respect thereto until
the final resolution thereof.
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10.2 INDEMNIFICATION.
(1) Target and the Target Stockholder agree, jointly and severally,
that on and after the Closing each shall indemnify and hold harmless ATC,
ATLP and their respective stockholders, directors, officers, employees,
agents and representatives (collectively, the "ATLP Indemnified Parties")
from and against any and all damages, claims, losses, expenses, costs,
obligations, and liabilities including, without limiting the generality of
the foregoing, liabilities for all reasonable attorneys', accountants' and
experts' fees and expenses incurred, including those incurred to enforce the
terms of this Agreement or any Collateral Document (collectively, "Loss and
Expense"), suffered by the ATLP Indemnified Parties by reason of or arising
out of (i) any breach of a representation or warranty made by Target pursuant
to this Agreement or any Collateral Document, (ii) any failure by Target to
perform or fulfill any of its covenants or agreements set forth in this
Agreement or any Collateral Document, (iii) any Loss or Expense resulting
from the pending action entitled DOBSON TOWER COMPANY V. CENTERPOINTE
COMMUNICATIONS, L.L.C. (Case No. CIV-99-00295-R) and, to the extent such
action effects the Target Assets or the Target Business, the action entitled
CENTERPOINTE COMMUNICATIONS, L.L.C. V. DOBSON COMMUNICATIONS CORP., ET AL.
(Case No. 499-CV-0328-Y) (collectively, the "Centerpointe Litigation"), and
any and all related appeals or other Legal Actions based on the subject
matter of these Legal Actions, including, without limitation, any Legal
Actions against ATLP or ATC or any of their Affiliates based on the subject
matter of such Legal Actions, (iv) any Retained Liability, and (v) the
matters described in Section 2.6.
(2) The Target Stockholder agrees that on and after the Closing it
shall indemnify and hold harmless the ATLP Indemnified Parties from and
against any and all Loss and Expense suffered by the ATLP Indemnified Parties
by reason of or arising out of any breach of representation or warranty made
by the Target Stockholder pursuant to this Agreement or any failure by the
Target Stockholder to perform or fulfill any of its covenants or agreements
set forth in this Agreement.
(3) ATC and ATLP agree, jointly and severally, that on and after the
Closing each will indemnify Target and the Target Stockholder and hold them
harmless from and against all Loss and Expense suffered by them by reason of
or arising out of (i) any breach of representation or warranty made by ATC
or ATLP pursuant to this Agreement or any Collateral Document, (ii) any
failure by ATC or ATLP to perform or fulfill any of their respective
covenants or agreements set forth in this Agreement or any Collateral
Document, (iii) any Assumed Liability, and (iv) any Non-Assignable Contract
covered by the provisions of the Non-Assignable Contracts Agreement. ATC and
ATLP agree that Sygnet shall be a third party beneficiary of the rights of
Target and the Target Stockholder under this Section 10.
(4) In the absence of fraud, from and after the Closing Date, the sole
and exclusive remedy (except as otherwise provided in Section 11.4) for any
misrepresentation or any breach of a warranty or covenant under or pursuant
to this Agreement or the Collateral Documents or otherwise relating to the
subject matter of this Agreement shall be a claim for indemnification
pursuant to this Article 10.
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10.3 LIMITATION OF LIABILITY.
(1) Notwithstanding the provisions of Section 10.2, after the Closing,
the ATLP Indemnified Parties, on the one hand, and Target and the Target
Stockholder, on the other hand, shall be entitled to recover their Loss and
Expense in respect of any Claim only (i) in the event that the aggregate Loss
and Expense for all Claims exceed, in the aggregate, $100,000, in which event
the indemnified party shall be entitled to recover all such Loss and Expense
only to the extent such aggregate Loss and Expense exceeds such $100,000; and
(ii) to the extent that the aggregate Loss and Expense for all Claims do not
exceed (x) Eight Million One Hundred Forty Thousand Dollars ($8,140,000) in
the case of Target and the Target Stockholder and (y) One Million Dollars
($1,000,000) in the case of ATLP and ATC; provided, however, that the
foregoing provisions and limits of this Section 10.3(a) shall not apply to
any indemnification of the ATLP Indemnified Parties arising under Sections
10.2(a)(iii), 10.2(a)(iv) or 10.2(a)(v) or of Target and the Target
Stockholder arising under Sections 10.2(c)(iii) or 10.2(c)(iv).
(2) In the case any event shall occur which would otherwise entitle any
party to assert a claim for indemnification hereunder, no Loss and Expense
shall be deemed to have been sustained by such party to the extent of any
proceeds received by such party from any insurance policies with respect
thereto.
10.4 NOTICE OF CLAIMS. If an indemnified party believes that it has
suffered or incurred any Loss and Expense, it shall notify the indemnifying
party promptly in writing, and in any event within the applicable Indemnity
Period specified in Section 10.1, describing such Loss and Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement in respect of which such Loss and Expense shall have occurred. If
any Legal Action is instituted by a third party with respect to which an
indemnified party intends to claim any liability or expense as Loss and
Expense under this Article, such indemnified party shall promptly notify the
indemnifying party of such Legal Action, but the failure to so notify the
indemnifying party shall not relieve such indemnifying party of its
obligations under this Article, except to the extent such failure to notify
prejudices such indemnifying party's ability to defend against such Claim.
10.5 DEFENSE OF THIRD PARTY CLAIMS. The indemnifying party shall have
the right to conduct and control, through counsel of its own choosing,
reasonably acceptable to the indemnified party, any third party Legal Action
or other Claim, but the indemnified party may, at its election, participate
in the defense thereof at its sole cost and expense; provided, however, that
if the indemnifying party shall fail to defend any such Legal Action or other
Claim within a reasonable time, then the indemnified party may defend,
through counsel of its own choosing, such Legal Action or other Claim, and
(so long as it gives the indemnifying party at least fifteen (15) days'
notice of the terms of the proposed settlement thereof and permits the
indemnifying party to then undertake the defense thereof) settle such Legal
Action or other Claim and to recover the amount of such settlement or of any
judgment and the reasonable costs and expenses of such defense. The
indemnifying party shall not compromise or settle any such Legal Action or
other Claim without the prior written consent of the indemnified party, which
consent shall not unreasonably be withheld, delayed or conditioned if the
terms and conditions of such compromise or settlement proposed by the
indemnifying party and agreed to in writing by the claimant in such Legal
Action or other Claim
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(a) include a full release of the indemnified party from the Legal Action or
other Claim which is the subject of the settlement proposal, and (b) if the
indemnified party is an ATLP Indemnified Party, do not include any term or
condition which would restrict in any material manner the continued ownership
or operations of the Target Assets or the conduct of the Target Business in
substantially the manner then being owned, operated and conducted by ATLP (or
any successor or assign). No matter whether an indemnifying party defends or
prosecutes any third party Legal Action or Claim, the indemnified and
indemnifying parties shall cooperate in the defense or prosecution thereof.
Such cooperation shall include access during normal business hours afforded
to the indemnifying party to, and reasonable retention by the indemnified
party of, records and information which are reasonably relevant to such third
party Legal Action or Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder, and the indemnifying party shall reimburse the
indemnified party for all its reasonable out-of-pocket expenses in connection
therewith.
10.6 ASSIGNMENT OF RIGHTS; ADDITIONAL INDEMNIFICATION. In the event
that Centerpointe Communications, L.L.C. ("Centerpointe") (or any successor
or assign or any Person making a Claim by, through or on behalf of
Centerpointe) is granted, by a judgment or order of a court or other tribunal
of competent jurisdiction that is not stayed, enjoined or otherwise
prevented, or by a final judgment of a court of competent jurisdiction, not
subject to further appeal, and exercises a right to purchase the Target
Assets or the Target Business as a result of the outcome of the Legal Actions
described or referred to in Section 10.2(a)(iii) or otherwise, or if ATLP is
otherwise ordered to dispose of the Target Assets or the Target Business, and
Target or the Target Stockholder receives any amounts in connection
therewith, Target and the Target Stockholder, jointly and severally, agree as
follows:
(a) that each hereby assigns and agrees to pay over to ATLP all such
amounts received by them (or their successors and assigns), up to amounts not
to exceed, in the aggregate, the Purchase Price. In the event that the
amounts so paid are less than the Purchase Price, Target and the Target
Stockholder, jointly and severally, agree to pay to ATLP an additional
aggregate amount equal to the difference between the Purchase Price and the
amounts so paid; and
(b) regardless of whether or not Target or the Target Stockholder
receives any amounts in connection with Section 10.6(a), to pay to ATLP an
additional amount (if positive) equal to the difference between (x) the
product of twelve times the average monthly gross revenues (determined in
accordance with GAAP) attributable to the Target Business for the three
months ending on the date of such disposition of assets times (A) during the
period through and including the second anniversary of the Closing Date,
fourteen (14) and (B) at any time after the second anniversary of the Closing
Date, twelve (12), minus (y) the Purchase Price; provided, however, that for
purposes of the formula in clause (x) above, twelve times the average monthly
gross revenues (determined in accordance with GAAP) attributable to the
Target Business for the three months ending on the date of such disposition
of assets shall not exceed twelve times the average monthly gross revenues
(determined in accordance with GAAP) attributable to the Target Business for
the three months ending on the Closing Date by more than $750,000 multiplied
by the number of years (prorated for any fraction of a year) between the
Closing Date and the date of such disposition of assets, and shall not in any
event exceed such amount by more than $2,250,000.
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The additional amounts payable pursuant to paragraphs (a) and (b) above may
be paid to ATLP out of funds then available, if any, under the Indemnity
Escrow Agreement or, if no funds are then available thereunder, with such
other cash funds as Target or Target Stockholder designate.
ARTICLE 11
GENERAL PROVISIONS
11.1 WAIVERS; AMENDMENTS. Changes in or additions to this Agreement may
be made, or compliance with any term, covenant, agreement, condition or
provision set forth herein may be omitted or waived (either generally or in a
particular instance and either retroactively or prospectively) with, but only
with, the consent in writing of the parties hereto. No delay on the part of
either party at any time or times in the exercise of any right or remedy
shall operate as a waiver thereof. Any consent may be given subject to
satisfaction of conditions stated therein. The failure to insist upon the
strict provisions of any covenant, term, condition or other provision of this
Agreement or to exercise any right or remedy thereunder shall not constitute
a waiver of any such covenant, term, condition or other provision thereof or
default in connection therewith. The waiver of any covenant, term, condition
or other provision thereof or default thereunder shall not affect or alter
this Agreement in any other respect, and each and every covenant, term,
condition or other provision of this Agreement shall, in such event, continue
in full force and effect, except as so waived, and shall be operative with
respect to any other then existing or subsequent default in connection
therewith.
11.2 FEES, EXPENSES AND OTHER PAYMENTS. All costs and expenses incurred
in connection with any transfer Taxes, sales Taxes, recording or documentary
Taxes, stamps or other charges levied by any Authority in connection with
this Agreement and the consummation of the Purchase shall be borne by ATLP,
all costs of environmental studies undertaken pursuant to the provisions of
Section 7.8 shall be borne by ATLP, all Hart-Scott-Rodino filing fees and
expenses, if any, shall be borne by the party making such filing, and all
other costs and expenses incurred in connection with this Agreement and the
consummation of the Purchase, including without limitation fees and
disbursements of counsel, financial advisors and accountants incurred by the
parties hereto, shall, unless otherwise provided herein, be borne solely and
entirely by the party that has incurred such costs and expenses.
11.3 NOTICES. All notices and other communications which by any
provision of this Agreement are required or permitted to be given shall be
given in writing and shall be deemed to have been delivered (a) five (5)
business days after being mailed by first-class or express mail, postage
prepaid, (b) the next day when sent overnight by recognized courier service,
(c) upon confirmation when sent by telex, telegram, telecopy or other form of
rapid transmission, confirmed by mailing (by first class or express mail,
postage prepaid, or by recognized courier service) written confirmation at
substantially the same time as such rapid transmission, or (d) upon delivery
when personally delivered to the receiving party (which if other than an
individual shall be an officer or other responsible party of the receiving
party). All such notices and communications shall be mailed, sent or
delivered as set forth below or to such other person(s), telex or facsimile
number(s)
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or address(es) as the party to receive any such communication or notice may
have designated by written notice to the other party.
(1) If to ATC or ATLP:
116 Huntington Avenue
Boston, Massachusetts 02116
Attention: Joseph L. Winn, Chief Financial Officer
Telecopier No.: (617) 375-7575
with a copy to (which shall not constitute notice to ATC or ATLP):
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Norman A. Bikales, Esq.
Telecopier No.: (617) 338-2880
(2) If to Target or the Target Stockholder:
c/o Dobson Communication Corporation
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
Attention: Everett R. Dobson
Telecopier No.: (405) 529-8515
with a copy to (which shall not constitute notice to Target or the
Target Stockholder):
Edwards & Angell, LLP
2800 BankBoston Plaza
Providence, Rhode Island 02903
Attention: Richard M.C. Glenn, Esq.
Telecopier No.: (401) 276-6611
11.4 SPECIFIC PERFORMANCE; OTHER RIGHTS AND REMEDIES. Each party
recognizes and agrees that in the event the other party should refuse to
perform any of its obligations under this Agreement or any Collateral
Document, each party shall, in addition to such other remedies as may be
available to it at Law or in equity or as provided in Article 10, be entitled
to injunctive relief and to enforce its rights by an action for specific
performance to the extent permitted by Applicable Law. Nothing herein
contained shall be construed as prohibiting any party from pursuing any other
remedies available to it pursuant to the provisions of this Agreement or
Applicable Law for such breach or threatened breach, including without
limitation the recovery of damages; provided, however, that none of the
parties shall pursue, and each party hereby waives, any punitive, incidental
and
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consequential damages arising out of this Agreement (including without
limitation damages for diminution in value and loss of anticipated profits).
11.5 SEVERABILITY. If any term or provision of this Agreement shall be
held or deemed to be, or shall in fact be, invalid, inoperative, illegal or
unenforceable as applied to any particular case in any jurisdiction or
jurisdictions, or in all jurisdictions or in all cases, because of the
conflicting of any provision with any constitution or statute or rule of
public policy or for any other reason, such circumstance shall not have the
effect of rendering the provision or provisions in question invalid,
inoperative, illegal or unenforceable in any other jurisdiction or in any
other case or circumstance or of rendering any other provision or provisions
herein contained invalid, inoperative, illegal or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative, illegal or unenforceable provision had never been contained
herein and such provision reformed so that it would be valid, operative and
enforceable to the maximum extent permitted in such jurisdiction or in such
case. Notwithstanding the foregoing, in the event of any such determination
the effect of which is to affect materially and adversely any party, the
parties shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the
fullest extent permitted by Applicable Law in an acceptable manner to the end
that the Transactions are fulfilled and consummated to the maximum extent
possible.
11.6 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, binding upon all of
the parties. In pleading or proving any provision of this Agreement, it
shall not be necessary to produce more than one set of such counterparts.
11.7 SECTION HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
11.8 GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by, and construed in
accordance with, the applicable Laws of the United States of America and the
Laws of State of New York applicable to contracts made and performed in such
State and, in any event, without giving effect to any choice or conflict of
Laws provision or rule that would cause the application of domestic
substantive Laws of any other jurisdiction. Anything in this Agreement to
the contrary notwithstanding, in the event of any dispute between the parties
which results in a Legal Action, the prevailing party shall be entitled to
receive from the non-prevailing party reimbursement for reasonable legal fees
and expenses incurred by such prevailing party in such Legal Action.
11.9 FURTHER ACTS. Each party agrees that at any time, and from time to
time, before and after the consummation of the transactions contemplated by
this Agreement, it will do all such things and execute and deliver all such
Collateral Documents and other assurances, as any other party or its counsel
reasonably deems necessary or desirable in order to carry out the terms and
conditions of this Agreement and the transactions contemplated hereby or to
facilitate the enjoyment of any of the rights created hereby or to be created
hereunder.
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11.10 ENTIRE AGREEMENT. This Agreement (together with the Target Disclosure
Schedule, the exhibits hereto and the other documents delivered or to be
delivered in connection herewith) constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements, arrangements, covenants, promises, conditions, undertakings,
inducements, representations, warranties and negotiations, expressed or implied,
oral or written, between the parties, with respect to the subject matter hereof,
including without limitation any previously executed confidentiality agreement
and/or letter of intent. Each of the parties is a sophisticated Person that was
advised by experienced counsel and, to the extent it deemed necessary, other
advisors in connection with this Agreement. Each of the parties hereby
acknowledges that (a) none of the parties has relied or will rely in respect of
this Agreement or the transactions contemplated hereby upon any document or
written or oral information previously furnished to or discovered by it or its
representatives, other than this Agreement (or such of the foregoing as are
delivered at the Closing), (b) there are no covenants or agreements by or on
behalf of any party or any of its respective Affiliates or representatives
other than those expressly set forth in this Agreement and the Collateral
Documents, and (c) the parties' respective rights and obligations with respect
to this Agreement and the events giving rise thereto will be solely as set forth
in this Agreement and the Collateral Documents. WITHOUT LIMITING THE GENERALITY
OF THE FOREGOING, EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE REPRESENTATIONS
AND WARRANTIES CONTAINED IN THIS AGREEMENT AND ANY COLLATERAL DOCUMENT, NONE OF
THE PARTIES MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY
DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER
REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE
TO THE OTHER OR THE OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER
INFORMATION WITH RESPECT TO ANY ONE OR MORE OF THE FOREGOING.
11.11 ASSIGNMENT. This Agreement shall not be assignable by any party and
any such assignment shall be null and void, except that it shall inure to the
benefit of and be binding upon any successor to any party by operation of Law,
including by way of merger, consolidation or sale of all or substantially all of
its assets, and provided that ATLP may assign its rights and obligations under
this Agreement to any Subsidiary of ATC so long as ATC continues to be a party
to this Agreement or otherwise guarantees the obligations assigned to such
Subsidiary hereunder and, provided further, that ATLP and ATC may each assign
its rights and remedies hereunder to any bank or other financial institution
that has loaned funds or otherwise extended credit to it.
11.12 PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any Person any right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement, except as
otherwise provided in Section 10.2(c) and Section 11.11.
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IN WITNESS WHEREOF, the parties have executed this Agreement or caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first written above.
American Tower Corporation
By: /s/ STEVEN J. MOSKOWITZ
-----------------------------------------
Name: Steven J. Moskowitz
Title: Vice President, Northeast Region
American Tower, L.P.
By: ATC GP, Inc., its General Partner
By: /s/ STEVEN J. MOSKOWITZ
-----------------------------------------
Name: Steven J. Moskowitz
Title: Vice President, Northeast Region
Dobson Tower Company
By: /s/ EVERETT R. DOBSON
-----------------------------------------
Name: Everett R. Dobson
Title: Chief Executive Officer
Dobson Communications Corporation
By: /s/ EVERETT R. DOBSON
-----------------------------------------
Name: Everett R. Dobson
Title: Chief Executive Officer
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APPENDIX A
DEFINITIONS
ACCEPTANCE NOTICE shall have the meaning given to it in Section 2.2(c).
ACCEPTED SITE shall have the meaning given to it in Section 2.8.
ACCOUNTING FIRM shall have the meaning given to it in Section 3.1(b).
ADVERSE, ADVERSELY, when used alone or in conjunction with other terms
(including without limitation "affect," "change" and "effect") shall mean any
Event which is reasonably likely, in the reasonable business judgment of the
relevant party, to be expected to (a) adversely affect the validity or
enforceability of this Agreement or the likelihood of consummation of the
Purchase, or (b) adversely affect the business, operations, management,
properties or prospects, or the condition, financial or other, or results of
operation of the Target or ATC and its Subsidiaries, taken as a whole, as
applicable, or (c) impair such party's ability to fulfill its obligations under
the terms of this Agreement, or (d) adversely affect the aggregate rights and
remedies of such party under this Agreement. Notwithstanding the foregoing, and
anything in this Agreement to the contrary notwithstanding, any Event generally
affecting the economy or the tower rental, ownership and construction business
shall not be deemed to constitute such a change, affect or effect.
AFFILIATE, AFFILIATED shall mean, with respect to any Person, (a) any other
Person at the time directly or indirectly controlling, controlled by or under
direct or indirect common control with such Person, (b) any other Person of
which such Person at the time owns, or has the right to acquire, directly or
indirectly, five percent (5%) or more of any class of the capital stock or
beneficial interest, (c) any other Person which at the time owns, or has the
right to acquire, directly or indirectly, five percent (5%) or more of any class
of the capital stock or beneficial interest of such Person, (d) any executive
officer or director of such Person, (e) with respect to any partnership, joint
venture or similar Entity, any general partner thereof, and (f) when used with
respect to an individual, shall include any member of such individual's
Immediate Family or a family trust.
AGREEMENT shall mean this Agreement as originally in effect, including,
unless the context otherwise specifically requires, this Appendix A, the Target
Disclosure Schedule, and all exhibits hereto, and as any of the same may from
time to time be supplemented, amended, modified or restated in the manner herein
or therein provided.
ALTERNATIVE TRANSACTION shall mean any proposal or offer relating to a
merger, consolidation, reorganization, tender offer, share exchange, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving, or any purchase of all or any substantial portion of the assets of,
or any issue, purchase or sale of equity securities of Target, or any series of
related transactions of the foregoing nature.
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APPLICABLE LAW shall mean any Law of any Authority, whether domestic or
foreign, including without limitation those regulating the safety and structure
of towers and all federal and state securities and Environmental Laws, to which
a Person is subject or by which it or any of its business or operations is
subject or any of its property or assets is bound.
ASSUMED LIABILITIES shall have the meaning given to it in Section 2.3(a).
ATC shall mean American Tower Corporation, a Delaware corporation that owns
all of the issued and outstanding capital stock of ATC Holding, Inc., a Delaware
corporation that owns all of the outstanding capital stock of ATC GP, Inc., a
Delaware corporation that is the sole general partner of ATLP.
ATC FINANCIAL STATEMENTS shall have the meaning given to it in Section 5.2.
ATC SEC DOCUMENTS shall have the meaning given to it in Section 5.2.
ATLP shall have the meaning given to it in the Preamble.
ATLP INDEMNIFIED PARTIES shall have the meaning given to it in Section
10.2(a).
ATLP'S KNOWLEDGE (or words of similar import) shall mean the actual
knowledge of any director or executive officer of ATLP, as such knowledge exists
on the date of this Agreement, after reasonable review of appropriate ATLP
records and after reasonable inquiry of appropriate ATLP employees.
AUTHORITY shall mean any governmental or quasi-governmental authority,
whether administrative, executive, judicial, legislative or other, or any
combination thereof, including without limitation any federal, state,
territorial, county, municipal or other government or governmental or
quasi-governmental agency, arbitrator, authority, board, body, branch,
bureau, or comparable agency or Entity, commission, corporation, court,
department, instrumentality, mediator, panel, system or other political unit
or subdivision or other Entity of any of the foregoing, whether domestic or
foreign, including without limitation the FCC.
BENEFIT ARRANGEMENT shall mean any material benefit arrangement that is not
a Plan, including (a) any employment or consulting agreement, (b) any
arrangement providing for insurance coverage or workers' compensation benefits,
(c) any incentive bonus or deferred bonus arrangement, (d) any arrangement
providing termination allowance, severance or similar benefits, (e) any equity
compensation plan, (f) any deferred compensation plan, and (g) any compensation
policy and practice, and (h) any retirement benefit, including without
limitation medical, dental, health, disability, hospitalization or life
insurance or reimbursement agreement.
BUILD-TO-SUIT AGREEMENT shall have the meaning given to it in Section
8.2(l).
CENTERPOINTE shall have the meaning given to it in Section 10.6.
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CENTERPOINTE LITIGATION shall have the meaning given to it in Section
10.2(a).
CIRCUMSTANCE shall have the meaning given to it in Section 2.8(c).
CLAIMS shall mean any and all debts, liabilities, obligations, losses,
damages, deficiencies, assessments and penalties, together with all Legal
Actions, pending or threatened, claims and judgments of whatever kind and nature
relating thereto, and all fees, costs, expenses and disbursements (including
without limitation reasonable attorneys' and other legal fees, costs and
expenses) relating to any of the foregoing.
CLOSING shall have the meaning given to it in Section 3.2.
CLOSING DATE shall have the meaning given to it in Section 3.2.
CODE shall mean the Internal Revenue Code of 1986, and the rules and
regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision shall be deemed to be a reference to any successor statutory or
regulatory provision.
COLLATERAL DOCUMENTS shall mean the Deposit Escrow Agreement, the Indemnity
Escrow Agreement, the Non-Assignable Contracts Agreement, the Master Lease, the
Build-to-Suit Agreement and any other agreement, certificate, contract,
instrument, notice, opinion or other document delivered or required to be
delivered pursuant to the provisions of this Agreement or any Collateral
Document.
CONFIDENTIAL INFORMATION shall have the meaning given to it in Section
7.1(a).
CONTRACT, CONTRACTUAL OBLIGATION shall mean any agreement, arrangement,
commitment, contract, covenant, indemnity, instrument, lease, license for tower
space, undertaking or other commitment, obligation or liability that is related
to the Target Assets and is binding on any Person or its property under
applicable Law.
CONTROL (including the terms "controlled," "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a Person, or the disposition of such Person's assets or properties,
whether through the ownership of stock, equity or other ownership, by contract,
arrangement or understanding, or as trustee or executor, by contract or credit
arrangement or otherwise.
CONVERTIBLE SECURITIES shall mean any evidences of indebtedness, shares of
capital stock (other than common stock) or other securities directly or
indirectly convertible into or exchangeable for shares of common stock, whether
or not the right to convert or exchange thereunder is immediately exercisable or
is conditioned upon the passage of time, the occurrence or non-occurrence or
existence or non-existence of some other Event, or both.
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CURE NOTICE shall have the meaning given to it in Section 2.7.
DEFECT shall mean, with respect to any Target Assets, the occurrence and
continuation of any of the following:
(a) the failure of Target to obtain a Required Consent;
(b) the Environmental Reports prepared pursuant to the provisions of
Section 7.8 shall have raised questions of potential liability that have had or
could reasonably be expected to have a Material Adverse Effect on such Target
Assets, or any Event or Events shall have occurred subsequent to the date
hereof, that, individually or in the aggregate, would cause the representations
and warranties of Target set forth in Section 4.17 (without regard to knowledge)
with respect to such Target Assets to be inaccurate or incomplete in any respect
that has or could reasonably be expected to have a Material Adverse Effect on
such Target Assets (an "Environmental Condition");
(c) ATLP shall have received, at its cost and expense, a report with
respect to each of the towers included in the Target Assets of such structural
engineers as are reasonably satisfactory to ATLP that shall indicate that any of
the Target Assets (i) is not structurally sound and in good operating condition,
(ii) is not in compliance in all respects with all Applicable Laws, Governmental
Authorizations and Private Authorizations, or (iii) requires any structural or
other repairs, except where any of conditions described in the foregoing
subsections (i), (ii) and (iii) has not had and could not reasonably be expected
to have a Material Adverse Effect on such Target Assets;
(d) any of the representations and warranties contained in Article 4
cannot be given and the absence of such representations and warranties has or
could reasonably be expected to have a Material Adverse Effect on such Target
Assets;
(e) in the case of the Site Leases for the Tower Sites known as Boardman I
(site number 84 in Section 4.4(b) of the Target Disclosure Schedule) and
Boardman II (site number 85 in Section 4.4(b) of the Target Disclosure Schedule)
located in Boardman, Ohio, the retail space covered by the applicable Site Lease
that does not relate to the business or operations of such Tower Site has not
been removed from the coverage of such Site Lease;
(f) Target shall have failed to deliver evidence reasonably satisfactory
to ATLP of the satisfaction of any Liens affecting, or security interests
encumbering, such Target Assets, except for Permitted Liens and except for such
Liens or security interests that have not had and could not reasonably be
expected to have a Material Adverse Effect on such Target Assets;
(g) a commitment to issue standard ALTA title insurance (obtained by ATLP
at its expense) insuring Target's and, if applicable, each of its Affiliates'
fee and leasehold interest in the parcels of land on which each of the towers
included in the Target Assets are located and the improvements located thereon
discloses any exception, other than Permitted Liens and other than exceptions
that have not had and could not reasonably be expected to have a Material
Adverse Effect on such Target Assets; or
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(h) any combination of the conditions described in subparagraphs (b), (c),
(d), (f) and/or (g) above shall have occurred and such conditions in the
aggregate have had or could reasonably be expected to have a Material Adverse
Effect on such Target Assets, even if no single condition in any such
subsection, taken individually, has had or could reasonably be expected to have
a Material Adverse Effect on such Target Assets.
DEFECTIVE SITE shall mean any Tower Site with a Defect.
DEPOSIT ESCROW AGREEMENT shall have the meaning given to it in the fourth
Whereas clause.
DISTRIBUTION shall mean, with respect to any Person, (a) the declaration or
payment of any dividend (except dividends payable in common stock of such
Person) on or in respect of any shares of any class of capital stock of such
Person or any shares of capital stock of any Subsidiary owned by a Person other
than such Person or a Subsidiary of such Person, (b) the purchase, redemption or
other retirement of any shares of any class of capital stock of such Person or
any shares of capital stock of any Subsidiary of such Person owned by a Person
other than such Person or a Subsidiary of such Person, and (c) any other
distribution on or in respect of any shares of any class of capital stock of
such Person or any shares of capital stock of any Subsidiary of such Person
owned by a Person other than such Person or a Subsidiary of such Person.
EMPLOYMENT ARRANGEMENT shall mean, with respect to Target, any employment,
consulting, retainer, severance or similar contract, agreement, plan,
arrangement or policy (exclusive of any which is terminable within thirty (30)
days without liability, penalty or payment of any kind by Target or any of its
Affiliates), or providing for severance, termination payments, insurance
coverage (including any self-insured arrangements), workers compensation,
disability benefits, life, health, medical, dental or hospitalization benefits,
supplemental unemployment benefits, vacation or sick leave benefits, pension or
retirement benefits or for deferred compensation, profit-sharing, bonuses, stock
options, stock purchase or appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits, or any
collective bargaining or other labor agreement, whether or not any of the
foregoing is subject to the provisions of ERISA, but only to the extent that it
covers or relates to any officer, employee or other Person involved in the
ownership or operation of the Target Assets or the conduct of the Target
Business.
ENTITY shall mean any corporation, firm, unincorporated organization,
association, partnership, limited liability company, trust (inter vivos or
testamentary), estate of a deceased, insane or incompetent individual, business
trust, joint stock company, joint venture or other organization, entity or
business, whether acting in an individual, fiduciary or other capacity, or any
Authority.
ENVIRONMENTAL CONDITION shall have the meaning given to it in the
definition of "Defect".
ENVIRONMENTAL LAW shall mean any Law relating to or otherwise imposing
liability or standards of conduct concerning pollution or protection of the
environment, including without limitation Laws relating to emissions,
discharges, releases or threatened releases of Hazardous Materials or other
chemicals or industrial pollutants, substances, materials or wastes into the
environment (including, without limitation, ambient air, surface water, ground
water, mining or
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reclamation or mined land, land surface or subsurface strata) or otherwise
relating to the manufacture, processing, generation, distribution, use,
treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances,
materials or wastes. Environmental Laws shall include without limitation the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 ET SEQ.), the Hazardous Material Transportation Act (49
U.S.C. Section 1801 ET SEQ.), the Resource Conservation and Recovery Act (42
U.S.C. Section 9601 ET SEQ.), the Federal Water Pollution Control Act (33
U.S.C. Section 1251 ET SEQ.), the Clean Air Act (42 U.S.C. Section 7401 ET
SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 2601 ET SEQ.), the
Occupational Safety and Health Act (29 U.S.C. Section 651 ET SEQ.), the
Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C. Section 136 ET
SEQ.), and the Surface Mining Control and Reclamation Act of 1977 (30 U.S.C.
Section 1201 ET SEQ.), and any analogous federal, state, local or foreign
Laws, and the rules and regulations promulgated thereunder all as from time
to time in effect, and any reference to any statutory or regulatory provision
shall be deemed to be a reference to any successor statutory or regulatory
provision.
ENVIRONMENTAL PERMIT shall mean any Governmental Authorization required by
or pursuant to any Environmental Law.
ENVIRONMENTAL REPORT shall have the meaning given to it in Section 4.17.
ERISA shall mean the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, all as from time to time in effect, or any
successor law, rules or regulations, and any reference to any statutory or
regulatory provision shall be deemed to be a reference to any successor
statutory or regulatory provision.
ESCROW DEPOSIT shall have the meaning given to it in the fourth Whereas
clause.
EVENT shall mean the existence or occurrence of any act, action, activity,
circumstance, condition, event, fact, failure to act, omission, incident or
practice, or any set or combination of any of the foregoing.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, and the rules
and regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any reference to any statutory or regulatory
provision shall be deemed to be a reference to any successor statutory or
regulatory provision.
EXCLUDED ASSETS shall have the meaning given to it in Section 2.2.
FAA shall mean the Federal Aviation Administration and shall include any
successor Authority
FCC shall mean the Federal Communications Commission and shall include any
successor Authority.
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GAAP shall mean generally accepted accounting principles applied on a
consistent basis, (i) as set forth in Opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants ("AICPA") and/or
in statements of the Financial Accounting Standards Board that are applicable in
the circumstances as of the date in question, (ii) when not inconsistent with
such opinions and statements, as set forth in other AICPA publications and
guidelines and/or (iii) that otherwise arise by custom for the particular
industry, all as the same shall exist on the date of this Agreement.
GOVERNMENTAL AUTHORIZATIONS shall mean all approvals, concessions,
consents, franchises, licenses, permits, plans, registrations and other
authorizations of all Authorities, including without limitation the United
States Forest Service, the FAA and the FCC, in connection with the ownership or
operation of the Target Assets or the conduct of the Target Business.
GOVERNMENTAL FILINGS shall mean all filings, including franchise and
similar Tax filings, and the payment of all fees, assessments, interest and
penalties associated with such filings, with all Authorities.
HART-SCOTT-RODINO ACT shall mean the Hart-Scott-Rodino Improvement Act of
1976, as from time to time in effect, or any successor law, and any reference to
any statutory provision shall be deemed to be a reference to any successor
statutory provision.
HAZARDOUS MATERIALS shall mean and include any substance, material, waste,
constituent, compound, chemical, natural or man-made element or force (in
whatever state of matter): (a) the presence of which requires investigation or
remediation under any Environmental Law; or (b) that is defined as a "hazardous
waste" or "hazardous substance" under any Environmental Law; or (c) that is
toxic, explosive, corrosive, etiologic, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and is regulated by any
applicable Authority or subject to any Environmental Law; or (d) the presence of
which on the real property owned or leased by such Person causes or threatens to
cause a nuisance upon any such real property or to adjacent properties or poses
or threatens to pose a hazard to the health or safety of persons on or about any
such real property; or (e) the presence of which on adjacent properties could
constitute a trespass by such Person; or (f) that contains gasoline, diesel fuel
or other petroleum hydrocarbons, or any by-products or fractions thereof,
natural gas, polychlorinated biphenyls ("PCBs") and PCB-containing equipment,
radon or other radioactive elements, ionizing radiation, electromagnetic field
radiation and other non-ionizing radiation, sonic forces and other natural
forces, lead, asbestos or asbestos-containing materials ("ACM"), or urea
formaldehyde foam insulation.
IMMEDIATE FAMILY shall mean, with respect to any individual, his or her
spouses, past or present, children, parents and siblings, and any of the spouses
of the foregoing, past or present, in all cases whether related by blood, by
adoption or by marriage.
INDEBTEDNESS shall mean, with respect to any Person, (a) all items, except
items of capital stock or of surplus or of general contingency or deferred tax
reserves or any minority interest in any Subsidiary of such Person to the extent
such interest is treated as a liability with indeterminate term on the
consolidated balance sheet of such Person, which in accordance with GAAP would
be
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included in determining total liabilities as shown on the liability side of a
balance sheet of such Person, (b) all obligations secured by any Lien to
which any property or asset owned or held by such Person is subject, whether
or not the obligation secured thereby shall have been assumed, and (c) to the
extent not otherwise included, all Contractual Obligations of such Person
constituting capitalized leases and all obligations of such Person with
respect to Leases constituting part of a sale and leaseback arrangement.
INDEBTEDNESS FOR MONEY BORROWED shall mean, with respect to Target, money
borrowed and Indebtedness represented by notes payable and drafts accepted
representing extensions of credit, all obligations evidenced by bonds,
debentures, notes or other similar instruments, the maximum amount currently or
at any time thereafter available to be drawn under all outstanding letters of
credit issued for the account of such Person, all Indebtedness upon which
interest charges are customarily paid by such Person, and all Indebtedness
(including capitalized lease obligations) issued or assumed as full or partial
payment for property or services, whether or not any such notes, drafts,
obligations or Indebtedness represent Indebtedness for money borrowed, but shall
not include (a) trade payables, (b) expenses accrued in the ordinary course of
business, (c) customer advance payments and customer deposits received in the
ordinary course of business, or (d) conditional sales agreements not prohibited
by the terms of this Agreement.
INDEMNITY ESCROW AGREEMENT shall have the meaning given to it in Section
8.2(h).
INTANGIBLE ASSETS shall mean all assets and property lacking physical
properties the evidence of ownership of which must customarily be maintained by
independent registration, documentation, certification, recordation or other
means, and shall include, without limitation, concessions, copyrights,
franchises, license, patents, permits, service marks, trademarks, trade names,
and applications with respect to any of the foregoing, technology and know-how.
KNOWLEDGE OF TARGET shall have the same meaning as Target's knowledge.
LAW shall mean any (a) administrative, judicial, legislative or other
action, code, consent decree, constitution, decree, directive, enactment,
finding, law, injunction, interpretation, judgment, order, ordinance, policy
statement, proclamation, promulgation, regulation, requirement, rule, rule of
law, rule of public policy, settlement agreement, statute, or writ of any
Authority, domestic or foreign; (b) the common law, or other legal precedent; or
(c) arbitrator's, mediator's or referee's award, decision, finding or
recommendation.
LEASE shall mean any lease of property, whether real, personal or mixed,
and all amendments thereto, and shall include without limitation all use or
occupancy agreements.
LEGAL ACTION shall mean, with respect to any Person, any and all litigation
or legal or other actions, arbitrations, counterclaims, investigations,
proceedings, requests for material information by or pursuant to the order of
any Authority or suits, at law or in arbitration, equity or admiralty, whether
or not purported to be brought on behalf of such Person, affecting such Person
or any of such Person's business, property or assets.
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LIABILITY means any direct or indirect liability, indebtedness, obligation,
cost, expense, claim, loss, damage, deficiency, guaranty or endorsement of
(other than endorsements for collection or deposits in the ordinary course of
business) or by any Person.
LIEN shall mean any of the following: mortgage; lien (statutory or other);
or other security agreement, arrangement or interest; hypothecation, pledge or
other deposit arrangement; assignment; charge; levy; executory seizure;
attachment; garnishment; encumbrance (including any easement, exception,
reservation or limitation, right of way, and the like); conditional sale, title
retention or other similar agreement, arrangement, device or restriction;
preemptive or similar right; any financing lease involving substantially the
same economic effect as any of the foregoing; the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction; restriction on sale, transfer, assignment, disposition or other
alienation; or any option, equity, claim or right of or obligation to, any other
Person, of whatever kind and character.
LOSS AND EXPENSE shall have the meaning given to it in Section 10.2(a).
MASTER LEASE shall have the meaning given to it in Section 8.2(i).
MATERIAL, MATERIALLY OR MATERIALITY for the purposes of this Agreement,
shall, unless specifically stated to the contrary, be determined without regard
to the fact that various provisions of this Agreement set forth specific dollar
amounts.
MATERIAL ADVERSE EFFECT means (i) an adverse effect on the Target Assets or
an increase in the Assumed Liabilities, in each case by more than $50,000 taken
on a per Tower Site basis, or (ii) a material adverse effect on Target or the
Target Assets, taken as a whole (without considering any calculation derived
from the per Tower Site dollar amount referred to above), rather than on a per
Tower Site basis, except any such effect resulting from or arising in connection
with (a) this Agreement or the Transactions contemplated hereby or (b) changes
or conditions (including without limitation changes in technology, law, or
regulatory or market environment) generally affecting the industry in which the
owners or users of communications tower structures operate.
MATERIAL AGREEMENT shall mean, with respect to Target, any Contractual
Obligation that (a) was not entered into in the ordinary course of business, (b)
was entered into in the ordinary course of business which (i) involved the
purchase, sale or lease of goods or materials, or purchase of services,
aggregating more than $25,000 during any of the last three fiscal years, (ii)
extends for more than three (3) months, (iii) is not terminable on thirty (30)
days or less notice without penalty or other payment, or (iv) involves the
leasing of space on any tower of Target, (c) involves a capitalized lease
obligation or Indebtedness for Money Borrowed, (d) is or otherwise constitutes a
written agency, broker, dealer, license, distributorship, sales representative
or similar written agreement, (e) accounted for more than one percent (1%) of
the revenues of Target in any of the last three fiscal years or is likely to
account for more than one percent (1%) of revenues of Target during the current
fiscal year, (f) is with the United States Forest Service or any other
Authority, or (g) involves the management by Target of any communication tower
of any other Person.
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MULTIEMPLOYER PLAN shall mean a Plan which is a "multiemployer plan" within
the meaning of Section 4001(a)(3) of ERISA.
NON-ASSIGNABLE CONTRACT shall have the meaning given to it in Section 2.5.
NON-ASSIGNABLE CONTRACTS AGREEMENT shall have the meaning given to it in
Section 8.2(g).
OPTION SECURITIES shall mean all stock appreciation rights, rights, options
and warrants, and calls or commitments evidencing the right, to subscribe for,
purchase or otherwise acquire shares of capital stock or Convertible Securities,
whether or not the right to subscribe for, purchase or otherwise acquire is
immediately exercisable or is conditioned upon the passage of time, the
occurrence or non-occurrence or the existence or non-existence of some other
Event.
ORGANIC DOCUMENT shall mean, with respect to a Person which is a
corporation, its charter, its by-laws and all shareholder agreements, voting
trusts and similar arrangements applicable to any of its capital stock and, with
respect to a Person which is a partnership, its agreement and certificate of
partnership, any agreements among partners, and any management and similar
agreements between the partnership and any general partners (or any Affiliate
thereof).
OWNED SITES means the Tower Sites designated as Owned Sites in Section
4.4(a) of the Target Disclosure Schedule (excluding any Rejected Sites) for
which a fee ownership is held by Target.
PERMITTED LIENS shall mean (a) Liens for current taxes not yet due and
payable, (b) Liens or other matters disclosed in the title policies,
commitments, searches and reports delivered to ATLP pursuant to this Agreement,
which Liens or other matters do not have and could not reasonably be expected to
have a Material Adverse Effect on the applicable property, (c) worker's,
carrier's and materialman's liens not yet due and payable, (d) with respect to
Tower Sites, any Liens or other matters placed upon such real property by the
owners thereof, other than to secure obligations or liabilities of Target or its
Affiliates, (e) easements, rights of way or similar grants of rights to a third
party for access to or across any real property or granted to any utility or
similar entity in connection with the provision of electric, water, sewage,
telephone, gas or similar services, (f) any Assumed Liabilities, and (g) such
imperfections of title, easements, encumbrances and mortgages or other Liens, if
any, as are not, individually or in the aggregate, substantial in character,
amount or extent and do not detract from the value, or interfere with the
present use of the property subject thereto or affected thereby, in a way that
would reasonably be expected to result in a Material Adverse Effect on the
Target Assets.
PERSON shall mean any natural individual or any Entity.
PERSONAL PROPERTY shall mean all of the machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, inventory,
spare parts and other tangible personal property which are owned or leased by
Target and used or useful as of the date hereof in the conduct of the business
or operations of the Target Business, plus such additions thereto and deletions
therefrom arising in the ordinary course of business between the date hereof and
the Closing Date.
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PLAN shall mean, with respect to any Person and at a particular time, any
employee benefit plan which is covered by ERISA and in respect of which such
Person or an ERISA Affiliate is (or, if such plan were terminated at such time,
would under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA, but only to the extent that it covers or relates to any
officer, employee or other Person involved in the ownership and operation of the
Target Assets or the conduct of the business of the Target Business.
PRIVATE AUTHORIZATIONS shall mean all approvals, concessions, consents,
franchises, licenses, permits, and other authorizations of all Persons (other
than Authorities) including without limitation those with respect to Intangible
Assets.
PRO RATABLE TAXES shall mean real estate and other property Taxes, ad
valorem taxes, gross receipts Taxes and similar taxes, but shall not include
federal, state or local income Taxes, franchise Taxes or other Taxes measured by
or based upon income or gain on sale or other disposition of property or assets.
PURCHASE shall have the meaning given to it in the first Whereas paragraph.
PURCHASE PRICE shall have the meaning given to it in Section 3.1.
REAL PROPERTY shall mean all of the fee estates and buildings and other
fixtures and improvements thereon, leasehold interest, easements, licenses,
rights to access, right-of-way, and other real property interest which are owned
or used by Target as of the date hereof, in the operations of the Target
Business, plus such additions thereto and deletions therefrom arising in the
ordinary course of business between the date hereof and the Closing Date.
REJECTED SITES shall have the meaning given to it in Section 2.8(b).
REPRESENTATIVES shall have the meaning given to it in Section 7.1(a).
REQUIRED CONSENTS shall have the meaning given to it in Section 2.4.
RESTRICTED TRANSACTION shall mean any (i) acquisition or agreement to
acquire (x) by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any Person or
other business organization or division thereof or (y) any assets (other than in
the ordinary course of business), or (ii) undertaking or agreement to undertake
the construction of one or more towers.
RETAINED LIABILITIES shall have the meaning given to it in Section 2.3(b).
SEC shall mean the Securities and Exchange Commission and shall include any
successor Authority.
SECURITIES ACT shall mean the Securities Act of 1933, and the rules and
regulations thereunder, all as from time to time in effect, or any successor
law, rules or regulations, and any
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reference to any statutory or regulatory provision shall be deemed to be a
reference to any successor statutory or regulatory provision.
SITE LEASES means the ground leases, licenses, easements, or other
agreements for use or occupancy of a Tower Site identified in Section 4.4(b) of
the Target Disclosure Schedule (except for ground leases, licenses, easements or
other agreements with respect to Rejected Sites) pursuant to which the leasehold
interests of Target in the Target Assets are derived.
SOFTWARE shall have the meaning given to it in Section 4.19.
SUBSIDIARY shall mean, with respect to a Person, any Entity a majority of
the capital stock ordinarily entitled to vote for the election of directors of
which, or if no such voting stock is outstanding, a majority of the equity
interests of which, is owned directly or indirectly, legally or beneficially, by
such Person or any other Person controlled by such Person.
SYGNET shall mean Sygnet Communications, Inc., an Ohio corporation, all of
whose issued and outstanding capital stock is owned by Sygnet Wireless, Inc., an
Ohio corporation, all of whose issued and outstanding capital stock is in turn
owned by Dobson/Sygnet Communications Company, an Oklahoma corporation, all of
whose issued and outstanding capital stock is in turn owned by the Target
Stockholder.
TARGET shall have the meaning given to it in the Preamble.
TARGET ASSETS shall have the meaning given to it in Section 2.1.
TARGET BUSINESS shall have the meaning given to it in the first Whereas
clause.
TARGET COMMON STOCK mean the common stock, par value $1.00 per share, of
Target.
TARGET DISCLOSURE SCHEDULE shall mean the Target Disclosure Schedule dated
as of the date hereof and heretofore delivered by Target to ATLP.
TARGET FINANCIAL INFORMATION shall have the meaning given to it in Section
4.2.
TARGET STOCKHOLDER shall have the meaning given to such terms in the
Preamble.
TARGET'S KNOWLEDGE (or words of similar import) shall mean the actual
knowledge of the executive officers and the directors of Target and the Target
Stockholder and of Timothy J. Duffy, as such knowledge exists on the date of
this Agreement, after a review of all records of Target and Sygnet in the
possession of the Target Stockholder, Target, Sygnet, or any of their respective
Subsidiaries.
TAX (and "Taxable", which shall mean subject to Tax), shall mean, with
respect to any Person, (a) all taxes (domestic or foreign), including without
limitation any income (net, gross or other including recapture of any tax items
such as investment tax credits), alternative or add-on
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minimum tax, gross income, gross receipts, gains, sales, use, leasing, lease,
user, ad valorem, transfer, recording, franchise, profits, property (real or
personal, tangible or intangible), fuel, license, withholding on amounts paid
to or by such Person, payroll, employment, unemployment, social security,
excise, severance, stamp, occupation, premium, environmental or windfall
profit tax, custom, duty or other tax, or other like assessment or charge of
any kind whatsoever, together with any interest, levies, assessments,
charges, penalties, additions to tax or additional amount imposed by any
Taxing Authority, (b) any joint or several liability of such Person with any
other Person for the payment of any amounts of the type described in (a), and
(c) any liability of such Person for the payment of any amounts of the type
described in (a) as a result of any express or implied obligation to
indemnify any other Person.
TAX ALLOCATION SCHEDULE shall have the meaning given to it in Section
3.1(d).
TAX RETURN OR RETURNS shall mean all returns, consolidated or otherwise
(including without limitation information returns), required to be filed with
any Authority with respect to Taxes.
TAXING AUTHORITY shall mean any Authority responsible for the imposition of
any Tax.
TITLE REPORT shall have the meaning given to it in Section 7.7.
TERMINATION DATE shall have the meaning given to it in Section 9.1.
TOWER LEASES means the leases or other Contracts or rights to use spaces on
the Tower Structures located on Tower Sites that are identified in Sections
4.4(a) and 4.4(b) of the Target Disclosure Schedule (except for leases or other
Contracts or rights with respect to Rejected Sites).
TOWER RELATED ASSETS shall mean (i) the Tower Leases and security deposits
(if any) from tenants under the Tower Leases, (ii) the Site Leases, (iii) the
Contracts, (iv) any Intangible Assets relating solely to the ownership or
operation by Target of the Tower Structures, the Tower Sites, the Tower Leases,
the Site Leases or the Contracts; (v) all rights to any casualty insurance
proceeds payable after the execution of this Agreement and with respect to
events occurring prior to the Closing with regard to the Target Assets (but only
to the extent the casualty to which the proceeds relate has not been repaired or
restored by Target at its cost prior to the Closing), and all rights to any
warranties held by Target with respect to the Tower Structures or Tower Related
Assets to the extent such rights are assignable, including those assignable with
consent to the extent such consents are received, or, to the extent not so
received, all amounts received by Target with respect to claims made after the
Closing Date with respect to such unassigned rights to any warranties, (vi)
copies of, or extracts from, all current files and records of Target to the
extent that such files or records contain information related to the design,
construction, management, operation, maintenance, ownership, occupancy or
leasing of the Target Assets, and (vii) the originals of the Tower Leases and
Site Leases, and the originals of any files and records referred to in the
preceding subparagraph which relate solely to the information described in such
subparagraph, provided the originals of such information are in the possession
of Target or are under any of its control and are not needed by Target in the
operation of its businesses after the Closing. To the extent the files and
records described in subparagraph (vi) do not relate solely to the design,
construction, management,
A-13
<PAGE>
operation, maintenance, ownership, occupancy or leasing of the Target Assets,
Target may retain the originals or copies of such files and records, subject
to any agreements among any of th parties to this Agreement to keep such
files and records confidential.
TOWER SITES shall mean all real property interests of Target in the up to
108 sites on or appurtenant to which the Tower Structures (excluding any
Rejected Sites) are located, including all fee, ground leasehold interests,
rights-of-way and easements (to the extent owned by Target) pertaining to such
Tower Sites, and shall include a fee ownership in the Owned Sites, and the
leasehold interest in and to the real property associated with the Target Assets
pursuant to the terms of the Site Leases.
TOWER STRUCTURES shall mean communications tower structures situated at the
locations that are identified in Sections 4.4(a) and 4.4(b) of the Target
Disclosure Schedule (excluding any Rejected Sites), and owned by Target, and all
of Target's right, title and interest therein or appurtenant thereto, including
rights to all attached tower lighting equipment; grounding systems; storage or
other buildings exclusively for third party tenants and not utilized by Target
or Sygnet; and physical improvements on each Tower Site, including without
limitation fencing; along with any tenant leases in Tower Related Assets,
easement rights or rights of way necessary for access to the Tower Structure and
for location of the Tower Structure and guy wires, if any, associated therewith;
provided however, such term does not include any Excluded Assets or any
equipment, property or other assets placed upon the Tower Structures or Tower
Sites by third parties pursuant to Tower Leases or other Contracts or by Sygnet.
TRANSACTIONS shall mean the transactions contemplated to be consummated on
or prior to the Closing Date, including without limitation the Purchase and the
execution, delivery and performance of the Collateral Documents.
A-14
<PAGE>
AMENDMENT NO. 1
TO
ASSET PURCHASE AGREEMENT
THIS AMENDMENT No. 1 TO ASSET PURCHASE AGREEMENT is made as of
October 15, 1999, by and among American Tower Corporation, a Delaware
corporation ("ATC"), American Tower, L.P., a Delaware limited partnership
("ATLP"), Dobson Tower Company, an Oklahoma corporation ("Target"), and
Dobson Communications Corporation, an Oklahoma corporation, as the sole
voting stockholder of Target (the "Target Stockholder").
W I T N E S S E T H:
WHEREAS, ATC, ATLP, Target and the Target Stockholder are parties to
an Asset Purchase Agreement dated as of July 6, 1999 (the "Original
Agreement"); and
WHEREAS, ATC, ATLP, Target and the Target Stockholder have agreed to
amend the Original Agreement as set forth herein pursuant to Section 11.1 of
the Original Agreement;
WHEREAS, capitalized terms used herein without definition which are
defined in the Original Agreement shall have the same meaning that such terms
have when used in the Original Agreement unless the context clearly requires
otherwise.
NOW, THEREFORE, in consideration of the foregoing, the parties
hereto, intending to be legally bound, agree as follows:
1. Article 2 of the Original Agreement is hereby amended by
inserting the following new Section 2.9:
"2.9 ESCROWED SITES
(a) At the Closing, ATLP shall purchase the Accepted Sites
listed on EXHIBIT H attached hereto (the "Escrowed Sites") subject to
the condition that Target or the Target Stockholder shall cure all
applicable Defects listed on said EXHIBIT H opposite each Escrowed Site
(the "Applicable Defects") within thirty (30) days following the
Closing Date. Such Escrowed Sites shall be transferred and conveyed at
the Closing subject to the Applicable Defects, with no adjustment to
the Purchase Price; provided however, that a portion of the Purchase
Price equal to Three Hundred Fifty-Eight Thousand Four Hundred Ninety
Dollars ($358,490) for each Escrowed Site will deposited into escrow
pursuant to Section 3.1(c). Thirty (30) days following the Closing Date
(the "Escrow Release Date"), ATLP and Target shall instruct the escrow
agent under the Indemnity Escrow Agreement to release to Target an
amount equal to Three Hundred Thirty-Nine Thousand Nine Hundred Ninety
Dollars ($339,990) per Escrowed Site (the
<PAGE>
-2-
"Escrow Release Amount") whose Applicable Defects have been cured and
accepted pursuant to Section 2.9(b).
(b) Target and Target Stockholder shall provide ATC and ATLP
with a Cure Notice for any cure effected with respect to an Escrowed
Site and shall request ATC's and ATLP's written confirmation that the
Applicable Defects with respect to such Escrowed Site have been cured.
Within five (5) days of receipt of a Cure Notice with respect to an
Escrowed Site, ATC and ATLP shall: (i) provide Target with written
notice that ATC and ATLP have satisfactorily completed their due
diligence investigation of the curative action taken with respect to
such Escrowed Site and are prepared, subject to the terms and
conditions of this Agreement, to accept such Escrowed Site and include
such Escrowed Site in the calculation of the Escrow Release Amount; or
(ii) provide Target with written notice (A) that states that ATC and
ATLP have determined in good faith that the curative action taken is
incomplete in a material way for the purpose of curing the Defect in
question and (B) that describes in reasonable detail the manner in
which the Defect remains uncured and describes the curative action, if
any, that would cure such Defect, in which event the Defect shall
continue as such and the site in question shall remain an Escrowed
Site.
(c) Any representations and warranties of Target and the
Target Stockholder that were omitted or qualified with respect to the
Applicable Defects for each of the Escrowed Sites shall no longer be so
qualified or omitted from and after the date that ATC and ATLP accept
an Escrowed Site pursuant to Section 2.9(b)(i). On the Escrow Release
Date, Target and the Target Stockholder shall furnish ATC and ATLP with
such certificates and other documents evidencing the truth of such
representations and warranties with respect to the Escrowed Sites as
ATLP or its counsel shall have reasonably requested. Notwithstanding
the foregoing, the survival period of such omitted or qualified
representations and warranties of Target and the Target Stockholder
with respect to Escrowed Sites whose Applicable Defects are cured will
be governed by the provisions of Section 10.1 as if such
representations and warranties had been given as of the Closing Date.
(d) In the event that Target and the Target Stockholder are
unable to cure all Applicable Defects with respect to any Escrowed Site
By the Escrow Release Date, ATC and ATLP shall have the right, in their
sole and absolute discretion, provided that such Applicable Defects
constitute a Defect at such time (i) to extend the time for Target and
the Target Stockholder to cure the Applicable Defects for such Escrowed
Site or (ii) to declare such Escrowed Site to be a Rejected Site and
reconvey such Escrowed Site to Target. In the event that any Escrowed
Sites are declared pursuant to the foregoing clause (ii) by ATC and
ATLP to be Rejected Sites, ATLP shall reconvey to Target title to such
Rejected Sites of at least the same quality as the title conveyed by
Target to ATLP on the Closing Date, and ATLP will provide Target with
such documents necessary to reconvey such Rejected Sites and such
certificates evidencing the title of such reconveyed Escrowed Sites as
Target or its counsel shall have reasonably requested. Simultaneously
with the reconveyance of any Escrowed Sites, ATLP and Target agree to
instruct the escrow agent under the Indemnity Escrow Agreement to
release to ATLP an amount
<PAGE>
-3-
equal to Three Hundred Fifty-Eight Thousand Four Hundred Ninety
Dollars ($358,490) per reconveyed Escrowed Site. For purposes of this
Agreement, any Escrowed Sites that are reconveyed to Target pursuant
to this Section 2.9(d) shall be deemed to be Rejected Sites under
Section 2.8 as if such Escrowed Sites had never been transferred and
conveyed to ATLP."
2. Article 3 of the Original Agreement is hereby amended by replacing
Section 3.1(c) in its entirety with the following:
"(c) Pursuant to the terms of the Indemnity Escrow Agreement,
Two Million Dollars ($2,000,000) (subject to (i) reduction in an amount
equal to Eighteen Thousand Five Hundred Dollars ($18,500) per Rejected
Site and (ii) increase in an amount equal to Three Hundred Thirty-Nine
Thousand Nine Hundred Ninety Dollars ($339,990) per Escrowed Site) of
the Purchase Price to be otherwise paid to Target on the Closing Date
shall be deposited into escrow."
3. Section 4.4(a) of the Original Agreement is hereby amended by
inserting the words "or held by Target under valid easements" after the words
"located entirely on such real property" at the end of the third to the last
sentence thereof.
4. The Original Agreement is hereby further amended by deleting EXHIBIT
D thereto in its entirety and inserting in lieu thereof a new EXHIBIT D thereto
substantially in the form of EXHIBIT D hereto.
5. Each of ATC, ATLP, Target and the Target Stockholder represents and
warrants that all requisite corporate action necessary for the valid execution
and delivery of this Amendment No. 1 has been duly and effectively taken.
6. The Original Agreement as amended hereby is ratified and confirmed
in all respects and shall continue in full force and effect. Without limiting
the generality of the foregoing, the term Agreement as used in the Original
Agreement shall be deemed to be the Original Agreement as amended by this
Amendment No. 1.
7. This Amendment No. 1 may be executed in several counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument, binding upon all of the parties. In pleading or
proving any provision of this Amendment No. 1, it shall not be necessary to
produce more than one set of such counterparts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
-4-
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 or
caused this Agreement to be executed by their respective officers thereunto duly
authorized as of the date first written above.
American Tower Corporation
By: /s/ Steven J. Moskowitz
---------------------------------------
Name: Steven J. Moskowitz
Title: Vice President, Northeast Region
American Tower, L.P.
By: ATC GP, Inc., its General Partner
By: /s/ Steven J. Moskowitz
---------------------------------------
Name: Steven J. Moskowitz
Title: Vice President, Northeast Region
Dobson Tower Company
By: /s/ Everett R. Dobson
---------------------------------------
Name: Everett R. Dobson
Title: Chief Executive Officer
Dobson Communications Corporation
By: /s/ Everett R. Dobson
---------------------------------------
Name: Everett R. Dobson
Title: Chief Executive Officer
<PAGE>
EXHIBIT H
<TABLE>
<CAPTION>
ESCROWED SITES APPLICABLE DEFECTS
-------------- ------------------
<S> <C>
- --------------------------------------- ---------------------------------------------------
2. Columbiana (Fairfield TWP), Ohio Environmental problem
- --------------------------------------- ---------------------------------------------------
10. Harborcreek, Pennsylvania Environmental problem
- --------------------------------------- ---------------------------------------------------
21. Bolivar, New York MOL for Access Problem
- --------------------------------------- ---------------------------------------------------
41. Carton, Pennsylvania Leasehold in Horizon to be assigned to Dobson
- --------------------------------------- ---------------------------------------------------
42. Dicksonberg, Pennsylvania Estate issues to be addressed
- --------------------------------------- ---------------------------------------------------
46. Sheffield TWP, Pennsylvania MOL for guy wire easements and access
- --------------------------------------- ---------------------------------------------------
48. Warren, Pennsylvania MOL and survey
- --------------------------------------- ---------------------------------------------------
52. East Brady, Pennsylvania Copy of site plan or survey to locate leased area
and graveyard
- --------------------------------------- ---------------------------------------------------
55. Emlenton, Pennsylvania MOL for guy wire easements and NDA for coal lease
- --------------------------------------- ---------------------------------------------------
56. Freeport, Pennsylvania Leasehold in Horizon to be assigned to Dobson
MOL for guy wire easements
- --------------------------------------- ---------------------------------------------------
58. New Bethlehem Pennsylvania NDA for coal lease
- --------------------------------------- ---------------------------------------------------
66. Brookville, Pennsylvania MOL for leased area and leasehold interest
- --------------------------------------- ---------------------------------------------------
68. Curwinsville, Pennsylvania NDA from oil and gas lessee and coal lessee
- --------------------------------------- ---------------------------------------------------
71. Marion Center, Pennsylvania MOL for guy wire easements
- --------------------------------------- ---------------------------------------------------
91. Canfield 2, Ohio Environmental problems
- --------------------------------------- ---------------------------------------------------
99. Lordstown, Ohio Consent to be obtained
- --------------------------------------- ---------------------------------------------------
101. New Springfield, Ohio Environmental problems
- --------------------------------------- ---------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT D
FORM OF INDEMNITY ESCROW AGREEMENT
<PAGE>
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."
RECITAL
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.
1
<PAGE>
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.
2
<PAGE>
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.
3
<PAGE>
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 communication services.
4
<PAGE>
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.
5
<PAGE>
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.
6
<PAGE>
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.
7
<PAGE>
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 X.
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.
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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 thirty (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
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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. Judgment 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 FCC, provide 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.
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<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: 8/24/97
------------------------------ ------------------------------
27
<PAGE>
EXECUTION COPY
DOBSON COMMUNICATIONS CORPORATION
AMENDED AND RESTATED STOCKHOLDER AND
INVESTOR RIGHTS AGREEMENT
dated as of September 17 , 1999
<PAGE>
AMENDED AND RESTATED STOCKHOLDER AND INVESTOR RIGHTS AGREEMENT
AMENDED AND RESTATED STOCKHOLDER AND INVESTOR RIGHTS AGREEMENT, dated as
of September 17, 1999 (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 originally entered into
this Agreement on December 23, 1998 following the termination of the earlier
Stockholder Agreement of the Company, dated as of February 26, 1997, 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 Company, together with the other parties thereto have agreed to
amend and restate the Stockholder and Investor Rights Agreement and AT&T
Wireless Services, Inc. wishes to become a party hereto as of the date
hereof; and
(C) 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 Common Stock ("Class B Common Stock"), of which
28,560 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 4,226 shares are subject to options which have been granted
but not exercised; and (b) 3,500,000 shares of preferred stock, par value
$1.00 per share ("Preferred Stock"), consisting of (i) 734,000 shares
designated 12 1/4% Senior Exchangeable Preferred Stock, Mandatorily
Redeemable 2008, of which 278,872 shares are issued and outstanding,
including PIK dividends thereon through July 15, 1999 (the "Senior PIK
Preferred"), (ii) 450,000 shares designated Class A 5% Non-Cumulative,
Non-Voting, Non-Convertible Preferred Stock ("Class A Preferred Stock"), of
which 314,286 shares are issued and outstanding, (iii) 90,000 shares
designated Class D Convertible Preferred Stock ("Class D Preferred Stock"),
of which 75,093.7 shares are issued and outstanding, (iv) 517,000 shares
designated Class E Preferred Stock ("Class E Preferred Stock"), of which zero
shares are issued and outstanding, and (v) 500,000
<PAGE>
shares designated 13 1/4% Senior Exchangeable Preferred Stock Mandatory
Redeemable 2009 of which 175,402 shares are issued and outstanding, including
PIK dividends thereon through August 1, 1999 (the "Exchangeable PIK Preferred
Stock") and with the remaining shares of preferred stock left undesignated;
and
(D) 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:
I. ARTICLE
DEFINITIONS
A. 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):
"AAA RULES" shall have the meaning set forth in Section 14.9.
"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, provided, that, (i) Logix Communications will not be
deemed to be part of the Company or an Affiliate of the Company for purposes
of this Agreement, including for purposes of giving rise to Conflicts from
and after the Logix Communications, Spin-Off or an initial public offering of
Logix Communications stock or tracking stock, and (ii) prior to the Logix
Communications Spin-Off or an initial public offering of Logix Communications
stock or tracking stock Logix Communications will not be deemed to be part of
the Company or an Affiliate of the Company for purposes of giving rise to
Conflicts unless the Logix Communications Spin-Off or an initial public
offering of Logix Communications stock or tracking stock does not occur by
the second anniversary of the Amendment and Restatement Date, in which case,
effective as of such second anniversary, this clause (ii) will have no
further effect.
"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
<PAGE>
Stock pursuant to distributions in accordance with the partnership agreement
or operating agreement of such Cash Equity Investor.
"AMENDMENT AND RESTATEMENT DATE" shall mean September __, 1999.
"APPRAISAL PROCEDURE" means the following procedure for determining the
Market Price, for the purpose of valuing the Logix Communications Common
Stock pursuant to Section 6.4 or the Class A Common Stock pursuant to a
Conflict Put Notice pursuant to Section 12.2(c), in the event that the shares
of Class A Common Stock are not listed or admitted for trading on any
national securities exchange and are not quoted on NASDAQ or any similar
service:
(1) The Company and the holders of a majority of the
outstanding shares of stock being appraised, or any investment bank appointed
by them, shall each determine, and attempt to mutually agree upon, the Market
Price.
(1) In the event that the parties fail to agree on the Market
Price or to mutually agree on an investment bank within 30 days then two
independent accounting or investment banking firms of nationally recognized
standing (each, an "Appraiser"), one chosen by the Company and one by the
holders of a majority of the outstanding shares of stock being appraised,
shall each determine and attempt to mutually agree upon, the Market Price.
Each party shall deliver a notice to the other appointing its Appraiser
within 15 days after the expiration of the 30-day period referred to in the
prior sentence. If either the Company or such holders fail to appoint an
Appraiser within such 15-day period, the Market Price shall be determined by
the Appraiser that has been so appointed.
(1) If within 30 days after appointment of the two Appraisers
they are unable to agree upon the Market Price, an independent accounting or
investment banking firm of nationally recognized standing shall within 10
days thereafter be chosen to serve as a third Appraiser by the mutual consent
of such first two Appraisers. The determination of the Market Price by the
third Appraiser so appointed and chosen shall be made within 30 days after
the selection of such third Appraiser.
(1) If three Appraisers shall be appointed and the
determination of one Appraiser is disparate from the middle determination by
more than twice the amount by which the other determination is disparate from
the middle determination, then the determination of such Appraiser shall be
excluded, the remaining two determinations shall be averaged, and such
average shall be binding and conclusive on the Company and such holders;
otherwise the average of all three determinations shall be binding and
conclusive on the Company and such holders.
(1) In connection with any appraisal conducted pursuant to
this Appraisal Procedure, the Appraisers shall adhere to the guidelines
provided in the definition of "Market Price" set forth below, including the
proviso thereto.
<PAGE>
(1) The fees and expenses of each Appraiser shall be borne
one-half by the Company and one-half by such holders.
"ARBITRATION NOTICE" shall have the meaning set forth in Section 14.9.
"AT&T" shall mean AT&T Wireless Services, Inc., a Delaware corporation.
"AT&T COMPANY STOCK" shall have the meaning set forth in Section 14.1.
"AT&T COMPETITIVE CONFLICT" shall mean that the aggregate number of POPs
in the AT&T Overlap Territory exceeds the lesser of 2,000,000 or 10% of all
POPs in the Company Territory, after giving effect to the particular
acquisition or transaction giving rise to such Conflict.
"AT&T OVERLAP TERRITORY" shall mean any AT&T Territory (excluding AT&T
Territory as of the Amendment and Restatement Date) that also constitutes
Company Territory as of the date AT&T or an Affiliate of AT&T (i) commences
Offering CMRS Service in such Company Territory or (ii) enters into a binding
agreement to acquire, manage or control a Person that is Offering CMRS
Service in such Company Territory.
"AT&T REGULATORY CONFLICT" shall mean a Regulatory Conflict that arises
solely as a result of actions taken or activities commenced by AT&T and its
Affiliates after the Amendment and Restatement Date.
"AT&T TERRITORY" shall mean, as of any date, any geographic area in
which AT&T or any Affiliate of AT&T is Offering CMRS Service, together with
any geographic area in which any other Person is Offering CMRS Service if, as
of the applicable date, AT&T or an Affiliate of AT&T has entered into a
binding agreement to acquire, manage or control such Person or such Person's
business of Offering CMRS Service in such area.
"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 relevant determination or take
the relevant action. To the extent that the Board of Directors (or any
committee thereof) 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
<PAGE>
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-3 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 and solely as a result of (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), (y) an IPO, and (z) the Logix Communications Spin-Off.
"CHANGE OF LAW" shall mean a change in a Law applicable to the Company,
AT&T and/or any of their respective Affiliates or their respective
businesses, properties or assets which is adopted or occurs after the
Amendment and Restatement Date.
"CLASS A COMMON STOCK" shall have the meaning given such term in recital
(C) hereto.
<PAGE>
"CLASS A PREFERRED STOCK" shall have the meaning set forth in recital
(C) hereto.
"CLASS B COMMON STOCK" shall have the meaning given such term in recital
(C) 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 (C)
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
(C) hereto.
"CLASS E PREFERRED STOCK" shall have the meaning set forth in recital
(C) hereto.
"CLAWBACK EXERCISE PRICE" shall have the meaning given such term in
Article 11.
"CLOSING PRICE" shall mean, with respect to each share of any class or
series of capital stock for any day, (i) the last reported sale price regular
way or, in case no such sale takes place on such day, the average of the
closing bid and asked prices regular way, in either case as reported on the
principal national securities exchange on which such class or series of
capital stock is listed or admitted for trading or (ii) if such class or
series of capital stock is not listed or admitted for trading on any national
securities exchange, the last reported sale price or, in case no such sale
takes place on such day, the average of the highest reported bid and the
lowest reported asked quotation for such class or series of capital stock, in
either case as reported on NASDAQ or a similar service if NASDAQ is no longer
reporting such information.
"CMRS" shall mean a Commercial Mobile Radio Service regulated under Part
20 of the FCC rules as of the date of this Agreement.
"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.
<PAGE>
"COMPANY COMPETITIVE CONFLICT" shall mean that the aggregate number of
POPs in the Company Overlap Territory exceeds the lesser of 2,000,000 or 10%
of all POPs in the Company Territory, after giving effect to the particular
acquisition or transaction giving rise to such Conflict.
"COMPANY OVERLAP TERRITORY" shall mean any Company Territory (other than
Company Territory as of the Amendment and Restatement Date) that constitutes
AT&T Territory as of the date the Company or an Affiliate of the Company (i)
commences Offering CMRS Service in such AT&T Territory or (ii) enters into a
binding agreement to acquire, manage or control a Person that is Offering
CMRS Service in such AT&T Territory.
"COMPANY REGULATORY CONFLICT" shall mean a Regulatory Conflict that
arises solely as a result of actions taken or activities commenced by the
Company and its Affiliates after the Amendment and Restatement Date.
"COMPANY TERRITORY" shall mean, as of any date, any geographic area in
which the Company or any Affiliate of the Company is Offering CMRS Service,
together with any geographic area in which any other Person is Offering CMRS
Service if, as of the applicable date, the Company or an Affiliate of the
Company has entered into a binding agreement to acquire, manage or control
such Person or such Person's business of Offering CMRS Service in such area.
"CONFIDENTIAL INFORMATION" shall have the meaning assigned to such term
in Section 6.3(a).
"CONFLICT" shall mean an AT&T Competitive Conflict, a Company
Competitive Conflict or a Regulatory Conflict.
"CONFLICT NON-VOTING NOTICE" shall have the meaning set forth in Section
12.2(b).
"CONFLICT NOTICE" shall have the meaning set forth in Section 12.2(a).
"CONFLICT PUT NOTICE" shall have the meaning set forth in Section 12.2(b).
"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, as amended on December 23, 1998, (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
<PAGE>
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 December 23, 1998, between Sygnet Wireless,
Inc., (as successor by merger to Dobson/Sygnet Operating Company), as
Borrower and NationsBank N.A., as Administrative Agent and (v) the Term Loan
Agreement, dated as of December 23, 1998, 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.
"DISPUTE" shall have the meaning set forth in Section 14.9.
"DOBSON PARTNERSHIP" shall mean 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 Note Registration Rights Agreement.
"DOBSON/SYGNET NOTE INDENTURE" shall mean the Indenture, dated December
23, 1998, 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 NOTE REGISTRATION RIGHTS AGREEMENT" shall mean the
Registration Rights Agreement, dated December 23, 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.
"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.
<PAGE>
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"ERISA AFFILIATE" means any trade or business, whether or not
incorporated, that, together with the Company, would be deemed to be a
"single employer" within the meaning of Section 4001(b) of ERISA.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended.
"EXCHANGEABLE PIK PREFERRED STOCK" shall have the meaning set forth in
recital (C) hereto.
"FCC" shall mean the Federal Communications Commission or similar
regulatory authority established in replacement thereof.
"FCC CONFLICT" shall mean any of the following: (i) the FCC Order being
withdrawn, reversed, superseded or otherwise ceasing to be in full force and
effect, including without limitation as a result of a Change of Law or an
application of existing law, or (ii) the commencement of the 90-day cure
period (as such period may be modified) set forth in the FCC Order.
"FCC CONFLICT NOTICE" has the meaning set forth in Section 14.1(a).
"FCC CONFLICT PUT NOTICE" shall have the meaning set forth in Section
14.1.
"FCC ORDER" shall mean the waiver of 47 CFR Section 22.942 granted to
the Company and AT&T by the Chief of the Commercial Wireless Division,
Wireless Telecommunications Bureau, DA 99-1475 (released July 29, 1999).
"FCC PUT" shall have the meaning set forth in Section 14.1.
"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 Exchangeable PIK Preferred
Stock Certificate of Designation, 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 12.6. This definition shall not be construed in accordance with the
final sentence of Section 1.2.
"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 December 23, 1998 pursuant to the terms of the Stock Purchase
Agreement among Fleet Equity and each such purchaser.
<PAGE>
"FLEET EQUITY" shall mean collectively Fleet Venture Resources, Inc.,
Fleet Equity Partners VI, L.P. and Kennedy Plaza Partners together with their
respective Affiliates.
"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
December 23, 1998.
"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.
"GAAP" means U.S. generally accepted accounting principles, consistently
applied.
"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.
"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.
"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).
<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, as amended by this Agreement.
"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 December 23, 1998, among Fleet Equity and the purchasers named therein.
The term JWC Common Stock, for purposes of this Agreement, shall include the
shares of Class A Common Stock purchased by AT&T from JWC pursuant to the
Stock Purchase Agreement.
"JWC SELLDOWN" shall mean the sale by JWC of up to $33.3 million of its
initial investment in Company Stock including, without limitation, Company
Stock sold to AT&T, pursuant to the Stock Purchase Agreement and 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.
<PAGE>
"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 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 COMMON STOCK" shall mean Common Stock, par value
$1.00 per share, of Logix Communications.
"LOGIX COMMUNICATIONS 1998 STOCK OPTION PLAN" shall mean the Logix
Communications 1998 Stock Option Plan.
"LOGIX COMMUNICATIONS SPIN-OFF" shall mean the consummation of the
proposed spin-off by the Company of the business of Logix Communications.
"MAJOR TELECOM COMPETITOR" shall mean any of (i) MCI/Worldcom Corp.,
Sprint Corporation, Bell Atlantic Corporation, GTE Corporation, LCI
International Inc., British Telecommunications plc, Cable & Wireless plc,
Deutsche Telecom, Telecom Italia SpA, France Telecom, Stentor companies,
Omnipoint Corporation, AirTouch Communications, Inc., and Telecommunicaciones
de Mexico or (ii) any other Person that derives over $2 billion of revenue
per annum (based on the most recently available data for the immediately
preceding year) from the provision or sale of telecommunications services, as
of the date of measurement.
"MARKET PRICE" shall mean, with respect to each share of any class or
series of capital stock for any day, (i) the average of the daily Closing
Prices for the ten consecutive trading days commencing 15 days before the day
in question or (ii) if on such date the shares of such class or series of
capital stock are not listed or admitted for trading on any national
securities exchange and are not quoted on NASDAQ or any similar service, the
cash amount that a willing buyer would pay a willing seller (neither acting
under compulsion) in an arm's-length transaction without time constraints per
share of such class or series of capital stock as of such date, viewing the
Company on a going concern basis, determined in accordance with the Appraisal
Procedure; PROVIDED that, in determining such cash amount, the following
shall be ignored: (i) any contract or legal limitation in respect of the
stock, including transfer, voting and other rights, (ii) the "minority
interest" or "control" status of the stock, (iii) any illiquidity arising by
contract in respect of the stock and any voting rights or control rights
amongst the stockholders, and (iv) any other contract rights or restrictions,
including those set forth herein.
<PAGE>
"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 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).
"OFFERING CMRS SERVICES" means the offering of CMRS Services to the
public utilizing radio facilities licensed to the offeror by the FCC OR in
which the offeror is advertising the availability of, and directly or through
franchise arrangements operating, retail outlets for the offering of the
offeror's or its Affiliate's CMRS Services.
"OVERLAP TERRITORY" shall mean the aggregate of AT&T Overlap Territory
and Company Overlap Territory.
"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.
<PAGE>
"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 distinct geographic 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 Exchangeable PIK Preferred Stock, the Class A Preferred Stock, the
Class D Preferred Stock and the Class E Preferred Stock.
"PREFERRED STOCK PUT RIGHT" shall have the meaning given such term in
Section 12.1.
"PROHIBITED TRANSFEREE" shall mean any Person (other than AT&T and its
Affiliates) 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 and AT&T and its Affiliates) 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).
"PUT RIGHT" shall mean a Preferred Stock Put Right or the right of AT&T
to require the Company to repurchase Company Stock held by it pursuant to
Section 12.2(c), as the context requires.
"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 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
<PAGE>
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).
"REGULATORY CONFLICT" shall mean the existence or occurrence of any of
the following conditions: (a) either AT&T or the Company or any of their
respective Affiliates own an attributable interest in both Cellular Systems
authorized to serve a Cellular Territory which violates any FCC rule or
regulation prohibiting such overlapping interests; OR (b) either AT&T, the
Company or any of their respective Affiliates holds an attributable interest
in more licensed broadband PCS, cellular, and SMR spectrum regulated as CMRS
than is permitted under any FCC spectrum cap regulation prohibiting such
interest; OR (c) either AT&T or the Company or any of their respective
Affiliates holds any other attributable interest or interests which violates
any rule or regulation of the FCC, for example, prohibitions on the ownership
of certain interests in the telephone company and cable television company
serving the same market; provided, that, in any case, a Regulatory Conflict
will not be deemed to exist if such Regulatory Conflict would not exist but
for a Change of Law.
"RELATED AGREEMENTS" shall mean the Investment and Transaction
Agreement, the Stock Purchase Agreement, the Certificates of Designation for
each of the Class D Preferred Stock, the Class E Preferred Stock, the New
Company Stock Option Plan, and the Logix Communications 1998 Stock Option
Plan and the Investor Questionnaires.
"RELEVANT PERCENTAGE INTEREST" shall have the meaning given such term in
Section 3.4.
"REPRESENTATIVES" shall have the meaning set forth in Section 6.3(a).
"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.
<PAGE>
"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 foregoing prior to the
date of issuance of any Subordinated Put Note, in accordance with Section
12.6 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 12.6, 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 12.6 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
(C) hereto.
"SENIOR PIK PREFERRED STOCK CERTIFICATE OF DESIGNATION" shall mean the
Certificate of Designation in respect of the Senior PIK Preferred Stock.
<PAGE>
"STOCKHOLDER" shall have the meaning set forth in the preamble.
"STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement, dated as
of April 13, 1999, among the Company, JWC and AT&T.
"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 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 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.
"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).
"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
<PAGE>
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.
"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 Tower Company, Dobson/Sygnet Communications
Company and their respective Subsidiaries and Dobson Operating Company.
A. 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.
I. ARTICLE
STOCKHOLDER APPROVAL
A. 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.
A. 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.
A. 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) either (i) a private letter ruling by the
Internal Revenue Service with respect to the Logix Communications Spin-Off
under the currently pending
<PAGE>
application therefor by the Company or (ii) an opinion from a nationally
recognized law firm or accounting firm, acceptable in form and substance to
the Board of Directors, that the Logix Communications Spin-Off will not
result in the recognition of income, gain or loss for the Company or its
Stockholders for US federal tax purposes and (B) all necessary creditor,
noteholder and other third party approvals, consents and waivers shall have
been obtained or waived. In addition, if the alternative referred to in
(A)(ii) above is pursued, the Company will, as a pre-condition of the Logix
Communications Spin-Off, obtain insurance coverage in respect of any
tax-related risks or liabilities arising if the Logix Communications Spin-Off
is a taxable event for the Company and/or its stockholders, and such
insurance policy, including its terms and coverage, will be approved by the
Board of Directors of the Company. The Stockholders acknowledge that the
holders of Class D Preferred Stock will participate in the Logix
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.
I. ARTICLE
MANAGEMENT OF THE COMPANY
a) BOARD OF DIRECTORS. 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:
(1) 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 Amendment and Restatement Date;
(1) one director selected by AT&T, in its sole discretion, so
long as it Beneficially Owns at least 50% 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 Amendment and Restatement Date, subject to
section 3.1(b);
(1) four directors selected by the Dobson Partnership, in its
sole discretion; and
<PAGE>
(1) one director jointly selected by JWC, AT&T (in the event its
designee is a member of the current Board of Directors) and the Dobson
Partnership, subject to Section 3.1(b). In the event that AT&T shall have
relinquished, and shall continue to relinquish, its right to designate a
director under Section 3.1(a)(ii) in accordance with Section 3.1(b), then the
director jointly selected by JWC and the Dobson Partnership pursuant to this
Section 3.1(a)(iv) shall be reasonably acceptable to AT&T, which consent
shall not be unreasonably withheld.
Each of JWC and AT&T (in the event its designee is a member of the
current Board of Directors) shall have the right to, so long as they hold
their respective Relevant Percentage Interest, designate one director for the
Board of Directors of each Subsidiary of the Company.
If, for any reason, any director to be designated pursuant to
clause (iv) hereof is not designated within 45 days of the time when such
designation right arises, then (x) such director will be jointly selected by
JWC and AT&T (in the event its designee is a member of the current Board of
Directors), and (y) if any such director is not designated pursuant to clause
(x) within 90 days of such time, then such director 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.
Any nomination or designation of directors and the acceptance
thereof pursuant to Section 3.1 shall be evidenced in writing.
a) If, for any reason, AT&T's director selected pursuant to
clause (a)(ii) above resigns or AT&T determines that it no longer desires to
have director designation rights, including as a result of a Conflict and the
related provisions herein, then AT&T may, at its option, relinquish such
director designation rights, in which case, an additional director will be
designated pursuant to Section 3.1(a)(iv) above and AT&T will be entitled to
observer rights as provided in Section 3.1(d) below, PROVIDED, that if AT&T
subsequently determines to reinstate such director designation rights, it may
do so by notifying the parties hereto, in which case, such observer rights
will terminate, AT&T's director designation rights in Section 3.1(a)(ii) will
be reinstated, and the additional director designated pursuant to this
Section 3.1(b) and 3.1(a)(iv) will concurrently resign or be removed.
a) The Stockholders acknowledge the rights of the holders of
Senior PIK Preferred Stock to designate an additional 2 directors and the
right of the holders of Exchangeable PIK Preferred Stock to designate an
additional 2 directors, in the event that the triggering events described in
paragraph (iii) of the Senior PIK Preferred Stock Certificate of Designation
and paragraph (iii) of the Sygnet PIK Preferred Stock Certificate of
Designation, respectively occur.
<PAGE>
a) If AT&T relinquishes its director designation rights pursuant
to Section 3.1(b), then AT&T will be entitled to designate an observer in
addition to its observer appointed under Section 3.4, who will be entitled to
attend all meetings of the Board of Directors and receive the same notice and
information provided to members of the Board of Directors. The Company will
reimburse the observer appointed pursuant to this Section in connection with
such person's role as observer for the reasonable and documented out-of-pocket
expenses and costs (including travel expenses), incurred by such observer in
connection with the performance of his service as an observer of the Board of
Directors.
A. 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.
A. 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.
A. COMPENSATION AND REIMBURSEMENT. The members of the Board of
Directors (other than the director selected pursuant to Section 3.1(a)(iv))
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% and AT&T Beneficially Owns at least 50%, respectively, 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 JWC or AT&T, as the
case may be, owns as of the Amendment and Restatement Date (the "Relevant
Percentage Interests"), JWC and AT&T shall each have the right to have an
observer present at all meetings of the Board of Directors and any committees
thereof (in addition to any directors appointed pursuant
<PAGE>
to Sections 3.1(a)(i) and (ii) above). The Company will reimburse the
observers appointed pursuant to this Section 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 observers or such directors in
connection with the performance by each such person of his service as an
observer or as a director or as a member of any committee of the Board of
Directors.
A. 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.
A. 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.
A. 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), (ii) and (iv)
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, (C) the Stock Purchase
Agreement, (D) 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 (E) the AT&T Operating Agreement and any
other transactions between Dobson and/or its Subsidiaries on the one hand and
AT&T and/or its Affiliates on the other; and (F) the put transactions
pursuant to Section 14.1 PROVIDED, HOWEVER, that in the event that the
director in Section 3.1(a)(iv) above has been selected by the Dobson
Partnership without the approval of JWC and AT&T, then the consent of the
director designated by JWC in Section 3.1(a)(i) and the director designated
by AT&T in Section 3.1(a)(ii) shall be required to approve a transaction of
the type described in this Section 3.7.
A. BOARD COMMITTEES. If a committee of the Board of Directors is
established, the directors selected pursuant to Section 3.1(a)(i) and (ii)
shall each be entitled to be a member of such committee, and if AT&T shall
relinquish its director designation rights, AT&T shall be entitled to
observer rights in respect of such committee.
<PAGE>
A. 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
Company's independent public accountants; (iv) amend this Agreement, subject
to Section 14.3; (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, subject to Section 6.5, 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 (including any action requiring
separate or additional approval by the Stockholders herein) that it is
otherwise prohibited from taking.
<PAGE>
I. ARTICLE
TRANSFERS OF SHARES
A. GENERAL.
a) Each Cash Equity Investor (other than Dobson Partnership)
agrees that at all times prior to, the earliest of (A) the IPO Date (B)
December 23, 2003 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 the following Transfers of shares of
Preferred Stock and Common Stock by a Cash Equity Investor are permitted:
(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 or the Stock Purchase Agreement, (vi) by AT&T to the
Dobson Partnership pursuant to Section 14.1, and (vii) to any other Person
after complying with Section 4.2, if applicable, PROVIDED, that in the case
of clauses (i), (ii), (iii), (v), and (vii) 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 Company Stock by co-investors
in the JWC Group (other than JWC) to a bank or financial institution.
a) 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.
<PAGE>
A. TAG-ALONG RIGHTS.
a) Subject to Sections 4.2(e) and 4.3(c), 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 total investment in the Company on a Fully Diluted Basis (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) subject to Section 4.3(c), each JWC Group Stockholder and
AT&T 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) or AT&T, respectively, 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 or AT&T, as the case
may be, 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 from the JWC Group Stockholders and AT&T is
hereinafter referred to as the "JWC/AT&T Group Value", and the Total
Tag-Along Value minus the JWC/AT&T Group Value is hereinafter referred to
as the "Remaining Value");
(ii) subject to Section 4.3(c), each Stockholder that is not a
JWC Group Stockholder or AT&T (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 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
<PAGE>
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, (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 and (vi) whether the provisions of Section
4.3(c) are applicable to such Tag-Along Event. 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.
Schedule IV sets forth an illustrative example for this Section 4.2(a),
PROVIDED, HOWEVER, that in the event of any conflict between such
illustration and this Section 4.2, Section 4.2 shall govern.
a) 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
<PAGE>
Preferred Stock into Common Stock and Transfer Common Stock to the Tag-Along
Event Purchaser.
a) 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.
a) 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.
a) 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) subject to Section
6.12.8, 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; (iii) any transfer
pursuant to Section 4.1(a)(i), (ii), (iii), (v) or (vi) hereof (and similar
Transfers of Fleet Buyout Stock); and (v) transfers by any JWC Group Stockholder
or AT&T after the earliest to occur of (A) the IPO Date, (B) December 23, 2003
or (C) a Change of Control.
A. 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.
<PAGE>
a) 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 and AT&T 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.
a) Notwithstanding anything to the contrary contained in this
Agreement, the Dobson Partnership shall not, nor shall it permit any of its
Affiliates (other than the Company) to, sell any shares of Company Stock to a
Major Telecom Competitor, unless such Major Telecom Competitor makes an
irrevocable offer to AT&T and its Affiliates to purchase from them, at the
same price and otherwise on the same terms and conditions as the sale to such
Major Telecom Competitor by the Dobson Partnership or such Affiliate, up to
all of the shares of Company Stock Beneficially Owned by AT&T and its
Affiliates. At any time within 14 days after receipt by AT&T of the
Tag-Along Notice with respect to such sale, AT&T may accept such offer and,
to the extent AT&T and its Affiliates elect to accept such offer,
concurrently with the consummation of any such sale by the Dobson Partnership
or such Affiliate, the sale of all of AT&T's shares of Tag-Along Stock in
respect of which it accepted such offer shall be consummated. The provisions
of this Section 4.3(c) shall not apply to any transferees or assigns of AT&T.
A. 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.
A. 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
<PAGE>
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, 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.
A. 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.
A. RIGHT OF FIRST REFUSAL FOR NEW SECURITIES; CAPITAL RAISING.
a) The Company hereby grants to each of JWC and AT&T, on the
same terms and conditions, a right of first refusal, to the extent necessary
to maintain their ownership in the Company on a Fully Diluted Basis, 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 each of JWC
and AT&T to purchase a pro rata portion necessary to maintain such ownership
on a Fully Diluted Basis 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 and AT&T as the case
may be, before the proposed issuance of New Securities. The right of first
refusal granted hereunder may be exercised by either of JWC or AT&T as to
themselves and shall terminate if unexercised within 30 calendar days after
receipt of notice from the Company to the Cash Equity Investors.
a) "New Securities" shall mean any authorized but unissued
shares, and any treasury shares, of preferred stock or common stock of the
Company and all
<PAGE>
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 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; (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.
a) If the Company or any Subsidiary in the future proposes to
raise private 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 as to such private equity capital on terms less favorable than the
prevailing market terms and rates offered to comparable companies to the
Company. If JWC determines to provide such private equity capital, then JWC
will make available to AT&T its pro rata portion thereof, determined by
reference to their respective holdings of Company Stock on a Fully Diluted
Basis in the Company at the Amendment and Restatement Date, on similar terms
and conditions as provided by JWC.
I. ARTICLE
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.
(1) 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
<PAGE>
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, and (C) AT&T shall have the right to make one
written request (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 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
<PAGE>
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 to have been given pursuant to Section 14.1.
(1) 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 AT&T) and LASTLY, against JWC and AT&T; 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).
(1) 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.
<PAGE>
a) 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 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 or AT&T except that each of AT&T and JWC may
Piggyback on the Demand Registrations of the other; PROVIDED that, in such
circumstances, any reduction requested by the managing underwriter(s) in such
registration in the number of Registrable Securities to be registered shall
first be applied to the party seeking to Piggyback on the Demand Registration.
a) 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.
a) 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:
(1) 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
<PAGE>
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 Securities covered by such
Registration Statement or the underwriters, if any, shall reasonably object;
(1) 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;
(1) 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
<PAGE>
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;
(1) 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;
(1) if requested by the managing underwriter or underwriters
or a holder of 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;
(1) 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);
(1) 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;
(1) 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
<PAGE>
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;
(1) 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;
(1) 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;
(1) 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;
(1) 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;
(1) not later than the effective date of the applicable
Registration, provide a CUSIP number for all Registrable Securities;
(1) 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
<PAGE>
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 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;
(1) 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;
<PAGE>
(1) 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 (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
(1) 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 Section 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.
<PAGE>
a) INDEMNIFICATION.
(1) 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 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.
<PAGE>
(1) 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 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.
(1) 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.
<PAGE>
(1) 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 Section 5(e)(ii) with respect to
indemnification by the Company of such underwriters, officers, directors and
control persons.
(1) 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
<PAGE>
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 clause (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, sut, 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.
a) 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.
a) 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
<PAGE>
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 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.
a) 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.
b) HOLDBACK AGREEMENTS.
(1) 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.
<PAGE>
(1) 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 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.
(1) PUBLIC INFORMATION REPORTING. 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.
(1) 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.
<PAGE>
I. ARTICLE
ADDITIONAL RIGHTS AND COVENANTS
A. 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 direct
or indirect wholly owned Subsidiaries, except for a pledge of any such shares in
connection with the incurrence of indebtedness.
A. 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.
A. 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 either a trade secret or material, non-public
information or is designated in writing by the party providing such information
or the Company as confidential (other than, in each case, such information as is
otherwise or becomes publicly available (other than in violation of this
Agreement or other applicable confidentiality agreements among the parties), or
has been or is independently developed or obtained from a person in a manner not
in violation of this Agreement or, to its knowledge, any other confidentiality
agreement) ("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
<PAGE>
construed to limit the right of any party to collect money damages in the
event of breach of this Section 6.3.
a) 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.
A. SALE OF LOGIX COMMUNICATIONS STOCK. If JWC or AT&T 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 or AT&T in Logix
Communications below 35% of the JWC or AT&T Logix Communications ownership
interest, as the case may be, 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 held as of the
Amendment and Restatement Date), JWC or AT&T, as the case may be, shall give 10
Business Days' written notice thereof to the Company (the "Section 6.4 Notice
Period") and during such Section 6.4 Notice Period the Company may elect to
purchase such Logix Communications Common Stock at a price which is the Market
Price thereof. In the event the Company elects to purchase such Logix
Communications Common Stock, it shall have 30 days (or such longer period as may
be necessary under the Appraisal Procedure) from the date of receipt of the
written notice from JWC or AT&T, as the case may be, in which to purchase such
Logix Communications Common Stock. This purchase right shall terminate upon the
earliest to occur of (i) the consummation by Logix Communication of an initial
public offering of its common stock with aggregate gross proceeds of at least
$50 million, (ii) December 23, 2003, (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.
A. 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 (including each of JWC and AT&T, if they are
holders of such 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.
<PAGE>
a) NEW SECURITIES. 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 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, and
(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.
a) 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 Company
shall not (i) issue any options pursuant to the New Company 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.
a) LOGIX COMMUNICATIONS SPIN-OFF. 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").
a) 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).
a) An example of the implementation and intent of this Section 6.7 is
set forth on Exhibit E hereto.
A. 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
<PAGE>
otherwise engage in any transaction that would involve a prohibited market
manipulation, whether under Regulation M under the Securities Act, or
otherwise.
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 the
treatment of such pooling of interests.
a) 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
A. OTHER TAX MATTERS. JWC and AT&T 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 or AT&T'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 JWC and AT&T 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.
A. 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 or AT&T, (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.
A. ADDITIONAL COVENANTS. The Company covenants to AT&T and JWC that
so long as AT&T Beneficially Owns at least 50% or JWC owns at least 35% of the
Class D Preferred Stock (or Class E Preferred Stock or Class A Common Stock
received upon conversion thereof) each respectively holds as of the Amended and
Restated Date, 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 AT&T (except in the case of Sections 6.12.9, 6.12.10
and 6.12.12,
<PAGE>
where the consent of AT&T or any director designated by AT&T shall not be
required) and JWC so long as they continue to own the percentage amounts of
their respective investments stated herein.
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.
1. 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.
1. 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.
1. 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, 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.
1. INSPECTION OF PROPERTIES AND BOOKS. Each of the Company and the
Subsidiaries shall permit each of AT&T or JWC, or any of their 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, upon reasonable notice, 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 during normal business
hours and after reasonable notice as AT&T or JWC may reasonably request,
PROVIDED, that in no event shall any such visit, inspection,
<PAGE>
examination, discussion or advice interfere in any material respect in the
business or other operations of the Company or any of its employees,
representatives or officers.
1. 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.
1. 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;
a) 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;
a) 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
a) permit or take any action which would result in the aggregate
benefit liabilities (with the meaning of Section 4001 of ERISA) of all
Guaranteed Pension Plans exceeding the value of the aggregate assets of such
Plans, disregarding for this purpose the benefit liabilities and assets of any
such Plan with assets in excess of benefit liabilities,
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,
<PAGE>
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.
1. 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 three directors selected in clauses (i),
(ii) or (iv) of Section 3.1(a) of this Agreement), (b) the sale or redemption of
up to $25.0 million in aggregate principal amount now held 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 to the Investment and Transaction Agreement, for the previous four
fiscal quarters, (c) required distributions in respect of Senior PIK Preferred
Stock, (d) distributions provided by the Restated Certificate, (e) distributions
required or permitted by this Agreement, including the put and call provisions
therein, and (f) the Logix Communications Spin-Off.
1. 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 or consolidated POPs
as of the end of the most recently completed fiscal quarter, the unanimous
approval by the Company Board of Directors (excluding any directors designated
pursuant to Sections 3.1(a)(ii) and 3.1(a)(iv)), PROVIDED, that the foregoing
will not apply to (a) any pledges, Liens or security interests in connection
with Company financing or the Sygnet Acquisition, (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, and (e) transactions in the ordinary course of business.
1. 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
<PAGE>
Board of Directors, or, in the case of any such transaction involving 10% or
more of the Company's consolidated assets or consolidated POPs as of the end
of the most recently completed fiscal quarter, the unanimous approval by the
Company Board of Directors (excluding any directors designated pursuant to
Sections 3.1(a)(ii) and 3.1(a)(iv)), 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
1. 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 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.
1. 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 or
consolidated POPs as of the end of the most recently completed fiscal quarter,
the unanimous approval of the Company Board of Directors (excluding any
directors designated pursuant to Sections 3.1(a)(ii) and 3.1(a)(iv)), 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.
A. INFORMATION 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
either
<PAGE>
AT&T or JWC, it will comply with, and it will cause each Subsidiary to comply
with, the following provisions:
a) ANNUAL STATEMENTS. 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 of AT&T and JWC, 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 AT&T
and JWC, 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.
a) Each of the financial statements delivered pursuant to this
SECTION 6.13.1 shall be certified without qualification by the applicable
accounting firm to have been prepared in accordance with GAAP consistently
applied.
1. QUARTERLY STATEMENTS. Within forty-five (45) days after the end
of each quarter, the Company will deliver to each of AT&T and JWC 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.
a) BUDGETS AND OTHER REPORTS. The Company will deliver to each of
AT&T and JWC, prior to the commencement of each fiscal year project spending and
capital budgets for the succeeding fiscal year, projected monthly statements of
income and cash flow for such fiscal year (the "Budget"), projected quarterly
balance sheets for such fiscal year 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, AT&T and JWC 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.
a) The Company shall also furnish to each of AT&T and JWC
(i) within five (5) days of the Company's receipt thereof, copies of all
management letters of the Company's accountants; (ii) within five (5) days of
the Company's receipt thereof, notice with respect to any material pending or
threatened litigation to which the Company or any Subsidiary is or may become a
party; (iii) within five (5) days of the Company's receipt thereof, notice of
any default or event of default with respect to any material agreement to which
the Company or any Subsidiary is a party; (iv) within five (5) days of the
filing thereof, copies of all material filings made by or on behalf of the
Company or
<PAGE>
any Subsidiary with any governmental regulatory agency; and (v) such other
information as either AT&T or JWC may reasonably request from time to time.
a) Within thirty (30) days after the end of each calendar month,
the Company will deliver to each of AT&T and JWC 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 either
AT&T or JWC may request from time to time.
I. ARTICLE
EXCLUSIVITY
A. EXCLUSIVITY. Prior to the earlier of December 23, 2003 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 Amendment and Restatement
Date 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 which the Company did not provide such services
at the time that JWC or its Affiliates 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. Anything to the contrary herein, the terms of this
Section 7.1 shall not apply to AT&T and its Affiliates (but nothing in this
proviso shall relieve AT&T's assigns and transferees that are not Affiliates of
AT&T from the operation of this Section 7.1).
<PAGE>
I. ARTICLE
AFTER-ACQUIRED SHARES; RECAPITALIZATION; INVESTMENT AND TRANSACTION AGREEMENT
A. AFTER ACQUIRED SHARES; RECAPITALIZATION; INVESTMENT AND
TRANSACTION AGREEMENT.
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.
a) 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.
A. 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 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.
A. INVESTMENT AND TRANSACTION AGREEMENT. Each of the parties to
the Investment and Transaction Agreement hereby amend such Agreement by
terminating and deleting Articles V and VI thereof and all sections therein.
I. ARTICLE
SHARE CERTIFICATES
a) RESTRICTIVE ENDORSEMENTS; REPLACEMENT CERTIFICATES. Each
certificate representing the shares of Company Stock now or hereafter held by
a Stockholder (including any 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:
<PAGE>
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, 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.
a) 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.
<PAGE>
I. ARTICLE
EQUITABLE RELIEF
A. 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.
<PAGE>
I. ARTICLE
STOCKHOLDER CALL RIGHT
A. STOCKHOLDER CALL RIGHT. The Dobson Partnership and the other
Stockholders (other than JWC, JWC Group Stockholders and AT&T) (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 on a pro rata basis from the holders thereof up to 35%
of the Class D Preferred Stock held as of the Amendment and Restatement Date
(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
relevant Stockholder or the JWC Representative, in the case of the JWC Group
Stockholders (other than AT&T), 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 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 or AT&T of any portion of the final 35% of their respective
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) held as of the Amendment and Restatement Date),
then the Clawback Exercise Price with respect to such selling stockholder's
Company Stock shall, if applicable, be reduced by the aggregate amount of the
net proceeds of such sales, PROVIDED that proceeds received by JWC or AT&T,
as the case may be, 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
<PAGE>
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 held as of the
Amendment and Restatement Date, (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).
<PAGE>
I. ARTICLE
PUT RIGHTS
A. CLASS D AND CLASS E PREFERRED STOCK PUT RIGHT. At any time
after the earliest to occur of (i) December 23, 2005, (ii) a Change of
Control, or (iii) the consummation of an IPO, each of JWC and AT&T shall have
the right to sell all of the Class D Preferred Stock or Class E Preferred
Stock held by such party to the Company (the "Preferred Stock Put Right") and
the Company shall have the obligation to purchase the shares as to which the
Preferred Stock Put Rights are exercised. Subject to Section 12.3, the
Company shall, within 120 days of the exercise by JWC or AT&T of its
Preferred Stock Put Right (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 cash amount per share
held by such Stockholder equal to its Liquidation Preference.
Notwithstanding the foregoing, the Company shall not redeem any shares
pursuant to this Section 12.1 unless such redemption is made pro-rata amongst
all the parties who have exercised their Preferred Stock Put Rights pursuant
to this Section 12.1 on the date of any redemption. The closing of any
redemption pursuant to this Section 12.1 shall take place at the Company's
offices or at such reasonable other location as the Company may notify the
other parties in writing. Notwithstanding anything in this section to the
contrary, neither AT&T nor JWC shall be bound to transfer its Preferred Stock
upon the exercise by the other party of its Preferred Stock Put Right and in
the event that AT&T or JWC elects not to so transfer its Preferred Stock,
such party shall retain the right to exercise the Preferred Stock Put Right
with respect to its Preferred Stock. In the event that AT&T or JWC exercises
its Preferred Stock Put Right and the other party does not elect to exercise
its Preferred Stock Put Right within 20 days of such exercise, then such
other party may not exercise its Preferred Stock Put Right until 120 days
following such initial exercise.
a) CONFLICT EVENTS. (i) Either AT&T or the Company may give
notice (a "Conflict Notice") to the other parties hereto, if it becomes aware
of the existence of a Conflict or enters into an agreement that would give
rise to a Conflict, or reasonably believes that a Conflict is likely to occur
as a result of pending transactions or other proposed actions, which notice
shall describe the Conflict in reasonable detail.
(ii) In the event that a party gives a Conflict Notice, the Company and
AT&T shall use their commercially reasonable best efforts to determine
whether a Conflict exists (or will exist after giving effect to pending
transactions or other proposed actions) and, if so, will use their
commercially reasonable efforts to agree in principle, within 60 days of
receipt of such Conflict Notice by the recipient thereof, as to a course of
action (including a framework of time within which to execute binding
definitive agreements or to consummate and complete the transaction
contemplated by such agreements) to cure such
<PAGE>
Conflict to the reasonable satisfaction of each of the Company and AT&T (an
"Agreement in Principle"). In the event the parties fail to (x) agree in
principle as to such course of action within such 60-day period, or (y)
execute such binding definitive agreements or consummate and complete the
transactions contemplated by such binding definitive agreements, in each case
in accordance with the Agreement in Principle then the provisions of Section
12.2(b) shall be applicable.
a) In the event that a Conflict Notice is given with respect to
either a Competitive Conflict or a Regulatory Conflict, and the provisions of
Section 12.2(b) are applicable pursuant to Section 12.2(a), then:
(i) In the case of the occurrence (without the prior written
consent of AT&T) of a Company Competitive Conflict or a Company Regulatory
Conflict, AT&T shall have the right to send a notice (a "Conflict Put
Notice") to the other parties hereto, which notice triggers the terms of
Section 12.2(c).
(ii) In the case of the occurrence (without the prior written
consent of the Company) of an AT&T Competitive Conflict or an AT&T Regulatory
Conflict, the Company shall have the right to send a notice (a "Conflict
Non-Voting Notice") to AT&T, which notice triggers the terms of Section
12.2(d).
(iii) In the case of a Conflict (other than an FCC Conflict)
resulting solely from a Change of Law, then the parties agree to address such
Conflict and the remedies appropriate to resolve such conflict in good faith
and a reasonable manner, at the time such Conflict occurs.
a) If AT&T sends a Conflict Put Notice in accordance with Section
12.2(b)(i), the Company shall have the obligation to purchase all of the
shares of Company Stock (other than any stock of Logix Communications from
and after the Logix Communications Spin-Off) then held by AT&T or its
Affiliates. Subject to Section 12.3, the purchase price therefor shall be
payable in cash and shall equal: (i) in the case of Class D Preferred Stock,
an amount per share equal to the then-current Liquidation Preference thereof,
plus the Market Price of the number of shares of Class A Common Stock that
would have been received upon conversion thereof on the date of the purchase;
(ii) in the case of Class E Preferred Stock, an amount per share equal to the
then current Liquidation Preference thereof; and (iii) in the case of any
other class of Common Stock, an amount per share equal to the Market Price
thereof. The closing of any purchase pursuant to this Section 12.2(c) shall
take place within 120 business days after the date of the Conflict Put Notice
(or such longer period as may be necessary under the Appraisal Procedure) at
the Company's offices or such other location or time as to which AT&T and the
Company agree.
a) If the Company sends a Conflict Non-Voting Notice to AT&T in
accordance with Section 12.2(b)(ii) or AT&T sends a Conflict Non-Voting
Notice, in its sole discretion at any time, then (i) AT&T shall cause the
director designated by it
<PAGE>
pursuant to Section 3.1(a)(ii) to resign (or the parties shall cause the
removal of such director) from the Company's Board of Directors, within 10
business days of the date of the Conflict Non-Voting Notice and AT&T will
relinquish its director designation right in accordance with Section 3.1(b),
(ii) the parties shall negotiate in good faith, and promptly implement, steps
appropriate to eliminate the voting rights of any Company Stock then owned by
AT&T or its Affiliates (E.G., by AT&T exchanging its shares of Class D
Preferred Stock for an equal number of shares of a new class of preferred
stock having no voting rights and convertible into common stock having no
voting rights, except in each case to the extent required by law, or AT&T
agreeing to vote all of its shares in the same proportion as all other shares
of Company Stock are voted) and, to the extent necessary to eliminate a
Regulatory Conflict, to eliminate any consent, approval, veto or similar
rights AT&T enjoys pursuant to the terms of this Agreement and (iii) the
parties will otherwise proceed reasonably and in good faith to resolve the
circumstances giving rise to the Conflict Non-Voting Notice; PROVIDED that
and except as set forth in this Agreement no party shall be required to agree
to any change, modification or supplement that adversely affects such party
in any material respect, and nothing in this Agreement shall be construed to
require any party to agree to divest or hold separate any of its assets or
otherwise take or commit to take any action that limits its freedom of action
in any material respect with respect to any of its businesses, product lines
or assets. Notwithstanding the foregoing, if a Conflict Non-Voting Notice
shall be sent, and AT&T shall subsequently Transfer any Company Stock, then
the voting rights of such Company Stock to be transferred shall be
immediately reinstated and the transferee shall be transferred Company Stock
with full voting rights. The parties hereby acknowledge and agree that any
procedures effected pursuant to this Section 12.2(d) shall remain in effect
until the Conflict giving rise to the Conflict Non-Voting Notice no longer
exists.
a) The parties agree that Section 12.2(b) will be inapplicable to
any Regulatory Conflict existing on the date hereof, and that the parties
will proceed in good faith to resolve or cure such Conflicts; AT&T further
agrees that it will not exercise its right to select a director pursuant to
Section 3.1(a)(ii) until each of the Company and AT&T are satisfied that no
Regulatory Conflict exists as of the date hereof or any such Regulatory
Conflict has been cured or the appropriate Governmental Authorities have
furnished a waiver with respect thereto.
a) Notwithstanding anything in this Agreement to the contrary
(including, without limitation, Section 12.2(a)) AT&T shall have 30 days from
the date of receipt of a Conflict Notice within which to either confirm or
deny that a Conflict may exist upon consummation of the transactions referred
to in the Conflict Notice. If AT&T either fails to respond to such Conflict
Notice or informs the Company that no Conflict may exist upon consummation of
the transactions referred to in the Conflict Notice and the parties
subsequently learn that a Conflict did in fact arise, AT&T shall be precluded
from asserting its rights under Section 12.2(b)(i) in respect of such
Conflict.
a) Nothing in this Agreement shall be construed to require AT&T or
any of its Subsidiaries to take any action, including without limitation
divesting any of their
<PAGE>
respective properties or other assets, other than in respect of shares of
Company Stock Beneficially Owned by them or their rights under this Agreement
or other rights arising from ownership of such Company Stock or agreements
with the Company.
a) The Company may deliver a notice to AT&T requesting that AT&T
confirm or deny that a Conflict exists, or may exist upon completion of a
transaction or transactions that have been publicly announced by AT&T, (i) at
any time the Company reasonably believes that AT&T has engaged in a
transaction or transactions that may create a Conflict, and (ii) once during
any calendar year (without regard to any notices given pursuant to clause (i)
of this sentence). Such notice shall include a list of the Licenses held by
the Company and its Subsidiaries. AT&T shall respond to such notice within
15 days stating whether or not it is aware, to the best of its knowledge,
that a Conflict exists. Any such notice or information given by AT&T will be
deemed to be Confidential Information subject to Section 6.3 of this
Agreement.
A. PAYMENT; RESTRICTIONS ON PAYMENT. Upon the surrender of the
certificate or certificates evidencing the shares of stock to be repurchased
by the Company pursuant to the Put Rights in Section 12.1 or 12.2(c), 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 12.4, the Company shall arrange additional
credit facilities or borrowing availability to obtain cash to meet its
obligations upon the exercise of the Put Right. If the Company cannot,
within the time periods stated in Sections 12.1 and 12.2(c), obtain cash to
meet its obligations upon the exercise of the Put Right, then the Company
shall issue to the Cash Equity Investor exercising the Put Right a
Subordinated Put Note, dated as of the date of exercise of the 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 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 Class D Preferred Stock hereunder as if such Cash Equity
Investors were holders of Class D 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.
A. RESTRICTIONS ON PAYMENTS BY THE COMPANY. Notwithstanding
anything to the contrary contained in this Agreement, the payment of cash
upon exercise of a Put Right 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 each as refinanced or amended and in
effect from time to time
<PAGE>
in accordance with Section 12.6, 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.
A. PAYMENT OF CASH. Notwithstanding anything else in this
Article 12 to the contrary (including Sections 12.3 and 12.4), 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 a Put Right
and shall not be issued Subordinated Put Notes in lieu of cash.
A. 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 a Put Right, so long as the Company has used commercially
reasonable efforts to negotiate standard covenant flexibility with regard to
permitting payment of the Put Right and 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 a 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 Class D
Preferred Stock and Class E Preferred Stock set forth in the Certificates of
Designation of the Class D Preferred Stock and Class E Preferred Sock. 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.
<PAGE>
I. ARTICLE
COMPANY CALL RIGHT
A. 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 on a pro rata basis from the holders thereof 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
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.
A. 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.
A. 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.
<PAGE>
I. ARTICLE
MISCELLANEOUS
a) FCC REGULATORY COMPLIANCE PUT. In the event either AT&T
or the Company believe an FCC Conflict exists, AT&T or the Company may give
notice (an "FCC CONFLICT NOTICE") to the other parties hereto. In the event
that a party gives an FCC Conflict Notice, the Company and AT&T shall use
their commercially reasonable best efforts to determine whether an FCC
Conflict exists and, if so, will use their commercially reasonable best
efforts to agree in principle, within 75 days of receipt of such FCC Conflict
Notice by the recipient thereof, to agree to a course of action (including a
framework of time within which to execute binding definitive agreements or to
consummate and complete the transaction contemplated by such agreements) to
cure such FCC Conflict to the reasonable satisfaction of each of the Company
and AT&T. In the event the parties fail to (x) agree in principle as to such
course of action within such 75-day period, or (y) execute such binding
definitive agreements or consummate and complete the transactions
contemplated by such binding definitive agreements, in each case in
accordance with the agreement in principle, then the provisions of Section
14.1(b) shall be applicable.
a) In the event that a FCC Conflict Notice is given and the
provisions of this Section 14.1(b) are applicable pursuant to Section
14.1(a), then AT&T shall have the right to send a notice (an "FCC CONFLICT
PUT NOTICE") to the Dobson Partnership, which notice triggers the terms of
Section 14.1(c).
a) If AT&T sends an FCC Conflict Put Notice in accordance with
Section 14.1(b), the Dobson Partnership shall have the obligation to purchase
(the "FCC PUT") all of the shares of Company Stock purchased by AT&T pursuant
to the Stock Purchase Agreement and then held by AT&T or its Affiliates (the
"AT&T COMPANY STOCK"). The purchase price therefor shall be payable in cash
and shall equal an amount per share equal to the original purchase price of
such shares as set forth in the Stock Purchase Agreement, plus accrued and
unpaid dividends thereon, if any, plus, solely with respect to the Common
Stock funded by AT&T, AT&T's carrying costs on such amount calculated at an
annual rate of 9% through the date of closing of any purchase pursuant to
this Section 14.1(c) (FCC PUT CLOSING"). The FCC Put Closing shall take
place within 120 days (or such earlier date (if any) as is required to comply
with applicable law) after the date of the FCC Conflict Put Notice at the
Company's offices or such other location or time as to which AT&T and the
Dobson Partnership agree.
a) In the event that Dobson Partnership acquires AT&T Company Stock
pursuant to this Section 14.1 then (i) all rights and interests associated
with such AT&T Company Stock under this Agreement will cease as to such AT&T
Company Stock, and such AT&T Company Stock, for purposes of this Agreement,
will no longer to be deemed to be AT&T Company Stock in the hands of Dobson
Partnership, and (ii) all
<PAGE>
rights granted to AT&T and its Affiliates pursuant to this Agreement
including, without limitation under Article III and Article IV shall
terminate upon the closing of the FCC Put and AT&T shall cease to have any
interest in the AT&T Company Stock.
a) In the event that a Regulatory Conflict would also qualify an FCC
Conflict, the provisions of this Article 14 shall apply.
a) JWC GROUP STOCKHOLDER REPRESENTATIVE. 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
(other than AT&T) 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 (other than AT&T) as if such JWC Group
Stockholder (other than AT&T) 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
(other than AT&T) 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 (other than AT&T). 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 (other than
AT&T), 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 (other than AT&T). Each of the JWC Group
Stockholders (other than AT&T) 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.
<PAGE>
A. 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 JWC, 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 AT&T, to:
AT&T Wireless Services, Inc.
7277 164th Ave., N.E.
Redmond, WA 98052
Facsimile: (425) 580-8405
Telephone: (425) 580-8416
Attention: William W. Hague
With a copy to:
AT&T Wireless Services, Inc.
295 North Maple Avenue
Basking Ridge, New Jersey 07920
Telephone: (908) 221-2000
Attention: General Counsel
<PAGE>
With a copy to:
Friedman Kaplan & Seiler, LLP
875 Third Avenue
New York, New York 10022-6225
Telephone: (212) 833-1100
Facsimile: (212) 355-6401
Attention: Daniel M. Taitz, Esq.
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
A. 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.
a) 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, the holders of a majority of the shares of
each class of Common Stock and Preferred Stock and each of JWC and AT&T so
long as they hold their
<PAGE>
respective Relevant Percentage Interests; 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.
a) 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.
A. 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:
(1) The consent in writing of all of the parties hereto; or
(1) December 23, 2010; or
(1) One Stockholder shall Beneficially Own all of the
Common Stock.
a) 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 Amendment and
Restatement Date, the provisions of Section 3.1(a)(i) shall terminate. In
the event the provisions of Section 3.1(a)(i) are terminated pursuant to this
Section 14.3(b), the director designated by JWC pursuant to Section
3.1(a)(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.
a) In the event that AT&T shall Beneficially Own less than 50%
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 AT&T on the Amendment and
Restatement Date, the provisions of Section 3.1(a)(ii) shall terminate. In
the event the provisions of Section 3.1(a)(ii) are terminated pursuant to
this Section 14.3(c), the director designated by AT&T pursuant to Section
3.1(a)(ii), 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.
<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.
A. SURVIVAL. Nothing contained in this Section 14.6 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 December 23, 2018. The provisions of Section 6.3 and Section 14 shall
survive the termination of this Agreement.
A. 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.
B. OBLIGATIONS SEVERAL. The obligations of each Stockholder
under this Agreement shall be several with respect to each such Stockholder.
A. 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.
A. 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 14.10, 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
furnished):
a) 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)
<PAGE>
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.
a) 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. The disputing party and the Company shall each
designate one arbitrator within 20 days of the delivery of the Arbitration
Notice. If either the disputing party or the Company fails so to timely
designate an arbitrator, the matter shall be resolved by the one arbitrator
timely designated. The disputing party 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. The disputing party 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. The disputing party 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 the disputing party and 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.
a) 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 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
<PAGE>
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 14.3.
a) EACH OF THE PARTIES HERETO, AFTER CONSULTING WITH COUNSEL
WAIVE THEIR RIGHTS, IF ANY, TO JURY TRIAL IN RESPECT TO ANY DISPUTE OR CLAIMS
BETWEEN OR AMONG THE PARTIES TO THIS AGREEMENT RELATING TO OR IN RESPECT OF
THIS AGREEMENT, ITS NEGOTIATION, EXECUTION, PERFORMANCE, SUBJECT MATTER, OR
ANY COURSE OF CONDUCT OR DEALING OR ACTIONS UNDER OR IN RESPECT OF THIS
AGREEMENT, INCLUDING, WITHOUT LIMITATION ANY CLAIM UNDER THE SECURITIES ACT,
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, ANY OTHER STATE OR FEDERAL
LAW RELATING TO SECURITIES OR FRAUD OR BOTH, THE RACKETEER INFLUENCED AND
CORRUPT ORGANIZATIONS ACT, AS AMENDED, OR FEDERAL OR STATE COMMON LAW.
A. 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.
A. 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.
A. 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.
<PAGE>
A. EXPENSES. All 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.
A. ATTORNEYS' FEES. In any action or proceeding brought to
enforce any provision of this Agreement, or where any provision 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.
A. 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.
A. 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.
<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: Chief Executive Officer
<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
AT&T WIRELESS SERVICES, INC.
By:
Name:
Title:
<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: (617) 753-1100
Attention: Dana Schmaltz
JWC Group Stockholders:
(See attached sheet)
AT&T Wireless Services, Inc.
295 North Maple Avenue
Basking Ridge, New Jersey 07920
Telephone: (908) 221-2000
Attention: General Counsel
<PAGE>
Schedule II
CAPITALIZATION
<PAGE>
Schedule III
NEW DIRECTORS
Everett R. Dobson
Russell L. Dobson
Stephen T. Dobson
Albert W. Pharis
Dana L. Schmaltz
Justin L. Jaschke
[AT&T Designee]
- ----------------------
* Subject to Section 3.1(d).
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1.1 Certain Defined Terms 2
ARTICLE 1. Definitions
1.1 Certain Defined Terms 2
1.2 Other Definitional Provisions 18
ARTICLE 2. Stockholder Approval
2.1 Organizational Documents 18
2.2 Approval of Stock Option Plans 18
2.3 Logix Communications Spin-Off 18
ARTICLE 3. Management of the Company
3.1 Board of Directors 19
3.2 Removal; Filling of Vacancies 20
3.3 Directors 21
3.4 Compensation and Reimbursement 21
3.5 Business of the Company 21
3.6 Required Votes 21
3.7 Transactions between the Company and the Stockholders or their Affiliates 21
3.8 Board Committees 22
3.9 Other Actions 22
ARTICLE 4. Transfers of Shares
4.1 General 23
4.2 Tag-Along Rights 23
4.3 Additional Conditions to Permitted Transfers 26
4.4 Stop-Transfer 27
4.5 Drag Along Rights 27
4.6 Redemption Rights 27
4.7 Right of First Refusal for New Securities; Capital Raising 28
ARTICLE 5. Registration Rights
(a) Demand Registration Rights 29
(b) Piggyback Registration Rights 31
(c) Selection of Underwriters 31
(d) Registration Procedures 32
<PAGE>
TABLE OF CONTENTS
(continued)
Section Page
<S> <C>
(e) Indemnification 36
(f) Contribution 40
(g) Registration Expenses 40
(h) Participation in Underwritten Registrations 41
(i) Holdback Agreements 41
(j) Public Information Reporting 41
ARTICLE 6. Additional Rights and Covenants
6.1 Wholly-Owned Subsidiaries 42
6.2 Amendments of the Restated Certificate and By-Laws 42
6.3 Confidentiality 42
6.4 Sale of Logix Communications Stock 43
6.5 Class Protection 43
6.6 New Securities 44
6.7 Logix Communications Spin-Off 44
6.8 Regulation M 45
6.9 (a) Pooling of Interests 45
6.10 Other Tax Matters 45
6.11 Class A Preferred Stock Transfer Restriction 45
6.12 Additional Covenants 45
6.12.1 Records and Accounts 46
6.12.2 Existence; Related Securities; Maintenance of Properties 46
6.12.3 Insurance 46
6.12.4 Taxes 46
6.12.5 Inspection of Properties and Books 46
6.12.6 Compliance with Laws, Contracts, Licenses and Permits 47
6.12.7 Employee Benefit Plans 47
6.12.8 Distributions 48
6.12.9 Merger, Consolidation, Sale of Assets or Other Dispositions 48
6.12.10 Sale and Leaseback of Property 48
6.12.11 Investments 49
6.12.12 Merger, Consolidation or Other Acquisitions 49
6.13 Information Covenants 49
6.13.1 Annual Statements 49
6.13.2 Quarterly Statements 50
6.13.3 Budgets and Other Reports 50
ARTICLE 7. Exclusivity
7.1 Exclusivity 51
<PAGE>
TABLE OF CONTENTS
(continued)
Section Page
<S> <C>
ARTICLE 8.
After-Acquired Shares; Recapitalization; Investment and Transaction Agreement
8.1 After Acquired Shares; Recapitalization; Investment and
Transaction Agreement 51
8.2 Amendment of Restated Certificate 52
8.3 Investment and Transaction Agreement 52
ARTICLE 9. Share Certificates
9.1 Restrictive Endorsements; Replacement Certificates 52
ARTICLE 10. Equitable Relief
10.1 Equitable Relief 53
ARTICLE 11. Stockholder Call Right
11.1 Stockholder Call Right 53
ARTICLE 12. Put Rights
12.1 Class D and Class E Preferred Stock Put Right 54
12.2 Conflict Events 55
12.3 Payment; Restrictions on Payment 58
12.4 Restrictions on Payments by the Company 58
12.5 Payment of Cash 58
12.6 Financing Agreements; Indebtedness 58
ARTICLE 13. Company Call Right
13.1 Company Right to Call Against Cash Equity Investors 59
13.2 Procedure 59
13.3 Payment 60
ARTICLE 14. Miscellaneous
14.1 FCC Regulatory Compliance Put 60
14.2 JWC Group Stockholder Representative 61
14.3 Notices 62
14.4 Entire Agreement; Amendment; Consents 64
14.5 Term 64
14.6 Survival 65
<PAGE>
TABLE OF CONTENTS
(continued)
Section Page
<S> <C>
14.7 Waiver 65
14.8 Obligations Several 65
14.9 Governing Law 66
14.10 Dispute Resolution; Waiver of Jury Trial 66
14.11 Benefit and Binding Effect; Severability 67
14.12 Amendment of By-Laws 68
14.13 FCC and Regulatory Approvals 68
14.14 Expenses 68
14.15 Attorneys' Fees 68
14.16 Headings 68
14.17 Counterparts 68
</TABLE>
SCHEDULES
Schedule I -- Cash Equity Investors
Schedule II -- Capitalization
Schedule III -- New Directors
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 C -- Form of Restated By-Laws
Exhibit D -- Form of Subordinated Put Note
Exhibit E -- Logix Spin-Off Dilution Protection Example
<PAGE>
DOBSON COMMUNICATIONS CORPORATION
CORPORATE STRUCTURE AND FOREIGN QUALIFICATIONS
Dobson Communications Corporation
INCORPORATED: 2-3-97 Oklahoma
FOREIGN QUALIFICATIONS: none
Subsidiaries:
Associated Telecommunications and Technologies, Inc.
INCORPORATED: 8-2-91 Oklahoma
FOREIGN QUALIFICATIONS: none
SHAREHOLDER: DOC Cellular Subsidiary Company
DCC PCS, Inc.
INCORPORATED: 6-7-95 Oklahoma
FOREIGN QUALIFICATIONS: none
SHAREHOLDER: Dobson Communications Corporation
Dobson Cellular of Arizona, Inc.
INCORPORATED: 11-15-96 Oklahoma
FOREIGN QUALIFICATIONS: Arizona
SHAREHOLDER: Associated Telecommunications and Technologies, Inc.
Dobson Cellular of California, Inc.
INCORPORATED: 10-16-97 Oklahoma
FOREIGN QUALIFICATIONS: California
SHAREHOLDER: DOC Cellular Subsidiary Company
Dobson Cellular of Imperial, Inc.
INCORPORATED: 4-21-98 Oklahoma
FOREIGN QUALIFICATIONS: California, Arizona
SHAREHOLDER: Dobson Cellular Operations Company
Dobson Cellular of Kansas/Missouri, Inc.
INCORPORATED: 10-2-95 Oklahoma
FOREIGN QUALIFICATIONS: Kansas, Missouri
SHAREHOLDER: DOC Cellular Subsidiary Company
Dobson Cellular of Maryland, Inc.
INCORPORATED: 8-13-96 Oklahoma
FOREIGN QUALIFICATIONS: Maryland, Pennsylvania, West Virginia
SHAREHOLDER: DOC Cellular Subsidiary Company
<PAGE>
Dobson Cellular of Navarro, Inc.
INCORPORATED: 3-2-98 Oklahoma
FOREIGN QUALIFICATIONS: Texas
SHAREHOLDER: Dobson Cellular Operations Company
Dobson Cellular of Sandusky, Inc.
INCORPORATED: 4-21-98 Oklahoma
FOREIGN QUALIFICATIONS: Ohio
SHAREHOLDER: DOC Cellular Subsidiary Company
Dobson Cellular of Texas, Inc.
INCORPORATED: 8-5-97 Oklahoma
FOREIGN QUALIFICATIONS: Texas
SHAREHOLDER: Dobson Cellular Operations Company
Dobson Cellular Operations Company
INCORPORATED: 12-16-97 Oklahoma
FOREIGN QUALIFICATIONS: none
SHAREHOLDER: Dobson Communications Corporation
DOC Cellular Subsidiary Company
INCORPORATED: 12-16-97 Oklahoma
FOREIGN QUALIFICATIONS: none
SHAREHOLDER: Dobson Operating Company
Dobson Cellular Systems, Inc.
INCORPORATED: 5-22-90 Oklahoma
FOREIGN QUALIFICATIONS: Texas
SHAREHOLDER: DOC Cellular Subsidiary Company
Dobson Fiber/Forte Colorado, Inc.
INCORPORATED: 6-18-91 Oklahoma
FOREIGN QUALIFICATIONS: none
SHAREHOLDER: Logix Communications Enterprises, Inc.
Dobson JV Company
INCORPORATED: 7-2-99 Oklahoma
FOREIGN QUALIFICATIONS: none
SHAREHOLDER: Dobson Communications Corporation
Dobson Operating Company
INCORPORATED: 12-18-90 Oklahoma
FOREIGN QUALIFICATIONS: none
SHAREHOLDER: Dobson Communications Corporation
<PAGE>
Dobson/Sygnet Communications Company
INCORPORATED: 7-23-98 Oklahoma
FOREIGN QUALIFICATIONS: none
SHAREHOLDER: Dobson Communications Corporation
Dobson Telephone Company, Inc.
A/K/A MCLOUD TELEPHONE COMPANY
INCORPORATED: 1-6-56 Oklahoma
FOREIGN QUALIFICATIONS: Texas
SHAREHOLDER: Logix Communications Enterprises, Inc.
Dobson Tower Company
INCORPORATED: 11-30-98 Oklahoma
FOREIGN QUALIFICATIONS: New York, Ohio, Pennsylvania
SHAREHOLDER: Dobson Communications Corporation
Logix Communications Corporation
F/K/A DOBSON WIRELESS, INC.
INCORPORATED: 6-7-96 Oklahoma
FOREIGN QUALIFICATIONS: All 50 states and the District of Columbia(1)
SHAREHOLDER: Logix Communications Enterprises, Inc.
Logix Communications Enterprises, Inc.
F/K/A DOBSON WIRELINE COMPANY
INCORPORATED: 12-16-97 Oklahoma
FOREIGN QUALIFICATIONS: none
SHAREHOLDER: Dobson Operating Company
RSA 339, Inc.(2)
INCORPORATED: 9-26-90 California
FOREIGN QUALIFICATIONS: none
SHAREHOLDER: Dobson Cellular of California, Inc.
Santa Cruz Cellular Telephone, Inc.
INCORPORATED: 10-23-87 California
FOREIGN QUALIFICATIONS: none
SHAREHOLDER: Dobson Cellular of California, Inc. - 86.2312%
- -------------------
(1) In Massachusetts, Rhode Island, Ohio, Logix Communications
Corporation is qualified as Dobson Wireless, Inc., with the pre-merger
Logix Communications Corporation also being qualified.
(2) RSA 339, Inc., has been merged into Dobson Cellular of
California, Inc. The merger documents have been filed and approved by the
Oklahoma Secretary of State, but approval by the applicable California
authorities is pending.
<PAGE>
Sygnet Communications, Inc.
INCORPORATED: Ohio
FOREIGN QUALIFICATIONS: Pennsylvania, New York
SHAREHOLDER: Sygnet Wireless, Inc.
Sygnet Wireless, Inc.
INCORPORATED: Ohio
FOREIGN QUALIFICATIONS: Pennsylvania, New York
SHAREHOLDER: Dobson/Sygnet Communications Company
Western Financial Services, Corp.
INCORPORATED: 1-14-94 Oklahoma
FOREIGN QUALIFICATIONS: none
SHAREHOLDER: Dobson Communications Corporation
LIMITED PARTNERSHIP INTERESTS
Oklahoma RSA 5 Limited Partnership
FORMATION: 8-9-89 Oklahoma
OWNERSHIP INTEREST: Oklahoma Independent RSA 5 Partnership - 65%
(Managing General Partner)
Oklahoma RSA 7 Limited Partnership
FORMATION: 8-9-89 Oklahoma
OWNERSHIP INTEREST: Oklahoma Independent RSA 7 Partnership - 65%
(Managing General Partner)
Texas RSA No. 2 Limited Partnership
FORMATION: 2-19-91 Oklahoma
OWNERSHIP INTEREST: Dobson Cellular Systems, Inc. - 61%
(Managing General Partner)
Oklahoma RSA 3 Limited Partnership
FORMATION: Oklahoma
OWNERSHIP INTEREST: Dobson Cellular Systems, Inc. - 5%
(Limited Partner)
GENERAL PARTNERSHIP INTERESTS
FORTE of Colorado
FORMATION:
OWNERSHIP INTEREST: Dobson Fiber/FORTE of Colorado - 20%
Gila River Cellular General Partnership
FORMATION: 9-30-97 Arizona
OWNERSHIP INTEREST: Dobson Cellular of Arizona, Inc. - 75%
<PAGE>
Oklahoma Independent RSA 5 Partnership
FORMATION: 3-21-94 Oklahoma
OWNERSHIP INTEREST: Dobson Cellular Systems, Inc. - 99%
Oklahoma Independent RSA 7 Partnership
FORMATION: 3-21-94 Oklahoma
OWNERSHIP INTEREST: Dobson Cellular Systems, Inc. - 99%
<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.
/s/ ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
November 9, 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 February 5, 1999, with respect to the consolidated
financial statements of Sygnet Wireless, Inc. included in the Registration
Statement (Form S-1 File No. 333-XXXXX) and related prospectus of Dobson
Communications Corporation for the registration of its Class A Common
Stock.
/s/ Ernst & Young LLP
Cleveland, Ohio
November 9, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial and Other Data" and to the use of our report
dated March 15, 1999, with respect to the consolidated financial statements of
American Cellular Corporation, and our report dated March 15, 1999, with respect
to the consolidated financial statements of PriCellular Corporation included in
the Registration Statement (Form S-1) and related prospectus of Dobson
Communications Corporation for the registration of its Class A Common Stock.
/s/ Ernst & Young LLP
Chicago, Illinois
November 9, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF PAUL KAGAN ASSOCIATES, INC.
We consent to the reference to our firm included in the Registration
Statement (Form S-1 File No. 333-XXXXX) and related prospectus of Dobson
Communications Corporation for the registration of shares of its Class A
Common Stock.
/s/ Paul Kagan Associates, Inc.
Carmel, California
November 11, 1999
